Category Archives: Banks and Bankruptcy

What Happens If My House Is Foreclosed On Before Filing Bankruptcy But Recording of the Trustee’s Deed Is After I File Bankruptcy?

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If you are trying to save your house from foreclosure the best way to avoid any confusion is to file for bankruptcy as soon as possible before your trustee sale date. Once your bankruptcy case is filed there is an automatic stay in place to prevent the sale of your home. If the trustee sale still goes through, the sale will be voided as it is in violation of the automatic stay.

What happens when you filed your bankruptcy case after the trustee sale was conducted but before the trustee’s deed is recorded with the county? Pursuant to California Civil Code Section 2924h(c), “…the trustee’s sale shall be deemed final upon the acceptance of the last and highest bid, and shall be deemed perfected as of 8 a.m. on the actual date of sale if the trustee’s deed is recorded within 15 calendar days after the sale…”

The courts in California are divided over the interpretation of this issue. One court in the Northern District of California indicated that if the bankruptcy case was filed after the trustee’s sale but before the recording of the trustee’s deed, the recording of the trustee’s deed is not a violation of the automatic stay and the secured creditors can proceed, making the foreclosure final. In Re Garner, 208 B.R. 698 (Bankr. N.D. Cal. 1997). In the Garner case, Minnie Bee Garner defaulted on her mortgage and her home was foreclosed on March 11, 1997. She filed for Chapter 13 bankruptcy protection on March 12, 1997. The foreclosure sale deed was issued to the third party purchaser on March 13, 1997 and the third party purchaser recorded the deed with the county on March 18, 1997. The secured creditor’s bankruptcy attorney filed a motion for relief from stay and the court granted it and held that as long as the deed was recorded within 15 days of the sale, issuing the deed did not violate the automatic stay. Therefore, the third party purchaser’s interest in the property was not avoided by the filing of Ms. Garner’s bankruptcy case.

A more recent case in the Central District of California held differently than Garner above. In In re: Gonzalez, Case No. 6:11-BK-15665-MW (C.D. Cal. 2011), there was a foreclosure sale of Mr. Gonzalez’s property on February 22, 2011. Mr. Gonzalez filed for bankruptcy on the same day. The exact time of the final bid is uncertain but for purposes of the case the exact time and whether the foreclosure sale went through before or after Mr. Gonzalez filed for bankruptcy did not matter. The deed was recorded with the county recorder’s office on March 2, 2011. The judge in this case held that at the time the bankruptcy petition was filed Mr. Gonzalez still held title to the property because the deed was not recorded yet. The subsequent filing of the deed after the bankruptcy petition was filed violated the automatic stay and therefore the recorded deed is void. The judge goes on to say that the provision of the California Civil Code Section 2924h that deems the sale to be final as of 8 a.m. on the actual date of sale does not matter because the deed filed with the county was void, and execution of a voided deed is a void act and does not create or perfect title. Upon appeal of this decision to the District Court for the Central District of California the Bankruptcy Court judge’s ruling was reversed. Like in Garner, the recording of the deed of trust was not a violation of the automatic stay.

This is a perfect example of similar facts but different outcomes even though they are all from the state of California. Maybe legislation will resolve this issue in a future time so there is no more confusion. As of right now if you have any issues you should consult a bankruptcy lawyer. The best way to avoid this issue is to make sure your bankruptcy case is filed at least a day before your trustee sale date. So that is what happens if your house is foreclosed on before filing bankruptcy and the recording of the trustee’s deed is after you file bankruptcy.

Should I Have Bank Accounts At the Same Bank I Owe Money To?

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Most people have at least one bank they are loyal to and have multiple types of accounts with that bank. I am sure that whatever bank you currently do business with (such as Bank of America, Wells Fargo, Chase, Citibank, San Mateo Credit Union, Fremont Bank, credit unions, or any other bank) offers you incentives and seemingly great deals to open another type of account with them. The new account could be a credit card, car loan, a mortgage or home equity loan, or home equity line of credit. This is a great opportunity for the banks to easily obtain more business from you since you are already a customer. Unless you hate your bank you would most likely take the bank up on the offer if you need that additional service. You are probably thinking that you need that service anyway so why not with a bank that you already know and trust? You can see all your accounts on one screen and take care of the payments easier and more efficiently. That is exactly what the banks want you to think and feel.

If everything in your life is going great there would be no issues with having multiple bank accounts, a credit card, car loan or a mortgage and line of credit with the same bank. What happens once you have a financial setback though? What happens if you are unable to continue paying on one or more of the debts owed to the bank? At this point you should highly consider speaking with a bankruptcy lawyer to assess your situation. Think of it this way: your accounts are a one-stop-shop for the banks as well. Are your credit cards cross collateralized with your vehicle loan? If so then you will not get the pink slip to the vehicle unless you pay all the credit card debt too. If you are unable to make your credit card payments for a period of time, guess what? Under certain circumstances banks can take the money you owe them from your bank accounts. How can the banks do this, you ask? This process is called a “setoff” and you gave them permission to do this when you signed up for the extra credit card, car loan or home mortgage. You don’t remember giving them permission? It is probably part of the small print under the terms and conditions of the loan or credit card that you probably never read and never knew that you would be giving the banks permission to do this.

If you have a credit card with a bank that you do not have a bank account with, the bank would need to sue you first and obtain a judgment against you before they can levy your bank account. This is not necessary if you have a bank account with the bank you owe money to. They can just take it from your bank account. It will get worse if you wrote a check to pay a bill not knowing that the bank already took some money out of the bank account and then the check bounces. You would then be hit with an NSF and be charged multiple fees by the bank. Most of my clients have the same response when I advise them of this practice. They say, “Oh, the bank will never do that to me! I’ve been a loyal customer for 20 years!” As a bankruptcy attorney that has filed hundreds and hundreds of bankruptcy cases I can tell you that banks are not people; they do not have feelings. They do not care if you have been a customer for 1 year or 10 years. Banks are in the business to make money. Bottom line: do not have bank accounts at the same bank where you owe money.