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Arrogant Lender – Pays $250,000 in Damages to Debtor

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In a case, the Bankruptcy Court ruled that an unrepentant lender who improperly took $297.72 was left with $250,000 in punitive damages plus the $17,500 in actual damages.

Case Summary:

  • Chapter 13 Debtor owed approx. $11,000 for an auto which was paid through the Chapter 13 Plan.
  • Debtor also owed $77,000 and $3,000 to the mortgage lender.
  • The home mortgage lender took over servicing for thousands of mortgages from a lender with a name similar to the auto lenders.
  • Servicing of the auto loan should not have been transferred to the new lender.
  • Payments of the auto loan were paid to the home mortgage (as requested by the home mortgage lender) for several months which were applied to the home mortgage rather than the auto loan.
  • Debtor informed the lender of the mistake.
  • Mortgage lender just ignored the Debtor and Debtor had to sue the Mortgage lender.
  • In the meantime, Debtor could not purchase a new car because the lien on the car would not be released by the auto lender. The auto lender did not receive the payments since the mortgage lender improperly applied them to the home mortgage.

Court Ruling:

  • 50 page Opinion by the Bankruptcy Court Judge.
  • Judge was angry that the mortgage lender “never apologized or even acknowledged” that the bogus claim transfer harmed the Debtor.
  • Judge did not consider the mortgage lender’s excuse that it did not act with malevolent intent.
  • Judge decided on larger amount to deter this mortgage lender from ever doing this again with words in her opinion that included: utter lack of adequate review, patently unreasonable, recklessly indifferent and wholly unreasonable.
  • Judge awarded $250,000 in punitive damages.

$250,000 will buy the debtor a real nice car and pay off all his creditors.     Lenders must not violate the automatic stay and then act as though it was just a mistake and basically act in a way to say:  too bad for the Debtor – it was just a mistake.

Courts do not tolerate arrogance and lack of respect for Debtors.    Transferring of loan servicing, which is common with loan servicing, creates confusion (to say the least for Debtors).