Tag Archives: Foreclosure

Foreclosure

Are the Courts Open?

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As Oklahoma is in the process of reopening after the Caronavirus shut down, it is a reasonable question to ask if the Courts are open.  The answer is — well, that depends?  Which courts and what do you mean by open?

The Federal Court system, which includes the Bankruptcy Courts, has had a paperless filing system in place since 2006.  That means that as a practical matter, the Courthouse no longer accepts paper, and filing by computer doesn’t violate social distancing, so filings have gone on as usual — well, sort of.  I am now reviewing and signing documents by remote using videoconferencing and electronic signatures, but actually filing the documents is the same as it was six months ago.

The Federal system has also moved to allow for telephonic hearings, and it has postponed jury trials and large evidentiary hearings.

The State system, however, is not so simple.  The State courthouses have been closed to the public for more than a month.  Filing of pleadings in existing cases and of new cases continues — by mail, email or fax.  In civil matters, the only hearings being conducted are emergency matters.

All of that is in the process of changing, but every County is proceeding according to its own rules and its own schedule.

What my clients want to know is can they still be sued, what happens if they have a pending answer date, when can a house in foreclosure be set for Sheriff’s Sale?

Those answers aren’t easy, but in most cases court clerk’s offices have been accepting new lawsuits for filing.  However, answer dates have been extended by order of the Supreme Court.  Sheriff’s sales have not been happening, but I am seeing them being reset.  Cleveland County has one set in early June, for instance.  So, if you have had a house in foreclosure, it is worth it to keep an eye on your mail, the court’s online docket and your County Sheriff’s Sale list.

Elaine

Keep in Touch with your Lawyer!

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It is even more important than usual during Coronavirus days to keep in touch with your lawyer — even if all businesses in your area are closed.  Sure, it is always important for all kinds of mundane reasons, like a change of address; but now those worries that are keeping you awake at night?  Call or email your lawyer.  You never know what tricks your lawyer may have stuck up a sleeve, and even if all businesses are closed, lawyers are pretty good about keeping an eye on email.  You might also call the office number.  It might be answered, and it might have a recording giving you information on how to get in touch.

First of all, your lawyer should be keeping a close eye on the various Coronavirus relief bills passing through Congress.  Second, your lawyer should have copies of the actual administrative orders from your Mayor or your Governor closing businesses, etc.  Your lawyer can tell you if they apply to you and how they are or can be enforced.  Your lawyer should also have a feel for employment law issues that may be effecting you, whether you are being told to work or not to work.

A bankruptcy lawyer can also help you with deciding which bills to pay and which not to when money gets really tight.

If you are in a bankruptcy, your lawyer can help you with issues like the reach of the automatic stay and the discharge injunction — that includes helping you shut down the phone calls if some creditor decides bankruptcy doesn’t really apply to them.  If you are in a Chapter 13 plan your lawyer can explain to you what remedies are available to you if you can’t make your plan payments or you need to change your plan terms.

Your  lawyer can also explain to you what court activity is ongoing in your area — are Sheriff’s sales still being held, are foreclosure cases being filed and heard, what about garnishments and collection cases?

Do not just sit at home and make yourself sick with worry.  Lawyers are trained problem solvers.  Sure, we can’t solve all of them, but we can try.

Elaine

What If I Didn’t List Something. . . .

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First of all, there is a huge difference between failing to list an asset, like that mineral interest you inherited from your Grandparents, and failing to list a debt, like a car loan. Either one is perjury, if the omission was intentional; and either one can be grounds for a finding of bankruptcy fraud or even a denial of discharge if the facts are right. So, you really do need to put some time and effort into making sure that your Schedules include all of your assets and all of your debts.

So, what happens if you missed something? Assets are a whole different issue, I will touch on another time. Let’s talk about not listing a debt. It can be easy to forget an old medical bill or there can be debts you don’t even know about. Let’s say you had a car repossessed a few months before the bankruptcy filing. You scheduled the repossession on your Statement of Financial Affairs, but you didn’t list the Creditor; because you didn’t realize that you were still going to owe them money.

The creditor doesn’t get notice of the bankruptcy, and a year or two later the creditor sues you for the difference between what you owed at the time the car was repossessed and the amount they got for the car (after subtracting repo fees, sale fees, reconditioning fees, etc, etc., etc.). So, a year or two after your bankruptcy you are being sued for thousands of dollars. Now what?

That depends. The first issue is which chapter you filed under. This assumes that you filed a Chapter 7 bankruptcy. The analysis for a Chapter 13 is quite different. The second issue is whether or not your Bankruptcy was an asset case or a no-asset case. In other words, whether or not your Trustee managed to distribute any money out to your creditors. Most Chapter 7 Bankruptcies are no-asset cases. The biggest variable, believe it or not, is where you filed your Bankruptcy.

