Unusual circumstance and need advice...

[phattysbox]

Greetings,

First off let me start by saying that I know whatever advice I get in this forum probably won't hold up in court and nor would ever use it. My apologies if I'm not explaining things well as I don't have all the facts nor am I well-versed in bankruptcy proceedings.

This situation is about my father (I'm doing well and my credit score is high) and I'm posting mostly on his behalf, but I want to verify some advice (file for bankruptcy) I gave him. This seems like a good place to start.

Ever since my parents divorce, my father has been on a long downward financial spiral. The house they both had was estimated at a value of ~375K and my mother opted to sell out why my father wanted to keep the house. My mother sold her portion, but my father decided to re-buy the house with a refinanced mortgage. Obviously it was an emotional decision but a poor financial decision. His income is ~55K and he figured the only way to keep the house was to turn it into a rental (another bad idea) to pay the mortgage. This he did illegally, as he ignored local town zoning laws and permits needed to convert his home into a rental. He poured money into converting a 3 bedroom two story house into a three apartment house (upstairs/downstairs/garage - studio).

This all began around 2004. In the interim, I know for sure he has accumulated a substantial amount of credit card and unsecured debt, although I don't know exact amounts. 2012 is when it all fell apart. One tenant left, while another tenant called into the town and alerted them to the illegal property. Town officials came out and told him the house needs to returned into its original condition or face hefty fines. Moreover, since this lovely tenant realized the power he/she has, they are no longer paying rent. The other tenant joined the fun and stopped paying as well.

Now that my father can't pay the mortgage and the court has ordered him to evict the tenants and convert back into a normal home. He has to do two evictions (which is not cheap - 1500$ each) and then knockdown all the walls and remove all appliances (he built gas lines to the upstairs which also illegal). This will cost more money and he literally has 20$ in his pocket (this he told me last night). My father is the type of person that can have the blinders on and proceed full force to the conclusion of something he started. Consequences be damned. His current goal is to evict the two tenants, convert the house, go into foreclosure, and possibly declare bankruptcy. All with no money. He is now going to his children, brother, and sister to ask for money to pay for the first eviction. Personally, I don't want to give him (or anyone for that matter) cash if that cash is going to an empty hole with no value.

So my advice to him is to declare bankruptcy NOW and save him wasting his (and other peoples) money. Is this wise advice? The problem is he has tenants and has certain obligations. Electricity and heat for that money pit for example needs to be paid. I do not know the legal ramifications of his situation, and he is afraid of going to jail (which I don't think is a possibility - all he did was make poor financial decisions). However, what if he can't follow the court order to evict and convert the house back? Could he go to the court (or through a lawyer I suppose) and state he literally cannot pay these things and will file for bankruptcy? Does the court take over the house?

Thanks for any feedback and all comments are welcome. I know most comments will be "get a lawyer or bankruptcy lawyer" but since he has no cash right now, he can't do this. I might rally family to just pay for a bankruptcy lawyer and nothing else.

Best,

J

ps - at some point I will point this post out to him and he will read the comments

[tobee43]

first phattysbox, welcome to the forum.

quite a story, your poor dad has been put through the mill, and i'm certain it hasn't been easy for you to see him go through all of this.

i can only tell you what i would do if it were me.

i would begin calling atty's for free consults immediately. set up some appts and get some opinions on what to handle first. we made monthly payments until we could actually afford the filing. bk attys take payments, in our case the atty began sending out letters on our behalf with only $100 monthly payments. so you can find one that will work with you.

your dad is certainly between a rock and a hard place with this tenants. i would say to immediately go out and file bk, but i'm concerned about the accumulation of the fines from the town and if they would be able to be discharged. an atty in your area will be able to clarify that situation for you.

i also don't understand why the evictions are so costly? who set those costs? really, he can do that himself, with notice just make certain one follows the "town" or city, or county ordinance and send notice both by certified mail and reg mail? go to court yourself? i know then the judge says fine your out, you have to get on it with the sheriff's dept., or anyway that's the way it worked in our county.


again, what concerns me is those fines. if the tenants were out then there is no violation on that front, other than, and i think this could be a problem, your father doing the work without permits and that can be a problem that the town can really push. have you spoken with the town about this as yet. also, you need to think about this...can your dad afford this place making 55k a year? so maybe's it's time to let it go back to the bank and walk away?

i agree with you, i would go to the bk directly, if it were me. i would find out about any repercussions that may not be discharged if any, and go for the bk now.

