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(USGovernment-News.Com, August 16, 2012 ) Skokie, Illinois -- Skokie bankruptcy attorney Ben Schneider earned a victory over a big bank last week when Northern District of Illinois bankruptcy judge found the bank’s mortgage invalid. Schneider’s clients, a couple in Chapter 13, could have a mortgage-free home upon the successful completion of their bankruptcy case; however, the bank has objected to the clients’ Chapter 13 plan in an attempt to have the judge reconsider.
The homeowners refinanced the property several years ago with the bank, but the bank failed to record its mortgage. When the homeowners fell behind on their mortgage payments, they filed Chapter 13. When the bank received notice of the bankruptcy, it filed a Motion for Relief from the Automatic Stay to give it time to record its mortgage. Schneider objected to the Motion, and the court found in the homeowners’ favor, declaring that there was no valid mortgage and that the bank’s claim was unsecured.
“This is a great victory for my clients,” Schneider said. “They filed Chapter 13 to catch up on their mortgage – they had no idea the mortgage wasn’t valid. If they hadn’t filed the case, the bank would have foreclosed without the legal right to do so.”
The mortgage lender has objected to the homeowners’ Chapter 13 plan, basing its argument in the courtroom on a case handed down in the 1890s that says a mortgage does not need to be recorded to be valid if the homeowners signed the note and the mortgage.
“The judge did not seem convinced,” Schneider said, “and neither am I. The Illinois recording statutes were enacted after this 1894 opinion was written, and I seriously doubt it’s still good law. That the bank had to dig back to the nineteenth century to find support for its cause is very telling. The fact is that if you don’t record a mortgage, it’s not a valid mortgage – period. It’ll be interesting to see how this objection is resolved.”
About Ben Schneider
Ben Schneider, a founding partner of the Law Offices of Schneider & Stone, is the principal bankruptcy attorney at the firm, handling Chapter 7, Chapter 13 and Chapter 11 cases for individuals.
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