Question: My husband and I currently own a property located in Indiana that is almost 100k underwater. We have put so much time and money in this place we never wanted to let it go, but because of financial hardships that have occurred we can no longer manage to make the payments and are considering walking away from the home. All the research we have done so far shows that Indiana is a judicial state and the foreclosure must go through the court system to be processes.
Our question to you is, “What happens during the judicial foreclosure process?”
Answer:If you are potentially facing foreclosure, one of the most important factors to keep in mind is that foreclosure laws and timelines may vary from state to state. Therefore, it would be very wise of you to research your state’s foreclosure laws so you can get a good estimate about how long the process will take to complete.
In order for a mortgage lender to proceed with foreclosure using the judicial foreclosure process, they must file a complaint with the courts to prove that your mortgage is in default and you have not been living up to their responsibilities.
The very first thing your mortgage servicer will do is contact their attorney to begin the court proceedings. However, before pursuing the foreclosure the attorney will determine whether or not you may be able to get out of default and repay the debt. If the attorney comes to a decision that they feel it is in their best interest to go ahead with foreclosure proceedings, they will file a lis pendens (pending lawsuit) with the courts. The main purpose of a lis pendens is to prove that you are in default on your mortgage and to make the public aware of this filing.
Once the courts come to a conclusion that the claim is valid and you have failed to repay the debt, than a judgement will be ordered for remaining balance of the loan and also additional fees that come along with the foreclosure process. At this time a “writ” will be issued in order for a sheriff’s sale date to be set. A writ is written statement that gives the sheriff permission to go on with the sale.
The actual sale must take place in an area available to the public and anyone who wishes to bid on the property. This auction is allowed to take place anywhere from the county courthouse to the front lawn of your property. When the auction occurs, the property will be sold to the individual with the highest bid. Usually the house is required to be paid in full or with a very large down payment.
It is very important for you to realize that because of the judicial foreclosure process, the lender has the right to pursue the deficiency balance by suing you for the amount owed. Because of this it is extremely important to do all you can to prevent foreclosure from taking place. If you feel foreclosure may be inevitable we strongly suggest you contact a local real estate attorney right away to get a clear idea about the specific foreclosure laws in your state, and what consequences will come along with this event. You should be able to get at least one consultation free of charge.