National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Avoiding a Lien Requires that the Lien Exist

Where the creditor sought to establish a judicial lien against the debtor’s interest in a tenancy in the entirety the threshold question is not whether the lien impairs the homestead exemption and may be avoided under section 522(f)(1), but whether a lien has been created at all. CRP Holdings v. O’Sullivan, No. 16-1526 (8th Cir. Nov. 14, 2016).

CRP obtained a default judgment against Casey Drew O’Sullivan and, attempting to secure a judicial lien on his real property, filed a notice of foreign judgment in the county where Mr. O’Sullivan’s residence was located. Mr. O’Sullivan filed for chapter 7 bankruptcy and claimed the property, which he owned as tenants in the entirety with his wife, as his homestead. The bankruptcy court sustained Mr. O’Sullivan’s motion to avoid the judicial lien. The BAP affirmed, finding that while CRP’s lien may not have been enforceable, it could still be avoided. In re O’Sullivan, 544 B.R. 407 (B.A.P. 8th Cir. 2016). [Read more…] about Avoiding a Lien Requires that the Lien Exist

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Texas Court Addresses Post-Petition Sale of Homestead in Chapter 7

A homestead that is exempt in chapter 7 is not part of the bankruptcy estate and, therefore, proceeds from its post-petition sale do not enter the estate for purposes of distribution to creditors. In re Montemayor, 547 B.R. 684 (Bankr. S.D. Tex. 2016) (Case No. 14-10031, Adv. Proc. No. 15-1003).

Juan Jose Montemayor filed for chapter 7 bankruptcy and claimed an exemption in a half-interest in real property as his homestead under Texas law. Post-petition he sold his interest in the property. With some of the proceeds, he bought land and commenced construction on a new residence. He deposited the rest of the proceeds into a bank account for use in building his new residence. When he had not invested all the proceeds in a new homestead within six months, as required by Texas homestead law, the trustee moved for an order requiring him to turn over the funds. The case was before the court on the trustee’s motion for summary judgment. [Read more…] about Texas Court Addresses Post-Petition Sale of Homestead in Chapter 7

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Bankruptcy History Creates Inference of Intent to Hinder, Delay

Where the debtor’s historical use of bankruptcy filings suggested improper purpose to hinder and delay creditors, the trustee’s adversary complaint stated a claim for violation of section 727(a)(2)(A). Rupp v. Pearson (In re Pearson), No. 15-4191 (10th Cir. Nov. 7, 2016).

Ms. Pearson filed a chapter 13 bankruptcy petition and had a plan confirmed in which she agreed to contribute her expected tax refund to the extent it exceeded $2,000. However, she kept the entire $4,829 refund and spent it on non-exempt personal items. As a result, the bankruptcy court dismissed her chapter 13 case. Two week later, she filed the current chapter 7 bankruptcy petition. The trustee filed an adversary complaint seeking to have Ms. Pearson’s discharge denied due to her misappropriation of the tax refund with intent to defraud creditors, in violation of section 727(a)(2)(A). [Read more…] about Bankruptcy History Creates Inference of Intent to Hinder, Delay

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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