Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 1)
98.7% of the homeowners who file Bankruptcy still end up losing their homes to foreclosure. In most cases, filing Bankruptcy will only postpone the foreclosure sale 3-6 weeks. The end result is that you’ve still lost your home, but now you’ve damaged your credit for the next 7-10 years with a Bankruptcy AND foreclosure both. Shocked to hear that? Keep reading, and I’ll explain why. I’m going to tell you everything the Bankruptcy Lawyer’s don’t want you to know. First, you have to understand how Bankruptcy works, and the purpose of it. In the second part, I will explain how the different types of Bankruptcy Cases work, and some other things the Lawyers don’t want you to know.
The Basics of Bankruptcy and The Foreclosure Process in Arizona
Most people believe that filing Bankruptcy will stop the foreclosure and allow them to save their home. In fact, Bankruptcy Attorney’s pay their bills and build their fortunes off of this popular misconception (well, the slimey ones do- there ARE some very good, legit Attorneys out there!) In an earlier article titled "Timeline to Arizona’s Foreclosure Process", I explained that the bank has 90 days from the time they file the Notice of Trustee’s Sale until the day of the Foreclosure Auction. When a homeowner files Bankruptcy anytime during this process, it puts an immediate HOLD on the foreclosure proceedings. Now, understand here, it doesn’t STOP the foreclosure sale, it merely PAUSES it in place. All actions are paused until the Bankruptcy Judge hears your case. Once the case is dismissed, or the banks are released from the case, they may immediately CONTINUE the foreclosure process, picking right up from where they left off.
For example- if you file bankruptcy 30 days before the foreclosure sale, the banks will NOT have to start the foreclosure process over once the case is dismissed. Instead, they can continue where they left off with only 30 days left until the sale. As soon as you file Bankruptcy, the banks merely POSTPONE the foreclosure sale until the case is released out of the Bankruptcy stay. Here’s the worst part, now you have a foreclosure AND a Bankruptcy on your credit report! Typically, that will drop off after 7-10 years, making it very difficult to purchase a new home, car, cell phone, etc or anything credit based within that time.
The Relief of Stay
As soon as your attorney files the proper paperwork with the court, a notice is sent out to every creditor involved. It doesn’t matter if you’re current on your payments or not, every creditor is now notified that you are in Bankruptcy. Federal Laws state that those creditors are not allowed to contact you for any reason. This is why the phone calls and letters will stop. They now hire Attorneys to talk to your attorney and file papers at every step in the process. I’ll give you one guess as to who they pass those Attorney’s fees on to. Yep, you’ve got it- they pass those Legal fees onto your balance payoffs. And that goes for every creditor you have. Not to mention the current interest, principle and late fees you’re incurring on a daily basis. Note- not every creditor will choose to hire an Attorney. Typically, it’s the major ones (Mortgage Holders, sometimes Car lenders- the smaller credit cards/creditors just hang out and wait for any scraps that may fall off the table).
Once the Court notifies all creditors of your Bankruptcy filing, your Lenders’ Attorneys will immediately file a Request for a ‘Relief of Stay’. Basically, this is a Request to the Judge to ‘Release’ the Lender from the Bankruptcy Proceedings, and continue on with the foreclosure. Their reasoning for this is that you cannot afford to bring the payments current, and they need to attempt to recoup as much collateral as possible, as soon as possible. You see, the banks lose a ton more money when you file for Bankruptcy, due to a loss of interest and delay in collecting their asset for liquidation. The longer they are dragged through a Bankruptcy case, the more money they lose in the end. And don’t forget the Lawyer’s fees they are paying for in the mean time.
Depending on your case and how busy the courts are with prior cases, it can take 3-6 weeks for the bank to obtain a Relief of Stay. Now, this occurs most of the time. However, there are instances where, depending on the type of Bankruptcy you file and complexities of your case, this process can be delayed for a longer period of time. The end reults are usually all the same- the bank eventually obtains a Relief of Stay, and continues on with the foreclosure until the auction. They will always take it to foreclosure sale, as that’s the easiest way to secure a clean title for them, and, have active buyers bidding on it.
In Part 2 of this article, I will explain the differences between the types of Bankruptcy, and other things the lawyers don’t want you to know. If you are facing foreclosure in Arizona and are considering filing Bankruptcy to stop it, please feel free to contact me. I am not a lawyer, but can answer many questions you might have. The call is free, no risk to you!
CONTINUE READING PART 2 OF THIS ARTICLE
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