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How 'Robo-Signing' Could Affect Chapter 13 Filers Trying to Avoid Foreclosure

October 27, 2010

As our Yucaipa personal bankruptcy lawyers have written here several times in the past, a Chapter 13 bankruptcy is one option for homeowners who are trying to avoid foreclosure. So we were interested to read an Oct. 22 blog post from the Wisconsin Law Journal about how this type of bankruptcy case could be affected by the recent "robo-signing" scandal and the resulting foreclosure moratoria laid down by several banks. The article said the moratoria could make bankruptcy unnecessary for people considering filing just to save their homes. But for others, the suspensions mean new sets of details to verify with lenders who have often proven unfriendly or uninterested.

The article quotes Henry Sommer, former president of the National Association of Consumer Bankruptcy Attorneys. He said each lender's moratorium may mean something different -- a halt just to the foreclosure sale, or to the entire case. He also said that no one should take the mortgage company's statements as truth, because they are frequently wrong, with departments not communicating even within the same company. Another bankruptcy lawyer said banks tend to lard on unjustified fees that he then has to dredge up documentation to challenge. Both suggested that homeowners and their attorneys request the original note and other original documentation and verify the chain of actual ownership of the home, an area where banks have been sloppy. All of this documentation allows lawyers to find and prove mistakes that could bring the foreclosure to a stop, or at least reduce the amount allegedly owed.

We believe most of this would be good advice even without the foreclosure moratoria. In the experience of our Perris consumer bankruptcy attorneys, lenders are not interested in getting the details right. In fact, they often make mistakes that cost homeowners significant money, time or heartache -- most famously, foreclosing or trying to foreclose on homeowners who have a loan modification. Filing for bankruptcy is one way to stop this, but as the article noted, the foreclosure moratoria could give homeowners a more temporary break, making Chapter 13 unnecessary for some people. Now that the robo-signing scandal has raised awareness of lenders' sloppy work, courts may be more open to allegations that banks have made paperwork mistakes. Experienced foreclosure attorneys can use these weaknesses to challenge unfair foreclosures.

If you're considering a bankruptcy as a way to avoid foreclosure, you should call Howard Law PC to discuss your options. Our firm absolutely handles bankruptcies, but we do not believe bankruptcy is the right option for everyone. After learning a little about your financial situation and obligations, our Laguna Niguel individual bankruptcy attorneys can give you our professional opinion on whether you're a good candidate for Chapter 13 bankruptcy, which allows you to set up a payment plan to catch up with overwhelming bills. If you are, we will stand by your side throughout the process, helping you through the initial credit counseling, stopping harassment by creditors, appearances in court and eventual discharge of your debts. If you prefer to avoid bankruptcy, our loan modification attorneys may also be able to help.

Howard Law offers free, confidential consultations, so you can tell us about your situation at no further risk or obligation. To learn more or set up a consultation, call us today at 1-800-872-5925 or send us a message online.