RANCHO CORDOVA, CA - A foreclosure rescue company described as a "scam" in a lawsuit filed by the state attorney general has filed for bankruptcy protection.
US Loan Auditors filed for Chapter 7 liquidation and its sister company, My US Legal Services, filed for Chapter 11 reorganization in US Bankruptcy Court in Sacramento last Thursday.
Both companies and their principals have been named in a $60 million lawsuit filed by the attorney general's office Oct. 6. The lawsuit claims US Loan Auditors was a foreclosure rescue scam that snared hundreds of California homeowners.
US Loan Auditors allegedly promised troubled homeowners it could save them from foreclosure by conducting a "forensic audit" to challenge the loan documents.
According to the lawsuit, the sister company, My US Legal Services, would then file "cookie cutter" lawsuits against lenders that were generally dismissed by the courts.
The lawsuit claims one homeowner was charged $56,000 for services that produced little or no relief.
One of the principals, attorney James Sandison, has also filed for personal bankruptcy protection.
A spokeswoman for the attorney general's office said it was uncertain what impact the bankruptcy filings would have on the lawsuit.
But the bankruptcy attorney representing the two companies told News10 the federal filings represent the best chance for clients to recover money they believe is owed to them because all the companies' assets had been frozen by the state court.
"They are subjecting themselves to the rigorous scrutiny of the bankruptcy court. They want to administer the remaining funds appropriately," said attorney Austin Cooper.
Cooper estimated as many as 2,700 homeowners had dealt with the two companies and he insisted most were satisfied with the results.
"There's a whole cadre of people whe were satisfied that it's not a scam," he said.
Cooper suggested homeowners who believe they are entitled to a refund file a claim with the US Bankruptcy Court for the Eastern District of California.
by George Warren, GWarren@news10.net