Things to Think about While in Foreclosure
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by: Michael Suchoparek
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Unfortunately, many American households are in the foreclosure process. Unbeknownst to most of these households, there are many options available them that they may not be aware of.
Probably the easiest way to save your home if you are in foreclosure is to file a Chapter 13 Bankruptcy. By doing this, you can stop the impending foreclosure and cure the amount you are behind over the next 60 months rather than the few months before your house in foreclosure. Moreover, no more interest or penalties will accrue while you are under bankruptcy protection. As an added bonus, you will wipe away your credit card debt, medical bills, and judgments while being able to keep your house.
In certain circumstances in a chapter 13, you can get rid of your second mortgage or your Home Equity Line of Credit (HELOC) by filing bankruptcy, which will help you make smaller payments on the house in the future. This is one of the benefits of the new bankruptcy law that a highly trained Colorado attorney can help you with. Not every state has this option so give us a call before the law changes and we can see if this is an option for you.
If a chapter 13 bankruptcy is not an option for you, you can modify your mortgage in some circumstances. A loan modification seeks to avoid foreclosure in Colorado by negotiating with the lender to modify the terms of your loan. This option makes sense in a situation where a homeowner has experienced a decline in income and can no longer afford the original loan but could afford the payments with a little adjustment. Examples of loan modifications include lowering the interest rate, extending the loan period, or adding the delinquent portion and fees back onto the principal of the loan to be repaid overtime. However, if your foreclosure date is fast approaching, there may not be time for this option.
You may also propose a repayment plan to your mortgage company. Oftentimes, a repayment plan is better suited to a homeowner who has had a short-term financial hardship but is now getting back on their feet. Although a homeowner is recovering, they may be several months (and thus several thousand dollars) behind on their mortgage payments and they need time to bring this amount current. Once a Colorado foreclosure has been initiated, a lender often will not accept any further payments less than the entire delinquent amount (this is so that they do not jeopardize their rights under the current Colorado foreclosure proceedings). A repayment plan requests that the lender stop the Colorado foreclosure process and structure a repayment schedule in a more lenient fashion to allow the recovering homeowner time to catch up on their loan and save their home.
You may also persuade your mortgage company to offer a forbearance. A forbearance is a request that the lender stop proceeding any further with the Colorado foreclosure for a short period of time. This is usually done in conjunction with other relief efforts. For example, a lender would issue a forbearance while the homeowner tried to sell their home to cure the debt via a short sale.
A short sale has many misconceptions in Colorado. First, a "short sale" is a solution when the homeowner is "upside down" in their home due to a decline in the local real-estate market (meaning they owe more on their home than it is worth). By doing a short sale, the homeowner is asking the lender to discount their mortgage principal to a level that can be discharged by selling the home at market value. In other words, if the homeowner owes $210,000 on their mortgage, but the home is only worth $200,000 due to current real estate conditions -- the homeowner would request that the lender accept the $200,000 (less closing costs) to payoff the loan. To complete a short sale, the homeowner must find a realtor or service that will be able to market their home as a short sale (often with reduced commissions) and is skilled at competently following up with the lender to handle all the details. However, please keep in mind that if there is deficiency from what you sold the home for from what was owed on the loan, you will be held liable. Many people do not realize this. However, this is something that you will have to deal with at some point.
Finally a Deed-in –Lieu is another option if available. Under a "deed in lieu" workout, a homeowner surrenders their property to the lender in exchange for forgiveness of their mortgage. The borrower also avoids the public notoriety of a Colorado foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure in Colorado.
As you can see, there are many options available while in foreclosure to save your house or get out from the mortgage. However, only a qualified Colorado Attorney will be able to explain all your options to you.
About the Author
Michael Suchoparek is a Bankruptcy Attorney in Denver, Colorado with the Law Firm of Weselis & Suchoparek LLC, The Fast Filers. Please visit his website at www.TheFastFilers.com
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