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.
This includes, under U.S. Code, Title 11 U.S.C. § 362(a):
1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and
(8) the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor.
The automatic stay goes into effect as soon as the bankruptcy petition is filed. Certain types of actions, however, cannot be stayed. This includes, under U.S. Code, Title 11 U.S.C. § 362(b):
1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor;
(2) under subsection (a) of this section—
(A) of the commencement or continuation of an action or proceeding for—
(i) the establishment of paternity; or
(ii) the establishment or modification of an order for alimony, maintenance, or support; or
(B) of the collection of alimony, maintenance, or support from property that is not property of the estate;
The automatic stay gives a debtor time to try to resolve their financial problems. The Bankruptcy Code also lets trustees, any professional person appointed by the bankruptcy court, or a debtor’s attorney apply for payment of their fees during 120 day intervals for compensation or reimbursements.
Located in Agoura Hills, California, Ownit Mortgage is the 16th- biggest issuer of subprime home loans. The decision to file for Chapter 11 bankruptcy comes just weeks after the company shut down its operations on December 5. Over the last 15 years, Ownit has funded loans for almost 12,000 brokers.
Sagaria Law, P.C. represents clients wishing to file for Chapter 11, Chapter 7, and Chapter 13 bankruptcy. We have offices located in San Jose, Fremont, and Monterey. To speak with one of our bankruptcy attorneys, contact Sagaria Law, P.C. today. Your first consultation with us is free.
Ownit Mortgage Files for Bankruptcy, Chron.com, January 2, 2007
Mortgage Lenders Network Halts Loans as Housing Slows, Bloomberg.com, January 2, 2007
Ownit Mortgage Solutions Closes Its Doors, December 6, 2006
U.S. Code, Title 11, Cornell Law School
Related Web Resources:
Corporate Bankruptcy, SEC.gov
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