What is worse, a BK or multiple foreclosures? - Posted by dave

Posted by David Krulac on July 02, 2002 at 14:08:26:


What is worse, a BK or multiple foreclosures? - Posted by dave

Posted by dave on July 02, 2002 at 09:05:01:

I am studying Lis Pendens lists to learn the foreclosure process in my state and ran across a guy who is going through foreclosure on three different properties, all duplexes or multi units. I have tried to talk with him about options but he said he was declaring bankruptcy.

My question is, if you have multiple properties going into foreclosure, is it better to let each one go back to the bank or just declare bankruptcy (would the BK just wipe out the houses). In this case would one BK hit be less damaging to his future than three foreclosures? What if he deeded in lieu of foreclosure each property?
Thanks for the info

Re: What is worse, a BK or multiple foreclosures? - Posted by ray@lcorn

Posted by ray@lcorn on July 05, 2002 at 20:35:15:


This is one of those questions where the only right answer is “it depends.”

If there is any equity at all and ongoing income, then bankruptcy is likely the best option. Depending on the ownership structure of the debtor and the size of the bankruptcy estate either Chapter 11 or Chapter 13 could offer the debtor the chance to reorganize by possibly restructuring the debt. This provides the opportunity to keep the properties.

Deed in lieu does nothing but give up the properties without a fight, and the lender would not accept it if there are other liens against the property. Foreclosure wipes out the other liens and is the better option for the lender.

About the only other feasible option short of bankruptcy if the multiple foreclosures have already started is to schedule a free market auction rather than the foreclosure sales. But that would require the cooperation of the lenders, and again would not necessarily satisfy all liens.

You can get some good leads on distressed properties by checking on confirmed reorganization (Chapter 11 and 13) plans that are not performing per the court order. This requires some research, but it is all public record.