IMPORTANT NOTE: After October 17, 2005 – anyone who has filed more than one bankruptcy in the last 12 months may find that they cannot get the protection explained below. You must seek experienced bankruptcy attorney in order to determine your rights.
“I” hope this article helps homeowners understand the process of a trustee’s sale of their home. Most people want to keep their homes and will always try to make their payments. But, if unforeseen circumstances make this impossible, do not cave in to a lender who calls and tells you to move immediately when you are only behind in your payments a couple of months. Instead, tell them you know they cannot do anything until the Notice of Sale is recorded and the statutory 91 day period expires. Then decide whether you can afford to keep the home or it would be better to surrender it. Then make plans to follow through with your decision as quickly as possible to avoid more stress in your life. Remember a house is not worth your health and mental well-being.
Many times people call me for advice on bankruptcy because their home is in the middle of a trustee’s sale (sometimes called a “foreclosure”). Some wait until almost too late to ask for any help. In fact, one couple waited to call until day before the sale; expecting that the bankruptcy process to stop the sale was so simple that anyone could do it at a moments notice. The Bankruptcy laws are very complex and became even more so after October 17, 2005. Therefore it is extremely difficult to do a bankruptcy and none should ever be done in just a few hours or even a few days.
Moral: NEVER wait until just a few days, or even a couple of weeks before a sale is scheduled for your home. This last minute rush puts everyone in a position of extreme stress and your attorney will not have the time necessary to properly review your situation. Unless the filing of a bankruptcy is done correctly you may only delay your problems and will still lose your home. It takes time to properly plan for, complete, review and file the huge stack of bankruptcy documents. Those documents must be accurate because you are going to testify, under oath, that they are true and correct to the best of your knowledge. Also, you are required to take a Credit Counseling class BEFORE filing your bankruptcy documents.
What should you do if you are behind on your mortgage payments? Once you realize that you cannot pay the regular payments you need to be immediately pro-active. Contact your mortgage company to determine if they have programs to help you. Find out from all your lenders the amount that is owed against the house. Determine the true value of your home. Talk to neighbors and realtors to determine the true value of your home; make sure to consider all necessary repairs. Deduct the costs repairs and the costs of selling your home (closing costs and realtor fees) from the value.
After you have these numbers decide whether you can afford to keep this house and whether there is value (equity) over and above the debt(s) owed on the home. Do not include judgments; but do include IRS or Arizona Department of Tax liens – if they have been recorded. Options: (1) workout payment arrangements with the lender; (2) sell the house and use the equity to start over; or (3) rent to house for enough to pay the mortgage(s). If there is no equity and you cannot sell the house for what is owed against it, then you have to consider letting the lender foreclose, or talk to the lender about a “short sale” or Deed in Lieu of Foreclosure. All of this work must be done before you can make a decision as to the next step – whether or not to file bankruptcy.
Understand that if you wait until after a trustee’s sale has been started there will be additional fees and costs for the trustee who is conducting the trustee’s sale. Those fees and costs will be at least $1,500. You must pay those additional trustee’s fees and costs, plus all past due mortgage payments. In addition, your past due payments will increase if your loan has a default rate of interest and late charges. The quicker you do something, the less money you will need to pay. If none of the options above work for you, then you may need to consider bankruptcy.
Bankruptcy is not a long term answer if you cannot afford to pay the regular monthly payments. There are two types of bankruptcy which are applicable in your situation. The first is a chapter 7 and second type is a chapter 13 – see Bankruptcy FAQ for more information about the differences.
For more information about the trustee’s sale process and answers to frequently asked questions, please visit: Trustee Sale FAQ
Trustee sales of real property (your home or land) and a bankruptcy are two separate legal processes. Both trustee sales and bankruptcy has a set of rules governing timing, processes and rights for both the lender and the borrower/debtor. I cannot explain one time line for these two processes because each has a separate timeline. Also the lender has their own internal rules and procedures. I cannot predict what these rules and procedures may be or the timing they may choose. So I will do my best to explain these separate processes and how they are intertwined. Understand the following is very generic and your situation may be slightly different from the norm.
