Wednesday, April 16, 2014

Filing Bankruptcy Case - Amount of Filing Fee

A filing fee needs to be paid to the Clerk of the Bankruptcy Court when a bankruptcy case is filed. The Judicial Conference of the United States Court announced that effective June 1, 2014, the filing fees for filing a bankruptcy will go up slightly. The new filing fee for a chapter 13 case rise from $281.00 to $310.00 and the filing fee for a chapter 7 case will rise from $306.00 to $335.00. 

Sunday, April 13, 2014

Property Excluded from the Bankruptcy Estate - Mere Bare Legal Title

Certain interests in property are not included in a bankruptcy estate. The bankruptcy code provides that the bankruptcy estate includes, with certain exceptions, all legal or equitable interests of the debtor as of the date of the filing of the bankruptcy case. 11 U.S.C. § 541 (a). Section 541 (d), though provides that property in which the debtor only holds "legal title and not an equitable interest"  becomes part of the estate only to the "extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold." The district court stated that the "plain language of section 541 (d) provides that if a debtor holds only legal title to property and not an equitable interest, then the equitable interest in such property is excluded from the estate."

In the case of In re: Marcos Antonio Campuzano, Case 11-CV-22929-KAM (S.D. Fla. 2012), the district court reviewed and upheld the bankruptcy court's ruling that the involved bankruptcy debtor only held bare legal title to a certain boat.  The district court noted that this finding was supported by the unrefuted testimony of three witnesses and was therefore not clearly erroneous.  The Bankruptcy Court's ruling was based on the unrefuted testimony of witnesses, whom the court deemed credible,  that the debtor did not make any payments towards the purchase price of the boat, did not have control of the boat, did not have access privileges at the marina, did not use the boat, and did not have any interest in using the boat.  Further testimony was that the debtor agreed to put the title to the boat in his name as at the time of the purchase, the actual owner was not a permanent resident of the United States and had concerns about his ability to be on the title to the boat.

Bankruptcy Schedules Must Completely Disclose Assets - The Doctrine of Judicial Estoppel

The recent case of Javier Milian vs. Wells Fargo & Company, et al,, Case 13-CV-22201-KMM (February 18, 2014) illustrates the importance of a person completing his bankruptcy schedules fully and accurately - including as to unfixed and contingent claim. In this case, the doctrine of "judicial estoppel" was applied to bar the debtor from pursuing a claim against his mortgage lender as he failed to list the claim in his bankruptcy schedules.  In this case, the Bankruptcy Court's decision to abstain and also apply the doctrine of judicial estoppel was upheld.

Judicial Estoppel

The District Court upheld the Bankruptcy Court's application of the doctrine of "judicial estoppel" barring the debtor's adversary proceeding.  The District Court explained that the judicial estoppel is an equitable doctrine that "prevents a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding." Barger v. City of Cartersville, GA, 348 F.3d 1289, 1293 (11th Cir. 2003),  Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1284 (11th Cir. 2002).  The District Court noted that bankruptcy petitions are required "under penalty of perjury to disclose in their bankruptcy petitions all fixed and contingent assets, including all causes of action that the debtor knows about or that exist at the time the bankruptcy action being, as well as those that the debtors learn about before the bankruptcy case is closed." 11 U.S.C. § 521.  The two factors in the application of judicial estoppel in a particular case are whether the inconsistent positions were made under oath in the prior proceeding and whether the inconsistencies have been calculated to make a mockery of the judicial system.

Pro Se Litigants

The District Court's ruling is also instructive to pro se litigant - that is, persons who represent themselves in court with the assistance of an attorney.  The District Court noted that  "judges cannot and will not give litigants legal advice" and that a litigant does not have the constitutional right to receive personal instruction from the trial court judge on courtroom procedure. The District Court also stated that the constitution does not require a trial court judge to take over the chores for a pro se litigant that would normally be taken care of by a trained attorney.  McKaske v. Wiggins, 465 U.S. 168, 183-84 (1984).

