Can You Stop Foreclosure & Get Your Debt Canceled?

by Guest Blogger on July 10, 2010

Having problems with an upside down mortgage? All is not lost.

Believe it or not but miracles still do happen. Imagine how this New York couple must have felt when a reputable bank instituted foreclosure proceedings against them. How can they win, one might ask? They must have prayed for a miracle. Lo and behold! A miracle did occur. Thanks to a sympathetic judge in New York. Yes, there are still kind people out there who protect the financially challenged and not just the financially gifted. A big question mark though on the use of the word “gifted.” This judge not only canceled the indebtedness but discharged the mortgage as well. It’s almost as if the couple now has a clean bill of financial health and need not worry any further about settling what was once an apparently insurmountable obligation secured by their home.

So how did this couple ever merit this blessing and the heart of the judge? Here are some tips that may be useful to those similarly situated.

Can You Stop Foreclosure & Get Your Debt Canceled?

As the case we discussed has illustrated, it is possible to fight foreclosure and win, even though it may be an uphill battle. Of course, each case is different.

1. First, upon the filing of a lawsuit to foreclose on your property, you must reasonably request the court for a settlement conference. This would show good faith on your part that you intend to settle your obligation and not escape liability.


2. Second, your proposal for settlement must be reasonable. Don’t ask for the moon by demanding a waiver of the indebtedness. No, this just won’t happen. Not even in the movies. Neither should you tinker with the interest (ie. ask for your interest charges to be modified). That’s how banks make money so don’t mess with that. A good start for a reasonable request would be a modification of terms. In other words, this is like admitting that you owe so much but you just need additional time to pay it off. One tried and tested method is to accompany your requested modification with a substantial payment. As the saying goes: “Show me the money!” Banks thrive on money. They need to see the money.

3. The last tip is often the most overlooked and neglected. You need to engage the services of a lawyer to assist you in your requested loan modification. True, lawyers are costly but they cost money because they can save you money or give you the much needed breathing space to settle your debts. Bear in mind that the people you will be dealing with have their own lawyers who themselves prepared the loan and mortgage documents. You need a lawyer to level the playing field.

If you’re in any trouble with debt and crippling loans, look to a debt management program for help.

In the particular foreclosure case in New York, the judge actually considered the social ills that might result if the home were to be foreclosed. Would the foreclosure be “repugnant to the public interest when seen from the point of view of public morality?” Heavy stuff, one might think. The court hastened to add that foreclosed properties are oftentimes boarded up, which in turn leads to vagrancy, dumping, vandalism, litter and the eventual decline of property values in the area.

Is there a glimmer of hope for those facing foreclosure of their homes? The bank referred to has filed an appeal to a higher court. Prudence dictates that we await the decision of the appeals court.

(Disclaimer: This is not intended to be legal advice but purely for informational purposes. The services of a lawyer have to be engaged if legal advice and representation are sought.)

 
This guest post was written by my dear brother-in-law, Earl Fischer, who is one passionate lawyer.

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{ 8 comments… read them below or add one }

1 edward gold July 10, 2010 at 7:29 am

I hope the legal environment I’m reading about in New York is not representative of the country. There must be more to this case. Was their malfeasance involved by the bank?

2 Elliot Zshornack July 10, 2010 at 2:26 pm

Great Stuff!!

One of the reasons people fear going into mortgage is the uncertainty with the country’s economic condition and with their economic condition. Its nice to hear that all may not be lost when the worst happens. This article gives a little bit of information of an actual case where it did happen. Someone was able to cancel the mortgage and it gives a bit of an insight on what led to the cancellation of the mortgage. It also gives us a bit of an idea on how the law works and how judges make decisions.

3 ET July 10, 2010 at 4:28 pm

The tips are sound and yes, I have had actual experienceing negotiating when matters of money are concerned. Granted, not in the magnitude of a home mortgage, but overall, if you take the initiative and appear to not be the type who is just looking for a handout or a freebie, then the loan holders turn a softer heart and ear…problem minimized if not solved.

4 Dennis July 11, 2010 at 10:32 pm

Very useful information for guys like me who are clueless on what to do with a notice of foreclosure. Simply said and easy to follow.

Thanks!

5 bluegrass filly July 12, 2010 at 10:21 am

I have witnessed several judges who are receptive to allowing a debtor in default to re-negotiate the loan, in order to avoid foreclosure, provided the defendant-debtor

(1) timely responds to complaints for foreclosure;
(2) shows the judge repeated efforts and attempts to reach a settlement with the bank;
(3) provides the judge with written communication the debtor has had with the bank’s loan servicing department.

Hope remains to a responsible debtor. Many times, the bank’s legal department or outside counsel handling foreclosure proceedings is not aware of the renegotiation already going on between the defendant-debtor and another department within the bank. An unfortunate case of the right hand not knowing what the left hand is doing. These details can help persuade the judge that the responsible debtor is entitled to a second chance.

6 Larry Fleckinger July 21, 2010 at 11:09 am

In my experience many banks will forgive your deficiency; credit unions do not want to play ball though.

7 John November 23, 2010 at 10:13 am

Can a Judge force a bank to modify a mortgage? I became ill over the last 3 yrs.Got hit with foreclosure and hired a lawyer.My lawyer wants to modify the mortgage on my yearly income(What I’m taxed on,what I made). Not a projected 12 months @ 5000 a month. Being ill I missed alot of work and pay.I made an average of 30,000 a yr for the last 3 yrs.The bank wants the 12 months figured in the modification even though I make much less.
Thanks.

8 Earl Fischer November 24, 2010 at 10:56 pm

I’m sorry to hear about your illness, John. I hope you get well soon in case your illness is still bothering you. It would not be proper to answer your question because you said you already have a lawyer so you should ask your lawyer. Also, different states have different laws on mortgage. Check with your state or local laws on mortgage modification. Bear in mind that mortgages basically involve contracts between 2 parties. A judge either enforces the contract or declares it invalid or unenforceable, in whole or in part, depending on whether the contract as a whole or some of its clauses contravenes the law or some other public policy consideration. Pardon the very general character of this response. Like I said above, you will have to check with your lawyer. Good luck!

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