Bankruptcy Laws Favor Homeowners Facing Payment Hikes


A rule that took effect in 2011 was put in place to protect homeowners who are facing payment hikes while in the midst of bankruptcy. It is a rule that Wells Fargo Bank failed to comply with over several years, resulting in a recent settlement that will see them pay some $81.6 million to more than 68,000 customers affected by their lack of compliance.

The law dictates that mortgage lenders must give homeowners currently in Chapter 13 bankruptcy proceedings at least 21 days’ notice of any increase or reduction in their monthly payments. Such notices are critical in a Chapter 13 filing inasmuch as this kind of bankruptcy is a reorganizational plan at its core. Litigants cannot properly develop a plan suitable to the courts if they do not have up-to-date information.

News reports say that Wells Fargo failed to file more than 100,000 notices as required by the rule. They also violated the rules relating to more than 18,000 escrow accounts. As a result, some 68,000 homeowners already in the midst of bankruptcy proceedings were negatively impacted.

More than $53 million of the settlement will go to some 42,000 homeowners subject to higher mortgage payments without proper notice. They will receive their settlement funds in the form of credits applied to their outstanding balances. Nearly three-quarters of those homeowners have outstanding balances of less than $300,000.

We Know Bankruptcy Law

There are very good reasons bankruptcy attorneys encourage those within severe financial straits to seek legal advice about bankruptcy. One of those reasons is clearly illustrated in the Wells Fargo case: Attorneys know bankruptcy law. We are the most qualified to offer consumers the advice and representation they need for a successful bankruptcy filing.

There is no way for us to know whether the actions taken by Wells Fargo were intentional or not. But we can say that their lack of compliance with the law regarding homeowner notices is something that is easily spotted by an experienced bankruptcy attorney. It may very well be that a bankruptcy attorney is responsible for bringing the case to light.

The important thing to understand is that you do have rights in a bankruptcy proceeding regardless of whether you are filing Chapter 13 or Chapter 7. Not only do you need to know your rights, but you also need to have an attorney capable of defending those rights. The fact that you are in financial trouble serious enough to require bankruptcy does not negate your rights under the law.

Consult with Your Attorney

The first step in a possible bankruptcy proceeding is to consult with a qualified attorney. Your attorney can help you assess your financial situation and determine whether or not you actually meet the qualifications for bankruptcy. If not, there are other resources you can utilize to get your financial house in order. If you do qualify, your attorney can lay out a plan and advise you on how to conduct a successful filing that eventually results in discharge.

Anyone facing severe financial distress should not leave his or her future to chance. As has been demonstrated by the Wells Fargo case, not having a qualified attorney on your side could result in actions being taken against you that are neither legal nor in your best interests. If there is any possibility that a bankruptcy filing is in your future, consult with an attorney. The experts here at Hayward Law Offices are standing by to assist you right now.

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We have office locations throughout the Chicago Area:

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All calls are routed through our Downtown office for your convenience.

Phone: 312-967-3159

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