What Happens During the Foreclosure Process?

In Georgia, the bank will advertise your house in the local newspaper for 4 weeks before the foreclosure date.  During this time, most people will receive tons of letters from bankruptcy attorneys and the bank. Do not ignore your mailbox during this time.  If you choose to file bankruptcy, your attorney will need to know the name of the law firm that is trying to foreclose.

Do not wait until the last second.  Do not let some well meaning banker lead you on with the promise of “I will get a you loan modification.”  Once your house is foreclosed on the courthouse steps, there is nothing you can do to get it back.

Two Types of Bankruptcy

Most people who file bankruptcy to save their home will file a Chapter 13.  Chapter 13 allows you to take all of the arrears you owe and spread them out over a monthly payment that is affordable to you.

The only time a person should use Chapter 7 to stop a foreclosure is when the regular monthly payment is too high and there is equity in the house.  In a case like this, the Chapter 7 trustee will put the house up for sale shortly after the case is filed. Once the house is sold, the debtor will get paid any exemption amount claimed ($21,500.00 for an individual and $43,000.00 for a married couple).

If there is no equity in the house and you want to let it get foreclosed, you will almost never have to worry about paying any deficiency unless you have a second mortgage.  For more information on this, read this blog post https://kellycanhelp.com/blog/do-i-need-to-file-bankruptcy-in-georgia-if-i-am-willing-to-let-my-house-get-foreclosed/

Contacting an Attorney Can Help

When facing foreclosure, finding the right bankruptcy lawyer will make all the difference to protecting your rights. Since each situation comes with its own set of challenges, only an experienced attorney can assess your options, and provide you with the best strategy to regain control over your debt.

The Law Office of Jeffrey B. Kelly can help with your legal needs from the first time you file a motion all the way through bankruptcy court. Call (770) 637-1756 for a consultation to begin your process and discover your best path to financial recovery.

Numerous factors can come into play and help determine whether the home is safe from seizure in a bankruptcy. It is imperative that the debtor research their situation, whether by consulting with an attorney or finding out themselves, prior to making a decision on filing bankruptcy.

There are two chapters in bankruptcy: Chapter 7 and Chapter 13. While Chapter 13 is the safest bet for saving your home, it is not always the necessary choice. Filing a bankruptcy does not automatically mean that your house will be taken from you. In fact, it is far more likely that the debtor will be able to keep their home in either chapter of bankruptcy.

Example

The most typical situation for a debtor who is also a homeowner finds him struggling to pay his unsecured credit cards and medical bills, while also ensuring his mortgage payment is made every month. Assuming the debtor/homeowner has his priorities in order, he will pay his mortgage every month to avoid foreclosure. If this debtor/homeowner qualifies for Chapter 7, he should be able to keep his home in most situations.

While filing a bankruptcy automatically discharges all debt able to be discharged, including home loans, the debtor can sign a reaffirmation agreement with the mortgage company. The reaffirmation agreement is filed with the bankruptcy court and ensures that the reaffirmed mortgage stays an official debt owed by the debtor and can resume after the bankruptcy is closed. Many debtor/homeowners can easily keep their homes while still getting the financial fresh start they desire.

Amount of Equity

The only roadblock to the above situation can occur when the house has a large amount of equity. Most homeowners with mortgage loans do not have enough equity in their homes for this to be a problem.  With the Georgia Homestead Exemption, a Georgia debtor/homeowner may exempt $21,500 of equity.

Note, however, that the debtor is current with his mortgage payments. A debtor who is not up to date can always be foreclosed on, even after bankruptcy.  The average debtor should be able to file Chapter 7 and keep their home as long as they are not behind on their mortgage.

Overdue Mortgage Payments

The debtor who is behind on their mortgage is in a much different position. While mortgage modification mediation exists in Chapter 7, it is much more difficult due to the short timeline between the case being filed and the case being closed.

