Foreclosure post BK + equity questions..

[KevFinnerty]

Foreclosure on my house is moving forward (the bank just got a judgment).

Short story is I had filed for BK last year when foreclosure started, house has some equity in it above what I owe the bank, and BK trustee had expressed interest in taking the house and declared me an asset case, which is what I wanted to try to get my homestead exemption applied to any equity and rest given to creditors. However nothing happened with selling the house and now trustee has declared his intention to switch me back to a "no asset" case in a court filing (although he hasn't done that yet, nor has my case been "closed" - my debts were "discharged" months ago though).

I believe time-wise the next thing that will happen is my house will be scheduled for a "sheriff sale" (I am in a judicial state, Pennsylvania btw), then I will be either offered cash for keys or evicted (yes/no?).

A couple questions:

(1) From reading some books (which may or may not be true) it appears that the bank cannot settle for a bid at the sheriff sale that is not "fair value", that is, something at least close to market value - as opposed to just what I owe on it. Is that even true? And how would I even fight it if they settled for much less than what the property is worth???

(2) If the house sells at the sheriff sale for more than what I owe the bank, I think I am entitled to put some kind of claim in on that at the courthouse once I find out what it went for, rather than just let the bank take all the $$$ (yes/no?).

(2a) And from there, if the BK trustee has switched me to a "no asset" case before then is he entitled to claim any of that $$$ from the house sale - also taking into account my homestead exemption, would I even be entitled to still apply that to that amount??

(2b) And furthermore, what if my BK case is completely *closed* before that happens???? Are the excess funds then even part of my BK????



(3) Alternatively, what if the sheriff's sale highest bid is LESS than what I owe the bank (I can't see that happening but you never know) - can the bank take that offer then come after me for the difference (isn't my house debt discharged in the BK which would mean that they cannot do that)?

(3b) And also, if the bank either gets no bids at the sheriff sale, or if the bid is less than what they are owed (and as I understand it I think that means that they DON'T sell the house????), at that point, if the bank DOESN'T sell the house at the sheriff sale, does the BANK become the owner then just like they had sold it to someone else, meaning at that point am I removed from the deed/going to be evicted or does that not happen until AFTER the house is sold BY the bank to SOMEONE ELSE other than themselves????? (I am totally confused on this point)


(4) A complication in this whole mess is that I am having money problems staying here even without having to pay my mortgage...wasn't expecting this to drag on so long....was not able to pay my HomeOwnersAssociation fee this month and am scrambling to raise money for paying my basic bills. Can the HOA put some kind of lien on the house further complicating things, sue me etc? Or can the HOA just be paid off as part of the house when it sells and me not paying them doesn't matter?


Thanks for any answers or insights.

[AngelinaCatHub]

Wow, I wish I could help you. Your 'short' story reads like you know more law than my bk lawyer (not an impossible feat). You need a real estate lawyer in Penn for that question is my best advice. It is too local to answer but by one who is worthy of Penn law. Perhaps only "Justbroke" could help. He's sharp at this but I'll bet you will even stump him. He is online and I'm sure he will see this. 'Hub

[KevFinnerty]

Thanks. I've got a bunch of long story posts elsewhere on this board that go into more details as things have been developing.

Justbroke may have answered some of this (or other stuff before). There are a lot of knowledgeable people up here that have helped me out (I learned more up here than I ever did from my BK lawyer). I don't think I've asked these exact questions before though, since I am at this stage now they are just occurring to me now, although I could be confused (my usual state of mind these days being very stressed out).

Unfortunately I have no $ to pay a lawyer now for foreclosure help....am hoping someone up here has some clues or me. Googling around is a big help but I can't find exact answers, some even conflicting ones, and am getting confused over some of this stuff.

[KevFinnerty]

Something very important just occurred to me that I am going to ask in a separate thread - the question of whether I can try to SELL my house b4 the sheriff sale once the trustee switches me formally to no asset case, or do I have to wait until he "closes" my bk case? Or since the bank got their judgment, am I not even allowed to do that in the first place??? I am going to ask this separately from my other questions....

[justbroke]

(1) From reading some books (which may or may not be true) it appears that the bank cannot settle for a bid at the sheriff sale that is not "fair value", that is, something at least close to market value - as opposed to just what I owe on it. Is that even true? And how would I even fight it if they settled for much less than what the property is worth???

This is always questionable! The key is, that at the Sheriff's auction, bidders will bed what they believe to be fair market value. The value usually starts off pretty high but no where near "market value". Remember that fair value and market value are different. What happens if the property becomes REO (real-estate owned, or bank owned) is that you can challenge the deficiency if you can prove that the amount the bank paid at auction was "fair value". It's always a tough call. I purchased a spec-home as an investment and rental property back in 2006. I surrendered it in my Chapter 13 and it sold in foreclosure and became REO. It sold for $98K to the bank holding the mortgage. I purchased it for $185K. While I could have challenged the "valuation" as not being fair or market value, it didn't matter because the debt was discharged in the bankruptcy. So the value was moot.

