Bankruptcy & Produce the Note

This page will discuss bankruptcy and the intersection of the “produce the note” foreclosure defense theory.  As we are learning, the Arizona courts and California courts (the two states where we are licensed to practice law) are denying homeowners who file the “produce the note” foreclosure defense lawsuits.  In these lawsuits, pro se litigants have been trying to obtain temporary restraining orders and preliminary injunctions to stop the foreclosure sale based upon the legal argument that the lender, loan servicer, or MERS  must PRODUCE THE ORIGINAL PROMISSORY NOTE in order to prove it is the beneficiary entitled to foreclose on the property.  Much of the hype is based on cases that have come out of “judicial foreclosure” states such as Ohio and Florida, where some homeowners have had success challenging the “lenders” with the so-called produce the note theory.  California and Arizona on the other had are non-judicial foreclosure states (although the lenders could file a judicial foreclosure if they wanted to) and courts in these two western states have not apparently been so keen on the produce the note foreclosure defense strategy. We talk about some of the theories going around in regard to produce the note on our informational website www.producethenoteattorney.com.

We recently posted an article discussing two recent Plaintiff’s who asserted the produce the note defense, and were basically denied relief on this theory.  You can retrieve our article here: http://www.loanmodradio.com/2010/03/everyone-is-talking-produce-the-note-does-this-work-in-california-to-stop-a-foreclosure/

With judges being indifferent to the concerns of homeowners in wanting to make sure the proper beneficiary is foreclosing on their loan (i know, strange concept), we are looking at forcing these lenders to prove they are a creditor in a bankruptcy court in a Chapter 7 filing.  We will be writing a detailed blog post that outlines our strategy here in the near future.

There are a good number of cases (i.e. legal precedent) that come from bankruptcy courts that demand that “lenders” and beneficiaries who wish to assert their secured creditor status in a bankruptcy court, or to lift the automatic stay provided by a bankruptcy filing, that these entities do not get a free pass (like they do in non-judicial foreclosure sales) and are forced to provide documentation proving they are a “creditor,” (hold the note/assignments/endorsement) and where truth in lending rescission claims exist, that they are a “secured” creditor.  Issues of “standing” (a constitutional question) and “real party in interest” also are raised in these types of proceedings.

You should never resort to a bankruptcy court to file a “produce the note” claim, but where you have legitimate unsecured debt that you wish to have discharged per Chapter 7 BK rules, and where you have a MERS loan, and other irregularities in your deed of trust, substitution of trustee, etc., these issues should be looked at with a fine tooth comb.

Indeed, all roads may lead to bankruptcy where MERS, the lenders, loan servicers, and Trustees of Securitized trusts refuse to share the bailout wealth.

The bankruptcy court may be the “court of last resort” for certain homeowners who fit the criteria for a Chapter 7 filing, meet the means test, have valid issues over the ownership of their loan, and/or have valid truth in lending (TILA) claims that raise extended three year rights to rescind, with the possibility of tender.

These are complicated issues not left to a broker or “attorney backed” loan modification company.  Time is of the essence and statutes of limitations are always in effect.  For more information contact us at (877) 276-5084 or visit www.AdversaryProceeding.com