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Wells Fargo ordered to pay bankrupt homeowners $81.6M

A recent federal government case involving Wells Fargo may be of interest to South Carolina residents. In the case, the banking giant agreed to pay $81.6 million to homeowners who went through Chapter 13 bankruptcy cases.

According to reports, Wells Fargo was required by bankruptcy law to notify homeowners in Chapter 13 bankruptcy at least 21 days before changing their payment amounts. The bank also failed to conduct analyses of escrow accounts within a specified deadline. Altogether, these issues affected 68,000 homeowners' accounts between Dec. 1, 2011 and March 31, 2015.

Of the settlement, $53.6 million will be paid by the bank to around 42,000 homeowners. The money will be divided among them and paid as credits towards their existing mortgage balances. Some is to be paid to homeowners who made mortgage payments that were too high due to the issues. About $10 million will be paid to homeowners who do not receive full compensation from the initial $53.2 million payout. In addition to the settlement payments, Wells Fargo will also be required to make improvements to its system in tracking Chapter 13 notice and escrow requirements.

Chapter 13 bankruptcy petitions are a good way for people to be able to have more time to catch up overdue mortgage payments. The chapter allows debtors to reorganize their debts. They can then stretch out their back-owed amounts over three to five years while still making their regular mortgage payments. In this way, debtors can stop foreclosure proceedings and have an opportunity to catch up on these payments. During the stay, the mortgage lender may not continue with the foreclosure action. A bankruptcy attorney can outline the eligibility and other requirements associated with a Chapter 13 filing.

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