If you filed your Chapter 7 Bankruptcy in Oklahoma (and this blog is always restricted to Oklahoma issues, since that is the only State in which I am licensed to practice), and it was a no-asset case; you’re almost home free. As long as the failure to list the debt was truly unintentional and in good faith, your liability for that debt was included in your discharge. That does not mean, however, that you can sit back and do nothing. The creditor has incurred collection costs as the result of your failure to give them notice. So, you need to take action ASAP to let them know about the Bankruptcy. The best way to do this is to contact your Bankruptcy attorney and have them send a letter to the creditor’s collection attorney explaining the facts, providing information about the bankruptcy filing and providing information on the law in Oklahoma as to the inclusion of omitted debts in a no-asset discharge. You can expect to pay for that service, but in my opinion it is money well spent. The last thing that you want to do is wind up facing a wage garnishment that could have been avoided or find that you may have waived some rights by allowing the creditor to continue acting out of ignorance of your bankruptcy filing. Remember, you have a duty to give notice of the bankruptcy filing to everyone you owe money to. Failing to do so does not necessarily leave you at the creditor’s mercy; but that does not mean it is completely without ramifications.

Elaine

Bankruptcy, the Fiscal Cliff and Tax Refunds

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Evidently, we have a deal on the fiscal cliff — well, sort of.  We have a deal for two months, and then all bets are off.  So, I’m not completely sure that what I have read so far accurately describes the contents of this deal (so double-check my facts before relying on them, please); but even better, anything that does (or doesn’t) change today might in 60 days or so.  I’m sorry, but Congress needs to grow up.

What does this have to do with Bankruptcy and Tax Refunds?  Well, first of all, it appears that the tax exemption for forgiveness of debt income on a principal residence has been extended for a year — or at least until March.  So, if your primary reason for filing for bankruptcy was to avoid tax consequences from a foreclosure or short sale; now, you may not need to.  The emphasis there is on MAY.  Do pay the relatively trivial amount of money to check this with a qualified tax expert — which I am not, and this tax exemption is deceptively complicated.

Now, for the bad news, your pay check will get smaller.  Tax withholding rates are going up 2%.  Most people who file for Bankruptcy have been living pay check to pay check  for many months.  A 2% withholding hit can make all the difference in the world between keeping the heat on and not.  Of course, the problem is that filing for bankruptcy isn’t cheap; and if you are living close to the edge, you probably don’t have the cash laid by for attorneys fees and filing fees.  So, before you spend your 2012 tax refund getting current on bills (like credit cards) and then realizing that you’ve blown your refund and still owe more than you can pay; consider whether you will be better served using that money to pay for a bankruptcy filing.

Every year people call me in late April or May who got back several thousand dollars in March or early April.  They spent that getting current on a bunch of debt and then realize a month later, that their balances aren’t going down and their income isn’t going up.  If your tax refund is enough to get you out of trouble, enough that you won’t need to file, enough that you will then be in a position to take care of yourself and your kids instead of Chase and Discover; then, by all means, use it to pay the bills — but do the math first.  Then, take a look at your retirement accounts and your kids’ college funds.  J.P. Morgan Chase made record profits in the 3rd quarter of 2012.  Did you?

Elaine

Foreclosures and What on Earth does “In Personam” Mean Anyway?

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I get to sue a mortgage company.  That always makes for a good Monday.  Here are the facts.  Woman files for Bankruptcy.  She gives her house back to the lender in the Bankruptcy.  She moves out and moves on.  Lender has to obtain clean title to the house, so the Lender files a foreclosure action.  Lender screws up.  Lender is getting sued. 

The rest of the details.  Yes, at least in Oklahoma, the lender is supposed to foreclose on the house; but the lender is only supposed to seek a judgment against the house — or, to use the fancy, Latin, legal phrase — in rem (against the property).  Instead, this lender filed its foreclosure action and sought a judgment in rem (against the property), but also sought a judgment against my client, or in personam (against the person).  So, this foreclosure petition is asking for the property AND the right to pursue my client for money if the house doesn’t sell for enough to pay the total amount due.  That is the problem.

You see, when my client filed for Bankruptcy, she got a discharge.  A discharge is the reason you file for Bankruptcy.  It is what gets you out of all that debt that caused you to file in the first place.  A discharge is a Court Order that means that none of the people that the Debtor owed money to at the time that the Debtor filed for Bankruptcy can ever try to make the Debtor pay them again.  That means no collection calls, no bills in the mail, no nasty letters, no lawsuits and NO in personam liability in a foreclosure. 

