Many clients have fallen behind on their mortgage payments.  If you fall far enough behind, a lender may begin a foreclosure process.  This is confusing time, and many people lose their way.  Although a loan modification may be possible, lenders often won't consider a modification request once foreclosure begins.  

A foreclosure usually follows the following steps:

1. You are 60-90 days behind (sometimes more).

2. The lender sends you a letter giving you notice that the loan is now accelerated, and foreclosure will begin.

3. In a legal sense, foreclosure begins with the filing of paperwork with the local county court requesting a hearing and sale date.  

4. The hearing is usually 30-45 days after the creditor files the paperwork.  The hearing is a time for the Clerk to determine that the loan documents are in order and that a sale is appropriate.

5. The sale is usually 3-4 weeks after the hearing.  

6. We are often able to get continuances, but the client must keep in mind that the creditor will continue to incur attorney fees related to the foreclosure proceedings. 

7. A bankruptcy is often the best way to (1) stop the foreclosure and (2) buy time to catch up.

8. A loan modification is the other method for stopping this process, but it is much less certain than a bankruptcy. 

9. If the lender sells the home, you will likely owe a deficiency (i.e., the difference between the amount owed and the lower sales price).  The lender can pursue collection efforts after the sale is over--in other words, the sale isn't always the end of the problem.

10. A sale may also result in a taxable event in one of two ways: (1) the loan deficiency may be forgiven (triggering a 1099) and/or (2) the sale may cause a capital gain.