How do I stop a foreclosure sale?
There are only 4 ways to stop a foreclosure sale: (1) cure the default, also called "reinstating" the loan, (2) pay off the loan in full, (3) negotiate an extension with the lender, or (4) file for bankruptcy.
No person is eligible to file bankruptcy unless that person has first attended a credit counseling session and obtained a certificate of completion within 180 days prior to the bankruptcy petition date. If you procrastinate, you may not be able to use bankruptcy to stop your foreclosure sale because you might not be able to get your counseling certificate in time.
Despite advertisements you may see from some attorneys, filing a bankruptcy is not something that should be done in a few minutes or hours before the foreclosure sale. Filing for bankruptcy is a comprehensive process that must include a listing of all of your assets and liabilities. Failure to properly prepare the bankruptcy petition may result in the loss of other assets that you would normally be entitled to keep.
So, even if you believe you will cure the default or sell your home before the date of the foreclosure, it may be in your best interest to consult with a lawyer well in advance of the sale so that you are fully aware of all of your options. Vanden Bos & Chapman, LLP can work with you to try to cure the default or help you sell your home. At the same time, we can get everything ready for you to file a bankruptcy just prior to foreclosure, just in case you are unable to cure the default, get an extension, or close a sale prior to the foreclosure sale. You can, and should, consider bankruptcy your "last-chance, ace-in-the-hole" if all other options fail.
a. How do I cure/reinstate the default?
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Under Oregon law, the Trustee has to stop the foreclosure sale if you pay the loan current at any time prior to the fifth day before the foreclosure sale. You would have to pay all missed payments, late charges, foreclosure fees and costs, and the lender's attorney's fees. You can request the exact cure amount from the Trustee. If you do attempt to reinstate the loan, please be aware that the Trustee will only accept certified funds.
b. Can I negotiate with the Trustee/lender?
Most major lenders have special departments with the authority and the ability to stop a foreclosure sale, provided you can reach an agreement with them. Each lender has its own unique programs and methods for negotiating and settling, but you should be prepared that any settlement will usually require a lump sum payment at the outset and installment payment arrangements to cure the remaining arrears. Do not rely on an oral or verbal promise by a lender or trustee – be sure to get any agreement with the lender in writing! Agreements with a lender are not enforceable in Oregon unless they are in writing and signed by the lender.
c. Can bankruptcy save my house?
A provision of the Bankruptcy Code called the "automatic stay" will stop a foreclosure immediately upon the filing of a bankruptcy. The "automatic stay" applies in both Chapter 7 and Chapter 13 cases but may not apply if you previously filed bankruptcy. If you have prior bankruptcies, you need to see a lawyer right away to determine if a bankruptcy stay will arise in your case or not. A Chapter 7 will only provide temporary relief from a foreclosure, while a Chapter 13 will allow you to force the lender to accept a 3 to 5 year plan to cure the arrearage. You should consult with an attorney from Vanden Bos & Chapman, LLP to determine whether a Chapter 7 or a Chapter 13 is best for your situation. Bankruptcy can be that last minute reprieve that saves your house when all other options have failed.