We recently filed and were discharged in bankruptcy and did not re-affirm the mortgage. The federal lien of course was not discharged (we knew it would not be) However the house is in now in pre-foreclosure. We have been puzzled that nothing has moved forward after a year of no payments, not a word from the lender. Could the lien be holding it up, and what will be the process with this lien attached. If the bank does nothing can I contact the FLU to take action themselves to foreclose? I have heard about so many zombie titles where the bank just walks away and I would rather the FLU got their money than have the house just sit there. We are staying in it until eviction, and I am willing to relinquish my rights to my homestead exemption to them if need be if the bank just walks away.
There is no way of knowing why the bank is not doing anything. My suspicion is that the lawyers they hire to do it are so busy that it just takes that long to get around to it. Foreclosure and collection attorneys always go after the low-hanging fruit, the easy cases where hey will get no resistance, and there is no real work involved. Maybe they have to do something to get the title cleared up. whatever the reason, it's a sweet deal, but remember, you are on the hook for property tax, insurance and utilities until the bank takes possession. If you don't keep insurance on the house, the bank will insure it and come after you to pay for it later. It is a post-bankruptcy debt, so even though you did not reaffirm, they can still charge you for that.
Chapter 7 Bankruptcy Attorney
No one really knows why the banks are not pursuing foreclosure in many instances, but I doubt the federal lien is an issue because I have seen many foreclosures proceed with federal tax liens, which are wiped out by a foreclosure. Unless you need to move, the deal you have now sounds pretty sweet - no rent until the bank does foreclose. Hope this perspective helps!
Yes, I always tell my clients to keep living for free (that's less than I pay, after all!), so you're doing the smart thing there. I wrote a paper on state-court judgments in bankruptcy (see http://www.scribd.com/doc/125506048/Treatment-of-Minnesota-State-Court-Judgments-Following-Bankruptcy-of-the-Judgment-Debtor), but much of it is applicable to federal liens. It was written for lawyers, but it should be somewhat intelligible to non-lawyers. The important thing to know is that there is a procedure for removing a lien that impairs your homestead exemption.
Contact counsel. A lawyer would need to know whether the underlying restitution claim was discharged and review the facts to know whether the lien can be avoided. Additionally, if you are just going to allow the bank to take your house, you might not care whether the lien is avoided unless you believe that there will be cash available to you after all lienholders' claims are satisfied. Generally foreclosure by a senior mortgagee will extinguish junior liens in any event. Additionally, if you avoid the lien, you might just invite foreclosure by a more junior lienholder who would move up a spot in priority.
You might also consider a chapter 13 petition, which might allow you to stay in the house and cure the arrears. There are many possibilities here, and you should take advantage of a free consultation ASAP.
Family Law Attorney
You are welcome to contact anyone you wish, but the reality is that you cannot force the lender to commence actual foreclosure - that's up to them. Most likely, the glut of foreclosures has them simply holding off on foreclosing because they don't want another property to handle.
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