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The Fractional Interest Bankruptcy Foreclosure Scam

To understand a fractional interest bankruptcy foreclosure scam, you must know what fractional interest is.  Fractional interest in real estate property often occurs through probate actions.  For example, say parents leave their house to two children, John and Michael.  As long as they do not predecease the parents, the sons inherit the property.  If John or Michael predeceases the parent, then their half of the property goes to their children.  Suppose John predeceases the remaining parent, and so his half of the property goes to his four children.  Upon the parent's death, the property ownership comprises half which goes to Michael and the other half divided by four of John's children, each of whom inherits one-eighth of the property.  These property divisions are fractional interests.

The Executive Office for the United States Trustees released a report explaining how the fractional interest transfer scam worked.  Scam artists promise foreclosure delay and re-financing to fractional interest property owners.  They transfer property either with or without the knowledge of the original property owner.  Even though the property owner may know about the first transfer to the scam artist, he or she does not know about the second property transfer.  Say, using the earlier example that one of John's children is living in the inherited house and doesn't want to lose his property ownership.  He consequently falls for the con artist’s advertisement.  The scam perpetrator transfers his 12.5 percent property ownership to a real or fictional entity and files bankruptcy.  In one scam, the perpetrators used the names of homeless persons on bankruptcy petitions.

The transfer temporarily stops the original owner's creditor from foreclosing on the property because the property is under the protection of an automatic stay.  The scam artist does not even tell the owner about the bankruptcy, just that the foreclosure is over and then collects his fee of several hundred dollars for the service.  However, once the bankruptcy ends, the creditor resumes foreclosure actions.

If you face foreclosure, do not fall prey to scams.  Consult an experienced bankruptcy attorney for legal help.

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