Lawsuit threat before discharge...

[whipster1]

They have to prove fraudulent intent. Your payments contradict their assertion. Ignore them and if they file an AP you will win.

[DebtStinks]

If they decide to push me into an AP do I really need the lawyer or can I represent myself? Just curious.

[Rick9972]

If they decide to push me into an AP do I really need the lawyer or can I represent myself? Just curious.

I had almost the exact same thing happen to me, about 33 days after my hearing. The creditor sent letter to my attorney, saying they were going to file an AP. Lawyer asked for more money to fight it. I sent lawyer letter to forward to the creditor, saying we did nothing wrong and if they felt the need, to file the AP. Creditor sent a settlement offer to the lawyer, who forwarded to me. I wrote "NO" in bright red letters and sent it back to them. We are now past 60 days and never heard another word.

[shabam]

Found it
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MAY 31, 2008

Are Borrowers Free to Lie?
Lender Held Responsible for Vetting Data on Home Loan

In a ruling that backs borrowers even when they have lied on loan applications, a federal bankruptcy judge held that borrowers who inflated their income to get a loan don't have to pay back a bank because the lender should have noticed a "red flag" about the deceit.

The case, which the Oakland, Calif., judge called "a poster child for some of the practices that have led to the current crisis in our housing market," places responsibility on the lender for vetting information in loan applications.

Inaccuracies in loan documents have emerged as a factor behind the current wave of foreclosure and bankruptcy actions. Mortgage experts say some applications were riddled with inflated credit and income scores that allowed borrowers to qualify for loans that should have been out of their reach.

The Oakland case highlights a debate that has emerged over whether responsibility for homeowners' woes should fall to lenders or borrowers. In the May 23 ruling following a trial, U.S. Bankruptcy Judge Leslie J. Tchaikovsky said that Cleveland-based National City Bank couldn't recover debt from a Pinole, Calif., couple who emerged from bankruptcy because the lender, which had funded the couple's home-equity line of credit, ignored a "red flag" in their loan application.

The borrowers "made a material false representation concerning their financial condition ... with knowledge of its falsity and the intent to deceive the bank," the court found. But the bank's reliance on those figures wasn't reasonable, the judge wrote. National City declined to comment.

One of the borrowers, Cecelia Hill, said in an interview: "I take full blame for living a lifestyle that we couldn't afford." Her family last year gave up the home, she says, which they had purchased some 20 years ago. They found themselves unable to make payments after having taken out additional debt, from National City, against the property. The lender that held the primary mortgage bought the home in a foreclosure sale.

"Under no circumstances did we intend to defraud anyone," she said. "And we signed a paper authorizing [National City] to call our employers and access our bank accounts, and they never did."

Mrs. Hill and her husband, Norman Hill, both 54 years old, work as a delivery driver and an employee for an auto-parts distributor, respectively. They signed two loan applications in 2006 incorrectly stating they earned about a combined $146,000 and, six months later, about $191,000 annually.

They claimed that their independent broker and the bank put the income figures into the applications without their knowledge and that they didn't read them before signing.

The judge, who said she didn't find the borrowers' argument to be credible, said even if they hadn't read the loan application, by signing it "they effectively made the representation" to the bank.

But the judge said that the income figures "would alert the reasonably prudent lender of the possibility that the information was inaccurate" and that the bank didn't follow its own guidelines, which required that it "evaluate the reasonableness of the stated income based on job type, tenure, and geographical location among other things."

Philip Stone, a Worcester, Mass., consumer-bankruptcy lawyer, said the nature of the case was unusual. Lenders typically don't try to collect debt from borrowers whose collateral has been sold. Still, he said "the ruling is significant because the judge is saying the lender has a responsibility to carry out an investigation of borrowers' financial condition." The couple represented themselves in defending the case, Mrs. Hill noted, saying she couldn't afford a lawyer.

By AMIR EFRATI

http://online.wsj.com/article_email/SB121219711917034619-lMyQjAxMDI4MTMyMTEzOTE3Wj.html#

[hereforinfo]

I remember reading that case on here a couple of weeks ago. That doesn't mean that anyone who lies on an application is off the hook. This couple got by on a loop hole because the underwriter messed up by either not following the guidelines required for that specific loan, or at least not documenting the process for determining if the stated income seemed reasonable.

There are some types of loans where it's standard practice (either within a company or industry) not to verify income, and in those cases the bank is not obligated to do so.

Regardless, I think in the case of the original poster here there isn't much to worry about. The creditor is probably bluffing and hoping for a settlement. I would tell them to repo the windows since you're letting the house foreclose. ;-) Seriously though, I think if you respond with a letter explaining it the way you did here, they will drop it.