Legal Question in Real Estate Law in California

Re: default on a loan

Well, your question omits a lot of facts that are useful in analyzing your prospects for recovering what you're owed, but let's go through a list of questions:

First, is the loan secured by a deed of trust (or otherwise)? Security is usually better, but not always! There are instances where unsecured creditors come out better, now that property values are down and secured lenders often are without recourse to the borrower while unsecured creditors likely have full recourse.

Was it a purchase-money loan, or a refinancing? Are you in first position, or is it a second (or lower) deed of trust? Is the property an owner-occupied residence? Were you the seller of the property, or are you a "third party" lender?

These are the major issues that will define where you stand in the pecking order in a foreclosure, whether the foreclosure can be by trustee's sale or must go through a court procedure, and whether your recovery will be limited to what the security sells for, or whether you can seek a deficiency judgment or can sue the borrower without going after the collateral at all.

Then, there are some additional factors which might affect your recourse and options, but which don't areise all that often: Is there a possibility the borrower committed loan-application fraud on you? Has the borrower failed to maintain the property reasonably? Have the taxes been paid? Did the borrower claim he would be an owner-occupant, the immediately rent it out? Has the rent he's collecting exceeded what he's been paying on the loan?

Then as to transferring assets to make himself seem judgment-proof: This very well may be a violation of the Uniform Fraudulent Transfers Act, a part of California's Civil Code. It is a civil wrong for a debtor or even a prospective debtor to transfer property by gift, below-fair-value sale, or otherwise, when this has the purpose or effect to "hinder, defraud or delay" the creditor. The remedies available to the creditor are broad, and include setting aside the transfer and liability of both the transferor and the transferee to the creditor. However, if you were not in a position to become a creditor with a claim on those assets because you aren't eligible to go beyond the collateral on your loan, the LLC and the UFTA probably won't help you.

I have some prior experience both with unusual foreclosure cases and UFTA cases, and would be willing to give you a further analysis, without obligation, if you contact me directly with answers to some or most of the questions posed above. Also, my office is probably about 40 minutes from you and most of my cases are in the Sonoma County court.

Re: default on a loan

Your recourse is like any other lender - get in line to sue and foreclose. Get a foreclosure company or experienced attorney in your area to help you. I wish you good luck in getting your money back someday.