Discharge of the credit card debts did not render the arbitration clause of the credit card agreement unenforceable and, where the clause was valid and not in conflict with the Code, the credit card companies’ motion to compel should have been granted. Belton v. GE Capital Consumer Lending Inc., No. 15-1934, consolidated with In re Bruce, No.15-3311 (S.D. N.Y. Oct. 14, 2015). [Read more…] about Discharge Injunction Claim Subject to Arbitration – Overturned on Reconsideration
CFPB Sues Over Student Financial Aid Scam
Taking advantage of confusion and concern over the costs of higher education, a financial aid scam has garnered millions of dollars in fees for bogus student loan financial services. The scam is run by Armond Aria using companies called Global Financial Support, Inc., Student Financial Resource Center and College Financial Advisory. The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against the companies and Aria in the District Court for the Southern District of California alleging that Aria and his companies violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by misleading consumers about their services. Specifically the complaint alleges that the company issues marketing letters to students and their families offering to conduct searches to match students with individualized financial aid opportunities. The letters falsely represent affiliation with the government or academic institution and demand a fee ranging from $59 to $78 to conduct the search. Students are instructed to fill out an application and pay the fee in accordance with a meaningless deadline or risk losing the opportunity to receive financial aid. In return, the applicants receive either nothing at all, or a general booklet on financial aid. In fact, the Department of Education operates the Free Application for Federal Student Aid (FAFSA), a national program enabling students to apply for college loans and grants. There is no fee associated with this program.
The lawsuit seeks both injunctive relief to stop the unlawful practices and restitution for those consumers harmed by the illegal conduct.
Debtor with No Mortgage May Take Housing Expense Deduction
May a bankruptcy debtor with no mortgage payments nonetheless take the deduction for “Local Standards: Housing and Utilities; mortgage/rent expense” when calculating her disposable income on the Means Test? The Bankruptcy Court for the Central District of Illinois said, “yes.” In re Currie, No. 14-71331 (Sept. 17, 2015). [Read more…] about Debtor with No Mortgage May Take Housing Expense Deduction
Post-Harris Attorney Fee Review
Since the Supreme Court’s decision in Harris v. Viegelahn, 135 S. Ct. 1829 (2015), the issue of payment of the debtor’s chapter 13 attorney’s fees out of undisbursed funds held by the chapter 13 trustee upon conversion to chapter 7 has split the courts. [Read more…] about Post-Harris Attorney Fee Review
Cautionary Tale: Pro Se Debtor Stuck with Reaffirmation Agreement
The court was powerless to permit the pro se debtor to rescind her reaffirmation agreement with her car creditor where she failed to rescind the agreement within the sixty-day time limit set forth in section 524(c)(4). In re Galloway-O’Connor, 2015 Bankr. LEXIS 3283, No. 15-70981 (Bankr. E.D. N.Y. September 29, 2015). [Read more…] about Cautionary Tale: Pro Se Debtor Stuck with Reaffirmation Agreement
NCBRC Gains Support of the American College of Bankruptcy Foundation
The National Consumer Bankruptcy Rights Center (NCBRC) is honored to have received a 2015 Pro Bono Grant in the amount of $10,000.00 from the American College of Bankruptcy Foundation. NCBRC is a 501(c)(3) organization dedicated to protecting the integrity of the bankruptcy system and preserving the rights of consumer bankruptcy debtors. NCBRC advances these goals by providing assistance either through working directly with debtors’ attorneys or by filing amicus briefs in courts throughout the country.
Formed in 1989, the ACB is an honorary public service association of bankruptcy and insolvency professionals invited to join based on their established record of the highest standards of professionalism and public service to the profession. It is the largest financial supporter of bankruptcy and insolvency-related pro bono legal service programs in the United States. The ACB’s stated missions of: “sponsorship and encouragement of legal research, publications and forums; establishment of scholarships; providing for the collection and maintenance of data and documents for scholarly research; and fostering the institution and maintenance of legal aid facilities for the indigent,” harmonize with those of NCBRC to support the bankruptcy bar and assist the most financially vulnerable members of society.
NCBRC’s Board of Directors is grateful to the American College of Bankruptcy Foundation for its confidence in our mission and support in our mutual goals of providing the best and broadest assistance to consumer debtors in their quest for a fresh start. Without the support of donors like the ACB Foundation, the assistance provided by NCBRC would not be possible.
