Respectfully submitted by Lawrence E. Rafferty (rafflaw) Weekend Contributor
In the past, I have written about the Big Banks continued unlawful actions that only result in “slap on the wrist fines” that in many cases are passed on to the shareholders and/or used as a tax deduction. It seems that Wall Street and the Banksters have not learned a thing. Or have they?
The latest wrinkle in Banksters taking advantage of American citizens is noted in a Crooks and Liars report which detailed an investigation into several Big Banks and their alleged refusal to honor the orders of Bankruptcy judges across the country. Of course, the “usual suspects” have been named in the latest investigations.
“The practice — a subtle but powerful tactic that effectively holds the credit report hostage until borrowers pay — potentially breathes new life into the pools of bad debt that are bought by financial firms.
Now lawyers with the United States Trustee Program, an arm of the Justice Department, are investigating JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial, formerly known as GE Capital Retail Finance, suspecting the banks of violating federal bankruptcy law by ignoring the discharge injunction, say people briefed on the investigations.” Crooks and Liars
What the US Trustee Program is investigating is the alleged practice by the aforementioned target banks of refusing to extinguish the debts that Bankruptcy judges have ordered extinguished and keeping those debts on the debtor’s credit reports. Without the debts being removed from the credit reports, discharged debtors are caught in a never ending process of trying to pay off discharged debts, just to renovate their credit ratings.
Of course, this practice is in direct conflict with our bankruptcy laws, but the law never seems to get in the way of Big Banks and their efforts to make everyone pay, except for themselves. A few examples from the New York Times, may help understand the impact of these alleged illegal actions by the aforementioned Big Banks.
“The errors are not clerical mistakes, but debt-collection tactics, current and former bankruptcy judges suspect. The banks refuse to fix the mistakes, the borrowers say, unless they pay for the purged debts. And many borrowers end up paying, given that they have so much at stake — the tarnished credit reports showing they still owe a debt can cost them a new loan, housing or a job. The Vogts, a couple in Denver, for example, paid JPMorgan $2,582 on a debt that was discharged in bankruptcy because they needed a clean credit report to get a mortgage.
There are many more who make payments on debts that they no longer legally owe, but never alert anyone because they do not realize the practice is illegal or cannot afford to litigate.
Humberto Soto, a 51-year-old unemployed hospital worker who went through bankruptcy in 2012, said he was almost one of those people who paid. In January, he was rejected for a Brooklyn apartment after the housing agency pulled his credit, which was tarnished by $6,411 on a Chase credit card, according to a letter from the agency, a copy of which was reviewed by The New York Times.
When he called JPMorgan, Mr. Soto said, he was told that the black mark would remain unless he paid. “It was either pay or lose the apartment,” he said. But after his bankruptcy lawyer explained the situation to the rental agency, Mr. Soto ultimately did not pay. (He got the apartment.)” New York Times
Federal Judge Robert D. Drain is handling these cases and he is skeptical about the defenses raised by the Big Banks.
“Judge Drain, who is presiding over the cases, posited that the banks’ ability to sell the soured debts depends on ignoring the bankruptcy discharge in order to collect money from people who don’t have to legally pay it.
In July, the judge refused to throw out the lawsuit against JPMorgan, saying that the “complaint sets forth a cause of action that Chase is using the inaccuracy of its credit reporting on a systematic basis to further its business of selling debts and its buyer’s collection of such debt.”
During a hearing last year on a related case, transcripts show, Judge Drain said, “I might refer this, if the facts come out as counsel’s alleging, to the U.S. attorney,” for criminal prosecution.” New York Times
As noted in the examples above, real people get hurt by the Big Banks alleged refusal to follow the law. Of course, I guess I should not be surprised that a Big Bank would do whatever it takes to get their money. Even if it breaks the law. After all, according to the linked New York Times article, their are billions at stake.
As shown in the latest reports of some of these same Big Banks being caught manipulating the foreign currency exchange market and the $4.3 Billion dollar fine assessed, they never seem to learn. Or as I suggested earlier, maybe they have learned how to game the Justice Department.
If these targeted corporate persons are found to have violated the Bankruptcy Laws, do you think any officer or director will go to jail? Just asking.
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Reblogged this on California Freelance Paralegal and commented:
The big banks are now ignoring the Bankruptcy laws by attempting to collect debts that have been lawfully discharged in a Bankruptcy by a specific order of a United States Bankruptcy Judge. There is big money at stake and the big banks want the money so bad they are now ignoring court orders. They seem to think that the laws do not apply to them. They need to be taught a lesson but I doubt the Justice Department will do much of anything except slap their wrist.
Old news. Banks and credit card companies have been not following the law for decades.
