Stopping a Foreclosure in Louisville, Kentucky
We file Chapter 13 bankruptcy cases which allow you to stop Louisville Kentucky foreclosures. Filing an answer and discovery in your foreclosure gives you additional time to do a work out or mortgage modification. Either a Chapter 7 or a Chapter 13 will stop a Kentucky foreclosure. But a Chapter 7 will only tend to delay it and avoid the liability. A Chapter 13 can be used to catch up and cure an arrearage. You often need additional time to:
- Rent the home.
- Sell the home.
- Attempt a mortgage modification.
- Short sale the home.
- Reside in the home while you search for another home.
- Do a Deed in lieu and give the home up.
- Do a workout agreement to put the arrearage onto the principle.
- A cash for keys option may be available to pay you money to surrender the home.
If those items are not your goals there are still other considerations. You may need to:
- Do a Chapter 13 to catch up the payments or strip away a second mortgage that has no equity.
- Do a Chapter 7 or 13 to avoid tax problems and deficiency from a foreclosure.
- Obtain a mortgage modificiation.
Here is our PowerPoint presentation from October 2016 for foreclosure attorneys on how to force mortgage companies to properly process a mortgage modification. NBI broadcasted this nationwide on CFPB and Regulation X requiring lenders to properly process mortgage modification applications.
Why avoid a default personal judgment
When a homeowner is served with a foreclosure the home rarely sells for enough to pay the mortgage. In Kentucky under KRS 426 the deficiency judgment is entered automatically if the sale proceeds are not sufficient to cover the debt owed. In Indiana under Section 32-29-7 the borrower must be personally served with a separate deficiency lawsuit. Once a deficiency judgment is entered the lender may attach wages, bank accounts, issue a judgment lien against other real estate and any personal property of the debtor. We have seen furniture taken from a home and autos being seized. Seizing furniture is rare but it has happened. The lender is required by IRS regulations to then file a 1099-C.
Avoid the 1099-C tax problem
When the lender charges off a debt a 1099-C is turned into the IRS to report the deficiency as income. The amount charged off becomes an IRS debt that may reduce social security benefits and tax refunds. All of this can be avoided if the homeowner will file bankruptcy prior to the sale of the home. The filing of a Chapter 7 bankruptcy will delay a foreclosure sale and may allow the homeowner additional time to modify a mortgage more easily. The filing of a Chapter 13 will allow a homeowner to catch up the payments or may strip a second mortgage. A discharge under either a Chapter 13 or 7 will avoid any deficiency or tax problem.
All these options allow you extra time in the home to sell it or live there. Please beware of Rescue scams claiming to help you stop a foreclosure in Louisville, KY and here is a general timeline of the foreclosure process and the Newsweek article about when it is time to walk away instead of defending the foreclosure.
Delaying the decision means fewer foreclosure choices
Ignoring a foreclosure or waiting too long to stop a home foreclosure is fatal. It increases the legal expenses and arrearage. And it makes it more likely you will lose your property in foreclosure if you don’t defend the complaint. You have far more choices and less expense if you get help early. Waiting until a week before a home foreclosure sale means you have lost options to avoid the sale. You have at least six different methods to avoid a foreclosure in the early stages. The Guide to Foreclosure in Louisville Kentucky is available.
To stop a home foreclosure you can see each section in our manual for explanations of how to:
- Get a new house loan (there is help in some cases and at prime rates)
- Pre-Foreclosure Mortgage Workouts
- A Chapter 13 Bankruptcy can strip a second mortgage
- Short Sale or Straw Purchases
- Deed in Lieu of Foreclosure
- Fight the foreclosure
Each method to avoid foreclosure has different advantages and costs. We can help. We are happy to give you a free foreclosure consultation in our office to discuss what can be done to avoid your foreclosure. If you have had a lawsuit filed against you then seek an attorney immediately to answer the lawsuit or file a bankruptcy to save your home.
Our Foreclosure Strategy to Stop Louisville Kentucky Foreclosures
We normally analyze a Foreclosure with the following strategy. Does the home owner owe more than what the property is worth? If so how do we reduce it? If a home mortgage is substantially more than a home is worth, the home owner often needs to eventually let the house go back. This can be accomplished by filing an answer, discovery and bankruptcy. This allows the homeowner the longest period of time in the home and avoids the tax debt. If the home is worth keeping, the homeowner should either obtain a modification or catch up a mortgage in a Chapter 13.
Surrendering a home
Sometimes property may not meet the needs of the home owner. In these cases, homeowners simply need time to find another house. During this time the Homeowner may sell the property, rent it out, or reside there until the home transfers.
Homeowners can sometimes refinance in a Chapter 13 or the homeowner may obtain a mortgage modification while they are in a bankruptcy. However Mortgage modifications rarely leave a homeowner better off according to a study by congress. If a homeowner has a reasonable home and mortgage but repayment was a temporary problem they probably need to file a Chapter 13 which can allow homeowners to take up to 5 years to catch up a mortgage.
Servicers may not be helpful
Complicating all of this is the fact servicers are paid for every letter and phone call while the loan is in default. Servicers earn a portion of the late fees they collect. The longer you are in default the more they earn. Since the servicer earns more from loans being in default than up to date, documents are often lost or opportunities to rehabilitate the loan are often missed If you are in a foreclosure call us 502-625-0905. Please like us on Facebook, Google Plus, Twitter or LinkedIn and help spread the word.