Old debts rearing their ugly head

[ifucan]

I had filed for Ch.7 back in Sept.2010. Long story short we had a AP filed
against us. In order to have the AP dropped the Trustee agreed that if we
drop our attempt for a discharge he would drop the AP. In retrospect it was
completely mishandled by our attorney and there never should have been a AP
filed....but that's another story!!

Anyway we never got the discharge,AP was dropped but now I go to the mailbox,
something I had finally not dreaded doing, and lo and behold a letter from an attorneys
office!! They were looking for the lifting of the stay of relief on a building that was
foreclosed on by their client in June of 2010. Now they want the deficiency of over
90K.

Guess my question is what do I do now. They stated my attorney needs to answer
on or before 5/25 ( a day before my birthday daggummit!!). What do we answer with?? Is this the first of more debtors rearing their ugly head!??!

[tobee43]

did you list the building in the petition??? if you did, you just send the a copy of the close order and discharge order and tell them to send you a 1099A and end of story....

but are you saying the bk was never discharged??? i'm not really understanding that. an AP should not have the power to prevent your bk from being discharged, maybe that debt alone, but not the entire bk. but if you did agree and signed something i would call the atty that handle this for you and ask what the heck is up here?

[ifucan]

Hi tobee. Thanks for the response. It is very discombobulated but yes we did sign an agreement that
if we agreed to waive our right to a discharge the Trustee would drop the AP he filed against us. The
building was foreclosed upon in June 2010 but we initially filed for BK in Sept.2010. So it was not listed
in the petition.

I do have a call into my attorney.

[tobee43]

this might be helpful

http://www.nationalbankruptcyforum.com/foreclosure/foreclosure-followed-by-a-deficiency-lawsuit-in-north-carolina/

Foreclosure followed by a deficiency lawsuit in North Carolina?

"In addition to numerous questions on the mortgage modification process, I am often asked whether a homeowner can be sued after foreclosure for the balance of the home loan. That answer depends on state law, which matters more and more with people losing investment properties in various states.

Many states have what is called an anti-deficiency statute, which prevents a mortgage holder from suing the borrower for an outstanding balance after foreclosure. North Carolina does have a limited anti-deficiency statute. The limitation is that the mortgage holder had to have sold the borrower the house, which is a rare circumstance. These are often referred to as seller-financed loans. North Carolina also allows the borrower to dispute whether the lender sold the home for fair value after foreclosure in the case of a primary residence.

Reacting to the foreclosure crisis the North Carolina legislature enacted NCGS 45-21.38A (provided below) which abolishes certain deficiency judgments: (1) rate spread loans as defined in the statute below, and (2) non-traditional mortgage loans. Despite this additional limited protection for borrowers lenders may have found a way to avoid this new statute by suing on the note PRIOR to foreclosure. In any event it appears borrowers are still exposed to possible lawsuits when they decide to walk away from a house and loan.

As a Charlotte Bankruptcy Attorney, I often file bankruptcy for people looking to avoid a potential house deficiency lawsuit. That being said few ever make the decision to file based solely on a house deficiency. Other possible options include a deed-in-lieu of foreclosure, short sale, or loan modification. For those who are able to reach an agreement with their mortgage company there is always the possibility of 1099 tax liability. The Mortgage Debt Relief Act of 2007 applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012, and may offer tax relief. As this foreclosure crisis continues, it is important to consider all options and seek legal advice before deciding to walk away from a home.

Jason Witt, Charlotte Bankruptcy

§ 45 21.38A.
Deficiency judgments abolished where mortgage secured by primary residence.

