17 Jul Foreclosure in North Carolina: What to Expect
Once you get behind on your home mortgage, one of the first fears that you may have is losing your home through foreclosure. It is important to understand how the foreclosure process works, what to expect if you get a Notice of Foreclosure, and why Chapter 13 bankruptcy can stop the foreclosure process and offer a way to keep your home.
First, realize that the foreclosure process does take some time. Even though it may seem as though once the process starts, there is no way to reverse it (and sometimes that is the case) there are ways to work with your lender, fight against a home foreclosure, and take steps to save your home.
In North Carolina there is a legal process that a lender has to follow.
A lender can’t simply show up one day and take your home. There is a legal process that they must follow, and facing foreclosure is less unnerving when you know exactly what you can expect. Understanding the process lets you know what your time frame is so that you can work with the bank to try to stay in your home. Knowing the process lets you determine whether your lender is doing everything correctly, and in turn, how to respond each step along the way.
The basic steps of the foreclosure process in North Carolina.
In North Carolina, foreclosures are regulated under Article 2A of Chapter 45 of the North Carolina General Statutes. Foreclosures always take place in state court in your county seat (for example, Raleigh in Wake County).
The first step in a foreclosure occurs before the “legal” aspect even begins. The mortgage holder must send you a pre-foreclosure notice that gives you information on your default, the interest charges and fees, and provides you an opportunity to cure your default.
Once you have notice, the mortgage holder may begin a foreclosure action. A foreclosure action is a court case with its own unique case number, which will begin with the year and “SP” for “special proceeding.” Once a foreclosure action has been opened, you will receive a Notice of Foreclosure Hearing, which is a formal court document that will give the date and time of a foreclosure hearing that is required before your home can be sold. The foreclosure hearing may come as soon as 20 days after you get the Notice of Foreclosure Hearing.
Judges generally do not hear foreclosures.
North Carolina is what is called a “power of sale” state. This means that generally no judge will hear a foreclosure, instead foreclosures are heard by the clerk of court.
The foreclosure hearing itself will be nothing like what you see on TV or in the movies. It is basically a review by the clerk of documents that the mortgage holder presents to him or her. The clerk can only look at a very narrow set of four issues before he or she can approve a foreclosure sale. The clerk must find: (1) valid debt that is held by the party seeking to foreclose; (2) a default on that debt; (3) the right for the holder to foreclose according to the deed of trust; and (4) that the debtor received proper notice of the hearing.
Because the clerk is only looking at such a narrow range of issues, it is incredibly difficult to offer a defense at these hearings, and nearly all hearings result in an order approving foreclosure sale. The clerk can’t look at why you are behind, or whether the bank is responsible for some wrongdoing. They can only decide whether the bank has proved the four elements. If you can show that the lender didn’t satisfy one of the elements (for example, show that the bank cannot prove that it holds the note to your loan), then you may have a defense to the foreclosure, but successful defenses before the clerk are rare. Any defenses that fall outside the four elements must be brought in a separate action filed in Superior Court; those cases can be expensive and are also difficult to win.
Either the borrower or the mortgage holder may also make a motion to continue the foreclosure hearing to a later date. Requesting to continue the foreclosure hearing could give you more time (up to 60 days) if you are able to show the clerk that there is a reasonable likelihood that you will resolve the default with the bank and prevent the foreclosure from happening. You could do this by showing that you have been negotiating payments with the bank, or that you are applying for a loan modification. If a continuance is granted, the clerk will issue a written order that confirms the continuance and the new date for the hearing.
The foreclosure sale
If the clerk allows the foreclosure to proceed, the next step is the sale of your property. You will receive a Notice of Foreclosure Sale (similar to the Notice of Foreclosure Hearing) that includes the date, time and place of the sale, which must be set at least 20 days after the hearing. The Notice of Foreclosure Sale will be published in the newspaper for two weeks as well. The auction of your home will occur on the day shown in the Notice of Foreclosure Sale, unless the sale is postponed.
Filing Chapter 13 bankruptcy any time up to 10 days after the sale can stop this process.
Even after the date of the sale, however, there is a 10-day “upset bid period” that allows for additional bids to purchase the home. The sale is not final, and title to the home will not transfer from you to the successful bidder until after the 10-day upset bid period expires. You can stop the sale of your home by filing a Chapter 13 bankruptcy at any time before the 10-day upset bid period following the sale expires. The protections of the Bankruptcy Code stop all action to collect any of your debts. That includes the transfer of the deed to your home in a foreclosure proceeding at the end of the 10-day upset bid period. This means that if you file a Chapter 13 bankruptcy before expiration of the upset bid period, the sale of your home will not become final and you may be able to bring your mortgage current over time so that you can stay in your home.
How long can you stay in your home after the sale?
After the 10-day upset bid period expires and the home is transferred, the new owner has the right to evict you from the property after giving you proper notice and time. The Sheriff will typically post a notice on the property and evict within 20-30 days after the deed to the home transfers.
But keep in mind that there are multiple steps before you actually lose your house, and it is important at each step to assess whether it is possible to negotiate with the lender and whether bankruptcy protection can offer a way to catch up on your mortgage and save your home.