Thomas B. Hjerpe, Esq.

Kenneth J. Collins, Esq.

Jocelyn M. Godniho, Esq.

Catherine M. Koshkin, Esq.

Of Counsel

350 E Street, First Floor

Eureka, CA  95501

Telephone:  707 442-7262

Law Office of

Hjerpe & Collins LLP

We are a debt relief agency.  We help people to file for bankruptcy relief under the Bankruptcy Code

Foreclosure, Short Sale, Bankruptcy and Loan Modification

A foreclosure may be the best way to let go of a property that is over-burdened, but the issues are complicated and you need to consider all options.


If you cannot make your mortgage payments your lender will start a foreclosure when you have fallen three or more months past due.  At that point the lender will record a Notice of Default.  Once your lender declares a default they will no longer accept partial payments – they will demand payment of the entire past-due amount.  You are given 90-days to bring the payments current.  If you are not current after 90-days, the lender will record a Notice of Trustee’s Sale which sets the foreclosure sale date.  You will have at least 20-days notice prior to the foreclosure sale date.  

If your property is lost in a foreclosure  and if the lender is not paid in full from the auction sale of your home, in most situations California law prevents mortgage lenders from suing you for the remaining unpaid balance.  However, if you had a 2nd mortgage it is likely that the holder of the 2nd mortgage may be able to sue you for the remaining balance owing on the 2nd mortgage.


If your home is worth less than the balance owing on the mortgage you may be able to do a short sale.  In a short sale the lender agrees to release the title for less than the balance owing.  If a foreclosure would leave you vulnerable to being sued by the holder of a 2nd mortgage, a short sale is an opportunity to negotiate a release of liability with both the holders of the 1st and the 2nd mortgages.  There may also be advantages to a short-sale if you plan to purchase real estate in the future.


A Chapter 13 Bankruptcy is frequently used as a tool to stop a foreclosure and structure a payment plan where you repay your past-due mortgage payments through a 5-year Chapter 13 Plan while you resume your ordinary mortgage payments and save your home from a foreclosure.  You can usually eliminate credit card debt and medical debt in such a payment plan.  If your home is worth less than what is owed on your 1st mortgage, it is also possible to remove and eliminate a 2nd mortgage.  

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Many lenders participate in mortgage loan modification.  Through the loan modification process the lender will reduce your interest rate, waive past-due payments and re-set your loan over a new 30-year terms.  This often has the effect of dramatically reducing your mortgage payments.  The process is difficult.  There is a tremendous amount of information required and the final decision on approval is highly dependent on the relationship of your income to the proposed modified loan payment.  If the new payment will not be the correct percentage of your income the application will be denied.  You need to know what those amounts and percentages are before you submit your application.  You can often get free assistance with mortgage loan modification applications at local non-profit credit counseling services.


Debt relief tax can be a major problem in a foreclosure or short sale, but the debt relief tax does not apply to debts eliminated in a bankruptcy.


Many people have lost their homes because they paid heavy fees to a company to help with mortgage loan modification only to find that little or nothing was done.  In California it is illegal to charge advance fees for help with mortgage loan modification.