What Will Happen to People Who Were Near Foreclosure Now That the Moratorium Has Expired?

My understanding is that the lender is basically just going to pick up where they left off. It’s like time froze for a year and a half, and now, we are resuming normal procedures. I don’t think that courts have dismissed these cases due to failure to prosecute because they’ve been tied up. The judges know that the lenders are not free to move along with these cases unless they are in a limited situation involving a private lender or vacant property. Otherwise, a lot of these that were at various stages are just going to pick up from the point where they left off. If they hadn’t been filed, there is a process that has to happen before a foreclosure case can be filed in Maryland if it’s an owner-occupied property, so the lenders will most likely begin that process.

There is probably going to be a backlog, so it’s hard to say how long it will take for the floodgates to fully open, as they say. I’ve heard that certain lenders aren’t going to be doing foreclosures until next year. Even though the moratorium is over, they’ve elected to try to work with people and not to go after them. That being said, the vast majority will move forward.

Should Homeowners Consider Short Sale Over Restructuring Their Loan or a Foreclosure?

Homeowners absolutely should consider a short sale. The longer that time goes on, the fewer options you could have as a homeowner because the amount that you are behind increases every month. At some point, the bankruptcy may no longer be an option, and if the bank doesn’t want to work with you, you may be forced to lose your house for lack of better options. Whereas, if you are only $10,000 behind now, you may be able to afford to pay that in a bankruptcy. An attorney might tell you to go ahead and file bankruptcy because you can pay $10,000 over five years. If you wait, that amount can double or triple. Attorney fees are added, other costs are added, interest accrues, and if you are not paying your mortgage, your mortgage company may be paying your taxes and insurance for you. So, the amount can go up very quickly, and I promise that if you first see a bankruptcy attorney when you are $100,000 behind, that’s going to be a lot harder to pay in five years while also paying your regular mortgage payment.

It’s always a good idea to have that conversation early. The worst thing that can happen is you just decide with the attorney that you need to wait. But at least if you are waiting, you can develop a strategy and know when to come back and engage the attorney and what your options are. You’ll have some sense of what you can do. The mortgage company will tell you that you have a handful of options, but they are not going to tell you which is best, only which ones you qualify for until you submit information to them. They won’t tell you about bankruptcy at all. For that reason, it’s just a good idea to have that conversation with an attorney early on, in my experience.

Is Now a Good Time for Homeowners to Consult with Bankruptcy Attorneys Prior to Foreclosure Proceedings?

Once the foreclosure process gets going, the lender will likely add all of the attorney fees and costs that they incur for that, which gets to be expensive. Things tend to snowball with foreclosure proceeding costs on top of the loan being in arrears. So, if you are looking to save your home, it’s a good idea to engage an attorney early when you could have more options, including a bankruptcy.

There are good components of bankruptcy. People read bad things online and get this misunderstanding that they’re going to file and lose everything they own. Plus, I know there’s some social stigma attached to filing. In reality, most people keep everything that they own. Chapter 13 is actually a tool that we use to help many people save their homes and give them more time to become current.

If you are behind on your mortgage and your forbearance plan ends, you have a very limited time to come up with that money. In a bankruptcy, you can take what’s owed at that point and put it into a five-year plan. You can also use that plan to pay off other debt that you may have, so if you have student loans, tax debt, medical bills, credit card debt, that can all be factored in, as well. Some of those debts can actually be wiped out. What your bankruptcy case allows you to do is prioritize the amount that you are behind on your mortgage ahead of most other kinds of debt.

Maybe you’ve been robbing Peter to pay Paul, as they say. Maybe you’ve been paying your credit card debt and not your mortgage, or maybe you have a lot of medical bills that you are paying, or some combination. Maybe you took out a car loan, but now you are working from home and could do without the car. The bankruptcy can help you eliminate some of those other debts, and in doing so, you can use the money that you were paying on those things and apply it toward the house payments to get caught up. You don’t necessarily have to take the whole five years; in some cases, you could do it in even less time. It just depends, but it’s a really great option.

Now, if you compare that to a loan modification, the advantage of the latter is that the bank can give you 30, or even 40 years in some cases, to pay them back, which obviously doesn’t come out to be as much per month. But the downside of a modification is that it’s not guaranteed. The bank can turn you down, which may end up leading to you filing bankruptcy anyway or losing your home. The other downside is that you are essentially taking the money that you didn’t pay (which was largely interest) and you are refinancing that amount and paying interest on it over another 30 to 40 years (in that example). Over time, you’d be paying a lot more on that money by doing something like a loan modification. There are loan modifications that simply take what you owe and put them on the back of the loan and make it so that you don’t accrue interest—that’s different. What I’m talking about is when the lenders put the amount that you didn’t pay back into the loan, and then over time, you end up paying a lot more, sometimes even more than in a bankruptcy.

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