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Five years ago I loaned the man (and his partner) who cared for my dad
the down payment on a mobile home. I drew up a very specific loan
agreement requiring them to pay me interest-only (8%) for 5 years and
then, if they could not refinnance, the agreement specified that they
would put the unit up for sale and repay me from the proceeds. The
agreement also specified that any attorney's fees I incurred in my sole
judgement to collect the pricipal, they would have to reimburse me for.
It also specified that at the end of the 5 year period, until they did
repay me, the interest would become whatever my credit card charged on
cash advances (I now know this rate of over 20% is not legal, but I
didn't know it when I wrote the agreement, and, it seems, neither did
they).
They have made every-interest only payment. They have requested and
extension on paying the principal. They say they have all their credit
cards maxed out. Because construction will begin in about 8 months on
an Indian casino immediately next door to their property, ruining a
view that extends across 350 acres of open fields, I feel the unit
should be sold now, while the context is still lovely, rather than wait
until it becomes a constuction site with cranes and trucks and dust....
In their letter requesting an extension they stated that "Robert is
still not reporting his income".... as a reason they have not even
asked to refinance. Robert was the fellow who worked for me and I paid
him as an independent contractor - I was pretty sure he paid no taxes
on trhe checks I wrote him, but that, at the time, was not my concern.
In fact I wrote an "employment statement" for them at the time so they
could use it to present to their lender so they would be more likely to
be awarded their loan. I'm sure they did not mention to their lender
that the down payment was a loan - that 100% of the property was being
financed, even the closing costs.
10% of the units in this park in California are now up for sale, sales
have been incredibly slow, prices have fallen 20% or more in most cases
in the last year, though a market analysis done for me by the realtor
who sold them their unit has revealed that their unit would probably
sell for what they paid for it 5 years ago (because very undesirable
adjacent units have moved and because the work they have done on the
place). The casino is hugely undesirable but the town and county in
California where it's slated to go up can not stop it, though not for
lack of trying. Approval has not been awarded yet, but it's a lock
according to the planning department in the town I've spoken with.
Can I place a lien on the unit, as contractors do when they don't get
paid, or is this ability unique to contractors and mechanics? How can
I go on record as being owed this money by them - is filing in superior
court for the $18,000 the only way? Could I file in small claims court
for the $2000 in legal fees I've incured in this to date? If I turn
this debt in for collection do I then only get a part of it?
If I file suit in superior court for the $18,000, a California real
estate attorney has said it would cost me $15,000 (this seems a lot for
an open-and-shut-case, but he charges $350 per hour so perhaps...)to
get a judgement, which would then be discharged in bankruptcy court,
which they have said they would revert to if I file suit against them.
They are fiercly protective of their credit. It seems they are making
minimum payments everywhere, and are struggling to remain off any
credit warning sheets.
I wonder if the new bankruptcy law with its tightened regulations,
particularly those requiring that tax forms be filed, and requiring
that the bankruptcy attorney be personally liable for the accuracy of
the finnancial statements presented to the court, would pervent them
from either filing or from being successful in having their debts
discharge. I can prove that 5 years ago they did not report the income
I paid Robert, and I can prove that they have a corrent parctice
keeping Robert's income under the table. How much of a deterent to
filing is this for them.
The real estate attorney I've hired, whom I've paid $2000 to to review
documents and make 2 phone calls to them, has said he knows nothing of
bankruptcy and cannot advise me. He's said that even in superior court
I probably be awarded only 1/2 my legal fees ("one always asks but
don't expect to get all of it").
I'm so angry with them. They want me to keep paying for their
lifestyle, which I resent like fury. There is a chance one of them is
quite ill (AIDS?... they hinted at "health issues" in their
conversations with my attorney) - I assume this will affect how their
case is viewed by the bankruptcy judge, somehow.
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"alex" <explodingwave@aol.com> wrote:
Five years ago I loaned the man (and his partner) who cared for
my dad the down payment on a mobile home. I drew up a very
specific loan agreement requiring them to pay me interest-only
(8%) for 5 years and then, if they could not refinnance, the
agreement specified that they would put the unit up for sale and
repay me from the proceeds. The agreement also specified that
any attorney's fees I incurred in my sole judgement to collect
the pricipal, they would have to reimburse me for.
But apparently the agreement did not provide for a security
interest (in other words, a formal mortgage) on the home. That was
your big mistake.
They have made every-interest only payment. They have requested
and extension on paying the principal.
Can I place a lien on the unit, as contractors do when they
don't get paid, or is this ability unique to contractors and
mechanics? How can I go on record as being owed this money by
them - is filing in superior court for the $18,000 the only way?
If you didn't get a lien at the beginning, unless they voluntarily
give you one now, the only way is to sue them and get a judgment.
Could I file in small claims court for the $2000 in legal fees
I've incured in this to date?
Only if you don't want to collect anything more than that.
If I turn this debt in for collection do I then only get a part
of it?
The full debt may be collected, but the collection agency will take
a fee.
If I file suit in superior court for the $18,000, a California
real estate attorney has said it would cost me $15,000 (this
seems a lot for an open-and-shut-case, but he charges $350 per
hour so perhaps...)to get a judgement, which would then be
discharged in bankruptcy court, which they have said they would
revert to if I file suit against them.
People threaten bankruptcy but don't always file. But it is a
risk. If you had gotten a lien up front, bankruptcy wouldn't be as
much of a problem.
I wonder if the new bankruptcy law with its tightened
regulations, [...] would pervent them from either filing or from
being successful in having their debts discharge.
If the debtor is a wage earner and can (in the court's opinion)
make periodic payments, he'll be required to pay back some or all
of his debt to you over a period of three to five years.
Stu
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