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How To Avoid Bankruptcy Foreclosure Scams

Bankruptcy courts, lenders, homeowners, and even "innocent bystanders" are being victimized by bankruptcy foreclosure fraud scams operating in the Los Angeles area, according to a report recently issued by a public sector-private sector task force. The report, prepared by the Bankruptcy Foreclosure Scam Task Force of the United States Bankruptcy Court for the Central District of California, identifies five different kinds of bankruptcy foreclosure scams.

The task force investigated the growing practice of filing for bankruptcy to delay or defraud creditors--especially home lenders--without intending to comply with the requirements for obtaining a bankruptcy discharge or completing a repayment plan. The task force was created in 1996 by Geraldine Mund, Chief Bankruptcy Judge for the Central District of California, in response to a rash of cases filed solely to stall foreclosure.

"The task force report is an important assessment of one of the most extensive abuses of the bankruptcy court in Southern California," according to Maureen Tighe, United States Trustee for the Central District of California. The United States Trustee Program is a component of the Justice Department that supervises the administration of bankruptcy cases. Tighe was appointed United States Trustee in April; she served on the task force in her former role as Deputy Chief of the Major Frauds Section of the Office of the United States Attorney for the Central District of California.

"The United States Trustee Program has been seeking fines and sanctions routinely when the operators of these foreclosure scams can be identified," Tighe continued. "The Program has also made referrals and assisted law enforcement in numerous criminal investigations of these scams, leading to numerous indictments and convictions."

Jerry Patchan, Director of the Executive Office for United States Trustees, added: "The task force has done fine work in illuminating a serious problem. The Executive Office recognizes the effect of these bankruptcy foreclosure scams, particularly in the Central District of California. We intend to continue working with the courts to seek effective ways to address these problems." The Executive Office for United States Trustees, located in Washington, D.C., oversees the Program's substantive operations and handles its administrative functions.

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