A prepetition fee agreement where the debtor agreed to have the law firm pay the filing fee postpetition at which time the debtor would reimburse the firm, was unenforceable in that it was predicated on ignoring Bankruptcy Rule 1006(a) which requires the fee to be paid when the petition is filed. In re Digregorio, No. 21-79 (Bankr. M.D. Fla. Oct 19, 2022). [Read more…] about Bifurcated Fee Agreement Violates Rules
Tax Debt Strict Foreclosures as Takings Clause Violations
Does a state law permitting the government to take and sell a debtor’s home to satisfy a tax debt, and keep the surplus value as a windfall, violate the Takings Clause? That is the question before the Supreme Court in two separate cert. petitions. Fair v. Continental Resources, No. 22-160 (filed Aug. 19, 2022) and Tyler v. Hennepin Cty, No. 22-166 (filed Aug. 19, 2022). It is also the question that was recently answered affirmatively by the Sixth Circuit in the case of Hall v. Meisner, No. 21-1700 (6th Cir. Oct. 13, 2022). These cases could have significant consequences in the bankruptcy context where debtors often challenge tax sales under avoidance principles (the issue raised in another Supreme Court cert petition, County of Ontario v. Gunsalus, No. 22-294). Certainly, the Sixth Circuit case adds ammunition to the Michigan bankruptcy debtor’s arsenal.
[Read more…] about Tax Debt Strict Foreclosures as Takings Clause Violations
Embezzlement Claim Based on Divorce Decree Survives Motion to Dismiss
The plaintiff’s allegations of embezzlement concerning a business debt the debtor, her ex-husband, owed to her were sufficient to withstand a motion to dismiss, where the plaintiff co-owned the business with the debtor and the debtor failed to comply with the family court’s order to set aside income from the business for the plaintiff. Bailey v. Bailey, No. 22-10013, Adv. Proc. No. 22-1001 (Bankr. E.D. Ky. Sept 26, 2022). [Read more…] about Embezzlement Claim Based on Divorce Decree Survives Motion to Dismiss
Hockey Player Shoots but Doesn’t Score
The district court found that the “mansion loophole” cap on exemptions provided for in section 522(p) applies even in opt-out states where the debtor does not have the option to choose between state and federal exemptions. It also held that rule 4003(b)(4) does not impose a deadline on notice to the debtor of filing an objection to exemptions. In re Kane, No. 21-8209 (N.D. Cal. Sept. 2022). [Read more…] about Hockey Player Shoots but Doesn’t Score
3% Change In Debtor’s Income Not Enough for Modification
The bankruptcy court abused its discretion when it granted the trustee’s motion to modify the debtor’s chapter 13 plan to capture the $300.00/month the debtor saved when he refinanced his home loan where the change in the debtor’s financial circumstances was not “substantial” as a matter of law. Martinez v. Gorman (In re Martinez), No. 21-1077 (E.D. Va. June 16, 2022). [Read more…] about 3% Change In Debtor’s Income Not Enough for Modification
Exemptions for Joint Tenancy and Separate Living
The debtors were entitled to exempt only their one-half interest in one of the two residences where they owned both properties jointly but the husband lived in one residence and the wife lived in the other. They could avoid the creditor’s judgment lien to the extent the lien impaired those exemptions. In re Snyder, No. 21-31521 (Bankr. N.D. Ohio Sept. 23, 2022). [Read more…] about Exemptions for Joint Tenancy and Separate Living
Creditors Cannot Rely on Verbal Agreement to Extend Deadline
The creditors were not entitled to have the court vacate its order of discharge where they claimed their untimely objection was in reliance on a verbal agreement between the debtor’s counsel and the trustee to extend the deadline but the court never ordered any extension. In re Kharlanov, No. 22-70984 (Bankr. E.D.N.Y. Sept. 22, 2022). [Read more…] about Creditors Cannot Rely on Verbal Agreement to Extend Deadline
Servicer Sanctioned for Post-Foreclosure Dunning
The bankruptcy court did not err in finding the mortgage servicer violated the discharge injunction or in awarding over $10,000 in sanctions where the servicer continued to dun the debtor for payment after the debtor had received her chapter 7 discharge and relinquished the home in a foreclosure sale. Berry v. Fay Servicing, LLC, No. 21-8005/8007 (B.A.P. 6th Cir. Sept. 9, 2022). [Read more…] about Servicer Sanctioned for Post-Foreclosure Dunning
Mortgage Creditor Sanctioned for Miscalculating Claim
The debtor was entitled to attorney’s fees and a reduction in the mortgagee’s arrearage claim where the mortgagee failed to reduce the arrearage by the entire amount the debtor had paid in his prior chapter 13 bankruptcy. In re Simmons, No. 22-680 (Bankr. D. S.C. Aug. 31, 2022). [Read more…] about Mortgage Creditor Sanctioned for Miscalculating Claim
Wrongful Possession Does Not Confer Property Interest
“[A] debtor’s mere possession of a property, without a good-faith claim to it, does not save an installment contract for § 1322(c)(1) relief.” In re Peralta, No. 20-3496 (3rd Cir. Sept. 7, 2022).
The debtor bought his house on an installment contract rather than through a traditional mortgage. After he breached the contract, he and the seller entered into a new agreement where the debtor agreed to resume regular payments but if he defaulted again, the seller would exercise its right to get a judgment for possession, and the debtor would vacate the house. The agreement specified that a second breach would “extinguish[ ] any and all rights, liens, and/or interest” the debtor had in the house. [Read more…] about Wrongful Possession Does Not Confer Property Interest