Contact: John Hartgen
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(703) 739-0800
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href='mailto:jhartgen@abiworld.org'>
color='#0000ff' size='3'>jhartgen@abiworld.org
U.S. TRUSTEE
LACKS AUTHORITY UNDER THE BANKRUPTCY CODE TO PURSUE ADVERSARY PROCEEDING
AGAINST MORTGAGE LENDER FOR ALLEGED ABUSES IN CHAPTER 13 CASE, ACCORDING
TO LATEST ABI QUICK POLL
size='3'>November 24, 2008, Alexandria, Va.
size='3'>— A majority of respondents (55 percent) in a recent ABI
Quick Poll agreed that a U.S. Trustee lacks authority under the
Bankruptcy Code to pursue punitive sanctions against a mortgage lender
for an alleged pattern of abuses in a chapter 13 case
size='3'>. Thirty-five percent of respondents
“strongly agreed” and 20 percent “somewhat
agreed.”
Forty-one percent of
respondents, however, thought that a U.S. Trustee does have authority
under the Code to pursue punitive sanctions in a chapter 13 case on
behalf of the public by way of an adversary proceeding in an action
alleging a pattern of abuse by a mortgage lender. Thirty-four percent
“disagreed strongly” and 7 percent “somewhat
disagreed” that a U.S. Trustee does not have the authority to
pursue punitive sanctions against an alleged abusive mortgage lender in
a chapter 13 case. Two percent of respondents did not know or had no
opinion on the issue.
The Quick Poll was based
on a bankruptcy judge’s ruling that a U.S. Trustee had no legal
basis for seeking monetary sanctions against Countrywide Home Loans for
filing inaccurate motions in a Miami couple's chapter 13 case.
Bankruptcy Judge A. Jay
Cristol said that U.S. Trustee
face='Times New Roman' size='3'>Donald Walton
size='3'>did not have the authority to pursue punitive sanctions on
behalf of the public through an adversary proceeding against the
mortgage lender. The proper parties to seek sanctions, according to the
ruling, were the debtors, who did not participate in the trustee's
lawsuit. Walton filed an adversary proceeding March 1 against
Countrywide in the chapter 13 case, claiming that the mortgage lender
abused the bankruptcy process by filing two inaccurate motions for
relief from the bankruptcy stay and a subsequent mortgage foreclosure
action.
ABI members and members
of the public were welcome to submit their response to the statement:
“In an action alleging a pattern of abuse by a mortgage lender in
chapter 13 cases, the U.S. Trustee lacks authority under the Code to
pursue punitive sanctions on behalf of the public by way of an adversary
proceeding. (Walton v.
Countrywide Home Loans, S.D.
Fla.)”
ABI’s Quick Poll is
posted on ABI’s home page,
href='http://www.abiworld.org/'>
size='3'>www.abiworld.org
size='3'>. ABI members and the public are invited to respond to a
question on a timely bankruptcy or insolvency issue. Visit
href='http://www.abiworld.net/quickpoll/'>
color='#0000ff' size='3'>http://www.abiworld.net/quickpoll/
to access the results of previous
ABI Quick Polls.
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ABI is the largest
multi-disciplinary, nonpartisan organization dedicated to research and
education on matters related to insolvency. ABI was founded in 1982 to
provide Congress and the public with unbiased analysis of bankruptcy
issues. The ABI membership includes nearly 11,700 attorneys,
accountants, bankers, judges, professors, lenders, turnaround
specialists and other bankruptcy professionals, providing a forum for
the exchange of ideas and information. For additional information on
ABI, visit www.abiworld.org. For additional conference information,
visit
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