A Florida provider of default legal services is sounding the alarm on a new bankruptcy practice that he says could delay the foreclosure process in the state.
According to an announcement put out by the Law Offices of Daniel C. Consuegra Monday, Chapter 7 bankruptcy trustees in the state have been filing paperwork to sell homes encumbered by valid mortgage liens. The sales convey the property, by trustee's deed, to third-party buyers, who are often investors. Consuegra says the sales are often connected to borrowers whose bankruptcy filings show there is no equity in the subject property, nor any provisions to bring loans current.
Oftentimes, the notice of sale provided to lenders is improper – if it is provided at all, Consuegra says. His firm has further discovered instances where the investor-buyers are revealed to be corporate entities affiliated with foreclosure defense firms. According to Consuegra, the investor-buyer then rents out the property on a month-to-month basis, delays the foreclosure and makes a profit from the rentals.
"For the mortgage lender, this means additional parties to the foreclosure action, added service of process costs, as well as difficult and costly litigation," Consuegra said in the announcement. "Often, the sale takes place in the bankruptcy while the foreclosure case is stayed by the automatic stay. In some cases, the foreclosure case goes to judgment, but must be vacated for failure to serve the new owner."
Consuegra says the issue is rearing its head in Florida's Middle and Southern districts and that the Tampa division of the court is examining the matter in specific cases.