Saturday, April 12, 2014

Bankruptcy Discharge of Divorce Attorneys Fees

One spouse of often ordered to pay the attorney fees of the other spouse in a divorce.  In some cases, this obligation to pay the involved attorneys fees is dischargeable in bankruptcy.  This is one of the many issues presented in the application of bankruptcy law to obligations of alimony, child support, and marital settlement agreements. The bankruptcy code's provisions as to the dischargeability of support obligations were significantly changed in the 2005 amendments to the bankruptcy code. It should be noted that there are some differences in the provisions in chapter 7 and chapter 13 bankruptcy.

In some cases, divorce related attorney fees owed are dischargeable in bankruptcy, but in other cases they are not. It generally is based on whether the involved attorney fee fits within the bankruptcy code's definitition of a "domestic support obligation" (DSO).  A decision issued in the Bankruptcy Court in Miami in 2009 in the case of In re Maria D. Lopez, Case No. 08-18101-BKC-LMI (Bankr. S.D.Fla. April 17, 2009)(Isicoff, J.) provides an an example of the application of the rules.  In this case, the Bankruptcy Court held that the involved attorney fees were not entitled to priority status as a "domestic support obligation".

In this case, it was the ex-wife who sought to discharge her obligation to pay her ex-husband's attorney fees that he incurred in their dissolution of marriage case. In the dissolution of marriage case, the family cout awarded the debtor's ex-husband his attorney fees.  When the ex-wife filed for bankruptcy under chapter 13, the ex-husband sought to have these attorneys fees paid in full on a priority status as a "domestic support obligation."  riority status would require full payment and the lack thereof would subject to claim to status as a general unsecured creditor and typically only a small dividend.

Definition of a Domestic Support Obligation

The Court explained that the Bankruptcy Code provides that a DSO owed to a former spouse is entitled to priority status.  The Court noted thought that while an award of attorney fees in some instances may be considered a DSO, not every award of attorney fees in a dissolution of marriage case are entitled to DSO status.

The Court reviewed that  for a claim to be considered as a DSO, it must meet all the requirements of section 101(14A) of the Bankruptcy Code. Generally, the claim must be
  1. owed to a spouse, former spouse, or child of the debtor, or such child's parent or guardian
  2. be in the nature of alimony, maintenance or support
  3. established or subject to establishment by reason of a separation agreement, divorce decree, or property settlement agreement or by court order
  4. not assigned to a nongovernmental entity unless voluntarily assigned for purposes of collection

"In the Nature of Alimony, Maintenance, or Support"

At issue in this case was whether the attorney fees were  "in the nature of alimony, maintenance, or support."
The Court rejected the claimant's argument that the attorney fees met the requirement of being "in the nature of alimony, maintenance or support" finding that they instead related to something else - custody, parentage, or visitation.

The Court noted that the determination of what constitutes "support" is a matter of federal law. The Court further noted that in determining whether an award of state court attorneys' fees constitutes "support", the Bankruptcy Court may "only undertake a simple inquiry as to whether the debt can be characterized as 'support'" and that it may look to state law for guidance on whether the obligation should be considered in the nature of "support". Also the Court noted that the state court judgment awarded claimant attorney fees based on the debtor's litigation misconduct and not based on their respective wages or ability to pay.

Discharge of Malpractice Judgment in Bankruptcy

All debt is generally discharged in a chapter 7 bankruptcy case with certain important exceptions. A recent case decided during January, 2014 by the Bankruptcy Court in Miami involved the dischargeability of a dental malpractice claim.

In this case, a former dental patient obtained a judgment for dental malpractice in the Dade-County Circuit Court in 2011. In 2012, the dentist filed for chapter 7 bankruptcy relief.  The former patient sought to except the dental malpractice claim from the chapter 7 discharge on the alleging that the dentist obtained his fee under "false pretenses, a false representation, or actual fraud..." 11 U.S.C. § 523(a)(2)(A).  The Court noted that the action for exception from discharge was not brought under 11 U.S.C. § 523(a)(6) on an allegation of "will and malicious injury by the debtor to another entity or to the property of another entity."  The former dental patient alleged that there was a "false representation" or "fraud" claiming that the dentist did not disclose his drug dependency and lapse in malpractice insurance.

