National Consumer Bankruptcy Rights Center
Protecting The Rights Of Consumer Debtors In Bankruptcy
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The bankruptcy court for the Eastern District of New York confirmed the debtors’ chapter 13 plan which provided for surrendering their residential property and vesting title in the creditor over that creditor’s objection. HSBC Bank v. Zair, No. 14-74456 (Bankr. E.D. N.Y. Aug. 13, 2015).
[Read more…] about Plan May Vest Surrendered Property in Creditor
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In a September 9, 2015, press release, the CFPB announced that it took action against the nation’s two largest debt buyers and collectors: Encore Capital Group and Portfolio Recovery Associates. Encore’s subsidiaries, also named in the action, are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, the two companies have bought over $200 billion in defaulted loans.
The Bureau found that both companies bought debts that “were potentially inaccurate, lacking documentation, or unenforceable. Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.” The all-too-familiar list of wrongdoing includes attempts to collect on debts that they knew were inaccurate or unenforceable by means of meritless lawsuits that they expected to, and often did, win by default, in violation of the FDCPA and the Dodd-Frank Wall Street Reform and Consumer Protection Act. They lied to consumers about their legal burdens and threatened litigation that was, in fact, not being considered. They harassed consumers with phone calls before 8:00 a.m. and after 9:00 p.m. and, in some instances, made collection calls to the consumer over 20 times in a two-day period.
The enforcement action consists of requiring both entities to stop reselling debts, stop collection efforts with respect to unverified debts, ensure accuracy when filing lawsuits, provide information to consumers such as the name of the creditor and charge-off balance, provide original documentation of the debt, use accurate affidavits, and cease collections efforts on time-barred debts.
Encore was ordered to pay up to $42 million in refunds and to dismiss all pending lawsuits or cease collection efforts on judgments involving misrepresentation.
Portfolio was ordered to pay $19 million in refunds where it made similar legal claims and where it collected payments on default judgments for debts that were barred by the statute of limitations.
Finally, Encore was ordered to pay $10 million and Portfolio $8 million to the CFPB;s Civil Penalty Fund.
The Encore consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf
The Portfolio Recovery Associates consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf
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A bankruptcy court for the District of Maryland held that the chapter 13 trustee could use funds that were undisbursed at the time of conversion to pay accrued fees owed by the debtors to their bankruptcy attorneys. In re Everest, No. 14-29084 (Sept. 10, 2015) consolidated with In re Brandon, No. 14-23735 (lead case), In re Rucker, No. 14-27630, and In re Burrows, No. 14-28940. [Read more…] about Harris Does Not Preclude Attorney Fees Upon Pre-Confirmation Conversion
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On September 8, 2015, Michigan Congressman Dan Kildee introduced a bill in Congress intended to reduce the burden on students and their families caused by the ever-increasing costs of higher education and the financial stress of student loans. H.R. 3451. The proposed legislation removes student loans from section 523(a)’s exceptions to discharge, thereby clearing the way for student loans to be discharged in bankruptcy just as credit card debts and car loans are currently dischargeable. In a statement issued by Mr. Kildee’s office, the necessity for the legislation was founded on his concern that “[s]tudent loan debt has soared in recent years, and there are now over 40 million federal and private student loan borrowers who collectively owe $1.2 trillion in student loans. The average student has $28,400 of loan debt, and total student loan debt in the U.S. has now surpassed credit card and auto loan debt totals.” In a press conference, Mr. Kildee explained: “It’s increasing[ly] clear that well educated society is absolutely necessary to a sustainable economy and to an equitable society that more fairly allocates the vast wealth that we create in this nation. The path to doing that is to make college affordable to more and more people. I think it’s important for us to remind ourselves that a college education for a young person in our state is valuable not just to them [but] for all of us and we should be willing to invest in it.”
Mr. Kildee also introduced two other bills dealing with student loans, one of which would exempt Pell Grants and scholarships from income taxes, and the other which would eliminate some private lenders’ unfair practice of automatically treating loans as being in default when a student’s cosigner dies even where the payments on those loans are current.
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A debt-buyer was out of luck when he could not establish the chain of title between himself and the original lender. Marx v. DeConne (In re DeConne), No. 15-175 (S.D. N.Y. Sept. 2, 2015). [Read more…] about Broken Chain of Title and Disallowed Claims
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A chapter 13 debtor does not have the authority under section 363(h) to sell estate property free and clear of a co-owner’s interest. Kao v. Kelly (In re Kao), No. 15-31193, Adv. Pro. 15-3114 (Bankr. S.D. Tex. July 7, 2015). [Read more…] about Debtor May Not Compel Sale of Property under Section 363(h)
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A post-discharge debt repayment agreement violated the discharge injunction because it was neither voluntary nor supported by new consideration. Venture Bank v. Lapides, No. 14-3085 (8th Cir. Aug. 25, 2015).
[Read more…] about Post-Discharge Agreement to Pay Unenforceable
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Bank of America’s failure to provide the debtor with a written reaffirmation agreement during the pendency of her bankruptcy led the court to deny its motion to reopen and compel surrender. In re Rodriguez, No. 12-12043 (Bankr. S.D. Fla. Aug. 12, 2015). [Read more…] about Court Denies Bank’s Motion to Reopen and Compel Surrender
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In two cases involving the courts’ practice of permitting the chapter 13 trustee to distribute undisbursed funds to creditors upon conversion to chapter 7, the courts found that Harris v. Viegelahn, 575 U.S. ___, 135 S.Ct. 1829 (2015), dictated a different result, even with respect to the debtor’s chapter 13 attorney fees and without regard to whether the case was converted prior to confirmation of the plan. In re Beauregard, No. 11-13069, consolidated with, In re Rule-Osburn, No. 14-13624, In re Montano, No. 14-12950 (Bankr. N. M. July 10, 2015); In re Sowell, No. 14-44130 (Bankr. D. Minn. Aug. 7, 2015). [Read more…] about Harris Precludes Attorney Fee Payments Out of Undisbursed Funds
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Debtors’ failure to prove actual damages, in addition to an apparently deliberate failure to mitigate damages deprived them of an award of sanctions without regard to whether Solutions Finance willfully violated the stay. In re Phillips, No. 15-30632 (Bankr. E.D. Tenn. July 13, 2015). [Read more…] about Debtors’ Failure to Mitigate Dooms Contempt Action