JPMorgan Chase Accused of Bankruptcy Fraud in Class Action Suit

A class action lawsuit being brought against JPMorgan Chase alleges that the bank engaged in fraudulent activity in tens of thousands of bankruptcy cases.

The suit claims that the bank actively deceived many people involved in the bankruptcy process, including Chapter 7, Chapter 13, and Chapter 11 trustees; bankruptcy judges; creditors; creditor attorneys; debtors, debtors in possession, and debtors’ attorneys; and the Office of the United States Trustee.

Among the charges being leveled against Chase are that the bank did the following:

• Committed fraud, perjury, and intentional misrepresentation in bankruptcy court by producing false title transfer evidence (sources claim that the bank used PhotoShop in some cases) in order to “prove” its stake in thousands of bankruptcy cases.
• Provided manufactured evidence to willfully deceive those involved in the bankruptcy process about who truly held class members’ non-negotiable promissory notes.

What Is Chase Actually Accused Of?

In plain English, Chase is facing charges of providing false evidence regarding home mortgages in bankruptcy cases. Specifically, the lawsuit alleges that:

• Chase fabricated documents that recorded its chain of ownership of residential mortgage loans. In order to be able to claim ownership of mortgage debt in bankruptcy court (or any court), a person must have a hard copy of the mortgage’s promissory loan (also called a Master Loan Note, or MLN). Because of electronic mortgage registration systems and securitization of mortgages (two factors that greatly contributed to the expansion and burst of the housing bubble), however, most banks no longer hold paper MLNs.
• Chase presented falsified documents in bankruptcy court. In order to “prove” that it was the lender to whom a bankruptcy filer owed money, Chase allegedly presented these fabricated documents to bankruptcy courts (because it did not have actual documentation).
• Chase rewarded lawyers for speedy action. During a bankruptcy case, filers are protected from collection actions like foreclosure by the automatic stay. But creditors can petition the court to lift that stay in order to collect on certain debts. In Chase’s case, the charges claim, the bank rewarded attorneys for producing false documents quickly and convincing the court to lift the stay quickly so that Chase could foreclose or collect money on a bankruptcy filer’s home.

Who Is Affected By the Class Action Suit?

The class named in the suit (Ernest Michael Bakenie v. JPMorgan Chase Bank, N.A., filed in the Central District of California) includes bankruptcy filers who live in California. To find out whether you are a member of the class, you can consult with a bankruptcy lawyer in your area.

Plaintiffs in the suit are seeking damages, restitution, injunctive relief, and disgorgement of profits.

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In this podcast, Jeena talks about her attempt to cut her own hair and the disastrous result. We also talk about why acting as your own lawyer is penny wise but pound foolish. Then we move onto LegalZoom, a popular DIY website for many legal issues.

We address frequently asked questions:

• Can I file my own bankruptcy?
• What can go wrong?

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First Circuit: Lender Not Obligated to Foreclose on Home Surrendered in Bankruptcy

Surrendering Property Usually Allows the Debtor to Walk Away From Underwater Property. What Happens When the Bank Refuses to Take Ownership?

One of the big advantages for consumers filing bankruptcy is the ability to surrender property they can no longer afford. Through bankruptcy, debtors can avoid a deficiency lawsuit and get rid of personal liability on a car loan or mortgage by giving back (surrendering) underwater property and walking away. However, what happens when the lender refuses to take back the surrendered property? Does effectively forcing a debtor to continue owning a surrendered asset constitute a violation of the discharge order?

First Circuit: Lender Not Obligated to Foreclose

A recent decision out of the First Circuit, Canning vs. Beneficial Maine Inc., holds that a secured creditor is not obligated to foreclose or release its lien on a surrendered home as long as theyre otherwise in compliance with state law. The issue is important because after surrender a foreclosure must occur before the bank can take ownership of the debtors home. Until the foreclosure sale, the debtor still owns the property and remains liable for insurance and HOA dues. The Court in Canning held that the banks refusal to foreclose was not a violation of the discharge order. The debtors argued that being forced to maintain the property indefinitely interefered with their right to a fresh start.

The Facts of the Case

The Canning case involved what appeared to be a fairly straightforward chapter 7 filing in which the debtors elected to surrender an underwater home. Upon receiving notice of the bankruptcy, the Cannings mortgage lender dismissed its pending foreclosure action explaining it was due to “the debtors filing chapter 7 bankruptcy.”

