Provided by the law office of:
Michael Kennedy Karlson, Esq.

Admitted to practice before the Court of New York State
and the Federal Courts of the Southern, Eastern and Northern Districts of New York

Note: This is based on a typical judicial mortgage foreclosure of residential real estate, ie: a one or two family house in the State of New York. Even if you are in a judicial mortgage foreclosure of a one or two family house in the State of New York, your case may not be typical. 


        This is when you get the "Did you Forget?" letters followed by more ominous mailers with lots of bold print, plus the phone calls. Non-institutional lenders often skip this stage.
                    How An Attorney Can Help: This is an ideal stage for workouts. You may be able to minimize or avoid  the Lender's legal fees (which they generally want to pass on to you) . You may be able to prevent the foreclosure case from commencing and damaging your credit. Early workouts can sometimes be set up with a few phone calls and faxes. That doesn't cost much and it can save a lot later. Workouts can work at any phase, but earlier is better.

        This is when they start sending out the legal papers. These typically include an Acceleration Notice, a Lis Pendens (a/k/a Notice of Pendency) and a Summons & Complaint. The precise time and manner of service of these documents can be CRUCIAL and you should note how and when you get any of these and keep any envelopes they may come in, because the postmark is evidence.

Your Time to Answer:

        Depending on how they serve the Summons & Complaint, you have 20 or 30 days to serve and file your Answer. The court may accept a late Answer but then the Defendant has to explain why the Answer is late. It is better to file a timely Answer. The Complaint sets forth their case against you. The Answer sets forth your defenses and any counterclaims against them. If you don't Answer, you DEFAULT.  Unfortunately, many Homeowners in this situation default.
                   Consequences of Default in Answering: Failure to file and Answer means that the Homeowners are not putting their case before the Court. They risk losing any defenses and counterclaims they may have. Default also allows the foreclosure case to proceed FASTER because the Lender need not give the Homeowner further Notice of certain intermediate steps.
                   How an Attorney Can Help: An experienced attorney knows what to look for when preparing an Answer in a foreclosure case. Defenses not raised in the Answer can be lost. It is important to differentiate legal Defenses from excuses.  Defenses are legal arguments put before the court which MAY lead the court to make a decision in your favor. Some Defenses are simple, many of them are complex and technical in nature. Excuses are things like loss of employment, medical problems and various other explanations of why-you-didn't-pay-the-mortgage which are generally not legally significant. People attempting to draft their own Answers too often fall into the trap of making excuses instead of raising defenses. The Judge often winds up having to tell the Homeowner that he is terribly sorry BUT the law requires him to find in favor of the Bank.

Intermediate Phase:  

        If the Homeowner has defaulted this is the calm before the storm. Suddenly the Lender gets quiet, too quiet. Maybe some freak power surge or disgruntled employee has removed all of the Lender's records of you? Don't count on it. Their lawyers are busy with various intermediate steps like getting a Referee appointed, having the Referee calculate exactly how much you owe and getting the Judgment of Foreclosure and Sale signed. Homeowners who filed Answers are routinely entitled to Notice of all such proceedings, and an opportunity to participate.. The calculation of how much you owe is an especially significant event. That is why New York State puts that calculation into the hands of the Judge and a court-appointed Referee, rather than just letting the Lender state what they think the amount should be.
                   How an Attorney Can Help:  You may have a real dispute with your Lender regarding how much is owing. Such disputes need to brought to the attention of the Referee. He writes up a report and gives it to the Judge. If you don't like what the Referee's report says you can still raise that with the Judge. Successfully litigating the issue of how much is owing could even save the property. For example, you may have been turned down for a re-fi because you had too little equity in the property. Even if you do eventually lose the property, the amount owing is still significant. If the Auction brings in more than the amount owing you may be entitled to Surplus Money. (See Below) If the Auction brings in less than the amount owing your Lender may be chasing you with a Deficiency Judgment. (See Below) 

Notice of Sale:

        You should receive a Notice of Sale telling you the time and place of the Auction. This also gets published (with your name and the property address) in the newspaper.
                    How an Attorney Can Help: To stop that sale you may need to apply for an Order to Show Cause or to file for Bankruptcy. The Order to Show Cause  process is a way to bring the case back before the Judge in the foreclosure case. If the Homeowner has defaulted this may be the first time that the Judge hears the Homeowner's side of the story. Bankruptcy starts a whole new case in the United States Bankruptcy Court. There are several different Chapters of Bankruptcy.

