When you borrow money to buy a home, you sign a promissory note agreeing to repay the loan in steady monthly installment payments. To protect the lender or the bank, you are required to give the bank a mortgage on the property. The mortgage is like a bridge -- it connects the promissory note to your home. The mortgage guarantees that if you are not able to pay on time, the bank can force the home to be auctioned off and the proceeds applied to the loan balance.
In a situation where you find yourself unable to pay your loans on time, the bank will have the right to accelerate the time for repayment. This means that the bank is no longer obligated to accept monthly payments and has the right to demand all of its money be paid in full immediately.
The Gainesville bankruptcy attorneys at Ruff & Cohen offer clear and honest counsel to help you decide on the course of action you need to take in the face of foreclosure. We can help you weigh your options and work to achieve an optimal outcome.
Schedule a free consultation when you call the firm at (352) 364-8688!
When you are unable to pay the bank in full after acceleration (and how could you if you were unable to even make the monthly payments?), a County Deputy Sheriff (or special process server) is sent to your home to hand you a Complaint for Mortgage Foreclosure and the case is now in court. In a foreclosure process, the bank seeks to have your home auctioned off in order to repay the bank. Under Florida foreclosure law, it is usually impossible to force the auction of the home sooner that about 65 days from the date the complaint is filed if the homeowner puts up even the slightest resistance. The end result of the foreclosure litigation is a hearing on the bank's Motion for Summary Judgment. In this hearing, the bank is likely to win, which results in a Final Summary Judgment and a date set for the auction to take place, usually about 3 weeks later.
In the event that your financial situation improves and you think that you can now bring your mortgage payments (plus litigation costs) current, you need the bank’s cooperation to de-accelerate your loan. If the bank refuses, this is where Chapter 13 of bankruptcy helps.
Chapter 13 law forces the bank de-accelerate the mortgage loan and allows you to catch up your missing payments over time. To save a home from foreclosure, Florida law requires the Chapter 13 bankruptcy petition to be filed before the public auction. The moment a Chapter 13 Petition is filed with a U.S. Bankruptcy Court, the foreclosure stops in its tracks. If the petition is filed minutes before the auction sale, that is also good enough to prevent the auction from taking place. If you want to be technical about it, the actual deadline is the filing of the Certificate of Sale by the Clerk following the auction. We had an emergency Chapter 13 case where the auction had completed, but the Certificate of Sale had not been filed when we filed a Chapter 13 petition. The Chapter 13 petition was filed “on time” but just barely.
Short sales are the result of mortgage loans where the balance on the homeowner’s loan at the bank far exceeds the market value of the home itself. Another factor is usually that the homeowner is way behind on the mortgage payments and the bank knows this loan is in trouble. The bank could foreclose on the house, but knows the foreclosure will only result in a public auction of the property that will not produce enough proceeds to pay off the loan. Auctions usually do not result in bidders offering the full market value – people at an auction want a steal, not just a fair deal. Sometimes a third party comes along and offers to buy an upside down house but is only willing pay the market value or something close to market value (but certainly more than an auction might bring), and this is where a short sale can occur. This means that the homeowner and the bank agree to let the third party buy the house at the offered price. The homeowner cannot force the bank to accept the third party’s offer. The bank is tempted, however, because it calculates it will receive more money from the sale to the third party than it would receive from a foreclosure auction sale. Plus, the bank will gets its money quickly, without the delay and legal expense of a mortgage foreclosure court action. So, the bank agrees to a short sale. At the closing, the bank releases its mortgage against the home and the third party gets a clear title in return for paying the agreed upon purchase price. The bank gets every penny from the sale despite the difference or the missing amount. But there remains an unpaid balance on the loan. What happens?
This missing amount is also called the mortgage deficiency. Many people considering short sales mistakenly assume that the bank will choose to waive the deficiency, but that is strictly a matter of negotiation. The homeowner needs to be crystal clear in a short sale as to the bank's intention with regard to the deficiency. If the bank refuses to waive the deficiency, the homeowner remains liable for the unpaid balance but the homeowner can pursue Chapter 7 bankruptcy. If the homeowner qualifies for Chapter 7, the debtor can be released from the responsibility of the mortgage deficiency. It is the same effect as forcing the bank to agree to waive the deficiency.
Making all these decisions can be difficult and challenging. That is why having a good counsel by your side is important. Turn to the Jacksonville bankruptcy lawyers at Ruff & Cohen.. We stand by our clients from start to finish, making sure that you are get strategic and smart solutions to your financial difficulty.
Call the firm at (352) 364-8688 to schedule your free consultation.