The bankruptcy court judge explained that to establish a "false representation" under 11 U.S.C. § 523(a)(2)(A) requires proof of a false or misleading statement with the intent to deceive, inducing a person to turn over money or property.  The court stated that the establishment of a  "false representation" requires an "expressed misrepresentation - oral or written"  and that "[s]ilence, or lack of communication, cannot deliver proof by a preponderance of the evidence."  Hanft v. Church, (In re Hanft, N.D., P.A.), 315 B.R. 617 (S.D. Fla. 2002).  In this case, the court did not find that the dentist had made any misrepresentations that were intended to deceive the former patient and cause her to turn over money or property.  The court noted that the dentist performed the services while licensed and insured.

The court also found that there was a lack of "actual fraud." The court reviewed that the establishment of "actual fraud" under this section "refers to common law fraud, and requires" the proof by a preponderance of the evidence that 1. there was a false representation made with the purpose and intent of deception, 2. that the representation was relied upon, 3. that the reliance was justifiably founded, and 4. that the person was damaged as a result of the false statement. Field v. Mans, 516 U.S. 59, (1995).   The court noted that "actual fraud" may be proven by a misrepresentation that is express or implied, but proof of actual fraud is required and not fraud merely implied in law.  The court found that the former patient did not prove express or implied "actual fraud" was committed.

The Court also rejected the former patient's argument that the dentists silence or omissions regarding his drug use or lapse in insurance coverage constituted "fraud" giving rise to an exception to discharge. The Court held that there was no proof that the dentist was under "any duty to disclose facts regarding either his drug use or his business' fiscal operations..."   The court stated that no "statute or legal case was presented to prove  that illnesses, weaknesses or impairments must be disclosed by medical professionals to their patients."

The Court also held that the dentist's failure to disclose the lapse of the malpractice insurance did not of itself constitute "fraud."  The Court distinguished case law presented with regard to the lapse of malpractice insurance involving physicians as opposed to dentists as the Florida regulations as to each profession differ. The Court noted that dentists are cover by the provisions of Chapter 466 of Florida Statutes while physicians are governed by the provisions of Chapter 458.  The Court pointed out that while physicians are required to disclose the failure to carry insurance, dentists are not.

Finally, the Court rejected that former patient's argument that malpractice judgments should be excepted from bankruptcy discharge when there was reckless action or their was a lack of malpractice insurance as the U.S. Supreme Court has already rejected that argument in the case of Kawaauhau v. Geiger, 523 U.S. 57 (1998).

The Court though did express sympathy for the unfortunate victim of the dentist's malpractice and suggest that it may be appropriate for the Florida legislature to require dentists to disclose the lack of malpractice insurance as is required of physicians or for the Board of Dentistry to establish a fund "like that established by the Florida Bar for victims of a lawyer's misappropriation or embezzlement."

Appeal of a Bankruptcy Court's Ruling - the Standards upon Appeal

Bankruptcy court decisions are normally appealed to the location's federal district court.  Certain standards are used by a district court in making its decision upon appeal.

When a district court reviews the bankruptcy court's decision, the bankruptcy court's factual findings are accepted unless they are "clearly erroneous" with due regard being given to the bankruptcy court's opportunity to judge the credibility of the witness. In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996).

The bankruptcy court's legal conclusions are reviewed de novo - that is afresh or anew.  Mixed questions of law and fact are also reviewed de novo. In re Lentek Int'l, Inc., 346 Fed. Appx. 430, 433 (11th Cir. 2009).  Under "de novo" review, the district court independently examines the law and draws its own conclusions after apply the law to the facts of the case without regard to the decision made by the bankruptcy court. In re Piper Aircraft Corp., 244 F.3d 1289, 1295 (11th Cir. 2001).

Friday, April 11, 2014

Eligibility for Chapter 13 Bankruptcy Relief - Debt Limitations and Waiver

In the case of General Lending Corp. v. Jesus Cancio, et al., Case No. 13-21030-CIV-Marra (SD Fla. 2014), the court reviewed a ruling by the Bankruptcy Court dealing with the issue of the eligibility amounts allowed for filing under chapter 13 and whether these eligibility amounts restrictions may be waived.

