What would be better for my clients to take Regions Bank deal or file bankruptcy
I am doing a short sale with my clients and they have a first with Bank of American and second with Regions Bank. Bank of America has offered to pay a certain amount to Regions they will accept, but only if my clients will sign a loan on 50% of the what they owe or bring 30% of the loan to closing to pay Regions bank off. Of course my clients do not have any extra cash to bring so they would need to sign this loan 240 months at a 0% interest. My clients say that they might just go ahead an file bankruptcy instead what should I do?
Replies to This Discussion
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Permalink Reply by Deidre St. Romain on
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Send them to a good attorney - you cannot give that kind of advice. Good luck.
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Permalink Reply by Teresa Simon on -
The first question I have is what do they owe? What do they owe their creditors in general? Can they settle their debts at pennies on the dollar? Is the debt manageable? Are we talking $50 a momth or $500 a month? Did you research Regions on this site? Is Regions HAFA? There are considerations that have to be made and you need to just send them to people qualaified to make those decisions.
I have seen many times debts reappear on credit reports after the bankruptcy under different collection agency names. By the time the client contests the debt and removes it and it reappears under another collection agency, and then client never really gets ahead filing the bk.
The client really needs to understand their individual situation, the rules of collection in their state etc.
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Permalink Reply by Lisa Jaworski on
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Hi Teresa, thank you for your reply. They have a first mortgage of $231,000 with Bank of America and a second mortgage around $88,000 the house appraised for by an independent appraiser for $245,000 about 4 months ago. They do not live in this house which is in GA now they live in a house in TN. They are going to go meet with a bankruptcy attorney on Wednesday to see what he says and what advice he gives them. I told them that I was not an attorney and that it was in their best interest to talk to someone that does bankruptcy. Do you have any good websites that would help them with understanding the rules of collection.
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Permalink Reply by Teresa Simon on
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Here is some non-specific information for Washington State, and I am sure someone will jump in here: Written contracts can be put on a collection report for 6 years and after 7 have to be taken off the credit report unless there is a judgment. If you're dealing with WRITTEN contracts I BELIEVE they can be sued up to three years. If a person makes a debt in Washington and makes payments and then stops making payments and then makes a payment the 6 year rule starts over from the last date of payment. Judgments can be renewed after 10 years. If I hadn't made a payment after 4 years, I personally,wouldn't think it would necessarily be a good idea to start making payments unless I was sure I could keep up with the payments. I personally wouldstart with the newest debts first and work backwards. Then I would look at what the oldest debts were and clean those up or wait them out.
If I use up my BK priviledge it won't be there if I need it later. Personally, (disclaimer), I would look into the laws of collection of contracts in my state and figure out what was truly collectible and have an trustworthy attorney maybe with an accounting background figure out worse-case scenario and decide from there.
Cody gave you good information. Someone is going to jump in here and tag what I told you. I will get out an ice bag and get ready for the lumps. Here comes the blanket party... 509 535 6500
Nobody in their right mind would tell you this indformation especially without disclaimers seeings as all states have different laws and even in their own states are so complex.
Almost 30 years ago I had an attorney explain to me that filing a bk was not a good idea as I had no real way for the people to collect from me. Eventually I worked out the issues and have gone on to pay all my bills. I have owned 50 plus homes and have gone from rags to ... well I don't know. I don't live in a fairy-tale world but I am not poor either. I sell average homes and am often called by people that live in fancy homes that would change places with me in a quick second.
I am NOT ADVISING you to advise your clients. I am ADVISING you to ADVISE your clients to familiarize your clients with the state laws of collections and SPEND the money they DON"T HAVE on getting the BEST advice so they can either build or rebuild their lives. It is money well spent. Ask people that have had to rebuild and have done so successfully. Don't ASSUME that because they are talking to a BK attorney it was their only option.
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Permalink Reply by Cody Lampariello on
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First let me say that I agree with the people here who have said you should not be providing that kind of advice. That being said here is my two cents: Even if they decide on bankruptcy they may want to do the short sale anyway. They can always put the note from regions in the BK. There are some other issues to consider; Is it a primary Residence? What is their asset base? For tax purposes.
The thing is that when they do the BK they are still going to have to wait for the foreclosure to go through even if the judge grants them full deficiency release from the mortgage. Atleast if they complete the shortsale once the BK is over then everything is done and they can move forward. Also they have less debt to put inside of the BK if the primary is satisfied in shortsale.
If they don't have a lot of other outstanding debt they may also be able to take the note and then settle it for far less than the face amount.
As you can see there are a lot of other issues at play here and even if you feel comfortable discussing them all you probably should not. Interview some attorneys and find one you trust to be on your team and still provide correct information to your client. Then refer the business.
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Permalink Reply by Sam on
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I feel like a broken record but here goes...
This should not come as any surprise to the sellers at this stage in short sale world, Regions Bank has a clear protocol of not accepting the small consideration from the first lien as settled. Their SS application specficially even addresses this in a disclaimer that the sellers have to sign for the review. Regions always gives the option of an additional sum for cash settlement or a 0% promissory note for all of or a part of the deficiency...and has for years now.
If this is comming as a surprise to them, then you did not correctly set their expectations. They should already have known this fact, counsulted with their attorney and CPA up front, and decided a long time ago whether a short sale was the right avenue. If they choose bankruptcy then tough lesson learned for you, but a very valuable one. Unfortunately, the buyers will also be negatively impacted, will be soured to the short sale process and certainly share their discontent adding to the short sale stigma.
Folks...if you are doing short sales, you need to know what you are doing. The impacts are too real to too many people to just take a stab at it. Short sales have been around for awhile now, there is no excuse in 2011 for not knowing. When I say you need to know what you are doing, I'm not talking about taking a CDPE course, which basically teaches you to market your self as a short sale expert (even though you are not) and how to submit a package to the bank. I am talking about understanding the real impacts of a short sale so you have empathy with the sellers and buyers, having a referral source for your clients, or potential clients, to get good legal advice, reasearching and understanding the neuances of each lender, etc. Set up the deal up from the listing for success...don't just cross your fingers and roll. And if you are not experienced, really experienced, partner with an agent who is and co list with them.
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Permalink Reply by joe beauchamp on
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The best thing for all, if the sellers are looking at BK, would be to negotiate a note with Regions, do the short sale, then do a BK to wipe Regions off. The sellers do not end up with a foreclosure on their credit and all those affected by the short sale, except Regions, get the best of the deal, including the sellers.
Not legal advice, of course..
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Permalink Reply by Wilsie Ortiz on
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Regions will approve the short sale but will ask for their money back!! It is a secured debt and BK will NOT wipe it off. I'm dealing with one right now. My seller has to pay $124 at 0% for the next 180 months. He has to pay 1/2 of what he owns.
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How is the promissory note a secured debt? What is the note secured by? Thank you.
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Permalink Reply by Laura Levenson on
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From my experience, NO it is not a secured debt. The home it was secured to is gone. Unless I have missed something??
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Permalink Reply by Joseph Alfe on
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1. I have closed several with Regions and ALL were no deficiency. They asked for a note on two deals, but we bought it out.
2. A note IS WIPED OUT in a BK. Refer to an attorney.
If the balance is 88K, and BOA is giving them 6K, then they owe 82K. I would start by offering 2500 in cash to buy out the note. Money comes from buyer. It's basically a counter offer.
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