Determining the best way to deal with your foreclosure situation and understanding your various options to stop the sale can feel overwhelming. These days, very few states require the lender to take the homeowner to court to foreclose on the home. The process in most states is known as nonjudicial foreclosure.
Ways to Stop a Foreclosure in Michigan
There is a lot of information and even misinformation about how to stop a foreclosure sale in Michigan. Below we outline the pros and cons of available options to find a resolution to your foreclosure situation.
Pay-off all delinquent amounts owed including legal fees and penalties, in full, by the date designated by your mortgage company.
- Benefits: Monthly mortgage payment remains unchanged.
- Disadvantages: Most people do not have a lump sum of money available to make this large payment. We typically do not recommend incurring additional debt with a 401K or retirement loan or borrowing money from a friend or family member to bring the mortgage current. This only creates an additional debt and burden on your budget and may create unexpected tax consequences and debt servicing fees.
Chapter 13 Debt Consolidation
- Benefits: Prioritizes your mortgage above all other debts so you can focus on catching up on the mortgage first then pay the other obligations later, likely at a reduced rate.
- Filing a Chapter 13 Bankruptcy will legally stop the foreclosure sale and set up reasonable repayment terms.
- Plan also allows you to remove second mortgage(s)and/or home equity loans to rebalance your home’s value relative to current market conditions.
- Program allows you prioritize mortgage repayment over other unsecured debts obligations such as credit cards, medical bills, personal loans, etc. These debts are frozen at 0% interest and deferred until the mortgage is brought current.
- All mortgage arrearages (missed payments) are paid back at 0% interest with no continued late penalties or interest charges.
- If you have a rental property, you can reduce the principal mortgage balance to current market value and own the property free and clear within 3 -5 years.
- Disadvantage: If you are planning to incur future debt over $1,000, you would need to obtain court authorization while you are in the repayment program.
- Benefits: Mortgage Company electively agrees to set up repayment terms.
- Disadvantages: The agreement is typically very rigid and requires large payments over a short period of time. If a payment is missed, your home will usually be put back into foreclosure immediately. The mortgage company typically requires an accelerated timeframe to make up missed payments – usually over a six to12 month time period. This short timeline can really create a steep monthly increase that usually creates other budgeting problems. The mortgage company typically still continues to apply late penalties and interest charges during the forbearance.
- Benefits: Missed payments are often added to the end of the mortgage contract.
- Disadvantages: Extends the terms of the mortgage and increases the amount of interest you will be paying over the life of the loan. The lender may require other fees or unfavorable terms to accommodate this modification. If your mortgage company commences foreclosure proceedings, it likely signals their strong intent to continue and conclude the foreclosure sale versus granting the homeowner a modification.
- NOTE: You are still able to pursue a loan modification through the Chapter 13 program while benefiting from the security of court protection from foreclosure.
Cash for Keys and Deed in Lieu of Foreclosure
- Benefits: Bank voluntarily takes home back without following through on foreclosure proceeding and/or provides you with a payment for vacating the home quickly and peacefully.
- Disadvantages: You may have a tax liability for the dollar amount or value that the mortgage company “forgave” as a part of this program via a 1099 income form. Check with a tax professional to understand the implications for your situation. You may forego all or part of your redemption period. Cutting this short will accelerate your timeline to find other living arrangements.
- Benefits: Bank voluntarily agrees to sell the home to a third-party for less than what you owe on it.
- Disadvantages: You may have to bring money to the close and/or sign a new note for the forgiveness amount to complete the sale. If the bank waives the deficiency may incur a tax liability for the dollar amount or value that the mortgage company “forgave” as a part of this program via a 1099 income form. Check with a tax professional to understand the implications for your situation.
Stopping Foreclosure with a Chapter 13 Bankruptcy
The Chapter 13 reorganization plan is the only legal means to stop your home foreclosure without voluntary bank cooperation or another legal basis to object to the mortgage against your property.
By filing Chapter 13, you have instant court protection for your home and a protective shield from all of your creditors to allow you time to rebalance your budget, reduce your debts and recover your credit. We provide same day foreclosure protection if necessary and can file your case with the court directly from our office to provide immediate proof and peace of mind that you have stopped the foreclosure sale.
Time is of the essence to stop a foreclosure. You have up until the hour of the Sherriff’s sale or Judicial Foreclosure to file the Chapter 13 and receive legal protection. After a foreclosure sale, the power shifts entirely to the bank. Don’t be fooled if the bank is working with you on a loan modification; they can and very possibly will still foreclosure on your home. This may seem counter-intuitive, but many loans are FHA-backed, meaning that once the bank forecloses they apply to the government for reimbursement of unpaid balances (you may then be obligated to the FHA for whatever they have paid out). For many banks, a foreclosure is less risky than trying to work out terms with a willing homeowner.
Take control of your finances by filing for Chapter 13 protection. You can still pursue a loan modification through the program as well as other means to reduce your mortgage debt, such as:
Ability to remove a second mortgage or home equity loan to rebalance your home’s value relative to current market conditions.
The Chapter 13 program can also deal with increased mortgage payments due to an escrow deficiency for back taxes or insurance. We can reduce the payment back to the regular amount and deal with the escrow deficiency through an extended payment plan at 0% interest.
All mortgage arrearages are paid back at 0% interest with no continued late penalties from the mortgage company.
The plan allows you to reduce the principal mortgage balance for rental properties to current market value. Under the program, you will own the property free and clear at the completion of the 3-year program.
Trust Our Expert Foreclosure Attorneys
For over a decade, Acclaim Legal Services has been helping Michigan residents prevent foreclosure and resolve debts. With convenient office locations in Detroit, Ann Arbor, Dearborn, Southfield, Flint or Warren, Michigan we offer free consultations to:
Review your finances and provide a comprehensive evaluation
Discuss your questions and concerns
Explore all of your available options to stop your foreclosure
Provide a recommendation to best resolve your current circumstances and meet your long-term goals
Call us today at 866-261-8282 to speak with a licensed attorney about your foreclosure matter.