Given the current state of affairs with regard to lenders, mortgagees, loan servicing agencies, collection agencies and the like with respect to home or business mortgages, it is frequently impossible to determine with whom you are speaking, what authority they have and what remedies they are actually capable of agreeing to in a home or business loan dispute. Indeed, frequently the actual owner of the debt is so lost in cybernetic space on Wall Street that a signature cannot even be produced to consummate a valid foreclosure.
I frequently speak with people whose loans have been overcharged or convoluted under the guise of late payments and fees, penalty interest, attorney’s fees, reinstatement fees and the like when in fact payments are current or the delay in receipt is due to the bookkeeping errors or computer generated nightmares which frequently exist at mortgage companies and/or servicing lenders. Clients are lost in the backlog of understaffed and overworked mortgage companies who simply make entries that are either late, erroneous, unjustified or not representative of the actual payments that have been submitted to them by the borrowers/homeowners.
The lenders then, usually through computer generated directives, retain attorneys and foreclose or simply foreclose through the existing trustees or substitute trustees when, in point of fact, the loan is current or if it is not current, the disputed sums claimed or their timeliness it is not the fault of the borrower.
It is critical that a homeowner in this situation make an immediate effort to get a court order enjoining the foreclosure before the foreclosure occurs. There are a myriad of legal rights, remedies, defenses and claims that are either lost or seriously watered down when asserted after the foreclosure sale occurs. It is far easier to put the dry spaghetti in stacks and separate it as appropriate than to try to unravel the spaghetti once it has been cooked. Lenders who proceed with foreclosure are by deed granted legal title, or title is passed to a third party purchaser by virtue of the loan documents and the foreclosure sale. This makes it more difficult for an attorney to enforce the rights of the borrower given the claims, expense and costs of the third parties, tying your lawyer’s hands to some degree in what he is capable of doing for you to save your home or business property.
A temporary restraining order injunction upon proper affidavit with sufficient facts is in most cases granted allowing a home or business owner to enforce his claims against the lender or mortgage company while retaining title to the property during the litigation process which can take anywhere from thirty days to three years depending on the court, the county and the jurisdiction.
It is not uncommon for the court to order the borrower to pay all payments into the court registry or an escrow fund where a true and honest accounting of what is being paid while the case is pending can be applied to the final judgment of the court. If the borrower/homeowner’s case has merit and the lender is in breach, state law permits the payment of attorney’s fees in addition to the claims for fees which are ordinarily authorized in form loan documents which puts added pressure on the lender/mortgagee to come to the table and settle the matter based on the actual facts of the case. However, these efforts are hampered greatly if the foreclosure has already occurred. Remember also that a lawyer needs, depending on the court and jurisdiction, enough time in advance of the foreclosure sale date to prepare a petition, temporary restraining order, and request for injunctive relief and/or claim for damages as the case may be in order to properly enforce the rights of the client.
Sadly enough, it is not uncommon for the first words of the client to be “They foreclosed on my house and all my payments are current, what are we going to do now?” The regrettable answer is, we are going to have to set aside the foreclosure and reverse all the legal title convoluted actions which have occurred by virtue of the Trustee Sale, in addition to making a legal effort to reinstate the loan. In most cases this is far more expensive to the client in attorney’s fees, time and consternation than simply preventing the sale in the first place by injunction.
Wednesday, August 12, 2009
Monday, June 1, 2009
Business Reorganization Under Chapter 11 of the Bankruptcy Code
Typically, Chapter 11 is used to reorganize a business which may be a corporation, sole proprietorship or partnership. Chapter 11 bankruptcy proceedings may be voluntary or involuntary. There is a two-pronged test to help determine whether a company qualifies to file a Chapter 11 bankruptcy as a “small business” case. The company must first partake in commercial and business activities with debts being non-contingent, liquidated, secured and unsecured debts that are less than $2,119,000. Second, the company must never have been appointed a creditors’ committee that was appointed by a U.S. Trustee, or the court must determined the committee is inactive and will not influence the current petition.
The Federal Bankruptcy Code states that in a Chapter 11 bankruptcy case a company is protected from claims by creditors while it attempts to reorganize its finances under a plan approved by the court. This is also referred to as the automatic stay. The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. Under certain circumstances a secured creditor can obtain an order from the Court granting relief from the automatic stay.
Chapter 11 is also referred to as “reorganization” because the business is given a period of time to create a plan that will reconstruct the company and help to relieve the financial problems for the company.
