How Are Bankruptcy and Foreclosures Different in California?
What is California Community Property Regime?
In California, marital property is considered “community property.” Under this regime, any property a couple acquires during the marriage is equally owned by both individuals. This combination of property also extends to personal debt as well. Therefore, when one spouse files for bankruptcy in California, all marital property becomes part of the bankruptcy estate.
On the positive side, it only requires one spouse to file for bankruptcy to protect the marital assets, including the home. This means, if a couple is facing foreclosure, only one of the spouses has to file bankruptcy to save the home. Our Sacramento bankruptcy lawyers will go over the pros and cons of filing jointly or as an individual. As you can imagine, whether one is more advantageous than the other depends on the circumstances.
Bankruptcy Exemptions in California
Filers in some states are required to use the federal bankruptcy exemptions. In other states, filers have the option of choosing between the federal exemptions and their state exemptions. In California, if you file for bankruptcy, you are required to use the state exemptions. However, you still have a choice. California is the only state that offers bankruptcy filers two separate sets of exemptions. Unfortunately, you must pick between one or the other. You are not allowed to mix and match exemptions that work for you.
The 704 exemptions offer filers an exemption to exclude a substantial amount of equity in their home. In cases where someone owns a home that does not have much equity, a bankruptcy filer could opt for the 703 exemptions. While the 703 exemptions limit the amount of equity a debtor could protect, they offer more flexibility through a generous wild card exemption. Our Folsom bankruptcy lawyers will evaluate your assets to help advise what set of exemptions will be the most beneficial given your circumstances.
Is California a Non-Judicial Foreclosure State?
In nearly every other state, a lender would have to go through a lengthy court proceeding to foreclosure on a home. However, California is a non-judicial foreclosure state. Under California law, a lender is not required to go through a court procedure when foreclosing on a property.
While a lender might not have to file a lawsuit, it still must comply with various provisions under California law. For example, a lender must provide a homeowner a Notice of Default and wait at least three months before scheduling a sheriff sale. Furthermore, the notice cannot be sent until you are at least 120 days in default.
What Should I Do if I’m Facing Foreclosure in California?
If your home is in foreclosure, you have options. You might be able to work with your lender to modify your mortgage, reducing your interest rate or even lowering the principal. However, you need to remember that a mortgage company is under no obligation to work with you or modify their loan terms.
The moment you miss a monthly mortgage payment, you are in default. You should be thinking about being proactive. Every day your wait, your arrears increase.
As discussed above, a lender in California cannot proceed with a foreclosure sale without sending the homeowner a Notice of Default. At this point, you are at least four months behind in payments. After serving notice, a bank is permitted to schedule a sale in approximately three months. While you are waiting for a response or sending in more paperwork, your clock is ticking. It is not unusual for a homeowner to contact our Orange County bankruptcy lawyers days before a sale, saying, “I was working with the bank, but they denied my loan modification.”
If you are behind on your mortgage and are worried about foreclosure, contact The Bankruptcy Group. We can begin looking at bankruptcy as an option, taking the appropriate time to plan accordingly. Our experienced attorneys could also assist you in working with your lender, ensuring that all the proper paperwork and financial documents are submitted on time.
When you file for bankruptcy in California, all collection actions against you cease. This includes any scheduled foreclosure sale. By filing Chapter 13, you present a plan to your lender to continue making your regular monthly mortgage and paying the money you are behind. If your plan complies with the Bankruptcy Code and you submit the required documents to the trustee, your lender will have to accept the plan.
Another thing to remember is that, just because you filed for bankruptcy, you are not prohibited from seeking a loan modification. However, depending on your situation, bankruptcy might still be more beneficial – especially if you are discharging a significant amount of unsecured debt in the process.
Contact Our California Bankruptcy Lawyers if You Are Facing Foreclosure
Foreclosure is scary. The thought of losing your home could paralyze you. However, inaction under these circumstances is never helpful. If you want to save your home, you need to act. Contacting our experienced Huntington Beach bankruptcy lawyers should be one of your first steps. The Bankruptcy Group could help you apply for a loan modification or file for bankruptcy to stop the foreclosure. Call to learn more about foreclosure and bankruptcy in California.