If you are facing foreclosure, remember: you have options. Learn how bankruptcy can stop foreclosure, alternative strategies, as well as some of the Texas foreclosure procedures.

Stopping Foreclosure Sales Through Bankruptcy

Getting behind on your mortgage is one of the worse things that you can do, especially if you have a reasonable mortgage payment and equity in your house. Always pay your mortgage before you pay unsecured debt. If you have a loss of income in your family, try refinancing your car and do everything you can to stay current. Sometimes, as much “want to” as you have, you just can’t keep current. If this has happened to you, don’t lose hope. You can catch up on past due mortgage payments through a Chapter 13 bankruptcy. This allows you to repay the past due amount (the arrearage) over up to five years usually at zero interest. That sounds good. Is there a catch? Sort of — you have to be able to stay current on future mortgage payments. As part of the Chapter 13 process, you present a plan for catching up and a budget that demonstrates you are able to afford both the Chapter 13 payment and the future mortgage.

This works in the majority of cases if you have stable income going forward. Chapter 13 may also lower car payments and you don’t have to pay anything on unsecured debt (assuming you don’t have enough money to do so in the budget). This can help save your home.

Don’t wait until the last minute to seek out help though. Even if you haven’t received a foreclosure notice, once your income is stable, you may need to file the bankruptcy and begin catching up. If you wait until your account is referred to a foreclosure attorney, there will be substantial additional charges for attorney’s fees. You must file bankruptcy before the foreclosure sale in order to save your home. Unlike some other states, in Texas, there is no right of redemption or right to reclaim the home after the sale.  If there is a valid foreclosure, if you file after the sale, you lose your home.

What is the foreclosure process?

Once you get behind, you will eventually receive a notice of intent to accelerate. What this means is that you will receive a letter which states how much you are behind, and how much time you have to bring the mortgage current. If you fail to bring the mortgage current, you will receive a second letter setting a sale date and requiring the entire amount of the mortgage. The notice of foreclosure sale must be given twenty days before the sale date unless your note requires a longer amount of notice. The notice must be given by certified mail. Some panicked people have been known to try to avoid a foreclosure sale by not picking up their certified mail notice. That won’t work. It is extremely important to pick up all certified mail notices. If you don’t, the sale is still going to happen; you just won’t know when.

Struggling with mortgage payments?

Foreclosures are at an all time high in this country. If you are behind on your house payments, and facing possible foreclosure, you are not alone.

Non-bankruptcy options:

Non-bankruptcy options include strategies such as loan modification, loan forbearance, short sale or deed in lieu of foreclosure. If your loan has defects, such as violations under federal or state law with the way the loan was made, you may be able to sue the lender to obtain more favorable loan terms.

Bankruptcy options:

Bankruptcy is also an option, and can be used to catch up on past due payments and completely stop foreclosure proceedings. In some cases, if you owe more than your home is worth, you may be able to strip off a second mortgage, paying only the first mortgage. Some people simply choose to “surrender” their home in bankruptcy if they owe a great deal more than their home is worth. Some people misunderstand bankruptcy and think you lose your home when you file. The opposite is true. Bankruptcy can help you keep your home if that is what is best for you and your family. There are many different ways bankruptcy can help a person who is delinquent and struggling to save his home.

Watch out for scams!

Unfortunately, in these troubled times, scammers and schemers have come out of the woodwork to prey on vulnerable homeowners desperate for a solution. Federal and state authorities have been targeting numerous mortgage modification scams. The US Attorney General and various federal and state authorities are reporting huge increases in scams targeting distressed homeowners. So be careful. Know with whom you deal. Be especially cautious in dealing with virtual companies (no local office). Check with the Texas Attorney General’s Office and the Better Business Bureau.

The time involved in the foreclosure process is extremely short. The sooner you act, the more options you will have.

If you are behind on your house payment, a reputable, local attorney experienced in foreclosure defense can give you all your options.

Procedure for Foreclosure in Texas

There are two types of foreclosure in Texas, judicial and non-judicial. Judicial foreclosure means suit must be filed before the home can actually be foreclosed. Non-judicial means that the lender is only required to follow a specific procedure for foreclosure to take place, but no court action is required.

Several different things determine when the lender is required to use judicial versus non-judicial foreclosure. Judicial foreclosure is required in all loans that come under “home equity loans” as defined by the Texas Constitution. While not typical, judicial foreclosure can also be required by your particular deed of trust. Most deeds of trust will provide for non-judicial foreclosure though unless the type of loan mandates judicial foreclosure.

What type of notice is required in order for a home to be foreclosed?

