Tennessee is a non-judicial foreclosure state. This means that your house may be foreclosed on without the lender having to go to court. Generally you will receive notice via mail 20 days or more before the scheduled sale date. The sale is performed by a trustee, not the lender.
Filing a Chapter 13 bankruptcy before the scheduled foreclosure sale will automatically stop the sale. When you file a bankruptcy an automatic stay immediately goes into effect. This automatic stay means that all creditor actions against you and your property must stop, including any foreclosure sale. This means that the automatic stay stops or voids any foreclosure sale of your property.
There are several things you will need to do before you may file a Chapter 13 bankruptcy. You will need to have filed your taxes for the most recent year. You will need to provide proof that you filed these taxes to your attorney. A list of all of your creditors with their addresses is also needed. You will also need to provide pay advices for the previous 6 months prior to filing bankruptcy. Finally, a government issued photo ID and proof of your social security number is required.
Chapter 13 differs from Chapter 7 by having a repayment plot. You propose to pay your creditors, including your mortgage lender, in the Chapter 13 Plot. The Plot will always include paying the regular mortgage note plus an amount that will be enough to pay off the arrears over the life of the Plot – up 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.
In order to go into effect, a Chapter 13 Plot must be “confirmed.” Upon confirmation the Chapter 13 Trustee will start paying your creditors. You make payments on your Chapter 13 Plot either directly or through a payroll deduction.
When your Chapter 13 bankruptcy is completed you will be current on your mortgage. At that time you will start to pay your mortgage lender directly. Unsecured debts that were not paid will be discharged – which means that creditors cannot take any adverse actions against you.