Recent Entries

Document Challenges To Motions For Relief From Stay In Chicago

Published on April 9, 2009 in Chapter 13, Chapter 7 and Motion. 0 Comments

There are ten bankruptcy judges in the Northern District of Illinois (Chicago).  Only one of these judges, Judge Schmetterer, has a standing order requiring supporting documents be filed with motions for relief.

Copies of the note and security interest must be filed as exhibits to the motion.  If the collateral is real estate, a recorded copy of the mortgage is required.  If it is a vehicle, the title is required, and if equipment, the UCC statement must be attached. None of the judges at this point require recorded assignments that show the moving party is the true party in interest, but Judge Schmetterer does require the relationship between the moving party and the original creditor be explained in the motion.

While vehicle titles and UCC statements are rarely challenged, debtor’s attorneys are increasingly asking for recorded documents and assignments or servicing agreements to prove that the moving party is the true party in interest.  This trend has been driven somewhat by activist attorneys, but perhaps as much or more so by debtors who have been paying attention to the media and surfing the net on the troubles some mortgage holders may have in proving they are the real party in interest.

It is always the best practice to send your attorney the note and/or security agreement, evidence of security, and any assignments or documents showing a servicing agreement. However, not every loan is equipped with a perfect portfolio of documents.  This is a problem only when the court requires them or debtors demand them.  In these cases, your WWR attorney will work with you to overcome or satisfy the debtors’ demands.

Unintended Consequences: Bankruptcy Cram Down May Actually Case Decrease in Bankruptcy Filings

Published on April 8, 2009 in Bankruptcy Act 2009, Chapter 13 and Real Estate. 0 Comments

With the proposed amendments to the Bankruptcy Code placed on temporary hold by Congress until at least late April, it seems appropriate to take a step back and examine the possible unintended consequences of the passage of such a law.

While providing troubled borrowers with an effective tool to rework their mortgage terms under the protection of the Bankruptcy Code, is it possible that the mere threat of such a modification by a borrower could lead an increasing number of lenders to agree to rework the loan terms outside of the bankruptcy process?

Debtor’s counsel have always operated with the knowledge that, while they have the ability to tie up a pending foreclosure for months or even years by aggressively opposing the case, the reality has always been that mortgage lenders held the upper hand once a Chapter 13 bankruptcy was filed. A borrower could not alter the terms of the loan, but could only seek breathing room to bring delinquent payments current.

If the proposed amendments become a reality, the leverage will clearly shift into the borrower’s favor, which may lead more and more lenders to seek a negotiated modification prior to bankruptcy, saving both sides from litigating over valuation of the home and risking assessment prior to plan confirmation.  The end result could be a decrease in Chapter 13 filings within the pool of borrowers who, but for their mortgage delinquency, might not be in financial difficulty.

Of course, the flip side to this argument would be that with all the economic indicators clearly showing a downturn, the actual number of borrowers whose only financial difficulty consists of their mortgage, is likely becoming smaller and smaller each month.  Therefore, it is likely that even with the offer of a voluntary loan modification by the lender, the vast majority of borrowers will still seek bankruptcy relief.

“Cram-Down” Provision May Be Dropped from House-Passed Banking Bill

Published on April 6, 2009 in Bankruptcy Act 2009, Chapter 13 and Real Estate. 0 Comments

Congressional Leaders may drop the “Cram-Down” provision if it threatens the passage of the overall banking bill.  Recently, at a Christian Science Monitor Breakfast, Senate Majority Leader Harry Reid stated, “If we can’t get the votes for that, and I am hopeful we can – I am semiconfident we can – then what I’ll do is take that off [the bill] and do the other banking provisions”.  Currently the legislation is facing stiff opposition in the Senate from Republicans and moderate Democrats who are pushing for a watered down version of the cram-down provision.  Senate Republicans and moderate Democrats led by Senator Evan Bayh and Senator Arlen Specter are pushing a version of the cram-down provision that applies only to homeowners with subprime loans.  There reasoning is that the subprime problem has done enough damage to the banking industry.

The cram-down provision in Obama’s plan is designed to encourage lenders to modify at-risk mortgages so that they are more affordable to struggling homeowers.  The plan gives lenders who voluntarily modify loans a cash bonus of $1,000 for each loan modified.  For now lenders will have to hold their breath a little longer as the Senate futher debates the specifics of the cram-down provision.