Posted by kevin on May 30, 2015 under Foreclosure Blog | 
Both Chapter 7 and Chapter 13 will stop a foreclosure.
The Bankruptcy Code says that a bankruptcy “petition filed… operates as a stay, applicable to all entities, of—… any act to… enforce [any lien] against any property of the debtor… .” See Section 362(a)(4). This means that the mere filing of your bankruptcy case will immediately stop a foreclosure from happening.
But What if the Foreclosure Still Occurs?
But what if your bankruptcy case is filed just hours or even minutes before the foreclosure sale, but the foreclosing mortgage lender or its attorney can’t be contacted in time for them to be informed? Or what the lender is contacted in time but messes up on its instructions to its foreclosing attorney so that the foreclosure sale mistakenly still takes place? Or what if the lender refuses to acknowledge the effect of the bankruptcy filing and deliberately forecloses anyway?
As long as the bankruptcy is in fact filed at the bankruptcy court BEFORE the foreclosure is conducted, the foreclosure would not be legal. Or at least would very, very likely be immediately undone. It does not matter whether the foreclosure happened mistakenly or intentionally.
A Foreclosure by Mistake
If a foreclosure happens by mistake after a bankruptcy is filed, or because the lender didn’t find out in time, lenders are usually very cooperative in quickly undoing the effect of the foreclosure. It is usually not difficult to establish that the foreclosure occurred after the bankruptcy was filed, and that usually quickly resolves the issue. If a lender fails to undo such a foreclosure after being presented evidence that the bankruptcy was filed first, the lender would be in ongoing violation of the automatic stay. This would make the lender liable for significant financial penalties, so they usually undo the foreclosure right away.
A Foreclosure Purposely Conducted after Your Bankruptcy is Filed
This almost never happens. If you are harmed by a foreclosure intentionally done after your bankruptcy filing, you can “recover actual damages, including costs and attorneys’ fees, and in appropriate circumstances, may recover punitive damages.” See Section 362(k). Bankruptcy judges are not happy with creditors who purposely violate the law. Enough of them have been slapped that most creditors know better.
Chapter 7 vs. Chapter 13
For purposes of stopping a foreclosure that is about to happen, it does not matter whether you file a Chapter 7 or Chapter 13 case. The automatic stay is the same under both.
But how long the protection of the automatic stay lasts can most certainly depend on whether you file a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” That’s because even though you get the same automatic stay, each Chapter gives you very different tools for dealing with your mortgage. That’s why your mortgage lender will likely react differently depending on which Chapter you file under and how you propose to deal with the mortgage within each.
Posted by kevin on May 12, 2015 under Foreclosure Blog |
I do not know what the future of the Consumer Financial Protection Bureau will be. Clearly, a lot depends on who wins the next presidential election. But, I do know the the CFPB is necessary.
I love to listen to Larry Kudlow on the radio and watch him on CNBC. He is a Reagan republican who worked for Bear Stearns for awhile. He believes in free trade, smaller government, and less regulation. He believes in the free market. He is articulate and energetic. I agree with a lot that he says, except when it comes to governmental regulation of financial institutions.
Well, I do believe in free markets to an extent. But I do not believe that we should be living in a “caveat emptor” society. Believe me, I have seen enough chicanery (over my entire 35 year career but especially in the last 8-9 years) to come to the conclusion that regulation is necessary to not only protect taxpayers but also to protect the players on Wall Street and the too big to fail banks from themselves.
There is something perverse going on here, however. You would think that after the $25 billion settlement and other multi-billion dollar settlements, the players would understand that they have to fly right. But every month or two, there is a new scandal, investigation, settlement. Just this past week, Ocwen entered into a $150 million settlement of a class action in Florida which alleged kickbacks on force placed insurance. The class members got $140 million which comes out to a less than princely sum of $350 per claimant, and Ocwen denied any liability.
The CFPB went after Wells Fargo and JP Morgan Chase and Genuine Title Co. Over 100 Wells Fargo employees took kickbacks from Genuine to get the title work associated with the loans. WF had to pay $24 million in penalties and another $11 million to consumers. JPMC engaged in the same behavior but at a lesser magnitude.
Obviously, monetary penalties are not stopping the players from playing. What will? Short of jail terms and long term suspensions from the industry, the only other method is enforcement of strong but fair regulation of the industry. Lord knows judges in judicial foreclosure states are not stepping in to fill the void.
Not just regulation, but regulation and enforcement. It does no good to have the regs on the books if the enforcement is weak or intermittent. The SEC dropped the ball. The Fed has eviscerated Truth in Lending by drafting regs and especially staff commentaries that are so pro-industry that you have to shake your head. But let’s be practical. Do you really expect an SEC staff attorney or Fed examiner making $75,000 per year coming down hard on Wall Street or Too Big To Fail Banks when that regulator is probably looking at the regulated class for his or her next job at $150-200K per year. I don’t think so.
So, maybe you just throw up your hands and blather about the conflicts of interest and inherent corruption of the system. Or maybe, you do something about it. At this point, the CFPB may be one of the few regulators who have remained untainted, at least at this time. Therefore, it must stay in business.
