The automatic stay is the hallmark of bankruptcy, so when the judge lifts the stay to permit a lender to foreclose, we tend to think the curtain has come down on our client as homeowner. Well, maybe not, or at least, not yet.
In some cases, the road to foreclosure seems to be a wandering path rather than an expressway. Case in point: relief from stay was granted in my client’s case on April 15th. The notice of default, the first step in the statutory foreclosure process, was not recorded until six months later.
Those six months are months the clients lived payment free in the house. They continue to try to wend their way through the lender’s loan modification process. Even if they aren’t successful in getting a modification, it will be at least another 4 months before the lender can hold a foreclosure sale.
This is a recent example that reinforces a story I’ve told before, about the client who moved his family out of their large comfortable home as soon as he saw they could not keep it. They rented a house, and worked on preparing for a bankruptcy filing. More than a year later, when we were ready to file, the lender had still not taken the first step in foreclosure. Twelve months the client paid rent, when he could have stayed where he was, at no cost.
I am finding that pre-bankruptcy planning is more and more likely to include a period of living rent-free in a pre-foreclosure home (or collecting rents from such) while ramping up to filing. Often debtors can turn the extra money into exempt assets!