In the beginning of this process, a company will file a petition in their local bankruptcy court. When a company files their petition, they must attach a schedule of assets and liabilities, a schedule of current income and expenditures, a schedule of executory contracts and leases, a statement of financial affairs, and the past two years tax returns.
In the case where an individual who runs a company files for bankruptcy, other documents are required to be attached to the petition, such as a certificate of credit.
The company must be prepared to pay a filling fee of approximately $1,000.00 and an administrative fee of approximately $39.00; however, these fees frequently change.
The voluntary petition will include standard information concerning the debtor’s name(s), the last four digits of the debtor’s social security number or the business tax identification number, residence, location of principal assets (if a business), the debtor's plan or intention to file a plan, and a request for relief under the appropriate chapter of the Bankruptcy Code. Upon filing a voluntary petition for relief under chapter 11 or, in an involuntary case, the entry of an order for relief, the debtor automatically assumes an additional identity as the "debtor in possession." The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee. A debtor will remain a debtor in possession until the debtor's plan of reorganization is confirmed, the debtor's case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally, the debtor, as "debtor in possession," operates the business and performs many of the functions that a trustee performs in cases under other chapters. These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the U.S. trustee or bankruptcy administrator, such as monthly operating reports.
After the petition is filed, the automatic say takes effect which prevents all judgments, collections, foreclosures, and repossessions from taking place. This period of time is used to attempt to resolve some of the company’s financial problems.
The U.S. Trustee monitors the progress of the chapter 11 case and supervises its administration. He will asses the company’s capability, the progress on the company’s plan of reorganization and discuss the different reports the company must complete. It is very important that the company be aware of the deadlines for the reports to be filed because in some cases it is challenging to attain extensions. By law, the Debtor must pay a quarterly fee to the U.S. Trustee for each quarter of a year until the case is dismissed or converted. The amount of the fee will depend on the Debtor’s disbursements each quarter. In small business cases, the process varies because the case is put on a fast track and limits the amount of time a company has to file a plan. For example, a small company must file their plan in the first 180 days after filing their petition and may receive an extension during the “exclusivity period” of 300 days, but only if the court believes the extra time will be useful. However, in a large commercial bankruptcy case the “exclusivity period” could last up to 18 months. If a company is classified as a small business they need be aware of the different procedures.
The U.S. Trustee acts as the moderator between the creditor and the company. The Trustee is allowed to conduct a “section 341 meeting”, in which the company under oath is question by the Trustee and the creditors. Another responsibility of the Trustee is to appoint a creditor’s committee, which consist of the seven creditors who hold the largest unsecured claims. The committee is allowed to investigate the company’s operations and help the company to create a plan. After appointing a committee, the company must file a disclosure statement, which a court must approve. The disclosure statement is a document that discusses information about the company and assists the creditors who hold the claims to make an informed decision about the plan. Following the approval of the disclosure statement, the next step is the acceptance of the plan of reorganization. The plan must include the classifications of the claims and the treatment plan for reorganization. After the plan is submitted, any party involved in the case can file and objection to the plan. If there are no objections filed, a hearing is held to confirm the plan if it meets the all the required criteria. The plan must be practical, submitted on time and in good faith. It must meet the requirements of the Bankruptcy Code. The Court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.
Before the plan goes into effect, the parties in the case may file a postconfirmation modification of the plan, which allows the parties to make adjustments to the plan. However, the adjustments must be approved.
A final decree closing the case will be entered after the estate has been "fully administered.
The Nacol Law Firm P.C.
Law office of attorney Mark Nacol
Serving the Dallas / Fort Worth Metroplex area for over 30 years
Tel: 972-690-3333
The Federal Bankruptcy Code states that in a Chapter 11 bankruptcy case a company is protected from claims by creditors while it attempts to reorganize its finances under a plan approved by the court. This is also referred to as the automatic stay. The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. Under certain circumstances a secured creditor can obtain an order from the Court granting relief from the automatic stay.
Chapter 11 is also referred to as “reorganization” because the business is given a period of time to create a plan that will reconstruct the company and help to relieve the financial problems for the company.
In the beginning of this process, a company will file a petition in their local bankruptcy court. When a company files their petition, they must attach a schedule of assets and liabilities, a schedule of current income and expenditures, a schedule of executory contracts and leases, a statement of financial affairs, and the past two years tax returns.
