How to Get Away With Bankruptcy Fraud

The boxy building that houses JC Foreclosure Service doesn’t look like much. Drive past, and you might miss it among the gas stations and body shops and small homes here in Bell, a working class, Hispanic enclave in the south part of Los Angeles County. The only thing that might catch your attention is the bold red writing on the front window that says, in Spanish, “WE MODIFY YOUR LOAN. EVICTIONS. BANKRUPTCIES.”

But inside, a kind of magic happens. The owner of the business, Carlos Baez, is a master of a Los Angeles art: contorting bankruptcy into a tool for profit. When his clients come to him, desperate to stay in their homes, he can promise help — as long as they keep paying him — by harnessing the power of bankruptcy to stop foreclosure. Baez is not a lawyer and records show the hundreds of cases he’s filed are often shoddily prepared and thrown out within a few months. But actually winning lasting debt relief for his clients isn’t the point. The goal is to buy time — which he does again and again.

Of course, there are laws to prevent such abuse of the system. If someone files again and again, bankruptcy’s protections can be revoked. But Baez has another technique he often uses. On paper, his clients appear to transfer ownership in their homes to a group of people who get 5 percent apiece. It’s a trick that can turn one homeowner into four homeowners, each of whom can file for bankruptcy, one after the other. It doesn’t matter if these new homeowners are real. By the time a flesh-and-blood person must appear at a hearing, a month or two has passed. Then the case is dismissed and a new homeowner comes forward. Rinse and repeat.

https://www.propublica.org/article/how-to-get-away-with-bankruptcy-fraud