My son had an unpaid credit card from 1999. Another company purchased the debt in 2006 and took him to small claims court in 2010, years after the statute of limitations had run out.
No one from the collection group had to show up. They “certified” that the debt was from 2006 when they bought it, not when the original debt went bad in 1999. The magistrate didn’t seem to understand what the statue of limitations even was and spent most of her time defending the collection group.
The decision could have been appealed but it would cost more to do so than the total amount of the debt.
SEE http://www.understandingmoney101.com
Google “Famous People Who Have Survived Bankruptcy” and you will see that the list includes Abraham Lincoln, Henry Ford, and a host of others.
Paul- Pretty pathetic comment. Have a nice day!
Don de Drain – your stock high performing? I would be willing to invest. It is nothing personal, just that I don’t know of any publicly held law firms.
THE FEDERAL RESERVE EMBEZZLES $4 BILLION FROM THE GOVERNMENT—DAILY
A popular concept is that the government will “borrow” from the Federal
Reserve for deficit spending. This involves giving a Treasury security
(bill, bond, or note) to the Fed as collateral and the Federal Reserve bank
of New York will credit an account of the government in the amount of the
security. The government will then buy military goods, fund social programs,
pay government salaries, etc. (Note: The Fed does not “print” the money as
Mr. Bernanke recently informed Congress. The Fed buys the FR notes [that are
in our billfolds] from the U.S. Treasury for the cost of printing,)
Voila !! Additional (fiat) money has been injected into the economy of the
Nation which, in the projection of Mr. Bernanke, may stabilize the economy.
(Actually, it continues the exponential inflation of the bubble started in
1913 that is approaching rupture.)
Observe the Fed holds the collateral. When the collateral matures,
government must pay the Fed to redeem the security. The fiat money spent by
government must be re-acquired and paid to the Fed. But the government has
already spent the money and the bank account is zero.
So the Fed can sell the collateral at the auctions of Treasury securities
(it has normally already been auctioned). If the funds went to the
government, the Fed would essentially give up the security. Clearly, this
does not happen.
If the funds went to the government, they would by law be used to pay off
the debt of the security that had been issued and that would negate any
increase of the (national) debt. Further, it would eliminate any inflation
from increased currency in circulation. Since the national debt consistently
increases and inflation is prevenient, the funds from securities sold for
deficit spending cannot go to the government.
The Federal Reserve Bank of New York has the responsibility of handling
all accounting and funds for auctions of Treasury securities. This fact has
been confirmed from both government and Federal Reserve websites. The funds
from deficit spending securities sales go into the FRBNY but they are not
recorded as coming out. These accounts are not mentioned in the ANNUAL
REPORT TO CONGRESS nor are they dispensed in any public record
Receipts from the 2010 auctions totaled $8.4 trillion. $7 trillion was
used to roll-over preexisting securities (without increasing the national
debt) and $1.4 trillion was received from deficit spending as detailed
above. That $1.4 trillion ($4 billion every day–7/52) disappeared in the
catacombs of the FRBNY. That is $4000 annually for every man, woman, and
child in every state.
Profit of the Fed legally belongs to the government. Concealment of funds
belonging to the government is identified as embezzlement and subject to one
year incarceration per count.
What do the owners of the Fed (BOG) do with the embezzled money? Ref:
http://patriotaction.net/forum/topics/funding-the-new-world-order
Once again, thank the fed gov. They had the chance to string up those derivative bundlers that would have continued the precedent of dealing with Keating-like crooks pointed out above. Heck, even W’s Enron buddy couldn’t duck the axe in the end. Plus, GM being able to “walk away” from $10 billion in fed loans?? Yes, indeed… at least two levels of justice. Yep.
slohrss29 – Keating finally plead guilty to wire fraud and bankruptcy fraud and got time served.
This bankruptcy law sounds like it was written by liberal attorneys and passed by a Democratic Congress.
I think most of us were raised with the reasoning and logic that if we purchased something, we needed to pay for the whole entire thing–period.
Now, we have a law that allows us to file bankruptcy when we over indulge in our selfish spending. No problem, we can file bankruptcy and simply wipe the slate clean.
Today, we can file bankruptcy on a debt as little as $6,000+ dollars, as in the case of Mr. Soto in this article. Where is the logic in that. This law has to be changed or banks would go out of business.
Notice to readers of this blog: If you are so bitter against big banks, I suggest you pull your money out and put your cash into small neighborhood banks and also get rid of those big bank credit cards. Yeah, it’ll never happen. You’ll just keep complaining about the very banks you have your money stashed. You may even be one of those bankruptcy cases. Hmmm.
Gigi – I have part of my money in a large bank and part in a federal credit union. Going with the small banks is an excellent idea because they usually give free checking, etc. which is very helpful and can save you a lot of money.
