December 15, 2019

Another Debtor Ripped Off by a Foreclosure Scam (Part 2)

Last month, I wrote a post describing a case that was recently heard by one of the judges in the Northern District of Georgia.  In this case, a debtor had filed a Chapter 13 the day of a foreclosure.  The lender was not aware of the bankruptcy so it went ahead with the foreclosure sale.  Like many foreclosure sales in Georgia, the amount of the mortgage was equal to the likely value of the house so there were no bidders at the foreclosure sale.  Instead, the lender bid the amount of the mortgage and was, in effect, the winning bidder.

By the end of foreclosure Tuesday, the lender’s law firm had learned of the Chapter 13 filing so the law firm did not “record” the foreclosure deed.  Instead, the lender filed a motion to “validate foreclosure” asking the judge to permit the foreclosure to go through thereby divesting the debtor of title.

The debtor painted a very sad picture – he and his wife had four children of their own and a sister and her three children were also living in the home – and they faced  homelessness if the foreclosure was allowed to go through.  Further, the debtor claimed that he and his wife had been victimized by a “paralegal service” that had prepared emergency “two page” petitions then did nothing more.

The lender’s attorney took a very hard line – between the husband and wife, these debtors had filed 5 previous cases only one of which actually worked for more than a few months.  The debtor was trying to scam the system and the court ought not permit such an action.  Further, the debtor had used the same paralegal service twice – if they were a ripoff why did he use them a second time?

The judge, who is a compassionate and decent man,  was clearly struggling with what to do.  I felt that the lender’s attorney took the wrong approach.  In my view the debtor and his wife came across more confused than pathologically dishonest.  They clearly did not have entirely clean hands when it came to using the bankruptcy process to stop a foreclosure, but I could see that the judge was bothered by the idea that 7 children and two families might end up on the street.

In my previous post I asked what you thought would happen.  Here’s what the judge did: [Read more…]

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?  [Read more…]

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