Can Chapter 13 Stop Foreclosure?
Lender ordered to pay $45 million in punitive damages after ignoring automatic stay
Los Angeles, CA: Can chapter 13 stop foreclosure? A California bankruptcy judge handed down a decision in April that awarded $45 million in damages to a husband and wife after their lender ignored bankruptcy proceedings and foreclosure on the couple.
The Sacramento Bee reported that the trouble began for the borrowers when they attempted to obtain a loan modification on their mortgage. They defaulted at the advice of the lender. Many lenders will encourage homeowners to get 4 months behind on mortgage payments to obtain a modification. The problem with this is that if the modification does not get approved, the lender can then foreclose. This is what happened with the Sundquists.
Homeowners Face Illegal Foreclosure Practices
After 20 attempts at loan modifications that were either declared insufficient or lost, they ended up filing a Chapter 13 bankruptcy to keep the lender from foreclosing. This move should have put an immediate stop to foreclosure proceedings. However, Bank of America chose to ignore the automatic stay and harassed the borrowers during their Chapter 13 bankruptcy. The lender’s agents knocked on the couple’s doors, rang doorbells and staked out the premises —all without even identifying who they were. Eventually, the bank evicted the couple from their home for six months.
This practice is completely illegal. When a homeowner files for a Chapter 13 bankruptcy, the harassment is supposed to immediately stop. Bankruptcy attorney Lauren Rode says that a “chapter 13 bankruptcy stops foreclosure immediately”. In the case of the Sundquists, California bankruptcy court Judge Christopher Klein awarded the couple $45 million in damages after they sued the bank for attempting to continue to foreclose. The judge said that the homeowners were “acting in good faith” and did not realize that “Bank of America had no intention of acting in good faith.”
What to Do When Facing Foreclosure
If you are behind on your mortgage, don’t let your lender talk you into falling further behind to obtain a loan modification. How many months behind on mortgage before foreclosure varies from lender to lender. Some may start foreclosure proceedings right away if you are denied a loan modification. However, a Chapter 13 bankruptcy will immediately put an end to collection efforts. When banks attempt to collect after a Chapter 13 bankruptcy court has issued an automatic stay, they can be held liable for damages.
If you are struggling to make your mortgage payments, contact a competent attorney who specializes in bankruptcy to discuss your options for your mortgage loan after chapter 13 discharge. Homeowners are urged to contact Consumer Action Law Group at (818) 254-8413 to learn how Chapter 13 bankruptcy can stop a foreclosure.
About Consumer Action Law Group of Panzarella, Gurevich & Rode, P.C: Consumer Action Law Group (hyperlink) is a law firm based in Los Angeles. The firm’s attorneys are dedicated to fighting for consumer rights. They are experienced in the following areas of practice: auto fraud, bankruptcy, car accident, credit report dispute (FCRA), employment law, mortgage fraud, surplus funds recovery, foreclosures, and TCPA violations.