Posted about 3 years ago. Applies to Arizona, 4 helpful votes
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Trustee sales of real property (your home or land) and a bankruptcy are two separate legal processes. Both trustee sales and bankruptcy has a set of rules governing timing, processes and rights for both the lender and the borrower/debtor. I cannot explain one time line for these two processes because each has a separate timeline. Also the lender has their own internal rules and procedures. I cannot predict what these rules and procedures may be or the timing they may choose. So I will do my best to explain these separate processes and how they are intertwined. Understand the following is very generic and your situation may be slightly different from the norm.
Trustee's sales of real property (home or land): the lender's goal is to either get paid the money they are owed or get the property.
If you have more than one loan real property (home or land) each lender has a contract with you. Each lender can pursue their rights to get paid. If they are not paid each lender can process a foreclosure, trustee's sale, sue you on the Promissory Note, or do a workout with you. No lender is forced to follow the lead of another lender. So your primary lender may agree to work with you, but the second lender on your home refuses. That is their right.
The trustee's sale process:
1) Once there is a default the lender has the right to file a trustee's sale and auction the property for sale.
2) Starts with a notice of trustee's sale which is recorded with the County Recorder's office.
3) The property owner receives a copy of the notice of sale by certified mail. The notice of sale is posted on the front door and published in a newspaper.
4) You still own the house until the sale (auction) is completed. You can rent the property and use the money as you need. You can remove items that belong to you. Do not remove any items that are fixed to the walls or will cause damage to the property.
5) The sale date is at least 90 days from the date that the notice of sale is recorded.
6) The lender has the right to postpone the sale to a date later than the original schedule sale date. The lender may elect to postpone for any reason.
7) Do not assume the lender will postpone even if they are in the process of working with you about a loan modification or short sale. There are thousands of reports of homeowners who are working with the lender but the trustee's sale happens despite promises made by the lender.
8) Once the sale (auction) is complete then title conveys to the new owner (probably your lender).
9) A trustee's deed will be recorded with the county recorder's office. This deed transfers title to the new owner.
10) Do not remove any items from the house after title conveys to the new owner - that is theft.
11) You will receive a 5 day notice to vacate the house.
12) If you fail to vacate within the 5 days then the new owner can file a forcible entry and detainer.
13) There will be a hearing within 10-12 days. The court will enter an order for you to vacate the house within 5 business days after the court hearing.
14) Continue to pay the homeowners dues until the house changes title (a trustee's deed is signed)
The bankruptcy process:
1) When a bankruptcy is filed an automatic stay stops all civil actions (lawsuits, foreclosures, garnishments, repossessions, etc).
2) If there is a trustee's sale pending on your home the lender may not precede without first obtaining permission from the Bankruptcy Court by filing a motion for relief from the automatic stay.
3) If no trustee's sale was started before your bankruptcy was filed the lender may not proceed without first obtaining permission from the Bankruptcy Court by filing a motion for relief from the automatic stay.
4) The automatic stay continues to protect the debtor and their property until either the Bankruptcy Court enters an order lifting the automatic stay or a discharge is entered.
5) Once the discharge is entered the lenders (who were listed in the bankruptcy) are permanently stopped from suing you. The lender still has the right to their collateral (house or vehicle so if you want to keep these items you need to pay for them.
6) A discharge is entered in a chapter 7 after 120 days (assuming you have completed all the requirements) or in a chapter 13 3-5 years.
7) In either chapter 7 or 13 the lender can file a motion for relief from the automatic stay asking that the Bankruptcy Court let the lender to as they please as to the property.
8) In a chapter 7 this motion for relief is usually granted unless you are current on the mortgage payments.
9) In a chapter 13 this motion for relief is usually not granted if you keep the new mortgage payments current after filing the bankruptcy. You can use the chapter 13 to pay the back mortgage payments when you filed the bankruptcy.
10) There is no way to predict how long it will take the lender to file a motion for relief, or even if they will file one.
11) When a motion for relief is filed it takes approximately 25 days to complete process from the date the motion is filed with the Bankruptcy Court.
12) Once a motion for relief is filed with the Court it is very important that you let your attorney know if you have been making the mortgage payments or some other reason why the lender's motion is not appropriate. You only have 15 days to file an objection to the motion for relief otherwise the Court will grant the lender's request for a lift stay order.
13) Once the Order lifting the stay is signed by the judge the lender may continue with their trustee's sale, negotiate a short sale or loan modification or repossess the vehicle.
14) There is no way to predict how long it will take the lender to process trustee's sale, negotiate a short sale or loan modification or repossess the vehicle. It could be days, weeks, or months. Until the legal process is completed you still own the property.
15) It is your responsibility to check with the person/company conducting the trustee's sale of your home/property. Once your bankruptcy was filed they have been postponing the sale. This may have been for a few weeks or several years. This is not the trustee assigned to your bankruptcy case. It is the trustee that was listed on the notice of trustee's sale which you received when the sale was originally started. If you cannot find this notice of sale you can get a copy at the County Recorder's office. It will have the name and phone number for the trustee.
16) Do not assume the lender will continue with a loan modification or short sale once the Court enters the order lifting the stay. The lender can do anything they want without the Bankruptcy Court stopping the lender. Be very careful.
17) If you have more than one loan on your property each lender can file for an order and pursue their legal options (trustee's sale, deed in lieu, short sale, or loan modification).
18) Continue to pay the homeowners dues that come due after the bankruptcy is filed until the house changes title (a trustee's deed is signed)
19) Once the trustee's sale is completed the new owner has the right to evict you as set forth in the trustee's sale process detailed above.