During a chapter 7 bankruptcy case, Georgia law permits a $10,000 exception for persons on real estate property meaning that a debtor is permitted to retain property only to the extent of that amount. Property that is acquired at the bankruptcy hearing is referred to as secured by real estate. The secured property must be free of encumbrances and all loans on it must have been discharged. If the debtor can establish that there are substantial expenses that render him unable to pay the debt, he may not be allowed to retain any secured real estate. He may still be able to retain possession of his home but this cannot be for a period longer than one year after the date of filing.
A debtor’s property may also be released if he can establish that the sale of it will prejudice the economic or political interests of a class. The court, after determining the eligibility of the debtor, will order a public auction to sell the property. At the public auction, people are not allowed to bid unless they are members of the class described in the petition. This means that anyone who signs an agreement to bid cannot participate. The trustee will evaluate the proceeds from the auction and transfer them to the lender.
If the creditor fails to recover his real property, the trustee may liquidate it. Under Georgia law, he may do this by selling the property to another person. The new owner, called the remainderman will carry on the debtor’s obligation. The proceeds will be given to the debtor. However, this distribution will be final and cannot be reopened by any subsequent trustee.
After the assets are sold, they are dispersed to the creditors. One type of real estate distribution occurs immediately. The creditors are reimbursed the whole of the debt (the amount not paid by secured loans) plus interest and fees. Another occurs when the property is sold at a trustee sale.
Another important piece of real estate law is that after a bankruptcy is filed, the property purchased within six months must be underwritten. This means that the buyer can’t have chattels or any fixtures until the property has been appraised. There are two types of appraisals. The certified appraisal is done by a professional appraiser, while the non-certified appraisal is done by an individual working under a contract. If the property isn’t purchased, the non-certified appraisal is used. Either way, the property is usually offered at a discount.
The second part of property distribution involves repayment. When a property is purchased during a bankruptcy in which the debtor retains the title, he is required to make monthly payments. These payments go to the real estate company holding the mortgage loan. However, if the property is purchased with a bankruptcy, the payments go to the trustee instead. Therefore, real estate companies often obtain a non-judicial foreclosure against the property.