Chapter 7 and Construction loan

[Birn]

I'm currently in a Ch. 7 BK. My 341 is set for this week. My case is a rather large case involving a bunch of bad investment property mortgages. Included in my case is a construction loan on a house that was going to be our primary residence. When the market fell through we decided to stay in our current house and not move. Our plan was to go ahead and finish the house and try to sell it to pay off the construction loan.

My financial situation got much worse and I had to file BK in late Feb. I wasn't sure if I should've told my builder and construction lender. My attorney told me that I had no obligation to say anything to them since they would be receiving written notice. Based on that advice, I said nothing to them about my BK. My builder went ahead and made another draw after my filing date and made another interest payment (When construction began, I had given my builder authorization to make the interest payments and request draws directly with the lender.)

Both my builder and construction lender have now received notice of BK. Now that they know about my BK, the lender won't issue any more draws and my builder can't move forward.

Is the fact that the lender issued draws after I filed BK going to be a problem for me? In other words, are they likely to object because I didn't tell them about my BK before they issued another draw? I was just following the advice my attorney gave me.

Also, I live in Texas and this house under construction will be surrendered in the BK.


Thanks!

[lrprn]

Is the fact that the lender issued draws after I filed BK going to be a problem for me? In other words, are they likely to object because I didn't tell them about my BK before they issued another draw? ...Also, I live in Texas and this house under construction will be surrendered in the BK.

Since you are surrendering the property and partially finished house in your Ch 7, your lawyer was right - you personally have no responsibility towards the builder or the lender to notify them personally before filing.

The builder and the lender will have to fight it out legally between themselves now.

There has to be a legitimate legal reason for your lender or your builder to file an objection. They can't file an objection just because they want to cause you trouble or get revenge.