Foreclosure Rescue Scams Utilizing Bogus Bankruptcy Filings Reported In Kansas

The Kansas City Star reports:

• Federal investigators in Kansas are trying to derail a foreclosure scam that began in California and is sweeping the United States using bogus bankruptcies to dupe homeowners and lenders. The scams take advantage of the fact that a bankruptcy automatically delays home foreclosures, which are at record levels. Experts warn that homeowners who buy into the deals still end up losing their homes when the fraudulent bankruptcies are exposed. And lenders often wind up paying thousands of dollars in legal fees chasing down the phony filings. “Even though it’s all bogus, you have to track it down and prove it, and these things take time,” said Los Angeles Bankruptcy Judge Maureen A. Tighe.

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1. Generally, the fraud works like this: Scammers approach people facing foreclosure and offer to save their property for an upfront or monthly fee. They persuade the homeowner to assign them a legal interest in the property.


2. Then the scammers — often without the homeowner’s knowledge — transfer fractional shares in the property, often 5 percent or less, to third parties. These third parties are usually fictional, investigators say, although in some cases the scam artists have recruited homeless individuals.


3. They then file bankruptcy petitions in the names of these third parties. Sometimes, as in the Kansas cases, it is in courts thousands of miles from where the property is located.


4. The scammers profit off the delays in several ways. Sometimes they reap monthly fees ranging from $250 to $850 or more from homeowners who think — because debt collectors are not calling anymore — that the foreclosure is stopped. Some homeowners may be led to think the fees are paying off their loans.


5. In other cases, the scammers take over the property and rent it for months to unsuspecting tenants, who are evicted after the ruse is discovered.

For more, see Foreclosure rescue scam makes its way to Kansas (if link expires, try here or try here). fractional interest