Post Petition Ch. 13 creditor remedies
Posted: Fri Nov 26, 2004 2:17 pm
How is it violating the automatic stay to lend the debtor money post petition? I suppose the repayments might be violative, but isn't this just paying an administrative expense?
----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Friday, November 26, 2004 2:07 PM
Subject: Re: [cdcbaa] Post Petition Ch. 13 creditor remedies
This fact pattern sounds like an unauthorized 1303 use of property out of the ordinary course which required both 363(b) and 362 motions. Its unclear what level of sophistication the parties have, so its difficult to predict what the court will do when it learns of the transactions and the requested relief. The general unsecureds will need 100% if not already provided for. The debtor risks dismissal of case for bad faith, perhaps depending on whether debtor was represented and what level of sophistication debtor has if not represented. Creditor risks sanctions for knowingly violating the automatic stay, etc.
However, as newly retained counsel for either party I believe you must immediately seeking nunc pro tunc orders with very good declarations regarding the need for and use of funds and the reason why the parties didn't seek approval first.
Good luck.
"Mark J. Markus" wrote:
Today must be strange facts day, but here's one I've never dealt with, on the creditor's side:
Creditor enters into an agreement with a Chapter 13 debtor, POST PETITION, to loan debtor money ($140,000). Money is lent, without BK court approval, and creditor records a deed of trust pursuant to the Note. The Deed of Trust is subsequently withdrawn for reasons NOT related to the Ch. 13 and a new Note is entered into with a new deed of trust which is not recorded. (I'm not sure whether the deed of trust recordation matters at all anyway, since I think it is void regardless).
So, basically, creditor has an unsecured post petition claim against this Ch. 13 debtor. Debtor had been making payments to this creditor, somehow, outside of his plan (putting aside for the moment where this additional disposable income came from). Creditor now wants to know what he can do to enforce his rights, get his money back, etc.
My preliminary thoughts: 1. File a Motion for Relief from Stay to allow the security interest in debtor's real property to be perfected. However, I see problems with this.
or, 2. File a claim for administrative expenses, which would tank the Plan and either force conversion or dismissal, neither of which would likely be in said creditor's best interest.
What if debtor's case is completed first, discharge granted. Can said creditor then record his deed of trust, or would it be void because the Note was entered into without bankruptcy court approval.
On top of all that, the Plan Confirmation orders here in the Central District of California (where this case was filed), limit debtor to borrowing up to $200 or so without court approval. Thus, the borrowing violated the confirmation order. OK, so what's the penalty and to whom is it against? Creditor thinks there is sufficient equity in the real property to protect his interest, provided we can get a deed validly recorded.
Thoughts? Thanks all...and Happy Thanksgiving.
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
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How is it violating the automatic stay to lend the
debtor money post petition? I suppose the repayments might be violative,
but isn't this just paying an administrative expense?
----- Original Message -----
From:
P
L
To: cdcbaa@yahoogroups.com
Sent: Friday, November 26, 2004 2:07
PM
Subject: Re: [cdcbaa] Post Petition Ch.
13 creditor remedies
This fact pattern sounds like an unauthorized 1303 use of property out of
the ordinary course which required both 363(b) and 362
motions. Its unclear what level of sophistication the parties have, so
its difficult to predict what the court will do when it learns of the
transactions and the requested relief. The general unsecureds will need
100% if not already provided for. The debtor risks dismissal of case for
bad faith, perhaps depending on whether debtor was represented and what level
of sophistication debtor has if not represented. Creditor risks
sanctions for knowingly violating the automatic stay, etc.
However, as newly retained counsel for either party I believe you
must immediately seeking nunc pro tunc orders with very good declarations
regarding the need for and use of funds and the reason why the parties didn't
seek approval first.
Good luck. "Mark J. Markus"
<bklawr@bklaw.com> wrote:
Today must be strange facts day, but here's one
I've never dealt with, on the creditor's side:
Creditor enters into an agreement with a
Chapter 13 debtor, POST PETITION, to loan debtor money ($140,000).
Money is lent, without BK court approval, and creditor records a deed of
trust pursuant to the Note. The Deed of Trust is subsequently
withdrawn for reasons NOT related to the Ch. 13 and a new Note is entered
into with a new deed of trust which is not recorded. (I'm not
sure whether the deed of trust recordation matters at all anyway, since I
think it is void regardless).
So, basically, creditor has an unsecured post
petition claim against this Ch. 13 debtor. Debtor had been making payments to this creditor, somehow, outside of his plan (putting aside for the moment where this additional disposable income came
from). Creditor now wants to know what he can do to enforce his
rights, get his money back, etc.
My preliminary thoughts: 1. File a Motion for Relief from Stay to allow the security interest in
debtor's real property to be perfected. However, I see problems
with this.
or, 2. File a claim for administrative expenses, which would tank the Plan and either force conversion or
dismissal, neither of which would likely be in said creditor's best
interest.
What if debtor's case is completed first,
discharge granted. Can said creditor then record his deed of trust, or
would it be void because the Note was entered into without bankruptcy court
approval.
On top of all that, the Plan Confirmation
orders here in the Central District of California (where this case was filed), limit debtor to borrowing up to $200 or so without court
approval. Thus, the borrowing violated the confirmation
order. OK, so what's the penalty and to whom is it
against? Creditor thinks there is sufficient equity in the real
property to protect his interest, provided we can get a deed validly
recorded.
Thoughts? Thanks all...and Happy Thanksgiving.
***********************************************Mark J.
MarkusLaw Office of Mark J. Markus11684 Ventura Blvd. PMB
#403Studio City, CA 91604-2652(818)509-1173(818)509-1460
(fax)e-mail: bklawr@bklaw.comweb:
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