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A. Wells Fargo Equity Line for Investment Rental Property Unit

Resolved Question:

A. Wells Fargo Equity Line for Investment Rental Property Unit 1.
1. Credit Line Note executed by me.
2. Deed in my name and Spouse.
3. Mortgage executed by me.
B. Wells Fargo Equity Line for Investment Rental Property Unit 2.
1. Promissory Note executed by Spouse and me.
2. Deed in the name of Spouse and me.
3. Mortgage executed by Spouse and me.
It appears that the mortgage on Unit 1 is defective. Specifically, Spouse did not execute the mortgage on the property that is owned by Spouse and me as tenants by the entireties.

Given that I have been discharged for the above mortgage debts under a personal and business Chapter 7, will there be non-recourse from Wells Fargo once I/we stop making the monthly mortgage payments on these properties for either me or my spouse?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  FiveStarLaw replied 3 years ago.
Welcome Back ArtCarlo,

Did you receive your discharge so soon?
Customer: replied 3 years ago.
August 21, however, I am doing some advanced planning with respect to my investment property mortgages/notes.
Expert:  FiveStarLaw replied 3 years ago.
A. Wells Fargo Equity Line for Investment Rental Property Unit 1.
1. Credit Line Note executed by me.
2. Deed in my name and Spouse.
3. Mortgage executed by me.
The bankruptcy would discharge any personal liability that you have associated with this debt. Since your wife did not sign the note, it appears that she would have no liability associated with the property.



B. Wells Fargo Equity Line for Investment Rental Property Unit 2.
1. Promissory Note executed by Spouse and me.
2. Deed in the name of Spouse and me.
3. Mortgage executed by Spouse and me.

The bankruptcy would discharge any personal liability that you have associated with this debt. However since your wife did sign the note, it appears that she would remain liable on the debt


Customer: replied 3 years ago.
I made an error under section B. The promissory note was executed by me alone. Would this change your legal opinion?
Expert:  FiveStarLaw replied 3 years ago.
Yes it does change my answer. Your wife would not be liable on the debt -- your liability would be discharged
FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36646
Experience: Bankruptcy Lawyer. Experienced.
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Customer: replied 3 years ago.

Since my wife's name is XXXXX XXXXX deed and the mortgage, but not the note, she will still be required to surrender the deed to the bank as collateral for the mortgage loan.

 

Will my wife be subject to any deficiency in the event that the bank sells the investment property below the outstanding loan amount. To better illustrate, I owe $130K and the bank sells the property for $50K. My wife will not be required to reimburse the bank for $80K difference. Right? Will my wife and/or I receive a 1099 form on the $80K?

Customer: replied 3 years ago.

I forgot to mention that I will pay $20 as a bonus after I receive your replies. Also, have a wonderful fourth of July weekend.

Expert:  FiveStarLaw replied 3 years ago.

Since my wife's name is XXXXX XXXXX deed and the mortgage, but not the note, she will still be required to surrender the deed to the bank as collateral for the mortgage loan.

yes

 

Will my wife be subject to any deficiency in the event that the bank sells the investment property below the outstanding loan amount.

No since she did not sign the note- only the note creates personal liability.

 

 

To better illustrate, I owe $130K and the bank sells the property for $50K. My wife will not be required to reimburse the bank for $80K difference. Right?

Correct

 

Will my wife and/or I receive a 1099 form on the $80K?

You will receive a 1099 however you will not be required to recognize relief of indebtedness income. Debt discharged in a bankruptcy is an exception to the regular recognition of income from discharge of indebtedness rules

 

Thanks in advance for the bonus. I appreciate it. Have a wonderful Fourth of July as well

Customer: replied 3 years ago.
Since my wife and I will be mailed a 1099, is she obligated to recognize relief of indebtedness income given that she did not file for a personal bankrupcty?
Expert:  FiveStarLaw replied 3 years ago.

Your wife will not receive a 1099 since she did not sign the note.

Thank you in advance for the bonus
Customer: replied 3 years ago.
I believe that my account was already charged for $40 and a $20 bonus. Please advise if you disagree.
Expert:  FiveStarLaw replied 3 years ago.
yes - thank you:<br/Customerpaid $40 (plus a $20 bonus!) on 7/2/2011 at 11:16 AM
Customer: replied 3 years ago.

