Adequate Protection Orders (APO) for BK 13

[Andy Mirza]

I recently had two successes with Adequate Protection Orders for borrowers in Ch 13 BK. The APO is another way to deal with a borrower's delinquency in their BK plan when it negatively affects a creditor. 

If a borrower is in default under their plan (delinquent in post petition payments or failure to pay for un escrowed taxes or insurance), you can file a MFR. However, a lot of courts are lenient and will give the debtor extra chances. You might go through added time and expense to try to get relief, only to get shut down by the judge.

I look at APOs as settlement agreements between creditor and debtor. Instead of taking the chance at a MFR hearing, which could go either way, both sides agree on a remedy to the default.

For the debtor, he or she doesn't run the risk of relief being granted at the hearing and he or she gets another chance to complete the plan.

For the creditor, you avoid the same risk of losing in court. If the debtor completes the APO, generally, they've fixed the problem (caught up in post petition payments or paid delinquent taxes). If the debtor fails, the creditor gets relief without having to go to a hearing.

In two of our cases, the debtors failed to perform on the APOs, which resulted in getting relief without having to go to a hearing.

Just another tool to deal with loans in BK :)

[Andy Mirza]

I wanted to provide an update on the two "successes" I mentioned in the original post.

We were actually granted relief for one of the loans. The trustee in the other case moved for a dismissal before we could get our MFR.

Both borrowers filed new Ch 13 cases, which stopped our trustee sales. One has dragged on and, months after getting nowhere with the borrower and her new BK attorney, we're getting our MFR hearing in October.

The other borrower filed a motion to extend the automatic stay. (When a borrower files their first BK, there is an automatic stay preventing creditors from trying to collect; if it's a second filing within 1 year of the last one getting dismissed, the automatic stay only lasts for 30 days.)

Our attorney filed a brilliant opposition laying out the borrower's 6 bankruptcy filings within 10 years, which showed a pattern of bad faith filings. The debtor's motion was denied and we were free to foreclose a few days later. The property sold to a 3rd party at auction and we were finally able to liquidate this note that was sub performing for years!