Bankruptcy law enhances and expands a debtor’s state law property rights by specifying the time within which a debtor may cure a mortgage default. In re Ausburn, No. 16153 (Bankr. E.D. Ark. Feb. 10, 2015). [Read more…] about Right to Cure Preempts State Law Property Rights
Maintaining Foreclosure Status Quo Does Not Violate Automatic Stay
Where foreclosure is commenced pre-petition, continuance of the state foreclosure process does not violate the automatic stay. Witkowski v. Knight (In re Witkowski), No. 14-34, __ B.R. __ (B.A.P. 1st Cir. Nov. 13, 2014). [Read more…] about Maintaining Foreclosure Status Quo Does Not Violate Automatic Stay
Nevada Banks Take a Gamble when it Comes to HOA Liens
In a 4-3 decision, the Nevada Supreme Court decided that Nev. Rev. St. 116.3116 gives a homeowners’ association (HOA) a superpriority lien based on certain unpaid dues and assessments so as to extinguish the first deed of trust upon foreclosure. SFR Investments Pool v. U.S. Bank, No. 63078 (Nev. S. Ct. Sept. 18, 2014). The court also held that, under the statute, an HOA may use a non-judicial foreclosure.
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Ocwen’s Errors Force Debtors into Bankruptcy
A Delaware Bankruptcy Judge took on the task of calculating the debtors’ mortgage payment history in the face of erroneous calculations by Ocwen Loan Servicing, LLC. Judge Shannon found that the debtors were current on their payments when Ocwen initiated foreclosure proceedings and that Ocwen’s errors forced the debtors into bankruptcy to save their home. Williams v. Ocwen, No. 13-12234 (Bankr. D. Del. July 18, 2014). [Read more…] about Ocwen’s Errors Force Debtors into Bankruptcy
Failure to Follow Condition Precedent to Foreclosure Precludes Recovery for Costs
It pays to read mortgage documents carefully to determine whether the bank or Servicer complied with contractual conditions precedent prior to bringing adverse action against the debtor upon default. In In re Demers, No. 13-11539 (Bankr. R.I. June 5, 2014), American Servicing Co. (ASC) failed to comply with such conditions and was denied recovery of nearly $2,000.00 in claimed fees and costs associated with initiation of foreclosure proceedings. [Read more…] about Failure to Follow Condition Precedent to Foreclosure Precludes Recovery for Costs
Discharge Precludes Deficiency Judgment from Post-Discharge Foreclosure
Does the debtors’ chapter 13 discharge extinguish their liability for a deficiency arising from a post-discharge foreclosure sale of their principal residence by a secured creditor whose claim was paid outside the plan? The Bankruptcy Court for the Eastern District of North Carolina said that it does. In re Rogers, No. 08-8341 (Bankr. E.D. N.C. July 8, 2013).
The issue came before the court when the creditor moved for an order that the earlier discharge did not relieve the debtors’ of personal liability on the post-discharge deficiency. The first hurdle the debtors overcame was the court’s finding that, for discharge purposes, the debt was “provided for” by the plan. The mortgagee had filed a proof of claim and the plan specified that the debtors would continue the payments on the mortgage outside the plan according to the terms of the lending documents. There was no deficiency to be cured through the plan. In Rake v. Wade, 508 U.S. 464, 473-74 (1993), it was established that any plan that describes treatment of a debt, even if that treatment is outside the plan, “provides for” the debt.
The court next found that even though the debtors’ payments on the debt extended beyond the life of the plan, section 1322(b)(5)’s “cure and maintain” provision was not implicated because there was no arrearage to cure through the plan. Therefore, section 1328(a)(1), which states that debts provided for under section 1322(b)(5) were nondischargeable, did not prevent the outcome sought by the debtors.
Finally, the court rejected the argument that by relieving the debtors of the burden of paying the deficiency, the court was “modifying” its rights in violation of section 1322(b) as interpreted by the Court in Nobelman v. American Savings Bank, 508 U.S. 324, 326 (1993). The court found that, in confirming debtors’ plan which merely referenced the lending agreement, the court had not altered the creditor’s rights in any way not permitted by the Code. While the discharge released the debtor from personal liability under Dewsnup v. Timm, 502 U.S. 410, 414 (1992) and Johnson v. Home State Bank, 501 U.S. 78, 84 (1991), in rem liability remained post-discharge and the creditor was able to avail itself of its rights under state law to foreclose based on that liability. The court concluded that, as it had found in its earlier decision in In re Lane, No. 97-06850-8-JRL (Bankr. E.D. N.C. July 13, 2006), “[t]he discharge extinguished their personal liability with respect to any past, present or future judgment arising from SECU’s claim, which was provided for under the debtors’ plan and discharged under § 1328(a).”
Deed of Trust Is Functional Equivalent of Mortgage for State Foreclosure Purposes
In Cruz v. Aurora Loan Services, No. 11-1133, Adv. Proc. No. 11-90116 (Bankr. S.D. Cal. Apr. 25, 2013), the court was asked to reconsider its earlier determination that the recording requirement of California’s non-judicial foreclosure statute applies to deeds of trust. See Cruz v. Aurora Loan Servs. LLC (In re Cruz), 457 B.R. 806 (Bankr. S.D. Cal. 2011) (“Cruz I“). [Read more…] about Deed of Trust Is Functional Equivalent of Mortgage for State Foreclosure Purposes