You’ve been getting large packets of mail for months and are afraid to open them because you can’t face what is in them. These come as certified, first-class mail, and they come often. Even if you open them, you don’t understand what they say because each packet is 100+ pages full of legal jargon. Maybe you’ve been calling your mortgage lender but are told so many different things by each different representative that you have no idea what’s up or down. You’ve tried to get a loan modification but your paperwork keeps getting rejected, and each person you talk to tells you something different. You can’t get a refinance because you have too much other debt. You are wondering if you should withdraw money from your retirement account to save your home. You try to make payments to your lender but they are returned to you. You don’t know how to stop foreclosure in Maryland.
One day you open a letter, and it says Notice of Impending Foreclosure Sale, and it has a sale date that’s only days away. At this point, you don’t know if you can save your home that you’ve worked so hard for and you don’t know if you’ll end up being forced to leave or even homeless. You are worried not only for yourself but for your family. What can you do to get your life back on track and stop the foreclosure? How to Stop Foreclosure in Maryland is one of the most common questions we get asked, and Chapter 13 is a way out that allows you to keep your home, address any other debt, and have a life free from all of these heavy burdens.
What Does Foreclosure Mean?
Foreclosure is when your home lender auctions off your home to pay down the debt that you owe on the home. In every mortgage, there are two documents that outline your obligations to your lender. The first is a Note, and in Maryland, the second is a Deed of Trust. Each of these documents confers obligations on you. The Note means that if you don’t pay the mortgage, your lender can sue you in court and garnish your wages, freeze your bank accounts, and other collections on judgments. The Deed of Trust gives your lender the right to auction off your home and use the auction proceeds to pay what you owe on the home. Your lender can do both of these things at the same time, but typically foreclosure will be the first step.
How Long is the Foreclosure Process in Maryland?
Your home can be auctioned off as soon as 45 days after your lender has filed an Order to Docket Foreclosure in the Circuit Court of Maryland in the county where your home is located. The Order to Docket can be filed as soon as 90 days after your first missed payment. If you don’t take action quickly, you could lose your home and you will not be able to stop the foreclosure auction from happening. It is important to talk to an experienced bankruptcy attorney right away to learn about how to stop a foreclosure in Maryland.
How Does Foreclosure in Maryland Work?
The first step in the foreclosure process is called a Notice of Intent to Foreclose, which your lender must mail to you via first-class and certified mail. The Notice of Intent to Foreclose must be mailed 45 days before an Order to Docket Foreclosure – essentially a lawsuit – can be filed in the Circuit Court. The Order to Docket Foreclosure will include either a Preliminary Loss Mitigation Affidavit or Final Loss Mitigation Affidavit. If it includes a Preliminary Loss Mitigation Affidavit, you have the option of applying for different kinds of assistance with your lender. The documentation required for this process is arduous. If your lender completes the loss mitigation analysis and finds that there are no options other than foreclosure, you will be mailed a Final Loss Mitigation Affidavit. The foreclosure can be scheduled within 45 days after your receipt of the Final Loss Mitigation Affidavit. Your lender will set an auction date and must advertise the sale in a newspaper three times. You will also receive a Notice of Impending Foreclosure Sale with the auction date. If you don’t file for bankruptcy before the auction date, it will be too late for bankruptcy to save your home.
How Do I Stop Foreclosure in Maryland?
If your home is in foreclosure, you have a few options available to stop foreclosure in Maryland.
A Loan Modification changes the terms of your existing loan. Every loan has 3 components: 1) a principal amount; 2) an interest rate; and 3) a term. For example, you may have a $300,000 mortgage with a 6% interest rate with a 30-year term. If you’re behind on your mortgage for $20,000, a loan modification could take what you owe and roll it into the principal balance, so instead of owing $300,000, you would owe $320,000. Your interest rate would be adjusted, typically to today’s interest rate, and the term would remain the same. This could result in a much higher monthly payment, particularly if you currently have a very good interest rate.
Another option that is available for certain kinds of loans because of COVID takes what you are behind and places a second lien on your home which must be paid if you refinance or sell your home. This kind of modification does not require you to make any additional payments and won’t change your monthly payment.
