How long does a foreclosure take?

Posted on by creditorsrightswi

You’ve decided that a loan has gone bad and are sending it to the attorney to start the foreclosure process.  How long is it going to take?  Well, like anything, it depends.

All foreclosure cases require the filing, service and answer of a complaint.  That process is approximately 30 days.  Assuming that the borrower has not answered the complaint, and are therefore in what is called “default”, the attorney can file a motion for default judgment and have a hearing.  Depending on the county and the judge’s calendar, that will occur within the next 30 days.  What happens after that is the large variable.

After a lender obtains judgment, the foreclosure goes into a redemption period, which is the borrower’s opportunity to pay their debt in full and retain the property.  The length of the redemption period varies depending, mainly, on the classification of the property.  If the property is homestead property, the redemption period is either 6 months or 12 months.  If the property is non-homestead, the redemption period is either 3 months or 6 months.  There are a few classifications within each of these, but these are the very basic differences.  The short vs. long redemption periods—meaning 6 vs. 12 or 3 vs. 6—depends on whether the lender has chosen to waive or preserve its deficiency rights. Deficiency rights are the lender’s ability to recover any shortfall of the borrower’s debt after the sale of the foreclosed property from the borrower’s other assets.  If the lender choses to waive deficiency, it receives the shorter redemption period (the 3 or 6 months depending on the classification of the property). If the lender decides to preserve its rights to deficiency, it receives the longer redemption periods.

After the redemption period ends, the foreclosure may go to sheriff’s sale and then a confirmation of sale.  That process may take another 30 days.

So, in a foreclosure, you have approximately 60 days prior to judgment and redemption period and another 30 days after judgment and redemption.  Then, to a large extent, the length of the foreclosure process will be determined by the redemption period assigned to the case.

Why do I need to file a UCC-1?

Posted on by creditorsrightswi

A UCC-1, sometimes referred to as a financing statement, is a document filed by a creditor to put all other parties on notice that the creditor has a secured interest in certain personal property.  The UCC-1 is akin to a real estate mortgage, but for personal property.

With real estate, the way a third party knows that a creditor must be paid before he or she takes the real estate free and clear is by reviewing the real estate records and seeing if there are outstanding mortgages.

The same is true for personal property.  The UCC-1 is filed to “perfect” a creditor’s security interest by putting the public on notice of the creditor’s lien.  The UCC-1 tells third parties that the creditor has a right to take possession of and sell certain assets for repayment of a specific debt.  Lastly, the filing of a UCC-1 establishes a creditor’s priority.  Just as a 1st mortgage holds priority over later recorded mortgages, a UCC-1 filed 1st on certain personal property holds priority over later filed UCC-1s on the same property.

Clearly it is important for a lender to properly and timely file a UCC-1 when a lender takes personal property as collateral for its loan.

What is a Chapter 7 Bankruptcy?

Posted on by creditorsrightswi

In a chapter 7 bankruptcy—sometimes called “straight” bankruptcy or “liquidation” bankruptcy—the bankruptcy trustee liquidates the debtor’s non-exempt assets to pay unsecured creditors.  Chapter 7 bankruptcies are what most of the general population thinks of when they think of bankruptcy.

A trustee is appointed as soon as the case is commenced.  The trustee is to collect the debtor’s non-exempt property and supervise the liquidation of that property.  The trustee is also required to distribute the cash proceeds of the estate property to the various creditors in the order of their priority as defined under the bankruptcy code.

Frequently, in chapter 7 bankruptcies, there are no non-exempt assets for distribution.  Meaning, all of the debtor’s assets fit within an exemption.  Thus, unsecured creditors receive nothing.

It can sometimes be frustrating when, as a creditor, you know of property the debtor possesses and know that he or she is allowed to keep that property after the bankruptcy while, as the creditor, you receive nothing.  Exemptions allow debtors to essentially “remove” property from the trustee’s grasp.  These assets are “exempt” from being liquidated to pay unsecured debt.  Only non-exempt property is property of the estate, which the trustee may sell to pay creditors.