Nov 8, 2019 | zoeyhyzg |
Perhaps surprisingly, one of the most frustrating developments in our ongoing foreclosure crisis involves mortgage loan providers' obstinate resistance to execute with a foreclosure in a prompt way. A lot of frequently, this situation develops in a Chapter 7 Bankruptcy in which the debtor has actually determined that it is in his/her benefit to give up a house. As all of us know, specify anti-deficiency laws determine whether a mortgage lender may seek a deficiency judgment after a foreclosure. We similarly understand that a Bankruptcy Discharge will safeguard that property owner from such liability regardless of what the debtor's state statutes have to say worrying whether a home loan loan provider might seek a shortage judgment. While protection from post-foreclosure liability to the mortgage loan provider remains a powerful benefit provided by the Insolvency Discharge, a fairly new source of post-bankruptcy petition liability has actually occurred in the last couple of years. One that our customers are all too regularly surprised by if we overlook to provide progressively comprehensive suggestions prior to, during, and after the filing of a bankruptcy petition. What I am discussing, obviously, are Homeowners Association charges, and to a lesser level, community water and trash fees. As all of us ought to know well, such recurring charges build up post-petition, and specifically since they recur post-petition, they constitute new debt-- and as new debt, the Personal bankruptcy Discharge has no impact whatsoever upon them. The typical case includes a Chapter 7 personal bankruptcy debtor who chooses that she or he can not potentially afford to keep a house. Possibly this debtor is a year or more in arrears on the first home loan. Maybe the debtor is today (as prevails here in California) $100,000 or more undersea on the property, and the loan provider has declined to provide a loan adjustment regardless of months of effort by the property owner. The home in all possibility will not deserve the protected quantities owed on it for decades to come. The regular monthly payment has gotten used to an installment that is now sixty or seventy percent of the debtor's household earnings. This house should be surrendered. The issue, naturally, is that surrender in insolvency does not correspond to a prompt foreclosure by the lending institution. In days past, say three or perhaps just 2 years earlier, it would. However today, home loan loan providers just do not want the home on their books. I typically imagine an analyst deep within the bowels of the mortgage loan provider's foreclosure department looking at a screen showing all the bank-owned properties in a given zip code. This would be another one, and the bank does not desire another bank-owned property that it can not sell at half the quantity it lent simply 4 years earlier. We could go on and on about the recklessness of the bank's choice in having actually made that original loan, but that is another short article. Today the property is a hot potato, and there is nothing the debtor or the debtor's personal bankruptcy lawyer can do to oblige the home loan lending institution to take title to the residential or commercial property. Thus the quandary. There are other parties included here-- most significantly, homeowners associations. HOAs have in numerous areas seen their month-to-month dues drop as more and more of their members have defaulted. Their ability to collect on delinquent association charges was long believed to be protected by their ability to lien the home and foreclose. Even if their lien was subordinate to a first, and even a second mortgage lien, in the days of house gratitude there was almost always sufficient equity in realty to make the HOA whole. But no more. Today HOAs frequently have no hope of recuperating unpaid from the equity in a foreclosed residential or commercial property. So, where does this all leave the personal bankruptcy debtor who must surrender his or her property? In between the proverbial rock and a difficult location. The lender may not foreclose and take the title for months, if not a year after the bankruptcy is submitted. The HOAs fees-- in addition to water, garbage, and other local services-- continue to accrue on a regular monthly basis. The debtor has typically moved along and can not lease the residential or commercial property. However be assured, the owner's liability for these recurring fees are not released by the insolvency as they emerge post-petition. And she or he will stay on the hook for new, recurring fees up until the bank lastly takes control of the title century law firm jacksonville fl to the home. HOAs will usually take legal action against the homeowner post-discharge, and they'll strongly seek lawyers' fees, interest, expenses, and whatever else they can think of to recoup their losses. This can in some cases result in tens of thousands of dollars of new financial obligation that the just recently bankrupt debtor will have no hope of releasing for another 8 years, should he or she file personal bankruptcy once again. This problem would not occur if home loan lenders would foreclose immediately in the context of a bankruptcy debtor who gives up a home. We as insolvency attorneys can literally plead that lender to foreclose already-- or, better yet, accept a deed-in-lieu of foreclosure, but to no avail. They just don't desire the property. What guidance, then, should we offer to debtors in this circumstance? The options are few. If the debtor can hang on up until the property actually forecloses prior to submitting bankruptcy, this would get rid of the problem. But such a hold-up is not a luxury most debtors can pay for. If this choice is not offered, the debtor needs to either reside in the residential or commercial property and continue to pay his/her HOA dues and municipal services or if the residential or commercial property is a 2nd house, for example, an attempt to lease the home to cover these continuous expenses. In the final analysis, the Personal bankruptcy Code never ever contemplated this scenario. Nor did most states' statutes governing property owners' associations. A solution under the Insolvency Code to force home mortgage lenders to take title to gave up real property would be perfect, however given the problems facing this Congress and its political orientation, we can easily state that the possibility of such a legal solution is beyond remote.
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