A progression seems to be taken place as the foreclosure crisis evolves. As a bankruptcy/real estate attorney with a high-traffic foreclosure website, I'm in daily contact with distressed homeowners from around the country. A couple of years ago, most people who visited my website, www.foreclosedDreams.com or contacted me personally were interested in learning about procedures we all know about today, e.g. foreclosures and short-sales. While interest in short sale information is still extremely high, I'm seeing a shift to questions about eviction after foreclosure and bankruptcy.
The progression from foreclosure inquiries to eviction and bankruptcy is reflected in the emails and phone calls I receive. Prior to March, I think most homeowners still had the belief they could short sale their home or otherwise workout their financial problems. This may have been the consequence of the foreclosure moratoriums in place at that time. After that, I noticed increased worry about actual foreclosure and eviction. Here are some recent comments posted on my site:
"My house has been foreclosed with a sale date of August 26, 2009. How much longer until the sheriff comes? I have 3 kids and need time, What can I do?"
"I am an unemployed homemaker with 2 small children, going through a divorce, and just received a Notice of Sale on my door this morning."
"Hello! Our home is scheduled for foreclosure and auction on 8/24/09. Please advise: When will we have to move out?Thank you."
Along with worries about eviction, homeowners are increasingly concerned about the possibility they might be sued for any deficiency resulting from a foreclosure. Some visitors are even worried about being sued after they have completed a short sale approved by their lender. No one explained to these folks that the lender has agreed to forgive the shortfall.
Interest in bankruptcy has spiked very recently. Homeowners or former homeowners are finally overwhelmed by their debts and are reaching the final stage of the downward progression. I receive calls from homeowners who have spent their savings trying to make their house payments. Often, they are just forestalling the inevitable.
Bankruptcy can help in limited circumstances. Prior to foreclosure, a Chapter 7 bankruptcy can give a homeowner with equity in their house sufficient time to sell. If there isn't any equity, a lender will probably get the stay lifted and move on with the foreclosure. A Chapter 13 filing helps if the homeowner has a steady income and needs to become current on missed payments. (These are very broad generalizations, of course.)
After foreclosure, bankruptcy can eliminate deficiency judgments. Debts forgiven in bankruptcy are not considered debt-forgiveness income, so bankruptcy can help save taxes. The real advantage of bankruptcy is can help people get a fresh start. Their nightmares are put behind them and they can move on with their lives.
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