This is where Chapter 13 comes into play. The majority of people who file bankruptcy to save their homes are going to file Chapter 13. The process of a Chapter 13 is much more conducive to saving a home from foreclosure than Chapter 7.

A Chapter 13 allows the debtor to catch up on their mortgage arrears while they are in the bankruptcy process, where the home is protected by the automatic stay that is imposed on all creditors when the bankruptcy is filed. The debtor will either catch up with the monthly payments based on their proposed plan or they will have the opportunity to get a modification through the mortgage mediation modification program (most bankruptcy districts have a program of this type). The modification could significantly reduce the monthly payment and make it easier for the debtor to catch up in the allotted time.

For debtors who have too much equity in their home that cannot be protected in a Chapter 7, a Chapter 13 gives them more time to repay the equity or find a loan that will have the same effect.

The main point to remember is that homeowners who are filing bankruptcy do not have to lose their homes in bankruptcy. Chapters 7 and 13 provide plenty of protection for homeowners. As long as homeowners first investigate their options and understand how their homes can be affected, they should be able to keep their homes and get their financial fresh starts.

The Miami Herald has reported that Florida’s Attorney General, Pam Bondi believes that Bank of America has failed “to follow the rules of a national mortgage settlement reached last year over the practice of robo-signing during the height of the foreclosure crisis.”

In her letter to Bank of America, Attorney General Bondi says that the bank may have violated the settlement by:

1. “failing to assign a single point of contact to the borrower ‘throughout the loss mitigation, loan modifications and foreclosure processes…until such time as Servicer determines in good faith that all loss mitigation options have been exhausted’;
2. failing to comply with the settlement’s dual tracking restrictions which prohibit borrowers from being referred to foreclosure while a completed loan modification application is pending;
3. failing to comply with certain timing requirements in cases where a borrower has been referred to foreclosure but makes a loan application within thirty days of referral and, during that time, contrary to the settlement, Bank of America moves for judgement or an order of stay while the application or an appeal from a denial is pending; and
4. failing to oversee foreclosure counsel to ensure counsel have appropriate access to accurate and complete information from the bank’s records necessary to perform their duties.  If properly informed, counsel presumably would respond to the borrower’s loss mitigation inquires during the course of litigation.”

New York Attorney General Eric Schneiderman has threatened sue Bank of America and Wells Fargo for the same violations.

Propublica has posted an article entitled, “Bank of America Lied to Homeowners and Rewarded Foreclosures, Former Employees Say”.  The article reports that “Bank of America regularly lied to homeowners seeking loan modifications, denied their applications for made-up reasons, and were rewarded for sending homeowners to foreclosure, according to sworn statements by former bank employees.”

As a Georgia bankruptcy attorney, I have heard clients complain that their bank will falsely claim that documents necessary for the loan modification were never faxed to them on time.  My consumers in Georgia have felt cheated and abused by the loan modification processes because they complied with every demand of the bank and still ended up in foreclosure.

Thank goodness Chapter 13 is available to consumers to save their homes from foreclosure.  If it was not for Chapter 13, thousands of homeowners would lose their homes because of bad bank practices.

The future does not look so good for Bank of America right now.  As the great Southern philosopher Dusty Rhodes once said, “Payback is hell daddy!”

Other posts you might be interested in reading.

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment?

5.  How do I stop a foreclosure?

A former politician from Barakaldo, Spain, threw herself out of a fourth floor window because of her distress over being evicted from her home.  In Granada, a newsstand owner hung himself just before his eviction.  In Valencia, a homeowner survived a jump from a balcony.

public backlash against banks in Spain

These tragedies have led to a public outcry against banks and a call for foreclosure reform in Spain.  The Journal reports that these deaths have led to large street demonstrations across Spain.  One Spanish police union has even offered to provide legal support for officers who refuse to participate in evictions.

