Two recent cases deal with the determination good faith in the context of a chapter 13 plan modification. In re Martin, No. 10-64790 (Bankr. N.D. Ohio November 27, 2013) and In re Maxwell, No. 11-17873 (Bankr. E.D. Cal. Nov. 8, 2013). [Read more…] about Good Faith in the Plan Modification Context
Supreme Court to Decide Inherited IRA Exemption Issue
In other Supreme Court news, the Court granted certiorari in the case of Clark v. Rameker (In re Clark), No. 13-299. In that case, the Seventh Circuit created a split in the circuits when it held that a debtor may not exempt her inherited IRA in bankruptcy. In re Clark, No. 12-1241 & 12-1255 (April 23, 2013). The Fifth Circuit had reached the opposite conclusion in Chilton v. Moser, 674 F.3d 486 (5th Cir. 2012). NCBRC will file an amicus brief on behalf of the NACBA membership in this important case.
Petition for Certiorari filed in Chapter 7 Lien Stripping Case
The issue of whether a wholly unsecured lien can be stripped off in chapter 7 bankruptcy was brought before the Supreme Court in a petition for certiorari filed on December 9, 2013, in the case of Bank of America v. Sinkfield. [Read more…] about Petition for Certiorari filed in Chapter 7 Lien Stripping Case
CFPB Takes Action Against Deferred-Interest Medical Credit Card
Following closely on the heels of the CFPB’s recent action against pay day lender Cash America, the CFPB has taken action against medical credit card company, CareCredit. CareCredit, a subsidiary of GE Capital Retail Bank, offers medical credit cards through over 175,000 offices of health care providers such as dentists and vision care professionals. In a consent order issued on December 10th, the CFPB ordered CareCredit to refund up to $34.1 million to more than one million patients who were deceptively enrolled for the medical credit card. [Read more…] about CFPB Takes Action Against Deferred-Interest Medical Credit Card
Private School Tuition Payments Not Constructively Fraudulent Conveyance
A New York bankruptcy court found that the chapter 7 trustee’s legal theory for recovery of private school tuition payments was “fundamentally flawed” and “at odds with common sense.” Getzler v. Xavierian High School (In re Okanmu), No. 11-43773, AP 13-01105, 13-01107 (Bankr. E.D. N.Y. Dec. 4, 2013). The trustee filed an adversary complaint seeking to avoid the debtors’ private school tuition payments for their minor children as constructively fraudulent transfers under sections 544 and 548(a)(1)(B). [Read more…] about Private School Tuition Payments Not Constructively Fraudulent Conveyance
California Law Precludes Claim of Nondischargeability
State law precluded a creditor’s claim of nondischargeability due to fraud in the case of Heritage Pac. Fin. v. Montano (In re Montano), __ B.R. __, 2013 W.L.5890681 (B.A.P. 9th Nov. 1, 2013). [Read more…] about California Law Precludes Claim of Nondischargeability
CFPB Takes Action against Payday Lender
In its first enforcement action against a payday lender, the Consumer Financial Protection Bureau (CFPB), ordered Cash America International, Inc. to refund consumers in the amount of $14 million and pay a fine of $5 million, as a result of its violations of consumer financial protection laws. Cash America, a publicly traded financial services company out of Fort Worth, Texas, is one of the largest short-term, small-dollar lenders in the country.
Deriving its authority from the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB began its oversight of payday lenders in January, 2012. The CFPB announced the action in a press release dated November 20, 2013, marking the Bureau’s first public enforcement action for failure to comply with the CFPB’s supervisory examination authority.
The violations include robo-signing by Cash America’s Ohio subsidiary, Cashland Financial Services, Inc. Cash America also extended payday loans to service members at a rate in excess of the 36 percent limit set by the Military Lending Act. Finally, Cash America was found to have impeded the CFPB routine examination by destroying records, deleting recorded phone calls with consumers, instructing employees to limit information provided to the CFPB, and withholding a report related to robo-signing.
As a result of its illegal practices, Cash America has voluntarily refunded approximately $6 million and has committed $8 million more to military borrowers and to Ohio victims who suffered from the robo-signing practices between 2008 and January 2013. Cash America has also dismissed pending lawsuits, terminated post-judgment collection activities, and cancelled all judgments in nearly 14,000 wrongful cases filed against consumers in Ohio. On top of these compensatory measures, Cash America has been ordered to pay a $5 million civil penalty. Finally, Cash America will develop and implement a plan to improve compliance with consumer financial protection laws.
CFPB Director, Richard Cordray, said of the action that it, “brings justice to the Cash America customers who were affected by illegal robo-signing, and shows that we will vigilantly protect the consumer rights that service members have earned. We are also sending a clear message today to all companies under our watch that impeding a CFPB exam by destroying documents, withholding records, and instructing employees to mislead examiners is unacceptable.”
New Filing Fee for Motions to Sell Property under Section 363(f)
The Judicial Conference for the United States has approved several changes to the federal court miscellaneous fee schedules including a new administrative fee for motions to sell property under section 363(f) of the Bankruptcy Code. Section 363(f) allows estate assets to be sold free and clear of liens and encumbrances. The committee rejected the idea of a sliding fee connected to the price of the property being sold, and settled on a flat fee of $176.00. The new fee will take effect December 1, 2013.
In instituting the new fee, the Judicial Conference is apparently taking advantage of the increasing trend in chapter 11 toward sale of businesses rather than restructuring. According to Jacqueline Palank of the Wallstreet Journal blog “Bankruptcy Beat,” this move comes in the face of a looming judicial budget crisis. A small percentage of operating funds comes from fees that the federal courts charge, and bankruptcy filing fees generate about 79% of the judicial operating funds that come from federal court fees in general. Where Congress appropriates most of the federal judiciary’s operating funds, recent government budget cuts negatively impact the judiciary. In his blog on the fee change, Cooley, LLP attorney, Robert L. Eisenbach, III, predicts that the new fee in this area could show significant revenue increase from chapter 11 cases. To a lesser extent, the change will impact chapter 7 as well.
Payments to Senior Lienholder Avoidable as to Junior Lienholder
Payments made to a senior lienholder within 90 days of bankruptcy were avoidable as a preferential transfer in favor of the junior lienholder. Gladstone v. Bank of America (In re Vassau), No. 09-9536, AP 11-90280 (Bankr. S.D. Cal. Sept. 25, 2013). [Read more…] about Payments to Senior Lienholder Avoidable as to Junior Lienholder
Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy
The BAP for the Eighth Circuit found that, under section 522(b)(3)(C), the debtor could exempt an Annuity purchased with funds rolled over from a tax-exempt IRA. In re Miller, No. 13-6026 (Nov. 4, 2013). [Read more…] about Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy