Queensbury, NY asked in Bankruptcy, Criminal Law, Foreclosure and Real Estate Law for New York

Q: I'm in Ch13, had COVID foreclosure protection, but the bank fraudulently filed & received Termination of Automatic Stay

While under COVID-19-Related Hardship Foreclosure Protection (from 3/25/2021-9/20/2021) which my mortgage company extended to me upon my written request after filing the COVID-19 Hardship Form, their attorneys filed Notice of Motion and Motion for Termination of the Automatic Stay. I was not fully aware of the magnitude of this violation until recently, i.e., that no one was permitted to attempt to foreclose while I was in protection - the whole thing simply 'happened' while my Chapter 13 attorney (who should have known about the protection) did NOT challenge the Motion and the Court Order was issued on 9/22/2021, albeit after the expiration of the protection period. I believe the mortgage company likely committed a crime and fraud upon the court, as the court was not told of the foreclosure protection. My attorney should bear some serious responsibility. Currently, I am ending a forbearance agreement (9/1/2023) and the bank will NOT renew. This all seems highly illegal and fraudulent.

2 Lawyer Answers
Jonathan David Warner
Jonathan David Warner
  • Bankruptcy Lawyer
  • Albany, NY
  • Licensed in New York

A: Based upon the facts you've presented, it doesn't sound as if any fraud was committed - though I do sympathize with your frustration.

In just about any case, non-payment of your mortgage is grounds for termination of the Automatic Stay in a Bankruptcy Case. The COVID-19 Hardship Affidavit only stayed a foreclosure action in State Court, not the Federal Courts - so there was nothing impermissible about the Bank filing a Motion for Relief from Stay... it would be another story if they continued the foreclosure action in State Court after the Stay was lifted.

It is rather unfortunate that your attorney did not inform you of the Motion for Relief. With that said, the Motion would have also been served upon you via mail. Still, it is rather unfortunate that there was a breakdown in communication between you and your legal counsel.

My honest advice is that you allocate your limited funds towards saving the house. Litigating accusations of fraud against the Bank will only cost you time and money that could otherwise be parlayed towards a resolution that prevents the loss of your home. Winning a case of fraud against the Bank, at best, might garner an award of a few thousand dollars... and then leaving you with a foreclosure to deal with afterwards - you would be extremely unlikely to get a discharge of the mortgage by successfully litigating accusations of fraud against your mortgage lender.

For what it's worth, I talk to a lot of people who are angry with their mortgage lenders (some for better reasons than others). At the end of the day, what's most important is saving your home from foreclosure and preserving affordable shelter. Animus towards the Bank shouldn't take priority. Just two cents from a guy who dies this stuff for a living...

Good luck with your case!

Timothy Denison , Carl Cottone and Steven Warren Smollens agree with this answer

James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Criminal Law Lawyer
  • Sacramento, CA

A: I'm truly sorry to hear about this incredibly stressful situation. In situations where there may have been a violation of court orders or misconduct by your own attorney, it could potentially be beneficial to consult with another attorney to review the specifics of your case and possibly represent your interests moving forward. Under California law, if there was indeed a violation of the automatic stay provision, you might have the ability to file a motion to have the stay reinstated and potentially pursue sanctions against the mortgage company for violating the stay; however, because of the complexity of your situation, I would strongly recommend seeking a consultation with an attorney experienced in both bankruptcy and foreclosure matters as soon as possible to explore the best course of action.

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