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What To Do When You’re Filing For Bankruptcy With Tony Sottile

GDNI 95 | Filing For Bankruptcy

 

While no one likes to admit failure or defeat in business, filing for bankruptcy is something you have to be prepared to do in case something goes wrong. Filing for bankruptcy at the right time and in the right way can help you find your springboard to make a full recovery in good time. Tony Sottile is an attorney with the law firm of Sottile & Barile. He joins Gail Anthony Greenberg and Chris Seveney in talking about everything you need to know about bankruptcy: procedures, processes, and even debtor attorneys. Don’t miss out on this chance to be ready for anything coming your way!

Listen to the podcast here:

What To Do When You’re Filing For Bankruptcy With Tony Sottile

We have a special guest, a follow-up from a guest we had prior. We’ve got Tony Sottile from the Sottile & Barile who is going to be talking about common mistakes made and bankruptcies and doing a little deep dive into PACER. Tony, how are you doing?

I’m doing fantastic. How are you, Chris?

I’m good. I’ll give Tony a minute to introduce himself. One question I had after you introduce yourself, Tony, have you seen an uptick in bankruptcies or if they’ve stayed flat? I’m curious about that because people will hear about a lot of consumer debt, but before we hop in, that was on my mind.

I’m Tony Sottile with the law firm of Sottile & Barile. We’re out here in the Midwest. We’ve got offices in Cincinnati, Cleveland, and Chicago, Illinois. We practice in Ohio, Kentucky, Indiana, Michigan, and Illinois for everything. That would be bankruptcy, foreclosure, eviction, forfeiture and collection activity as well. You can add the States of Wisconsin, Colorado in Washington DC for bankruptcy only matters. We practice across the whole country for certain bankruptcy matters. They’re called limited access filing matters. I’m proud to say this is our fifth year of operations. That was quite an exciting moment when we realized this was our fifth-year and we plan on going strong for many more.

To answer your question, Chris, first of all, we’re in downtime of new bankruptcy filings anyway. Bankruptcy filings are pretty much at their lowest from December through February in terms of new filings. It’s a race from March to October, November and then again it slows down around the holidays. Nobody has money to file bankruptcy because filing bankruptcy, believe it or not, costs a lot of money. These debtor attorneys charge quite a bit of money for bankruptcy. They don’t have any money until they get their tax refunds and they got to spend their tax refunds down. They start filing again in February and March. We’re going to pick back up here. Year over a year though we are up from where we were this time last year. You are starting to see an increase in bankruptcies again as people spend more money because the economy is great and then realize that they can’t pay back some of the debts. They’re in bankruptcy. I need to say more and it will continue to rise, I believe.

I would think with housing pricing increasing and people’s spending increasing, you’d see more of a rise in bankruptcy because people would want to protect that house that may have the equity. Whereas, if there are not as many equities, people may try and avoid bankruptcy and try and give the house back to the bank and devoid it. Correct?

Yes, that’s exactly correct. How much they make? It depends on which chapter they can file. If they’re relatively lower-income, generally Chapter 7 is the way to go. If they have a little more income, a little excess income, not enough to pay all the bills or they’ve got some real estate they want to keep, they’re in arrears on it. That’s when you find people filing Chapter 13s. A lot of people are filing 11s, you’ll see all of it.

I’ve dealt with 7s and 13s. Mostly 13s, not too many 7s, but the 7s I’ve had, it had some hair on them, to say the least. I filed 7s with no reaffirmation agreement and then the borrower keeps paying and then you’re quite alone. It’s like, “Servicer, what do I do? I can’t talk with them because they discharge. How do you go about it?” I’ll turn over to you and I know you’ve got a presentation for everyone and people reading this episode, we will have this up on YouTube and our Facebook group, the Notes, and Bolts From The Good Deeds Note Investing Podcast. I’ll turn it over to you, Tony.

This is a continuation of part one that we did in October of 2019. We did unexpanded one-on-one. We did a lot of small topic discussions on different pleadings and different costs, things to look for in a bankruptcy. It’s the nuts and bolts on the Notes and Bolts show. We wanted to do something a little bit more advanced this time. There will be some high-level overview of different pleadings. That’s not what we’re going to talk too much about. I don’t want to get too bogged down with that so we can make sure we cover some of these other things. If there are questions, please make sure to ask and we’ll try to get them answered along the way. I don’t want to confuse anybody. This is not a beginner level show. This is a little bit more of sophomore junior level stuff.

I wanted to talk a few things about common mistakes that we see the note buyers making. That wasn’t enough to fill a whole class. We wanted to throw in a deep dive into PACER. Let’s go right into some common mistakes. Common mistake number one is not taking the time in your due diligence process. Some of you do your due diligence, some of you farm it out. Whether you’re doing it or somebody is doing it for you, you want to make sure that you’re reviewing anything that you get in. You want to make sure that you’re looking for bankruptcy information because that’s going to be a big part of your decision-making process, whether or not you end up buying the note or buying the pool or whatnot.

Look for bankruptcy pleadings in that tape. Look for any jurisdiction or case number that’s on them. Most pleadings are going to have a case number and a jurisdiction on them. See if documents like that are within the materials that you’re able to take a look at. I know that this doesn’t happen all the time, but sometimes you’re able to get a Social Security number that’s gold because then you can go and put that person’s Social Security number in PACER and doing a national PACER search to see if they’ve filed any bankruptcy. That’s your best bet. Your best bet is to get social and run it through pacer.

If your borrower is John Smith, don’t even bother trying to search.

When we go to the PACER side of the session, I’ll teach you a couple of different ways you can search, but Chris is exactly right. If your debtor’s name is John Smith, don’t even bother looking at PACER. If it’s a unique name, you may not need a Social Security number. You can’t search by property address or a lot of the stuff that you would think you might be able to search by. You need a debtor’s name and their Social Security number. Hopefully, you have that. If not, you can find some pleadings in the tape that you’re reviewing. That’ll give you a clue whether or not you’re also dealing with a bankruptcy at some point.

Filing bankruptcy, believe it or not, costs a lot of money. Click To Tweet

I’ll read your servicer notes. Check out the servicer note. Sometimes the debtor will call in and tell the servicer that, “I filed bankruptcy, here’s my bankruptcy case number.” You may not get the jurisdiction, but you can probably get the jurisdiction from where the property address is. Most people are filing bankruptcy where the property is located. Most of these folks only have one property. Read the servicer notes that might contain some useful information. See what was already done on that file. See what the intent of the debtors is. If you do see that they’ve filed bankruptcy and we’ll talk about some of these pleadings and some of the things to look for on PACER, but see what’s already been done in the case. See what the intent of the debtors was in the case. Do they want to keep the property? Do they want to surrender it? Consider having an attorney do a post-petition file review. If you’re not comfortable, if you see that they’ve got a bankruptcy on record, get with your bankruptcy attorney, get with us. We can take some time with you and we can review that file. At the very least, the bankruptcy part of that file. That’s what we would do.

