Defenses Against Foreclosure

If you're in danger of losing your home because of an inability to make mortgage payments, don't despair.

Both Chapter 7 and Chapter 13 bankruptcy can stop home foreclosure, repossession and lawsuits. Find a local bankruptcy lawyer to get protection today.

As more and more American homeowners default on their mortgages and risk losing their houses, judges and lawyers are discovering new ways to prevent foreclosure from forcing families out of their homes.

Experts who have studied the ways in which Americans react to foreclosure have noted that most people don't take action soon enough - that is, when they begin to realize that monthly payments are more than they can reasonably afford.

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With that in mind, here's how to tackle foreclosure with help from both traditional wisdom and the latest courtroom decisions to help you.

  1. Contact your lender.

    2. Many resources recommend contacting your mortgage lender as soon as you realize that you aren't able to meet your mortgage requirements. Taking action sooner, rather than later, will likely give you more leverage since your loan won't yet be in default.

    • Best Case Scenario: Your lender will work with you to devise a new payment schedule, arrange a short sale or recommend credit counseling to help you get back on track. You'll avoid foreclosure and may even manage to save your home.
    • Worst Case Scenario: Your original lender won't work with you because it has securitized your loan and sold it to investors. If this happens, you may have trouble tracking down the current holder of your mortgage, and should probably consider another course of action.
  2. File Chapter 13 bankruptcy to protect your home.

    3. The automatic stay in bankruptcy halts all legal actions, including foreclosures. By filing bankruptcy, you give yourself breathing room and a chance to get caught up on past payments so that you can receive your discharge and get a fresh financial start.

    • Best Case Scenario: The bankruptcy court cannot modify the terms of your mortgage, but it can help you in some important ways. First, it can give you a venue to air any grievances you've had with your lender or loan servicer (e.g. you believe your payments were processed incorrectly); second, it can stretch out balloon payments on your mortgage (so you're not responsible for them all at once); third, it can cram down (reduce) the amount of a second mortgage on your home, under certain circumstances.
    • Worst Case Scenario: You miss one of the payments scheduled in your repayment plan, which will lift the automatic stay and allow your lender to proceed with foreclosure proceedings. Alternately, you could wait too long to take action and be unable to file bankruptcy before foreclosure proceedings begin. Either way, you will likely have to consider another course of action.
  3. Fight your foreclosure in court with help from a bankruptcy lawyer.
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If you were unable for some reason to halt foreclosure proceedings, you can still fight them in a court of law. The July 2008 issue of the American Bankruptcy Association Journal notes that, as judges hear more and more foreclosure cases, they are accepting more and more defenses.

Because of recent FBI and IRS criminal investigations into the mortgage industry's handling, packaging and securitization of subprime loans, judges are apparently more open to the idea that lenders could be in the wrong in foreclosures.

  • Best Case Scenario: Your lawyer will be able to find technical or other grounds on which a judge is likely to dismiss your case. Foreclosures in the past year have been dismissed because lenders were unable to prove they held the note to mortgage loans, because banks failed to follow technical requirements for foreclosure paperwork, because lenders failed to modify loan terms according to court orders, because lenders violated consumer protection laws and for other reasons.
  • Worst Case Scenario: A judge will find that your foreclosure proceedings are valid and may move forward.

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