National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Cross-Collateralized Loans May Be Crammed Down

Cross-collateralized loans were not immune from cramdown where they did not have a “close nexus” to the purchase of the collateral vehicles for purposes of the 910-claim exception to cramdown, and motor vehicles are not “any other thing of value” for purposes of the second exception. In re McPhilamy, No. 16-10238 (Bankr. S.D. Tex. Jan. 31, 2017).

In their chapter 13 plan, the debtors, Sean and Bertha McPhilamy, sought to treat as unsecured five of the seven claims held by Rio Grande Federal Credit Union (RGFCU). The claims were based on loans cross-collateralized by two motor vehicles, a Honda Civic and a Chevy Camaro. The loans were executed at least within 910 days, and in some cases within one year, of the McPhilamy’s bankruptcy. The plan proposed to treat the other two of the seven claims (claims 10 and 12) as secured because they were for loans used to purchase the two vehicles at issue. Those two debts exceeded the value of the vehicles.

Though RGFCU did not object to confirmation, the trustee moved to dismiss or convert on the basis that the debtors had failed to propose a confirmable plan. [Read more…] about Cross-Collateralized Loans May Be Crammed Down

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NCBRC’s Year in Review

Financially distressed debtors seeking the fresh start offered by bankruptcy, often lack the resources to pursue important issues at the appellate level. In an effort to equalize the playing field between consumer debtors and their creditors, the NACBA Board created the National Consumer Bankruptcy Rights Center (NCBRC or “Nicbric”), a 501(c)(3) organization. Since its inception in 2010, NCBRC has provided support to consumer bankruptcy debtors and their attorneys in cases of national importance. NCBRC fulfills its mission through three programs. Under the Amicus Program, NCBRC has filed briefs in cases addressing such vital issues as the invidious practice of debt collectors filing stale claims and the misapplication of judicial estoppel by the courts. In its Pro Bono Appellate Program, NCBRC has worked with attorneys from leading bankruptcy firms around the country who have donated over 300 hours to the amicus project. Finally, NCBRC’s Educational Program is devoted to supporting the bankruptcy bar by providing education on current issues in consumer bankruptcy. To this end, NCBRC’s Project Director, Tara Twomey, is an active participant in in-person and on-line training programs.
To  learn more about NCBRC in general and to read about specific cases in which NCBRC filed amicus briefs in 2016, go to NCBRC Year in Review 2016.
In order to continue this great work we need your help. Consider making a contribution today by clicking here.

 

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Property Tax Refund Not Exemptible

A state property tax refund intended to “provide property tax relief to certain persons who own or rent their homesteads,” is not “government assistance based on need,” for purposes of Minnesota exemptions. Hanson v. Seaver (In re Hanson), No. 16-6023 (B.A.P. 8th Cir. Jan. 6, 2017).

Upon objection by the chapter 7 trustee, the Bankruptcy Court found debtor, Sheri Lynn Hanson, was not entitled to the public assistance exemption based on her refund under the Minnesota Property Tax Refund Act. [Read more…] about Property Tax Refund Not Exemptible

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Escrow Is Not Separate Collateral

Provisions in a deed of trust, including an obligation for the debtor to maintain an escrow account, are incidental to the residential security interest and do not remove the claim from bankruptcy’s anti-modification provision. Birmingham v. PNC Bank, No. 15-1800 (4th Cir. Jan 18, 2017).

Chapter 13 debtor, Gregory John Birmingham, filed an adversary complaint seeking to cram down his mortgage with PNC and arguing that the anti-modification provision did not apply because PNC’s claim was not secured solely by his residence. Specifically, Mr. Birmingham pointed to the provisions in the lending agreement requiring him to: 1) maintain an escrow account to cover obligations such as property taxes, 2) maintain property insurance, and 3) assign to PNC any proceeds from third parties arising out of judgments, settlements or other actions involving the property.

