When it's time to press the panic button
You’ve been in foreclosure for a while, but now it’s really time to panic: you’ve been served with a notice of sale.
You fell behind on your mortgage payment a long time ago and you didn’t do anything about it. The collections calls started, but you started dodging them. You blocked the collector’s phone number and you stopped receiving calls. Or, you just stopped picking up the phone at home when you didn’t recognize the number.
You were served with the summons and complaint, but you didn’t consult a lawyer to see what your options were. Maybe you showed up to the first settlement conference, but the paperwork that the bank asked you for was too overwhelming, and you retreated. You didn’t show up to the second settlement conference, and the bank proceeded with the foreclosure action. Maybe you didn't read this post and you hired a modification "specialist." That didn't work out. The bank got an order of reference, they moved for judgment of foreclosure of sale, and they eventually got that too. It’s been a long time, and aside from receiving a giant stack of papers every once in a while, nothing has really changed about your situation. You’re still living in the property and no one really knows you’re in foreclosure. You might get an occasional telephone call (or a knock on your door) from a random stranger asking you to sell your house to them. By the way, those people cold calling you and dropping by to visit are the sharks that circle when they smell blood in the water. Their presence should concern you; they’re trying to buy your property for less than what it’s worth. Because you read this post, you know in your heart that the other shoe is going to drop soon, and then it does.
One day, you find a notice of sale in your mail. After careful reading, it tells you the date, time and place where your house is going to be sold at public auction. The date is like two weeks away. It could be more; it probably won’t be too much less. Now if you listened to me when I gave you this advice, you probably wouldn’t be in this position now. Even if you were in this position, you would have been well prepared for it and would have a game plan with how you’re going to deal with this. But you didn’t do anything when you first fell behind (or at any point during the foreclosure), and you’re not well prepared for what you’re going to right now.
So let’s say you don’t have anywhere else to live. Like at every point during this process, you’re better off if you get ahead of this sale. So, what are your options?
First, some harsh truth about the way the world works. Most businesses don’t sell you what you need; they sell you what they want you to buy. We’ve all been prey to the auto mechanic who won’t pass your car’s inspection because the windshield wipers need to be replaced, or the doctor who wants to run this test you’ve never heard of before (what a coincidence – the doctor just bought this unique machine that runs that very same test!), or the oil company that needs to replace this one part on your boiler, and by the way, that part isn’t covered by your service contract.
Many lawyers are the same way. If the lawyer is a state court litigator, he’ll tell you to do an order to show cause, maybe a motion to vacate the judgment of foreclosure and sale, maybe a motion to dismiss. If the lawyer is a bankruptcy practitioner, she’ll urge you to file a bankruptcy. How do you know what to do?
So, your options at this point are basically to file an order to show cause in the foreclosure action or to go to bankruptcy court and file for bankruptcy. You need a stay of this sale right now. These are the only ways to urgently stop a sale. There are pros and cons to each of these alternatives, and I’ll do a deep dive on all of the considerations in another post. Of course, every situation is different and the advice you should be receiving should be tailored to your situation. If I’m the person you talk to about your situation, I’ll tell you that if you have some time, you should try the order to show cause. If the auction is scheduled for tomorrow, you need to go to the bankruptcy court now.
By the way, if I’m representing the bank on your case, and you call me two weeks before the scheduled auction to let me know that you’re selling the property and you need a payoff quote, I know you’re not actually selling the property and that you’re just filing for bankruptcy. You’re not fooling me. Next time, just tell me that you’re planning on filing your bankruptcy the day before the auction and you need to know how much to put that you owe the bank on your bankruptcy petition. I’ll applaud your honesty.