Foreclosure: What is it? What are my rights and options?
Foreclosure: What is it? What are my rights and options?
- What Is Foreclosure?
- What happens during foreclosure?
- Strict Foreclosure or Foreclosure by Sale?
- Deficiency Judgment
- Do I Have Options?
- Other Resources
- For More Information
Foreclosure is a lawsuit in which a bank, mortgage company, town, condo association, or other lien holder seeks to take an owner's property to satisfy a debt. A town or condo association may actually take ownership of the property or have the property sold to pay off the debt. After foreclosure, the owner loses any rights he had in the property. Foreclosure is a court process, and you must follow the process carefully to protect your rights. The rights talked about in this pamphlet are very complex. Please talk to a lawyer if you’re facing foreclosure.
Defending against a foreclosure is complex and can be expensive. You may end up owing legal and appraisal fees. In order to defend yourself in a foreclosure, pay close attention to court proceedings and deadlines:
- Receive the Summons and Complaint
The plaintiff starts a foreclosure lawsuit by having a marshal serve a Summons and Complaint on the defendant. In the upper right hand corner of the Summons is a date. It is called the return date. You do not have to go to court on that date but you must know the return date to figure out the deadlines for filing papers.
- File an Appearance Form
You should file an Appearance within 15 days after the return date. An Appearance form tells the court that you are not ignoring the foreclosure. Once you file the Appearance, you will getnotice of whatever is happening in court. You can get an Appearance form at the court clerk's office or on the web: http://www.jud.ct.gov/webforms/forms/cl012.pdf.
If you don’t file an Appearance within 15 days of the return date, the court may enter a default, and you may not be able to fight the foreclosure. If you miss any deadline, contact the court clerk IMMEDIATELY.
IMPORTANT: If you don’t live in Connecticut, you should get legal advice before you file an Appearance since you may become subject to a deficiency judgment.
- File an Answer
You have 15 days after the Return Date to file an Answer to the complaint. You can get an Answer form from the court clerk or online: http://www.jud.ct.gov/webforms/forms/CV106.pdf. Before you write an Answer, read every paragraph in the Complaint very carefully. When you write your Answer, say whether you agree, disagree or do not know whether you agree or disagree with each paragraph in the Complaint.
You should not agree with any paragraph you do not understand, or any paragraph that says something you don’t agree with. If you have any defenses to the foreclosure, write that you have special defenses and briefly explain all possible defenses. Be sure to sign the Answer. You file the Answer at the court clerk's office and send a copy to everyone who has filed an Appearance in the case. The court will give you a list of names and addresses of people who have filed an Appearance. It is up to you to send every one of them a copy of anything you file in the case. If you don’t file an Answer within 15 days of the Return Date, the court may enter a default against you.
The judge will issue a decision to dismiss or allow foreclosure. If the court finds that there should be a foreclosure, it will order either strict foreclosure or foreclosure by sale. In strict foreclosure, the judgment will set a law day after which you will lose your rights in the property. In foreclosure by sale, the court will set a sale date after which you will lose your rights to the property.
The judge may be willing to set a longer law day or sale date if you can show that there is a good chance you will be able to sell or refinance the house. You can also ask the judge to set a longer law day or sale date if you have a good reason. Some good reasons are: you have children in school who need to finish the school year; or you or a family member is disabled and you need extra time to move.
If you do not have any defenses to the foreclosure, you must decide whether you prefer a strict foreclosure or a foreclosure by sale. If you do not tell the court which type of foreclosure you prefer, the court will usually order a strict foreclosure.
- Strict Foreclosure
In a strict foreclosure, a judge sets "law days" for each person listed as a defendant (owner or borrower, other lien holders, and sometimes tenants) in the foreclosure. After your law day, you lose all rights to the property.
You have until your law day to pay off what you owe to the plaintiff [the bank, town, condo association or other party bringing the case]. The amount due will include attorney's fees and court costs. To pay off the debt, you could sell the property yourself or borrow money from a lender. If you do not pay off what you owe by your law day, then people assigned the other law days have a chance to pay off the debt. If another person listed as a defendant pays off the mortgage, that person gets legal title to the property. If no one pays off the debt, then the plaintiff gets title to the property. In a strict foreclosure, there is no chance to collect any equity you might have in the property. Equity is what you actually own of the property, or, the difference between what the property is worth and how much you owe.
- Foreclosure by Sale
You should NOT ask for a foreclosure by sale unless you have a lot of equity in the property. In a foreclosure by sale, a judge will set a sale date. On the sale date, an attorney appointed by the court auctions off the property to the highest bidder. The money from the auction first goes to pay for the costs of setting up the auction, then to the plaintiff to pay what the plaintiff is owed, and to pay off any other liens on the property. If any money is left over, it goes to the defendant. If you pay the amount of the judgment plus any costs and fees incurred by the auctioneer before the date of sale, you can stop the sale and protect your rights to the property. To pay off the debt, you could sell the property yourself or borrow money from a lender.
If you think foreclosure by sale is a good option, file a Motion for Foreclosure by Sale with the court clerk and send a copy of the motion to the lawyers in the lawsuit. A hearing will be scheduled where you can explain to the judge why you want a foreclosure by sale. The judge will probably want to know if the property is worth more than the total debt. Total debt includes court fees, the costs of the auction, and any other liens on the property.
