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Underwater property and deficiencies
The latest updates should be out next month. We just finished them last month.
Thank you, and best regards, Lou Esbin
Law Offices of Louis J. Esbin
25129 The Old Road, Suite 114Stevenson Ranch, California 91381
Tel: 661-254-5050 | Fax: 661-254-5252 | Web: www.Esbinlaw.com Certified Bankruptcy Specialist -
State Bar of California Board of Legal Specialization
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There is an exhaustive discussion of the issue in the CEB Mortgage, Deeds of Trust and Foreclosure Litigation guide (4th Ed. 2009). There is a small crack in the rights of the second to sit on its rights, as you state, when the first and second are original purchase money and the same lender at the time of foreclosure; however, where one is assigned to a third party, the argument is lost, and the second need not participate in the foreclosure to preserve its rights under the note.
At one time, because I am a contributing author to the treatise, CEB offered a discount to cdcbaa members. It is a resource that if you are dealing with these issues you should become familiar with.
>
> Thanks for the reply Dennis. I am still confused. The line of CA cases I am reading (starting with Brown) seem to indicate that the one action rule requires a secured creditor to exhaust the collateral before seeking a deficiency judgment on the note. The exception to the rule is a sold out junior who lost its security through no fault of its own. In my example, there is arguably $100,000 equity in the property. It doesn't seem right that the second can sit on its hands and claim 'sold out junior" status.
>
> As far as getting my P&As in order, the Chapter 13 decisions I am finding all seem to indicate that the plan cannot provide surrender in full satisfaction of the debt over an undersecured creditor's objection. In my example, the undersecured second would seem to have the absolute right to seek payment of the unsecured portion of its debt. Is there some case law I am missing? Otherwise, I guess my question would be: how is this issue dealt with in this jurisdiction - if anyone knows? Do the undersecured creditors typically object and/or file unsecured claims? Absent that, would the Chapter 13 trustee object if I scheduled the first and second as fully secured and inserted "surrender in full satisfaction" language into the plan?
>
>
> --- In cdcbaa@yahoogroups.com, "DennisM" wrote:
> >
> > Sam:
> >
> > 2nd does not have to look to collateral. It can sue on the note.
> > Also, if 1st forecloses, it will be a sold out junior and will have to sue on the note.
> >
> > Chapter 13, unlike chapter 11, allows the surrender of the collateral, but you would have to get the plan confirmed before the 1st foreclosed and the second will probably object, so have your p&a in order before you file.
> >
> > dennis
> >
> > --- In cdcbaa@yahoogroups.com, "sambenevento" wrote:
> > >
> > > I tried starting this thread before without luck - but I am still puzzled. Very high income PC has only 1 credit card ($8000) plus rental property worth $530,000 with a $430,000 purchase money first and a $280,000 second taken out about 1 year after purchase for remodel. The first filed an NOD but the second is pounding it's chest about suing on the note. 2 questions: a.doesn't the one-action rule require the second to exhaust the collateral before pursuing the debtor on the loan (assuming it doesn't lose that right by using the non-judicial foreclosure procedure)? b. Can I just put PC into a 13 to pay 100% to her one credit card over a 6 month plan while surrendering the rental to the first and second (my fear being that the second will block confirmation or file a deficiency claim that has to be paid 100%). Any insight would be appreciated.
> > >
> >
>
The post was migrated from Yahoo.
Thanks for the reply Dennis. I am still confused. The line of CA cases I am reading (starting with Brown) seem to indicate that the one action rule requires a secured creditor to exhaust the collateral before seeking a deficiency judgment on the note. The exception to the rule is a sold out junior who lost its security through no fault of its own. In my example, there is arguably $100,000 equity in the property. It doesn't seem right that the second can sit on its hands and claim 'sold out junior" status.
As far as getting my P&As in order, the Chapter 13 decisions I am finding all seem to indicate that the plan cannot provide surrender in full satisfaction of the debt over an undersecured creditor's objection. In my example, the undersecured second would seem to have the absolute right to seek payment of the unsecured portion of its debt. Is there some case law I am missing? Otherwise, I guess my question would be: how is this issue dealt with in this jurisdiction - if anyone knows? Do the undersecured creditors typically object and/or file unsecured claims? Absent that, would the Chapter 13 trustee object if I scheduled the first and second as fully secured and inserted "surrender in full satisfaction" language into the plan?
>
> Sam:
>
> 2nd does not have to look to collateral. It can sue on the note.
> Also, if 1st forecloses, it will be a sold out junior and will have to sue on the note.
>
> Chapter 13, unlike chapter 11, allows the surrender of the collateral, but you would have to get the plan confirmed before the 1st foreclosed and the second will probably object, so have your p&a in order before you file.
>
> dennis
>
> --- In cdcbaa@yahoogroups.com, "sambenevento" wrote:
> >
> > I tried starting this thread before without luck - but I am still puzzled. Very high income PC has only 1 credit card ($8000) plus rental property worth $530,000 with a $430,000 purchase money first and a $280,000 second taken out about 1 year after purchase for remodel. The first filed an NOD but the second is pounding it's chest about suing on the note. 2 questions: a.doesn't the one-action rule require the second to exhaust the collateral before pursuing the debtor on the loan (assuming it doesn't lose that right by using the non-judicial foreclosure procedure)? b. Can I just put PC into a 13 to pay 100% to her one credit card over a 6 month plan while surrendering the rental to the first and second (my fear being that the second will block confirmation or file a deficiency claim that has to be paid 100%). Any insight would be appreciated.
> >
>
The post was migrated from Yahoo.
Sam:
2nd does not have to look to collateral. It can sue on the note.
Also, if 1st forecloses, it will be a sold out junior and will have to sue on the note.
Chapter 13, unlike chapter 11, allows the surrender of the collateral, but you would have to get the plan confirmed before the 1st foreclosed and the second will probably object, so have your p&a in order before you file.
dennis
>
> I tried starting this thread before without luck - but I am still puzzled. Very high income PC has only 1 credit card ($8000) plus rental property worth $530,000 with a $430,000 purchase money first and a $280,000 second taken out about 1 year after purchase for remodel. The first filed an NOD but the second is pounding it's chest about suing on the note. 2 questions: a.doesn't the one-action rule require the second to exhaust the collateral before pursuing the debtor on the loan (assuming it doesn't lose that right by using the non-judicial foreclosure procedure)? b. Can I just put PC into a 13 to pay 100% to her one credit card over a 6 month plan while surrendering the rental to the first and second (my fear being that the second will block confirmation or file a deficiency claim that has to be paid 100%). Any insight would be appreciated.
>
The post was migrated from Yahoo.
I tried starting this thread before without luck - but I am still puzzled. Very high income PC has only 1 credit card ($8000) plus rental property worth $530,000 with a $430,000 purchase money first and a $280,000 second taken out about 1 year after purchase for remodel. The first filed an NOD but the second is pounding it's chest about suing on the note. 2 questions: a.doesn't the one-action rule require the second to exhaust the collateral before pursuing the debtor on the loan (assuming it doesn't lose that right by using the non-judicial foreclosure procedure)? b. Can I just put PC into a 13 to pay 100% to her one credit card over a 6 month plan while surrendering the rental to the first and second (my fear being that the second will block confirmation or file a deficiency claim that has to be paid 100%). Any insight would be appreciated.
The post was migrated from Yahoo.