In my April 18th post, I discussed the recent trend of municipalities enacting ordinances designed to give their code enforcement liens “superpriority” over prior-recorded mortgages. Basically, the municipalities have sought to achieve for their liens the same priority as that afforded liens for unpaid real estate taxes. In 2011, the 5th District Court of Appeal… Continue Reading
Tag Archives: Debt and Judgment Collection
HB 87 – Florida’s Foreclosure Bill Is Back (Part 2)
Posted in Debt and Judgment Collection, Special Assets LitigationIn a prior post, we discussed two of the four main components of HB 87, the foreclosure reform bill presently under consideration in Florida. The remaining sections of the bill which merit consideration involve a revised “show cause” procedure and provisions designed to protect third parties who have purchased foreclosed property. The bill proposes to… Continue Reading
Municipal Liens vs. Mortgages: Which Has Priority?
Posted in Debt and Judgment Collection, Special Assets LitigationI have recently encountered several situations in which local governments are claiming, under ordinances they have enacted, that their liens and fines have “superpriority” status over existing mortgages, regardless of when the liens were recorded and whether or not the mortgage holder ever was given notice of the liens. It seems that these claims are… Continue Reading
Debts Non-Dischargeable When Use of Proceeds Intentionally Misrepresented
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionWhen an individual obtains a loan with no intention of repaying the lender, it is well established that such a debt is not dischargeable in bankruptcy. If, however, a debtor does not misrepresent its intent to repay the lender, but instead materially misrepresents the purpose of the loan, is the debt dischargeable in the debtor’s… Continue Reading
Transfers of Real Property for Estate Planning and Other Purposes and Their Effect on the Mortgage Lender
Posted in Commercial Real Estate Lending, Residential Real Estate LendingI receive frequent inquiries from bank clients who are concerned because their mortgage borrower has requested permission to transfer the collateral real property to another entity. These requests commonly are made for estate planning purposes (though other reasons are often cited) and may involve transferring the property to other entities such as a trust. The… Continue Reading
A Potential End-Around McNeal: Liens Partially Secured by Personal Property
Posted in Bankruptcy, Debt and Judgment CollectionWhen the time comes to collect a debt, few organizations are as accomplished as the Internal Revenue Service. The IRS showed just such guile in the case of In re Williams, a recent Chapter 7 proceeding in the Middle District of Georgia, in which the creditor raised an interesting, and more importantly, successful defense to… Continue Reading
HB 87 – Florida’s Foreclosure Bill is Back
Posted in Debt and Judgment Collection, Special Assets LitigationOn February 7, the House Civil Justice Subcommittee voted to pass Florida’s newest bill designed to improve the efficiency of mortgage foreclosures: House Bill 87. While it is still early in the legislative process, this is a good time to examine the four main components of the bill. First, the new bill limits the time… Continue Reading
In re Sundale, Ltd.: Bankruptcy Court May Have Final Say in Certain State-law Counterclaims
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionAs we have discussed in previous posts, the Supreme Court has held that not all counterclaims which arise within the context of a bankruptcy case are “core” proceedings, such that the bankruptcy court may make a final and binding determination on the claim. This is troublesome to creditors because further litigation of the claim has… Continue Reading
Radlax
Posted in Bankruptcy, Debt and Judgment CollectionCan a Chapter 11 debtor propose a plan to sell a lender’s collateral free and clear of the lender’s lien without allowing the lender to credit bid? The Supreme Court says “no”—unless there’s cause. There are three ways for a debtor to confirm a plan without the affirmative vote of a secured creditor: (1) the… Continue Reading
Foreclosure Strategies for Second Mortgage Holders
Posted in Debt and Judgment Collection, Special Assets LitigationLenders holding second mortgages will, assuming the first mortgage is in default, face decisions as to how to best protect their interests in the property. These questions typically come to the forefront when the first mortgage holder files a foreclosure suit and names the second mortgage holder as a defendant. The bank in second position… Continue Reading
Florida Foreclosure Sales: Developing a Maximum Bid
Posted in Banking Operations, Debt and Judgment CollectionA secured creditor who obtains a foreclosure judgment has the ability to “credit bid” at the foreclosure sale up to the full amount indicated in the judgment, without being required to deposit any funds with the Clerk of the Court. After the entry of the foreclosure judgment and prior to the scheduled sale, a creditor… Continue Reading
Surcharge of Debtor’s Exempt Assets Allowed when Debtor Willfully Conceals Non-Exempt Assets
Posted in Bankruptcy, Debt and Judgment CollectionConcealing assets from the Bankruptcy Court rarely, if ever, turns out well for a debtor. In a recent First Circuit case, a debtor concealed proceeds from prepetition sale of his former marital home, claiming that all of the proceeds were paid to his former wife. Nevertheless, the debtor actually received nearly $27,000, which he used… Continue Reading
Florida Deficiency Proceedings: Effect of Bids at the Foreclosure Sale
