NACBA/NCBRC filed an amicus brief in support of the debtors in a case where, two years after he elected not to administer a fully-disclosed cause of action against Ocwen, and the debtors’ bankruptcy case was closed, the chapter 7 trustee moved to reopen the case to obtain approval for a settlement agreement with Ocwen. Stevens v. Whitmore (In re Stevens), No. 20-60044 (9th Cir.) (filed Feb. 26, 2021). [Read more…] about NACBA Files Amicus in Technical Abandonment Case
Modification under CARES Act
For plan modification under the CARES Act, the debtor need not have been current in plan payments prior to enactment of the Act. In re Gilbert, No. 16-12120 (Bankr. E.D. La. Oct. 6, 2020).
In four separate cases, debtors sought to modify their chapter 13 plans under section 1329(d) which Congress added to the Bankruptcy Code as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In all four cases, the debtors’ plans were confirmed and they fell behind on payments prior to March 27, 2020. In three of the cases, the debtors sought modification of their plans to pay off the arrearages and extend the length of the plan beyond sixty months. In the fourth case, the debtor sought only to reduce payments to unsecured creditors. The trustee opposed the modifications arguing that the CARES Act permits modifications only if the debtors first fell behind in their plan payments after March 27, 2020, and the sole reason for the default was the pandemic.
The bankruptcy court disagreed. [Read more…] about Modification under CARES Act
Tribe Has Sovereign Immunity from Stay Violation Suit
Payday lenders belonging to a Native American Tribe enjoy sovereign immunity from suit under section 362 for violation of the automatic stay. In re Coughlin, No. 19-14142 (Bankr. D. Mass. Oct. 19, 2020).
The chapter 13 debtor filed a motion seeking a finding that a group of payday lenders violated the automatic stay when they continued to dun him for payments after he filed his bankruptcy petition. The creditors, all members of a Native American Tribe, moved to dismiss the complaint, arguing that they were entitled to sovereign immunity for their conduct. [Read more…] about Tribe Has Sovereign Immunity from Stay Violation Suit
Legal Malpractice Claim Accrued When Debtors Denied Discharge
Where the only injury resulting from bankruptcy counsel’s conduct was denial of discharge, the cause of action for legal malpractice accrued post-petition and belonged to the debtors rather than the chapter 7 bankruptcy estate. Church Joint Venture, L.P. v. Blasingame, No. 19-5505 (6th Cir. Jan. 26, 2021).
The debtors filed for chapter 7 bankruptcy but were denied discharge when the court learned of undisclosed assets in the form of personal property, shell companies, family trusts, etc. The debtors filed a malpractice lawsuit against their bankruptcy attorneys in state court. When the trustee declined to bring a suit against the debtors’ attorneys on behalf of the bankruptcy estate, the debtors’ primary creditor, CJV, obtained derivative standing to do so. CJV moved for summary judgment on the issue of whether the cause of action belonged to the estate. The court treated the debtors’ response as a cross-motion for summary judgment and granted judgment in favor of the debtors. The BAP for the Sixth Circuit affirmed. Church Joint Ventures, L.P. v. Blasingame (In re Blasingame), 597 B.R. 614 (B.A.P. 6th Cir. 2019). [Read more…] about Legal Malpractice Claim Accrued When Debtors Denied Discharge
Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
A state-mandated notification with the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Calif. Franchise Tax Bd., No. 20-1025 (B.A.P. 9th Cir. Oct. 5, 2020). [Read more…] about Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
Voluntary Dismissal Under 1307(b) over Objection by Creditor
The debtor was permitted to voluntarily dismiss her chapter 13 case under section 1307(b) despite the judgment creditor’s objections and a technical error, where, even if a good faith component is read into the statute, the creditor failed to provide evidence of bad faith and was otherwise provided due process. Murphy v. Marinari (In re Marinari), No. 19-3642 (3rd Cir. Jan. 19, 2021) (unpublished).
The judgment creditor filed a claim and an adversary proceeding in the debtor’s chapter 13 case. The debtor filed an “application” to voluntarily dismiss her bankruptcy case under section 1307(b). When the bankruptcy court dismissed the case over the creditor’s objection, the creditor appealed. The district court affirmed. [Read more…] about Voluntary Dismissal Under 1307(b) over Objection by Creditor
Transfer of Funds Divided between Creditor and Creditor’s Agent Fully Avoidable
Garnished wages divided between the creditor and his agent in accordance with their fee agreement were an avoidable transfer in their entirety even though the creditor never received the portion withheld by the agent. Hooker v. Wanigas Credit Union, No. 20-2252 (6th Cir. Jan. 26, 2021) (unpublished).
During the ninety-day preference period,Wanigas Credit Union, through its agent, Shek Law Offices, garnished $884.13 from the debtor’s wages in satisfaction of a judgment Wanigas had against the debtor. Shek retained $452.60 of the garnished wages and sent the remaining $431.53 to Wanigas. After filing for bankruptcy the debtor sought turnover of the funds under section 547(b)(1) as a preferential transfer. Wanigas turned over only the funds it received. It argued that the portion retained by Shek was not subject to turnover because Wanigas never received the funds, and in the alternative, because the funds were subject to an attorney-charging lien. The bankruptcy court denied Wanigas’s motion for summary judgment and ordered the turnover of the funds. The district court granted leave to appeal and affirmed. [Read more…] about Transfer of Funds Divided between Creditor and Creditor’s Agent Fully Avoidable
Two Vehicles Securing One Claim Must Receive Identical Treatment in Ch 13 Plan
Under section 1325(a)(5), a Chapter 13 plan cannot provide for different treatment of two vehicles that were purchased at different times with loans from the same creditor where both lending agreements included cross-collateralization clauses securing each loan by both vehicles. Barragan-Flores v. Evolve Federal Credit Union, No. 18-50420 (5th Cir. Jan 14, 2021). [Read more…] about Two Vehicles Securing One Claim Must Receive Identical Treatment in Ch 13 Plan
SCOTUS Finds Retention of Property Is Not Exercise of Control
In an unhappy start to the new year, the Supreme Court resolved a long-festering issue in favor of creditors when it found that “mere retention of property does not violate §362(a)(3).” City of Chicago v. Fulton, 592 U.S. ___, No. 19-357 (S.Ct. Jan. 14, 2021).
Here, a number of chapter 13 debtors entered bankruptcy after the City of Chicago impounded their vehicles for failure to pay traffic fines. In their separate cases, the debtors sought return of the vehicles arguing that once they filed for bankruptcy, the City’s retention of the vehicles violated the automatic stay. The bankruptcy courts in each case agreed with the debtors. In a consolidated opinion, the Seventh Circuit found that retention of the vehicles constituted an exercise of control over property of the estate within the meaning of section 362(a)(3). It affirmed. In re Fulton, 926 F. 3d 916 (7th Cir. 2019). [Read more…] about SCOTUS Finds Retention of Property Is Not Exercise of Control
Creditor Cannot Be Compelled to Take Possession of Surrendered Collateral
Surrender of collateral under section 521(a)(2) is a procedural action lifting the bankruptcy stay and permitting a lienholder to exercise state remedies with respect to the collateral. Because surrender does not affect the substantive rights of the debtor or the creditor, however, the debtor could not compel the creditor to take possession or release the lien. In re Loucks, 619 B.R. 908 (Bankr. E.D. Mich. Oct. 9, 2020) (case no. 20-42265). [Read more…] about Creditor Cannot Be Compelled to Take Possession of Surrendered Collateral