Bankruptcy for Note Investors: Chapter 7 vs Chapter 13 | Real Estate Notes Show

Episode: 3/19 Nathan and Dave Talk Bankruptcy with Tony Sottile Dave's Goals and Plans: - Wanted to connect with audience about bankruptcy education which is often missing from programs - Planning to monitor Facebook feed for audience questions during the episode - Bought notes alone that weren't in bankruptcy and wanted to discuss if that's a terrible thing - Wants to cover topics that are interesting, fascinating, and relevant to problems people are already going through Nathan's Goals and Plans: - Operates as a short-term investor wanting to get in and out of notes quickly - Currently working on several non-performing notes with bankruptcy issues - Finds bankruptcy frustrating because it adds extra steps and delays foreclosure by months - Waiting for bankruptcy plans to be presented before proceeding to foreclosure on current cases Key Recommendations: - Debtors should have counsel representation, especially in Chapter 13 cases, rather than filing pro se - Note investors should understand the local trustee's attitudes and rules as they vary significantly by jurisdiction - Investors should expect debtors to file bankruptcy plans at the last moment (day 29-30) rather than early Topics Discussed: - Bankruptcy players: debtors, creditors, local trustees, U.S.

trustee, judges - Key differences between Chapter 7 and Chapter 13 bankruptcies - Lien strips and cram downs - Chapter 13 timeline and process - Cost implications of bankruptcy for note investors - Bankruptcy as a delay tactic for foreclosure Guest Insights: - Tony Sottile graduated law school in 2002 and initially represented debtors before switching to creditor side in 2015 - His practice covers 5 states for all services (foreclosure, bankruptcy, collections) and 94 jurisdictions for bankruptcy filings - There is an underserved market of individual note holders who need legal services, not just large institutions - Proofs of claim (POC) and transfers must be filed in specific formats across different jurisdictions - If bankruptcy cases lack complications, investors may never interact with a judge weekend bye-bye thanks again tony and debtor two on a property and only debtor one files chapter seven bankruptcy you can continue collecting against debtor 2.

there is no code debtor protection in a chapter 7 case so not really that big of a deal with with what i typically see from the standard note buyers buying out there but something to keep in mind the one we're going to spend a little bit more time on today are chapter 13s and and the the title of a chapter 13 case is adjustments of debts of an individual with regular income so what you need to glean from that is it's an adjustment of debts so it's a modification of debts it's a it's a plan of how they're going to reorganize those debts of an individual so that means it's a person it's a natural person or a couple it cannot be a business a business cannot file a chapter 13 bankruptcy with regular income so that means there needs to be a wage coming in typically a wage or some type of monthly weekly bi-weekly bi-monthly income coming in that that debtor can use to adjust their debts to uh to pay off some of their debts uh it's designed for debtors who have regular income possibly too much to file a chapter seven bankruptcy there's plenty of people out there with good money that just still need to file bankruptcy um we're not going to get into means testing and things like that of whether somebody can qualify for a seven or they need to go a 13 but but typically you could also see people who make a little bit more money in a chapter 13 in a chapter 13 case they take a lot longer they take about three to five years and that's all done through a court confirmed plan we're going to talk about plans a little bit more in a bit but it's what it sounds like right it's a plan of reorganization it's a document that the debtor puts together that says how they plan to reorganize their debts and how they plan to reorganize their assets reviewing and understanding that plan is very important it is critical to the note buyer that they understand and review the plan well as in you know court um a little bit more about your practice i know you do one side and franco does another can you share what you guys do sure so we've kind of split our practice federal court which is bankruptcy court and state court so foreclosure and eviction so franco handles foreclosure and evictions and debt collection so we do debt collection work as well wage garnishments bank levies things like that that's all done in franco's part of the world which is up in cleveland ohio middleburg heights and then the bankruptcy side of the house we handled down here in loveland ohio which is just outside of cincinnati and uh we practice in ohio kentucky indiana michigan and illinois for everything so that's foreclosure bankruptcy evictions collections everything in those five states and then uh the additional states of colorado wisconsin and washington dc for bankruptcy all bankruptcy in those three additional jurisdictions and then lastly about four years ago we started a national uh part of our practice group where we can handle quite a few pleadings in all 94 jurisdictions so we spent about a year uh compiling all the information that we would need to file proofs of claim transfers of claim the various chapter 13 notice requirements things like that uh in all 94 bankruptcy jurisdictions and so we do that from this office as well wow so those who are confused with pof is you know the emotional relief is that he's gonna get into that so you know if you're not understanding acronyms of what it means we're gonna get into a little bit about that we're not gonna dive too deep into it we're not gonna do this forever but for hours on end but nathan what's your experience with bankruptcy where are you at with bk oh bk is driving nuts um like because i'm an in and out guy i i want to get in and get out of a note as quickly as possible and bk is not it is not fast so for me they're they're a headache and a half and uh and just all the process and i [Music] [Music] hey everybody dave puts here from jkp holdings alongside me in a few seconds will be nathan turner he's running a few minutes behind guys uh but i'm glad to connect with everybody i'm excited about this one there's been a lot of questions around bankruptcy and a lot of curiosities because it's a field that seems to be lost uh in a lot of education programs a lot of times people just don't want to talk about it because they just don't know much about it so this is a great opportunity um to jump in here and kind of talk about things if you have questions along the way please feel free to jump in ask questions post any things you have problems with or whatever um and what not so um hopefully everyone can hear us okay if you can i'm seeing a black screen for some reason here i also make sure everyone can see us connect with us um let me just make sure this is if you can see us or whatever please send me a message i'm seeing a black rotating screen for whatever reason yeah not sure what's happening here let me just jump on um and just make sure everything's working out okay whatever reason okay well it shows okay on my on my phone real quick so um i wanted to bring up the fact that bankruptcy has a lot of different aspects to it a lot of questions to it um and there's some things that we don't need to actually worry about oddly enough um there are certain things that we don't get involved with and we shouldn't have to worry about and there's some aspects of it that actually makes it better for us so for those people who are interested in both we're going to go over that stuff um we've been times where we bought alone wasn't bankruptcy is that a terrible thing or not um and things like that so i'm curious what people say um and nathan said i'll be there in five minutes so he'll be here real quickly so um what we want to do here guys is go over what everyone understands right and to cover the topics that are interesting and fascinating and problems you're already going through um so what we're going to do is i'm going to introduce tony over here in a second he's going to go through a slideshow to kind of present what he already knows and what questions have been posted before in the meantime as you come up with questions we'll be monitoring the facebook feed um and we'll post it into his question bank to kind of answer um he's a go to the slideshow first to kind of cover a lot of the topics um but we're gonna move to it so without further dude nathan will be here in a second tony how are you doing this friday afternoon i'm great dave thank you thank you for having me on your show here how are you doing well man hopefully everything's going okay in the midwest uh but cove and all that stuff hopefully everyone's healthy and well so far so good and it's uh the winter's winding down it is only 35 degrees with a strong wind today but uh but uh uh warmer weather is on its way that's for sure yeah so can you give a background where you came from what you've been involved with how long you've been doing bankruptcy i know it's only been six months you've been starting this so um but give a little background who you are what you've been doing and how you've come into bankruptcy sure sure so um i graduated law school in 2002 out here in ohio and uh didn't really know what i wanted to get into i knew i didn't really want to carry somebody's briefcase i wanted to kind of work for myself in some ways and go to court and kind of get a name for myself going and there's there's not a whole lot of areas of the law that you can do that involved in a case if there's not a whole lot of complications in a case you will never see a judge you you may have a hearing nowadays a lot of those are telephonic which is great but the vast majority of things that we do in bankruptcy court um do not involve a judge uh there's a lot of deals that are made a judge signs off on it perhaps the judge puts their signature on it but but uh there's not a whole lot of interaction with the bankruptcy judge so that's kind of a who's who in the process there's there's there's a there's a few parties and when you figure out who they are that's who you know you're talking with um if we're able to pass these slides around later on i i just kind of gave a run down here of um of what i just said so we can skip we can skip that one so so the big ones the big bankruptcies that that you guys are going to deal with are chapter 7 and chapter 13 so really really abbreviated explanation of each so a chapter 7 bankruptcy is a liquidation bankruptcy when someone says they give up they're filing bankruptcy that typically means they're liquidating their assets they don't have a whole lot of assets they've got debt um so what what's going to happen is they file bankruptcy a trustee is appointed to the case the trustee's going to examine the debtors assets um if there are any you know they may have a car they may have a house but it's fully encumbered so they're not really assets there's nothing that the trustee can take and liquidate in into cash to give to creditors that's what the trustee's role is in a chapter 7 bankruptcy primarily is to see if there's anything that he can make money on to give to creditors again typically doesn't happen i would say nine out of ten chapter seven cases um are are what are called no asset cases and typically take four to six months uh they're very quick four to six months it's the most common chapter of filing um and then one thing you need to worry about in chapter sevens is that there's no coder protection so if you've got uh you know debtor one um kind of right off the bat so uh when i looked into it a little bit more bankruptcy was one of those areas and i liked the concept of bankruptcy i liked the concept of being able to show a client a rule talk about their problem and how it fits into that rule and and apply that rule whether it helps or or or doesn't help um i got in on the debtor side so i used to represent debtors and small businesses in chapter 7 and chapter 13 bankruptcies worked for a very large national law firm doing that and i was out of dayton ohio um after about three years four years of doing that i got a little disenfranchised with representing the borrowers and decided let's get it on the creditor side of things so uh the rest as they say is history i work for a couple of larger regional firms here in uh the cincinnati ohio area and in 2015 decided you know there's a better way to do this there's an underserved market out there uh not everybody who holds a note is wells fargo or chase and uh there's plenty of plenty of regular joes out there that are buying buying notes and i think it's an underserved market so my partner franco barely and i you know we met at a previous law firm and we we decided to start this thing up and it's been going well ever since awesome and welcome nathan i hope everything's going well i know you're uh in a situation you had to get out of so i appreciate you joining us so it's it's awesome to hear you tony because um like a lot of investors when i first got involved you guys were scary dealing with attorneys is a scary thing for investors um and you and a few other attorneys um present online the fact that we don't have to be nervous or scared or worried to talk to you guys that you're not this big bad lawyer that we see on tv that we're nervous about shaking your hand having a bite to eat is not a big deal to have with you guys um and you serve the these these individuals small investors uh on a daily basis um through social media as mean we're working on a few with tony sperm right now where um you know we're waiting for for the bankruptcy uh plan to be presented so that we can then go on to something so that they can not pay so that i can then foreclose but it just it's adds extra steps and it adds months on end when i'm just trying to get a job done it's a it's a big headache i don't like to add on to that what i think uh nathan says those people who have non-performing notes you may get into bankruptcy not for a positive thing but to delay the foreclosure yeah right they can file bk the morning of they have 30 days to file their plans and they probably won't right and then they're back you're back to where you have to go back to the courts get it all done and get that thing re you know publicized and get the foreclosure started so and that's been my experiences is when they have to present a plan um i don't know that i've ever handled one where they turned it in after five days it's always you know 29 30 days like they're waiting right to the end which frankly if i was in their position i would do the same thing but it's for me because i'm i'm a short term uh you know turn it around that that becomes a frustration absolutely so well further ado tony let's bring up your powerpoint kind of show people what we're talking about those who are new again um i'm gonna share the chat any questions you may have with tony and we'll let him adjust where he wants to answer things i'll put into the chat box we have up here okay let me i am not as technologically savvy as i like to be so hold on a second here okay does everybody see the slideshow there we go yes we're good okay we're good okay so let's talk a little bit about bankruptcy okay uh we're going to cover some topics today uh let's just kind of outline we're going to talk about um and honestly you know uh dave and nathan are gracious enough to give me an hour or so here any single one of these slides we could spend a single hour on so this is this is this is very 30 000 foot view stuff but um but let's get into some of that stuff so we're going to talk about who the players are in a bankruptcy we're going to talk about some key differences between 7s and 13s we're going to talk about lean strips and cram downs a little bit of timeline what a chapter 13 timeline looks like some common questions that i get quite frequently from from note buyers and investors and the big thing everybody wants to know about is what's this going to cost me so let's hit up who the players are first okay so you've got a whole bunch of people that are involved in the bankruptcy process you've got the u.s trustee debtors council creditors council the local trustee the judge the debtors okay obviously let's start with the debtors that's who's filing the bankruptcy and they've got their attorneys some debtors file it themselves those are usually kind of pain in the rear end kind of cases but uh we call that a pro se filing we prefer a debtor to have counsel especially in a chapter 13 context because they're pretty complicated so uh those are those are two of the main parties the debtor and their attorneys then you've got the creditors that's that's all of us and creditors council that's me okay so we're kind of the other side of the other side of the coin on a bankruptcy then you got people that are kind of in the background you've got the local trustee that's the one that you're going to deal with the most often that you hear about when somebody talks about oh you've got a good trustee in this case or oh this trustee is difficult or this trustee's rules or this trustee's uh attitudes on things that's what you're really talking about the local trustee and for chapter 13 trustees there's a few hundred of them across the country there's usually a couple in every jurisdiction then you get the us trustee that's kind of the boss of the local trustees uh the the the jurisdictions of the united states are divided up amongst regions uh and each region has uh kind of a regional trustee and then there's a u.s trustee over all of them and then you got the judge if you do things if you don't get too um there are some debt limits and again i've got a 2b continued at the bottom of this slide because we're going to really take apart each line on this slide with with kind of an individual slide but there's some debt limits to a chapter 13 bankruptcy so uh so an individual can't have more than 420 000 or so in unsecured debt and about 1.3 million in secured debt those sound like big numbers but 420 000 is a bad hospital stay 1.3 million dollars is a small town landlord with a couple of properties uh so it's pretty easy to go over the debt limits in a chapter 13 bankruptcy um and uh not be able to qualify for a chapter 13 bankruptcy uh there's code data protection so we talked about there not being any code data protection in a chapter seven bankruptcy there is in a chapter 13.

