The Real Party in Interest and Motions for Relief From the Automatic Stay

by Brett Weiss, Esq.

April 20, 2008

A recent bench decision by Maryland Bankruptcy Court Judge Thomas J. Catliota was an important ruling regarding the real party in interest requirement of FRBP 7017.

Americredit Financial Services, Inc., an auto loan servicer, filed a MLS in its own name. Its name appears on the car title as the sole lienholder, it represented that it “has a validly perfected, first priority purchase money security interest in the Collateral…” and it was listed as a secured creditor in both the Schedules and the Chapter 13 Plan.

A response was filed to the MLS arguing that the car loan had been sold to a securitized trust, and that Americredit was therefore not the real party in interest. Americredit responded by agreeing that the note had been transferred to the securitized trust, but argued that the debtor’s failure to object to the POC waived this issue, and that its servicing agreement with the trust allowed it to file the MLS in its own name.

Judge Catliota ruled that since the loan was not owned by Americredit, it needed to file the MLS in the name of the actual noteholder, and denied the MLS (but allowed Americredit to amend to reflect the true owner of the loan).

With the vast majority of loans (home, car, computer, etc.) being securitized, this is an important defense to MLSs, particularly since in a number of these cases, the securitized trust is simply unable to produce the original note or demonstrate that the title records appropriately reflect that it is the proper secured party.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.

Last modified: January 3, 2012