Your mobile or manufactured home in Alabama may be repossessed or foreclosed upon if you default on loan payments. When they are first purchased, most mobile homes are considered personal property, rather than real property, and the owner may secure a loan with the mobile home to purchase it. However, a mobile home can be treated like other homes in the bankruptcy process. This means that debtors in the Montgomery area should consult a knowledgeable lawyer if they own this type of property. At the Grainger Law Firm, we have helped many individuals decide whether the bankruptcy is the right path for them after assessing their financial situations.
In Alabama, a lender has a legal right to repossess a mobile home if the owner is in default or fails to comply with terms in the loan documents. An Alabama lender can repossess the mobile home, or hire an agent to seize it, as long as he or she does not breach the peace to do it. Whoever repossesses the property may not do so through harassment, threats, or physical force. If a mobile home can’t be seized without a breach of the peace, the lender can sue in court for repossession. When a mobile home is worth less than $1,000, a debtor will not be liable for the remaining balance of the loan.
After repossessing a mobile home, lenders have the right to dispose of it, and most sell the home to account for the debt. In Alabama, selling the repossessed mobile home is legal if it is sold in a commercially reasonable manner through a public or private sale. A lender has to give the owner of the mobile home reasonable notice before selling the home, including the date and location of the sale. Loans for a mobile home using it as collateral that can be repossessed are considered secured debts for purposes of determining their status during bankruptcy.
When filing for Chapter 7 bankruptcy, your mobile home can be protected using the Homestead Exemption, but only if you own it. In Alabama, the homestead exemption covers a single-family dwelling that has been owner-occupied, in addition to the surrounding land if it is 160 acres or less. An individual can exempt up to $5,000 in his or her mobile home in bankruptcy. In Alabama, married couples filing for joint bankruptcy can double the amount of the homestead exemption, and therefore they can exempt up to $10,000 of a mobile home.
You are more likely to be able to keep your mobile home from being repossessed if you file for Chapter 13 bankruptcy. This puts into place an automatic stay, which stops your creditors from harassing you, collecting debts, or taking steps to repossess your property. However, when you file for Chapter 13, you will need a plan to repay your debts, including any outstanding payments for your mobile home. Typically, repayments under the plan take 3-5 years, after which any remaining debts will be discharged. If you fail to make payments, however, any of your creditors can resume their collection efforts.
In some instances, a Chapter 13 payment plan will provide an opportunity to pay-off the mobile home in the five-year plan based upon its value instead of the amount owed. To qualify, the mobile home must not have been formally converted into real estate with the land and you must own it for at least a year. For example, Joe buys a mobile home and puts it on his land that is already paid for. Four years later, he still owes $58,000 on the mobile home but it is only worth $28,000. If Joe can afford to pay-off the $28,000 in a five-year payment plan, he saves $30,000 in principal owed while getting a low interest rate.
If you are concerned about mobile home repossession, you should consult an experienced bankruptcy attorney. At Grainger Legal Services, we have years of experience evaluating the financial situations of Alabama individuals and helping them decide whether bankruptcy or a different solution makes the most sense for them. We serve clients in Montgomery, Troy, and Prattville, among other communities throughout the state. Call us at (334) 260-0500 or contact us online to schedule a consultation.