When a loan is in default and a borrower files for bankruptcy, interactions with the borrowers are typically stayed and the lender’s interest can be threatened. Legal review and intervention are needed to protect the client’s interest. Activist Legal will work with local counsel to provide motion for relief from stay, plan review, plan objection, proof of claim, and transfer of claim services during a pending bankruptcy.
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When a borrower files for Bankruptcy, a stay is often put into place preventing debtors from proceeding with any activities to collect on a debt including foreclosing. A creditor can file a motion to request relief from the stays. Activist Legal and local counsel can secure the documents to file a motion for relief from stay and track the filing and results.
With certain bankruptcy cases, primarily Chapter 11 and Chapter 13, the borrower may file a proposed plan to pay its creditors over a period of time. It is important to review these plans to ensure that our client’s interests are protected. Activist Legal and local counsel can review the plan and provide recommendations as to any proposed plans that might impact our client’s lien.
In the event that the borrower proposes a plan that fails to include the creditor or compensate the creditor adequately, Activist Legal will work with local counsel with a local Bankruptcy attorney to file an objection to the plan and secure a favorable amended plan or a denial of the plan.
In some cases borrowers will file a motion to cramdown a creditor’s lien when the collateral securing the creditor’s lien has lost value. If granted, the cramdown will decrease the value of the creditor’s lien to the market value suggested by borrower’s motion. With junior liens, borrowers may file motions to strip the lien entirely by demonstrating that the current market value of the property does not exceed the debt on a senior lien. Cramdowns and strip offs can significantly reduce the value of a creditor’s lien or in some cases completely wipe out a lien. Activist Legal can work with local counsel to fight such motions.
A proof of claim must be filed by creditors within a certain time frame after a Bankruptcy case has been filed. In Chapter 13 bankruptcy, this is generally 90 days from the first scheduled meeting of creditors. A proof of claim establishes the amount of debt owed to a lien-holder and advises the bankruptcy parties to whom and where bankruptcy plan payments should be made. Failure to file a proof of claim can impact a creditor’s ability to secure payment from a bankruptcy plan. Activist Legal and local counsel can assist creditors with obtaining the necessary documents and data in order to file a proof of claim in a timely manner.
When a lien has been assigned to a new creditor and a proof of claim has already been filed by a prior creditor, a transfer of claim must be filed to notify the court of the new claimant. This will ensure that payments on a bankruptcy plan are distributed to the correct lien-holder. Activist Legal can work with the new claimant to obtain the documents, data and file the transfer of claim with the bankruptcy court.