“Wells Fargo’s conduct is clandestine. Rather than provide Jones with a complete history of his debt on an ongoing basis, Wells Fargo simply stopped communicating with Jones once it deemed him in default. At that point in time, fees and costs were assessed against his account and satisfied with postpetition payments intended for other debt without notice. Only through litigation was this practice discovered. Wells Fargo admitted to the same practices for all other loans in bankruptcy or default. As a result, it is unlikely that most debtors will be able to discern problems with their accounts without extensive discovery.”
Introduction. In understanding what happened in this case, it is important for the layman to understand the following: All bankruptcies in the U.S. are governed by federal law. The concept – though not necessarily the process – is simple: The moment one files for bankruptcy, an “automatic stay” is imposed. This means that immediately upon filing a petition in bankruptcy, no creditor may attempt to recover any monies or seek other relief against that person [called the “debtor”] without court approval. A trustee is appointed to administer the bankrupt’s estate. Creditors, such as Wells Fargo, must then file a “proof of claim” with the court, setting forth the amount the debtor owes them as of the date he or she filed their petition. A bankruptcy proceeding in which a “reorganization plan” or “plan” is filed with the court is known as a “Chapter 13” bankruptcy. If the plan is opposed by any creditors or the trustee, it must be worked out, or resolved by the Bankruptcy Judge. Once “confirmed” by the Court, the debtor and all creditors must adhere to it.
Typically, a reorganization plan will identify who, what, when and how, creditors are to be repaid by the debtor. Any variance from the plan has to first be approved by the bankruptcy court. Some actions and events in bankruptcy lingo are occasionally referred to “post-petition” in order to signify that they occurred after the debtor filed for bankruptcy. Events occurring before the debtor’s bankruptcy filing are referred to as “pre-petition.” The trustee is in charge of overseeing the operations of the final confirmed plan.
In the following case, Wells Fargo was one of the debtor’s creditors, and as such, had participated in, and was bound by, the confirmed plan. As demonstrated below, the courts jealously guard debtors who seek federal bankruptcy protection. Any deviation from a confirmed plan by the debtor’s creditors, especially intentional deviations, can result in severe sanctions.
Discussion. The Memorandum Opinion written by the Honorable Elizabeth W. Magner, U.S. Bankruptcy Judge, could have been completed in a few pages. Instead, she decided to take 21 pages, setting out in detail, the conduct of Wells Fargo, that you sensed was not going to end well for this Big Bank. Continue reading “Slapdown! – In Re: Jones v. Wells Fargo Home Mortgage, Inc.”