Creditor’s Rights - Georgia State Profile
Georgia has a population of approximately 8.3 million
people and is among the fastest growing states in the
country, with a population increase of more than 25%
during the decade of the 1990s. Roughly half of Georgia’s
residents live in the Atlanta metropolitan area. Other
large metropolitan areas include Augusta, Columbus,
Macon & Savannah. The state covers more than 57,900
square miles, which makes it the largest state east
of the Mississippi River. The state is divided into
an unusually large number of counties, with a total
of 159. About 67 percent of Georgia residents are homeowners,
with more than one in every five residents living in
manufactured housing.
Georgia, one of the original 13 colonies, was settled
by James Oglethorpe. His original plan was to settle
Georgia with inmates from England’s debtors' prisons.
Although that plan did not entirely pan out, it did
have a tremendous influence on how the laws governing
debtor-creditor rights in Georgia were formulated. Georgia
was, and for the most part continues to be, a very creditor-friendly
state.
Foreclosure
The foreclosure process employed almost exclusively
in Georgia is non-judicial and is among the fastest
in the nation. Georgia is a classic title theory state.
In Georgia, the borrower (mortgagor) actually gives
legal title to the lender (mortgagee) through the instrument
known as a “Deed to Secure Debt” or “Security
Deed.” The lender actually owns the property until
the debt is paid and allows the borrower to use and
possess the property. If the borrower defaults, the
lender may move to declare the Deed to Secure Debt and
Promissory Note in default (in Georgia most lenders
use the standard FannieMae/FreddieMac form note).
To enforce a default, the lender must make a written
demand upon the borrower (mortgagor), setting forth
a breach and accelerating the debt (declaring the entire
debt due and payable immediately). Keep in mind that
federal fair debt provisions apply and notices required
under the Fair Debt Collection Practices Act (i.e. validation
of debt etc.) are generally sent to the borrower (mortgagor)
simultaneously. The property is ultimately sold pursuant
to a power of sale provision in the Security Deed.
In this non-judicial foreclosure, the Lender must follow
the notice requirements extremely carefully. A notice
of sale must be served on the original mortgagor or
current owner (if his identity has been made known to
or acknowledged by the lender) by certified mail, return
receipt requested. The notice must be sent to the borrowers
last known address, which is the address listed on the
Security Deed or an address the borrower has subsequently
designated with notice by certified mail to the lender.
It is generally a best practice to provide notice by
regular and certified mail to all known addresses for
every borrower. It is not required that the borrower
(mortgagor) actually receive the notice, only that it
be sent in compliance with the statute. The notice must
be postmarked and provided to the defaulting borrower
no later than 15 days prior to the date of proposed
sale.
Prior to the sale taking place the lender must have
published the scheduled foreclosure sale in the legal
organ for the county in which the real property collateral
is located for four (4) consecutive weeks immediately
preceding the first Tuesday of the month (sale day).
The notice of sale must contain the date, time and place
of sale along with a description of the property, the
names of the mortgagee and mortgagor and a reference
to the power of sale provision.
There are 159 counties in Georgia and each county
has a designated legal organ (newspaper), which publishes
foreclosure advertisements a minimum of once per week.
Each county, therefore, will have its own independent
publication deadlines that must be met for a sale to
occur in a particular month.
In Georgia, foreclosure sales are not randomly set.
They always occur on the first Tuesday in every month
on the courthouse steps of the particular county. Exceptions
are made for certain legal holidays that may fall on
the first Tuesday. The sale must be conducted between
10:00 a.m. and 4:00 p.m. or it is an improper use of
the power of sale. Sales are generally conducted by
the foreclosing attorney, and the foreclosing attorney
is permitted to credit bid at the sale on the lender’s
behalf. Successful bidders are required to tender the
full amount of their bid in cash or certified funds
immediately upon the conclusion of the sale, unless
the foreclosing lender is the successful bidder. Should
a sale be postponed, terminated or voided, the entire
foreclosure process must be repeated.
Once the sale occurs, the foreclosing attorney prepares
and issues to the successful purchaser (most often the
lender) a Deed Under Power of Sale, which gets recorded
in the land records of the particular county in which
the property is located. Once a sale is concluded on
the courthouse steps, there is no right to redeem given
to the defaulting borrower (mortgagor).
A foreclosure sale will sever and extinguish any lien
junior or subordinate to the one being foreclosed, with
one notable exception. Foreclosure alone does not automatically
extinguish a federal tax lien, which will stand as a
lien against the property unless prior notice has been
given to the IRS. The notice must have been given more
than 25 days prior to the foreclosure sale and the IRS
must fail to take any action within 120 days after the
foreclosure sale to protect its interest in order to
extinguish the lien with respect to the security.
