What Is a Notice of Dismissal of Foreclosure?

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If your lender's attorney files a notice of dismissal, you may get to stay in your home.
If your lender's attorney files a notice of dismissal, you may get to stay in your home. (Image: David Sacks/Lifesize/Getty Images)

People who cannot pay their mortgages, as well as those who have received their mortgages from less-than-honest mortgage lenders, may face foreclosure action. This means the mortgage lender files a formal lawsuit in court in order to repossess and sell the mortgaged property. Sometimes, however, these lawsuits end with a notice of dismissal of foreclosure.

Definition

A notice of dismissal of foreclosure is a formal motion filed by the plaintiff's attorney in a bankruptcy case. The notice tells the court that the plaintiff no longer wishes to pursue foreclosure action against the defendant and moves that the court drop the case. Alternately, a notice of dismissal of foreclosure may refer to a letter the court sends to the defendant in a bankruptcy case. The letter indicates the plaintiff has dropped the foreclosure lawsuit.

What the Notice Means

A notice of dismissal of foreclosure means that the foreclosure action against the defendant is stopped. This means the defendant gets to stay in and keep his home, at least until such time that the plaintiff refiles the foreclosure lawsuit. In some instances, a notice of dismissal of foreclosure may mean the defendant is entitled to seek dismissal of the mortgage, such as if the plaintiff filed a fraudulent foreclosure, but usually the mortgage stands.

With or Without Prejudice

A defendant may receive a notice of dismissal of foreclosure that notes the case has been dropped "with prejudice" or "without prejudice." If the notice says "with prejudice," this means the court has found some reason the plaintiff cannot refile the foreclosure lawsuit. This may happen if the plaintiff files the lawsuit in bad faith or doesn't prosecute it within a reasonable time. If the notice says "without prejudice," this means the plantiff may refile the lawsuit at any time. Notices that indicate dismissal without prejudice are of more concern to a homeowner because the homeowner cannot guarantee the plaintiff will refrain from future legal action.

When They Happen

The attorney for a plaintiff in a foreclosure lawsuit files a notice of dismissal of foreclosure before the foreclosure date or sale of the home. The exact time the attorney does this varies, as each state has its own regulations on the amount of time homeowners have to respond to foreclosure notices; this impacts how long it takes to set the formal date of sale.

Bottom Line

Usually, getting a notice of dismissal of foreclosure is a good thing, particularly if the court dismissed the case with prejudice. However, a notice of dismissal of foreclosure does not always guarantee you are out of legal hot water with your home.

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