July 15, 2020

As Foreclosure Rates Rise, Beware of Foreclosure Scams

With foreclosure numbers in Tennessee cities on the rise, it should come as no surprise that desperate homeowners are being targeted by scammers.  Usually the scammers pitch promises to stop a pending foreclosure using a "secret provision in the law" or an alleged special relationship with mortgage lenders.

In almost every case, the scammer asks for several hundred or several thousand dollars, then he prepares a two page Chapter 13 "emergency petition" in the homeowner’s name and files the petition in the local bankruptcy court.  The scammer does not put his own name on the petition – instead he signs the homeowner’s name as if the homeowner filed the case.

Often the emergency filing will stop the foreclosure, although only temporarily.  Under the bankruptcy law, a Chapter 13 plan and schedules must be filed within 15 days of the "emergency" filing.  Since the homeowner did not intend to file bankruptcy in the first place, many of these cases are dismissed by the clerk’s office when no plan and schedules are filed.

Further, many of the emergency petitions are filed without proper documentation – no credit counseling certificate and no pay advices.

At best, the bewildered homeowner will realize what is going on and will retain counsel to either proceed with the Chapter 13 or to file a dismissal in court.  More often than not, however, the homeowner will be afraid to take any action out of concern that the homeowner himself did something wrong.   The wrongfully filed case will wind its way through the bankruptcy system until it is eventually dismissed and the homeowner will be left facing foreclosure again, but with less of a bankruptcy option because of the previous filing.

Recently a federal judge in Kansas denied bond to a foreclosure scammer named Issac Yass, who owned a company called Stopco that allegedly perpetrateda slightly different type of bankruptcy fraud in several States, including Tennessee.  Investigators say that Yass operated by filing Chapter 13 petitions on behalf of fictitious persons who claimed to have a fractional interest in the properties in foreclosure.  He then charged homeowners a monthly fee.  Yass’ case is unique in that the alleged fraud was perpetrated on a grand scale – investigators contend that since 2006, Yass stopped foreclosures on over $50 million worth of properties.

At Clark and Washington, we have seen many cases of many kinds of foreclosure scams.   Sometimes we can help pick up the pieces, and sometimes there is little or nothing we can do.  If you are facing a foreclosure in Tennessee, we strongly recommend that you seek competant legal advice from a lawyer who is a member of the Tennessee bar.  If a non-attorney foreclosure prevention company solicits your business, run the other way.