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California has three separate statutory provisions that prohibit a lender from obtaining a deficiency judgment after foreclosure.  These provision are found at Cal. Civ. Proc. § 580b, Cal. Civ. Proc. § 580d in conjunction with Cal. Civ. Proc. § 726(a), and after July 15th, 2011, Cal. Civ. Proc. § 580e.  A deficiency is simply the loss that a lender sustains after the property is foreclosed.  The deficiency is measured by the difference between what is owed on the loan and what the bank collected from selling the property after foreclosure. A deficiency judgment after foreclosure may result in a wage garnishment, bank account levy, and a judgment lien against other property owned by the borrower.  Because of the seriousness of a deficiency judgment sound legal advice should be sought out whenever foreclosure appears imminent.
If a borrower is facing an imminent foreclosure or has already had a property foreclosed and one of the California statutory provisions to be discussed below is not helpful a bankruptcy discharge may be the only means of averting the negative consequences of a deficiency judgment. In reviewing options with a client as a bankruptcy attorney, I always start with non-bankruptcy law.  With that in mind I summarize the non-bankruptcy protections found in the California anti-deficiency provisions.
The first statutory provision that may protect a borrower from a deficiency is Cal. Civ. Proc. § 580b. Cal. Civ. Proc. § 580b protects a borrower from a deficiency after foreclosure where the property is occupied by the borrower as a personal residence and where the money borrowed from the lender was used for the purchase of the property.  This provision does not protect a borrower where the property is not a dwelling occupied by the borrower or where the loan was not part of the financing used to buy the property.  Specifically this provision does not protect a borrower if the loan was a refinance loan or an equity line of credit.
The specific language of  Cal. Civ. Proc. § 580b reads as follows: “[n]o deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser. 
The second statutory provision that may protect a borrower from a deficiency is Cal. Civ. Proc. § 580d. Cal. Civ. Proc. § 580d in conjunction with Cal. Civ. Proc. § 726(a) is often referred to as the “Single Action Rule.”  Basically what this means is if a lender non-judicially forecloses on the property (power of trust deed sale) they may not later seek a deficiency.  Practically speaking this means that in over 99% of foreclosures by a senior lienholder (the holder of the first Trust Deed) the senior lienholder will not be able to collect a deficiency.  However, note in rare cases where the property has very little value or no value and or if the borrower has independently very deep pockets the lender may choose judicial foreclosure and after the foreclosed property is sold obtain a money judgment for the balance of the loan.   One of the reasons that judicial foreclosure is rare in California is that it can take the lender much longer to ultimately foreclose on the property.
Another problem with the “Single Action Rule” is that it does not protect the borrower from being sued by a junior lienholder who either waives their right to foreclosure or sues after the property is foreclosed by the senior lienholder. Very frequently, a borrower will wind up owing a deficiency to a junior lienholder after the senior forecloses where the junior lien arose out of a home equity line of credit or from a refinance that included a second.  The term that is often associated with this a “deficiency from a sold out junior lienholder.” However where there is a “sold out junior lienholder” there is case law that may still prohibit them from collecting on the deficiency.  One California appellate case holds if the senior lienholder and the junior lienholder are one in the same than the foreclosure by the senior lienholder precludes the collection of a deficiency by the junior. The junior lienholder is deemed to have sold itself out and elected its sole remedy on CCP 726(a). Simon vs. Superior Court, 4 Cal.App.4th 63, 5 Cal.Rptr.2d 428 (1992).  Taking this one step further the California Court of Appeal recently held that where the senior and junior are owned by the same bank that an assignment to another lender of the junior after foreclosure does not allow the assignee to collect a deficiency.  Bank of America vs. Mitchell, 2012 Westlaw 1177866 Cal.App.  However the lender may circumvent the Simon and Bank of America vs. Mitchell results by assigning the junior trust deed prior to foreclosing on the senior trust deed.  National Enterprises, Inc. v. Woods, 94 Cal.App.4th 1217, 115 Cal.Rptr.2d 37 (2001).
The last statutory provision that may protect a borrower from a deficiency is Cal. Civ. Proc. § 580e. Cal. Civ. Proc. § 580e only became effective July 15th, 2011.  The provision expands anti-deficiency protection to all mortgages or deeds of trust if all lenders agree to a short sale.  A short sale occurs when the lender allows homeowners to sell their property for less than the amount owed to the lender. Although the lender receives less than the full value of the loan in a short sale, the lender avoids the costs of both the foreclosure and resulting expenses of a property which would end up with the lender. All lenders still have to agree to a short sale process. The law also makes clear that the protections do not apply to commercial loans with multiple security which includes a security interest in residential property.
As discussed earlier consulting with bankruptcy counsel early on may allow a distressed borrower to explore the greatest number of available options.  Bankruptcy may be used not only to avert the negative consequences of a deficiency judgment but a Chapter 13 may sometimes be also be used proactively to get caught up on defaulted payments or to avoid/ strip a wholly unsecured junior lien from the property altogether.  Please feel free to contact my office for assistance. 

