Keeping Your Home: Common Misconceptions & Ways to Beat Foreclosure

The down turned economy has left many Americans facing foreclosure of their home – including New Yorkers. But what does the term “foreclosure” really mean? Our New York legal expert explains what it means, the best way to deal with it, how long you can stay in your home, and advice on how to beat foreclosure.

Misconceptions about Foreclosure

Elliot Schlissel, a New York lawyer who has been assisting clients for over 30 years in the New York metropolitan area and in Long Island’s Nassau and Suffolk counties, says that there is a lot of misinformation out there as to what constitutes a foreclosure. He explained:

When a house goes into foreclosure, it is the start of a long, detailed process where a financial institution seeks to take title of the house back from the owner. Many people mistakenly think that the start of the foreclosure process means that the house doesn’t belong to them anymore. That’s not true. It only means that a process has been started – generally because the homeowner has failed to make their mortgage payments on a timely basis.

Dealing with Foreclosure

There are many ways of dealing with a foreclosure, but to start with, if a homeowner is served with the summons and complaint in a foreclosure, the first thing they should do is hire an attorney that does foreclosure defense work, according to Schlissel, who told us:

My office has been handling foreclosure defenses for almost three decades. There are numerous things we do in foreclosures. We can submit a written answer to the court in the foreclosure and tie up the process in the courts. We can then try to modify the loan, renegotiate the loan or refinance the loan. We also assist our clients in filing bankruptcies – and a Chapter 13 bankruptcy will stop a foreclosure.

As a last resort, we sometimes assist our clients in selling the house to get out of foreclosure. If you’re selling a house that’s worth less than the mortgage, it’s called a short sale and permission of the bank or financial institution is necessary to effectuate this type of transaction. You can also do a deed in lieu of foreclosure. In that case, the bank takes the house back. Every situation is different and the first step is to quickly retain an attorney. At the most, you have 30 days after being served with the foreclosure summons and complaint to submit a written answer to the summons and complaint to the court and the bank’s attorney.

How Long You Can Stay in Your Home

According to Schlissel, if the homeowner retains competent counsel, the owner can remain in his house anywhere from a year to two and a half years after the start of the process. Without retaining counsel, it will go faster than that. He says the key factor here is time.

If you lost your job, you may obtain a new job in time. In addition, there are new federal programs out there. In fact, President Obama has a program for reducing mortgage rates. A mortgage modification can be done where your mortgage can be reduced, the terms can be changed or the amount of the months you’re behind on can be placed at the end of your mortgage and you can start making payments again.

People should never give up when their house goes into foreclosure because they’ve lost their jobs or are going through financial difficulties, according to Schlissel. They should be proactive and seek help from an experienced attorney as there are solutions in the marketplace to help them.

How to Beat Foreclosure

The homeowner facing difficult financial times may be able to beat the foreclosure process by filing for bankruptcy. Schlissel offered the following advice about how bankruptcy affects the foreclosure process:

Foreclosure proceedings are brought in the New York State Court. Bankruptcy proceedings are brought in a Federal Court. Under the supremacy clause to the United States Constitution, all actions in a Federal Court are superior to actions in a State Court. The United States Constitution reserves the right to make laws concerning bankruptcies to the federal government, which is why all bankruptcy proceedings are handled in Federal Courts.

When a bankruptcy proceeding is brought in a Federal Court, it stays or stops the state court foreclosure proceeding. You can then set up a repayment plan for up to 60 months (5 years), to get your mortgage current within the confines of the bankruptcy. As long as you’re acting within the bankruptcy statute and set up an appropriate plan, the financial institution is not in a position to move forward with the foreclosure on your house. This is one way of getting out of foreclosure and getting your mortgage payments current.

If you’re facing foreclosure, contact an experienced New York real estate attorney to discuss your situation and see what options may be available to you.

Case Studies: Strategies to Overcome Foreclosure and Protect Your Home

Case Study 1: Utilizing Bankruptcy to Halt Foreclosure

In this case study, the homeowner facing foreclosure explores the option of filing for bankruptcy to stop the foreclosure process. By filing for bankruptcy in a Federal Court, the homeowner can invoke the supremacy clause of the United States Constitution, which gives federal bankruptcy proceedings priority over state court foreclosure proceedings.

This effectively puts a temporary hold on the foreclosure and allows the homeowner to set up a repayment plan within the bankruptcy to bring their mortgage current.

With the appropriate plan in place, the financial institution is unable to proceed with the foreclosure, providing an opportunity to save the home.

Case Study 2: Defense Strategies and Loan Modifications

Another approach to beating foreclosure is presented in this case study, focusing on foreclosure defense work and loan modifications. Homeowners who are served with a foreclosure summons and complaint can hire an attorney experienced in foreclosure defense to navigate the legal process.

This can involve submitting a written answer to the court, negotiating loan modifications with the lender, or exploring options such as refinancing or renegotiating the loan terms.

By engaging in foreclosure defense strategies, homeowners can potentially delay the foreclosure process and work towards finding a solution that allows them to retain their home.

Case Study 3: Exploring Alternative Solutions

When facing foreclosure, homeowners may consider alternative solutions to avoid losing their homes. This case study highlights options such as short sales and deeds in lieu of foreclosure.

A short sale involves selling the house for less than the mortgage balance with the permission of the bank or financial institution. A deed in lieu of foreclosure allows the bank to take the house back voluntarily.

While these options may not be applicable to every situation, they provide alternatives for homeowners who are unable to meet their mortgage obligations and want to avoid the lengthy foreclosure process.