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Texas Bankruptcy - Foreclosure In Texas

Foreclosure in Texas is a legal proceeding for the process of termination of a mortgagor’s interest in property. Foreclosure is usually initiated by the mortgage lender to gain title of the property or to obtain the proceeds by forcing a sale of the property to satisfy all or part of an unpaid debt obligation. In Texas foreclosures on property are carried out both in court as well as out of court. The foreclosure process in Texas tends to move fairly quickly in comparison to other states and from beginning to end the entire foreclosure process usually takes about three months.

As previously noted Texas law provides for both in court as well as out of court foreclosure proceedings. The term for in court foreclosure is “judicial foreclosure” which is a somewhat costly and time consuming method of foreclosure which involves the filing of a lawsuit to obtain the court’s permission in order to foreclose. This process requires all the usual steps of filing Lawsuits in Texas such as filing a complaint, service of process on the mortgagor, proper notice, and a hearing or hearings until an order by the court is issued authorizing a foreclosure is obtained.

The most common foreclosure process in Texas is a “non-judicial foreclosure” which is a method of foreclosure that does not require the court’s permission to foreclose on a property, nor does it involve the filing of a lawsuit to foreclose. This “non-judicial foreclosure” is a foreclosure method that is used when a “power of sale clause” exists in a mortgage instrument or deed of trust however the Texas Property Code allows for “non-judicial foreclosure”.

In a “non-judicial foreclosure” the trustee/lender has to serve written notice sent via certified mail to the mortgagor’s last known address or address on file with the lender at least twenty-one days prior to the foreclosure sale. Should the property being foreclosed be a homestead, then an additional twenty day written notice by certified mail must be sent to the mortgagor giving them a twenty day right to cure the deficiency before the debt is accelerated. A written notice of the foreclosure sale has to be posted at the county courthouse as well as filed with the clerk of the county where the property is located.

Most all real estate in Texas is financed by the actual purchaser, by providing a promissory note and a mortgage referred to in Texas as a "deed of trust" to a lender, in return for the money used to purchase the real estate. The “deed of trust” names a person, which is most often an attorney hired by the lender, who acts as a Trustee. Your real estate or real property is technically held by the trustee who holds the legal title to your property in trust for the lender. Should you the mortgagor default by failing to make payments as required, fail to tender any contractual escrow reserves or anything else that constitutes default under the mortgage instrument or lending agreement, the lender will then order the trustee to sell your property at a foreclosure sale.

When an unexpected event prevents you from making even a single payment when it becomes due your lender may consider it a mortgage default and you may be facing a foreclosure. Sometimes certain mortgage creditors will commence a foreclosure the moment you’re late by sending you a certified letter immediately. Since there is no requirement that a notice of a foreclosure sale has to actually be received, it only makes sense to always retrieve certified mail from the post office. The lender’s only requirement is that a notice be sent to the last known address of the debtor according to the lender's records. Once notice is sent by the lender which may or may not be picked up by you, the lender posts a notice of sale at the door of the county courthouse and files a foreclosure notice with the country clerk 21 days prior to the foreclosure sale and if the property to be foreclosed is homestead property, an additional twenty day written notice by certified mail must be sent to you before the debt is accelerated. Now posting a sale at the door of the county court house is exactly that. If you walk into a county court house in Texas you will likely see numerous legal papers and pleadings attached to binders or bulletin boards on the walls of the court house lobby or fairly close to the entrance door. Texas does not require the lender to publish notice of the sale in the local newspaper. Most major Texas counties have electronic access to their foreclosure postings through their county clerk’s website. There are also various services in Texas that collect this information from the court house postings and publish them online or in their own publications.

All foreclosure sales in Texas are between 10 a.m. and 4 p.m. on the first Tuesday of the month (regardless of holidays) and usually take place on the county courthouse steps or just in side the court house lobby. The foreclosure sale is conducted by a sale trustee and just like a public auction the property goes to the highest bidder. The highest bidder must pay for the property in cash at the time of the sale, however the trustee may allow some time (within the same day) for the highest bidder to pay the entire amount in full. The trustee/lender is also eligible to bid on the property if they choose to do so and you are entitled to know what the trustee/lender in fact bids on the property.

If you’re interested to know what they intend to bid you can call the particular trustee's/lender’s office prior to the foreclosure sale and simply ask what they intend to bid on the property, in case there are no other bidders. Keep in mind they have no obligation to tell you, but most trustees/lenders don’t want to actually take the property back due to the costs involved and may just tell you. Depending on the mortgage contract the lender may also eligible to “credit bid” on the property if they so choose.

