The state of Florida prohibits banks from using their own stock as collateral for extensions of credit. These prohibitions are known as anti-tying regulations. Tying is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. The purpose of […]
Involuntary Bankruptcy is used by some creditors to force an alleged debtor[1] into bankruptcy. From the perspective of a debtor, an involuntary bankruptcy carries serious consequences, including loss of credit standing. The impact on a debtor’s credit report and to her credit score can follow a debtor for years, even […]
Once the creditor obtains a decree from the court that the debtor made a fraudulent transfer, the creditor may collect on its claim under Florida’s Uniform Fraudulent Transfer Act (“FUFTA”), which provides creditors with various remedies. See a previous blog post on the various remedies under FUFTA, Remedies for Creditors […]
Creditors may become frustrated when they discover a debtor has engaged in an unfair transaction that hampers their ability to collect payment. However, creditors are not without remedy in the event that there has been some funny business with the debtor’s finances. Regardless of the debtor’s intentions behind the questionable […]
After entering a participation agreement, a once promising loan sometimes becomes a problem loan once the borrower defaults. Following default, both the lead and participating banks always assess collectability. If the parties find the borrower is uncollectible based upon changes in circumstances, flaws in the underwriting or borrower fraud, it […]
Involuntary bankruptcy is a legal proceeding creditors may use to force a debtor into bankruptcy, rather than a debtor voluntarily seeking bankruptcy protection on his or her own behalf. Creditors seeking involuntary bankruptcy must file a petition in the bankruptcy court, and the debtor has the opportunity to defend against […]
Involuntary bankruptcy is a legal proceeding creditors may use to force a debtor into bankruptcy, rather than a debtor voluntarily seeking bankruptcy protection on its own behalf. Creditors seeking involuntary bankruptcy must file a petition in the bankruptcy court, and the debtor has the opportunity to defend against being forced […]
The filing of an involuntary bankruptcy is a serious matter, and creditors rarely resort to this drastic measure when attempting to collect on a debt. The prospect of creditor liability for costs, attorney’s fees, damages, and possibly punitive damages makes involuntary petitions a risky endeavor. Involuntary bankruptcy is most often […]
The Supreme Court of Florida in Bartram v. U.S. Bank Nat. Ass’n, 2016 WL 6538647 (Fla. 2016) held that prior acceleration in a foreclosure action that was involuntarily dismissed was revoked by the involuntary dismissal, and therefore did not trigger the statute of limitations to bar future foreclosure actions. Additionally, the Court held in Singleton v. Greymar Assoc., 882 So. 2d 1004 (Fla. 2004) that the res judicata analysis applies equally to statute of limitations defenses and doesn’t prohibit the re-filing of a foreclosure action that was previously dismissed so long as the second foreclosure action is predicated on a subsequent default. At first glance, this decision appears to have broad application to any type of secured installment debt. If Bartram is broadly applied it could breathe life into ancient debt that was long ago considered time barred by commercial lenders. However, there are distinctions that may limit the application of Bartram to residential mortgage foreclosures. Future appellate decisions will address how broadly Bartram should be applied. This article addresses the best argument for narrow application and the best argument for broad application. If Bartram is applied broadly it could serve as a basis for commercial lenders to re-evaluate mortgages in default in which they previously declined to foreclose. It could also serve as a basis for commercial lenders to re-evaluate corporate policy directed toward secured property that currently has little value or corporate policy directed toward junior mortgages with current value that is insufficient to cover the senior lienholder.
In a perfect world, all loans would be performing, and the lead bank and participant would share in the profits of a loan participation with minimal risk of loss. In the real world, a promising participation loan easily becomes a problem loan, and the lead bank and participant bank can find themselves embroiled in litigation against each other. Such litigation puts a substantial strain on the lead bank’s resources to enforce the loan documents against the defaulted debtor, at a time when the parties should be sharing resources for loss mitigation. One common reason a participant may sue a lead bank after borrower default is based upon the participant’s assessment of collectability. If the participant determines that the collateral is worthless or the borrower is otherwise judgment-proof, the participant may look to the lead bank to recover its share of participation in the failed loan.