When Is It A Good Idea To Defend A Foreclosure Action?

Generally, it is always a good idea to defend a foreclosure action.  The specific benefits will depend upon the individual debtor.  For example, if someone is looking to save the home, defending the foreclosure action can lead to several potential results.  First, the lender can agree to modify the loan, effectively allowing the homeowner to remain in the property long term.  Secondly, the lender may agree to allow for a short sale, whereby the lender agrees to accept less than what is owed in exchange for a full release of the homeowner from any deficiency.  If this is the only significant debt of the homeowner, then short sale is the best remedy.  Thirdly, the homeowner may simply need time to get his affairs in order and to find alternative housing.  Defending the foreclosure action will definitely garner more time than not defending at all.

Where would a bankruptcy case fall in the mix?  It all depends upon the particular fact pattern and the individual desires of the homeowner.  If there is going to be a deficiency judgment, Chapter 7 will eliminate that debt.  If the goal is to save the home and repay the mortgage arrears over time, then Chapter 13 would be the best option.  Of course, you must make sure that the homeowner can qualify for either of those chapters under the Bankruptcy Code.  The Chapter 7 can be filed anytime, either before or after the foreclosure case completes.  The Chapter 13 must be filed prior to a sheriff’s sale in order to reorganize the debt and save the home.