We would review the bankruptcy part of the file and tell you where that case is, what’s going on and if money is coming in. You should know some basic timelines. Chapter 7, 3 to 6 months. Chapter 13 is 3 to 5 years. If you’re doing your due diligence, have some common bankruptcy knowledge. Google can be your friend on a lot of this. Know some differences between the chapters. Getting help is imperative on this. Have an attorney look it over for you or maybe check out some previous presentations. The one we did in October, Chris is good for a lot of this stuff.

One thing I’ll mention, before we hit that last thing is because this is important and you’ve mentioned Social Security numbers and I wholeheartedly agree with that because not only are you reviewing for bankruptcy but also how many bankruptcies? You may have a serial filer and who keeps filing, dismiss filing and the lender might’ve been a hedge fund that hasn’t taken the time to try and beat them to the punch. That can cause you to expend a good amount of money trying to beat to the punch, which goes into what Tony’s last item on this one is.

Which is price your offer with all of this in mind? There are a lot of investors out there that love bankruptcy loans because they understand bankruptcy, they understand it in and out, or they know where to go to get the information. They’ve got a good network of people that can help them take a nasty bankruptcy file and maybe spend some money, but be able to prevent that debtor who’s filing on the eve of a foreclosure sale every time. Be able to file the correct pleadings to get that debtor to have to stop.

You can file pleadings with the court to put a chill on that debtor from filing bankruptcy for potentially 180 days a year maybe. That’s more than enough time in most jurisdictions to get a foreclosure through, especially since it’s probably already started. If you can get that price down pretty low the few thousand dollars in attorney’s fees that you’re looking to do all of this, you may still come out far ahead. Price your offer with all this in mind and don’t run. Bankruptcy is a part of your due diligence process, but it doesn’t need to be the kiss of death unless that’s your deal. You don’t like bankruptcy files. There are plenty of folks out there like that too.

I’m the opposite. I love them because you get to see how much the borrower makes. You can see the loan and get an understanding of what their arrearages are on the loan and they need to be pretty much confirmed. It’s not the total payoff is something that somebody made up. It’s something that is, I’ll say legitimate from that standpoint. It’s a controlled environment and it’s controlled federally versus locally. I know people have issues in certain states, including myself because judges may be more liberal or depending on the state. Bankruptcy that’s a federal court system. They still may in certain areas be a little more liberal than others, but typically they follow the same guideline I would think. Won’t you agree, Tony, for the most part?

Yes. Generally speaking, you might have jurisdictions or judges that are a little more debtor-friendly, a little more creditor friendly, but your local attorneys will be able to help you and, “We drew Judge Smith. He’s aggressive on these. Maybe we want to give it a try,” or “This judge, there’s no way we’re going to get this through with this judge.” Engage your attorneys. Common mistake number two is reviewing the bankruptcy plan in light of the maturity date on the note. This is another area where we see a lot of mistakes being made. It’s not the smaller note buyer and the smaller note investor, it’s the institutional clients that we deal with as well.

Here’s why knowing when the maturity date on the note is important. It’s because there could be a balloon payment due during the case. If that debtor is not addressing that balloon payment within that bankruptcy case, that case is destined to fail. If you can, you need to know that going in. If there’s a balloon payment, make sure it’s addressed in the bankruptcy plan. Another reason why this is important is that generally first mortgages on residential property. This is the property that the debtor is living in. If that loan matures during the bankruptcy, it can be modified and the interest rate can be crammed down. You may be looking at a note that you might be able to get according to the face of the note, 10%, 12%, 15% interest. If that note comes due during the bankruptcy, they can cram that down to a lower interest rate.

Only if and this is rare, this is why it’s not common. It is a mistake that we see made. You’re not typically dealing with such large interest rates anyway, but we want you to get what you’re paying for. If you think you’re paying for a note that’s going to get you 10% and it matures during the bankruptcy, don’t even worry about the balloon. Say there is no balloon, it matures. It’s over with. You may not be getting what you bargained for. That should also be part of your due diligence process is knowing when that note matures. If they’re in bankruptcy, that should cause some alarms to go off. Was that maturity addressed in the bankruptcy? Is there a balloon payment due somehow as you’re looking at the note? When is that balloon payment due?

If that’s due during the bankruptcy? Was it addressed? You should also know that if you’ve got a note already if you’ve purchased the note and that loan then subsequently goes into bankruptcy. All of this still matters. It’s not necessarily a loan that you’re looking to buy, but if the note you already own then goes into a Chapter 13, make sure as you should do on every Chapter 13 bankruptcy, that you’ve got an attorney looking at that, performing a review of the bankruptcy plan and putting together a proof of claim.

I was going to ask this question because a lot of services will do the proof of claim for you. The question I get asked a lot is, did your servicer ever do it and have an attorney do it? I usually tell people, have the attorney do it. I know you’re a bankruptcy attorney, you might be a little bias in that, but would you agree with that component? Probably because of the next thing you’re going to talk about is why I’m guessing you probably would want an attorney to do it.

I would recommend you have an attorney do that for several reasons. One, that attorney is probably a little more versed in filing proofs of claim. They’re probably going to charge you the same amount. They’re the same price no matter who’s doing them? Most attorneys you’re going to see are following the Fannie Mae fee schedule. If you’ve got an attorney who’s not following that, you hope they’re on the lower end of that. I see a lot of attorneys trying to flat overcharge note investors because “you don’t know any better.” That’s ridiculous. I like the Fannie Mae fee schedule. It’s black and white. I can point to it and say, “This is what the fee is. It has a built-in discount. That’s why it’s there. It’s there because firms have a lot of Fannie Mae files.” Fannie Mae is the biggest player in the arena. At least they probably still are. They set the prices on this and they work these prices down. They’re fair, but a lot of attorneys don’t. A lot of attorneys think they’re too low.

Are these costs recoverable as part of the plan or your recoverable costs against the borrower?

Some jurisdictions, yes, some jurisdictions, no. For example, Ohio, a proof of claim plan review, what I charge you for that is not recoverable. In most jurisdictions, it’s completely recoverable. Of course, you’ve got jurisdictions in the middle where even though Tony said Sottile’s going to charge you what Fannie Mae says Tony can charge, which is either $900 or $950 for a proof of claim and a plan review. I believe it’s $950 and an additional $250 for a separate form called Form 410A, which is a loan history. It’s upwards of $1,100, $1,200. There are some jurisdictions that say, “You’re only able to recover $600 from the borrower.” You can’t recover that directly from the borrower if they’re in bankruptcy. I don’t want you to get too bogged down in this. We’ll talk about post-petition fee notices a little bit on the PACER review but you can’t build a debtor in bankruptcy. You’ve got to go through the court to bill the debtor. That’s another thing that the attorney’s going to know that the servicer may not know.

GDNI 95 | Filing For Bankruptcy
Filing For Bankruptcy: Number one among the most common mistakes people make in bankruptcy is not taking the time to do their due diligence.

