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Surviving Debt: Introduction

This chapter provides advice on the best way to deal with problems you may face when renting a residence: (1) you want to move to less expensive housing, but the landlord wants you to pay for breaking the lease; (2) you want to stay in the residence, but your landlord is seeking to evict you; or (3) you are having trouble renting a new residence because of your credit or rental history. For more information on tenant rights concerning public housing and HUD subsidized housing, see the National Housing Law Project’s HUD Housing Programs: Tenants Rights.

Surviving Debt: Getting Out of a Lease

If you can no longer afford your lease, a good option is to move to housing you can afford. This is better than being evicted and being forced under severe time pressure to find another residence. If you move before your lease is up, you may be liable for part or all of the remaining months of rent on the lease. However, there are often ways to avoid most or all of this liability. Even if you have to pay something to get out of a long-term lease, being able to switch housing on your own schedule may be worth it.

Surviving Debt: Responding to a Landlord’s Eviction Attempts

Although some defenses to eviction are available, landlords can nearly always remove you eventually for non-payment of rent. Often, your best option when faced with an eviction is to buy yourself enough time to find alternate housing that is both affordable and adequate, with minimal disruption to your life—and to avoid acquiring eviction records that may hamper your access to housing long into the future.

Surviving Debt: Introduction

The prior two chapters provide advice on your options when you are having trouble involving your mortgage payments and your rights to engage in loss mitigation and loan modifications. However, a foreclosure sale may be so close at hand that a workout agreement or loan modification is not possible, or the lender may not agree to an acceptable arrangement. In these situations, you should consider the options laid out in this chapter.

Surviving Debt: Your Rights in the Mortgage Foreclosure Process

Preliminary Notices. To protect your rights, you need to be informed about what is happening—the worst thing you can do is ignore everything. If you are behind on your mortgage payments, stay on top of things: carefully read the notices you receive, keep track of deadlines, and contact the servicer or foreclosure attorney at regular intervals.

Surviving Debt: Getting Legal Advice to Stop a Foreclosure; Advice to Avoid

When threatened with foreclosure, immediately seek legal help. It is better to get this help too soon rather than too late. Free help may be available at a neighborhood legal services office (go to www.lawhelp.org to find a legal services office) or a bar association panel of pro bono attorneys. A small number of lawyers in your area may handle foreclosure defense cases for a fee and many lawyers will help you file a bankruptcy.

Surviving Debt: Delaying the Foreclosure Process

Foreclosure can move very quickly, but you can exercise your legal rights to slow down the process to evaluate your options and put in place a long-term solution, such as to refinance your mortgage, sell your home privately, arrange a workout agreement or loan modification, or save up money to get you caught up on your payments. You cannot properly delay foreclosure just because you need more time. The actions you take must be based on some underlying legal claim or defense that is raised in good faith.

Surviving Debt: A Chapter 13 Bankruptcy May Stop a Foreclosure Permanently

Unlike a chapter 7 bankruptcy that only delays a foreclosure, a chapter 13 bankruptcy filing may eliminate the threat of foreclosure by letting you slowly get caught up on past-due payments over a period of years, while at the same time, you must continue to make your regular monthly payments. Do not file the chapter 13 bankruptcy too soon, and instead pursue options to modify your payments, discussed in the prior chapter. But you definitely do not want to wait too long, and you must file the chapter 13 bankruptcy before the foreclosure sale.

Surviving Debt: State Temporary Bans on Foreclosure; Conference and Mediation Programs

Several states and local court systems have created programs that offer settlement conferences and mediations for foreclosures. These programs are designed to encourage the servicer to agree to alternatives to foreclosure. How these programs work will vary, but they all give you the opportunity to discuss your situation with a live person as opposed to leaving messages in the servicer’s voicemail system. Often the programs refer you to housing counselors and other advocates who can help you through the process.

Surviving Debt: Your Options After the Foreclosure Sale

Redemption and Setting Aside the Sale. Some states, for a very limited number of days after the foreclosure sale, allow you to “redeem” the home back from the lender—in other words, they allow you to pay off the full mortgage and related fees and charges. This way, you end up with clear title to the property.

