Tennessee allows for a non-judicial foreclosure process. In a non-judicial foreclosure the lender does not have to go to court in order to foreclose on property. Lenders usually provide notice by mail at least 20 days in advance of the scheduled sale date. The lender will not perform the sale, instead a trustee is in charge of the process.
If you file a Chapter 13 bankruptcy at any time before your house is actually sold at auction then the sale is stopped. The sale is stopped because of the operation of the automatic stay, which goes into effect after filing bankruptcy. Once you file a bankruptcy the automatic stay stops most creditor actions, including foreclosure sales. Therefore, a foreclosure sale is stopped or it has no legal effect.
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.
For any property you wish to keep that has a lien on it you must pay for that property. The debts owed on these properties are “secured” debts – these include a mortgage and debts owed on cars. “Unsecured” debts are not backed by any property. You may be able to pay less than 100% of these debts, depending on certain things – like your current income, your income over the last 6 months, and the value of all your property.
Some property, like automobiles, are subject to possible cram downs. A cram down is where a debt secured by property is reduced to the value of the property rather than the value of the contract. An example would be an automobile that has a $15,000 payoff but is only worth $10,000, the cram down would result in the secured claim being reduced to $10,000 and the remaining $5,000 becoming an unsecured debt. There are a few rules that determine if you can cram down your property.
A Chapter 13 Plan must be confirmed before it can go into effect. Upon confirmation the Chapter 13 Trustee will begin to distribute the funds you have paid into your plan. You make payments to the Chapter 13 Trustee either through a payroll deduction or directly.
Once you have paid into your Chapter 13 Plan as you proposed and completed all payments you will be current on your mortgage. At that time you will resume paying your mortgage directly to the lender. Any unsecured debts that were not paid during the bankruptcy will be “discharged” – meaning creditors cannot take any action to collect the debts.