 

That’s a common mistake that I see is when escrow goes up and so forth, you have to file something within 45 days before the date, because I’m going through that where the escrow got bumped up because the year has turned. You have to notify the court that it’s going up.

We’re going to talk about that. That’s another common mistake coming up here. That’s common mistake number two. These are in no great order. This common mistake number two, a loan maturing during a bankruptcy that’s a little rarer. Common mistakes number 3 and 3.5. We’ve got a bonus one in there. Let’s talk about the first one. Common mistake three thinking that the bankruptcy filing slows everything down. Sure, it does. It stops foreclosure, it stops or forfeiture action stops your collection. Whatever you’re doing, it stops it, but to a debtor whose heart is pure, whose intentions are good, a debtor who wants to keep that property, this is how they can do it. This is how they can get that arrearage caught up. This is what you’re looking for from a good, honest bankruptcy debtor. Somebody that wants to catch up on those arrears and need a break from the foreclosure auction that’s bearing down on them and a good debtor. A debtor that means what they want to do, once those payments start. You’ve got a nice steady stream of income coming in.

If a debtor wants to catch up on our arrears, this is a way for them to do so rather than having to come up with a gigantic amount of money for a foreclosure sale that’ll be canceled, they can file a thirteen and pay that over some time. In most cases, if there are arrears on a house, if there are arrears on the property, that payment’s going to come from the trustee. The trustee in the case is the one doing a lot of the accounting on this. They are taking the money from the borrower, sending it to you and you can look that up online. It’s a good deal. Don’t think that because of bankruptcies filed, it’s going to slow things down for forever. It may help you out in the long run.

That leads right into 3.5, which is that you think you’re going to get paid as soon as that bankruptcy is filed because that’s not the case. If the debtor is making the ongoing mortgage payments, that should continue pretty much despite the bankruptcy being filed, it could be a little delayed a month, 45 days, maybe 2 months. If that debtor is making payments, that debtor is instructed to continue making those payments. That is the ongoing payment. If there are arrearages, that’s not going to begin until the plan confirms. If you’ve got a property and we filed a proof of claim that lists $30,000 mortgage arrears, it could be many months before you get that payment.

If the trustee is also making the ongoing payments in addition to the arrearage payments, that’s called a trustee pays pre-petition. That’s the arrears and post-petition, which is the post-petition ongoing payments. If the trustee is paying that, you’re not going to get paid until proof of claim is filed, which you want to do right away anyway. You’ve got to get that claim on file and in some cases, you may not get paid until that plan confirms. Hopefully, the plan is going to confirm within a few months. Your attorney can help you understand because it’s a guessing game for everybody here as well. An attorney can give you some guidance on when they think that the plan will confirm. That would be based on objections to that plan or knowing that trustee in that jurisdiction. You’re not going to start getting payments just because that debtor filed for bankruptcy. It’s going to take a little while.

Once they do start, they should continue. We need to speed that up quickly. The ways to speed that up, filing that proof of claim. If we have to, we can file something called a motion for adequate protection, which tells the court your asset is depreciating. There’s a diminution in value and we want those payments to start immediately. We don’t want to wait until the plan confirms. I would only recommend doing that on higher-value assets because that motion for adequate protections is going to set you back probably $800, $900 depending upon your attorney. I don’t think there’s a filing fee for a motion for adequate protection, but you’re looking at a lot of money when if you can wait a couple more months, it will probably start. I wouldn’t advocate for that. An attorney turning down work, I wouldn’t advocate for that on a lower value asset.

I was going to mention a few other things about getting paid immediately. What I’ve learned is the trustee gets paid first because they get a fee or something for doing it. The other thing is sometimes there are superior liens above the first mortgage. I’ve sometimes had either taxes or there are certain things that have taken superior. I had to wait about six months before the payments started coming to me. I had to pay the trustee for three months and then the payments, the $700 a month will go into payoffs on tax or something like that. You’ve seen that happen in the past as well, correct?

That’s correct. Debtor attorneys get paid before you, keep that in mind.

Remind me to tell you that I have a bankruptcy where the debtor’s attorney was disbarred. They filed for bankruptcy. The attorney had filed bankruptcy and was taking money from the clients and using that to defend her case and filing frivolous motions to reclaim that the trustee was incompetent, I guess or something. I watched the hearing because my attorney said it would be entertaining.

I would’ve said that would be entertaining. These are another couple of common mistakes. Here’s a fourth one. “What if there’s a bankruptcy? I don’t need to do anything.” That could not be further from the truth. I hear this a lot, “I don’t care about bankruptcy. They want to keep the property.” These are some of the things you were saying before, Chris. If it’s a Chapter 7 bankruptcy, you must review that statement of intent. You’ve got to know what that debtor wants to do with that property. This isn’t a must, but you want to consider in a Chapter 7 context, a reaffirmation agreement, which is a post-petition filing that your attorney puts together. They prepare, they send to the debtor’s attorney and presuming that debtor wants to keep the house, you would want them to file a reaffirmation agreement, which is another promise to pay on a debt that would ordinarily be discharged in the bankruptcy. In this case, what we’re all dealing with here is property. Your lien survives. You still have a lien if that debtor gets a discharge, but you have no recourse against that borrower. You can’t then foreclose on that borrower and go after them for the difference. You may not want to do that, but there are a lot of investors that do want to do that.

If you’re able to get a reaffirmation agreement in my opinion, your note is more valuable if you choose to sell it later on. You can get a personal judgment against that borrower in a subsequent state court action and a foreclosure action. If that debt is discharged, if that loan is discharged, you can’t. You’re limited to getting your property back. Again, it’s something you may or may not care about, but in a Chapter 13 case, this is where there are a lot more musts, things that you must do. There’s a bankruptcy, now you’ve got to jump into action. You must review that plan and file a proof of claim. If you purchase a note that is not in bankruptcy that then goes into bankruptcy, we’re going to cover that at the end. It doesn’t matter.

If you’re buying a note that’s already in bankruptcy, make sure you’re still reviewing that plan even if you can’t object to it, even if it’s too late to do that. Make sure there’s a proof of claim on file. You have to file any ongoing payment change notices. If the borrower’s payments are going up due to an escrow change or a change in property taxes, an interest rate change, whatever it is, 21 days before that change goes into effect, whether that payment goes up or down, you have to file with the court a payment change notice that says, “Payments going up to X payments going down to Y and attach proof of what that is.” Typically, it’s an escrow letter that says what the payment is going to be and why.

You can’t change the payment. This is a big way noteholders get into trouble and are not filing payment change notices. You can’t raise or lower the payment. Technically, you violate the bankruptcy code because you didn’t file that at least 21 days before the change takes effect. You must do that. You must file post-petition fee notices before charging the debtor’s account. We talked about this with the recoverability question. When the state of Ohio, if I charge you whatever, I charge you for a proof of claim, you cannot file a Post Petition Fee Notice, a PPFN for that money, but in Indiana, you can.

