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Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The Bankruptcy Court in Miami addressed in the case of In re Dominique, 368 B.R. 913 (Bankr.S.D.Fla. 2007)(Isicoff, J.) the consequences of the failure of a mortgage servicer to give the required notice of an escrow account deficiency per RESPA, Florida statutes, and the provisions of the mortgage during the pendency of a chapter 13 plan. The court held that the consequence of such failure was the waiver of the escrow account deficiency.
The debtors' confirmed chapter 13 plan provided to cure the mortgagee's pre-petition arrearage and to maintain regular payments. Towards the end of the chapter 13 plan, the mortgagee demanded payment of an approximate $6,000 escrow account shortage. The mortgage required the debtors to maintain an escrow account with the mortgage loan servicer for the payment of an allocable portion of property taxes and insurance premiums. The debtors filed a motion seeking a ruling that the $6,000 escrow shortage would be discharged upon completion of the chapter 13 plan.
The court found that RESPA and its regulation require a mortgage loan servicer to do an annual escrow analysis and to provide the borrower with annual notice of any deficiency if the mortgage requires the borrower to make escrow payments. 12 U.S.C. section 2609(b), 24 C.F.R. 3500.17(c), 3500.17(f). The servicer may require the borrower to pay additional deposits into the escrow account to make up the deficiency but is not required to do so. 24 C.F.R. section 3500.17(c)(1)(ii), 24 C.F.R. section 3500.17(f)(3) and (f)(4).
The court also found that Florida law imposes a time deadline for notice of a deficient escrow account to be within 15 days after the lender receives notice of taxes due of notification of an insurance premium due. Fla. Stat. section 501.137(2). The court noted that RESPA does not generally preempt state law and does not preempt state law for purpose of the notice requirements for escrow account deficiencies. 12 U.S.C. section 2616 and 24 C.F.R. section 3500.13.
The court rejected the mortgagee's argument that it was excused from giving notice of the escrow account deficiency during the years of the plan on the claim that it would be a violation of the automatic stay as the court noted that merely providing notice of an escrow deficiency is not a stay violation. Chase Manhattan Mortgage Corp. v. Padgett, 268 B.R. 309 (S.D.Fla.2001).
The court concluded that the mortgage servicer failed to comply with Federal and Florida law in not providing annual notice of the escrow account deficiencies. The debtors requested that the court order the escrow shortage discharged. The court stated that the resolution of this issue lies in non-bankruptcy law as the escrow shortage arose post-petition. The court found the cases of In re Guevara, 258 B.R. 59 (Bankr.S.D. Fla. 2001), Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000) and Universal American Mtg. Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir.2003) as inapplicable to the resolution of this issue, but adopted the reasoning of the court in Padgett.
In Padgett, the court upheld the bankruptcy court's holding that the lender had waived its rights to recover post-confirmation advances for taxes and insurances as the lender failed to meet its obligations as a mortgage servicer under RESPA and the Florida notice requirement to notify the debtors of the need to increase monthly payments. In applying the Padgett decision to this case, the court held that since the mortgage servicer did not provide the annual notice as required by RESPA and Florida law as well as by the mortgage, that the right to payment was waived. The court stated that the mortgagee thereby failed to meet the conditions precedent to seeking payment and that the failure could not be cured as the involved time periods (annual or 15 day periods) had passed. The mortgage servicer was only entitled to seek the payment of the escrow shortage for the current escrow account computation year.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Move over Dracula, there’s a new kid in town – the vampire foreclosure.
RealtyTrac, a company that compiles and publishes information about the housing market, has coined a new term.
“Vampire foreclosures,” refer to bank-owned homes still occupied by the former owners.
The press, ever hungry for a news story that shows an America in crisis, is sucking every drop out of this one.
But I can’t help but wonder whether the vampire foreclosure isn’t such a bad thing after all.
Keep Houses Occupied, Keep Neighborhoods Vibrant
As a child of the 1970s in New York City, I vividly remember driving through The Bronx and noticing all of the boarded-up buildings.
