How Many Acres Are Involved, and What Are They Used For?
The Redemption Period in Michigan: The Laws Have Changed
As of December, 2011, the amount of acreage owned is no longer a factor in determining the length of the post-foreclosure sheriff’s sale redemption period in Michigan. Prior to December, 2011, foreclosure of land more than 3 acres required a “redemption period” of 12 months as opposed to the 6 months required for non-abandoned property of less than 3 acres.
For residential property not used for “agricultural purposes,” regardless of acreage, the determining factor is the amount of indebtedness on the mortgage involved at the time of foreclosure. If the amount claimed by the bank or other entity holding the mortgage to be due at the time of foreclosure is 66 2/3% of what is owed, the redemption period is 6 months. If the amount owed is less than that percentage, it is 12 months.
The reason for this is that the Michigan legislature recently revised a state law concerning foreclosure, MCL 600.3240, to make this change. The change was a “bargain” struck with creditor-friendly state legislators to continue to allow them to foreclose by publication rather than judicially (i.e., via a formal lawsuit filed with a state court in order to prove their right to foreclose). The result may be that properties with larger acreage that simply do not happen to be utilized agriculturally (determined by the filing of a Schedule F with one’s tax return) will be foreclosed faster, still with no need for banks to prove their right to foreclose before a judge, and, additionally, shortening a prior 90-day modification mediation period in the state foreclosure process to 60 days if the homeowner does not quickly return certain documentation.
In short, this is mostly favorable to mortgage-holding creditors and their servicers rather than homeowners, though, for many foreclosed homeowners, particularly those who, like most, actually have less than 3 acres to begin with, there will be no effective change in the redemption period.
The Redemption Period in Michigan Defined
But what is the redemption period? The redemption period, in short, is a period of time following a foreclosure sheriff’s sale of your property which Michigan state law provides in order to give you an opportunity to come up with a lump sum of cash sufficient to buy the property back from the foreclosing bank free and clear of any liens for whatever the foreclosing bank (or other sheriff’s sale purchaser) paid for it. For example, if, at sheriff’s sale, your home is purchased by the bank holding the mortgage (who are required to enter a bid up to the full amount of the debt you owe that bank) for $150,000, you may “redeem” the property from the bank, buying it back, for $150,000.
Obviously, this is not something that many homeowners can accomplish. But the redemption is, otherwise, a period of time in which the homeowner may remain in the home with any further need to make mortgage payments or pay property taxes before being required to relocate.
Foreclosure, the Redemption Period, and Bankruptcy in Michigan
If a Chapter 7 or Chapter 13 bankruptcy has been filed by the homeowner as a logical reaction to the foreclosure, the up-shot of this is exactly that: they may have less time to remain in the home free of that obligation to make a monthly payment, preparing to make the next move forward. While, after a bankruptcy, there will be no continuing legal obligation to make any payments or negotiate with the foreclosing bank (or any banks or entities holding second or third mortgages, who will have received nothing from the sheriff’s sale) with regard to deficiencies the bank may collect from the homeowner even after foreclosure (that is, the difference between the amount owed on the mortgage note and the amount the house sold for at sheriff’s sale), it is still a very useful if not vital period of time for homeowners attempting to make a fresh start.
However, depending upon the amount bid at the foreclosure sheriff’s sale, a Chapter 7 Trustee in a Chapter 7 bankruptcy proceeding may attempt to sell or short-sell the home, potentially requiring the foreclosed homeowner to relocate prior to the expiration of the redemption period.
If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
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