Bank of America Drops Lawsuit Against Nashville Bankruptcy Trustee
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Bank of America Drops Lawsuit Against Nashville Bankruptcy Trustee

September 7, 2012


Bank of America has dropped its lawsuit against the bankruptcy trustee in charge of Chapter 13 filings in Nashville, Tennessee, according to a report from the Nashville Business Journal.

Sources say the massive bank filed a claim against Nashville’s trustee, Henry Hildebrand, alleging that he had failed to distribute money from a certain bankruptcy case involving a failed attempt to foreclose on a house.

The filing represented the first effort by a financial institution to sue a trustee during a bankruptcy proceeding, according to sources. The dispute, according to Hildebrand, occurred as a result of a simple miscommunication. In his words, the lawsuit was simply a "manifestation of the right hand not knowing what the left is doing, which is exactly the problem."

In this particular case, Hildebrand, who is in charge of every Chapter 13 bankruptcy filing in the area, demanded to see Bank of America’s mortgage paperwork before it filed a claim against someone in bankruptcy who had fallen behind on mortgage payments.

Sources say that Hildebrand has become well known for his aggressive attempts to force home loan lenders to provide the original paperwork for their mortgages before they can file a claim in bankruptcy court.

In a typical Chapter 13 case, consumers must provide a broad range of documents and proof of their financial status, so Hildebrand believes it’s only fair for creditors to meet the same burden of proof.

Bank of America, however, reportedly failed to file a timely claim in the bankruptcy case that is at the center of the current dispute, and it also failed to show documents proving that it held the loan for the home in question.

As a result, Hildebrand refused to distribute money to the bank, and officials for the financial institution took the unprecedented step of suing the bankruptcy trustee.

Fortunately for Hildebrand, however, Bank of America decided to negotiate a deal directly with the bankruptcy filers, and dropped the lawsuit against the trustee. The bank also reportedly agreed to pay the trustee’s attorney fees, sources say.

Since the lawsuit was dismissed, though, and the bank simply brokered a deal directly with the debtors, whether banks will actually have to show original paperwork to prove their claims may remain an unsettled issue in Tennessee bankruptcy law.

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