This was the time of Fort Apache, rampant crime and a general sense of, “do not go to The Bronx ever, under any circumstances, unless you place very little value on your life.”
Things were so bad that then-mayor Ed Koch spent $300,000 on decals to cover up decaying windows.
Now, banks are leaving former owners in their homes rather than letting the properties go vacant.
Kids continue to play in the streets, and the trash gets hauled away on a weekly basis rather than piling up at the curb. Cars drive through the neighborhood, leading to increased vigilance on the part of the residents.
Someone waters the lawn. At night, lights come from living rooms.
Life goes on, rather than stopping and leaving a ghost town. This is the stuff of neighborhoods, and is what makes an area more attractive to new residents as opposed to new investors.
How is this a bad thing for the fabric of society?
Banks Holding Back The Tide Of Foreclosures
The flip side of the argument is that, by not releasing the properties to the sales market, banks are artificially propping up the housing market. Reduced supply, after all, drives up prices.
Mortgage experts will say that this shadow inventory is sure to cause an avalanche of properties hitting the market … someday. But what they don’t understand is that for the first time the banks have the exact same interests as homeowners.
The banks want these properties to fetch the highest possible prices, so they won’t release all of them for sale at the same time. Rather, they’ll dribble them out over time.
Homeowners want their homes to retain as much value as possible. They want the vampire tenants to keep watering the lawns and taking out the trash. They have a vested interest in keeping the neighborhood a vibrant one, if only to protect their own resale value.
Cities Face A Shrinking Tax Base
When the homeowner loses the house in foreclosure, there’s not much motivation to keep paying the taxes. Sometimes the bank will step in to foot the bill, but that’s not always the case.
Cities and towns are disturbed that the reduction in tax revenue cuts into the bottom line. But the city can decide to foreclose on the house for unpaid taxes, or even (as one city in California is doing) take the house through eminent domain.
See also:
Either way, the cities have a way to get their money in the long-run.
Maybe Vampires Aren’t All Bad
As a nation, we’re struggling with the effects of the foreclosure debacle. Banks continue to press forward, homeowners, keep on trying to right their financial ships.
Until things are sorted out and we can all get back on our feet, perhaps the vampire foreclosure problem isn’t so much of a problem.
Perhaps, it’s an unintended way for homeowners to keep from becoming homeless and to prevent communities from disintegrating.
Time will tell how it plays out, but the upshot is that sometimes a vampire’s kiss isn’t always such a bad thing.
Image credit: Conekt
Chapter 13 Bankruptcy Lawyer - Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. His office is in Miami at 1221 Brickell Ave., 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
Chapter 13 bankruptcy is often used to save a person's home from foreclosure. Under chapter 13, you are allowed to stop the mortgage foreclosure case and catch your mortgage up-to-date. The chapter 13 plan usually involves paying off the mortgage arrearage over a 3 to 5 year period in addition to making your regular ongoing monthly mortgage payments.
If your home has decreased in value, sometimes you are able to wipe out or "avoid" your second mortgage. For example, if you owe $300,000 on your first mortgage and $100,000 on your second mortgage and your home has gone down in value to $299,000, there is no equity or value to "secure" the second mortgage. Under these circumstances, the chapter 13 plan (and related section 506 motion) may provide to wipe out or avoid the second mortgage lien. The $100,000 debt owed on the second mortgage will be wholly unsecured and usually only receive a small dividend like the credit cards receive -- typically around five cents on the dollar.
A certified copy of the order avoiding the second mortgage may be recorded in the county public records to document that the second mortgage is void.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Utnehmer v. Crull (In re Utnehmer) 12-1362 (Opinion released last week! 10/10/13)
Developer may erase debt to investors during bankruptcy proceedings because their loan agreement for luxury home project did not make them business partners.
In 2005, a real estate developer purchased a million dollar property in Venice California. However, it was apparently a junk property. The developer wanted to tear down the structure and build from scratch, resell it and make a healthy profit. However, they did not have enough money.
