Better to get Deed in Lieu? - Posted by John Merchant
Posted by John Merchant on October 04, 2008 at 10:54:33:
While it’s true that in CH 7 there’s an immediate, simultaneous “Stay of Foreclosure” that “Stay” is normally only protection for about a month, until the BK Court grants the “Motion to Lift Stay” that is then usually filed by the bank.
Two or three big problems that currently exist though:
First, if the BK Trustee feels there might be some equity in the RE, he/she’ll probably file “Motion to Convert to CH 13” which the BK Court will probably grant, as that Court wants to see as many creditors paid from assets of the bankrupt as possible.
In a CH 13, the Court will pretty carefully proceed to look at true market value of all assets so as to get all creditors as much help as possible.
Secondly, that BK Court might have the authority to do a “cramdown” or “lien strip” so as to reduce (or remove, in case of subordinate lien 2d or 3d note) the amount of money owed on the DOT secured note.
Third, with the plethora of Distressed Property Acts that have been enacted around the country (and in NC to be specific), you, as potential buyer of the RE from the Distressed Owner, have to walk very gingerly in your dealings with the DP Owner, so as to legally avoid violating NC laws.
John Locke, a well known and highly respected REI recently recounted his phone call from NC Atty Gen re dealings w DP Owners in NC and what and how the AG feels such dealings must be conducted so as to stay legalin NC.
I saw this on another RE forum, which the rules here forbid me to name here, but if you’ll email me I’ll pass it on to you.
Of course with the current recession/depression, there are so many houses in foreclosure that the one you’ve found might have no interested BK trustee or Court so you might be able to take title easily and w/o a fight.
In lots of otherwise foreclosable properties, though, it’s much simpler to go to debtor and pay him/her a few bucks and take a Deed in Lieu of Foreclosure so as to avoid your legal expenses and save lots of time.
Always try the DIL route first.