Alaska Bar Assoc. — Bankruptcy Section

We just spoke at the Alaska Bar Association — Bankruptcy Section on the issue of the Alaska usury statute.  We had less than two hour notice to prepare for the presentation.  The materials are available at the Bar Office.

The attendees seemed surprised to learn that the Cox v. Cooper decision actually doesn’t have very wide sweeping effect.  There are seven state statutes that exempt whole classes of creditors and transactions from the decision.  Two Federal acts also limit the decisions scope:  The Banking Act of 1864 and the Depository Institutions and Deregulation and Monetary Control Act of 1980.  These two acts exempt all federal banks and state banks that compete against federal banks from state regulation.  Add to that the Marquette National Bank v. First of Omaha Service Corp. and Smiley v. Citibank decisions and all interest and fees for banks are exempt from state regulation.

The Cox v. Cooper decision only concerns local Alaska credit between private parties.  The sky is not falling.  Even though the creditors bar insists that it is.  I wonder how much money the local and national banks will pay in fees for amicus briefs on a local issue with no bearing on their operations?  Indeed, regulating hard money lenders could actually send more business to the banks.

Thank you for the invite, Michelle Boutin, Chair of the Alaska Bar Association — Bankruptcy Law Section.

 

Alaska’s New Security Interest Law

Security interest law concerns security interests in personal property rather than real property.  The law is generally known as UCC 9, or the Uniform Commercial Code section 9.  We find the statute at Alaska Statute 45.29.101-709.    Alaska recently adopted the 2010 changes to the security interest law.  The law is effective for security interests after July 1, 2013.

The law instituted significant changes between the old recording rules and the new rules.  The impact of not recording your security interests may mean that you can’t collect your debt if the debtor becomes bankrupt.

 

What you need to record a lien.

You must give value to a debtor.  The debtor must have rights in the collateral.  The Debtor must give an acknowledged security agreement to you.

Properly Recording Perfects the Lien.

Properly recording the security interest provides notice to the world of your rights and perfects your interest.  The new rule changes substantially change the recording rules.

Account Debtors Must Comply With Notice of Debt Assignment

The statute includes new provisions that need debtors to pay the assignee of a debt rather than the original creditor.  A debtor’s failure to pay the assignee after notice of an assignment leaves the debtor liable to pay twice.

Filing Financing Statements

You will still use form UCC-1 to file the financing statement.  In most circumstances you will only need to file a single document and not multiple documents in several jurisdictions.  You don’t need to get the debtor’s signature on the financing statement to file the document.  You also don’t need to have the organization’s ID or the form of their entity.  If the proper filing place is in Alaska you can file online here.

Foreclosure After Default

You can still engage in self-help repossession of property as long as you can go ahead without breaching the peace.  You can also start a judicial foreclosure.  There are also still the rights of proceeding with a strict foreclosure.

Substance over Form

The statute will apply to transactions, even if you word your agreement in a way to try and escape the statute.  The bankruptcy court is likely to consider whether there is an obligation and whether it is secured by collateral. For example, the sale of Accounts can still be considered simply a UCC 9 security agreement transaction.  The risks of not recording the financing statement are that someone else may claim priority over you or a bankruptcy judge could rule that you are not perfected and therefore not collateralized.  Similarly transactions where you keep title may be treated as a security interest, requiring perfection.  It also applies to consignments, sales of intangibles, sales of promissory notes and accounts.

The New Location Rules

Where you record the financing statement depends on the debtor.  The debtors place determines the choice of law and the place of filing.  Registered organizations must be recorded at the place where they are organized.  Alaska companies in Alaska.  Delaware companies in Delaware.  Individual debtors in the state of their residence.  Other entities at the chief executive office.

Foreign Debtors are recorded in their own country, if their laws are like our UCC9; otherwise, you will need to record in Washington DC.  For all Canadian provinces, except Quebec you would file in Canada.  For other countries you can take a look at Prof. Arnold S. Rosenberg’s work at Thomas Jefferson School of Law here.