The District Court reviewed the bankruptcy code's provision for eligibility to be a debtor under chapter 13 as set forth in 11 USC § 109 (e) which limits chapter 13 relief to individuals with "regular income" owing secured debts of less than $1,081,400. and unsecured debts less than $360,475.00. Only "noncontingent" and "liquidated" debts are included in making this calculation.  The Court noted that this eligibility determination is to be made as of the petition date. In re De La Hoz, 451 B.R. 192, 194 (Bankr. M.D. Fla. 2011). The Court noted that normally these restrictions are "strictly construed".

The Court further noted that the 11th Circuit Court of Appeals has not yet addressed the issue of whether this "eligibility" limitation is "jurisdictional" but that the majority of the courts that have addressed the issue have found this it is not jurisdictional in nature.  The Court adopted the majority view of the courts that the eligibility limitations may be waived if a creditor fails to raise an objection to the debtor's eligibility in a timely manner. Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. 1989).

The District Court upheld the Bankruptcy Court's ruling rejecting the creditor's argument that its objections were not barred by laches.  The Court explained that laches arises after an "unreasonable and inexcusable delay."  The Court noted that laches is a doctrine whereby one side's inaction and the other side's legitimate reliance may bar claims for equitable relief.

The District Court unheld the Bankruptcy Court's ruling finding no error under the applicable standards of review.

Thursday, April 10, 2014

Stop Mortgage Foreclosure by Filing for Mortgage Modification

In many cases, you can stop a mortgage foreclosure by filing for a mortgage modification under the HAMP program. The application for a mortgage modification can be filed directly with the mortgage lender or was part of a chapter 13 bankruptcy you may file. If you are on the eve of a foreclosure sale, I would probably be best to file a chapter 13 bankruptcy in order to insure the stopping of your foreclosure sale.

If you file the modification as part of a chapter 13 bankruptcy case, the modification request will proceed under the Miami Bankruptcy Court's new "LMM" program (Loss Mitigation Mediation) which has been very successful in helping homeowners achieve a mortgage modification.

Suspension of  Referral or Foreclosure or Foreclosure Sale

Immediately upon a mortgage borrower's application for consideration for a HAMP mortgage modification, a may not refer a mortgage loan for foreclosure or conduct a scheduled foreclosure sale unless

  • the borrower has been evaluated for HAMP and determined to be ineligible for the program   
  • borrower accepts a Trial Payment Plan and fails to make current trial period payments unless
    • the mortgage servicer is evaluating the borrower for a HAMP Tier 2 application until the evaluation for a HAMP Tier 2 is complete and the borrower is determind to be ineligible for HAMP Tier 2
  • the borrower or co-borrower states he is not interested in pursuing a HAMP modification
  • the remaining non-borrower was unable to assume the note and re-apply for HAMP during the period provided under the rule
  • the Loss Mitigation Application is incomplete and i. more than 120 days has passed or ii. more than 30 days has passed since the servicer sent the borrower an "Incomplete Information Notice"
  • If the borrower submits an incomplete Loss Mitigation Application the mortgage servicer if the application still remains incomplete after the later of  
  • a delinquency for more than  four months 
  • 30 days has has passed since the servicer sent the borrower an "Incomplete Information Notice" and the Loss Mitigation Application still is incomplete

Suspension of Foreclosure after Referral for Mortgage Foreclosure 

If the foreclosure has already been filed, the mortgage servicer must suspend the foreclosure process upon the borrower's accept of a Trial Payment Plan upon verified income and for the duration of the trial period

Suspension after Foreclosure Sale Already Set

If a borrower submits a HAMP application at least 7 business days prior to a scheduled foreclosure sale, the mortgage servicer must immediately suspend the foreclosure sale for a period of time as necessary to evaluate the borrower's HAMP application if  the new application under any of the following circumstances:
  • If the borrower had made at least one payment under a HAMP Tier 1 Temporary Payment plan
    • unless there has been a change in circumstances
  • If the borrower had defaulted under a HAMP Permanent Modification  and either i. 12 months has passed since the effective date of the modification or ii. the borrower has experienced a change in circumstances 
  • the borrower was previously determined to be ineligible for a HAMP Tier 1 modification

Tuesday, April 8, 2014

Florida Homestead Exemption Lost by Abandonment

The homestead exemption provided by the Florida constitution in article X, section 4 (a) may be lost by "abandonment".  Various types of conduct may constitute "abandonment."

