Levitt homebuyers to get representation in bankruptcy court
In a rare move, Bankruptcy Judge Raymond Ray ordered the United States Trustee to appoint a "Home Purchase Deposit Creditors" committee after hearing directly from 30 Levitt & Sons homebuyers in a special court session on Jan. 10. Some homebuyers were heard in his courtroom, but many were contacted by telephone. All had filed "pro se" motions asking for their contracts to be canceled and their deposits refunded. As a group these homebuyers could lose more than $15 million in deposits on homes that were never started or are partially complete.
When I talked with Roberta Licker (one of the homebuyers) before the hearing last week, she told me she had two priorities when she talked with Judge Ray. One was to get her contract canceled and get her money back and the second was to ask that a special committee be formed for the homebuyers because they were not being appropriately represented by the current debtors committee. Every bankruptcy attorney she talked with before the hearing told her that it wasn't possible or that it's never been done.
Well Judge Ray proved them all wrong. He said in his order after the hearing on January 10, "Pursuant to 11 U.S.C. 1102(a)(2) "the court may order the appointment of additional committees of creditors ... if necessary to assure adequate representation of creditors ..." Judge Ray concluded, "There is no doubt the plight of the many 'Home Purchase Deposit Creditors' is unique from the majority of the other creditors. Based on the foregoing the Court finds that those creditors who fall into the class of "Home Purchase Deposit Creditors" are not currently assured of adequate representation in this large and complicated bankruptcy." Roberta Licker not only got her wish that a committee be appointed. Steven Schneiderman of the U.S. Trustee's office asked her to serve on the committee.
Criteria for serving on the committee include:
- Creditor must have signed a contract to purchase a house or lot from Levitt & Sons or one of its subsidiaries.
- Creditor has not closed on the contract or otherwise taken possession of the house.
- Creditor paid a deposit which has not been refunded in full.
Roberta Licker also got another pleasant surprise. Judge Ray ordered that her home purchase contract and the $24,000 which was held in escrow be refunded. Her full deposit was over $40,000 so she still has a fight on her hands, but Judge Ray told her she's one of the lucky few whose deposit is still available for refund.
This special homebuyers creditor's committee could set a precedent for homebuyers everywhere who are faced with a builder bankruptcy. Hopefully there won't be any more but given the current economic downturn, more builder bankruptcies are likely.
Lita Epstein has written more than 20 books including the Complete Idiot's Guide to Improving Your Credit Score.