Robo-Signing and Consumer Bankruptcy Cases

When the term “robo-signing” comes up, most consumers think back to the use of robo-signed documents during the foreclosure crisis, and the harms many homeowners faced as a result. Can robo-signing also cause harm to debtors who file for consumer bankruptcy? According to a recent report in MarketWatch, Citigroup recently “agreed to pay $5 million to settle claims over robo-signing in tens of thousands of bankruptcy cases.”
How does robo-signing relate to personal bankruptcy cases, and what are the key facts to know about the recent Citigroup settlement?
What is Robo-Signing in a Bankruptcy Case?
When documents are filed in certain types of cases—including many foreclosure cases as well as Chapter 7 bankruptcy and Chapter 13 bankruptcy cases—they need to be signed by the party submitting them. In the case of foreclosures, a bank typically provides paperwork that confirms the details of the foreclosure, and that paperwork is supposed to be reviewed and signed by someone who ensures that the facts are correct. In most cases, a bank employee is the one who reviews the documents and signs them. However, during the foreclosure crisis, many banks had employees who signed the documents without actually reviewing them for accuracy. This is known as the practice of “robo-signing.”
When it comes to bankruptcy cases and robo-signing, the issue typically concerns the signing of—without properly reviewing—proofs of claim. In consumer bankruptcy cases, the creditor must file documents in order to get paid. More specifically, the creditor must file paperwork that provides specific information about the claim, including the type of the claim and the total amount that the debtor owes the creditor. This is known as the “proof of claim.”
Citigroup and Robo-Signed Proofs of Claim in Consumer Bankruptcies
In the Citigroup case, according to an article in Reuters, nearly 72,000 credit card account proofs of claim were “robo-signed,” meaning that the documents were signed without being properly reviewed. The MarketWatch report describes how “tens of thousands of proofs of claim [that] were filed in bankruptcy cases across the country . . . were improperly signed by employees of a third-party vendor who had not reviewed and/or lacked knowledge of the contents of the proof of claim.”
Indeed, as the Reuters article clarifies, Citigroup hired a third-party vendor to review and sign proofs of claim, yet between 2012 and 2015, thousands of documents were robo-signed. Citigroup learned of problems with the proofs of claim in 2015, and the article highlights that it has “adopted procedures to avoid a recurrence” at the same time it has “complied with applicable bankruptcy signing requirements” since it learned about the problems with the third-party vendor. Of the $5 million settlement, each affected credit card holder is expected to receive approximately $70.
Contact an Oak Park Bankruptcy Attorney
If you have questions about the consumer bankruptcy process, or if you have concerns about whether you may have been affected by robo-signed documents in your consumer bankruptcy case, you should speak with an experienced Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more