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CA Lawyer
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Category: Bankruptcy Law
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Experience:  Bankruptcy Attorney
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I filed for Chp. 11 bankruptcy protection to prevent a foreclosure

Customer Question

I filed for Chp. 11 bankruptcy protection to prevent a foreclosure on my commercial property. This property was also cross-collateralized with 3 additional parcels. The commerical property was assigned to my Living Trust. The Living Trust was a standard trust in my personal name, not an LLC or Corporate Trust. The bank assumed the trust was in an LLC, and proceeded with the foreclosure. The bankruptcy was filed in my personal name and was assigned a case number XXXXX to the foreclosure. What legal recourse do I have against the bank's illegal foreclosure?The commerical property had a long term lease(10 yr w/2.5 yrs remaining), strong income position (4K net/mo), as will as 400K equity. Please advise.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  CA Lawyer replied 5 years ago.
If the bankruptcy was filed prior to the foreclosure, then the foreclosure sale is invalid and can be voided in the bankruptcy Court.

You would have to file a motion to void the sale and for attorneys fees and costs. If the property was sold to a bona fide purchaser for value and the transfer has been completed, then the sale itself might not be voidable, but you could recover from the lender for any damages associated with the void foreclosure including attorneys fees and costs. Again this would need to be litigated in bankruptcy Court.



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CA Lawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 1655
Experience: Bankruptcy Attorney
CA Lawyer and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.

Damages? Punative Damages, i.e rental income, lost equity, pain and suffering, credit.

Or, Compensatory Damages. How do you evaluate damages, aand are there monetary limits?

Expert:  CA Lawyer replied 5 years ago.
The code says that the debtor is entitled to their actual damages, including costs and attorneys fees. If the sale can be invalidated, then the costs, lost income in the interim, and attorneys fees might be the only actual damages.

There isn't any specific dollar limit on damages.

Emotional distress damages are not very common in these type of cases.

Punitive damages can be awarded in the court's discretion if there is a WILLFUL violation of the stay.

In any event, the sale is likely voidable and can be reversed. The only way it wouldn't be is if the purchaser at the sale had no knowledge of the bankruptcy filing.



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Customer: replied 5 years ago.

Bank still owns it. If they keep it can I consider lost rents and lost equity as damages?

Expert:  CA Lawyer replied 5 years ago.
If the bank owns it then the foreclosure is void or voidable.

You can still collect actual damages, but not lost equity because you get the property back.

Just need to file a motion with the court or get them to stipulate that it was void.

If they had knowledge of the bankruptcy and did this anyways, you could still potentially get punitive damages (in the court's discretion).


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Customer: replied 5 years ago.

The bank had knowledge of the bankruptcy because I presented them with a certified letter showing the case number XXXXX to the foreclosure.

Since the bank has taken the building in foreclosure they allowed the heat to be shut off, causing the fire sprinkler pipes to freeze and break, thus causing extensive damage. I don't want the building back, however I would like to recover my equity value at the time of the foreclosure, along with rents starting at the time of foreclosure until the end of the term lease. Is that possible?

Expert:  CA Lawyer replied 5 years ago.
Its more likely that you would be able to get the building back plus the monetary damages, repair costs, lost rent, etc.

The bankruptcy court wouldn't be able to make the lender buy out your equity.

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