Even with the economy slowly improving, people across the country continue to file for bankruptcy, including here in West Virginia. Bankruptcy is an interesting area of law: it is federal law, but the outcome of many cases depends upon state law. Oftentimes, the laws are so tightly intertwined, it is difficult to determine whether a matter should be litigated by a West Virginia bankruptcy attorney, or dealt with in state court.
Why do people file for bankruptcy? One of the biggest reasons is the threat of foreclosure. Ever since the housing bubble exploded, the rate of foreclosure in West Virginia has risen, with one in 8,320 houses foreclosed upon. The hardest-hit counties include Wayne, Kanawha, Hampshire, Berkeley, Jefferson, Hancock, and Tyler. Many people bought houses with mortgages that they could not afford, or they could afford their mortgages until they lost their jobs.
When you default on your mortgage payments, the mortgage lender usually first issues a notice of default. If you are unable to cure the default, the lender issues a notice of sale. Under West Virginia law, mortgage lenders are permitted to do what is known as a “non-judicial foreclosure.” That means the lender can sell your house without having to get permission from a state court. The notice of sale must follow state requirements in Chapter 59 of West Virginia’s code, including the time and place of sale; the names of the parties to the deed; the date of the deed; the quantity and description of the land; and the terms of sale. A trustee then auctions the house off to the highest bidder. “Judicial foreclosure,” where the court must issue a final judgment, and the house is sold at a sheriff’s sale, is also common.
If you file for bankruptcy before the foreclosure sale, you can prevent the sale from taking place. If you file for “personal,” or individual bankruptcy, what is known as an “automatic stay” takes effect. The stay prevents creditors from continuing their harassment or acts of repossession, including foreclosure. As long as you do everything that you are required to do for your bankruptcy case, the stay will remain in effect.
There are some wrinkles, however. First, if you want to keep your home, you have to be careful about the type of bankruptcy you choose. If you file for Chapter 7, the most common type of bankruptcy, you could risk losing your home. That is because a Chapter 7 trustee takes over your “estate” and determines what is exempt and non-exempt property. The non-exempt property is sold and the proceeds are used to pay off creditors. On the other hand, if you file for Chapter 13, you may be able to keep your house. All Chapter 13 filers must provide a payment plan, where they state how much they will be able to pay to the Chapter 13 trustee — who then pays the creditors — over a period of several years. If you are able to make the plan payments, you could pay off your mortgage debt and keep your house. If you can’t make the payments, or if the Chapter 13 or a creditor finds other fatal flaws in your case, your case could be dismissed and your house may be vulnerable once again.
We at the Wolfe Law Firm don’t want that to happen. You and your loved ones should be able to stay in the house you worked hard to buy. That is why, right when the mortgage lender or other creditor first threatens, you need to contact an experienced bankruptcy attorney to defend your rights.