Houston Foreclosure Attorney
Foreclosure usually begins after a homeowner falls behind on mortgage payments, and the lender will have to follow the process outlined in state law before selling the home at auction. The lender applies the sales proceeds toward the mortgage balance, and Texas law allows lenders to pursue deficiency judgments – the balance remaining on a loan after the sale of the home – after foreclosure.
Lenders typically do not begin the foreclosure process until after a homeowner has missed several payments, three or more. Many people will consider alternate measures such as loan forbearance, a short sale, or a deed in lieu of foreclosure before considering filing for bankruptcy.
“At The Sparrow Law Firm, we recognize that each case is uniquely different.”
Are you facing foreclosure in the greater Houston area? You will want to speak to an experienced bankruptcy lawyer about your possible options.
The Sparrow Law Firm has helped multiple homeowners in Texas file for Chapter 7 or Chapter 13 bankruptcy and still keep their homes. Let us help you discuss everything available to you when you call 281-973-0431 or contact us online to take advantage of a free consultation.
Chapter 7 And Foreclosure
Chapter 7 bankruptcy is generally a quicker process than Chapter 13, as most cases can be completed within six months. As soon as you file bankruptcy (Chapter 7 or 13), a court-ordered injunction known as the automatic stay will prevent the bank from foreclosing on your home.
Unfortunately, the relief is often only temporary. A lender can file a motion for relief from stay that allows them to continue with the foreclosure process even while your bankruptcy case is live.
If a person enters bankruptcy behind on their mortgage, the lender will likely file a motion for relief from stay and will be given the right to continue with the foreclosure. Not all lenders who have successfully lifted the automatic stay immediately resume with foreclosure.
There are three major drawbacks to using Chapter 7 when you are facing foreclosure:
- You could still lose your home – Chapter 7 will forgive some of your debt, but with a mortgage, the home serves as a type of collateral in case a person defaults on their payments. Chapter 13 allows a person to pause action on that lien while they catch up on their payments, but Chapter 7 will not lift the lien and the foreclosure on a home can still go through.
- You could lose other valuables – The goal of a bankruptcy court is to do what it can to make the creditors whole again from their loss, and this will frequently involve awarding money to creditors obtained from the sale of some assets of the debtor. This often means that property that cannot be exempted in a bankruptcy petition becomes likely to be seized and sold.
- You may not be eligible – Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, any person whose average gross income for the six-month period before the bankruptcy filing exceeds the state median income for the same-sized household is ineligible for Chapter 7 bankruptcy. A person whose income is sufficient enough to pay their living expenses and fund a reasonable Chapter 13 repayment plan is also ineligible for Chapter 7.
Texas offers an unlimited homestead exemption for a residence on 10 acres or less in a city, town, or village or 100 acres or less in the country (this doubles to 200 acres for families). If you sell your house, the proceeds are exempt for six months after the sale under this exemption.
When a house is sold in foreclosure, the price at which the home is sold is often much less than the outstanding amount of the mortgage. The difference between the amount owed on the mortgage and the foreclosure sale price is called the deficiency.
In Texas, lenders are permitted to sue for a deficiency judgment after foreclosure but must do so within two years of the sale. Texas Property Code § 51.003 establishes that if the price at which real property is sold at a foreclosure sale under Texas Property Code § 51.002 is less than the unpaid balance of the indebtedness secured by the real property, resulting in a deficiency, any action brought to recover the deficiency must be brought within two years of the foreclosure sale and is governed by this section.
Any person against whom such a recovery is sought by motion may request that the court in which the action is pending determine the fair market value of the real property as of the date of the foreclosure sale. The fair market value shall be determined by the finder of fact after the introduction by the parties of competent evidence of the value.
Competent evidence of value may include, but is not limited to, the following:
- expert opinion testimony;
- comparable sales;
- anticipated marketing time and holding costs;
- cost of sale; and
- the necessity and amount of any discount to be applied to the future sales price or the cash flow generated by the property to arrive at a current fair market value.
If the court determines that the fair market value is greater than the sale price of the real property at the foreclosure sale, the persons against whom recovery of the deficiency is sought are entitled to an offset against the deficiency in the amount by which the fair market value, less the amount of any claim, indebtedness or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure, exceeds the sale price. If no party requests the determination of fair market value or if such a request is made and no competent evidence of fair market value is introduced, the sale price at the foreclosure sale shall be used to compute the deficiency.
Any money received by a lender from a private mortgage guaranty insurer shall be credited to the account of the borrower prior to the lender bringing an action at law for any deficiency owed by the borrower. Notwithstanding the foregoing, the credit required by this subsection shall not apply to the exercise by a private mortgage guaranty insurer of its subrogation rights against a borrower or other person liable for any deficiency.
Chapter 13 And Foreclosure
For many homeowners who want to keep their homes, Chapter 13 is the better choice because it allows for more options. In a Chapter 13 bankruptcy, a person can pay off the late payments over the length of the repayment plan, as long as they continue to meet their current mortgage payments as well.
Making timely payments under a Chapter 13 debt repayment plan can avoid foreclosure. Chapter 13 bankruptcy gives a person the ability to repay their debts in a controlled, consolidated repayment plan, lasting between three and five years.
A debtor can request a specific amount of time but will need sufficient income to pay both their current mortgage bills in addition to their debt payments. As long as a person makes every payment throughout the course of the repayment plan, they will not face foreclosure, allowing them to stay at home.
Chapter 13 also has the ability to stop payments on any mortgages past the first. Chapter 13 often grants a court to see these mortgages as unsecured debt, making them eligible for discharge.
Under Chapter 13, any unsecured debt is factored last in your repayment, meaning it is rarely paid back. Rearranging your debt in this manner is possible for those whose first mortgage is secured by the home’s value, meaning there is no leftover equity to secure other mortgages.
When a person has a second or another junior lien on their homestead, they might be able to get rid of it through a process called “lien stripping.” This is only available in a Chapter 13 case, and only when the property is worth less than the balance of the primary loan.
To strip the lien, a debtor will have to file a motion in bankruptcy court and present evidence on the value of the property and the mortgage loan balances. If the court voids the junior lien, the debt owed to that creditor will be treated in the Chapter 13 case as if it were unsecured and any remaining balance will get wiped out with other qualifying unsecured debt at the end of the case.
“Don’t Be Afraid Of Bankruptcy in Texas”
– Ikaha M. Sparrow
Texas Foreclosure Resources
Foreclosure | Fact Sheet | TexasLawHelp.org – Visit this website to learn more about when a lender can start a foreclosure, how you can prevent foreclosure, and what loss mitigation is. Also find information about what the foreclosure process is, how bankruptcy can prevent foreclosure, and whether you can refinance or sell your home to avoid foreclosure. Also, learn about being sued for a deficiency and how to stay in a home during foreclosure.
General Information – Foreclosure – Guides at Texas State Law Library – Find information about both Texas state law and federal law relating to foreclosure. You can also read legal pieces written in “Plain English.” Also learn who to contact, access e-books, and find other books at the state law library.
Contact A Foreclosure Lawyer In Houston | The Sparrow Law Firm
If you are facing foreclosure in Houston or a surrounding area of Harris County, you do not have much time to delay taking action. Take the steps right now to ensure that you will have legal representation during this challenging time.
The Sparrow Law Firm stands by your side throughout the entire foreclosure process and can help use bankruptcy laws to get you protected and stay in your home. Call 281-973-0431 or contact us online today to let our firm dig into your case and explain what you can do during a free consultation.