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Does federal law apply to non-court foreclosure proceedings?

On Behalf of | Jul 5, 2018 | Firm News, Stop Home Foreclosure | 0 comments

When a person in Colorado is facing the possibility of foreclosure, their lender may first try to collect on the debt in a variety of ways. However, debt collectors cannot try to collect on the debt by any means possible. Under the Fair Debt Collection Practices Act, debt collectors are limited in what measures they can take to try to collect on the debt. However, one question that is currently the subject of an on-going lawsuit is whether the Act protects debtors in non-court foreclosure proceedings.

The United States Supreme Court will take up a case regarding foreclosures and the Fair Debt Collection Practices Act. The issue is whether the Act provides protections for debtors facing foreclosure outside the court system. In 2016, of the nearly 400,000 homes in the foreclosure process approximately half are done via non-court foreclosure proceedings. The borrower in this case is claiming federal law that mandates that debt collectors, even in a non-court foreclosure, must confirm that the debt is valid and provide the debtor with documentation of this.

It is important that, at any point in the foreclosure process, that a homeowner’s rights are protected. If the Fair Debt Collection Practices Act applies to non-court foreclosures, then homeowners will be afforded certain rights such as the right not to be called by a debt collector at unreasonable hours. In addition, under the Act, debt collectors cannot threaten or harass the debtor.

It remains to be seen how the Supreme Court will rule on this case, but the outcome could affect thousands of people who are facing foreclosure. Foreclosure can be intimidating, but there are ways homeowners may be able to stop home foreclosure. For example, they may be able to work out an agreement with their lender to pay what they owe without foreclosing on the property. A short sale might be another option. Also, some people are able to stop foreclosure, if only temporarily, through filing for bankruptcy. In the end, it is important that homeowners facing foreclosure are protected by the law from harassment and threats by debt collectors.