New York bankruptcy helps homeowners most when they are nearing foreclosure, not afterwards. The primary reason is that the automatic stay protects homeowners from debt collection and foreclosure efforts. Chapter 7 can buy debtors substantial time to sell their homes on their terms, like a short sale, or exempt its equity from the bankruptcy estate altogether. In chapter 13, debtors can craft a repayment plan that will cure arrearages and put them back on track to repayment, and it can strip liens off unsecured junior mortgages.
One issue that’s often unaddressed is the consequences of leaving personal property behind after a foreclosure, because in many cases, unfortunately, debtors leave substantial possessions behind when they leave. An important reason this isn’t discussed much is that either debtors don’t care about such personal belongings, or the belongings aren’t worth anything or are essentially garbage, like old magazines.
On the other hand, if the former homeowner’s personal property has any real value, e.g. jewelry, then the successor owner (probably a bank) ought to give notice to the predecessor that the property is in its custody. There’s a custom that the successor will give the predecessor 30 days to collect the personal property and if the predecessor doesn’t then the new owner will consider it legally abandoned. At that point the new owner will probably auction the property off, usually after giving a public notice and a private notice to the owner where and when it will occur. Anything left will be disposed of.
Of course, the new owner isn’t necessarily bound to do any of these things, so former homeowners will have a tough time suing the new owner to recover any of these items when they realized they left them and they were worth something. The incentive for banks is to get rid of the garbage as quickly as possible and make the home salable. Its agents might not be so diligent about protecting the former owner’s personal belongings. The new owner may credit the proceeds of such an auction to the homeowner’s prior debts.
By contrast, bankruptcy offers debtors multiple exemptions to keep personal property away from creditors. This leaves debtor-homeowners facing foreclosure with a very clear choice: Either accept the foreclosure and possibly leave behind some personal belongings that might have value, or consult with an experienced New York bankruptcy lawyer to prevent a foreclosure, possibly keep the home, and prevent any valuable property from going to the bankruptcy estate.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