Perhaps the big banks are taking their ques from the Obama administrations total disregard for the bankruptcy laws in the big auto bankruptcy. They totally ignored the law giving secured bondholders the first claim on remaining assets in favor of giving ownership to the unions who supported Obama’s campaign for president.
Thanks Squeeky – guess I was just thinking of the revolving charges that I have personally seen continue after supposedly being included in a bankruptcy.
Paul S., the bankruptcy laws are federal. The exception is the determination of what property is exempt from the bankruptcy estate. In some states you can apply either your state or the federal exemptions. In others, you are required to apply your state exemptions. As a result, in some states you can keep your home no matter how much equity you have in it, while in others you can protect only a few thousand dollars of equity in your home.
@BillW
Here is a better link. The above one is a lot of advertisement, but this link is more direct about the various laws:
http://www.nolo.com/legal-encyclopedia/bankruptcy-exemptions-state
Squeeky Fromm
Girl Reporter
@BillW
Actually, bankruptcies are different in each state. Many states permit debtors to use Federal limitations, but what property you can exempt can widely vary. In some states, you can keep your residence pretty much regardless of value, while in other states you are limited to maybe $25,000 equity in a home.
Here is a link you may find helpful:
http://www.bankruptcyhome.com/bankruptcy-state-law.htm
Squeeky Fromm
Girl Reporter
Paul-
If you are concerned about the poor downtrodden banks not adequately exercising their rights to pursue crooks under the BK laws, you might want to buy some shares in some banks, go to a shareholders’ meeting, and complain. I’m going to save my own concern for the downtrodden BK debtors who get bullied by the banks in violation of the discharge injunction.
Don de Drain – I am thinking stock in a bank is probably going to perform better than stock in your law firm.
Thanks rafflaw for the post. know of what might be a real life example of your thread:
Person went bankrupt a number of years ago (due to a medical situation). That bankruptcy was supposed to include all revolving debt. However, one creditor listed a debt as included in the bankruptcy but then relisted again it as current. That person when trying to buy a house years later was unable to close on the house until they paid off that debt.
I can not say that the creditor actions were intentional or maybe a bookkeeping error. Either way, they got paid off on an amount that a court had deemed included in a bankruptcy.
Paul Schulte:
Debts incurred in anticipation of bankruptcy can be, and are, subject to being excepted from discharge. You need to remember that financial institutions are well-protected under bankruptcy laws.
Mike A – there is a time limit on the courts clawing back goods and cash. You just have to wait out the time limit.
This has been a very good discussion, I appreciate the quality and tone of the contributions.
Paul S-
So if the banks fail to exercise their rights under the BK laws, whose fault is that? Let’s punish all bk debtors because the banks don’t show up to pursue the crooks. Makes perfect sense to me. [Snark]
The BK laws were amended in 2005 to make them much more creditor friendly. Biggest winners after the law was changed were consumer lenders and the IRS. From my standpoint, the consumer lenders had all the tools they needed to pursue the crooks before the law was changed, but they failed to use those tools. it was cheaper for them to pay some lobbyists to get changes to the law that have made BK more difficult for crooks and -non-crooks alike.
I understand why that happened. But I think the changes made in 2005 went too far in favor of creditors.
don de drain – so, who do we complain to? The lobbyists, the legislators, the President at the time?
“Paul C. Schulte
……. You realize that bankruptcy laws are different in different stater?
What I want to know is: how is the one person who filed bankruptcy getting a mortgage?”
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I am not the attorney here – but think federal bankruptcy laws are applicable. Not different rules in each state.
btw – should a person who goes bankrupt be barred from ever getting a mortgage? quite a penalty! or maybe they have to wait a certain number of years – believe presently 4 years.
Deserve? If we all got what we deserved I doubt we would be having this discussion. The question is what does the law allow? I’ll go back to my abortion analogy and ask,does the law discriminate on how or why the woman got pregnant to determine if the abortion should be allowed?
Paul S-
There are specific grounds under which a creditor can sue to have certain debts declared non-dischargeable. In addition, there are grounds for denying a debtor a discharge altogether. Plus there are other provisions which effectively prevent persons who make too much money from using chapter 7 bankruptcy. These provisions, taken together, help prevent abuse of the system. So you and others who whine about abusive bankruptcy filings can stop your bellyaching.
The person who is getting a mortgage may be buying a small home with a large down payment and is likely paying a high rate of interest. If they filed BK 5 years ago, the BK is still on their credit report, but they may be doing much better financially now.
Don de Drain – unless there is a significant amount of money involved, the banks are not showing up at the creditor hearings. My wife works some large bankruptcies for a major financial institution and I get a little shop talk