After the foreclosure sale the trustee then transfers ownership to the highest bidder free and clear of any junior liens but subject to any senior liens. If the bid amount is higher than the amount owed to the lender, any extra monies go to junior lien holders. After a foreclosure sale a trustee/lender may obtain deficiency judgment if the property is sold for less than what is owed which usually tends to be the case. However, their limitation is to the actual difference between the fair market value of the property at the time of foreclosure sale and the balance of the loan in default only.

As a potential tax consequence of a foreclosure sale the Internal Revenue Service requires all mortgage lenders to report foreclosures on form 1099 which is a miscellaneous income report. Depending on the amount of the sale you may be required to report the income from the forgiveness of debt.

Bad things sometimes happen to good, honest, hard working people which often can bring their financial world to a screeching halt. The first course of action when you fall behind on a mortgage payment before the foreclosure process ever begins is to contact the lender and attempt to work it out. Maybe you might be able to defer the missed mortgage payment(s) until the end of the loan. Maybe the mortgage company offers some type of forbearance agreement or additional grace period. Whatever the case may be the first step is to attempt to negotiate with the mortgage company if you have trouble making your payments. If after you have tried to negotiate some type of work out arrangement or don’t receive a response at all, you may want to contact a lawyer to examine your options under Chapter 13 Bankruptcy.

Hopefully you will never have to experience the prospect of foreclosure. But should you experience the unexpected financial problems life can bring and you find yourself facing foreclosure, you have options to stop foreclosure and repay the payments over time in a Court supervised repayment plan. Chapter 13 Bankruptcy allows eligible people who are facing foreclosure to regain control of their finances and make repayment of their arrearages based on terms their budget states they can afford.

When facing a foreclosure in Texas, Bankruptcy can be an option to address loosing your home. There are options for people who decide to file Chapter 13 Bankruptcy to save their home from foreclosure. Filing bankruptcy (any type) generally halts the foreclosure of your home. The automatic stay goes into effect upon your filing however there are elements of the new bankruptcy law that affect the automatic stay which should be discussed with an experienced bankruptcy attorney. Your lender must cease its foreclosure attempt immediately. You will then have time to decide what to do. If your lender is threatening foreclosure or has initiated foreclosure proceedings, you should contact us right away. You cannot save your home once the foreclosure sale has begun.

If you file bankruptcy under Chapter 7 of the Bankruptcy Code, you can choose to reaffirm your mortgage debt and keep your home. However, if you are behind on your payments, you must catch up before you can reaffirm. If you do not have the ability to bring your payments current, your lender can get the Court to lift The Automatic Stay so that it may proceed with the foreclosure. The lender must then sell the property and credit the proceeds to your debt. If any money is left over, the lender must pay it to you. Typically, the sale brings in less than the debt which, in most cases, you will technically owe. The Bankruptcy Court will discharge the balance along with your other unsecured dischargeable debts. A Chapter 7 Bankruptcy may not be able to save your home if it is worth more than the amount of the mortgage plus your exempt equity and the costs of the sale. In that instance, the Trustee could take the property, sell it, pay off the debt and the costs of the sale, take their commission, pay you the balance of equity you may be entitled to under the exemption scheme, and distribute the remainder to your unsecured creditors.

If you file bankruptcy under Chapter 13 of the Bankruptcy Code, you can also choose to keep your house. You must continue to make your current payments and catch up on your arrears through a Court supervised plan of repayment. Unlike Chapter 7, you do not have to pay off your past-due balance in one lump sum. You can pay your arrears through your Chapter 13 repayment plan. The Bankruptcy Code requires that you cure your default within a reasonable time. The Court usually requires that you make up your missed payments within a year of filing.

For most people their home is their largest investment and often their most significant asset. It is important to get all the facts when facing foreclosure or the implications of bankruptcy and your home.

If you have questions regarding foreclosure or the implications of bankruptcy and foreclosure or Bankruptcy and Your Home please contact The Law Offices of R.J.Atkinson,LLC at 800-436-9056 for a free initial consultation to discuss your legal options in Bankruptcy. Don’t loose everything.

With locations in Houston, San Antonio, Austin, and Dallas we are a Texas Debt Relief Agency and help people file for Bankruptcy under the Bankruptcy Code. Don’t Lose Everything.


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