By operation of state law, a tax sale purchaser has title to the purchased property and cannot have its rights modified in chapter 13 to permit the debtor to redeem over the course of the plan. Deed Co. v. Jimerson, No. 17-513 (N.D. Ga. Jan. 23, 2018). [Read more…] about Debtor May Not Modify Rights of Tax Purchaser
Court Not Required to Dismiss Case Exceeding Debt Limits
A court is not required to dismiss a chapter 13 case where the debtor’s student loan debt causes his total unsecured debts to exceed the statutory debt cap. In re Pratola, 578 B.R. 414 (Bankr. N.D. Ill. Dec. 27, 2017), appeal filed, Stearns v. Pratola, Case No. 1:18-cv-213 (N.D. Ill. filed Jan. 11, 2018). [Read more…] about Court Not Required to Dismiss Case Exceeding Debt Limits
District Court Reassesses Evidence of Undue Hardship
The district court reassessed the evidence presented at the adversary hearing and overturned the discharge of the debtor’s student loan debt. DeVos v. Price (In re Price), No. 17-3064 (E.D. Pa. Jan. 24, 2018). Chapter 7 debtor, Kristin M. Price, was a mother of three pre-school children, separated from her husband, and employed part-time as a vascular sonographer. She sought to discharge her almost $26,000.00 federal student loan. The bankruptcy court applied the three-part Brunner test specifically finding that Ms. Price’s financial distress was likely to persist for at least five of the seven years remaining on her loan contract. Because this constituted a “significant portion of the repayment period,” the court granted discharge under section 523(a)(8). [Read more…] about District Court Reassesses Evidence of Undue Hardship
How Much Notice is Enough?
The Eleventh Circuit found that even though Nationstar did not receive notice of the debtor’s objection to its claim, it was enough that Nationstar had actual notice of a court-ordered change in the status of its claim from secured to unsecured and failed to take timely action to protect its interest. Nationstar Mortgage v. Iliceto, No. 16-16815 (11th Cir. Dec. 11, 2017) (unpublished).
Robert Iliceto filed for chapter 13 bankruptcy listing U.S. Bank as his mortgage creditor. Nationstar filed a transfer of claim establishing itself as the assignee of the mortgage from U.S. Bank. Nationstar listed both its street address and a P.O. Box as “preferred” addresses. Mr. Iliceto filed a claim on Nationstar’s behalf in his chapter 13 bankruptcy and, at the same time, objected to the claim on the basis that Nationstar was not a proper assignee. Mr. Iliceto failed to serve the objection on Nationstar as required by Rule 3007(a) and section 502 of the Code. [Read more…] about How Much Notice is Enough?
Right to Attorneys’ Fees for Stay Violations Extends to Appeals
In a case of first impression, the Eleventh Circuit held that the “explicit, specific, and broad language [in section 362(k)] permits the recovery of attorneys’ fees incurred in stopping the stay violation, prosecuting a damages action, and defending those judgments on appeal.” Mantiply v. Horne (In re Horne), No. 16-16789 (11th Cir. Dec. 5, 2017). [Read more…] about Right to Attorneys’ Fees for Stay Violations Extends to Appeals
Court Won’t Let Bank of America “Buy and Bury” Judgment Against It
“To name and to shame Bank of America on the public record in an opinion that stays on the books serves a valuable purpose casting sunlight on practices that affect ordinary consumers.” Sundquist v. Bank of America, No. 10-35624, Adv. Proc. No. 14-2278 (Bankr. E.D. Cal. Jan. 18, 2018).
