News
Bank Considers Filing Bankruptcy a Sign Times are Getting Harder
It’s not just individuals who are facing a decision as to whether to file bankruptcy. Just a few months ago the Office of Thrift and Supervision entered a Cease & Desist Order against Birmingham based Superior Bank. The 73 bank company was once a thriving operation. However, for the last seven quarters the bank reported that loans “not being paid as agreed” have increased. This is a clear sign of a bank in trouble.
So, a few days ago federal regulators sold off 73 of the banks. That has caused the bank to consider filing its own bankruptcy. The Birmingham News reports that the bank owes $122 Million but only has about $6 Million in assets.
As individuals continue to face challenges from banks rushing to foreclose, creating modification programs that are designed for failure for most borrowers and calling for substantial pay downs in order to renew otherwise performing loans, its certainly noteworthy to see a bank experience what many borrowers are experiencing.
One of the bank’s investors has recently filed a fraud lawsuit alleging that the representatives of the bank told him the bank Read the rest of this entry »
Did Your Representative Take Away Real Protection for Homeowners from Fast Foreclosure?
Home Foreclosures
Last September, the Tennessee legislature passed a huge bill that gave significant relief to homeowners struggling to avoid foreclosure. The Bill (converted to an Act when it became law) require any lender who desires to foreclose on a deed of trust to first give written notice to it’s borrower (the homeowner) that it had a right to foreclose on the mortgage. This created a real level of protection Tennessee residents because Tennessee has one of the fastest processes that allows a bank to take away your home in the United States. Because I file a number of Chapter 13 bankruptcies to help people protect their home from foreclosure, this bill was of significant interest. If you are facing foreclosure and you live in Knoxville, Maryville, Sevierville or surrounding areas, your house can be foreclosed by your bank in less than 23 days (prior to September 2010). With the enactment in September of the 60 day notice requirement it would take nearly 90 days to foreclose. (Note that the 60 day notice would only have to be given once every twelve months.)
So this week we are reminded, “What the legislature given, it also may take away.” The Tennessee Bankers Association lobbied for and was able to get passed a bill that creates an exemption from sending a 60-day advance notice of foreclosure (SB 1451/HB 1921). The Exemption Bill passed by unanimous votes on both the Senate and House floor Thursday morning. Ouch!
Of course the Exemption Bill didn’t get much press. After all, in order to take advantage of the exemption, the Lender must meet in-person with the borrower within 180 days prior to publishing notice of foreclosure. Additionally, the Lender must execute an affidavit stating the time and place of the meeting and the affidavit must be attached to the trustee’s deed.
So here’s the deal. You get behind on your loan at the bank. Your loan officer calls and asks you to come to the bank to Read the rest of this entry »
Will Tennessee Follow Florida in Decline of Bankruptcy Filings?
In Jacksonville Florida it is reported that bankruptcy filings are down by over 10% compared to the first quarter of 2010. Is there any chance that we’ve seen the tide of bankruptcy filings turn and now will continue to decline. I think the answer is probably “NO.” Here’s why.
In Florida, which is a judicial foreclosure state, we saw a halt to the foreclosure lawsuits due to the claims of “robo-signers” and other nefarious activities by lenders. Many of the big lenders completely halted the foreclosure process for over 4 months. That really didn’t happen in Tennessee where the lenders utilize what is known as non-judicial foreclosure.
Non-judicial foreclosure is simply a foreclosure that does not require the filing of a lawsuit. If your home is in Knoxville, and you have not filed a bankruptcy case, then a lender can foreclosure your home, start to finish in less than 30 days. Now that’s pretty fast. Compare that will Florida and other judicial foreclosure states (where a lawsuit is required in order to foreclose) and you can easily see the disadvantage most homeowners are under in Tennessee.
I’m often asked the question, “Can I save my home from foreclosure?” Most often the answer is “YES“. If you file a Chapter 13 bankruptcy and cure the back payments under your Chapter 13 Plan, then you will most likely be able to keep your home. However, you must file your bankruptcy case in Knoxville before the foreclosure occurs. Read the rest of this entry »
Knoxville Bankruptcy Attorney Advises to Consider Lien Stipping for Second Mortgages in a Chapter 13
It’s no secret that real estate prices, including homes, have plummeted in recent years. If you purchased your home during the real estate boom, you might have both a first a second mortgage. It’s a shame that the property may no longer be worth what is owed on the first mortgage. However, there’s good news too.
