Sometimes it’s hard to find relief for your debt even after you have been the victim of the foreclosing process. The sad fact is that even such a drastic resolution doesn’t always ties up all the loose ends. Occasionally, you will end up owning money to your mortgage holder even after the property has been sold off. What happens in the aftermath is, these days, thankfully a lot less drastic than it used to be. Instead of being sent straight to debtor’s prison, you are protected by anti-deficiency laws. When it comes to understanding anti-deficiency laws, a bit of research is in order.
Understanding Anti-DeficiencyLaws is Easier Than Anti-Deficiency
ccasionally, there is a discrepancy between the balance of the mortgage and the price that a foreclosed property nets at auction. This means that, theoretically at least, you still owe the remaining amount of money to the holder of the mortgage. This imbalance is known as a deficiency. If not properly addressed, it can hang over your head for a very long period of time. However, some jurisdictions do offer you a way forward out of your present trouble.
Some states have passed special anti-deficiency laws. The purpose of these laws is to protect debtors from being sued by the mortgage holder for the rest of the money that may be left over after all of the property covered under the foreclosure process has been concluded.
Anti-Deficiency Laws Are a Life Saving Measure for Suffering Debtors
States that have adopted anti-deficiency laws offer a measure of life saving protection to debtors. Under the terms of the average anti-deficiency measure, the holder of the mortgage can only penalize a debtor on the property that is expressly covered within the terms of the mortgage. This means that, even if the market value of the property has plunged below the amount of the mortgage, the debtor can not be forced to cover the shortfall. For example, if the value of the mortgage is $120,000, but the property only sold for $100,000, this means that you are not on the hook for the extra $20,000.
How Do Anti-Deficiency Laws Work?
Under the terms of the foreclosing process, if you fail to make your payments too many times in a row, the holder of your mortgage is entitled to seize the property and sell it to make back the money they are owed. Alternatively, they can hang on to the property and develop it or rent it out in order to see a return on their investment.
As noted above, there will often be a discrepancy – in legal terms, a deficiency – between the fair market value of the house and the actual selling price. If the amount of your mortgage is $500,000 and fair market value of your property is $400,000, there is a built-in deficiency here already. If the property should sell at auction for only $300,000, you will not be liable for the full $500,000. The shortfall between the value of the mortgage and the deficiency created by the sale of the property is covered under modern anti-deficiency laws.
What Can the Mortgage Holder Expect to Recover?
Under modern anti-deficiency laws, the holder of the mortgage will be under certain limitations when it comes to what they are allowed to recover via a foreclosure. If the mortgage you agreed to was intended to cover the purchase of the property you treat as your primary residence, you will not be responsible for any deficiency that arises. The holder of the mortgage is entitled to seize the property, sell it, and pocket the proceeds, but this is the limit of their ability. They cannot proceed to sue you for any shortfall that exists between the auction price and the market value of the property.
Anti-Deficiency Laws Give You the Freedom to Walk Away Clean
The ultimate purpose of anti-deficiency laws is to give you the chance to wipe out your debt and walk away cleanly. You will not be forced to labor for years to come under a series of punishing debt payments or wage garnishments. These laws are also designed to save you from the hassle of having to file for bankruptcy in order to escape immediate payments for any amount that a court declares as a deficiency.
Which Areas Will Not Be Covered Under Anti-Deficiency Laws?
It is important to keep in mind that anti-deficiency laws will not be able to protect you under every single circumstance. For example, these laws are not designed to give you any protection for any extra home equity lines or second mortgages you may have taken out to cover your expenses. You cannot expect any protection for your property if you are not currently using it as your primary place of residence.
Foreclosure and Bankruptcy
It isn’t as hard as you think to fall behind on your mortgage payments. The loss of a job can put you behind in an instant. You can also just as easily fall victim to an illness or injury that your insurance company refuses to pay out the full amount of coverage on. Not every person – in fact, hardly any person – that falls behind on their mortgage should be looked at as a deadbeat or financial delinquent. Falling behind on your mortgage payments exposes you to a world of headaches, financial and otherwise. If you fall too far, you may be subjected to a series of penalties, including foreclosure.
How Are Foreclosure and Bankruptcy Related?
You may be wondering what your alternatives are if you are warned by your mortgage holder that the foreclosing process is about to begin. As it turns out, there are several that you may consider as a way forward from your present unfortunate situation. In some rare cases, you may be able to come to a compromise solution with the holder of your mortgage. For example, they may agree to a short sale of the property or a modification of the original loan. However, in most cases, they will not be so agreeable.
