Receiving a notice of a foreclosure sale is not something that a person usually plans for, but having a plan to stop a foreclosure sale is something you can plan for. Perhaps you knew this day was coming but due to circumstances out of your control you simply have not been able to get a handle on your mortgage payments in order to remain in your home or you feel that you are too far behind to take any action which could allow you to keep your home. If you have received a notice of trustee sale, that means you have probably already received a notice of default as well as a notice of pre-foreclosure options which advised you to get assistance to avoid a foreclosure sale. Perhaps you procrastinated or did not want to think about it and now you need to stop your foreclosure sale immediately. Fortunately for you there are still options available in order to keep your home or slow down the foreclosure process but you have to act fast.
Washington State Foreclosure Fairness Mediation Program (FFA Mediation)
The first option, and the preferred option for many homeowners, is to stop your foreclosure by requesting FFA mediation through the Washington state department of commerce. This particular type of mediation can only be requested by an attorney or a housing counselor who you may choose to represent you in negotiations with your bank and in preparing the required paperwork that needs to be submitted to your bank in order to obtain a loan modification. The FFA mediation may be requested from the date you receive a notice of default up until 20 days after your notice of foreclosure sale is recorded with your county's recorders office. If you fail to submit an application within the required timelines, you can still have an FFA mediation if your bank agrees to mediate with you voluntarily.
Once your mediation application is received by the Washington State department of commerce your bank will not be able to foreclose on your home until the FFA mediation process has been concluded. This process can usually take several months to conclude and in the meantime you can live in your home rent free until a decision is made on whether you are approved for a loan modification and whether the bank has mediated in good faith. In general if all of the required documents are submitted in a timely fashion you will only need to attend one mediation session in the county for which you reside. At the mediation session your representative, yourself, a mediator, an attorney for the bank, and a representative from the bank (usually via phone) will all be present at your mediation.
Borrowers usually prefer FFA mediation if it's a possibility as a successful mediation can result in a loan modification where your arrears are placed at the end of your loan and your payments are reduced. There are numerous factors to consider when determining whether you will be a good candidate for a modification but most banks have an in house review as well as review you for all federal programs available. In order to apply for a modification you should have proof of income for at least 2 months or else the bank will not approve you for a modification as you need to be able to show that you can make the payments.
It should be noted that some smaller bank may be exempt from FFA mediation so you will want to consult with your lawyer or housing counselor to make sure you are a good candidate.
Filing for Chapter 13 Bankruptcy
Filing either a chapter 7 or chapter 13 bankruptcy will stop your foreclosure sale immediately, even if you waiting until the day before when the sale is going to take place. The difference between filing a chapter 7 bankruptcy and a chapter 13 bankruptcy is that a chapter 7 bankruptcy will allow debtors to discharge unsecured debts like credit cards or medical bills if you qualify, however it would not resolve any issues with discharging a mortgage debt on a home you want to keep and the process is usually completed within about 90 days. A chapter 13 bankruptcy on the other hand allows debtors to make up arrears on a mortgage over the course of 5 years (60 months) while also potentially being able to discharge unsecured debts. In order to use chapter 13 bankruptcy as a long term option for retaining your home you would have to have at least enough household income to pay your normal mortgage payments and your arrears over 60 months. This could be a challenge for some debtors if the household income is limited. With that said debtor may apply for a loan modification even after the bankruptcy case is filed in order to reduce payments, although ideally you should apply prior to filing chapter 13 so the payments are already worked out.
If you are somebody who does not think they can afford a chapter 13 payment, you could always file a chapter 13 to buy more time in order to apply for a loan modification, short sell your property, or live rent free while you figure out your options. A chapter 13 bankruptcy is completely voluntary and may be dismissed at any time. With that said if your payments are not received by the chapter 13 trustee within a few months, the trustee will seek to dismiss your case so plan accordingly.
In general, filing for either chapter 7 or chapter 13 bankruptcy requires one court appearance with a bankruptcy trustee and in chapter 13 bankruptcy your repayment plan will be reviewed and eventually confirmed by a bankruptcy judge if you are able to present a feasible repayment plan over 60 months.
File a Lawsuit or Request a Postponement from Your Bank
Filing a lawsuit should always be your last resort as it can be very time consuming, expensive and stressful and it is also not something that can usually be used to stop a foreclosure sale immediately. Ground for suing your lender usually revolve around predatory lending so you should speak to an attorney who deals in such types of cases if you believe you have been taken advantage of by your bank. Another option to stop a foreclosure sale immediately is to simply pick up the phone and see if your bank will work with you directly to stop your sale and allow you to apply for a loan modification. Sometimes this method can be effective but I would not leave it to chance on whether you will be able to postpone your foreclosure sale immediately. I would recommend either FFA mediation or bankruptcy to be guaranteed that your foreclosure sale will be stopped immediately.