Other Means of Perfection

There are other means of perfection such as control or automatic perfection.  The control generally concern accounts, such as deposits, investments, electronic chattel paper and letters of credit.

Recording your Financing Statements

The financing statement lasts for six years without a continuation.  When you search the state records you do not know whether the recorded documents were actually authorized.  They are based solely on the name of the debtor as typed by the submitting party.  All financing statement once recorded stay in the system, even if they have been terminated. If the financing statement has been wrongfully terminated your interest may be subject to the existing claims.  Accordingly, reviewing the state documents is merely the start of your due diligence.

Debtor Name Trap

Many people working for companies don’t actually know what the official name for their business is as recorded in the State’s records.  If you simply take your debtor’s word for the name of the enterprise, it is likely the name will be incorrect and that could leave you unsecured.  It is a best practice to get a copy of the record recorded with the state.  You want the name from the articles of incorporation.  When the debtor is an individual you want to use their name as typed on their current drivers license issued by the State of Alaska.

 

For more information on the changes to Alaska UCC 9 give us a call.

Contesting Alaska Deed of Trust Foreclosures

[Deed of Trust Foreclosure Sales

 

Many attorney’s knee jerk response is that deed of trust foreclosure sales don’t get set aside.  This certainly is the general rule.  However, Alaska has a long history of setting aside deed of trust foreclosure sales, even if they are only rare occasions.  Alaska is particularly troubling in that the statute provides for redemption rights only to the extent provided for in the deed of trust.  Because the statute does not require redemption rights the banks don’t allow any redemption rights.  Accordingly, the courts have allowed sales to be set aside.  Due process violation allegations have been made, but the Alaska Supreme Court has not reached the question by finding other reasons to allow the sales to be set aside.  Accordingly, the issue remains open whether a due process claim could be successful.  The following are excerpts taken from various pleadings and briefs filed in cases in Alaska.  Rather than waiting to provide a more cohesive analysis on the topic, I thought I’d make these resources generally available to those that might either use them as a launching point or to engage in debate on the issues.

Alaska Courts set aside Trustee Foreclosure Sales

“Equity Abhors a forfeiture and will seize upon slight circumstances to relieve a party therefrom.” Rosenberg v. Smidt, 727 P.2d 778, 783 (Alaska 1986) citing, Jameson v. Wurtz, 396 P.2d 68 (Alaska 1974).  The remedy of setting aside the sale will be applied in cases which reach unjust extremes.  Rosenberg v. Smidt, 727 P.2d 778, 783 (Alaska 1986) citing Semlek v. National Bank of Alaska, 458 P.2d 1003, 1006 (Alaska 1969).  If the bidders are allowed to claim the property after paying only a small fraction of the value of the property the matter has reached an unjust extreme.   See, e.g., Rosenberg v. Smidt, 727 P.2d 778 (Alaska 1986).

 

The Alaska Supreme Court has stated that

“. . .defects in the mechanics of the trustee’s exercise of the power to foreclose may render the foreclosure sale voidable.  Generally, mere inadequacy of price is not sufficient by itself to require the inadequacy of the sale price is (1) “so gross as to shock the conscience and raise a presumption of fraud or unfairness,” or (2) is coupled with other irregularities in the sale procedures, then invalidation of the sale may be justified.

Gross inadequacy is measured by reference to the fair market value of the property at the time of the sale.  Fair market value for these purposes has been defined as not the fair “forced sale” value of the real estate, but the price which would result from negotiation and mutual agreement, after ample time to find a purchaser, between a vendor who is willing, but not compelled to sell, and a purchaser who is willing to buy, but not compelled to take a particular piece of real estate.  Baskurt v. Beal, 101 P.2d 1041, 1044 (Alaska 2004).