There is a significant amount of paperwork that needs to be prepared to apply for a loan modification and you may receive conflicting information from each person you talk to from your lender or servicer. Your lender or servicer may also send you documents in the mail that say different things. This makes the loan modification process very confusing.
A mortgage refinance, unlike a loan modification, does not change the terms of your existing loan, instead, you obtain a new loan with different terms. A refinance has many additional requirements. These include a good credit score which should ideally be 700 or more, a good debt-to-income ratio, and a loan-to-value ratio. The debt-to-income ratio is the percentage of your monthly gross income that is devoted to your debt, which should ideally be 36% or less. This means that if, for example, your credit card payments and car payments total $1,500 per month and your gross monthly income is $4,000, your debt-to-income ratio is 37.5%. Finally, the loan-to-value ratio is how much you owe on the mortgage divided by the value of your home. For example, if your home is worth $300,000 and you owe $250,000, you would divide $250,000 by $300,000 to get an LTV of 83.33%. You will need at least 5% equity for a refinance but will get the best terms with 20% or more equity. If you have a significant amount of debt or judgments or lawsuits against you, this will make a refinance more difficult and may not answer the question of how to stop foreclosure in Maryland.
Reinstatement is when you pay back the amount that you’re behind on your mortgage in full. For example, if you are behind $20,000, you would pay your lender $20,000 to reinstate your mortgage. Most people who are struggling with debt are unlikely to have $20,000. Withdrawing money from your retirement account to pay for a reinstatement is generally not a sound financial decision because the withdrawal will be taxed as income and you will pay a 10% early withdrawal fee. In bankruptcy, in the vast majority of circumstances, retirement accounts are fully protected and cannot be touched by your creditors under Maryland law.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy legally stops a foreclosure once filed because of the automatic stay and allows you to pay back the amount that you’re behind on your mortgage over 3-5 years. Chapter 13 also lets you address any other debts you have, such as medical bills, credit cards, lawsuits, taxes, personal loans, and business debt. Unlike a loan modification and refinance, when you file for Chapter 13, any collections must stop against you, including foreclosure. The automatic stay gives you breathing room to reorganize your debt, and your Chapter 13 plan proposes how you will pay back your debt. This is a surewhy answer to how to stop foreclosure in Maryland.
Sell Your Home in Chapter 13 Bankruptcy
If you let your home go to foreclosure, the typical foreclosure sale price is 70% of fair market value, which means that you can lose out on a significant amount of equity. Additionally, a foreclosure is viewed by the credit bureaus as worse than a Chapter 13 bankruptcy. If you file for Chapter 13 bankruptcy, you can stop a foreclosure and take control of the home sale process by hiring your own realtor and deciding what offer to accept. Steiner Law Group has helped clients realize tens of thousands of dollars from selling their homes through bankruptcy versus foreclosure. Contact us to learn more.
Bankruptcy Is The Only Guaranteed Way to Stop Foreclosure in Maryland
Chapter 13 and Chapter 11 bankruptcy is the only guaranteed way to stop a foreclosure and pay back what you owe, short of paying off the amount that you are behind in full as reinstatement. You can protect your assets in Chapter 13 and Chapter 11 through various bankruptcy exemptions and other foreclosure defense strategies, and you can address all of your debt in one place. Unlike a loan modification or refinance, your lender no longer dictates whether you qualify or not. By filing for Chapter 13 or Chapter 11 bankruptcy to stop a foreclosure in Maryland, you can take control of your future and can catch up on your mortgage.
Do not wait until the last minute when you ask yourself how to stop foreclosure in Maryland. It is always better to get ahead and talk to an experienced bankruptcy attorney before you make any decisions and before your foreclosure is already scheduled for auction. Properly planning for bankruptcy, including all of its nuances, is not something that should be rushed. Bankruptcy is complicated, and Steiner Law Group strives to make the process as simple as possible.
If you have questions about how to stop foreclosure in Maryland, Steiner Law Group has helped hundreds of individuals, families, and businesses get back on their feet, free from the burden of debt. Call us today at (410) 670-7060 or schedule a consultation.