The last few years have been rough for Americans and the entire world. Stocks have been very volatile, inflation is up, and political unrest seems to be dividing the country even more than ever. To make matters even worse Foreclosures have been increasing over the past few months. In this article, we will discuss the topic of foreclosures in America, with a special focus on the state of Florida.
WHAT IS A FORECLOSURE
A Foreclosure is a legal process by which a lender tries to recoup the property back from the borrower. This is usually caused by the borrower failing to pay their mortgage payments. If the borrower doesn’t pay their mortgage payments for a period of months, the lender may begin the Foreclosure process.
The highest rate of foreclosures in the United States was in 2010 with over 2,000,000 foreclosure filings.
WHAT IS THE FORECLOSURE PROCESS
The foreclosure process can vary depending on each state and usually follows a similar pattern. The process begins when the borrower misses a few months of mortgage payments. Each month the bank will usually notify the borrower, that he or she is behind on their payments and need to catch up. If the borrower does not pay their past payments in full then the next step will start.
There will then be a notice of foreclosure, called a lis pendens, that is posted with the county clerk in the county in which the property is located. This is the start of the foreclosure process and the lender declares that their intent is to liquidate the real estate asset.
The actual foreclosure process can take anywhere from 3 to 9 months depending on the state. Before, and during the Foreclosure, the borrower can try to negotiate with the bank if they want to try and keep the property. Once the foreclosure process is completed, the real estate asset will then be sold at auction, and the bank will keep the money made selling the asset from the auction.
After the house is sold or when the bank takes possession, the old homeowner will need to leave the property or will be evicted. This is pretty much the general process of foreclosure but each case will be different because of circumstances and the state.
STOPPING A FORECLOSURE
There are two ways one may stop, or at least delay the foreclosure process. The first way to delay a foreclosure is to file for bankruptcy. Upon the filing of the bankruptcy, an automatic stay is activated, which stops the foreclosure. In a Chapter 13 bankruptcy, the debtor may pay the arrearages of missed payments owed to the lender over a period of thirty-six (36) to sixty (60) months, and generally be permitted to retain the subject property. A Chapter 7 bankruptcy also possesses the benefit of the automatic stay, however, Chapter 7 usually will only temporarily stop the Foreclosure process.
A borrower may also apply for a loan modification, which may also temporarily delay the foreclosure. The borrower may seek certain concessions from the bank in the negotiation of a loan modification. The bank may agree to not only stop the Foreclosure process, but also reduce monthly mortgage payments, and interest rates, and provide that any arrears owing to the bank either be forgiven or placed at the end of the mortgage loan.
BENEFITS OF BANKRUPTCY
Two of the most popular forms of bankruptcy in America are Chapter 7 and Chapter 13 bankruptcy.
If you are planning to file for Chapter 7 bankruptcy, a benefit of this is that you can delay the foreclosure process. You may not be able to permanently keep your home, but you may be able to live in the home until the foreclosure process is completely finished, allowing the debtor additional time to secure alternative housing. After the bankruptcy is finished, one normally will not be liable for the mortgage debt, after the process is completed.
In a Chapter 13 bankruptcy, one may restructure one’s debts, and pay mortgage arrears over a period of up to sixty (60) months. Some unsecured debts may be completely eliminated and certain secured debts may be modified and reduced.
FORECLOSURES IN FLORIDA
It is estimated a foreclosure appearance on a credit report can lower the rating anywhere from 50 to 160 points.
HIRE AN ATTORNEY?
If you are having a financial hardship and think you may be at risk of losing your home, then it is a good idea to talk with an attorney who has knowledge and experience in bankruptcy and foreclosure law.
The attorney may advise you regarding the best options available to you, based on your individual situation and circumstances. There are many options available if you are facing foreclosure of your home, including:
- a loan modification,
- Chapter 7 bankruptcy,
- or Chapter 13 bankruptcy.
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