Urgent: Home is at stake! Question about Real Estate Contract

[nmtechie]

I am trying to help my sister keep her house. My mother is trying to help too. She filed a pro-se Chapter 13 house and her only asset is her house which is financed by a 2 year Real Estate Contract (I guess it would be an executory contract). It sets to mature on March 14, 2007. Her plan was confirmed on November 16, 2006 for 44 months. The holder of her Real Estate contract didn't object to the plan at all. So now she is trying to refinance and the mortgage companies said they refinance in 1 year provided she makes timely payments to the trustee and to the lienholder. My mother can get it financed in her name in 1 year. She is willing to approach the seller about extending the contract for one year in her name.

Does the automatic stay lift on March 14, 2007 which is the deadline to refinance?

Why was the plan confirmed only to have to stay lift a few months later?

Should she contact the lienholder or what can she file with the court to stop the acceleration? She could modify the plan couldn't she and that would extend the automatic stay? No attorney wants to touch her case.

[lrprn]

Filing Ch 13 pro se these days is almost 99% guaranteed to turn out badly. I'm sorry to hear that your sister is now caught up in such a messy situation that has put her house at stake. When did she file?

She can try filing a modified Ch 13 plan once she knows what the new balloon payments are going to be - no guarantees though.

Both the pre-Oct 2005 and especially the new post-October 2005 bankruptcy laws are full of traps, grey areas, and black holes that are just waiting to trip the no-lawyer filer. Your sister really needs an experienced Ch 13 bankruptcy lawyer to help her. She needs to keep searching to find one and be ready to pay whatever it takes to get real legal representation to help her make the right decisions in this situation.

**DO NOT** allow your mother to refinance the loan until her trustee gives your sister written permission to proceed. Since the house is a part of your sister's bankruptcy estate, the trustee must first approve whatever she does with it. If your mom refinances the house in her name without the trustee's permission to do so first, that could be interpreted as transfer of an asset with intent to defraud and the trustee could then come after the house to sell it out from under your sister for her creditors. Don't want to scare you, but you need to understand the gravity of what your sister has done and the risks she has opened up by filing without a lawyer.

Can you explain a little more about why she filed Ch 13 pro se (without a lawyer) in the first place? If we know more details, we usually can help sort things out better.

[HHM]

I am not clear on the nature of the real estate transaction here.

You say it is a 2 year purchase contract, was this originally a "lease/purchase" type of deal?

Plus, what other debts is she paying in her 44 month Chapter 13?

The automatic stay is really of very little value here. Because the note holder need only file a Motion to Lift to Stay and there really is not legal basis to prevent the court from lifting the stay. So, you won't be able to put the balloon payment into the chapter 13 plan.

[nmtechie]

I am not clear on the nature of the real estate transaction here.

You say it is a 2 year purchase contract, was this originally a "lease/purchase" type of deal?

Plus, what other debts is she paying in her 44 month Chapter 13? 3 credit cards are the only other debts included.

The automatic stay is really of very little value here. Because the note holder need only file a Motion to Lift to Stay and there really is not legal basis to prevent the court from lifting the stay. So, you won't be able to put the balloon payment into the chapter 13 plan.

It is not a lease purchase. It is a 2 year interest only balloon note. If the note isn't refinanced, it would convert to a month to month lease.

[nmtechie]

Filing Ch 13 pro se these days is almost 99% guaranteed to turn out badly. I'm sorry to hear that your sister is now caught up in such a messy situation that has put her house at stake. When did she file?

She can try filing a modified Ch 13 plan once she knows what the new balloon payments are going to be - no guarantees though.

Both the pre-Oct 2005 and especially the new post-October 2005 bankruptcy laws are full of traps, grey areas, and black holes that are just waiting to trip the no-lawyer filer. Your sister really needs an experienced Ch 13 bankruptcy lawyer to help her. She needs to keep searching to find one and be ready to pay whatever it takes to get real legal representation to help her make the right decisions in this situation.

**DO NOT** allow your mother to refinance the loan until her trustee gives your sister written permission to proceed. Since the house is a part of your sister's bankruptcy estate, the trustee must first approve whatever she does with it. If your mom refinances the house in her name without the trustee's permission to do so first, that could be interpreted as transfer of an asset with intent to defraud and the trustee could then come after the house to sell it out from under your sister for her creditors. Don't want to scare you, but you need to understand the gravity of what your sister has done and the risks she has opened up by filing without a lawyer.

Can you explain a little more about why she filed Ch 13 pro se (without a lawyer) in the first place? If we know more details, we usually can help sort things out better.

No attorney that she went to see wanted to take the case b/c her only debts are this house (2 year interest only balloon note), 1 student loans (which is in deferrment), and 3 credit cards. She didn't want to lose her house. Basically they didn't want to take the case b/c she wasn't a big money case. This house owed $81,266, and $1,800 in CC debt.

The one attorney who gave her legal advice said the credit didn't object to the confirmation with the contract expiring in less than 4 months would be willing to have it continue as a long-term obligation. Is this correct?

[HHM]

Is the reason she needed to file Chapter 13 is because she was behind on her house payments, or was she thinking that doing so will get her out from under this balloon payment.

Sometimes we are simply stuck with our mistakes, I mean, really, this was a lousy deal to get involved in in the first place. Basically, she has made 2 years worth of payments, and if she cannot finance the balloon (or pay it), she loses the house and it becomes a lease. Is this even deeded as a mortgage? Or simply an unrecorded contract between the owner and your friend.

As for the attorney's, all attorney's jump on the chance to do a 13 because it involves large fees (relative to a chapter 7) and they are almost guaranteed payment, and the fees an attorney can charge are essentially set by the court, so there is no "big money" issue here, the reason they probably didn't want to take the case is that there isn't much they can do to help. I hate to say it, but based on the limited information provided so far, your friend should never have filed chapter 13 in the first place.

[nmtechie]

Is the reason she needed to file Chapter 13 is because she was behind on her house payments, or was she thinking that doing so will get her out from under this balloon payment.

She wasn't thinking of the balloon mortgage at that time; she was just behind on her house payments due to testing for ovarian cancer (which her insurance wouldn't pay). She has just received a letter today from the loan servicer of this note stating that she needs to renew her insurance with them for escrow. All the letters she has gotten has been from the loan servicer and they are the standard form letters.

Sometimes we are simply stuck with our mistakes, I mean, really, this was a lousy deal to get involved in in the first place. Basically, she has made 2 years worth of payments, and if she cannot finance the balloon (or pay it), she loses the house and it becomes a lease. Is this even deeded as a mortgage? Or simply an unrecorded contract between the owner and your friend.

This is indeed a recorded mortgage with the county. I went to the county courthouse this am and pulled all the paperwork and made copies. The land contract was recorded and there was a special warranty deed issued also on the property. One attorney I have spoken too said that the note reads more like a long term wraparound mortgage obligation than a 2 year real estate installment contract. He said that she should approach the seller for a 15 month extension since she has proof that she can refinance at that time. He said that this type of note has to be foreclosed on through state courts too so it was be in his interest to do a joint motion to rewrite the terms of the note by extending the term, allowing default letters to be sent, etc. He said that the court should never have confirmed otherwise. The real estate contract was written by the seller and it has a lot of problems with it. It is ambiguous. I'm going to help her get this resolved.