In the case where an individual who runs a company files for bankruptcy, other documents are required to be attached to the petition, such as a certificate of credit.
The company must be prepared to pay a filling fee of approximately $1,000.00 and an administrative fee of approximately $39.00; however, these fees frequently change.
The voluntary petition will include standard information concerning the debtor’s name(s), the last four digits of the debtor’s social security number or the business tax identification number, residence, location of principal assets (if a business), the debtor's plan or intention to file a plan, and a request for relief under the appropriate chapter of the Bankruptcy Code. Upon filing a voluntary petition for relief under chapter 11 or, in an involuntary case, the entry of an order for relief, the debtor automatically assumes an additional identity as the "debtor in possession." The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee. A debtor will remain a debtor in possession until the debtor's plan of reorganization is confirmed, the debtor's case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally, the debtor, as "debtor in possession," operates the business and performs many of the functions that a trustee performs in cases under other chapters. These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the U.S. trustee or bankruptcy administrator, such as monthly operating reports.
After the petition is filed, the automatic say takes effect which prevents all judgments, collections, foreclosures, and repossessions from taking place. This period of time is used to attempt to resolve some of the company’s financial problems.
The U.S. Trustee monitors the progress of the chapter 11 case and supervises its administration. He will asses the company’s capability, the progress on the company’s plan of reorganization and discuss the different reports the company must complete. It is very important that the company be aware of the deadlines for the reports to be filed because in some cases it is challenging to attain extensions. By law, the Debtor must pay a quarterly fee to the U.S. Trustee for each quarter of a year until the case is dismissed or converted. The amount of the fee will depend on the Debtor’s disbursements each quarter. In small business cases, the process varies because the case is put on a fast track and limits the amount of time a company has to file a plan. For example, a small company must file their plan in the first 180 days after filing their petition and may receive an extension during the “exclusivity period” of 300 days, but only if the court believes the extra time will be useful. However, in a large commercial bankruptcy case the “exclusivity period” could last up to 18 months. If a company is classified as a small business they need be aware of the different procedures.
The U.S. Trustee acts as the moderator between the creditor and the company. The Trustee is allowed to conduct a “section 341 meeting”, in which the company under oath is question by the Trustee and the creditors. Another responsibility of the Trustee is to appoint a creditor’s committee, which consist of the seven creditors who hold the largest unsecured claims. The committee is allowed to investigate the company’s operations and help the company to create a plan. After appointing a committee, the company must file a disclosure statement, which a court must approve. The disclosure statement is a document that discusses information about the company and assists the creditors who hold the claims to make an informed decision about the plan. Following the approval of the disclosure statement, the next step is the acceptance of the plan of reorganization. The plan must include the classifications of the claims and the treatment plan for reorganization. After the plan is submitted, any party involved in the case can file and objection to the plan. If there are no objections filed, a hearing is held to confirm the plan if it meets the all the required criteria. The plan must be practical, submitted on time and in good faith. It must meet the requirements of the Bankruptcy Code. The Court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.
Before the plan goes into effect, the parties in the case may file a postconfirmation modification of the plan, which allows the parties to make adjustments to the plan. However, the adjustments must be approved.
A final decree closing the case will be entered after the estate has been "fully administered.
The Nacol Law Firm P.C.
Law office of attorney Mark Nacol
Serving the Dallas / Fort Worth Metroplex area for over 30 years
Tel: 972-690-3333
Monday, April 13, 2009
Chapter 11 Business Bankruptcy
The key to a successful Chapter 11 bankruptcy is pre-bankruptcy planning. There are great powers afforded to Chapter 11 Debtors, such as the ability to object to your creditors' claims, avoid liens, reject leases and contracts with no penalty, extend the time for repayment to existing creditors or even reduce the amount owed or paid to them. The ultimate purpose of a Chapter 11 case is to get a Plan of Reorganization (repayment) confirmed by the court. This is by no means a simple task and the requirements for doing this are rather complex. The Plan is basically a contract with one's creditors as to how they will be repaid, and from what source. The creditors have to vote for the Plan in certain numbers, or if they do not vote in sufficient numbers for the Plan, they may be forced to accept the Plan if other requirements are met.
There are many ways to formulate a Plan, subject to the requirements and limitations of the Bankruptcy Code, and the more skilled attorneys will explore all avenues to improve your business and financial position.Often there is litigation associated with any Chapter 11 case, either with the Debtor attacking the creditors, or vice versa.