so if you've got debtor one and debtor two who filed a bankruptcy i'm sorry you've got debtor one and debtor two on a note and only debtor one filed bankruptcy you can't do anything to debt or two you've got to go into court even though debtor two never filed only debtor one did because their co-debtor debtor two has protections under the law in that debtor one's chapter 13 bankruptcy so there's more chapters 9 11 12 and 15 okay typically you're not going to see a lot of these um nine is for municipalities so that's detroit orange county california uh you're not going to see those doing uh doing the note buying work that that we typically see in our practice chapter 11 we do see a good bit of chapter 11 bankruptcy work uh in our bankruptcy practice it's more from our institutional clients um however i do see some chapter 11 work from some of my note buyer clients chapter 11 is for the business that needs to reorganize so uh we talked about chapter 13 is only for individuals if a business needs to reorganize they file chapter 11 bank bankruptcy it's also for the higher net worth individuals so we talked about the people with uh too much debt uh too much debt too much too much assets things like that so we got like pier one filed a chapter 11 jcpenney mike tyson burt reynolds so these are people with higher net worths or businesses that need to reorganize chapter 12 is for family farmers and fishermen uh it's kind of a class unto itself because farmers and fishermen typically are only paid once a year at harvest maybe twice a year so chapter 13 if you remember required regular income family farmers and fishermen don't typically have that so we we do see a good bit of chapter 12 work maybe once a month or so now mind you we're doing about 600 or 700 bankruptcies a month in my firm so so one or two a month or chapter 12 bankruptcies and again we're in farm country out here in ohio kentucky indiana michigan illinois um so we do see some family farmers and then chapter 15 just very briefly is cross-border cases blockbuster is one such case so when blockbuster went bankrupt in the united states blockbuster canada came into the united states and latched on to blockbuster usa's bankruptcy and that's called a border banker so you're not going to see those in your worlds either so that's why we're not even going to talk about those let's get back to chapter 13 and that's definitely where i want to spend a you know a good chunk of time today so um i want to talk about what's in the plan and what's outside of the plan now we're going to hit up some questions that um people posted on the website or on on facebook when we uh announced this um this webinar so uh when you hear inside the plan or outside the plan you can kind of correlate that to trustee pay or debt or pay so the debtor's got a note they're paying that a chapter 13 bankruptcy they're either going to be paying that to the trustee or they're going to be paying it to you so typically for shorthand people say in the plan or not in the plan i don't like that trustees don't like that but that's kind of the parlance that people use if it's a trustee pay if you're getting your money from the trustee that means it's in the plan if it's outside of the plan that means the debtor's paying it directly i would prefer everything be paid through the chapter 13 trustee you may not but i do as many of your attorneys because i can then use the trustees records to see what came in and what didn't come in when it came in the amount that it was um it helps you with your record keeping i'm sorry that was illegal i thought they weren't allowed to pay anything outside the plan oh it depends trustees vary um the trustees vary on that uh quite often some trustees even if you're behind they will let the debtor pay directly in most trustees who has any arrears on the property they'll make that become part of the plan they'll make that who chooses to paid trustee pay or debtor pay what's that who chooses if it's paid by the debtor or through a trustee if it's a jurisdiction where you can pick um then the debtor technically picks that but most jurisdictions have local rules and local requirements as to what as to how that's decided and typically it comes down to whether or not there's arrears on the property if there's arrears the trustee's going to be paying it if there's no arrears then the debtor can pay that my home jurisdiction cincinnati and dayton ohio if the debtor is current on the property they can pay that mortgage directly they can pay that note directly but if they're behind on it even one dollar behind on it it's got to go through the trustee we talked about plans a little bit before and how extremely extremely important plans are we have a form plan that's pretty much followed all over the country these days which took many many years to develop and you would like to think because bankruptcy is a federal thing you would like to think that it's all the same in every jurisdiction but unfortunately it isn't um you have to review that plan and you have to understand uh what's going on in that plan that's something that your attorneys if you ask me you should handle we can work through that with you and explain to you what we're looking at but that plan review at the very beginning of the case as soon as that plan is filed is critically important it will outline what that borrower wants to do um typically uh a standard plan is going to say you know i owe ten thousand dollars in arrears i plan to divide that ten thousand by sixty months pay one sixtieth of that ten thousand dollars in arrears every month plus my ongoing mortgage payment that's a good plan there's not a whole lot to object to that uh there's not a whole lot of reason to object to that especially if there's only 10 000 in arrears if there's 30 000 in arrears we would want to object to that um where i see people getting creative debtors getting creative is i owe 10 000 in mortgage arrears months one through 59 i'm going to pay one dollar on those arrears per month and then month 60 i'm going to refinance my mortgage and pay off the rest of the arrears i see that with regularity if you don't object to that plan you're stuck with it and you're stuck getting a dollar a month until month 60 and there's not a whole lot of cases that complete only about 30 35 of chapter 13 is complete so you may be stuck in this bankruptcy for 59 months getting a buck a month because you didn't object to that plan so planner reviews are very very very important uh from an arrearage perspective um but also from a valuation perspective okay uh you need to understand the the valuations that that we use uh in in in reviewing a plan and what the borrower's going to use in review and putting that plan together so how did the debtor come up with their value they're going to typically go to the county auditor they're going to go to zillow they're going to go to what the neighbor down the street sold their house for they're going to go to whatever they think their house is worth it may be a good price it may be a high price it may be a low price but the debtor can testify to themselves what they believe the value of the price the value of their home is how do you come up with your value of the property you unfortunately need a little bit more evidence to support that hopefully you don't need to and we can all agree on evaluation that's what normally happens we all agree on evaluation of the property okay but sometimes we don't and sometimes you need to get an appraisal done sometimes that borrower is going to say that property is only worth ten thousand dollars you think it's worth a heck of a lot more than that so we're going to talk about getting an appraisal it might be as simple as a bpo it might be as simple or as complicated as an interior appraisal that that's going to cost several hundred bucks but that's outside the norm typically we're all going to agree on a value of the property that's actually what we've got going on tony and this one in ohio where she claims it's something like twenty thousand dollars and we're saying ah it's more like 70 75 so yeah see that's a big spread that's a big spread and the other thing that could that could mortgage i'm sorry she's just renting it out so it's that's a problem we won't get into it all the way but no we won't but we're going to cover cram downs and that's a cram down situation okay which is probably where we are with that case so and that's why evaluation is very important so the type of property is it residential or rental and the lien position first mortgage second mortgage those are very very important when you're you're figuring out what your valuation is on the property we had a question about calculating our ears this is a good point to talk about that so um the debtor's going to calculate our ears on a very basic level okay they're going to get a statement from their servicer from their lender that says you're 10 payments behind at a thousand dollars a month your rears are ten thousand dollars okay so they're bankrupt ahead okay so let's pick back up with calculating arrears so it's really really simple for the debtor to calculate arrears they think they're down ten thousand dollars a thousand bucks a month for for 10 months um so they're gonna file their bankruptcy with with an arrearage amount of ten thousand dollars a thousand dollars a month ten months in arrears but we all know that it's a lot more than that right because you've had a lawyer you've started foreclosure you've ordered title you've done all these other things and your urge is really more like twenty thousand dollars so your arrears is going to be calculated when you file your proof of claim so when that debtor files bankruptcy you get to your attorney and you say attorney so-and-so filed bankruptcy i need you to review the plan tell me what it says and i need you to file a proof of claim so i'm going to come back to you and i'm going to tell you i need you to provide me with every bill everything that was due on this account prior to that bankruptcy being filed so everything up until that day that that case was filed we can put on the proof of claim well most things it's a little jurisdictionally dependent but most things we can put on a proof of claim up until the day that bankruptcy was filed so we can put uh in many cases we can put the attorney fees that you've accumulated on the foreclosure we can put title costs we can put filing fees we can put all these other things the taxes that you've paid the insurance because the debtor's not gonna know to list that as an arrearage on their property um your arrearage needs to be calculated and proven down to the penny when i started this on the creditor side you know 10 15 years ago i used to be able to say there's ten thousand dollars in arrears and go about my business but nowadays i have to prove every penny of that ten thousand dollars um or my client doesn't get it so so when it comes time to calculating arrears we need to be very very precise if you come to me and say i did 100 drive by appraisals in the last year i'm going to ask you for a receipt for each one of those so so it gets a little technical sometimes so you may not really care about those because they're 10 bucks a piece or whatever they are um you know but you've got you've got other other fees on the cost just give me a copy of the invoice give me a copy of the tax bill that you paid you give me a copy of the real estate um uh insurance that you paid for the property for the property insurance um so that's what that's what i'm talking about when it comes time to our calculating arrears and we need to be very precise when payments come in in that bankruptcy uh and your servicers are going to do this you need to make sure that the payment when it comes in from the trustee it's going to be split some of that money is going to be for your ongoing payment some of it's going to be for the arrearage payment you need to make sure that you're tracking what of that payment is going to pre-petition debt the arrears or post-petition debt the ongoing payment you need to make sure that you're applying pre-petition to pre-petition and post-petition to post-petition and i put that on here as well just something for people to think about your servicers know this so apply pre to pre post to post and it'll be difficult to get into trouble the reason why you want to do that is because we talked about briefly a second ago the success rate in chapter 13 bankruptcies is pretty low um so when that bankruptcy dismisses and you've got to unwind all of this stuff much easier to do because then you can take everything that you apply previously to your pre-petition arrears and then everything that you applied post petition all gets applied on the debt that's owed okay if that bankruptcy gets dismissed it all goes back to the beginning but if that bankruptcy gets all the way through and again about a third do okay if it gets all the way through at the end of that case that pre-petition should be 100 current and that post petition should be 100 current that does happen that does happen i see that every day that happens hey tony tony kobe cox here got a question for you mentioned on this that we need to make sure that gets a pri applied pre to pre post to post how do we do that what's the command mechanics of us being able to do that well your servicer should do that for you um when the check come from the chapter 13 trustee it's going to be outlined by a claim so so we've got a proof of claim that we file that may be proof of claim 1-1 okay uh well the trustee has that claim set out 1-1 1-1 a so when they send you 1500 that month they're going to tell you 1-1 is a thousand dollars and 1-1 a is 500 and you will know that 1-1 is your arrearage and 1-1 a is your ongoing payment amount they should split that out for you to make to to allow you to apply that properly so is that is that one dash one one 1-1 a is that something that will come to us directly from the trustee as the note investor or do we have to obtain that from the servicer who who generally is going to receive that portion of the payment well that's a good question however you set up your proof of claim so if you set up your proof of claim that you the note holder want the money to come to you then that's going to come to you but if you want it to go to your servicer and that's where most of it that's where payments usually go usually goes to the servicer then the servicer will apply that correctly yeah i'm more interested in the notification rather than the actual funds i would want the funds to go to the servicer of course but i you know it's it's uh you know trust but verify so yeah you you won't get notification from the trustee that a payment was made to your servicer and typically for for those who don't understand is when your bankruptcy gets filed the servicer typically or should push the payment pay to date to be today they're consistently considered um up uh they're paid after today and they're consistent they're actually not behind any longer because arrears payment covers the back pay where you're going to see the fact that it looks like it's performing but they're not paid for three years your next due date should be next month oddly enough and the rear seas kept care of everything that was before it was delinquent but in the eyes of what you see in your system it will show that the borrower is actually current at this moment and that's how the services should be recording it cody you can also get a subscription to the ndc um national data something um uh and uh you can you could you should be able to track it that way you can at least see when a trustee sent a payment um and the amount that it was but the trustee's only gonna send one notification to that payment and if you say it goes to your servicer that your servicer is going to get notification yeah that makes sense tony are you going to talk a little bit a little bit about pacer later on as well not a whole lot on pacer so we talked about the very beginning as we kind of had to pick and choose what we talked a whole lot about just summarizing pacer for everyone who's listening is is the system which you can log in and look up if anyone has a bankruptcy filing before or now see all the documents or the court hearings so if you sign into there they charge you it's a dime a page and every quarter if you have born and ten dollars worth they send you a bill so that's the way you can look up to see if anyone has a bankruptcy what the details of it all the documents and everything else or you just call tony and he tells you what's going on exactly uh but yeah it's a good idea for any note investor as part of their due diligence when purchasing a note is to run that one run that um homeowner's social security number through a through a pacer search or some kind of search where you can find out if they filed any bankruptcies and see where that bankruptcy is along in the process um so keep on trucking along let's talk about some timelines again talked about this at the beginning these are going to be very very broad no two cases are the same every jurisdiction is going to be judge district division trustee specific um and and i have to say that because i don't want anybody coming back and saying oh tony you said this was going to happen at day 14 and it and it's not like that um but but again just so you get an idea of the process of a chapter 13 bankruptcy okay so pre-filing a debtor is going to see an attorney they're probably going to tell their creditors look i'm filing bankruptcy they're going to have to do a bunch of stuff in order to file on the day they file that means the automatic state goes into effect immediately you can't speak to them anymore you can't call them you can't ask them when they're going to make their next payment as soon as they file bankruptcy you cannot speak to the debtor directly you got to go through their attorney now you may accidentally speak to the borrower because you didn't know that they filed bankruptcy that's fine nobody's saying that you're going to get dinged for that but calling every day and asking where your money is that's a problem you got to go through their attorney on that same day or within a day or two after a judge is going to be assigned a trustee is going to be assigned to the case and things are going to start coming together so between day one and days 14 and 30 okay a notice of filing is going to be sent to all the creditors so if the debtor listed you in their bankruptcy it's going to go to you that they file bankruptcy um if it's a recent purchase if you um are just kind of looking at this case if you haven't sent the hello letter yet debtors they sometimes don't understand where their mortgage is they don't understand you know they they had to deal with with first united bank and now cody cox owns the note you know they don't understand that so first united bank may get the notification um so it's difficult you may not get notification that's why running pacer searches um or making sure you know where the bankruptcy is along the process along in the process is a good idea so uh by day 14 nathan you were saying or dave one of you were saying that that plans need to be filed within 30 days it's actually 14 days then debtor has 14 days to file a chapter 13 bankruptcy plan okay by the time that is filed it's about two weeks have passed you're going to get notice of it again if you're listed in the bankruptcy you'll get notice of it and then in theory by day 30 they should start making payments ah okay especially if they're paying direct if this is a direct pay situation where the debtor is making their mortgage payments directly you may never see a stoppage in that payment you may be dealing with a current mortgage a current note situation where the borrowers are only filing bankruptcy to pay them back taxes or get a car out of repo or something like that medical yeah you know so so you may have especially if it's a debt or pay you may never miss a payment uh you know may never miss a time coming in so by day 30 that debtor should be making payments again especially if they're paying directly by about day 45 they're gonna have what's called a meeting of creditors uh it sounds fancy typically no creditors show up i haven't been to one in many many years um it's just a time for a creditor to ask questions of the debtor under oath we do go to some of them especially if the debtor's been hiding from us things like that but but typically nobody goes to those if you're going to object to the plan we talked about those before if we're going to object to the plan you really should have done that by now um that's you know forward another 15 20 days or so the plan is going to confirm if there's no if there's no objection so you're already two months in and the plan is not confirmed yet okay this is not a fast process uh you know like nathan and dave like we were talking about before nothing about bankruptcy is fast it is a slow laborious process so we're day 60 70 75 into this the plan if there were no objections is just now confirming if there were objections we're still trying to hash out those objections we want the value higher the arrears are off those kinds of things all of those objections are going to push out the confirmation date weeks and months later by about day 70 and it is actually day 70 for for what we're about to talk about you have to have your proof of claim file so in two months and ten days from the day that debtor filed bankruptcy you the note holder has to have their proof of claim filed with the court there's some exceptions to that we might be able to file kind of a skeletal proof of claim and and be able to finish it 50 days later but that's for another day i want you guys to know you have to have your proofs of claim filed in 70 days from the day that bankruptcy has filed until that proof of claim is on file and of record the trustee if the trustee's the disbursing agent on your payments the trustee's not going to make any payments because you've not proved your claim that's what a proof of claim is a proof of claim is an accounting of the arrears a proof of claim is proving that you own that note it's showing the note it's showing any endorsements showing the assignment it's showing all of those things that you need to show to prove that you own that note file it as soon as possible do not call me on the 69th day and say tony we want you to file a proof of claim