Our Moreno Valley foreclosure defense lawyers have written here before about the troubling practice among mortgage lenders of hitting borrowers with inflated fees when they come out of bankruptcy. This can cancel a lot of the financial progress made by borrowers seeking to get back on their feet and violate the spirit of bankruptcy law. In In re Terry Jacks et al., a proposed class of bankruptcy debtors sought to prove that it also violates the letter of bankruptcy law, by violating the automatic stay against creditors provided in any personal bankruptcy filing. In this case, the Eleventh U.S. Circuit Court of Appeals found that Wells Fargo Bank did not violate the law by failing to disclose certain fees, and dismissed claims that had not yet accrued.
Terry and Sandra Jacks of Alabama filed for Chapter 13 bankruptcy in 2007, including their three-year-old mortgage in the petition. Wells Fargo, their lender, filed a proof of claim that did not list any attorney fees or costs, but advised readers that Wells Fargo reserved the right to seek reimbursement for attorney fees and other costs related to the case. The couple later filed a Chapter 13 plan that included payments to be made to the bank, but noted that they may have a claim against the bank for violation of the automatic stay and of Bankruptcy Rule 2016, for undisclosed post-petition fees and costs. The judge confirmed this. The couple later filed a proposed class action against Wells Fargo for the same reasons listed in their plan. The bankruptcy court dismissed the claim on the merits and the federal district court affirmed, leading to the current appeal.
The Eleventh Circuit also affirmed. Importantly, while Wells Fargo had charged the couple $310 for the attorney fees for filing its proof of claim, the bank had not taken any action to enforce that claim. Sandra Jacks found out about the charges only because she specifically requested her account history and noticed a new charge. Thus, the court said, Wells Fargo cannot be said to have collected or attempted to collect -- and that's what violates the automatic stay provisions of the bankruptcy code. It distinguished the case from similar bankruptcy cases by saying the $310 was never added to the couple's account balance. Similarly, the Eleventh found no violation of bankruptcy rules requiring disclosure of fees, because Wells Fargo made no attempt to collect the fee. Finally, it declined the couple's request for an injunction against attempts by Wells Fargo to collect those fees in the future, because the claims are not ripe -- the bankruptcy is not yet over and the bank claims it will not enforce its fees if they complete it successfully.
As Los Angeles County foreclosure defense attorneys, we're disappointed by the Eleventh Circuit's decision in this case. This problem is not limited to Alabama or the purported class in this case; across the nation, lenders are surprising debtors with extra fees after the bankruptcy ends. Here in the Central District of California, the bankruptcy court has responded by adopting an optional document requiring fuller disclosure and closer communication. The Eleventh Circuit may be right that Wells Fargo didn't violate the law in the case of Terry and Sandra Jacks, but our Mission Viejo foreclosure defense lawyers hope bankruptcy courts in its jurisdiction have taken preemptive measures that don't require filers to pursue lawsuits in the first place.
If you're considering bankruptcy as a way to protect your home from foreclosure, you should call Howard Law PC to see how we can help. For a free, confidential case evaluation, send us an email or call us today at 1-800-872-5925.