The District Court for the Southern District of Florida, in the case of Carpenter v. Brown, 13-CV-61183-KMM (SD Fla. 2013), addressed the issue of whether the placing of a property on the market for sale or the entering into a sales contract constitutes the abandonment of the homestead exemption.    In this case, the debtor closed on a contract for the sale of his property eight days after filing for chapter 7 relief.  In the case, the District Court upheld the Bankruptcy Court's disallowance of the exemption of the real property as a homestead as it found that the debtor did not have the intent to remain permanently in the property on the date the bankruptcy case was filed.

Article X, section 4 (a)(1) of the Florida Constitution provides for the homestead exemption. The Court explained that the definition of a "homestead" is liberally construed to protect homeowners. In re: Brown, 165 B.R. 512, 514 (Bankr. MD Fla. 1994).  But the Court noted, that at the same time, the Court must "take care to prevent it from being an instrument of fraud."  Once a property is established as a homestead it does not lose that status until it is "abandoned".  The Court explained that a "homestead has been abandoned when it is no longer a 'bona fide' home and place of permanent residence."  The Court noted that the main consideration in the determination of whether a homestead has been abandoned is the "owner's intent" and the physical absence from the property is "not determinative." 

In this case, the District Court, which was acting in its appeals capacity of the Bankruptcy Court's decision, upheld the Bankruptcy Court's finding that the debtor failed to satisfy the "intent prong" of the homestead exemption. The Bankruptcy Court found that the debtor did not possess the requisite intent to live permanently at the property on the date of the filing of the bankruptcy case and that he had therefor abandoned the property as being his homestead. 

The District Court rejected the debtor's argument that despite the contract for the sale of the property, the homestead was still intact as he still lived there.  The District Court cited a prior rulings in other cases which held that the placing of property on the market for sale or lease may constitute the abandonment of the intent to use and occupy the property as a permanent place of residence. The property would no longer qualify for the homestead exemption unless the debtor had the intent or ability to use the proceeds to establish a new homestead. Smith v. Hamilton, 428 So. 2d 382, 384 (Fla. Dist. Ct. Appl. 1983). 

In this case, the District Court stated that the debtor did not display an intention to reinvest the sales proceeds in a new homestead. The debtor noted that the spent a portion of the sales proceeds on moving expenses and moved to Massachusetts.  The Court reviewed that the sales proceeds of a sale of a homestead are only exempt if "the seller shows by a preponderance of the evidence an abiding good faith intention prior to and at the time of the sale of the homestead to reinvest the proceeds in another homestead within a reasonable time." Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 201, 206 (Fla. 1962). The Court noted that here is was undisputed that the debtor did not have the intention to reinvest the proceeds in another homestead

Friday, April 4, 2014

Stop Mortgage Foreclosure with Chapter 13 Bankruptcy

You can stop your mortgage foreclosure by filing a chapter 13 bankruptcy under most circumstances.  Chapter 13 will give you an opportunity to apply for a mortgage modification while under the protection of the Bankruptcy Court.

A chapter 13 bankruptcy must be filed before the foreclosure sale takes place if desire to save your real property. Under chapter 13 you are required to present a plan of reorganization.

Mortgage Modification

In Chapter 13  you are able to use the Bankruptcy Court's new "LMM" program - Loss Mitigation Mediation. You and the mortgage company are able to communicate over a special internet portal so documents do not get lost.

WipeOut "Under-Water" Second Mortgages

Under chapter 13 bankruptcy, you can avoid or wipe-out your second mortgage if it is wholly "under-water." 

