Back in February we first broke this story of bankruptcy hijackings and tales of woe here in the Central District. The Hijacking continues and we now report that you need to be on the lookout for your Chapter 7 and 13 cases.  However, the scheme under Chapter 11 is to transfer the house ("asset") into an LLC or other corporate entity and then have that entity file under Chapter 11 to stop the foreclosures.

We now know that real estate agents and brokers are behind the scheme to defraud desperate homeowners out of their mortgage payments or what ever amount they can afford to pay these fraudsters on a monthly basis.  The false promise is that they will stop the foreclosure and keep them in their house.  It’s nothing more than a rent skimming scheme and when the foreclosure is about to occur, the house is then transferred ("fraudulent transfer") into the name of some random innocent debtor in bankruptcy.  As a result of the transfer, the lender takes the position that the Debtor’s automatic stay applies to this home.  The lender will then file a Motion For Relief From the Stay that could create problems for the innocent debtor.

If this happens in your case (for unrepresented persons), or your client’s case (attorneys representing debtors), it is important to take action. Usually, the debtor has no knowledge of the property or the transfer, which makes them innocent. An Opposition to the Motion For Relief MUST be filed and should emphasize that the debtor has no knowledge of the property or the transfer.  Usually a declaration from the Debtor is appropriate.

The reason for the opposition is not to stop the relief from stay, but to prevent the order from including language that the Debtor’s case was filed in bad faith, which is not true.  Here, we have an innocent debtor with a fraudulent action happening in there case.  That’s the distinction. If no opposition is filed, the Court can make a finding of bad faith and that could cause huge problems for the future of the innocent debtor’s case. 

Photo Credit:  Eva The Weaver

Other Lawyers Playing The Bankruptcy Alphabet

Cathy Moran claims H Is For House. Mark Markus of Los Angeles agrees.
Kim Coleman says H Is For Hardship Discharge
Cate Eranthe says H Is For Homeowner Association Dues
Stuart Ing of Hawaii proclaims H to be for Household Size
Bill Balena from Cleveland tells us H Is For Honesty
Mitchell Goldstein agrees with me that H is for Household
Detroit bankruptcy lawyer Kurt O’Keefe asks How Much Your Home Is Worth

Southgate, Michigan Bankruptcy Attorney Christopher McAvoy says that H is for Harrassment by Creditors

New York Bankruptcy Lawyer Jay Fleischman explains that H is for Household

Hearings, Household Median Income, Honesty, Honest But Unfortunate Debtor, Home is Where the Heart is, and Homestead