Texas File #024 — A $487k Counterclaim Settlement Without Bankruptcy

A Harris County homeowner had lived in the property for 19 years. Two prior Chapter 13 filings — both dismissed for missed plan payments — had left them ineligible for the automatic stay under §362(c)(4). A substitute trustee sale was scheduled for the first Tuesday of the following month.

A Chapter 7 filing would have required surrendering the property. The homeowner had significant non-exempt equity. Bankruptcy was, structurally, not the right tool.

Texas allows non-judicial foreclosure with as little as 41 days from Notice of Default to sale. That speed cuts both ways. It means the sale can come fast — but it also means the counterclaim, once filed in Texas district court, forces a fast response from the law firm.

In this case, the counterclaim was filed 11 days before the scheduled sale. A temporary restraining order was granted the following business day. The sale was removed from the courthouse-steps docket.

The good accounting ledger audit traced the loan into an SEC-registered mortgage-backed security tranche assigned in 2019. The audit surfaced a discrepancy: the assignment recorded in Harris County named an entity that had ceased to exist prior to the recording date. The servicer had not disclosed this in the substitute trustee's notice.

That single discovery was the pivot point of the settlement.

The Guild trustee account pledged funds sufficient to reconcile the accounting to a settlement figure that reflected the true balance minus the audit adjustments and the disclosure gap. The counterclaim was resolved via stipulated settlement. The mortgage was reassigned. The homeowner remains in the property.

Total elapsed time: 58 days. No bankruptcy on the credit report. No non-exempt equity surrendered.