Using C13 to delay foreclosure on rentals

[galstaf]

Hi folks,

I have searched the forums looking for recent advice and not really found anything that matches my situation.

I have a number of rental properties plus a primary residence. I am delinquent on all the properties and facing foreclosure in a nonjudicial state (GA). I believe I can get current as I am expecting a cash influx in 3-4 months, but by that time everything would be foreclosed affecting my tenants and of course my credit.

So I am trying to use a C13 to delay the foreclosures, but really don't want to proceed with the BK thing unless absolutely necessary (i.e. the expected cash doesn't come in).
So I was thinking of filing a C13 to stop the impending foreclosures, then asking for continuances of the 341 meeting to drag out the relief of stay for as long as possible.

Questions:

1>> Is this a viable approach.. if not why not?
2>> Has anyone successfully had one or more 341 continuances?
3>> What are viable excuses for getting a continuance?
4>> What is the best way to request a continuance? (in person, writing, phone?)

Like I mentioned, eventually I would like to drop the C13 altogether by having it dismissed... I just need to keep my real estate in place until I can dig my way out of this.

Thoughts / *constructive* comments would be sincerely appreciated!

My best,

Gal

[justbroke]

You didn't find this information on this Site, because we don't advocate, condone or even help people who try to game the system. Asking for continuances is not going to happen easily. Trustees and the United States Trustee (UST) don't like people who game the system just to abuse the "automatic stay".

1>> Is this a viable approach.. if not why not?

No. I think you might get one continuance of the 341 Meeting, but as soon as they determine that you're just delaying just to delay, you may get something that you don't want... that's a dismissal with prejudice. That means never being able to file against any scheduled debt... forever.

2>> Has anyone successfully had one or more 341 continuances?

For cause, you can get it moved... but cause means something serious. One continuance may happen. Some Districts are more strict, and unless you're in the hospital or overseas, they aren't moving the first scheduled meeting.

3>> What are viable excuses for getting a continuance?

If I knew one, I wouldn't post it here, as I am actually quite against tactics to game the system. You must have cause. Whatever your "cause" is... you present it to the Trustee and see if that's acceptable. Here's a good excuse though, and I post it here because it's enumerated in the Code... military deployment.

4>> What is the best way to request a continuance? (in person, writing, phone?)

Ask your attorney. I'm willing to bet that if you tell an attorney this, they probably won't take your case. Well, some might and they'd at least earn a bunch of fees ($2K or more since you have lots of property).

Now, for constructive advice. You need to really think about your financial position. You need to evaluate your balance sheet from a P&L perspective, and not a cash influx or cash receipts versus payable standpoint. In other words, take what you owe on Property A and take what the FMV of Property A is. If the FMV is more than you owe on the Property, then that is good. Do this for each property. Any property that isn't worth it, from an income or from a debt service (rental) perspective, then you need to let it go. If your debt service ration on any property is less than 1.25:1, then you need to let it go! (This is coming from a multi-unit and single-family residence owner.)

Sometimes, people just want to hold onto property because it sounds nice... but on the balance sheet, it doesn't look nice at all. I wonder what got you behind to start with... was it vacancies? This is one of the key aspects of owning mixed-use and multi-unit rentals as costs increase as turnover rates increase.

You really need to be asking... do I want to be in this business, and not... how can I use the Bankruptcy system to stave off foreclosure. In very rare cases, a debtor seeking to dismiss a Chapter 13.... can have that denied! This can be denied if the UST enters a motion instead to convert you to a Chapter 7. It rarely happens, but if you're playing games, and the UST sees this... they can pull the motion to convert and liquidate estate. Do you have equity in these puppies???

[AngelinaCatHub]

In no way do I wish to disrespect our host, but; CLAP, CLAP, CLAP, JB.

How many times have we read this same scenario? I guess we are learning from habit. Very good explanation and our host should take a second look. It is not nice to fool Federal Courts. 'Hub

[galstaf]

Thanks JustBroke,

Actually I do have equity in two of the properties at least; those are the ones I am trying to save as I also have tenants trying to get thru the loan process to buy them.
However underwriting is now more strict than ever, so that is taking much longer than hoped for.
The other two rentals are upside down and as I no longer have W2 income to take deductions against they are not worth keeping.