If I do that same thing for you in Indiana, after I charge you before you pass that charge along to the borrower, you have to tell the court, “I have a bill here that I’m going to pass along to the debtor. It’s $1,200. It’s $1,100. It’s right here. Here’s the invoice from my attorney. I want it to be built to the borrower.” You have to file a post-petition fee notice to do that. You can’t add it to the debtor’s account. You must respond to a trustee’s notice. A trustee, if there are arrears on the case. We talked about this, we’re talking to a high level and I’m glossing over a lot of things. When that trustee nears the end of the case, they’re going to file a pleading called a Notice of Final Cure. You must file a response that notices a font up here that says, “Yes, I am the note holder. I agree that the debtor is current,” or “No, they are not current. Here’s where they’re behind.” You have to file agree or disagree response to that Notice of Final Cure.

Bankruptcy is a part of your due diligence process, but it doesn't need to be the kiss of death unless that's your deal. Click To Tweet

We were talking about escrow accounts before. A lot of times when notes are bought and sold, on our end, on the legal side of things, we see escrow accounts canceled or created. You can’t do that on a note in bankruptcy. You have to inform the court that you’re doing that. These are all musts. Don’t think just because, in bankruptcy, you can choose to do what you want or what you don’t want. There are a lot of things you have to do. I’ve got that little line at the end. If you buy a note that’s already in bankruptcy, another thing you need to add, you have to file a transfer of claim. If Bob buys a note from Chris that’s already in bankruptcy, Bob needs to file a transfer of claim. The trustee or the debtor who’s ever making these payments know to start paying Bob and to stop paying Chris. That’s called a transfer of claim and you’ve got to file it. Still do everything that we’ve got listed above. That’s another big common mistake is that people think they don’t need to do anything.

On transfer claims, I use to rely on my servicer but have found that sometimes they don’t do it in the most timely fashion or manner. That’s something that either a servicer or an attorney can do but I’ve gone to the attorney because it’s almost like they do 1,000 of these a day. You get in the queue and it’s done quickly in that instance. I found attorneys do it much faster and at the same price.

It’s the pricing factor. Your attorneys are probably charging you the same amount that your servicer is charging because, behind the scenes, that servicer may be having an attorney do it anyway. Things like reviewing plans, filing proofs of claim, payment change notices, post-petition fee notices and transfers of the claim and here’s my pitch that we can do for you when all 94 bankruptcy jurisdictions. If not us, believe it or not, I don’t care that much. I’d love to do it for you. The point is you need to have that done. Whether it’s me or it’s somebody else, you’ve got to get those things done. These are musts for our bankruptcy case.

Filing one transfer of claim for somebody isn’t funding your trip to Hawaii.

No. A transfer of claim is $125 and I do them multiple times a day. Payment change notices, I bet we do 150 to 200 of those a month in our office. These are things that we do all the time, every day across the whole country. We know what we’re doing. The last common mistake I wanted to bring up, this was at the behest of one of our attorneys. This doesn’t matter in a lot of cases, but it is a common mistake when it does come up. Broker Price Opinions, BPOs. A lot of people think that that’s all I need when valuation is in question on a piece of property. BPOs are cheaper and in many cases, they’re very cheap. There are some times, okay but they’re lacking when valuation is a big concern.

This is common in second mortgage cases, junior lien areas, not much when you’ve got the first lien. If the debtor doesn’t live in the property then they can cram it down. They can do things if it’s a property that they do not live in. Valuation sometimes matters. When I review a plan, I’m going to report back to you what they say the property is. Even if it doesn’t matter, even if I know you’re a first mortgage, I’m still going to tell you what the debtor says that property is worth. If it ever comes into question, we need the best evidence we can on the value of that property. The best evidence is not a broker price opinion. It is not what Zillow says, what Redfin says or what the county auditor says.

These are good indicators. These values may help you with your due diligence, but these are not something that we can go before a judge and say, “Zillow says it’s $300,000 and that’s the value of the property.” Don’t do this right away because the borrower files bankruptcy. Don’t go, “Tony said I’ve got to get an appraisal and it’s $300.” Don’t do it until your attorney tells you to have to. Know that value is in question and we’re probably going to tell you, “You need to get an appraisal.” A BPO from two years ago is not going to cut it.

Tony, I have a question then I have a comment too. If you’re a first lien homeowner, is it possible to get a cram down on the value?

No. In a Chapter 7 case, no and in a Chapter 13 case, no. That’s if the debtor occupied primary residence property. The problem comes in if that debtor has multiple properties. They may list your property as being their residential property, but they may move from that residence. This is why I need you to know the value that they’re calling your property. If later on, they say, “I don’t live in that property, I rent that property out.” They might try to sneak in some cram down and we want to be armed for that.

The other common mistake that I hear, and I’m curious if you see this happening a lot is, people are trying to reach out to the borrower when they’re in bankruptcy, which is I know a big no-no.

The people being the note investor that owned the note?

The investor, yes.

It’s tough. You’re not supposed to do that. They’ve got an attorney.

I’ve been told, “Don’t even consider it if they call you even. Tell them, run it through their attorney and have their attorney run it through my attorney.”

You can give them factual information on the case. If they want to know what is owed, you can tell them what is owed. If they say, “Can I pay in two months instead of next month?” Talk to your attorney. When’s the next time this is due? Talk to your attorney because the date on the contract that says when the data’s due may not be the same as what the bankruptcy court says. It’s always best for them to have their attorney give you a call. I’m not stupid. I know that it happens. My institutional clients take debtor calls. It is what it is. That’s business but don’t get hoodwinked by what sounds like a well-meaning debtor and you’re trying to help them out because of that deal somehow go south or that debtor decides they don’t like what you’re presenting them anymore. They’re going to go straight to their attorney and say, “I’ve been talking with Chris Seveney and he said, ‘Blah, blah, blah.’” Now, you have a real problem because you’re talking with a representative party in a federal bankruptcy case.

What would happen to me if I did that? What are the ramifications? I know you’re not supposed to do it, but what would happen if somebody did?

You may not be able to participate in the bankruptcy. You may not get your payments. You may have to wait until the bankruptcy is over. More than likely, you’ll get hauled into court and get a wrist slap and told, “Don’t do that again. If that happens, don’t do it again.” The ramifications, you’re not going to lose your lien. That has to be the most egregious case. A well-meaning note investor and note holder is not going to get a punishment like that. More likely than not, you may have to go to the end of the line to get your money. You won’t get your money until the end of the case. That means that debtor’s getting to live in your property, rent-free. That’s an egregious punishment, but it happens to the big guys all the time. They lose their arrears because they’re not doing the right thing. Probably not going to happen to the smaller guy, but it could. You’re going to avail yourself of the bankruptcy courts. You’ve got to play by their rules. That’s a few common mistakes. What I’d like to do is dip through some things on PACER.

That’d be great because some people if you don’t know what PACER is, I’ll call it the catchall for all bankruptcy, where this is when you’re looking for your due diligence for a bankruptcy case, this is where you go. I’ll let you, Tony, take it from here. If you have questions, feel free to put them in the chat over anything that we’ve gone through.

