CitiFinancial foreclosed on Lonnie’s Woodbridge house back in 2017.
My usual advice, when people ask, is to file bankruptcy right away when there’s a foreclosure. Lots of people don’t, though, and Lonnie was one of those.
In 2017 Lonnie could have filed Chapter 7 bankruptcy and just cleared the foreclosure deficiency. He hoped nobody would bother him about the money he still owed after the house was foreclosed.
Now in 2022, the CitiFinancial debt was owned by an outfit called Dyck-O'Neal and they wanted $173,000. And they wanted it now!
When Lonnie came to see me, he was no longer eligible to file Chapter 7. In the meantime, his parent died and left him with a share of the paid-for family home. In a Chapter 7 bankruptcy, that house, where his sister was living, would get sold.
Lonnie caught a break. He had waited too long, but so had Dyck-O'Neal. They left him alone for just over five years after CitiFinancial accelerated the debt (starting the foreclosure process). After five years, under the Virginia statute of limitations, CitiFinancial was too late.
We put Lonnie in a Chapter 13 payment plan—because he owned that house with his sister, he had to pay his debts. And the bankruptcy judge agreed with us—Dyck-O’Neal was too late. They get nothing. Lonnie is paying his other debts through his Chapter 13. Debts that he had been paying anyway.
This is not a totally happy-ever-after story. If Lonnie had filed Chapter 7 in 2017, his bankruptcy wouldn’t be hurting his credit score. (It would still show—for ten years—but not drag down his credit.) Now with Chapter 13, his score might not fully recover before 2029.
