Debtor Denied Right of Rescission By Court
The daughter also claimed that since the credit union did not supply her with a notice of her right to rescind the mortgage secured by her parents’ residence, that she could now rescind the transaction, that her parents should be able to retain the funds borrowed and the credit union compelled to release its mortgage on the parents’ residence.
The parents and daughter also filed separate bankruptcies in an attempt to avoid repayment of the debt.
The court reviewed the circumstances when a lender is required to provide a borrower with a notice of the right to rescind the transaction.
The court noted that the Truth in Lending Act provides, in pertinent part, that in the case of any consumer credit transaction in which a security interest is or will be retained or acquired in any property which is used as the principal dwelling of the debtor, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the rescission forms, whichever is later, although not exceeding three years after the date of the transaction.
Here, the court found that the daughter could not rescind the transaction since the debt was not secured by her own primary residence and since the attempt to rescind was not made within three years from the date of the transaction. Hence, the Truth in Lending Right of Rescission did not apply to the daughter’s transaction and the credit union had no obligation to supply the rescission forms in this case.
The court further found that the parents’ and daughter’s actions were clearly based upon greed and manipulation, as they were attempting to keep the residence without paying for the loan.
The court held that either the parents or the daughter must make payments to the credit union, whether through the Bankruptcy Court or otherwise, or the credit union could foreclose on the mortgage and obtain possession of its collateral. Heritage Federal Credit Union, successor in Interest to Knox County School Employees Credit Union v. Coxet al. (U.S. Bankruptcy Court, C.D. Illinois, No. 91-82729).
Author: Charles R. Harroun, Attorney at Law