Foreclosure happens when a homeowner is unable to keep current with their mortgage or real estate loan payments. In such cases, ownership rights to the property transfer from the borrower to the lending institution. The lender will then sell the property in a foreclosure sale and take the proceeds in order to make up for the missed payments. The sale can either occur through the supervision of the court system or through out-of-court processes.
Usually, the homeowner is given notice of the impending foreclosure before the process starts, so that they can have time to respond to the upcoming foreclosure proceedings. Sometimes, property owners are able to pay off the debt they owe. If a property owner is unable to do so, the foreclosure will usually continue until the sale of the foreclosed property is finalized. In some cases, it may be possible to stop the foreclosure process once it has already started.
For instance, the filing of certain legal proceedings will stop all other legal proceedings, including an ongoing foreclosure proceeding. Examples of these are:
- Filing for bankruptcy: If a person files for bankruptcy, it will create an “automatic stay” on all other lawsuits and legal proceedings, including foreclosures. This means that the foreclosure will be on hold until the bankruptcy proceeding is completed. Additionally, the bankruptcy process may help the person manage their debt, creating other options in terms of the foreclosed property.
- Filing a lawsuit against the lender: For out-of-court foreclosure proceedings (“foreclosure by power of sale”), it may be possible to stop the foreclosure proceeding by filing a lawsuit against the lender. This can happen for instance, if the lender never had proper title to the property, or if there was a major error in the lending documents, or if the lender didn’t follow state requirements and procedures for a foreclosure.
Note that you usually cannot stop foreclosure simply by filing a lawsuit against the lender if the process is being handled through the courts (“foreclosure by judicial sale”). This is because the borrower will be required to raise any challenges through the existing legal process.
Lastly, of course, it is never a good idea to file a lawsuit or file for bankruptcy simply for the sake of stopping a foreclosure proceeding. In fact, there are laws against filing frivolous lawsuits, which are lawsuits that have no sound legal basis. However, if such filings are absolutely necessary to preserve and enforce your legal rights, they can have the aforementioned effects on foreclosure proceedings.
Besides stopping existing foreclosure proceedings, it is also possible to avoid foreclosure altogether before it begins. This can happen through various mechanisms, such as:
- Mortgage modification or refinance options
- Short sale (selling the home for a loss of profit)- while you will ultimately give up ownership of the property, it will avoid foreclosure, and usually results in better credit effects than foreclosure
Finally, even if foreclosure has been fully completed, it may sometimes be possible for the borrower to re-obtain their property by exercising their right of redemption. This is where the person pays off all existing debt. They usually have one year to redeem their property.
Understanding how to stop foreclosure can involve many different laws and real estate concepts. You may need to hire a foreclosure lawyer in your area if you need assistance with any type of foreclosure legal issues. Your attorney can research the laws to determine what types of options are available for you. Also, if you need to file any legal proceedings, your attorney can help you with the filing processes and can represent you in court as well.