Thursday, April 3, 2014

Mortgage Modification under the Bankruptcy Court's New "Loss Mitigation Mediation" Program

The Bankruptcy Courts in Miami has recently started a new program to help people get a mortgage modification in your to help them save their home from foreclosure with the assistance of the bankruptcy court as part of their  chapter 13 bankruptcy case.  Most of the time, the homeowner seeks to modify their first mortgage and is able to wipe out their second mortgage as the second mortgage is "underwater"

The program is called "Loss Mitigation Mediation" (LMM). It is available for homeowners and certain investment property owners who are seeking a modification of their mortgage and may be facing foreclosure of the mortgages on their property.  As part of the LMM program, the Bankruptcy Court appoints a meditor to assist the parties in reaching an agreement.  LMM has been successful in about 80% of the cases in other parts of Florida that previously instituted the program. One advantage of this program is that it provides for better communication with the mortgage lender in the process of negotiating a mortgage modification. A mediator is appointed by the Bankruptcy Court to help the parties negotiate an agreement.

As part of this process, an order is issued by the Bankruptcy Court requiring your mortgage lender to register with the internet portal and negotiate with you for a mortgage modification. The documents that are needed for the mortgage company to consider the mortgage for a modification are submitted on an internet portal for better communications.  \ All communications between the parties is done through the LMM Portal. After the order is entered the homeowner, mortgage lender and mediator communicate and meet to mediate a modification. In the meeting, all parties must be really and able to settle all matters.

Wednesday, April 2, 2014

Florida Mortgage Foreclosure Deficiency Judgments

Recent Developments in the Collection of Deficiency Judgments after Mortgage Foreclosure

For the past 30 years in Miami-Dade County, Florida, large mortgage companies and banks have virtually never pursued a "deficiency" judgment after a mortgage foreclosure on a first mortgage.   The best advice at the time was not to be concerned about a deficiency judgment.

Recently though, things have apparently changed.  I recently conferred with a client who received a letter from a company that bought the right to pursue a deficiency after a foreclosure sale. It threatened to sue them for an alleged $200,000 deficiency.

The law firm that wrote the threatening letter was a reputable law firm. I checked out the company that held the debt. It was actually a legitimate company - Dyck O'Neal, Inc. - in Texas - engaged in the business of buying up bad debt of various types for pennies on the dollars for many years.

Deficiency Judgment

A typical residential mortgage foreclosure action usually only seeks a judgment setting a foreclosure sale of the real estate. It does not seek a "money judgment" upon which the mortgage company can seek "execution" or collection of the sum of due.   This judgment of foreclosure only allows the mortgage lender to set a foreclosure sale.  A deficiency judgment can be pursued like any other judgment for a debt.

Limitation on Amount of Deficiency

The new "Florida Fair Foreclosure Act" effective on June 7, 2013 provides a limitation on the amount to be allowed as a deficiency regarding foreclosures of owner-occupied residential real estate. The amount to be awarded may not exceed the difference between the foreclosure judgment amount (or in the case of a short sale, the outstanding debt) and the fair market value of the property on the date of the foreclosure sale.

One-Year Statue of Limitations to Seek Deficiency Judgment

The new act also provides in Florida Section 95.11(5)(h) that for actions file on and after July 1, 2013,  a claim of deficiency, subsequent to the foreclosure of one-to-four family residential properties, must be filed within one year from the day after (1) the certificate of title is issued or (2) the mortgage lender accept a deed-in-lieu of foreclosure.  For other actions, a deficiency claim must be brought by the earlier of (1) five years after such action accrued or (2) by July 1, 2014.

Monday, March 31, 2014

"Short Sale" of Real Estate

A short sale involves the mortgage lender (or lenders) agreeing to a homeowner to sell his home for a price less than enough to payoff the mortgage in full. The lender is agrees to satisfy its mortgage lien for an amount less than a full pay-off so as to allow the sale of the real estate.  As the net proceeds of the sales price is less than the full amount due on the mortgage lien(s), the mortgage holder(s) must agree to accept a "short" payoff in exchange for release of its mortgage lien.

Many homeowners facing foreclosure consider a "short sale", but have a difficult time understanding all of its implications. Some property owners that attempt to achieve a short sale are not successful in their efforts. Many seem to indicate frustration in the attempt to communicate with the mortgage lender(s) and/or actually complete a short sale. In addition, many lenders may be under contractual or regulatory restrictions that may not permit them to agree to a short sale.