Trustee’s sales of real property (home or land): the lender’s goal is to either get paid the money they are owed or get the property.
If you have more than one loan on real property (home or land) each lender has a separate contract with you. Even if both loans are held by the same lender. Each lender can pursue their rights to get paid. If they are not paid each lender can process a foreclosure, trustee’s sale, sue you on the Promissory Note, or do a workout with you. No lender is forced to follow the lead of another lender. So your primary lender may agree to work with you, but the second lender on your home refuses. That is their right.
I have had several clients decide to file bankruptcy at this point because it can be a scary situation when they receive the Notice of Sale, or the investors start calling to “help them out of their situation”. Unfortunately, by waiting until after a trustee’s sale has actually been started you may have incurred $2,000 or more in fees and costs which must be paid as part of the arrears. All arrears can be included in the Chapter 13 bankruptcy plan and paid over a period of time stopping all additional service and late fees.
The law is currently in flux as to exactly how long that period may be – probably 3-5 years. In order to qualify for a chapter 13 you must have more income than you have basic living expenses (excluding credit cards and other debts that will be discharged in your bankruptcy) and you must keep the new monthly mortgage payments current.
If you are in a situation where you do not qualify for a chapter 13 then you might be able to file a chapter 7. The chapter 7 will delay the trustee’s sale for a short period of time.
The filing of a chapter 7 requires the creditor to file additional paperwork with the Bankruptcy Court called a Motion for Relief from the Automatic Stay. The creditor must obtain a signed court Order before proceeding with the trustee’s sale. Once the motion for relief from the automatic stay is filed with the Court it will take the creditor approximately 20-30 days to obtain that signed court Order. Once the creditor obtains the court order now they can move forward on the trustee’s sale or start one, depending on the circumstances. But, the good news is that because you have filed for bankruptcy the lender is not allowed to sue you and obtain money judgment. Therefore, you can get rid of the debt on the house and all the other debts.
If the Debtor is not making the payments on their property then chances are they will receive a Motion for Relief of Stay (MFR) shortly after filing the bankruptcy. We talked about this process when we met to fill out your documents, therefore this notice should not come as a surprise. But in case you do not remember here are the basics:
For more information on Bankruptcy and answers to frequently asked questions, please visit: Bankruptcy FAQ’s
In Chapter 7 there are very few defenses to the MFR so if you want to keep property in a chapter 7 then keep the payments current, otherwise you should file a chapter 13.
In a Chapter 13 the law requires that you start making your regular monthly payment to each of the secured lenders. Talk to me about making payments to those lenders who we are scraping off the debts. If you fail to make the payments in either 7 or 13 then the lenders will most likely be able to obtain this court order and pursue their remedies against the security (house, car, appliances, etc). If you are in a chapter 13 and want to keep the property then make sure you are making the regular months payments.
Here is an excerpt from the Disclosure statement that you signed before your chapter 13 was commenced: YOUR HOME: It is absolutely imperative that you start making the regular monthly payments to all the secured creditor(s) on your home at the next regularly scheduled payment after you filed your bankruptcy. In other words – the next month after filing your bankruptcy you must make your payment. I require that you make all payments by cashier’s check and mail to your creditor by certified, return receipt mail, keeping copies of all payments and transmittal letters. Make certain that you check with your lender to obtain the correct person or department where you should send your payments. Tell the lender that this is a bankruptcy matter and they will transfer you to the correct department that is handling your file.
If you fail to make any of these payments the lender will file for a Court Order permitting them to take your home. If the lender takes this step and you want to save your home you will need to pay my fee for responding (at least $750, plus costs) and pay the attorney’s fees for the lender (usually $600 to $1,000, plus costs), plus pay the creditor the missed payments since you filed your bankruptcy. It is expensive to miss even one payment.