we're gonna do it but it's gonna be a pile of crap and that's not what you want okay you want an accurate honest um proof of claim to be filed so as soon as that debtor files bankruptcy get the ball rolling with your trustee on those proofs of claim to get those filed get it going as soon as possible because here's what's going to happen that debtor may make a couple of payments and then fall out of the bankruptcy if you've got a proof of claim on file and that debtor falls out of their bankruptcy you may get a couple of payments because you got your proof of claim in early it's always a good thing to get your payments to get your proof of claim filed before the deadline um after day 70 okay you want to monitor for objections sometimes people aren't going to like your proof of claim so using the example before the debtor's going to say there's ten thousand dollars in arrears because it's a thousand bucks a month and they're behind ten months you file your proof of claim showing twenty thousand dollars in arrears because you've got the same ten thousand dollars in arrears but now you've also got ten thousand dollars in costs and fees and and stuff that you've accumulated um there could be objections to that proof of claim you got to watch for those you should be resolving your plan objections if there are any and then once that plan confirms you need to watch for payments okay your servicer will do that you'll do it however those payments are coming in watch for payments if the debtor falls behind on payments talk to your attorney you may want to file a motion for relief from stay we're going to talk about motions for relief from staying a little bit i don't want to get too bogged down in that while we're talking about a timeline but you may want to file that you may not want to file that um again after confirmation if there's any payment change that happens because of a rate adjustment or or um you know more taxes that are due those kinds of things you have to file a notice of payment change with the court you got to do that 21 days before you want that payment to be a different amount so that's a notice of payment change if you are buying or selling a note in bankruptcy you've got to make sure that a transfer of claim is filed so you as the buyer of that note in bankruptcy if you want to get paid on that you have to transfer that proof of claim and it's a form that your attorney will fill out for you that says yeah you get joe debtor used to be paying chase now joe debtor needs to pay um by you know uh you know me now because now i'm the note holder and that's a transfer of claims so that happens after confirmation if um i charge you because i'm going to charge you for that transfer of claim i'm going to charge you for these things that we're doing after confirmation if you're in a jurisdiction where you can assess that fee to the borrower you've got to file a post petition fee notice with the court before you can charge the borrower for that okay so that's called a ppfn post petition fee notice we'll talk about those more a little bit later but again don't want to get too bogged down in all the all the alphabet soup of bankruptcy here so those are all things to think about um again post confirmation monitor the case eventually if we got a good debtor here who's making their time their payments timely the plan is going to complete the trustee's going to file a notice of final cure saying that all the arrears have been paid you must respond to that it's going to say notice a final cure you have to respond to that and say that you agree or you don't agree the debtor's going to receive their discharge and the case is going to close so post discharge if the debtor did get a discharge post discharge you need to make sure that the account is updated with all the money that came in from the bankruptcy case you cannot be collecting on debt that was discharged in the bankruptcy so if that trustee says i've made all the arrearage payments and you don't object to that you don't respond to that but you can show you can prove that they actually didn't make two of those payments and you don't respond and that debtor gets discharged you cannot go back to that debtor and collect those two payments those were discharged in the case bankruptcies are important to follow all the way through and you'll be walked through it by the trustee and by what they file with the court and what they sent to your attorney who's entered an appearance for you on the case okay that is a very quick timeline any single one of those little blue boxes could be their own presentation but it's important to see a i think a timeline of of bankruptcy so so let's you know before you get to there at any moment if a loan gets transferred from me to nathan does that slow down the process you know for me i'm trapping that claim but for anyone who's new should they be nervous if that if any of those steps are not done and that loan is transferring uh no it's a good idea to maintain so you've got a note dave and you're selling it to nathan you've got a proof of claim on file dave it's being sold to nathan nathan's got to file his transfer of claims saying i nathan hold the note now no longer does dave hold the note uh maintain that relationship between one another because another payment or two may go out to you dave instead of nathan um i see that happen trustees missed those i mean there's a lot of paperwork there's a lot of things coming in and out of a trustee's office they may miss that um but get those transfers as soon as i mean that should be part of the onboarding of that loan for nathan is for him to get his attorney to file that transfer of claim to get that process started as soon as possible but typically it's it's it's a notice there's really nothing that happens it's a notice of transfer of claim no one's going to object to that not separate from the regular hello goodbye letters correct the hello goodbye letters has nothing to do with the bankruptcy case um we may attach the hello letter to that to that uh transfer of claim just so um uh the trustee and the debtor and everybody can see your information nathan how to get ahold of you those kinds of things yeah but generally a transfer of claim is a pretty simple one two page document with with maybe an attachment of a hello letter or an an endorsed note something like that so tony two questions in the chat here is uh what if the borrower wants a modified alone in the middle of all this well that's a slide later on but i i don't think we're gonna get to all of our slides we might want to uh we might want to do a part two on this yeah okay um the question was do you file uh jeffrey claim before you file the assignment or does not matter so assignment's only for county records this is bk so they're two different it doesn't matter which way you do it correct as long as you're filing your claim in bk you still gotta file your assignment with the county that's only for the county records not doing bk right yeah for a transfer of claim generally i don't care about it an assignment a claim because that could there is an assignment on the mortgage because that generally could take uh some of these counties especially now during the times of cove that are are months behind so i'm not going to wait for that assignment just tell me that it happened maybe give me a low letter or something like that and that's enough for me and that's enough for bankruptcy courts in general that's enough for bankruptcy courts if it's ever challenged for any reason maybe by then the assignment will be done but we don't need the assignment to do a transfer of claim but modification to answer your modification question yes you can do a modification during a bankruptcy um and a bankruptcies actually if you ask me a good chance and a good opportunity to do that because typically that borrower's going to have an attorney who may be able to help walk them through why that is a good thing for them um you know the borrower doesn't understand that you did not pay a hundred cents on the dollar for this note and that you may be able to give them a haircut because you didn't pay a hundred percent for the you didn't pay a 100 cents on the dollar for the note so you can get them into something that's more affordable for them and you can do that but you can't talk to them directly okay that's that's the important thing you got to go through their attorney their attorney may not call you back you have to call your attorney so it sounds simple well it sounds complicated because there's more more people in the mix but it's generally a good opportunity to be able to do a modification if there is one to be done in my opinion the process is simple but there's just more steps in between because there's more people that's correct and then because it's in bankruptcy you may have to modify some things you may have to file an amended proof of claim because that modification may wipe out all the arrears right so the trustee can't be paying on mortgage arrears anymore so you would just need to file an amended proof of claim the debtor may want to file with the court and notice or a motion to approve a loan modification um that's typically something that a debtor files we have some jurisdictions where that's a creditor filed pleading but that's kind of ridiculous for that to be a creditor file pleading that's that should be a better file pleading and so for investors too you can talk to the bk attorney right the debtor's bk and you can also call the trustee up right so you wouldn't i wouldn't advise doing it but you can speak to the trustee and say listen i want this i typically go through my service server or my attorney to ask for the ledger or whatever he asked for yes you can you can speak to the trustee and say listen i want the ledger to proof of payments you can ask for that because i could show you what payments have come in yeah um but yes don't talk to the borrower um if they call you just say let's say i can't speak you right now you have an attorney representing you and they may say listen all i want to do is modify my loan then you just direct them hey listen talk to your attorney i'm calling my servicer and we'll go from there that's exactly right or or send you some kind of uh permission on their letterhead that says you can talk to my client for the purposes of a loan modification that's generally what happens because these attorneys don't want anything to do with that for their their client they want you to be able to talk directly with them they want to get out of the way just as much as you want them out of the way so they'll give you authority for either you or your servicer to talk to them about that so let's get to seconds here right or sometimes first but i would say mostly seconds like cram downs okay so very briefly on cram downs okay cram down's a big reason why people file chapter 13 bankruptcy it's reducing a secured interest to the value of property okay happens all the time with personal property it exists only in chapter 13 cases not chapter 7 cases a debtor can cram down a non-primary residence but then they must pay off that entire debt within the plan term let's be honest that's impossible to do we do not see these with any regularity whatsoever we do proofs of claim we probably do a hundred proofs of claim a month maybe one of those has that debtor paying off that claim within that five year term it just doesn't happen okay um so generally speaking you're not going to see a cram down happen in a chapter 13 case on on non-primary on on non-primary residents like that so but you may be very happy if they can cram that down in a 13 again because you probably didn't pay 100 of what the notice of what the notes face value is right um i want to skip that example it's not a big deal i want to talk about strip offs okay because a lot of people are buying seconds right now i see seconds talked about all the time in our facebook groups here so um when a lien on property is wholly unsecured okay i just want to walk through the definition here the lien may be stripped off and made unsecured so we're really talking about junior liens here primarily second mortgages so here's my example the value we talked about how important value is okay the value is determined at the beginning of the case and the debtor's plan so looking at that debtor's plan the value of the residence was determined to be 150 000 in this example okay the first mortgage is for a hundred and sixty thousand dollars you have a second for forty thousand dollars that second mortgage is able to be stripped and that's some scary stuff okay because that's why value is so important if you can show the value of that house was a hundred and sixty one thousand dollars and the first mortgage is only a hundred and sixty thousand dollars your full second mortgage is paid you can't strip any of it off if even a dollar of equity is present the debtor cannot strip that off i can't stress to my clients enough especially those in the second mortgage space how important a good valuation at the beginning of the case can be later on okay so that's what you need to keep in mind there needs to be equity for your mortgage to survive that case but here's the deal debtors have to file to strip off that mortgage they may be able to do it by motion but they may have to do it by an adversary proceeding again not going to get into this into the mechanics of either of those but the debtor must file for that to happen so you may know that you have a strippable lien you may say oh yeah i mean this is this is garbage i paid five cents for it you know but at the end of the day i still would suggest you file a response to that debtor's motion to strip off your lien yes that is spending good money after bad and i'll be the first to say don't pay me if you don't have to i will turn down work but this is a situation where i would tell you let's file a response because that response is going to indicate how all of this is going to happen we are not going to cancel that lien unless and until you get a chapter 13 discharge if your case converts to a chapter 7 case the lien remains we are not canceling that lean and less than until a series of things happen you want all of that in black and white and then if they do get a discharge you want that agreed order to be able to be used at a at a closing or with the title or with the title agency or with the county recorder's office to be able to say i don't have a second mortgage on that property anymore that agreed order may say upon com upon discharge the lender will issue a satisfaction of mortgage it will say whatever all the parties agree to but if it doesn't say anything and that debtor filed a motion to strip off the mortgage and this and the judge signed an order that said the mortgage is stripped is it stripped then when is it stripped we we have a real problem on our hands here if we don't get good language on record with the with the case that may be how you sell them you may be able to resell it uh you know always in agreed order i do not like default orders to be entered for any of my clients even if we want what the borrower is asking for still reply still get an agreed order on on file um so that's kind of stripping off stripping off liens so just so people know now that the leanest trip is now an unsecured debt if the debt is still present it's just not secured by the property it's just not secured by the property right so um you don't have to release it until the debtor's discharge though and that's the thing a lot of people think that as soon as they file bankruptcy or as soon as they file that motion they don't have to do anything it's stripped off it's not it's not they have to take additional steps the attorney for the borrower the borrower directly has to take an additional step to strip off that junior lien but that dead still on the books not by secure by anything that could be on the books forever as a debt owed by the by the i guess the prop no okay no not if it's discharged not if they get a discharge that's it okay now if you have a first now here's where you may be thinking dave if you've got a first and the debtor gets a discharge of their debt um you can then foreclose on that first mortgage you just can't get a judgment against the borrower because that debt was discharged so so yes that debt kind of stays on the books with the county but you get the property back in a foreclosure sale so at the second and it gets stripped and you have a first and second that second gets stripped there's no the liens on the property is still first and second or is that second completely off that of the county books off depends what you put in your agreed order yeah so guys this one make sure you're clear that that stripping of the lien is important so if you're looking at an asset and you're not reviewing the bankruptcy court and you know they have a bankruptcy filing or don't you better be looking at this and make sure the second lien has security still yes or you're buying blank debt just know what you're buying you know what you're buying an unsecured can still be collected on and tony do you guys do that i'm sorry do you collect on unsecured debt oh yes oh yes we file unsecured we file unsecured proof of claims for um proofs of claim for our a lot of our auto lenders so they've already repo the car they've sold the car we're filing a proof of claim for an unsecured balance typically you're getting a few pennies on the dollar you're not getting a whole lot but you're getting something it's something yep it's something and then that debtor's got to be in that bankruptcy for at least 36 months typically again broad generalities here and if not a lot of claims are filed you may get a lot more than that couple of pennies on the dollar right so always good to file a proof of claim yeah so let's zip through a couple of other questions that uh that i saw on the facebook page here um don't like your plan treatment we got to look for the valuation of the property and how the debtor uses that property we talked about that at the beginning of this presentation debtors cannot cram down a first lane on residential property okay what if you're not getting paid okay you're not getting paid well should you be was a proof of claim filed if this is a trustee paid jurisdiction and no proof of claim was filed you are not going to get paid so you may buy a loan no proof of claim was filed and you wonder why you're not getting paid well you shouldn't be getting paid because no proof of claim was filed so these are all things that your attorneys can can walk you through and determine why you're not getting paid um more often than not a proof of claim was filed the trustee's just not getting money from the debtor um perhaps you know in our scenario before where dave sold a loan to nathan uh perhaps the trustee just didn't see that transfer of claim dave's been taking the money all along and he's telling nathan to take the you know you know take a walk on the highway buddy you know and uh you know we got to figure out that and get that corrected so um here's a situation where you may or you may not want to file a relief from stay okay you're not getting paid but the trustees also filed a motion for a motion to dismiss the case because you're not getting paid because the trustee's not getting paid so you may come to me and say tony i want to fall for relief from stay and i may tell you look don't waste your money this case is going to get dismissed why bother or i may tell you look i know this trustee they're going to give this debtor another bite of the apple every single time let's file for relief from stay so those are people understanding the stay is a state from foreclosure or filing any kind of legality to take a property back so the stay is the word for saying you can't file foreclosure on it so you want relief from that pause so you can move forward with the foreclosure and now motion relief is an expensive feature especially if you're dealing with a loan that has a 200 hour a month payment right right so you're getting two hours a month and your relief estate could be 9.50 or so depending on jurisdiction and that's five months of payments and if you could just wait a month and the trust he can file for you you're saving that money yes and that's a that would be something that i would talk about with my client when they came to me and said should i file well i'm only getting 200 bucks a month well in a chapter 13 a motion for relief from stay is a thousand fifty dollars plus 186 dollars in filing fees so you're 12 1300 into a motion for relief from stay then it may just not be worth it you may just want to wait out the bankruptcy it i i don't get happy clients that way i mean they're happy that they're saving money but they're not happy that they have a note that's not making any money for them so um let's see here so filing for relief from staying dave like you just talked about it gets the property out of the bankruptcy estate it allows you to either commence or restart whatever probably got the debtor to file bankruptcy in the first place so you probably started foreclosure you started a forfeiture you started an eviction whatever you're doing they filed bankruptcy the stay went into effect that stays all of those proceedings you're looking for relief from that stay to be able to proceed in state court usually motions for relief from stay are resolved with an agreed order that agreed order may result in more payments coming your way when i file a motion for relief from stay i will almost always entertain an agreement because i know the judges want an agreement to be reached sometimes the borrower just says i give up i don't want it i'm not paying on it anymore and take the house back but i know a judge every single time 10 times out of 10 times is going to say uh no no creditor you're going to you're going to accept we're going to reach some kind of settlement you're gonna i'm gonna order you to take an extra hundred bucks a month until the arrearage is caught up that accumulated during the bankruptcy i want to get in front of all of that i'm gonna go to you and i'm gonna say look they're six hundred dollars behind let's take an extra hundred bucks a month for the next six months but here's what i'm gonna do in that agreed order i'm gonna say if that debtor ever falls behind again i don't have to start this process again i don't have to waste my clients money and spend another thousand fifty