Predatory Lending Claims and Bankruptcy
By Kurt O'Keefe, Attorney at Law on Sep 18, 2007 in General Bankruptcy Information
What if you have claims against your mortgage company for predatory lending, abusive mortgage practices, Truth in Lending violations, downright fraud, whatever, and you file Chapter 7 or Chapter 13 bankruptcy? What happens to the claims?
Any analysis should start with the current value of your home, and consider where will you end up if you win a lawsuit against the mortgage company.
In this era of declining home values, even if you can rescind your mortgage, that might leave you owing more that the home is worth, making the whole exercise more trouble than it’s worth.For example, your home is worth $200,000, and you owe $240,000 on the mortgage. If you succeed in getting a court to set aside the mortgage lien and award $35,000 in damages, you still owe $205,000 on a $200,000 home. In such a case, why try to keep it?
There is never a guarantee a lawsuit will be won, of course.
If there is any possibility of a claim, you must list it as an asset.
In Chapter 7, you will have to make sure to list the claim and exempt it, if possible. Otherwise, any claim will belong to the Chapter 7 trustee.
In Chapter 13, the claim must still be listed. If you want to pursue the claim, it depends on several things beyond the scope of this entry, whether you need the Chapter 13 Trustee to sign off, or join with you in the suit against the mortgage company, and who would get how much of any recovery, you or the Trustee on behalf of your creditors.
As always, consult an attorney experienced in consumer and bankruptcy law on these issues.
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