Judicial Foreclosure Process and Defense
Under the new Michigan Foreclosure laws, lenders are forced to pursue a Judicial Foreclosure if they fail to execute a loan modification for an eligible borrower during the 90 day period. While is a lengthy and most costly option for the mortgage company, it also creates a judgment against the borrower.
What is the Judicial Foreclosure Process?
To initiate the judicial foreclosure process, the lender must:
- File a complaint in the Circuit Court where the property is located.
- Serve the borrower with the complaint as to provide notice of the foreclosure.
- The complaint should state what debt is owed and explain why the default should allow the mortgagee to foreclose and take the property given as security for the loan.
Upon receipt of the complaint, the borrower has 21 days to file a responsive pleading.
The Court will dismiss the complaint if the borrower pays the mortgagee the principal and interest due plus any additional costs prior to the judgment of sale. Upon conclusion of the case, whether the parties appear before the Court or whether a default judgment is entered, if the Court finds the borrower in default it will enter a judgment against the borrower. The Court will then execute the judgment by ordering a sale of the property. While the Court has the power to order a sale of the property, the sale cannot take place until 6 months after the complaint was filed (3 months for land contracts). The borrower may still satisfy the mortgage by paying the required principal and interest plus costs after judgment is entered but before the sale occurs.
The property may be sold by the county clerk where the judgment was entered or where the land is located, or by any other person who is appointed by the Court to conduct the sale (typically the Sheriff). The sale must be public and held between 9:00 a.m. and 4:00 p.m. at the courthouse or anywhere else the Court decides. Michigan law requires the person authorized to conduct to the sale to give notice of the sale, as well.
The law specifies that the judicial foreclosure sale may not be ordered on less than 42 days notice and publication of the sale cannot begin until 6 months after the complaint is filed (3 months for land contracts). Furthermore, the law provides detailed notice and publication requirements for executing the court-ordered-sale. In particular, the person authorized to conduct the sale must publish a written notice in 3 public areas in the city where the property is to be sold at least 6 weeks (42 days) prior to the sale. A copy of the notice must also be published in the county newspaper once each week for 6 successive weeks.
It is important to note that the borrower may be personally liable for any deficiency in the sales price. After the sale, the borrower has 6 months to redeem the property.
Unlike under a foreclosure by advertisement, under a judicial foreclosure, the mortgagee must serve the borrower with a complaint and must also follow the strict notice of sale requirements of the law. As a result, the judicial foreclosure process is much longer than the foreclosure by advertisement process and the borrower will be able to remain in the house for at least a full year from the time the process is initiated (6 months from the time the complaint was served until the sale is completed plus the 42 days notice period plus the 6 month redemption period after the sale).
Stopping a Michigan Judicial Foreclosure Sale
At any point in the judicial foreclosure process prior to the court-ordered sale occurring, you may file a Chapter 13 bankruptcy to stop the foreclosure sale and set up repayment terms with your lender. This will provide you with legal protection from the judicial foreclosure and reasonable repayment terms to bring the mortgage current over a 36 – 60 month time period.
If you don’t stop the court-ordered judicial foreclosure sale, you will need to address the debt resulting from the deficiency judgment. This debt becomes unsecured debt after the sale occurs and can be eliminated in a Chapter 7 bankruptcy.
Reach out to Acclaim Legal Services now
Acclaim Legal Services can provide the fast, knowledgeable foreclosure experience that you need to answer any questions you may have regarding bank foreclosure laws in Michigan.
We offer free in-office or phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action. We specialize in bankruptcy law, debt resolution, foreclosure prevention and credit repair. We have offices in
