What Should I Expect At My Foreclosure Hearing?

In the State of North Carolina, foreclosure hearings are held by the Clerk of Court or Assistant Clerk of Court, as judges rarely hear foreclosures. The Clerk of Court is only to hear cases involving “legal defenses.” Cases involving any other type of defense, such as defense of fraud cases, are to be handled through Superior Court. This is due to North Carolina being a “Power of Sale” state.

Is It Common For a Loan Modification To Be Delayed?

When you are having trouble making your house payments, there are options that might work well for you. One of these options is a loan modification. This is when the bank changes your loan so that you have a lower, more affordable monthly payment. Many people who try to obtain a loan modification have been facing delays of all types.

Girl on White BackgroundWhen trying to get a loan modification, there is a lot of paperwork that the lender will need to determine whether you will qualify. Once the documents are submitted to the lender, some people will then get notification from the bank that either they are missing paperwork or that additional paperwork is needed. Another thing that seems to be common lately in the process is the lender telling the homeowner that they have missed a deadline. If that happens, they may even go back to the beginning of the process and start everything over. Typically, that means the homeowner has new deadlines, and has to submit all or some the paperwork over again.

It seems common lately for banks to say that they will not even consider a loan modification if you are current on the payments. They encourage people to stop making the payments so that they will have a better chance of getting a loan modification. Then, after the homeowner is several months behind in payments, the bank denies them the modification and the foreclosure process begins.

Typically, after applying for a loan modification, the lender will put the homeowner on a trial period for a few months at the lower payment amount. Make sure you keep all information pertaining to these payments. It has not been uncommon lately for the lender to either say they did not receive the payment on time or at all, or they do not credit the payment to your account correctly.

So if you are looking into the possibility of modifying your loan, be sure you are prepared for the possibility of long delays and a lot of paperwork. There could be more than one person handling your account, so make sure you write down and keep track of the entire process, including who you talk to, what papers you receive in the mail, what payments you send in, etc. Also, be sure you are persistent and follow up with the bank so you don’t slip through the cracks.

What is Forced Placed Insurance?

If you are behind on your house payments and are considering filing Chapter 13 bankruptcy to save your home, it is important that you find out whether you have forced placed insurance.

Happy Family Standing TogetherYour bankruptcy attorney may ask you whether your homeowner’s insurance payments are usually included in your mortgage payments (in other words, whether your insurance is escrowed). If your answer to that question is yes, but you are several months behind on your mortgage payments, there are further steps you need to take.

When you fall behind on mortgage payments, the mortgage company is no longer receiving money from you each month to make your homeowner’s insurance payment on your behalf. Therefore, the homeowner’s insurance may lapse due to non-payment. The mortgage company cannot have the liability of a house with no insurance coverage, so the mortgage company will pay for insurance on your behalf. This is called forced-placed insurance because the mortgage company is essentially forcing it onto your home since there is no other insurance coverage on your home.

Why should you be concerned about forced placed insurance? The reason is that this insurance is generally much more expensive than the insurance you could find and pay for on your own. When your Chapter 13 bankruptcy is filed, the mortgage company will add the forced placed insurance costs onto the amount you are behind on payments. In the end, this could cause your Chapter 13 plan payment to be higher than necessary.

If you contact your mortgage company and find out there is forced-placed insurance on your property, speak with your Chapter 13 bankruptcy attorney about your options. He or she may recommend that you obtain your own property insurance that you will pay for out of pocket. Your attorney will also remind you to notify the mortgage company with proof of the new coverage when it has been obtained, so the forced-placed insurance can be cancelled.

Can Bankruptcy Stop A Foreclosure?

The short answer to the question is yes.  When a homeowner is facing foreclosure they should immediately look at their options in filing bankruptcy.  Whether you are looking into options for keeping the house or surrendering it, bankruptcy could very well be the best option for you.  The hardest decision for most people comes down to whether they want to try and save their home or surrender their property within the bankruptcy.  Generally speaking, most clients will have to choose between the two options, but the good news is you’re not alone.  Meeting with an experienced bankruptcy attorney can put you on the right track and offer a different perspective.  It’s important to have someone on your team who is experienced and will offer guidance to you and your family. 

Foreclosure Sign in Front of HouseBefore we talk about the benefits of each type of bankruptcy when it comes to the foreclosure of your home lets first briefly discuss how bankruptcy stops foreclosures.

