Re: Need advice…heres the scenario - Posted by JohnBoy
Posted by JohnBoy on August 04, 2003 at 21:52:50:
The chapter 7 discharges the borrower from having to pay back the loan. This is ordered by the court, not the lender. The lender does not release the borrower from a loan. The court does.
While it is true you should avoid a lawsuit if possible, I would not be so quick to avoid one where the buyer is the one that defaulted. It would be different if the buyer did not default and this situation with the lender foreclosing was what is causing the buyer to file a lawsuit. What are the buyer’s grounds for filing a lawsuit? You said they defaulted. So what are they suing for?
I understand you made good money up front, but if you refund that money you made nothing up front. You say there is $30k in equity. To give that to your buyer is giving up a lot of money just to avoid a lawsuit they are threatening you with over something they defaulted on! They defaulted, and now they are saying they are going to file a lawsuit, and you are saying you should maybe refund their $5k and give them your $30k in equity to avoid them from suing you. That’s $35k of your money you are willing to just walk away from to avoid a lawsuit. And they are the one’s that defaulted on their contract with you! It would be different if it were a couple thousand we’re talking about. But we’re talking about up to $35k here. That is worth defending. What grounds are they basing their lawsuit on? Because the lender is foreclosing? This is after they defaulted on their contract with you. At least that is the way it sounds from your post.
The fact their is no one responsible for the loan does not matter. The lender may not agree to let you reinstate it, but regardless, they still have to foreclose on the property to take it away from you. You still legally own it, period!
How long does a foreclosure typically take in your state? Would that be enough time to sell the property before the sheriff sale can take place? It shouldn’t cost you more than $1200 - $2000 to stall off the foreclosure by having an attorney contest it. In my state it takes a minimum of 9 - 12 months to foreclose and that is if you don’t even respond to the foreclosure complaint. A lot longer if you do contest it. I can contest a foreclosure in my state and my attorney wouldn’t have to appear in court more than 2 - 3 times over the first year contesting it! How much does that cost to have the attorney file an answer to contest it, then appear in court maybe 2 - 3 times over the next year? About a couple hundred to prepare the answer and file it, and about $150 per hour to appear a few times over a year. About $1200 total!
For $35k in total profit and equity I will glady shell out up to $5k to defend my money by fighting a frivolous lawsuit against a buyer that defaulted and contesting a foreclosure to stall the lender off long enough to sell the property so I can get my money out of it. It doesn’t matter that I have no money out of my pocket in the deal. That $5k up front money I got from the buyer and the $30k in equity in the property, IS MY MONEY! I sure as heck wouldn’t just roll over and let my deadbeat buyer have it all just because they are threatening to sue me and because I have no money invested out of pocket!
Is there more to this then you are telling us? What grounds does your buyer have to base a lawsuit against you on? What am I missing on this? Anyone can sue anyone for anything, but if their lawsuit has no basis they aren’t going to win anything.
It sounds to me like, based on your post, that the buyer defaulted, then after the fact the lender came along the following month and filed a foreclosure complaint because the original borrower filed BK on the loan. Now your buyer is claiming they are going to sue you because the you didn’t make the payments and they can’t buy the house now because the lender is foreclosing. Is that what is happening here? Or did your buyer default after learning about the lender foreclosing? That could be a problem.
BTW, if you give the buyer their $5k back then it sounds like you will end up out of pocket on this deal. You said you used the buyer’s $5k to catch up the loan for all but one payment. So if you used that money to catch up the loan and you end up giving the buyer that $5k back, then you are out of pocket for $5k! Minus any cash flow you may have got during the time the buyer lived in the property and made their payments to you. Did you collect $5k or more off the monthly cash flow so far? It appears to me based on your post that you haven’t made much money at all yet since you stated you used your buyer’s up front money to catch up the loan. But like I said before, your post is confusing, so maybe we don’t have all the facts on this. Do we?