Creative solution...help me think.

[Arcinio Arauz]

I generally work with properties under distress, get an option and wholesale. I found a house with over grown grass and vacant over one year now. I finally got in touch with owner and she stated that the house may be in foreclosure. She declared bankruptcy and the mortgage was "dismissed" in January 2011. She been out of the house since and knows nothing else. She gave me a phone number to last known lender. She owed 225k and house is worth 150k. Is there anything I can do to salvage a deal?

[Dion DePaoli]

First, let us correct what you have said. A mortgage (or DOT) does not get "dismissed" by a bankruptcy or any other event. A Bankruptcy can be dismissed, which means the BK plan was not followed, so essentially the BK applicant was denied BK for lack of following the BK pay plan. If the BK plan was followed, then the debits are "Discharged" which means the creditor is considered paid in full and no longer can collect any outstanding balances.

A personal BK is either a Chapter 7 or Chapter 13. A chapter 13 can include the BK applicants primary residence debt but is not canceled or dismissed. It can be reduced by the court of the trustee but it doesn't just disappear. Additionally, they do not knock that much principal off when it is reduced and that is base don the negative equity and other loan parameters. A chapter 7 does not include the home.

So, the first thing I would do is look up the title to the home and see if the security instrument is still valid. The lender may have already caused a foreclosure and the lady does not know it.

If she is still the vested owner of the property, then she is the person you will have to deal with regarding your plan. If she is not the owner, well she lost the property and you can approach the new owner if that works for you.

In the event, she still owns and foreclosure did not get completed then you will have to deal with the pending foreclosure. I presume you have some knowledge on how to do this. You can call the last know lender, which I am guessing what you have is the last known servicer. If you look at the title to the home, if the mortgage has been assigned to a new investor, there should be an assignment recorded.

It is interesting to see a loan with no progress since 2011 but things happen. This can also be due to many reasons both simple and complex. One of those might stem from the BK filing she did and the loan has been serviced poorly or changed hands and serviced poorly. Since it sounds like the BK is dismissed, the mortgagee can resume collections again. Prior to that, the mortgagee could have filed for Relief of Stay to pursue their collections. If a Transfer of Claim never took place, the new owner or owner's servicer may not have been alerted the BK was dismissed.