[phattysbox]

first phattysbox, welcome to the forum.

quite a story, your poor dad has been put through the mill, and i'm certain it hasn't been easy for you to see him go through all of this.

i can only tell you what i would do if it were me.

i would begin calling atty's for free consults immediately. set up some appts and get some opinions on what to handle first. we made monthly payments until we could actually afford the filing. bk attys take payments, in our case the atty began sending out letters on our behalf with only $100 monthly payments. so you can find one that will work with you.

your dad is certainly between a rock and a hard place with this tenants. i would say to immediately go out and file bk, but i'm concerned about the accumulation of the fines from the town and if they would be able to be discharged. an atty in your area will be able to clarify that situation for you.

i also don't understand why the evictions are so costly? who set those costs? really, he can do that himself, with notice just make certain one follows the "town" or city, or county ordinance and send notice both by certified mail and reg mail? go to court yourself? i know then the judge says fine your out, you have to get on it with the sheriff's dept., or anyway that's the way it worked in our county.


again, what concerns me is those fines. if the tenants were out then there is no violation on that front, other than, and i think this could be a problem, your father doing the work without permits and that can be a problem that the town can really push. have you spoken with the town about this as yet. also, you need to think about this...can your dad afford this place making 55k a year? so maybe's it's time to let it go back to the bank and walk away?

i agree with you, i would go to the bk directly, if it were me. i would find out about any repercussions that may not be discharged if any, and go for the bk now.

Thanks, and thanks for the advice. I totally forgot about any fines that are accrued and the possibility of them not being discharged. Something he will have to discuss with a lawyer for sure.

He definitely can't afford it. He couldn't afford it back in 2004, he certainly can't afford it now. Eventually he wants to declare BK, but he wants to evict the tenants and return the house to its prior state (which is extremely hard IMHO) first. My guess is he wants to avoid any fines.

[tobee43]

that's why i think an atty will help you if you work out a payment plan with them.

you need to address these issues immediately if not sooner. don't worry about the evictions as much as the continued fines. for that matter once the bank gets back the house they can evict them. really how can the town expect anything with tenants that refuse to leave to even make the needed repairs???

i'm most concerned and hopefully one of our resident attys will chime in, with what if your dad just walked away now. didn't restore the house, which he can't because he can't afford it. include the entire mess in the bk. let the town know he's done, he's giving up...(but i would let an atty tell you how to notify the town).


yes, it's most likely because of the fines that he wants to restore it, but that's why an atty will be able to tell you what steps to take if he's going to include the house in a bk and walk away from it. let the bank worry about the taxes etc. i'm just hoping those fines are dischargable.

[phattysbox]

i'm most concerned and hopefully one of our resident attys will chime in, with what if your dad just walked away now. didn't restore the house, which he can't because he can't afford it. include the entire mess in the bk. let the town know he's done, he's giving up...(but i would let an atty tell you how to notify the town).

This is exactly the type of info my father needs... I'll start pushing him into getting a bk atty.

[tobee43]

please do phattysbox, it will help lift both of your loads.

also, hopefully hhm or des will see this post and have some valuable input for you and your dad's situation. make certain you keep posting, there are many out here to help and support you along this road!

i know it doesn't seem like it, but this will all pass and it will all work out

[keepsmiling]

I was just about to post same as tobee before I read her response.... if he walks away from the house, he shouldn't need to do all that work. It becomes the bank's problem, I would think. He shouldn't keep throwing good money after bad.

Time for him to stop paying all bills and save up for a rental, I'd think.

Any idea what the house is currently worth? And what state is he in? he might stand to get some cash as an exemption for the house if the tt takes it. Could be the best outcome- perhaps.

[phattysbox]

Apparently my father is convinced that he might go to jail if he doesn't fix the problem with his house. I just got off the phone with him and he mentioned an agreement he made with the bank when he re-bought the house. Basically he agreed that only he and one other person would live in the house for at least one winter. He did not follow this of course, and modified the house for three tenants. Its a breach of contract with the bank - I'm not sure if bk would hurt or help him with this. I'm not even sure if bk will help with any of the fines he is sure to get. One thing is for sure - he think that violating this contract will land him jail so he's soldering on.

Personally I think that's BS and pleaded with him to hire an atty to find out exactly what to do.

[tobee43]

oh my....please convince him he's not going to jail.

what? like the banks haven't broken their agreements? i know, he's just honest as they come and scared. now, i guess the next thing on your plate is how can you get through to him.

