It only works in Trustee Sale states. (California is a trustee sale state.) However, it can easily triple the amount of time that a trustee can take to complete the foreclosure process. It doesn’t work from the lender side at all, it purely focuses on the trustee side of a foreclosure sale.
The trustee will eventually be able to finish the Trustee Sale but this has been used to delay the sale up to 41 months. The minimum time it has worked is 6 months and 15 days so far. That’s the minimum time so far it’s taken for the trustee to comply and then proceed with the sale.
A client may qualify if:
- The Trustee Sale Date is 30 days or less from now
- You have filed Bankruptcy, been denied for a loan mod or a temporary restraining order was lifted
- You need more time to facilitate a short sale, regular sale or loan modification
- If you are renting from a landlord or losing your home that you want to stay in
A Trustee Sale Legality Challenge is only a TEMPORARY solution to keep the foreclosure sale date at bay.
We can use it to only delay the sale – not cancel the foreclosure. It is a complex tactic that focuses on stalling the sale by focusing on the trustee sale legality. You can delay the sale for 6 months plus by using this method. This is NOT an inexpensive route however, but it’s cheaper than paying the mortgage and prevents a sale without doing credit damage like a bankruptcy filing. It has delayed sales for up to 41 months. We can use this as “insurance” for a “lock out” of truste sale while pursuing other solutions.
Beware: DO NOT SIGN OVER A SMALL PORTION OF YOUR GRANT DEED TO SOMEONE IN BANKRUPTCY to delay a Trustee Sale
Companies are approaching homeowners offering a delay product involving signing over 1% or 1/16th interest in the property to someone who is in bankruptcy. This is EXTREMELY illegal. DO NOT DO IT!
Comparing Trustee NOS Challenge to Bankruptcy as Method of Facilitating Delay
Amount of Delay
Chapter 7 Bankruptcy – 30 – 45 day Delay
Banks are very aware that many homeowners are filing Chapter 7 Bankruptcy to delay their foreclosure. When filed, a Ch 7 will put an automatic Stay on all of your debts. That means that no creditors can proceed with debt collection. Therefore, immediately after the bank is notified of the filing they send their legal team to court to file a motion to lift the stay. Most banks are doing this so fast that the stay only keeps the homeowner in their house for 30 – 45 more days. As soon as the stay is lifted, your house is back on the auction block and you now have a bankruptcy on your record and likely will be calling ASND, Inc anyways.
Chapter 13 – 40 -60 day Delay
Similar to Chapter 7, when a Chapter 13 is filed it will stop creditors from collecting debts immediately. The difference is that Chapter 13s are the reorganization of debts. This will buy the homeowner a few more weeks, but the banks will still file a motion to lift the stay. Homeowners who are this delinquent are at a disadvantage in court against a valid creditor who has not been paid in an excessive amount of time. Again, as soon as the stay is lifted your house is back on the auction block and you now have a bankruptcy on your record.
Trustee Sale Challenge – 6 – 40 Month Delay
6 months 15 days is the fastest any homeowner has lost their house in this program with the longest being 3 years and 4 months. You will not have a bankruptcy on your record and can still work out a modification or short sale while in the program. It’s not cheap, but it’s way cheaper than the alternative of having the home sold out from underneath us before a sale or a non-deficiency agreement with the lenders was completed (for a short sale).
Credit Damage Incurred
Bankruptcy
Filing any type of bankruptcy will have very strong consequences. Homeowners who file just to prolong the sale of their house disqualify from filing again for 7 years (in a Ch. 7). Therefore, you are vulnerable for that entire period. What happens if there is some medical emergency that incurs tremendous bills? You will not be able to protect yourself against getting your wages garnished. No matter what the debt or situation, you are no longer allowed to protect yourself because you used your ‘free pass’ on your foreclosure, which could have been handled much differently.
Also, many companies pull credit and might not hire a candidate with a Bankruptcy on their record. In today’s job market, can anyone afford such a big disadvantage?
Trustee Sale Challenge
While in the program, you are likely to be getting revolving mortgage lates until a solution has taken place, whether it is foreclosure, short sale, fair market sale, modification or reinstatement.
Financial Benefits
Chapter 7
Chapter 7 Bankruptcy wipes the slate clean for people who qualify (qualifying for a BK is now tougher than ever). When approved, most debts can be released. This is a good choice for homeowners with a lot of unsecured debt (credit cards, personal loans…). Your mortgage is secured by your home, meaning that even after bankruptcy is filed they can still take your property. So the financial benefits only include removing unsecured debt.
Chapter 13
Chapter 13 is reorganization of debts. The judge is going to work with yourself and your creditors to plan out an acceptable repayment plan to all of them. Often the property will be removed from the BK as the delinquency is extreme and it is a secured loan. This is not a great option for homeowners looking to buy time.
Trustee Sale Challenge
While you are employing a Trustee Sale Challenge to verify the legality of your foreclosure proceedings, you live in your house for a fraction of what your mortgage or rent would be. During this time you can save money to buy another place in the future. You can get into a debt settlement program and remove all of your unsecured debts without filing bankruptcy. It is your savings to do with what you please. This won’t stop an eventual sale though, just delay it for months.
Just to make it perfectly clear:
We can ONLY buy time by utilizing a trustee notice of sale challenge to push off the sale date significantly into the future. Some other method must be used to actually resolve the foreclosure! This is a good form of insurance to make sure the trustee doesn’t sell the property out from underneath us while we are pursuing our final objectives.
We work all of the above solutions in conjunction with credit cleanup further down the line after our client’s lives have stabilized. We have systems in place to help accomplish life stabilization too – mainly due to the fact we’ve been down the foreclosure route ourselves so we know how we fixed it long term. We also now know what we really needed to know 20 years ago when we were going through all this ourselves.
Vic Pillai
Lighthouse Consulting Group
1800 529 2959 ext 1003
www.lhcginc.com
