Shelby County leads state in number of foreclosures

In Shelby County - where a third of residents either spend too much of their income paying for housing, live in overcrowded homes or lack a kitchen or indoor plumbing - it comes as little surprise that the county is home to 30 percent of Tennessee's foreclosures. Fortunately, there are resources distressed homeowners can take advantage of to prevent a foreclosure, including filing for bankruptcy.

Tennessee's foreclosure problem

In 2011, 17 out of Tennessee's 95 counties had a foreclosure rate of at least one foreclosure for every 100 housing units. However, Shelby County leads the state in the number of foreclosures with one foreclosure for every 71 housing units. This equated to 5,688 foreclosures in Shelby County alone in 2011.

That same year, Memphis had the highest number of real-estate-owned homes (REO) in the state, with 268 properties owned by FHA, Freddie Mac or Fannie Mae. The high rates of foreclosure, combined with Tennesseans spending too much of their monthly in come on housing or having inadequate housing, have caused a housing crisis in the state.

Keep My Tennessee Home relief program

Fortunately, state and federal agencies are working together to get homeowners who are underwater on their mortgages the help they need to stay in their homes and stave off foreclosure. The Keep My Tennessee Home program makes federal money available through the Tennessee Housing Development Agency.

To be eligible, a homeowner must own and occupy his or her primary residence and have experienced a job loss or at least a 30 percent reduction in his or her income through no fault of his or her own. Additionally, the mortgage loan must be less than or equal to $275,000 and gross household income must be equal to or less than $92,680. Lastly, an applicant must not have liquid assets in excess of six months' worth of mortgage principle, interest, insurance and taxes.

If applicants meet these requirements, they may be eligible for up to $40,000 in federal money paid over three years. The amount may change or be repayable if the applicant becomes employed or if the home is sold before five years have passed. However, those who become employed but still spend at least 31 percent of their income on housing may continue to receive payments.

How bankruptcy could help

Another option for those who have been threatened with foreclosure is filing for bankruptcy. When a homeowner files for bankruptcy, an automatic stay is applied to all debt collection efforts, including the foreclosure process. This can buy homeowners time to stay in their homes.

While those who file under Chapter 7 still may be unable to save their homes during bankruptcy proceedings, those who qualify for Chapter 13 bankruptcy are often able to keep their homes. During a Chapter 13 bankruptcy, filers create a repayment plan to get back in control of their existing debts, including their mortgages. As long as filers are making payments in full and on time under their new plan, most will be able to stay in their homes.

If you are a Memphis or Shelby County resident who has been threatened with foreclosure or has been foreclosed upon, contact an experienced bankruptcy attorney to learn more about the types of relief available to you.