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Ask Ellen Your Own Question
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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I am planning on purchasing a non-performing loan note from

Customer Question

I am planning on purchasing a non-performing loan note from a bank. The receiver of the loan has filed bankruptcy and wanted to know what is the standard procedure when the receiver files for bankruptcy and as a owner of the note what rights do I have.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 5 years ago.

So sorry to hear of your dilemma. I will strive to provide you with legal information to assist you. If my answer is not clear to you, I encourage you to ask me for clarification by using the reply button.

You may not purchase the nonperforming loan absent bankruptcy court approval.

The automatic stay of the bankruptcy court prohibits any action concerning the debtor outside of the bankruptcy court. Once a bankruptcy Is filed, all interests of the debtor becomes property of the bankruptcy estate and bankruptcy court approval is required.

Once a bankruptcy is filed, the automatic stay of the bankruptcy court is in effect Bankruptcy Code regarding the automatic stay. 362 (4)k provides for actual and punitive damages for the willful disregard of the automatic stay.

Please let me know if you have any questions concerning my answer.
Ellen and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
I think there may be a little confussion. Please find the information here that I am reffering to.

This is the note that I am plan on purchasing. I can provide all documents related to the note and if you would be willing to go through those documents and give me a understanding if I purchase this note then what is the procedure that I have to take in getting the debtor to make payments on note.
Expert:  Ellen replied 5 years ago.

The link lists numerous notes -- which are you referring to?
Customer: replied 5 years ago.
Please search the note in webster,tx.
Customer: replied 5 years ago.
I accidently clicked accepted answer. Can you please reverse that.
Expert:  Ellen replied 5 years ago.
Please confirm that this is the address:
904 E Nasa Rd
I will respond in about one hour
Customer: replied 5 years ago.
Expert:  Ellen replied 5 years ago.

I skimmed through the due diligence.

I do not know whether you are aware that is the mortgagor and not the receiver that is in bankruptcy. Based upon the information that I saw it appears that the borrower is in a Chapter 11 bankruptcy.

A Chapter 11 bankruptcy may result in a change the terms of the note that you are purchasing

Customer: replied 5 years ago.
I want to know how much you will charge to go through the documents that are provided and give me a good understanding as to what they mean and what it will mean for me to take over the note. I need questions answered such as what options I have after I purchase the note to get money from the mortgagor, what is the procedure that will take place in the bankruptcy and what can I expect out of bankruptcy. What is the procedure in taking over the property if the note is not paid. Hope you can provide me with these answers.

I am aware it is the mortgagor that is in debt.

Expert:  Ellen replied 5 years ago.

The answers to your questions are not in the documents that are attached as due diligence. You need to obtain a copy of the debtors/mortgagors bankruptcy file. The bankruptcy can result in a complete restructuring of the note that you are purchasing and that the due diligence relies upon.

Customer: replied 5 years ago.
Can you tell me where you want me to send all the documents? Email, Fax. Etc.
Expert:  Ellen replied 5 years ago.
I cannot review the entire bankruptcy file for the debtor. I suggest that you have local counsel review the bankruptcy file. The bottom line in purchasing the note is that it is subject to restructuring by the bankruptcy court. the terms of the note may be changed by the bankruptcy court
Customer: replied 5 years ago.
What is the worst I can expect from the court?
Expert:  Ellen replied 5 years ago.
The worst that you can expect would be a reduction in interest rate, a reduction in principal amount owed and an extension of time to pay the note.

The best that you can expect is a delay in payment and a delay in your ability to foreclose.

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