Some people file bankruptcy just before the foreclosure . They have given up trying to keep the house–just can’t afford it. They want to get some time to save some money before they have to move. They ask, how long do I have?
In Virginia, the short answer is at least three months.
When you file Chapter 7 bankruptcy, you are protected by the automatic stay. A stay is a court order. And the automatic stay is, automatic. Everybody who is trying to take your money or property is automatically told to stop. That includes the foreclosure. http://en.wikipedia.org/wiki/Automatic_stay.
The foreclosure lawyers need to get permission from the bankruptcy judge to start the foreclosure again. (This is called relief from the automatic stay–they will send you a copy of that court paper.) Getting that permission from the judge will take them about six weeks.
Once they get permission it should take them five or six more weeks to put through the foreclosure sale. (Should is an important word in that sentence and we’ll come back to it. Sometimes they take a lot longer.)
In Virginia the foreclosure take effect on the date of foreclosure sale. All your rights are gone. (Some states give you months afterward to buy the house back. Not here.)
Now you are a tenant without a lease in your own house. (Somewhat better than a trespasser, but not much.) Most people want to be out by that point. That will be about three months after the Chapter 7 bankruptcy was filed.
What about cash for keys? If you are still in the house after the foreclosure sale, what happens next? It partly depends on the new owner. Sometimes the new owner will decide to buy your cooperation–to pay you cash for keys, to get you to move out promptly and leave the place clean.
You don’t have any legal right to cash for keys, but if the new owner thinks that’s the easiest way to go, you can sometimes get several thousand dollars. Click here http://robertweed.com/resources/CashforKeys.pdf for s sample cash for keys letter.
What if I get a mean owner? If you get a mean new owner, they will evict you. That’s a two step legal process. First, they will file an unlawful detainer–a court paper saying you have to be out. In Virginia they can do that in less than three weeks. A couple weeks after that, if you are not gone, the sheriff will put you out. Here’s how the Fairfax County sheriff’s office describes eviction. http://www.fairfaxcounty.gov/sheriff/eviction.htm.
What if they don’t foreclose? I said earlier that they should foreclose you about six weeks after they get permission from the judge. Fairly often it takes them longer; sometimes a whole lot longer.
The main reason for that, I think, is that the foreclosure lawyers are overwhelmed. There are way more foreclosures today than there have ever been, and they are having trouble keeping up with the work. So sometimes they don’t get to you for a while; and some people get lost in the shuffle.
A second reason can be the condo fees. Even after the bankruptcy you are still the owner until the foreclosure sale. The condo fees are an after bankruptcy debt and you have to pay them. If the bank thinks they’ll have a hard time selling your unit, they might rather let you pay the condo fees for the next six months, and then foreclose you when they think they could sell your condo quickly.
(Make no mistake, your condo association will sue you–fast–for those after bankruptcy condo fees. The foreclosure crisis is really hurting the condo associations and they have no room in their budgets for being reasonable.)
With those two factors, I am sometimes seeing five or six months go by after the bankruptcy before the foreclosure sale.
How can I plan? Obviously planning is easier if you have a smaller family. If you can get everything pretty much packed up, ready to move, you can keep living for free (except for the condo or HOA) for as long as they will let you. Be ready to go when they actually set up a sale date; and wait to see if they offer you cash for keys.
With a bigger family, that’s harder. Finding a place to move to will be harder and you have to pay more attention to things like school districts. Of course, you don’t need me to tell you everything is harder when you have to take care of your kids; you know that.