Mortgage Company Abuse of Bankruptcy Laws

     Mortgage companies routinely ignore Chapter 13 bankruptcy law.

You complete your plan payments, believing you are once again current with the mortgage, having accomplished your goal.

But then, you get a notice from the mortgage company, claiming you still owe them thousands of dollars.  Or, worse still, you just get a notice of a foreclosure sale from the mortgage company.

These are some examples of mortgage company abuse of the bankruptcy laws.     As the linked to article reports, Countrywide has come in for more than its share of sanctions.

My understanding is, the mortgage industry has simply chosen not to invest in software that would correctly apply mortgage payments in Chapter 13 cases.

They keep track of the payments as if no bankruptcy were filed, and then add the charges when the bankruptcy is over.

Now, this is legal if the Chapter 13 is dismissed, then creditors are allowed to calculate what is due them as if no bankruptcy had been filed.

But, for debtors who have dutifully made all their payments, adding these charges is simply illegal.

I have a Michigan client who was in the final days of his five year plan, looking forward to his discharge and resuming the monthly mortgage payment, when the mortgage company, Option One in this case, filed a supplemental proof of claim for $15,000.

Most of this was allegedly for taxes and insurance.

Option One, though represented by counsel from the beginning, declined to follow the Detroit Bankruptcy Court Rules on changing monthly payments on pending Chapter 13 cases to provide for increasing the payment to cover increased escrow amounts.

Obviously, just days from completing his plan, my client was in no position to come up with the $15,000.  We objected to the claim, the Judge asked the attorneys to write up their arguments, and the case was set for hearing.

The day before the hearing, Option One withdrew their claim.

Now pending is my motion for them to pay my attorney fees for the time caused by their late claim.

Mortgage companies will trample on your rights, you need aggressive, knowledgeable counsel, like those who write this blog.