Foreclosure Defense: To BKR or not to BKR, here are the issues in Bankruptcy

The bottom line is that Chapter 7, 11, or 13 bankruptcy can be effective tolls in defending against unlawful foreclosures, but hey are not magic bullets. Like all legal procedures attempting to navigate them without a licensed legal professional who is a known quantity in Bankruptcy Court, is at the very least hazardous.

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I have a client in the service of our country for whom I am rendering services with minimal charges. He asks me now about filing a bankruptcy petition. LIke all litigation strategies contesting unlawful foreclosures, success really depends upon either a successful discovery strategy, a successful cross examination of the robo witness, or both. Here is what I wrote to him:

First I need to coordinate with your BKR attorney. Make absolutely certain that you put nothing on any of your schedules that could be construed as admitting that  there is a valid secured lien in favor of anyone. Second, you might not need to file a lawsuit, because they will probably file a proof of claim — and you can object to the proof of claim. We often trip them up exactly there. If they don’t file a proof of claim (theoretically they are are not required to do so if they claim to be a secured creditor) you can file one for them in which you state that nothing is owed and there is no lien in favor of the named creditor.

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But if your schedules are done correctly (contrary to virtually all software used by BKR attorneys) they will be forced to file a proof of claim, because you will be listing the house as an asset that is collateral for a loan, if it still exists, that may be owned by John Doe.
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They might also file a motion to lift stay (MLS). That gets tricky because the threshold on such a motion is whether there is ANY color of a claim that could be pursued in the state courts or by nonjudicial foreclosure and subsequent possession. Assuming we are right that the current claimant has no claim, the lawyers and/or servicers will produce fake documents that are facially valid, even though they are totally fake.
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In most instances the facially valid documents are taken as sufficient color of title or claim such that the stay is lifted. While this is often treated by both attorneys and judges as a judgment on the merits, it is not. It is merely a determination by the bankruptcy court that in the interest of judicial economy and the bankruptcy estate, the matter should be resolved under state law, rather than Federal bankruptcy law.
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Depending upon how the wind is blowing, you can file a lawsuit. You can do this in one of three ways: (1) an adversary lawsuit in the bankruptcy court seeking declaratory, injunctive or supplemental relief, (2) a collateral action in state court or (3) a collateral action in Federal court.
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The key to any of this is getting discovery. First you serve interrogatories, requests to produce and requests for admissions directed at who owns the debt by reason of having paid for it. The added implied component is that they paid a party who owned the debt by reason of having paid for it. And the further implied element is that the claimant paid value for THE debt not just any debt, such as that arising solely from the note itself which may or may not be evidence of the debt.
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Then you file a motion to compel if they don’t answer or object. That is standard fare for the foreclosure mills. If they do have a confirmable money trail you are most likely going to lose, so if you get to that point, I think it would be wise to settle. While there have been some judges who simply won’t give anything to homeowners and who think that all homeowners in foreclosure are deadbeats, my experience is that the overwhelming majority of judges will grant an order to compel answers to the discovery propounded to the claimant.
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The big mistake made by pro se litigants is that they snatch defeat from the jaws of victory by failing to file a motion to compel and then failing to file a motion for sanction seeking to strike the pleadings and enter judgment for the homeowner. the plain simple fact is that in most cases the entire foreclosure case rests upon a paper trail that diverges from the money trail. If you are successful, at a minimum, you will be undermining the prima facie case that the claimant is pursuing foreclosure for restitution of an unpaid debt owed to the claimant — and you will win at least 65% of the time (based upon my experience).
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The reason for the high percentage of cases in which the foreclosure mills lose the case is simply that they don’t have a real client, a real claim or a real claimant. Their entire case is completely dependent upon presumptions arising from the facially validity of fake documents.
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As I have seen repeatedly, possession of the note is by the law firm and the law firm is naming a claimant as client with whom they have had no contact nor any retainer agreement. It is all based upon plausible deniability of everything blows up. And the lawyers under current construction of litigation privilege seem to have total immunity for pushing a revenue scheme that includes the law firm.

4 Responses

  1. AXJ….thanx, FRCP 60, was sitting before the court with a request for 60 and an injunction or TRO, dismissed again, (improper notice, stated the judge, when they didn’t show up) by State Judge, after an ex-parte conversation with the wrong attorney and refusing to see my notice of the proper attorney in the case. In NC, so Ninth Circuit doesn’t work, but am in Eastern District of NC on appeal right now. Do not expect a different result frankly, but will push through to the Circuit Court if necessary. No transfer to trust, no standing by servicer, completed foreclosure 2009-then another order for foreclosure in 2015, same DOT and note, stay order effective in 2011 through 2015 from Federal Court, MERS contracts expunged by Delaware bankruptcy court 2008, default by SPS servicing in 2007, unattached allonge after the 2009 FC in 2012 transferring to debt to trust and US Bank by attorney in fact-Ocwen, while originator was in bankruptcy and merged in another corporation, no receipt for purchase-just assignment, 15 attorneys to date, no notice of new counsel, continued for 3 years for “good cause”, news to me…the outright disregard of the Rules is astounding.

  2. You all can continue the fight in the BAP and Ninth Circuit using FRCP 60…

  3. I too filed a Chapter 13 and did every thing you mentioned, except filing a motion to compel. The judge used Rooker-Feldman to dump the entire chapter 13. A long lost party from 2009, who orchestrated the completed 2009 foreclosure filed a claim, twice the amount of the original note, tolling the missed payments (they were never involved in the 2015 special proceeding)….came out of nowhere. The judge allowed the claim as secured, even though it was contested and a stay from the Federal Court for the originator-lender was in place from 2011 through October 2016 AND there was a completed foreclosure on the same DOT and note that was completed in 2009, while the court ignored it and allowed another foreclosure order in 2015. I am in District Court right now, with an appeal of the AP. There is so many things wrong with this case, not enough time and room to post it. What you say is correct, but some of these judges are completely ignoring the paperwork. This paperwork is compelling and factual….their paperwork, not mine. They have told the judge the story, the truth and the judges are completely ignoring it. This is part and parcel of non-judicial states. And I did initially have counsel, who did nothing. He presented absolutely no defenses, when there were many and after the order was signed he ignored my numerous attempts at contact until 11 days after the order. This was intentional. I lost my 10 day right to enjoin or appeal. To date this lawyer refuses, after numerous requests to give me my file. I gotta wonder if in my case, there is more going on here…just saying.

  4. Good topic Neil, I had experience in my own what you described, I was represented by a lady counsel in my BK Chap. 13 proceeding, everything was going ok,then the creditor filled the proof of claim, The alleged créditor BANA ‘s Attorney months after did file an supplemental objection to my plan and did motion to lift the stay in those evidence he filed documents I reported to the state and federal authorities as fraudulent/void documents recorded in Los Angeles County record. This issue I reported to my own counsel and it caused to finish my business relationship with her,as I see later on factors to report her to the CA State bar for missrepresentation.
    I really didn’t know what to do, at that time I was asking my self how my own counsel is telling me these documents are no relevant? Also she changed her mind in doing an AP (adversary proceeding). I gave her an advance money to do it in the date I hired her.The judge already lift the motion of stay as validated the motion presented by the alleged BANA counsel. So then I went to the trustee informing her the alleged creditor obtained a unfair /void judgment based on false evidence at the same time informing her im having issues with my own counsel in this,she suggested me to make a lettet to the Judge.I did it along to my congressman, Fbi,Secret services,and the DOJ trustee fraud Dept in Los Angeles.
    At the time of the last hearing to dismiss my chaptet 13 the judge said I may need to get a counsel and she said also I received your letter I don’t respond letters, I declare in the hearing the opposite side got an unfair/void judgment based on false evidence,the counsel in record has made a misrepresentation of the creditor because none employee from BANA has made a declaration in the proceedings, the entire documents filed it’s in base of the alleged servicer WF. Counsel has mislead the court,the trustee and myself.
    For now I’m standing by what these fraudulent institutions will do, then after I take the proper action,at least it won’t be rejusdicata because the issue I arose in my own never got argued and decided in court.

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