Unexpected job losses, health emergencies, and other situations that impact your finances can all lead to a scary situation – foreclosure. In many cases, it is possible to work out a deal with your lender. However, if your finances are indeed in dire straits, the lender may choose to pursue foreclosure. Whether you are still mitigating your losses or in the middle of foreclosure proceedings, we recommend reaching out to a foreclosure attorney for legal advice.
In this guide, we’ll show you when it’s too late to stop a foreclosure and what your options are if you ever reach that point.
State by State Information on When It’s Too Late to Stop a Foreclosure
For the most up-to-date information on when it’s too late to stop a foreclosure in your state, be sure to check official state legislation. Here are a few examples of the point of no return across various states:
- You have the Right of Redemption in New York, meaning that you can stop the foreclosure sale at any time if you come up with the necessary money. This only applies BEFORE the foreclosure sale, because New York does not allow redemption periods (this a period of time in which you can pay off your debts after the foreclosure sale to avoid losing your home). Currently, New York (among other states) are under a foreclosure moratorium due to COVID-19. This means that all foreclosure proceedings and evictions have been paused for the time being. This order was instated in March of 2020, and it was renewed again in August. It is likely that the moratorium will be extended again.
- Texas allows nonjudicial foreclosures to take place. This means that not all foreclosures have to go through a court. Therefore, lenders will often foreclose quickly. The entire process can take a mere 60 days – and lenders just have to provide notice 20 days after the missed payment.
- Arizona allows borrowers to pay off their outstanding mortgage debt (and any subsequent penalties) until the last business day before the foreclosure sale.
- In California, borrowers may pay off outstanding debts until five days before the sale. During the final five days, the lending bank may choose whether or not they will accept payment for a loan in default.
How to Stop a Foreclosure
There are a few strategies you can use to delay a foreclosure. We recommend receiving legal counsel to figure out which option is best for you.
Bankruptcy: Chapter 7, 11, and 13
The Chapter 7 foreclosure timeline is the least advantageous, as it merely pauses the foreclosure procedures. Chapter 13 and 11, on the other hand, give you the chance to work out a repayment plan and hopefully avoid foreclosure in the long run. With Chapter 13 bankruptcy, you will be allowed to pay off your debt over the course of 3-5 years, in most cases.
You may be wondering – when is it too late to stop a foreclosure by filing Chapter 11 bankruptcy? This is much trickier than filing Chapter 7 and 13, because your lender may vote for or against your reorganization plan. Furthermore, it is a much more expensive solution than filing for the other two forms. Due to the intricacies involved in this kind of bankruptcy, we only recommend pursuing it with trusted legal counsel.
And what is the main difference between Chapter 11 and 13 bankruptcies? Well, Chapter 13 bankruptcies are for people who have a stable source of income and are under a certain amount of debt. On the other hand, Chapter 11 bankruptcies can be filed by nearly anybody – there is no required minimum income, nor is there a debt cap. Often, Chapter 11 bankruptcies are filed by businesses, rather than individuals.
You can find out more about bankruptcy and foreclosure in our recent article.
We highly recommend working with your lender to modify the loan. This way, you won’t have to suffer the severe negative credit impact that comes along with bankruptcy. A loan modification is when a borrower and a lender work out an agreement to decrease the term of a loan or lower the interest rate. You could also refinance the loan – this is where you replace your old mortgage with a newer one that has more favorable terms.
It is possible that you can pay off your debts by making a short sale. This is where you sell your home for a smaller sum than what you owe your lender. However, going through with a short sale could lower your credit score by over 100 points.
How to Stop a Foreclosure Auction
As mentioned earlier, the method in which you can stop a foreclosure auction really depends on your state. In some states, you can pay off your debts the day before an auction and keep your home. In other states, there is a five day period that you have to pay the debt before.
But, if you file for bankruptcy, the sale has to stop – even if you file one minute before the sale was scheduled. There are several ways that you can buy yourself more time before your home is sold. Very rarely will it be “too late.” If you want to know more about the options available to you, simply fill out the contact form on our website. Our legal team has much experience helping borrowers in default keep their homes and fight foreclosures.