What a mess. But, I smell money. (long) - Posted by Stacy (AZ)

Posted by JohnBoy on March 28, 2002 at 14:00:37:

Buying the notes from the lender would probably be the best way to go if you can get them to sell.

What if the sellers were to get this worked out on the property? Would they still need to file a BK or would resolving the matter with the property take care of everything?

Could the loan be reinstated if the arrears were paid up?

If the Judge doesn’t approve of the plan then the Judge will usually order the BK to be dismissed or covert to a 7. If you have a plan worked out with the sellers to resolve the issue with the property then the sellers should elect to have the BK dismisseed for now instead of converting. Then they can refile later if they will still need to file a BK. This would also help to delay the foreclosure since their BK would be dismissed the lender would then proceed with the foreclosure process. When the sale date is near they can then file the chapter 7 to delay the process a little longer to buy time if need be. Filing the 7 would stop the sale until the lender gets a lift of stay or just waits until the 7 is discharged in usually 90 days.

Buying the notes from the lender and then taking the property back in lieu of foreclosure should resolve any issues with the BK court pertaining to the equity in the property. You would be a secured creditor and are entitled to your security.

Is the first current? If the first is current then you might just try to buy the second at a discount, then as a secured creditor take deed in lieu and just continue to pay on the first. Being a secured creditor with a second would entitle you to take the property back and continue to pay on the first without the lender calling the first due as long as the payments are current.

The lender may or may not be willing to sell off the second only. But if the second is the only note in default right now then they may be willing to sell it knowing their first is still secured as a 1st lien and knowing they won’t have to discount it to recoup all their money on that one.

You’ll need to talk with the lender and see what they’re willing to do and then take it from there.

What a mess. But, I smell money. (long) - Posted by Stacy (AZ)

Posted by Stacy (AZ) on March 28, 2002 at 12:54:52:

I have a potential deal that’s throwing me more curves than any of my prior ones combined. Maybe someone can offer some help or advice?

The sellers are a couple going through bad times. They are both unemployed and are splitting up. They are behind on their two mortgages, and the bank started to foreclose on their second mortgage. Chase Manhattan owns both the first and second. Before the trustee’s sale date set for October 2001, they filed for Chapter 13, which stopped the Trustee’s sale.

The court is about to rule on their CH 13 “plan”. However, the lawyer handling the BK has told the couple he doubts the plan will be approved, since neither one of them have a job. This may mean they have to refile under chapter 7.

Here are the numbers:
1st note: $50K (not being foreclosed)
2nd note: $10K (being foreclosed)
Arrears owed: $5K
Total owed: $65K

Rehab costs: $10K
ARV: $115K to $125K

The buyers are interested in selling to me if they can get $10K walking money, which I agreed to only if the BK and foreclosure issues can be worked-out. They signed an authorization for me to speak to Chase, and gave me their BK lawyer’s phone number.

What I really want to do is to call Chase and negotiate a sale of their two notes at a discount. I don’t know if they’d do this with as much equity as there is in this house, but I’m thinking the BK issue would motivate them to get rid of their problem quickly. What do you think?

I wouldn’t agree to buy the notes if the couple ended up getting their chapter 13 approved. I’m not interested in collecting payments on the notes, I want the property.

Is it true that if they are forced to declare chapter 7, I could foreclose on one of the notes (if I had bought them)?

So, in my preferred scenario, I’d buy the two notes at a discount, have the couple sign a deed in lieu to give me ownership, and give them $10K to vacate. I could envision being into the property for $50K or less.

Issues: even if they have to declare chapter 7, I’m thinking the court would disallow this sale to me, since there’s so much equity. Even if allowed, would they be allowed to keep the $10K cash they get from me?

Second scenario: When I know the sellers are changing to a chapter 7, I quickly call the lender and buy the notes at a discount. Then I just wait until the BK is complete, and foreclose myself.

There are so many ways to get in trouble with a BK and foreclosure. I wish I had a law degree so I knew all the ramifications. But with this much equity, certainly there must be a way to make it work with low risk.


Re: What a mess. But, I smell money. (long) - Posted by phil fernandez

Posted by phil fernandez on March 28, 2002 at 18:53:20:

I agree with JB. Get ownership of the 1st or at least the 2nd from Chase M. Then you are in a position of ownership.

If you just try to do a deal with the owner with that kind of equity, it would be my guess that the bankruptcy judge will invalidate the sale to you.

This deal is worth pursuing with that kind of equity at stake.