WebLaw: This is a related question. I presume that the only method of payment for your answer would be via the bonus selection. Please let me know your fee for rendering your legal opinion with respect to the following question?

 

As we discussed (see above), one Wells Fargo mortgage is enforceable and the other one appears to be flawed. Since both mortgage balances exceed the value of the mortgaged property. The negotiation of a resolution may be difficult because I suspect that the department that holds the valid mortgage may be unwilling to make a concession to accommodate the department that holds the flawed mortgage. Also, please keep in mind that my spouse and I are obligated to make timely payments on my principal residence mortgage of $150,000 (this is the third mortgage with Wells).

 

Does Wells Fargo Bank have any legal grounds for blocking me and my spouse from surrending the deed on one rental property (without any legal recourse) and selling the other property outright since my spouse did not sign any of the promissory notes connected to these properties and I will be discharged from my mortgage debt obligations under my personal and business filings of Chapter 7?

 

I am about to write a propsal to Wells Fargo advising them of the above planned transactions. How do you think I should fashion the proposal?

 

Thank you.

Expert:  FiveStarLaw replied 3 years ago.
Hi ArtCarlo-

Welcome back. This answer is going to take much thought, cannot respond to you later today?

Also I am not permitted to suggest a price. When you respond regarding the timing of my answer, please let me know what you suggest as a bonus on a per answer/response basis.
Customer: replied 3 years ago.

I can wait for your reply up until Tuesday. Is that a reasoable time frame? I will pay you $30 for answering each question ($60 in all). Do you accept?

 

Thanks and best regards,

 

Art Carlo

Expert:  FiveStarLaw replied 3 years ago.
Art Carlo,

Recapping the current situation:
the mortgage on unit one is defective and the promissory note was signed only by you --not your wife.

the mortgage on unit 2 is not defective but the promissory note was signed only by you

Your current question:

Does Wells Fargo Bank have any legal grounds for blocking me and my spouse from surrending the deed on one rental property (without any legal recourse) and selling the other property outright since my spouse did not sign any of the promissory notes connected to these properties and I will be discharged from my mortgage debt obligations under my personal and business filings of Chapter 7?

  • it appears that you will be able to surrender unit 2 to WF without legal recourse
  • It does not appear likely that you would be able to sell unit 1. A defective mortgage would typically results in the trustee taking action to set aside the mortgage and claiming the property for the benefit of the estate
Customer: replied 3 years ago.

I thought that once Wells Fargo Bank discharged my business equity line debt, then my pledged collateral's (Unit 1) title of ownership would be free and clear.

 

Since my name and my wife's name is XXXXX XXXXX the deed (wife never signed the note and mortgage), it would appear to me that the trustee would not be able to claim the property (Unit 1) for the benefit of the estate. Am I correct?

 

What is the statute of limitations for a Trustee to take action for claiming my property under a business/ personal Chapter 7?

 

Will you be answering my second question? (I am about to write a propsal to Wells Fargo advising them of the above planned transactions. How do you think I should fashion the proposal?)

 

What is the agreed amount that I owe you?

 

AC

Expert:  FiveStarLaw replied 3 years ago.

I thought that once Wells Fargo Bank discharged my business equity line debt, then my pledged collateral's (Unit 1) title of ownership would be free and clear.
The chapter 7 bankruptcy discharges your personal liability on the lien but not the lien on the property. This means if the property were to be foreclosed, the lender could sell the property to satisfy the debt but could not obtain a judgment against you for the unsatisfied portion of the debt. However it also means that you cannot sell the property without paying the lien in full

 

Since my name and my wife's name is XXXXX XXXXX the deed (wife never signed the note and mortgage), it would appear to me that the trustee would not be able to claim the property (Unit 1) for the benefit of the estate. Am I correct?

Yes you are correct that you may claim the equity under the tenancy by the entireties exemption.

.

What is the statute of limitations for a Trustee to take action for claiming my property under a business/ personal Chapter 7?