(2) If the house sells at the sheriff sale for more than what I owe the bank, I think I am entitled to put some kind of claim in on that at the courthouse once I find out what it went for, rather than just let the bank take all the $$$ (yes/no?).

You would get anything left over after ALL FEES are also paid for. This includes the Trustee's attorney fees, listing fees, and any other fee you could imagine. Pile on late fees and interest accrual, the place would have to sell WELL OVER what you owe.

(2a) And from there, if the BK trustee has switched me to a "no asset" case before then is he entitled to claim any of that $$$ from the house sale - also taking into account my homestead exemption, would I even be entitled to still apply that to that amount??

If the BK trustee abandoned the home, he abandoned the home because s/he doesn't see any value there. Otherwise, and trust me, the BK Trustee would have been all over that property and would have sold it himself!

(2b) And furthermore, what if my BK case is completely *closed* before that happens???? Are the excess funds then even part of my BK????

No. IF the BK Trustee abandoned the asset, the BK Trustee abandoned the asset! The only way I can fathom your case being re-opened to recover funds for creditors, would be if there was some sort of fraud.

(3) Alternatively, what if the sheriff's sale highest bid is LESS than what I owe the bank (I can't see that happening but you never know) - can the bank take that offer then come after me for the difference (isn't my house debt discharged in the BK which would mean that they cannot do that)?

No. You discharged it in bankruptcy! It would be a violation of the discharge injunction and contempt of court. Don't worry about this!

(3b) And also, if the bank either gets no bids at the sheriff sale, or if the bid is less than what they are owed (and as I understand it I think that means that they DON'T sell the house????), at that point, if the bank DOESN'T sell the house at the sheriff sale, does the BANK become the owner then just like they had sold it to someone else, meaning at that point am I removed from the deed/going to be evicted or does that not happen until AFTER the house is sold BY the bank to SOMEONE ELSE other than themselves????? (I am totally confused on this point)

The bank will either become owner or it will sell. Technically, the bank will not let it go for less than the value of your mortgage. This makes it VERY difficult for any investors to pick these up, unless the bank is sleeping, or there is already equity in the property!

(4) A complication in this whole mess is that I am having money problems staying here even without having to pay my mortgage...wasn't expecting this to drag on so long....was not able to pay my HomeOwnersAssociation fee this month and am scrambling to raise money for paying my basic bills. Can the HOA put some kind of lien on the house further complicating things, sue me etc? Or can the HOA just be paid off as part of the house when it sells and me not paying them doesn't matter?

Yes, they can put a lien and they can foreclose. Typically, the Bank would step in and pay these fees to avoid losing the home to an HOA foreclosure. Yes, it gets complex, but it will probably be some time before the HOA pursues foreclosure.

Just my opinion based on my experience in these matters.

[justbroke]

Something very important just occurred to me that I am going to ask in a separate thread - the question of whether I can try to SELL my house b4 the sheriff sale once the trustee switches me formally to no asset case, or do I have to wait until he "closes" my bk case? Or since the bank got their judgment, am I not even allowed to do that in the first place??? I am going to ask this separately from my other questions....

You have to wait for the asset to be abandoned. That's either when the case is closed or the Trustee formally abandons the asset. Until your case is closed or the asset abandoned, it still belongs to the Bankruptcy Estate. You can ALWAYS redeem the property by paying what you owe. Selling the property would just make things way too complex. I'd avoid that like the plague unless you have a BUYER with financing or cash right now, and the bank is willing to do a short sale.

[KevFinnerty]

Thanks justbroke.

A couple followup questions.

You would get anything left over after ALL FEES are also paid for. This includes the Trustee's attorney fees, listing fees, and any other fee you could imagine. Pile on late fees and interest accrual, the place would have to sell WELL OVER what you owe.

If the BK trustee abandoned the home, he abandoned the home because s/he doesn't see any value there. Otherwise, and trust me, the BK Trustee would have been all over that property and would have sold it himself!

Well here's the thing - I had a lot of debt that perhaps factored into the trustee's thinking process of deciding not to proceed with the sale. For example, say I owed about $120k debts, about $80k on my mortgage (that is what the bank just bumped it up to claiming another $5k in interest). I believe the house might have "only" sold for $150k. That to me is still a decent chunk of change ($70k) left that could have gone towards (a) my homestead exemption ($20k) leaving $50k, (b) any "fees" (??? 50k in fees seems crazy, let's say even if it was an outlandish $20k in fees), leaving "only" $30k for the creditors.

And look at it now without any of that stuff happening - that is - no trustee "fees" to payoff in a no asset case (right?). No homestead exemption "per se" to deduct. And no payoff to the creditors either - BUT that $70k of equity still exists - and if the house sells for that - who gets it??

