Two Points to Make to Your Bankruptcy Attorney at the Start of Your Case

1. Perhaps remarkably, one of the most aggravating advancements in our continuous foreclosure crisis has to do with mortgage lenders' obstinate resistance to execute with a foreclosure in a timely manner. A lot of typically, this scenario occurs in a Chapter 7 Personal bankruptcy in which the debtor has identified that it is in his/her benefit to surrender a home. As all of us understand, specify anti-deficiency laws determine whether a home mortgage loan provider may look for a deficiency judgment after a foreclosure. We likewise know that an Insolvency Discharge will protect that homeowner from such liability despite what the debtor's state statutes need to state concerning whether a mortgage lending institution might seek a deficiency judgment. While defense from post-foreclosure liability to the mortgage lending institution remains an effective benefit used by the Insolvency Discharge, a fairly brand-new source of post-bankruptcy petition liability has actually emerged in the last couple of years. One that our customers are all too regularly amazed by if we overlook to use significantly detailed guidance before, during, and after the filing of a bankruptcy petition. What I am discussing, naturally, are Homeowners Association fees, and to a lower level, municipal water and garbage costs. As we all ought to know well, such repeating fees build up post-petition, and exactly due to the fact that they repeat post-petition, they make up brand-new financial obligation-- and as new debt, the Insolvency Discharge has no effect whatsoever upon them. The typical case includes a Chapter 7 personal bankruptcy debtor who chooses that he or she can not perhaps manage to keep a home. Possibly this debtor is a year or more in arrears on the very first home loan. Possibly the debtor is today (as prevails here in California) $100,000 or more undersea on the property, and the lending institution has refused to offer a loan adjustment regardless of months of effort by the homeowner. The home in all probability won't deserve the secured quantities owed on it for decades to come. The month-to-month payment has actually adapted to an installment that is now sixty or seventy percent of the debtor's household income. This house needs to be surrendered. The problem, of course, is that surrender in bankruptcy does not correspond to a prompt foreclosure by the lending institution. In days past, say 3 or perhaps simply 2 years back, it would. However today, home loan lenders merely do not desire the property on their books. I often picture an analyst deep within the bowels of the home mortgage lending institution's foreclosure department taking a look at a screen showing all the bank-owned homes 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 amount it provided simply four years ago. We could continue about the recklessness of the bank's decision in having actually made that initial loan, however that is another post. Today the home is a hot potato, and there is absolutely nothing the debtor or the debtor's personal bankruptcy attorney can do to compel the mortgage loan provider to take title to the home. Thus the quandary. There are other celebrations involved here-- most significantly, homeowners associations. HOAs have in lots of locations seen their monthly fees plummet as increasingly more of their members have

2. actually defaulted. Their ability to collect on delinquent association fees was long thought to be protected by their ability to lien the home and foreclose. Even if their lien was subordinate to an initially, and even a second mortgage lien, in the days of house appreciation there was almost constantly adequate equity in realty to make the HOA whole. But no more. Today HOAs often have no hope of recovering unpaid from the equity in a foreclosed home. So, where does this all leave the bankruptcy debtor who must surrender his/her home? In between the proverbial rock and a tough location. The loan provider might not foreclose and take the title for months, if not a year after the personal bankruptcy is filed. The HOAs charges-- together with water, trash, and other community services-- continue to accrue on a regular monthly basis. The debtor has actually often moved along and can not rent the property. However be guaranteed, the owner's liability for these recurring fees are not released by the insolvency as they occur post-petition. And she or he will stay on the hook for brand-new, recurring costs up until the bank finally takes over the title to the home. HOAs will normally take legal action against the homeowner post- discharge, and they'll strongly look for attorneys' fees, interest, costs, and whatever else they can consider to recover their losses. This can sometimes result in 10s of countless dollars of brand-new debt that the just recently insolvent debtor will have no hope of releasing for another 8 years, ought to he or she submit bankruptcy once again. This problem would not arise if mortgage lending institutions would foreclose without delay in the context of a personal bankruptcy debtor who gives up a home. We as personal bankruptcy lawyers can literally ask that loan provider to foreclose already-- or, even better, accept century law firm jacksonville florida a deed-in-lieu of foreclosure, but to no avail. They simply don't want the residential or commercial property. What suggestions, then, should we offer to debtors in this circumstance? The options are few. If the debtor can hold on till the residential or commercial property really forecloses prior to filing bankruptcy, this would eliminate the problem. But such a delay is not a luxury most debtors can manage. If this option is not available, the debtor needs to either live in the property and continue to pay his/her HOA dues and community services or if the property is a second home, for example, an attempt to rent the property to cover these continuous expenses. In the last analysis, the Bankruptcy Code never ever pondered this scenario. Nor did most states' statutes governing house owners' associations. A remedy under the Bankruptcy Code to oblige home loan loan providers to take title to surrendered real estate would be ideal, however offered the problems facing this Congress and its political orientation, we can easily say that the possibility of such a legislative solution is beyond remote.