After receiving their discharge, the Cannings took the position that the banks failure to either release its lien or foreclose was in violation of the discharge order. They then filed an adversary case seeking actual and punitive damages as well as declaratory relief ordering the bank to take title to their house or deliver unencumbered title.

Where Property Has Value, Lender Not Required to Release Its Lien

Ultimately, the Court sided with the bank relying on the fact that the bankruptcy discharge does not extinguish the mortgage lien, only personal liability to pay the mortgage. While the bank was prohibited from attempting to collect personally from the Cannings, they were not obligated to foreclose or release their lien. Like many homes, the Cannings property had plummeted in value and the Court ruled that the bank could wait for values to recover before making a decision. Also persuasive was the banks willingness to settle and release its lien upon payment of the actual value of the property, rather than demanding the outstanding loan amount.

The record reflects that the property had significant value, that the bank did not suggest they would discharge the mortgage only upon full payment of the loan, and that the Cannings were not incurring any attendant costs.

The Court Got it Wrong

In ruling against the Cannings, the First Circuit naively argues that continued ownership wasnt forcing them to incur costs and therefore wasnt a coercive tactic. We here at National Bankruptcy Forum find that hard to believe. Any consumer attorney will tell you that one of the biggest issues facing their clients in this crazy real estate market are lingering homeowners association dues. An all too common story involves the bankruptcy debtor who surrenders their home only to be sued by the homeowners association because the lender is either too busy or too lazy to foreclose. Even after surrender, until the bank forecloses the debtor owns the property and owning property carries with it liability, liability for mishaps and injuries as well as liability for homeowners association dues. For folks who have just sworn under oath that theyre legally insolvent, these costs are especially real and tremendously stressful.

Ruling that a willful failure to foreclose does not violate the discharge order goes against the spirit of a fresh start by essentially punishing the debtors for defaulting on their mortgage. The banks argument that real estate can improve in value is theoretically accurate, however it ignores the reality behind most surrender and foreclosure scenarios. In this case the Cannings had all of their utilities shut off all utilities and moved out. Is it likely that their neglected property will increase in value? Not likely. Abandoned homes and homes that are in foreclosure bring down property values. Unless the bank intends to spend far more money maintaining and fixing up the home that it would have spent foreclosing, theres no other way to explain their behavior other than as a retaliatory action.

We think the First Circuit got this one all wrong, what are your thoughts?

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Bank of England man: ‘Peer-to-peer to replace High Street banks’

Lost in all the Budget hullabaloo this week was a momentous admission by one of the nations foremost bankers: the way we save, invest and borrow is on the verge of radical change.

Andy Haldane, head of policy at the Bank of England, said the loan and savings books at High Street banks like Lloyds, RBS, HSBC and the rest face a very real threat from peer-to-peer lenders.

In his words: Small peer-to-peer lenders like Zopa and Funding Circle could in time replace High Street banks.

Thats quite an endorsement of a very nascent but incredibly promising new way to save and lend.

Peer-to-peer (P2P) is a simple concept. You cut out the middle man and get a better rate on your loan (lower) or savings (higher).

Fast Online Payday Loans: Are They Right For You?

According to a recent survey report, around 75 percent of people take payday loans to handle their unpredictable expenses. These situations commonly include medical bills, car repairs, household repairs and electricity or gas bills payment. For such purposes, short term cash can be very useful as it provides urgent cash without a lengthy procedure.

For many people, Paycheck loans are a lifesaver at the end of the month when the salary gets all used up and there are still payments to be made. If used wisely, these easy cash loans can help save money by avoiding late charges on bills and bouncing checks.

The scope and success of these loans can be determined by the fact that there are thousands of payday lenders offering different types of loans in the payday industry and many are planning to enter it. Not only this, but many big banks have also started sanctioning quick paycheck loans to the public. However their terms and conditions slightly differ from those of payday lenders at payday stores.

These unsecured advances are simple and easy to apply and repay. If your cash requirements fall under $1500 then opting for a fast short term loan is the best thing to do. It not only saves you from monetary stress and depression but help you run your monthly household budget smoothly.

One thing that borrowers should keep in mind before applying for a payday advance is that these loans have high interest charges and they must be returned on the settled date in order to avoid getting late fee charges.

Nevada Still #1 in Top 10 List of Underwater Mortgages by State?

This month, several news outlets reported on the state of Americas underwater mortgages. The situation is grim: in the fourth quarter of 2011, the number of houses that were underwater actually grew by 3.7 percent. 11.1 million Americans live in homes in which the remaining balance on their mortgages is worth more than the full value of their houses. This comes to 22.8 percent of all homes that have mortgages, and eight percent have fallen behind on their mortgage payments. The rate is the highest its been since 2009.

