Common Mistakes by Debtors and Their Attorneys

 

There are a number of mistakes that debtors and their bankruptcy attorneys make that cause serious  problems after their discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge injunction or the automatic stay and can cause the debtor to suffer a serious financial loss..

1. Failing to Send Notice to Late Added Creditors



One of the mistakes attorney's often make is failing to send the bankruptcy notice to creditors who are added after the initial filing. This can make it difficult to enforce the discharge injunction. We find this all the time. A new creditor is added and since the bankruptcy notice has already gone out the creditor doesn’t get notice of the bankruptcy. Although the creditor may get other notices or a copy of the discharge, the creditor has been deprived of its opportunity to attend the 341 meeting or file a proof of claim. Although the debt will probably still be discharged it will be hard to successfully prosecute a contempt action if the creditor continues to try to collect the debt. Invariably, the creditor will claim they didn’t get notice of the bankruptcy and we won’t be able to prove otherwise. The solution would be for the attorney to send the bankruptcy notice to late added creditors by certified mail, return receipt requested, so there will be  proof they got proper notice of the bankruptcy filing.

 

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Mortgage Servicing Rights: A Cash-Cow for Servicers But A Nightmare for Consumers.

 



A recent trend in the mortgage lending industry is the sale by banks and mortgage companies of the lucrative servicing rights on the loans in their portfolios. Special servicers like Nationstar and Ocwen are taking over the collection of mortgage payments, processing of modifications and the foreclosure and collection of delinquent accounts. This is probably a positive development  as  the banks and mortgage companies have been doing a horrible job at it.

 

Unfortunately, the assignment of servicing rights on a mortgage loan can cause the consumer much grief. I can't count the number of times that a client has complained that they were current on their mortgage until the servicing rights were transferred and they suddenly had to make payments to another company. Invariably in the transition a payment would get lost or delayed and then the collection letters would start, late charges applied and suddenly a perfectly good loan was in default.

 

A Chapter 13 bankruptcy is often the only way to cure a loan that is in default. Those who do not qualify for Chapter 13 must file Chapter 7 and reaffirm the debt or surrender their homes and get a discharge of the mortgage debt. These filers who surrender their homes, however, should carefully monitor their credit after their discharge as the original lender, the original servicer and the successor servicers quite often will continue to report the account to the credit bureaus. And successor servicers will often act like the loan is still collectable. With all these assignments it is not unusual to find  the original lender or servicer and the successor servicer reporting to the credit bureaus on the same loan and pulling credit reports when there is no longer any account relationship. This inaccurate reporting can significantly delay the recovery of a filer's credit score.

 

So, if you get a notice in the mail that the servicing rights on your home mortgage are being assigned to a new company be wary, monitor your credit reports carefully and if you find something that doesn't look right, seek professional help..

 

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