Foreclosures in Texas always take place on the first Tuesday of the month. As a general rule, the lender must first give a demand to cure. The homeowner must be given no less than twenty (30 days is average) to come up with the money owed, “cure.” Assuming the foreclosure is on the borrower’s principal residence, this notice must be by certified mail to each of the debtor’s on the note.

If the homeowner fails to cure, a second notice must be given, the posting notice, which actually states the date and place of the foreclosure sale. This notice also accelerates the obligation and gives a minimum of twenty-one days notice of the foreclosure sale date. In addition, the lender is required to post the notice of foreclosure at the courthouse or other usual place of posting foreclosures. The lender also files a copy of the posting notice with the court clerk, but it is not required to be filed in the land records.

The Texas Supreme Court has held that actual receipt of the foreclosure notice is not required. All the lender has to do is place the certified notice in the mail. If the post office messes up and you don’t receive the notice, the foreclosure may still be valid. Some people think that if they reject or don’t pick up the certified mail, this will somehow make the foreclosure invalid. This is not true.

If you are late on a mortgage payment, don’t count on receiving a notice. Check the foreclosure postings. When you get a notice, don’t wait and try to work it out with your lender. Immediately consult an attorney. It will take time for any attorney to prepare the paperwork and help you in the event that you need to file suit or file bankruptcy. If you wait until the last minute, you may not be able to find an attorney who can drop everything and give you the help that you need.

In general, the entire foreclosure process takes about 60 days from when the homeowner receives an initial demand.

Are there any defenses to foreclosure in Texas?

There are many defenses to foreclosure, including common law fraud, violations of the Truth in Lending Act, the Home Ownership Protection Act, and the Texas Home Equity Act. Your original loan documents, as well as any documents that you have received in the foreclosure process are key. While there may be a very limited exception, in general, once the foreclosure occurs, and especially if the home is purchased by a buyer at the foreclosure sale, you will probably not be able to set aside the foreclosure.

Is bankruptcy a defense to foreclosure?

No, but bankruptcy stops the foreclosure from proceeding provided you file before the sale occurs and give proper notice to the proper parties. When you file bankruptcy, a stay order is issued stopping any collection action, including a foreclosure from going forward. Filing bankruptcy may give you the time to either negotiate a workout, and is often an effective way to catch up on a mortgage arrearage. Often, homeowners get further and further behind because the lender won’t take partial payments once the homeowner gets behind. Bankruptcy can be used to force the lender to work with the homeowner and allow him to catch up over time.

Can a homeowner catch up the past due payments any time before the sale?

Typically, a lender will allow this, but they may not have to allow it. In these tough economic times, most lenders don’t want more unsold homes back in their inventory. But do not count on this. The controlling factor is what the trust deed states the lender has to do. Many provide that the homeowner may cure by catching up five days before the sale date.

Assuming that a homeowner is current on the note, are there other reasons that a lender can foreclose?

A homeowner has other obligations under the typical deed of trust and note. For example, the borrower/homeowner may be required to keep insurance in effect and may not be permitted to sell the property. Failure to keep insurance or trying to sell “by owner” without refinancing the underlying obligation can result in a lender taking foreclosure action.

If my home is sold at foreclosure, do I still owe the debt?

When a home is sold at foreclosure, it often brings less than the amount owed on the mortgage. This is referred to as a “deficiency.” If the loan is a home equity loan, then the lender may not recover the deficiency from the homeowner as there is no personal recourse or liability on a home equity loan. However, in other types of loans, the homeowner may be sued for the deficiency provided suit is timely brought (2 years from date of the foreclosure sale). If sued on a deficiency action, the borrower may request that the court determine the value of the property on the date of the foreclosure sale. If the court’s value is greater than what the property was purchased for at the foreclosure sale, the court’s value is used in determining the amount of the deficiency judgment.

What are my options if I receive a notice of foreclosure?

If you are not paying your mortgage and you receive the Demand to Cure and the Posting Notice, you have limited options. You may file bankruptcy or you may file suit to enjoin the foreclosure sale. You should act immediately. Do not fall for any “foreclosure rescue” scams. Get professional help.

For information about what and how foreclosure laws apply in your particular case, send us a message online or call 903 759 5922. We represent individuals in Gregg, Harrison, Cass, Camp, Marion, Morris, Rusk and Upshur Counties and surrounding areas.

We are providing some general, education information about foreclosures in Texas. This information pertains to residential foreclosures (homes where the borrower actually lives). This information is intended to provide only general information and should not be construed or relied upon as legal advice. For information about your particular situation, you should consult an attorney. If you are dealing with foreclosure, you should consult an attorney immediately!