The Poorly-Filed Bankruptcy Case:

        Technically, this isn't a stage of foreclosure at all. Bankruptcy is a whole different case. But it is a common occurrence. Bankruptcy forms are complex. Even a relatively simple Bankruptcy filing can require over 40 PAGES of Official Bankruptcy Forms. Some of the forms are complex and detailed and filling them out is an exercise in misery,  unless you have the expensive software that attorneys use. But Wait, someone will inevitably tell you, you don't have to fill out all of those forms. You only NEED to file what is called a 'Bare-Bones' petition. This comes as quite a relief for most people. They are happy because the Bare-Bones Petition is just the first few pages of that scary looking pile of Official Bankruptcy Forms, AND they tend to be simple pages asking for things like name and address. If you can read and write, you can fill out a Bare-Bones Petition. Absent some prior bad history with the Bankruptcy Court this Bare-Bones filing should stop your sale. Mission Accomplished! Or is it?
                    The Problem is that ALL of those missing pages are still required to be completed and now have STRICT DEADLINES of when they must be completed by. If they don't get filed, your Bankruptcy case gets dismissed. When the Bankruptcy case gets dismissed, your Lender will proceed with the Foreclosure. If you try to go back to the Bankruptcy Court you now have some prior bad history with them that makes you appear to be a Bad Faith Serial Filer. This could give rise to a Presumption of Abuse.
                    How an Attorney Can Help: If you've made the difficult decision to file for Bankruptcy, do it right. Those Official Forms have to be filled out and filed properly for your Bankruptcy Reorganization to have any chance of success. Bankruptcy may be a real long-term solution to your financial problems.

The Auction:

        Your property is sold at a public auction.
                    How an Attorney Can Help: You still may be able to set aside the sale, even after its happened. This is much harder to do, so try not to wait so long and if you do want to try to set the sale aside, you should try to do so as soon as possible. 

Surplus Money - Deficiency Judgment:

        If you property sells for more than what is owed on it, you may be entitled to Surplus Money. If it sells for less than what was owed on it, your Lender may be entitled to a Deficiency Judgment.
                    How an Attorney Can Help: If you get foreclosed for a total of $150,000 (including the Lender's extras like legal fees & foreclosure costs) and the house goes for $190,000 at auction, someone should hand you a check for $40,000, right? Wrong. Don't sit around waiting for it. You have to chase after it, in what is called a Surplus Money Proceeding. This is something that should be simple, but it's not. It gets even more complex if you have other creditors chasing after that money too. Even if you don't have other creditors, there is still a lot of red tape. The Deficiency Judgment is the reverse situation. They took your house but they are still chasing you for more money. Legal representation can help in this situation too.

The Eviction:

        The foreclosure sale meant that you don't own the place anymore. The new owner, either the Lender or some investor, will eventually try to get you to physically vacate the property. Usually they'll send you a Notice to Quit and then you may wind up in Housing Court (in New York City).
                    How an Attorney Can Help: The eviction case may have been improperly started and maybe it can be dismissed, although they may start another. Alternatively, an attorney can negotiate the terms of your exit by asking for more time to leave. This may allow your children to finish up the school year in their current school before you have to move. Such deals may or may not require you to pay rent for the period you're staying. Sometimes the new owner is willing to offer 'Cash for Keys', that usually requires you get out quickly but you get some cash to find a new place to live. How much time or money you can get is a subject for negotiation. An attorney can negotiate such terms on your behalf.

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