You may have just missed a mortgage payment or see an upcoming foreclosure auction and wonder how to stop a foreclosure in New York. Chapter 13 bankruptcy may be one of the most popular options, but what is the cost compared to what you are paying now? Will it provide you relief?
The purpose of this article is the following:
Most of these options are aimed at allowing you to continue making modified payments towards your mortgage. Some are more focused on getting rid of the debt in total.
These options are all pretty nuanced, so keep reading to learn more about what options are available to you.
You may be able to stop a foreclosure in New York up until the foreclosure auction, but this is an estimate and it may be dependent on the state.
As such, check the official New York guidelines or you can get a free bankruptcy consultation with local New York attorney.
There’s no easy way around it, facing a foreclosure in New York is awful. Whether you lost your job, you’ve become ill or disabled, or something else is keeping you from being able to keep up with mortgage payments, foreclosure is one of the most terrifying and disheartening threats you can face. Let’s first cover judicial vs non-judicial foreclosures in New York. Here’s a quick difference, and what is allowed in New York:
Judicial Foreclosure: The lender must file a foreclosure lawsuit (judicial foreclosure) to gain court permission to sell the home.
Non-Judicial Foreclosure: The lender does not file a foreclosure lawsuit. These foreclosures are generally handled by the Clerk of Court’s Office or the Sheriff’s Office in the county where the property is located.
New York allows judicial foreclosures. This means that you are served with the foreclosure lawsuit and have a specific number of days to respond to the lawsuit. If you do not respond to the lawsuit, the court enters a default judgment and orders your home to be sold at the next foreclosure sale.
A judicial foreclosure involves filing a summons and complaint with the court asking that the court order the home to be sold at a foreclosure auction. You must be served with a copy of the foreclosure complaint. In most states, you have 20 to 30 days to respond to the complaint.
We know that the thought of foreclosure can be overwhelming. Luckily, there are a few things you can do to either prevent, stall or stop foreclosure immediately. Let's cover those now starting with bankruptcy, a common option to stop foreclosure.
Yes, bankruptcy can stop foreclosure in New York, but it’s important to understand the difference between Chapter 7 and Chapter 13 bankruptcy.
A Chapter 13 bankruptcy in New York is a common option to stop a foreclosure because the 3 or 5 year payment plan allows you to catch up on the home’s arrearage. This means that, if a lender is pursuing foreclosure, they will be ordered to stop, giving you time to get on top of your finances.
A Chapter 7 bankruptcy in New York is a liquidation bankruptcy, so it may be less common to pursue this option unless you potentially want the New York bankruptcy trustee to sell your home. So, you may qualify for Chapter 7 bankruptcy in New York, but you may not want to pursue it even though it's often the lower cost bankruptcy option because the trustee pay sell your home.
The challenge with a Chapter 13 bankruptcy is understanding what your Chapter 13 plan payment will be and whether that provides enough relief to you. For example, if you are $120,000 in arrears on your house, and you get into a 5 year / 60 month Chapter 13 repayment plan then will you be able to afford the additional $2,000 per month that you would pay to catch up on the arrears.
As such, we built a free New York Chapter 13 bankruptcy calculator based on the official bankruptcy forms to provide a monthly all-in payment estimate, including the mortgage arrears, attorney cost, and filing fee cost. The calculator also allow you to send your data to an attorney that serves your county in New York for a free phone evaluation.
| # of People | 150% Poverty Guideline |
|---|---|
| 1 | $15,060 |
| 2 | $20,440 |
| 3 | $25,820 |
| 4 | $31,200 |
| 5 | $36,580 |
| 6 | $41,960 |
| 7 | $47,340 |
| 8 | $52,720 |
| 9 | $58,100 |
| * Add $5,380 for each individual in excess of 9. | |
Have you begun to notice that mortgage payments are becoming harder and harder to pay in full? Has something significant in your life occurred that is stopping you from being able to make your payments. Before you miss a payment, it may be worth reaching out to your lender to see if they offer or would consider loan modification.
Have you missed payments, but you have enough cash on hand to pay off everything that you’ve missed? Approach your lender with the cash to see if they would take the payment and allow you to continue paying down your loan without any legal action. Typically, if you have the funds available, lenders will eagerly accept this option.
Have you missed a couple of payments, but you are generally still able to make payments? Try seeing if your lender would consider a repayment plan. A repayment plan allows you to slowly pay back the payments you missed while simultaneously continuing to make your normal mortgage payments. This allows you to slowly pay off the missed payments instead of having to pay it upfront. Though lenders may be more hesitant to do this, you can try and come to an agreement on a monthly payment on top of your mortgage that they will accept.
Let’s discuss how forbearance works. Has something recently happened that is stopping you from making your payments? Did you lose your job, get sick, go through a divorce, or something else that would impact your financial situation? Your lender may be willing to enter into a forbearance agreement. This agreement typically means the lender is giving you permission to make lower payments (or even no payments) for a period of time. In most cases, if you are able to prove that the reason you are struggling to make payments is not a long-term hindrance, your lender may be willing to give you a short period of time as a sort of ‘grace period.’
Interest rates have recently increased, making refinancing a difficult option to consider, especially if you are just barely missing the full payment. This also allows you to start fresh with a new lender, meaning the lender may be more willing to work with you if you need a little more assistance later on.
I know it’s a difficult thing to think about, but sometimes, the best option is to sell your home. If you would make money, or even break even, if you sell your house, it’s a really good option to consider. Perhaps you could even purchase a house that is more in your price range, or even rent a house while you get back on top of your finances. Either way, selling your home allows you to not have to go through foreclosure, something that can drastically change your credit and reputation.
