Archive for the ‘Bankruptcy Petition’ Category

Bankruptcy, Deed In Lieu Of Property Foreclosure, As Well As Deficiency Judgments

Tuesday, September 27th, 2011

It’s very typical and very straightforward for homeowners to become confused about different choices to keep away from foreclosure. With so a lot of distinct approaches available, it becomes difficult to keep the final goal of each and every straight. As an example, homeowners could file bankruptcy to purchase additional time, but desire to give their residence back with a deed in lieu, but are also worried about being sued for a deficiency judgment afterwards.

You’ll find a number of concerns to this one group of procedures to . First the foreclosure lawsuit filed within the courts followed by the bankruptcy petition will need to be considered. Then the turning more than of the home to the lender along with the possibility of a deficiency judgment is an entirely separate aspect, while it’s going to also relate to the bankruptcy filing as well as the dismissal of the case.

To start with, the foreclosure procedure that the bank initiated against the homeowners has been stopped by the bankruptcy filing, as long as it was a Chapter 13 bankruptcy and also the mortgage was included. The foreclosure is stopped through the legal mechanism called an “automatic remain,” which puts any collection activities on hold though the courts consider the bankruptcy. Filing a Chapter 7 to liquidate debts, although, doesn’t have an effect on the status of the residence loan or put the foreclosure on hold, given that it’s a secured loan and can not be discharged entirely through bankruptcy.

The automatic stay of any collection efforts in a Chapter 13, nonetheless, puts all foreclosure proceedings on hold until the bankruptcy is dismissed either by the homeowners or by the court. If the homeowners are able to complete the payment plan over 3-5 years, they are going to have paid back the arrears on the mortgage and reinstate the loan, and the lender will not have the ability to sue for foreclosure any longer. Nevertheless, if the homeowners fall behind on the bankruptcy payments, the bank will most likely have the stay released and proceed with the foreclosure. At this point, the owners won’t have the protection of bankruptcy to rely on to stop foreclosure once more.

In terms of giving the residence back towards the bank through a , this can not be accomplished although the house is nonetheless tied up in the bankruptcy courts. Homeowners can start to negotiate a deed in lieu using the lender, but they will not have the ability to transfer ownership towards the mortgage corporation without voluntarily dismissing the bankruptcy. For this reason, it can be very best to have the deed in lieu transfer completely negotiated using the lender just before releasing the stay. Otherwise, if the deal falls through, the homeowners will not be able to go back into bankruptcy to defend themselves against the foreclosure.

For a bit of very good news, once the deed is transferred back towards the lender, there is certainly no opportunity for a deficiency judgment against the homeowners. This is for a couple of reasons. First, the bank accepts the deed as payment in full of the mortgage loan, so there’s no actual deficiency. The residence is just not auctioned off for much less than the total quantity owed — the bank accepts ownership as payment in full instead of going by means of with the full foreclosure. Second, the deed in lieu is often a direct transfer of the property with no real funds involved — there’s no transaction where the bank could claim they are owed much more dollars than they received from the deed transfer. Unless the homeowners agree to pay far more (which they need to not have to do), the bank has no genuine claim to anything added.

When homeowners are attempting to stop foreclosure from taking their property, there may well be various strategies they are going to need to look at. Some of them will compliment one another, for example the deed in lieu precluding the possibility of a deficiency judgment, while others will counteract one another, for example the impossibility of transferring the home by means of a while in bankruptcy. Homeowners should attempt to study these related aspects of diverse solutions just before taking the step of going through with any of them.

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