(a) As used in this section, the term “nontraditional mortgage loan” means a loan in which all of the following apply:
(1) The borrower is a natural person.
(2) The debt is incurred by the borrower primarily for personal, family, or household purposes.
(3) The principal amount of the loan does not exceed the conforming loan size for a single family dwelling as established from time to time by Fannie Mae.
(4) The loan is secured by: (i) a security interest in a manufactured home, as defined in G.S. 143 145, in the State that is or will be occupied by the borrower as the borrower’s principal dwelling; (ii) a mortgage or deed of trust on real property in the State upon which there is located an existing structure designed principally for occupancy of from one to four families that is or will be occupied by the borrower as the borrower’s principal dwelling; or (iii) a mortgage or deed of trust on real property in the State upon which there is to be constructed using the loan proceeds a structure or structures designed principally for occupancy of from one to four families that, when completed, will be occupied by the borrower as the borrower’s principal dwelling.
(5) The terms of the loan: (i) permit the borrower as a matter of right to defer payment of principal or interest; and (ii) allow or provide for the negative amortization of the loan balance.
(b) Except as provided in subdivision (6) of subsection (c) of this section, this section applies only to the following loans:
(1) A loan originated on or after January 1, 2005, that was at the time the loan was originated a rate spread home loan as defined in G.S. 24 1.1F.
(2) A loan secured by the borrower’s principal dwelling, which loan was modified after January 1, 2005, and became at the time of such modification and as a consequence of such modification a rate spread home loan.
(3) A loan that was a nontraditional mortgage loan at the time the loan was originated.
(4) A loan secured by the borrower’s principal dwelling, which loan was modified and became at the time of such modification and as a consequence of such modification a nontraditional mortgage loan.
(c) This section does not apply to any of the following:
(1) A home equity line of credit as defined in G.S. 45 81(a).
(2) A construction loan as defined in G.S. 24 10(c).
(3) A reverse mortgage as defined in G.S. 53 257 that complies with the provisions of Article 21 of Chapter 53 of the General Statutes.
(4) A bridge loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the borrower plans to sell his or her current dwelling within 12 months.
(5) A loan made by a natural person who makes no more than one loan in a 12 month period and is not in the business of lending.
(6) A loan secured by a subordinate lien on the borrower’s principal dwelling, unless the loan was made contemporaneously with a rate spread home loan or a nontraditional mortgage loan that is subject to the provisions of this section.
(d) In addition to any statutory or common law prohibition against deficiency judgments, the following shall apply to the foreclosure of mortgages and deeds of trust that secure loans subject to this section:
(1) For mortgages and deeds of trust recorded before January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(2) For mortgages and deeds of trust recorded on or after January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold as a consequence of a judicial proceeding or by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the judicial or foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(e) The court may, in its discretion, award to the borrower the reasonable attorneys’ fees actually incurred by the borrower in the defense of an action for deficiency if: (i) the borrower prevails in an action brought by the holder of the obligation secured by the foreclosed mortgage or deed of trust to recover a deficiency judgment following the foreclosure of a loan to which this section applies; and (ii) the court rules that the holder of the obligation secured by the foreclosed mortgage or deed of trust is not entitled to a deficiency judgment under the provisions of this section. The amount of attorneys’ fees to be awarded shall be determined without regard to the provisions of the loan documents, the provisions of G.S. 6 21.2, or any statutory presumption as to the amount of such attorneys’ fees. (2009 441, s. 1.)"

[ifucan]

[QUOTE=tobee43;569928]this might be helpful

http://www.nationalbankruptcyforum.com/foreclosure/foreclosure-followed-by-a-deficiency-lawsuit-in-north-carolina/

Foreclosure followed by a deficiency lawsuit in North Carolina?

"In addition to numerous questions on the mortgage modification process, I am often asked whether a homeowner can be sued after foreclosure for the balance of the home loan. That answer depends on state law, which matters more and more with people losing investment properties in various states.

Many states have what is called an anti-deficiency statute, which prevents a mortgage holder from suing the borrower for an outstanding balance after foreclosure. North Carolina does have a limited anti-deficiency statute. The limitation is that the mortgage holder had to have sold the borrower the house, which is a rare circumstance. These are often referred to as seller-financed loans. North Carolina also allows the borrower to dispute whether the lender sold the home for fair value after foreclosure in the case of a primary residence.

Reacting to the foreclosure crisis the North Carolina legislature enacted NCGS 45-21.38A (provided below) which abolishes certain deficiency judgments: (1) rate spread loans as defined in the statute below, and (2) non-traditional mortgage loans. Despite this additional limited protection for borrowers lenders may have found a way to avoid this new statute by suing on the note PRIOR to foreclosure. In any event it appears borrowers are still exposed to possible lawsuits when they decide to walk away from a house and loan.