[phattysbox]

now, i guess the next thing on your plate is how can you get through to him.

That is an understatement. He is also afraid that the lawyer will expose him to this breach of contract, and thus land him jail or have fines against him.


I've started contacting lawyers on his behalf.

[LadyInTheRed]

Your father will not go to jail for breaching his contract with the bank. But, he is under a court order to evict the tenants and return the house to a SFR. Not complying with that order could eventually result in a contempt of court charge which could lead to jail time. He needs to consult with an attorney about that possibility. But, that isn't likely to happen without some warning. He would have a chance to explain to a judge why he hasn't complied with the court order.

It may be premature to file BK at this point. Even if the mortgage is discharged, he will still own the house after BK until the bank forecloses. The penalties might continue to accrue. It may be better to stop paying the mortgage and wait for the bank to foreclose, then file BK. He really needs to consult with a BK attorney before he spends money returning the house to it's original condition. It may be that because of the existing court order he can't get out of that obligation even if the bank forecloses. It also could be that it all becomes the bank's problem when it forecloses. He may need the advice of another type of attorney. A real estate attorney maybe? I'm not sure.

I agree with tobee that he should be able to do the evictions himself. Try googling "[name of state] eviction procedures".

[LadyInTheRed]

He is also afraid that the lawyer will expose him to this breach of contract, and thus land him jail or have fines against him.

That really seems irrelevant at this point. The breach of contract is a matter of public record. Again, a breach of contract is a civil matter, not a criminal matter. He will not go to jail for that. The conversion of the house without proper permits may be criminal, but the authorities are already aware of that.

But, your father is going to have to get over his fear of lawyers. If he consults with a lawyer, the lawyer has a duty of confidentiality. While that duty may not extend to something that is already public record, why would an attorney want to go to the bank and tell them that a borrower breached a contract? It's not going to happen. Once your father retains a lawyer, the lawyer must act in your father's best interests.

[tobee43]

Your father will not go to jail for breaching his contract with the bank. But, he is under a court order to evict the tenants and return the house to a SFR. Not complying with that order could eventually result in a contempt of court charge which could lead to jail time. He needs to consult with an attorney about that possibility. But, that isn't likely to happen without some warning. He would have a chance to explain to a judge why he hasn't complied with the court order.

It may be premature to file BK at this point. Even if the mortgage is discharged, he will still own the house after BK until the bank forecloses. The penalties might continue to accrue. It may be better to stop paying the mortgage and wait for the bank to foreclose, then file BK. He really needs to consult with a BK attorney before he spends money returning the house to it's original condition. It may be that because of the existing court order he can't get out of that obligation even if the bank forecloses. It also could be that it all becomes the bank's problem when it forecloses. He may need the advice of another type of attorney. A real estate attorney maybe? I'm not sure.

this is so very important! i would be extremely mindful when reiterating this information to him, you don't want to further scare him although these are serious matters. you know him, so i'm certain you will find a way to get through to him "gently".

that's why it's so important to get him to a few consults so it maybe can come from someone else's mouth as opposed to yours.

[despritfreya]

This is a very complicated issue for which seeking advice off the Internet is not the way to go. I realize you are trying to arm yourself with as much information as possible so that you can assist your father. However as LITR points out, he is under a court order and I am not sure a bk will help him.

1. The Court Order appears to have been issued under the regulatory power of a governmental entity. It is not in the nature of a money judgment. It is in the nature of an injunction requiring him to act.

2. Filing a bk will not stop the governmental unit from implementing its regulatory power. 11 USC 362(b)(4)

3. A discharge talks in terms of a debt, not the enforcement of a regulatory action. I am not sure your father’s “liability” to the government is even something that would be subject to a discharge.

4. I am not sure that a foreclosure of the property will end the problem since the regulatory action was not directed at the lien holder.

I think your father needs to consult with two attorneys who can work together - one that is familiar with zoning regulations and injunctions related to such violations and one that is familiar with the effect of a bankruptcy on such issues. I can tell you that if your dad walked into my office I would not be able to answer such questions without spending time researching these issues. My first call would be to an attny I know who handles zoning matters. It may very well be that he must undo the damage or get the regulatory court order modified in some way.

Des.

[tobee43]

des, that is such excellent advise, and as you have pointed out, this is an extremely complicated situation and needs the attys you have suggested.

thank you for pointing out just getting rid of the house, does not rid one of the problems associated with the problems that the house has.