A federal bankruptcy judge awarded $45 million in punitive damages — much of which will go to UC law schools — to a Sacramento couple March 23 in a ruling that found that Bank of America unlawfully foreclosed on their house.
The judge ruled the couple will give each of the five campuses — UC Berkeley School of Law, UC Davis School of Law, UC Hastings College of Law, UCLA School of Law and UC Irvine School of Law — $4 million of the punitive damages. The couple will receive more than $1 million in actual damages.
Additionally, the judge ruled the couple will give $10 million of the punitive damages to both the National Consumer Bankruptcy Rights Center and the National Consumer Law Center.
According to court documents, the couple had filed a chapter 7 bankruptcy case to clear debt, thus enhancing their ability to pay Bank of America on a modified loan. After completion of the chapter 7 case, the couple was given no credit for their improved debt profile. The couple was then faced with “imminent foreclosure,” causing them to file for a chapter 13 case in order to move forward with loan modification.
Bank of America expressed their understanding that their performance in this foreclosure was not satisfactory and that they have since changed their processes in a public statement.
“We believe some of the court’s rulings are unprecedented and unsupported, and we plan to appeal,” the statement from Bank of America said.
Campus assistant law professor Prasad Krishnamurthy said he would be surprised if Bank of America did not appeal. He added that he believes that this case showcases the disarray in the housing market.
“Multiply the experience of this couple by 10, 20, 30 million. That’s … the experience of many people,” Krishnamurthy said. “The case is kind of illustrative of the (situations of) many million people who (owned) homes from the period of 2008 to 2012.”