Making Considerations While Selecting a Bankruptcy Lawyer

1. Maybe remarkably, among the most discouraging developments in our continuous foreclosure crisis involves mortgage loan providers' obstinate resistance to carry through with a foreclosure in a timely way. The majority of typically, this situation occurs in a Chapter 7 Personal bankruptcy in which the debtor has determined that it is in his/her finest interest to surrender a home. As all of us understand, specify anti-deficiency laws determine whether a home mortgage lender may seek a shortage judgment after a foreclosure. We likewise know that an Insolvency Discharge will safeguard that house owner from such liability despite what the debtor's state statutes need to say concerning whether a mortgage loan provider might seek a deficiency judgment. While defense from post-foreclosure liability to the home mortgage loan provider stays an effective advantage offered by the Bankruptcy Discharge, a relatively brand-new source of post-bankruptcy petition liability has actually arisen in the last couple of years. One that our clients are all too often shocked by if we disregard to use progressively extensive advice before, throughout, and after the filing of a bankruptcy petition. What I am talking about, naturally, are Homeowners Association charges, and to a lesser degree, municipal water and trash charges. As we all ought to understand well, such recurring fees accumulate post-petition, and exactly since they recur post-petition, they make up brand-new financial obligation-- and as brand-new financial obligation, the Insolvency Discharge has no effect whatsoever upon them. The typical case involves a Chapter 7 bankruptcy debtor who chooses that he or she can not possibly afford to keep a house. Perhaps this debtor is a year or more in defaults on the very first mortgage. Perhaps the debtor is today (as prevails here in California) $100,000 or more underwater on the property, and the loan provider has actually declined to provide a loan modification in spite of months of effort by the property owner. The home in all probability will not be worth the secured quantities owed on it for years to come. The regular monthly payment has changed to an installment that is now sixty or seventy percent of the debtor's family earnings. This house must be surrendered. The problem, of course, is that surrender in personal bankruptcy does not relate to a prompt foreclosure by the lender. In days past, say three or perhaps just two years earlier, it would. However today, home loan lenders merely do not want the residential or commercial property on their books. I often envision an expert deep within the bowels of the mortgage lending institution's foreclosure department taking a look at a screen showing all the bank-owned residential or commercial properties in a given zip code. This would be another one, and the bank does not want another bank-owned residential or commercial property that it can not cost half the amount it lent simply 4 years earlier. We could continue about the recklessness of the bank's choice in having actually made that original loan, however that is another short article. Today the home is a hot potato, and there is Century Law Inc bbb nothing the debtor or the debtor's bankruptcy lawyer can do to compel the mortgage lender to take title to the residential or commercial property. Hence the dilemma. There are other celebrations included here-- most especially, house owners associations. HOAs have in many locations seen their monthly charges drop as a growing number of of their members have actually defaulted. Their ability to collect on delinquent association dues was long believed to be secured by their capability to lien the residential or commercial property and foreclose. Even if their lien was subordinate to a first, and even a 2nd mortgage lien, in the days of house appreciation there was nearly always adequate equity in property to make the HOA whole. However no more. Today HOAs often have no hope of recuperating previous charges from equity in a foreclosed property. So, where does this all leave the personal bankruptcy debtor who must surrender his or her property? Between the proverbial rock and a tough place. The lending institution may not foreclose and take the title for months, if not a year after the bankruptcy is submitted. The HOAs dues-- together with water, trash, and other local services-- continue to accrue on a monthly basis. The debtor has often moved along and can not rent the residential or

2. commercial property. But be guaranteed, the owner's liability for these recurring costs are not released by the insolvency as they arise post-petition. And he or she will remain on the hook for new, recurring fees till the bank finally takes control of the title to the property. HOAs will generally take legal action against the house owner post-discharge, and they'll aggressively seek lawyers' fees, interest, costs, and whatever else they can think about to recoup their losses. This can often lead to 10s of thousands of dollars of brand-new financial obligation that the recently insolvent debtor will have no hope of releasing for another eight years, ought to she or he file bankruptcy again. This issue would not emerge if home loan lenders would foreclose immediately in the context of a personal bankruptcy debtor who surrenders a home. We as bankruptcy attorneys can literally beg that lender to foreclose currently-- or, even better, accept a deed-in-lieu of foreclosure, however to no get. They simply don't want the property. What suggestions, then, should we offer to debtors in this situation? The choices are few. If the debtor can hold on up until the property really forecloses previous to filing personal bankruptcy, this would get rid of the issue. However such a hold-up is not a high-end most debtors can pay for. If this option is not readily available, the debtor needs to either live in the residential or commercial property and continue to pay his or her HOA charges and municipal services or if the residential or commercial property is a 2nd home, for example, an effort to rent the residential or commercial property to cover these continuous costs. In the last analysis, the Insolvency Code never pondered this situation. Nor did most states' statutes governing house owners' associations. A remedy under the Personal bankruptcy Code to oblige mortgage lending institutions to take title to gave up real estate would be ideal, however given the problems facing this Congress and its political orientation, we can easily say that the possibility of such a legal option is beyond remote.