Posted on Jan 15, 2014

If your Texas home has already been foreclosed upon by your mortgage lender, there is usually not anything to be done about it. Unlike some states in the U.S., Texas does not have a "redemption" period for mortgage foreclosures. Once it's sold at the foreclosure auction, that is it.

But if you file bankruptcy, you may be able to have the foreclosure reversed as a "preference" or "preferential transfer." But there are several requirements, so that it may or may not apply to your case:

1. there must have been a transfer of property, usually satisfied by the foreclosure sale and the giving of a trustee's deed to the buyer;

2. the foreclosure sale must have been to an existing creditor of the homeowner. In other words, the property must not have been purchased by a 3rd party, only the foreclosing creditor. This is the typical situation in Texas, the foreclosing party usually buys the home back at the foreclosure sale. But if a 3rd party purchaser bought the property, sorry.

3. the foreclosure must be because of homeowner's failure ot pay an antecdent debt (the mortgage) as opposed to if it was a foreclosure because they didn't have insurance or some other, non-monetary reason (rare);

4. The homeowner (debtor) must be insolvent. Their debts must exceed their non-exempt assets on the date of the foreclosure. Most if not all homeowners in this situation will pass this test.

5. the bankruptcy has to be filed within 90 days after the foreclosure sale, or the foreclosure cannot be set aside as a preference.

6. the property's value must be more than the balance due to the creditor that is foreclosing. If there is no equity in the property, the foreclosure sale cannot be set aside as a preference.

7. the bankruptcy must be filed before the property is sold to a 3rd party, a "bona fide purchaser" or BFP, following the foreclosure. The house is likely unrecoverable in such a circumstance, but you may be able to recover money damages.

So these are the elements that must exist to reverse your foreclosure as a preference under 11 USC Section 547 of the Bankruptcy Code here in Texas by filing bankruptcy. If there were irregularities in the sales process, there could be other grounds to reverse a foreclosure.

Contact our Houston law office at 713-772-8037 and make an appointment with one of our attorneys, if you are facing foreclosure or if you wish to see if it may be possible to reverse your Texas foreclosure.


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J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization