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Initiating Marion County (Indianapolis) Sheriff's Sales

Back in January of 2011, I posted:  Sheriff's Sale Checklist - Marion County (Indianapolis) Illustration.  Step 1 was to "praecipe" for the sale.  (In August of 2010, I answered the question:  What's A "Praecipe"?

For years in Marion County, we praeciped for sales by filling out by hand an entry into a formal praecipe book found in the Marion County Clerk's Office on the 1st Floor of the City-County Building.  In all other counties, we prepare a written pleading entitled "praecipe" and have it file-stamped by the Clerk for placement into the trial court's record.   

Recently, we had a case in Marion County in which our praecipe via the book apparently got lost somewhere between the Clerk's Office and the Sheriff's Office.  Innocent mistake - it happens - but the client was not happy.  So, we inquired into whether we could trigger the sale process without utilizing the book.  We can.  

Here is an information sheet prepared by Marion County that speaks to how to get a sheriff's sale by bypassing the praecipe book process:  (.pdf):

  1. Submit an original and two copies of the praecipe
  2. Attach to the praecipe one copy of the foreclosure judgment/decree
  3. Submit a check for $1.00 for certification of the judgment/decree
  4. Attach to the praecipe a copy of the first page of the complaint
  5. Submit one self-addressed stamped envelope

Items 1-5 should be submitted to:

Marion County Clerk's Office

Attn:  Rosalinda Sanchez

200 East Washington Street, Room W-140

Indianapolis, Indiana 46204  

Rosalinda made it clear to me that, if you submit a typed praecipe, you do not praecipe with the book.  "You choose one or the other," she said.

Although Marion County's book system would seem to have a 99% success rate, my sense is that the submission of a typed praecipe, which looks and feels more like a formal pleading, could close that 1% gap.  For what it's worth, from now on we're going to follow the steps in Rosalinda's handout.  

As a reminder, a word to the wise:  Indiana Sheriff's Sales:  Local Rules, Customs and Practices Control.  Find the Rosalinda in each county with which you're unfamiliar, and make her your friend....


SB 415: IndyStar Weighs In On Settlement Conference Issue

I recently wrote about the bill making its way through Indiana's legislature that involves state-mandated residential foreclosure settlement conferences:  prior post.  Last Saturday's Indianapolis Star ran a lengthy article on the matter - "Bill could strip struggling Hoosiers of rights to save homes".  In February, the Star wrote a piece seemingly praising the bill - "New legislation would help cities address abandoned houses".  But SB 415 has since been amended to include the more controversial proposal to remove certain loss mitigation procedures, which have arguably been superseded by more recent federal protections.   

My understanding is that the bill is a hot topic at the Statehouse.  Indeed Indiana's Attorney General has been outspoken on the matter.   But, others say there has been some misunderstanding of the issue.  In fact, the Star quoted my partner Tom Dinwiddie , who is an advocate for the Indiana Mortgage Bankers Association:   

[the amendment] was supported by the Indiana Mortgage Bankers Association, a trade group that represents hundreds of mortgage lenders around the state. They say mortgage lenders should not have to deal with two different systems. Going through two processes is expensive, time consuming and unnecessary, the association said.

“The federal system was drafted by the Consumer Financial Protection Bureau and is much more comprehensive in its requirements than the current state requirements,” Tom Dinwiddie, a lawyer for the mortgage bankers group, wrote in an email.

When this year's session ends, I will advise as to how this turned out.

 


Case Study: Dismissing A Single-Asset Real Estate Debtor’s Chapter 11 Bankruptcy Case

What if, as a secured lender, your single-asset real estate entity borrower seeks refuge from your mortgage foreclosure action in bankruptcy court?  You might be able to obtain an expedited dismissal of the case, as we were able to do for our client in Uptown Business Center, LLC, 2013 Bankr. LEXIS 4324.

Generalities.  Following a two-day trial, our client prevailed on a motion to dismiss the bankruptcy filing “for cause” under 111 U.S.C. § 1112(b).  The Court’s opinion (.pdf) provides a road map for the pursuit of dismissal when there is no reasonable likelihood that a debtor’s bankruptcy plan will be confirmed within any reasonable time.  Our side essentially contended that the debtor’s filing was made in bad faith purely to delay the state court foreclosure.  In response, the debtor claimed that reorganization was feasible. 

For cause.  A creditor may move for a dismissal of a Chapter 11 case “for cause” under 11 U.S.C. § 1112(b).  Section 1112(b)(4) contains an illustrative but non-exhaustive list of scenarios that constitute “cause.”  Section 1112(b)(2) states that courts may not enter a dismissal if the debtor rebuts the showing made by the creditor by establishing “that there is a reasonable likelihood that a plan will be confirmed within applicable time frames and that acts or omissions that are the cause for dismissal were reasonably justified and will be cured within a reasonable amount of time fixed by the court.” 