If you want to keep you home you must keep the payments current – NO EXCEPTIONS. You may do your best to keep your mortgage payments current only to find that your lender sells your loan to another lender and the loan records are “screwed up”.
The following is an e-mail from a chapter 13 trustee relating some of the nightmares that borrowers/debtors have been facing: “Our Chapter 13 trustee is having problems with any number of lenders. Lenders and loan servicing is becoming a big problem as loans get sold and re-sold. The loan history does not follow the loan, servicers go out of business and getting an accurate accounting is impossible. The degree to which mortgagees can screw up the accounting of a mortgage that is being cured in a chapter 13 plan is boundless.
The stories would be amusing if it were not for the very real threat of foreclosure at the end of a chapter 13 plan.” What can you do to protect yourself? Before and during your bankruptcy you must request all of the backup documentation and actually look to see that the payments are credited correctly. If they are not you must immediately notify my office so that we can object to the proof of claim filed by the lender. This is your responsibility, after all this is your home you are trying to protect.
The Constitution of the United States
The Federal Convention convened in the State House (Independence Hall) in Philadelphia on May 14, 1787, to revise the Articles of Confederation. Because the delegations from only two states were at first present, the members adjourned from day to day until a quorum of seven states was obtained on May 25. Through discussion and debate it became clear by mid-June that, rather than amend the existing Articles, the Convention would draft an entirely new frame of government. All through the summer, in closed sessions, the delegates debated, and redrafted the articles of the new Constitution. Among the chief points at issue were how much power to allow the central government, how many representatives in Congress to allow each state, and how these representatives should be elected–directly by the people or by the state legislators.
The work of many minds, the Constitution stands as a model of cooperative statesmanship and the art of compromise.Does not the Constitution give us our rights and liberties? No, it does not, it only guarantees them. The people had all their rights and liberties before they made the Constitution. The Constitution was formed, among other purposes, to make the people’s liberties secure– secure not only as against foreign attack but against oppression by their own government. They set specific limits upon their national government and upon the States, and reserved to themselves all powers that they did not grant. The Ninth Amendment declares: “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
What is meant by the term “constitution”? A constitution embodies the fundamental principles of a government. Our constitution, adopted by the sovereign power, is amendable by that power only. To the constitution all laws, executive actions, and, judicial decisions must conform, as it is the creator of the powers exercised by the departments of government.
What is the source of the philosophy found in the Constitution? The book which had the greatest influence upon the members of the Constitutional Convention was Montesquieu’s Spirit of Laws, which first appeared in 1748. The great French philosopher had, however, in turn borrowed much of his doctrine from the Englishman John Locke, with whose writings various members of the Convention were also familiar.
Are there original ideas of government in the Constitution? Yes; but its main origins lie in centuries of experience in government, the lessons of which were brought over from England and further developed through the practices of over a century and a half in the colonies and early State governments, and in the struggles of the Continental Congress. Its roots are deep in the past; and its endurance and the obedience and respect it has won are mainly the result of the slow growth of its principles from before the days of Magna Carta.
How extensively has the Constitution been copied? All later Constitutions show its influence; it has been copied extensively throughout the world.
The United States government is frequently described as one of limited powers. Is this true? Yes. The United States government possesses only such powers as are specifically granted to it by the Constitution.
What is meant by the word veto, in the President’s powers? The word is from the Latin and means “I forbid.” The President is authorized by the Constitution to refuse his assent to a bill presented by Congress if for any reason he disapproves of it. Congress may, however, pass the act over his veto but it must be by a two-thirds majority in both houses. If Congress adjourns before the end of the 10 days, the President can prevent the enactment of the bill by merely not signing it. This is called a pocket veto. (Art. I, sec. 7, cl. 2).
