In recent years, it has been fairly common for homeowners to find themselves in the unhappy position of owing more on their home than its current value. In such situations, many people are holding on to their homes and waiting for conditions to improve. However, if loss of income, medical expenses, or other life complications cause you to fall behind on your mortgage payments, you may quickly find yourself facing lender foreclosure. Once a foreclosure notice is served in Colorado, it can be only a matter of weeks until you are evicted. You need to act quickly with your response.
The foreclosure process
Once you’ve been served the notice of foreclosure, the process starts with a Rule 120 hearing. At this hearing, the lender seeks the right to proceed with the sale of your home. Only two issues are of interest in this hearing: (1) is the borrower in the military and therefore given a special exemption; (2) whether or not the borrower is delinquent on payments.
If the foreclosure is allowed to go forward your home may be sold in a foreclosure action and often sells for far less than the mortgage owed. In such cases, the lender can legally sue you for what is called the deficiency balance – the amount you owed on the home that they were not able to recoup in the sale. Even if the lender does not pursue you for the legal deficiency through legal means, they can still issue a 1099 forgiveness of debt notice and you will be taxed on the amount forgiven as if it is income, resulting in a large obligation owed to the IRS.
How to fight back
If you are served with a notice of foreclosure, your first and best move is to contact the experienced attorneys at Robinson & Henry. We can help you respond quickly and then explore your options for action including:
- Filing Chapter 13 bankruptcy with a negotiated plan that allows you to keep our home
- Negotiating with your lender for additional time
- Other possible strategies unique to your situation
If you have a second mortgage on a home that is underwater (valued at less than you owe on it), this second mortgage can be considered an unsecured loan and can be stripped away in a Chapter 13 bankruptcy, as long as you complete your court approved debt repayment plan.
If Chapter 13 seems the preferred option, but isn’t possible, we can discuss the wisdom and potential advantages of surrendering your home in a Chapter 7 bankruptcy. In this case, the debt is discharged like other unsecured funds you owe.
Contact us for help
Foreclosure situations are different. In a Colorado foreclosure there are many avenues open for legal exploration. By consulting with a skilled and knowledgeable attorney you will be made aware of your options and be able to take full advantage of your best course of action. The experienced attorneys at Robinson & Henry will be your able allies as you navigate your way through this difficult process. Call 303-688-0944 for a free consultation.