Foreclosures, especially nonjudicial foreclosures, often move quickly. In a few states, you could lose your home in as little as about 30 days after a nonjudicial foreclosure officially starts. In others, the process might take a few months. On the other hand, a judicial foreclosure could take a few months or a few years, depending on the state and the circumstances.
You might want to delay a foreclosure to get more time to:
- try to work out an alternative, like a loan modification
- sell your home, either in a short sale or for an amount sufficient to pay off the mortgage debt in full
- refinance the loan
- live in the property while you save up money to reinstate the loan, or
- live in the house while you save money to pay for another place to live after you move out of the property.
If you're facing a nonjudicial or judicial foreclosure, you might be able to slow the process down by exercising your legal rights.
How Can I Delay a Foreclosure?
There are many ways to potentially slow down a foreclosure. You might be able to delay the foreclosure process and possibly get a more favorable outcome by fighting the foreclosure in court, applying for loss mitigation (a foreclosure alternative), asking a court to give you some more time in the home, or filing for bankruptcy.
Challenging a Foreclosure in Court
You might be able to delay your foreclosure by challenging it in court. But you can’t stop the process just because you want more time to live in the home. You must have some legal reason or valid defense that’s based in good faith for fighting the foreclosure.
Fortunately (or unfortunately, depending on your perspective), servicers and lenders often make mistakes in the foreclosure process. For example, the servicer or lender might fail to:
- send you a breach letter as required by the loan contract
- comply with federal mortgage servicing laws
- give you proper notice of the foreclosure as required by state law, like by not sending a notice of default or notice of sale (or sending a notice that has significant errors)
- properly advertise the sale in a newspaper
- provide the original documents, like the promissory note, if required by state law, or
- prove standing (the right) to foreclose.
If the servicer made a serious error, a court might even force it to start the foreclosure over.
Applying for Loss Mitigation
Under federal law, if you send the servicer a complete loss mitigation application after foreclosure starts, but more than 37 days before a foreclosure sale, the servicer can’t ask a court for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until:
- it tells you that you’re not eligible for any loss mitigation option (and your appeal, if you get that right, has been exhausted)
- you reject all loss mitigation offers, or
- you don’t abide by the loss mitigation agreement, like by not making payments on a trial modification.
The foreclosure stops if you get approved for a loss mitigation option, like a loan modification.
But just applying for a foreclosure alternative probably won’t buy you a lot of time. Generally, the servicer must review your application within 30 days and proceed with the foreclosure when any of the three conditions mentioned above is satisfied. Also, the servicer doesn't have to review more than one loss mitigation application from you. However, if you bring the loan current after submitting an application, and then submit another one, the servicer must consider your subsequent application.
Some states also have a law that prevents a foreclosure from going forward if the borrower submits a loss mitigation application.
Requesting More Time From the Court
In some rare instances, a judge might delay a foreclosure if you’re facing a significant hardship or you have a lot of equity in the home.
Delaying a foreclosure due to hardship. To get a delay, you’ll have to prove you have a major hardship that involves more than just losing the property, like you have a severe illness. The hardship will also likely have to be temporary, and you must show you can eventually get caught up and resume making regular payments. Otherwise, the judge might decide to let the foreclosure go ahead if it looks inevitable that you’ll eventually lose the property anyway.
Delaying a foreclosure if you have a lot of equity in the home. If you have a large amount of equity in the property, a judge might give you a short reprieve from foreclosure so you can sell the home. If there’s enough equity that a sale will repay the entire debt owed to the lender, a judge might feel that it’s fair to let you sell the property.
Delaying the Foreclosure By Filing For Bankruptcy
You can stop a foreclosure in its tracks, at least temporarily, by filing for bankruptcy.
Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy will stall a foreclosure, but only temporarily. Once the bankruptcy case gets filed, a legal protection called the “automatic stay” goes into effect. The automatic stay is a court order (injunction) that prevents creditors from moving forward with debt collection actions, including foreclosure on a home. Even though the automatic stay will stop a foreclosure, the lender can ask the court to lift the automatic stay and, if allowed, move forward with the foreclosure in a matter of a couple of months.
You'll only be able to use a Chapter 7 bankruptcy to save your home if you're up to date on the loan and you don't have much equity in the property. So, a Chapter 7 bankruptcy normally won’t stop a foreclosure long-term unless you can get a modification. However, working out a loan modification while you're in Chapter 7 bankruptcy isn't likely or common. If you need a loan modification, it's better to complete the process before you file. (And if you get a modification, maybe you won't need to file for bankruptcy. Talk to a lawyer to learn about the best way to protect your home if that's your goal.)
With a Chapter 7 bankruptcy, you'll likely get a delay of a couple of months until the lender can get relief from the automatic stay. If you already filed for bankruptcy within the past year, however, the stay could be limited to 30 days or eliminated altogether.
You generally shouldn’t file a Chapter 7 bankruptcy just to delay a foreclosure. But if you have a lot of other outstanding debts that you can discharge (eliminate) through the bankruptcy process, filing for bankruptcy might make sense.
Chapter 13 Bankruptcy
If you want to keep your home, a Chapter 13 bankruptcy might be a better option for you. In a Chapter 13 bankruptcy, you can get caught up on the overdue payments over time through a repayment plan. But you’ll need enough income to pay the monthly payment and your other expenses, too. Again, if you've repeatedly filed for bankruptcy in the past year, you might not be entitled to a stay.
Some Benefits to Filing for Bankruptcy
Some advantages to filing for bankruptcy include avoiding a deficiency judgment and potential tax benefits.
Avoiding a deficiency judgment. If your home sells at a foreclosure sale for less than you owe on the mortgage loan, the difference is called a "deficiency." In most states (not all), the lender can get a personal judgment, called a "deficiency judgment," against the former owner for this amount. By filing for Chapter 7 or Chapter 13 bankruptcy before or after the foreclosure sale, you can eliminate your liability for a deficiency judgment.
Potential tax benefits. You can avoid the tax consequences that can follow a foreclosure, such as capital gains or tax due on forgiveness of debt income (like if the lender waives its right to collect a deficiency) by filing for bankruptcy. The key is to wipe out the debt before the tax gets assessed. Once assessed, you’ll have to qualify for an exception. Otherwise, you’ll be stuck with the tax debt, which can be substantial.
Talk to an Attorney About How to Delay a Foreclosure
You’ll probably need a foreclosure lawyer’s assistance to help you figure out whether the servicer made a mistake in the foreclosure process or violated the law, as well as to help raise this issue in court. In a judicial foreclosure, you have the opportunity to file an “answer” (a response to the suit); but if the foreclosure is nonjudicial, you’ll have to file a lawsuit to get into court. You’ll also likely need a foreclosure attorney’s help if you want to request more time from the court due to a hardship or your equity in the home.
If you want to learn more about whether filing for bankruptcy is appropriate in your situation, consider talking to a bankruptcy attorney.
To learn more about applying for loss mitigation, consider talking to a HUD-approved housing counselor.