Legal Question in Real Estate Law in North Carolina
I bought a home in NC and then the company I worked at for 10 years closed. My company offered to move me to another office in Ga. I had no other option as I was from a small town that any other job would not match my pay and I would end up losing everything. I had ten days to move and rented my house for half of what the mortgage was so I have been paying half the mortgage payment and rent here. While it has been financially gruelsome I did it because I didnt feel good about letting the house go or filing bankruptcy. It worked for a year and the tenant has quit paying rent and will not return calls text or mail although I know she is still living there. I can not even make a trip there. She is just living there fancy free and meanwhile has ruined my credit and put me in floreclosure process. I have no choice now but to file for bankruptcy or let the house foreclose. These are my questions:
Is foreclosure or bankruptcy better? If I dont file bankruptcy cant they come after me for any deficiencies?
If bankruptcy is better should I file before or after the foreclosure?
And what can I do to get fancy free out of my house before either one happens? It is my understanding that she will get another 90 days free after I lose the house. That just makes me ill.
1 Answer from Attorneys
Neither is "better." Both are options which affect your credit and have consequences. Which is "better" in your situation would depend.
Do you want to keep the home? Do you have positive equity? If so, sell the home. You are going to need to get the tenant out though. If you have negative equity (the home is mortgaged for more than it is worth) then you might want to see if you can do a short sale. With a short sale, a lender has to agree to sell the property for less. Many lenders will want you to pay the difference between the selling price and what is still owed. This can often be negotiated down once the sale occurs and they release the lien but you may need to agree to it to make the sale happen. If there is more than one mortgage then both lenders may have to agree to the short sale.
If there is only one lender and a you have a little equity, have you considered a "deed-in-lieu" (DIL) of foreclosure? With a DIL, you agree to convey the property back to the lender. This only will work if there is one lender.
If you can't sell, do a short sale or DIL, then foreclosure may be an option if: (1) you don't care about losing the property and (2) the risk of a deficiency judgment is slight. In NC a lender (assuming that the property was financed by a bank and not a seller), then the lender has 1 year to seek a deficiency judgment against you. If there is more than one loan, then a second mortgage holder can always sue you on the notel that is not subject to the deficiency judgment rules. Whether a lender will or will not seek deficiency depends on what other assets you have.
I would not file bankruptcy at this time. You can always file later. You want to see if a lender will seek a deficiency judgment or sue you on the note. If not, and if you have no other debts, then there is no reason to file.
Regarding the tenant, a federal law passed a while ago which allows a tenant to remain on the property after the home is foreclosed on for 90 days or till the end of the lease. However, a condition of this is that the tenant pay rent. Until the foreclosure, the tenant pays rent to you. After the foreclosure, it is paid to the new owner of the property. If the tenant does not pay rent, the new owner is not going to be as nice as you and will kick her butt out of there.
I don't know why you feel its so hopeless. I would get the tenant evicted immediately and get someone in there who can pay the rent. Since you are renting, this is now rental property and if you want to keep the property, you might want to consider a chapter 13 bankruptcy which would allow you to modify the terms of the mortgage and/or get caught up on the amount you are behind. its worth talking to a bankruptcy lawyer. If you are in Georgia and have been there 6 months, then any bankruptcy would be filed in Georgia.
While I am admitted in both Georgia and NC, I don't file bankruptcy in either state. But many attorneys give free bankruptcy consults and I suggest that you get one with a bankruptcy attorney in the state where you are going to file (I assume Georgia as you have been there for at least a year).
You say your credit is now shot. Bankruptcy or foreclosure will not help it. Derogatory information can stay on your credit file for 7 years. If you do a chapter 7 bankruptcy, its 10 years from the date of discharge. For a chapter 13, its still 7 years, but in a chapter 13, the 7 years runs from the date of discharge. In a chapter 13, you repay a percentage of your debt over a 3-5 year period, so bankruptcy stays on there 10-12 years. Don't just file to buy yourself breathing room unles absolutely necessary - the mere fact that you file and later dismiss the bankruptcy gets reported.
Bottom line - look into one of the other options I outlined - short sale, DIL or outright sale if possible. If you are going to try keeping the hous, you need to get the tenant out of there NOW. You will have to commence eviction proceedings or get an attorney to do it for you if you can afford it. The forms are online at www.nccourts.org and it can be done by you being out of state although you will have to come to NC for the hearing.
If nothing will work, then allow the property to be foreclosed upon and look into filing bankruptcy only if you are sued for a deficiency or on the note of any second mortgage. The only reason I would file bankruptcy now would be if you wanted to try to save the home and do a chapter 13.
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