Foreclosure Fees Sometimes Hidden in Bankruptcy

Foreclosure auction signs

Foreclosure auction signs (Photo credit: niallkennedy)

Recent law changes now prevent most mortgage lenders from hiding the fees they charge for foreclosures when you have filed for bankruptcy protection. Nevertheless, some lenders haven’t gotten the message and some foreclosure fees are still being hidden in the small print.

These facts caused one Chapter 13 filer to recently berate his mortgage company for failing to share the fact they had been charging the fees in the payment plan, and the bank did not reveal this fact until year four of their plan. If the debtor ever wanted to surrender the home, he would have been paying for the privilege of having the home foreclosed on him instead of having what was owed on the home discharged in the bankruptcy.

A minor point until you consider most of these foreclosure fees can add up to thousands of dollars. So, what are these foreclosure fees paid for that can be hidden from you and added to your costs if you are not careful when filing a bankruptcy?

There are a number of fees that can arise when a bank seeks a foreclosure. Here are some of these fees:

  • Legal Fees. Attorneys have to be paid for legal actions in legally removing the ownership of a property to a lien holder. Many of these fees are stipulated by state laws the attorneys will not likely be willing to take less for.

  • Court Costs. The courts will also charge fees for documents that must be filed in order for the process to be legal. These fees could include copying fees, filing fees, and the like. These are necessary costs in order to make the tax and county documents correct for title searches, so the house can be sold to the next owners.

  • Auction Costs. When a house is foreclosed on in most states, the sheriff will hold an auction to sell the home. These auctions costs the county time and money. The Sheriff and county cannot do them for free.

  • Miscellaneous Fees. There can be a wide range of miscellaneous fees for the foreclosure process. Some of these might include overnight delivery fees, monthly inspection fees to check the property, processing fees, evaluation of property fees, demand fees, and closing costs.

Can a mortgage bank charge you for all of these fees? Technically, you will find that the most all mortgage lenders put this in the mortgage contract that you have the responsibility to pay for the foreclosure process if you default on the loan. So, yes, they can charge you for all these fees, but if you file for bankruptcy, these fees can be discharged in bankruptcy.

Can you get rid of the lender’s foreclosure fees short of filing for bankruptcy protection? You have alternatives in that you can settle with the lender, or you might engage in some type of tactic like a deed in lieu of a foreclosure. Be sure and read your mortgage contract before you sign.

Technically, mortgage lenders are no longer aloud to hide foreclosure fees from you even if you are filing a bankruptcy, but it is still a good idea to consult with you bankruptcy lawyer when you have foreclosure problems.

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