Foreclosures Attorney in El Dorado, Arkansas

For most people in America, buying a home is the biggest investment they’ll ever make; therefore, people will do just about anything to hold onto their homes – and even try to move up to a more upscale neighborhood. 

However, life is full of unexpected events, and losing a job due to a recession or pandemic can put your home ownership in jeopardy. 

But what do you do when times are so tight that lenders from every direction are coming after you? First, you prioritize your home ownership, but if that is jeopardized by a few missed payments, what then? Bankruptcy can offer a means to stop the debt collectors and give you time to come up with a plan to hold onto your home.  

If you are behind in your home payments in or around El Dorado, Arkansas, and facing possible foreclosure by your lender, contact our team at the Rushing Law Firm, PLLC, immediately. We can meet with you, assess your situation, and advise you of your options under either Chapter 7 or Chapter 13 of the bankruptcy code.  

The Rushing Law Firm, PLLC, also helps people get back on their feet for a fresh financial start in Magnolia, Camden, Crossett, El Dorado, and throughout the counties of Union, Columbia, Ashley, and Ouachita, Arkansas.

What Is Foreclosure and What Causes It? 

Foreclosure is a legal means for the holder of the mortgage on your home to take back the property and sell it to fulfill the loan obligation when you fall behind and offer no plan to catch up on back payments and honor the terms of the mortgage. The most obvious cause for a lender to take foreclosure action originates with your missing payments and piling up past-due obligations on the loan.    

Many loans these days are also packaged with escrow accounts, by which the lender collects funds each month – in addition to payment on the principal – to cover property taxes and homeowners’ insurance. But if your loan is unbundled, and you are personally responsible for taxes and insurance, the mortgage lender – usually a bank, credit union, or other financial institution – can take action to foreclose if you’re too far behind on those obligations. 

Types of Foreclosure Allowed by Arkansas Law 

Basically, states throughout the nation recognize two types of foreclosure actions – judicial and non-judicial. Some states allow only one, and some both. Arkansas recognizes both options, and there is a crucial difference for the homebuyer when a judicial is used over a non-judicial foreclosure and vice versa.   

First, judicial foreclosure is done through court proceedings, while non-judicial foreclosure is not. In many ways, a non-judicial foreclosure can be done almost entirely without your involvement once you have been properly notified.  

But more importantly, in a judicial proceeding, you, the homeowner, are given 12 months after the sale of your property to exercise what is called the right of redemption. This right allows you to repurchase your home one year after it has been foreclosed and sold. To do so, you have to pay the person or entity who purchased the foreclosed property their bid price plus any interest and fees that accrued.  

In a non-judicial foreclosure, there is no right to redemption for the previous homeowner. Once the foreclosure sale is over, the property belongs to the new buyer.  

For a mortgage holder to carry out a non-judicial foreclosure, however, the loan document you sign to purchase the property must include language allowing them to foreclose without judicial proceedings. You need to verify the foreclosure language in your loan papers when you purchase your home, and certainly when you are facing foreclosure and need to weigh your options seriously. 

How Filing Bankruptcy Can Help 

Whether you file for Chapter 13 or Chapter 7 of the bankruptcy code, you will be immediately issued an “automatic stay,” which means that all creditors must cease contacting you and trying to collect any debt. For secured lenders such as a home mortgage company, however, the stay can be temporary since they are allowed to petition to bypass the stay and continue their collection efforts.  

If you are facing foreclosure and you’re not already speaking with your lender about a modification or extension when you’re issued your automatic stay, it is vital to do so.  

Chapter 13 of the bankruptcy code is known as “the wage earner’s plan.” This means that you still have an income, but it is insufficient to cover all your debt obligations. Under Chapter 13, you are allowed to offer a repayment plan to all your creditors. Unsecured creditors can be offered a portion of what’s owed them, but secured creditors such as mortgage lenders must have their obligations honored fully.  

Say you file for Chapter 13, and you’ve already made up your mortgage past dues and are making mutually agreed-upon monthly payments. In this case, you simply calculate your monthly disposable income after living expenses (including your mortgage) and pay that amount to your creditors for three to five years, depending on your income and debts owed.    

At the end of the repayment period, you will be discharged from all unsecured debts with a few exceptions, such as many student loans, taxes, and spousal and child support, if applicable. This generally means you get to keep everything you possess, and nothing will be sold to pay creditors as might happen under a Chapter 7 petition.    

Now, say you want to file for Chapter 13 but still owe the previous month’s mortgage payments. You can figure that past-due amount into calculating your repayment plan and pay it off over three to five years with everything else. However, you will still have to meet your monthly mortgage obligation.  

If you’re facing foreclosure and considering Chapter 7, unless you are up to date on all payments -- whether you’ve secured a loan modification or extension or not -- Chapter 7 will be good only for allowing you some extra time to negotiate new terms with your lender. These new terms will have to include any past-due amounts plus a monthly sum going forward.  

Keep in mind, however, that Chapter 7 is known as the liquidation plan, which means that any assets not exempted under state or federal law can be sold by the court to help pay creditors.   

The beauty is that filing for bankruptcy gives you more time (during the automatic stay) to work out an arrangement with your mortgage holder or to come up with the money to honor any still-due payments. Remember, your mortgage holder can petition to end the automatic stay at almost any moment, so time truly is of the essence.