Posted in Debt and Judgment Collection, Special Assets LitigationDuring a deficiency proceeding, once a creditor introduces the foreclosure sale price, the borrower technically has the burden of presenting evidence to establish the fair market value of the property. In the absence of such evidence, the trial court has the power to act upon the assumption that the sale price reflects the fair market… Continue Reading
Insiders as Equity Investors: Competition Protects Lenders from Absolute Priority Rule Circumvention
Posted in Bankruptcy, Commercial Lending, Debt and Judgment Collection, Loan WorkoutsUnder the absolute-priority rule, unpaid creditors normally receive the equity in a reorganized business. If a plan of reorganization proposes a “new value” investment in exchange for equity, however, the rule does not strictly apply. In the case of Bank of American National Trust & Savings Ass’n v. 203 North LaSalle Street Partnership, the Supreme… Continue Reading
Forward Contracts for Commodities not Avoidable as Preferential Transfers
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionBecause debtors may avoid certain transfers and contracts entered into during the ninety days before they filed their bankruptcy petition, trade creditors are understandably nervous about entering into contracts with customers who may appear to be on the edge of insolvency. Such anxiety is especially acute when the nature of the creditor’s business necessitates entering… Continue Reading
Though not Precedent, McNeal Proves Persuasive in Southern District of Florida
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionMortgage modification has long been an angst-ridden topic for consumer creditors. The issue once again rose to the forefront in May of 2012, when the Eleventh Circuit issued the unpublished opinion of In re McNeal, wherein the court allowed a Chapter 7 debtor to “strip off,” or avoid, a wholly unsecured junior mortgage. As discussed… Continue Reading
A Troubling Interpretation: Prepetition Foreclosures as Preferential Transfers under § 547
Posted in Bankruptcy, Debt and Judgment CollectionAs stated in Doug Waldorf’s post below, the concept of property valuation in regards to a deficiency judgment is well established within the Eleventh Circuit. The fair market value of the property is established at the foreclosure sale. When foreclosure and bankruptcy cross paths, however, other considerations come into play, and it is important that… Continue Reading
Formal Objection to Confirmation not Necessary to Appeal “Absolute Priority” Violation
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionCramdown. The very word makes the hair on the back of lenders’ necks stand up, because in the past, there was little a lender could do once the bankruptcy court confirmed a Chapter 11 plan. However, in the 2011 decision of In re Lett, the Eleventh Circuit loosened the stranglehold and allowed a creditor to appeal the confirmation… Continue Reading
What Lenders Need to Know About “Equitable Mootness” in Appealing a Confirmed Chapter 11 Plan
Posted in Bankruptcy, Debt and Judgment CollectionAs many lenders have learned the hard way, an appeal of a confirmed Chapter 11 plan is often met with strong resistance by the debtor. Often a strong arm tactic used by debtors to encourage courts to deny appellate review of confirmed reorganization plans, the doctrine of “Equitable Mootness” has recently come under fire. Because… Continue Reading
Avoid Potential Lender Liability for Setting Off Against an Account
Posted in Banking Operations, Debt and Judgment CollectionA lender’s ability to set off against a borrower’s account can be a valuable tool for lenders, but care must be exercised to safeguard against potential liability. If setoff is exercised against a checking account, there is a likelihood that checks drawn on the account prior to the setoff (or prior to notice to the… Continue Reading
A Lender’s Right to Set Off Against an Account
Posted in Banking Operations, Debt and Judgment CollectionUnder Florida common law, a bank may set off the balance of an obligation owed to it by its depositor (e.g., a loan) against a general deposit made by the depositor (e.g., the balance of a checking or savings account) which has been accepted by the bank in good faith and in the ordinary course… Continue Reading
The Threat of Lien Stripping in “Chapter 20” Bankruptcy
Posted in Bankruptcy, Debt and Judgment CollectionAs discussed in the McNeal posts below, junior mortgage holders are increasingly finding that their mortgages are worth less than the paper they were printed on. Especially troubling to lenders, are conflicting decisions that allow liens, which otherwise would have passed through a Chapter 7 bankruptcy, to be avoided in a subsequent Chapter 13 proceeding…. Continue Reading
First Challenge to McNeal Reveals Lien Stripping Challenges for Chapter 7 and 13 Debtors
Posted in Bankruptcy, Commercial Lending, Debt and Judgment CollectionNearly five months after McNeal was decided by the Eleventh Circuit, a challenge has arisen within the Eastern District of New York, which has historically been fertile ground for bankruptcy law. In Wachovia Mortgage v. Smoot, the court rejected a debtor’s attempt to strip off a wholly unsecured junior mortgage in a Chapter 7 proceeding,… Continue Reading
How Does a Bank’s Claim For Set-Off Fare in the Face of a Garnishment?
Posted in Banking Operations, Debt and Judgment Collection, Special Assets LitigationIn Florida, it is well established that a bank has a common law right of set-off against funds held in a depositor’s account if the depositor has defaulted under a loan from the bank. This allows the bank the option to apply the funds in the depositor’s account as needed to pay the outstanding obligation… Continue Reading