Living Will – Sample
25-211 – Liability of community property and separate property for community and separate debts
33-401 – Formal requirements of conveyance; writing; subscription; delivery; acknowledgment; defects
33-402 – Forms for conveyances; quit claim; conveyance; warranty; mortgage
33-405 – Beneficiary deeds; recording; definitions
Article 2 – Foreclosure
33-721 – Foreclosure of mortgage by court action
33-722 – Election between action on debt or to foreclose
33-723 – Right of junior lien holder upon foreclosure action by senior lien holder
33-724 – State as party to foreclosure actions
33-725 – Judgment of foreclosure; contents; sale of property; resale
33-726 – Redemption of property by payment to officer directed under foreclosure judgment to sell the property
33-727 – Sale under execution; deficiency; order of liens; writ of possession
33-728 – Recording upon record that mortgage is foreclosed and judgment satisfied; effect
33-729 – Purchase money mortgage; limitation on liability
33-730 – Limitation on deficiency judgment on mortgage or deed of trust as collateral for consumer goods
33-807 – Sale of trust property; power of trustee; foreclosure of trust deed
33-808 – Notice of trustee’s sale
33-809 – Request for copies of notice of sale; mailing by trustee or beneficiary; disclosure of information regarding trustee sale
33-810 – Sale by public auction; postponement of sale
33-811 – Payment of bid; trustee’s deed
33-812 – Disposition of proceeds of sale
33-813 – Default in performance of contract secured; reinstatement; cancellation of recorded notice of sale
33-814 – Action to recover balance after sale or foreclosure on property under trust deed
Article 5 – Judgment Liens on Real Property
* (Homestead exception to lien enforcement (ARS 33-964(B)
Article 6 – Mechanics’ and Materialmen’s Liens
Article 7 – Personal Property Liens
ARTICLE 22 A.R.S. Section 44-1378, et seq. Foreclosure Consultants – prohibited acts and fraud against the homeowner.
– Residential Mortgage Fraud A.R.S. 13-2320
How does a deed of trust differ from a mortgage? Arizona treats deeds of trust as conveying a lien, not as conveying title. See, e.g. Brant v. Hargrove, 129 Ariz. 475 (1981) (“Commonly referred to as the lien theory, this approach views a mortgage as not passing legal title, the right of possession, or the other incidents of ownership to the grantee-mortgagee.”). Under a title theory, the creditor is permitted to enter the land upon default, but in lien states, the creditor is required to foreclose in order to obtain a right of possession. In Arizona, creditors secured either by a mortgage or a deed of trust have no right of possession pre-foreclosure. See ARS 33-703.
A deed of trust conveys legal title in real property to a third party—the trustee—to secure the performance of a contract. A.R.S. §§ 33–801(8), –805; Snyder v. HSBC Bank, USA, N.A., 873 F.Supp.2d 1139, 1153 (D.Ariz.2012). The trustee holds legal title until the loan balance is paid or the security reclaimed. See A.R.S. § 33–801(8), (10); Hatch Cos. Contracting, Inc. v. Ariz. Bank, 170 Ariz. 553, 556, 826 P.2d 1179, 1182 (App.1991) (explaining “deed of trust ‘conveys’ the trust property to a trustee who holds the property for the benefit of the beneficiary designated in the deed of trust”). In the interim, the trustee holds only “bare legal title—sufficient only to permit him to convey the property at the out of court sale.” Eardley v. Greenberg, 164 Ariz. 261, 264, 792 P.2d 724, 727 (1990) (quoting Brant v. Hargrove, 129 Ariz. 475, 480 n. 6, 632 P.2d 978, 983 n. 6 (App.1981) (internal quotations omitted). A deed of trust is therefore “ ‘[i]n practical effect … little more than a mortgage with a power to convey upon default,” ’ id. (quoting In re Bisbee, 157 Ariz. 31, 34, 754 P.2d 1135, 1138 (1988)), and the two are treated similarly. See Brant, 129 Ariz. at 480, 632 P.2d at 983 (agreeing with reasoning in Hamel v. Gootkin, 20 Cal.Rptr. 372, 374 (App.1962), that it would be unrealistic to treat deeds of trust differently from mortgages, in determining whether a deed of trust defeated a joint tenancy, where the two “perform the same basic function”).
