In Georgia, if you file Chapter 13 bankruptcy or Chapter 7 bankruptcy, the answer is never. Creditors can’t sue you in a Chapter 13 and a second mortgage holder can be wiped out in a Chapter 7 and a Chapter 13 if you are surrendering the house. In bankruptcy, the automatic stay protects you from lawsuits.
If you do not file Chapter 13 or Chapter 7, the answer to this questions depends on various factors. It depends on the mortgage company and how much money the house is sold for at the auction on the courthouse steps. If the house sells for enough money to pay all of your first and second mortgage, you are in the clear. In Georgia, this almost never happens in real life. In the current real estate market in Georgia, it is extremely difficult to sell a house for the tax assessor’s value. In most cases, a more likely scenario is that the house gets sold for enough money to cover the first mortgage holder but the second mortgage holder gets nothing.
Usually, the first step for the second mortgage holder is to try to work out some kind of payment with you. If this does not work, they will sue you in Georgia. Small banks tend to be the most aggressive collectors on second mortgages in Georgia. I have some case cases where the second mortgage company will sell the debt to some debt collector who may wait a few years before they institute lawsuits to collect on the debt.
After they get a judgment against you, the next step is to garnish your wages. If they garnish your wages in Georgia, they are going to take twenty five percent of your net income. In addition to garnishment, they can use the judgment to seize any money in your bank accounts.
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