Unpaid debts can cause a homeowner to lose their home. Whether a debt is the result of a mortgage default, adverse court judgment, or tax lien, a creditor can attempt to take possession of a debtor’s home in order to get payment for all monies owed. In such a situation, a homeowner does have some recourse, such as negotiation, legal remedies, and even bankruptcy. Depending on the situation, there may an opportunity to discuss some kind of agreement (usually known as a workout agreement) to either stop the foreclosure effort altogether or at least get more time for the debtor before the foreclosure goes through. In pursuing negotiation, a debtor would be well served to have as much money as possible to apply toward any outstanding payments. Many states allow a debtor the right to redeem the property by paying the balance of the mortgage plus all foreclosure costs and fees. (Although the scope and availability of the right of redemption varies from state to state). Moreover, irregularities in the foreclosure sale process itself (lack of proper notice to the debtor, improper or no advertisement of the sale, etc.) or an abnormally low foreclosure sale price can sometimes be grounds to invalidate a foreclosure sale. In case of a mortgage issue, a debtor might also be able to challenge the mortgage agreement itself.Negotiation
State Legal Remedies
Federal Legal Remedies
If a federal loan is involved, especially a Federal Housing Administration loan, then the creditor must act in compliance with certain federal regulations and guidelines. Some of those directives include a mandatory consideration all possibilities short of foreclosure (loss-mitigation). The Fair Debt Collection Practices Act offers some limited possibilities. In a non-judicial foreclosure situation, debt collectors (businesses dedicated to collecting on debts) cannot make false threats to foreclose or attempt to foreclose on property otherwise exempted by law. On the other hand, such restrictions are inapplicable to the party that actually loaned the money.
A debtor facing foreclosure might be able to file an emergency bankruptcy filing along with a certificate of compliance indicating that the creditor has obtained credit counseling. As a result of the filing, the creditor is granted a stay, a period in which no collection of foreclosure action may be undertaken against the party filing the bankruptcy. Accordingly, the debtor will attempt the have the stay lifted, so that they can proceed with the foreclosure.The Bankruptcy Option
Although the above discussion is not meant as legal advice, keep in mind that many foreclosure defenses can differ from state to state. Nonetheless, when someone is facing foreclosure on their home, an attorney can evaluate various option(s), and negotiate a favorite outcome or otherwise prevent a creditor from acting unfairly in such a situation.The Need for Legal Counsel
