In this Bankruptcy case, a Chapter 13 bankruptcy debtor receives $250K from an arrogant mortgage lender.   The Court rules a mortgage lender is arrogant and unrepentant.   As a result, the mortgage lender pays the Bankruptcy Debtor $250,000 in punitive damages plus the $17,500 in actual damages.  The mortgage lender improperly took $297.72.

Case Summary:

• Chapter 13  Bankruptcy Debtor owed approx. $11,000 for an auto paid through the Chapter 13 Plan.  
• $77,000 and $3,000 were owed to the mortgage lender.
• The home mortgage lender took over servicing from a lender with a similar name to the auto lender.
• The servicing of the auto loan should not have been transferred to the new lender.
• Payments of the auto loan are paid to the home mortgage (as requested by the home mortgage lender) for several months.
• However, these payments are applied to the home mortgage rather than the auto loan.
• As soon as the Debtor sees the mistake, he informs the lender.
• The mortgage lender just ignores the Debtor.
• Because the car lien was not released by the auto lender, the Debtor cannot purchase a new car.
• For that reason, the Bankruptcy Debtor sues the mortgage lender.
• The auto lender did not receive the payments and the mortgage lender improperly applies for the payments.

Court Ruling:

• A 50-page Opinion is issued by the Bankruptcy Court Judge.
• Judge is angry that the mortgage lender “never apologizes or even acknowledges” that the bogus claim transfer harmed the Debtor.
• No consideration is given to the mortgage lender’s excuse that it did not act with malevolent intent.
• In the end, the Court decides on a larger amount in an effort to deter this mortgage lender from ever doing this again.
• The Court’s opinion used words that included: utter lack of adequate review, patently unreasonable, recklessly indifferent, and wholly unreasonable.
• Judge awards $250,000 in punitive damages.

$250,000 can buy the debtor a real nice car and pay off all his creditors.     Lenders cannot violate the automatic stay.   They cannot act as though it was just a mistake and act as though it is:   “too bad for the Debtor – it was just a mistake”.

Courts do not tolerate arrogance and lack of respect for Bankruptcy Debtors.    Although transferring of loan servicing is not uncommon. it does create confusion for Bankruptcy Debtors.  Lawyers can be arrogant and it costs them, too.

As a Bankruptcy Lawyer who is Board Certified in Consumer Bankruptcy Law, I fight for Bankruptcy Debtor rights.  Debtor Rights-Bankruptcy  I offer a free bankruptcy consultation where I can determine and advise you if bankruptcy is right for you.