National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Title-Pawned Vehicle Drops Out of Estate When Not Redeemed Post-Petition

A chapter 13 plan treating a loan secured by property which had been title-pawned prior to bankruptcy should not have been confirmed where the debtor failed to redeem the property within the redemption grace period. TitleMax v. Northington, Nos. 16-17467, 16-17468 (11th Cir. Dec. 11, 2017). In so holding, the Eleventh Circuit deemed TitleMax’s continued prosecution of its motion for relief from stay as equivalent to an objection to confirmation.

Debtor, Gustavius Wilber, entered into a title pawn agreement with TitleMax pledging his car as security for a loan. After the payment due date for the loan expired but before the statutorily-mandated redemption period had lapsed, Mr. Wilber filed for chapter 13 bankruptcy and proposed a plan to repay the loan with interest. TitleMax filed a motion for relief from stay. At the confirmation hearing, which took place after the redemption period had lapsed, TitleMax continued to press for relief from stay but specifically indicated that it was not objecting to confirmation of the plan. The bankruptcy court confirmed the debtor’s plan and later denied TitleMax’s motion for relief from stay. In re Wilber, 551 B.R. 542, 544–47 (Bankr. M.D. Ga. 2016). The district court affirmed. Title Max v. Northington, 559 B.R. 542, 545 (M.D. Ga. 2016). [Read more…] about Title-Pawned Vehicle Drops Out of Estate When Not Redeemed Post-Petition

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$119,000 Sanctions for Discharge Injunction Violations

Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence. Ocwen Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017).

Debtors, Christopher and Valerie Marino, surrendered their real property in their chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June, 2013, through April, 2015, Ocwen, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” Ocwen also made approximately one hundred calls to the Marinos seeking payment on the discharged debt. [Read more…] about $119,000 Sanctions for Discharge Injunction Violations

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Clark v. Rameker Does Not Limit State IRA Exemption

The interpretation in Clark v. Rameker of the federal exemption relating to inherited IRAs does not preclude a state from providing a broader exemption for inherited IRAs in its exemption scheme.

When Waheeda Kara filed for chapter 7 bankruptcy she opted to use Texas state exemptions and claimed an exemption in an inherited IRA under section 42.0021 of the Texas Property Code. The trustee objected to the exemption arguing that it did not meet the criteria set forth in Clark for an exemptible “retirement fund.” The court found that state exemptions permitted her to exempt the IRA and overruled the objection. In re Kara, No. 16-51059 (Bankr. W.D. Tex. July 13, 2017). [Read more…] about Clark v. Rameker Does Not Limit State IRA Exemption

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Anticipated Discretionary Bonus Not Property of Estate

The debtor’s anticipated bonus was not part of the bankruptcy estate where its issuance was discretionary and the employee had no enforceable interest in it at the time of the petition. In re Bronikowski, No. 16-50719 (Bankr. W.D. N.C. June 16, 2017).

Vincent and Lisa Bronikowski filed a chapter 7 petition in November, 2016. In their schedules, Ms. Bronikowski listed, and claimed an exemption for, an anticipated bonus from her employer for the 2016 year. Ms. Bronikowski’s employee handbook provided that the employer had “full and final discretionary authority to interpret and administer the Plan as well as determine the amount, if any, and payment of all incentive bonuses, awards and other compensation pursuant to the Plan.” The trustee objected to the exemption. The Bronikowskis amended their schedules asserting that the anticipated bonus should not be deemed property of the bankruptcy estate. [Read more…] about Anticipated Discretionary Bonus Not Property of Estate

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Court Rejects “Certainty of Hopelessness” and Limits Repayment Period

“[N]otwithstanding a debtor’s potential eligibility for an extended term student loan repayment program, if a debtor chose not to enter such a program in good faith, the repayment period under the second Brunner prong is the remaining contractual term of the debtor’s loan.” Price v. Devos (In re Price), No. 15-17645, Adv. Proc. No. 16-11 (Bankr. E.D. Pa. June 23, 2017).

The debtor, Kristin M. Price, was a twenty-nine-year old, soon-to-be-divorced, mother of three young children. She was educated and trained to work in vascular sonography and was employed part-time in that field. She filed for chapter 7 bankruptcy in October, 2015. At that time, she had an outstanding student loan from the Department of Education which she sought to discharge under section 523(a)(8). [Read more…] about Court Rejects “Certainty of Hopelessness” and Limits Repayment Period

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Abandonment of Acceleration

A creditor may abandon acceleration of a Note either by explicit agreement or by actions consistent with abandonment. In re Williams, No. 16-33276 (Bankr. S.D. Tex. Aug. 3, 2017).

Chapter 13 debtor, Durwyn Williams, defaulted on his home equity loan from U.S. Bank Trust which was serviced by Caliber Home Loans. On June 28, 2010, Caliber accelerated the balance due on the Note, and commenced foreclosure proceedings against the property securing the Note. In August, 2014, with foreclosure proceedings still ongoing, Caliber sent Mr. Williams a notice reiterating that his property was in foreclosure and that there was an outstanding balance of approximately $250,000.00. When Mr. Williams filed chapter 13 bankruptcy in June, 2016, Caliber filed a proof of claim for over $500,000.00. Mr. Williams objected to the proof of claim as precluded by the four-year statute of limitations triggered when Caliber invoked the Note’s acceleration clause. [Read more…] about Abandonment of Acceleration

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Texas Tax Purchaser’s Rights Cannot Be Modified

Where the chapter 13 debtor failed to redeem property sold in a tax sale within the time period laid out in section 108(b)(2), the tax purchaser had an ownership interest in the property rather than a lien and was, therefore, entitled to relief from stay to take possession. In re Millington, No. 17-31290 (Bankr. S.D. Tex. Aug. 8, 2017).

Derron Millington filed for chapter 13 bankruptcy three days before expiration of the Texas deadline for redeeming property sold through tax foreclosure. When he failed to redeem after filing his petition, Gulf States, the tax purchaser, moved for relief from stay. [Read more…] about Texas Tax Purchaser’s Rights Cannot Be Modified

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What Makes a Lien “Judicial”?

Where the debtor has a right to due process prior to the fixing of a debt, the lien acquired by the clerk of court’s filing the certificate of the debt is a judicial lien subject to avoidance in bankruptcy. Arkansas Dept. of Workforce Serv. v. Leaks, No. 16-8036 (E.D. Ark. June 14, 2017).

Tilda Marie Chambers Leaks received two overpayments of unemployment benefits. The Arkansas Department of Workforce Service (ADWS) concluded that the overpayments were due to fraud. It filed with the county clerk’s office Certificates of Overpayments of Unemployment Benefits and certified that all appeal rights had been exhausted. When the clerk filed the certificates of debt, liens against Ms. Leaks’ property were automatically created. In her chapter 13 bankruptcy, Ms. Leaks sought to avoid both liens as judicial liens impairing an exemption under section 522(f). The bankruptcy court granted the motion. [Read more…] about What Makes a Lien “Judicial”?

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Discovery Rule Applies to Accrual of Cause of Action

Where the debtor did not discover the injury giving rise to a medical product liability class action suit until after her bankruptcy was closed, the settlement proceeds from that cause of action were not property of the estate even though the debtor underwent the medical procedure while the bankruptcy was still pending. In re Purcell, No. 08-40224 (Bankr. D. Kan. July 19, 2017). [Read more…] about Discovery Rule Applies to Accrual of Cause of Action