When people contact me about a Texas foreclosure, I almost immediately ask their foreclosure status. Foreclosure isn’t an event, it’s a process. Where you are in that process makes a big difference in the advice I give.
The process starts with a default. Default leads to phone calls and mail from the mortgage company. The phone calls will generally be collection efforts. The mail will generally be workout options and notices. After 2 or 3 months of defaults, the mortgage company will send a Notice of Default and Intent to Accelerate. This notice gives a certain number of days to fix the problem (get caught up on payments or otherwise initiate a workout). At both of these stages, I usually recommend you initiate a mortgage workout. A successful workout can either fix the problem short-term (forbearance) or long-term (loan modification).
If the default isn’t fixed by the deadline, the next step is a Notice of Sale and Acceleration of Loan. This notice gives the date and time for an auction of the property. Normally this notice is mailed to you 20 days before the auction. At this stage, some mortgage companies will still accept workout applications. Others will not. If a workout application is accepted, the mortgage company will usually postpone the auction to a later date. If it is not, you may have very little notice before the actual auction. I usually recommend we prepare to file a Chapter 13 bankruptcy before the auction date.
If nothing is done to stop the foreclosure auction, the property is sold to the highest bidder. In many cases, the highest bidder is the mortgage company, because it will usually bid up to the payoff on the loan. Once the sale is completed, ownership will transfer ownership to the buyer. Meaning, you are now just an occupant. At this stage it is too late to file a bankruptcy, unless the mortgage company bought the property and is willing to reinstate the loan. Likewise, it is too late to initiate a workout. Often, your best option is to negotiate a “cash for keys” payment. This is rare unless the mortgage company bought the property. It is an agreement made with the mortgage company’s assigned representative (commonly a realtor) to pay you to vacate the property by a certain date, leaving the property in “broom-swept” condition.
If you do not voluntarily hand over the keys, the buyer will need to evict you. First, the buyer needs to give the occupant an eviction notice. If the occupant does not vacate the property within 3 days, the buyer will need to file an eviction lawsuit at the local Justice of the Peace. The Justice of the Peace will set a hearing date and time for the eviction lawsuit. If successful, the buyer will get an Eviction Order. The Order is submitted to the local law enforcement (usually the sheriff), who will wait five days from the date of the Order to evict the occupant. On the sixth day, a law enforcement officer will show up at the property, remove the occupant and their personal property and change the locks. At this stage, I believe in simply getting out before you are thrown out. A bankruptcy will not help. If you play nice and have a good reason, the attorney representing the buyer may give you additional time before forcibly removing you from the property.
That’s a Texas foreclosure in a nutshell. Other states may have different foreclosure processes. Note – my recommendations above assume you are behind on your mortgage payments. If not, this foreclosure process becomes a “wrongful foreclosure” process with a completely different solution. Usually, that solution is filing a lawsuit to stop the foreclosure.