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California Real Property Foreclosure Sales

The lesson for this section is:  Do NOT Wait Until the foreclosure sale is about to happen to start inquiring into your bankruptcy options!!!  

In California, non-judicial foreclosures (the most common) require the following notice to the property owner after a default has occurred in payments due:

1.  Notice of Default recorded against the property.   The Trust Deed holder must then wait three (3) calendar months before scheduling a sale date.

2.  Notice of Sale Date must be given at least 21 days prior to the foreclosure sale (after the 3 months have run on the Notice of Default).

More relevant information pertaining to the above:

A.  You (the borrower) have until 5 BUSINESS DAYS prior to the foreclosure SALE DATE to reinstate the loan.  This means, to pay all past due amounts, including attorneys' and foreclosure trustee's fees.

B.  The only way to catch up on arrearages (past due amounts) to your secured creditors is by filing either a Ch. 13 or Ch. 11 case.

I have been getting a glut of phone inquiries lately from debtors who have their foreclosure sale in less than a week and they want to properly plan for and file a Ch. 13 case.   This is an unbelievably bad idea.  I understand you want to hold out as long as you can by working out a deal with your lender to catch them up, or whatever, but if you don't at least explore your bankruptcy options far enough ahead of time, you are just asking for disaster.

Proper planning for a Ch. 13 case takes several weeks.  It also costs money for attorneys fees, so you need to build that into your pre-bankruptcy planning.  

If you can even find an attorney that will handle a Ch. 13 case one week's notice (or less), you are almost guaranteed that you are going to overlook critical things which must be put into your Plan or paperwork.  Amending in Ch. 13 is extremely difficult because every number and amount affects every other one.  It also causes your attorney to incur additional costs which will need to be paid and which can cause your plan to ultimately fail, in which case the foreclosure you were trying to stop will just proceed.

I am 4 weeks into such a quick-filed case right now and every day a new creditor pops up, or I find out something else that was missing that my client simply didn't remember in the rush to file.  Additionally, we did not have time  to find out the precise amount owed to the mortgage lender, so the Plan we filed may also be deficient it the numbers provided by my client were inaccurate.

Thus, the point of all the above is simply this. You should contact a bankruptcy attorney for at least a consultation as soon as you get the Notice of Default which starts the 3-month clock ticking.   Talking to an attorney does not obligate you to file bankruptcy nor does it prevent you from making arrangements to pay the past due amounts with your creditor.  It does, however, enable you to be in a position to effectively utilize bankruptcy should the need arise in the coming months.  What you do and when you do it depends on numerous factors, including your income situation, etc.

Of course, getting an early consultation does not only benefit you in foreclosure situations, but in any situation regarding bankruptcy.  Foreclosure is just one extreme example of a scenario where clients often wait WAY too long to discuss their options.