HOW TO DELAY OR STOP FORECLOSURE

According to data compiled by RealtyTrac, foreclosures in the state of Colorado in the past 12 months topped off in June 2020, then went downward until just this past March, when foreclosures spiked again — up to about 80 statewide.

During the latter half of 2020, foreclosures were protected by federal pandemic mandates and laws that helped account for the downslide. As those measures expire, foreclosures may well return to higher levels.

Once you fall behind on your mortgage payments, your bank or any other lienholder may initiate foreclosure proceedings to force you to catch up on your payments. If that fails, they will sell your home to another buyer through an auction.

If you’re in or around Westminster, Denver, Aurora, Boulder, or Northglenn, Colorado, and you’re facing foreclosure on your home, contact our team of bankruptcy attorneys at Garcia & Gonzales, P.C., to discuss your options for retaining your home or delaying the sale.

The Foreclosure Process in Colorado

By federal law, once you are 120 days behind in making your mortgage payment (or payments if there is a second or third mortgage), the lender can proceed with the foreclosure process. In Colorado, the lienholder has two options for pursuing foreclosure — judicial and nonjudicial.

In a judicial foreclosure, the lender files a lawsuit seeking the sale of the home to recover the debt owed to them. If the homeowner fails to respond to the lawsuit, it is approved almost automatically. If you choose to challenge it, you can at least maybe stall the process. Most lenders, however, shun this option due to the cost involved.

The alternative to filing a lawsuit is called nonjudicial foreclosure, in which the court’s involvement is minimal. The bank or any other interested lender must first send the homeowner a letter with information regarding potential foreclosure proceedings. The lienholder then files what is called a Notice of Election and Demand (NED) with the public trustee.

In Colorado, unlike other states, foreclosure sales are handled by a public, not private, trustee. The trustee is obliged to set a sales date at least 110 days — but not more than 125 days — after the filing of the NED with the county clerk and recorder.

Under Rule 120 of the Colorado Rule of Civil Proceedings, the lender must also appear in court to have the foreclosure sale authorized. This can delay the proceedings, especially if the homeowner shows up in court to challenge the pending foreclosure.

Foreclosure Alternatives

Once the bank informs you of your loan default, you can work with the lender on a loan modification, or if you have the money or access to it, you can make up the balance in default and continue making your monthly mortgage payments.

Other steps — which do not allow you to keep your home — are a short sale or a deed in lieu of foreclosure. Both require the consent of the lender. A short sale is basically just a quick sale of the property to satisfy obligations owed. A deed in lieu of foreclosure hands over the property to the lender without foreclosure.

In both cases, if the home’s value is less than the amount owed to the bank, there might be a deficiency judgment against you. For example, if your loan is $250,000, but the home’s value is just $200,000 (or it sells for $200,000 in a short sale), you could be held responsible for a deficiency judgment of $50,000. You should get the bank to consent to forego any deficiency judgment in a short sale or deed in lieu of a foreclosure agreement before proceeding.

Bankruptcy, however, is the quickest and surest route to delay foreclosure and, in some cases, even in resolve it altogether.

The “Automatic Stay” Under Bankruptcy Protection

When you file for either Chapter 13 or Chapter 7 bankruptcy, the court will place what’s called an “automatic stay” on any debts you owe and on any foreclosure proceedings against your home, meaning the debt collectors have to quit calling and the sale of your home is temporarily placed on hold. The lender, however, can petition the court to have the stay removed from a planned foreclosure. So, though you may get an extension to stay in your home, it might not be for that long.

Under Chapter 13, all of your debts are consolidated into one lump-sum debt load with a set monthly payment to be satisfied under a 36- to 60-month repayment plan. You can include past-due mortgage payments in this amount, which would then leave the property in your hands so long as you continue to make your regular mortgage payment every month.

Under Chapter 7, you can keep your home depending upon a few factors. Chapter 7 is a liquidation plan that allows the appointed bankruptcy trustee to sell your non-exempt assets to pay off your creditors. Your home is exempted under homestead protection, but only up to a certain amount. Equity up to $75,000 is exempted, but that figure rises to $105,000 if you or your spouse is disabled or 60 years of age or older.

What this means (should you wish to retain your home) is that you can continue to make your mortgage payments — so long as you are current or make up any past-due amount — if your equity does not exceed the amounts stated above. If your equity exceeds those amounts, you will have to make up the difference. Otherwise, the trustee can — and no doubt will — sell your home to satisfy creditors.

For example, if you owe $175,000 on your home, and the home’s value is $250,000, your home is safe from being sold because the equity is just $75,000. If your loan is the same amount but the home value is $300,000, then you’d have to come up with $125,000 minus your allowable exemption to keep your property. Keep in mind, however, if you have that kind of cash lying around, you might not even qualify for bankruptcy protection in the first place.

Our Team is Ready to Help

We have a combined half-century of experience in helping clients with debt relief and foreclosure problems. You do have options in having your home foreclosed upon, including protection under the bankruptcy code, so you can retain your home or mitigate the damages.

Contact us immediately to discuss your situation and explore potential routes to retaining your home. Your case will be handled by one of our experienced attorneys, not a paralegal or legal assistant. We will work with our clients one-on-one.

Our firm — Garcia & Gonzales, P.C. — proudly serves clients throughout the Denver, Westminster, Boulder, Aurora, and Northglenn areas of Colorado.