This article is written by Peters and Associates.
Question: My house is going to the auction block at 10 a.m. tomorrow. What are my chances of stopping the sale?
The only guaranteed way to stop a foreclosure sale that quickly would be to file an emergency bankruptcy petition. When a bankruptcy is filed, an automatic stay goes into effect, stopping all collection activity, including foreclosure sales.
Filing bankruptcy for the purpose of stopping a foreclosure sale is not a permanent fix, but it does allow homeowners to buy some time while exploring their options. Most of the time when people come to me to stop a foreclosure sale, their goal is to keep their home long-term. Using a bankruptcy to stop a sale often can bring a lender back to the negotiating table and add time to start, or continue, the loan modification process.
New in 2015, Nevada introduced the Mortgage Modification Mediation program, which forces lenders to negotiate face to face within a Chapter 13 bankruptcy. In addition, if you have more debt (other than the house’s first mortgage), bankruptcy can be a great option to stop the impending sale, gain time to help with loan modification or relocation, and eliminate your other debt as well.
If, on the other hand, your only debt is the house and you don’t want to keep it, remember that the statutory period for a deficiency judgment in a non-judicial foreclosure is six months from the date of the foreclosure sale if the loan was originated before Oct. 1, 2009. (Most mortgages in Nevada are non-recourse as of Oct. 1, 2009; see Nevada Revised Statute §§ 40.430, 40.455, 40.459, 107.080(5).)
In other words, if your lender does not initiate a lawsuit against you within six months of the foreclosure sale date, you are free and clear of the debt. However, if the lender does sue you within the statutory period, you can file bankruptcy at that time to eliminate the debt and lawsuit.
All of the above is specifically about stopping an immediate sale date on a home. When there’s more time, a reputable attorney may be able to stop or postpone a sale by making contact with the lender and negotiating a loan modification by submitting a full workout package containing the homeowner’s financials. At our firm, for example, we can stop most foreclosures without bankruptcy when we’re hired at least two weeks in advance of the sale date.
Please note: The information in this column is intended for general purposes only and is not to be considered legal or professional advice of any kind. You should seek advice that is specific to your problem before taking or refraining from any action and should not rely on the information in this column.