Apparently the most difficult item in the short sale process is communicating with the lender and any second mortgage holder, such as the holder of a "home equity loan." In addition to the agreement of the first mortgage holder, the agreement of any junior mortgage holders must also be obtained. Outstanding judgments or tax liens may also be an issue as the buyer would need to receive clear title.

The process of obtaining a short sale usually takes several weeks to pursue and one needs to furnish substantial documentation, including personal financial information such as paycheck stubs, bank statements, 401(k) statements, and tax returns. One may also need to furnish information about a hardship.

Release from Liability

One of the most important issues in the short sale is whether the homeowner is actually released from liability for the "short" or unpaid amount. If the mortgage company and/or the second mortgage company do not release a person from liability for the unpaid portion, the benefit of a short sale to a homeowner may be questioned.

Saturday, March 29, 2014

Saving Your Home from Foreclosure under Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often used to save a person's home or investment property  from foreclosure. Under chapter 13, you are allowed to stop the mortgage foreclosure case and propose a plan to reorganize your mortage payments. The chapter 13 case though must be filed before the foreclosure sale.

Cure Mortgage Arrearages

One typical plan provides for the catching your past due mortgage payment. The chapter 13 plan usually involves paying off the mortgage arrearage over a 3 to 5 year period in addition to making your regular ongoing monthly mortgage payments.

The Bankruptcy Court's New Loss Mitigation Mediation Program

The Bankruptcy Court in Miami started a new mortgage mediation program on April 1, 2013. It has been very successful in other parts of Florida where the program was previously instituted several months ago. Under this program a mediator is appointed by the Bankruptcy Court to assist in the process and documents and communications are exhanged over a special internet portal.

Avoid Second Mortgage 

If your home has decreased in value, sometimes you are able to wipe out or "avoid" your second mortgage. For example, if you owe $300,000 on your first mortgage and $100,000 on your second mortgage and your home has gone down in value to $250,000, there is no equity or value to "secure" the second mortgage. Under these circumstances, the chapter 13 plan (and related section 506 motion) may provide to wipe out or avoid the second mortgage lien. The $100,000 debt owed on the second mortgage will be wholly unsecured and usually only receive a small dividend like the credit cards receive -- typically around five cents on the dollar.

A certified copy of the order avoiding the second mortgage may be recorded in the county public records to document that the second mortgage is void.

Friday, March 28, 2014

Chapter 7 and Chapter 13 Bankruptcy Debt Relief

Chapter 13 and chapter 7 bankruptcy are the types of bankruptcy used by individuals to obtain debt relief.  Chapter 13 and chapter 7 bankruptcy each provides for different requirements and relief.  In general chapter 13 provides for an opportunity to reorganize your debt and chapter 7 provides for an opportunity to just discharge your debt.

Chapter 13 bankruptcy is often used by people with higher incomes and substantial non-exempt property to formulate a chapter 13 plan to reorganize their debt while under the protection of the bankruptcy court. Under a chapter 13 plan, you are able to reorganize your secured debt (such as mortgages and car loans) as wells as unsecured debt (credit cards and personal loans).  Often you are only required to back only  10% to 20% of you unsecured debt and discharge the rest. A typical chapter 13 plan is over a period of 3 to 5 years. 

Chapter 13 bankruptcy is also used by people who are behind with their mortgages and to save their homes from foreclosure. Under a chapter 13 plan, you are able to take various approaches. You may reinstate your mortgage by catching up-to-date your past due payments over a period of up to 5 years.  You may use the bankruptcy court's new loss mitigation mediation ("LMM") program to negotiate with your mortgage company to achieve a modification of your mortgage. Totally underwater second mortgages on residential property may be wholly avoided. Maintenance association liens may be avoided to the extent they are not secured by equity in the real estate.   

Chapter 7 bankruptcy is usually used by people with lower income and little non-exempt property. Under chapter 7 unsecured debt, such as credit cards and loans, is discharged, unless it falls within the categories of non-dischargeable debts, such as student loans and some types of taxes.