5 Unique Points About Georgia Bankruptcy Law

1. Perhaps surprisingly, one of the most aggravating developments in our ongoing foreclosure crisis pertains to home mortgage lenders' obstinate resistance to execute with a foreclosure in a timely manner. Most commonly, this circumstance occurs in a Chapter 7 Insolvency in which the debtor has figured out that it is in his/her benefit to give up a house. As all of us understand, mention anti-deficiency laws determine whether a home mortgage loan provider may look for a deficiency judgment after a foreclosure. We likewise know that a Bankruptcy Discharge will secure that homeowner from such liability no matter what the debtor's state statutes have to say worrying whether a home mortgage loan provider might look for a deficiency judgment. While security from post-foreclosure liability to the home mortgage lender remains a powerful advantage offered by the Insolvency Discharge, a fairly brand-new source of post-bankruptcy petition liability has actually developed in the last number of years. One that our clients are all too frequently amazed by if we overlook to provide progressively thorough suggestions before, during, and after the filing of an insolvency petition. What I am speaking about, naturally, are Homeowners Association dues, and to a lower level, municipal water and garbage charges. As we all need to know well, such recurring costs build up post-petition, and specifically since they recur post-petition, they make up brand-new debt-- and as new financial obligation, the Bankruptcy Discharge has no effect whatsoever upon them. The typical case includes a Chapter 7 insolvency debtor who decides that he or she can not perhaps afford to keep a home. Possibly this debtor is a year or more in defaults on the first home loan. Perhaps the debtor is today (as prevails here in California) $100,000 or more undersea on the residential or commercial property, and the lender has actually declined to use a loan adjustment in spite of months of effort by the house owner. The house in all probability will not be worth the protected quantities owed on it for decades to come. The monthly payment has actually adapted to an installment that is now sixty or seventy percent of the debtor's home earnings. This house must be surrendered. The problem, obviously, is that surrender in bankruptcy does not correspond to a prompt foreclosure by the loan provider. In days past, state three or perhaps simply two years ago, it would. But today, home loan lenders simply do not desire the residential or commercial property on their books. I often picture an analyst deep within the bowels of the home mortgage lender's foreclosure department looking at a screen revealing all the bank-owned properties in an offered postal code. This would be another one, and the bank does not desire another bank- owned residential or commercial property that it can not offer at half the amount it lent just four years back. We could go on and on about the recklessness of the bank's decision in having made that initial loan, but that is another article. Today the home is a hot potato, and there is absolutely nothing the debtor or the debtor's insolvency attorney can do to compel the mortgage loan provider to take title to the residential or commercial property. Hence the conundrum. There are century law firm address other parties included here-- most especially, property owners associations. HOAs have in lots of areas seen their month-to-month fees drop as more and more of their members have defaulted. Their capability to gather on overdue association charges was long believed to be secured by their ability to lien the home and foreclose. Even if their lien was subordinate to a first, and even a second mortgage lien, in the days of house gratitude there was almost constantly adequate equity in real estate to make the HOA whole. But no more. Today HOAs often have no hope of recovering unpaid from equity in a foreclosed home. So, where does this all leave the personal bankruptcy debtor who must surrender his or her residential or commercial property? In between the proverbial rock and a tough location. The lending institution may not foreclose and take the title for months, if not a year after the insolvency is filed. The HOAs fees-- in addition to

2. water, garbage, and other municipal services-- continue to accrue on a month-to-month basis. The debtor has actually often moved along and can not lease the property. However be ensured, the owner's liability for these recurring costs are not discharged by the bankruptcy as they arise post-petition. And she or he will remain on the hook for brand-new, recurring costs until the bank finally takes over the title to the home. HOAs will normally sue the property owner post-discharge, and they'll aggressively seek lawyers' fees, interest, costs, and whatever else they can think of to recover their losses. This can sometimes lead to tens of countless dollars of new financial obligation that the just recently insolvent debtor will have no hope of discharging for another 8 years, need to she or he submit personal bankruptcy again. This issue would not emerge if home mortgage loan providers would foreclose immediately in the context of a personal bankruptcy debtor who gives up a home. We as insolvency attorneys can actually plead that lending institution to foreclose currently-- or, much better yet, accept a deed-in-lieu of foreclosure, however to no obtain. They simply don't desire the property. What suggestions, then, should we offer to debtors in this circumstance? The choices are few. If the debtor can hang on till the residential or commercial property in fact forecloses prior to filing bankruptcy, this would get rid of the problem. However such a delay is not a high-end most debtors can afford. If this alternative is not readily available, the debtor ought to either reside in the property and continue to pay his/her HOA charges and community services or if the residential or commercial property is a second home, for instance, an effort to rent the residential or commercial property to cover these continuous expenses. In the final analysis, the Bankruptcy Code never considered this situation. Nor did most states' statutes governing property owners' associations. A solution under the Personal bankruptcy Code to compel home mortgage lending institutions to take title to surrendered genuine property would be ideal, however given the issues facing this Congress and its political orientation, we can easily say that the possibility of such a legislative option is beyond remote.