Foreclosures currently represent 45% of all existing sales in California while nationally the number is at 28%. There are 3 years of inventory for foreclosed homes that will clog the market and keep the housing market from jumping back. As a bankruptcy attorney in Palm Springs and Palm Desert I have seen the banks continually postpone foreclosures as they do not want to release more homes into an already depressed and saturated housing market. I have had multiple cases that I was about to file and consistently the banks postpone the foreclosure month after month. Its good for my clients who are living Mortgage free for months but will probably create a slower recovery so I am torn on this issue. Bankruptcy can stop a foreclosure on the brink of a trustee sale and keep the home from being foreclosed on for at least an additional 3 months and I have seen it take 6 months after filing a bankruptcy (chapter 7) for a foreclosure to start again. This is for people with no intentions of keeping there home but who need to save money and buy time in their current homes. Chapter 13’s are for people who just need time to get caught up on arrears but want to save their homes. Chapter 7 you can keep your home but if you have arrears you’ll have to get caught up quick or the bank can move forward with general foreclosure guidelines.
Foreclosed homes really drag the market down and can help with Comps if you want to strip an upside down mortgage. When junior liens no longer have value because current maket value on homes is below what the first is owed, we can strip those liens in a chapter 13 and treat them as unsecured debt and have them discharged. Foreclosed homes and so called REO’s are usually sold for 35% below market value where as short sales are sold around 10% below current market value. All these conditions lead me to believe that Bankruptcy will continue to be a way out and relief for home owners. Talk to a riverside county bankruptcy attorney in regards to options that you have in saving your home or buying time to live in your home so to save money and move forward with your fresh start.