We recently handled an interesting case for a client that looks like it may provide a model for consumers hoping to avoid bankruptcy in 2022. In this case our client came to us on the tail end of a foreclosure. The client is on a fixed income and living in a modest 1,000 square foot home for 15 years. Unfortunately, the client was experiencing financial hardship due to medical conditions related to Covid-19 and fell behind on their mortgage before the pandemic kicked into full gear. Because the lender initiated the foreclosure prior to the Covid-19 outbreak, once the prohibitions on foreclosures ended, our client's home was first to go to final judgment and foreclosure sale. The client came to us looking for options. After a evaluating the client's situation here were the relevant factors we weighed:

1. Client couldn't afford to pay mortgage. Even if we were to get a loan modification it was going to most likely fail due to lack of incomes.
2. Increase in homeowner's insurance premiums meant the extra $100 per month in escrow would make modification impossible.
3. Client was too far behind to save house in Chapter 13 bankruptcy as they couldn't afford the current mortgage payments let alone repaying past due debt.
4. Client had $100,000 in equity in the home, even after default and missed payments, due to rising real estate prices.
5. Client had $18,000 in credit card debt that had been unpaid for some time.
6. Client had very limited time as the final judgment for foreclosure had already been entered.
7. Client owned car free and clear that was worth approximately $10,000.

A couple of things were clear once we dug in:

1. Client couldn't file a chapter 7 bankruptcy because they would lose the car. They wouldn't be able to afford to repay $10,000 to the court to save the car and without it they would never be able to find transportation due to fixed income.
2. Client couldn't afford to make a chapter 13 bankruptcy work due to limited income. To save the house, a chapter 13 requires you to pay your mortgage on time while also repaying past due balance divided over 60 monthly payments. This was a non-starter for client.
3. Client had exhausted all options in foreclosure court and the final judgment had been entered and there were no grounds for appeal.
4. Time was running out. At any moment the client was 30 days away from losing their home to foreclosure sale.

Normally, we would handle a situation like this as follows:

1. File Chapter 7 Bankruptcy and wipe out the $18,000 in credit card debt.
2. We would exempt out the home equity to protect it in Chapter 7 Bankruptcy.
3. Once the client receives their discharge we would look to sell the home.
4. Client would get equity from the sale and would have no credit card debt to repay because of the prior Chapter 7 Bankruptcy discharge.
5. Client walks away debt free, $100,000 in pocket after sale of home.

Due to the equity in the car and the client's inability to pay it back, even over 6-9 months, Chapter 7 Bankruptcy was off the table. So, here is what we did:

1. List and sell the house. Using our team of lawyers who are also licensed realtors we listed the property for sale.
2. Negotiated numerous competing bids and eventually settled on one that would net client approximately $100,000 from the sale.
3. Advised client to sign contract and then we closed it in our office through our title company.
4. While the sale was moving towards closing we were also able to reach out to the bank's lawyer to delay the next foreclosure sale.
5. We closed the sale of the home and netted the client nearly $100,000.
6. We negotiated the $18,000 of credit card debt to get the client debt free.

Thus, at the end of our representation, the client had nearly $80,000 in their pocket, still had their car and their fixed income, and were debt free.  Since saving the home was never an option and the loss of the home to foreclosure was imminent this was the best and only path to follow. While the client will now have to rent, the money they received will provide them with financial security for a number of years and may give them the opportunity down the road to make money from their money.

This is important because most law firms simply don't understand enough about consumer finance, real estate, foreclosure, and bankruptcy to provide any of these options. The prior lawyers the client dealt with only defended her foreclosure, with no regard for long term planning, or only handled bankruptcy. We were the only law firm to even suggest this solution and we made every aspect of the transaction work, from the listing and sale of the home through our licensed real estate agent lawyers, to the real estate closing, to our discussions with the foreclosure lawyers, to our understanding enough to avoid bankruptcy in this situation, to our debt settlement work. No other firm is set up to handle cases from start to finish and no other law firm knows how to prioritize your personal wealth. If you have any issues with your home mortgage, foreclosure, bankruptcy, or want to list and sell your home call us today.