Countrywide Financial Corp. and a U.S. bankruptcy trustee submitted another proposal in an attempt to resolve claims that it manipulated the bankruptcy system by purposely losing or destroying more than $500,000 in mortgage checks from people in foreclosure and then charging them with late fees and legal costs.

The U.S. Trustee office, an arm of the Justice Department that oversees the bankruptcy system, has accused the lender of abusing the court system by levying hidden fees on bankrupt homeowners trying to cut their debts.

This proposal attempt followed an earlier proposal that was denied by a U.S. bankruptcy judge who said the first plan was too vague on how the bank would protect homeowners from this happening in the future.

In the newly proposed settlement, Countrywide dropped the demand that the judge bar Countrywide clients from suing for any damages related to the lost payments.

The company also removed a non-disparagement provision that may have stalled a wider investigation.

The new proposal also calls for the trustee to audit borrower accounts (at the trustee’s expense) to make sure the company is indeed cashing borrowers’ checks and not issuing unfitting fees.

In addition, borrowers would also receive itemized statements that would fully disclose any fees and detail their payoff amounts.

Countrywide also has allegations of lending and bankruptcy abuse in states that include Florida, Ohio and Georgia. Additionally, the FBI is investigating Countrywide.

Note: Countrywide was bought out earlier this year by Bank of America Corp., the second-largest bank in the United States according to its assets.

Tags: bankruptcy, bankruptcy trustee, Countrywide