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The issuance by the Third District Court of Appeals in Miami of the recent decision in Deutsche Bank Trust Company Americas, etc. v. Harry Beauvais, et al., Case No. 3D14-575, may be an appropriate time to review what actions a Miami homeowner that seeks to save their home from foreclosure should consider. If upheld, the Court's decision may indicate that some notions of "foreclosure defense" may be based on assumptions that are contrary to what the Court's appears to have ruled.   A homeowner seeking to save their home from foreclosure may be better served on directing his or her efforts towards the modification of their mortgage instead of  "winning" a foreclosure case.   For example, it appears that in most cases, arguments regarding statute of limitatations issues will not result in a "quiet title" judgment.

Present Modification Opportunities

If a homeowner seeks to save their home from foreclosure, focusing primarily on "foreclosure defense" is not likely to be the solution.   The federal government, the mortgage lenders, and the general economic climate, present good opportunities to modify your mortgage that may not exist in years to come.  For many, the after-tax benefit cost of paying a modified mortgage payment may not be significantly more than paying for a "foreclosure defense".

Possible Rising Real Estate Price and Interest Rates 

A homeowner may be making a error in not taking the opportunity to modify their mortgage based on present real estate values and interest rates. Real estate prices and interest rates may be rise,  causing the new modification payment to be higher the longer a person waits to pursue a modification.

Also, if a person who has a first and second mortgage, it would be better to address their situation before there is a rise is in real estate prices. If the second mortgage is wholly "underwater", it may be avoidable in a bankruptcy case.  If real estate prices go up enough that the second mortgage is not wholly "underwater," the second mortgage could not be avoided at all.

"Winning" Foreclosure

There may not exist much of a thing as "winning" a foreclosure case. For many, simply getting a foreclosure case dismissed, "with" or "without" prejudice may not be much of a "win".  In most instances, a new foreclosure action may be filed on a new default almost immediately.

For example,  "winning" a foreclosure case by getting the case dismissed on a on rule of evidence, is not much of a "win" - it only means that the lender did not establish a sufficient evidentiary record at the trial. In most cases, the lender can simply file another case.

Statute of Limitations

Even if the statute of limitations has run to bring a foreclosure action on the mortgage note, generally the mortgage note remains valid and the mortgage and its liens remains valid. The continued validity of the mortgage and its lien is governed by the time period set forth in the statute of repose.

"Lost Mortgage Note"

Getting your foreclosure case dismissed on the grounds that the mortgage note is "lost" or the plaintiff cannot prove standing only effects a dismissal of the foreclosure case.  In most cases, this simply buys time until the lender refills another case. The mortgage note and mortgage lien remains valid.

Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com

May a second foreclosure action be brought after the first foreclosure action has been dismissed - "with" or "without" prejudice? How does the foreclosure statute of limitations come into play? The Florida Third District Court of Appeal's recent decision in Deutsche Bank Trust Company Americas, etc. v. Harry Beauvais, et al., Case No. 3D14-575 gives guidance.  The following may be how the holdings of this decision would generally seem to direct. 

Generally 

In general, a foreclosure action may be had on a foreclosure cause of action on which the foreclosure statute of limitations has not expired.  A foreclosure cause of action based on a mortgage installment note accrues after default and acceleration. The five year statute of limitations to bring a foreclosure action begins to run upon such accrual. 

Prior Dismissal With Prejudice - Second Action Permitted

If the first foreclosure action had been dismissed "with" prejudice, a second foreclosure action may be brought action with "new" items. 

It would appear, generally, that no  second foreclosure action, after the first was dismissed with prejudice, could ever be possibly be barred by the foreclosure statute of limitations as it never began to run in the first instance. The dismissal "with" prejudice was a "determination on the merits" and indicates that the previously asserted default and acceleration was invalid or ineffective i.e.  it "never happened." 

The second foreclosure action would be based upon these "new" items: 1. "new" mortgage note installment payments coming due, 2. a "new" default and acceleration made, 3. which creates a "new" foreclosure cause of action, 4. commencing a "new" statute of limitations period, 5. to bring a "new" foreclosure action. 