Although the beneficiary under a deed of trust, like a mortgagee, may have an interest in the property itself, the fact remains he has no interest in the title. See Saxman v. Christmann, 52 Ariz. 149, 154, 79 P.2d 520, 522 (1938). “Such encumbrancers cannot maintain an action to quiet title, for they have no title.” Id.; see also Berryhill v. Moore, 180 Ariz. 77, 88, 881 P.2d 1182, 1193 (App.1994) ( “[A] mortgagee’s interest does not attach to the title. Rather, it attaches to the land. Thus, under Arizona law, a mortgagee cannot bring an action to quiet title because the mortgagee has no title.”) (internal citations omitted).
Biel Properties, LLC v. CRG Partners, II, LLC (2015 WL 1605657) (April 9, 2015).
Note: Berryhill and Stat-o-matic are still good law.
Pence v. Glaze, 1 CA-CV 02-0520, 1/29/04: A layman who files what may be an invalid deed of trust on a debtor’s residence because the deed of trust was not signed by the debtor’s spouse who jointly owned the residence cannot be liable for filing an invalid lien under ARS Section 33-420(a) unless the layman knows or has reason to know the deed is invalid. Such knowledge cannot be presumed on the theory that every person is presumed to know the law.
Cecelia M. and Randall Lewis v. Ann and Ray C. Debord October 6, 2014 – 2 CA-CV 2014-0004 –
Does interest in property have priority over recorded judgment?: Whether a judgment creditor may satisfy his or her judgment by executing on the judgment debtor’s real property that was transferred to a subsequent purchaser after recordation of the judgment pursuant to A.R.S. § 33-961(A) but before attachment of the information statement required under A.R.S. §§ 33-961(C) and 33-967(A). Here, the Debords acquired their interest in the property in July 2012.But the Lewises did not attach an information statement to their recorded judgment until August 2013. Because the Debords acquired their interest in the property before the Lewises complied with § 33-967(A), the Debords’ interest in the property has priority over the Lewises’ judgment lien. Accordingly,the Lewises cannot satisfy their judgment by executing on the Debords’ property. The trial court therefore did not err in granting summary judgment in favor of the Debords. See Ochser, 228 Ariz. 365, ¶ 11, 266 P.3d at 1065;Pi’Ikea, 234 Ariz. 284, n.7, 321 P.3d at 454 n.7 Read Opinion.
Tax liens: Daystar vs Maricopa County Treasurer (Az Ct App, Div One 5-6-04) good review of tax liens statutes and governing law.
Predatory Lending: A recent New Jersey appeals court decision could spark a series of lawsuits against lenders and extend liability for predatory practices all the way up the mortgage food chain.
The Appellate Division of New Jersey Superior Court ruled in Associates Home Equity Services Inc. v. Troup that borrowers can sue lenders for “reverse redlining,” the practice of using race, income, and other demographic information to target high-cost loans to certain neighborhoods. It also said lenders buying loans in the secondary market could be held responsible for the actions of the loan’s originator.
Attorney General’s re predatory lending and other scams.
This web site was established for two reasons:
First, as part of our dedicated effort to serve our clients in the most timely and economic fashion possible.
Second, to act as a reference tool for anyone seeking basic information about Arizona real property or Federal bankruptcy laws.
Whenever retaining an attorney every client has certain rights and responsibilities. Both you and your attorney must be committed to honoring the following…
-Diane L. Drain
Arizona is facing a crisis of unlicensed people and companies who are offering very bad legal advice and producing bungled legal paperwork. As a direct result of this incompetent work the courts are facing a crisis number of poorly informed individuals.
In most cases the attorney’s fees are less than those that are ultimately charged by these “document preparation services.” See the State Bar of Arizona for more information on the UPL “unauthorized practice of law” problem facing our citizens.
Not only does the lawyer bring years of education and experience, but the State Bar of Arizona has established the Client Protection Fund to protect the integrity of the legal profession by reimbursing losses caused by the dishonest conduct of lawyers admitted and licensed to practice in Arizona.