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#1000741 - 07/21/08 06:17 PM Charging borrower for attorney's fees assoc. w/BK
Many Hats Offline
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Joined: May 2008
Posts: 915
Orlando, FL
Can we charge back to the borrower (in this case, the loan type is a HELOC) the attorney's fees associated with a bankruptcy?

For example, we had a borrower file a CH.7 and we have incurred a great deal of fees due to obtaining attorney guidance, etc. The borower is still paying us and intends to do so.

I think my boss would just like to make him pay for it.

I said no since we didn't foreclose on the property, but thought I'd get a second opinion.

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#1000762 - 07/21/08 06:28 PM Re: Charging borrower for attorney's fees assoc. w/BK Many Hats
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
What does your loan agreement and this attorney that has been giving you legal advice say you can do?

Normally legal expenses can be recuperated, however that could be complicated in a bankruptcy.

Do you have a formal reaffirmation on this debt, or has this debt been excluded from the bankruptcy? (is this the same one we were talking about a few days ago) If there is no reaffirmation or this debt has not been excluded what is your legal basis to be collecting anything on this debt? Possibly another question for the attorney.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1000872 - 07/21/08 07:07 PM Re: Charging borrower for attorney's fees assoc. w/BK Dan Persfull
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Joined: May 2008
Posts: 915
Orlando, FL
He didn't reaffirm with the court...and he isn't reaffirming with us. We are going to do a modification extending the maturity date (since he's still in the property and still paying us), but that's it - the attorney advised against a new note or reaffirmation agreement. The attorney recommended we suspend the line first, then execute the modification once we've received evidence that the borrower received the suspension notice. They recommended specific lanuage be added to modification agreement (namely that it does not make him personally liable for the debt).

They'll charge us an arm and a leg for all of this & my boss would rather not pay for it.

Again....that's why we have attorney's to avoid getting nailed for a Reg Z or bankruptcy discharge violation, but I thought I'd ask anyway.

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#1000908 - 07/21/08 07:22 PM Re: Charging borrower for attorney's fees assoc. w/BK Many Hats
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
I don't know what others think but I think I would be seeking the advice of another attorney.

I haven't dealt with bankruptcy for a long time but there is, or was a thing called preferential treatment, which simply means if the creditor voluntarily pays a debt that was included in the bankruptcy can cause the entire bankruptcy to be put in jeopardy for the borrower, and with a discharged note how on earth can you legally modify it, and again at one time if the borrower gets "cold feet" he could contact his attorney, or if the bankruptcy trustees learns he's paying you outside the bankruptcy, there is a strong possibility that all monies paid to you will have to be forfeited back to the customer or to the bankruptcy court for distribution. I'm no attorney, don't play one on TV or in the movies, but I honestly think you have paid for some bad advice.

But as a disclaimer, read my tag line!!!!!
Last edited by Dan Persfull; 07/21/08 07:25 PM.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1000917 - 07/21/08 07:28 PM Re: Charging borrower for attorney's fees assoc. w/BK Dan Persfull
Many Hats Offline
Platinum Poster
Joined: May 2008
Posts: 915
Orlando, FL
Point taken...thanks so much!!!

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