Blog

How Does Foreclosure Law Work in Georgia

By Jonathan on April 24, 2013

The Atlanta newspaper recently published an article reporting that over 40% of homes in the metro Atlanta area are “underwater,” meaning that they are worth less than what is owed. In such a climate, homeowners faced with years of payments on real estate with no chance for even a break even sale, much less profit are deciding to simply walk away.

Abandoned homes, of course, cause neighborhood values to decline even more, continuing the downward cycle. Presumably, at some point property values will level off but it may take years, if ever, for values to rise to pre-2008 levels.

In years past, mortgage lenders would act quickly to secure their rights by initiating foreclosure proceedings against homeowners who defaulted on their loans. We have seen far less foreclosure action in the metro Atlanta area over the past few years because lenders are worried about potential liability arising from procedural irregularities (the “robo-signing” problems) and because the federal government has put a great deal of pressure on the big mortgage companies not to foreclosure during a bad recession. [Read more…] about How Does Foreclosure Law Work in Georgia

File Bankruptcy if You are not Broke? Maybe Not Such a Crazy Idea

By Jonathan on April 15, 2013

The Atlanta Journal Constitution ran a front page story on Sunday, April 14 entitled More than 40% of Georgia Homes Underwater. The AJC reporter notes that “there’s not another metro area in the United States with as many concentrated pockets of mortgage holders who are underwater in their homes. No place else comes close.”

Your house is considered underwater if it is worth substantially less than what you owe. From the mid-1990’s through the mid-2000’s, home values in metro Atlanta rose and mortgage lenders offered outrageous deals to encourage residential purchases. It was common to see interest only loans or 100% financing which required nothing down from the purchaser.

As long as home prices kept rising, you could refinance over and over, and even take cash out. Rising prices minimized the risk to lenders so loan underwriting standards were lax. I regularly spoke to potential bankruptcy clients who earned $50,000 to $70,000 annually but were living in $350,000 to $400,000 homes. They were meeting with me to deal with excess credit card debt – in many cases, these folks kept their expensive homes even while filing bankruptcy.

When the real estate market crashed in 2008, your home value may have plummeted, but the mortgage obligation remains. Thus, as the AJC points out, there are many areas in metro Atlanta where homeowners are making mortgage payments on homes that may never increase in value to the balance on the loan – the mortgage is kind of a permanent rental. [Read more…] about File Bankruptcy if You are not Broke? Maybe Not Such a Crazy Idea

Debt Consolidation Not Always a Good Idea

By Jonathan on April 9, 2013

The New York Times recently ran an article in its business section entitled The Risk of Transferring a Car Loan to a Credit Card. The Times reported noted that several credit card issuers now promote programs in which you can transfer the outstanding balance on your car loan to a credit card.

At first blush, this seems like an interesting concept. Car loans are secured debts, while credit cards are unsecured loans. If you default on a car loan, you run the risk of repossession, whereas a credit card issuer would have to sue you to collect a default, thereby giving you months to refinance or find additional money.

Further, some of the credit card lenders are offering teaser rates such as zero interest for up to 18 months.

Credit card issuers are desperate for new business. The great credit crunch of 2008 and new federal consumer protection laws have resulted in a significant decline in consumer credit. Credit card lending is an extremely profitable business but it depends on numbers – specifically, it depends on borrowers who pay, but who sometimes pay late, thereby racking up late fees and interest charges.

And these late fees and interest charges are exactly why trading your car loan for a credit card balance may not be such a good idea.

If you are extremely disciplined and can pay off the transferred balance in full when interest rates are zero or very low, you could save hundreds or thousands of dollars of interest charges. [Read more…] about Debt Consolidation Not Always a Good Idea

Home Foreclosed? Here’s What Happens Next

By Jonathan on April 8, 2013

Georgia foreclosure law allows lenders to start and complete the mortgage foreclosure process in as little as 37 days. This means that just over a month from the start date of the foreclosure, you may lose all title interest in your home.

With very limited exception, lenders in Georgia do not have to go to court to foreclose on your home. Georgia law permits non-judicial foreclosure, which means that if you go into default, the mortgage company or bank needs only to send you a written notice of intent to foreclosure, then advertise the pending sale for four (4) weeks in the legal newspaper for the county where the property is located.

By contrast, other states like Florida, Illinois and Ohio use a judicial foreclosure procedure where the lender must file a lawsuit against you, win a judgment allowing for a foreclosure then conduct the sale. In these other states, a title transfer might not happen for 8 months to a year.

Foreclosure sales in Georgia are conducted on the courthouse steps of the county where the property is located. These sales occur only on the first Tuesday of each calendar month and consist of live auctions conducted by mortgage company lawyers. [Read more…] about Home Foreclosed? Here’s What Happens Next

Troublesome Transfers Disrupt Bankruptcy Planning

By Jonathan on March 19, 2013

One of the more frustrating parts of bankruptcy practice occurs when I have to tell a prospective client that he cannot file because he recently transferred property out of his name in an attempt to protect that property from creditors. Most of the time, the transfers are made by someone who owes money to a creditor that he cannot pay and he wants to protect assets from that creditors.

Recently, for example I spoke to a man who has well over $100,000 of equity in his home and over $150,000 in credit card debt. Recognizing the risk to his house, this gentleman executed a quit claim deed to his wife, transferring all of his interest in the house to her. Five months after the transfer he called me to say that he was ready to file bankruptcy. Unfortunately, I had to advise him not to file now because Section 727 of the Bankruptcy Code says that a transfer of property for no purpose other than to frustrate the intent of creditors within a year prior to filing is considered a fraudulent transfer and would prevent such a filer from receiving a discharge.

Another type of troublesome transfer can arise when an elderly parent attempts to transfer assets to an adult child in an effort to qualify for Medicaid. Usually the problem arises not for the transferor but for the transferee. [Read more…] about Troublesome Transfers Disrupt Bankruptcy Planning

Bank Won’t Talk to You Now that You have Filed Bankruptcy – Here’s a Solution

By Jonathan on March 13, 2013

Mortgage companies and banks often put you on a “no communication” list after you file bankruptcy. Your on-line access log-in may stop working, you will no longer receive loan statements, and when you call customer service you may be told that because you are in bankruptcy, the lender cannot talk to you anymore.

Lenders are not giving you the silent treatment because they are angry at you for filing bankruptcy, nor are they trying to be rude. They are not talking to you because the automatic stay protection of the Bankruptcy Code says that once you file, it is a violation of the stay to make any effort to collect a debt.

Arguably, a loan statement could be construed as attempting to collect a debt and customer service reps not knowledgeable about bankruptcy may say something improper. Basically your bank or mortgage company does not want to find itself facing a claim for damages arising from violating the stay so many of these companies simply cut off all communication.

The problem for you, of course, is that you may have a need to speak with a representative. Perhaps you need to confirm receipt of a mortgage payment that was paid directly after filing. You may need to make an electronic payment directly from your checking account. You may need a copy of your payment history.

How do you get past the wall of silence? [Read more…] about Bank Won’t Talk to You Now that You have Filed Bankruptcy – Here’s a Solution