If the banks foreclose (which is imminent), the tenants will be evicted within 7 days. If I can delay foreclosure and get them to a point where they can close the loan... everything is paid off and everyone is better off.

The main reason for the high BK rate in GA is due to the extremely quick foreclosure process here. BK is our only defense and method to slow foreclosure down to what is "normal" in other states. I am not trying to "game" the system here, I am trying to keep the roof over my tenants heads until they can get their loan closed. It won't be me on the street, just folks that can't pay rent sufficient to keep up with the debt burden on the property. Not their fault; just a product of the crappy adjustable loans I have against the properties.
This is real life... not a game.

Hopefully you better understand my motivation and we can get something a little more helpful to draw the process out as long as possible so I can help my tenants.


Thanks in advance

[justbroke]

I understand the motivation, but just don't understand (fully) the reasoning. The best you could do is have the tenants contact the Bank and the Bank may accept their tenancy on a month by month basis until the property actually sells. Generally speaking, non-judicial foreclosures usually end up as REO (Real Estate Owned by bank) properties and do not actually sell to a third party.

You should check out Protecting Tenants at Foreclosure Act of 2009.

I just want you to do the right thing financially and not to suffer some bad fate by using the Bankruptcy Courts to extend your stay. Yes, it's done all the time. However, you have real property with equity and that could pose some issues, as mentioned earlier.

Would you walk if you could? Is the only reason you're doing this to protect the tenants? If so, please see Protecting Tenants at Foreclosure Act of 2009.

[galstaf]

I would walk from two of the properties, but would like to sell the other two to the tenants.

If I can sell the other two I could potentially even realize some much needed equity. The banks here generally turn out the tenants as quickly as possible; I deal with REO properties all the time as part of one of my other endeavors. The banks are under a lot of pressure to get the bad assets off their books because of FDIC requirements on REOs.
It would be doubtful that the tenants would be permitted to stay.

I will check out the Protecting Tenants at Foreclosure Act of 2009 tho.. thanks for the tip.

In the meantime, I have 2 days before foreclosure, so have to file the BK at least so I have some breathing room.
Any tips you guys have to help me stretch out the process would be appreciated as living in the state of GA doesn't give me any other choices.

Thanks for the advice in advance.

Gal

[justbroke]

There are no other tips. Since it's non-judicial (just like in North Carolina), the only way to stop it is to file an action which stays the foreclosure. That action would be to file under Title 11 of the Bankruptcy Code (Chapter 7, 9, 11, 12, 13). If you're going to do a Chapter 13, there's a lot of work, as you must also file a Plan of Reorganization within 15 days of filing your skeleton (emergency) petition.

You have a lot ahead of you and this is the first I read that you're 2 days from a sale date. You're in a really tough spot. You'd need to be on the phone at 8AM looking for attorneys, or getting very very familiar with filing a Chapter 13 petition... within the next 12-24 hours! Last minute Chapter 13s are... difficult to pull off anyhow.

Should you choose to file a Chapter 13... your Plan should probably surrender the properties that are underwater. You should provide for any curing of arrearages. I highly suggest, if you are really going to try this, that you first try to get an attorney (which will be difficult in this 11th hour). Second, at worst, get an electronic copy of the NoLo Press Chapter 13 guide and be prepared to spend the next 36 hours without rest... learning how to file.

As a former multi-property owner, I do wish you luck in your endeavors. Personally, I gave up.

[frogger]

If the banks foreclose (which is imminent), the tenants will be evicted within 7 days. If I can delay foreclosure and get them to a point where they can close the loan... everything is paid off and everyone is better off.

I don't mean to rain on your parade, but tenants being evicted within 7 days of foreclosure in GA is total and complete b.s.

I don't know of your true intentions, but what you're doing is trying to open the barn door to let the horses out after the barn is already on fire.

This didn't happen to you overnight, so don't expect an overnight solution to the problem.

If you're underwater and having to continue to put money into rentals to keep them afloat, then you're the pilot of the Titanic.

I don't mean for this to sound hard or rude, but it is what it is. JB gave some excellent advice above.