Legal Strategies for Avoiding a Mortgage Foreclosure

At the end of December, more than 787,000 Americans had filed for unemployment. Many Americans have been laid off or had their work hours reduced due to the coronavirus pandemic. If you are struggling to pay your mortgage, you are not alone. Many Americans are trying to find a way to continue paying their mortgages during these challenging financial times. 

If you are concerned about a mortgage foreclosure, or your lender has already started the foreclosure process, there are several legal strategies you can take to avoid mortgage foreclosure. We will discuss some of the best options for preventing a mortgage foreclosure below. Still, the best thing you can do is speak with an experienced Philadelphia bankruptcy lawyer about your legal options.

Payment Plans Such as Forbearances and Loan Modifications

One of the options for avoiding foreclosure is negotiating a payment plan, such as a forbearance plan or a loan modification plan. Your lawyer will be able to negotiate with your mortgage company to request a repayment plan. Should your lender agree to the prepayment program, you will be able to initiate a loan workout and create a plan to begin making payments. Typically, loan modifications stop the foreclosure process. 

In many cases, the lender will stop the foreclosure process and push back the payment’s due dates to the end of the loan. A forbearance plan is easier to achieve in most cases, but it will only pause the foreclosure process until you have caught up with your payments, meaning there will often be less of a delay.

Short Sales

Has your lender filed a notice of disclosure before scheduling an auction? If you have received an offer from a buyer, your lender is required to consider the offer. If they do foreclose on your home, the lender will quickly resell your home. You have the option of presenting your loan officer with a reasonable short sale offer. In some cases, lenders will accept the short sale offer to save them the trouble and expense of finding a qualified buyer. If your home is on the market, you can keep seeking a buyer for it, even after the foreclosure process has begun. Discussing your case with an experienced lawyer will help you navigate the process of short selling your home.

Defending Against Your Foreclosure

It is always wise to work with an experienced lawyer if you are going through the foreclosure process, no matter what legal option you choose. It may be possible for a knowledgeable and skilled foreclosure defense lawyer to defeat the allegations in the foreclosure complaint on legal grounds. Typically, lenders use boilerplate complaints with generic legal arguments. They do not want to spend a significant amount of time arguing the case in court or writing a tailored complaint. Most homeowners will not challenge the complaint, so they use default language. 

However, the generic arguments may not apply to your case. Your lawyer may be able to successfully argue against all of the allegations made by your lender. By arguing against a complaint, your lawyer may be able to stall the foreclosure for months, or the lender may begin the foreclosure proceedings again. In other cases, the lender may determine that it is not worth proceeding with the foreclosure and work with you for a loan modification.

Deed in Lieu

When a homeowner is facing foreclosure, he or she can sign the deed to the home over to the bank voluntarily. This is typically not the best option for those facing foreclosures. Lenders generally are not willing to agree to take a deed in lieu of foreclosure. They would need to pay any subsequent mortgages or home equity lines of credit off before they could even properly execute a deed in lieu. Proceeding with the foreclosure process also allows the lender to verify that the homeowner is truly in financial distress. Deeds in lieu of foreclosures are often not accepted unless foreclosure will happen very soon, or the owner has put his or her property on the market for several months and not been able to sell it.

File for Chapter 7 Bankruptcy

Many homeowners facing foreclosure determine that filing for bankruptcy is their best course of action. Filing for any type of bankruptcy will immediately stop the foreclosure process. Many individuals file for Chapter 7 bankruptcy, Which allows the homeowner to dissolve all of their debt and wipe out the majority of the responsibility to pay off the debt. Filing for bankruptcy gives a homeowner between 45 and 75 days to develop a plan for avoiding foreclosure. The time frame depends on your local bankruptcy court judge and your lender’s timeline.

Not everyone has the right to file for a Chapter 7 bankruptcy. Instead, the applicant must prove that his or her income and assets are below the Pennsylvania household’s median income level. If you do not qualify for a Chapter 7 bankruptcy, you will likely be eligible for a Chapter 13 bankruptcy. Your lawyer will be able to review your financial situation and advise you on which type of bankruptcy will provide you with the most benefits.

File for Chapter 13 Bankruptcy 

Chapter 13 bankruptcies are often referred to as reorganization bankruptcies. This type of bankruptcy will work with a bankruptcy trustee appointed by the court to reorganize your debt and create an effective payment plan. If you follow the payment plan and make payments according to it, you will permanently stop the foreclosure. At the end of chapter 13 bankruptcy, you will walk away free from the majority of your debt.

Contact a Philadelphia Bankruptcy Lawyer

If you are unable to make your mortgage payments, you are not alone. The experienced Philadelphia bankruptcy lawyers at the Law Offices of Cibik & Cataldo are here to help. We will review your case and provide you with experienced legal advice regarding your best options. Contact us today to schedule your free initial consultation.