The Automatic Stay

An automatic stay is enacted when you file for bankruptcy. That is a fancy way of saying that the filing of a bankruptcy puts a freeze on all collection efforts, including foreclosures. If a creditor tries to collect debts, foreclose on a property, try to repossess a vehicle, etc. then they are violating federal laws and could face sanctions. So no matter which type of bankruptcy you file there will be an automatic stay that goes into place, which will stop a foreclosure. However, that automatic stay only lasts for different periods of time depending on which type of bankruptcy you file. So lets talk about each of those different types of bankruptcies.

Chapter 7 Bankruptcy and the Foreclosure of a Home

The bad news first, a Chapter 7 bankruptcy typically means you will ultimately end up losing your house. Someone who is facing a foreclosure may choose to file a Chapter 7 bankruptcy if they believe the house isn’t worth keeping in the long run.

There is some good news. Filing a Chapter 7 bankruptcy before the foreclosure will allow them to keep the foreclosure off of their credit and will wipe out any potential deficiency balances from the foreclosure…that’s really important! Also, although filing a Chapter 7 bankruptcy will not protect your house long term if you are behind on the house payments it will make the foreclosure process start back over. This will typically buy you another three months or longer in the house. (We’ve had people in their property for two years after surrendering it in a bankruptcy.) Live there rent and mortgage free and save your money up for the next place you move to. A Chapter 7 bankruptcy will also wipe out most of your unsecured debts like credit cards, medical bills and unsecured personal loans. There have also been rare circumstances where someone has surrendered their house within a Chapter 7 bankruptcy and then the bank is willing to try to work something out and modify or refinance the house after the bankruptcy. Like we said, this doesn’t happen often but it is another possibility.

Chapter 13 Bankruptcy and the Foreclosure of a Home

Has your mortgage company been dragging you along for months now?  They keep telling you they are working on a loan modification but haven’t actually delivered on their promise?  Don’t let your sale date come and go before finding out what your options are for filing bankruptcy.  The mortgage company is not keeping your sale date in mind and could very well lead you right in to losing your home through foreclosure.  If you want to keep the house and get on a repayment plan, you need to look into filing Chapter 13 bankruptcy before it’s too late.  This type of bankruptcy will reorganize your debts and allow you to get assistance on paying back what’s behind on the house over 3-5 years.  Depending on what you are behind on the house and how much other debt you have, you will probably be on a repayment plan for 5 years which will allow you to keep a low monthly payment to pay back the arrearage amount on your house.  A Chapter 13 bankruptcy will also allow you to usually only pay back a portion of your unsecured debts like credit cards, medical bills and unsecured personal loans. At the end of your Chapter 13 bankruptcy you could potentially save your home and have no more unsecured debts.

What Is Abandonment In Bankruptcy?

Foreclosure Sign in Front of HouseProperty that is surrendered or was not protected under the bankruptcy code exemptions is fair game for the bankruptcy Trustee.  Once a debtor has filed bankruptcy, his estate becomes that of the bankruptcy court and the bankruptcy Trustee.

At that time, the Trustee determines if there is any value or potential value in any of the assets of a bankruptcy case.  If the property proves to be worthless, with no beneficial value, or the value is not worth the hassle of selling the property, the Trustee will submit a motion to abandon the property.  Once an asset is abandoned in bankruptcy, it is released from the protection of the bankruptcy automatic stay.  At this point, the property may be sold, transferred, or used by the debtor or other parties of interest, such as the mortgage company.  Abandonment can be automatic if a Final Decree is issued on a case which officially closes a bankruptcy (this is after the discharge is issued.)  A final decree labels the property for abandonment because the case has been closed and the Trustee has issued a non-distribution of assets.

To better illustrate, lets take a look at a common example. A debtor surrenders a home in bankruptcy and must forfeit a piece of land that he was not able to protect with his exemptions.  The Trustee reviews the estate and decides to hire a real estate agent.  The real estate agent explains that due to the market’s condition, the land would take over a year to sell, but the house may sell in 6 months.  The Trustee decides to put both on the market for 6 months.  Debtor receives a discharge but not a Final Decree.  The time passes and the Trustee has not even received an offer on the land or house.  To cut his losses, he decides to file a Motion to Abandon on the land and notifies the creditors there are no assets to be disbursed.  The debtor receives a Final Decree a month later.  The house is considered abandoned by the receipt of the Final Decree and the land becomes the debtor’s once again.  The mortgage company sets up foreclosing proceedings on the home and months later, the home forecloses and the debtor’s name is removed from the deed.

