How Consumer Concerns Impacted a Mortgage Servicer’s Bankruptcy Filing
Often when we talk about bankruptcy and problems with mortgage servicers, we are talking about consumers who file for Chapter 13 bankruptcy to avoid foreclosure or consumers who file for Chapter 7 bankruptcy in order to get a fresh start financially. However, as a recent Chapter 11 bankruptcy case suggests, sometimes consumer issues and consumer advocacy work actually can impact a mortgage servicer’s bankruptcy case. A recent article in The Wall Street Journal describes the case as one in which “consumer concerns sink Ditech’s Chapter 11 exit plan.” We want to provide you with more information about the background of the case, and then we want to say more about the significance of consumer concerns in the case.
Getting the Facts About the Ditech Financial, LLC Bankruptcy Case
According to an article in Bloomberg, last week consumers were waiting to hear about how a judge would rule on the proposed bankruptcy plan put forth by Ditech Financial, LLC, a mortgage servicer that has faced allegations that it “failed to properly credit payments and wrongfully foreclosed on homes.” More than 4,000 homeowners made allegations against the mortgage servicer. More specifically, consumers alleged that Ditech misapplied mortgage payments, did not credit payments that were properly made, misrepresented the amount of money that consumers owed on mortgages, and did not acknowledge plans made by consumers to get back on track with mortgage payments.
When Ditech filed for Chapter 11 bankruptcy, part of its reorganization plan included selling its mortgage serving business “free and clear of these consumer claims.” Whether Ditech could do this ultimately was up to a bankruptcy judge. If the judge had decided Ditech was allowed to sell the mortgage servicing business, consumers would have lost their ability to file claims against the company in addition to other harms. Consumer advocates pushed for the bankruptcy court to deny Ditech’s proposed restructuring plan for the sake of consumers.
Bankruptcy Judge Denies Ditech’s Proposed Plan
The bankruptcy court denied Ditech’s proposed restructuring plan, citing concerns about consumers. The bankruptcy judge explained that “the terms [of the proposed restructuring plan] weren’t fair to borrowers,” according to The Wall Street Journal article. More precisely, the bankruptcy judge explained that “the plan could prevent homeowners whose mortgages were serviced by Ditech from fighting back against fees, defaults, and foreclosures once the company’s assets are sold.”
While the plan was supported by many of the company’s creditors, some of the company’s consumer creditors actually opposed the plan because of how it would impact consumers. The U.S. Trustee also opposed the plan, emphasizing that it did not “protect the rights of homeowners to challenge account errors.”
Although the bankruptcy court’s decision affects only this particular case, it does send a signal that mortgage servicers and other large companies filing for bankruptcy protection cannot complete the Chapter 11 process if consumers could be seriously harmed as a result.
Contact an Oak Park Bankruptcy and Consumer Protection Lawyer
Consumers have many protections under federal and state law, and it is important to speak with an experienced Oak Park consumer protection attorney if you have questions. Contact the Emerson Law Firm today to speak with an advocate about your case.
See Related Blog Posts:
Consumer Bankruptcy and Foreclosure: Get the Basics
Is Chapter 12 Bankruptcy for Consumers?
Getting the Facts About the Ditech Financial, LLC Bankruptcy Case
According to an article in Bloomberg, last week consumers were waiting to hear about how a judge would rule on the proposed bankruptcy plan put forth by Ditech Financial, LLC, a mortgage servicer that has faced allegations that it “failed to properly credit payments and wrongfully foreclosed on homes.” More than 4,000 homeowners made allegations against the mortgage servicer. More specifically, consumers alleged that Ditech misapplied mortgage payments, did not credit payments that were properly made, misrepresented the amount of money that consumers owed on mortgages, and did not acknowledge plans made by consumers to get back on track with mortgage payments.
When Ditech filed for Chapter 11 bankruptcy, part of its reorganization plan included selling its mortgage serving business “free and clear of these consumer claims.” Whether Ditech could do this ultimately was up to a bankruptcy judge. If the judge had decided Ditech was allowed to sell the mortgage servicing business, consumers would have lost their ability to file claims against the company in addition to other harms. Consumer advocates pushed for the bankruptcy court to deny Ditech’s proposed restructuring plan for the sake of consumers.
Bankruptcy Judge Denies Ditech’s Proposed Plan
The bankruptcy court denied Ditech’s proposed restructuring plan, citing concerns about consumers. The bankruptcy judge explained that “the terms [of the proposed restructuring plan] weren’t fair to borrowers,” according to The Wall Street Journal article. More precisely, the bankruptcy judge explained that “the plan could prevent homeowners whose mortgages were serviced by Ditech from fighting back against fees, defaults, and foreclosures once the company’s assets are sold.”
While the plan was supported by many of the company’s creditors, some of the company’s consumer creditors actually opposed the plan because of how it would impact consumers. The U.S. Trustee also opposed the plan, emphasizing that it did not “protect the rights of homeowners to challenge account errors.”
Although the bankruptcy court’s decision affects only this particular case, it does send a signal that mortgage servicers and other large companies filing for bankruptcy protection cannot complete the Chapter 11 process if consumers could be seriously harmed as a result.
Contact an Oak Park Bankruptcy and Consumer Protection Lawyer
Consumers have many protections under federal and state law, and it is important to speak with an experienced Oak Park consumer protection attorney if you have questions. Contact the Emerson Law Firm today to speak with an advocate about your case.
See Related Blog Posts:
Consumer Bankruptcy and Foreclosure: Get the Basics
Is Chapter 12 Bankruptcy for Consumers?
Comments
Post a Comment