A bankruptcy court awarded almost $70,000.00 in damages for PNC’s stay violation. In re Ogden, No. 11-19841 (Bankr. D. Colo. June 1, 2015). It is easy to feel imaginary malice behind the often frustrating interactions with impersonal, computer operated, entities with which we all find ourselves conducting business. In this case, however, the court found that the debtor’s sense of actual ill will was confirmed by testimony from PNC’s representative in its defense to the charge of stay violation. [Read more…] about Court Rejects Bank’s “Devil Made Me Do It” Defense
Chase Gets Off the Hook, ABI Gets $7.5m, Debtors Get $20
We’ve heard on the street that the $20 checks for debtors are starting to roll in. The payments are part of a $50 million settlement between the United States Trustee Program and JP Morgan Chase, N.A. that was approved by the Bankruptcy Court for the Eastern District of Michigan on March 9, 2015.
The settlement concerns approximately 50,000 improper payment change notices filed by Chase in thousands of bankruptcies across the country. The improprieties of these notices range from failing to review the accuracy of the notices before filing, to notices signed in the names of employees or former employees who had nothing to do with the accuracy of the notices. See the Department of Justice press release here for further information.
The settlement includes a variety of remedies for affected homeowners in bankruptcy. These range from outright forgiveness of the loan (for only 325 loans), adjustments/credits to credits, suspense accounts or escrow accounts (for 30,508 loans); and/or cash payments in the amounts of $600.00 and/or $20.00 (for 18,908 loans). Some debtors have already started receiving these cash payments. The settlement also includes a payment of $7.5 million to the American Bankruptcy Institute’s endowment for financial education and support for the Credit Abuse Resistance Education Program.
There have been several concerns raised regarding the settlement. It appears no parties outside the USTP were consulted as to the practical ramifications to ongoing bankruptcies including standing chapter 13 and 7 trustees and debtors’ counsel. The USTP has been given no record or database of names of the thousands of affected debtors by Chase’s improper notices. The parties appointed an Independent Reviewer, Ms. Amy Walsh of The Morvillo law firm, to verify whether Chase fulfils its settlement obligations and to verify Chase’s numbers of incorrect notices by a sampling methodology. Of note, the Morvillo law firm lists on its Representative Clients webpage that its partners have also represented officers, director or partners in several financial institutions including J.P. Morgan.
The order and the settlement can be found here.
Child Tax Credit Refund Exemptible as Public Assistance Benefit
The federal Additional Child Tax Credit is a “public assistance benefit,” which may be exempted in bankruptcy under Missouri exemption law. Hardy v. Fink (In re Hardy), No. 14-1181 (8th Cir. June 2, 2015). [Read more…] about Child Tax Credit Refund Exemptible as Public Assistance Benefit
Court Reaffirms Dewsnup in Chapter 7 Cases
“The reasoning of Dewsnup dictates that a debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral.” So held the Supreme Court yesterday in Bank of America v. Caulkett, 575 U.S. ___, No. 13-1421, and Bank of America v. Toledo-Cardona, No. 14-163 (U.S. June 1, 2015). Justice Thomas (who did not take part in the Dewsnup decision) delivered the opinion of the Court in which all Justices joined except with respect to the footnote in which Justice Kennedy, Justice Breyer and Justice Sotomayor did not join. The case should have no affect upon lien-stripping in the reorganization chapters. For example, the decision preserves the application of 506(a) and use of 1322(b)(2) to strip liens in chapter 13. [Read more…] about Court Reaffirms Dewsnup in Chapter 7 Cases
Automatic Stay Is Not Equivalent to Homestead Exemption
Bankruptcy’s automatic stay does not provide the benefits of Florida’s homestead exemption to preclude the debtors’ use of the state wildcard exemption. Valone v. Waage (In re Valone), No. 14-11457 (11th Cir. Apr. 29, 2015). [Read more…] about Automatic Stay Is Not Equivalent to Homestead Exemption
Separated Spouses Chapter 7 Cases Consolidated
Factual considerations supported consolidation of separated spouses’ chapter 7 cases where the husband claimed federal exemptions and the wife claimed state exemptions. Boellner v. Dowden (In re Boellner), No. 14-2816 (8th Cir. May 12, 2015). [Read more…] about Separated Spouses Chapter 7 Cases Consolidated
Undisbursed Funds Returned to Debtor Upon Conversion
In a unanimous decision, the Supreme Court today found that funds paid into a confirmed chapter 13 plan that are undisbursed when the case is converted to chapter 7 should be returned to the debtor. Harris v. Viegelahn, 575 U.S. ___, No. 14-400 (May 18, 2015).
[Read more…] about Undisbursed Funds Returned to Debtor Upon Conversion
Proof-of-Claim Deadline Applies to Secured and Unsecured Alike
“The deadline for filing a proof of claim in Federal Rule of Bankruptcy Procedure 3002(c) applies to all claims, including those of secured creditors.” In re Pajian, No.14-2052 (7th Cir. May 11, 2015). [Read more…] about Proof-of-Claim Deadline Applies to Secured and Unsecured Alike
Priority of Noteholders in Duplicate Note Scheme
A Florida appellate court addressing a fraudulent scheme involving selling duplicate promissory notes, found that “the bank that first perfected its interest in a note and related mortgage is entitled to the priority of its interest.” HSBC Bank USA v. Perez, No. 4D13-3193 (Fla. Dist. Ct. App. May 6, 2015). [Read more…] about Priority of Noteholders in Duplicate Note Scheme
Green Tree Servicing Settles with FTC and CFPB for $63 million
The Federal Trade Commission and the Consumer Financial Protection Bureau have announced a $63 million settlement in a dispute with the national mortgage servicing company, Green Tree Servicing. The FTC and CFPB charged Green Tree with thug-like collection methods including: barraging the debtor with phone calls as early as 5 a.m. and as late as 11 p.m.; threatening debtors with arrest, imprisonment, and garnishment; yelling at consumers and using obscene language; mocking illnesses and other personal situations causing financial distress; revealing debts to employers, neighbors, family; and taking payments out of debtors’ accounts without consent. It also failed to honor loan modifications, misapplied payments, provided incorrect creditor information to consumer reporting agencies, and overcharged or demanded unnecessary fees. $48 million of the settlement will go to affected consumers and $15 million represents civil penalties.
In addition to the $63 million dollars, the settlement requires Green Tree to clean up its act by implementing “a home preservation plan to offer options to consumers whose loans were transferred to the company during the time covered by the complaint.” It must cease collection on disputed debts until the completion of an investigation and verification of amounts owed. “The proposed order also prohibits Green Tree from making material misrepresentations about loans, processing procedures, payment methods, and fees, from taking unauthorized withdrawals from consumer accounts, and from violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act.” In short, the order requires Green Tree to competently and honorably perform the services a loan “servicer” is meant to perform.