Bankruptcy Scam in Southern California

I don’t know about you but life used to seem much easier.  There just wasn’t always this cloud of schemes and scams engulfing the real estate industry and making it is seem so uncertain.

Our newest discovery involves two defendants who have pleaded guilty and a third that is awaiting trial for fraudulent bankruptcy petitions to delay foreclosures on more than 1,400 Southern California homes.

This scam involved, as usual, upfront fees.  Let me take a moment to be very clear, if you have to pay upfront fees for a loan modification or similar service, it is most likely a scam, steer clear!

Once the homeowners paid the fee, the scam’s perpetrators had them sign a grant deed for a one-eighth interest in the house.  The scammers would then file a bankruptcy petition in the name of the fictitious person. 

Filing the bancruptcy petition creates a delay in the foreclosure proceedings and resulted in lenders paying lawyers to file motions to dismiss the bankfuptcies in order to move forward and continue foreclosure proceedings.  Some lenders lost interest payments on the mortgages for up to three years.

Bankruptcy fraud carries a maximum sentence of 5 years in federal prison.

The scam allegedly started in late 2006 and one of the defendants had to serve a jail sentence for fraud conviction prior to its close in 2008.

California has enacted a law banning a company or individual to collect advance fees from consumers for loan modification or mortgage loan help services.  If you hear of a friend or family with San Diego real estate that is offered help with their mortgage subsequent to an upfront fee, warn them to run the other way!

Please help us continue our fight against these scams, take a moment and forward this to someone who may need it.