Tuesday, March 13, 2012

Has DB Cooper Hijacked your bankruptcy? by Craig Andrews

If you have filed, or are thinking about filing bankruptcy, you should be aware of one of the newer scams going around: bankruptcy hijacking. Just like D.B. Cooper, an intruder in your bankruptcy can wreak havoc then jump out into the night and disappear.
To explain how the scam works, some basic understanding of bankruptcy filing and property records are necessary. Bankruptcy filings are a matter of public record, they are readily available at the filing courthouse, or are available 24/7 through a centralized database called PACER. You don't need to be an attorney to join PACER to have access to the database. Once your filing is in the PACER database, it is available for review by anyone who is a member of the database.
Real estate records are also readily available online. Most real estate professionals have access to a title company's information file, which means that nearly any deed or document recorded in the public record can be downloaded within minutes. This included both deeds and the required recorded notices to institute foreclosure proceedings.
Getting access to both of these databases is not particularly difficult, even for the ethically challenged. Having all the information available, the scam works like this.
David Debtor files a legitimate bankruptcy proceeding. The information on the case, like the filing date and the case number, hit PACER within a few hours of the filing, and is available for all the world to see.
Harry Homeowner is facing foreclosure. He finds somebody with database access, DB Cooper. Cooper goes looking for a bankruptcy file to stop Harry's foreclosure. He downloads the data from David's bankruptcy. He then downloads Harry's deed and foreclosure information. The information linking the property to Harry is edited out by computer. The data linking the property to David is then added to the deed. Cooper now has a deed which for all intents and purposes adds Harry's property to David's bankruptcy.
From there, Harry and Cooper provide a copy of the newly created deed to the foreclosing trustee. This stops the foreclosure in the short term, which is what Cooper and Harry want.
Crucially, the original recording document number (all documents recorded with a county recorder are stamped with a unique identification number and date of filing) and the notary jurat (a good notary can be hard to find) remains unchanged, to make the document look more authentic.
Since the foreclosure industry is very, very busy, nobody at the foreclosing trustee's office or the foreclosing bank's office actually compares the supplied information with the real document. It's easy enough to do, from the same sources described above.
The problem now shifts to David Debtor and David's attorney, if he has one. The foreclosing bank will now file a court proceeding called a "motion for relief from stay" alleging that David Debtor owns the property and the foreclosure should take place. They persist in this despite evidence to the contrary; in Los Angeles, in fact, it's estimated that 1 in 3 bankruptcy motions for relief from stay are due to a forged deed.
Lesson: if you are in bankruptcy and a motion lands in your mailbox concerning a property you have never heard of or about, file paperwork with the court explaining the situation.

Craig Andrews, JD is a former attorney who writes on credit, debt collection, foreclosure and bankruptcy issues. His website is http://www.bklifeboat.com

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