The bankruptcy court granted PNC’s motion to dismiss and the district court affirmed. [Read more…] about Escrow Is Not Separate Collateral

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CFPB Goes After Student Loan Servicer

In a Press Release issued on January 18, the CFPB announced that it was suing the nation’s largest student loan servicer, Navient Corporation, for illegal activity at every stage of the student loan process. The company is accused of systematically creating obstacles to repayment by providing bad information, incorrectly processing payments and failing to act on customer complaints. The complaint alleges that Navient’s conduct resulted in borrowers paying much more than they would have had their loans been properly serviced and had they been given accurate information about alternative repayment plans.

Navient, formerly part of Sallie Mae, Inc., services more than 12 million student loans approximately half of which are through its contract with the Department of Education.

According to CFPB Director, Richared Cordray, “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”

Specifically, the CFPB accuses Navient and two of its subsidiaries, Pioneer Credit Recovery and Navient Solutions, of:

  1. Failing to correctly apply or allocate payments to borrower’s accounts,
  2. Steering borrowers who had trouble repaying their loans away from the lower repayment plans they were entitled to under federal law and into forbearance programs which allow interest to accrue while the borrower is on hiatus from repaying the loan,
  3. Failing to inform borrowers enrolled in income-driven repayment plans of the need to renew those plans annually,
  4. Deceiving private student loan borrowers as to the steps necessary to release a co-signer from the loan,
  5. Harming the credit of disabled borrowers including severely injured veterans.

The lawsuit alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the FCRA and the FDCPA.

 

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City Lacked Standing to Object to Plan’s Tax Redemption Provision

The City of Philadelphia lacked standing to object to the debtor’s plan provision under which he proposed to redeem over the life of the plan property sold in a tax sale. In re Wilson, No. 15-6385 (E.D. Pa. Dec. 28, 2016)

Earl Wilson failed to pay his city property tax. As a result, the property was sold at auction and sold again to a “subsequent purchaser” in accordance with Pennsylvania’s Municipal Claims and Tax Lien Act (“MCTLA”). That law permits a tax debtor to redeem property within nine months of sale. Mr. Wilson filed for chapter 13 bankruptcy in which his revised Fifth Amended Plan proposed to pay the redemption amount over the course of the plan. The bankruptcy court confirmed the plan over the City’s objection specifically finding that the City lacked standing to object to that portion of the plan providing for redemption of the property. [Read more…] about City Lacked Standing to Object to Plan’s Tax Redemption Provision

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FTC Cracking Down on Dishonest Payday Lenders

The FTC has been going after fraudulent payday lending operations centered in Missouri and Kansas, with settlements as high as $1.266 billion.

In a press release dated January 9, 2017, the FTC announced charges against businessman, Joel Jerome Tucker, and his companies, SQ Capital LLC, JT Holding Inc., and HPD LLC, for selling portfolios made up of fake payday loans. According to the FTC, the loans listed in the portfolios named phony lenders and debtors, including their social security and bank account numbers, and led to collection activities against consumers who had not taken out loans. The FTC previously brought actions against two debt collectors that used the fake portfolios. [Read more…] about FTC Cracking Down on Dishonest Payday Lenders

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Battle Lines Have Been Drawn – Midland v. Johnson

In a flurry of party and amici briefs, the issue of whether a proof of claim for a stale debt gives rise to an FDCPA claim has been briefed before the Supreme Court. Midland Funding v. Johnson, No. 16-348 (petition filed Sept. 16, 2016). The case is on appeal from the Eleventh Circuit decision that the “Bankruptcy Code does not preclude an FDCPA claim in the context of a Chapter 13 bankruptcy when a debt collector files a proof of claim it knows to be time-barred.” Johnson v. Midland Funding, LLC, C.A. No. 15-11240, 2016 U.S. App. LEXIS 9478 (11th Cir. May 24, 2016). The issue is currently pending in courts around the country including the First, Third, Sixth, Seventh and Eighth Circuits. Oral argument is scheduled for January 17.

Johnson ACA Intl amicus
Johnson Brunstad Amicus
Johnson Chamber of Commerce amicus
Johnson DBA intl amicus
Johnson NABT Amicus
Johnson NACBA Amicus SCt Dec 2016
Johnson NARCA amicus
Johnson NCLC etc amicus
Johnson Petition brief
Johnson petition reply
Johnson Reprinted brief of respondent
Johnson Resurgent Capital Amicus
Johnson US amicus