All posts in Current Events

Original article by Sara Randazzo at the Wall Street Journal. 

A once-prominent Wall Street trader imprisoned in 2005 for embezzling $43 million from Merrill Lynch & Co. recently met the ire of a bankruptcy judge, who refused to let him get rid of his debts through bankruptcy because of repeated lies to the court.

The accumulation of deceits and excuses from Daniel Gordon “helped destroy his credibility and, quite frankly, insulted the intelligence of the court,” Judge Robert Gerber in U.S. Bankruptcy Court in Manhattan wrote in a Jan. 13 ruling. The court’s order, which follows a two-day trial held in May 2013, denied Mr. Gordon the ability to use the bankruptcy process to discharge tens of millions of dollars in debt.

Mr. Gordon filed for Chapter 7 protection in October 2009 after the Internal Revenue Service came after him to pay taxes on a portion of the stolen $43 million. By then two years out of prison, Mr. Gordon had reinvented himself as a businessman whose projects included lending money to professional athletes at steep interest rates.

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By Jessica Silver-Greenberg

November 12, 2014 9:45 pm November 12, 2014 9:45 pm

Credit Ángel Franco/The New York Times

Bernadette Gatling said she has lost job opportunities because employers viewed her credit report, which included voided debts.

In the netherworld of consumer debt, there are zombies: bills that cannot be killed even by declaring personal bankruptcy. Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court. The problem, state and federal officials suspect, is that some of the nation’s biggest banks ignore bankruptcy court discharges, which render the debts void. Paying no heed to the courts, the banks keep the debts alive on credit reports, essentially forcing borrowers to make payments on bills that they do not legally owe.

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Dealing With Mortgage Owners Who Won’t Foreclose — A Possible Bankruptcy Option

by Siu Yan Chan[1] and John Rao
NCLC eReports, July 2014, No. 4
Bankruptcy; Foreclosures and Servicing

Consumer advocates have struggled with finding ways to force mortgage holders to foreclose on property that their clients no longer wish to keep and in fact may have vacated. Homeowners having vacated a home may be better off expediting a foreclosure to stop the accumulation of fees and other expenses for which the homeowner continues to bear responsibility until the foreclosure. A recent bankruptcy court decision offers the possibility that the chapter 13 plan confirmation process might be used to obtain an order conveying the property to the mortgage holder.

THE ZOMBIE MORTGAGE PROBLEM

Homeowners who vacate their homes in response to a pending foreclosure often hope the foreclosure sale will put an end to certain of their financial problems. Until the property is sold at a foreclosure sale, they remain responsible as owner for the property taxes and homeowners’ association (HOA) fees. They are also responsible for maintenance of the property, and can face potential liability for local housing code violations and any personal injuries occurring on the property.

SIMPLY FILING BANKRUPTCY MAY NOT BE THE SOLUTION

Simply filing bankruptcy may not speed up a foreclosure sale or eliminate the homeowner’s continued liability for various fees and expenses. Although the debtor’s mortgage debt (but not the lien on the home) may be discharged, as well as any prepetition HOA fees, an exception to the discharge obtained in a chapter 7 case provides that the debtor remains liable for any postpetition HOA fees that come due until the property is sold.[2]

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