dollars on a filing fee and i want to just be able to file a notice of default with the court and i want to be able to go back to the court and say they have defaulted on our agreed order and agreed order doesn't cost you any more filing a motion for relief from stay at least i don't charge for those an agreed order is going to say we're not going to have to do this again if uh if the debtor falls behind again so that is very very generally what filing thoroughly from stay is going to get you so dismissed versus discharge is very commonly confused just quickly i know you're beginning to hear dismiss and discharge how would you define it okay so two words look kind of the same sound kind of the same could not mean more polar opposite in a bankruptcy context if a case gets dismissed it's over overdone you are back in the position you were in before that bankruptcy was filed if you are if you are able to reset that foreclosure sale for the day after that dismissal order is entered you can do that you have to give the debtor credit for any money that you would have gotten during the bankruptcy but at the end of the day if that dismissal hits you're done there's no more bankruptcy there's a bankruptcy on their record but there's no discharge a discharge is what that debtor's looking for in a bankruptcy and it's a discharge it's an absolution of of their debt uh that they wanted to get rid of in the bankruptcy so a discharge means you can never collect that debt again period so you may you can foreclose on your property you just can't collect any deficiency on that foreclosure from that borrower if that loan is discharged in the bankruptcy if that loan is uh is absolved and if the borrower is absolved from that loan in the bankruptcy when they receive that discharge right um i'm gonna skip repeat filer and how often people can file um collection of your attorney's fees from the debtor sometimes sometimes you can pass my fees along to the borrower um it's going to depend on jurisdiction and your attorney will know the answer to whether or not that can happen uh it varies widely and oftentimes it won't be for what your attorney charges you for things so uh a a proof of claim is 950 the proof of claim and plan review is 950 plus 250 dollars if i have to fill out what's called form 410a again not going to get into all of that just realize that's twelve hundred dollars and i'm going to charge you for this that's the fannie mae fee that's what we pass right along all of our clients provides a lot of clarity it's easy to understand the southern district of indiana will allow you to get i think it's 500 i can't remember exactly what it is from the borrower so i'm not lowering my feet of 500 but you can go to the borrower and say you owe me 500 because i had to pay tony 1200 to file that more jurisdictions allow you to collect it all um and again whether or not the debtor's gonna pay you just never know but you have to file a notice of post-petition fee expense or charge to get that going uh and that's something that your attorneys can do for you uh can i sell or buy a note in bankruptcy yes we do it all the time we talked about that can i modify a loan in bankruptcy yes you can we talked about that um so i i talked about some costs involved i think everybody at this point really understands that our office and most other firms that do what we do are going to follow the prevailing fannie mae fee schedule for whatever foreclosures cost and for whatever bankruptcies and evictions it's just easier it's just easier for everybody um i don't want nathan to ever think i'm giving dave a deal because dave gave me two files this month it just doesn't make any sense to me uh it's it's it's clarity and it's it's something that anybody can look up and see what the prevailing fannie mae fee schedule is um so these are just some very common pleadings and what they cost okay um and that's as of yesterday right or the day before whatever yeah yesterday so if you guys have any side questions we're going to kind of cut this sure we have some technical issues of course if you have questions put in the chat um and we'll answer them as we can some go on facebook connection with zoom um just weirdly enough but you know understand bankruptcy is a lot more than this uh we're kind of rushing through a lot um even the stuff of repeat filers and what you can do about them is a whole nother conversation and unless you're in florida which they reject those kind of claims a lot um most times you can get out of a situation where a person repeat files so uh so he's going to review some of his slides here to decide which ones you should hit on last if you have questions specific questions that's always best um you can post them you can email them you can reach out if you have them right now we can answer real quick but understand the fact that bankruptcy nationwide is generally the same steps procedures and everything else um the costs differ from state state a little bit but most of time is the same also understand the rules behind the bankruptcy is identical throughout the country you should not be interacting with people you shouldn't be um and if you have questions reach out to your bank street attorney we're having a plan problem with one of our assets it's in tennessee and they're working through getting that solved um i will tell you that we've had many times where the judge kicks the bucket down the street when they should be dismissing it i don't want to spend 1200 bucks to get a file out of bk when my payment's about 50 a month i'm hoping the trustee will come through um and we usually give about three months for that to happen uh dave were there any questions in the chat nothing yet which is awesome i mean i know we have a bunch of feels odd gear if there is anything particular feel free to reach out tony social media email or whatnot he's put himself out there a lot nathan do you have you had any questions recently that came up in your circle um nothing that comes to mind immediately i would actually go back and look at a couple of my bks and just see um i think you know as much as we go through in this and and there's extra steps and there's extra time and everything else it doesn't mean they're not worth anything yeah these they're still viable notes uh i know dave you like them better than i do but uh you you so one of the big things about bankruptcy and that you know i know the bigger funds love this is that you're not only getting that 225 payment a month you're also getting an additional possibly 100 200 hours a month and arrears and you're so you're getting it maybe for three years maybe for five years you're getting an extra kick and when that kick is over you can sell a loan right you bought it at a 12 yield whatever plus the bonus is getting a 15 yield and then you're selling it at a 11 12 yield in three years so during that time period you jumped it up take advantage of the rears coming up i see a lot of people wanting to buy loans in bankruptcy yeah yeah so i don't see any questions here guys um i i do want to thank tony for dealing with all the craziness and going through a very difficult confusing field as best you have um you guys are really awesome to work with um and you know it's interesting because bankruptcy and beat foreclosures are two different worlds where um available other than that man i i'm good and we're moving we're moving to cook county slowly no sales but now we can get to judgment that's exciting and it's getting there so yeah so reach out anytime uh you know i recognize a lot of the names that signed up for this so uh you know if we're not connected connect with me connect with our page we put out some stuff online we don't put a whole lot out there but we're always pretty available uh if i can't answer your question i'll get somebody to help you out uh you know franco and i kind of split my my law partner and i franco barely kind of split our practice state court versus bankruptcy court and uh it works out real well for us so let us know what we can do for you awesome awesome thank you very much tony i appreciate it thank you david nathan for doing the opportunity and uh we'll be talking soon we have some great uh episodes coming up in the next week as well um me and me to work behind the scenes um we're gonna be talking about joint ventures topics uh we're going to be talking about creating from a more uh cfd to a note um some of these awesome some awesome interesting topics that people are really intrigued by um so stay tuned for those uh the information will be coming soon so thank you very much guys if you have any questions reach out to tony reach out to myself and hit up nathan as well thank you everybody thank you and have a great [Music] [Music] hey everybody dave puts here from jkp holdings alongside me in a few seconds will be nathan turner he's running a few minutes behind guys uh but i'm glad to connect with everybody i'm excited about this one there's been a lot of questions around bankruptcy and a lot of curiosities because it's a field that seems to be lost uh in a lot of education programs a lot of times people just don't want to talk about it because they just don't know much about it so this is a great opportunity um to jump in here and kind of talk about things if you have questions along the way please feel free to jump in ask questions post any things you have problems with or whatever um and what not so um hopefully everyone can hear us okay if you can i'm seeing a black screen for some reason here i also make sure everyone can see us connect with us um let me just make sure this is if you can see us or whatever please send me a message i'm seeing a black rotating screen for whatever reason yeah not sure what's happening here let me just jump on um and just make sure everything's working out okay whatever reason okay well it shows okay on my on my phone real quick so um i wanted to bring up the fact that bankruptcy has a lot of different aspects to it a lot of questions to it um and there's some things that we don't need to actually worry about oddly enough um there are certain things that we don't get involved with and we shouldn't have to worry about and there's some aspects of it that actually makes it better for us so for those people who are interested in both we're going to go over that stuff um we've been times where we bought alone wasn't bankruptcy is that a terrible thing or not um and things like that so i'm curious what people say um and nathan said i'll be there in five minutes so he'll be here real quickly so um what we want to do here guys is go over what everyone understands right and to cover the topics that are interesting and fascinating and problems you're already going through um so what we're going to do is i'm going to introduce tony over here in a second he's going to go through a slideshow to kind of present what he already knows and what questions have been posted before in the meantime as you come up with questions we'll be monitoring the facebook feed um and we'll post it into his question bank to kind of answer um he's a go to the slideshow first to kind of cover a lot of the topics um but we're gonna move to it so without further dude nathan will be here in a second tony how are you doing this friday afternoon i'm great dave thank you thank you for having me on your show here how are you doing well man hopefully everything's going okay in the midwest uh but cove and all that stuff hopefully everyone's healthy and well so far so good and it's uh the winter's winding down it is only 35 degrees with a strong wind today but uh but uh uh warmer weather is on its way that's for sure yeah so can you give a background where you came from what you've been involved with how long you've been doing bankruptcy i know it's only been six months you've been starting this so um but give a little background who you are what you've been doing and how you've come into bankruptcy sure sure so um i graduated law school in 2002 out here in ohio and uh didn't really know what i wanted to get into i knew i didn't really want to carry somebody's briefcase i wanted to kind of work for myself in some ways and go to court and kind of get a name for myself going and there's there's not a whole lot of areas of the law that you can do that um kind of right off the bat so uh when i looked into it a little bit more bankruptcy was one of those areas and i liked the concept of bankruptcy i liked the concept of being able to show a client a rule talk about their problem and how it fits into that rule and and apply that rule whether it helps or or or doesn't help um i got in on the debtor side so i used to represent debtors and small businesses in chapter 7 and chapter 13 bankruptcies worked for a very large national law firm doing that and i was out of dayton ohio um after about three years four years of doing that i got a little disenfranchised with representing the borrowers and decided let's get it on the creditor side of things so uh the rest as they say is history i work for a couple of larger regional firms here in uh the cincinnati ohio area and in 2015 decided you know there's a better way to do this there's an underserved market out there uh not everybody who holds a note is wells fargo or chase and uh there's plenty of plenty of regular joes out there that are buying buying notes and i think it's an underserved market so my partner franco barely and i you know we met at a previous law firm and we we decided to start this thing up and it's been going well ever since awesome and welcome nathan i hope everything's going well i know you're uh in a situation you had to get out of so i appreciate you joining us so it's it's awesome to hear you tony because um like a lot of investors when i first got involved you guys were scary dealing with attorneys is a scary thing for investors um and you and a few other attorneys um present online the fact that we don't have to be nervous or scared or worried to talk to you guys that you're not this big bad lawyer that we see on tv that we're nervous about shaking your hand having a bite to eat is not a big deal to have with you guys um and you serve the these these individuals small investors uh on a daily basis um through social media as well as in you know court um a little bit more about your practice i know you do one side and franco does another can you share what you guys do sure so we've kind of split our practice federal court which is bankruptcy court and state court so foreclosure and eviction so franco handles foreclosure and evictions and debt collection so we do debt collection work as well wage garnishments bank levies things like that that's all done in franco's part of the world which is up in cleveland ohio middleburg heights and then the bankruptcy side of the house we handled down here in loveland ohio which is just outside of cincinnati and uh we practice in ohio kentucky indiana michigan and illinois for everything so that's foreclosure bankruptcy evictions collections everything in those five states and then uh the additional states of colorado wisconsin and washington dc for bankruptcy all bankruptcy in those three additional jurisdictions and then lastly about four years ago we started a national uh part of our practice group where we can handle quite a few pleadings in all 94 jurisdictions so we spent about a year uh compiling all the information that we would need to file proofs of claim transfers of claim the various chapter 13 notice requirements things like that uh in all 94 bankruptcy jurisdictions and so we do that from this office as well wow so those who are confused with pof is you know the emotional relief is that he's gonna get into that so you know if you're not understanding acronyms of what it means we're gonna get into a little bit about that we're not gonna dive too deep into it we're not gonna do this forever but for hours on end but nathan what's your experience with bankruptcy where are you at with bk oh bk is driving nuts um like because i'm an in and out guy i i want to get in and get out of a note as quickly as possible and bk is not it is not fast so for me they're they're a headache and a half and uh and just all the process and i mean we're working on a few with tony sperm right now where um you know we're waiting for for the bankruptcy uh plan to be presented so that we can then go on to something so that they can not pay so that i can then foreclose but it just it's adds extra steps and it adds months on end when i'm just trying to get a job done it's a it's a big headache i don't like to add on to that what i think uh nathan says those people who have non-performing notes you may get into bankruptcy not for a positive thing but to delay the foreclosure yeah right they can file bk the morning of they have 30 days to file their plans and they probably won't right and then they're back you're back to where you have to go back to the courts get it all done and get that thing re you know publicized and get the foreclosure started so and that's been my experiences is when they have to present a plan um i don't know that i've ever handled one where they turned it in after five days it's always you know 29 30 days like they're waiting right to the end which frankly if i was in their position i would do the same thing but it's for me because i'm i'm a short term uh you know turn it around that that becomes a frustration absolutely so well further ado tony let's bring up your powerpoint kind of show people what we're talking about those who are new again um i'm gonna share the chat any questions you may have with tony and we'll let him adjust where he wants to answer things i'll put into the chat box we have up here okay let me i am not as technologically savvy as i like to be so hold on a second here okay does everybody see the slideshow there we go yes we're good okay we're good okay so let's talk a little bit about bankruptcy okay uh we're going to cover some topics today uh let's just kind of outline we're going to talk about um and honestly you know uh dave and nathan are gracious enough to give me an hour or so here any single one of these slides we could spend a single hour on so this is this is this is very 30 000 foot view stuff but um but let's get into some of that stuff so we're going to talk about who the players are in a bankruptcy we're going to talk about some key differences between 7s and 13s we're going to talk about lean strips and cram downs a little bit of timeline what a chapter 13 timeline looks like some common questions that i get quite frequently from from note buyers and investors and the big thing everybody wants to know about is what's this going to cost me so let's hit up who the players are first okay so you've got a whole bunch of people that are involved in the bankruptcy process you've got the u.s trustee debtors council creditors council the local trustee the judge the debtors okay obviously let's start with the debtors that's who's filing the bankruptcy and they've got their attorneys some debtors file it themselves those are usually kind of pain in the rear end kind of cases but uh we call that a pro se filing we prefer a debtor to have counsel especially in a chapter 13 context because they're pretty complicated so uh those are those are two of the main parties the debtor and their attorneys then you've got the creditors that's that's all of us and creditors council that's me okay so we're kind of the other side of the other side of the coin on a bankruptcy then you got people that are kind of in the background you've got the local trustee that's the one that you're going to deal with the most often that you hear about when somebody talks about oh you've got a good trustee in this case or oh this trustee is difficult or this trustee's rules or this trustee's uh attitudes on things that's what you're really talking about the local trustee and for chapter 13 trustees there's a few hundred of them across the country there's usually a couple in every jurisdiction then you get the us trustee that's kind of the boss of the local trustees uh the the the jurisdictions of the united states are divided up amongst regions uh and each region has uh kind of a regional trustee and then there's a u.s trustee over all of them and then you got the judge if you do things if you don't get too involved in a case if there's not a whole lot of complications in a case you will never see a judge you you may have a hearing nowadays a lot of those are telephonic which is great but the vast majority of things that we do in bankruptcy court um do not involve a judge uh there's a lot of deals that are made a judge signs off on it perhaps the judge puts their signature on it but but uh there's not a whole lot of interaction with the bankruptcy judge so that's kind of a who's who in the process there's there's there's a there's a few parties and when you figure out who they are that's who you know you're talking with um if we're able to pass these slides around later on i i just kind of gave a run down here of um of what i just said so we can skip we can skip that one so so the big ones the big bankruptcies that that you guys are going to deal with are chapter 7 and chapter 13 so really really abbreviated explanation of each so a chapter 7 bankruptcy is a liquidation bankruptcy when someone says they give up they're filing bankruptcy that typically means they're liquidating their assets they don't have a whole lot of assets they've got debt um so what what's going to happen is they file bankruptcy a trustee is appointed to the case the trustee's going to examine the debtors assets um if there are any you know they may have a car they may have a house but it's fully encumbered so they're not really assets there's nothing that the trustee can take and liquidate in into cash to give to creditors that's what the trustee's role is in a chapter 7 bankruptcy primarily is to see if there's anything that he can make money on to give to creditors again typically doesn't happen i would say nine out of ten chapter seven cases um are are what are called no asset cases and typically take four to six months uh they're very quick four to six months it's the most common chapter of filing um and then one thing you need to worry about in chapter sevens is that there's no coder protection so if you've got uh you know debtor one and debtor two on a property and only debtor one files chapter seven bankruptcy you can continue collecting against debtor 2.

