Lets Talk Bankruptcy(ch. 13) and 2nd mortgages - Posted by David Alexander

Posted by John Behle on January 20, 2000 at 19:08:46:

…without all the facts. (and lots of dots)

It may be they can pull out of the bankruptcy, come to an agreement the court would approve, etc. We work with people as a lender that way sometimes and making the loan solves the problems. I’ve never worried about the situation of talking with them.

Usually it them contacting me and I am the one that has to tell them that they can’t do anything outside the court. Most of the time it is a potential foreclosure (the morning of) that triggers a bankruptcy and if a deal can be structured with the lender the bankruptcy wouldn’t even be needed.

Just a note as to the secured creditor thing before. As a lender with a trust deed or mortgage, there is not even an issue as to whether I am secured (though in a few rare cases I have seen bankruptcy judges take people’s security away.)

There’s no question. I AM secured. If the court sees that there is a great deal of equity above my lien, they may be very reluctant to release the property for me to foreclose, etc. They will want to use the equity to satisfy other creditors.

If there is little equity above my lien, then the court may be convinced that no one else besides me will be getting anything out of that property. The credit card companies, etc. will have to fight for what is left. The court may then release the property out of the bankruptcy for me to continue foreclosure on.

Lets Talk Bankruptcy(ch. 13) and 2nd mortgages - Posted by David Alexander

Posted by David Alexander on January 19, 2000 at 15:09:24:

Have a note in second position, my honest play is to get to the asset of the house, resale and cash out big.

But, I believe the people want to keep the house.

Anyway bought the note and they filed bankruptcy. What do I need to know.

David Alexander

Re: Lets Talk Bankruptcy(ch. 13) and 2nd mortgages - Posted by Ed Garcia

Posted by Ed Garcia on January 19, 2000 at 18:37:01:


Hold the Press.

We need more information. Based on what you have just told us.
Your plan (A) (my honest play is to get to the asset of the house, resale and cash out big.

Doesn’t look good.

The reason I say that is because, you also tell us,(I believe the people want to keep the house).

That tells me we had better put together a plan (B).

David, I need to know,
What is the value of the house?
What is the amount of the first?
What are the terms and conditions of the first?

Obviously I need to know the amount of your second?
And what you paid for it?

You seem to know the borrowers situation. I need to know if you know it first hand, because you have spoken to the borrower. Or did you get your information second handed, meaning through another party( such as the seller of the note).

Personally, before I go and over react, and contact attorneys, and let their cost meter
run up. I need to know where the bodies lie in this deal. Because I don’t know the
information that I just asked for, I don’t even know if it’s worth a legal opinion or
a legal battle.

David, I can’t tell you how many times I’ve had a deal just like this, not necessarily
a note that I bought, but a second that I’ve owned. And I worked it out with the
borrower. The move I will recommend, will depend on the information as it comes in.

Knowing the borrower wants to keep the house, discourages my plan (A).
So now I have to set up a plan (B) that could be mutually beneficial to both the
borrower and myself.

David, I’m a people person, when I can, I prefer to see if I can work it out with the
borrower. If that doesn’t seem feasible, then of course I can take the avenue that
both John, and Ray recommended.

If you want to gather this information, and come back on the Creonline for everybody
to see, that’s fine I will help you work this deal in front of God and everybody.
If you prefer to work this deal privately between us( which is what I would do) that’s fine too. The only reason I would prefer to work between us, is because then we can do it
on the phone. If you think that you can work this deal by yourself, and just want a second
opinion, I’m here for that too.

David, I have watched you post time and time again helping people. That’s why I’m making myself available to you. If you need me I’m here.(909) 944-0199.

Ed Garcia

Re: Lets Talk Bankruptcy(ch. 13) and 2nd mortgages - Posted by ray@lcorn

Posted by ray@lcorn on January 19, 2000 at 16:45:45:


Did you not see the thread last week on this topic? We went through some pretty detailed stuff. I think I may have the text on my machine at home. I’ll look tonight and email it to you if I do.

Bottom line, run don’t walk to a good bankruptcy attorney. John is right in that you need someone with knowledge of both RE and bankruptcy, but if you must choose, pick one with knowledge of bankruptcy.

However, I disagree with John about value. You want to prove that you are SECURED. That means that the house is worth at least as much as the SECURED liens against it. There is a world of difference in being a secured creditor and an unsecured one. There is also better treatment for a creditor for a loan on a principal residence as opposed to other debts.

