J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

The 5th Circuit in Matter of Oparaji ruled on October 5, 2012 that judicial estoppel did not bar Wells Fargo from claiming much more money in its proof of claim in a subsequent bankruptcy, than it did in the original bankruptcy.

Also, it said that since the first case was dismissed anyway, that would also prevent the first case from having any effect on how much Wells Fargo could claim in the second case. To me, it's another example of bad facts make bad law. Unfortunately, sometimes that's all the facts you have. In this case the debtor had gotten his first chapter 13 case confirmed. But he defaulted on the payments, and didn't pay taxes and insurance, apparently more than once.

The debtor modified his plan to cure the defaults, and Wells Fargo amended their claim on more than one occasion. But Wells Fargo apparently did not amend the proof of claim to add the post-petition escrow shortage. The first case was then dismissed. In the second case, Wells Fargo filed a claim for all the arrears, escrow shortage, etc., a whopping amount that they had not asked for in the first case.

The debtor filed an adversary proceeding or lawsuit in bankruptcy court objecting to that. The Bankruptcy Court ruled for the debtor, finding that Wells Fargo was judicially estopped from claiming amounts in the second case, that they had not claimed in the first. On appeal, the U.S. District Court affirmed the Bankruptcy Court. But on further appeal to the 5th Circuit, the 5th Circuit reversed the District Court.

The 5th Circuit ruled that the mortgage servicer did not have to file a claim at all in the chapter 13 case, which is correct. But if they do file a claim, apparently it is now the law in the 5th Circuit that they don't have to file an accurate claim, although the Proof of Claim form itself says: "Penalty for presenting fraudulent claim: Fine of up to $500,000 or imprisonment for up to 5 years, or both, 18 U.S.C. Sec. 152 and 3571." That is, they don't have to include everything that they are owed in the claim. And if they don't they are not estopped.

How bizarre. And the 5th Circuit held that since the first case was dismissed anyway, it really never existed, so you can't base judicial estoppel on that. I guess I can see the reasoning there, but in my humble opinion it sets a bad precedent. These mortgage servicers should be required to file accurate claims, every time. That's there job; if they don't, they should not be able to collect the amounts that they fail to claim, after everyone has relied on the inaccurate claim. Feel differently? Post your opinion or comment. Thanks!

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