Enter Patrick and Mary Crull. The Crulls loaned the developer $100,000. The goal was to rebuild the property in one year. However, the Great Recession caused a change in plans. In 2008, the project was completed and sold for $3,725,000. The real estate developer sold the property for about 2.5 million more than what he bought the property. Unfortunately, the sale proceeds were used the money to pay back other creditors, but did not pay back the Crulls.
The Crulls were mad! They filed a lawsuit. The Developers never answered the complaint because they knew that they were going to be forced to file bankruptcy. The Crulls were easily able to obtain a judgment of $213,645.17 for their $100,000 investment.
The Developers countered the judgment by filing a chapter 7 bankruptcy petition. They named the Crulls as debtors and sought to discharge the debt. The Crulls were forced to file a complaint inside the bankruptcy proceedings and asked the court to rule that the Developers could not discharge the debt to them via this bankruptcy. At the trial, the bankruptcy court found that the loan agreement for bankruptcy created a partnership between the Developer/debtor and the Crulls, and because of that partnership, Developers'/Debtors' debt to them could not be discharged.
The Developers appealed the trial court and won! The appellate court reversed the bankruptcy court. Bankruptcy Code Section 523(a)(4) provides that if a person filed for bankruptcy under a chapter 7, he cannot get rid of debts he owes, which occurred due to his fraud while acting in a fiduciary capacity. In California, business partners are fiduciaries within the meaning of Section 523(a)(4). Here, however, the loan agreement between the real estate developers and and the Crulls were not good enough to create a partnership relationship.
What is interesting to note is that the loan agreement made reference that the Developers and the Crulls were going to form a partnership in the future. But because it was a mere idea to form a partnership in the future, it was not enough to form a partnership. Thus, the appellate court concluded there was nothing in the loan agreement that established any intent to create a partnership at any point.
The court concluded that because there was no partnership agreement between the real estate developers the Crulls, they did not owe a fiduciary duty. As a result, the debt is discharable.
This opinion by the court was published last week. The Crulls are probably still kicking themselves for electing to be lenders instead of partners on this Venice beach property.
Photo Credit: http://www.flickr.com/photos/huffstutterrobertl/
This article was written by California Attorney, Kenneth Jorgensen.
To find out more, or to contact Ken, please visit his websites at www.fresnolawgroup.com and
www.fresnobankruptcylawgroup.com
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for October 15, 2013 Bridgewater-based Savient Pharmaceuticals files for bankruptcy Bondholders Seek to Force Suntech Into Bankruptcy in U.S. Bankruptcy trustee targets Catholic schools
Groeb Farms, a major honey supplier in the United States since 1981, has filed for Chapter 11 bankruptcy in Detroit, Michigan. The filing comes after the supplier was accused of buying Chinese honey illegally. The supplier supposedly was making illegal honey purchases in order to avoid anti-dumping tariffs imposed in 2001 by U.S. trade regulators. [...]
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
In the case of Everhome Mtge. Co. v. Rowland, 2008-Ohio-1282 (10th Appellate District, March 20, 2008)(Klatt, J.), the Ohio Court of Appeals reversed the trial court order granting the plaintiff's motion for summary judgment for foreclosure and found that there existed a genuine issue of fact whether the plaintiff is the holder of the note and mortgage.
The court held that under Ohio rules of civil procedure, [e]very action shall be prosecuted in the name of the real party in interest.". Civ.R.17(A). The real party in interest in a foreclosure action is the current holder of the note and mortgage. Chase Manhattan Mtge. Corp. v. Smith, Hamilton App. No. C-061069, 2007-Ohio-5874, at para. 18. A party that fails to establish itself as the current holder is not entitled to judgment as a matter of law. First Union Natl. Bank v. Hufford (2001), 146 Ohio App. 3d 673, 677, 679-680.
