RECENT BANKRUPTCY COURT DECISION WILL FORCE 1000'S OF HOMEOWNER OUT OF CHAPTER 13 INTO CHAPTER 11

By
Services for Real Estate Pros with Law Offices of Louis J. Esbin
A well reasoned recent bankruptcy decision, following the letter of law, has held that wholly undersecured second or third lien creditors will be added to the total amount of unsecured debt, such that the total amount allowable of $336,900 would be exceeded and therefore the cases must be dismissed. This unfortunate result could be devastating to 1000's of middle class Americans being caught between the upside and downside. No doubt that we will be take this decision up to the Ninth Circuit and possibly the Supreme Court, as the issues are too important to thousands of families. This is even more reason why our elected officials must seriously take up bankruptcy reform, including the modification of first deed of trust secured by a residence.

Comments (2)

Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Interesting information. All will be watching to see how this plays out. Thanks for sharing.

Aug 08, 2009 10:11 PM
Louis Esbin
Law Offices of Louis J. Esbin - Santa Clarita, CA

Thank you.

A recent AP article discussed how loan servicers are taking advantage of the government handout.  Under U.S. Treasury Guidelines they are paid from $3500 to $4500 per loan that is modified.  As we know, merely 6% of loans in need of modification are actually modified, but the modifications are done in such a way that default is almost guarantied.  My office is one of the few that bundles bankruptcy relief with loan modifications, giving clients a true financial restructuring; just like corporations are given.  We even attempt to analyze the loan documents for any issues that can give us leverage in negotiating a modification of the first that cannot be modified by the court.  The expense to the client is more than double what it would be if the Courts were allowed to modify the loans, and the lender/servicer is paid through the U.S. Treasury.

Aug 09, 2009 05:14 PM