You filed for Chapter 7 bankruptcy protection and all your debts, including your home mortgage were discharged during the bankruptcy proceedings. Now you find out four years later the bank is planning on selling the home in an auction, can they do that without actually taking over the house? The answer is yes even though the house may still be in your name the bank can indeed foreclose on your home. Filing for bankruptcy and listing your home mortgage among your debts does not actually provide your lender with the means in which to physically recover the property.
The bank has two main ways in which it can recover the property; a deed in lieu of a foreclosure or foreclosure. A deed in lieu of foreclosure involves the homeowner signing over all interest in the home back to the lender, thus avoiding a foreclosure. This is slightly better for your credit score than an actual foreclosure. In the United States, including Colorado, there are typically two types of foreclosures; judicial and non-judicial. After a mortgage loan has been listed in a bankruptcy, the lender must still pursue one of these two foreclosure methods in order to take back possession of the property.
A judicial foreclosure requires the mortgage lender to go through a court procedure to obtain ownership possession of the home. A non-judicial foreclosure avoids the court system and allows the mortgage lender to sell the home at a foreclosure auction without the approval of the court. Of course each lender must follow state specific foreclosure procedures in order to legally sell the property through an auction. Every state has different requirements for each process and it can be beneficial for a homeowner to consult with an attorney to learn his or her rights in the foreclosure process.
Another advantage to consulting with a debt relief attorney in your state is to learn about ways to avoid a foreclosure through bankruptcy or other means, if the homeowner wants to stay in the home. A personal bankruptcy can help a consumer either get out from under and underwater mortgage, or avoid a foreclosure in certain circumstances. Like foreclosure procedures, personal bankruptcy guidelines vary somewhat from state to state, which is another reason to consult with a professional before you make any decisions regarding your specific situation.
Source: Fox Business, "Can Your Lender Foreclose After Bankruptcy?," Justin Harelik, Aug. 21, 2012
Our law firm handles personal debt relief issues, including using a Chapter 7 or Chapter 13 bankruptcy to stop foreclosure. Visit our Colorado stop home foreclosure page to learn more.