The court found that the note and mortgage in this case did not identify the plaintiff as the lender, but set forth a different entity as lender. To prove its status as the current holder of the note and mortgage, the plaintiff relied on the affidavit testimony of an officer which merely stated that the attached documents were true copies of the note and mortgage. The court concluded that this affidavit was insufficient to establish that the plaintiff was the current holder of the note as it failed to specify how or when it became the holder of the note and mortgage. The court stated that without evidence demonstrating how it received an interest in the note and mortgage, the plaintiff cannot establish itself as the holder. According, the court found that there was a genuine issue of material fact regarding whether the plaintiff was the real party in interest and reversed the trial court's summary judgment.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
There’s only so long that a creditor can sue you for a past due debt. In California, you can’t use bankruptcy to let that time run out.
One of the tactics student loan lawyers and debt collection defense attorneys use fairly regularly is to defend based on the expiration of a statute of limitations.
Sue too late, and you’re out of luck. It’s one of the reasons, I think, that we’re starting to see so many lawsuits for past due private student loan debt – the clock is ticking down, and creditors are jockeying for position.
Given the fact that private student loan debt is so large, my fellow student loan lawyers have been debating whether putting someone into a bankruptcy would give us a leg up over creditors such as National Collegiate Student Loan Trust.
The thinking among our little band of student loan advocates has been that if we could somehow cause the statute of limitations to run out, our clients could wipe out some of their student loan debt at the end of the bankruptcy.
In California, at least, that doesn’t work. Here’s why.
Effects Of Bankruptcy On The Statute Of Limitations
When you file for bankruptcy, an automatic stay goes into effect. With limited exceptions, nobody can sue you while you’re in bankruptcy.
At the same time, Section 108 of the U.S. Bankruptcy Code holds that if a lawsuit hasn’t been stated when the bankruptcy case has been filed, and if the statute of limitations for doing so hasn’t expired before the date of the filing of the petition, then such period does not expire until the later of—
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) 30 days after notice of the termination or expiration of the automatic stay.
Looking at that part of the U.S. Bankruptcy Code alone, it would seem as if the tactic of filing for bankruptcy would make sense as a way to get the statute of limitations to run out.
Let’s say you’ve got a 4-year statute of limitations to collect a debt (remember, the statute of limitations on a promissory note such as for private student loans is 6 years, not 4). You’re 3 years past due, so you file a Chapter 13 bankruptcy figuring that you can sit there until the time limit runs.
See also:
Once you’re out, you’ve got to wait 31 days before you’re home free.
But you’ve forgotten one piece of the puzzle.
Does Bankruptcy Toll The Statute of Limitations?
The issue of a statute of limitation is one of state law, not federal.
Under California law, a creditor has four years to file a lawsuit against you. For promissory notes such as private student loans, the time is extended to six years.
Other states have their own time limits.
Beyond that, many states have laws that stop the statute of limitations from running under certain circumstances.
Bankruptcy Stops The Clock
California Code of Procedure § 356, for example, states the following:
When the commencement of an action is stayed by injunction or statutory prohibition, the time of the continuance of the injunction or prohibition is not part of the time limited for the commencement of the action.
A line of California cases has interpreted CCP § 356 held that the automatic stay in bankruptcy stops the clock on the statute of limitations. Some of those cases are:
- Scuhmacher v. Worcester, 55 Cal.App.4th 376 (1997)
- Inco Development Corp. v. Superior Court of San Bernardino, Case No. E036800 (Cal. Ct. App. 2005)
- Lewow v. Surfside III Condominium Owners Assn., Inc., 203 Cal. App. 4th 128 (2012)
The Solution Of Bankruptcy May Create Problems
If you’ve got a debt – student loan or otherwise – and are watching the clock tick down, filing for bankruptcy may end up putting you in a worse situation.
If the debt’s dischargeable, you’ve got nothing to fear. But if you’re dealing with a private student loan debt that won’t be wiped out at the end of the bankruptcy case, you may be unwittingly extending the time for the creditor to sue you.
