National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Debtor may not modify default interest rate.

A “cure and maintain” plan permits deceleration of the loan but does not allow a debtor to return to the pre-default interest rate. Anderson v. Hancock (In re Hancock), No. 15-1505 (4th Cir. April 27, 2016).

The Andersons purchased residential property from the Hancocks, financed in the amount of $255,000 by the sellers. The Andersons signed a thirty year note agreeing to pay $1,368.90 per month including interest payments at 5%. In the event of a default, the note provided that the interest rate would increase to 7%. The note also entitled the Hancocks to accelerate the loan. When the Andersons defaulted on the loan, the Hancocks imposed the default interest rate, notified the Andersons of acceleration of the loan, and instituted foreclosure. The debtors filed chapter 13 bankruptcy proposing to cure the arrears and maintain payments at the 5% interest rate through the life of the plan. The Hancocks objected to the plan on two bases. First, they argued that the calculation of arrears was too low because it was based on the pre-default interest rate. Second, they maintained that all future payments on the loan should be at the 7% interest rate. [Read more…] about Debtor may not modify default interest rate.

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Compassion and Common Sense Enter Student Loan Discharge Arena

Where there was sufficient evidence to corroborate the debtor’s credible testimony of medical disability indicating likelihood of her inability to work in the future, the second prong of Brunner is satisfied even though there may be more or better corroborating evidence the debtor could have presented. Nightingale v. North Carolina State Educational Assistance Authority, 2016 Bankr. LEXIS 1667, No. 13-10834, Adv. Proc. No.13-2060 (Bankr. M.D. N.C. April 14, 2016). [Read more…] about Compassion and Common Sense Enter Student Loan Discharge Arena

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SSA May Not Recoup Overpayment from Future Benefits

Finding no logical relationship between the debtor’s obligation to repay pre-petition overpayments and her entitlement to future social security benefits, a bankruptcy court in the eastern district of California denied the Social Security Administration’s request for recoupment. United States v. Angwin, No. 15-11120, Adv. Proc. No. 15-1080 (Bankr. E.D. Cal. April 5, 2016). [Read more…] about SSA May Not Recoup Overpayment from Future Benefits

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Certainty of Hopelessness that Judge Will See Reason

In a sanctimonious opinion divorced from reality, devoid of compassion, and logically flawed, a district court for the Middle District of Alabama found that the debtor failed to establish a “certainty of hopelessness” with respect to future ability to pay off her student loans and directed the bankruptcy court to find the debts nondischargeable. ECMC v. Acosta-Conniff, No. 15-220 (M.D. Ala. May 2, 2016). [Read more…] about Certainty of Hopelessness that Judge Will See Reason

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Notice of Abandonment Not Required under 554(c)

Where the debtor’s asset was included in his chapter 7 schedules, the trustee certified in his Final Report that the estate had been fully administered, and the case was closed, the asset was abandoned. In re Robertson, 2016 Bankr. LEXIS 931, No. 14-20984 (Bankr. D. Utah, March 24, 2016).

Michael Lynn Robertson listed his breach of contract claim against Banner Bank (successor to Far West Bank) on his schedules when he filed for chapter 7 bankruptcy. The trustee communicated with counsel for both Mr. Robertson and Banner Bank but neither the trustee nor the Bank took any action with respect to the claim. The trustee filed his Report of No Distribution and the court closed the case, both actions accomplished by text entry. [Read more…] about Notice of Abandonment Not Required under 554(c)

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Misapplication of Plan Payments Violates Discharge Injunction

The secured creditor violated the discharge injunction when it misapplied plan payments and then claimed default and late charges post-discharge. Scott v. Caliber Home Loans, 2015 WL 9986691, No. 09-11123, Adv. Proc. No. 14-1040 (Bankr. N.D. Okla. July 28, 2015).

