Surrendering a California Home in Bankruptcy. How Much Time? Part 1 of 2.

07 Jul Surrendering a California Home in Bankruptcy. How Much Time? Part 1 of 2.

Debtors always ask how much time they will have to live in their home if they intend to surrender it in their Bankruptcy Proceeding. If you live in California, you will find this blog useful. Generally speaking, expect to live there at least a year without making any mortgage payments!

Generally, the foreclosure process in California may be as little as 3 months and 3 weeks at its quickest. But homes are never foreclosed upon in California within four (4) months from the last payment. Rather, foreclosures generally take place at least 6 to 8 months from the last payment received. Bankruptcy further lengthens this time frame and eviction proceedings then add further time to remain in the home.

The typical foreclosure in California is not initiated until the debtor defaults and misses several payments. So generally speaking, the foreclosure process usually will not start until 3 or more payments are missed, so about 3 or more months from making the last mortgage payment.

Once started, the lender must record and notice the debtor a “Notice of Default.” After 90 days transpire from the “Notice of Default,” the lender then may record a “Notice of Sale” and send the same to the debtor. The sale date under this notice can not take place until at least 3 weeks after the recording of the “Notice of Sale.” While the Notice of Default and Notice of Sale can technically happen in as little time as 3 months and 3 weeks, they are most often completed in 4 to 5 months, and many times much longer. So outside of bankruptcy, a foreclosure will take about 8 months or longer from when the last payment was made.

If a Bankruptcy is filed, then generally another 2 to 3 months is added to the above time frame. This is because the Bankruptcy Filing works as a restraining order on the disposition of all assets, including the home. The lender is prohibited from taking any further action on the property unless the Bankruptcy Court provides permission. This is done by the lender filing a “Relief of Stay Motion” and proving to the Bankruptcy Court that they have rights to continue with their foreclosure process.

Finally, just because a foreclosure takes please, it does not mean that the debtor is immediately removed from the property. Instead, the lender must now institute eviction proceedings to obtain possession of the property. These proceedings do not happen overnight and typically take another 6 to 8 weeks at the earliest, generally much longer. Moreover, the lenders will typically offer “cash for keys” wherein they will forego eviction proceedings and offer $1,000 to $7,000 to the debtor if an acceptable move out date can be reached by agreement.

My next blog provides an example of the forgoing in a typical California foreclosure/bankruptcy case.

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