December 15, 2019

Another Debtor Ripped Off by a Foreclosure Relief Scam (Part One)

This afternoon (September 9), I had a chance to observe a very interesting case heard by one of the judges in the Northern District of Georgia.  The issue at hand was a motion filed by a mortgage creditor to “validate” a foreclosure that had been cried out on the courthouse steps back in July.

The mortgage creditor went first and presented her client’s case:  the debtor had filed a bankruptcy on the morning of July 7, 2009 minutes before the lender sold the debtor’s house on the courthouse steps.  The lender was not aware of the filing and proceeded to foreclose.  When the lender’s attorney returned from the courthouse, he discovered that a bankruptcy had been filed, so he did not record the deed.

Instead, the lender retained bankruptcy counsel who filed a motion have the bankruptcy annulled and the foreclosure validated.   If validated title would pass and the lender would now be the title owner of the property.  In such a situation the debtor’s bankruptcy would offer no protection and the debtor would be subject to eviction.

The mortgage company’s attorney noted that this was the fifth bankruptcy filed by the debtor and his wife, and the third case filed this year to stop a foreclosure.   In none of the cases filed this year did the debtor or his wife make any payments to the trustee or pay anything to the mortgage company.  In none of these cases did the debtor or his wife file any of the required bankruptcy paperwork.

Clearly the debtor and his wife were acting in bad faith, argued the mortgage company’s lawyer, and they should not be allowed to misuse the bankruptcy process.

What would the debtors have to say?  The debtor and his wife appeared pro se (without an attorney).  They told the judge that they filed this bankruptcy to save their home, where they lived with their 4 children, and the wife’s sister and her 3 children.

They further explained that the bankruptcy paperwork they filed was prepared by a “paralegal” from a “foreclosure prevention” company.   The paralegal had instructed them to file the Chapter 13 to stop the foreclosure and to give the company a chance to continue its negotiations with the mortgage lender.  Now, however, the foreclosure prevention company did not seem to be in business anymore – its telephone number was disconnected and its st0refront abandoned.

Now, they just needed some time to obtain representation and to restart negotiations with the lender.   They were victims of a foreclosure rescue scam (the same company that had misled them twice before this year) and now they finally realized that they were on their own.

What would you do in this situation?  What did the judge do?  The answer – see my next post….

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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