Prior Dismissal Without Prejudice - Generally Can Bring Second Action 
if Brought within Statute of Limitations that Previously Commenced

If the first foreclosure action had been dismissed "without" prejudice, nothing "new" is required as the mortgage note remains in default and accelerated and the foreclosure cause of action is still in existence.  In fact, as the note has already been accelerated, no new payments, default, acceleration, and cause of action can exist. The second action must be filed before the statute of limitations expires.  

Deceleration - Can or Has the Already Commenced Statute of Limitations be Stopped?

The Court makes reference that deceleration of an accelerated mortgage installment note may be effected by an "affirmative act" by the lender or holder of the mortgage note. The affirmative acts referenced include contractual reinstatement or modification by the parties. The decision makes some reference to the notion that deceleration make also be effected by revocation, which may or may not require the existence of a contractual provision in the mortgage note allowing such.  There is also a reference to the concept that dismissal, even "without" prejudice could automatically trigger a deceleration if provided for by the contract. 

Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com

Casino and entertainment company Caesars Entertainment Corp will be filing for bankruptcy next month in an attempt to cut its growing debt.
Caesars signed what is known as a lock-up agreement with its bondholders on Friday, consenting to place its greatest unit, Caesars Entertainment Operating Co (CEOC), into Chapter 11 bankruptcy in mid-January—by January 15 at the latest.
The proposed filing for Chapter 11 bankruptcy protection will decrease Caesar’s current debt of $18.4 billion to roughly $8.6 billion, according to the company.
On Monday, Caesars Entertainment Corp announced it will acquire affiliate Caesars Acquisition Co in an all-stock agreement. This procurement will allow the company to restructure its $18.4 billion debt without seeking outside financing.
Other portions of the Las-Vegas based company, Caesars Entertainment, Caesars Entertainment Resort Properties and Caesars Growth Partners, will not be included in the bankruptcy process, according to CEOC.
One term of the lock-up agreement is that a particular percentage of first-lien bondholders must sign the contract before Caesars is prepared to file bankruptcy papers. Caesars must receive approval from other senior creditors in order to meet voting requirements to approve a bankruptcy plan before a judge can approve
CEOC plans to divide its U.S.-based enterprises into two separate companies: an operating firm and a publicly traded real estate investment trust that will maintain a recently formed property company.
By splitting the aforementioned assets, CEOC will cut its annual interest expense by 75 percent.
Caesars was weighed down with debt after the company was made private for $30.7 by Apollo Global Management LLC and TPG Capital in 2008. The deal occurred before the credit crisis and part of a buyout; Caesar’s has lost money every year since 2009.
Friday’s closing price for Caesars Entertainment was $1.22 billion, or $8.96 per share.

