When Should You File Bankruptcy When Facing Foreclosure, Eviction, or Repossession?
Often times after a foreclosure sale, eviction judgment, or car auction we receive a phone call from someone who thought, for one reason or another, that they had more time to act and protect themselves. Unfortunately, like any lawsuit or legal proceeding, timeliness to act is of the essence. With collection activities, if one does not act in a timely manner, they will lose their asset, and replacing the asset may prove to be most difficult in that the borrower/defendant is now a credit risk. Accordingly, it is recommended that when one is facing foreclosure, eviction, or vehicle repossession they reach out to an experienced bankruptcy attorney for legal defense strategies and necessary timing as well.
Once a mortgage is delinquent to the extent that foreclosure proceedings have begun, the homeowner is usually delinquent on other bills such as utilities, credit cards, and personal loans. Our lawyers realize that the last bill any homeowner wants to fall behind on is their monthly mortgage payment. Unfortunately, homeowners sometimes do not take any action toward their overall financial situation until the prospect of losing their home becomes a reality when a Complaint in Foreclosure is served upon them or even later.
Mortgage foreclosure is not just an overwhelming concept for a homeowner, it is a very costly one. Per Pennsylvania and New Jersey mortgage contracts, all fees and costs associated with the collection of the mortgage are the borrower(s) responsibility. Accordingly, the borrower is ultimately responsible for the lawyer fees for their lender’s counsel, filing fees, service fees, sheriff costs, appraisal fees, and advertising costs. Unfortunately, these fees can easily exceed ten thousand dollars and make catching up on mortgage payments more difficult for the borrower as the borrower delays taking any action.
Once a Bankruptcy is filed and the automatic stay is imputed, all collection efforts against the borrower, their home, and any other property is stayed or stopped immediately. In addition to the foreclosure litigation stopping, all fees and costs associated with the foreclosure litigation stop as well. Unfortunately, some continuously delay taking action in the form of filing bankruptcy or filing a defense to the foreclosure and the subject home sells in foreclosure. Because the home sells to what the law labels a “good faith purchaser for value,” the buyer of the property at sheriff’s sale or foreclosure auction is protected and the previous homeowner is unlikely to be able to recover the property once again. Accordingly, especially when dealing with a home (which has become more difficult and expensive to obtain), it is most important to act timely.
When facing eviction, a Chapter 13 bankruptcy is one of the debt relief options for staying the eviction hearing and establishing a repayment plan for back rent due. A Chapter 13 Plan allows a tenant to stay in the property and repay the back rent due over a period of three to five years while reducing monthly expenses related to other debts such as credit cards and personal loans. Chapter 13 is the most viable option where the tenant does not have a viable defense to the eviction complaint in Landlord/Tenant court or does not have the funds to pay towards any payment plan proposed by the Landlord. It is imperative that one considers or files a Chapter 13 before any judgment or consent judgment is entered against them and in favor of the Landlord. Because, under 11 U.S.C. Section 362(b)(22) once a judgment is entered against the debtor/tenant, the automatic stay protections afforded in bankruptcy are no longer available to the tenant.
Vehicle repossession usually occurs once a borrower is two months or more behind on payments. Repossession can occur without any notice to the borrower and often times the vehicle subject to the defaulted loan is taken with personal items in the vehicle. The vehicle is transported to a holding lot where it usually is stored for 7-14 days until it is auctioned and sold to the highest bidder. Once the vehicle is taken the lender can demand the amount behind on the vehicle plus repossession fees and costs or the lender may invoke an acceleration clause of the vehicle contract and demand the full amount due and owing on the vehicle, otherwise known as the payoff amount.
In February of 2021 the Supreme Court in the case of the City of Chicago v. Fulton decided that the automatic stay in bankruptcy does not actually require a lender to turn over a vehicle that was repossessed prior to the bankruptcy filing. Because the Supreme Court did not rule on the viability of the borrower filing a turnover proceeding to reclaim the vehicle and still require lenders to file a motion for relief to sell a repossessed vehicle; lenders, even in the aftermath of the Fulton decision, have returned the repossessed vehicle to the borrower in every case we have filed thus far. However, if the vehicle had been sold at auction, unfortunately, it would not be possible to reclaim the vehicle after that point and therefore action should and needs to be taken upon the default on the vehicle.
Contact the Bankruptcy Lawyers at Sadek & Cooper
If you are facing foreclosure, eviction, repossession, or are feeling overwhelmed with debt call 215-545-0008 or 856-890-9003 to schedule a meeting with Brad J. Sadek. Brad has assisted over 5000 satisfied clients throughout Pennsylvania and New Jersey and is Super Lawyers listed and A+ rated by the Better Business Bureau. For your convenience, you may also use the below scheduling link provided below.