In Atlanta, Should I File Bankruptcy After a Foreclosure?

Filing Chapter 7 or Chapter 13 after a foreclosure in Georgia may be a good idea for homeowners with second mortgages or if the foreclosing mortgage company files a report of the sale and intends to collect on the deficiency balance after the foreclosure pursuant to Georgia Code § 44-14-161. Filing bankruptcy will discharge the deficiency balance on the first mortgage and the entire second mortgage.

Yes, You can Still File Bankruptcy After Foreclosure

There is no requirement that you file bankruptcy prior to a foreclosure sale. If you qualify to file Chapter 7, the Chapter 7 bankruptcy filing will discharge the entire amount of the mortgage debts. If you file a Chapter 13 case, you may have to repay a small percentage of the mortgage debt but no interest or late fees will accrue before the final discharge of the case. However, there are considerations for filing bankruptcy prior to the foreclosure sale.

Considerations for Filing Bankruptcy Before Foreclosure

If you have a foreclosure that is currently scheduled in Georgia but has not been completed, you may want to consider filing bankruptcy before the foreclosure sale for several reasons:

  1. You May Not Qualify to File Chapter 7 if You File Bankruptcy After the Foreclosure.

    Having the mortgage may assist you in qualifying to file Chapter 7 rather than Chapter 13. Because the threshold for filing Chapter 7 is earning less than median income for your household size, if you earn more than median income, you may want to file Chapter 7 BEFORE your foreclosure in order to take the mortgage debt as a deduction on the means test.

  2. You Can Live In Your House For a Longer Period of Time if You File Chapter 7 Bankruptcy Before the Scheduled Foreclosure.

    When you file Chapter 7 or Chapter 13, a bankruptcy stay is effective and protects you from any collections activities, including foreclosure. Thus, even if you file bankruptcy the day before the foreclosure sale, the bank is required to stop the foreclosure. If you file a Chapter 7 bankruptcy with the intention of ultimately giving up your house, you can probably live in your house for a few months after the originally scheduled foreclosure date.

  3. You Can Create a Plan To Keep Your House in a Chapter 13 Bankruptcy if You File Before the Scheduled Foreclosure.

    If you file a Chapter 13 bankruptcy case in Georgia prior to the scheduled foreclosure sale, you can create a repayment plan for your mortgage arrears that will allow you to keep your home long-term.

For more information or for a free initial consultation, please contact the Law Offices of Charles Clapp at 404.585.0040.