California-Based Ownit Mortgage Solutions Inc. Files For Chapter 11 Bankruptcy
Subprime mortgage lender Ownit Mortgage Solutions Inc. has filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court of San Fernando Valley in California.
The company, which makes loans to borrowers with poor credit and limited income, lists it debts as more than $100 million and assets between $1 million and $100 million. According to the LA Times, the bankruptcy filing is in response to lawsuits filed by two creditors.
Ownit Mortgage says that it owes its largest unsecured creditor, Merrill Lynch LP Holdings Inc., approximately $93 million. Merrill Lynch is also an owner of a 20% stake in Ownit Mortgage. Credit Suisse First Boston, owed $12.7 million, and Terwin Advisors LLC, owed $19 million, are also unsecured creditors of Ownit Mortgage.
The Automatic Stay
When filing for Chapter 11 bankruptcy, the debtor receives an automatic stay, which gives a debtor a period of time where all judgments, foreclosures, collection activities, and repossessions of property are suspended. Creditors cannot pursue any debt or claim from before the bankruptcy petition was filed.
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