Foreclosures
by: Central Virginia Legal Aid Society, Inc.
Foreclosure
When you buy a house or land on time, or borrow money to buy a house or land, the creditor usually takes a security interest in the property you buy. This means that if you don't pay, the creditor can foreclose upon (or take back) that property. (A person or business you owe money to is called a creditor.) However, you have important legal rights that protect you.
When may a creditor foreclose?
In Virginia, a creditor may not foreclose unless you're more than 10 days late with a payment. If you make all missed payments and any late fees, within 10 days of the due date, a creditor may not foreclose. If you are more than 10 days late with all or part of a payment, a creditor may foreclose. However, if your creditor has agreed to accept your late payments or to change your due date, foreclosure may not be allowed. A change in your due date may happen orally or in writing, or by your creditor repeatedly taking late payments without complaint.
What happens when a creditor "accelerates" a mortgage?
If your mortgage is accelerated, all the money you owe is due all at once, right now. In this case, you no longer have the right to make payments over time. In Virginia, a creditor may not accelerate a mortgage unless you're more than 10 days late with a payment. If you make all missed payments and any late fees, within 10 days of the due date, a creditor may not accelerate.
May a creditor foreclose if I catch up all my missed payments?
If a creditor has not accelerated your mortgage and you make all missed payments and any late fees, the creditor may not foreclose. Even after you're more than 10 days late with a payment, a creditor can't refuse your payment and foreclose if the creditor hasn't accelerated.
If a creditor has accelerated your mortgage, you can't simply make all missed payments and any late fees. Even if you make all missed payments and any late fees, all the money you owe is due all at once, right now. You may need to file bankruptcy to keep your house and land.
How does a foreclosure work?
Almost all mortgages in Virginia are secured by a Deed of Trust. A Deed of Trust is a
deed of the property from you to a Trustee, who usually is a lawyer. The Trustee has the power
to sell your property if you don't keep the promises in the Deed of Trust. This includes your promise to pay the mortgage payments on time, in full, every month.
Is a foreclosure done through court?
No. Under Virginia law, foreclosures are done outside of court, rather than through the court system. The Trustee simply sells your property. This usually happens at a public auction to the highest bidder. Before doing this, the Trustee must follow the rules set forth in your Deed of Trust. The Trustee also must follow the Real Property Foreclosure Act that was in effect when you signed your Deed of Trust.
If you have not kept all your promises in your Deed of Trust, the Trustee may accelerate the mortgage, and sell your home. Usually, mortgages that are federally insured or guaranteed must be at least three months behind before foreclosure.
Must a creditor give me a notice before foreclosure?
The Trustee must give you a written notice, by certified or registered mail, telling you the time and place of the sale. You must get this at least 14 days before the sale. However, if your property is sold to an innocent third party for value, a sale is valid even if the notice was not sent.
Must a creditor advertise the foreclosure sale?
The Trustee must advertise the foreclosure sale in a newspaper of general circulation before the foreclosure sale. The Trustee must strictly follow the advertising requirements. If the Trustee does not do this, a court may set aside or void a foreclosure sale. The ad must state the location of your property, the location of the foreclosure sale, and the terms of the sale.
Where the Deed of Trust does not say the number of ads, the sale must be advertised for four weeks in a row, or for five days (which may be five days in a row) if your property is located in a First Class City or in a neighboring county. The sale must take place no more than 30 days after the last ad, and no fewer than 8 days after the first ad.
If the Deed of Trust says the ads must be published weekly, the sale must be advertised at least once a week for two weeks. If the Deed of Trust says the ads must be published daily, the sale must be advertised for at least three days (which may be three days in a row).
What happens at a foreclosure sale?
The Trustee must hold the foreclosure sale in a manner to get a fair sales price. A low sales price alone is not be enough to set aside a sale. However, where the sales price is very low (usually less than 50% of assessed value) and evidence exists that the Trustee was not trying to get a fair sales price, a court may set aside the sale.
Do I have to move right after the foreclosure sale?
A foreclosure only affects who owns the property. A foreclosure does not affect who has the right to use or occupy the property. If the new owner wants possession of the property, the new owner must file an unlawful detainer action in court.
What is an unlawful detainer?