there is no code debtor protection in a chapter 7 case so not really that big of a deal with with what i typically see from the standard note buyers buying out there but something to keep in mind the one we're going to spend a little bit more time on today are chapter 13s and and the the title of a chapter 13 case is adjustments of debts of an individual with regular income so what you need to glean from that is it's an adjustment of debts so it's a modification of debts it's a it's a plan of how they're going to reorganize those debts of an individual so that means it's a person it's a natural person or a couple it cannot be a business a business cannot file a chapter 13 bankruptcy with regular income so that means there needs to be a wage coming in typically a wage or some type of monthly weekly bi-weekly bi-monthly income coming in that that debtor can use to adjust their debts to uh to pay off some of their debts uh it's designed for debtors who have regular income possibly too much to file a chapter seven bankruptcy there's plenty of people out there with good money that just still need to file bankruptcy um we're not going to get into means testing and things like that of whether somebody can qualify for a seven or they need to go a 13 but but typically you could also see people who make a little bit more money in a chapter 13 in a chapter 13 case they take a lot longer they take about three to five years and that's all done through a court confirmed plan we're going to talk about plans a little bit more in a bit but it's what it sounds like right it's a plan of reorganization it's a document that the debtor puts together that says how they plan to reorganize their debts and how they plan to reorganize their assets reviewing and understanding that plan is very important it is critical to the note buyer that they understand and review the plan um there are some debt limits and again i've got a 2b continued at the bottom of this slide because we're going to really take apart each line on this slide with with kind of an individual slide but there's some debt limits to a chapter 13 bankruptcy so uh so an individual can't have more than 420 000 or so in unsecured debt and about 1.3 million in secured debt those sound like big numbers but 420 000 is a bad hospital stay 1.3 million dollars is a small town landlord with a couple of properties uh so it's pretty easy to go over the debt limits in a chapter 13 bankruptcy um and uh not be able to qualify for a chapter 13 bankruptcy uh there's code data protection so we talked about there not being any code data protection in a chapter seven bankruptcy there is in a chapter 13.

so if you've got debtor one and debtor two who filed a bankruptcy i'm sorry you've got debtor one and debtor two on a note and only debtor one filed bankruptcy you can't do anything to debt or two you've got to go into court even though debtor two never filed only debtor one did because their co-debtor debtor two has protections under the law in that debtor one's chapter 13 bankruptcy so there's more chapters 9 11 12 and 15 okay typically you're not going to see a lot of these um nine is for municipalities so that's detroit orange county california uh you're not going to see those doing uh doing the note buying work that that we typically see in our practice chapter 11 we do see a good bit of chapter 11 bankruptcy work uh in our bankruptcy practice it's more from our institutional clients um however i do see some chapter 11 work from some of my note buyer clients chapter 11 is for the business that needs to reorganize so uh we talked about chapter 13 is only for individuals if a business needs to reorganize they file chapter 11 bank bankruptcy it's also for the higher net worth individuals so we talked about the people with uh too much debt uh too much debt too much too much assets things like that so we got like pier one filed a chapter 11 jcpenney mike tyson burt reynolds so these are people with higher net worths or businesses that need to reorganize chapter 12 is for family farmers and fishermen uh it's kind of a class unto itself because farmers and fishermen typically are only paid once a year at harvest maybe twice a year so chapter 13 if you remember required regular income family farmers and fishermen don't typically have that so we we do see a good bit of chapter 12 work maybe once a month or so now mind you we're doing about 600 or 700 bankruptcies a month in my firm so so one or two a month or chapter 12 bankruptcies and again we're in farm country out here in ohio kentucky indiana michigan illinois um so we do see some family farmers and then chapter 15 just very briefly is cross-border cases blockbuster is one such case so when blockbuster went bankrupt in the united states blockbuster canada came into the united states and latched on to blockbuster usa's bankruptcy and that's called a border banker so you're not going to see those in your worlds either so that's why we're not even going to talk about those let's get back to chapter 13 and that's definitely where i want to spend a you know a good chunk of time today so um i want to talk about what's in the plan and what's outside of the plan now we're going to hit up some questions that um people posted on the website or on on facebook when we uh announced this um this webinar so uh when you hear inside the plan or outside the plan you can kind of correlate that to trustee pay or debt or pay so the debtor's got a note they're paying that a chapter 13 bankruptcy they're either going to be paying that to the trustee or they're going to be paying it to you so typically for shorthand people say in the plan or not in the plan i don't like that trustees don't like that but that's kind of the parlance that people use if it's a trustee pay if you're getting your money from the trustee that means it's in the plan if it's outside of the plan that means the debtor's paying it directly i would prefer everything be paid through the chapter 13 trustee you may not but i do as many of your attorneys because i can then use the trustees records to see what came in and what didn't come in when it came in the amount that it was um it helps you with your record keeping i'm sorry that was illegal i thought they weren't allowed to pay anything outside the plan oh it depends trustees vary um the trustees vary on that uh quite often some trustees even if you're behind they will let the debtor pay directly in most trustees who has any arrears on the property they'll make that become part of the plan they'll make that who chooses to paid trustee pay or debtor pay what's that who chooses if it's paid by the debtor or through a trustee if it's a jurisdiction where you can pick um then the debtor technically picks that but most jurisdictions have local rules and local requirements as to what as to how that's decided and typically it comes down to whether or not there's arrears on the property if there's arrears the trustee's going to be paying it if there's no arrears then the debtor can pay that my home jurisdiction cincinnati and dayton ohio if the debtor is current on the property they can pay that mortgage directly they can pay that note directly but if they're behind on it even one dollar behind on it it's got to go through the trustee we talked about plans a little bit before and how extremely extremely important plans are we have a form plan that's pretty much followed all over the country these days which took many many years to develop and you would like to think because bankruptcy is a federal thing you would like to think that it's all the same in every jurisdiction but unfortunately it isn't um you have to review that plan and you have to understand uh what's going on in that plan that's something that your attorneys if you ask me you should handle we can work through that with you and explain to you what we're looking at but that plan review at the very beginning of the case as soon as that plan is filed is critically important it will outline what that borrower wants to do um typically uh a standard plan is going to say you know i owe ten thousand dollars in arrears i plan to divide that ten thousand by sixty months pay one sixtieth of that ten thousand dollars in arrears every month plus my ongoing mortgage payment that's a good plan there's not a whole lot to object to that uh there's not a whole lot of reason to object to that especially if there's only 10 000 in arrears if there's 30 000 in arrears we would want to object to that um where i see people getting creative debtors getting creative is i owe 10 000 in mortgage arrears months one through 59 i'm going to pay one dollar on those arrears per month and then month 60 i'm going to refinance my mortgage and pay off the rest of the arrears i see that with regularity if you don't object to that plan you're stuck with it and you're stuck getting a dollar a month until month 60 and there's not a whole lot of cases that complete only about 30 35 of chapter 13 is complete so you may be stuck in this bankruptcy for 59 months getting a buck a month because you didn't object to that plan so planner reviews are very very very important uh from an arrearage perspective um but also from a valuation perspective okay uh you need to understand the the valuations that that we use uh in in in reviewing a plan and what the borrower's going to use in review and putting that plan together so how did the debtor come up with their value they're going to typically go to the county auditor they're going to go to zillow they're going to go to what the neighbor down the street sold their house for they're going to go to whatever they think their house is worth it may be a good price it may be a high price it may be a low price but the debtor can testify to themselves what they believe the value of the price the value of their home is how do you come up with your value of the property you unfortunately need a little bit more evidence to support that hopefully you don't need to and we can all agree on evaluation that's what normally happens we all agree on evaluation of the property okay but sometimes we don't and sometimes you need to get an appraisal done sometimes that borrower is going to say that property is only worth ten thousand dollars you think it's worth a heck of a lot more than that so we're going to talk about getting an appraisal it might be as simple as a bpo it might be as simple or as complicated as an interior appraisal that that's going to cost several hundred bucks but that's outside the norm typically we're all going to agree on a value of the property that's actually what we've got going on tony and this one in ohio where she claims it's something like twenty thousand dollars and we're saying ah it's more like 70 75 so yeah see that's a big spread that's a big spread and the other thing that could that could mortgage i'm sorry she's just renting it out so it's that's a problem we won't get into it all the way but no we won't but we're going to cover cram downs and that's a cram down situation okay which is probably where we are with that case so and that's why evaluation is very important so the type of property is it residential or rental and the lien position first mortgage second mortgage those are very very important when you're you're figuring out what your valuation is on the property we had a question about calculating our ears this is a good point to talk about that so um the debtor's going to calculate our ears on a very basic level okay they're going to get a statement from their servicer from their lender that says you're 10 payments behind at a thousand dollars a month your rears are ten thousand dollars okay so they're bankrupt ahead okay so let's pick back up with calculating arrears so it's really really simple for the debtor to calculate arrears they think they're down ten thousand dollars a thousand bucks a month for for 10 months um so they're gonna file their bankruptcy with with an arrearage amount of ten thousand dollars a thousand dollars a month ten months in arrears but we all know that it's a lot more than that right because you've had a lawyer you've started foreclosure you've ordered title you've done all these other things and your urge is really more like twenty thousand dollars so your arrears is going to be calculated when you file your proof of claim so when that debtor files bankruptcy you get to your attorney and you say attorney so-and-so filed bankruptcy i need you to review the plan tell me what it says and i need you to file a proof of claim so i'm going to come back to you and i'm going to tell you i need you to provide me with every bill everything that was due on this account prior to that bankruptcy being filed so everything up until that day that that case was filed we can put on the proof of claim well most things it's a little jurisdictionally dependent but most things we can put on a proof of claim up until the day that bankruptcy was filed so we can put uh in many cases we can put the attorney fees that you've accumulated on the foreclosure we can put title costs we can put filing fees we can put all these other things the taxes that you've paid the insurance because the debtor's not gonna know to list that as an arrearage on their property um your arrearage needs to be calculated and proven down to the penny when i started this on the creditor side you know 10 15 years ago i used to be able to say there's ten thousand dollars in arrears and go about my business but nowadays i have to prove every penny of that ten thousand dollars um or my client doesn't get it so so when it comes time to calculating arrears we need to be very very precise if you come to me and say i did 100 drive by appraisals in the last year i'm going to ask you for a receipt for each one of those so so it gets a little technical sometimes so you may not really care about those because they're 10 bucks a piece or whatever they are um you know but you've got you've got other other fees on the cost just give me a copy of the invoice give me a copy of the tax bill that you paid you give me a copy of the real estate um uh insurance that you paid for the property for the property insurance um so that's what that's what i'm talking about when it comes time to our calculating arrears and we need to be very precise when payments come in in that bankruptcy uh and your servicers are going to do this you need to make sure that the payment when it comes in from the trustee it's going to be split some of that money is going to be for your ongoing payment some of it's going to be for the arrearage payment you need to make sure that you're tracking what of that payment is going to pre-petition debt the arrears or post-petition debt the ongoing payment you need to make sure that you're applying pre-petition to pre-petition and post-petition to post-petition and i put that on here as well just something for people to think about your servicers know this so apply pre to pre post to post and it'll be difficult to get into trouble the reason why you want to do that is because we talked about briefly a second ago the success rate in chapter 13 bankruptcies is pretty low um so when that bankruptcy dismisses and you've got to unwind all of this stuff much easier to do because then you can take everything that you apply previously to your pre-petition arrears and then everything that you applied post petition all gets applied on the debt that's owed okay if that bankruptcy gets dismissed it all goes back to the beginning but if that bankruptcy gets all the way through and again about a third do okay if it gets all the way through at the end of that case that pre-petition should be 100 current and that post petition should be 100 current that does happen that does happen i see that every day that happens hey tony tony kobe cox here got a question for you mentioned on this that we need to make sure that gets a pri applied pre to pre post to post how do we do that what's the command mechanics of us being able to do that well your servicer should do that for you um when the check come from the chapter 13 trustee it's going to be outlined by a claim so so we've got a proof of claim that we file that may be proof of claim 1-1 okay uh well the trustee has that claim set out 1-1 1-1 a so when they send you 1500 that month they're going to tell you 1-1 is a thousand dollars and 1-1 a is 500 and you will know that 1-1 is your arrearage and 1-1 a is your ongoing payment amount they should split that out for you to make to to allow you to apply that properly so is that is that one dash one one 1-1 a is that something that will come to us directly from the trustee as the note investor or do we have to obtain that from the servicer who who generally is going to receive that portion of the payment well that's a good question however you set up your proof of claim so if you set up your proof of claim that you the note holder want the money to come to you then that's going to come to you but if you want it to go to your servicer and that's where most of it that's where payments usually go usually goes to the servicer then the servicer will apply that correctly yeah i'm more interested in the notification rather than the actual funds i would want the funds to go to the servicer of course but i you know it's it's uh you know trust but verify so yeah you you won't get notification from the trustee that a payment was made to your servicer and typically for for those who don't understand is when your bankruptcy gets filed the servicer typically or should push the payment pay to date to be today they're consistently considered um up uh they're paid after today and they're consistent they're actually not behind any longer because arrears payment covers the back pay where you're going to see the fact that it looks like it's performing but they're not paid for three years your next due date should be next month oddly enough and the rear seas kept care of everything that was before it was delinquent but in the eyes of what you see in your system it will show that the borrower is actually current at this moment and that's how the services should be recording it cody you can also get a subscription to the ndc um national data something um uh and uh you can you could you should be able to track it that way you can at least see when a trustee sent a payment um and the amount that it was but the trustee's only gonna send one notification to that payment and if you say it goes to your servicer that your servicer is going to get notification yeah that makes sense tony are you going to talk a little bit a little bit about pacer later on as well not a whole lot on pacer so we talked about the very beginning as we kind of had to pick and choose what we talked a whole lot about just summarizing pacer for everyone who's listening is is the system which you can log in and look up if anyone has a bankruptcy filing before or now see all the documents or the court hearings so if you sign into there they charge you it's a dime a page and every quarter if you have born and ten dollars worth they send you a bill so that's the way you can look up to see if anyone has a bankruptcy what the details of it all the documents and everything else or you just call tony and he tells you what's going on exactly uh but yeah it's a good idea for any note investor as part of their due diligence when purchasing a note is to run that one run that um homeowner's social security number through a through a pacer search or some kind of search where you can find out if they filed any bankruptcies and see where that bankruptcy is along in the process um so keep on trucking along let's talk about some timelines again talked about this at the beginning these are going to be very very broad no two cases are the same every jurisdiction is going to be judge district division trustee specific um and and i have to say that because i don't want anybody coming back and saying oh tony you said this was going to happen at day 14 and it and it's not like that um but but again just so you get an idea of the process of a chapter 13 bankruptcy okay so pre-filing a debtor is going to see an attorney they're probably going to tell their creditors look i'm filing bankruptcy they're going to have to do a bunch of stuff in order to file on the day they file that means the automatic state goes into effect immediately you can't speak to them anymore you can't call them you can't ask them when they're going to make their next payment as soon as they file bankruptcy you cannot speak to the debtor directly you got to go through their attorney now you may accidentally speak to the borrower because you didn't know that they filed bankruptcy that's fine nobody's saying that you're going to get dinged for that but calling every day and asking where your money is that's a problem you got to go through their attorney on that same day or within a day or two after a judge is going to be assigned a trustee is going to be assigned to the case and things are going to start coming together so between day one and days 14 and 30 okay a notice of filing is going to be sent to all the creditors so if the debtor listed you in their bankruptcy it's going to go to you that they file bankruptcy um if it's a recent purchase if you um are just kind of looking at this case if you haven't sent the hello letter yet debtors they sometimes don't understand where their mortgage is they don't understand you know they they had to deal with with first united bank and now cody cox owns the note you know they don't understand that so first united bank may get the notification um so it's difficult you may not get notification that's why running pacer searches um or making sure you know where the bankruptcy is along the process along in the process is a good idea so uh by day 14 nathan you were saying or dave one of you were saying that that plans need to be filed within 30 days it's actually 14 days then debtor has 14 days to file a chapter 13 bankruptcy plan okay by the time that is filed it's about two weeks have passed you're going to get notice of it again if you're listed in the bankruptcy you'll get notice of it and then in theory by day 30 they should start making payments ah okay especially if they're paying direct if this is a direct pay situation where the debtor is making their mortgage payments directly you may never see a stoppage in that payment you may be dealing with a current mortgage a current note situation where the borrowers are only filing bankruptcy to pay them back taxes or get a car out of repo or something like that medical yeah you know so so you may have especially if it's a debt or pay you may never miss a payment uh you know may never miss a time coming in so by day 30 that debtor should be making payments again especially if they're paying directly by about day 45 they're gonna have what's called a meeting of creditors uh it sounds fancy typically no creditors show up i haven't been to one in many many years um it's just a time for a creditor to ask questions of the debtor under oath we do go to some of them especially if the debtor's been hiding from us things like that but but typically nobody goes to those if you're going to object to the plan we talked about those before if we're going to object to the plan you really should have done that by now um that's you know forward another 15 20 days or so the