If your lender serves you with a foreclosure complaint in Louisville, KY, you only have 20 days to file an answer. If you don’t, a default judgment may be issued. A mortgage company often starts the foreclosure process on a single-family home when you are about 60 to 90 days overdue. Interestingly, there are many different ways to handle a foreclosure proceeding. However, always be sure to use a qualified Louisville Foreclosure attorney.
You have to decide to save the home or allow it to go back to one of several methods. The method you choose may allow you to avoid the tax liability or debt for the deficiency. Some foreclosure defenses are more profitable than others. Some foreclosure defenses include suing the bank or suing the debt collector back. The law firm for the bank or the lender rarely explains your best options or legal issues to you. They want you to profit them.
If you wish to save the home, you have options. The options are to file an answer to the foreclosure proceeding, attempt a mortgage modification, or submit a Chapter 13 bankruptcy and catch up on the payments. Even if you wish to sell the home, filing bankruptcy or an answer and discovery often gives you time to sell the property or find another home. Our law office does just that.
Choosing a Foreclosure Attorney
If you want to let the home go back, you might need to delay the foreclosure proceeding to short sale the house or find another home. Filing an answer or bankruptcy will typically give you the time you need to find other housing and avoid tax and deficiency problems. You will find that many people offer solutions to difficult decisions for your foreclosure problem. However, most of those “experts” are only looking to make a profit from their answer to your foreclosure problem.
Additionally, many solutions are scams from people who claim to be experts. A person who was just released from prison can buy a badge from some agency and claim to be an expert. But they don’t earn the knowledge by doing thousands of cases as a foreclosure attorney does. Many scam artists claim to be an expert at saving homes from foreclosure. These experts are often only looking to steal from homeowners. They often make promises to get a short sale or mortgage modification, but usually, they just take your money.
Almost every mortgage company offers free loan modification or workout programs. So, you don’t usually need an outside service to do a modification or workout. However, you do need time to get it done.
Foreclosures and Short Sales
Short sales are definitely an alternative to foreclosure. With this alternative, you or your realtor do much of the work to sell the property for the mortgage company. However, it might take a long time to find a buyer. Also be aware that a short sale cannot be done if there are several liens like a second mortgage, judicial, or tax liens. The bank may not need more REO property, but it also does not have to accept a short sale. In fact, you might do a lot of work just to get a refusal. Thankfully, there are local real estate agents who specialize in short sales for Freddie Mac, HUD, and government foreclosures.
A short sale has a slightly smaller effect on your credit and getting a mortgage later. Notice I say a slightly lower impact on your credit. When you don’t pay the full amount of the debt on time, it always affects your credit. The short sale option is just slightly less damaging than a bankruptcy by about 25 points. But, be aware that short sales still give you a 1099 tax problem. In fact, even real estate agents cannot predict the price of the tax bill. Never-the-less, the IRS requires each mortgage company to claim the tax loss and file 1099. However later, this may or may not cause an income tax problem for you. Also, the mortgage company may or may not forgive the deficiency. Instead, they often they require you to sign a new debt.
Homeowner Foreclosure Scams
Beware of strangers that offer to purchase your home. Unfortunately, selling your home to a stranger is usually a foreclosure scam in which this person simply evicts you or charges you rent when the best alternative is to call a good bankruptcy attorney and stay in the home. However, as long as the deed is in your name, you generally have the right of possession.
Also, be wary of foreclosure rescue companies who claim that they are helping you. They might even ask you to send them mortgage payments! Of course, this is all at a substantial fee to you. However, unless they are a licensed attorney they cannot file documents in court. Instead, they might even send you forms to file yourself. However, they rarely delay the sale any more than if you did nothing. Or, they might recommend that you see a bankruptcy attorney only days before the sale. In either case, the home sells anyway. Given these options, I assure you that a licensed foreclosure lawyer is far less expensive.