In situations where the foreclosure sale does not
produce enough cash to pay the loan balance in full
(after deducting expenses and accrued unpaid interest),
the lender may elect to obtain a personal judgment against
the borrower for the unpaid balance. This deficiency
process in Georgia is accomplished through confirmation
of the foreclosure sale. For the foreclosure sale to
be confirmed, an application must be brought to the
Superior Court in the county in which the sale occurred,
within 30 days of the sale. Otherwise, the right to
pursue a deficiency is lost. This is a judicial process.
As part of the confirmation proces,s the Judge will
generally examine how the sale was conducted to determine
whether the property was sold for its fair market value.
The lender must enter a minimum bid equal to at least
the fair market value of the property for the sale to
be confirmed.
Bankruptcy
The bankruptcy process in Georgia is also noteworthy.
Georgia is the Chapter 13 capital of the world. The
Northern District of Georgia, encompassing the Atlanta
metropolitan area, has the highest number of Chapter
13 bankruptcies filed in the United States annually.
The Middle District of Georgia (including Macon and
Columbus) and Southern District of Georgia (including
Augusta and Savannah) also have significantly high numbers
of Chapter 13 cases being filed. Many have speculated
that the large number of Chapter 13 filings is substantially
related to the very fast (4-6 week) foreclosure process.
The Northern District has eight judges, four Chapter
13 Trustees and a panel of 10-15 Chapter 7 Trustees
to handle the massive volume of cases. In the Northern
District, Chapter 13 Trustees normally expect that post-petition
payments will be sent directly to the mortgage servicer,
and they will ordinarily pay pre-petition claims pro-rata
with other secured claims, based upon the amount stated
in the servicer’s claim. The dockets are relatively
fast in this jurisdiction, as confirmation occurs roughly
60 days from filing. Motions for Relief from Stay and
Claims are generally filed electronically in this jurisdiction,
and as such, virtually all documentation is available
online via PACER. Attaching a copy of the Security Deed
is generally sufficient for filing claims and motions
in this jurisdiction.
In the Middle District of Georgia, there are 2 full
time and 1 part time judges. There are 2 Chapter 13
Trustees and a panel of approximately five to ten Chapter
7 Trustees. The Chapter 13 Trustees in this district
will often act as conduits for post-petition mortgage
payments when there is a significant pre-petition arrearage.
Payment of claims is generally based upon the amount
stated by the servicer in the claim. Funding of the
arrearage claim does not begin until well into the case.
However, servicers are advised to examine the plan very
carefully in this district and object to confirmation
since many plans understate the pre-petition arrearage
and delay receipt of the initial post-petition payment.
Confirmation is generally held about 90 days from filing
in this district. Motions and claims will generally
require attaching a recorded copy of the Security Deed
and all assignments in this district. This jurisdiction
has begun to experiment with electronic filing and copies
of most filed documents are available online via PACER.
In the Southern District of Georgia, there are two
full time and one part time judges as well. There are
also three Chapter 13 Trustees and a panel of five to
ten Chapter 7 Trustees. The Chapter 13 Trustees expect
that post-petition payments will be made directly to
mortgage servicers and will pay claims based upon the
amount stated in the claim on a pro-rata basis with
other secured creditors. The claim must be served upon
the Trustee and Debtor’s counsel in this district
when it is filed. Attaching a copy of the Security Deed
is generally sufficient for filing claims and motions
in this jurisdiction. This jurisdiction is scheduled
to begin electronic filing in the near future; documents
may be accessed online via PACER.
There are also many Chapter 7 proceedings filed in
Georgia. Most Chapter 7 Trustees will not take an active
role with respect to mortgage claims unless there is
either an abundance or lack of equity in a property.
Manufactured Housing - Personal Property Foreclosures
The law in Georgia with regard to foreclosing on manufactured
housing is a bit tricky. Although conducting a non-judicial
(real property type) foreclosure would be preferable,
many times this process will not be immediately available
and the personal property foreclosure process must be
employed for the collateral to be recovered and sold.
Georgia has recently enacted procedures for converting
manufactured housing to realty, thus your counsel will
have to inspect the loan documentation and title information
to determine how to proceed with foreclosure. Although
the personal property foreclosure process is a judicial
process, it is relatively quick, with most unopposed
cases resulting in a Writ of Possession approximately
two (2) weeks from service. The personal property foreclosure
process permits only the return of the collateral and
will not allow a money judgment to be taken against
the borrower.
Eviction
The eviction process in Georgia is also a judicial
process of very short duration. After a demand for possession
is made, the action is filed and the defendants are
served. The hold-over tenant is given seven (7) days
to answer either orally or in writing. If there is no
answer a Writ of Possession is issued immediately and
is delivered to the Sheriff within a few days. The lender
must provide the labor for removing the tenant(s) from
the property. The Sheriff will be present to keep the
peace. If an answer is filed, a hearing is held within
approximately two (2) weeks. The tenant(s) may not challenge
the validity of the foreclosure proceeding at this hearing.
Should the Court rule against the tenant(s), the tenant(s)
will have seven (7) days to vacate the premises.
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