Bankruptcy, like foreclosure, has become a production business. While nontraditional mortgage loans (NTMs) and foreclosures are the products of a patented scheme, bankruptcy is more of a legislated racket. Bankruptcy and foreclosure structures have attorney “mills” operating as a business by shuffling humans through a cattle car-like process, both systems personally affect the individuals and their families – and both are tragedies.
The reason for the comparison is although they both have federal oversight in common – only one has a tough and powerful specialized court system. Even with a tough bankruptcy court, evil shysters and psychotic scammers materialize to pick every last morsel off of the carcass. [There is comfort in knowing Karma is never late].
Bankruptcies began to increase during the 1960s and have grown dramatically since 1980. Between 1980 and 2004, bankruptcies grew at an annual average rate of 7.6 percent a year. It is not surprising that another industry, the general-purpose credit card was born in 1966, when the Bank of America established the BankAmerica Service Corporation that franchised the BankAmericard brand (later to be known as Visa) to banks nationwide. The target – the American consumer.
Many families have sought the protection of bankruptcy in order to eliminate debt and try to save their homes from the egregious Wall Street land-grab securities’ scam. But just how safe are you in a bankruptcy court? Bankruptcy should be your last resort and your discussion with your bankruptcy attorney should include all of the pros and cons. Don’t just rely on the attorney’s synopsis – do your own research. There are several classifications of bankruptcy and if you are contemplating it – you should try to understand all of them and what they mean to you and your family.
Nothing should be taken for granted. If you decide to file bankruptcy scrutinize every paragraph in your filing – you are the one filing the claims even if it is through an attorney. Then review and discuss every claim in your bankruptcy filed by your creditors.
No matter what Chapter petition you file – 7, 11, 12, 13, etc. declare, report and review everything and be honest. That goes for creditors too. A dishonest claim or oath is criminal and according to 18 U.S.C. § 152 “shall be fined under this title, imprisoned not more than 5 years, or both.”
Some creditors think they can make your bankruptcy their feeding frenzy by filing false and inflated claims. Just because you are bankrupt does not mean you should ignore false claims – you owe it to your other creditors to let them know that someone is defrauding your estate. Discuss with your bankruptcy attorney whether you should file an objection to a false claim (and reiterate your concern in writing).
18 U.S.C. § 152 “attempts to cover all the possible methods by which a bankrupt or any other person may attempt to defeat the Bankruptcy Act through an effort to keep assets from being equitably distributed among creditors.” (Source: 2 Collier on Bankruptcy 1151 (14th ed. 1968)) (emphasis added).
False Claims—18 U.S.C. § 152(4). A “false” claim is one that is known by the creditor to be factually untrue at the time the claim is filed. Subsection (4) provides:
“A person who…knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;…shall be fined…, imprisoned…, or both.
The elements of a false claim violation are:
- that bankruptcy proceedings had been commenced;
- that defendant presented or caused to be presented a proof of claim in the bankruptcy;
- that the proof of claim was false as to a material matter; and
- that the defendant knew the proof of claim was false and acted knowingly and fraudulently.”
United States v. Overmyer, 867 F.2d 937, 949 (6th Cir.), cert. denied, 493 U.S. 813 (1989).
On the official bankruptcy proof of claim form at the bottom is a warning:
What is a fraudulent claim?
Unlike foreclosure, the bankruptcy courts have tried to maintain a higher standard and protect the integrity of the administration of a bankruptcy case. Although bankruptcy judges are not Article III life-term judges, Congress has provided bankruptcy judges with powers under 11 U.S.C. § 105, for instance, allowing them to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions” under the bankruptcy codes and procedures. That means the bankruptcy judge has the power to sanction and enforce these statutes when creditors, their attorneys or agents file false claims. Because their power is so awesome – YOU don’t want to be on the wrong side.
And because a bankruptcy judge is on par with a federal court judge, the integrity and soundness of his decisions and court process are closely reviewed. Not just by the local district courts but also by the appellate panels.
False claims and false oaths undermine the integrity of the bankruptcy process and before you even contemplate bankruptcy – or as a creditor, file a false or inflated claim – consider this:
“[A]n act is done with intent to defraud if it is done with the intent to deceive any creditor, trustee, or bankruptcy judge.” U.S. v. Sabbeth, 262 F.3d 207, 216 (2d Cir. 2000) at 217 (statement made by the District Court to the jury). “The plain language of the false-oath provision punishes a person for making a false statement “knowingly and fraudulently.” The common understanding of the term “fraudulently” includes the intent to deceive. See Black’s Law Dictionary 662 (6th ed. 1990) (“A statement… is ‘fraudulent’ if it was falsely made, or caused to be made, with the intent to deceive.” United States v. Gellene, 182 F.3d 578, 586-87 (7th Cir. 1999).
In plain English – if you are a creditor and know your proof of claim is false and/or inflated or you may have done something unscrupulous to cause the debt to have been incurred, and you filed it with the intention of collecting the falsified amount – just be aware that 18 U.S.C. § 152 may be raised against you – and not just by the debtor.
Foreclosure, like bankruptcy, has become highly specialized – and it too needs its own court system and statutes like 18 U.S.C. § 152. This statute alone might make a lot of attorney foreclosure mills think twice about filing fabricated assignments of mortgage.
If the modification process were run through a program where it forced the system to be transparent we might begin to stabilize the economy. Maybe in foreclosure, since this new mortgage system has become an integral element of our financial structure, Congress needs to craft a new court with rules and procedures based on the integrity once met with the respect and higher standards of the bankruptcy courts.