If you are facing foreclosure, you should immediate schedule a free consultation with a bankruptcy attorney. Filing chapter 7 bankruptcy can delay the foreclosure by several months, giving you extra time to gather your things together and find a new place to live. Filing chapter 13 bankruptcy will permanently stop the foreclosure, and allow you to keep the home, provided you maintain future payments after filing the bankruptcy.
How is a house foreclosed?
For a foreclosure to begin, a homeowner must fall behind on mortgage payments. Typically falling three months behind on your mortgage payments will initiate a foreclosure proceeding with many lenders. The lender begins a process of selling the home at the court house steps in order to get repaid whatever they can towards the loan. Generally, the Lender will hire a Law Office to send you a letter requesting that you catch up the missed mortgage payments, or dispute the debt, within 30 days of receipt of such letter. If after 30 days the missed mortgage payments are not caught up, then the Law Office will send you a “notice of acceleration” and specifically provide you a date of foreclosure. Notice of Acceleration means the Lender will only accept the full payoff amount of the mortgage loan. The process involves placing an advertisement for four consecutive weeks in the local county organ (paper), advertising the sale. In Georgia, all foreclosures occur on the first Tuesday of a given month. Therefore, if you receive a notice of acceleration on July 15th, then that means typically the foreclosure will be scheduled for the first Tuesday of September (because they have to advertise the foreclosure for four weeks, the earliest first Tuesday of a given month would, in this example, be September).
Generally a lender won't begin the foreclosure process until you've missed several payments. Nor will they consider a loan modification until you have missed several payments (usually more than three). Applying for a loan modification, or loan forbearance, will delay the foreclosure proceeding as well for several months, as the lender needs time to analyze your income, expenses, and home value relative to loan amount.
If a Loan modification is denied, or a foreclosure notice has already been received, typically the only thing that can stop the foreclosure at that point is to file Bankruptcy.
The Automatic Stay will delay Foreclosure
When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order that directs your creditors to cease their collection activities immediately, including any attempts to garnish your wages, repossess your property, or foreclose on your house. It doesn’t matter if the Creditor knows about your bankruptcy case or not, hence the term “automatic” stay. Therefore, if your house is scheduled to be foreclosed on Tuesday at 10:00 am, and you file your case at 9:59 am, then the foreclosure will automatically be stopped by operation of law.
The Chapter 13 Process
If you're behind on your mortgage payments and have received a foreclosure notice, or loan acceleration notice, the only way to keep your home is to file a Chapter 13 bankruptcy.
Chapter 13 bankruptcy lets you pay back your mortgage delinquency over a three to five year period. You will be required to pay all future mortgage payments that come due after you file your case, and make the Chapter 13 payment as well, and you will need to show the Court that you have enough income to make the required payments.
2nd mortgages and lien stripping: Chapter 13 can be used to help eliminate your second mortgage or equity loan payments. If your house is worth less than what you owe on your first mortgage, then your second mortgage may be classified as an unsecured debt, allowing you to repay pennies on the dollar in many cases.
After filing Chapter 13
After you file Chapter 13 Bankruptcy, you will generally have a hearing about 30 days later. The hearing is called the “341 meeting of Creditors”. Your appearance at this hearing is mandatory. The chapter 13 Trustee will put you under oath, and ask you a series of simple questions to insure that everything listed in your petition is true and correct, and that you listed all of your debts and all of your assets. He will also verify your income and employment information, and insure that you are making your chapter 13 payments in a timely manner. The chapter 13 Trustee will send both you and your bankruptcy attorney a list of his objections to your case. Do not let this letter scare or discourage you. Virtually all cases have some sort of objection to work through. Typically most objections are resolved by providing the Trustee with additional documentation, or adjusting your payments, and eventually your chapter 13 case will be confirmed by the Court.
The Chapter 7 Process
Filing Chapter 7 bankruptcy will wipe out and discharge all your mortgage debt. You are free to stay in the house until the creditor actually forecloses on the house, which could take anywhere from 3-12 months after filing your chapter 7 case. Before a mortgage lender can foreclose on your house when your in Chapter 7, they need to file a Motion with the Court requesting permission to re-initiate foreclosure proceedings, known as a “motion to lift stay”. Because of the expense involved with filing such a Motion, many mortgage creditors chose to wait until your chapter 7 is discharged and completed before re-initiating foreclosure proceedings. This will enable you to save up a substantial amount of money, which can be used to pay for moving expenses and obtain new shelter.
After you file Chapter 7, you will need to attend a hearing, which is generally scheduled about a month after you file the case. At the hearing, the Chapter 7 trustee will ask you a series of yes and no questions, virtually all of which ask you about your assets. Of typical importance to the chapter 7 trustee is whether you own any real estate, and what type of vehicles you own. Also many questions will relate to whether anyone owes you money for any reason, for instance, maybe you have a personal injury claim or workers compensation claim pending. Any such lawsuits in which you could obtain money are considered assets that could be used to pay your creditors. Meeting with an experienced Lagrange Bankruptcy attorney will help insure that you keep as many assets as possible when filing chapter 7 bankruptcy.