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Tuesday, September 28, 2010

When To File Bankruptcy?

Own your home and in foreclosure?

You feel like you should try to beat the banks at their scams and file bankruptcy?

Well don't do it.  Here is what I would do....

Once upon a time from sea to shining sea and from purple mountains majesty, bankruptcy judges would protect the home owner. Well not any more. Bankruptcy judges are in on the foreclosure scams. If I file bankruptcy during my foreclosure the judge will lift the stay and the house be taken out of the bankruptcy. Then the plaintiff will get a summary judgment as fast as a robo judge will sign the order. So I file the bankruptcy and spend all that money for nothing.

But, I am getting smart!

A mortgage is the security for the promissory note. They take the mortgage, foreclose on it and sell the house to pay the note holder. That is how the note holder gets his money. So, get smart here. My mortgage is a secured debt. Because of this, the bankruptcy judge will lift the stay so the secured debt can be satisfied. Then when there is not enough money from the sale to pay the complete note off, the bank will then sue me for a deficiency judgment. The difference between what they got from the courthouse sale and the balance owed at the time of the summary judgment. This deficiency can be thousands of dollars. The only way to wipe it off is claim this unsecured debt in bankruptcy. Since the deficiency is unsecured and there is no mortgage any more, the bank cannot ask the judge to lift the stay. Many times the bank will not even appear at the bankruptcy court. So I am getting smart.

The time for me to file the bankruptcy is AFTER the summary judgment has been entered. Once this has been entered into the court and filed in the public records. I will go straight to the bankruptcy court and file bankruptcy. I will do it within minutes. I will not wait a day. I have the forms already filled out. I will place the summary judgment on schedule "F" as an unsecured debt. I will ask the judge to wipe it off with all other debts claimed.

Yes, when this happens, the greedy bank is not getting the house back. I will not ask for the summary judgment to be set aside. I will not allow the bank another stab at killing me. A bankruptcy judge should allow the unsecured debt to be included in the wipe out.

OK, now I own the house and the mortgage is wiped out in the bankruptcy. Now what? Good question.

The bankruptcy judge can order the house sold and all my debtors paid from the proceeds. Or, the judge can look at the value of the house at present market conditions and just let me have it. Now that is what we have been fighting for all these years since this fraud in Florida courts surfaced.

OK, get smart. Now find an attorney and let him guide you through the foreclosure. You could still win there. But if you do not, do not cry and go jump off some bridge. Go out and have a good supper and celebrate. Then soon as the summary judgment is signed, do as I will do and go straightway and file bankruptcy. Do it. Just do it.

Lit Gant
Not intended to be legal advice....just an opinion of what I would do.


  1. This seems like a cool idea. But are you saying to file BK after the summary judgment is issued in the foreclosure case? Or are you saying to wait until the mortgage company files a separate suit for the deficiency? The only way to know the amount of the deficiency is to wait for the foreclosure sale and a certificate of title is issued. By that time, it will be too late to keep your home.

  2. At the foreclosure the judge will determine all the cost and expenses and award the plaintiff the right to foreclose based upon the affidavit of the cost presented. You will have all the numbers. And if they are not exact it does not matter. The same day as the judge orders foreclosure and it is filed of record, that is the same day a person can file for bankruptcy. Now the note is unsecured debt. Before foreclosure a bankruptcy judge can determine if there are issues of fact that may also allow the debt to be wiped out. In any case, it is best to run by your options with a bankruptcy lawyer who has already done both kinds of filings.

  3. It's a great theory but I wonder if it would really work. It is still taboo to side with the homeowner that's not paying the mortgage, even for BK judges. Thanks for explaining the idea. I'll keep it in mind.

  4. In America we agree to pay for what we get. This is from a toaster to new cars. It also includes houses. If we are taken advantage of by schemes, fraud, deceptive acts in trade and business, we are allowed to rescind contracts. In buying homes there is a federal provision in the Truth and Lending Act (TILA) that gives the homeowner a right in cases of fraud to rescind mortgage contracts. This right has nothing to do with whether or not a person is current on the mortgage. With cars we have lemon laws. What is the difference in a person who refuses to pay for a lemon car and a person who refuses to pay for a home when there was fraud in the appraisal, in the terms and agreements, in notarizing the forms, in truth in disclosing interest rates and who you are doing business with. In home refinances and purchases, there is fraud when one person represents they are loaning and then at closing someone else is the lender. Or you were jacked up on interest rates because of lies of qualifying to discover you qualified for an interest rate 2-4% lower. But you were lied to so the brokers and lenders could earn bigger kick backs. There are lots of reasons to stop paying a mortgage and demand legal accountability. With many, they had no clue they had been ripped off until unemployment, crash in home prices and equity value. When it all started coming to light, many refused to pay any more into the scams by the lenders, these securitized trusts, and the ponzi scheme. As Americans we have a right to the rule of law. And if there was fraud in any purchase or refinance we should have unbiased courts and judges. And if fraud is uncovered, they should pay for it, even if in some cases it means a free house. Some got free cars with the lemon law. Why do the same people who are cry-babies about free houses because of fraud, laugh and shout when they get a free car because of lemon laws? Still, what ever our situation, we have a right to what ever remedy the courts and the law provides for in consumer protection. We have a right to fight for redress and compensation if we have been damaged, mentally harmed or hurt, and for the lies and fraud. If BK is the way to win, then win with BK if the robo-judges will not give us fairness in the courts.

  5. The Lender cannot get a deficiency judgment on a Florida homesteaded property.