Ignorance of law, accounting, bookkeeping and financial reporting leads to arguments and assumptions about futility

Let me first state that in 16 years of public appearances, presentations at CLE seminars for litigators and bankruptcy lawyers, thousands of articles published in 26 countries, and thousands of cases litigated in court, there has been only icy silence from Wall Street as to my criticism of the financial system, the political system, and the judicial system as to how they treated the 2008 crash.

No one has said I am wrong despite appearances in which the banking industry was represented on the same stage. But plenty of judges have ruled for the homeowner because I was right in my basic premise: debts are assets and if the claimant does not own it they do not own a claim — nor does the court have any authority or jurisdiction to hear the claim.

I recently received a “disagreement” from a blog reader reflecting a false sense of futility based upon ignorance of the basic premises of our society. Here is what I replied:


Your argument is philosophical. It is not a legal argument, nor an argument that would be sustained by the Financial Accounting Standards Board, the AICPA or the SEC.


You can disagree with the philosophy of our laws, rules, regulations, customs, and practices, but you cannot successfully disagree with their existence. I do not speak of what should be the law. I speak of what the law is.


All debts are assets. In any case, where you prove that they are not assets, then you have disproved the debt. The debt is either owned by the person making a claim against you or to someone else. If the person making a claim has no record of the debt as an asset, then they can plead a case, but they can’t prove it. There is a huge difference between saying something and proving something.

When you go to court, you must fit your argument within standards, customs, and practices that have long existed, even before the country was founded. If you show up with philosophical arguments or even worse complaints about unanswered questions, you have nothing, and the court will do nothing.
Simple explanation:
  • Legally, debts arise when a party receives consideration (unless it is a gift and you can prove it was a gift). It doesn’t matter whether or not anything is in writing. The debt is a legal concept that exists as soon as the consideration is received.
  • All debts are enforceable unless statutes are passed and signed into law that restricts the enforcement of debts. The general rule, though, is that debts are enforceable. Certain types of debts must be in writing to be enforceable, but that does not restrict the injured party from suing under unjust enrichment.
  • Under Federal and State constitutions, due process restricts the types of cases that can be heard by a court.
    • Only matters in a controversy involving a present injury or imminent injury can be heard.
    • The general rule is that a court will only hear cases where the injury is alleged and only grant relief to cover the injury.
    • But pleading practices allow certain allegations to be implied. So, in our example, if you plead that you are the “holder” of a note, then it is presumed that you are injured by nonpayment.
  • Legally and procedurally, all business entities (corporations etc.) must appear in court through counsel. When the attorney files a pleading in court, it is on behalf of a client whom he or she represents.
    • The basic rule is that all people who are sued have a right to challenge the claim against them and to perform investigations and discovery to corroborate or rebut the truth of the matters asserted against them.
    • So if the injury is alleged or implied, the respondent/defendant may ask for corroboration of the existence of such an injury beyond the mere announcement, implication, or allegation.
  • That brings us to double-entry bookkeeping, which has been used since its first use in the 1300s in Venice, Italy. https://en.wikipedia.org/wiki/Double-entry_bookkeeping
    • The basic premise is that all businesses either maintain a general ledger of all transactions or one can be constructed from receipts and other information.
    • If a person or business claims to own something, the thing must exist, and the thing must have been acquired by the claimant.
    • Next, transactions are recorded through compliance with the rules of double-entry bookkeeping. This premise is derived from the fact that every transaction has two aspects — something coming in and something going out.
      • The basic rule is that if I acquire a loan, my assets will increase to the extent of the amount I paid for it.
      • The amount I paid for it would be a reduction in assets, namely “cash.”
      • Hence, the cash payment and the asset value increase are reflected either in the general ledger, if there is one, or in the transaction documents and receipts, or both.
      • All actual or potential records of an asset, liability, income, or expense are reflected on the ledger. And all ledgers must have backup receipts and other documents, or they won’t survive an audit.
      • In the case of a loan, the new payee is me since I paid for it, but the borrower need not pay me until he receives direct notice from the original payee to start paying me as the new owner.
      • That is what prevents double liability for the same debt. Debts do not increase because there are new owners. They only increase if the borrower has received more money or more money has been paid for his/her benefit pursuant to a loan agreement.

*So for practitioners, this means you are searching for (a) entries on the ledger and (b) the backup receipts and documentation. You also want the contact information of a live human being with personal knowledge who knows whether the company named as the claimant is, in fact, making a claim — or, as I have repeatedly said and revealed — that a claim is being asserted using the name of the claimant without any expectation that the remedy sought will inure to the benefit of the named claimant.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 14 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

Yes you DO need a lawyer.
If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Please visit www.lendinglies.com for more information.r

3 Responses

  1. ANON – excellent response thank you!!

  2. By deregulation, accounting and laws were broken during the financial crisis heyday. Unlike Enron who was caught for its it’s manipulation of ‘assets,’ the financial crisis was too big with vast players to prosecute. Instead many settlements were done that did not benefit homeowners.
    ‘Assets’ are accounted for differently after charge-off. Debt collection rights are sold elsewhere and produced cash flows are accounted for by income/profit statements and not by balance sheet financial accounting. This was a problem for the government by the financial crisis as ‘assets’ could not be taken back on balance sheet as never there in first place.
    The Citigroup settlement offered some help to homeowners. Citi admitted that it purchased ‘loans’ from Argent/Ameriquest (what did they really purchase?) and then claimed to securitize those loans. This was the only settlement that allowed homeowners to apply for refinance. The problem with this was that to qualify, the ‘loan’ had to be serviced by Citi and most were serviced elsewhere. Argent/Ameriquest were in massive multi-district litigation. Argent/Ameriquest is the only non-bank to not have been acquired. There is no successor. Citi rejects premise that they acquired their ‘assets’ – this is likely because none existed to acquire.
    The problem remains – who is the ‘creditor?” By all law, the trustee is a legal holder, not a creditor. A ‘trust’ cannot be a creditor, Investors? The crisis trust have been nearly fully liquidated – largely as a result of the settlements. Try to find an investor who receives pass-through of current cash flows. Have to also note that accounting rules were changed to accommodate the crisis.
    The next problem is precedent law. While the courts started out for homeowners directly after crisis, law, by courts, was quickly changed to set precedent that, in effect, immediately challenges most claims at onset. Judges are very reluctant to overturn precedent law, and any discovery that may lead to new precedent law is feared. Not saying it can’t be done. However, can’t blame pro se or even attorneys for difficulty in breaking down the barriers.
    Large scale petitions to government should have been done a long time ago. Not sure if it is too late for retribution or reformation. .

  3. As usual for over a decade, Neil’s article illuminates the knowledge we need in these cases – as wholly unambiguous knowledge – if folks are smart and truly aggrieved by what has transpired for over 15 years – they will learn from these articles; and if one cannot contribute intelligently, then go away. Thanks Neil.

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