BK, then Foreclosure, then done?

[Boscoe]

Ok, filing BK. Please review this scenario.

Property is close to being foreclosured on. After filing, the foreclosure sale takes place. Value of property is more than the outstanding mortgage debt.

Does the foreclosure sale effectively wipe out this debt even before the BK is complete, given the oversecured position ?

My question would be, if in this situation, would the mortgagor have any recourse should the BK be dismissed after the foreclosure sale took place?

[poorme]

When you file, the actions being taken by the mortgage holder will have to cease, at least for awhile. Effectively, the foreclosure actions will be stopped while the bk is open - you will be protected by the automatic stay. They (or you) will be unable to sell the house while the bk is open. The mortgage holder WILL file for a Lift of Stay, allowing them to proceed with foreclosure outside the stay's protection. In almost all cases, the bk court will grant their motion. At best, you will have gained some time before you have to surrender the home, however this could be anywhere from a couple of months to 5 or 6 depending on where you live.

With the value of the house being enough to satisfy the debt, the trustee will have more than a passing interest, and may choose to seize and sell the home within the bk in order to satisfy the lien holder and other creditors. In other words, you may lose the equity value (aside from your exemption) and see the proceeds applied towards the unsecured debts.

Better info can be provided if we know which state you reside in. Do you have an attorney handling your bk? Any other pertinent details you can provide will be helpful.

[SinkingFast]

Generally speaking,......... If you're actively in Foreclosure when you file BK, the Foreclosure process will stop temporarily.

Generally, after the 341 Meeting, the Mortgage Lender will file a Motion to Lift Stay so the Foreclosure process can continue. Then your house will be sold per the Laws of your State.

If the house brings more than is owed,......... And what is owed will be your principal balance PLUS all late fees, PLUS all interest that's accrued, PLUS your Mortgage Lender's legal costs,......... The first person the Trustee could pay out of the proceeds of the Sale is you.

If your State has a Homestead Exemption, the Trustee will give you your Homestead allotment out of the proceeds from the Sale. The remainder of the proceeds from the Sale will be siezed for the benefit of your Creditors. And to line the Trustee's pocket, of course. Can't forget that!!

[HHM]

You do need to be prepared for the fact that homes almost never fetch more than the minimum owed to the bank (regardless of the value), at a foreclosure sale, and that 90% of the houses at foreclosure auctions are merely taken in by the bank as REO's (Real Estate Owned by the Bank), i.e. the bank is the only bidder.

So, don't hold your breath for any check if the house goes to foreclosure.