Options for Protecting Your Home in Foreclosure

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not knowing what to expect or if there is any way to stop a foreclosure. Take for instance the case of “Mr. Smith.” Mr. Smith is a fictitious name.

The Situation of Mr. Smith
After losing his job, Mr. Smith stopped paying his mortgage, and unable to find a new job, he could not pick up his mortgage payments again. Over the next two years, “Mr. Smith” approached his lender multiple times asking for a loan modification. Unfortunately, the paperwork he submitted to the bank was lost several times. The bank he started with had sold its mortgages to other lenders and the new lenders had staff changes as well. Although  Mr. Smith tried three times for a modification, he was unsuccessful. In the meantime, his unpaid mortgage balance increased every month and he had no idea how to resolve the situation.

Mr. Smith, a Florida resident, eventually was served a foreclosure summons.

Potential Solutions
Mr. Smith consulted an attorney to discuss his options. The attorney asked if Mr. Smith wanted to try to hold onto his house. If he did, he would have to consider filing for bankruptcy under Chapter 13, where mortgage modification mediation programs have been extremely successful. One reason is that the multi-year repayment timeline of a Chapter 13 bankruptcy would allow Mr. Smith to catch up the unpaid balance.

About Modification Mediation
A modification mediation may be requested by the debtor or attorney. The mortgage company usually will cooperate. All documents required by the mortgage company must be submitted through an online portal so there is no confusion about which documents have been provided. (This is a major problem outside of mediation). A mediation date is set. and more often than not, an agreement is reached.

Chapter 7 Bankruptcy Option
Mr. Smith also could choose to file a Chapter 7, which stops the foreclosure process immediately with an “automatic stay” of creditor action. During the period of the automatic stay, Mr. Smith would be able to remain in his house long enough to prepare to move, find a new job, and/or try to work out a new payment plan with the lender.

Mr. Smith also could decide to hire a foreclosure attorney to fight the lender’s repossession, and/or drag out the process as long as possible while “Mr. Smith” figures out whether to file bankruptcy or contact someone with the financial means to help him out.

All of the above options are feasible and will work if the situation fits the decision. The best bet when falling behind on your mortgage and facing foreclosure is to contact an attorney. S/he can explore your concerns, find out your priorities, and let you know how your desired outcomes can be achieved.

As always, this article is an illustration and not intended to provide legal advice for an individual case. If you are trying to protect your home from foreclosure, contact a qualified attorney about your specific case.

High Profile Judgment against Gawker Media Group Illuminates the Bankruptcy Process

When The Wall Street Journal (WSJ) reported that Univision Communications, Inc. won a court-administered auction of assets belonging to Gawker Media Group (08.16.16), I thought this case perfectly illustrated how the Chapter 11 bankruptcy process works. For example …

A Single or Series of Disastrous Financial Incidents Disrupts a Company
In this case, a court order to pay a $140 million court award to Hulk Hogan—following his invasion-of-privacy suit against the media outlet—led to a very costly legal battle and outcome. This judgment followed a series of prior legal claims that also weakened the company.

The Debtor Files for Financial Relief
Gawker Media Group filed for Chapter 11 bankruptcy relief. When a Chapter 11 bankruptcy petition is filed, the court appoints a bankruptcy case trustee to oversee the process. The bankruptcy trustee works with the debtor and/or debtor’s attorney to review company assets, assess liabilities, review creditor claims and decide whether and how assets will be liquefied (sold and distributed) to repay creditors. The bankruptcy plan typically relieves the debtor of a portion of financial obligations while also structuring options to repay creditors.

Before the trial, Gawker founder Nick Denton estimated the company’s value at $250 million, but during the proceedings, the jury was told the company was worth $83 million. The bankruptcy trustee’s job was to review all financial data provided to the court and assess all submitted documentation to determine the accuracy of claims about debtor assets.

The trustee typically works with the debtor’s attorney to ensure that secured creditors are repaid and non-secured debt is appropriately resolved according to the debtor’s ability to pay.

In this case, Gawker listed 20 unsecured creditors, including Mr. Hogan.

The Court Sets a Date for Auction of the Debtor’s Assets

After assets are established, the bankruptcy trustee schedules an auction to transform liquifiable assets into funds to repay creditors. In this case, publisher Ziff Davis offered $90 million for Gawker, “but withdrew its offer based on the price and terms set by the court.” In the end, Univision bid $135 million, according to the WSJ report, and will not be responsible for payment of the Hogan lawsuit.

The Bankruptcy Trustee Reviews the Auction Results and Decides Whether to Approve the Bid(s)

At the time of the WSJ report, the trustee still had to approve the sale. After the terms of a bankruptcy sale are made public, and before the judge issues a final decree, the creditors (secured and unsecured) are given an opportunity to review and object to details of the sale. The bankruptcy trustee gathers all creditor responses, then makes recommendations to the court. Finally, the bankruptcy court judge makes the decision to approve the bankruptcy and liquidation.

In the above case, “proceeds from the sale will be used to pay Gawker’s creditors, finance further litigation costs, and cover whatever damages may ultimately be leveled following appeals,” wrote Lukas I. Alpert in WSJ.

Resolution of this Case

Final details would be determined by the courts. In prior court action (before the Chapter 11 corporate bankruptcy filing), “Mr. Denton (Gawker founder) was found personally liable for $10 million of the Hogan judgment and jointly liable, along with former Gawker editor A.J. Daulerio, for $115 million of the verdict levied against the company.” Mr. Denton then sought personal bankruptcy protection earlier this month to freeze collection actions from Hulk Hogan.

For more information on this case, read the WSJ article in full. If you are contemplating a personal bankruptcy (Chapter 7 or Chapter 13) and would like information to determine whether bankruptcy is the right option for you, feel free to Solomita Law for a free consultation.