Sure, the foreclosure needed to be filed.  In the Petition it should have mentioned the Bankruptcy filing and then said that the lender was seeking the property only, and not seeking a personal judgment against my client.  This one didn’t do that.  Some weeks I really like Mondays. 

Elaine

 

 

Mortgage Mods and Foreclosures

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A man called me this morning who had just been served with a foreclosure Petition.  He says that he has a mortgage modification agreement negotiated with Wells Fargo.  So, they sued him anyway.  Frankly, he may be right — and he may not be.  He wanted to know what he should do about filing an answer to the foreclosure.  I told him that the first thing he needed to do was send a letter to his Congressmen.  He didn’t know who they were.

I did explain to him how to file an Answer and told him twice that he needed to file it with the Court, and that meant take it to the Court Clerk’s office and then send a copy to the foreclosure attorneys.

Still, is it any wonder that we get the legislative responses that we do out of Washington when the people who call my office don’t even know who their Congressional representatives are?

Elaine

Sheriff Sale Bidding Chaos

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In Oklahoma the Sheriff’s Sale is one of the last stages in the foreclosure process.  You will find a general description of the entire Oklahoma foreclosure process on my web site’s foreclosure page.  The way Sheriff Sales work, bidding opens at 2/3 of appraised value.  Then, the bidding begins.  The mortgage company will generally have a representative there to bid on the property.  The mortgage company will be bidding with its judgment.  What that means is that as long as they don’t bid more than they are owed on the property (including sales costs, attorneys fees, court costs, etc.), then they don’t pay cash for the property.  They just exchange that much of their judgment.

So, if the mortgage company is owed a total of $95,000 on a property and buys it at Sheriff Sale for $80,000.  Then, at least in theory, the mortgage company can continue to seek the difference (called a deficiency) from the home owner or anyone else liable on the note and mortgage like a guarantor.  If the mortgage company bids $95,000, then they can’t collect any more from the home owners; because they aren’t owed any more.  What you won’t see is the mortgage company bidding more than $95,000, because then they would have to add cash to their judgment amount.  Any other bidder who wins the property must pay cash.

I just checked the Sheriff’s Sale results for Cleveland County, Oklahoma.  Twenty-two properties were sold.  Of those, twenty were bought by the mortgage company; and two were bought by a 3rd party.  Of the twenty bought by the mortgage company 11 of them were bid up to more than the appraised value for the property — in some cases a lot more.  One property sold to the mortgage company for $139,007 credit against its judgment.  The property was appraised for $95,000.

Bidding, like at all auctions, goes up in increments.  So the bidding for the property appraised for $95,000 would have started at $62,700 (2/3 of $95,000).  It would then be bid up in some kind of increments until only one bidder was left.  In most cases that last bidder was the mortgage company.  So, the mortgage company was going beyond appraised value in order to outbid people who would have paid them cash for the properties.  What is wrong with this picture?

Elaine

Sheriff’s Sale Pricing

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I have been watching the bidding habits at Sheriff’s Sales lately.  The first thing I noticed was that I thought some of the appraisals were a bit optimistic.  Then, I realized that Sheriff’s Sales sale prices are higher than market.  Yep, read that one again.  Sheriff’s sale prices are higher than market.

So, who are these lucky bidders who are paying more than appraised value and well above market rate for these houses?   Why, the mortgage companies, of course!

The most extreme example is a case I was watching where the property was appraised at a whopping $16,000 — probably a pretty fair price, actually.  That means bidding opened at around $11,000.  The mortgage company wound up with it — for $87,000+.  No, that is not a typo.  That is extraordinary, but I am seeing fairly regularly the major mortgage companies bidding up to the total amount of their judgments, even if that is more than the property is worth.

Without getting into why on Earth these companies are doing this, to me, as a consumer lawyer this means two things:

1.  No potential for additional liability against the former home owner; and

2.  The possibility that if the mortgage company has improperly padded their judgment amount (and yes, I think it has happened), then, the home owner might be able to force the mortgage company to actually kick back a little cash — would kind of like to try this actually.

Elaine

FHA Loans and Loss Mitigation

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It occurred to me after I put up the post about VA loans, that not all servicers are complying with FHA requirements either.  So, if you have an FHA loan, that loan is in foreclosure, about to be, in default or just in trouble; you probably want to read the FHA rules for loss mitigation (i.e., how mortgage servicers are supposed to deal with loans in trouble).

The FHA regs are also on my website.  Check out the Foreclosure page, left hand panel, towards the bottom.

As usual, I don’t do mortgage workouts.  If you need help, contact someone who has been trained by the FHA as a mortgage counselor or a lawyer who is well-versed in FHA regs.

Elaine