When you have to default on your mortgage, foreclosure is really a serious matter and not a game, but if it happens through no fault of your own, here are a couple of ways you might play the foreclosure game.
Learn Whether or Not You Live in a Foreclosure Judicial State
When you are having financial problems and are considering filing for bankruptcy protection, saving up money to pay for legal fees and still make your living expenses should become your top priority.
Unfortunately, one of the first things that happens to people facing bankruptcy is that you tend to “rob Peter to pay Paul” before you save up anything. As a result, you often become very late on many of your living expenses. All too often you certainly cannot save money.
The first living expense many facing bankruptcy avoid is your mortgage. When you get behind on your mortgage, you are in default on your payments. Defaulting can cause your mortgage company to foreclose on your property. That means they will legally take back the secured asset, your home, based on the existing foreclosure laws within the state you reside.
There are two kinds of foreclosure states- judicial states and non-judicial states. If you live in a judicial foreclosure state, the mortgage company must go through the court system in order to legally take their secured property to satisfy the debt. Judicial foreclosure states have numerous foreclosure laws to protect the rights of the consumer. Because of these complicated laws and the legal process to implement them, a foreclosure in a judicial state can take as many as several years to complete.
On the other hand, in a non-judicial state, the terms of the contract most often establishes foreclosure procedures, and depending on the terms, the mortgage company need only prove you have defaulted to begin the foreclosure process. This process can be very fast in some states, often taking only months.
If you learn you are in a judicial state, you know you are going to file for bankruptcy protection, and you can estimate the average time it is taking for mortgage companies to go through the process, you can stop making mortgage payments. You will be living rent free until you are legally forced out. By legally doing so, it is a way for you to play the foreclosure game so that you can save money to make necessary expenses until the process comes to a conclusion, enabling you to have a fresh financial start.
Learn the Differences Between Secured and Unsecured Debts
The term foreclosure and repossession applies to secured assets within the bankruptcy legal process. Secured assets are debts that have a legal security, like a lien, tied to the debt. A legal security can also come in the form of a signed legal document where you have promised the creditor that they can retrieve the property if you default on the conditions of the loan. A secured debt is normally not discharged in bankruptcy, but the automatic stay of bankruptcy postpones the collection or retrieval of a secured debt until a specific time.
An unsecured debt is a loan or credit line where the transaction is not backed by a promise of retrieval of the property purchased through the use of the money. Purchasing an asset with the use of a credit card is an example of an unsecured debt.
Recognizing which type of debts you own will help you in determining how to play the foreclosure game. Many bankruptcy lawyers will tell you to stop making payments on unsecured debts the moment you decide to file for bankruptcy protection. This tactic will help you save money and pay necessary expenses up until the bankruptcy is closed.
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