Creditors Caught Stealing from Consumers in Violation of Bankruptcy Protection
January 2nd, 2012 | 
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You might expect to have your property stolen on a busy street in a crowded city by pickpockets or from a cyberthief on the Internet, but not through the bankruptcy process. Now, I am not suggesting that your attorney, the trustee or even the judge does anything wrong. I am talking about CREDITORS.
It never ceases to amaze me that debtors and their attorneys face motions to disgorge fees or even sanctions for mistakes on the schedules or missing a deadline (even when it is not their fault), but creditors and their attorneys get a free pass – or two or three.
On a regular basis, my colleagues and I face creditors who – AFTER our clients have filed for bankruptcy – send bills, file lawsuits and even add on fees to mortgages and car loans. We have to take time to stop them and are expected to do it for free. The courts typically give them a pass or two as they argue that it was an administrative error. Sometimes, the courts step in and prevent sanctions or even attorney fees arguing that there was no harm.
NO HARM? To someone who filed for bankruptcy protection to STOP their creditors.
NO HARM? To someone who was already stressed out beyond belief and paid an attorney to stop there people.
NO HARM? To someone who already thinks the system is stacked in favor of the creditors.
Jessica Silver-Greenberg recently reported on one thief in the Wall Street Journal article “Debts Go Bad, Then It Gets Worse” – Capital One. What’s in your Wallet? Their hands.
Apparently, Capital One settled a lawsuit in 2008 filed by a U.S. bankruptcy trustee in Massachusetts accusing them of illegally trying to collect discharged debt. They claim that their policy is never to collect on discharged debt. It must have been a mistake. MADE 5,600 TIMES.
As part of that settlement, a court-appointed auditor concluded that Capital One pursued 15,500 “erroneous claims” seeking money on discharged debts. They claim it wasn’t that many, but they never said just how many people they sued, demanded payment from or otherwise tried to steal from.
NOT STEALING? When you try to take something you are not entitled to from someone who is, what do you call it?
When some of those borrowers sued, Capital One agreed to reimburse some of the borrowers, lawyers and bankruptcy trustees for legal costs incurred trying to fend off Capital One. How nice of them? They reimbursed money that they were no longer entitled to. IN VIOLATION OF A FEDERAL COURT ORDER.
But wait, there’s more (I always wanted to say that).
Now, New York Post reporter Catherine Curan revealed that banks have been trying to steal from homeowners who have fallen behind on mortgage payments with escrow payments for taxes and insurance. When the homeowner files for Chapter 13 bankruptcy protection, they file claims to collect the escrow shortages AND then they calculate the shortage in their annual escrow analysis. See “Sloppy seconds: Feds probe million$ in ‘double-billing’ by banks”.
According to the article, an analysis by The New York Post of 2011 bankruptcy cases shows the unlawful collections could range higher than $150 million. That’s MILLION with an M. AND it only includes 2011. Lawyers and accountants at the New York City office of US Trustee have gotten involved and are poring over local Chapter 13 bankruptcy cases for evidence of wrongdoing. How much more will be revealed if a nationwide study is done.
All petitions and schedules filed with the bankruptcy courts are filed under penalty of perjury. That means potential sanctions and jail time.
Guess what? Proofs of Claim are filed that way too. They come with an oath:
I declare under penalty of perjury that the information provided in this claim is true and correct to the best of my knowledge, information, and reasonable belief.
and a warning:
Penalty for presenting fraudulent claim: Fine of up to $500,000 or imprisonment for up to 5 years, or both. 18 U.S.C. §§ 152 and 3571.
Where are their sanctions? Where is the jail time for the representatives who perjure themselves?
I’ll tell you. Nowhere.
And if you think these are a few thousand isolated incidents … Guess again.
What out for thieves! Look after your property! Hire an attorney to fight for you. If you are in the metro Richmond area, Hanover or Caroline Counties, or anywhere else in central Virginia, contact bankruptcy and consumer lawyer Mitchell Goldstein at (804) 592-1674 or by email at mitch at mitchellpgoldstein dot com.
Photo Credit: Steve Hunt
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