Monday, October 28, 2019

Bankruptcy: Prior Bankruptcy Petition - Dismissal "With Prejudice"

     In the case of Colonial Auto Ctr. Inc. v. Tomlin, the United States District Court at Charlottesville, Virginia, reviewed a Bankruptcy Court's decision denying a creditor summary judgment against the debtor in a motion to determine if the creditor's debtor was nondischargeable due to the debtor's prior bankruptcy case being dismissed "with prejudice". 
     In Tomlin the Bankruptcy Court had ruled that the words "dismissed with prejudice" meant only that the debtor could not file another bankruptcy petition for 180 days. The creditor, however, argued that the language meant that the debtor could not discharge pending debts in a later bankruptcy petition; the creditor asserted that dischargeability had a res judicata effect. 
     The District Court ascertained that the question before it was does an order stating only that a case is "dismissed with prejudice," which in the general legal context, the effect of precluding the subsequent litigation based upon the same claim, have, in the bankruptcy context, the effect of precluding the subsequent discharge of pending debts? 
     The District Court ruled that there was no reason to depart from the traditional effect of an order dismissing a case "with prejudice", and that the Bankruptcy Court erred in determining that the prior order as effecting something less than res judicata. The District Court further ruled that the debtor failed to identify any portion of the Bankruptcy Code in which Congress indicated an intention that a dismissal "with prejudice," once ordered, does not effect claim preclusion in relation to a pending debt. Accordingly, the District Court vacated the Bankruptcy Court's order denying the creditor summary judgment. 

Monday, October 21, 2019

Collections: Credit Reports

     Credit reports provide individuals or institutions that have legitimate "need to know" rights with access to important information. This information includes full name, address, social security number, employer, spouse's name, loans, charge accounts, credit cards, bankruptcies, tax liens, and judgments. 
     Credit reports are governed by state laws and federal law - the Fair Credit Reporting Act (FCRA). In addition, the Federal Trade Commission regulates the credit reporting industry. 
     The three largest credit reporting agencies are Equifax, Trans Union, and Experian. There are also several local agencies. 
     Information will remain on credit reports for varying lengths of time: 
  * Chapter 7 Bankruptcies - Ten years from the date of filing, regardless of dismissal or discharge. 
     * Chapter 13 Bankruptcies - Seven years from plan completion. 
     * All remaining negative information - Seven years. 
     * Open accounts in good standing - indefinite. 
     If an individual disputes information reported to the reporting agency, the individual can send notice of the dispute to the agency. The agency will then contact the information provider to verify the information. If the information cannot be verified, it should be deleted. The Agency will then report its findings to the individual. If the individual still disputes the information, the individual may provide a written statement (up to 100 words) to accompany the report.
     If the verification results in a more favorable report for the individual, he may request that the revised copy be sent to anyone who has requested his report within the last six months for credit purposes, or in the past two years for employment purposes. 

Monday, October 14, 2019

Foreclosure: Foreclosure Basics

     Foreclosure law is a creature of state statute. Accordingly, each state’s laws are different. Because the statute controls, courts will enforce strict adherence to the exact words and requirements. Failing to fully comply with statutory mandates will likely result in defective foreclosures and costly work. 
     In an upcoming blog we will explore foreclosures from beginning to end. From the preparation of the deed of trust, to final accounting after sale. 

Monday, October 7, 2019

Real Estate: Using Deeds of Trust to Secure Your First, Second, Equity Line or Refinance Home Loans

     In a previous blog we began a discussion of the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this blog, we will review the benefits of securing your first, second, equity line or refinance home loans with a deed of trust. 
     Real estate liens provide important security for your debt. Since real estate is the largest investment and asset for most individuals, they will usually make every effort to pay debts secured by their real estate first. However, you need to know the chain of title in order to make an informed decision about your loan. Specifically, in what position will your lien be? Are there any “clouds” on the title? You will not know the answer to these questions without a proper title search and review. 
     Once you know your position you will need to examine the available equity to cover your loan. What is the value? What are the balances due on the liens ahead of your anticipated position? Beyond the business decision of determining when the equity is sufficient for your risk tolerance, in order to take advantage of the “$1.00 rule” in the bankruptcy code for chapter 13 cases (should your debtor decide to later file bankruptcy), you need to ensure that there is at least $1.00 in equity to cover the loan. You should take into consideration that property values may go down (e.g., 2008 to present). 
     If the deal is made and the real estate closing occurs, immediate and proper recording of your deed of trust is essential to preserve your position. If the debtor defaults, foreclosure on the property can occur. If the debtor seeks reorganization of his debt in Chapter 13, you can seek full payment of the debt. 
     We have experienced attorneys and staff who can examine title and properly represent your interests in real estate closings.