File chapter 7

 Do you need to file bankruptcy to stop a foreclosure sale date?

 Most California homeowners feel the only way to stop a trustee sale date is by filing for bankruptcy protection, but that is not necessarily the case and may only be a temporary fix. Most bankruptcy lawyers will advise their clients they must file bankruptcy chapter 13 to stop a trustee sale and restructure their mortgage while eliminating most of their unsecured debt. While that might sound good for some, many simply can’t afford a chapter 13 payment. They may in fact qualify for a HAMP or MHA government approved loan modification and restructure their mortgage first, then file chapter 7 and wipe out all their unsecured debt. A bankruptcy attorney who understands loss mitigation as well as foreclosure laws and timelines may be your best option. An attorney who has the experience may have the ability to simply review the client’s financial information, contact the lender and postpone the trustee sale for 30-60 days right over the phone, without the need to file for bankruptcy protection. This process may allow our attorneys the proper time needed to negotiate a lower interest rate and restructured mortgage that’s reasonable and help our clients keep their home. In most instances loan modifications offered to homeowners in default is nothing more than an unaffordable forbearance agreement thus forcing them into bankruptcy at the eleventh hour to stop the sale of their home. This is not the only option available, but the common practice of most real estate and bankruptcy attorneys. In June 2010 new HAMP programs may offer principal reductions down to fair market value with low interest rates as well. This is a huge benefit to struggling homeowners who are in a negative equity position and severely upside down on their homes.  Obviously the homeowner needs to have the ability to make a reasonably modified payment. A bankruptcy attorney may also use the threat of filing bankruptcy to negotiate with a lender if they are not willing to cooperate. Typically, something is better than nothing if they are going to lose money by foreclosing

If a borrower has a 2nd mortgage we can eliminate it several different ways. We find after getting a loan modification on a first mortgage we can settle the unsecured 2nd mortgage for pennies on the dollar or file for bankruptcy chapter 13 and strip the 2nd lien completely. This is a strategic and legal way to get a principal reduction. For instance, in one case our client was able to strip a 2nd lien in the amount of $200,000 on a property now worth $700,000. The home use to be worth about $975,000 and the 1st trust deed is only $725,000. By utilizing this combination of a loan modification followed by a chapter 13 bankruptcy when the California real estate market rebounds so will our client’s equity. If your income is low and your property value is upside down it’s “the perfect storm”.

 Filing a chapter 13 bankruptcy will give someone the opportunity to restructure their debt and repay a small percentage of their secured and unsecured debt over time, typically 3 -5 years. If you are current on your mortgage a chapter 7 bankruptcy allows one to completely eliminate their debt, keep their home,  and get their life back on track. As long as the 1st mortgage is current or brought current, clients can keep their home and eliminate all their unsecured debt with a chapter 7 if they pass the means test.  When a loan modification is combined with a bankruptcy chapter 7 or chapter 13 it can be a very powerful tool, allowing homeowners to reaffirm debt and in many cases keep what they want. Whether our clients want to keep, sell or walk away from their home we can help. For a free and confidential consultation with an experienced bankruptcy attorney call the Law Offices of Zhou & Chini today at 888.901.3440 or visit us on line at

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