Foreclosure Defense

People are often prompted to seek the advice of a bankruptcy attorney when they face a foreclosure by their lender.  Bankruptcy may help with foreclosure in three primary ways: (1) stopping the foreclosure through the automatic stay; (2) curing an arrearage that exists at the time of filing; and (3) eliminating a deficiency after foreclosure. Furthermore, in certain limited circumstances, you can alter the terms of the loan to pay only as much as the property is worth. If you are in default on your mortgage and wish to keep the property, Chapter 13 is often the best solution.

Immediately upon filing a bankruptcy, a federal law called the Automatic Stay protects you and your property from collection efforts, including foreclosure. Therefore, without the court’s approval, your lender cannot foreclose upon you home once you file bankruptcy.

Also, in a Chapter 13 case, you can force your lender to accept payments to cure your default over time. For example, if you are $10,000.00 behind on your mortgage and your lender has not yet foreclosed, you may file a Chapter 13 case and cure your default by making your regular monthly payments plus a cure payment of $176.00 per month (in a 60 month case).

And in either a Chapter 7 or a Chapter 13 case, you can typically eliminate any deficiency that is owed to the lender after the lender has foreclosed.  A deficiency exists if your property value is less than the debt owed to the bank.

Non-Bankruptcy Options

While bankruptcy may be a good option for some people, others may be better off defending against the bank’s efforts to seek a judgment against the property owner after foreclosure.  Georgia has a unique and technically complicated procedure that all banks must follow if they want to seek a deficiency after they foreclose.  The procedure is called “confirming the foreclosure sale” or foreclosure confirmation for short.  The confirmation proceeding is not a suit to collect the deficiency.  Rather, it is a prerequisite to the bank’s ability to sue you for the deficiency. The purpose of the confirmation statute is to protect debtors against deficiency actions when the property is sold for less than its fair market value.  The law is there to protect you, the property owner. You should be given full credit for the value of your property.

In order to confirm the sale, the bank must report the sale to a superior court judge in the county where the  property is located within 30 days of the foreclosure sale.  Once the foreclosure has been reported, the bank only has to give you 5 days notice prior to the hearing taking place.  You must be personally served with the application for confirmation and a notice of the hearing. It is important to act quickly once you have been served with the application for confirmation.  You should review the notice for the hearing date and contact an attorney immediately to discuss your rights.

The main issue at a confirmation hearing is the value of the property that the bank sold at foreclosure.  Banks frequently use a value much lower than what the owner believes the value to be, and often lower than what an expert real estate appraiser will say the property is worth.  While it is possible for a property owner to testify as to the value of the property, we generally prefer to hire a local Savannah, Georgia, expert appraiser to testify on your behalf.  This increases the cost to you slightly, but gives you a much greater chance at success.

The bank’s foreclosure confirmation will be tried in front of a judge.  You are not entitled to have your case decided by a jury.  Upon the conclusion of the hearing, or sometimes at a later date, the judge will rule in one of three ways.  The judge may confirm the sale, which means that the judge believes the property sold at its true market value and that the bank complied with the foreclosure laws. If the confirmation is confirmed, the bank is then allowed to file a separate suit against you to collect the deficiency.  The judge may deny the confirmation, which means that the judge believes that the property was worth more than what the bank sold it for at foreclosure.  If the confirmation is denied, and the decision is not overturned on appeal, the bank is forever barred from suing you for the deficiency.  Finally, the judge may order a re-sale of the property.  This means that the judge did not believe the property was sold at its true market value, but wants to give the bank another chance.  The bank can then re-foreclose and again seek confirmation of the sale.  The best result for a property owner is an outright denial.

If you are facing a foreclosure confirmation, call us now to discuss your options.