The new owner may evict you only by filing a lawsuit (unlawful detainer warrant) in General District Court. A hearing will be held. If the judge rules in your favor, you get to stay. If the judge rules in the new owner's favor and you came to court, the judge must give you at least 10 more days in which to move. If you have not moved by the end of the 10 days, the landlord, based on the court order, can get a Writ of Possession. This allows the Sheriff to remove you and your belongings from the premises.
If the judge rules in the new owner's and you did not come to court, the Writ of Possession may be issued immediately.
The new owner may not cut off utilities, lock you out of the house, or evict you without going to court. You don't have to move out just because the new owner tells you to leave and takes out an unlawful detainer. The new owner must wait until a court order is issued. These steps usually take more than a month months from the date of the foreclosure sale.
Can a bankruptcy stop a foreclosure sale?
Bankruptcy means you ask the court to excuse you from your duty to repay your creditors. A person or business you owe money to is called a creditor. Bankruptcy allows you to discharge (get rid of) most of your debts, but also keep a certain amount of property. Two kinds of bankruptcy apply to individuals and married couples not in business. These are a Chapter 7 (or straight) bankruptcy and a Chapter 13 (debt adjustment) bankruptcy.
Under the new bankruptcy law that took effect October 17, 2005, debtors who have the ability to repay some of their debts must enter a repayment plan under a Chapter 13 bankruptcy, rather than having their debts canceled under a Chapter 7 bankruptcy. All bankruptcies are filed with your local United States Bankruptcy Court.
Once you file for bankruptcy, most - but not all - debt collection must stop. This is called the "automatic stay." Filing for bankruptcy stops repossessions, utility cutoffs, debt collection lawsuits, garnishments, levies, attachments, foreclosures, evictions where a judgment of possession has not been entered, and most other actions to collect debts. However, under the new law, filing for bankruptcy does not stop an eviction where a judgment of possession has been entered, or an eviction based on illegal drug use or danger to property.
In a Chapter 7 bankruptcy, what happens to a house that I'm buying?
If you're buying a house, you may have to give it back to the creditor. In a Chapter 7, there are a number of ways you can keep your house. If you are current on your payments, you may "reaffirm" the debt by agreeing to keep the debt even though you filed bankruptcy. However, if you are behind in your payments, you may have to file a Chapter 13 to keep property you're buying on credit. A final way to keep property is to "redeem" it. This means you pay the creditor what the property is now worth, not what you still owe on it. (This rarely happens because it requires you to have a large sum of money.)
Even if you can use one of these ways to keep your house in a Chapter 7, you still may lose the house to the Bankruptcy Court if you have more "equity" in it than you can protect under Virginia's debtor exemption laws. (Equity means the fair market value minus the amount you still owe on the house.) Issues like this need to be carefully reviewed by a bankruptcy attorney.
In a Chapter 13 bankruptcy, what happens to a house I'm buying?
In a Chapter 13 bankruptcy, you may not have to give back, redeem, or reaffirm a house you're buying. Instead, you may be able to keep a house you're buying even if you're behind on payments. To keep the house where you live, you must make current payments, and you get three to five years to catch up missed payments.
What is the filing fee for a bankruptcy?
As of April 9, 2006, the filing fees are $299 for a Chapter 7 bankruptcy and $274 for a Chapter 13 bankruptcy. Under the new law, the court may allow you to pay this over several months if you can't pay all at once. However, if you don't pay the filing fee on time as required by the court, your bankruptcy will be dismissed. If you are very poor, the court may allow you to file a bankruptcy for free under the new law.
In addition, you probably will need to file a Homestead Deed in connection with the bankruptcy. Your local Circuit Court charges $21 to record this. This must be paid at the time you file the bankruptcy.
Can I file bankruptcy without an attorney?
You may be able to do this, but it is not recommended. Bankruptcy is difficult. You may lose income, property, or other rights if you don't know the law.
How often can I file a bankruptcy?
Under the new law, there are longer waiting periods to file another bankruptcy.
• If you get a Chapter 7 discharge, you must wait eight years before you file another Chapter 7.
• If you get a Chapter 7 discharge, you must wait four years before you file a Chapter 13.
• If you get a Chapter 13 discharge, you must wait six years before you file a Chapter 7.
• If you get a Chapter 13 discharge, you must wait two years before you file another Chapter 13.
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