Initially, you should:
1) Confirm that the party attempting to foreclose on your residence is in fact the mortgage holder. Recent innovations in the packaging of mortgage securities may make it difficult for the lender to establish its right to foreclose.
2) Determine if the value of your property exceeds the California homestead exemption amount.
Filing for Chapter 7 bankruptcy may not be your best option if the aforementioned options have proven ineffective. To avoid foreclosure, you must continue to make your mortgage payments. If you are in arrears on your mortgage payments, the lender may petition the court to revoke the automatic stay and proceed with the foreclosure.
A mortgage consists of two components: the promissory note and the lien. In bankruptcy, the promissory note portion of the mortgage (the amount you owe) will be discharged, but the lien portion of the mortgage (which grants the lender the right to foreclose) will survive, thereby granting the lender the right to foreclose. However, Chapter 7 bankruptcy may help you retain your home by erasing your other debts, thereby freeing up funds to catch up on your mortgage payments.
You may choose to reaffirm the promissory note, which means it will survive your bankruptcy and you will continue to be responsible for this debt even after your other obligations are discharged. This is not the best course of action for the majority of individuals.
In a Chapter 7 bankruptcy, tax liens, mechanics' liens, and liens created with your consent will not be eliminated. If you used a home equity loan as collateral for loans other than your mortgage, those creditors also have a claim against your property.
However, if a creditor recorded a lien on your property after prosecuting you and obtaining a judgment, you may be able to remove the lien without paying the creditor anything. A Motion to Avoid a Judicial Lien must be filed. You may also be able to cancel additional liens, but you must file a separate lawsuit.
Will the trustee in bankruptcy sell your home?
If there are insufficient funds to pay unsecured creditors, it is unlikely that the trustee will sell your residence at auction. In order to determine if there will be anything left for unsecured creditors, the bankruptcy trustee will evaluate the distribution order of the proceeds from the bankruptcy sale:
1) First, to the mortgage lender to pay off the mortgage, then to the second party.
2) to lien claimants, then
3) to pay sale-related taxes, fees, and expenses, and then
4) to your unsecured creditors (subtracting your homestead exemption).
The trustee will sell your home if there are sufficient funds remaining to pay your unsecured creditors.
Consult your lender
Your lender may not want to go through the trouble of a foreclosure if you propose reasonable alternatives.
- Give you extra time;
- Decrease your regular payment, then increase it by the delinquent amount to make up for the shortfall;
- Prolongate the term of your loan;
- Short sale (selling the property for less than what is owed to the lender and requesting that the difference be waived).
You will increase your chances of receiving a positive response if you provide the lender with a well-researched and documented analysis of your financial situation, along with a detailed improvement strategy. When you make such an evaluation, you may conclude that mortgage modification is not in your best interest and that it makes no sense to continue paying your mortgage, even if your lender agrees to modify it.
" - https://www.affordablecebu.com/