National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Title-Pawned Vehicles Property of Estate

Vehicles subject to title pawn are property of the bankruptcy estate where the debtors filed their bankruptcy petitions prior to expiration of the redemption period. Title Max v. Northington, No. 16-172 (M.D. Ga. Oct 27, 2016).

In this consolidated appeal, the chapter 13 debtors, Jonathan Northington and Gustavius Wilber, pawned their vehicles with Title Max. Under Georgia law, the debtors had the right to redeem the vehicles within thirty days of maturation of the pawn transaction by paying the remaining principal, plus interest and pawnshop fees. Both debtors filed for bankruptcy before the redemption period expired and Title Max filed proofs of claims as a secured creditor. [Read more…] about Title-Pawned Vehicles Property of Estate

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Mandamus Cannot Substitute for Untimely Appeal

Where the debtor failed to timely appeal the bankruptcy court’s holding that it lacked jurisdiction over his motion for damages based on violation of the automatic stay, the BAP did not have jurisdiction to rule on the debtor’s petition for writ of mandamus concerning that same holding. Ozenne v. Chase Manhattan Bank, No. 11-60039 (9th Cir. Nov. 9, 2016). [Read more…] about Mandamus Cannot Substitute for Untimely Appeal

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District Court Oversteps on Issue of Sovereign Immunity in Section 362

Sovereign immunity precludes a damages award for emotional distress based on the IRS’s violation of the automatic stay. Hunsaker v. United States, No. 16-386 (D. Or. Oct. 20, 2016). The district court reversed the bankruptcy court’s damage award (blogged here), finding that sovereign immunity can be waived only by “unequivocal, clear statutory language. F.A.A. v. Cooper, 132 S. Ct. 1441, 1448 (2012).” [Read more…] about District Court Oversteps on Issue of Sovereign Immunity in Section 362

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Late-Filed Proofs of Claim Disallowed

“If a creditor wishes to participate in the distribution of a debtor’s assets under a Chapter 13 plan, it must file a timely proof of claim.” Spokane Law Enforcement Fed’l Credit Union v. Barker, No. 14-60028 (9th Cir. Oct. 27, 2016).

Marcella Lee Barker filed her chapter 13 petition, and the Spokane Law Enforcement Federal Credit Union was notified of the filing and the deadline for filing a proof of claim. In the schedules accompanying her proposed plan, Ms. Barker listed a secured loan from the Credit Union in the amount of over $6,600 and an unsecured loan in the amount of over $47,000. Four months after the filing deadline had elapsed, the Credit Union filed its proofs of claim. The Credit Union sought an order from the bankruptcy court to allow the claims. The court denied the motion and disallowed the claims as untimely. The BAP for the Ninth Circuit affirmed. [Read more…] about Late-Filed Proofs of Claim Disallowed

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HAMP Deadline Is Fast Approaching

HAMP, the Treasury program that allows eligible homeowners to reduce their mortgage payment, will come to an end on December 30, 2016. The program, begun in 2009 as part of the “Making Home Affordable” initiative, was extended from its original deadline of December 30, 2015. A compilation of information provided by servicers participating in MHA under a Servicer Participation Agreement shows that, as of September, 2016, the program has processed over 9.3 million applications of which approximately 2.9 million were approved and 6.5 million denied.

To apply for HAMP, you must submit by December 30, 2016:

  • A “Request for Mortgage Assistance”  (RMA) form
  • IRS Form 4506T, 4506T-EZ, or a signed copy of last year’s tax return
  • The “Dodd-Frank Certification” (which may be part of the RMA)
  • Proof of income

Forms and information about the program are available at www.makinghomeaffordable.gov.

hamp-activity-report

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Plan May Provide for Balloon Payment

A plan providing for periodic payments on a mortgage ending with a balloon payment during the plan, does not violate the Code’s requirement that plan payments be in “equal monthly amounts.” In re Cochran, No. 15-52314 (Bankr. M.D. Ga. Sept. 1, 2016).