Here’s what we’re going to do. When I say PACER when you look up cases in PACER, you’re going to see things.

For people reading, PACER.gov is the website.

You’re going to search for a case. If you already know the case, you’re going to do this bottom line where it’s searching individual court websites. If you know you’re going to go in and you know the Smith cases in the middle district of Florida, you’re going to go straight there. We’re going to go back to that. If you don’t know where the case is and you’re fortunate enough to have a Social Security number or to have a unique debtor’s name, you can go in this way. It’s going to default to the debtor Social Security number. You can type that in. You can also search for the party. If your debtor is John Smith, don’t even bother. If your debtor is a unique name, you might be able to get that. You can put that in. You can choose a party role, which will further reduce your selections. A debtor is DB by the way. Don’t do John Smith, but if you’ve got a debtor’s name, you know how to spell it, you know it’s spelled correctly, go ahead and choose that DB feature and that will weed out the CRs, that’s the creditors. It will weed out joint data. Maybe you’ll not want to weed out joint debtors. It will weed out US trustee. It will weed out special parties and interests. The court type is bankruptcy.

If you need a name, I’ve got names I can give you off the top of my head too, Tony. 

That’s okay. What I want to do here though, to find a couple of cases that I’ve looked at is I want to go back to the direction to a case, the individual court website. I wrote down a case here that I’m going to pull up here. We’re going to look at a Chapter 7 case first in the Northern District of Ohio. You’re going to select that case. I’ve already logged in. If you need to log in, you’ll eventually make it to this screen. This is a hard screen to find. This is the main screen. It’s where you type in the case number. You’re coming to this link in the Northern District of Ohio in my particular example here because you already know the case number. We’re going to put in a case number here.

For those that don’t infuse search by a certain name, like search Chris Seveney. There are only two of us in the US and I had a BK, which I don’t, but you typically want your searches. It will show the case number. It will show the district, they’ll show the name and it will show the date filed. It will show if it’s closed as well. You click on any one of those and it will probably open up what Tony is going to show us.

If you are searching for a debtor in the main search engine, this is the information you’re going to get right up here at the top. It’s going to say the case number, it’s going to tell you the judge, it’s going to tell you the chapter that it is. It will tell you when the bankruptcy was filed and this may be something that you want to know. If your note originated after the bankruptcy was filed or after the debtor’s last bankruptcy anyway, then you have nothing to worry about because you’ve got a good loan. There’s a whole lot of things that you can look at in this Walter’s case. The first thing that I always go to when I’m looking up somebody in PACER is I go to a Docket Report. I like to search for the oldest date first because I want to go back to the beginning. This is what it looks like. This is a Docket Report. This isn’t a big one. Most Chapter 7 cases are not big PACER searches. You are charged to do PACER research. It’s $0.10 a search. Our PACER bill quarterly is upwards of $15,000 a quarter. If your PACER bill is under $100 a quarter, you don’t get a bill. Chris, do you know what the number is?

It’s a little less but rarely do I ever get a bill and to give people an idea, I have probably 8 to 10 bankruptcy cases going on. I can’t remember the last time I got a bill. Typically when you get the bill is when you’re doing due diligence, not when you have the active. What you’re doing is you’re downloading all these forms here. It’s $0.10 a page or at $3 max. If you’ve got five, you’re doing due diligence, you may spend $10 or $15 on each one, which will add up to $75 or $100. You’re right, if you only spent $0.10, they are not going to send you a bill.

When you’re spending $0.10, remember that Tony’s PACER bill is $15,000 every three months.

That’s why it’s $900 for a proof of claim.

What I want to do while we’re in a case like this because I want to pull up a bankruptcy petition. Here’s some good information. It’s going to tell you that the document you’re going to request has 64 pages. You’re only billed for 30 pages max. The most you’re ever going to be billed is $3. Even though we’re getting 64 pages. We’re going to go ahead and do this anyway. We’re going to go ahead and take a look at this bankruptcy petition. We’re going to briefly look at some of these things here.

Tony, while you’ve gone through this and for people to know, this is all public record, correct? 

Yes. That’s the P in PACER, Public.

This stuff is not anything like, “You shouldn’t be showing this.” Bankruptcies are all public records. You can’t get in trouble for sending this without an NDA or something. This is all public record.

This is all public record. You’re not going to get a debtor Social Security number in this. Certain things like that are redacted to only parties in the case. You can look anybody up. I purposely took some newer cases because the forms changed at the beginning of 2018. I intentionally took newer forms because you’re going to see these more and eventually this is all you’re going to see. This is a voluntary bankruptcy petition, a BP, a petition, whatever you want to call it. They redact the Social Security numbers right there for the two borrowers. There is not a whole lot on this first page. What I want to draw your attention to, for example, it will tell you, “Have they filed bankruptcy within the last eight years?” You’ll know if they’re a repeat filer right away.

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This particular debtor filed in 2015. This is a 2019 case. This is at least this debtor’s second bankruptcy. That may have some merit to what you’re looking at with this borrower. They are multiple filers. Some people are interested in, how much do you estimate the liabilities, your assets? None of this matters in my opinion. The real meat of this is when we start getting to the schedules, schedules A and B. Schedule A is all real property and vehicles. This is where you’re going to find the property that you’re looking at. This is where the debtor is going to tell you when a Chapter 7 case, they think this property’s worth $200,000. They say that they roughly owe $200,000 on the property. This isn’t factual. This is what they think.

Tony, what if you have a borrower who files bankruptcy and puts the property in there and your property is not in the bankruptcy?

You’re going to want to get an attorney involved because there could be a lot of reasons why it’s not listed. It could have already been foreclosed on and it could be listed in schedule F. That’s why when you’re doing due diligence and you’re looking for a particular property in someone’s bankruptcy, you’ve got to look in multiple places. The first place you look is schedule A because that’s where you hope it is. That’s an obvious location from that property. They don’t list properties. Here’s why they do that because their attorney says, “Nothing’s going to happen to your house. Don’t worry about it. Your house is not part of this bankruptcy.” Whether the attorney fails to list it or the borrower’s doing that themselves as a pro se debtor, those are the worst. They don’t include the property in their bankruptcy because they don’t want to file bankruptcy on their property. It doesn’t work like that. Every debt and every asset you have must be listed in this bankruptcy petition.

GDNI 95 | Filing For Bankruptcy
Filing For Bankruptcy: Note holders tend to get in trouble because they don’t file payment change notices, so they can’t raise or lower the payment.

 

That’s what I did with mine. I went and got an attorney and let them deal with it.

