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Lenders Beware: Bankruptcy Judge Orders Mortgage Lender to Pay $250,000 in Punitive Damages for $297.72 Stay Violation

By Michael L. Moskowitz and Melissa A. Guseynov

In June, a Bankruptcy Judge for the Northern District of Ohio calculated $250,000 in punitive damages against a mortgage lender for violating the automatic stay by incorrectly filing a proof of claim on a car loan that had not been transferred to that lender. In re Mocella, 552 B.R. 706 (Bankr. N.D. Ohio 2016).

Here, the originating lender held a mortgage on debtors’ residence as well as a car loan. As part of a bulk transfer of loans, the originating lender assigned the mortgage to a new lender. The car loan was not transferred. Due to a bookkeeping error, the new lender mistakenly thought the car loan had been transferred to it, along with the mortgage loan. As a result of this error, the new lender filed a proof of claim for both the mortgage and car loan.

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Creditor Alert: Debt Collectors May Face FDCPA Liability for Filing Stale Bankruptcy Claims

By Michael L. Moskowitz and Melissa A. Guseynov

We’ve previously covered the interplay between the Bankruptcy Code and Fair Debt Collection Practices Act (“FDCPA”). Recent litigation has focused on debtor challenges to time-barred proofs of claim. This has resulted in conflicting statutory interpretation. In a recent decision, the United States Court of Appeals for the Eleventh Circuit held that debt collectors, defined as a type of creditor under the FDCPA, may face FDCPA liability for knowingly filing a time-barred proof of claim in a bankruptcy case. Johnson v. Midland Funding, LLC, 2016 WL 2996372 (May 24, 2016).

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