Tennessee allows for non-judicial foreclosure. Therefore, your lender does not have to go to court in order to foreclose on your property. The usual process is for you to receive notice by mail 20 days or more before the scheduled auction date. A trustee performs the actual sale, not the lender.
At any time before the sale is performed a person who owns the house in foreclosure may file a Chapter 13 bankruptcy and stop the foreclosure sale (there are a few exceptions to this, but it need not concern us here). The reason filing a Chapter 13 bankruptcy stops the sale is because when a person files a bankruptcy an automatic stay goes into effect. The automatic stay stops most creditor actions against the person and the property the person owns. This means the foreclosure sale cannot take place or is voidable by law if it does take place.
In order to file a Chapter 13 bankruptcy there are several things you need to do and bring to your bankruptcy lawyer. At a minimum you must have filed your taxes that were/are due in the year you are filing bankruptcy. You must also bring a copy of the tax return or a tax transcript indicating that you did file. You must also bring a list of ALL of your creditors. You are also required to have the last 2 months of pay stubs if you receive regular wage income. Finally, you need to have a government issued photo ID and a social security card.
One element of a Chapter 13 bankruptcy that is different than a Chapter 7 (”straight” or “liquidation”) bankruptcy is the Chapter 13 Plan. It is the Chapter 13 Plan where you propose to pay your creditors, most importantly your mortgage holder. This will always include paying the regular monthly note along with an “extra” amount that will be large enough to pay off the arrears in a period of 36 to 60 months.
After filing for Chapter 13 you will have to pay for any property you wish to keep if that property has a lien on it. The debts are referred to as “secured” debts – examples include mortgages and financed vehicles. A debt that does not have a lien attached to property is referred to as “unsecured” debts. In a Chapter 13 you may be able to pay anywhere from 0 cents on the dollar up to the full amount, depending on things like current income, income over the previous six months, and the total value of your personal and real property.
Some property, like cars, can be subject to a “cram-down” in a Chapter 13 bankruptcy. A debt is crammed down when the secured debt is reduced to reflect the value of the property rather than the actual amount owed. An example would be a car that has a payoff amount of $20,000 but the car is only worth $10,000, the cram down would result in a secured debt of $10,000 and an unsecured debt $10,000.
In order to go into effect, a Chapter 13 Plan must be “confirmed.” Upon confirmation the Chapter 13 Trustee will begin paying your creditors. You make payments on your Chapter 13 Plan either directly or through a payroll deduction.
At the completion of your Chapter 13 Plan you will be caught up on your mortgage. You will then resume paying your lender directly the regular monthly mortgage. Any unsecured debt that was not paid will be “Discharged” meaning the creditors cannot take any adverse action against you.
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