Offer in compromise, that offer must be “computed”, i.e. reduced to present value. This “offer” to negotiate a settlement for less
than the amount the creditor would take in a legal foreclosure sale, if the debtor were permitted to redeem the property for full price, is
the only offer to compromise the creditor can offer. It is an offer within the contemplation of § 722(5), and it must be “calculated”.
You’ve been thinking and praying about whether to get an appraisal on your home if you might be offered a payoff. Now you know.
This is a good time to read the section entitled “Appraisal”, in the section of the pamphlet entitled “Paying Creditors off.” It spells out the difference between an appraisal and a discount and offers some suggestions about how to negotiate a favorable compromise offer in cases where you may qualify to avoid the necessity of an appraisal.
If the creditor is making a good faith offer, to accept less than the full amount due, that must be reported to the judge, whereupon the judge may order it accepted, if it meets the statutory test. (This statutory test must be met, or the judge has no authority to order that it be accepted, and the report is merely informative.)
Note that “judge” has nothing to do with a party’s status. A judge of a bankruptcy court does not have to be a practitioner. This report must be filed with a bankruptcy judge, whose office is to rule on what is a good faith offer, and what is not.
A judge, who is not a practicing bankruptcy attorney, can’t be expected to know that the terms of an offer to compromise are negotiated, and he can’t be expected to know that, by rejecting a good faith offer to compromise, a person may be avoiding his or her right to an appraisal.
There are many ways to accomplish this. A creditor may submit a motion to avoid appraisal, or it may simply make a good faith offer to compromise a little less than the full amount due. A motion can be filed early in the case, before the person has had a chance to be completely victimized by the process.
The motion to avoid appraisal is to be filed in the adversary proceeding, or, if the creditor has not filed the adversary, the judge may order it filed. If it is being filed in a voluntary, no asset case, the adversary will be the place where it is filed. (If the creditor is the trustee, there is no adversary.)
The motion must clearly and concisely state: (1) The full name and dba of the debtor; (2) The amount claimed due, and the date the claim accrued; (3) The basis for the claim; (4) Whether the basis is an open-ended contract or a non-open ended contract; (5) The amount offered to settle, and the basis for the offer; (6) Whether the amount was offered in good faith; (7) That the creditor has not been paid, that the amount offered was less than the debt as shown on the books and records of the creditor, and if there is doubt about it, how the amount is determined; (8) Whether the person has suffered a judgment or made any levy or sale; (9) Whether the debtor has any defenses to the claim; and (10) The basis for any defenses to the claim.
In making this motion, a creditor must have an absolute and iron-clad right to recover. It cannot be a contingent claim based on foreseeability. The motion must be drafted before the creditor files the claim.
For more details about how offer in compromise might help with your financial situation, call (888)489-4889 for a free consultation.