Chapter 13 helps some Americans save their homes from foreclosure

Here in the United States, homeowners have the option of filing Chapter 13 bankruptcy to save their homes.  Chapter 13 stops the foreclosure of a home.  A Chapter 13 will allow you to pay back any past due mortgage payments through the plan.  This a great tool for someone who has fallen behind on mortgage payments while they were out of work but has now found a new job.

In situations where the future mortgage payments are not affordable, Chapter 13 will not solve the problem because it does not lower the future payments.  However, in many cases, future mortgage payments become much more affordable when credit card debt and medical debt are eliminated in the bankruptcy.

When a person is in a situation where they need to surrender the house and eliminate first and second mortgages, Chapter 7 is the solution.  Chapter 7 is commonly referred to as the fresh start provision of the bankruptcy code because it allows you the opportunity to eliminate all of your debt and move on with a new start.

U.S. Chapter 13 Laws Need to Be Changed

I hope that the Chapter 13 laws will be changed in the United States so that judges can modify future mortgages so that more people can stay in their homes.  Some bankers argue that this change in the law would hurt their industry, but they are wrong.  Under the current law, when a bank forecloses on a home, they almost always get less than the appraised fair market value because no one is going to pay the full value on any house that a bank has foreclosed.  Why not let a bankruptcy judge modify a mortgage so that the balance owed is adjusted down to the current fair market value?  This would help everyone.  Less foreclosures would result in increased property values.

I”m praying that mortgage reform train will soon get moving again.

Other posts you might be interested in reading.

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment?

5.  How do I stop a foreclosure?

Evander Holyfield said that he always thought he would be able to save his 54,000 square feet mansion on 235 acres in Fayette County, Georgia with 11 bedrooms, 17 bathrooms, three kitchens, two lane bowling alley and a 135 seat theater.  Earlier this week, he was evicted.

How could a rich and famous person like Evander Holyfield lose his house in foreclosure?  During his career, Holyfield has earned over $250 million dollars.

Could he have filed Chapter 13 bankruptcy and saved his house from foreclosure?

Filing chapter 13 stops foreclosures but if you have more than $1,081,400 in secured debt, you can’t file Chapter 13 bankruptcy.  Instead, you have to file Chapter 11.

For purposes of this blog post, lets assume Holyfield could file Chapter 13 bankruptcy.

Should he have done it if he could have?  The answer is probably no.

Every person who is considering Chapter 13 needs to understand that it  does not help you with future mortgage payments.  Chapter 13 is a great tool for someone who is behind on their mortgage payments and has the means to catch them up over time.

For example, let’s say you have a person who has been unemployed for the six months.  Understandably, this person has fallen behind on their mortgage payments.  Let’s say a week before the foreclosure date, this person finds a new job but the mortgage company refuses to work them this late in the process.  This person would be a great candidate for Chapter 13 bankruptcy.  Chapter 13 allows you to catch up the back payments over time and stop the foreclosure of your home.

In contrast, if a person has mortgage payments that are just to high, Chapter 13 will not bring them down.

My guess is that Evander Holyfield has access to a team of lawyers.  Perhaps they looked at estimates of his future income compared with his monthly expenses and decided it was best to let the house get foreclosed.

The Atlanta Journal reported that the maintenance costs alone on his mansion were $1 Million per year.  The Atlanta Journal also reports that he currently owes more than $500,000.00 in back child support payments.

If Mr. Holyfield has a large amount of unsecured debt, Chapter 7 might be a better option for him.

Evander Holyfield is the only five time World Boxing Champion in history.  I wish him the best as he fights this financial battle.

Other posts you might be interested in reading.

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment?

5.  How do I stop a foreclosure?

Can you imagine living in a state where a mortgage company could take your house away from you through foreclosure without you ever knowing about it?  Welcome to Georgia!

Your mortgage company currently has no legal obligation to notify you of their intent to foreclose on your home.  However, in a recent online edition of the  Atlanta Journal and Constitution, the paper has reported that the Georgia State Senate has approved a bill requiring mortgage companies to notify Georgia consumers before they start a foreclosure action.

