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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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My house loan has been sold three times. The last was to Chase

Resolved Question:

My house loan has been sold three times. The last was to Chase Home Finance. I went to the county court house to the recorders office and found that Chase is not on the Deed of Trust. We are nearly at forclosure. Can I demand a Deed of Trust from Chase to prolong this action?? I need more time to get the money.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 8 years ago.
You have just found out,Customer that the sale of a loan from one financial institution to another does not require that a new deed of trust be prepared or recorded. Under centuries-old contracts law, the purchaser "steps into the shoes" of the prior owner and enjoys the same rights and has the same obligations as the original.

There is really no utility in demanding a deed of trust from Chase. There is none. What does give Chase the right to foreclose is its agreement with the 2nd owner of the loan, which traces upstream to your original lender. This is similar to the "Substitution of Trustee" situation commonly used to hire someone other than the original lender to perform the non-judicial foreclosure. In fact, a search for everything recorded regarding your house *might* uncover some similar documents evidencing the transfer of deed of trust rights from the first, to the second, and then to the third. Even if there are no recorded documents, the fact that you know of the exchanges of the "paper" indicates that you most likely received proper notice.

The situation might be different if you had full payments ready to make but were denied knowledge of where to send them. A partial payment is a breach of the loan agreement.

Some lenders are willing to put a loan into "forebearance" for a few weeks and maybe up to 3 months to give time for loan modification to either be worked out or be denied. Any homeowner who gets that concession should have a "plan b" for what to do if the modification request is denied.

A Chapter 13 BK might be the best solution. It would forestall any foreclosure for at least 30 days in most situations, and a debtor who wants to keep the house can re-affirm the debt and put the missed payments into the 5-year repayment plan. This puts the creditor back into a fully-paid up position, with the exception of post-petition late fees and perhaps other charges (default interest rate hikes might be prevented too), by the end of the plan.

A debtor must have regular income to fuel the Chapter 13 plan, must live on a specified portion of the income (federal standards, with some usually small adjustments for local conditions, limit the $$$ allowable for housing, food (depending on family size), and other monthly expenses), and must pay the remainder of the income to the Chapter 13 BK Trustee. The Trustee then divvies up the money after taking 10% for his or her services. The Plan must provide for full payment of all of your secured creditors (like the home lender, now Chase), and give more money to the unsecured creditors (usually credit cards, and the "under-secured" portion of otherwise secured loans such as being upside-down in a car loan) than they would have received if the debtor had filed a Chapter 7 BK.

At the end of the plan, most debts that are still unpaid get discharged and no one can chase the debtor for them ever again without getting into major trouble.

The re-affirmation of debt option is generally available in a Chapter 7 BK only if the debtor is current on all monthly payments before filing for BK.

Thank you.

Brent Blanchard and other Bankruptcy Law Specialists are ready to help you
Customer: replied 8 years ago.
That was a good answer. Problem is now we are stuck between a rock and a hard place. Due to business conditions I am not working and my husband's hours got cut from 40 to 24. We already spoke to an attorney and the money we would have to put into the trustee account is more than my husband makes in a month. I hate feeling so helpless now. We went from making 65,000 a year to 30,000 if we are lucky. Are there anyother alternatives. We can't loose our home.
Expert:  Brent Blanchard replied 8 years ago.
The income thresholds for filing a Chapter 7 without there being a *presumption* of abuse, and for calculating Plan payments in a Chapter 13, are based on the average of the last six months before filing BK.

A Chapter 7 can still be filed before the average drops of its own mathematical accord, but the debtor would need to successfully oppose the presumption of abuse. With the law having changed towards the end of 2005, we don't yet have a lot of court decisions to go on to predict the outcome, but a good BK attorney would be able to discuss overcoming the presumption and how it has been treated in the Western District of Missouri.

There may be a possibility of using a Chapter 7 filing now to hold off the foreclosure, saving funds to help pay for the home, and then converting the case to Chapter 13 based on a lower monthly average income later on. The difficulty lies in how quickly Chase would want to make a motion for relief from the automatic stay to clear the decks for foreclosure.

In any event, there are two things you can count on:

1. If you cannot lose your home, you must find a way to make the regular monthly payments. Missed payments and pre-petition late fees can be addressed in a Chapter 13 Plan. Sometimes, they can be negotiated with the lender as part of a re-affirmation agreement in a Chapter 7.

2. A debtor's negotiating position is much stronger with an attorney representing him or her, and with an active bankruptcy case providing at least several weeks' worth of delay before the creditor can resume foreclosure, and the prospect paying for an attorney to get relief from the automatic stay.

IME, any success in getting a loan modification is going to depend on showing enough monthly income to support the monthly payments of the modified loan.

Thank you.