We Stop Navy Federal Trying to Pull a Fast One
This is a story of Navy Federal trying to take unfair advantage of a disabled vet; and how we were able to stop them.
Harry is the disabled vet. He wasn’t able to quite make ends meet when he filed Chapter 7 Bankruptcy in 2015, even though he was working. His biggest creditor then was Navy Federal. He had a credit card, a personal loan, and a car loan with Navy. He gave up the car—it was a 2007 with 131,000 miles.
Three years later, his health got worse. He lost his job and with it part of his income. Then, this year he go behind on his mortgage, talked to me, and we put him in a Chapter 13 payment plan, so he could catch the house up.
Up pops Navy Federal, demanding to be paid. Demanding to be paid on the car he gave up in his 2015 bankruptcy, and the personal loan he cleared; and the credit card he cleared.
Navy Federal demands to be paid on debts that were cleared in bankruptcy five years before.
That set off the Chapter 13 Bankruptcy Trustee. Not at Navy Federal; the trustee went off at Harry. “You were supposed to list everybody you owed money to and you left Navy Federal out. Why’d you do that?” The trustee asks the judge to toss out Harry’s payment plan, saying Harry had lied to the court.
My first job as a lawyer was to calm the trustee down. Harry could lose his house if his payment plan got tossed out.
Now, Navy had to know about the bankruptcy. Because if they’d been asking for payment during these five years, we’d have set them straight. They never did. they didn’t say anything until the slip their paper—called a proof of claim—into the bankruptcy court.
Maybe it’s an honest mistake.
They Probably Broke No Rule
The odd thing is there’s probably no rule broken here. Even if they did it on purpose. In a case called Midland Funding v Johnson, the Supreme Court looked at the word “claim.” When creditors want to be paid in a bankruptcy, they file a paper called a Proof of Claim.
According to the Supreme Court, there’s nothing that says the “claim” has to be enforceable, it just has to be a claim. The burden is on Harry—and me, his lawyer—to catch them when they try to pull a fast one. This time, we did.