Even though there is no law that currently requires them to notify you, most mortgage companies will mail you a certified letter about six weeks before the foreclosure sale date.  In Georgia, foreclosures must take place on the first Tuesday of the month.  Mortgage companies are required to advertise any house that they intend to foreclose in the legal county newspaper in which the house is located.  They must advertise the foreclosure for four weeks prior to the sale date.

In addition, almost every homeowner facing foreclosure will receive letters from local bankruptcy attorneys explaining how Chapter 13 can stop a foreclosure proceeding.

The problem is that many loan modification companies have somehow figured out how to beat bankruptcy attorneys to the punch.   Bankruptcy attorneys get names and addresses from the newspaper.  In contract, loan modification companies purchase the names and addresses of homeowners who are behind on their mortgage payments long before the foreclosure action starts.  Most of the loan modification company mailers are clearly scams.  The Federal Trade Commission has cracked down hard on many of these crooks.  Some loan modification crooks even purchase the phone numbers of potential victims.

In other cases, homeowners that are behind on payments will receive letters from potential investors who want to explore the option of bringing your house current on the payments while you agree to deed the property to them.  The advantage to the investor is that the loan stays in your name.  Thus, the investor gets to buy your house using your credit.

The bottom line is that a person who is behind on their mortgage payments can receive so much mail from so many sources that they just decide to ignore it all.

In Georgia, if you ignore your mail, you could end up losing your house to foreclosure without any warning.

Other Posts:

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment in Georgia?

5.  How do I stop a foreclosure in Georgia?

The Journal reports that this review process could be unveiled in the next few weeks.  The Office of the comptroller of the Currency estimates that 4.5 million borrowers coul be eligible for review.

The federal government will be setting up a website and a toll free number giving the details of the process.

What bothers me is that the reviews will be conducted “by third party companies that were hired earlier his year by 14 banks that signed consent order in April with the OCC and the Federal Reserve.  The regulators had to sign off on the selection of these companies”  (See page C1 Wall Street Journal, October 4, 2011).

It seems to be like the government has agreed to allow a fox to be in charge of guarding the hen house.  I doubt we will see many people recover anything.  I bet there will be a few token cases where awards will be granted so that the foxes can claim to the government that they are doing their job.

Important points of the article are:

1.  Money awards will be determined on a case-by-case basis.

2.  There will be a deadline for borrowers to request reviews.

3.  Very few borrowers are expected to have their foreclosures overturned and their homes returned to them.

4.  Banks could be held liable for miscalculating mortgage payments.

5.  Banks could be held liable for impermissible fees and penalties.

6.  Banks could be held liable for forcing expensive insurance coverage into the mortgage payment and pushing consumers into foreclosure.

7.  Banks could be held liable for starting foreclosure proceedings while they were receiving payments as part of trial loan modifications.

8.  Banks may be liable for foreclosing on people who provided all of the necessary documentation for loan modifications but still got foreclosed.

I think the proper place for these issues to be resolved is in a court of law and not some review process that will be run by “third party” companies.

Three years, Congress had the opportunity to pass a bill that would have allowed bankruptcy judges to modify mortgages.  Had this bill passed, the entire foreclosure meltdown would have been avoided.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

In the article, the Journal details how mortgage companies are becoming more aggressive in Florida in pursuing these deficiency judgments after foreclosure sales.

I doubt that we will see first mortgage holders start pursuing deficiency judgments in Georgia.  Click here to read a blog post I wrote about confirmation of foreclosure in Georgia.  In my twelve years as a bankruptcy attorney, I’ve seen it happen only one time.  In almost every single case, it is complete waste of time for a mortgage company to chase a consumer who just lost their home in a foreclosure sale.

However, I have seen an increase in cases where a credit union refuses to foreclose on the house.  Instead, they sue the consumer on the note.  When they are successful in their lawsuit, the credit union will then be able to garnish twenty five percent of the consumer’s net income.

