Under Chapter 51.002 of the Texas Property Code, “a sale of real property under a power of sale conferred by a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. of the First Tuesday of the month.”
This is very fortunate because it means foreclosure can only occur one day per month.
If you want to stay in the home and cure the missed payments, you may be able to file a chapter 13 bankruptcy. When a bankruptcy petition is filed, you have bankruptcy protections, called the automatic stay, which prevent your creditors from acting against you. If you file your case prior to the foreclosure, the foreclosure cannot take place.
In a chapter 13 bankruptcy, your mortgage arrears and ongoing mortgage payments will be included in a chapter 13 plan. The arrears will be paid back and spread out for the term of the plan, which is 36 to 60 months. You will also make your ongoing mortgage payments through the chapter 13 trustee. This means for the term of the plan; the chapter 13 trustee will act as a conduit between you and your mortgage lender so there is no dispute as to whether ongoing mortgage payments have been paid. Once the plan is over, your mortgage will be current, and you will resume the ongoing payments on your own.
A bankruptcy may stop the foreclosure even if someone besides the mortgage lender, such as the county or the HOA is foreclosing. Below, we will discuss the most common possibilities, the county is foreclosing for delinquent taxes or the Homeowner’s Association is foreclosing for missed payments.
Example 1: The county is foreclosing
A bankruptcy may help you whether your goal is to stay in the home or keep the land and cure the missed taxes or surrender the home or land to the county. If you wish to stay in the home or keep the land and cure the missed taxes, you will file a chapter 13. In a chapter 13 bankruptcy, the tax years you missed will be included in the chapter 13 plan and payment to the tax appraiser will be spread out over the plan term, which is 36 to 60 months. You will be responsible for making your ongoing tax payments on your own. When you finish the case, your taxes will be current.
If you no longer wish to stay in the home or keep the land, you may surrender it back to the county. If you surrender the home or land through a bankruptcy, the county cannot sue you for any deficiency. This is especially important if you have other liens on the property. If the property is sold at auction, the primary lien holder is paid first, and the tax appraiser is only paid if there are sufficient proceeds from the sale. Since auction prices are notoriously low, the county may not be paid, and your debt may not be cleared if you do not surrender the property through a bankruptcy.
Example 2: The Homeowner’s Association is foreclosing
A bankruptcy may help you whether your goal is to stay in the home and cure the missed payments or surrender the home. If you want to stay in the home and cure the missed payments, you will file a chapter 13 bankruptcy. In a chapter 13 bankruptcy, your missed HOA payments will be included in your chapter 13 plan and be paid back over the term of the chapter 13 plan. You will be responsible for the ongoing HOA payments. If you no longer wish to stay in the home, you can surrender it back to the lender. If you surrender the home through a bankruptcy, the HOA cannot sue you for any deficiency. This is especially important if you have other liens on the property. If the property is sold at auction, the primary lien holder is paid first, and the HOA is only paid if there are sufficient proceeds from the sale. Since auction prices are notoriously low, the HOA may not be paid, and your debt may not be cleared if you do not surrender the property through a bankruptcy.
When your home is in danger, you may receive many advertisements to purchase your home for less than what you owe. Think very carefully before selling your home for pennies on the dollar. You need to be sure you will make enough from the sale to pay the lender, property taxes and any other liens against the property such as a second mortgage or HOA dues. If the home sale is not able to meet all liens, fees and costs, creditors can still pursue you for the amount that is not paid from the sale. This means you can be sued for any deficiency. If the creditor receives a judgement against you, your checking account can be garnished, making it difficult or impossible for you to pay other bills and purchase necessities.
When your home has been foreclosed, it is likely that the lender will sell the home for less than what you owe to quickly dispose of the asset. For example, if you owe $100,000 on your home, it is possible the lender could sell the home for $80,000, leaving $20,000 owed. The $20,000 owed is the deficiency balance and remains collectable against you outside a bankruptcy case.
A bankruptcy may help with a deficiency resulting from a repossession or a foreclosure. A deficiency debt is an unsecured debt and is dischargeable.
When you walk away from your home, your lender will likely foreclose and sell to the highest bidder. If the highest bid is not enough to cover your mortgage, you will owe a deficiency to your mortgage lender. The amount you owe to the mortgage lender after a foreclosure is called a deficiency balance. For instance, if you owe $100,000 to your mortgage lender and the highest bidder only pays $90,000, you will still owe $10,000 to the mortgage lender.
If you qualify, a bankruptcy can help with a deficiency resulting from a repossession or a foreclosure. A deficiency debt is an unsecured debt and is dischargeable. In a chapter 7, unsecured debt will not be paid unless there are nonexempt assets. Since the exemption statutes are generous, it is rare for a client to have nonexempt assets; however, it is important to disclose all your assets. In a chapter 13, unsecured creditors will only receive a distribution if your budget allows or you have nonexempt assets. When your case is completed, unsecured creditors are discharged.
When your home is in danger of foreclosure, you may receive many advertisements to assist you with the mortgage loan modification process. You should remember, you can contact your mortgage company and work to modify your mortgage loan without paying a third party.*
Typically, our office speaks with clients who have encountered one or more of the following mortgage loan modification scams:
1) The loan modification company requests fees up front for their services. Sometimes these fees are a few thousand dollars, but some of these clients have paid $7,500 or more. In nearly all cases, the client paid the mortgage loan modification company more than the chapter 13 attorney fees.
2) The loan modification company asks the client to pay mortgage payments and trial modification payments to the loan modification company instead of the mortgage company.
3) The mortgage loan modification company tells the client to stop corresponding with the mortgage company, so the client is unaware that the foreclosure process is underway.
4) The mortgage loan modification company was not successful in achieving a mortgage loan modification but does not notify the client
5) The mortgage loan modification company was not successful in achieving a mortgage loan modification but tells the client to file a bankruptcy petition to stop the foreclosure. Since the case is not properly handled, the bankruptcy is quickly dismissed, and the foreclosure process is resumed.
6) When the mortgage loan modification company is paid in full, the client can no longer get in touch with the mortgage loan modification company.
The links below describe some of the mortgage loan modification warning signs as seen by HUD and Making Home Affordable.
*Chapter 13 clients may apply for, and if considered eligible by their mortgage company, receive mortgage loan modifications. Clients may apply for mortgage loan modifications alone or with attorney assistance using the loan modification portal.
According to the Texas Board of Legal Specialization, there are more than 100,000 lawyers licensed to practice law in Texas. However, out of 100,000 licensed Texas attorneys, only 7,350 are Board Certified.
The State Bar of Texas only allows Board Certified Attorneys to represent themselves as experts. In addition to the Texas Bar Exam, Board Certified Attorneys must have been in practice for at least 5 years and pass an exam in their field. Board Certified attorneys must also submit periodic references from peers and meet continuing legal education requirements.
Furthermore, hiring a Board-Certified attorney costs the same as hiring a Non-Board-Certified attorney. The Bankruptcy Court sets the attorney fees in a chapter 13 case. This means all attorneys must charge the same unless otherwise ordered by the Court.
Billy Price has been practicing since 1992 and Board Certified in Consumer Bankruptcy since 2005; while Megan Price has been practicing since 2008 and Board Certified in Consumer Bankruptcy since 2014.
If you are ready to set your first appointment, you should bring the following:
1. Copy of your foreclosure letter
2. Copy of your latest mortgage statement
3. Proof of income
4. Last 2 tax returns
5. Last 3 months bank statements
If you cannot gather all the items listed above, do your best to bring items 1 and 2. We may ask for additional items for future appointments.
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