Many Bankruptcy cases in Georgia, and other states, are filed to stop a foreclosure of the family home. They are not filed only because of the foreclosure, but the realization that the family home is about to be lost is usually the final straw after a period of financial problems. It is certainly understandable that no one wants to uproot their family and find another place to live if it is possible to save their home. Since the first Tuesday of each month is “Foreclosure Day” in Georgia, the Monday before Foreclosure Day is the busiest day of the month, by far, for Bankruptcy filings. The question, therefore, is how can a foreclosure be stopped in the state of Georgia? We will review the ways in which a lender can be stopped from foreclosing on a home in Georgia, with the benefits and risks of each.
- The Filing of a Bankruptcy case Immediately Stops a Foreclosure Because of the Automatic Stay. Even if a foreclosure takes place after the Bankruptcy case is filed, such as where the foreclosing lawyer was not aware of the filing, the foreclosure sale is void. If stopping a foreclosure sale is the goal, there is no doubt that filing a Bankruptcy case is the most certain method of accomplishing that goal, even if the case is filed early on Foreclosure Day. There are exceptions and caveats. One, the mere filing of a case is a temporary benefit – the opportunity to use Bankruptcy to solve long term financial problems. That may be through a Chapter 7 or Chapter 13 case and Chapter 13 Plan. In addition, if this is the third case filed within a year, the automatic stay will not apply and the lender can foreclose (although they are usually safe and halt the sale anyway). Finally, in very unusual cases such as when the homeowner has a history of Bankruptcy cases or other legal tactics to stop the sale, the lender may seek an emergency hearing on Foreclosure Day and ask the Judge for permission to proceed with the sale.
- Reaching an Agreement with the Lender May Stop a Foreclosure. Many foreclosure are stopped because the owner and lender reach an agreement or the lender agrees on some “breathing room” to work on a long term solution. Any such agreement should always be in writing and should include the lawyer handling the foreclosure sale for the lender. There is nothing wrong with an agreement between the parties to resolve an issue without having to go to court. However, even if there is an agreement in place, if the lender forecloses anyway, whether intentionally or “accidental” (such as when the lender’s lawyer was not aware of the agreement), it is extremely difficult, if not nearly impossible, to undo the foreclosure sale. If a third party investor purchases the home, it is probably gone. Even if the lender purchases it at the sale (the normal outcome), Georgia law makes it very, very expensive to go to Court to try to unravel the sale if the lender is not cooperative. One final note and warning: various legal forums are filled with people who say they were working with the lender and the lender promised they would work it out, only to find the lender foreclosed anyway. You should never, ever rely on mere oral promises from a lender representative to “work with you” and assume they will not foreclose. Such statements have virtually no legal weight and will not stop or undo a foreclosure sale.
- In Rare Cases, a State Court May Stop a Foreclosure Sale. It bears repeating that it is rare for a court, other than Bankruptcy Court, to stop a sale. Without getting into great detail on the requirements for getting a restraining order to stop a sale, it is safe to say the homeowner will have to present clear documentary evidence that the lender has acted unlawfully or has agreed, in writing (as above), to not proceed with the sale. This is a very high bar, and even when a Judge might believe you have a valid case they usually allow the foreclosure sale and allow you to proceed with monetary damages if you have a valid claim. Remember, the Judge will know if you are behind on payments and just looking to stop or delay the sale. In the internet age there are, unfortunately, many sites where people can read about all kinds of ways that the lender has acted unlawfully. Many of these arguments have no merit at all and most of these cases are dismissed fairly quickly. It is also very expensive to hire a lawyer to present even a valid case to a Judge, and people who try it without a lawyer have almost a zero chance of success. Most emergency cases filed in state court have no legal merit and come after the person has exhausted other methods (such as filing multiple Bankruptcy cases).
Foreclosures in Georgia do not require Court approval and are notoriously lender-friendly. As discussed, the only absolute way to stop a foreclosure sale in Georgia is to file a Bankruptcy case. However, such a filing should not be taken lightly. The mere filing of a case is a “quick fix” to stop the sale, but to really have the best opportunity to save the house you must make a good faith effort to proceed with the case and get all the benefits. Do not wait until the day before, or even a week before, Foreclosure Day to see a Bankruptcy lawyer. Your options in finding a good lawyer are much more limited, and the chances of making a mistake are much higher. A large percentage of “emergency” filings are dismissed because there has been no planning. If you are facing foreclosure, and especially if you have received a foreclosure notice, call and make an appointment with one or two good lawyers. If you are in Georgia, please contact us. Otherwise, find a couple good lawyers in your area and set up free initial consultations.