Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

How soon can we buy a home after bankruptcy?  This is a frequently asked question from my clients who are struggling to decide whether to fight to save their underwater mortgaged home, or simply walk away and come back into the market within a couple years.  What we are now seeing is a steady stream of buyers who went through the short sale process nearly two years ago, who have saved their money and now have 3-5% to buy again.

Home Ownership University posted FHA, Fannie and Freddie guidelines in their recent article. It is very important to consider your long term goals when making the financial decision to walk away from your present mortgage and start over.  If you are among those who want to re-enter the marketplace in the future, a short sale and/or bankruptcy is clearly a better option than a foreclosure.  Remember that time is of the essence because the safe harbor tax breaks will likely be ending in 2012.

Your credit score is also a factor here and you are wise to work with a reputable credit repair expert whether you decide to file bankruptcy or not because lenders are looking for a score if 640 or better for potential buyers.  If you have debts besides your mortgage, you should consider bankruptcy as an option.  Otherwise, if all you're dealing with is mortgage debt, then a short sale is right for you.

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The gulf states must contend with hurricanes.  The northeast has their bitter cold.  Here in California, we must always be prepared for "The Big One," earthquakes that is.  As our economy limps along, virtually lifeless, and looking more like a depression rather than the politically correct "recession," we must be prepared for the onslaught of more potential foreclosures.

If you, or someone you know is facing or potentially facing a foreclosure, an attorney who is familiar with this area of law can explain your options so you can choose the course of action that is best for your individual needs, goals and desired outcome.

The five (5) ways to stop a foreclosure are:

1. Modification
2. Short Sale
3. Deed in Lieu
4. Bankruptcy
5. Injunction

Of the methods listed above, only a bankruptcy and a court ordered injunction will legally stop a foreclosure and even those methods may be temporary.  Most of the time, the lender may suspend their foreclosure proceedings in order to entertain the workout options of a modification, short sale or deed in lieu of foreclosure, but they are not legally required to do so. 

Recent court rulings in Massachusetts to invalidate thousands of foreclosure proceedings because the chain of title had not included all of the assignments that had taken place prior to foreclosure.  Unfortunately, a homeowner is not likely to invalidate a foreclosure in California after the sale date, especially where a bonified purchaser is involved and the property has been transferred.

A Chapter 13 bankruptcy is still the most economical and effective way to temporarily stop a foreclosure because of the automatic stay.  This allows the homeowner time to make up all past due payments.  This also allows the attorney to file any adversary proceedings necessary to invalidate the foreclosure proceedings and possibly sue the lender under TILA and RESPA violations; potentially recouping damages on behalf of their clients.

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