I had the pleasure of attending the Nebraska Association of Trial Attorneys seminar held at the Nebraska College of Law a week ago, and it got me thinking about how much trial attorneys need to understand about the bankruptcy process.  In a nutshell, here are seven things every trial attorney should understand about bankruptcy.
1. Injury Claims Must Be Listed as Asset on Bankruptcy Schedules.   A debtor must list all his or her property in the bankruptcy schedules.  The bankruptcy estate includes every interest of the debtor including causes of action owned by the debtor.  This is especially critical in Chapter 7 cases where all of the property of the debtor is temporarily vested in the Chapter 7 Trustee until the Trustee reviews the asset schedules and interviews the debtor.  If the injury claim is not listed as an asset, the claim remains in the possession of the bankruptcy trustee, and that means the debtor does not have standing to proceed with the injury claim after the bankruptcy case is completed.  Armed with that information, counsel for the defense may seek a motion to dismiss the injury claim if it was not listed in the bankruptcy schedules since the debtor lacks standing and such a dismissal, of course, may then cause the unpleasant topic of an expired statute of limitations on the injury claim to arise.
Do you know if your PI client filed bankruptcy?  Is that question on your client intake form?  Is that question asked again prior to trial?  If the claim was listed, how was it listed?  Have you reviewed a copy of the bankruptcy schedules?  Have you checked the federal PACER computer system for possible bankruptcy case filings?  How will you respond to a client whose case is dismissed after the statute of limitations has expired when they say “I thought you knew that I filed bankruptcy because of all those medical bills I was facing?”  
2. Personal Injury Claims are Exempt under Nebraska Law (but it may constitute Disposable Income).  Nebraska Statute 25-1563.02 provides that “all proceeds and benefits,   including interest earned thereon, which are paid either in a lump sum or are accruing under any structured settlement providing periodic payments, which lump-sum settlement or periodic payments are made as compensation for personal injuries or death, shall be exempt from attachment, garnishment, or other legal or equitable process and from all claims of creditors of the beneficiary or the beneficiary's surviving dependents unless a written assignment to the contrary has been obtained by the claimant.” Some Chapter 7 Trustees questioned whether this exemption protected compensation awarded for lost wages and medical expenses, however, the Nebraska Bankruptcy court ruled that the exemption expressly protects all proceeds and benefits including lost wages and medical expenses.  In re Rhea, BK 04-42427.
Although personal injury proceeds are exempt under Nebraska law, when a substantial settlement is received in the middle of a Chapter 13 payment plan this will open a discussion of whether the debtor is now able to pay a greater portion of their debts.  The Chapter 13 Trustee will need to be notified of the settlement and the trustee may inquire as to how the settlement will be spent.  The trustee cannot compel a turnover of the settlement, but they can seek to increase the bankruptcy payment or dismiss the case if it is apparent that not all of the funds received will be necessary to pay future medical bills or basic living expenses. 
3. Motion for Relief from bankruptcy stay required to allow litigation.   The filing of a bankruptcy petition causes a federal injunction to automatically come into existence that stays all collection efforts against the debtor, and this injunctive relief is commonly referred to as the “Automatic Stay.”    In a cause of action involving claims and counterclaims it may be necessary to obtain authority from the bankruptcy court to allow the personal injury claim to proceed.  Bankruptcy courts will commonly grant limited relief from the bankruptcy stay to allow the parties to an injury lawsuit to proceed with litigation under the provision that any settlement of the case be subject to future court approval.
4. Chapter 7 is Fast. Chapter 13 is Slow.  Which do you need?   Chapter 7 cases are completed in approximately 90 days whereas a Chapter 13 case is open for three to five years.  If a settlement of a claim is expected in the near future, most debtors are better off filing a Chapter 7 case so that they can be free of debt before they obtain possession of a large settlement.  A debtor who receives a large settlement before or during a Chapter 7 case may find that they are no longer eligible for the quick discharge if it is apparent that they have the ability to pay back some of their debt. Chapter 13 offers debtors the benefit of time.  It gives them the ability to reject low-ball settlement offers on their injury claim since they have the ability to hold off creditors while the case is pending.  Chapter 13 gives the debtor time to litigate their injury claim and to maximize their net recovery.  In addition, Chapter 13 offers flexibility in that a debtor may offer a minimal monthly payment to creditors at the beginning of the case while they are still healing from injuries or going through physical therapy and then increase the bankruptcy payment in the later years of the bankruptcy plan. 
5. Motion to Employ Counsel Required in Chapter 13 Cases.  In order to be able to be paid compensation for representing a debtor in a personal injury case it is necessary to request approval of the bankruptcy court to employ counsel.  Those lawyers who provide legal services to a debtor without seeking court approval risk having their request for compensation denied.  If you volunteer services there is no right to demand compensation.  Bankruptcy Code Section 327 provides that a debtor may, with the Court’s approval, employ one or more attorneys as long as they do not hold an interest adverse to the bankruptcy estate.  An affidavit of the personal injury attorney stating that they have no adverse interest to the estate should accompany the motion along with a copy of the legal service agreement.
6. Reaffirmation of Legal Services Agreement in Chapter 7.  What is the effect on a legal retainer agreement that is not reaffirmed in a Chapter 7 proceeding?  The simple answer is that the agreement is discharged and the compensation to be paid for services rendered to a debtor after the Chapter 7 case is filed is no longer determined by the agreement.  For this reason it is essential that the personal injury attorney either execute a reaffirmation of the original retainer agreement or sign a new retainer agreement following the completion of the Chapter 7 case. 
7. Motion to Approve Settlement:  A settlement that is reached during a Chapter 13 case must be approved by the bankruptcy court.  The claim is property of the bankruptcy estate, and a debtor is incapable to transferring or converting estate property without prior court approval.  In addition, the Chapter 13 trustee will be interested in seeing a copy of the settlement and a statement of the future medical or income needs of the debtor to determine if the debtor’s bankruptcy payment should be increased.
Image courtesy of Flickr and The May Firm.