What you should realize is that it takes time for the foreclosing process to begin. You will normally have two or three months to make back payments before the holder of the mortgage makes up their mind to act against you. During this time, if you cannot make the payments, you can still suggest other alternatives. These may range from an extension on the mortgage to a deed in lieu of foreclosure. If all else fails, you can close the link between foreclosure and bankruptcy by applying for Chapter 13 protection.
You Can Use a Chapter 13 Bankruptcy to Save Your Home
There are certain advantages which you will be entitled to have recourse to if you decide to file for Chapter 13 bankruptcy protection. For example, one of the chief protections afforded by Chapter 13 bankruptcy is the scope that it gives you to set up a schedule for paying off the debt that has accumulated due to defaulting on your mortgage. In most cases, you will even be allowed to propose the exact length of time that you will take for making these repayments. As long as you can commit to such a schedule and manage to observe it to the letter, you will be allowed to keep your property.
Chapter 13 Bankruptcy Can Help Eliminate Second and Third Mortgage Payments
Filing for bankruptcy under Chapter 13 conditions can also help you to phase payments that are due on a second or third mortgage. This type of protection typically allows a bankruptcy court to consider second or third mortgages as a form of unsecured debt. What this means for you is that unsecured debt is a matter of very low priority and will usually not have to be paid back. However, this will only be the case if the first mortgage on your home contains the whole of your property value. If this is so, then the second or third mortgages will have no further value to be secured or collected.
Bankruptcy May Be Your Best Choice to Save Your Home and Your Credit
You should be aware that filing for bankruptcy will certainly have some adverse effects on your credit. However, the damage will not be anywhere near as severe or long lasting as the negative effect that follows after having your home foreclosed on. Not only will being foreclosed on have a ruinous effect on your credit, but you may also still be saddled with the leftover debt.
Bankruptcy May Carry More Advantages Than Disadvantages
Even if filing for bankruptcy doesn’t save your home, you are probably better off having done so. You may no longer have your home, but you will at least be free of mortgage debts and tax liability. You’ll have a huge monkey off your back and will be able to plan for your future. This would not be the case if you simply allow yourself to be foreclosed on without trying to fight the process.
In addition to being in debt, being foreclosed on may mean you may never be able to even consider buying a home in the future. Most mortgage companies will not even consider you a candidate for a new loan if you have been foreclosed upon in the past. Bankruptcy, although it also carries its fair share of disadvantages, will at least allow you to start again with a clean slate. If you are faced with a choice between being foreclosed on or filing for bankruptcy, it may be wise to choose the latter course of action.
Foreclosure Statutory Redemption
It can be hard to remain a home owner in the modern world. There are so many perils to face that can stack up against you when you least expect it. Defaulting on a mortgage payment is every home owner’s nightmare, and for good reason. The thought of interest payments, late fees, and even being foreclosed upon is the stuff of nightmares. On top of it all, it’s far easier to miss a mortgage payment than you may think. A lay off from your job or a serious illness that comes with a high insurance deductible can knock you off your feet. If the worst should occur and you lose your home, what then?
Can Foreclosure Statutory Redemption Laws Help You Regain Your Lost Home?
There may be a chance that you could be able to regain the home you have lost due to the foreclosure process. A special set of foreclosure statutory redemption laws exist in some states. Thanks to these statutory redemption laws, you just might be able to claw back into a position to where you legally regain control of your property after first coming to a compromise with your creditors.
Who do You Have to Deal With in Order to Reclaim Your Property?
What’s the catch? Statutory redemption laws allow the person who was foreclosed on to reclaim their property under one condition. You need to be able to pay the full amount of what your property sold for at the foreclosure sale. You will also need to pay a certain rate of interest, known as statutory rate of interest, to the person who bought the property at the sale. This person will, in almost every case, be the holder of your mortgage or their appointed trustee.
How Does the Statutory Redemption Process Work on Your Behalf?
The statutory redemption process will begin when you make a special demand, which must be made in writing, to the person who purchased your property at the sale. This demand will consist of a special request for a full statement of the monetary amount that will be required from you if you are going to reclaim your property. In other words, you are asking for an invoice that you can then determine whether or not you are able to pay.
After You Receive Your Statement, It’s Up to You to Pay It Off
After the person who bought your house receives this demand, they will have a certain amount of time to send you a fully itemized statement of the amount that is required. The time limit for them to do so will vary according to the state you’re in, but will generally be about 10 days. Once you receive this statement, you can make up your mind as to whether or not you intend to pay the bill and reclaim your home. Depending on state regulations, you may or may not have to foot the bill for any renovations that have been made to the property during the time it was in the hands of the purchaser.
