What have I done? Will my case be discharged?!?!?

[cujosmom]

Hi All,

I am currently in an absolute panic. I am currently 26 months into a 36 month Chapter 13. I had a primary residence and a rental property in which I kept the primary and requested to surrender the rental. A few months ago, I received a letter from Chase asking that I short sale the house rather than go through a foreclosure and I am scheduled to close next Friday and will get a small incentive which I planned on using to catch up on bills. I had no idea that you needed the approval of the courts to do this until now. I called my attorney right after I got the letter and they said, sure, if the bank wants you to short sale instead of foreclose, that's fine. I am so scared that if I go through with it that I will jeopardize my case. Chase is 100% aware that I am in the middle of bankruptcy and I would think they would know or should have mentioned if I need something showing approval from the courts but they haven't said a word and I have the signed/approved contract from them already.

So now what do I do? I'm in the Middle District of Florida. I can't believe we are this close to closing and just now found this information out. I am screwed aren't I? We signed the offer weeks ago so I have to sell it.

Help!!!!

Thanks in advance for your advice!

[justbroke]

I don't think you'll have too much trouble, but you absolutely need court approval! However, if the creditor ALREADY has Relief from the Automatic Stay (RFS), and you were already in the process of foreclosure, I don't think the "approval" is required. I'm assuming that you are confirmed and that this property is not included in the plan. Most Plans in the Middle District revest all property back to the Debtor anyhow.

If your attorney thinks that no approval is required because an RFS was already granted, then that sounds about right. So, I'm thinking that an RFS means the Trustee abandoned the property by not fighting the RFS. I'm willing to guess that the Trustee actually filed a Consent to the RFS and the RFS was granted without a hearing (negative noticing).

[cujosmom]

Thanks for the reply, Justbroke. I am seriously freaking out. How do I find out if an RFS was already granted? Here are more details: I surrendered the property in my petition. Bank of America was the original owner of the mortgage at the time I filed bankruptcy in November 2009- they had started the foreclosure process in June 2009. Then in October 2010, Chase assumed the mortgage and the foreclosure proceedings were closed by Bank of America since they no longer own the mortgage. I had no idea I still was on the title and had assumed the bank took it back. Then 2 months ago I got the letter from Chase asking me to short sale rather than go through a long foreclosure process. So they were never in my bankruptcy filing to begin with but Bank of America was. I do know they are totally aware of my bankruptcy status though since they state on the short sale approval documents that they will not come back to collect any deficiency and I had discussed it with them when this all started. I would think they would know I need to have this approval of the court if it were required but maybe I don't since they are not listed as a creditor in my bankruptcy petition. They are asking that I close no later than next Friday. I have a buyer and Chase has approved it all. So would Chase need to get a relief from stay if they weren't listed on my petition to begin with?

[cujosmom]

I'm thinking they must have gotten an RFS to transfer the property from Bank of America to Chase. Correct?

[justbroke]

If Bank of America received an RFS then Chase has that RFS because they are the "successor in interest" to the Mortgage/Note and the bankruptcy proceeding. If you have PACER access, you can check PACER to see if the RFS was requested. If you don't have that access, just bounce this off your attorney! Just ask if Chase/Bank of America had an RFS granted and whether this is the reason why you don't need prior court approval for the sale.

[cujosmom]

There WAS a Relief from Stay and the court said they could move forward with foreclosure proceedings but could not go after me for a deficiency.

[cujosmom]

So does this mean that if there was an RFS filed and approved I do not need approval to short sale it? It just seemed weird to me that Chase would not require me to have a required document but if it's not required, then that makes sense.

[justbroke]

I don't think you technically need approval. It's not "property of the Estate". The Trustee already "abandoned" it, so it's not something the Trustee is administering (or controlling).

[cujosmom]

Justbroke, you are a lifesaver! Thank you for being so helpful. So you wouldn't worry if you were me? I can see where the RFS was filed and approved and it specifically stated that Chase could go ahead and foreclose if they want. So that's means the trustee has no interest and has removed the property from the estate?

[justbroke]

So that's means the trustee has no interest and has removed the property from the estate?

Exactly.