Pernicious Scam Targets Bankruptcy Filers
A new scam targeting bankruptcy filers has emerged in several states under which con artists, posing as the intended victim’s bankruptcy attorney or a staff member, are calling and telling the consumer to wire money immediately to satisfy a debt. The callers may threaten the consumer with dismissal of their ongoing bankruptcy case, discharge revocation, or even arrest. Callers tend to be sophisticated and well-informed with knowledge of details about the case, perhaps through access to PACER, including the judge’s name and case status.
One bankruptcy attorney reported the following scenario. His client received a call during non-business hours using “spoofing” technology to make it appear on Caller ID that the call was coming from the bankruptcy attorney’s office. The caller identified himself as an associate of the intended victim’s attorney and explained that a creditor was opposing discharge and that, in order to prevent unraveling of the case, the attorney had negotiated a settlement outside bankruptcy under which the debtor must immediately wire money directly to the creditor. Failure to do so was likely to result in dismissal or discharge revocation. Fortunately, the client suspected a scam and hung up.
In light of this and other scams, it would be wise for bankruptcy attorneys to explain to all clients the specific method of communications they employ when contacting clients. Clients should be warned that under no circumstances would a bankruptcy attorney or staff member telephone and ask for a wire transfer immediately to satisfy a debt. Nor would the bankruptcy attorney or staff member ever threaten arrest if a debt is not paid. Clients should be advised that the best thing to do upon receipt of one of these calls is to hang up without giving out any personal or account information and contact their bankruptcy attorney as soon as possible. Recipients of these calls should also contact their state Attorney General’s Consumer Assistance Program.
Undisbursed Funds Go To Debtor upon Dismissal
Post-confirmation wages that are undisbursed upon dismissal of the debtor’s chapter 13 case must be returned to the debtor without distribution to the debtor’s attorney, the trustee, or creditors. In re Edwards, 2015 Bankr. LEXIS 3195, No. 13-30230 (Bankr. S.D. Ill. September 22, 2015). [Read more…] about Undisbursed Funds Go To Debtor upon Dismissal
Ninth Circuit Overturns Sternberg
The Ninth Circuit Court of Appeals issued an en banc decision “that 11 U.S.C. § 362(k) authorizes an award of attorney’s fees reasonably incurred in a debtor’s prosecution of a suit for damages to provide redress for a violation of the automatic bankruptcy stay.” America’s Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard), ___ F.3d. ___, No. 12-60052 (Oct. 14, 2015). In so holding, the court overruled Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), which held that section 362(k) “allowed a debtor to recover only those fees incurred to end the stay violation itself, not the fees incurred to prosecute a damages action.” [Read more…] about Ninth Circuit Overturns Sternberg
CFPB Reports on Student Loan Servicer Failures
The CFPB has come out with a report detailing roadblocks to federal and private student loan repayment caused by student loan servicers’ sloppy practices. The report states that “41 million Americans collectively owe more than $1.2 trillion in student loan debt, making student loan debt the second-largest class of consumer debt behind mortgages.” One in four student loan borrowers are delinquent or in default on student loans. The CFPB received more than 30,000 responses to its notice to student loan borrowers requesting comments on student loan servicing.
Reported problems include:
- Difficulty accessing information about loan accounts and repayment programs,
- Incorrect information or inaccurate billing statements that are difficult to correct,
- Surprise fees and lost benefits caused when servicer changes result in lost account records, new policies or disrupted administration of accounts,
- Inaccurate payoff statements or surprise bills demanding extra payments,
- Incorrect classification as in default upon the death of a co-signer even though payments are current,
- Application of payments to costs and fees rather than to loan repayment.
Servicing problems raise concerns about whether debtors who fulfill the requirements for income-based lower monthly payment plans are receiving information about those plans, or are instead being steered into less-advantageous, short-term options like forbearance. The report noted that servicer mishandling of student loans may adversely affect older people, veterans and consumers with disabilities, disproportionately.
The report makes a number of recommendations intended to provide a roadmap for reform, including:
- Consistent, industry-wide, standards for the servicing market,
- Federal and state enforcement of consumer protection laws to hold servicers accountable,
- Requiring servicers to provide timely, accurate, information about loan repayment and alternative payment plans,
- Greater transparency including publication of servicer-level information on loan performance.
The CFPB offers a guide to navigate the repayment options through its Repay Student Debt tool.
CFPB Student Loan Servicing Report Sept 2015