You’ve seen the commercials and heard them on the radio: “don’t pay your debt, don’t go into bankruptcy, eliminate your debt!”
Eliminate your debt without bankruptcy? Really? What the hell am I advising my clients then?
So I did some poking around… which is big fancy lawyer talk for “legal research.” And I think I was able to put my finger on what some of these companies are actually selling.
Vapor Money
There have been some cases brought by folks who got a loan, but are claiming that they did not really get money, thus did not get a loan, and are thus, not responsible for the debt. A US District Court decision from the Eastern District of Missouri describes it like this:
In his Complaint, Plaintiff appears to argue that he does not owe the money due on his loan because it was not backed by actual money. Specifically, Plaintiff alleges that he, “turned over a bond [to an unspecified party] as an asset exchange,” and “this bond was then exchanged with other instruments from the United States Department of Treasury.” (Compl., P. 5). Plaintiff maintains CitiMortgage materially altered the bond, with the intent of defrauding Plaintiff. (Id.). Plaintiff further claims there was no consideration for the contract in the amount of $113,451, the original amount of the bond of collateral held by Plaintiff, and that “CITIMORTGAGE, INC. cannot, loan the capital stock of their directors, nor can they loan the money of their depositors, and they can only loan money.” (Id., at 6.)
With these vague allegations, Plaintiff may be attempting to allege the “vapor money” theory as a ground for recovery. In the typical vapor money claim, “Plaintiff alleges that the promissory note he executed is the equivalent of `money’ that he gave to the bank. He contends that [the lender] took his `money,’ i.e., the promissory note, deposited it into its own account without his permission, listed it as an `asset’ on its ledger entries, and then essentially lent his own money back to him….He further argues that because [the lender] was never at risk, and provided no consideration, the promissory note is void ab initio, and Defendants’ attempts to foreclose on the mortgage are therefore unlawful.” Demmler v. Bank One NA, No. 2:05-CV-322, 2006 WL 640499 at *3 (S.D. Ohio Mar. 9, 2006). While the vapor money theory has not been addressed by any court within the 8th Circuit, it and “similar arguments have been rejected by federal courts across the country.” McLehan v. Mortgage Electronic Registration Sys., No. 08-12565, 2009 WL 1542929 at *2 (E.D. Mich. June 2, 2009) (citations omitted). See, e.g., Thomas v. Countrywide Home Loans, No. 2:09-CV-00082-RWS, 2010 WL 1328644 (N.D. Ga. Mar. 29, 2010); Andrews v. Select Portfolio Servicing, Inc., No. RDB-09-2437, 2010 WL 1176667 (D. Md. Mar. 24, 2010); Barber v. Countrywide Home Loans, Inc., No. 2:09-CV-40-GCM, 2010 WL 398915 (W.D.N.C. Jan. 25, 2010); Kuder v. Washington Mut. Bank, No. CIV S-08-3087 LKK DAD PS, 2009 WL 2868730 (E.D. Cal. Sept. 2, 2009); Rodriguez v. Summit Lending Solutions, Inc., No. 09cv773 BTM(NLS), 2009 WL 1936795 (S.D. Cal. July 7, 2009); Johnson v. Deutsche Bank Nat’l Trust Co., No. 09-21246-CIV, 2009 WL 2575703 (S.D. Fla. July 1, 2009); Gentsch v. Ownit Mortgage Solutions Inc. No. CV F 09-0649 LJO GSA, 2009 WL 1390843 (E.D. Cal. May 14, 2009). Thus, the vapor money theory is not a valid route to recovery, and Plaintiff’s claims based upon it must be dismissed.
In the Thomas v. Countrywide Home Loans case referenced above, the plaintiff in that case was sanctioned:
The Court finds that the Complaint is frivolous and has absolutely no basis in law for fact. The Court further finds that Defendants properly informed Plaintiff that Defendants would seek sanctions if Plaintiff did not voluntarily dismiss the action. The Court finds that Defendants are entitled to sanctions.
In the Kuder v. Washington Mut. Bank case referenced above, the court noted:
As defendants accurately observe, plaintiff’s claims are premised on the so-called “vapor money” theory which has been consistently rejected by federal courts as frivolous.
Reasonable minds can disagree on whether a strategy works. And when reasonable minds disagree, they take their disagreements to court. Courts across the country are rejecting the notion that you can simply eliminate your debt by invoking the “vapor money” theory or some other bizarre notion that a loan really isn’t money. And I’m willing to bet they are making an awful lot of money at least selling this bogus idea – because the costs of prime time advertising on radio and TV ain’t cheap. But my take is this: anyone who tells you that you can eliminate your debt without either paying it, compromising or settling it, or without getting a bankruptcy discharge is lying to you. Period.
And if anyone in Massachusetts has been victimized by these outfits that claim to teach you the skills to “eliminate” your debt using this “vapor money” or any other half-baked theory, I want to hear your story.
And if anyone wants to comment and tell me why I am wrong, bring it.
Related posts:
- Here’s Another Reason Why You Actually Need to Read Credit Card Agreements
- You and Your Credit Card Terms: What You Don’t Know may Bite the Ones You Love.
- Foreclosure Scams in Southern California
- Woulda, Shoulda, Coulda: A Creditor Loses Big in the Bankruptcy Court
- A Loophole in Massachusetts Court Rules and a Call for Reform
Tags: Consumer Scams, debt elimination, Discharge of Debts, FDCPA
