7 Tips for Choosing a Bankruptcy Lawyer

1. Maybe surprisingly, one of the most discouraging advancements in our continuous foreclosure crisis pertains to mortgage lending institutions' obstinate resistance to finish with a foreclosure in a timely way. The majority of typically, this scenario arises in a Chapter 7 Personal bankruptcy in which the debtor has identified that it is in his/her benefit to surrender a house. As we all know, mention anti-deficiency laws identify whether a mortgage lending institution may seek a deficiency judgment after a foreclosure. We likewise know that a Bankruptcy Discharge will safeguard that house owner from such liability despite what the debtor's state statutes have to state worrying whether a mortgage lending institution might look for a shortage judgment. While protection from post-foreclosure liability to the home mortgage lender stays an effective benefit offered by the Insolvency Discharge, a reasonably new source of post-bankruptcy petition liability has emerged in the last number of years. One that our customers are all too frequently shocked by if we disregard to offer increasingly detailed recommendations before, throughout, and after the filing of an insolvency petition. What I am talking about, of course, are Homeowners Association dues, and to a lesser extent, local water and garbage costs. As we all ought to understand well, such repeating fees accumulate post-petition, and precisely because they recur post-petition, they make up brand-new debt-- and as new financial obligation, the Personal bankruptcy Discharge has no impact whatsoever upon them. The typical case includes a Chapter 7 personal bankruptcy debtor who decides that she or he can not potentially afford to keep a home. Perhaps this debtor is a year or more in arrears on the first home loan. Possibly the debtor is today (as prevails here in California) $100,000 or more underwater on the home, and the loan provider has actually declined to provide a loan adjustment despite months of effort by the house owner. The home in all possibility will not deserve the protected quantities owed on it for years to come. The month-to-month payment has gotten used to an installment that is now sixty or seventy percent of the debtor's household income. This home should be surrendered. The issue, naturally, is that surrender in insolvency does not relate to a timely foreclosure by the lending institution. In days past, say 3 and even simply 2 years ago, it would. But today, home loan loan providers merely don't desire the home on their books. I often envision an analyst deep within the bowels of the home mortgage loan provider's foreclosure department taking a look at a screen revealing all the bank-owned residential or commercial properties in a provided 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 quantity it lent just 4 years century law firm llc earlier. We might go on and on about the recklessness of the bank's decision in having made that initial loan, but that is another article. Today the property is a hot potato, and there is absolutely nothing the debtor or the debtor's insolvency lawyer can do to compel the home loan lending institution to take title to the residential or commercial property.

2. For this reason the dilemma. There are other parties involved here-- most notably, house owners associations. HOAs have in many areas seen their monthly dues plunge as increasingly more of their members have actually defaulted. Their capability to gather on delinquent association dues was long believed to be protected by their capability to lien the residential or commercial property and foreclose. Even if their lien was subordinate to an initially, or perhaps a second mortgage lien, in the days of home gratitude there was nearly constantly enough equity in real estate to make the HOA whole. However no more. Today HOAs often have no hope of recuperating past dues from the equity in a foreclosed home. So, where does this all leave the bankruptcy debtor who must surrender his or her home? Between the proverbial rock and a difficult place. The loan provider might not foreclose and take the title for months, if not a year after the personal bankruptcy is filed. The HOAs fees-- in addition to water, garbage, and other municipal services-- continue to accrue on a monthly basis. The debtor has actually frequently moved along and can not lease the residential or commercial property. But be assured, the owner's liability for these recurring charges are not discharged by the insolvency as they arise post-petition. And he or she will remain on the hook for brand-new, repeating costs until the bank finally takes control of the title to the property. HOAs will normally sue the homeowner post-discharge, and they'll strongly seek attorneys' costs, interest, expenses, and whatever else they can think about to recoup their losses. This can sometimes result in tens of countless dollars of new financial obligation that the recently insolvent debtor will have no hope of releasing for another eight years, need to he or she submit personal bankruptcy once again. This problem would not develop if mortgage lenders would foreclose immediately in the context of an insolvency debtor who surrenders a home. We as personal bankruptcy lawyers can actually beg that lending institution to foreclose already-- or, even better, accept a deed-in-lieu of foreclosure, but to no avail. They just do not want the residential or commercial property. What suggestions, then, should we give to debtors in this circumstance? The choices are few. If the debtor can hold on up until the residential or commercial property in fact forecloses prior to filing bankruptcy, this would eliminate the problem. However such a hold-up is not a high-end most debtors can pay for. If this choice is not readily available, the debtor must either reside in the property and continue to pay his or her HOA dues and community services or if the property is a second house, for instance, an attempt to rent the residential or commercial property to cover these continuous costs. In the final analysis, the Bankruptcy Code never ever pondered this scenario. Nor did most states' statutes governing homeowners' associations. A remedy under the Personal bankruptcy Code to oblige home loan loan providers to take title to surrendered real property would be ideal, but offered the problems facing this Congress and its political orientation, we can easily state that the possibility of such a legal option is beyond remote.