As a Charlotte Bankruptcy Attorney, I often file bankruptcy for people looking to avoid a potential house deficiency lawsuit. That being said few ever make the decision to file based solely on a house deficiency. Other possible options include a deed-in-lieu of foreclosure, short sale, or loan modification. For those who are able to reach an agreement with their mortgage company there is always the possibility of 1099 tax liability. The Mortgage Debt Relief Act of 2007 applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012, and may offer tax relief. As this foreclosure crisis continues, it is important to consider all options and seek legal advice before deciding to walk away from a home.

Jason Witt, Charlotte Bankruptcy

§ 45 21.38A.
Deficiency judgments abolished where mortgage secured by primary residence.

(a) As used in this section, the term “nontraditional mortgage loan” means a loan in which all of the following apply:
(1) The borrower is a natural person.
(2) The debt is incurred by the borrower primarily for personal, family, or household purposes.
(3) The principal amount of the loan does not exceed the conforming loan size for a single family dwelling as established from time to time by Fannie Mae.
(4) The loan is secured by: (i) a security interest in a manufactured home, as defined in G.S. 143 145, in the State that is or will be occupied by the borrower as the borrower’s principal dwelling; (ii) a mortgage or deed of trust on real property in the State upon which there is located an existing structure designed principally for occupancy of from one to four families that is or will be occupied by the borrower as the borrower’s principal dwelling; or (iii) a mortgage or deed of trust on real property in the State upon which there is to be constructed using the loan proceeds a structure or structures designed principally for occupancy of from one to four families that, when completed, will be occupied by the borrower as the borrower’s principal dwelling.
(5) The terms of the loan: (i) permit the borrower as a matter of right to defer payment of principal or interest; and (ii) allow or provide for the negative amortization of the loan balance.
(b) Except as provided in subdivision (6) of subsection (c) of this section, this section applies only to the following loans:
(1) A loan originated on or after January 1, 2005, that was at the time the loan was originated a rate spread home loan as defined in G.S. 24 1.1F.
(2) A loan secured by the borrower’s principal dwelling, which loan was modified after January 1, 2005, and became at the time of such modification and as a consequence of such modification a rate spread home loan.
(3) A loan that was a nontraditional mortgage loan at the time the loan was originated.
(4) A loan secured by the borrower’s principal dwelling, which loan was modified and became at the time of such modification and as a consequence of such modification a nontraditional mortgage loan.
(c) This section does not apply to any of the following:
(1) A home equity line of credit as defined in G.S. 45 81(a).
(2) A construction loan as defined in G.S. 24 10(c).
(3) A reverse mortgage as defined in G.S. 53 257 that complies with the provisions of Article 21 of Chapter 53 of the General Statutes.
(4) A bridge loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the borrower plans to sell his or her current dwelling within 12 months.
(5) A loan made by a natural person who makes no more than one loan in a 12 month period and is not in the business of lending.
(6) A loan secured by a subordinate lien on the borrower’s principal dwelling, unless the loan was made contemporaneously with a rate spread home loan or a nontraditional mortgage loan that is subject to the provisions of this section.
(d) In addition to any statutory or common law prohibition against deficiency judgments, the following shall apply to the foreclosure of mortgages and deeds of trust that secure loans subject to this section:
(1) For mortgages and deeds of trust recorded before January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(2) For mortgages and deeds of trust recorded on or after January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold as a consequence of a judicial proceeding or by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the judicial or foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(e) The court may, in its discretion, award to the borrower the reasonable attorneys’ fees actually incurred by the borrower in the defense of an action for deficiency if: (i) the borrower prevails in an action brought by the holder of the obligation secured by the foreclosed mortgage or deed of trust to recover a deficiency judgment following the foreclosure of a loan to which this section applies; and (ii) the court rules that the holder of the obligation secured by the foreclosed mortgage or deed of trust is not entitled to a deficiency judgment under the provisions of this section. The amount of attorneys’ fees to be awarded shall be determined without regard to the provisions of the loan documents, the provisions of G.S. 6 21.2, or any statutory presumption as to the amount of such attorneys’ fees. (2009 441, s. 1.)"[/QUOTE[/B]

Tobee....................thanks for your help on this. Please if you don't mind help me
out further on this. I have read this over and over till my head hurts. Please forgive
my ignorance, but I'm looking for the section that fits my situation exactly.

Thanks again for all your help.