Surviving Debt: Special Protections for Active-Duty Military

If you are on active duty in the military or left within the past nine months—or you are the spouse or dependent of someone on active duty—you have special protections from foreclosure under the Servicemembers Civil Relief Act. This Act applies to all types of mortgage loans, but only applies if you entered into the loan before your current period of active duty.

Surviving Debt: Foreclosure of Land Installment Sales

Your foreclosure rights are very different if you have a special type of home mortgage called an “installment land contact,” “land sale contract,” “contract for deed,” or “bond for deed.” This chapter calls them “land installment sales.” In a land installment sale scenario, you do not take title to your home until you have made all the monthly payments that are due, often for more than 10 or even more than 20 years. You pay property taxes and are responsible for repairs, but you do not yet have title to your home.

Surviving Debt: Foreclosures of Manufactured (Mobile) Homes

The law is often unclear as to whether a manufactured home is considered real estate. If the manufactured home is treated as real estate, the foreclosure rules are similar to any other home. If the manufactured home is treated as personal property, then the foreclosure rules are similar to car repossessions—discussed in Chapter 14. The answer will vary from state to state and will often depend on where the home was when the loan documents were signed.

Surviving Debt: Foreclosure for Unpaid Condominium Fees

If you do not pay your condominium fees, in many states the condo association has a priority lien on your home, meaning that it can foreclose on your unit to collect the amount due. Such a lien can also complicate your ability to obtain a loan modification from your mortgage lender, unless you first get caught up on your condo fees. Other times the condo association may just sue you in court for the fees.

Surviving Debt: Additional Resources

NCLC’s Home Foreclosures is a comprehensive legal treatise covering all aspects of federal and state law providing consumer rights related to home foreclosures. The treatise is kept current through updates to the digital version that can be purchased separately or is included with the print version. The treatise is available at www.nclc.org/bookstore.

Surviving Debt: Introduction

Understanding how a credit report works and how it affects a family is critical in allowing families to make the right choices in dealing with their debts and other obligations. This chapter explains how information gets into your credit report, what information is in your report, who sees it, and how it affects your life.

Surviving Debt: What Is a Credit Report and a Credit Score?

Your credit report is a record of how you have borrowed and repaid certain debts. About 90% of adult Americans have a credit file with each of the three major credit bureaus—Experian, Equifax, and TransUnion, often referred to as the “Big Three.” Many but not all creditors report each month to one or more of the credit bureaus the status of each of their accounts.

Surviving Debt: How Does Continued Non-Payment Affect Your Credit Score?

Consumers are rightfully concerned about their credit score, but you should not respond to debt collector pressures by paying overdue low priority debts ahead of high priority ones just because of these concerns. An overdue bill may damage your credit score but very often the damage has already happened by the time a debt collector is threatening you.

Surviving Debt: How to Review Your Credit Report and Credit Score

The first step in learning about your credit report is to order copies from the three major credit bureaus (Experian, Equifax, and TransUnion) and read these reports carefully. Because there can be differences between the three major credit bureaus, you should order your report from all three. You are entitled to one free copy of your report every year from each of the three major credit bureaus, but you must order from the centralized request service, and not from the individual credit bureaus.

Surviving Debt: Coping with a Bad Credit Report

Avoid Credit Repair Agencies. Sometimes these agencies are also called credit services, credit clinics, or similar names. Signing up with these agencies is almost always a really bad choice. They charge a hefty fee and usually cannot deliver what they promise. You generally can do a better job cleaning up your credit record at no cost, and these agencies may even make matters worse for you or cause you legal problems.

Surviving Debt: Rebuilding Your Credit

Do Not Rush into New Credit Just to Build Your Credit Score. It is tempting to rebuild credit by getting new credit and making timely payments. You should not start trying to get new credit during times of financial difficulty simply to improve your credit report. This is likely to take your attention away from paying high priority debts first.