Beth Ann (not her real name) asked me to be her Virginia bankruptcy lawyer in December, 2008. She was self employed, a single mom, with not much income. She was in one of those two year teaser rate loans, and when the real rate hit, there was no way she could afford the house payment.
In February, 2009, she came back and asked if bankruptcy could help her keep the house. Her brother had lost his house to foreclosure, and his family was now living there, too.
Still not enough income to afford that house payment, but I had hope. Barrack Obama had just been inaugurated two weeks before, and changes in bankruptcy law had been part of his platform. Obama had promised to change the law so the bankruptcy judge could adjust the balance on a home mortgage to what the house was now worth. (Bankruptcy judges can do that on an apartment, an office building, or one of Donald Trump’s casinos. But homeowners can’t use bankruptcy the way businesses can.)
The bank set a foreclosure sale on February 28, 2010, so we filed a bankruptcy for Beth Ann the day before. We hoped to save her house with the change in the bankruptcy law that President Obama promised but hadn’t been voted on yet.
On March 5, that change in the bankruptcy law passed the House of Representatives. It looked like Beth Ann and Obama were on a roll. We filed our bankruptcy reorganization plan two weeks after her bankruptcy was started. And the change in the law we needed was half way there.
That’s as far as it got. On April 30, the bill failed in the U.S. Senate. Commentators blamed Obama for going silent when he needed to speak up.
On July 13, 2009, her mortgage company got permission from the bankruptcy judge to foreclose her house. (Called “relief from the automatic stay.”)
On September 30, my office got a copy of the notice sent to her of the upcoming foreclosure sale. Beth Ann’s luck had run out.
Or had it. Beth Ann came to see me last week about a problem in her credit report. (I’m one of a handful of bankruptcy lawyers in the country who sues the credit bureaus to fix people’s after-bankruptcy credit reports.)
She mentioned that she is still in the house. A year after the mortgage company got permission from the bankruptcy judge–seventeen months after the first sale date was blocked by her bankruptcy–there was no foreclosure.
As a bankruptcy lawyer, I file a lot of bankruptcies for people on the eve of foreclosure. I tell them it gets you at least three more months to live in the house, sometimes more.
Beth Ann’s experience is on the long end of the sometimes more.
Here’s the lesson. If you want to keep your house and they’ve set a foreclosure sale, file bankruptcy. (That’s if you have eligibility–you certainly want to talk to an experienced bankruptcy lawyer, first.) At the least, you’ll get several more months to live for free.
And landing your file on a different person’s desk might work in your favor. That new person might offer you a deal you didn’t get offered before. Or, they might not know what to do with you, and you just sit there. That seems to be what happened to Beth Ann.