Bankruptcy

UST Turned Loose on Countrywide

By Adam Levitin

The UST has been turned loose on Countrywide. The United States Trustee has sought to conduct discovery on Countrywide as part of a motion for sanctions against Countrywide for abusing the bankruptcy process by filing claims that included fees Countrywide knew were not authorized. (See Katie Porter's article on this troubling phenomenon here.) Countrywide sought to squash the discovery motion. Yesterday, the Bankruptcy Court for the Western District of Pennsylvania denied Countrywide's motion. The bankruptcy court was unimpressed by Countrywide's slippery slope argument that this will open up the door to discovery on the entire lending industry. I have to think, though, that if anythign shocking comes out of discovery, trustees (and debtors) elsewhere might think about taking a closer look at creditors' claims. The decision can be found here.

Full post as published by Credit Slips on April 03, 2008 (boomark / email).