What you might see
Each State has a different foreclosure process. For North Carolinians, this is what you might expect to see. After you have missed a monthly payment then the bank may call and write to you about catching up the missed payment. After enough months, some...not all, will stop taking partial payments. So, the fact that your company is still trying to collect all the missed payments doesn’t necessarily mean one thing or another, but if they stop taking partial payments then the odds are strong they are working on a foreclosure. Even if they take partial payments, such as you are three months behind but you catch one of those up does not mean you are safe. They can still move forward with foreclosure as long as there is any breach (e.g. even 1 payment missed). So, you gave them some money but they are not slowing down.
After a missed payment, the first few steps are not things they give you notice of. They may not tell you they are reviewing your account, that they have a foreclosure law firm working on it, that a substitution of Trustee has happened, or that they are drafting the papers to set the Hearing. The first thing you might get in the mail, or served by a sheriff, is the Notice of Foreclosure Hearing, which they have to give you 20 days notice. The Hearing is a mandatory step they have to take before they can set a Sale date, and generally only fully catching up the mortgage (plus attorney fees) during this window will stop the process. If I remember correctly, your credit report can also now show that a foreclosure has taken place. This is because the notation does not require that a foreclosure has completed, but merely one has begun. This entry should be in the public records section of an Equifax, Experian, or Transunion report. Also, while you should attend the Hearing to know what is going on, you are not required to. The summons is not a subpoena.
After the Hearing has happened, then they have to give you 20 days notice of the Sale. Once again, mail, sheriff, or other official “service of process”, which can include newspapers for your last known location if they can’t otherwise locate you with other methods. The sale wouldn’t likely be just your house, but multiple properties set for that day to be sold in quick succession. After a sale there is a 10 day upset bid period in North Carolina. That means the house sold, but there are 10 days for someone else to bid 5% or higher above the winning bid (this can include you or a family member bidding to win now but it’s rare.) If there is an upset bid then the 10 day clock restarts. If there is no upset bid, then after the 10 days, the deal is sealed. That property is gone. It now is in the hands of the new owner to eject any current occupants. This might be with a notice on the door or a sheriff who gives a handful of days before returning. Any persons must leave and any property still inside when a lock is changed or door boarded, is likely considered abandoned.
First, the bad news. North Carolina has fairly lackluster foreclosure defense laws. They seem to be a fraction of the power of those in consumer protection States like Texas, California, or Florida. The laws do exist though for the victims of particularly egregious offenses by creditors. Blatant, outright, and damaging lies told to you might qualify and if so then look for help fast by searching for NACA (“National Association of Consumer Advocates”) and other attorneys who assist with foreclosure defense and consumer rights. Mortgage modifications? Foreclosures are time sensitive and you need to be 100% sure the law firm is not moving forward with the foreclosure. Bless their hearts, but the random call center person you speak with at the bank may not be fully informed and your home is too valuable to take that risk on their word.
I missed a step...deficiency
I did leave out a step from the timeline after a sale. I know this is a lot of depressing information, but for many people this is the most important part. If the house sold for less than what you owed, then NC allows deficiency judgments. Yes, it is insult to injury, and they can be tens of thousands of dollars. You might think that your house was worth about what you owed, but that may have been with some touch-ups and a few months in the hands of a skilled Realtor. That is not the case with a foreclosure, so properties regularly sell for far less than they would in regular market conditions. Remember, the buyer is buying it, “as is” and hasn’t seen inside so they are likely bidding low to account for that risk and hoping for a steal.
Chapter 7 (getting time and avoiding deficiency)
If a bankruptcy case is filed during the process then some of the process has to restart. This time period stretches into the 10 day upset bid period, but if this was your plan then ideally you and your attorney should have been working on getting the bankruptcy case ready for a couple of weeks so it isn’t rushed. Then you have a little time...time to move gracefully, catch it up and carry on, or for some people the main goal is avoiding a likely deficiency judgment while also getting rid of other debt.
Chapter 13 (curing the arrears)
With a Chapter 13 case the house can be surrendered with a shot at avoiding the biggest ramifications of a deficiency judgment, but there is another option. A Chapter 13 has a, “Plan Payment” which is generally debts you have to pay (think of recent income taxes) or choose to pay (like choosing to keep a vehicle) and if your budget can handle the house then it may be back on the table to keep. We see this alot...ALOT. I am happy to report that it can work quite well.
Here is an example. If someone’s mortgage was $1000 per month and they were 3 months behind, then that might be $3000 plus interest and attorney fees if in the foreclosure process. For simplicity, let’s say $3600 is needed to catch it up. Coming out-of-pocket for that amount might be difficult or impossible. For the 36-60 months the Chapter 13 is active a payment is made each month to the Trustee (who administers the case). You keep paying directly for your groceries and your monthly utilities, and often the Trustee is sending money to the mortgage, car, IRS, or other creditors. Your plan payment would be at least $1000 (that the Trustee turns around and sends to the bank for the mortgage and keeps them in check) and then that $3600 is divided up over the life of the Plan. So, if that Plan was 36 months then the monthly payment increases by some over $100 per month. The goal is that at the end of the 36 months all of the regular payments have been made and the $3600 that was behind, and causing the house to move towards being sold in foreclosure is caught up. Then, at the end of the case, the mortgage is deemed to be, “Current” and you and your home, mortgage, and bank can proceed as normal after the case is successfully completed. When you pay off the house it is still yours.
So, yes, the first step might always seem like the hardest; but it doesn’t have to be. To find out more, contact the Law Offices of John T. Orcutt. Read reviews from satisfied clients, then call +1-919-646-2654 to schedule a free student loan bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
North Carolina General Statutes, Chapter 45, Articles 2 & 2A