So if you look at it from my perspective now, with those debts now discharged - if the asset is abandoned, if I sell it for $150k, hell even $120k - that still leaves anywheres from $40k to $70k!! Even if it only sold for $100k, which is ridiculously low IMO - there is still a big amount left over....

The bank will either become owner or it will sell. Technically, the bank will not let it go for less than the value of your mortgage. This makes it VERY difficult for any investors to pick these up, unless the bank is sleeping, or there is already equity in the property!

I truly believe that there is at least $70k of equity here. Of course there are many factors involved as to what it could sell for...but I think it is possible.

Yes, they can put a lien and they can foreclose. Typically, the Bank would step in and pay these fees to avoid losing the home to an HOA foreclosure. Yes, it gets complex, but it will probably be some time before the HOA pursues foreclosure.

Just my opinion based on my experience in these matters.

The HOA costs every month are really killing me right now If it is something that only affects the bank needing to step in and pay that to let THEMSELVES foreclose, then it is not something I need to worry about. I understand there may be more to this though. I'll certainly keep paying if only I can get some $$ coming in..


Thanks for your replies.

[KevFinnerty]

You have to wait for the asset to be abandoned. That's either when the case is closed or the Trustee formally abandons the asset. Until your case is closed or the asset abandoned, it still belongs to the Bankruptcy Estate.

So it is either or? A notification of the asset being abandoned (without case closed), OR case closed period. Hmmm. I hope he follows through on his status report and abandons the asset/marks me as "no asset" asap!!!

[justbroke]

I don't understand the home with that much equity, and such a small homestead, not being taken by the Trustee. What did you list the value as on Schedules B? How much did you exempt? Are you also saying that your case is not closed yet... even though you filed last year? What's the hold up? Were you an "asset case" already? Have you looked on PACER to see what your status is?

Some HOAs are aggressive and will come after you personally rather than go after a lien. It just depends on your HOA and how they handle missed assessments/dues/fees. My HOA doesn't really care because 99.5% of the HOA dues are actually in the property taxes so they get them the old fashioned way... coercion.

Something is missing in this picture.

[KevFinnerty]

I don't understand the home with that much equity, and such a small homestead, not being taken by the Trustee. What did you list the value as on Schedules B?

We listed the value as to what a local realtor told me I might be able to get for it. And gave the trustee a sheet with amounts that similar homes were on the market for.

How much did you exempt?

The federal exemption, about $20,000.

Are you also saying that your case is not closed yet... even though you filed last year? What's the hold up? Were you an "asset case" already?

Correct, case is not closed yet.

I filed last fall. At the 341 meeting we discussed the property with the trustee and he expressed an interest in pursuing. Trustee declared me an asset case about a month or so later. Two months after that they discharged my debts.

Six months later, still nothing happened. I asked my lawyer's office many times "when will we hear from the trustee? Is he getting a realtor involved or what? Can I stay here until he sells it?? etc etc etc". The answer(s) were always, "we've heard nothing, just sit tight, you don't want to be stirring up a hornet's nest, be grateful you can still live there in the meantime", etc etc etc.

Have you looked on PACER to see what your status is?

I used to check pacer every day but slacked off to only once a week after August rolled around. Then since the bank just started sending me letters regarding them foreclosing I've been checking pacer more often again.

After the bank got their judgment (about a week or so ago), the trustee all of sudden filed a "status report" in pacer saying he had consulted a realtor and decided that there would not be enough equity in the house after paying my exemption plus various fees to give anything to the creditors - and that he would be filing something to switch me back to a no asset/no distribution case. Which is where I am now, hoping he does that and closes my case so I can try selling my house before the bank completes the sheriff sale!

Some HOAs are aggressive and will come after you personally rather than go after a lien. It just depends on your HOA and how they handle missed assessments/dues/fees. My HOA doesn't really care because 99.5% of the HOA dues are actually in the property taxes so they get them the old fashioned way... coercion.

With this latest development (if the trustee closes my case) & I can sell my house I am scrambling to try to raise money to keep my HOA payments current. I imagine they could screwup my selling the house. I'm just so broke and struggling severely now though...

Something is missing in this picture.

Not sure what to tell ya. I think the trustee just forgot about me, or had some other reason for not doing anything. I don't understand why he didn't even try to sell the house at all. The real estate market here is pretty bad though, maybe he's right and they didn't think they could sell it for enough to cover my debts, exemption, their own fees, etc, so they did nothing.

[justbroke]

Sometimes a Trustee needs to be poked... not to see if they fell asleep but to see if they are still alive! In any event, one strategy is always to file a Motion to Compel Abandonment, but that only works if you want to spend more money on attorneys. I see in another thread that you have now become a "no asset" case and the Trustee abandoned the asset.

Congratulations!

[KevFinnerty]

Thanks for all your help JB.