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Foreclosure Defense: To BKR or not to BKR, here are the issues in Bankruptcy

livinglies.me | November 22, 2019

The bottom line is that Chapter 7, 11, or 13 bankruptcy can be effective tolls in defending against unlawful foreclosures, but hey are not magic bullets. Like all legal procedures attempting to navigate them without a licensed legal professional who is a known quantity in Bankruptcy Court, is at the very least hazardous.

I have a client in the service of our country for whom I am rendering services with minimal charges. He asks me now about filing a bankruptcy petition. LIke all litigation strategies contesting unlawful foreclosures, success really depends upon either a successful discovery strategy, a successful cross examination of the robo witness, or both. Here is what I wrote to him:

First I need to coordinate with your BKR attorney. Make absolutely certain that you put nothing on any of your schedules that could be construed as admitting that there is a valid secured lien in favor of anyone. Second, you might not need to file a lawsuit, because they will probably file a proof of claim — and you can object to the proof of claim. We often trip them up exactly there. If they don’t file a proof of claim (theoretically they are are not required to do so if they claim to be a secured creditor) you can file one for them in which you state that nothing is owed and there is no lien in favor of the named creditor.

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But if your schedules are done correctly (contrary to virtually all software used by BKR attorneys) they will be forced to file a proof of claim, because you will be listing the house as an asset that is collateral for a loan, if it still exists, that may be owned by John Doe.
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They might also file a motion to lift stay (MLS). That gets tricky because the threshold on such a motion is whether there is ANY color of a claim that could be pursued in the state courts or by nonjudicial foreclosure and subsequent possession. Assuming we are right that the current claimant has no claim, the lawyers and/or servicers will produce fake documents that are facially valid, even though they are totally fake.
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In most instances the facially valid documents are taken as sufficient color of title or claim such that the stay is lifted. While this is often treated by both attorneys and judges as a judgment on the merits, it is not. It is merely a determination by the bankruptcy court that in the interest of judicial economy and the bankruptcy estate, the matter should be resolved under state law, rather than Federal bankruptcy law.
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Depending upon how the wind is blowing, you can file a lawsuit. You can do this in one of three ways: (1) an adversary lawsuit in the bankruptcy court seeking declaratory, injunctive or supplemental relief, (2) a collateral action in state court or (3) a collateral action in Federal court.
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The key to any of this is getting discovery. First you serve interrogatories, requests to produce and requests for admissions directed at who owns the debt by reason of having paid for it. The added implied component is that they paid a party who owned the debt by reason of having paid for it. And the further implied element is that the claimant paid value for THE debt not just any debt, such as that arising solely from the note itself which may or may not be evidence of the debt.
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Then you file a motion to compel if they don’t answer or object. That is standard fare for the foreclosure mills. If they do have a confirmable money trail you are most likely going to lose, so if you get to that point, I think it would be wise to settle. While there have been some judges who simply won’t give anything to homeowners and who think that all homeowners in foreclosure are deadbeats, my experience is that the overwhelming majority of judges will grant an order to compel answers to the discovery propounded to the claimant.
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The big mistake made by pro se litigants is that they snatch defeat from the jaws of victory by failing to file a motion to compel and then failing to file a motion for sanction seeking to strike the pleadings and enter judgment for the homeowner. the plain simple fact is that in most cases the entire foreclosure case rests upon a paper trail that diverges from the money trail. If you are successful, at a minimum, you will be undermining the prima facie case that the claimant is pursuing foreclosure for restitution of an unpaid debt owed to the claimant — and you will win at least 65% of the time (based upon my experience).
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The reason for the high percentage of cases in which the foreclosure mills lose the case is simply that they don’t have a real client, a real claim or a real claimant. Their entire case is completely dependent upon presumptions arising from the facially validity of fake documents.
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As I have seen repeatedly, possession of the note is by the law firm and the law firm is naming a claimant as client with whom they have had no contact nor any retainer agreement. It is all based upon plausible deniability of everything blows up. And the lawyers under current construction of litigation privilege seem to have total immunity for pushing a revenue scheme that includes the law firm.

 

 

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"CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea–it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-CFLA (2352) for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online)".

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