Having caused the implosion of the real estate market and the worst recessions since the Great Depression, banks have done everything possible — by legal means and by those illegal — to avoid working with homeowners. Especially if it meant debt forgiveness.
And why not? It’s not as if the government has held them criminally responsible for anything. As our Miami foreclosure defense attorneys continue to report, underwater homeowners in South Florida need to get proactive in seeking the advice of experienced legal counsel.
Now it appears, having agreed to a $25 billion settlement with the federal government that induces them to work with troubled borrowers, banks have been forgiving debt in droves.
It’s just that the debts do not exist.
The New York Times is reporting consumers across the nation are getting letters from some of the nation’s largest banks — forgiving debt they don’t owe.
In Connecticut, $64,000 that a homeowner had eliminated through a bankruptcy filing three years ago. Here in Florida, $190,000 that a resident no longer owed. In Virginia, Bank of America wiped out a $231,000 home equity loan a consumer had discharged last May.
Banks very well may be attempting to satisfy the terms of their agreement with the government by eliminating debts they have no legal right to collect in the first place. A bankruptcy attorney reported several of his clients have received such letters.
Aside from the in-your-face taunting of the government by banks many thought got a sweetheart settlement deal to begin with, consumer advocates point to the possible tax nightmare that could result. The Internal Revenue Service considers forgiven debt income — the exception is when such debt is discharged through bankruptcy. By claiming to forgive debt a consumer has discharged, banks could be setting struggling consumers up for undue consequences.
The letters even warn the information will be reported to the IRS — borrowers will have to prove the banks erred in claiming to have forgiven the debt.
This is just another example of bank action putting consumers at peril — months or even years after they thought a matter had been settled. Please don’t attempt to deal with these companies on your own — consulting experienced legal counsel will be well worth the cost and the peace of mind.
For their part, banks contend the letters were meant to notify borrowers of the release of liens in connection with the forgiveness of debt through bankruptcy. Bank of America estimates it sent out 12,000 of the letters. Perhaps we shouldn’t blame consumers if they are confused — since nowhere in the letter does it discuss liens.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991.