Need help with Chapter 13 and Foreclosure?
Keeping a roof over your family’s head is essential to their mental and physical well-being. For any number of reasons you’re behind on your mortgage payments and unable to get caught up. What’s more, the mortgage company is threatening to foreclose on your property.
What is Foreclosure?
Foreclosure is the legal process that a lender uses to reclaim real property, land or house when monthly payments fall behind.
The Foreclosure Process in South Carolina. What happens if you do nothing?
The lender must take certain legal steps in order to complete a foreclosure sale on your property.
Knowing where you are in the process will help you determine your options. Here are the usual steps that the lender will take if your payments fall behind:
- The lender sends you a letter stating the amount that is past due on your home loan and a date that they will retain a law firm to initiate foreclosure proceedings against your property.
- If you are unable to get current on the payments, you will receive another letter either from the lender or their attorney stating that the loan is in default and the lender will demand the full amount of the loan.
- If no agreement with your lender is worked out, you will be served with a lawsuit (complaint) seeking to foreclose on your home. This will consist of a thick stack of papers which you need to review carefully. In the group of foreclosure documents will be a very important document called Mortgagers Right to Foreclosure Intervention. Follow the instructions in that notice and the mortgage company must consider you for a mortgage modification. This sounds great. Unfortunately, only a very small percentage of loans are actually modified at this point.
- If the mortgage modification request is rejected by the lender, you have 30 days to file an answer to the foreclosure complaint or you will go into default.
- Whether you answer the complaint or go into default, a hearing will be scheduled before the Master in Equity or a referee. At that hearing the Master will make a decision as to whether to let the foreclosure move forward. Few homeowners hire attorneys to file answers on their behalf and are not contested. In most cases the Court enters an order authorizing the sale of the property on the Courthouse steps.
- A notice advertising the sale of the property must be published for 21 days before the sale can take place.
- On the noticed sales date the property is sold.
- The complaint must state whether a deficiency is being demanded or waived. If a deficiency is demanded it means that you will be responsible for any difference between the sales price on the courthouse step and the amount owed. If waived, the lender only wants the house back. Waiver of the deficiency is very common is South Carolina.
- If a deficiency is demanded and not subsequently waived, the bidding stays open for 30 days after the date of the sale.
- When your home is sold, you will be ordered to vacate the premises.
- An uncontested foreclosure could wrap up in as little as 2-4 months. A contested foreclosure can take much longer to complete.
You Still Have Options
- A Bankruptcy filing will immediately stop the foreclosure process.
- Do not panic.
- Act quickly, proactively, and rationally.
- Select an experienced and skilled bankruptcy lawyer to represent you.
- Make an appointment with your lawyer to discuss preventative actions.
- Assemble all of your legal loan documents and correspondence.
- Be open-minded about new budget possibilities and credit counseling.
- Decide if you want to keep your home. This is both a heart and a head decision.
- Review the benefits of filing for Chapter 13 bankruptcy protection.
Keeping your house under Chapter 13
If you are in the midst of a foreclosure, Chapter 13 might be the best option for you.
In South Carolina, filing a Chapter 13 Bankruptcy relief can help you save your home from foreclosure, and sometimes it may be the only solution. A successful Chapter 13 bankruptcy filing reduces all non-mortgage debt to a manageable level so that you can make your monthly mortgage payment. It often means that unsecured creditors, such as credit card companies, will receive only pennies on the dollar for the outstanding debt you have with them.
Secured debt, such as your car payment, is often significantly reduced and can be spread out over an extended period of time as part of the Chapter 13 plan.
A Chapter 13 filing alone will not stop an adjustable rate mortgage from adjusting; thus, as the interest rate increases, your monthly house payment may also increase. Although a Chapter 13 Bankruptcy cannot stop adjustable rate mortgages from rising, some lenders are willing to freeze the interest rate for the length of the bankruptcy case or longer.
Traditional Chapter 13 plan treatment of mortgage payments
Chapter 13 has long been used to fix mortgage problems. The traditional way is to make up late payments over the three- to five-year life of your bankruptcy plan. All future mortgage payments have to be paid in addition to the payments agreed upon in the bankruptcy plan.
Filing for Chapter 13 protection well in advance of the foreclosure sale date is the safest way to keep your home. You will also save money by filing early because you will not have to continue to pay the lender’s costs and lawyer’s fees for the foreclosure proceedings. All past-due house payments are part of your Chapter 13 plan.
Mortgage Modification and Loss Mitigation in a Chapter 13 case
Sometimes the traditional approach is simply not feasible and absent a mortgage modification it will not be possible to retain a home. Since early in 2015, The South Carolina Bankruptcy Court has been a participant in a portal operated by Default Mitigation Management LLC (“DMM”) for the purpose of seeking mortgage modifications and loss mitigation. This is a secure web platform that enables the Court to have oversight in this process. Bankruptcy Courts in other states have been involved in process for a longer period of time and the success rates for mortgage modification are quite high. The benefit of this portal is that the process is transparent and it is easy to insure that each party has received the information that it needs to decide how to proceed.
There are 3 Bankruptcy Court Judges in South Carolina and each has their own view on Mortgage Modification while in a Chapter 13 case. One of the Judges will order a mortgage company to consider modifying a mortgage while a debtor is in a Chapter 13 case. Another Judge will permit a mortgage modification if the mortgage lender consents or does not object. The Court cannot order that a mortgage company modify a mortgage but it can assist is the development of an efficient method to insure a meaningful review of the debtors circumstances.
This area is very fluid and changes will continue as the process evolves.
Keeping your house under Chapter 7
If you are current with your mortgage payments and the equity in your home is less than $58,225 per debtor ($116,450 for a joint filing), filing a Chapter 7 bankruptcy petition may be the better option. Keeping up with mortgage payments will be easier if you can eliminate most of your other debt.