Foreclosure can be very complicated and the process is complex and expensive. Many are unsure what foreclosure is, and what rights they have in the process. Put simply, foreclosure is a lawsuit filed against the owner of the property by a bank or lender. Foreclosure is a lengthy court process, and the property owner has a right to participate in that process to the full extent of his/her rights.
The Two Types of Foreclosure
There are two avenues that the process of foreclosure can take, strict foreclosure and foreclosure by sale. It is important to understand both types of foreclosure because one of the rights of the property owner is to decide which avenue is taken. If no action is taken by the owner in the foreclosure process, the court will proceed with a strict foreclosure.
If there is little or no equity in the property, proceeding with a strict foreclosure is best. A judge will set down a “law day” and for anyone named on the foreclosure. There is a chance to repay the debt and pay the legal fees; the foreclosure will not turn the title of the property over until the law day. However, a law day can be set as soon as three weeks from the judgment. It is up to the judge how long it will be until the law day. If the owner is unable to pay the debt, the title of the property will be turned over to bank or lender.
Foreclosure by sale is the avenue that should be taken if there is a large amount of equity in the property. A judge will set a sale date, and an attorney will be appointed by the court to act as “committee for sale”. This attorney will handle auction of the property, and the auction will take place on the sale date. On the date of the sale, the committee will have court permission to enter the property, but they must also have owner consent if the property is still occupied. The money earned from auction will pay all legal and costs incurred by the court first, and then pay on the debt. Any remaining funds are given to the owner.
The Foreclosure Process
1. Receiving a Summons and Complaint.
The Summons will name the owner as the defendant in the foreclosure lawsuit. The Complaint will say why the bank or lender is taking foreclosure action against the owner. It is important to note the return date, which will be located on the upper right corner of the Summons. This date is the deadline for filing additional papers.
2. Filing an Appearance.
This lets the court know that the owner wishes to participate in the process and wishes to receive further notices regarding the case. This form must be filed within two days of the return date.
3. Apply for protection.
Unemployed and underemployed owners may be entitled to protection. If eligible, the owner must file an application of protection within twenty five days of the return date.
4. File an Answer
The deadline to file an answer is fifteen days after the return date. An answer is the rebuttal to the complaint. The owner should address each paragraph within the complaint, stating whether he/she agrees or disagrees. If in disagreement, state why this is so. State any defenses available that are applicable. If something is unclear, do not agree to it; include in the answer that the section is unclear.
5. Decide which type of foreclosure to use.
If the owner wishes to have a foreclosure by sale, file a motion for foreclosure by sale with the court clerk.
6. The court issues a judgment.
At this point, a judgment is made to dismiss or permit the foreclosure. This is where the judge will set the law days or date of sale.
7. Ejection from the property occurs.
If the owner does not leave the property before the law day or the sale of the property, a marshal will serve him/her with notice of ejection, and then the marshal will come to remove the owner from the property. This is not ideal, as they are not gentle with items. There is also the risk of belongings being lost or broken. Items will be placed in storage and the owner will have fifteen days to retrieve the items before auctioning. Most cities will charge a storage fee as well.
8. Deficiency Judgment is issued.
If the foreclosure does not cover the amount of the debt, a motion can be filed by the bank or lender for the remainder of the debt. There is a separate hearing, and the owner has the right to argue against the motion for a Deficiency Judgment.
It is important that any owner contact a lawyer for state specific advice, if the owner desires to fight the foreclosure. If the owner has a VA, HUD, FmHA or FHA insure loan on the home, there may be additional owner rights to the ones listed here. For more information on options, check out the article Defending Against Foreclosure. Make sure to pursue all avenues when beginning this process
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