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Practical Effect of Ch. 7 on Mortgage
If the lender wants to provide better payment terms to the borrower
after discharge through "loan modification", let them. Regardless of
the unenforceability of the modification, lenders modify after
discharge all the time. As long as the lender was listed and noticed
in the bankruptcy, there is no basis for any misrepresentation claim
regarding the loan modification. You are not required to do anything,
nor should you. Lender's cannot contract around section 524(c). Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
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On Mon 12/07/10 8:57 AM , "Cameron Totten" tottenlaw@sbcglobal.net
sent:
With one of my clients, that is the dilemma. Reaffirmation seems
absurd when the property is worth around $250k and the note is for
$600k. However, how do you do a modification post-discharge? Would I
need to file a motion to re-open the case and then file a
reaffirmation agreement with the modified terms?
I have another client with a trickier scenario. He rented from a
landlord/owner who filed Chapter 7. Prior to discharge, he purchased
the property from the trustee subject to all liens, etc. The
landlord/owner ultimately received a discharge. As the note was only
in the landlord/owners name, I dont think that a
modification/reaffirmation would be possible. However, the lender is
requiring him to continue to make the loan payment on the property.
It does not appear that they have any legal basis for doing anything
other than foreclosing. Nevertheless, my client wants to keep the
property. Any suggestions as to how to proceed? My instinct tells me
that a lender would be much more willing to foreclose asap because
they are in a precarious situation because they dont have a right
to payment.
FROM: cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] ON
BEHALF OF Mark T.Jessee
SENT: Sunday, July 11, 2010 10:53 PM
TO: cdcbaa@yahoogroups.com
SUBJECT: Re: [cdcbaa] Practical Effect of Ch. 7 on Mortgage
You are correct on your analysis on the note being discharged and
the security interest of the deed of trust remaining. Modification
is not impossible without a new note or reaffirmaton. Happens all the
time. It is rare that I see a home lender seek a reaffirmation
agreement and I would never let a client sign one unless there was
some exceptional circumstance beneficial to the debtor and there would
need to be tons of equity in the property. Usually reaffirming home
loan debt is very unwise. Especially when many lenders seem so
willing to modify post discharge.
Regardless, only if there is a reaffirmation agreement does personal
liablility survive discharge. Without court approval in the form of a
reaffirmation agreement, any modification is not enforceable against
the debtor personally under Section 524(c). Any such attempt to
enforce any modification not formally reaffirmed is a violation of the
discharge injunction. I do not even think the same lender can get
around 523(c) by refinancing the loan without a court approved
reaffirmation agreement because consideration is at least in part
stemming from the discharged debt.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
ON SUN 11/07/10 9:42 PM , "CAMERON TOTTEN" TOTTENLAW@SBCGLOBAL.NET
SENT:
I've been struggling with this issue for months. However, it is more
prevalent now as most PCs and clients aren't close to making their
mortgage payment and plan payment simultaneously. Thus, a chapter 7 is
their only bk option. Correct me if I'm wrong but it is my
understanding that a note is discharged as with all other debt.
However, the deed of trust remains after discharge. Thus, a
"modification" would be impossible. Instead, the lender would have to
issue a new note or reaffirm the prior note. Does anyone have any
experience with what lenders are actually doing in this situation? Are
they negotiating new notes if the borrower wants to keep their house
or simply foreclosing? Is there any legal or practical benefit to
continue to make payments after discharge? Is the one action rule
still applicable after the note has been discharged? Thanks.
Cameron Totten
ctottenlaw.com
Sent from my Verizon Wireless BlackBerry
Links:
[1] mailto:cdcbaa@yahoogroups.com?subjectRE: [cdcbaa] Practical
Effect of Ch. 7 on Mortgage
[2]
The post was migrated from Yahoo.
It has been my understanding (and personal experience in the valley), that Judges in the Central District will not reaffirm mortgages.
Jonathan Leventhal
My Card
Jonathan D. Leventhal, Esq.