SARE and bad faith.  The Court’s opinion discussed single-asset real estate (“SARE) entities and why they get special treatment.  In Re Castleton Associates Limited Partnership, 109 B.R. 347 (S.D. Ind. 1989) spelled out the “totality of the circumstances” test applicable to determining bad faith in the filing of SARE cases.  There are fourteen different factors that courts can consider:

  1. the debtor has few or no unsecured creditors;
  2. there has been a previous bankruptcy petition by the debtor or a related entity;
  3. the debtor has engaged in improper pre-petition conduct;
  4. the petition allows the debtor to evade court orders;
  5. there are few debts to non-moving creditors;
  6. the petition was filed on the eve of foreclosure;
  7. the foreclosed property is the sole or major asset of the debtor;
  8. the debtor has no ongoing business or employees;
  9. there is no possibility of reorganization;
  10. the debtor’s income is not sufficient to operate;
  11. there was no pressure (to dismiss the case) from non-moving creditors;
  12. the debtor’s reorganization essentially would involve the resolution of  a two-party dispute;
  13. a corporate debtor was formed and received title to its major assets immediately before the petition; and
  14. the debtor has filed the Chapter 11 case solely to invoke the automatic stay.

Our case for dismissal.  We put on evidence showing that there was no hope for the debtor to reorganize.  (Very early in the dispute, our client and the debtor entered into a forbearance agreement giving the debtor time to refinance the debt at a discount, which the debtor was unable to do.)  The debtor’s sole asset was a commercial, mixed-use building leased out to tenants.  The real estate had been fully leased at the time of the debtor’s payment default.  Among other things, we established that the net income was insufficient to meet the operating expenses, to service the debt and to bring the interest arrearage current.  The debtor had no employees.  The debtor was the subject of our mortgage foreclosure action and filed bankruptcy about an hour before the hearing on our motion for summary judgment.  The debtor delayed a resolution of the state court litigation for months and never asserted a viable defense.  We asserted that the debtor’s financial problem was a dispute between it and our client, a so-called “two-party dispute” that did not fit the profile of a Chapter 11 case.  We argued that the debtor was abusing the purpose of bankruptcy reorganization solely to prevent our client from exercising its contractual rights to collect its debt and foreclose on its mortgage. 

Dismissed.  The Court found that the debtor was not likely to be rehabilitated through the Chapter 11 process and did not have the economic wherewithal to reorganize.  The debtor’s proposed plan was not feasible. The debtor could not obtain alternative financing to secure infusion of capital in the near future.  The Court said:

[i]t was mismanagement of the Debtor that prompted the Debtor’s financial woes with [creditor].  The Court finds that this is essentially a two party dispute that should be adjudicated in State Court.  [Creditor] has borne its burden of showing that ‘cause’ exists to dismiss the case under § 1112(b) and the Debtor has not come forward with credible evidence to establish there is a reasonable likelihood that a plan will be confirmed with a reasonable amount of time. 

Following dismissal, we were able to obtain summary judgment in state court and proceed to a sheriff’s sale.  Our client, which purchases distressed debt, currently owns and operates the property.  (Note:  The Indianapolis Business Journal followed this case, so for more, click here.)


News From Indiana General Assembly: SB 415 And Residential-Related Settlement Conferences

Our State's legislative session is in progress.  One bill of note is SB 415 - Vacant and Abandoned Housing.  Here's its digest: 

Provides that a county, city, or town fiscal body may adopt an ordinance to establish a deduction period for rehabilitated property that has also been determined to be abandoned or vacant. Specifies that there must be delinquent property taxes or special assessments on real property before it may be sold by the county treasurer as abandoned or vacant property. Provides that an order of a local building standards hearing authority that real property is abandoned or vacant and nonpayment of the associated penalty permits the executive of the county, city, or town to vacant and abandoned housing and mortgage servicing. Specifies that there must be delinquent property taxes or special assessments on real property before it may be sold by the county treasurer as abandoned or vacant property. Specifies that the county treasurer and not the county auditor is to auction abandoned or vacant property. Eliminates the concept of redemption after sale regarding abandoned or vacant property to be sold by the county treasurer. Provides that the county, city, or town executive that certifies a property as abandoned or vacant has an option to take ownership of the property if the minimum bid is not received. Separates out several provisions concerning abandoned and vacant property sales from delinquent tax sales and makes related changes. Provides that a hearing authority may use the same standards that are used by a court in finding that real property is abandoned or vacant for purposes of selling the real property at an abandoned and vacant property sale. Permits a county, city, or town executive to use the courts instead of a hearing authority for the determination that a property is abandoned or vacant. Prohibits owners of property that was found to be vacant or abandoned in any county, from buying property at a tax sale, and requires the attorney general to include these owners on the tax sale blight registry. Provides for the following: (1) Removal of properties not suitable for tax sale from the tax sale list. (2) A redemption period of 120 days from the date of the tax sale from which the property was removed. (3) Notice of removal of property from the tax sale list. Eliminates a provision that permitted the county auditor to be the only signer of a sales disclosure form in the case of a tax sale because the sale disclosure form is not required for a tax sale. Adds a requirement to issue a judgment when property is found to be abandoned. Adds conditions under which a property may be determined to be abandoned. Provides that the statute concerning foreclosure prevention agreements does not apply to a mortgage servicer subject to certain federal regulations adopted under the federal Real Estate Settlement Procedures Act.

I wrote about changes to the vacant and abandoned housing laws back in 2010. 

Evidently one of the potential controversies surrounding the 2015 bill is an amendment in committee with language that addresses the duplicative requirements in the Dodd-Frank Act and Indiana Code as it pertains to settlement conferences and loss mitigation.  Some say the amendment may do away with all or portions of the rules enacted in 2009 related to mandatory settlement conferences for residential foreclosures.  (I touched on that here.)  The Journal Gazette in Fort Wayne wrote about the issue over the weekend in a pro-borrower story:  link.  The bill has been referred to the House Local Government Committee.