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Couple Wins Legal Judgment Forcing Bank to Comply With Bankruptcy Court's Order

November 30, 2010

As Rialto personal bankruptcy attorneys, we tell our clients that bankruptcy will protect them from illegal or unethical behavior by creditors. That may still be correct, but a recent article from AOL's DailyFinance suggested that sometimes, bankruptcy filers have to go back to court to enforce their rights. The Nov. 23 article told the story of a North Carolina couple, Michael and Dolores Kirkbride, who filed for bankruptcy in January of 2008, after the declining real estate market hurt their business as landlords. As part of their bankruptcy, Countrywide Financial negotiated to foreclose on two of the Kirkbrides' properties, which was formalized by an October 2008 court order. However, according to a court order in a lawsuit the couple filed this year, Countrywide and its successor, Bank of America, continued to demand that the Kirkbrides pay their "debt" and declined to go through with the foreclosure.

As the article explains, the debt was settled by court order as part of this couple's bankruptcy. However, the Kirkbrides started receiving collection calls from Bank of America just three days after the court order to foreclose. The couple alleges they answered 100 of the approximately 400 calls the bank made, staying on the phone for 30 to 40 minutes each time in an attempt to explain the mistake. Meanwhile, because the Kirkbrides technically still owned the homes, they continued incurring tax and homeowners' association bills. And because the bank did not report the debt as settled, their credit was damaged further. In January of 2010, the couple got the bank to acknowledge receiving a letter about the court order, but it took no action until their bankruptcy lawyer asked the court to sanction the bank. After they filed for sanctions against the bank, the bankruptcy court ordered Bank of America to pay $126,000 in damages and provide proof that it has corrected the credit reports, within two weeks of the Nov. 19 decision.

Half of that $126,000 is punitive damages, which means payments intended specifically to punish the bank for what the judge called "flagrantly disregard[ing] the court's order." As Placentia consumer bankruptcy lawyers, we're pleased that the court recognized this problem. However, we're less pleased that the problem fits into a clear pattern of behavior from banks -- blatant disregard for the rights of their borrowers. As the robo-signing scandal shows, this sometimes translates into disregard for the rule of law. We've written here many times that we believe banks' "mistakes" with loan modifications are actually intentional attempts to extract as much money as possible out of homeowners before foreclosure. This case seems like a genuine mistake, but it also shows that Bank of America's procedures for correcting mistakes are broken -- perhaps intentionally. The Kirkbrides had to hire a bankruptcy attorney before they could enforce the rights given to them by an undisputed court order.

Howard Law PC does exactly this kind of work -- helping borrowers stand up to outrageous conduct by lenders that is putting them in financial peril. Unfortunately, in our experience as Dana Point individual bankruptcy attorneys, this is a common problem among people who are fighting a foreclosure or attempting to get a loan modification. Filing for bankruptcy, the Kirkbrides' solution, is probably not right for every client. However, filing for bankruptcy does trigger a review by an independent bankruptcy judge, who can enforce borrowers' rights with a court order whenever necessary. We help clients in similar situations review their situations to decide whether bankruptcy is their best choice. If it is, we help them through the difficult but ultimately rewarding process of clearing away their debts and protecting their homes as thoroughly as possible.

If you're deep in debt and your struggles with your mortgage servicer have gone nowhere, consider calling Howard Law for a free consultation on your case. To learn more or set up a meeting, call us toll-free at 1-800-872-5925 or send us a message online.