Delay in Foreclosing Causing Much Grief and Financial Loss to Consumers

One of the most perplexing problems for consumers who have surrendered their home in bankruptcy, is that it often take months or even years for the lenders to get around to foreclosing. On the surface this might not seem like a big deal since the property becomes the mortgage servicer's problem once it is surrendered, but that's not the case at all.

Once a discharge has been granted the consumer no longer is liable for any deficiency the lender may suffer, but he still remains liable for taxes and homeowner's dues. We frequently find ourselves having to respond to lawsuits from homeowner associations for unpaid dues or threats from municipal authorities theatening to impose fines for properties that are falling apart or becoming overgrown with vegetation. Clients are frustrated by this and cannot understand why this property that has long since been surrendered in bankruptcy is still a problem for them.

What is even worse for the consumer, however, is the propensity for servicers to continue to send monthly statements, insurance notices, escrow statements, default notices and a myriad of other paperwork to the consumer who no longer has the account with the lender or servicer since the debt has been discharged. This continued communication with the debtor is in clear violation of the discharge injunction yet it seems to be unstoppable. 

We have filed suit on numerous occasions against mortgage services for these types of violations, settled the cases, only to have the notices continue again before the ink is even dry on the settlement. Sometimes it's immediate but often it is a year or two later when the notices start coming again. A lot of times this happens because a new servicer is assigned to the account and, for some unknown reason, the account pops up again as an active account. It gets even worse if the new servicer starts reporting the debt on the consumer's credit reports which is a common occurance.

I guess the ultimate question is why does it take mortgage lenders so long to foreclose? I know of people who have lived rent free in their homes for three or four years after they stopped making payments. What's up with that? I know sometimes there are chain of title issues due to the mortgages being transferred so often between securitized trusts and the government has put a lot of heat on them to try to do modifications. But from what I have seen of the modification process, the mortgage servicers aren't really serious about modifying loans and are only going through the motions--stringing customers along with the false hope that they will get a second chance with their mortgage when they have no intention of giving it to them.

The bottom line is consumers who have surrendered their homes in bankruptcy often suffer extreme mental anguish and financial loss due to the mortage servicer's delay in foreclosing on property that has been surrendered to them. Fortunately, there are remedies under both state and federal laws.  For more information about remedies available visit our website at http://mancheelawfirm.com/.

In my spare time I write novels and the next one coming out this fall is about a family that is victimized by a predatory mortgage lender. So if you'd like to see a practical example of what is happening in the marketplace today visit my website at http://williammanchee.com/ and check out Unconscionable, a Rich Coleman Novel Vol. 3. While you are waiting for Unconscionable to come out read Plastic Gods, A Rich Coleman Novel Vol 2. It's a timely financial thriller about a predatory bank and how one attorney lost everything when he became a threat to its lucrative business.

Creditors Often Fail to Pass on Bankruptcy Notices to Collection Agencies

Today I'm working on a petition against a Colorado collection agency that called our client six times afrer receiving the account from the orignal creditor who was listed in their chapter 13 bankruptcy. This is a blatant violation of the automatic stay and/or discharge injjunction. In this instance the case was later converted to chapter 7 so it was a discharge violation. Then, to make matters worse, the collection agency assigns the case to an attorney for collection, yet another violation.

How does something like this happen? Is it intentional or simply negligence? The excuse we almost always get from collection agencies is that they had no knowledge of the bankruptcy because the creditor who sold or assigned the account didn't tell them about it. Unfortunately for the collection agencies, ignorance of the bankruptcy is no excuse. When they try to collect a debt that is no longer collectable they violate the Texas Unfair Debt Collection Act and if they report it to a credit bureau they can be guilty of liable as well. It is irrelevant whether they knew about the bankruptcy or not.

What is fairly clear is that when the original creditor gets the conversion and discharge notices it will not pass on those notices to the current holder of the debt. I think this is a matter of logistics. The original creditors simply have too many accounts that have been assigned for collection or sold and have no mechanism in place to forward notices from the bankruptcy court.

So, the consumer loses and has to suffer through the mental anguish that always results from taking nasty phone calls and/or receiving collection letters from attorneys long after the debt is discharged. Lucky there is a remedy to the consumer.