Bankrupcy before foreclosure - Posted by Gene Fetter

Real Estate Investing Real Estate Law
#1

Posted by Natalie-VA on May 08, 2007 at 09:12:08:

Gene,

I would be really careful on this one. First, you need to have a good idea of where the bid will go to figure out if you’ll get paid. Second, you should be very cautious about the amounts due to the 1st and 2nd. Make sure that those numbers are really payoff numbers and not just an estimate of principal due. If the borrower is delinquent on those notes also, the actual payoffs could be thousands higher than you think.

Once the borrower files bankruptcy, the lender has to ask the court for a “relief from the stay”. The borrower could drag this out while those payoffs continue to increase.

–Natalie

#2

Bankrupcy before foreclosure - Posted by Gene Fetter

Posted by Gene Fetter on May 06, 2007 at 16:39:28:

Hello,
I am working in northern California and my partner and I were following a particular property in foreclosure due to be sold at the Trustees Sale on 5/8/07. We were figuring the owner would file bankrupcy before Tues. 5/8/07, and that he did. But now I’m not clear about what happens next. I know there are differant “chapters” of bankrupcy but don’t know the difference between them.

I talked to the foreclosing lender (who is in 3rd place @ 145k) and asked if they were interested in selling the note. They will let me know tomorrow. FYI, the first lien is for $265K, and the second is for $108K). The first three liens (Deeds of Trust) add up to about $518K. Value of property is 610K-650K. There are also other subordinate Deeds of Trust on the property totaling appox. 150k
So, my question is twofold: First re: the bankrupcy question already stated. And second, would it be wise to go after the 3rd or 4th deed at a discount?
Thanks,
Gene

#3

Relief from Stay - Posted by John Merchant

Posted by John Merchant on May 18, 2007 at 11:09:15:

Just as Natalie says, it’s now up to the lender to file its Motion for Relief from Stay…which their lawyer will do in a few weeks.

The BK Court will then routinely enter its Order Lifting Stay and the lender will proceed to foreclose.