When Patricia J. and Michael A. Scott filed their chapter 13 petition, the predecessor to Caliber Home Loans filed a claim for $180,527.66 with an arrearage of $19,073.96 and ongoing monthly payments of $1,414.19. The Scotts’ plan included paying off their mortgage arrears and maintaining their mortgage payments to Caliber. They made all their plan payments and prior to discharge, Caliber filed a Notice of Post-Petition Mortgage Fee, Expenses, and Charges of $2,061.82. The Scotts paid that amount through the plan. One month before discharge Caliber filed its Statement in Response to Notice of Final Cure Payment stating the debtors had cured the mortgage arrears and were current on their mortgage payments. The debtors received their discharge in March, 2014, and the trustee sent his Notice of Final Cure on April 21, 2014. On May 1, 2014, Caliber mailed a statement to the Scotts stating that they were delinquent in the amount of $3,139.97 for past due monthly payments and uncollected “Late Charges.” Caliber sent a notification that the Scotts were in default and that it had the right to undertake collection action including foreclosure. [Read more…] about Misapplication of Plan Payments Violates Discharge Injunction

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Post-Discharge Settlement Not Estate Property

A post-discharge settlement based on a medical device implanted in and removed from the debtor pre-petition was not part of the bankruptcy estate. In re Ross, No. 08-04-87445 (Bankr. E.D. N.Y. April 14, 2016)

At the time Barbara Ross filed her bankruptcy petition, there was no reason to believe the medical device was problematic and, in fact, at the time of the settlement, six years post-discharge, the debtor had suffered no injury as a result of the device. The settlement was provided out of surplus funds relating to the settlement of a class action lawsuit concerning a slightly different medical device. The trustee sought to reopen Ms. Ross’s chapter 7 bankruptcy under section 350, to administer the settlement as property of the estate under section 541. [Read more…] about Post-Discharge Settlement Not Estate Property

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Tax Scammers Arrested in Miami

Five Cuban nationals were arrested in Miami in connection with an ongoing tax scam. See Washington Post. The sophisticated scam involves scammers calling victims on the telephone, often using Voice Over Internet Protocol that makes the caller ID appear to be the IRS, falsely identifying themselves as IRS agents, and demanding money for taxes owed. The callers insist that money be wired immediately, recently demanding that the victims pay using iTunes gift cards, or the victim will be subject to arrest. When they call, they claim to have the victim’s tax return and they seek further personal information.

The suspects are accused of tricking 1,500 victims into paying a total of $2 million. This is the “largest and most pervasive” scam the IRS has faced in 30 years and is thought to have taken in approximately 6,400 victims overall and netted criminals $36.5 million.

The scammers were tracked down following a tip that came into the Senate Aging Committee’s fraud hotline last year. The call led fraud investigators to uncover the identity of some of the suspects through Walmart surveillance tapes. Christian Science Monitor. The suspects have been charged with wire fraud and conspiracy to commit wire fraud.

The IRS advises victims receiving such calls to hang up immediately. For more information, call the IRS information line at 1.800.829.1040. To report scams contact TIGTA at 1.800.366.4484 or visit the “IRS Impersonation Scam Reporting” form on their website.

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No Conflict Between FDCPA and Code

“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, No. 15-11240 (11th Cir. May 24, 2016). In two separate cases, Alieda Johnson and Judy N. Brock sued debt collectors for violation of the FDCPA alleging that they used “false, deceptive, or misleading representation or means in connection with the collection of any debt” (15 U.S.C. § 1692e) when they filed proofs of claim in the plaintiffs’ bankruptcy cases for debts they knew to be time-barred. The district courts granted the debt collectors’ motions to dismiss finding that the Bankruptcy Code permits a creditor to file a proof of claim for which it has a “right to payment,” and that the FDCPA and the Code are irreconcilable. The cases were consolidated on appeal to the Eleventh Circuit. [Read more…] about No Conflict Between FDCPA and Code

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Nondischargeability Based on Collateral Estoppel

Issue preclusion provided a short-cut to finding that the debtor’s liability for the costs and penalties incurred under state consumer protection laws was nondischargeable in bankruptcy under section 523(a)(6). O’Rorke v. Porcaro (In re Porcaro), No. 15-26 (B.A.P. 1st Cir. Feb. 3, 2016). [Read more…] about Nondischargeability Based on Collateral Estoppel