The Lawyers.com Law Forums will be shutting down on June 30, 2017. We encourage you to resolve any outstanding discussions prior to that time. If you have any questions about this change, please email info@martindale.com.

Chapter 11 and County Court

Previous | Next
 rated by 0 users
Latest post Thu, May 7 2015 1:13 PM by Taxagent. 4 replies.
  • Tue, May 5 2015 8:44 AM

    • Millerkan
      Consumer
    • Not Ranked
    • Joined on Tue, May 5 2015
    • FL
    • Posts 2

    Chapter 11 and County Court

    My husband had 2 loans with one bank and 2 loans with another bank.  Prior to these 2 banks merging, they decided to time all our loans to renew at the same time about 2 months after the merger took place.  3 of these loans were commercial and 1 was residential and all were on short term modifications, anywhere 6 months to 1 to 2 years.  The bank told my husband not to make any payments on the loans for over 90 days before the renewals and they would roll the interest into the loan renewals.  When it came time to renew, they would not renew unless he cross collateralized the house with the other loans, which the house has over a million dollars of equity in it.  In order to renew and do this, he had to sign a document waiving all his rights to sue the bank from past, present and future agreements.  He said "no" to this, so the bank sued on all 4 notes and tried to foreclose on all 4 properties.  So then my husband filed Chapter 11 and was able to transfer the house into the LLC that the other 3 properties were listed under (due to previously being in the LLC before the house became homesteaded and built).  So now the bank is sueing him on his personal guarantees on all 4 loans.  Is this legal?  How can my husband qualify for Chapter 11 and also be sued in County Court for the personal guarantees on all the loans.  If all banks did this, wouldn't it undermine the purpose of Chapter 11?  Also, when they wanted him to renew the loans, they wanted him to sign his rights away, but still sign a personal guaranty on the loans.  How do you sign a personal guaranty on performance, but have no rights?  Without any rights, they could deliberately put him in a position where there would be no way for him to perform and still seek the personal guarantees on the loans?  My husband is a commercial builder and needs bonding to be able to work.  If they were to win on the personal judgement on his personal guarantees, this would force him into Chapter 7 Bankruptcy and he wouldn't be able to get bonding, and therefore wouldn't be able to work.  He has a college degree in building science and has been in business for himself as a general contractor for over 25 years and this is all he knows for work.

  • Tue, May 5 2015 9:23 AM In reply to

    Re: Chapter 11 and County Court

    Did he file Chapter 11 for just the LLC, or did he file for bankruptcy personally, too? If just the LLC filed bankruptcy then creditors are only prevented from trying to collect on the LLC’s debts while the automatic stay of the bankruptcy court is in effect. In that situation his personal creditors could still pursue your husband for he owes them. Thus, he could be sued personally on the guarantees he gave for the loans even though the LLC is in bankruptcy. If he doesn't have a lawyer representing him in the bankruptcy action he probably should get one. The lawyer will be able to advise him how best to proceed to deal with these lenders. 

  • Thu, May 7 2015 10:08 AM In reply to

    • Millerkan
      Consumer
    • Not Ranked
    • Joined on Tue, May 5 2015
    • FL
    • Posts 2

    Re: Chapter 11 and County Court

    In Chapter 11, he filed for just the LLC and the only real creditor on the LLC is this bank.  Most banks make people sign personal guarantees on their loans.  What I don't understand is that the reason he filed Chapter 11 is due to the bank trying to foreclose on these loans, and the bank is the only real creditor.  The bank is trying to  defeat the Chapter 11 by suing him on his personal guarantees, but then they also wanted him to sign all his rights away when he renewed his loans.  How can a bank do this?  Seems like banks can pretty much do whatever they want with people.  We show enough income to pay the bank on their notes monthly, but my husband doesn't want to cross collateralize our home.  This was never the original agreement when he did his loans and just because they merged they changed the rules when they timed his loans to renew all the same time.  My husband had been doing business with these banks for many many years. So if we don't do what the bank wants, they just take his properties and they make all the rules.  Doesn't seem fair.  This same bank took our neighbors home, shut their business down when they were in the same situation due to the merger.  Their home was 100% paid for and they convinced them to cross collateralize their home and if so, they would allow them to continue to run their buisness.  They convinced our neighbor to sign those documents waiving all their rights.  But then the bank took their home and shut their business down anyways.  Another thing we found in discovery is that these 2 banks were discussing our loans 5 months before the merger took place, so they timed all our loans to renew at the same time, forcing us to cross collateralize our home and sign all our rights away.

  • Thu, May 7 2015 10:37 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Chapter 11 and County Court

    The bank is entitled to try and get as much collateral and guarantees of,being  paid as they can jawbone into the equation.  and in a way I don't fault a lender from seeking to lock in multiple,ways of getting paid 

    Odds are if you signed a personal guarantee and did not file for bankruptcy personally, the lender can chase you personally all day long and squeeze as hard as the law allows.

    Time to review hubby's options with counsel seasoned at bankruptcy et al. 



  • Thu, May 7 2015 1:13 PM In reply to

    Re: Chapter 11 and County Court

    Millerkan:
    The bank is trying to  defeat the Chapter 11 by suing him on his personal guarantees, but then they also wanted him to sign all his rights away when he renewed his loans.  How can a bank do this?  

    Because the Chapter 11 filing was just the LLC only the LLC gets the protection of the automatic stay in bankruptcy. The lenders are still free to pursue your husband personally based on his guarantee of the loans. I’m pretty sure bank didn’t ask him to “sign away all his rights” nor could it have done so. But when the loans come up for renewal, that typically means the current loan is ending and must be paid in full unless the lender agrees to renew it, and the lender is free to ask for additional security or for changes in the loan terms in order to renew the loan. In effect, the renewal process is very much like seeking a new loan. The bank reviews the borrower’s credit, income, debts, collateral, etc., and decides what it will require to make the loan. None of that is illegal or even improper. That's simply the business of commerical lending.

    That said, I've not read the particular loan contracts at issue here, so I don't know exactly how the loans your husband has work. If your husband didn’t like the terms of the renewal, he probably should have tried to get another lender to refinance the loans for him on terms he liked better, if he could find a willing lender to do it. When loans have balloon terms or renewal terms, you have to be prepared to pay off the loan if the lender isn’t willing to renew or extend a new loan to cover it.

    Your husband’s attorney should be able to review the contracts and advise him of his options to deal with this, including what to do about the lenders going after him on the personal guarantees. It may be that he'll need to file bankruptcy personally, too, if he wants to slow the lenders down and get him breathing space to try working out a deal that would allow him to keep these properties. 

Page 1 of 1 (5 items) | RSS

My Community

Community Membership Search Community