Bankruptcy/Quit Claim Deed/Mortgage Question Real Scenario

[Jack Tesell]

Need help or insight to what happens after these steps have been taking

Bank files complaint on house 3/2007

Owner moves out

Owner files bankruptcy 7_2009

Motion of Stay filed by bank 8_2009

Relief of Stay Granted 9_2009 to bank

Bankruptcy discharged 11_2009

Owner Quit Claims deed to a second party 3_2014 (owner cant buy house because his name is still on the old house)

Bank send letter to foreclose 7_2014 7 years after complain was filed and the deed in no longer in his name and the debt has been discharged in Chapt 7 Bankruptcy.

Any one know how the rest of the story plays out?? The bank can forclosure on their "lien" if perfected (questionable through assignments) but can't get Title (Deed) without proving they have a superior lien?

Thanks,

Jack

[Dion DePaoli]

You are in the ballpark with your understanding Jack.  Just a couple of tweaks.

The Borrower conveying title in March 2014 would not really do much to avoid foreclosure.  The mortgage or deed of trust would be superior to that event, so the Mortgagee could simply foreclose those interest's granted.  Any event post mortgage recording is subject to having interests and rights terminated by the mortgage's foreclosure since they are inferior to the mortgage.    

The BK assumptions here may be a bit off.  Really one should pull those papers out and review for what really happened.  That said, if a relief was granted, chances are that mortgage debt was not actually discharged.  So, borrower may still be on the hook for deficiency, depending on state, and the entire balance still due.

So, it plays out as a simple foreclosure.  Mortgagee has filed, within the complaint all know parties will be named so Borrower and new QCD owner and perhaps some unknown tenants, etc.  Any other junior interests including liens or interests will also be named.  I am not sure where subject property is located or if proceeding is judicial or non-judicial, so for each it's own in prevailing manner.  

Foreclosure is the process of extinguishing the right of redemption granted to all junior parties.  Foreclosure is not or does not give any immediate right to title to any party for the property including the Mortgagee.  It does preserve a right of redemption to all junior or inferior parties to the foreclosing party's interests.  So upon the completion of the process, the property will be sent to sheriff sale and auctioned off.  The Mortgagee can set a bid price which if met or exceed the Mortgagee takes the cash but still may reserve rights (state dependent) to deficiency.  In the event the auction does not give way to a bid equal to or exceeding the Mortgagee's minimal bid, then title will be issued from the county to the Mortgagee upon the expiration of any post sale redemption period, if any.  

While over the last couple of years a fair amount of attention has been paid to verify the parties involved in the chain of assignments, more recently courts have relaxed a bit on these matters paying more attention to possession.  That is not to say that ownership or standing can not be challenged, it just means that those challenges are proving less and less likely to do much if the Mortgagee can evidence their standing by having possession of the original note.  Obviously, details always matter in such cases.  

In the example above, I would not bet too much that the borrower will step forward and challenge much as it looks like they tried to dump the property.  The party who joined title in the QCD could bring a challenge but most likely they will simply be afforded their legal right of redemption and will not likely be able to stay the action or overturn a ruling to the same.  

So, I would say, stay tuned, sounds like this property will be at auction sooner or later depending on local process and timelines.