Are you behind on payments and facing a potential foreclosure?
If so, you’re probably wondering how to stop a foreclosure in Georgia.
You have a lot of options.
What’s important is picking the option that gets you current on payments or out of the house fast.
A foreclosure could have effects on your employment, living situation, and finances for years.
Let’s dig into your options to stop the foreclosure process.
How to Stop a Foreclosure in Georgia
How Long Do I Have?
If you fall behind on mortgage payments, the lender cannot simply evict you.
A federal mortgage servicing law that went into effect in 2014 prohibits the bank from starting the foreclosure process in most cases unless the loan is more than 120 days past due.
After the 120 days in the foreclosure timeline in Georgia, the bank can pursue foreclosure under state law.
This 120-day waiting period gives homeowners the opportunity to apply for a loss mitigation option, such as a loan modification in Georgia.
When You’ve Received a Notice of Sale
Have you have received a notice of sale already?
You will need to pay the missed mortgages payments.
If you can’t, your house will go into the auction process in 30 days.
Let’s assume you’re facing foreclosure and you aren’t able to make the payments.
That means that it is time to find alternative options for how to stop foreclosure in Georgia.
To play it safe, it’s best to partner up with the best foreclosure defense attorney in Atlanta that you can find.
1. Short Sale
You might be wondering…
“What is a short sale?”
According to James Chen at Investopedia:
A short sale in real estate is when a financially distressed homeowner sells his or her property for less than the amount due on the mortgage. The buyer of the property is a third party (not the bank), and all proceeds from the sale go to the lender. The lender either forgives the difference or gets a deficiency judgment against the borrower requiring him or her to pay the lender all or part of the difference between the sale price and the original value of the mortgage.
Since a short sale means you’re trying to sell your house for less than you owe on your mortgage, your lender will have to sign off on it.
But first, the lender is going to need proof that the short sale must happen.
Hardship papers show the bank that the seller is, in fact, undergoing financial hardship.
That paperwork may include bank statements and account information, income statements such as:
- pay stubs
- copies of monthly bills
- various expenses (must have receipts)
- asset disclosures, and more.
Who qualifies for a short sale?
Generally, people who owe more on their homes than it’s worth.
For example, your home is worth $150,000, but you owe $165,000 on it.
You’d have to sell at a loss if you were forced to sell it.
However, just because your house lost value doesn’t mean you can short sale.
You can’t do a short sale if you have equity.
If your house was worth $200,000 and dropped in value to $165,000, but you only owe $115,000, you can’t short sale.
Equity doesn’t just mean your mortgage balance is less than the sales price, resulting in equity.
That’s because you have costs of sale.
If, after you deduct the cost of sale you have no equity, then you do not have enough equity to sell.
Some costs include, but are not limited to:
- Realtor commissions
- title fees
- closing costs
- recording fees
- miscellaneous fees to sell
Too Much Equity to Do a Short Sale:
- Market value: $300,000
- Payoff existing mortgage: $250,000
- Costs of sale (approx): $28,000
- Net Equity: $22,000
No Equity and Must Try to Short Sale:
- Market value: $300,000
- Payoff existing mortgage: $280,000
- Costs of sale (approx): $28,000
- Equity Shortage: – $18,000
In the second example above, it is easy to see that you don’t have to necessarily owe more than your home is worth to be a candidate for a short sale.
You simply must have not enough equity to sell.
What are the Consequences of a Short Sale?
The biggest consequence of a short sale will be a negative impact on the seller’s credit score.
You will also be unable to apply for new mortgage financing for a temporary period.
Contrary to popular belief, a short sale can be just as damaging to your credit score as a foreclosure.
2. Deed-In-Lieu of Foreclosure
A deed in lieu of foreclosure—sometimes called a deed in lieu—is an alternative to foreclosure that may be helpful in certain situations.
In a deed in lieu agreement, you transfer the title to your property to the lender in exchange for a cancellation of your mortgage debt.
Both foreclosure and deeds in lieu require you to leave your home.
However, a deed in lieu agreement can help you avoid some of the consequences of foreclosure.
This allows you to begin a faster financial recovery.
What is a Deed in Lieu of Foreclosure?
