Facing Foreclosure?
Many people file bankruptcy as a last-ditch effort to save their house from foreclosure. Georgia is one of the few states which allows “non-judicial foreclosure.” This means the lender can auction off your house if you are in default, after giving notice, without the courts having anything to do with it, not even so much as a hearing.
Typically, once your house payments are three months or more behind, the lender may turn the account over to an attorney, who will send you a letter informing you all of the balance is now due, and you must pay it or the home will be sold at auction. The law firm publishes a legal notice that your home is up for auction in the appropriate newspaper for your county for four weeks preceding the auction date, which is almost always the first Tuesday of the month. Then the house is sold; if there are no other bidders, usually the lender buys it back.
IF YOU FILE BANKRUPTCY, ALL FORECLOSURE ACTIVITY MUST CEASE AT ONCE, BY LAW, AND YOUR HOUSE CANNOT BE AUCTIONED OFF WITHOUT FURTHER LEGAL PROCEEDINGS.However, this does not always stop foreclosure indefinitely. It may only provide some breathing room to work out a better solution.
Saving Your House Under Chapter 13 Bankruptcy
If you are late in your house payments, Chapter 13 may be for you. If you can show that you can make your house payments once you are granted bankruptcy relief on your other debts, then you can keep your house in Chapter 13 as long as you make the payments. Even if you are behind in your payments several months, you can be given up to five years to catch up, and the lender is forbidden by the Court from foreclosing. And if your house is “underwater” (you owe more than it could be sold for in today’s market), a second mortgage can be entirely stripped (in effect, cancelled).
Saving Your House Under Chapter 7 Bankruptcy
IF you are current on your house payments (or if you can be current by the date you file bankruptcy), and you are eligible to file Chapter 7 Bankruptcy, you can keep your house as long as you keep making your payments on time, and as long as you do not have over $43,000 equity in the house (for married couples) or $21,500 equity (for singles). (Sometimes an additional $600 can be added to this total.) With many houses worth less than they were when purchased, this is often not a difficult hurdle. However, if you file Chapter 7 Bankruptcy and your house payments are not up to date, the lender can have his attorney file a “Motion to Lift Stay,” which means the lender is asking the Court for permission to foreclose if necessary even though the house is in bankruptcy. A hearing is then scheduled, and this permission is eventually given, unless your attorney can convince the judge there is sufficient reason not to.
A Word About Loan Modifications
Some lenders will grant loan modifications. However, for every modification we know of which went through, we know of several which did not. Worse, we constantly hear of people who were told by their bank or other lender that a modification was being actively considered, even while the bank was taking steps to foreclose on the house! Why lenders often tell the homeowner a “loan modification” is being considered when they are (for example) already advertising the house for foreclosure auction is a mystery to us – Poor communication between different departments of the bank? Deliberate deception to make the foreclosure sale go smoother? General incompetence? Some other reason? It is hard to say; some in the legal community believe the second is the answer. Some things will remain hidden until the Day of Judgment (Luke 12:2-3 Ecclesiastes 12:13-14). Be careful. As President Reagan said, “Trust, but verify.”
Scams to Look out For
There are many out to get your money under the guise of “saving you from foreclosure.” If you’ve fallen behind in your mortgage payments, they may promise to “help” or “rescue” you. There is the occasional legitimate help program, but check out any group or person which claims they will save your home very carefully. Frequently, an alleged “rescuer” has you “temporarily” surrender your title (ownership) of your house, with the promise that if you will pay rent to them, they will deal with the mortgage company, and later you can buy your house back. Sometimes they tell you that you need to surrender title so that “someone with a better credit rating can get new financing to prevent the loss of the home.”
But there may be one or more unseen serious hooks. Perhaps they will never contact the mortgage company at all, and just collect rent and “service charges” from you until one day the mortgage company forecloses. Perhaps they will sell the house to another victim, who is not aware there is not clear title because the crooks never paid off the mortgage. Perhaps the deal is “legitimate,” but they make the terms such that buying back the house is almost impossible, or unreasonably expensive. Whatever the scheme, you end up permanently losing possession of your house, and losing all your equity to the “rescuer.”
In fact, you may be left still holding the original mortgage on a home you no longer own! The bank can then sue you for the full amount of the mortgage due on the house you no longer own, and garnish payments up to ¼ of your paycheck until it is paid in full.
Even worse are schemes in which you are told that the company will “help” you, and that they want you to sign documents which they say are just contracts for their “rescue” services, or perhaps documents “for a new loan” or “a loan modification to make the mortgage current;” but unbeknownst to you, the documents really state that you are surrendering ownership of the house. After they lose their house and any equity they had, victims of this variation often state that they never intended to give up their home; they were never told that the documents they were fraudulently induced to sign took away their ownership. And even if they have the energy and money to sue the crooked “rescue” company, it often turns out to be a corporation or LLC which has no assets since they transferred title to another entity or person right away, and they may disappear and reincorporate under a different name, perhaps with different officers, next week. The best tip-off that a “rescue” plan is a scam is that they want you to pay them money up front.
These scamsters prefer to work secretly, of course, with no one warning you to look out for them; so it is not unusual for them to try to get you to talk to an attorney while they are ripping you off. Here is an excerpt we found from an actual document sent by one of these crooked “rescue” companies to a homeowner they wanted to scam: “We have learned that any discussion between you, the homeowner, and your attorney(s) at this point, will preempt our efforts and prevent us from being successful.” Any honest, worthwhile company would have no objection to an outside attorney approving the documents.
Also, especially beware of any out-of-state group or “law office” that promises to arrange a loan modification for you in return for extremely high upfront charges. Such groups often take your money and then do little or nothing to finalize a modification for you, and (if they really do anything for you) only make a couple of phone calls and fill out paperwork you could have done for yourself for free. Almost always these types never do enough to actually rescue the home, and by the time you realize they are accomplishing nothing, they stop talking to you when they can no longer get more money out of you, and you are left to deal with the loss of your home with no help from them. If you need help, try working directly with the lender yourself, or only deal with a local, flesh-and-blood law firm with a proven reputation that will honestly evaluate your chances of getting a modification and work for your best interests.