One of the most frightening things about financial distress is when it threatens our basic needs: food, clothing, shelter. When someone receives the foreclosure notice, it can be terrifying. As we will outline below, it is important to contact an attorney as soon as a notice is received because a homeowner’s options narrow considerably the longer they wait.

When someone defaults on their mortgage, a mortgage lender will usually reach out to the homeowner frequently to try and encourage them to get current, but the mortgage lender will usually wait several months before beginning the foreclosure process. Even though it usually takes months of deficiencies before a mortgage lender start the foreclosure process, it is important to understand that it does not have to wait months—it can usually begin the process 15-30 days from notice that a payment was missed, depending on the mortgage contract.

Once a homeowner defaults on his or her payment, the mortgage lender must first send a pre-foreclosure notice to the homeowner. The notice formally notifies the homeowner that they are in danger of foreclosure due to non-payment unless they cure the deficiency and inform them about available relief programs. This pre-foreclosure letter must be sent before a notice of default can be legally sent and recorded.

The notice of default is a formal notice that a homeowner must receive, and which must be recorded. The notice is the first step in the foreclosure process. Once the notice of default has been sent and recorded, a home owner has a minimum of 90 days to cure the default. Unfortunately, at this point, it will likely include a default interest rate that has accrued since the first event of default, penalties, fees, and costs, which can range into the thousands.

If the homeowner does not cure the default within the 90-day window, the mortgage lender can file a notice of sale. Although the sale can be scheduled after 30 days, it is usually longer, with an average timeframe to the sale coming in at about 60 days. The notice of sale must be published at least three times, once per week for three consecutive weeks in a newspaper. The notice of sale must also be posted in a conspicuous place on the property being sold.

If a homeowner files for bankruptcy at any time prior to the sale of their house, they may be able to save their home under certain circumstances. The only form of bankruptcy that can keep a homeowner in their house is a Chapter 13 bankruptcy. Assuming a person qualifies, a Chapter 13 takes all of the mortgage arrears and place it into a repayment plan, along with that person’s other debt and allows the homeowner to pay it back over 3-5 years. This is a great option for people who can make their regular mortgage payment and can afford to pay a little extra, or people who need more time to work out a loan modification. At the very least, a bankruptcy can buy some time to figure out what other options a homeowner may have.

Unfortunately, if a bankruptcy is filed after the sale, it will not return the home to the homeowner, but it may still discharge (eliminate) any money owed to the mortgage lender at the time the bankruptcy is filed. This is why it is so critical to meet with an experienced bankruptcy attorney early on to prevent the loss of a home. If your home is in the process of being foreclosed on, contact one of our bankruptcy attorneys today and receive a free consultation on your options in saving your home.

U.S. Bankruptcy Courts Rules and Regulations