 

Furthermore, “. . .a trustee has a duty to take reasonable steps to act impartially and in such a way as “not to sacrifice the debtor’s property.”  Id at 1046.

Alaska Deed of Trust Bidders Do Not Earn BFP Status when on Inquiry Notice of Defenses to Sale or they are Bad Faith Purchasers.

Alaska Stat. 34.90.030 grants bona fide purchasers at a foreclosure sale a conclusive presumption that the provisions for a non-judicial sale were performed if the trustee recites the factual specifics of their compliance with statutory requirements.  The Alaska Supreme Court has applied the statute in Rosenberg v. Smidt, 727 P.2d 778, 784 (Alaska 1986).  In Rosenberg the court stated that to qualify as a BPF the purchasers must be good faith purchasers for value and without notice of any defect.  Id.  Furthermore, a bad faith purchaser or one on inquiry notice does not become a BFP due to the recitations in the Trustee’s deed. Semlek v. National Bank of Alaska, 458 P.2d 1003 (Alaska 1969).

1) Foreclosure Purchaser Inquiry Notice may Defeat BFP Status: 

In addressing the quality of the bidder’s “notice,” the property owner only must show the bidders were on inquiry notice of potential defects in the sale to deprive the Bidders of BPF status.  Modrok v. Marshall, 523 P.2d 172 (Alaska 1974).

“It is a settled rule of property that circumstances, which suggest outstanding equities in third parties, impose a duty upon the purchaser’s to make a reasonable investigation into the existence of a claim.  Given suspicious facts, the status of bona fide purchaser turns upon whether there was a prudent inquiry into their import.”  Modrok v. Marshall, 523 P.2d 172 at 174 (Alaska 1974).

 

Facts that put bidder on inquiry notice of Defects of sale include:

 

1)                  Insufficiency of the Sale Price in comparison to the fair market value of the property sold;

2)                  Absence of the Owner at the Sale along with insufficient Trustee recitation of facts regarding the owners actual notice of the sale date.

 

When the owner is absent from the sale and the trustee’s deed fails to recite factual details in the deed then a bidder is on inquiry notice and is deprived of BFP status.  The court explained that requiring factual recitals tends to assure the requirements of law concerning mailing and delivery are complied with.  In the present case the trustee’s deed identifies the notice of sale which contained a specific sale date which was different than the actual sale date.  The trustee’ deed is completely silent on why the sale was continued or whether any factual steps were taken to apprise the owner of the new sale date.  This lack of any facts addressing this absence of notice to the Owner placed the Bidders on inquiry notice and deprived them of their BFP status.

2) Bad Faith Purchaser Conduct Defeats BFP Status:

A bad faith purchaser or one on inquiry notice does not become a BFP due to the recitations in the Trustee’s deed. Semlek v. National Bank of Alaska, 458 P.2d 1003 (Alaska 1969).  The Plaintiff’s following conduct caused their conduct to be bad faith:

1)            They created a collusive buying group to chill the sale and lower the auction price.

2)            They failed to address make sufficient inquiry into the items in which they were on inquiry notice;

3)            They failed to notify the owner of the sale so that she could timely object to the sale during the free statutory sale cancellation procedure.

Bidders had a duty to not chill the sale and take deliberate steps to lower the auction sale price.  .” Cf. McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).  The trustee must take “reasonable appropriate steps to avoid sacrifice of the debtor’s property and his interest.  Id.  “The trustee under a deed of trust generally regarded as owing a fiduciary duty to both the trustor and the beneficiary and is required to perform his duties impartially.   McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).  The trustee must take “reasonable appropriate steps to avoid sacrifice of the debtor’s property and his interest.  Id.  The Bidders were on notice that the borrowers were occupying the house before bidding on the property.

