Louisiana Executory Process Explained:

In Louisiana, executory proceedings are a method by which the holder of a mortgage or privilege can effect the seizure and sale of secured property without previous citation and judgment.  Hiring a creditors’ rights attorney experienced with foreclosures and repossessions to navigate the steps is crucial.

Executory process is available when the mortgage or privilege instrument is an “authentic act” that contains a “confession of judgment,” meaning the borrower has already acknowledged judgment in the document.  When a creditor files a petition for executory process with prima facie evidence, a court may issue a writ of seizure and sale, directing the sheriff to seize and sell the property.

Because it omits some steps that are often necessary to seize someone’s property, this is typically quicker than other forms of foreclosure.  In Louisiana, the majority of foreclosures follow this procedure.  Although executory process is a unique feature of Louisiana law, it is not as complex as it might seem.  Though it may not be as quick as non-judicial foreclosures available in other states, it is less burdensome than pursuing foreclosure through ordinary process.  Thus, it is the pre preferred method for creditors of distressed property.

Executory Process Steps:

Default:

When a person takes out a mortgage to purchase a property, they commit to paying the bank or another lender on a regular basis.  They “default” on the mortgage if they cease making these payments on time. The lender, which is typically a bank, has the authority to initiate foreclosure proceedings if a borrower fails on their mortgage.

A “grace period,” or additional time to make up missed payments before the lender initiates foreclosure procedures, is sometimes included in mortgage agreements.  In order to avoid foreclosure, the borrower can attempt to make up the missed payments during this time.  Following the grace period, lenders notify borrowers of the possibility of foreclosure and offer them one more opportunity to make payments.  This is their last chance to keep their property from going into foreclosure.

Filing a Petition for Executory Process:

If the borrower doesn’t make up the missed payments within the additional time permitted, the lender may file a petition in compliance with La. Code Civ. Proc. art. 2634, with the court to initiate an executory process foreclosure.  In this legal action, the lender requests authorization from the court to seize the property because of the borrower’s noncompliance with the terms of the mortgage.

The creditor cannot use the executory process unless they have specific loan documentation.  In particular, the mortgage must be in authentic form (i.e., executed before a notary and two witnesses) and include a “confession of judgment” of the debt.  The original promissory note or a certified copy must also be filed with petition.

Court Review:

After the petition is filed, the court verifies that the bank has followed all legal requirements for executory process.  This includes that, among other things, they have all the required documentation proving the borrower promised to repay a loan but hasn’t.  “Approving the petition” refers to the court granting the bank’s official request to begin the accelerated foreclosure procedure.  The court will then sign an order in accordance with La. Code Civ. Prov. art. 2638, that authorizes the issuance of a writ of seizure and sale.

Notice to the Debtor:

Once the court signs the order to issue the writ, the sheriff shall serve a notice upon the borrower in accordance with La. Code Civ. Proc. art. 2721.  This ensures the borrower knows what’s going on and has an opportunity to react.  Additionally, this notice frequently states that the borrower has limited time to prevent foreclosure.  In such situations, individuals may only have a few days to either find the money they owe or try to keep their property through other legal means.  Once the notice is served, the property is constructively “seized”.

Property Sale:

Once the writ is issued, notice served, and property effectively seized, the sheriff will set a sale date.  The sheriff must advertise the property sale in accordance with La. Code Civ. Proc. art.  2722, and have the property appraised in accordance with La. Code Civ. Proc. art.  2723.  The appraisal can be waived in the mortgage instrument which could save the creditor some costs, but a creditor who performs a foreclosure without appraisal waives their right to pursue a deficiency judgment afterwards.  So the choice to proceed with or without appraisal should be made strategically.

The sale is conducted by auction at the courthouse, with the high bidder winning.  The creditor has the right to place a bid at the auction.  If the creditor wins, they effectively only must pay the sheriff’s costs.  Any other winner must pay their entire bid up front, and the creditor is paid up to their loan balance after the sheriff deducts their costs and fees.  The minimum bid is two-thirds of the appraised value.  If there is no appraisal, the minimum bid is the sheriff’s costs.

Again, the decision by a creditor to bid and how much to bid should be made carefully.  Many creditors will opt to open the bidding at the two-thirds minimum to ensure the sale goes forward, but if that amount is not enough to cover the balance of their loan and any superior mortgages, it may be strategic to bid higher especially if there are other competing bidders.

Recordation of Sheriff’s Deed:

The sheriff must issue an act of sale within fifteen days of the sale in accordance with La. Code Civ. Proc. art.  2342.  When recorded in the conveyance records, this provides the final proof of the property transfer.   The sheriff will then file its return with the clerk of court in accordance with La. Code Civ. Proc. art.  2343, which effectively closes the executory process.

Eviction:

The original borrower is typically granted a brief window of time to vacate the property after it is sold.  When someone vacates a property, they should leave it empty for the new owners and take all of their belongings with them.  The amount of time allotted for moving out may be as little as a few days.  This highlights how urgent and quick-paced this last stage of the procedure is, as the borrower must quickly clear the property following the sale.  If the prior owner refuses to leave or they had a tenant living in the property, an eviction proceeding may become necessary.

Deficiency Judgment:

The bank may seek a “deficiency judgment” in court if a balance remains after the sheriff’s sale.  The creditor does this by filing a supplemental petition for ordinary process to pursue a money judgment.  The lender can recoup the remaining debt from the borrower through this legal procedure.

Foreclosure versus Repossession:

Executory process is most commonly thought of in reference to foreclosure of immovable property, whether that is residential homes or commercial properties.  However, executory process is also commonly used for the repossession of movable property such as automobiles, boats, and recreational vehicles.  While Louisiana offers “self-help” repossessions of movables, the process is not always available such as when an unruly debtor won’t allow a creditor to repossess the collateral without breaching the peace. 

Executory Process versus Ordinary Process:

A foreclosure or repossession done through executory process is faster than doing so through ordinary process.  An ordinary process requires first obtaining a money judgment which may take a few months, prior to execution of the judgment.  Once execution can begin, the process is similar, but there are subtle differences between the writ of seizure and sale issued in an executory proceeding and the writ of fieri facias issued in an ordinary proceeding.

Louisiana Foreclosure Attorneys:

We are a Gretna law firm that has served the New Orleans area since 1980.  Our experienced executory process lawyers and creditors’ rights team are well versed at handling foreclosures and repossessions across Louisiana.  We take pride in offering an effective and efficient experience.  Call us today for a free consultation and find out why so many of our clients come back to us.