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With one of my clients, that is the dilemma. Reaffirmation seems absurd when the property is worth around $250k and the note is for $600k. However, how do you do a modification post-discharge? Would I need to file a motion to re-open the case and then file a reaffirmation agreement with the modified terms?
I have another client with a trickier scenario. He rented from a landlord/owner who filed Chapter 7. Prior to discharge, he purchased the property from the trustee subject to all liens, etc. The landlord/owner ultimately received a discharge. As the note was only in the landlord/owners name, I dont think that a modification/reaffirmation would be possible. However, the lender is requiring him to continue to make the loan payment on the property. It does not appear that they have any legal basis for doing anything other than foreclosing. Nevertheless, my client wants to keep the property. Any suggestions as to how to proceed? My instinct tells me that a lender would be much more willing to foreclose asap because they are in a precarious situation because they dont have a right to payment.
The post was migrated from Yahoo.
Loan Modifications can go forward. Do limited opposition to MRS and ask Relief not occur until 14 days after discharge to facilitate negotiations. Some Judges will fashion this remedy if you attach proof of modification, the agreement with the negotiator and declaration of progress, (i.e. QWR's sent and response rec'd - negotiator assigned (date) - list progress - etc.) If the foreclosure sale date was pending at the filing of the petition, some Judges will agree to not lift the stay until 14 days after discharge.
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The post was migrated from Yahoo.
You are correct on your analysis on the note being discharged and
the security interest of the deed of trust remaining. Modification
is not impossible without a new note or reaffirmaton. Happens all the
time. It is rare that I see a home lender seek a reaffirmation
agreement and I would never let a client sign one unless there was
some exceptional circumstance beneficial to the debtor and there would
need to be tons of equity in the property. Usually reaffirming home
loan debt is very unwise. Especially when many lenders seem so
willing to modify post discharge.
Regardless, only if there is a reaffirmation agreement does personal
liablility survive discharge. Without court approval in the form of a
reaffirmation agreement, any modification is not enforceable against
the debtor personally under Section 524(c). Any such attempt to
enforce any modification not formally reaffirmed is a violation of the
discharge injunction. I do not even think the same lender can get
around 523(c) by refinancing the loan without a court approved
reaffirmation agreement because consideration is at least in part
stemming from the discharged debt.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
On Sun 11/07/10 9:42 PM , "Cameron Totten" tottenlaw@sbcglobal.net
sent:
I've been struggling with this issue for months. However, it is more
prevalent now as most PCs and clients aren't close to making their
mortgage payment and plan payment simultaneously. Thus, a chapter 7 is
their only bk option. Correct me if I'm wrong but it is my
understanding that a note is discharged as with all other debt.
However, the deed of trust remains after discharge. Thus, a
"modification" would be impossible. Instead, the lender would have to
issue a new note or reaffirm the prior note. Does anyone have any
experience with what lenders are actually doing in this situation? Are
they negotiating new notes if the borrower wants to keep their house
or simply foreclosing? Is there any legal or practical benefit to
continue to make payments after discharge? Is the one action rule
still applicable after the note has been discharged? Thanks.
Cameron Totten
ctottenlaw.com
Sent from my Verizon Wireless BlackBerry
Links:
[1] mailto:cdcbaa@yahoogroups.com?subjectPractical Effect of Ch. 7
on Mortgage
[2]
The post was migrated from Yahoo.
I've been struggling with this issue for months. However, it is more prevalent now as most PCs and clients aren't close to making their mortgage payment and plan payment simultaneously. Thus, a chapter 7 is their only bk option. Correct me if I'm wrong but it is my understanding that a note is discharged as with all other debt. However, the deed of trust remains after discharge. Thus, a "modification" would be impossible. Instead, the lender would have to issue a new note or reaffirm the prior note. Does anyone have any experience with what lenders are actually doing in this situation? Are they negotiating new notes if the borrower wants to keep their house or simply foreclosing? Is there any legal or practical benefit to continue to make payments after discharge? Is the one action rule still applicable after the note has been discharged? Thanks.
Cameron Totten
ctottenlaw.com
Sent from my Verizon Wireless BlackBerry
The post was migrated from Yahoo.