Bankruptcy Court Motion Seeks Zayat Home Foreclosure

The holder of a note and mortgage on the Teaneck, N.J., residence of Ahmed and Joanne Zayat has filed a motion for bankruptcy court permission to seek foreclosure on their 7,714 square-foot mansion. The filing was made by Fay Servicing, on behalf of Wilmington Savings Fund Society in its capacity as an investment trustee.

Ahmed Zayat is the head of Zayat Stables, which owned 2015 Triple Crown winner American Pharoah   during his racing career, among other successful horses.

The Zayat bankruptcy case is an involuntary Chapter 7 case brought by creditors in September 2020, essentially seeking to liquidate the Zayat estate. When the case was filed, an automatic stay went into place, prohibiting creditors from taking certain actions to protect their rights. Wilmington hopes to terminate the stay so it can seek a judicial sale of the residence toward satisfaction of the mortgage debt. 

The motion to terminate alleges:

• Wilmington in its capacity as trustee of a business enterprise—not to be confused with the role of the trustee of the Zayat bankruptcy case—owns a note in the original principal amount of $1,861,371, and that the debt is secured by a mortgage on the real estate.
• The current balance of the debt is $1,867,109.54.
• Lifting the automatic stay is authorized when the debtor has no equity in the subject property and the property is not necessary to an effective reorganization.
• There are other liens on the property totaling approximately $2,915,000.
• The residence was valued at $3,550,000 when the bankruptcy case commenced and thus has no equity because it is worth less than the mortgage debt and other liens on the property.
• The Zayats have not made any showing that a plan of reorganization is contemplated or that the property would be required to make one work.

The matter is scheduled for a hearing Feb. 1 at 10:00 a.m. ET in the United States Bankruptcy Court for the District of New Jersey before Judge Vincent F. Papalia.

According to Realtor.com, the two-story residence built in 2001 is situated on about one-half acre. Zillow.com says the 2020 tax assessment on the home was $2,667,100 and that annual property taxes amount to $85,267.

The Zayat bankruptcy case has been long-enduring and contentious with seemingly endless issues. The outcome of the motion lies squarely in the hands of the bankruptcy court. If the motion is granted, the next step would be filing a foreclosure case, presumably in a state court of competent jurisdiction in the county where the property is situated.

The motion does not state whether the Zayats have been making scheduled payments on the mortgage debt or paying the property taxes. However, the manner in which the motion is framed suggests any such payments would not be relevant to the outcome of the motion.

Filings in a legal case usually state only one side of the issue.