Corporation Using UCC-1 to Stall Foreclosure for up to 36 months

I just got a call from an attorney claiming to have a way to keep lenders off a homeowner’s back for up to 36 months. The process involves the use of a corporate entity like a c-corp or an LLC. The homeowner would be the “owner”/shareholder of the corporation, but the attorney would be the officer of record.

The new corporation would then put a lien (UCC-1) on the property that is about to be foreclosed. He didn’t give details of the process after that. It sounds like an illegal scheme to me, but has anyone heard of this? The attorney is charging $900 to form the entity and record the lien. He claims that it can stall the foreclosure of the house for up to 36 months.

I thought that a UCC-1 is only applicable to commercial property or activity. Can this be used to encumber a primary residence at all?


Here’s just a a few off the cuff observations.

A lien whose purpose is to hinder, delay or defraud a creditor is subject to the fraudulent transfer law. The lien must be for value and I doubt the $900 includes the necessary capital.

I don’t see how a lien prevents the creditor from forcing the homeowner into involuntary bankruptcy where ownership of the corporation must be disclosed unless people are willing to lie.

Such a set up looks like a conspiracy to me.

if you are in a trust deed state, you already agreed to the sale of the property by the trustee upon default of the contract (mortgage). I don’t see how a new UCC-1 filing is going to change and/or delay that. The UcC-1 has a priority date of the date file which is by definition junior to the Deed of Trust.

Maybe I’m missing something???

things that sound too good to be true, usually are.

OK, I finally got more detail on this. The “service” requires homeowner to QUITCLAIM 1% of the home to these lawyers or more precisely to an LLC that they will form. The newly formed LLC will file bankruptcy on the 1% that they own effectively placing a cloud on the title that they hope will stall a foreclosure or auction.

Of course the Trustee for the lender will discover this and clear title eventually, in which case the lawyers simply form another LLC and do the proces all over again. They keep clouding the title to keep stalling the foreclosure. They charge $900-$1200 a month (which is far less than the mortgage that some have to pay on the property in question).

The process for clouding title sounds plausible, but I don’t see how one can employ this strategy and not serve jailtime for fraud too?

  1. It is a fraudulent transfer.

  2. There are gift tax issues with the 1% transfer.

  3. It is a civil fraud.