3)                  Possible factual Allegations

  1. The Bidders were the only bidders present at the sale.
  2. The Bidders created a collusive group to prevent competitive bidding at the sale thereby defeating the objective and purpose of a public sale.
  3. The Deed of Trustee attempted sale fails to comply with the Alaska Statutory requirements.
  4. The Bidder’s failed to promptly notify the Owners of the sale until after the lapse of A.S. 34.20.080(g) trustee rescission thereby intentionally depriving the Owner or Seller  the opportunity to correct any sale deficiencies.
  5. The Bidders were on notice that the deed of trust itself did not include redemption rights.
  6. The U.S. Constitutional Rights of due process which include notice and opportunity to be heard as guaranteed under the 14th Amendment was a matter of public record.
  7. The Alaska Constitution Article 1, Section 7 which affords due process rights to Alaska citizens was a matter of public record.
  8. The lender and Trustee breached the duty to seasonably advise the obligor on request of the amount in default.  Hagberg v. Alaska Nat’l Bank, 585 P.2d 559 (Alaska 1978).
  9. The lender and Trustee converted the owner’s right of reinstatement or satisfaction of the debt by breaching its duty to seasonably advising her of the cure amount or the redemption amount.  Young v. Embley, 143 P3d 936 (Alaska 2006).
  10. The Deed of Trust Trustee and lender have a duty to timely communicate the reinstatement and satisfaction amount; and, to be reasonably willing and able to accept a reinstatement or satisfaction from the debtor.   Nystrom v. Buckhorn Homes, 778 P.2d 1115; Alaska 1989).
  11. Perhaps the lender and trustee also have a duty to inspect the property, the tax rolls and consider the fair market value of the premises to fulfill its obligation to not forfeit the owner’s equity in the property.  This duty arises under the trustee’s  duty to act impartially to the trustor and beneficiary of the trust by informing the beneficiary of the continued sale date but failing to announce the continuance to the trustor.  These rights arise from the duty to not to sacrifice the debtor’s property for an insufficient amount.  McHugh v. Church, 583 P.2d 210  (Alaska 1978).  I propose the lender and Trustee also has a  duty to notify the trustor of the sale results within the trustee’s ten day timeline to rescind the sale thereby not sacrifice the owner’s equitable rights of redemption.

Alternatives to Selling My Annuity

Alternatives to Selling My Annuity

People have all seen the J.G. Wentworth advertising “Its my money and I want it NOW!”  They’ve done a great job of getting people interested in immediate gratification from their rights to future money.  Many people become reliant on the receipt of those future funds and fail to realize the other options available to them.

Borrowing Money Inside the Annuity Contract

Some annuities and insurance policies provide for borrowing against the future sums that they owe you in the contract.  You need a copy of the annuity contract to know if this is possible.  Generally the transaction costs are much lower on these types of transactions.  They can be the cheapest way to get funds early.

Continue reading “Alternatives to Selling My Annuity”

Valuing My Money — Like an Investor. What is it worth?

This is part two of a series on selling your rights to money in the future.  These rights may arise from an:

  • annuity,
  • structured settlement,
  • court judgment,
  • court settlement,
  • note payments or
  • other contract rights for money in the future.

When the dollars you will receive and the dates for their payment are known values for the payments may be described with precision.  When the payments are all the same size and the dates are uniformly separated the value may be expressed by resorting to single formulas.  When the amounts and dates change then the formulas become more complicated.  The formulas related to valuing these transactions are taught as upper level college courses, but you could take an online class here.  It is impossible to teach an entire college course in a single blog post.  Much less the issues related to the secondary market on annuities.  (You can find a great book on that here.)  The formulas generally reduce the comparison to a single number called the discount rate.  You can look for their statement of the discount rate applied.  You should then find someone competent to independently verify that the rate the state is actually the rate computed.

Continue reading “Valuing My Money — Like an Investor. What is it worth?”

My Money Now!

A judge asked me to publish a list of structured settlement buyers soliciting business from Alaskans.  He wanted Alaskan’s to find competitive bidders.  To many Alaskans come to court to approve a sale and only have a single bid because they can’t find another bidder.