If You Are Not Able to Pay, You Will Forfeit Your Claim
As noted above, once you have received your statement, it’s up to you to pay or not pay it. If you are unwilling or unable to pay off the statement, you will have to forfeit any and all future claims on the property. The person who purchased the home at the sale will then be in possession of the title, as well as all rights and other interests in the property. If you are still living in the home after the sale has been concluded and you have forfeited your claim, you will likely be evicted. In any case, you now have no choice but to vacate the property or face prosecution on trespassing charges.
How Long Do You Have to Use the Statutory Redemption Clause?
Depending on whether or not you live in a state that has a provision for the statutory redemption clause, you may have anywhere from 30 days to a full two years to make use of it. In many states, there are special strictures on the statute that limit your ability to have recourse to it. For example, certain states will allow a judge to reduce or even revoke your right to use the statute if it is discovered that you have abandoned the property.
It’s Important to Understand Your Statutory Redemption Rights
Being foreclosed on can be a painful and disorienting experience. It’s important that you fully understand all of the rights that you possess. It’s an excellent idea to meet with an attorney who can help you to understand and make full use of your statutory redemption rights. This is an excellent chance for you to reclaim your property and rebuild your life.
Missing your mortgage payment too many times in a row can be cause for serious concern. If you feel you are coming perilously close to losing your home, you should know that help is available. There are several Federal laws affecting foreclosure that you may be able to have recourse to in order to save your home. While nothing is guaranteed, it’s still an excellent idea to gain more information about these laws and how they may be able to assist you in your time of greatest need.
Can Filing for Bankruptcy Help You Save Your Home?
Filing for bankruptcy may not be the first option you think about when looking for ways to save your home. You are most likely dreading the effect that a bankruptcy may have on your credit. It’s certainly not a move you would make unless you were absolutely sure of facing foreclosure. But keep this mind: Filing for bankruptcy will automatically stay any foreclosing action that may have been initiated.
Your Level of Bankruptcy Protection Depends on the Type
Of course, the stay may not be permanent. Whether it is lifted or not will depend on whether the holder of the mortgage has any equity to speak of in the actual property. If you have filed for bankruptcy under Chapter 11, the stay may be lifted either because you don’t really have any equity of your own in the property or because the motion does not allow for adequate protection of any equity that the mortgage holder does have in that property.
Filing a Straight Petition for Bankruptcy is Also Possible
If you have filed under a straight petition for bankruptcy, in the form of a statement in which you ask for the summary discharge of all your debts, your claim may be even more precarious. In this case, the holder of the mortgage will normally be allowed to proceed with foreclosing on your home if it turns out that you definitely have no equity in the property. Even if you do possess some level of is equity, your home could still be sold by the bankruptcy court.
How Can the Soldiers and Sailors Act Help Save Your Property?
If you are currently serving in our nation’s armed forces and received your mortgage before you entered the military, you may be entitled to a special level of protection under the Soldiers and Sailors Relief Act of 1940. Of all the Federal laws affecting foreclosure, this may be the one that proves most useful to you. This special Act allows a service member to set aside the default judgment that immediately precedes the opening of foreclosing proceedings. The onus will then be on the holder of the mortgage to prove that the person who filed the claim is not a currently serving member of the military.
You Will Need to Be Present or Represented at the Hearing
If you are currently are serving in the armed forces, the mortgagor is in the armed services, you will have to be physically present or represented by an attorney at the hearing. This means that certain forms of the foreclosing process, such as point of sale, will not be permitted. It also means that if the court should rule that your ability to pay off your mortgage has been adversely affected by your service in the military, you will be granted an indefinite stay against all foreclosing proceedings while you are currently serving.
Is It Better to File for Bankruptcy or Under the Soldiers and Sailors Act?
You may be wondering which of these two major alternatives is the right one for you to make use of in your time of need. If you are a service member, the Soldiers and Sailors Act may well be your best bet to get the time you need to pay your debts. This is a far better move than filing for bankruptcy. But if you are not a currently serving member of the armed forces, you will obviously not be taken seriously if you file under the Soldiers and Sailors Act. If you have exhausted all of your other resources and bankruptcy is the only way to gain breathing space, then you may as well take the plunge.
Filing for Bankruptcy is Better Than Being Foreclosed On
You can take some solace in reflecting on the fact that filing for bankruptcy is at least superior to being foreclosed on. Although it will certainly do damage to your credit rating, this damage will be nowhere near as permanent as it would be after a foreclosure. Most lenders won’t even consider you for a future home loan if they see that you have been foreclosed on in the past. With bankruptcy, you will at least have a fresh slate to start again from.