Foreclosure without bankruptcy?

[Rowan]

I am currently 3 months behind on my mortgage payments (1st and 2nd) in Tennessee. I moved to Texas 3 months ago and was counting on a renter to make the mortgage payments. The renter, however, has not paid the rent. I am currently in the process of eviction, but cannot catch up on the mortgage payments. I really want to just let the house go and have it foreclosed on. Is it possible to do this without filing bankruptcy? Tennessee is a non-judicial state. What process will I have to go through? Also, in a non-judicial state, can the mortgage companies come after me for any additional money owed after sale at auction?

I would appreciate any help anyone could give me!

Thanks!
Rowan

[Hot-Tod-E]

Normally after you miss the 4th payment the lender will start foreclosure. You will be served with a law suit (called Lis Pendens) which will basically ask you to pay off the loan, in full. You have 20 days to answer the law suit. If you don't answer the lawsuit (which why would you since you want them to foreclose), then you give up further rights to be notified, etc of further foreclosure activity. In Non-Judicial states the sale happens very fast, like within 90 days, in Judicial states it can take much longer, up to 24 months. I am more familiar with Judicial foreclosure proceedings, so forgive me if I mis-quote.

As far as a deficiency balance goes, yes that can, and will, come after you for it. AND any late fees, legal fees, and the cost of the auction sale itself. They'll probably even throw in some maintenance fees, etc. just to jack up the fees.

You will be responsible for every penny! The only way out of that is to be under the blanket protection of the Bankruptcy Law.

There are other options, like a Deed in Lieu, short sale, etc. But each comes with it's own legalities and I would say your best bet would be to consult with an attorney before making any decisions. But do it quick, non-judicial goes fast!

HTH.

[Hot-Tod-E]

By the way, I've been reading on this forum and there is TONS of information avialable. You can use the search function to find more information.

Also, there is a member called SinkingFast who appears to be an expert on this subject. He/She might even be a lawyer or at least went to law school, as he/she is extremely knowledgable about Foreclosure and BK.

I bet he/she could answer some questions and from the information I've read that he/she has written, he/she seems very helpful and probably wouldn't mind.

HTH.

[SinkingFast]

Tennessee Foreclosure Laws are a bit funky.

There is no set number of payments that have to be missed before a Lender seeks Foreclosure action in TN. That varies from Lender to Lender.

You're 3 months late on payments, but have you received a notice to Cure from the Lender? That's a "Pay Up or we're gonna Foreclose" letter.

Most all TN Foreclosures are non Judicial, no Court Ordered sale. Most mortgage instruments contain a "Right to Sale" clause in them. And it generally takes 2 months to Foreclose. The Lender sends a letter of Cure. Generally gives you 30 days to pay up. Then the Lender proceeds with the actual Foreclosure process.

The Lender is required to advertise the property for sale at least 3 times over the course of 20 days prior to the Sale. Generally, the Sheriff sets a price of at least 50% of the fair market value of the property to open. Highest bidder wins and receives a Certificate entitling them to the property.

BUT, the owner has 2 years to Redeem the property. That's 2 years in which you can come back and buy the house back by paying the full amount owed.

There's no rhyme or reason to when Lenders Foreclose. Sometimes its based on their REO sheet. Real Estate Owned. If they already have too many Foreclosed properties in progress, it doesn't look good to investors to take on more. Also too, the investor behind your mortgage may not want another REO property right now. May be why they are waiting.

Any way you go. Foreclosure, Deed In Lieu, or Short Sale, you can be held accountable for the deficit balance. Just depends on the Lender. If the Lender "forgives" the deficiency, then those $$$ become tax liable income to you. The Lender could also choose to charge off the debt. It won't be tax liable income for you but the Charge Off will show in your Credit Report.

[Rowan]

Thank you both for your fast replies!! The more I think about it the more I am considering bankruptcy. I also have about $20,000.00 in credit card debt in which I am behind on payments. I have emailed several bankruptcy lawyers this morning (no personal phone use at work per management) to see what they would recommend.

If I file for bankruptcy soon, what impact will that have on the foreclosure? If I list in the bankruptcy that I want to surrender the property will that help? Will I be responsible for any left over debt after the foreclosure if I have declared bankruptcy?

I'm really tired of creditor's calling me and getting late notices in the mail. I know I got myself into this mess, but I'm ready for it all to be over with. I think bankruptcy is my best bet right now.

[Hot-Tod-E]

Hi again Rowan:

If you include the mortgage in your bankruptcy and your bankruptcy is discharged you will not be responsible for any deficit balance, legal fees, or late fees.

However, you will still have a foreclosure, as well as a bankruptcy on your credit report. BK for 10 years, Foreclosure for 7 years.

Also, you have to qualify for a Chapter 7 to get all your debt discharged. With the new BK laws, most are forced into a Chapter 13, but you can still surrender the house in a 13.

Best to get a couple free consults with BK Lawyers in your area.

Thank you both for your fast replies!! The more I think about it the more I am considering bankruptcy. I also have about $20,000.00 in credit card debt in which I am behind on payments. I have emailed several bankruptcy lawyers this morning (no personal phone use at work per management) to see what they would recommend.

If I file for bankruptcy soon, what impact will that have on the foreclosure? If I list in the bankruptcy that I want to surrender the property will that help? Will I be responsible for any left over debt after the foreclosure if I have declared bankruptcy?

I'm really tired of creditor's calling me and getting late notices in the mail. I know I got myself into this mess, but I'm ready for it all to be over with. I think bankruptcy is my best bet right now.

[SinkingFast]

If you file BK and include the house, the debt can possibly be discharged immediately by BK. Depends on the Chapter you file.

If your income is below the Median, you are allowed to try for Ch 7. If your Median is above the Median, and you don't have enough Secured Debt payments to off set the income, you could be forced to go Ch 13. If you file Ch 13, the remaining debt for the mortgage will be discharged when you complete your Ch 13 payment plan.

You can give up the house either way, but who gets money in a 13 will be determined by whether or not you have Secured Debt. Right now, your mortgage Lender would be in line first to get paid from a Ch 13 payment plan. CC Creditors are at the end of the line.

Since you've only been in Texas 3 months, you're gonna have to wait another 3 months to file BK. New Law requires you be in a new State of residence 6 months prior to filing.

That's really no big deal tho. You're gonna have to interview attnys, pick one, gather your docs, the attny is gonna have to verify your info, get up to speed on TN Exemptions and correct application, etc. So it's gonna take a while for you to get ready to file anyway.

Here's a link for you about the Means Test including Median Income and allowables amounts for expenses:

http://www.usdoj.gov/ust/

Here's a link to TN BK Exemptions:

http://www.tennesseebankruptcylaw.com/exemptions.html

According to Mortgage Brokers that have posted here on the Forum,........ If your Foreclosure and your BK fall together, timewise, future, prospective Lenders will probably view the 2 events as one occurance rather than 2 seperate events.

Once you reach the 150+ days late stage on a mortgage, prospective Lenders view it as a Foreclosure even tho it really hasn't happened yet.