Ejectment is the final step in a foreclosure. If you don’t leave the property after the law date or the sale of the property, the court will issue an order allowing the plaintiff to get a marshal to throw you out. First, a marshal will give you a copy of the ejectment. This can happen as little as 24 hours before you have to move. The ejectment is a notice that lists the time and date when the marshal will move you out.
On the day and time in the notice, the marshal will arrive with movers. The movers will take all of your possessions and place them in storage. You have 15 days to claim them from storage. After 15 days, the town has the right to auction them off. Contact your town to find out where your property is being stored. The town may charge you a storage fee.
Note: An ejectment only happens after the law day or sale date.
A deficiency judgment is an order by the court, after the law day or sale date, which says that you still owe money to the lender. In a strict foreclosure, if the property is worth less than your total debt and the plaintiff files a motion within 30 days after the date for redemption (the law day), the court will enter a deficiency judgment against you. The amount you owe will be the difference between the total debt and the value of the property. A deficiency judgment following a strict foreclosure requires a separate hearing, and you have a right to argue against the deficiency. The plaintiff will present evidence about the value of the property. You can hire your own appraiser to counter the plaintiff's appraiser, or you can ask the plaintiff's appraiser questions to show that his conclusion of value is wrong. You can also testify about the value of the property.
In a foreclosure by sale, if the auction brings in less money than your total debt, the court will enter a deficiency judgment.
Defending against foreclosure is complex and can be expensive. You must evaluate your options carefully, keeping in mind that you may end up responsible for additional legal and appraisal fees. This section will outline some of your options.
If You Have a VA, HUD, FmHA or FHA Insured Mortgage, you may have additional rights in a foreclosure. These rights are not discussed in this pamphlet. You should consult a lawyer as soon as possible.
- Selling the Property
Selling the property before foreclosure may save you legal and appraisal costs while preserving the value of the property, particularly if you sell your property in the early stages of the proceeding.
You can sell your property any time before the law day or sale date. If you find a buyer, be sure the sale price is high enough to cover the total debt. If you can’t find a buyer willing to pay a high enough price, you may be able to get permission from the plaintiff for what is called a “short sale.”
- Programs Available to Homeowners
If you fell behind on your mortgage because you lost your job, you are entitled to financial counseling.
- Homestead Exception
If you’re sued for a debt that is not related to your home, the first $75,000 of equity in your
home is protected from foreclosure. The protected amount is $125,000 for a judgment arising from services by a hospital. If you think you may qualify for this protection, consult an attorney as soon as possible.
The foreclosure mediation program tries to work out an agreement between you and your lender that keeps you in your home. If you are being foreclosed because you owe back taxes, condo fees or did not pay on a judgment, you are NOT eligible for mediation.
- Deed in Lieu of Foreclosure
If you have little or no equity in your property and refinancing or a private sale is not possible, you may want to consider offering title to your property to the plaintiff instead of going through the foreclosure process. If the plaintiff accepts the deed, your credit rating may be helped, since you will not have a foreclosure in your credit history. You may also negotiate giving the plaintiff the deed in return for the plaintiff’s promise not to seek a deficiency judgment against you. However, you may have to pay conveyance taxes to the state and town if you give a deed in lieu of foreclosure. You should get a lawyer's help if you think the option of deed in lieu of foreclosure is available to you.
- The Right of Redemption
At the time the judge issues the judgment, she will also set the law day or the sale date. On or before this day, you can exercise your right of redemption. This means that you pay off
- the mortgage,
- all interest due,
- any court costs,
- attorneys' fees,
- title search fees, and
- appraisal fees.
If you pay off your debt, you will need to get a Satisfaction of Judgment from the lender. This form should state that you paid off (or satisfied) the amount of the judgment. File the Satisfaction of Judgment with the court clerk. File a certified copy of the Satisfaction of Judgment and the judgment, with the town clerk where the property is located.
- Extending the Law Day or Sale Date
If you need additional time to sell the property or to pay off your debt, you can ask the court to reopen the judgment to extend the law day or sale date. Extending the law day or sale date may increase the amount you have to pay.
To get an extension, file a Motion to Open. State that you need more time. Explain to the court how and when you plan to pay off your debt. The Motion to Open must be both filed and heard before the law day or sale date. There is normally a 2-week delay between when the Motion is filed and when the court schedules a hearing. There is a $125 fee to file a Motion to Open. Send a copy of the Motion to the lawyers involved in the foreclosure.
Sometimes foreclosure can be prevented by filing bankruptcy. This is a very complex area of law and should be considered only with the advice of an attorney.
The Connecticut Housing Finance Authority (CHFA) and the Department of Housing and Urban Development (HUD) provide counseling for people facing foreclosure. Call the Connecticut Department of Banking Foreclosure Hotline (1-877-472-8318) to find a CHFA-HUD approved housing counselor in your area. You can also visit Connecticut Fair Housing Center for additional help. These resources can provide information about state and federal mortgage assistance programs and foreclosure intervention programs.
Statewide Legal Services: 860-344-0380 (Central CT & Middletown) or 1-800-453-3320 (all other regions).
Not from Connecticut?
Most of the information on this web site is for Connecticut residents only. Visit LawHelp.org to find a legal services program and/or a legal information web site in your area.