If you are unable to do any of the previous options, your lender may agree to a deed in lieu of foreclosure. All this means is that you would hand over the deed of your property to the lender, canceling any debt you may owe them. The lender would then own your property in New York, and you would have to vacate the home. Again, this allows you to walk away without too much damage.
Short selling your home means selling your home for less than what you currently owe on the house. Because a lot of houses that go to auction aren’t sold for their appraised price, some banks and lenders will agree to a short sell of your home.
You may find New York government wants you to stay in your home, so there may be free resources that you can see whether you can help stay in your home.
For this, check out New York's New York’s Homeowner Protection Program (HOPP) which may provide free mortgage payment counseling or foreclosure mediation services. One challenge with these services though may be the limited scope of who they will help because everyone who is applying for these services may have faced a financial hardship.
It can be helpful to review the actual source of the New York foreclosure law to understand your options. You can check the link above, which was one of the sources we’ve found. If it’s not a government link, you can call your state government to see whether you can get the actual law text.
Here’s another source below that provides some information on how to stop a foreclosure in New York.
New York law provides that the homeowner may reinstate the loan at any time prior to final judgment. The homeowner can also pay the arrearage after judgment, but before the sale, and the proceedings will be stayed (postponed). If the homeowner subsequently defaults, then the court can order enforcement of the judgment. (N.Y. Real Prop. Acts. Law § 1341). New York law doesn't provide a redemption period for foreclosed homeowners after the sale.
It may depend on variables such as when the lender starts the process. That said, lets cover how the process works.
As you know, foreclosure is a legal process in which a lender (whoever you got your mortgage loan through) decides to seize and resell your home after a certain amount of missed payments. There are a few steps in between missing payments and having your home foreclosed. Each state’s process can be slightly different than what the federal government states.
Here’s the New York foreclosure timeline:
Day 1-90: Lender must send information to get help within at least 90 days before starting court case.
Day 90: Foreclosure case started, and summons and complaint with court serves you summons.
Day 91-120: Your answer to the complaint is due.
Day 121+: You either start the Mandator Settlement Conference or judge may sign a foreclosure judgment for a sale that is advertised for at least 21 days.
Now that you understand the New York timeline, let’s go through the definition of the different steps in the process.
The entire process starts with a missed payment. As soon as you begin missing payments, lenders begin the process of monitoring your account and prepare to take action after a certain period of time. In New York, lenders cannot begin the foreclosure process until at a specific number of days after your first missed payment. If this is not enough time for you to get back on top of your missed payments, the process will continue.
After the 120 days has passed since your last payment, your lender can now send you a Notice of Default letter. This will be a public notice that is sent through your County Recorder’s Office.
Once you are sent the Notice of Default, you typically have some time to either work something out with your lender (options covered later) or fully pay back your missed payments. If you are able to pay back the missed payments, the foreclosure will end and you will continue paying off your house as normal. If you are not able to do either, your foreclosure will proceed.
In New York, foreclosures may happen quickly. In fact, most houses are put up for auction after a Notice of Default. The lender will set a date for the house to be auctioned on, during which time you still maintain the right of redemption, meaning, if you can bring cash that covers the outstanding balance in your loan, the foreclosure auction will be stopped. If you cannot do this, the house will be sold to the highest bidder with cash payment. Oftentimes, the bank will buy back the house if there are no cash bidders.
If a third-party doesn’t end up buying the house, and the bank or lender now owns the property, they will continue trying to resell it. During this time, if you are still in the house or property, the new owners can have you evicted.
While avoiding the threat of foreclosure altogether is the best decision, it can be hard to stay on top of your payments when life happens. Because of this, we know it’s important to have ways that can help stall or even stop foreclosure from happening. Let’s take a look at some steps you can take to save your home from foreclosure.
While these options are all viable and something you should look into if you are facing foreclosure, there are some other tips that are important to keep in mind:
DON’T ignore the calls, letters, and emails from your lender after you miss a payment. Almost all of the options for delaying or working around foreclosure involve working closely with your lender. This means that having an open and honest line of communication will almost always be better than ignoring their attempts to reach out.
The only thing that happens when you ignore your lender is moving closer and closer to foreclosure. Instead, immediately respond to your lender, let them know your situation, and see if they have anything that can help you. Lenders know it is typically more cost-effective for them to allow you to pay off your loan in unique ways than it is for them to go through the foreclosure process. But they can’t help you if you are avoiding talking to them at all.
Figure out your priorities. If you are falling behind on multiple payments and are looking at various repossessions, foreclosures, and potentially bankruptcy, it may be a good time to evaluate what you value the most. Is your car more important to your livelihood than a house? Then perhaps you sell the house and either purchase a more modest home or rent something. Is it more important to you that your family has a house you own? Then consider allowing your car to be repossessed or even selling it to ensure you can continue making payments on your house. Whatever your priorities are, make sure to really focus on those payments, even if that means cutting back payments somewhere else.
Consider working with legal representation. Even if the process doesn’t involve going to court, it’s good to have someone who knows the ins and outs of foreclosure law to make sure your lender isn’t abusing the system in any way. If you are about to go into foreclosure, it might be worth scheduling a consultation to make sure everything is done right.
Ultimately, you understand your situation best, so hopefully this provides clear options to stop foreclosure in New York. Chapter 13 bankruptcy is a common option, but what’s the cost? You can also communicate with your lender as best you can, lay out your priorities, and then decide your best course of action. If you would like to talk to someone about your options, please text or call us at 833-272-3631. Feel free to take the free New York Chapter 13 payment plan calculator below to estimate your Chapter 13 plan payment.
