Bankruptcy Lawyer Helping Individuals in Los Angeles

Seeking to Halt a Sheriff’s Sale

Many people facing foreclosure or a sheriff’s sale want to keep their home. Filing for bankruptcy can stop an impending sheriff’s sale. An automatic stay goes into effect as soon as you file for bankruptcy. The stay prohibits any of your creditors, including your mortgage lender, from trying to collect on the debt through foreclosure or other means. The mortgage lender will need to either wait until the conclusion of the bankruptcy or make a motion for relief from stay to the bankruptcy court to continue with the foreclosure. A new sheriff’s sale may be scheduled, but filing for bankruptcy allows you several more months in your home. After the new sheriff’s sale, there is a short redemption period during which the owner may continue to live in the home.

If you file for Chapter 7, this stalls the imminent sheriff’s sale for several months. During that time, you can save money so that you have more money for a rental, or in rare cases, negotiate with your lender to come current on your mortgage payments. However, it is much more likely you will be successful at obtaining a loan modification if you negotiate the modification when you first become delinquent on a loan.

On the other hand, if you file for Chapter 13, you can restructure all of your debts, including your mortgage. You will need to pay off the arrearages owed to the mortgage lender and come current on your mortgage, but filing for Chapter 13 allows you to avoid the sheriff’s sale and arrange your finances so that you can keep your home. Through Chapter 13 bankruptcy, you may also have the opportunity to eliminate or strip junior liens that are not fully secured.

You should be aware that even if your home is sold in a sheriff’s sale, you might face continued collection efforts by the mortgage lender. When a home is sold for less than what a borrower owes on the loan, the lender can sue the borrower for the difference (a deficiency judgment), as well as attorneys’ fees and costs. Filing for bankruptcy protects you from further collection efforts by the mortgage lender. This should not be the only consideration when deciding whether to file for bankruptcy, but it should be one important factor.

In California, you cannot reverse a non-judicial foreclosure once it is complete. However, when a foreclosure is judicial and ends in a sheriff’s sale, there is a short redemption period under Cal. Civ. Code Proc. § 729.030. The redemption period is three months if the proceeds of the sale are sufficient to cover a mortgage debt, or within a year if the sale proceeds are not sufficient to cover the debt, except when a deficiency judgment is prohibited or waived. During the applicable redemption period, a homeowner can buy back his or her home if he or she acquires the funds to do so.

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