If the auction takes place, you are no longer able to save your home by filing Chapter 13. After the sale happens, your only recourse is to redeem the property by repaying the purchaser what he paid for the property. Plus, he also gets a small profit. The person who wins the auction owns the home from the moment the auction is over. No bankruptcy or foreclosure attorney can reverse a Kentucky foreclosure auction. The only exception is redemption.
You must file Chapter 13 or Chapter 7 before the auction sale, or the house belongs to a new owner after the auction. If an auction is ordered, a judgment is entered, and you lost the lawsuit, you have a limited time to appeal a verdict. After it is sent to the commissioner, the only option left to stop the sale is bankruptcy or asking the mortgage company for mercy. Usually, the lender has no mercy.
Louisville Foreclosures and Bankruptcy
Your Louisville foreclosure defense is to file bankruptcy. If you file Chapter 7, you can delay the sale for what is often at least 4-6 months. Chapter 7 only allows you to keep about 25,000 in equity for each person on the deed. Chapter 13 will enable you to catch up on a mortgage. You only have to catch up on the mortgage to keep a home in Chapter 13. But in Chapter 13 you have to repay:
- Your best effort in repayment. If the creditor has to tighten his belt, you must tighten yours.
- What it takes to repay secured creditors get them up to date and repay priority creditors
- What if Chapter 7 was repaid.
Both Bankruptcy chapters will stop a foreclosure temporarily. Chapter 13 allows you to keep the home by catching up on the mortgage permanently.
Foreclosures and Surrendering the Home
Doing nothing means your home typically will be sold by the Jefferson County Commissioner. Doing nothing is not planning the foreclosure process. It is just letting it happen to you. A foreclosure sale will keep you from getting a mortgage for at least three years and up to 7 years for conventional mortgages. A Bankruptcy will have a smaller effect than the foreclosure proceeding, but it will still keep you from owning a home for two years. Bankruptcy avoids the tax problems which a short sale or surrendering a home does not prevent.
Homeowners who simply walk away from a home are still liable for building code violations and sewer costs. Until the house is out of your name, you remain responsible for property taxes, lawsuits for injuries that happen on the property, and building code citations. There are ways for homeowners to surrender foreclosure property that avoids tax and deficiency liability. Use a Louisville Foreclosure Defense law firm who helps you plan it, so you don’t have a tax liability or a deficiency debt.
Foreclosure Attorneys and Your Options
Homeowners who get served with a foreclosure action by the Sheriff must be certain to talk to an attorney to talk about your options. A real estate agent is not a lawyer and cannot give legal advice. The foreclosure rescue company usually is not an attorney and cannot appear in court, sue the bank back, or give you legal advice. Even if they call themselves a “law group,” they are not lawyers. Google isn’t a lawyer either. A qualified lawyer should cover all of your options in a free consultation.
As time goes by, you lose choices and options. People often have a foreclosure because a disaster happened. At other times their expenses simply exceeded their income, and they need a fresh start. Your duty to yourself and your family is higher than your obligation to repay the bank. The bank won’t tell you how to sue the bank back. Instead, the bank will only give you the choices they want you to make, such as surrender the property, pay the account off, or pay it up to date.
More Louisville Kentucky Foreclosure Options
If you have had a disaster or if your budget has more going out than coming in, then you probably need to file a bankruptcy to make your home mortgage affordable. A short sale will not usually give you the fresh start you need if you need to cure a negative budget. Like a sinking boat that has more water coming in than going out, your financial ship has to sink, if you have a negative cash flow.
Until you get a positive cash flow, even letting the home go back will not solve the financial problems you have. Bankruptcy offers you the chance to restructure your budget, which other options simply don’t do. Bankruptcy allows you to keep or let the home go back while putting you into a budget in which you are able to afford living.
Do you find yourself facing foreclosure? Contact my office right away to start the conversation. Nick C. Thompson, Attorney: 502-625-0905