Expert advice on bankruptcy and foreclosure

June 25th, 2024

Attorney Theresa DeGray's commitment to foreclosure prevention

Connecticut attorney Theresa DeGray's passion for helping homeowners prevent foreclosure stems from her personal experience with bankruptcy. In 2009, despite being a lawyer, she found herself overwhelmed by debt and unsure of her options. Struggling with medical, credit card and student loan debt, DeGray felt trapped and unable to move forward with her life.

“I was living with my parents and desperate for a solution,” she remembers. “So, I turned to a lawyer I’d worked with years earlier who suggested filing for bankruptcy,” she adds.

Taking his advice, DeGray began a financial journey that would not only change her life, but also reshape her entire career. She emerged from bankruptcy with a clean slate, ready to rebuild her credit and her life. “I was able to get married, buy a house, have a child and start my law firm,” DeGray says.

Since then, DeGray has dedicated her practice, Consumer Legal Services, LLC, to helping homeowners in Connecticut navigate the complex world of bankruptcy and foreclosure. She’s equally dedicated to ending the stigma surrounding the decision to file bankruptcy, especially to save your home.

“There is such a stigma about filing personal bankruptcy, I wouldn’t talk about my own at first out of embarrassment,” she says. “But, sharing my bankruptcy story inspires my clients that they can overcome their financial issues and encourages them to trust me,” she continues.

DeGray shared with BlueHub SUN the ways bankruptcy can be a lifeline for those struggling with debt, potentially saving their homes.

Insights on Bankruptcy and Foreclosure from a Legal Expert

DeGray didn’t face foreclosure during her own bankruptcy. In fact, she says, “I had no assets to lose in a bankruptcy.” But, when DeGray launched her law firm and began working with bankruptcy clients, she quickly saw the link between bankruptcy and foreclosure. “Foreclosure can be a gateway to bankruptcy,” she says, since it often leads to debtors filing for bankruptcy protection to save their homes.

Life events such as the death of a spouse, illness, divorce or significant income loss often trigger these situations. These events can lead to overwhelming debt, forcing individuals to seek bankruptcy protection to halt foreclosure proceedings temporarily.

When faced with foreclosure, filing for bankruptcy, whether Chapter 7 or Chapter 13, can provide immediate relief. “Taking this legal step immediately stops the foreclosure process, at least temporarily,” explains DeGray. She emphasizes that most bankruptcies she or her colleagues file for their clients allow them to buy time and regroup financially, sometimes allowing them to prevent foreclosure altogether.

Chapter 7 and Chapter 13: Essential Tools for Attorneys

Chapter 7 and Chapter 13 bankruptcies serve different purposes, but both are essential tools for preventing foreclosure. Chapter 7, known as a discharge bankruptcy, eliminates most unsecured debts but doesn’t directly save a home from foreclosure. “It can, however, be a stepping stone for them towards stabilizing their finances,” says DeGray. “That can allow homeowners to focus on reinstating their mortgage and pay other essential living expenses without the burden of overwhelming unsecured debt,” she adds.

In contrast, Chapter 13 involves a repayment plan that includes paying mortgage arrearages, helping to reinstate the mortgage and halt foreclosure. “Most Chapter 13 bankruptcies are filed because somebody is at imminent risk of losing their home,” explains DeGray. “So, many clients come to me to do foreclosure defense work for them, and foreclosure is a trigger for bankruptcy,” she says.

DeGray says that while Chapter 13 can be a powerful tool, it requires the debtor to make both regular monthly mortgage payments and payments on their mortgage arrearage. “This double payment can be challenging for most people, making it difficult for them to complete their plans,” she says. Nonetheless, Chapter 13 offers some homeowners with the income to complete their plans and a true path to keeping their home. But, this is a complex process.

“Getting a lawyer’s help is essential to understanding which of these might help you keep your home, or if they’re a viable option at all,” DeGray says.

Considering All Options Available to Create a Viable Foreclosure Prevention Strategy

Developing a comprehensive strategy to save homes from foreclosure involves exploring every available option. DeGray says, “Most homeowners don’t understand just how many options they have.” Only by evaluating all possible options can homeowners find the most effective solutions for avoiding foreclosure. Contacting the lender can be a good first step.

In most states, it starts with mediation between the homeowner and the lender, and DeGray raves about Connecticut’s mediation system. “Connecticut has a wonderful mediation program with incredible professionals,” she says.

In Connecticut, a neutral third party is appointed as the mediator. Both the homeowner and the lender must attend the session. Discussions during mediation often lead to loan modifications or other solutions that can prevent foreclosure and keep families in their homes. “Foreclosure is stayed in Connecticut during mediation,” she explains.

Connecticut homeowners who can’t get a mortgage modification can explore alternatives like Connecticut’s Emergency Mortgage Assistance Program (EMAP). “EMAP offers second mortgages usually capped at $50,000 to cover mortgage arrearages,” says DeGray. The program offers repayment flexibility that’s often indispensable to homeowners facing serious financial challenges. “If you have a VA loan, the Veterans Affairs Servicing Purchase Program or VASP may be available to you, too,” she explains.

Additionally, housing counselors certified by the U.S. Department of Housing and Urban Development (HUD) offer valuable resources and counseling services to support homeowners facing foreclosure or eviction.

One option DeGray discourages is a short sale. “My clients don’t usually benefit from those,” she says.  

But, doing a short sale and buy-back through BlueHub SUN’s program can be an exception, because it enables clients to stay in their homes.

The SUN Program: A Lifeline for Homeowners in Facing Home Loss

DeGray calls BlueHub SUN, “a miracle solution for homeowners facing foreclosure.”

“The SUN program is a saving grace for many of my clients, providing a viable solution when all other options fail,” DeGray says.

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