Experts advise recent Neumann buyers
When a company files bankruptcy, what's a consumer to do?
Stand in line with a claim against the company, along with all the other creditors at bankruptcy court.
That is what some experts say when consumers are in a financial deal with a company like Neumann Homes, which announced this week it plans to file for bankruptcy.
"The consumer is in a really poor position right now," said Wheeling attorney David Siegel, who specializes in bankruptcies.
Here's what Siegel says about a possible bankruptcy filing with a home builder:
Q. What happens to the consumer?
A. Consumers are at different stages of the process. Some are at risk with their down-payments. Some are at different levels of home completion. Others have moved in but are worried about their guarantees. It will be taken by the court on a case-by-case basis.
Q. Who gets in line first?
A. Bigger creditors go first. Many consumers may not get full refunds, if any.
Q. What's the biggest risk here?
A. People with down-payments. Chances are, they lost that money.
Q. What about the partially finished homes?
A. The court could order another builder to finish them, depending on how far along those homes are. After all, you cannot close on an 80 percent finished home.
Q. If the company doesn't have the money, or cannot get the money, who pays for the building materials to finish the home?
A. Often the bank will if they're trying to cut their losses.
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Q. What happens to any home guarantees for those people who have already moved in?
A. Guarantees could be modified by the court. This would be taken on a case-by-case basis.
The Illinois attorney general's office has been looking into the Neumann Homes financial situation. Spokeswoman Robyn Ziegler addresses some consumer questions:
Q. What happens to consumers who may have signed mortgages on homes they may never get? What happens to those mortgages?
A. Typically in a new home development, consumers will not sign a promissory note and mortgage until closing.
Q. What can consumers do to help themselves in this situation?
A. While consumers can file complaints with the attorney general's office, at this time they might really not know what to complain about. They will need to eventually file their claims with the bankruptcy court. If the company does file for bankruptcy, consumers should file a Proof of Claim Form with the Bankruptcy Court.