Zuckerberg Bankruptcy Law Office

When the Indiana legislature passed Local Rule 49TR85-231 in November of last year, it was a victory for Marion Country Superior Court Judge Cynthia Ayers.  The rule requires that homeowners be notified immediately that they have an option open to them before foreclosure - a mortgage settlement conference with their lender, and that rule went into effect on July 1 of this year.

Judge Ayers reports that these settlement conferences have led to successful mortgage modifications in only a third of the cases. Meanwhile, according to the Indianapolis Star, the total of residential foreclosures filed this year in Marion Country alone is expected to top 10,000.

Judge Ayers, who chairs the Indianapolis Bar Association Mortgage Foreclosure Task Force, hopes the combination of the new state law and $21 million worth of grants from the Federal Home Loan Bank will substantially ease the foreclosure problems.

I’ve written many times about the automatic stay in bankruptcy, which is a court order that halts all collection efforts by creditors (see “Oh, Yes.  You Can Stop Being Harassed!”) The new settlement conference legislation also includes an automatic stay.  The conference itself must be completed within ninety days of the foreclosure notice, and during that time, foreclosure efforts are “put on hold”.

The conferences themselves are usually conducted in the county courthouse, with the homeowner participating either in person or by telephone. It is not necessary for the homeowner to have a lawyer at the conference, but counsel is recommended, as the lender will have an attorney present.

In fact, the reason I and the other professionals in my four bankruptcy law offices made the decision to become involved in helping clients negotiate with their lenders is exactly the reason the new legislation was introduced. The idea is to create a win-win situation, keeping the homeowner in the home wherever possible, yet “supporting the lender’s interest in loss mitigation”. Exactly as in the bankruptcy court process, the purpose is to treat all parties fairly, and to provide help and the opportunity for a “fresh start” to individuals and families who have suffered severe financial setbacks.