If the home is worth no more than the first mortgage, then as a Chapter 13 bankruptcy debtor you may be able to strip the lien of the second mortgage from the home. You just went from being completely underwater to having a chance to create equity every month with your payments.
The Eleventh Circuit Court has found that a second mortgage lender’s lien could be stripped off of the primary residence only if the collateral was worth no more than the first mortgage. This is true because the second lien is wholly unsecured when the first mortgage is greater than the value of the home. (You can find the court case at Tanner v. First Financial, Inc., 217 F. 3d 1357 (11th Cir. 2000).
Therefore, it is extremely important to value your home correctly when you go into a Chapter 13. The bankruptcy in Knoxville will evaluate the value of your home and if it is less than the amount of the first mortgage, then you can strip Read the rest of this entry »
Is a Chapter 11 on the Menu for Fast-food Pizza Chain Sbarro?
Reuters is reporting that perhaps next week shopping mall food court favorite Sbarro may seek bankruptcy protection as it obtains over $30 Million of financing. The financing would be available for operations while Sbarro restructures its indebtedness.
Lenders sometimes condition loaning operational money upon the filing of a Chapter 11 case and then obtaining court approval of what is know as debtor-in-possession financing. Most of the Chapter 11 cases filed in Knoxville don’t see this type activity. However, in the major business centers with larger and perhaps “mega-cases” debtor-in-possession financing is a common occurrence. By requiring bankruptcy court approval a lenders obtains certainty in its security position on the collateral.
It’s easy to see that sometimes the filing of a Chapter 11 Bankruptcy case may simply be a tool for the survival and growth of your business. Our firm has been involved as attorneys for the debtor a variety of cases including, hotels, restaurants, car washes, doctors, lawyers (but no Indian chiefs). If your business is struggling during these difficult times don’t delay consulting with an experienced bankruptcy attorney. Delay in developing a plan is often a key factor to an unsuccessful case.
If Bankruptcy filings in Knoxville are Down, Why Do Foreclosures Continue to Rise?
Home Foreclosures
Recently the National Bankruptcy Research Center reported that bankruptcy filings were down in February as compared to the same period in 2010. Obviously they’ve taken their numbers from the numbers actually reported in the Federal Bankruptcy Court system. What troubles me is that there seems to be more and more foreclosures of homes in Knoxville, Sevierville and surrounding areas.
If you’ve received the Notice of Foreclosure from your least favorite attorney, now is the time to ask yourself, “Can bankruptcy save my home? The answer is often ‘YES!”
The most often considered plan to save your home is filing a Chapter 13 Bankruptcy. This is known as a repayment plan case. Here you pay payments to the Chapter 13 Trustee for a period of 36 months or 5 years. She takes the money and pays your mortgage, cures the back payments that are often in arrears as well as paying some money to unsecured creditors. When you finish the Chapter 13 plan payments, your home mortgage will be current and you should owe not other money. That’s a good thing. You’ve saved your home. Victory won! Read the rest of this entry »
Will Knoxville Real Estate Firms Follow Florida’s Stirling Sotheby’s International Realty into Bankruptcy
A long and deep recession claimed another victim this week. Stirling Sotheby’s International Realty, a well known and respected real estate brokerage company with over 100 agents filed Chapter 11 bankruptcy a few days ago. No doubt the Florida real estate market was the first to experience the huge downturn, but other locales including East Tennessee have long been feeling the pressure of no buyers and no lenders willing to finance buyers.
When a company like Stirling files bankruptcy, it makes one wonder will Knoxville real estate firms soon follow. For most real estate brokerage companies the only revenue comes from closing sales. Visit any Title Agency in Knoxville and you’ll see reduction in staffing, sometimes closed offices and in many cases a completely closed shop. This is true because lenders, fearful that they may make a loan that will be criticized by regulators, simply opt for no loans at all.
To get a brief understanding of the problem, just understand that Stirling has been in business for over 20 years. In its bankruptcy papers it listed $1.1 Million in assets but over $6 Million in debts.
The next step for Stirling is the filing of a Plan of Reorganization which will be presented to creditors for approval. This plan will likely pay unsecured creditors pennies on their debt but would allow Stirling to exit from bankruptcy and perhaps retain an opportunity to serve the real estate industry in the future.
