The Notice of Default is the statutory legal notice that formally starts the foreclosure process in California. Once you receive this formal default notice from your mortgage lender, the clock starts ticking and you have 90 days to bring your loan current and avoid a foreclosure. The clock is ticking. If you fail to bring your loan current within 90 days of the Notice of Default, then your lender can file a Notice of Sale, setting a sale date of your home within 20 days.
Bankruptcy Can Stop a Foreclosure Notice of Default
If you have received a Notice of Default, followed by a Notice of Sale, then your house is facing an imminent foreclosure. You have to either pay all of your missed payments, or file a bankruptcy before the sale date. Otherwise, you will lose your home. When you have a house in foreclosure, filing bankruptcy can stop foreclosure of your home, even if you file on the eve before the foreclosure sale date.
Why Your Lender Has a Right to Foreclose
When you take out a home loan, you sign two separate documents (among a stack of other documents) that give your lender the right to foreclose on your house if you don’t timely repay your loan as agreed. You sign a promissory note agreeing to repay your home loan, and you sign a deed of trust that is recorded against your house as security for the loan. It is important to understand how the promissory note and deed of trust work together.
In California, the deed of trust that you sign, also called a trust deed, gives your lender what is called a power of sale. The power of sale is to the effect that if you don’t pay your home loan as agreed under the terms of the promissory note, then your lender can foreclose on your house to collect the loan, or as much of it as possible with the proceeds yielded by the foreclosure sale.
California has strict statutory procedures that your lender must follow in order to conduct a foreclosure of your house pursuant to a power of sale in a deed of trust. This includes the obligation to give you certain notices prior to the foreclosure sale date.
How Chapter 13 Bankruptcy Stops Foreclosure
In a Chapter 13 bankruptcy, you repay your missed payments over time and permanently save your home from foreclosure. The promissory note is the document that says your bank is lending you a certain sum of money and spells out the repayment terms (for example, $2,500 per month for 360 months, i.e., 30 years).
Promissory notes go by many different names, including a note, a fixed rate note, an adjustable rate note, or some other variation of terms that almost always includes the word “note” in the title. If you don’t repay the loan as required by the promissory note, you will be in default of the promissory note and your lender can exercise its legal remedies to collect the note.
Talk to a Bankruptcy Attorney
If you have received a Notice of Default, your house is in jeopardy of being lost to foreclosure in as little as 110 days (90-day Notice of Default period, plus 20-day Notice of Sale period). You should immediately contact an attorney who is both a San Diego bankruptcy attorney and foreclosure attorney to discuss your options for saving your home from foreclosure.