So you are a beneficiary of a recovable living trust.   You need to file bankruptcy.   Can you?   Well, it depends.   As long as you are not the settlor and the settlor lives through your bankruptcy, your beneficiary interest is contingent, meaning it doesn’t come into your bankruptcy as property of the estate.   That’s because if the settlor is still alive, that person can always amend the terms of the trust and exclude you as a beneficiary.
Imagine if you filed a chapter 7 bankruptcy, which typically lasts between 4-6 months.   During the course the chapter 7 trustee wanted to pull your contingent interest as a beneficiary into the bankruptcy estate.  Well, the settlor would more than likely just change the terms of the trust and write you out immediately as a beneficiary.  The chapter 7 trustee would be out of luck.   The settlor did not engage in fraud in writing you out of the trust; there is nothing improper in doing so.   However if the settlor was deceased or became deceased during the course of your bankruptcy, the beneficiary interest is no longer contingent and might become part of the bankruptcy estate where applicable.
 

By: Ceara L. Riggs, Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
The question I am probably asked the most is, “How long will I get to stay in my house?” It depends. Looking for a more definite answer? Chances are, any lawyer that wants to keep their Bar Card and Number will give you the same answer.
And as frustrating as that answer probably is, it’s the reality of the situation. So you want numbers, here’s the numbers:

• Day 1 – a foreclosure complaint is filed by the bank (which probably means you’ve missed at least 2-3 payments already, if not more). Enjoy how definite that number is because after day 1, everything “depends.”
• Some point after that – you’re going to be served with notice that the bank has filed a foreclosure suit against you. So, as you can see, the contingencies start early.
• 20 days after you’re served – you better have filed an answer to the bank’s complaint, otherwise the process moves ALOT faster and you’re likely to have significantly less time in your house.
• Sometime after you are served – there could be a Motion for Summary Judgment, there could be Interrogatories, Admissions, and/or Depositions, there could a case management conference, there could be a trial and there is no rhyme, reason or rule as to if any of these things occur or when they will occur if they do happen
• 860 days after day 1 – Approximately. If you have not reached a modification or agreement with your bank, your house will be sold at a foreclosure sale. But, of course, this is an average too.

Sparknotes version: it takes, on average, 861 days (or, more than 2 years), to foreclose on a property in Florida.  Think about that. That means, every day, somewhere in Florida, a homeowner has stopped making payments on his or her house and then, at some point after that person stopped making payments, essentially nothing happened for about 861 days. Want to stay in your house? Want to find a new place? Want to rent out the place and have a new source of income? Maybe you just want to give raccoons and other critters a safe haven from the snowbirds on our roads?

Give us a call. Let us discuss your situation and where you fall on the “it depends” timeline. For a free evaluation of your situation and to see how we can help you stay in your house, contact The Reissman Law Group, P.A. today.
The post 861 Days to Foreclosure appeared first on St. Petersburg Law Blog.

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
Professional athletes filing bankruptcy have been in the news over the years including Mike Tyson, Sheryl Swoopes, and Lawrence Taylor. It may shock some people that professional athletes, who made millions during their careers, face the same kind of financial troubles that middle class Americans find themselves in. One of the latest professional athletes to file bankruptcy is Warren Sapp, formerly of the Tampa Bay Buccaneers.
Unfortunately, professional athletes are not immune from the problems regular people face, they just have a few more zeros at the end of their bills. Whether it is over-spending, bad investments, or a victim of the recent real estate bubble, professional athletes are subject to the same types of financial problems. Another possible reason for filing bankruptcy is to stop pending litigation or to stop a garnishment. Read a post about bankruptcy and garnishment here.
Recently, I had the opportunity to look over Warren Sapp’s bankruptcy petition and schedules at the request of a local reporter. The question the reporter had was the question most people had, why did Warren Sapp file Chapter 7 bankruptcy? At first look, it may be hard to understand. Many of the larger debts owed by Warren Sapp would appear to be non-dischargeable including taxes owed to the IRS and domestic support obligations to a former spouse and minor children. So why now? When I looked over the Statement of Financial Affairs “why now” become apparent to me.
One of Warren Sapp’s creditors, PNC Bank, who Mr. Sapp listed a debt totaling over $800,000.00, held a judgment against Warren Sapp and the creditor executed a Writ of Garnishment. Warren Sapp stated that PNC bank garnished more than $130,000.00, in December, 2011. One way to stop a garnishment is to file bankruptcy. Our clients face garnishment of their wages and bank accounts on a regular basis, and if appropriate, we will file bankruptcy on their behalf to stop the garnishment and discharge the underlying debt. Again, Warren Sapp just  had a few more zeros at the end of his garnishment than most of our clients, but it still has the same effect.
Please check back for information regarding Warren Sapp’s bankruptcy. I will be following his case and providing my thoughts on what happens.