Chapter 11 is often a good option to protect a viable business that has just gotten over-leveraged during its growth. The biggest mistake business owners often make is seeking the advices of an experienced bankruptcy attorney too late in the process. Early planning can make a difference in whether a Chapter 11 is successful or not. I offer a free consultation to help individuals and business owners assess their situation. Call my office at 865-246-1050 to set up an appointment today.
Bankruptcy Personal Exemptions Raised to $10,000 in Tennessee
The New 10k Exemption for Personal Property
The purpose of bankruptcy is to take care of your debts by liquidating your assets. In case of Chapter 7, most of the assets and properties are exempted under Federal or State law. Although, there is a federal exemption law in the US, most states have their own State laws which they follow. Fortunately, Tennessee is one of those states. A law passed on 5th April, 2010 increases the limit of exempt personal property from 4k to 10k, and this law became effective from July 2010. This means that people of Tennessee can now save $10000 worth of personal property from their creditors. This will aid the financial rehabilitation of those who file for bankruptcy due to any reason.
What are Bankruptcy exemptions?
During extreme financial crises, filing for bankruptcy becomes the safest option to avoid a complete collapse. Like most of the other states, people in Tennessee also file for Chapter 7 Bankruptcy. This allows them to declare their property and assets as exempt. When the law approves an asset as exempt, that means the person can have complete ownership of that asset.
However, there is a limit to define how much of an asset can be exempt. Assets and properties exceeding those limits are often liquidated and the amount is paid to the creditors. Listing all of your assets and properties as exempt is really important as any property that is not exempt can be sold by the bankruptcy trustee.
Who can benefit from this exemption?
Any one who has been a resident of Tennessee for two years can benefit from the Tennessee exemptions. By law, a permanent resident of Tennessee is a person, who has a permanent Tennessee address and holds some other official record such as a permanent driver license. Read the rest of this entry »
Sale of Nashville’s Sabre Assets in Bankrupty Not so Simple
Nashville arms dealer Sabre finds itself in the midst of a fight over who will end up with the company’s assets. Its principals have been indicted for gun trafficking and are awaiting extradition from the UK.
Not to worry, while the officers may be fighting criminal extradition, the battle rages for the actual assets of the company. Nashville’s daily newspaper, The Tennessean, reports that an Alabama company is ready to purchase the assets for $2.3 Million. E
Obviously this Company has lots of plenty of challenges. It is not likely that it will survive as an operating company. Section 365 of the Bankruptcy Code permits the sale of assets inside the bankruptcy. It may be that the owners are going to attempt to use this provision to liquidate the assets in an orderly fashion rather than having the sale on the courthouse steps.
Chapter 11 bankruptcy is often used to equalize the leverage between a debtor and a creditor after an event of default has occurred. The creditor is concerned only about liquidating its debt. The borrower, however, may also be concerned about paying other creditors, including the Internal Revenue Service whose debt can seldom be discharged in a bankruptcy.
One thing that can be learned from the Sabre bankruptcy is that the creditors don’t hold all the cards. Be careful that your company doesn’t expend all of its assets fighting off your creditors before you engage experience bankruptcy attorney. I’ve helped level the tables by filing bankruptcy for Knoxville and Sevierville based companies since 1983.
7 Reasons Borders May Choose Chapter 11 Bankruptcy
I reported on this site a month ago that big time book seller Borders was on the verge of filing bankruptcy. The Wall Street Journal reported Saturday that it is likely that Borders will file a Chapter 11 on Monday or Tuesday.
It’s likely that the case is being filed sooner rather than later because the Chapter 11 process has the possibility of giving certainty to their status visa vie other creditors. Businesses often consider a Chapter 11 for benefits such as:
1. Stopping penalties on tax claims;
2. Gaining additional time to resolve litigation in the trial and appellate courts. Normally, during an appeal, a losing defendant would be forced to post a bond to prevent recovery of the judgment during the appeal. Not do, in a Chapter 11.
3. Freezing the statute of limitations on specific claims for recovery of monies.
4. Delaying the impact of claimed defaults by lenders.
5. Rejection of burdensome contracts such as employment contracts or suppliers contracts
6. Gaining leverage in restructuring indebtedness in a way that is advantageous to the business.
7. Securing priority for a lender who will only lend if it has certainty of its security and its priority of payment.
These are just 7 reasons a company might choose Chapter 11 as a business strategy. If your company is struggling be sure to understand that successful Chapter 11′s are well planned and executed. There are several keys to a successful Chapter 11. Read the rest of this entry »