Now that you're less nervous, I would just make sure, through your attorney, whether the small "compensation" that you are receiving is going to cause you issues next year. As you know, each year you submit your tax returns to the Chapter 13 Standing Trustee. They look at them, and see if you made any "significant" additional income. (Noting that the money that the lender, Chase, gives you will be reported on a 1099-MISC tax form.) I don't know what "significant" is, but it's usually something more than a 10% change since the plan was last confirmed/modified.

[cujosmom]

I wouldn't think they would worry about the additional income since I actually lost my job after I filed bankruptcy and even with the additional income, I still won't be making what I was when I was confirmed. That's why this additional incentive money was so welcomed. We're making it but barely and the extra will definitely help. Not enough to make a difference on my tax returns compared to years past but enough to make Christmas a little brighter for my 3 kids. I just didn't want to do anything that would jeopardize our case since we have worked so hard at staying current with the trustee.

So one last time- if an RFS is granted- the property is no longer part of the estate? As such we don't need approval from the courts to either short sale or foreclose? Chase would know if we needed a required document to sell the house, correct? Would Chase agree to short sell the house knowing we didn't have the appropriate documents from the court? I know I should call my attorney but to be honest, I hate calling them. Now that I'm confirmed and in the middle of my plan, they go out of their way to be difficult to work with since I'm not prospective $$ anymore. >.<

When I spoke with Chase about why they wanted me to short sale, they said in Florida it would cost them much more to go through a long foreclosure process than to offer a cash incentive to short sale the house quickly. Literally, if we close by next Friday, we will have completed a short sale, start to finish in less than 60 days. In some ways, it seems to good to be true since I didn't even realize we still owned the house 3 months ago and now I am free and clear to short sale and gain the cash incentive.

Thanks again for your help! You have no idea how much I appreciate it!

[justbroke]

So one last time- if an RFS is granted- the property is no longer part of the estate? As such we don't need approval from the courts to either short sale or foreclose? Chase would know if we needed a required document to sell the house, correct? Would Chase agree to short sell the house knowing we didn't have the appropriate documents from the court? I know I should call my attorney but to be honest, I hate calling them. Now that I'm confirmed and in the middle of my plan, they go out of their way to be difficult to work with since I'm not prospective $$ anymore.

Here are the answers in order...

1. Yes. It's no longer part of the Bankruptcy Estate!
2. No. The Court already "removed" the protection of the stay from any acts against the property (in rem). This is permission for the creditor to pursue any means to repossess or otherwise negotiate with the debtor (you) as to the disposition of the property. If you actually looked at some of the RFS Motion language, it probably had language requesting that the creditor can contact the debtor to work on various ways to re-install the mortgage (bring it current) or to otherwise foreclose.
3. Yes. Chase absolutely knows the rules. An RFS is already the permission for them to "dispose" of the property. Whether that's through actual foreclosure, deed in lieu, or otherwise, the Trustee -- and hence the Estate -- has already abandoned the asset.
4. No. Chase knows that an RFS is what is needed to foreclose or to pursue "other options" outside the Confirmed Plan.

Yes, it's cheaper these days, in Florida, for a lender to do the short sale. That way, clear title can be conveyed at the sale, just like a foreclosure. Only a short-sale will usually net more for the creditor than the foreclosure. In fact, many foreclosures just simply end up in the bank's possession -- so-called REO or real-estate owned properties -- and they then need to sell it.

[cujosmom]

I called my lawyer this morning and she says we have to file a motion to short sale the property. I am so upset right now. She is calling the trustee today to find out more information but insists that we need to do this even if the relief from automatic stay was granted. I am so upset right now. I'm just trying to get back on my feet here and now this. SO FRUSTRATED!!!!

[justbroke]

I called my lawyer this morning and she says we have to file a motion to short sale the property. I am so upset right now. She is calling the trustee today to find out more information but insists that we need to do this even if the relief from automatic stay was granted. I am so upset right now. I'm just trying to get back on my feet here and now this. SO FRUSTRATED!!!!

I think it's mostly for disclosure to the Court. I figure that this is to make sure that you're not making money on the property. I couldn't find any other Florida cases like this one.