If it’s not there, you’ve got to act quickly because if that case discharges and you didn’t do anything about it, you may not be able to collect on that lien. You may only be limited to getting your property back. You may not be able to do anything with that homeowner because that debt is discharged. Look on schedule A. Maybe you can look at the cars. It’s not that big of a deal though. Once you get to schedule Bidwell, what they do is they merge schedules A and B. Schedule A is where you want to start. Schedule D is where you want to be. This is where creditors who are owed money on secured debt must be listed. This is where you’re going to see the noteholders. This is where you’re going to see the car creditors. This is where you’re going to see other lien holders listed on schedule D. We already saw from the debtor’s voluntary petition page. If they think the collateral is worth $200,000. That’s where is, that’s where that comes from. They say they owe Bayview $182,500.

That’s important. If what they say they owe Bayview, you get the opportunity to tell them what they owe you.

You do that by the filing of a proof of claim. This is Chapter 7 that we’re looking at. We’re not looking at Chapter 7 for purposes of filing a proof of claim or anything. We’re looking for some financial information in Chapter 7. Chapter 7s are quick. Chris, like you were saying, you don’t even have a whole lot of Chapter 7s because they’re in and out and they’re done. Chapter 13s, much of this is the same in a 13 as well, but Chapter 13 is having some staying power. Schedule D is important to have a place to look for a shell point. They might have a second mortgage here. These are all things that you can look up at a petition and maybe you understand a little bit better.

Chris, you were talking about what if your property is not listed? Schedule E is taxes and stuff like that, it’s not going to be there. Schedule F is another place where people put their properties. People will put properties here if a foreclosure has been filed but not yet sold because they don’t live there anymore. They’ve already moved out. The property was foreclosed on, even though it’s still secured and should be listed in schedule D, they’ve listed it an F, and just because your property is not listed in D doesn’t mean the end of the world. It could be misclassified. An attorney may need to get involved to get that change, but in most cases, it’s not going to matter. That’s what schedule F is. Schedule F is for creditors who have unsecured claims.

Here’s another bit of good information though. There are a lot of debtors and a lot of creditors here. One thing that I like that I want you all to know about is what you can find on schedules I and J. Especially if you’re trying to help a borrower with a loan mod or you’re trying to do some due diligence to see if you could get a loan mod with this borrower. They have to disclose their income, their sources of income, and all of their expenses in these pleadings. In this particular case, it looks like only debtor two, this used to be husband and wife, but now they list them debtor 1 and debtor 2. Debtor one, presumably the husband is unemployed. It says he’s employed and then it lists his occupation as unemployment. You’re going to find all kinds of mistakes the way that it is. What you’re looking at here is debtor two, is employed. There is a cook at a middle school. Looks like they make about $1,500 a month. These are all their deductions still. Deductions don’t matter necessarily, but you’re going to find what their monthly income is.

The next schedule is their expenses. You see they got a couple of kids in the house, the second debtor lives in the house. It’s probably a family unit and then it lists their expenses. Somehow they don’t have any rent. Maybe they live with a friend or something like that. They’re not listing any expenses for that. They’re surrendering this property but we’ll take a look at that. You can look at their expenses here. Vehicle insurance, transportation expenses, food, lodging, all useful information to you if you are looking to somehow modify their loan. You can glean a lot of information from schedules I and J. I want to look at the Statement of Financial Affairs, SOFA. As everybody knows, everything’s got an abbreviation bankruptcy. This is the Statement of Financial Affairs and this is going to also give you some good information primarily if they’re a gambler. They won $9,200 gambling.

You will find legal actions that they’re involved in. Within a year before they filed bankruptcy, were you a party to a lawsuit? Have you been foreclosed on? Have your wages been garnished? You may find some information on an underlying foreclosure here that you may want to look up as you’re doing some due diligence. You may not know that the property that you’re looking at is already involved in a foreclosure, which you may or may not like. Depending upon what your investment goals are. That’s what I want you to look at and SOFA as you’re looking at PACER, look for those things. You’ve got a 401(k), that’s another source of money. They don’t have any balance in it. They probably bled it down already trying to not file bankruptcy. If you see a retirement account that’s got a substantial balance, again, that may help you with a loan modification. “Give me a lump sum of $5,000 and we can get this going.” “I see you’ve got a four alarming,” you may not want to tell him that you’re stalking them and learning that information, but however you want to spin that with them so they don’t think you’re a creep may help your cause.

Within a 401(k), even if you’re not of age, you can for the foreclosure, take a withdrawal. You’ll have a hardship withdrawal.

This is all public information, you’re allowed to have this. This is the SOI, Statement of Intention that I wanted you to look at. I already see another mistake. When we’re looking at schedule D, they have mortgage debt to a couple of mortgage places. That should be listed here and isn’t. This is a shoddily filed bankruptcy petition. You’ll find a lot of crap out there. Those two secured creditors should be listed here along with what the borrower wants to do with that, which would either be to surrender the property, retain the property and redeem it. That is not you, that is only for secured personal property like cars, computers, rings and things like that. You’ll never see real estate with the possibility of redeeming it. That’s different redeem than in a foreclosure context. Since we’re looking at Chapter 7, you’re going to see, retain the property and enter into a reaffirmation agreement. This is something that you want to look for. Is there a reaffirmation agreement? If so, the debt is still valid. If you have a piece of property that goes into bankruptcy, see what the SOI says. If the debtor wants to do a reaffirmation agreement, they are good to do.

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That’s interesting, Tony because I learn this from a discussion with you as I bought a note that was in Chapter 7. It was part of a pool of assets. In here they had selected surrender the property, but in the same token, they were still paying the mortgage and keeping it current. When it gets a transfer to the servicer, the servicer is like, “What do you want me to do? There’s no reaffirmation agreement. I’m technically not supposed to communicate with them and stuff.” I know I’ve seen some agreements be drafted by attorneys that say, “You don’t owe us anything, but if you want to send us payments, it’s up to you. Go ahead. Here’s where you need to send them essentially.” That’s a hairy situation I find is when they say surrender, but then they keep paying.

They keep taking their voluntary payments but don’t call them when they skip a month. They just hope that continues.

Have your attorney foreclose on it.

Honestly, that’s a case where you go straight to foreclosure or forfeiture or wherever you are with the lien that you have. In the interest of time, that’s pretty much it for a Chapter 7 case.

Can you go back to the docket as well and walk through the steps. They file it and then I know there’s a meeting of creditors. This is about a 3 to 6 months timeline. I’ve found in many instances reading through this to see as well because sometimes there might be and it’s usually Morgan on Chapter 13 a lot of objections and stuff like that.

They filed for bankruptcy on the 18th of January in 2019. That’s when they filed that voluntary bankruptcy petition. On the same day, that court issued notice to the creditors. All the creditors at that borrower were listed when that 341 meeting of creditors is. Every bankruptcy debtor that files bankruptcy has a meeting of creditors. In this particular case, that was 319. It was roughly two months after they filed for bankruptcy. Other good things in here, you’ll see some creditors filing requests for notices. That means that in this case, PRA, Portfolio Recovery Advisers. There is a big debt buyer out there. They want to notice what’s going on in the case. That’s all that means. Employee income records. This might be a good thing for you to look at if this was due diligence for you.

