[WSBARP] Bankruptcy Gurus

[nestor at pplsweb.com]

I agree with you. I never heard of a completed foreclosure being set aside a
preference since it is involuntary transfer. I would continue with the
foreclosure and forget the deed-in-lieu since you need to take out the
subordinate lien holders anyways.  Even though you are a secured creditor
with a priority interest, I would avoid getting dragged into Bankruptcy
court on this issue. If they file bankruptcy at this point in time you are
still getting dragged in, but it should be less complicated to get a relief
from stay and proceed with foreclosure.

 

My two cents worth for a Friday.

 

Nestor Gorfinkel, Attorney at Law

Licensed in Washington & Florida

Florida Civil-Law (International) Notary

 

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From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Paul Neumiller
Sent: Friday, February 23, 2018 1:10 PM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Bankruptcy Gurus

 

Hey Everybody And Happy Friday.  Please bear with me on this set of facts.
I am working with a non-profit that sells housing to low-income people with
seller financing.  Buyer/Debtor is now in default and there are multiple
junior liens to the non-profit's deed of trust amounting to about $100k.
Debtor, who is represented by a legal aid society type attorney, is willing
to sign a deed-in-lieu agreement giving the residence back to the non-profit
so the non-profit can fix it up and get another deserving family into the
residence.  (My deed-in-lieu contains non-merger language so that Creditor
can continue with the foreclosure process to foreclose out the junior
lienholders.)  Here's the problem, Debtor's attorney tells me that Debtor
wants to declare bankruptcy once the "foreclosure procedure is completed."  

 

OK, it seems to me that the non-profit should NOT accept the deed-in-lieu
now because it could be set aside as a preferential payment or transaction
in the bankruptcy court.  The only reason that the non-profit would accept
the deed-in-lieu is to get early possession of the residence so the
non-profit can start to repair it and fix it up.  It seems to me that, since
the non-profit needs go the full foreclosure route anyway in order to
eliminate the junior lienholders, then the non-profit should not accept the
deed-in-lieu and avoid the specter of being set aside as a preference.  The
non-profit wouldn't get the property early but it may be a "cleaner"
transaction.  Is this sound reasoning??  Can a fully completed foreclosure
get set aside as a preference?  Thanks for your help and drive carefully out
there.

 

-Paul Neumiller 

 

 

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