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CLLA NEWSWIRE | FROM THE CLLA NEWSWIRE
Senate Bill Fights Creditor Fraud And Increases U.S. Trustees' Role In Bankruptcy
David Goch, Washington Legislative Counsel | May 26, 2011
On Tuesday, Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, introduced S.1054, the Fighting Fraud in Bankruptcy Act of 2011, to "support and strengthen" the powers of U.S. Trustees to protect homeowners from creditor fraud in bankruptcy court. Sens. Sheldon Whitehouse (D-R.I.) and Richard Blumenthal (D-Conn.) are original co-sponsors.
According to Leahy’s press release, as part of the Department of Justice's efforts to scrutinize bankruptcy case foreclosure documentation, the U.S. Trustee's office reviewed 10,000 proofs of claim filed by mortgage servicers. The Executive Office of the U.S. Trustee (EOUST) reported an error rate ten times greater than the rate acknowledged by some mortgage servicers.
Leahy stated further that trustees have faced legal challenges from mortgage servicers, challenging the trustee’s legal authority to seek additional documentation or the court’s ability to impose sanctions for defective or fraudulent filings, as a result of the recent increased efforts to hold mortgage servicers accountable in the bankruptcy process.
According to Leahy, his bill “bolster[s] the EOUST's ability to fight creditor fraud and protect homeowners in the bankruptcy process, while preventing needless litigation over its authority to do so.”
Whitehouse, in a release, added: “It's inexcusable when big banks hit homeowners with bogus mortgage fees and improper foreclosures.”
S.1054 has the following four provisions that:
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