The bottom line is, when a Trustee abandons property they are notifying the bankruptcy court, creditors and the bankruptcy debtors that they no longer have an interest in the property.

Can the Homeowners’ Association (HOA) Foreclose If I Don’t Pay My Dues?

Many people have been led to believe that a homeowners’ association cannot foreclose on their home.  That is not true!  Homeowners’ associations foreclose on property everyday across America and very likely everyday in North Carolina.

Happy Family Standing Together

If your neighborhood has a homeowners’ association, you received and signed documents acknowledging the association’s rights when you purchased your lot or home.  As a matter of fact, participation in the homeowners’ association was not an option for you, it was a requirement if you wanted to purchase your lot or home!   Many people do not read the documents and realize the requirements and powers of the homeowners’ association when they purchase their property, since it was just one of the many documents signed the day of closing.

Your neighborhood will have bylaws and covenants that are specific to your homeowners’ association, but it is under North Carolina General Statutes Chapter 47F that all homeowners’ associations obtain their power.    Under Chapter 47F-3-116 Lien for assessments, the homeowners’ association can place a lien on your home or lot if you do not pay your assessment.  If the amount owed is “…unpaid for a period of 30 days or longer…” the homeowners’ association may file a lien on your property with the Clerk of Superior Court.  The statute provides the timelines, procedures and notice requirements for filing the lien.  If the homeowners association files a lien on our property and the assessment remains unpaid for 90 days or more, the homeowners’ association may foreclose on the property just like your mortgage companies.

Unfortunately, many homeowners ignore the letters they receive from their homeowners’ association.  Most often the letters are ignored because the homeowner does not realize the power provided to the homeowners’ association.  In other cases, the amount owed to the homeowners’ association seems immaterial compared with the monthly mortgage payment(s), so the homeowner does not expect the association to proceed with foreclosure.  Regardless, the homeowners’ association has the right to, and often will, foreclose for what might seem like small dollar amounts.  There have been many cases when the attorney’s fee associated with the foreclosure is more than the homeowners’ assessment amount.  The key is to never ignore the letters from the homeowners’ association; otherwise, you may discover you no longer own your home or lot.  Filing Chapter 13 bankruptcy can stop foreclosure proceedings, so you may want to see if this is an option if you find the homeowners’ association foreclosing on your property.

Can a Second Mortgage Company Foreclose on My Home?

Have you ever had those times when you were running short of cash?  There was that unexpected car repair or the kids’ summer camp deposit you didn’t have in the budget.  You knew something had to give that month but you weren’t sure what!  When you considered the options of what you could do without or simply not pay – food, gas, car payment, mortgage – you decided you would not pay your second mortgage.  You have missed a couple of payments on the second mortgage in the past and they have never said anything, so you should be fine.  What can they do anyway?

Foreclosure Sign in Front of House

You might be surprised to hear that your second mortgage, Home Equity Line of Credit (HELOC) or third mortgage, if you have one, can foreclose on your property.  Unfortunately, many people have been led to believe that is not possible or that it is not legal.  Do not be fooled.  No different than your first mortgage, your second/third mortgage or HELOC has a lien on your home.  When you obtained the second/third mortgage loan or HELOC you singed a deed of trust.  That deed of trust provides them a lien on your home and gives them the option of foreclosing on your home if you fall behind on the payments.

In most cases, the second/third mortgage company or HELOC will allow you to get further behind on your mortgage payments before starting the foreclosure process.  They will also work with you for a longer period of time before foreclosing, since they know they will be required to pay the balance of the first mortgage loan before they receive any money from the foreclosure.  Sometimes the delay in the foreclosure process by the second/third mortgage company or HELOC can lull you into a false sense of security.  Unfortunately, when they start the foreclosure process you may be so far behind on the mortgage payments with them that you have no way of catching up.  At that point, you may want to consider filing a Chapter 13 bankruptcy to save your home.

Can I Get a New Apartment Lease During Bankruptcy?

You sure can! It may be a bit more difficult to find a place that will rent to you than it otherwise would be, but be patient. Depending on the rental agency, you may be required to pay a higher security deposit or even be required to have a co-signer. It really depends on the rental agency.