Mortgages Foreclosure

Do you live in Memphis and are behind in mortgage payments?

If you are current on your mortgage loan payments you can continue making them directly to the mortgage company. If you are behind on your mortgage payments and you are filing a Chapter 13 bankruptcy, the Chapter 13 Trustee will insist that you make the payment through your Chapter 13 plan.

In most cases if you own a house you want to keep it. Debtors usually call after they are 3 or more months behind on their payments. At this point, many mortgage companies stop accepting payments and begin proceedings to foreclose on your house.

Can a bankruptcy stop a foreclosure?

Debtors in this situation often call wanting to file a Chapter 7 bankruptcy. However, a Chapter 7 bankruptcy in Memphis would only temporarily stop the foreclosure. Further, if you have equity in your house over and above the exemptions under state law (i.e. $5,000.00, $12,500, or $25,000 based on your particular situation), the Chapter 7 trustee may sell your house and use the proceeds to pay off any other debts you may have.

The most common way to keep your house is by filing a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you can pay the amount you are behind at the time you file in installments over the length of your plan (usually 60 months) along with your ongoing payment each month. Also, in some cases, you can negotiate a loan modification with your mortgage company while you are in a Chapter 13 bankruptcy.

Stopping a foreclosure eviction

If you fall behind on your mortgage payments, the mortgage holder (or 2^nd mortgage holder if you have more than one mortgage) can proceed with the foreclosure process. In Tennessee, the Foreclosure Eviction process includes publication in a newspaper for a period of time and then a sale of your home or house. Usually the sale is conducted on the courthouse steps. If there is no buyer, the mortgage holder will usually place a bid to buy the home or house. After the foreclosure sale, the buyer (usually the mortgage holder who foreclosed on the home or house) will transfer the title into the name of the buyer. After that, your home or house can be sold. However, even though these steps have been taken, you can remain in your home or house until you are evicted. (See below about the eviction process)

Although a Chapter 7 bankruptcy liquidation may stop a foreclosure for a short period of time, the usual practice (if you want to keep your home or house) is to file a Chapter 13 bankruptcy payment plan which allows you to keep your home or house by paying off the past due mortgage payments over the length of the plan (usually 60 months) and then resuming the payment of your ongoing mortgage payment.

What are the consequences of a foreclosure?

Of course, you lose your home or house as a result of a foreclosure. A Foreclosure Eviction severely damages your credit. According to some credit experts, a foreclosure may damage your credit as much as filing a bankruptcy. In addition, you may have tax consequences from a foreclosure, if your home or house is bought at the foreclosure sale by the mortgage holder for less than the amount you owe on your mortgage. The IRS can say the difference between what you owed on the mortgage and what your home or house was sold for at the foreclosure sale, is income from the forgiveness of a debt. You may receive a tax information form (1099) from the mortgage holder showing this income was reported to the IRS. If this is your situation, we urge you to contact a tax expert.

What is a short sale?

A short sale is where your mortgage holder or holders (if you have more than one mortgage) agree(s) to let you sell your home or house for less than what is owed on the mortgage(s). You should be aware that this may also have tax consequences similar to a foreclosure.

Do not act on anything you read on this site without hiring an attorney. This is why we offer, for free, to prepare a bankruptcy petition for you to see what works best in your personal financial situation. We provide representation for individuals who live in Lauderdale, Tipton, Fayette and Shelby County, Tennessee, who qualify to file bankruptcy in the Bankruptcy Court for the Western District of Tennessee located in Memphis, Tennessee.

Sincerely yours,

Arthur Ray

Arthur Ray Law Offices

^*For those who qualify under federal law.