plan is going to confirm if there's no if there's no objection so you're already two months in and the plan is not confirmed yet okay this is not a fast process uh you know like nathan and dave like we were talking about before nothing about bankruptcy is fast it is a slow laborious process so we're day 60 70 75 into this the plan if there were no objections is just now confirming if there were objections we're still trying to hash out those objections we want the value higher the arrears are off those kinds of things all of those objections are going to push out the confirmation date weeks and months later by about day 70 and it is actually day 70 for for what we're about to talk about you have to have your proof of claim file so in two months and ten days from the day that debtor filed bankruptcy you the note holder has to have their proof of claim filed with the court there's some exceptions to that we might be able to file kind of a skeletal proof of claim and and be able to finish it 50 days later but that's for another day i want you guys to know you have to have your proofs of claim filed in 70 days from the day that bankruptcy has filed until that proof of claim is on file and of record the trustee if the trustee's the disbursing agent on your payments the trustee's not going to make any payments because you've not proved your claim that's what a proof of claim is a proof of claim is an accounting of the arrears a proof of claim is proving that you own that note it's showing the note it's showing any endorsements showing the assignment it's showing all of those things that you need to show to prove that you own that note file it as soon as possible do not call me on the 69th day and say tony we want you to file a proof of claim we're gonna do it but it's gonna be a pile of crap and that's not what you want okay you want an accurate honest um proof of claim to be filed so as soon as that debtor files bankruptcy get the ball rolling with your trustee on those proofs of claim to get those filed get it going as soon as possible because here's what's going to happen that debtor may make a couple of payments and then fall out of the bankruptcy if you've got a proof of claim on file and that debtor falls out of their bankruptcy you may get a couple of payments because you got your proof of claim in early it's always a good thing to get your payments to get your proof of claim filed before the deadline um after day 70 okay you want to monitor for objections sometimes people aren't going to like your proof of claim so using the example before the debtor's going to say there's ten thousand dollars in arrears because it's a thousand bucks a month and they're behind ten months you file your proof of claim showing twenty thousand dollars in arrears because you've got the same ten thousand dollars in arrears but now you've also got ten thousand dollars in costs and fees and and stuff that you've accumulated um there could be objections to that proof of claim you got to watch for those you should be resolving your plan objections if there are any and then once that plan confirms you need to watch for payments okay your servicer will do that you'll do it however those payments are coming in watch for payments if the debtor falls behind on payments talk to your attorney you may want to file a motion for relief from stay we're going to talk about motions for relief from staying a little bit i don't want to get too bogged down in that while we're talking about a timeline but you may want to file that you may not want to file that um again after confirmation if there's any payment change that happens because of a rate adjustment or or um you know more taxes that are due those kinds of things you have to file a notice of payment change with the court you got to do that 21 days before you want that payment to be a different amount so that's a notice of payment change if you are buying or selling a note in bankruptcy you've got to make sure that a transfer of claim is filed so you as the buyer of that note in bankruptcy if you want to get paid on that you have to transfer that proof of claim and it's a form that your attorney will fill out for you that says yeah you get joe debtor used to be paying chase now joe debtor needs to pay um by you know uh you know me now because now i'm the note holder and that's a transfer of claims so that happens after confirmation if um i charge you because i'm going to charge you for that transfer of claim i'm going to charge you for these things that we're doing after confirmation if you're in a jurisdiction where you can assess that fee to the borrower you've got to file a post petition fee notice with the court before you can charge the borrower for that okay so that's called a ppfn post petition fee notice we'll talk about those more a little bit later but again don't want to get too bogged down in all the all the alphabet soup of bankruptcy here so those are all things to think about um again post confirmation monitor the case eventually if we got a good debtor here who's making their time their payments timely the plan is going to complete the trustee's going to file a notice of final cure saying that all the arrears have been paid you must respond to that it's going to say notice a final cure you have to respond to that and say that you agree or you don't agree the debtor's going to receive their discharge and the case is going to close so post discharge if the debtor did get a discharge post discharge you need to make sure that the account is updated with all the money that came in from the bankruptcy case you cannot be collecting on debt that was discharged in the bankruptcy so if that trustee says i've made all the arrearage payments and you don't object to that you don't respond to that but you can show you can prove that they actually didn't make two of those payments and you don't respond and that debtor gets discharged you cannot go back to that debtor and collect those two payments those were discharged in the case bankruptcies are important to follow all the way through and you'll be walked through it by the trustee and by what they file with the court and what they sent to your attorney who's entered an appearance for you on the case okay that is a very quick timeline any single one of those little blue boxes could be their own presentation but it's important to see a i think a timeline of of bankruptcy so so let's you know before you get to there at any moment if a loan gets transferred from me to nathan does that slow down the process you know for me i'm trapping that claim but for anyone who's new should they be nervous if that if any of those steps are not done and that loan is transferring uh no it's a good idea to maintain so you've got a note dave and you're selling it to nathan you've got a proof of claim on file dave it's being sold to nathan nathan's got to file his transfer of claims saying i nathan hold the note now no longer does dave hold the note uh maintain that relationship between one another because another payment or two may go out to you dave instead of nathan um i see that happen trustees missed those i mean there's a lot of paperwork there's a lot of things coming in and out of a trustee's office they may miss that um but get those transfers as soon as i mean that should be part of the onboarding of that loan for nathan is for him to get his attorney to file that transfer of claim to get that process started as soon as possible but typically it's it's it's a notice there's really nothing that happens it's a notice of transfer of claim no one's going to object to that not separate from the regular hello goodbye letters correct the hello goodbye letters has nothing to do with the bankruptcy case um we may attach the hello letter to that to that uh transfer of claim just so um uh the trustee and the debtor and everybody can see your information nathan how to get ahold of you those kinds of things yeah but generally a transfer of claim is a pretty simple one two page document with with maybe an attachment of a hello letter or an an endorsed note something like that so tony two questions in the chat here is uh what if the borrower wants a modified alone in the middle of all this well that's a slide later on but i i don't think we're gonna get to all of our slides we might want to uh we might want to do a part two on this yeah okay um the question was do you file uh jeffrey claim before you file the assignment or does not matter so assignment's only for county records this is bk so they're two different it doesn't matter which way you do it correct as long as you're filing your claim in bk you still gotta file your assignment with the county that's only for the county records not doing bk right yeah for a transfer of claim generally i don't care about it an assignment a claim because that could there is an assignment on the mortgage because that generally could take uh some of these counties especially now during the times of cove that are are months behind so i'm not going to wait for that assignment just tell me that it happened maybe give me a low letter or something like that and that's enough for me and that's enough for bankruptcy courts in general that's enough for bankruptcy courts if it's ever challenged for any reason maybe by then the assignment will be done but we don't need the assignment to do a transfer of claim but modification to answer your modification question yes you can do a modification during a bankruptcy um and a bankruptcies actually if you ask me a good chance and a good opportunity to do that because typically that borrower's going to have an attorney who may be able to help walk them through why that is a good thing for them um you know the borrower doesn't understand that you did not pay a hundred cents on the dollar for this note and that you may be able to give them a haircut because you didn't pay a hundred percent for the you didn't pay a 100 cents on the dollar for the note so you can get them into something that's more affordable for them and you can do that but you can't talk to them directly okay that's that's the important thing you got to go through their attorney their attorney may not call you back you have to call your attorney so it sounds simple well it sounds complicated because there's more more people in the mix but it's generally a good opportunity to be able to do a modification if there is one to be done in my opinion the process is simple but there's just more steps in between because there's more people that's correct and then because it's in bankruptcy you may have to modify some things you may have to file an amended proof of claim because that modification may wipe out all the arrears right so the trustee can't be paying on mortgage arrears anymore so you would just need to file an amended proof of claim the debtor may want to file with the court and notice or a motion to approve a loan modification um that's typically something that a debtor files we have some jurisdictions where that's a creditor filed pleading but that's kind of ridiculous for that to be a creditor file pleading that's that should be a better file pleading and so for investors too you can talk to the bk attorney right the debtor's bk and you can also call the trustee up right so you wouldn't i wouldn't advise doing it but you can speak to the trustee and say listen i want this i typically go through my service server or my attorney to ask for the ledger or whatever he asked for yes you can you can speak to the trustee and say listen i want the ledger to proof of payments you can ask for that because i could show you what payments have come in yeah um but yes don't talk to the borrower um if they call you just say let's say i can't speak you right now you have an attorney representing you and they may say listen all i want to do is modify my loan then you just direct them hey listen talk to your attorney i'm calling my servicer and we'll go from there that's exactly right or or send you some kind of uh permission on their letterhead that says you can talk to my client for the purposes of a loan modification that's generally what happens because these attorneys don't want anything to do with that for their their client they want you to be able to talk directly with them they want to get out of the way just as much as you want them out of the way so they'll give you authority for either you or your servicer to talk to them about that so let's get to seconds here right or sometimes first but i would say mostly seconds like cram downs okay so very briefly on cram downs okay cram down's a big reason why people file chapter 13 bankruptcy it's reducing a secured interest to the value of property okay happens all the time with personal property it exists only in chapter 13 cases not chapter 7 cases a debtor can cram down a non-primary residence but then they must pay off that entire debt within the plan term let's be honest that's impossible to do we do not see these with any regularity whatsoever we do proofs of claim we probably do a hundred proofs of claim a month maybe one of those has that debtor paying off that claim within that five year term it just doesn't happen okay um so generally speaking you're not going to see a cram down happen in a chapter 13 case on on non-primary on on non-primary residents like that so but you may be very happy if they can cram that down in a 13 again because you probably didn't pay 100 of what the notice of what the notes face value is right um i want to skip that example it's not a big deal i want to talk about strip offs okay because a lot of people are buying seconds right now i see seconds talked about all the time in our facebook groups here so um when a lien on property is wholly unsecured okay i just want to walk through the definition here the lien may be stripped off and made unsecured so we're really talking about junior liens here primarily second mortgages so here's my example the value we talked about how important value is okay the value is determined at the beginning of the case and the debtor's plan so looking at that debtor's plan the value of the residence was determined to be 150 000 in this example okay the first mortgage is for a hundred and sixty thousand dollars you have a second for forty thousand dollars that second mortgage is able to be stripped and that's some scary stuff okay because that's why value is so important if you can show the value of that house was a hundred and sixty one thousand dollars and the first mortgage is only a hundred and sixty thousand dollars your full second mortgage is paid you can't strip any of it off if even a dollar of equity is present the debtor cannot strip that off i can't stress to my clients enough especially those in the second mortgage space how important a good valuation at the beginning of the case can be later on okay so that's what you need to keep in mind there needs to be equity for your mortgage to survive that case but here's the deal debtors have to file to strip off that mortgage they may be able to do it by motion but they may have to do it by an adversary proceeding again not going to get into this into the mechanics of either of those but the debtor must file for that to happen so you may know that you have a strippable lien you may say oh yeah i mean this is this is garbage i paid five cents for it you know but at the end of the day i still would suggest you file a response to that debtor's motion to strip off your lien yes that is spending good money after bad and i'll be the first to say don't pay me if you don't have to i will turn down work but this is a situation where i would tell you let's file a response because that response is going to indicate how all of this is going to happen we are not going to cancel that lien unless and until you get a chapter 13 discharge if your case converts to a chapter 7 case the lien remains we are not canceling that lean and less than until a series of things happen you want all of that in black and white and then if they do get a discharge you want that agreed order to be able to be used at a at a closing or with the title or with the title agency or with the county recorder's office to be able to say i don't have a second mortgage on that property anymore that agreed order may say upon com upon discharge the lender will issue a satisfaction of mortgage it will say whatever all the parties agree to but if it doesn't say anything and that debtor filed a motion to strip off the mortgage and this and the judge signed an order that said the mortgage is stripped is it stripped then when is it stripped we we have a real problem on our hands here if we don't get good language on record with the with the case that may be how you sell them you may be able to resell it uh you know always in agreed order i do not like default orders to be entered for any of my clients even if we want what the borrower is asking for still reply still get an agreed order on on file um so that's kind of stripping off stripping off liens so just so people know now that the leanest trip is now an unsecured debt if the debt is still present it's just not secured by the property it's just not secured by the property right so um you don't have to release it until the debtor's discharge though and that's the thing a lot of people think that as soon as they file bankruptcy or as soon as they file that motion they don't have to do anything it's stripped off it's not it's not they have to take additional steps the attorney for the borrower the borrower directly has to take an additional step to strip off that junior lien but that dead still on the books not by secure by anything that could be on the books forever as a debt owed by the by the i guess the prop no okay no not if it's discharged not if they get a discharge that's it okay now if you have a first now here's where you may be thinking dave if you've got a first and the debtor gets a discharge of their debt um you can then foreclose on that first mortgage you just can't get a judgment against the borrower because that debt was discharged so so yes that debt kind of stays on the books with the county but you get the property back in a foreclosure sale so at the second and it gets stripped and you have a first and second that second gets stripped there's no the liens on the property is still first and second or is that second completely off that of the county books off depends what you put in your agreed order yeah so guys this one make sure you're clear that that stripping of the lien is important so if you're looking at an asset and you're not reviewing the bankruptcy court and you know they have a bankruptcy filing or don't you better be looking at this and make sure the second lien has security still yes or you're buying blank debt just know what you're buying you know what you're buying an unsecured can still be collected on and tony do you guys do that i'm sorry do you collect on unsecured debt oh yes oh yes we file unsecured we file unsecured proof of claims for um proofs of claim for our a lot of our auto lenders so they've already repo the car they've sold the car we're filing a proof of claim for an unsecured balance typically you're getting a few pennies on the dollar you're not getting a whole lot but you're getting something it's something yep it's something and then that debtor's got to be in that bankruptcy for at least 36 months typically again broad generalities here and if not a lot of claims are filed you may get a lot more than that couple of pennies on the dollar right so always good to file a proof of claim yeah so let's zip through a couple of other questions that uh that i saw on the facebook page here um don't like your plan treatment we got to look for the valuation of the property and how the debtor uses that property we talked about that at the beginning of this presentation debtors cannot cram down a first lane on residential property okay what if you're not getting paid okay you're not getting paid well should you be was a proof of claim filed if this is a trustee paid jurisdiction and no proof of claim was filed you are not going to get paid so you may buy a loan no proof of claim was filed and you wonder why you're not getting paid well you shouldn't be getting paid because no proof of claim was filed so these are all things that your attorneys can can walk you through and determine why you're not getting paid um more often than not a proof of claim was filed the trustee's just not getting money from the debtor um perhaps you know in our scenario before where dave sold a loan to nathan uh perhaps the trustee just didn't see that transfer of claim dave's been taking the money all along and he's telling nathan to take the you know you know take a walk on the highway buddy you know and uh you know we got to figure out that and get that corrected so um here's a situation where you may or you may not want to file a relief from stay okay you're not getting paid but the trustees also filed a motion for a motion to dismiss the case because you're not getting paid because the trustee's not getting paid so you may come to me and say tony i want to fall for relief from stay and i may tell you look don't waste your money this case is going to get dismissed why bother or i may tell you look i know this trustee they're going to give this debtor another bite of the apple every single time let's file for relief from stay so those are people understanding the stay is a state from foreclosure or filing any kind of legality to take a property back so the stay is the word for saying you can't file foreclosure on it so you want relief from that pause so you can move forward with the foreclosure and now motion relief is an expensive feature especially if you're dealing with a loan that has a 200 hour a month payment right right so you're getting two hours a month and your relief estate could be 9.50 or so depending on jurisdiction and that's five months of payments and if you could just wait a month and the trust he can file for you you're saving that money yes and that's a that would be something that i would talk about with my client when they came to me and said should i file well i'm only getting 200 bucks a month well in a chapter 13 a motion for relief from stay is a thousand fifty dollars plus 186 dollars in filing fees so you're 12 1300 into a motion for relief from stay then it may just not be worth it you may just want to wait out the bankruptcy it i i don't get happy clients that way i mean they're happy that they're saving money but they're not happy that they have a note that's not making any money for them so um let's see here so filing for relief from staying dave like you just talked about it gets the property out of the bankruptcy estate it allows you to either commence or restart whatever probably got the debtor to file bankruptcy in the first place so you probably started foreclosure you started a forfeiture you started an eviction whatever you're doing they filed bankruptcy the stay went into effect that stays all of those proceedings you're looking for relief from that stay to be able to proceed in state court usually motions for relief from stay are resolved with an agreed order that agreed order may result in more payments coming your way when i file a motion for relief from stay i will almost always entertain an agreement because i know the judges