If your guy has a job, chances are you or any other lienholder will not be able to foreclose. Under Chapter 13, the whole idea is to give the guy a breather and make payments on the debts. You will get paid, it’s just a matter of when.


The name and number of a bankruptcy pro - attorney - Posted by John Behle

Posted by John Behle on January 19, 2000 at 16:14:56:

Ideally find someone that knows both real estate and bankruptcy - but find someone and move quick now. If you can show there is little equity to satisfy other creditors you might be able to get a “Stay” and have the right to foreclose, negotiate, etc.

If there is a lot of equity and unsecured creditors, you may have to ride it out but will be safe. You may be able to get your attorney to press them as far as a sale though. Bottom line - GOOD attorney.

Ed, the guy already filed - Posted by ray@lcorn

Posted by ray@lcorn on January 20, 2000 at 24:49:12:


I appreciate where you are coming from, but this guy already filed. The time for dealmaking just ended. The borrower (debtor), is now under the control of the court. He can’t cut a deal, no matter how good lookin’ you are! (And that is saying something!).

What you can do by trying to cut a deal on the side is get a cite and a possible fine (though unlikely) for violating the automatic stay. Did you know it is a violation of the stay (federal offense) for a creditor to even CONTACT the debtor after the filing without the debtors permission? Even when the debtor gives permission most creditors won’t talk without their attorney in the room just because it is so easy to be in violation.

Plan B in this case is for Plan Bankruptcy. Bankruptcy is a different world from anything I ever thought I knew about the legal system. Chances are very high that you will get less than you want, no matter which side you are on.

Ed, you are exactly right that David hasn’t told us enough for us to know whether this is a fight worth fighting. I mean, if he’s got a thousand dollars in the note, and the house is way overleveraged, then it probably isn’t worth any more than filing a claim and waiting for the mercy of the payment plan. On the other hand, if David has substantial funds invested in the note, and the house has liens of 100% or less of its value, then David has a very good chance of getting all of his money, and probably even the profit he wants from the deal.

But you have to play this game by their rules. And that means you have to prove value, then use that leverage to help craft the most rapid payback plan possible. Worst case is if it converts to a Chapter 7, then the value argument is even stronger. If you are secured, you’re closer to the front of the line for getting paid.

Sorry to stop the Ed Garcia Express!, but what David needs is a good local attorney if he isn’t going to walk away from the note. (Email me if you need a reference, Dave.)


Re: Lets Talk Bankruptcy(ch. 13) and 2nd mortgages - Posted by Stacy (AZ)

Posted by Stacy (AZ) on January 19, 2000 at 16:57:19:

Ray, David-

Here is the thread from one of the prior posts. In the first paragraph you’ll find the thread (message number) to last week’s post. Just type them into your browser “address” field, at the end of the line.



Re: Ed, the guy already filed - Posted by Ed Garcia

Posted by Ed Garcia on January 20, 2000 at 02:12:14:


Thank you for the information, but I already understood that they filed.

Ya know Ray, I never was one to go by the book.

I won’t talk Bankruptcy law, I’m not qualified. But I disagree with you about talking to
a borrower after they BK. Stand back Mr. Alcorn. Your talking to the Bankruptcy kid.

Now let me put you in for a real shocker roo. Not only have I done it. I’ve also refinanced
them to boot. While you’re telling me I can’t, I have.

Of course you can’t do anything with out the approval of the courts.

To tell you the truth Ray, a chapter 13 is a walk in the park, the 7 is the tuffy. I’m going to
take it a step further to really get you going, I’ve cut deals with the creditors.
I know, I know, you can’t do that either.

Now let me really ruin your day, I’ve worked with the court, as well as credit counselors,
or attorneys. The last one I did was 2 years ago, and by the way on that one I cut a deal with
the IRS as well. If you think I’m making this up Mr. Alcorn, I’ll give you names and address.
This is well documented. I did the deal for a little over $300,000. I saved the borrowers
Horse Ranch, located in Hemet, California, which was worth over $700,000.

As a matter of fact on this one I made the loan for the $300,000. she started out with a 13
went into a 7, had an incorrect filing, went into a 7 again. The IRS had a lien on her property,
and was in the process of taking it. To this day, this lady thinks I walk on water.

Ray, you know I don’t play. I’ll even let you call her up and talk to her.