William Jackson Cochran had a loan from the Bank of Perry which was secured by his residence and surrounding land. The terms of the lending agreement were that Mr. Cochran would make regular monthly payments for three years then pay off the remainder of the loan in a balloon payment. When the balloon payment came due, Mr. Cochran was unable to make it but continued to make the regular monthly payments. The Bank assigned the loan to RREF and RREF instituted a foreclosure action. Mr. Cochran filed a chapter 13 bankruptcy petition to save his home. His proposed plan contemplated continuing the payments he had been making as Adequate Protection Payments. The plan proposed to pay the remainder of the debt in a single payment within twelve months of confirmation. [Read more…] about Plan May Provide for Balloon Payment

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Demand for Full Payment Does Not Accelerate Mortgage Maturity Date

Demanding full payment of a mortgage after the debtor’s default did not accelerate the maturity date such that the limitations period for filing a foreclosure action was moved up. Washington v. Bank of New York Mellon, No. 15-3210 (3rd. Cir. Sept. 30, 2016) (unpublished).

Though the mortgage agreement specified a maturity date of 2037, the debtor, Gordon Washington, argued that when Bank of New York demanded full payment and filed its first foreclosure action in 2007, it activated the mortgage agreement’s acceleration clause and established a new maturity date for the mortgage. The foreclosure action failed for lack of prosecution and the creditor filed a new action after Mr. Washington had filed his bankruptcy petition in 2014. Mr. Washington then sought an order to the effect that the creditor no longer had an interest in the property because the limitations period had elapsed. [Read more…] about Demand for Full Payment Does Not Accelerate Mortgage Maturity Date

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Chapter 20 Fails on Bad Faith

The bankruptcy court did not abuse its discretion in dismissing the debtor’s chapter 13 case for bad faith filing. The fact that the chapter 13 was filed while the debtor’s chapter 7 was still pending was a factor to be considered in the bad faith analysis but was not dispositive. Cuevas v. Chandler (In re Cuevas), No. 15-1032 (B.A.P. 9th Cir. Oct. 5, 2016) (unpublished). [Read more…] about Chapter 20 Fails on Bad Faith

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Cert. Granted in FDCPA Case

The Supreme Court today granted certiorari in the case of Midland Funding, LLC. v. Johnson, No. 16-348, in which the Eleventh Circuit found that not only does a proof of claim on a time-barred debt violate the FDCPA, but the FDCPA claim is not in conflict with, nor is it precluded by, the Bankruptcy Code.

This issue has been circulating in various forms throughout the courts as many debt collectors have made it a business practice to file proofs of claim in bankruptcy cases on debts they know to be time-barred and, therefore, uncollectible. Success of this practice depends upon the claim slipping past the debtor and his or her attorney, if the debtor is represented, as well as the bankruptcy trustee. In many cases, trustees have conceded that they do not routinely check proofs of claim for validity based on timeliness. NACBA has taken a stand on the issue, arguing that such practices violate the FDCPA and that the debtor can prosecute the FDCPA claim notwithstanding the existence of the bankruptcy action. Owens v. LVNV Funding, LLC, ___F.3d ___, 2016 WL 4207965 (7th Cir. Aug. 10, 2016); Nelson v. Midland Credit Management, Inc., ___ F.3d ___, 2016 WL 3672073 (8th Cir. July 11, 2016).

 

 

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Surrender Ends State Foreclosure Fight

“Debtors who surrender their property in Bankruptcy may not oppose a foreclosure action in state court.” Failla v. Citibank, No. 15-15626 (11th Cir. Oct. 4, 2016). Bankruptcy debtors, David and Donna Failla, opted, under section 521(a)(2)(B), to surrender their home but continued to live in the house and oppose Citibank’s state court foreclosure action. The trustee abandoned the property as having negative value. Citibank moved to compel surrender. The bankruptcy court granted the motion ordering the Faillas to cease opposition to foreclosure in the state court. The district court affirmed. [Read more…] about Surrender Ends State Foreclosure Fight