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When a foreclosure action is near an end the lender’s attorneys must publish notice of the  pending foreclosure sale in local newspapers in the defendant’s area for at least four weeks prior to the sale. Such notice usually also results in the homeowner being alerted to the pending sale. While lenders can give notice of the sale to the defendant, they are not required to do so if the defendant has not answered or otherwise defended the foreclosure proceeding.

1. What is a Foreclosure Sale or Foreclosure Auction?
2. What is a Notice of Sale?
3. How Does the Foreclosure Sale Need to Be Noticed and/or Publicized?
4. What is the Role of the Referee at the Foreclosure Sale?
5. What are Covid Rules When it Comes to Foreclosure Sales?
6. Staying the Foreclosure Sale
a. Staying the Foreclosure with Chapter 13 or 11 Bankruptcy
b. Staying the Foreclosure with Chapter 7 Bankruptcy
7. Can the Property Owner Be a Bidder at the Foreclosure Sale Even Though They are a Defendant in the
Foreclosure?
8. Terms of Sale at the Foreclosure Auction
9. Bidding Process and High Bidder
10. What Happens if There are No Bids or if the High Bidder Fails to Close on their High Bid
11. Can a Foreclosure Sale be Challenged?

There are two main ways to stop a foreclosure proceeding: a) by filing a bankruptcy case the automatic stay of the bankruptcy would stop the sale, and b) by filing an emergency Order to Show Cause, the stay of the Order to Show, cause if granted, would also stop the sale.
A bankruptcy case has the advantage of providing a sense of certainty by immediately stopping a foreclosure process and any possible actions within the foreclosure litigation such as a foreclosure sale. A bankruptcy case has the advantage of not relying on the consent or agreement of the mortgage holder who under federal Bankruptcy Law is required to abide by the automatic stay which immediately goes into effect upon the filing of the bankruptcy case. There are several types of bankruptcy cases available to persons in foreclosure or threatened with foreclosure: Chapter 13, Chapter 11, and Chapter 7. Chapters 13 and 11 reorganize debt and revolve around a plan which allows a “catch up” over time on mortgage arrears and other debt, while Chapter 7 eliminates or “discharges” debt. More detailed descriptions of these types of bankruptcy cases and how they can help in a foreclosure situation follows below:

Bankruptcy to Stop a Foreclosure Sale

a) A Chapter 13 Bankruptcy – A Chapter 13 bankruptcy case is often used to stop the foreclosure process, including foreclosure sales, with the goal of curing mortgage arrears over a designated period of time. The Chapter 13 plan also cures debt other than mortgage arrears, such as credit card balances, often without interest and at a reduced rate. Under a Chapter 13 case, a monthly payment plan is developed, which allows the gradual curing of debt, including mortgage arrears, over time for up to five years. During this process, on a monthly basis, the debtor will go back to making post-petition mortgage payments, as well as making Chapter 13 plan payments to a court-appointed trustee. The combination of such payments will allow the debtor not to fall further behind in mortgage arrears, while at the same time curing the arrears that existed before the filing of the case. A budget, a Chapter 13 plan and bankruptcy schedules, as well as other significant documentation need to be submitted to the Chapter 13 trustee and Bankruptcy Court as part of the process needed to confirm the Chapter 13 plan.
b) A Chapter 7 Bankruptcy – A Chapter 7 bankruptcy case will, like all bankruptcy cases, stop a foreclosure proceeding and/or a foreclosure sale with its automatic stay. Unlike the other type of “reorganization” cases, Chapter 7 does not have a plan, and simply provides for the “discharge” or the legal forgiveness of the debtor’s debt. Usually the debt sought to be discharged is non-mortgage unsecured debt such as credit card debt, personal loans and medical bills. In appropriate cases the elimination of such burdensome unsecured debt would allow the client to concentrate on curing their mortgage arrears. If a client decides to allow a foreclosure action to proceed against their main or secondary property, Chapter 7 will allow the discharge of any “deficiency” debt that may still remain, if the amount owed in secured debt on the property exceeds the property’s fair market value.
c) A Chapter 11 Bankruptcy – Reorganizations can be either within or outside the context of a bankruptcy case. Outside the context of a bankruptcy case a business or an individual may try to workout formal agreements with several of its creditors in what is considered to be a reorganization. Within the context of a bankruptcy case, a Chapter 11 reorganization case allows a business or an individual with significant debts and assets to protect itself from its creditors while it concentrates on reorganizing its affairs. A Chapter 11 reorganization case requires the debtor to offer a plan of reorganization, which extends, and in some instances, reduces many of the debtor’s obligations.

Order to Show Cause to Stop a Foreclosure Sale

If you are nearing the end of the foreclosure proceeding with a notice of sale scheduling a foreclosure sale in favor of the Plaintiff, an Order to Show Cause, would potentially stay the foreclosure sale and attack the legitimacy of the entire foreclosure action.  At such a late point, for the defendant to be able to assert themselves in the foreclosure case, an Order to Show Cause, rather than a regular motion is necessary because of time constraints and the need for strong immediate relief. Orders to Show Cause are emergency motions and can be pursued in the Supreme Court of New York to obtain urgent relief such as the voiding of a judgment or the stopping of a foreclosure sale and/or the extension of the defendant’s time to answer the complaint.  The defendant usually argues that the foreclosure should be stayed because of technical and/or substantive reasons and that the homeowner should be given more time and opportunity to pursue options, like modification, refinancing and/or a voluntary sale that have a good chance of resolving the foreclosure situation. Usually technical reasons  need to be present to show that there were improprieties in the foreclosure action with such issues as defective process of service, lack of standing, predatory lending, and defective assignments.  If you believe that you many need an Order to Show Cause, especially if there is a scheduled foreclosure sale date, then time is of the essence and you should contact us immediately to review your options.
Stopping foreclosure sales with a bankruptcy case or an emergency Order to Show Cause requires knowledge, experience and assertiveness. The Law Firm of Ronald D. Weiss, P.C. relies on these qualities to make sure that your rights are protected and preserved especially at the potential end of the process. Even at this point, a defendant if properly represented can save their home or gain crucial time to negotiate with their lender.
Please call us at (631) 271-3737, or e-mail us at weiss@ny-bankruptcy.com for a free consultation to discuss such legal options in greater detail.