A judicial foreclosure process involves the lender moving to court in an attempt to recover a loan balance by selling the property used as collateral by the borrower (Purtell, 2015). Typically there are two types of foreclosures, judicial and non-judicial foreclosures although Kentucky laws only recognize judicial foreclosures. Judicial foreclosures rely on a court process where the court must make a ruling on the final process of foreclosure (Foreclosure.com, 2018). The property that the lender seeks to sell to recover their balance on loan must be the same that was as security for the loan. Additionally, the judicial foreclosure process is brought before the court in the event of the borrower’s failure to pay the agreed installments. A judicial foreclosure will last longer than the non-judicial type owing to the processes and procedures involved. A successful judicial foreclosure process in Kentucky will result in the sale of the defaulting borrower’s property through a foreclosure sale.
Start of the Process
Kentucky is a lien theory state, implying that property is allowed as security for loans with proper documentation. This law forms the basis for judicial foreclosures in the state. Hence, the documentation used is referred to as a mortgage. The foreclosure process begins with the lender filing a complaint in court for a default in payment according to the agreed terms of the mortgage. The borrower is also served a notice of the complaint which requires him or her to appear in court for the proceeding. Kentucky laws allow the borrower a period of twenty days to answer to the complaint (Foreclosure.com, 2018). Mostly, these complaints go answered resulting in entering of a default. Entering of a default leads allows the lender to place a notice on the property notifying the general public that the property is being foreclosed. Such notices serve two purposes, guarding the public against purchases that may lead to loss of the property and notifying them of the possibility of future bids for purchase.
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Documentation
Importantly, documentation for the lender-borrower relationship affects the course of the judicial foreclosure process. The promissory note is a vital document to the process. This is the primary loan document t which stipulates the party with the authority to bring the foreclosure (Purtell, 2015). It also outlines the agreed terms for the payments which in turn forms the basis for the complaint. The mortgage, a primary document in the borrower-lender relationship, provides more details on the loan and the property in question. Hence, the court relies on these documents to arrive at a decision on whether the borrower is s defaulter. Lenders are allowed to file complaints in court after a month of defaulting by the borrower, although most of them file these complaints between three and six months of the borrower’s failure to make payments.
Handling of the Process
Mostly, the whole process from the time the lender files a complaint to the period of the auction takes approximately. Given the fact that borrower is served a notice of the complaint, they too have a chance to explain before a judge the reasons for failure to keep to the terms of the agreement. Failure by the borrower to respond hastens the judicial foreclosure process. However, in the event that the borrower contests the process through filing for bankruptcy and seeking adjournments, the process takes much longer. If the borrower takes the decision to abandon the property before completion of the judicial foreclosure process, the lender is allowed to take possession immediately. Hence, the process moves to the foreclosure auction immediately and the lender sells to recover the balance on the loan. Conversely, a notice of intent to sell is issued if the borrower does not abandon the property. This notice is issued once the judge ascertains that the borrower has defaulted on payments. The notice allows the borrower a grace period to make the accrued payments and avoid an auction.
Alternatives for Avoiding Foreclosure
Interestingly, the borrower still maintains several chances of stopping the foreclosure process before and after its commencement. The first of these changes presents itself where the lender issues a notice of intent before filing a complaint. This happens before the complaint is brought before the court and a decision on the default is made. The borrower can make due payments, accrued interests, and fees and stop the foreclosure process. Furthermore, another chance presents itself during the response to complaint stage. Here, the borrower can offer valid reasons for failure to make payments and the court will decide that they did not default. Hence, the borrower and lender will agree on how the late payments will be made. Again, after issuance of a notice of sale, the borrower can stop the foreclosure by repaying the balance of the mortgage (Foreclosure.com, 2018). This is in addition to the costs incurred by the lender through the judicial foreclosure process. Filing for bankruptcy can also work to delay the process and avoid loss of the property.
Conclusion
In essence, the judicial foreclosure process ends with a public auction where the lender sells the property to recover the balance on the loan. Kentucky laws demand that the property is sold at an amount equal to the loan owed to the lender. However, in some cases, a public auction may fail to attract a bid that is equal to the loan balance. Thus, the lender is forced to sell at a price lower than the loan balance. Therefore, the borrower still owes the lender for the amount that was not recovered through the sale.
References
Foreclosure.com. (2018). Kentucky Foreclosure Laws. Foreclosure . Retrieved June 24, 2018 from https://www.foreclosure.com/statelaw_KY.html
Purtell, B. (2015). Nuts and Bolts of a Foreclosure Action . Retrieved from https://c.ymcdn.com/sites/www.kybar.org/resource/resmgr/2015_Convention/Foreclosure_Action.pdf