[justbroke]

I had filed for Ch.7 back in Sept.2010. Long story short we had a AP filed against us. In order to have the AP dropped the Trustee agreed that if we drop our attempt for a discharge he would drop the AP. In retrospect it was completely mishandled by our attorney and there never should have been a AP filed....but that's another story!!

I don't understand. Are you saying that you received a discharge for everything except for the creditor who initiated the adversary proceeding (AP)? Also, when you say "Trustee" do you mean the bankruptcy Trustee or a third-party "trustee" on a deed of trust?

It could make a difference as to whether you received a discharge in the bankruptcy or your bankruptcy was entirely dismissed without discharge.

[ifucan]

I don't understand. Are you saying that you received a discharge for everything except for the creditor who initiated the adversary proceeding (AP)? Also, when you say "Trustee" do you mean the bankruptcy Trustee or a third-party "trustee" on a deed of trust?

It could make a difference as to whether you received a discharge in the bankruptcy or your bankruptcy was entirely dismissed without discharge.

Hi justbroke- The Trustee handling the entire BK filed a AP against us as he accused us of fraud. My attorney felt
the "charges" were frivolous. However my attorney was basically spineless and in over his head and advised us to
go along with the Trustee. Therefore if we agreed to not have a discharge for our entire BK then the Trustee would
drop the AP.

Our BK was entirely dismissed without discharge.

[justbroke]

Well, since the bankruptcy has no bearing on this particular issue, I can now look at the issue you are facing.

When you wrote that a "building" was foreclosed upon, this indicated to me that it was a.) a commercial building, a mixed use building, or some multi-tenant "building", b.) was an investment or commercial debt, and c.) that you did not occupy it as your primary residence. If that is true and you were foreclosed upon by exercise of a power of sale, in N.C., then you are subject to the deficiency judgement.

If I were in your shoes, I'd be seeking legal counsel! The deficiency could be reduced to judgment and then they could start to levy property and other assets. You will probably need to file bankruptcy, again. This time, you will need a discharge in order to get rid of this deficiency.

You have some planning to do. Since you felt your prior bankruptcy attorney was not working for you, then you will need to shop for a new attorney.

[ifucan]

Well, since the bankruptcy has no bearing on this particular issue, I can now look at the issue you are facing.

When you wrote that a "building" was foreclosed upon, this indicated to me that it was a.) a commercial building, a mixed use building, or some multi-tenant "building", b.) was an investment or commercial debt, and c.) that you did not occupy it as your primary residence. If that is true and you were foreclosed upon by exercise of a power of sale, in N.C., then you are subject to the deficiency judgement.

If I were in your shoes, I'd be seeking legal counsel! The deficiency could be reduced to judgment and then they could start to levy property and other assets. You will probably need to file bankruptcy, again. This time, you will need a discharge in order to get rid of this deficiency.

You have some planning to do. Since you felt your prior bankruptcy attorney was not working for you, then you will need to shop for a new attorney.

Thanks justbroke. I guess my question is....can I file BK AGAIN on the same debts??? I was under the impression that I
was not. If they get a judgement I have no assets. I have a first mortgage on my home.....that I am on a trial modification,
and no other assets. If they get a judgement I have nothing to give them! If I can't file BK again on this debt I have no idea
how I can get rid of it????

Not sure what to do.

[justbroke]

You can file on the prior debts. Do you know if it was dismissed without prejudice? If the case was dismissed with prejudice, you would not be able to discharge any debts which were incurred prior to filing the dismissed case.

Please remember that assets include, but are not limited to, real and personal property, cash on hand, and even future earnings. If you are working, they could seek to attach your pay through a garnishment!

[ifucan]

You can file on the prior debts. Do you know if it was dismissed without prejudice? If the case was dismissed with prejudice, you would not be able to discharge any debts which were incurred prior to filing the dismissed case.

Please remember that assets includes, but it not limited to, real and personal property, cash on hand, and even future earnings. If you are working, they could seek to attach your pay through a garnishment!

Wow that's disheartening! I believe the case was dismissed without prejudice as the BK Trustee agreed to
drop the AP if we agreed to not pursue a discharge.

I am meeting with my attorney next week. Thanks.

[justbroke]

Yes, it is real disheartening. Wage garnishment can be a serious issue depending on the State in which you live. Hopefully, you can come up with a good plan to get rid of this potential $90K judgment!