40% Excise Tax on Buyers without Court Approval

Judges are required to evaluate the fairness of the structured settlement transactions.  When the buyer gets a judge to approve their purchase, then the buyer isn’t required to pay the 40% excise tax to the IRS on the transaction.  The problem is most judges never took finance so they can’t quickly evaluate whether it is a good deal.  The person selling doesn’t have a clue on how to evaluate the matter and they think they can’t afford an expert to evaluate the value.  Furthermore, the underlying rights may be very complex and a simple finance equation may not resolve the issue.  That is one of the reasons people historically require competitive bids to evaluate whether the deal is reasonable.  Buyers tend to be experts.  But, buyers tend to only use the sharpest pencil when in competition with others.  That is why public projects are put out to bid.  Annuities shouldn’t be any different.

Those Who Want My Money Now — Need Multiple Bidders

To get the best price for anything, you have to have multiple bidders.  Just because you have only seen the commercials from one company doesn’t mean their are not more buyers available. This list is provided to help Alaskans find more bidders for their future cash.

If these people think that you are letting them be a sole source bidder they will likely low ball the offer.  If you let them think the matter is urgent and that selling is your only solution, they will low ball the offer.  Selling probably isn’t the only solution to your need.  Those three issues are topics for another post.  This post is simply about finding more bidders.

There are rumors that there are at least two buyers in Alaska.  However, they do not appear to maintain a web presence.  If any company would like to be added to the list of prospective bidders, please forward the information about who you are, where you are located, what instruments you are interested in and your contact numbers, including a web site.

Disclaimer About the My Money Buyer List

I do not endorse any of these companies.  I have never represented any of these companies.  I have represented clients that had offers from a few of these companies.  I have represented clients that received substantially better offers after they engaged my services.   My experience dealing with these companies is that they will offer low amounts of cash for your rights.  They will also do everything they can to make you commit to only negotiating with them.  In every case I have handled, these same companies will pay substantially more money than their first offer.  The list also does not attempt to discover or disclose any financial relationships between these entities.  However, J.G. Wentworth and PeachTree Settlement Funding are owned by the same entity.  They know when they are bidding against each other for business.  Accordingly, don’t rely on bids between these entities alone.  In competitive bidding scenarios any one of them may become the highest bidder.

The inspiration for this table came from Vaughn’s List, which can be found here.  I added the additional research on whether the business registered to conduct business in Alaska.  I also eliminated one entity from his list that no longer appears to be doing business.

I noticed that he reports problems with J.G. Wentworth.  Apparently J.G. Wentworth does  not appreciate unsolicited back-links to its domain.  Apparently they have threatened Mr. Vaughn with litigation over the link.  J.G. Wentworth has claimed that its recent financial misfortunes are due to Google punishing J.G. Wentworth due to his back link.  But, it appears that the real reason for J.G. Wentworth’s financial misfortunes arise from Moody’s down grading the company, see their report. Moody’s reported that J.G.Wentworth planned on going public but didn’t and then decided to issue massive dividends to the private investors. Moody’s stated “Net proceeds from the $425 million Senior Secured Term Loan issuance will be used to finance a $309 million capital distribution to JGW’s shareholders as well as to repay an existing $142 million term loan.” Almost a third of a billion dollars in profits being distributed to private investors from the profits of giving people My Money now.

 

Future Articles about My Money:

  1. Viewing My Rights to My Money — Like an Investor.  What is it worth?
  2. Alternatives to Selling My Money.
  3. They offered enough for My Money to get a new Snow Machine — What a Deal?
  4. Negotiation Strategies for Selling My Money
  5. I’m Selling My Money — But They Say We Have to Go To Court
  6. Picking an attorney to evaluate your My Money Sale
  7. 40% Excise Tax on Buying My Money
  8. Buyer’s Attorney Has no Conscience Will Help You Give Your Money Away

Clayton Walker