Questions about debts or bankruptcy? Call Doug Beaton, a local specialist in American bankruptcy law.

If you are not making payments on a mortgage, a second mortgage, or some other type of secured loan, like a car payment, and you file a Chapter 7 bankruptcy case, how long will it take for the bank to request a chance to do a foreclosure?

Like most legal questions, the answer can be given in two words: “It depends.” But first, a primer. If you are in bankruptcy (with a few exceptions), a lender can’t just do a foreclosure or repossession. They need to ask the bankruptcy judge for permission first. This is done through filing a motion for “relief” from the automatic stay of proceedings that protects you, the debtor. And by the way, this relief isn’t free: the Court, besieged by these types of cases, now charges creditors $150 just to file them with the clerk.

Well, how soon will a lender typically file for relief? Right now I’m seeing all kinds of responses from lenders ranging from just a few days after your case is filed to “never.”

But I think I’m on to a clue: I think the banks, at least some of them, are “leaning.”

Meaning that if the property is in a desirable neighborhood, the chances for quick action increases. An ordinary neighborhood (or worse), and the interest just isn’t there.

File a bankruptcy case for a nice home in Andover? You won’t wait too long to hear from the bank about a motion for relief.

File a bankruptcy case with an ordinary (or worse) home in Lawrence or Haverhill, and it might be a while before they get to it.

Now officially, banks are in the lending business, not the real estate selling business. On paper, they shouldn’t really WANT to own any more property anywhere.

But with the slight uptick in the economy, and the real estate business at least not in complete free-fall, a lot of leaning is starting to go on. So if you have a nice house in a nice neighborhood, be prepared to try to keep up on those mortgage payments at all costs!

By Doug Beaton

A common question people ask is what happens if they are simply unable to make regular mortgage payments?

First off, if you are able to make the payments, by all means do so.

But people who know the end of the rope is near may consider “strategic defaults” — purposely not making payments in order to get the bank’s attention. That it will.

What is unclear is what happens next: the bank’s reaction is completely unpredictable.

I have seen people two years behind in payments and foreclosure papers still have not been filed.

But sometimes it goes the other way: eager banks who begin the process just a month or so after you get behind. But in general, this hasn’t been happening, because of the growing problem of “shadow inventory.”

Shadow inventory, simply put, is bank-owned property that is so stacked up that they are having trouble even marketing it. Banks aren’t really in the real estate business, they are in the money lending business. One more house added to the hundreds or thousands they are trying to sell is not what they are looking for.

Deeds in lieu of foreclosure and short sales come in to the picture at this point, and may be a way to get out of your predicament, but at a price: you may still be responsible for the shortfall in the likely case that your house does not recoup the loan money. You also could possibly be liable to income taxes if a bank “forgives” part of a loan.

Bankruptcy comes in to play if you either wish to avoid paying a deficiency notice after a foreclosure (these Chapter 7 bankruptcy cases are common in the Lawrence area right now), or if you have a second mortgage that is completely under water. In the latter case, the second mortgage can often be stripped with a Chapter 13 bankruptcy filing.

By Doug Beaton