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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 39045
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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If a servicer doesnt notify the court that originating bank

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If a servicer doesn't notify the court that originating bank is out of business, and as such are now the ones trying to collect the debt (without proper authority, paperwork, etc) would this have been considered fraud on the bankruptcy court?
The short answer here is "no."

In order for there to be a fraud on the court, a party must make a material misrepresentation in the court record upon which the court relies in making a decision.

The issue here is whether or not the original bank's ceasing operation is material to the issue before the court, which is the debtor's bankruptcy. If the loan servicer has authority to service the debt on behalf of the creditor, whomever that may be, then the original bank's business condition is irrelevant, therefore no fraud exists. If the loan servicer has no authority to service the debt, then the original bank's circumstances may still be irrelevant, because the material issue is simply whether or not the loan servicer has authority to act on behalf of whomever owns the debt in effecting a recovery of the loan balance or foreclosure of the property.

Hope this helps.

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