While each case is different, your business may be able to avoid liquidation if a carefully crafted debt reorganization plan is presented and accepted by the creditors' committee. The Nacol Law Firm PC understands what needs to be done in order to salvage what you have worked hard to build. Specifically, we suggest:
-Boards of directors’ considerations and management of troubled companies before and during Chapter 11 proceedings, including counseling financially distressed companies of viable alternatives to commencing a bankruptcy case, problems and solutions which may or will arise in bankruptcy cases and structuring the potential resolution of same prior to their emergence
-Cash collateral negotiations and debtor- in- possession financing arrangements
-The purchase and sale of businesses and assets from Chapter 11 debtors
-Complex Chapter 11 plan negotiations and the litigation of contested plan confirmation issues
-Preference litigation and fraudulent conveyance litigation
-Enforcing the rights of secured creditors
-Single asset real estate partnership cases
-Corporate restructuring advice
The Nacol Law Firm
Law office of Mark Nacol
Serving clients in the Dallas / Fort Worth Metroplex area for over 30 years
Tel: 972-690-3333
There are many ways to formulate a Plan, subject to the requirements and limitations of the Bankruptcy Code, and the more skilled attorneys will explore all avenues to improve your business and financial position.Often there is litigation associated with any Chapter 11 case, either with the Debtor attacking the creditors, or vice versa.
While each case is different, your business may be able to avoid liquidation if a carefully crafted debt reorganization plan is presented and accepted by the creditors' committee. The Nacol Law Firm PC understands what needs to be done in order to salvage what you have worked hard to build. Specifically, we suggest:
-Boards of directors’ considerations and management of troubled companies before and during Chapter 11 proceedings, including counseling financially distressed companies of viable alternatives to commencing a bankruptcy case, problems and solutions which may or will arise in bankruptcy cases and structuring the potential resolution of same prior to their emergence
-Cash collateral negotiations and debtor- in- possession financing arrangements
-The purchase and sale of businesses and assets from Chapter 11 debtors
-Complex Chapter 11 plan negotiations and the litigation of contested plan confirmation issues
-Preference litigation and fraudulent conveyance litigation
-Enforcing the rights of secured creditors
-Single asset real estate partnership cases
-Corporate restructuring advice
The Nacol Law Firm
Law office of Mark Nacol
Serving clients in the Dallas / Fort Worth Metroplex area for over 30 years
Tel: 972-690-3333
CHAPTER 7 - Consumer Bankruptcy
Under the new bankruptcy laws, bankruptcy is still an available option for consumers facing financial difficulties. It is now more important than ever to have a trusted, bankruptcy attorney working for you. The telephone should no longer be an instrument of torture and that mountain of bills can be a memory.
To assist you, below are some common financial warning signs:
1. Are any of your credit accounts more than 30 days late?
2. Do you pay only the minimum payment due on your credit cards a majority of the time?
3. Do you float or bounce checks in order to put food on your table or pay monthly expenses such as electric or gas?
4. Have you borrowed money from a loan to payday or vehicle title loan source?
5. Do bill collectors call you at home or work?
6. Do you have multiple mortgages on your house?
7. Have you reached the credit limit on one or more of your credit cards?
8. Have you borrowed money to pay off your credit cards (including balance transfers) and accrued significant balances again?
9. Do you lose sleep at night because you worry how you are going to pay your bills?
10. Do you live from paycheck to paycheck with no source of funds for unexpected obligations?
11. Have you borrowed money from friends and/or relatives to meet obligations?
12. Do you pick and choose which accounts to pay because you can't afford to pay all of your obligations?
13. Has your credit line been stopped by one or more creditors?
14. Is your house in jeopardy of foreclosure?
15. Has your house been foreclosed or your car repossessed leaving you with a balance due on the property that you no longer own?
16. Do you stress over your finances?
17. Are you afraid or hesitant to answer your telephone because you don't want to be abused or belittled by a representative attempting to collect money from you?
18. Do you write checks hoping they don't clear your bank before your paycheck gets deposited?
19. Do you make excuses to yourself or those around you as to why you can't pay your bills?
If you answered yes to any of these questions, you should contact a qualified bankruptcy attorney for consultation.
The Nacol Law Firm PC
Law office of attorney Mark Nacol
Serving clients in the Dallas / Fort Worth Metroplex area for over 30 years
Tel: 972-690-3333
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