When I saw a consumer go through this type of situation, I advised him to continue living in the house while his wages were being garnished.  In his case, getting garnished was much cheaper than the mortgage payment.  Also, the amount he was being garnished for was much cheaper than renting an apartment.  In his case, the credit union was incredibly stupid by choosing to garnish his wages instead of just foreclosing on the house.

If we see first mortgage holders start to pursue deficiency judgments in Georgia after a foreclosure is completed, I doubt it will last long.  In almost every case, the consumer will file for bankruptcy and wipe out the mortgage company.  Legal fees for pursing a deficiency judgment against a consumer are expensive.  Thus, any mortgage company who chooses to pursue a deficiency judgment will most likely be throwing good money after bad.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

In the conclusion of the decision, the Court states, “….we agree with the judge that the plaintiffs did not demonstrate that they were holders of the Ibanez and LaRace mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at foreclosure sale.”

The next step for these banks will be to get their paperwork in order and start the foreclosing process again.  The debtors in these cases are not going the get a free house.

As a Georgia bankruptcy attorney, I fear that some Georgia consumers are going to read about these types of court rulings in some newspaper and fail to take proper action to prevent the foreclosure of their home because of misconceptions.  While its true that banks across the nation are being investigated for their sloppy paperwork in relation to the sale of mortgages, this does not change the fact a legal foreclosure can quickly take place in Georgia.

In a conducting a nonjudicial foreclosure, all the banks have to do in Georgia is advertise the property in question for four consecutive weeks before the foreclosure in the legal organ of the Georgia county in which the property is located.  On the first Tuesday of the following month, the foreclosure sale takes place.

However, Chapter 13 is a great option for Georgia consumers to save their home.  The foreclosure stops when the bankruptcy case is filed.  In a Chapter 13 bankruptcy, a debtor can pay back the arrears on the mortgage over a period of up to 60 months.  In addition, unsecured debt like credit card bills and medical debt can be eliminated.

Any consumer in Northwest Georgia that is facing foreclosure should take advantage of a free consultation and call me at 770-637-1756 to schedule an appointment so that I can review the entire situation with you.  Ignoring the problem won’t make it go away.  Procrastination may cost you dearly.  Take action and call me today.

Other Posts:

1.  Can I eliminate my unsecured second mortgage in a Chapter 13?

2.  How much does it cost to file?

3.  How does a Chapter 13 work?

I’ve met with clients from Dallas, Douglasville, Hiram, Cartersville, Calhoun, Rome and Dalton who have had vacation homes or rental properties that they need to unload.  Many of these bankruptcy clients bought these homes thinking that they could always sell them if their income ever dropped.  Unfortunately, with the national meltdown in real estate prices, selling the property has become impossible in many situations.

Lets say you own a vacation condo in Florida with $300,000.00 owed on the first mortgage and $100,000.00 owed on the second mortgage.  Lets assume the house is sold at foreclosure for $300,000.00.  When your second mortgage company files the 1099(c) with the IRS, you will be tax on the full $100,000.00 as income.  This can make your tax bill to the IRS go through the roof.  However, if you file for bankruptcy before the foreclosure takes place, this event will not be taxable.  If you sit around and wait to file bankruptcy after the 1099(c) has already been filed, you may end up with tax debt that cannot be eliminated in your bankruptcy.

It is extremely important for owners of second homes to understand that the Mortgage Forgiveness Debt Relief Act and Debt Cancellation applies only to your principal residence.  The IRS states, “The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on the principal residence.  Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Any person who is facing foreclosure should take advantage of a free consultation with a bankruptcy attorney and explore all options and consequences of the foreclosure of their property.

Related Posts:

1.  Bankruptcy and the taxation of foreclosure by the IRS

2.  Can I Wipe Out My Second Mortgage in a Chapter 13?

3.  When Will My House be foreclosed in Georgia?

4.  Should I file bankruptcy if I’m  letting the house get foreclosed?