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Foreclosures are beginning to tick up as government-mandated moratoriums and forbearance grace periods wear off. In June, borrowers with a single payment past due rose 5 percent. The number of borrowers in active foreclosure rose as well, likely due to the lifting of the last two years’ moratoriums and forbearance protections. During the pandemic, millions of homeowners took advantage of forbearance programs to avoid default as lockdowns ate into their savings and their earning capacity. For those in the forbearance program still in some sort of loss mitigation status, the impact of the end of these programs remains to be seen. Homeowners are worried their forbearance agreements are now ending and Banks are asking for a balloon payment up front of all arrears during the forbearance period – which for some is 18 months or more of mortgage payments. If borrowers who are this far behind are unable to secure a loan modification from their mortgage company, they may find themselves in foreclosure.

If a borrower is being foreclosed on, one option to consider is bankruptcy. A Chapter 13 or Individual Chapter 11 allows a debtor to take advantage of the automatic stay which acts as an injunction, or bar, to creditors’ attempts to collect debts or enforce liens during the bankruptcy case. In other words, the moment you file bankruptcy relief the stay goes into effect that prohibits your lender from going forward with the foreclosure sale. Chapter 13 and Individual Chapter 11 are designed as a pathway for Debtors to keep their homes and assets for the long term by entering into an affordable repayment plan that allows the Debtor to get caught up on their mortgage.

At Farinash & Stofan, we serve clients in Cleveland, Fort Oglethorpe, Dayton, and the greater Chattanooga, Tennessee area.