DAUGHTERS’ BANKRUPTCIES FAIL TO SAVE PARENTS’ INVESTMENT PROPERTIES

Parents sometimes involve their children to refinance houses when push comes to shove in a second to the last attempt to save their properties. If using children to refinance is the second to the last step, what is the ultimate last step? Having their children file bankruptcies after the parents have filed their own bankruptcies is the final last step. Every bankruptcy stops the foreclosure of property. But there must be a feasible plan of reorganization to pay the default to be able to save the properties, otherwise, the family bankruptcies only serve to delay foreclosures for several more months. Eventually, if no feasible confirmable reorganization plan is submitted that the court can approve, secured creditors can always ask for the bankruptcy court’s permission by filing a motion for relief to continue foreclosure.

In Re Moniz and In Re Camara, debtors were sisters who filed bankruptcies after their parents’ Chapter 11 failed. Both debtors were on title with their parents in investment properties which were all initially acquired by one or both parents without any of their children. Both sisters treated the properties as belonging to their parents even if their names were on title. The parents managed the properties, paid the mortgages, and reported the rents as income on their tax returns. The children, the two sister-debtors, acquired their interests in the properties in 2006, when their parents were unable to refinance mortgages without them. At the parents’ request, the debtors applied for loans from Saint Anne’s Credit Union. The loans were secured by mortgages on the properties. The loans went into default in 2008. The parents filed for Chapter 11 relief in 2009. In January 2011, after the parents’ fifth attempt at confirming a Chapter 11 plan failed, the court dismissed the father’s case and converted the mother’s case to Chapter 7. The credit union filed a motion for relief from stay in the mother’s case and subsequently obtained relief from stay on January 2011. Once stay relief was obtained, the credit union started foreclosure, prompting the daughters to file for bankruptcy immediately. The daughters filed for Chapter 7 relief then converted to Chapter 13. The objective was to stop foreclosures of the investment properties anew by freezing the defaults and paying them in three years.

DAUGHTERS’ BANKRUPTCIES FAIL TO SAVE PARENTS’ INVESTMENT PROPERTIES(Part II)