Over the past decade, consumer spending has reached an all-time high. In the 1950s, Americans saved just under ten percent of their income and only about 60 percent of earnings went to consumer spending. Contrast this with 2007, when consumer spending accounted for almost three quarters of people’s earnings, while the average American saved nothing.
Among other things, the rise in consumer spending was marked by increases in credit card and mortgage debt. Now, however, credit is growing tighter and the unemployment rate is rising. If a family loses one income due to a layoff, the mounting financial burdens can become crippling. Many Wisconsin families can no longer afford to pay their mortgage and other debts.
Too often, however, those families that cannot avoid foreclosure fail to take advantage of the opportunity to build a cash reserve and, potentially, to pay down other debts. Foreclosure is not immediate — it takes some time for a foreclosure action to work its way through the legal process. During this interim, financially troubled families have an opportunity to improve their financial situation.
Foreclosure Timeline
Per Wisconsin law, foreclosure proceedings do not even begin until the home owner — the mortgagee — is in default on the loan. Typically, mortgagees are considered to be in default if they fail to make a mortgage payment for three consecutive months. Once this threshold is reached, the mortgage lender is free to file a foreclosure suit.
In order to obtain a foreclosure ruling from the court, the mortgage lender must deliver a notice of the court filing to the borrower. The sheriff will deliver a summons and copy of the complaint in the mortgage suit, after which the borrower has 20 days to file an answer. Eventually, the court will have an opportunity to make a ruling on the case, at which time the court could issue a judgment of foreclosure. The time for this stage of the process differs, but could take one to two months.
Once the judgment of foreclosure has been issued, the debtor is entitled to a period of time in which he or she can reclaim the property by paying the past due amount plus any interest and fees. Known as the redemption period, the length of time a debtor has to exercise this option varies based on many factors. For abandoned property, the debtor may have as little as two months. For most properties, however, the debtor has at least six months to reclaim his or her home. Per Wisconsin law, in fact, if the lender refuses to waive the right to a deficiency, no sale can be made for one year after the judgment is entered.
Even after the reinstatement period, the residents still will not be forced to immediately vacate the foreclosed home. Instead, a sheriff’s sale must be scheduled to dispose of the property. Notice of the sale must be published in newspapers and public records. After the sale takes place — usually through an auction process — the winning bidder typically engages in a confirmation hearing, at which the sheriff’s sale is finalized. This process generally takes an additional four to eight weeks.
After the confirmation hearing, the winning bidder will usually receive a deed to the property within one or two days. At this time, he or she becomes the lawful owner of the property and the foreclosed homeowner must vacate the premises. From start to finish, the entire foreclosure process can take up to 13 months — over a year that struggling debtors can maintain their residence while using the money that previously went toward the mortgage to pay down other debts.
Conclusion
Most people take great pride in home ownership, and as a result foreclosure can be a painful process. More than perhaps any other piece of property, a person’s home is often intrinsically linked to their self image and sense of worth. It is not recommended that people lightly make the decision to forego making mortgage payments.
However, in many instances — especially since the recent economic collapse — people find themselves trapped in an upside-down mortgage from which their seems to be no escape. If you have exhausted all other potential remedies, such as meeting with your lender to attempt to negotiate better mortgage terms, but still see no way out, taking the time afforded by the foreclosure process to improve other aspects of your financial picture may be the most reasonable course of action. To learn more about your legal rights and obligations in foreclosure, contact an experienced bankruptcy attorney.
