Recently there has been a lot of press about “foreclosure rescue scams.” A common scenario involves promising desperate homeowners that foreclosures against their properties will be stopped due to predatory lending on the part of banks. The use of “forensic audits” is a common selling point.
While it is true that banks gave out many risky loans over the past decade, homeowners facing foreclosure should be extremely cautious when hearing words like “guarantee” or claims of abnormally high success rates. Due diligence is always recommended.
One thing that will stop a foreclosure sale right away is the filing of bankruptcy. This is because the filing of bankruptcy immediately imposes an “automatic stay” against continued collection efforts on the part of creditors. In most cases, a creditor will need to obtain a bankruptcy court order granting “relief from the automatic stay” before resuming collection efforts. Attempting to foreclose on a home when the automatic stay is in effect is prohibited by federal bankruptcy law.
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Homeowners who file for bankruptcy seeking to save their homes from foreclosure often file for Chapter 13 bankruptcy. This is because Chapter 13 bankruptcy allows people to catch up on mortgage arrears by repaying what they’ve fallen behind over 3 to 5 years. Delinquent property taxes can also be paid back in this way. This is of course conditioned on the bankruptcy filer successfully fulfilling the requirements of Chapter 13 bankruptcy.
While Chapter 13 bankruptcy can be more challenging for debtors than Chapter 7 bankruptcy, it can also be more flexible. Chapter 13 has been optimal for many people over the years and is even more important now during a time of elevated foreclosures. Consulting with a law firm that knows how Chapter 13′s work is very important as some attorneys only handle Chapter 7 bankruptcies.
We discuss bankruptcy scams in Lancaster California here.
Elena Steers is a highly experienced bankruptcy attorney, the founder of Law Offices of Steers & Associates, and previously worked as a Bankruptcy Trustee Assistant at the Office of the Chapter 13 Trustee in Los Angeles. Her current affiliations include the State Bar of California, National Association of Consumer Bankruptcy Attorneys, and Central District Consumer Bankruptcy Attorneys Association.