[WSBARP] Bankruptcy Gurus

[Marcus Fry]

Paul:
I respectfully disagree.  I would take the deed-in-lieu.  Possession is paramount in many of these cases to protect the security.  You should always be glad to get the debtor out of the property because if they no longer see the home as investment, they are not going to care to keep it up.  If debtor later files for bankruptcy and someone tries to set it aside, then just deal with it then.  I should note that I doubt the trustee or anyone else for that matter will seek to set aside the transfer if there isn't any equity in the property.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
P.O. Box 1689
Yakima, Washington  98907
Telephone:  (509) 248-7220
Facsimile:  (509) 575-1883

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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of nestor at pplsweb.com
Sent: Friday, February 23, 2018 1:39 PM
To: 'WSBA Real Property Listserv'
Subject: Re: [WSBARP] Bankruptcy Gurus

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> [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<mailto: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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