Foreclosing Deeds of Trust: Another Collection Tool
Over the past couple of years, there has been a substantial increase in foreclosures in North Carolina and around the nation. Certainly, the poor economy has been a major reason for the increase. However, according to the Greater Wilmington Business Journal, foreclosures in North Carolina declined in September.
Many of our clients make use of Promissory Notes secured by Deeds of Trust on real property as a means of securing past due balances and establishing a payment plan from delinquent customers. Despite the security given by the Deeds of Trust, our clients are often hesitant about seeking enforcement through foreclosure. Most would rather file suit for the unpaid Note in order to obtain a judgment. Often, this is a good approach as a lack of equity in the property securing the Note makes foreclosure an unappealing option. However, in certain situations, foreclosure may be the most effective option for recovering the debt.
The foreclosure process is simple and clearly defined by statute. First, the creditor sends a letter providing notice to the debtor of default under the terms of the Note. If the debtor does not resolve the issues, the foreclosure proceeding is filed and the debtor is served with notice of the foreclosure hearing. At the hearing, the debtor has the opportunity to object to the foreclosure. If the clerk allows the foreclosure, the sale date is set and all interested parties are given notice. At the foreclosure sale, the trustee accepts bids and the highest bidder must deposit funds immediately with the clerk. After the upset bid period, where anyone can make a better bid, the sale is finalized and title passes to the high bidder upon delivery of the full amount of the bid.
In the event the highest bid does not cover the full amount owed, the creditor is able to file a lawsuit to cover the deficiency. However, this option is not available in certain situations.
Foreclosure is a relatively new service that we are offering to our clients. If you would like to learn more please contact us!