want an agreement to be reached sometimes the borrower just says i give up i don't want it i'm not paying on it anymore and take the house back but i know a judge every single time 10 times out of 10 times is going to say uh no no creditor you're going to you're going to accept we're going to reach some kind of settlement you're gonna i'm gonna order you to take an extra hundred bucks a month until the arrearage is caught up that accumulated during the bankruptcy i want to get in front of all of that i'm gonna go to you and i'm gonna say look they're six hundred dollars behind let's take an extra hundred bucks a month for the next six months but here's what i'm gonna do in that agreed order i'm gonna say if that debtor ever falls behind again i don't have to start this process again i don't have to waste my clients money and spend another thousand fifty dollars on a filing fee and i want to just be able to file a notice of default with the court and i want to be able to go back to the court and say they have defaulted on our agreed order and agreed order doesn't cost you any more filing a motion for relief from stay at least i don't charge for those an agreed order is going to say we're not going to have to do this again if uh if the debtor falls behind again so that is very very generally what filing thoroughly from stay is going to get you so dismissed versus discharge is very commonly confused just quickly i know you're beginning to hear dismiss and discharge how would you define it okay so two words look kind of the same sound kind of the same could not mean more polar opposite in a bankruptcy context if a case gets dismissed it's over overdone you are back in the position you were in before that bankruptcy was filed if you are if you are able to reset that foreclosure sale for the day after that dismissal order is entered you can do that you have to give the debtor credit for any money that you would have gotten during the bankruptcy but at the end of the day if that dismissal hits you're done there's no more bankruptcy there's a bankruptcy on their record but there's no discharge a discharge is what that debtor's looking for in a bankruptcy and it's a discharge it's an absolution of of their debt uh that they wanted to get rid of in the bankruptcy so a discharge means you can never collect that debt again period so you may you can foreclose on your property you just can't collect any deficiency on that foreclosure from that borrower if that loan is discharged in the bankruptcy if that loan is uh is absolved and if the borrower is absolved from that loan in the bankruptcy when they receive that discharge right um i'm gonna skip repeat filer and how often people can file um collection of your attorney's fees from the debtor sometimes sometimes you can pass my fees along to the borrower um it's going to depend on jurisdiction and your attorney will know the answer to whether or not that can happen uh it varies widely and oftentimes it won't be for what your attorney charges you for things so uh a a proof of claim is 950 the proof of claim and plan review is 950 plus 250 dollars if i have to fill out what's called form 410a again not going to get into all of that just realize that's twelve hundred dollars and i'm going to charge you for this that's the fannie mae fee that's what we pass right along all of our clients provides a lot of clarity it's easy to understand the southern district of indiana will allow you to get i think it's 500 i can't remember exactly what it is from the borrower so i'm not lowering my feet of 500 but you can go to the borrower and say you owe me 500 because i had to pay tony 1200 to file that more jurisdictions allow you to collect it all um and again whether or not the debtor's gonna pay you just never know but you have to file a notice of post-petition fee expense or charge to get that going uh and that's something that your attorneys can do for you uh can i sell or buy a note in bankruptcy yes we do it all the time we talked about that can i modify a loan in bankruptcy yes you can we talked about that um so i i talked about some costs involved i think everybody at this point really understands that our office and most other firms that do what we do are going to follow the prevailing fannie mae fee schedule for whatever foreclosures cost and for whatever bankruptcies and evictions it's just easier it's just easier for everybody um i don't want nathan to ever think i'm giving dave a deal because dave gave me two files this month it just doesn't make any sense to me uh it's it's it's clarity and it's it's something that anybody can look up and see what the prevailing fannie mae fee schedule is um so these are just some very common pleadings and what they cost okay um and that's as of yesterday right or the day before whatever yeah yesterday so if you guys have any side questions we're going to kind of cut this sure we have some technical issues of course if you have questions put in the chat um and we'll answer them as we can some go on facebook connection with zoom um just weirdly enough but you know understand bankruptcy is a lot more than this uh we're kind of rushing through a lot um even the stuff of repeat filers and what you can do about them is a whole nother conversation and unless you're in florida which they reject those kind of claims a lot um most times you can get out of a situation where a person repeat files so uh so he's going to review some of his slides here to decide which ones you should hit on last if you have questions specific questions that's always best um you can post them you can email them you can reach out if you have them right now we can answer real quick but understand the fact that bankruptcy nationwide is generally the same steps procedures and everything else um the costs differ from state state a little bit but most of time is the same also understand the rules behind the bankruptcy is identical throughout the country you should not be interacting with people you shouldn't be um and if you have questions reach out to your bank street attorney we're having a plan problem with one of our assets it's in tennessee and they're working through getting that solved um i will tell you that we've had many times where the judge kicks the bucket down the street when they should be dismissing it i don't want to spend 1200 bucks to get a file out of bk when my payment's about 50 a month i'm hoping the trustee will come through um and we usually give about three months for that to happen uh dave were there any questions in the chat nothing yet which is awesome i mean i know we have a bunch of feels odd gear if there is anything particular feel free to reach out tony social media email or whatnot he's put himself out there a lot nathan do you have you had any questions recently that came up in your circle um nothing that comes to mind immediately i would actually go back and look at a couple of my bks and just see um i think you know as much as we go through in this and and there's extra steps and there's extra time and everything else it doesn't mean they're not worth anything yeah these they're still viable notes uh i know dave you like them better than i do but uh you you so one of the big things about bankruptcy and that you know i know the bigger funds love this is that you're not only getting that 225 payment a month you're also getting an additional possibly 100 200 hours a month and arrears and you're so you're getting it maybe for three years maybe for five years you're getting an extra kick and when that kick is over you can sell a loan right you bought it at a 12 yield whatever plus the bonus is getting a 15 yield and then you're selling it at a 11 12 yield in three years so during that time period you jumped it up take advantage of the rears coming up i see a lot of people wanting to buy loans in bankruptcy yeah yeah so i don't see any questions here guys um i i do want to thank tony for dealing with all the craziness and going through a very difficult confusing field as best you have um you guys are really awesome to work with um and you know it's interesting because bankruptcy and beat foreclosures are two different worlds where um available other than that man i i'm good and we're moving we're moving to cook county slowly no sales but now we can get to judgment that's exciting and it's getting there so yeah so reach out anytime uh you know i recognize a lot of the names that signed up for this so uh you know if we're not connected connect with me connect with our page we put out some stuff online we don't put a whole lot out there but we're always pretty available uh if i can't answer your question i'll get somebody to help you out uh you know franco and i kind of split my my law partner and i franco barely kind of split our practice state court versus bankruptcy court and uh it works out real well for us so let us know what we can do for you awesome awesome thank you very much tony i appreciate it thank you david nathan for doing the opportunity and uh we'll be talking soon we have some great uh episodes coming up in the next week as well um me and me to work behind the scenes um we're gonna be talking about joint ventures topics uh we're going to be talking about creating from a more uh cfd to a note um some of these awesome some awesome interesting topics that people are really intrigued by um so stay tuned for those uh the information will be coming soon so thank you very much guys if you have any questions reach out to tony reach out to myself and hit up nathan as well thank you everybody thank you and have a great weekend bye-bye thanks again tony [Music] [Music] hey everybody dave puts here from jkp holdings alongside me in a few seconds will be nathan turner he's running a few minutes behind guys uh but i'm glad to connect with everybody i'm excited about this one there's been a lot of questions around bankruptcy and a lot of curiosities because it's a field that seems to be lost uh in a lot of education programs a lot of times people just don't want to talk about it because they just don't know much about it so this is a great opportunity um to jump in here and kind of talk about things if you have questions along the way please feel free to jump in ask questions post any things you have problems with or whatever um and what not so um hopefully everyone can hear us okay if you can i'm seeing a black screen for some reason here i also make sure everyone can see us connect with us um let me just make sure this is if you can see us or whatever please send me a message i'm seeing a black rotating screen for whatever reason yeah not sure what's happening here let me just jump on um and just make sure everything's working out okay whatever reason okay well it shows okay on my on my phone real quick so um i wanted to bring up the fact that bankruptcy has a lot of different aspects to it a lot of questions to it um and there's some things that we don't need to actually worry about oddly enough um there are certain things that we don't get involved with and we shouldn't have to worry about and there's some aspects of it that actually makes it better for us so for those people who are interested in both we're going to go over that stuff um we've been times where we bought alone wasn't bankruptcy is that a terrible thing or not um and things like that so i'm curious what people say um and nathan said i'll be there in five minutes so he'll be here real quickly so um what we want to do here guys is go over what everyone understands right and to cover the topics that are interesting and fascinating and problems you're already going through um so what we're going to do is i'm going to introduce tony over here in a second he's going to go through a slideshow to kind of present what he already knows and what questions have been posted before in the meantime as you come up with questions we'll be monitoring the facebook feed um and we'll post it into his question bank to kind of answer um he's a go to the slideshow first to kind of cover a lot of the topics um but we're gonna move to it so without further dude nathan will be here in a second tony how are you doing this friday afternoon i'm great dave thank you thank you for having me on your show here how are you doing well man hopefully everything's going okay in the midwest uh but cove and all that stuff hopefully everyone's healthy and well so far so good and it's uh the winter's winding down it is only 35 degrees with a strong wind today but uh but uh uh warmer weather is on its way that's for sure yeah so can you give a background where you came from what you've been involved with how long you've been doing bankruptcy i know it's only been six months you've been starting this so um but give a little background who you are what you've been doing and how you've come into bankruptcy sure sure so um i graduated law school in 2002 out here in ohio and uh didn't really know what i wanted to get into i knew i didn't really want to carry somebody's briefcase i wanted to kind of work for myself in some ways and go to court and kind of get a name for myself going and there's there's not a whole lot of areas of the law that you can do that um kind of right off the bat so uh when i looked into it a little bit more bankruptcy was one of those areas and i liked the concept of bankruptcy i liked the concept of being able to show a client a rule talk about their problem and how it fits into that rule and and apply that rule whether it helps or or or doesn't help um i got in on the debtor side so i used to represent debtors and small businesses in chapter 7 and chapter 13 bankruptcies worked for a very large national law firm doing that and i was out of dayton ohio um after about three years four years of doing that i got a little disenfranchised with representing the borrowers and decided let's get it on the creditor side of things so uh the rest as they say is history i work for a couple of larger regional firms here in uh the cincinnati ohio area and in 2015 decided you know there's a better way to do this there's an underserved market out there uh not everybody who holds a note is wells fargo or chase and uh there's plenty of plenty of regular joes out there that are buying buying notes and i think it's an underserved market so my partner franco barely and i you know we met at a previous law firm and we we decided to start this thing up and it's been going well ever since awesome and welcome nathan i hope everything's going well i know you're uh in a situation you had to get out of so i appreciate you joining us so it's it's awesome to hear you tony because um like a lot of investors when i first got involved you guys were scary dealing with attorneys is a scary thing for investors um and you and a few other attorneys um present online the fact that we don't have to be nervous or scared or worried to talk to you guys that you're not this big bad lawyer that we see on tv that we're nervous about shaking your hand having a bite to eat is not a big deal to have with you guys um and you serve the these these individuals small investors uh on a daily basis um through social media as well as in you know court um a little bit more about your practice i know you do one side and franco does another can you share what you guys do sure so we've kind of split our practice federal court which is bankruptcy court and state court so foreclosure and eviction so franco handles foreclosure and evictions and debt collection so we do debt collection work as well wage garnishments bank levies things like that that's all done in franco's part of the world which is up in cleveland ohio middleburg heights and then the bankruptcy side of the house we handled down here in loveland ohio which is just outside of cincinnati and uh we practice in ohio kentucky indiana michigan and illinois for everything so that's foreclosure bankruptcy evictions collections everything in those five states and then uh the additional states of colorado wisconsin and washington dc for bankruptcy all bankruptcy in those three additional jurisdictions and then lastly about four years ago we started a national uh part of our practice group where we can handle quite a few pleadings in all 94 jurisdictions so we spent about a year uh compiling all the information that we would need to file proofs of claim transfers of claim the various chapter 13 notice requirements things like that uh in all 94 bankruptcy jurisdictions and so we do that from this office as well wow so those who are confused with pof is you know the emotional relief is that he's gonna get into that so you know if you're not understanding acronyms of what it means we're gonna get into a little bit about that we're not gonna dive too deep into it we're not gonna do this forever but for hours on end but nathan what's your experience with bankruptcy where are you at with bk oh bk is driving nuts um like because i'm an in and out guy i i want to get in and get out of a note as quickly as possible and bk is not it is not fast so for me they're they're a headache and a half and uh and just all the process and i mean we're working on a few with tony sperm right now where um you know we're waiting for for the bankruptcy uh plan to be presented so that we can then go on to something so that they can not pay so that i can then foreclose but it just it's adds extra steps and it adds months on end when i'm just trying to get a job done it's a it's a big headache i don't like to add on to that what i think uh nathan says those people who have non-performing notes you may get into bankruptcy not for a positive thing but to delay the foreclosure yeah right they can file bk the morning of they have 30 days to file their plans and they probably won't right and then they're back you're back to where you have to go back to the courts get it all done and get that thing re you know publicized and get the foreclosure started so and that's been my experiences is when they have to present a plan um i don't know that i've ever handled one where they turned it in after five days it's always you know 29 30 days like they're waiting right to the end which frankly if i was in their position i would do the same thing but it's for me because i'm i'm a short term uh you know turn it around that that becomes a frustration absolutely so well further ado tony let's bring up your powerpoint kind of show people what we're talking about those who are new again um i'm gonna share the chat any questions you may have with tony and we'll let him adjust where he wants to answer things i'll put into the chat box we have up here okay let me i am not as technologically savvy as i like to be so hold on a second here okay does everybody see the slideshow there we go yes we're good okay we're good okay so let's talk a little bit about bankruptcy okay uh we're going to cover some topics today uh let's just kind of outline we're going to talk about um and honestly you know uh dave and nathan are gracious enough to give me an hour or so here any single one of these slides we could spend a single hour on so this is this is this is very 30 000 foot view stuff but um but let's get into some of that stuff so we're going to talk about who the players are in a bankruptcy we're going to talk about some key differences between 7s and 13s we're going to talk about lean strips and cram downs a little bit of timeline what a chapter 13 timeline looks like some common questions that i get quite frequently from from note buyers and investors and the big thing everybody wants to know about is what's this going to cost me so let's hit up who the players are first okay so you've got a whole bunch of people that are involved in the bankruptcy process you've got the u.s trustee debtors council creditors council the local trustee the judge the debtors okay obviously let's start with the debtors that's who's filing the bankruptcy and they've got their attorneys some debtors file it themselves those are usually kind of pain in the rear end kind of cases but uh we call that a pro se filing we prefer a debtor to have counsel especially in a chapter 13 context because they're pretty complicated so uh those are those are two of the main parties the debtor and their attorneys then you've got the creditors that's that's all of us and creditors council that's me okay so we're kind of the other side of the other side of the coin on a bankruptcy then you got people that are kind of in the background you've got the local trustee that's the one that you're going to deal with the most often that you hear about when somebody talks about oh you've got a good trustee in this case or oh this trustee is difficult or this trustee's rules or this trustee's uh attitudes on things that's what you're really talking about the local trustee and for chapter 13 trustees there's a few hundred of them across the country there's usually a couple in every jurisdiction then you get the us trustee that's kind of the boss of the local trustees uh the the the jurisdictions of the united states are divided up amongst regions uh and each region has uh kind of a regional trustee and then there's a u.s trustee over all of them and then you got the judge if you do things if you don't get too involved in a case if there's not a whole lot of complications in a case you will never see a judge you you may have a hearing nowadays a lot of those are telephonic which is great but the vast majority of things that we do in bankruptcy court um do not involve a judge uh there's a lot of deals that are made a judge signs off on it perhaps the judge puts their signature on it but but uh there's not a whole lot of interaction with the bankruptcy judge so that's kind of a who's who in the process there's there's there's a there's a few parties and when you figure out who they are that's who you know you're talking with um if we're able to pass these slides around later on i i just kind of gave a run down here of um of what i just said so we can skip we can skip that one so so the big ones the big bankruptcies that that you guys are going to deal with are chapter 7 and chapter 13 so really really abbreviated explanation of each so a chapter 7 bankruptcy is a liquidation bankruptcy when someone says they give up they're filing bankruptcy that typically means they're liquidating their assets they don't have a whole lot of assets they've got debt um so what what's going to happen is they file bankruptcy a trustee is appointed to the case the trustee's going to examine the debtors assets um if there are any you know they may have a car they may have a house but it's fully encumbered so they're not really assets there's nothing that the trustee can take and liquidate in into cash to give to creditors that's what the trustee's role is in a chapter 7 bankruptcy primarily is to see if there's anything that he can make money on to give to creditors again typically doesn't happen i would say nine out of ten chapter seven cases um are are what are called no asset cases and typically take four to six months uh they're very quick four to six months it's the most common chapter of filing um and then one thing you need to worry about in chapter sevens is that there's no coder protection so if you've got uh you know debtor one and debtor two on a property and only debtor one files chapter seven bankruptcy you can continue collecting against debtor 2.