The property automatically belongs to the bankruptcy estate unless the trustee abandons it

 

Will you be answering my second question? (I am about to write a propsal to XXXXX advising them of the above planned transactions. How do you think I should fashion the proposal?)

I did not answer your 2nd question because I wanted to be certain that you understood my answer to your first question as it impacts the 2nd question.

What is the agreed amount that I owe you?
The $30 for the first answer. Every time we post back and forth it seems that another question arises that requires an answer. I would appreciate payment for each helpful answer
FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36646
Experience: Bankruptcy Lawyer. Experienced.
FiveStarLaw and other Bankruptcy Law Specialists are ready to help you
Expert:  FiveStarLaw replied 3 years ago.
Art Carlo,

Thank you for the payment. Do you still want me to answer your 2nd question?
Customer: replied 3 years ago.
Yes, please do. Art
Expert:  FiveStarLaw replied 3 years ago.

Good Morning Art,

 

"I am about to write a propsal to Wells Fargo advising them of the above planned transactions. How do you think I should fashion the proposal?"

You may want to consider delaying making any proposals until after you have received your discharge. 2 reasons for this:
1. The lender is prohibited from dealing with you during the pendency of the bankruptcy due to the automatic stay of the bankruptcy court. 362 (4)k provides for actual and punitive damages for the willful disregard of the automatic stay.
2. Negotiations with the creditor prior to discharge can result in the creditor objecting to the discharge as a negotiating tool
Customer: replied 3 years ago.

I will inform you when the discharge deadline has passed. Art

Expert:  FiveStarLaw replied 3 years ago.
please do -- good luck
Customer: replied 3 years ago.

Hello WebLaw: There were no objections to my discharge and the deadline has passed. I should be receiving the confirmation/documentation from the Bankruptcy Court in the next few days. So if you are up to answering my second question, please do. If you are able to provide me with your response by Monday, that would be fine. Thank you. Art

Expert:  FiveStarLaw replied 3 years ago.
That Is Good News Art! Let me see what I can do
Customer: replied 3 years ago.

Thanks!

Customer: replied 3 years ago.

Please keep in mind, if the bank does not voluntarily remove their lien on my unit 6-203, I will sue them for a declaratory judgement that the mortgage is defective.

Expert:  FiveStarLaw replied 3 years ago.

Good Evening Art,

 

"I am about to write a propsal to Wells Fargo advising them of the above planned transactions. How do you think I should fashion the proposal?"

It still appears premature to contact Wells Fargo. Your bankruptcy case typically would not yet be closed even though you have received your discharge. You will want to contact the trustees office or the bankruptcy court to inquire whether the case is closed but typically it would not be.This means that the trustee can still take action to collect assets for the benefit of creditors
Customer: replied 3 years ago.

I will confirm the case is closed and let you know. Art

Expert:  FiveStarLaw replied 3 years ago.
ok
Customer: replied 3 years ago.

I just asked a question and requested your address but it was re-routed to another attorney. Are you no longer linked to this web site?

 

So I specifically asked for you (WebLaw) for a separate / new question. And was in the process of being rerouted again to a different lawyer. I withdrew my question. Here is my question. Please tell me how much to pay you via the bonus button.

 

If I sue the bank that thought they held an ownership interest in a condo that was pledged to secure a business loan in default, but due to the defective mortgage and note, it turns out that they never had a valid claim, and therefore, cannot recover the property. However, the bank refuses to withdraw the lien thus making it impossible for me to sell the property with a clear/clean title. Are there any similar cases/lawsuits that went to trial in the State of Florida with an unfavorable verdict for the lending institution?

Expert:  FiveStarLaw replied 3 years ago.
Good Morning Art,

Please send me the link to the question you sent and I will follow-up to determine why the question did not come to me. I certainly am still working here. Thank you for letting me know

There are many cases (hundreds) that would be directly on point and favorable to you. This is not an uncommon situation in Florida in light of the housing decline. The nature of the action is called a "quiet title action"

If you are certain that your bankruptcy has been closed ( not just discharged) you may consider filing a quiet title action to challenge the mortgage on the property.

A quiet title action exists when there is a question as to the ownership of property. The purpose of the quiet title action is to clear the title so that it properly indicates the ownership in the public records.In your situation, you would be challenging the mortgage holders lien on the property that encumbers your ownership interest.

FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36646
Experience: Bankruptcy Lawyer. Experienced.
FiveStarLaw and other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

WebLaw: When the Bankruptcy Court closes my case, I plan to send the below letter to the mortgage lender. Please critique it and/or make any changes that you deem appropriate. Also, please let me know what your fee will be to complete this request.

 

Proposed Letter to Bank:

 

Please refer to the separately attached Notice of Bankruptcy and Order of Discharge for Art (me).

 

It appears that the mortgage on Condo Unit 207 is defective. Specifically, my spouse did not execute the mortgage on the property that is owned by my spouse and me as tenants by the entireties. Nevertheless, for the purposes of settlement, my spouse and I request that the bank consider the following proposal:

 

1. My spouse and I will execute and deliver to Bank a deed in lieu of foreclosure for Condo Unit 203 (with a remaining mortgage balance of $133,000 discharged). I signed the Home Equity Account Agreement dated August 9, 2005. My spouse and I signed the mortgage and both of our names appear on the Deed.

 

2. Bank will execute and deliver to my spouse and me a release of the defective mortgage on Condo Unit 207. Business Bank Equity Line dated September 12,2005 was signed by the LLC. The mortgage was executed by me alone. The Deed to Unit 207 is in both of our names.

 

3. The parties will execute such additional documents as may be necessary to carry out the terms of this agreement.

 

If the agreement is not accepted in writing on or before September 16,2011, then the offer will be deemed rejected and withdrawn.

 

I will be available to discuss at your convenience. In any event, I thank you for your consideration.

 

Yours truly,

Expert:  FiveStarLaw replied 3 years ago.

Good Morning Art,

 

I am happy to review your letter. A very generous bonus would be appreciated


Proposed Letter to Bank:

 

My personal liability on the above-captioned debts was discharged in a Chapter 7 Bankruptcy on xxxxx, Case Number XXXXX

 

1. Condo Unit 203. Attached is a copy of the quitclaim deed recorded XXXXXXX transferring any interest in Unit 203 to you. Also attached is a copy of the letter to the Condo Association informing them to send further notices and assessments to you directly. (Art - FYI- Association fees that accrue after the date of discharge remain your responsibility until title has been transferred)

 

2. Condo Unit 207. Attached is a Release of Lien to be properly executed and returned to me no later than September 16, 2011. As you know the lien on Unit 207 is invalid as the mortgage was executed solely by me although the property was held as tenancy by the entireties.

 

If you have any questions please direct them to me in writing. If I have not had a response from you on or before September 16, 2011 I will direct counsel to file a quiet title action and seek additional damages

 

Please be governed accordingly.

 

 

FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36646
Experience: Bankruptcy Lawyer. Experienced.
FiveStarLaw and other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

WebLaw: Can Wells Fargo reject the Deed in lieu of Foreclosure on Unit 203? What happens next, foreclosure? Do I have any recourse?

Customer: replied 3 years ago.
WebLaw: fyi... Not urgent to reply. I will add bonus after you reply. Thank you.
Expert:  FiveStarLaw replied 3 years ago.
thanks- I will respond later in the day.
Expert:  FiveStarLaw replied 3 years ago.
Yes Wells Fargo can reject the deed in lieu of foreclosure. They are not obligated to accept the property. Sometimes a lender will want to go through the foreclosure process in order to clear the title of any possible liens.

Foreclosure would follow if the deed in lieu is rejected. Your personal liability was discharged by the bankruptcy however association fees that accrue after the date of discharge remain your responsibility until title has been transferred.
Customer: replied 3 years ago.
Will the Bank foresclosure have an impact on my wife's Credit Rating since the property is jointly owned (she ownly signed the mortgage)? Can the Bank go after my wife later for any shortgage of the loan amount owed?
Expert:  FiveStarLaw replied 3 years ago.
Since your wife is on the mortgage but not the note, the foreclosures should not impact her credit rating nor can a deficiency judgment be entered against her
FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36646
Experience: Bankruptcy Lawyer. Experienced.
FiveStarLaw and other Bankruptcy Law Specialists are ready to help you

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