The housing bubble affected states differently, especially Nevada. People with underwater homes considering filing Las Vegas bankruptcy should know theyre not alone. Yahoo! Real Estate took the data and compiled a top 10 list of states with underwater mortgages. It isnt surprising, but Nevada comes out on top with 60.1 percent of houses underwater and 4.5 percent with five percent equity or less. Worse, Nevada is the only state in which the total mortgage debt exceeds total property value. Homeowners lost an average of $150,000, and the median homes value dropped 60 percent.

Although the banks and the federal government agreed to a settlement that would give principal reductions for mortgagors, this may not be enough for Nevada homeowners, 13.4 percent of whom are 90 days delinquent on their mortgages. If youre in these circumstances, consulting with a Las Vegas bankruptcy—even if youre eligible for a principal reduction—will help you evaluate all of your options. You might be able to save money via a short sale, refinance, mortgage modification, offering your deed in lieu of foreclosure, and filing bankruptcy. Dont throw good money at a mortgage youll never pay off.

Mortgage Lender Allows Large Principal Reduction To Avoid Foreclosure

 In another example of bank’s becoming cooperative in mortgage modifications for primary residences, an attorney colleague told me this week that one of his clients was offered a substantial principal reduction as part of a deal keep the client in his home. The bank foreclosed, and the attorney defended the mortgage foreclosure on behalf of the client. The client’s home was over $100,000 under water. The case went through state court mediation. The client was seeking an interest and payment reduction. 

  The mortgage company representative said it was his company’s new policy to keep people in their homes and avoid foreclosure. The bank offered to mark the mortgage balance down to fair market value through a permanent mortgage balance reduction. The bank wrote off over $100,000 of mortgage debt as part of the homeowner’s payment reduction. The homeowners have no personal liability to repay the amount of mortgage deduction.    This windfall for the homeowner may be an anomaly, and it also could be due to the attorney’s negotiation skill (the particular attorney is skilled in all types of legal negotiations). I find that the story is consistent with what I see as a gradual change in mortgage lender policy. Mortgage companies are becoming flexible to make reasonable concessions required to keep good customers in their primary residences. 

Apples and Oranges? Standard Deductions vs. Itemized Deductions

When filing your taxes, how do you choose which deduction to take?  The standard deduction or itemized deductions?  What is the standard deduction? And what does it mean to itemize deductions? And why should you use one instead of the other?  TurboTax software solves these questions for you by choosing the option that gives you the biggest tax refund.  Ultimately, both deductions will save you money, but one will save you more than the other depending on your circumstances.

What Is a Standard Deduction?

The standard deduction is a fixed dollar amount that can be subtracted from your Adjustable Gross Income to reduce the amount of taxes you owe. The specific amount is set every year by the IRS and is usually adjusted for inflation. Which of the standard deductions you can take is determined by your filing status, such as Single or Married Filing Jointly. Taking the standard deduction precludes you from itemizing any of your deductions.

What Is an Itemized Deduction?

Itemized deductions are expenses that fall under a long list of IRS allowable categories. Some of these categories are dental and medical expenses, home mortgage interest, charitable contributions, business use of a home or car and deductible taxes. You must have paid these expenses for yourself or for one of your dependents, such as your spouse or child. Additionally, you must be able to document these expenses with receipts.  You dont need to know what these deductions are.  TurboTax will easily guide you through itemized deductions.

How Do I Choose?

Itemizing will usually be the way to go if you had large non-reimbursed dental and medical expenses or if you had interest expense on a mortgage, paid property taxes, had large employee business expenses that were not reimbursed by your employer, had major uninsured casualty losses or made large contributions to charities, but TurboTax will make the appropriate choice for you based on your entries for these expenses.

When You Dont Have a Choice

There are times the choice will be made for you. You cannot use the standard deduction if you are a non-resident alien. If you are married filing separately, and your spouse chooses the standard deduction, you cannot itemize. If you do not have the necessary records for itemizing, then you have use the standard deduction. If you qualify to file Form 1040EZ or 1040A, you cannot itemize, though you may be able to claim certain exemptions and credits.

Both types of deductions are very important because they are a way to reduce your taxable income. While it is may take some time to gather receipts for itemized deductions, you might find it a worthwhile effort as you try to make your taxable income as low as you legally can.