there is no code debtor protection in a chapter 7 case so not really that big of a deal with with what i typically see from the standard note buyers buying out there but something to keep in mind the one we're going to spend a little bit more time on today are chapter 13s and and the the title of a chapter 13 case is adjustments of debts of an individual with regular income so what you need to glean from that is it's an adjustment of debts so it's a modification of debts it's a it's a plan of how they're going to reorganize those debts of an individual so that means it's a person it's a natural person or a couple it cannot be a business a business cannot file a chapter 13 bankruptcy with regular income so that means there needs to be a wage coming in typically a wage or some type of monthly weekly bi-weekly bi-monthly income coming in that that debtor can use to adjust their debts to uh to pay off some of their debts uh it's designed for debtors who have regular income possibly too much to file a chapter seven bankruptcy there's plenty of people out there with good money that just still need to file bankruptcy um we're not going to get into means testing and things like that of whether somebody can qualify for a seven or they need to go a 13 but but typically you could also see people who make a little bit more money in a chapter 13 in a chapter 13 case they take a lot longer they take about three to five years and that's all done through a court confirmed plan we're going to talk about plans a little bit more in a bit but it's what it sounds like right it's a plan of reorganization it's a document that the debtor puts together that says how they plan to reorganize their debts and how they plan to reorganize their assets reviewing and understanding that plan is very important it is critical to the note buyer that they understand and review the plan um there are some debt limits and again i've got a 2b continued at the bottom of this slide because we're going to really take apart each line on this slide with with kind of an individual slide but there's some debt limits to a chapter 13 bankruptcy so uh so an individual can't have more than 420 000 or so in unsecured debt and about 1.3 million in secured debt those sound like big numbers but 420 000 is a bad hospital stay 1.3 million dollars is a small town landlord with a couple of properties uh so it's pretty easy to go over the debt limits in a chapter 13 bankruptcy um and uh not be able to qualify for a chapter 13 bankruptcy uh there's code data protection so we talked about there not being any code data protection in a chapter seven bankruptcy there is in a chapter 13.

so if you've got debtor one and debtor two who filed a bankruptcy i'm sorry you've got debtor one and debtor two on a note and only debtor one filed bankruptcy you can't do anything to debt or two you've got to go into court even though debtor two never filed only debtor one did because their co-debtor debtor two has protections under the law in that debtor one's chapter 13 bankruptcy so there's more chapters 9 11 12 and 15 okay typically you're not going to see a lot of these um nine is for municipalities so that's detroit orange county california uh you're not going to see those doing uh doing the note buying work that that we typically see in our practice chapter 11 we do see a good bit of chapter 11 bankruptcy work uh in our bankruptcy practice it's more from our institutional clients um however i do see some chapter 11 work from some of my note buyer clients chapter 11 is for the business that needs to reorganize so uh we talked about chapter 13 is only for individuals if a business needs to reorganize they file chapter 11 bank bankruptcy it's also for the higher net worth individuals so we talked about the people with uh too much debt uh too much debt too much too much assets things like that so we got like pier one filed a chapter 11 jcpenney mike tyson burt reynolds so these are people with higher net worths or businesses that need to reorganize chapter 12 is for family farmers and fishermen uh it's kind of a class unto itself because farmers and fishermen typically are only paid once a year at harvest maybe twice a year so chapter 13 if you remember required regular income family farmers and fishermen don't typically have that so we we do see a good bit of chapter 12 work maybe once a month or so now mind you we're doing about 600 or 700 bankruptcies a month in my firm so so one or two a month or chapter 12 bankruptcies and again we're in farm country out here in ohio kentucky indiana michigan illinois um so we do see some family farmers and then chapter 15 just very briefly is cross-border cases blockbuster is one such case so when blockbuster went bankrupt in the united states blockbuster canada came into the united states and latched on to blockbuster usa's bankruptcy and that's called a border banker so you're not going to see those in your worlds either so that's why we're not even going to talk about those let's get back to chapter 13 and that's definitely where i want to spend a you know a good chunk of time today so um i want to talk about what's in the plan and what's outside of the plan now we're going to hit up some questions that um people posted on the website or on on facebook when we uh announced this um this webinar so uh when you hear inside the plan or outside the plan you can kind of correlate that to trustee pay or debt or pay so the debtor's got a note they're paying that a chapter 13 bankruptcy they're either going to be paying that to the trustee or they're going to be paying it to you so typically for shorthand people say in the plan or not in the plan i don't like that trustees don't like that but that's kind of the parlance that people use if it's a trustee pay if you're getting your money from the trustee that means it's in the plan if it's outside of the plan that means the debtor's paying it directly i would prefer everything be paid through the chapter 13 trustee you may not but i do as many of your attorneys because i can then use the trustees records to see what came in and what didn't come in when it came in the amount that it was um it helps you with your record keeping i'm sorry that was illegal i thought they weren't allowed to pay anything outside the plan oh it depends trustees vary um the trustees vary on that uh quite often some trustees even if you're behind they will let the debtor pay directly in most trustees who has any arrears on the property they'll make that become part of the plan they'll make that who chooses to paid trustee pay or debtor pay what's that who chooses if it's paid by the debtor or through a trustee if it's a jurisdiction where you can pick um then the debtor technically picks that but most jurisdictions have local rules and local requirements as to what as to how that's decided and typically it comes down to whether or not there's arrears on the property if there's arrears the trustee's going to be paying it if there's no arrears then the debtor can pay that my home jurisdiction cincinnati and dayton ohio if the debtor is current on the property they can pay that mortgage directly they can pay that note directly but if they're behind on it even one dollar behind on it it's got to go through the trustee we talked about plans a little bit before and how extremely extremely important plans are we have a form plan that's pretty much followed all over the country these days which took many many years to develop and you would like to think because bankruptcy is a federal thing you would like to think that it's all the same in every jurisdiction but unfortunately it isn't um you have to review that plan and you have to understand uh what's going on in that plan that's something that your attorneys if you ask me you should handle we can work through that with you and explain to you what we're looking at but that plan review at the very beginning of the case as soon as that plan is filed is critically important it will outline what that borrower wants to do um typically uh a standard plan is going to say you know i owe ten thousand dollars in arrears i plan to divide that ten thousand by sixty months pay one sixtieth of that ten thousand dollars in arrears every month plus my ongoing mortgage payment that's a good plan there's not a whole lot to object to that uh there's not a whole lot of reason to object to that especially if there's only 10 000 in arrears if there's 30 000 in arrears we would want to object to that um where i see people getting creative debtors getting creative is i owe 10 000 in mortgage arrears months one through 59 i'm going to pay one dollar on those arrears per month and then month 60 i'm going to refinance my mortgage and pay off the rest of the arrears i see that with regularity if you don't object to that plan you're stuck with it and you're stuck getting a dollar a month until month 60 and there's not a whole lot of cases that complete only about 30 35 of chapter 13 is complete so you may be stuck in this bankruptcy for 59 months getting a buck a month because you didn't object to that plan so planner reviews are very very very important uh from an arrearage perspective um but also from a valuation perspective okay uh you need to understand the the valuations that that we use uh in in in reviewing a plan and what the borrower's going to use in review and putting that plan together so how did the debtor come up with their value they're going to typically go to the county auditor they're going to go to zillow they're going to go to what the neighbor down the street sold their house for they're going to go to whatever they think their house is worth it may be a good price it may be a high price it may be a low price but the debtor can testify to themselves what they believe the value of the price the value of their home is how do you come up with your value of the property you unfortunately need a little bit more evidence to support that hopefully you don't need to and we can all agree on evaluation that's what normally happens we all agree on evaluation of the property okay but sometimes we don't and sometimes you need to get an appraisal done sometimes that borrower is going to say that property is only worth ten thousand dollars you think it's worth a heck of a lot more than that so we're going to talk about getting an appraisal it might be as simple as a bpo it might be as simple or as complicated as an interior appraisal that that's going to cost several hundred bucks but that's outside the norm typically we're all going to agree on a value of the property that's actually what we've got going on tony and this one in ohio where she claims it's something like twenty thousand dollars and we're saying ah it's more like 70 75 so yeah see that's a big spread that's a big spread and the other thing that could that could mortgage i'm sorry she's just renting it out so it's that's a problem we won't get into it all the way but no we won't but we're going to cover cram downs and that's a cram down situation okay which is probably where we are with that case so and that's why evaluation is very important so the type of property is it residential or rental and the lien position first mortgage second mortgage those are very very important when you're you're figuring out what your valuation is on the property we had a question about calculating our ears this is a good point to talk about that so um the debtor's going to calculate our ears on a very basic level okay they're going to get a statement from their servicer from their lender that says you're 10 payments behind at a thousand dollars a month your rears are ten thousand dollars okay so they're bankrupt ahead okay so let's pick back up with calculating arrears so it's really really simple for the debtor to calculate arrears they think they're down ten thousand dollars a thousand bucks a month for for 10 months um so they're gonna file their bankruptcy with with an arrearage amount of ten thousand dollars a thousand dollars a month ten months in arrears but we all know that it's a lot more than that right because you've had a lawyer you've started foreclosure you've ordered title you've done all these other things and your urge is really more like twenty thousand dollars so your arrears is going to be calculated when you file your proof of claim so when that debtor files bankruptcy you get to your attorney and you say attorney so-and-so filed bankruptcy i need you to review the plan tell me what it says and i need you to file a proof of claim so i'm going to come back to you and i'm going to tell you i need you to provide me with every bill everything that was due on this account prior to that bankruptcy being filed so everything up until that day that that case was filed we can put on the proof of claim well most things it's a little jurisdictionally dependent but most things we can put on a proof of claim up until the day that bankruptcy was filed so we can put uh in many cases we can put the attorney fees that you've accumulated on the foreclosure we can put title costs we can put filing fees we can put all these other things the taxes that you've paid the insurance because the debtor's not gonna know to list that as an arrearage on their property um your arrearage needs to be calculated and proven down to the penny when i started this on the creditor side you know 10 15 years ago i used to be able to say there's ten thousand dollars in arrears and go about my business but nowadays i have to prove every penny of that ten thousand dollars um or my client doesn't get it so so when it comes time to calculating arrears we need to be very very precise if you come to me and say i did 100 drive by appraisals in the last year i'm going to ask you for a receipt for each one of those so so it gets a little technical sometimes so you may not really care about those because they're 10 bucks a piece or whatever they are um you know but you've got you've got other other fees on the cost just give me a copy of the invoice give me a copy of the tax bill that you paid you give me a copy of the real estate um uh insurance that you paid for the property for the property insurance um so that's what that's what i'm talking about when it comes time to our calculating arrears and we need to be very precise when payments come in in that bankruptcy uh and your servicers are going to do this you need to make sure that the payment when it comes in from the trustee it's going to be split some of that money is going to be for your ongoing payment some of it's going to be for the arrearage payment you need to make sure that you're tracking what of that payment is going to pre-petition debt the arrears or post-petition debt the ongoing payment you need to make sure that you're applying pre-petition to pre-petition and post-petition to post-petition and i put that on here as well just something for people to think about your servicers know this so apply pre to pre post to post and it'll be difficult to get into trouble the reason why you want to do that is because we talked about briefly a second ago the success rate in chapter 13 bankruptcies is pretty low um so when ....