I made a 2nd lien here in Los Angeles, CA in May 2008, Owner Occupied. The borrowers had sufficient income to qualify and lots of equity. One source of income was from a rental duplex, which they cashed out on 3 weeks after taking out my $50k 2nd. They began defaulting in 2009 and an NOS was filed sale to be conducted Jan. 2010. Mr. filed ch 13 on day of sale. It was dismissed due to non-feasibility. NOS refiled then Mrs. files ch 13, we object and somehow the court approves the plan. They juggled who they paid for the last 4 years, Trustee files 2 motions to dismiss, then reinstates. Finally, we and the first file an MFR due to non-payment April 2014. Ours is granted and the first enters into an adequate protection plan. We also note that the balloon is due May 2014 as well. NOS filed June, Mr. filed ch 13 again. The plan appears to not be feasible again and we object. In Mr's new plan, his attorney attempts to drag the 2nd out over 5 years. The court is not allowed to change the terms of a Note, which this will clearly do. Given the courts very lax approach to these debtors I'm concerned it will be granted.
Here's the question: Has anyone else experienced a bankruptcy court allowing a balloon payment to be amended into payments? Any advice or unique approaches to this nightmare?
Have you contacted an attorney in your state? One that specializes in representing creditors. You should be able to contact the bar association to get a referral. I stopped practicing law in Alabama approximately 2 years ago. I still have my license. I just decided it was not for me. I represented debtors in bankruptcy court by the way. Anyway, I would cringe every time I would see someone trying to represent themselves. The bankruptcy code can be very difficult to understand. Mainly because of the way it is written and also because a lot of times you have to take into account other areas of law when determining what can and cannot be done. So my strongest recommendation is that you contact an attorney in your area.
By the way the bankruptcy court is not run according to an adversary proceeding, for example, like criminal or domestic court. Instead they are like mediation (this is a very simple definition) and the job of the Judge is to basically insure that the creditor (which would be you) and the debtor is protected. I know that you may not feel like that right now but that is their job. There may be something you can do or need to do that you are not aware of, that is where an attorney can be helpful. A lot of people don't realize that a judge can't make a ruling on something if it is not presented to the court. So if something needs to be filed and it is not filed then the judge will not be able to rule on it. Sorry for the long post and Good luck!
Worst mistake you've made is to not have brought an attorney in at the beginning. Having said that, an attorney maybe could now (depending on the specifics) file a motion for dismissal with a 180 day prohibition on the creditor and spouse filing another bankruptcy. That would give you time to foreclose.
Is there a reason you did not hire an experience bankruptcy lawyer?
I have an attorney, I have spent close to $20k in attorney's fees over the last 4 years. He says they can't modify it and we filed a motion for relief due to the multiple bk's filed and alleged they are acting in bad faith, among other things. My concern is they shouldn't have confirmed the wife's BK 4 years ago because it was not feasible based on the income. We contested that as well and the court still confirmed it. Our opposition was supported
by the fact they defaulted multiple times with all 3 creditors resulting in a granting of our MFR. I'm trying to see if anyone else has experienced a forced modification of a balloon, if so what they did about it. In CA (not sure if it's federal or just our State), the court cannot change the terms of a Note. But they are not suppose to confirm a plan that will fail either...Just frustrated with the system.
I feel for you, but it is sad but that is what bankruptcy is for to protect the debtors.
@Robert Davidson, we did request an "In Rem" motion, which would prohibit them from refilling and requested the waiver of the 14 days. Our MFR was continued til August, the same day of the confirmation hearing.
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No BK expert my any means, but your attorney should be much more aware of your options, and the possible outcomes, than anyone here. Much may depend on how much equity there is, above the first. Here, a second mtg is often stripped completely, if there is no equity above the first.
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