You, hopefully in here, be able to see the debtor’s pay stubs. This is a notification of a direct deposit. This is what Ms. Walters makes. You saw what she disclosed on her schedules. This is a pay stub. This is what she’s getting. That’s some good information. You’re not going to see that in every case, but this particular jurisdiction probably forces that to be filed. This is another good thing. After the 341 meetings of creditors, you’re going to hopefully find this trustee’s report of no distribution. That means the trustee has taken a look at the debtor’s case and there is nothing for the trustee to liquidate and give to creditors. This case is going to wrap up quickly at this point.

This one wrapped up in two days. The discharge order was entered two days after the trustee filed that final report. What’s interesting is that the 341 meetings were held. It was continued to 42. The 341 meetings were held on 42 but the trustee didn’t get around to filing their final report until two months later. That is the way that it is sometimes. Usually, what you want to see is these reports filed quickly after the 341 meetings with creditors, but sometimes it doesn’t happen like that. Look for that. When you see that the cases are nearing the end. You see that they’ve got an order of discharge and the case is closed a couple of days after that discharge order goes on. This is a common Chapter 7 case. This is probably how the vast majority of Chapter 7s go. They file, there’s a 341 meeting of creditors. They get their discharge cases closed, not a whole lot of activity.

Chapter 13s can go in many different directions. 

I’m going to pull up a pre-arranged Chapter 13 to point out a couple of other things to look for in a Chapter 13 case. I’m going to go straight to the Docket Report. Look at the oldest case first. You see first thing filed, it happens to be the same number of pages, 64 pages is the voluntary petition. I’m not going to pull that up. We don’t need to look at that in a Chapter 13 case. Since we looked at one in Chapter 7 and they’re the exact same. What I want to call your attention to in a Chapter 13 case is a filing that’s typically filed the same day and that’s the bankruptcy plan. By law, it has to be filed within fourteen days of the bankruptcy being filed. Typically, because debtor’s attorneys are using a lot of software that helped them with these filings because they’re voluminous. They’re typically filed the same day. Let’s open up this Chapter 13 plan and take a look at a couple of things. The first thing I want you to look at is part one, the notices. If in 1.1, if they check this included box in section 1.1 that means they’re trying to limit what is paid to a secured creditor. That’s you.

If this box is checked, if the included boxes checked, they are trying to cram down something. It might not be yours alone. It might be a car loan. It might be another piece of property or something like that. This is your first indicator that something would be potentially wrong with your case. In this case, they’re not trying to cram anything down. The other thing you want to look for is nonstandard provisions. We’re going to look at that at the end here. Chris, this is another good thing that we can in a couple of months. It’s a real deep dive in a Chapter 13 plan. I could spend an hour on the plan alone.

I was going to say, we could because you can get into going back to looking at some of the other things on here. It’s to see if the claim is on there or sometimes there are multiple claims by the same company. It’s like, “Which one am I buying?” There’s a search there. We could do a follow-up deep dive on some other components of this.

While we’re here, in this case, look to the treatment of secured claims. That’s exactly what this part is called. Part three treatment of secured claims. You can’t see it, but this is a real property right here. If you’re looking at purchasing this loan or this is your name potentially or the name of your company, make sure that the current payment amount is correct. Make sure that if you are owed arrears, that this arrearage figure is populated. These are all things that when you send this to your attorney to do, “I do look at this and I will report back to you. They say the ongoing payment is $676.64. They say there’s no arrearage. If any of this is wrong, let me know.”

For people, just to confirm, arrearages are past dues.

Up until that bankruptcy was filed, anything on that account is listed as an arrearage in this petition.

That could be advanced if you advance taxes or interest for payments missed. It’s a lot of times the difference between the UPB and the total payoff essentially is putting it in simple terms is kind of what it is.

You’re going to look at the treatment of secured claims. Remember that box we talked about at the beginning, if there’s any cram down, you’re going to see that, but because there isn’t anything to be crammed down, it’s not here. There’s a surrender of the collateral section. Your collateral could be listed here. This is the debtor’s plan of reorganization, what they intend on doing with your property. These are the places where you need to look at. There’s a lot of stuff in there that doesn’t matter to you. You don’t care how much total debt they have. The other thing I want you to look at is the nonstandard plan provisions. This is another area where our firm spends a lot of time when we’re reviewing plans because this is where they’re going to say, “I owe 7E Investments $50,000. I’m going to pay them $1 a month until month 59 or I will pay the balance of what I owe.” That sounds ridiculous. I see it quarterly, some ridiculous stamp nonstandard plan provisions. Here’s the problem, if that is listed in the plan and you have proper service and you don’t object 7E Investments is only getting that $1 a month for 59 months and then you better hope in months 60 they’re going to pay the rest of that off. We all know that that’s going to happen.

I have one where we did object because the borrower makes $20,000 a year and arrears are called at $60,000 for easy rough numbers. It was starting at $300 a month for the first 24 months. Then it goes up to $2,000 a month for 12 months and then the last 24 months is $2,500. My attorney’s like, “The guy makes $20,000 a year. How’s he going to afford $2,500 a month?” The judge, after we objected twice, still would approve it. My attorney is like, “Stop fighting it. Let them approve the plan so they can fail faster essentially.”

You’ll start getting at the least that the $200 of the $300 a month we’re supposed to get for a little while.

Which we got that, it’s starting to kick into that next amount, which we know we’re not going to get.

If you don’t, then you file for relief from stay, but at least you’ve got some money coming in. That’s why you need an attorney involved in a lot of these cases.

That’s important for people because you’re going to see everybody and their brother try and stick something in there. A lot of people glean over these things. Especially when you’re doing due diligence on a note you’re buying and it’s possibly a hedge fund. It was a low balance bankruptcy and they weren’t paying attention. You see that a lot too because it’s not worth their time to pay attention. It’s something to look as part of due diligence.

Chapter 13 PACER is going to be much larger. This case is still ongoing. This case is active. There’s nothing recent. This is a good case. This debtor is paying and there’s not a whole lot of action in this case. What I wanted to point out is what you can find here. Even though this motion for relief from stay is for a vehicle and you know it’s not your property, this could be your property. If you’re doing due diligence and you see a motion for relief from stay and then a subsequent order granting that motion for relief from stay, that’s going to change how you look at that property. Now that property is not part of that bankruptcy, that debtor does not want that property. You know you’re not getting any more money in that bankruptcy. Money is out and you’ve already got relief from stay. Now, you’ve got to go on the state court and file for foreclosure. You can get a better idea maybe of what your potential legal fees are on a case to help you price your offers.

Once you get the motion for relief, Tony, you aren’t getting any more money from that borrower. It’s done if their only recourse is BK.