It’s just another reason why the analysis involved in resolving your bill problems is best left to an attorney who understands all the angles.
Jordan E. Bublick is a chapter 13 and chapter 7 personal bankruptcy lawyer with an office centrally located in Miami at 1221 Brickell Avenue, 9th Floor. Jordan E. Bublick is a graduate of New York University School of Law (LL.M., 1984), Ohio State University College of Law (J.D., 1983), and Brandeis University (B.A., 1979).
Jordan E. Bublick's website is www.bublicklaw.com.
Jordan E. Bublick's may be contacted at telephone number (305) 891-4055 or by email at [email protected].
Chapter 7 personal bankruptcy is used to discharge your dischargeable debt including credit cards, medical bills, and unsecured loans.
Chapter 13 personal bankruptcy is used to formulate a chapter 13 plan that will reorganize one's secured (such as a mortgage or car loan) and unsecured debt (such as credit cards and personal loans).
Practicing in the Bankruptcy Courts in Miami-Dade County and Broward County. Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
In December, 2007, Congress passed the "Mortgage Forgiveness Debt Relief Act of 2007" to alleviate tax consequence for some homeowners in foreclosure. The new Act excludes from gross income certain cancelled discharged "qualified principal residence indebtedness."
Existing law provides that discharged debt, whether after a foreclosure or short sale, is generally taxable income realized in the year the debt was forgiven, unless an exception applies. Generally only reductions in principal and not forgiveness of interest results in discharge of indebtedness income ("DOI"). Usually a lender is required to issue a Form 1099-C to report the DOI to the IRS. Taxpayers are required to disclose DOI to the IRS whether the lender issues a 1099-C or not. Taxpayers may be able to exclude the DOI from income if an exceptions to DOI applies.
Two existing exceptions to DOI are the insolvency and bankruptcy exceptions. 26 U.S.C. section 108(d). If the borrower is insolvent, DOI is not taxable. If the debt is discharged in bankruptcy, DOI is also not taxable. Another exception is the "purchase price infirmity doctrine". This allows DOI to be excluded from income where the lender agrees to write down the purchase money debt to the true value of the collateral as the purchase price was inflated in the original transaction due to fraud or misrepresentation. Another exception from DOI is when the liability was contested. Pursuant to Zarin v. Comm'r, 916 F.2d 110 (3d Cir.1990), DOI is not income where there is a legitimate basis for the borrower to claim that the debt was never owed or collectible because illegal.
The new Act adds to the existing exceptions from DOI a category of "qualified principal residence indebtedness." Up to $2 million of indebtedness may be excluded if the reason for the discharge is either a decline in the residence's value or the taxpayer's financial condition. It should be noted that debt excluded by the Act reduces the taxpayer's basis and a "short sale" could result in a taxable "gain" which may be taxable as a capital gains.
In order for this new exception to apply, the debt must be "qualified" which includes only acquisition and not home equity indebtedness. Acquisition indebtedness includes funds borrowed to buy, construct, or improve a home. Debt consolidation loans or cash out loans are generally not acquisition indebtedness. The Act only applies to debt discharged between January 1, 2007 and December 31, 2009. Pub.L.No. 110-142 Section 2(d). If acquisition debt is refinance, the refinanced principal amount retains its status as acquisition indebtedness. The excess of the total refinanced loan amount over the refinanced acquisition indebtedness is treated as home equity indebtedness and is not eligible for exclusion from income. Acquisition indebtedness included loans to "substantially improve" the principal residence.
This new exclusion only applies if the debt was discharged due to the borrower's financial condition or a decline in the home's value. A discharged based on the lender's acknowledgment of its wrongdoing or even rescission is not eligible for the qualified principal residence exclusion. Documentationj in any litigation or settlement that one of the required grounds is the basis for the discharge of the debt would be helpful.
The homeowner must apparently elect to take either the qualified principal residental exception or the insolvency exception. The insolvency exception, if elected, is "in lieu of" the qualified principal residence excetion.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
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