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Con Artists Involved in Bankruptcy Abuse

In addition to the fractional interest transfer scam (discussed in another blog), there are other similar scams:

  • The con artist offers to end foreclosure problems and collects monthly mortgage payments from the homeowner, telling the homeowner that the foreclosure is being worked out.  Unbeknownst to the homeowner, the perpetrator either forges the homeowner's name on a bankruptcy petition or has the homeowner sign a petition without realizing what the form is.  The bankruptcy stops creditor actions, making it appear that the foreclosure is handled.  The scammer pockets all mortgage payment money in addition to the fees collected for the foreclosure consulting service.
  • The con artist persuades the homeowner to quitclaim the residence to the perpetrator.  A quitclaim is a deed that transfers the homeowner's interest in the home to someone else—in this case, the con artist transfers the property to the name of someone who has filed bankruptcy, such as a Chapter 11 business debtor on the other side of the country. The transfer prevents the creditor from foreclosing on the property, but only as long as the bankruptcy is still in progress.

In 1996, the Chief Judge of the United States Bankruptcy Court for the Central District of California established a Bankruptcy Scam Task Force to investigate scams and bankruptcy abuses.  The Final Report of the Bankruptcy Foreclosure Scam Task Force revealed that many supposed mortgage consultants and foreclosure specialists carried out abusive bankruptcy filings like the ones just mentioned.

Reporting suspicious activity to the bankruptcy trustee, your bankruptcy lawyer, or the U.S. Trustee Program helps authorities take action to shut these operations down.  When dealing with foreclosure or debt problems, consult a qualified bankruptcy lawyer who can protect your interests.

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