10-12245-13 In re Holmdahl

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Bankruptcy
Foreclosure sales

Where the debtor’s house was bought at a sheriff’s sale after foreclosure, but the down payment was forfeited, the down payment is to be used to reduce the debtor’s arrearages on the house.

“In truth, the forfeited funds constitute an unusual ‘payment’ on the loan which the parties likely never contemplated. However, based upon the language of the mortgage, there is no justification for treating the funds as anything other than ‘payments or proceeds’ which should be ‘applied to each Periodic Payment in the order in which it became due.’ The primary goal in contract interpretation is to give effect to the parties’ intent, as expressed by the contractual language. Md. Arms, 326 Wis. 2d at 311. Here, the intent seems clear. Only specific payments would be applied to principal; all others would be handled in accordance with the broader contractual provision directing that payments be applied to periodic payments (of principal and interest) in the order they came due.”

10-12245-13 In re Holmdahl

W.D.Wis., Utschig, Bankr. J.