ncbrc

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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

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Embezzlement Claim Based on Divorce Decree Survives Motion to Dismiss

The plaintiff’s allegations of embezzlement with respect to 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

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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

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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

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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

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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

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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

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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

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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

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Laches Forecloses Trustee’s Motion to Dismiss

Where the Trustee slept on her right to challenge the debtor’s method of calculating her plan payments until shortly before the debtor completed her plan, the doctrine of laches compelled denial of the trustee’s motion to dismiss. In re Melcher, No. 16-21536 (Bankr. E.D. Ky. Aug. 30, 2022).

The debtor and the chapter 13 Trustee negotiated a 60-month plan in which the debtor agreed to commit one third of her annual gross income over $120,000 to the plan (“excess income payments”). The debtor calculated her first excess income payment by taking the income from Box 1 of her W-2 form, subtracting $120,000 and multiplying the result by .33. After discussion with the Trustee and one of her creditors, the debtor’s payment was accepted as correct. The debtor used the same method of calculation for the following years’ excess income payments. [Read more…] about Laches Forecloses Trustee’s Motion to Dismiss