By DORWIN J. WOLFE
ELKINS -- In some good news for homeowners in West Virginia and across the nation, the rate of foreclosures has dropped since the previous year.
A survey taken this past October by CoreLogic, provider of residential property information, found that there were only 48,000 completed foreclosures over the past 12 months, compared to 68,000 at that time the previous year. That includes 514 in West Virginia, which was cited as one of five states with the lowest rate of completed foreclosures.
However, the numbers above do not include foreclosures that are in progress. When those are taken into account, the number rises to 879,000, though even that is down nearly a third compared to 1.3 million the previous year.
No explanation is given for this decline, with one of the study conductors simply noting that the numbers are far below where they were at the beginning of the mortgage crisis in 2008. Perhaps the economy has improved enough that people can afford to make their loan payments, especially after agreeing to a modification. Perhaps the national mortgage settlement has had an impact, giving homeowners more options to keep their homes and report abuses.
One other possible explanation is that more people have filed for Chapter 13 bankruptcy. When an individual or couple files for Chapter 13 bankruptcy, that individual or couple gets an automatic stay that acts as an injunction, halting any attempts to foreclose upon a home or repossess other property.
If a company ignores the automatic stay and continues its repossession efforts, the debtor could file a motion claiming willful violation of the automatic stay, which could result in the company having to pay damages. At the very least, a bankruptcy court might find that the company's actions that violated the stay were void.
In return for the automatic stay, the debtor agrees to a three-to-five year payment plan, depending upon how much the debtor has earned over the previous six-month period. The plan, which must be certified by the bankruptcy court in order to take effect, arranges to pay the debtor's secured creditors, including mortgage lending companies. These payments are often smaller and more manageable than the previous loan payments, and do not preclude an arrangement for a loan modification.
While the three-to-five year plan usually does not enable the debtor to pay off the loan, it usually gives the debtor enough time to make significant payments on the loan, making it more manageable once the bankruptcy is discharged. However, if the debtor fails to make payments to the Chapter 13 trustee (who distributes them to the creditors), the debtor's case may be dismissed and the automatic stay would be lifted. Then mortgage lenders would be able to foreclose once again.
Bankruptcy is a huge decision that affects every aspect of the debtor's life, and is not something to enter into lightly.
The Wolfe Law Firm is an Elkins personal injury firm founded by Dorwin Wolfe. This editorial appeared on the firm’s blog.