Asian Journal- The Filipino-American Community Newspaper

QUESTION: My situation is very desperate. I have been behind in our mortgage payments for over a year now. When I receive a Notice of Trustee Sale last December, I immediately consulted a lawyer. On the advice of my previous attorney, I filed for Bankruptcy under Chapter 13 to forestall the trustee sale.

Under the repayment plan, I am supposed to pay $3,500 every month to Bank of America. My wife and I use to bring home $7,000 every month. However, I was laid off from my work last April due to the slump in economy. Now our combined income is barely $5,000 per month. Hence, we cannot make ends meet and still afford to pay the repayment plan. We also have two minor children to support and a sizeable credit card debt of $80,000. Hence, we pay the trustee about $700.00 per month for our credit card debts.

Since I have not been able to honor the repayment plan, the trustee told us last week that my bankruptcy petition will be dismissed. However, the hearing for the dismissal is still in two weeks. I am afraid we would lose our house to a foreclosure sale. We were advised to convert my Chapter 13 into Chapter 7, but we do not want to lose our house.

Last week, we found out that Bank of America will put up our house for trustee sale on Wednesday! We do not want to lose our house. Is there still any hope to keep our house?

Answer: Your situation is urgent. However, there are still legal steps you can do to save your house. First, you must verify whether the bank had filed a Motion for Relief from Automatic Stay with the bankruptcy court. Technically, upon filing for bankruptcy, all your assets, including your house becomes the property of the bankruptcy court. And, no one may foreclose or sell it without the court’s authorization. If Bank of America had filed the Motion and was granted relief from stay, then the bank can go forward with the sale.

Your best option will be to file a temporary restraining order (TRO) with the state court to enjoin foreclosure. In our experience, most lenders did not comply with the law’s stringent standards of proper notice before the recordation of the Notice of Default, failed to assess the borrower’s financial position and explore options to avoid foreclosure. [California Civil Code §2923.5]

Should the court deny the TRO, your wife should be ready to file a Chapter 7 bankruptcy or convert your case to from Chapter 13 to Chapter 7. You can convert to Chapter 7 because your circumstances have changed. Your combined income is now below the median income for California. You should act fast and retain a good lawyer who can represent you in bankruptcy and state court at the same time.

Debtors, under chapter 7 can still retain their houses, provided they are able to pay the mortgage. Under Chapter 7, each debtor is entitled to $75,000 each as exemption. This exemption will be applied to the equity left over after deducting all the loans from fair market value of the house. Hence, if the house is worth $300,000 and it has an outstanding mortgage debt of $225,000, the house has equity for $75,000. A debtor can claim this house as an exempt property from bankruptcy. However, most houses have zero equity due to the slump in the market. Therefore, the Trustee is not interested in re is nothing for the trustee to take.

Meantime, you must also negotiate with the bank for a loan modification and get them to agree to the plan. You can try to negotiate with the bank to lower your interest rate, extend the term of the loan, or even lower your principal.

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If you have any loan from countrywide or any of its affiliates, please call our office at 213-639-3888 or e-mail us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Our office is located at 3699 Wilshire Boulevard, Suite 720, Los Angeles, California 90010.

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This article does not constitute any legal guarantee or advice for any individual matters and does not create attorney client relationship with the readership.

( www.asianjournal.com )

( Published on September 19, 2009 in Asian Journal Los Angeles p. C3 )