A deed in lieu of foreclosure is a transfer of your home to the lender.
This transfer of deed satisfies mortgage debt that’s in default.
Choosing a deed in lieu over a foreclosure can help you obtain better terms from your lender and reduce the negative impact on your credit score.
The deed in lieu process also moves more quickly than a foreclosure or short sale.
Once you have agreed to terms, you will likely have 30 to 60 days to vacate and surrender possession of your home.
In order to start the process, you will need a loss mitigation package from your mortgage lender.
The application will need to be filled out and submitted along with documentation detailing your income and expenses.
In addition to the application, your lender may require you to meet the following conditions:
- You must have tried to sell your home
- There can be no additional liens on your home other than your mortgage
- The lender cannot have started the foreclosure process
- You and your lender must agree on terms that include the fair market value of the home
The Consequences of a Deed in Lieu
The main consequence of a deed in lieu is losing your home.
Losing your home will happen whether you chose foreclosure or a deed in lieu.
But you will stop incurring interest and late fees on the money you borrowed.
Your mortgage responsibilities will generally be forgiven for this property.
That is unless the property’s resale value doesn’t cover your mortgage balance.
Let’s say the resale value is $100,000, but you owe $125,000.
The banks don’t want to lose money.
If they can’t resell the house to cover the loan balance that you have, you may end up owing money.
When this happens, they will try to tell you that you owe them a lump sum.
Work with the lender to set up a payment plan.
Remember, it’s in their best interest for you to pay that money back.
In that sense, you have some control.
Just tell them how much you can reasonably afford and ask them to set up the payment plan.
If you don’t do this, the lender will pursue collection against you.
The lender can choose to forgive the difference.
This sounds great, right?
Just know that you are not off the hook.
If the deficiency is greater than $600, the lender must file a 1099C form with the IRS, letting the agency know how much money was forgiven.
That amount then counts as part of your taxable income for the current year.
This means that you will owe taxes on this money.
There’s no payment plan here.
You will owe a lump sum to the IRS.
Beyond the negative tax implications, the long-term effect of a deed in lieu includes a significant hit to your credit score.
A deed in lieu agreement is not as severe as the impact of a foreclosure.
But having it in your credit history may make future financing more difficult.
3. Chapter 13 Bankruptcy
Chapter 13 is great in the fact that it allows you to remain in your home.
But, you still have to repay your debts.
Chapter 13 sets up a repayment plan for your debts.
The process for Chapter 13 bankruptcy takes three to five years.
The length of time depends on the repayment plan.
What Happens After Your Chapter 13 Filing?
After you file for Chapter 13 bankruptcy, a trustee is appointed to administer your case.
When you file for Chapter 13, you will list creditors on your application.
When you file, these creditors will be notified of your filing.
When they receive this notice, your collection actions against you must stop.
Within 14 days from filing for Chapter 13, you must file a repayment plan
This repayment plan is then submitted for court approval.
You must come up with a fixed payment plan.
This payment plan will be paid to the Chapter 13 Bankruptcy Trustee.
This trustee distributes the funds to the proper creditors.
Creating a feasible repayment plan is complicated, so it’s best to hire a bankruptcy lawyer to help you through the process.
4. Selling to an Investor
All of the above scenarios takes a lot of work and can potentially ruin your life financially for a few years.
What if I told you there was an easier way?
You’d be skeptical, right?
Well, there is.
No scams. No strings attached.
We buy houses in Atlanta from homeowners facing foreclosure almost weekly.
We strive to help as many homeowners out of foreclosure as possible.
Check out our reviews here to see how we have helped others.
How Selling to an Investor Works
You simply fill out the form on this site.
We come out to the property as quickly as we can to gauge the repairs needed.
We give you an offer.
If you accept, we submit the paperwork to the attorneys.
Roughly 14 days later, we are able to close on the house.
It’s really that simple.
Consequences of Selling to an Investor
When you have 30 days to sell and move out of your house, things move at lightning speed.
You will be in a whirlwind for a month or so.
The benefit is that the sale of your house is taken care of.
We handle all of the paperwork.
You get to focus on things that matter.
Like finding a new place to live and packing.
Other than that, just show up at the closing table.
We hope to be the calm in the storm.