If we go the motion for relief from stay route, we’re doing it because you’re not getting any more money. If that debtor wants to pay you after we filed for the relief, you have two options. We can either withdraw the relief from stay and then you can accept the money or you’ve got to send the money away. Which is tough, but you can’t have it both ways. You can’t ask for relief and also take money. Motions for relief from stay are your last effort. They’re not paying. That being said, if you filed for relief and they come to you with some money or their attorney, comes to me with some money, I’m going to go to you and say, “Maybe there’s a way we can get both. We can get that money and we can protect ourselves against having to do this later on and we can reach an agreed order.” That says, “The debtor fell behind $3,000 after the filing of the bankruptcy plan. We will take $500 a month for the next six months in addition to the ongoing payment, in addition to the arrearage payment amount.” It’s snowballing as you can see. It gives that debtor another chance and it allows you to keep the money that came in after we filed that motion. If that debtor falls behind again, we can go to the court on a more fast track method called a notice of default and say they’ve defaulted on the agreed order that we entered into and it saves you some money. You don’t have to start all over again with another motion for relief from stay.

Tony, could you teach people the proof of claim? I know that’s something that we’ve been talking about. People need to visualize it.

You could look at a proof of claim by going to the claims register. I didn’t happen to see if this debtor had real estate. We did, they do. Here is a real estate proof of claim. It looks like every other bankruptcy form does layout the same. It lists the value of the property. I don’t put values on my proofs of claim because you don’t need to. The big area is the amount of the claim that is secured. That’s when you’re going to put there what you’re owed. You’re going to put how you’re perfected. It’s going to be note secured by a mortgage. A different language is commonplace but this is the amount of your claim $121,658.53. If there were arrears, you’re going to put the arrears right here, but this debtor’s current. This is the form called the 410A Form and because they’re current, there is nothing on here. The only time you’re going to have something on a Form 410A is when there’s arrearage. There are attachments to the proof of claim. There’s going to be the note, the mortgage and escrow statement. All of those things are then attached to the proof of claim that’s filed.

This particular proof of claim has notice of mortgage payment change attached to it. At some point during this bankruptcy case, the payment changed. The creditor went in and filed this notice of mortgage payment change and the current escrow was $68.50. The new escrow payment was going to go up a couple of bucks. This was going to be effective on April 1st of 2019. To make that happen, they filed this 1.5 months in advance. They filed this in February of 2019. You have to do it at least 21 days in advance. That is even listed here. It must do it 21 days before the new payment amount is due. That’s a notice of mortgage payment change. Here’s why it changed. The creditor attached to the escrow disclosure statement that says where it changed.

GDNI 95 | Filing For Bankruptcy
Filing For Bankruptcy: If you are owed arrears, make sure that the arrearage figure is properly populated.

 

Sometimes you may miss filing in time and you have to wait until you can start charging that escrow. It’s not like the end of the world. I’ve got one that was for March 1st, then on February 10th or February whatever, they’re supposed to give it to me and they missed it and gave it to us a day late. It’s like, “We’ve got to wait until April 1st.”

Rerun escrow, the payment will be a little bit different again, but you’ll be able to recoup that. You can’t recoup it that month starting. Chris, that’s something that we don’t need to do it now, but sometime in the future, let’s set up something where we spend the whole time in PACER.

We’ll grab one case and go through the entire thing. If you want, Tony, we can use one of my cases even because I know the history of it. I can tell you what was the back and forth that may have led to one thing or another thing as well. I’ll be happy to go through that and because I’ve got some pretty interesting ones. It seems like I always get these whacked-out crazy ones.

Probably more of an overview than a deep dive, but we’re trying to be a little aggressive with doing both of those things.

One other thing too, do you mind clicking on the History documents because that’s another tab as well that is similar to that other report that you showed, which goes to the history. In Chapter 13, this one had 32 numbers. Those can get up into the hundreds quickly. This is a short one.

This is a boiled-down version of the Docket Report.

I scan this thing because I see things like number eight, pay mortgage outside of the plan. I would want to take a look at that. Return mail stuff I don’t care about. The financial course, I don’t care about. Dockets or credit cards and stuff like that. Transfers of claims unless it’s yours, you don’t need to worry about and you’ll start when you go through these things and understanding what’s going on. If it’s yours, you’re going to know what a lot of this stuff is because your attorney is going to tell you all of these things already. The other thing I believe, Tony, correct me if I’m wrong when you see a motion for relief from stay to understand what that is if you go back to the claims register that would attach to whoever’s the order of the motion for release that was, correct?

Yeah, they’ll typically be a trustee note on the claims register that would say relief obtained. They’re not going to be paying it anymore. This was the mortgage creditor claim. It would be somewhere probably in the remarks, the trustee would go in through the court that relief granted.

There’s only one thing associated with that. You can see amending claims for some of the other ones and stuff. We’ll go through a deep dive into those again at another time. I find for bankruptcy, I like them. When I say I like them, I like the buy bankruptcies that have been 12 to 30 months in bankruptcy because a lot of those instances, if they made it a year plus in the bankruptcy, they start to see the light at the end of the tunnel and they’ve been making their payments. You’ve got to remember these borrowers after 60 months or whatever the period is, any credit card debt, all of that’s gone. They’ve got no bills except the mortgage to pay you. They should keep paying me after that because they’re also not going to be able to go out and get $100,000 in credit cards again. That’s one thing where I say I like to acquire assets that may be in bankruptcy that has been in bankruptcy for a little while. 

There are a lot of folks out there like that. It is a sound investment strategy.

This is one of those things, and I’ll be honest with people. If you go into PACER and you’re not familiar with it, the first few times you go in there, you’re going to be completely lost, in the sense of it’s like, “How do I do that again type of thing?” Once you start getting a few assets of under bankruptcy and stuff, you learn quickly. It’s like, “Here’s what I’m going for.” Every time you’ll learn something new because you’ll be doing due diligence on a case and realize, “What is this?” I reach out to Tony and I’ll download that form and be like, “Tony, what is this?” I get an answer from him. Tony, any last-second thoughts on anything?

No. It’s about bankruptcy. It’s a confusing topic. It’s an attorney-heavy topic but we can get through it together.

Thank you, everyone, for joining us in this episode. Go out and do some good deeds.

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About Tony Sottile

GDNI 95 | Filing For Bankruptcy

Tony was licensed as an attorney in 2002 after graduating from Ohio Northern University, Pettit College of Law with a Juris Doctorate and from Transylvania University with a Bachelor of Arts in Business Administration.  Upon graduating and passing the Ohio Bar, Tony began working for a national firm representing consumer debtors and small businesses in Chapter 7 and 13 bankruptcies.  In 2006, Tony began working for a firm specializing in representing creditors.  Since then, Tony has handled matters pertaining to bankruptcy, real estate foreclosure, eviction and more and in 2015, he opened Sottile & Barile, Attorneys at Law.

Tony is licensed in the States of Ohio, Kentucky, and Indiana as well as in the Federal District Courts of Ohio, Kentucky, Indiana, Michigan, and Illinois.  Tony is a member of the Ohio, Kentucky and Indiana State Bar Associations, the Cincinnati Bar Association and the National Association of Chapter Thirteen Trustees (NACTT).

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