Calling it a “naked effort to coerce this court to erase the record,” the bankruptcy court declined to vacate its 2017 judgment in which it awarded damages for violation of the automatic stay in the amount of $1,074,581.50 and ordered an additional $5 million in punitive damages based on Bank of America’s conduct in connection with Erik and Renee Sundquists’ home mortgage. In addition to the award directed to the Sundquists, the 2017 order included a $45 million punitive damage award to be distributed to various public interest entities which were added to the case as Intervenors. The order also cancelled the Sundquists’ attorney’s contingency fee agreement, citing section 329(b), and ordered payment of her fees on a lodestar basis. Sundquist v. Bank of America (In re Sundquist), 566 B.R. 563 (Bankr. E.D. Cal. 2017) (2017 order) (blogged here). [Read more…] about Court Won’t Let Bank of America “Buy and Bury” Judgment Against It
Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap
“There are certain situations where a debtor claiming federal exemptions under § 522 of the Bankruptcy Code can claim an exemption of a 100% interest in an asset. What we do not decide is whether doing so entitles such a debtor to clear title in that asset and any post-petition appreciation.” Ayobami v. Peake, No. 16-20589 (5th Cir. Jan. 3, 2018). [Read more…] about Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap
Debtor’s Treatment of Student Loan Outside Plan Not Confirmable
The court could not confirm the debtor’s plan proposing to pay all claims in full except her student loan debt for which she proposed payments on interest only outside the plan. In re Ryan, 17-1507 (Bankr. M.D. Fla. Nov. 7, 2017).
Jenna Ryan’s chapter 13 petition schedules listed total debts in the amount of approximately $173,000, including a student loan debt from the Department of Education of almost $80,000. Her disposable income was $4,417.72. Her plan proposed to pay $1,403.09 per month for sixty months to pay off all debts in full except for the student loan debt. As to that claim, the plan proposed that Ms. Ryan would maintain payments outside the plan. She took the “position that there are no payments due under the terms of the student loan, given the filing of the bankruptcy, so her payments are voluntary and enough to cover the accruing interest payments.” [Read more…] about Debtor’s Treatment of Student Loan Outside Plan Not Confirmable
Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens
The bankruptcy estate’s interest in property does not become superior to a valid senior judgment lien even though the bankruptcy trustee took the steps necessary to avoid a fraudulent transfer and bring the property into the estate. In re Knight, No. 16-584 (Bankr. D. S.C. Nov. 6, 2017).
Apex Bank obtained two judgments against Talmadge Knight in state court. By operation of state law, the judgments resulted in liens on Mr. Knight’s property. Shortly thereafter, Mr. Knight transferred his farm property, Saluda, to Ambler Road, LLC., an entity owned solely by Mr. Knight. Mr. Knight later filed for chapter 7 bankruptcy. Apex filed two proofs of claim totaling approximately $1.9 million. The trustee filed an adversary proceeding to avoid the transfer of the Saluda property from Mr. Knight to Ambler. That proceeding was settled and the transfer avoided. The trustee then arranged a sale of the property for $146,000 and moved the court for permission to sell free and clear of liens. The motion contained some inaccuracies about the property and did not mention Apex’s judgment liens. [Read more…] about Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens
Bankruptcy Court Lacked Power to Order $375,000 in Punitive Damages
A bankruptcy court lacks inherent or statutory power to award $375,000 in punitive damages based on the creditor’s violation of Rule 3002.1(c) and disregard of a court order. PHH Mortgage Corporation v. Beaulieu, Nos. 16-256, 16-257, 16-258 (D. Vt. Dec. 18, 2017).
The debtors in three chapter 13 cases had confirmed plans under which they were able to remain in their homes post-petition and pay their mortgages through the trustee. Two sets of debtors, the Gravels and the Beaulieus, successfully completed their payments and the court issued an order stating that they were current on their mortgages and charges through the completion of their plans. PHH sent all three sets of debtors a monthly statement for fees based on property inspection, late charges, and insufficient funds, all of which were were incurred more than 180 days prior to the statement in violation of Rule 3002.1(c). The trustee moved for sanctions in all three cases for violation of Rule 3002.1(c) and, in the Beaulieus’ and the Gravels’ cases, for violation of the Bankruptcy Court’s Order at the close of their cases. [Read more…] about Bankruptcy Court Lacked Power to Order $375,000 in Punitive Damages