Florida Asset Protection Blog

Homestead Protection Against Homeowner Association Liens

A caller said he was angry at his homeowners association because it had raised monthly dues to compensate for revenues lost from neighbors who were abandoning their home to foreclosure. He said that he owned his own home free and clear and that he wanted to stop paying his HOA dues in protest against the increased assessments. His wanted to know whether HOA could foreclose on his home to collect dues. The caller told me he assumed that the Constitutional homestead provision protected his home from forced sale initiated by an HOA lien. I told the caller he should pay his HOA dues.

There are exceptions to Florida's homestead protections. One of the exceptions is a consensual (voluntary) lien. A mortgage is an example of a consensual lien. When a homeowner secures the repayment of a loan by giving the lender a mortgage the homeowner has agreed by contract to waive homestead protection. If that were not the case few people in Florida could finance the purchase of their homestead. By law homeowners associations also have consensual liens on houses in their respective subdivisions. An HOA can impose a lien on your property for unpaid dues and assessments. Although the dues and assessments may initially be small the Florida statutes provide the HOA the right to add attorneys fees incurred in the collection of unpaid amounts. Law firms working for HOAs have been known to pile on attorney fees. A relatively small assessment, with fees added, can become a significant lien on your home. If the lien is not paid, the HOA has the right to foreclose the lien just as a bank can foreclose an unpaid mortgage. I explained to the caller that his protest against the HOA dues could cause him to lose his free and clear homestead.

Mortgage Foreclosure Defense Explained In Online Blog Post

A large percentage of the asset protection inquiries I have received in the past year have been from people concerned about a mortgage foreclosure on one or more of their properties. Most people who contact me are interested in asset protection from deficiency judgments. One of the issues I discuss with my clients facing a foreclosure and a potential deficiency claim is whether the homeowner should hire an attorney to defend the foreclosure even though the homeowner is  unable, or unwilling, to continue making mortgage payments. There are advantages and disadvantages to foreclosure defense, and the decision to defend or default depends on the individual debtor's situation and his assets. I found blog post  by the Florida law firm of Parker and DuFresne in Jacksonville which post  discusses legal defenses to a foreclosure action even when the homeowner is behind in payments. I am providing an  excerpt from the post below so that homeowners can learn how some attorneys defend foreclosure suits.

The Parker and DuFresne blog states, in part, the following:

"While you are litigating the foreclosure case, you are not required to make your normal monthly mortgage payments.  The legal process will afford you time to reinstate the mortgage, sell your home, file a bankruptcy or move out.  You may be able to force the lender to completely rewrite the terms of your note and mortgage, enabling you to keep your home.

This may sound too good to be true, but you may actually have valuable defenses and counterclaims against your mortgage company that could actually prevent foreclosure and even require your lender to pay you damages.  Across the country, judges are punishing mortgage companies for incomplete record keeping and for violations of the Truth In Lending Act.  You may be able to allege valid defenses including fraud and Truth In Lending Act violations.

Are you aware that your mortgage company is probably not the same company that actually loaned you the money to buy or refinance your home?  How do you know if the mortgage company suing you has been properly assigned your note and mortgage?  Your mortgage company may have failed to properly assign the note and mortgage before initiating the foreclosure.  Does your foreclosure complaint even have copies of the note, mortgage and purported assignment attached? 

Most likely, these documents are not attached, and may not even be in the possession of your mortgage company.  Your mortgage company may be attempting to substitute your original note and/or mortgage with a purported copy.  This is called a “Count to Establish Lost Documents."  There are strict legal requirements to establish a lost note or mortgage, and your mortgage company may be unable to meet the requirements if challenged.  

If your current mortgage company is not your original lender, it probably has never read your mortgage.  Your mortgage may require that the plaintiff accelerate (i.e. demand) the entire balance of the note.  Your mortgage company may have failed to do that, which may entitle you the opportunity to cure the mortgage by paying the reinstatement amount.  It is also common for mortgage companies to inflate the balance due on the mortgage by charging homeowners junk fees, such as Broker Price Opinions (BPO), property inspections and other "property preservation expenses."

So, essentially, your mortgage company may have filed an improper foreclosure lawsuit, but your time is limited.  You have or will be served a copy of the foreclosure complaint by a process server.  You typically have only 20 days to respond to the mortgage company's complaint, so you need to see an attorney immediately if you wish to defend against the foreclosure.  If you are beyond the twenty days, there are still defenses that can be raised."

I do not handle mortgage foreclosure defense. I know several attorneys in the central Florida area to whom I refer mortgage defense clients.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

 

 

Involuntary Bankruptcy Petitions By Single Creditors

Many asset protection clients are concerned about involuntary bankruptcy. Involuntary bankruptcy can deprive debtors of some asset protections which are effective in the creditor’s collection efforts in state court proceedings. For instance, homestead protection is unlimited in state court but is restricted in amount and by time in a bankruptcy court. Debtors with otherwise effective asset protection plans often ask whether a single, aggressive creditor forcing them into bankruptcy court. The general rule is that one creditor cannot force an involuntary bankruptcy in order to collect the debt.

A creditor’s petition for an Involuntary bankruptcy requires that the creditor allege and prove with evidence that the debtor is not generally paying his debts. As an example, one bankruptcy court held that, "Under Bankruptcy Code, involuntary bankruptcy petition cannot be maintained in federal court unless it can be shown that debtor is not generally paying his debts; consequently, under most circumstances, debtor's failure to pay single creditor will not justify granting of involuntary bankruptcy petition..." As long as a debtor can show that he is current on all or almost all of his other debts including credit cards, mortgages, and other obligations the debtor will probably successfully defend an involuntary bankruptcy petition of a single aggressive creditor.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Tenants By Entireties : Account Owned Through Couple's Living Trusts

Bank accounts owned jointly by a husband and wife are exempt from the individual creditors of either spouse as tenants by entireties property. Today, one of may clients described a joint bank account that was titled in the name of their respective living trusts. The account was owned by the Husband, as trustee of husband’s living trust and Wife, as trustee of wife’s living trust. We discussed the issue of whether a bank account owned by spouse’s living trusts, rather than the spouses’ individual names, is a protected entireties accounts.

Florida courts have extended homestead protection to a residence owned by a debtor as the trustee of the debtor’s living trusts. The homestead provision of the Florida Constitution applies protection to "natural persons." The courts have "looked through" the living trust to find that the trustmaker and trustee, the natural person, is the real legal owner of the property who is entitled to protection under the homestead clause of the Constitution. It is not clear whether courts would similarly look through a married couple’s separate living trust to construe a bank account titled in the name of marital trusts as an entireties account. I conducted just a few minutes of legal research and found no Florida state court or bankruptcy case which discussed this type of fact pattern. I suspect that most courts would consider a bank account titled jointly in the names of spouses’ separate living trusts to be an entireties account. There would be a greater chance of tenants by entireties protection if the couple included in their trust agreement a statement that they intended to retain tenants by entireties ownership of assets owned jointly by their respective living trusts or by a joint living trust.