I know you consider yourself an authority in this field because you did your home work when
you needed to. But Ray, please don’t tell me about what I can’t do, because I might start to
believe you.


Ed Garcia

Re: Ed, the guy already filed - Posted by ray@lcorn

Posted by ray@lcorn on January 20, 2000 at 10:30:25:


Far be it from me to call your experience into question. I love you like a brother, and I highly value your advice and experience. I know you already know that, but I want everyone else to hear it as well.

In this case, the fact is that the automatic stay prevents a creditor from making any contact, WITHOUT THE DEBTOR’S PERMISSION. Obviously, you had the concurrence of the debtor in the case you cited. I dealt directly with creditors in our own Chapter 11 cases, mostly because the lawyers had a hard time understanding the deals we were involved in. Real estate jocks they ain’t.

However, to advise someone to deal directly with a debtor that has no previous experience with the process is reckless. In fact, the debtor’s attorney has advised David to get a lawyer and make future contact through him. The guy is playing hardball already.

I did want to take back the statement I made about the time for dealmaking being over. As you and I both know, bankruptcy is all about money, and therefore essentially a dealmaking process. In a private email exchange between David and I, I told him that probably some of the best lessons I learned about money I learned in bankruptcy court. But again, to someone without experience it is dangerous to enter the process without experienced counsel. I trust that with both you and I in David’s corner, and with the help of a good local attorney, we can help protect his assets and maybe throw a wrinkle or two into the debtor’s plan. Cutting deals with the other creditors is part and parcel of the process, but that comes later. The first two battles are about cash and then about value. That determines each creditor’s staus in the case. In a chapter 13, the best seat to have is as a creditor secured by a principal residence that the debtor wants to keep. A lot of leverage there.

I learned what I know of the code the same way you did… in the courtroom. I do not consider myself an authority. I have been around the process enough to know that even attorneys that do nothing but bankruptcy get surprised on a regular basis. But I hope that you will acknowledge that before you can get into the details of cutting deals in bankruptcy court, you have to take the time to get the lay of the land. That what we started out talking about doing, and I agree with you that the case may be best discussed further off the board.

So David, you’ve got two pretty big guns in your corner. Now the question is do you have the nerve to pull the trigger?! (smile)


Ed, Ray, John… - Posted by David Alexander

Posted by David Alexander on January 20, 2000 at 16:20:29:

You know I’m not one to wait on pulling the trigger. I’m going to go ahead and see if I can get the payors to talk to me over breakfast, or dinner.

going to try and get to the heart of the situation, and see whether it’s gloom, doom, mountains of debt or a few missed payments and trying to stay on track.

Thanks, for all you help


P.S. With the big guns I have for friends I’m dangerous, and Ray I’m still looking up.

Re: Ed, the guy already filed - Posted by Ed Garcia

Posted by Ed Garcia on January 20, 2000 at 13:15:07:

Brother Ray,

You’re going to love this.


There, you see, you never thought I’d tell you that, you are right.

Believe me, that wasn’t easy. (smile)

Ray, where I completely agree with you, is when you say that for me to advise folks to do
what I just told you I did, would be irresponsible.

I would never advise someone to do what I do. I’ve been doing this stuff for years.
It’s like playing poker, you’ve got to know when to hold them, and know when to fold them.

You know Ray, there are many times when we can’t discuss or advise on the net, because what
may be applicable in that particular situation, would not be generally considered good advice
for others who are still learning.

That’s why in many of my post, when I see that the advice I will be giving only would apply to
the individual who originated the post, I’ll tell them to call me.

The thing I didn’t like about your post, is that you were advising David, with out all of the facts.

The advice that you and John shared, was obvious. Of course you should contact your attorney.
I think David knew that before he made his post.

Rather then get a story of what has happened to you, as interesting as your stories are. I preferred
to see if I could give him some information, that would be helpful to him.

Ray, when you say, ((In this case, the fact is that the automatic stay prevents a creditor from making any contact, WITHOUT THE DEBTOR’S PERMISSION.
Obviously, you had the concurrence of the debtor in the case you cited.))

That’s correct.

No argument, that’s why I mentioned I am a people person. I kind of mosey right up the borrower
start to do what I have to do.

Ray I have so much more to say about this matter, but I have to go. Scott Smith, you remember that
name. He is a member of the Players Club, is waiting for me. I have already spoken with David,
and I hope I have given him a direction that he needs to take.

I love ya Brother, I have to run,

Ed Garcia