As if filing bankruptcy was not tough enough…
Clients walk into the offices of The Mark Bamberger Company with some dreadful problems. One of the more common is the threat or ongoing nightmare of a foreclosure. In some cases, their lender is saying it is right on the horizon. In more cases foreclosure has been commenced. What is important to know is that the filing of a foreclosure complaint is only the first step of a long process; ending in a sheriff’s auction sale of the property out from under my clients. This process can take between three and 18 months; depending on how vigorously the client fights, how clever their attorney is in stalling for time or negotiating a refinance or loan modification, or how badly the lender really wants the property.
The Automatic Stay
Often I am asked how foreclosure ties into bankruptcy. Whether the bankruptcy is under Chapter 7 or Chapter 13, the answer is roughly the same. Filing bankruptcy puts ALL pending or ongoing legal action “on ice”. This is legally termed the “automatic stay”. The only way a creditor gets out of this is to wait out the discharge of the bankruptcy or move the bankruptcy court for relief from the automatic stay; which often takes about as long as the bankruptcy itself.
Never Surrender
Bankruptcy CAN be an efficient way to stop a foreclosure long enough to negotiate a deal with the lender. Before the filing of a bankruptcy petition, the lender has all the power. After filing the petition, the debtor gains some power since they can choose whether to keep or “retain” the property or give it up, called “surrender”. Even if the debtor says they want to keep it; five minutes and an amendment to the petition can change the outcome. What that means is that the lender gets the property; with all the debt and non-performing loan that goes with it. They generally do not want that, no matter how nice the house is, since they are inheriting debt; plain and simple.
So much for mandated loan modification
Unfortunately, as has been reported on the national news, the major lenders took billions in federal bailout money; only to go back on their promises to make loan modification easier. Sometimes they seem to be cutting of their nose to spite…my clients! The bottom line is this – a bankruptcy can be used as leverage, but never guarantees success in a client keeping their home!
Mark J. Bamberger, Esq., Owner and Attorney at Law
The Mark Bamberger Co., LLC
Offices in Tipp City, West Chester, and Enon
