The Supreme Court granted certiorari today in two of the three Chapter 7 lien-strip-off cases challenging the Eleventh Circuit decision in McNeal. Bank of Amer. v. Toledo-Cardona, No. 14-163 and Bank of Amer. v. Caulkett, No. 13-1421 (petition granted Nov. 17, 2014) (consolidated for argument) (Bank of Amer. v. Bello, No. 14-235 is still pending). In McNeal v. GMAC Mortg., 735 F.3d 1263 (11th Cir. 2012) pet. den. (May 20, 2014), the court bucked the trend to find that Dewsnup v. Timm, 502 U.S. 410 (1992), which held that a partially secured lien could not be stripped-down in chapter 7, did not apply to wholly unsecured liens. There are more than a dozen cases currently pending in the Eleventh Circuit challenging this decision, but, after an early abortive attempt to bring the issue before the Supreme Court (Bank of America v. Sinkfield, No. 13-700 (cert. denied, March 31, 2014)) the issue is now on track for final resolution. Briefing should be completed by March and argument is likely to be scheduled for the last week of March, with decision by June. The debtor is being represented by Stephanos Bibas, the Director of the Supreme Court Clinic at the University of Pennsylvania Law School.
Arbitration Judgment Applies to Determination of Nondischargeability
The doctrine of collateral estoppel mandated that findings in a state court arbitration judgment applied to the determination of nondischargeability of a debt in chapter 7 bankruptcy. Margolis v. Hensley (In re Hensley), No. 12-42785, Adv. Pro. 12-4180 (Bankr. E.D. Tex. Oct. 1, 2014). [Read more…] about Arbitration Judgment Applies to Determination of Nondischargeability
Lender May Be Compelled to Take Title to Surrendered Property
Under section 1322(b)(9), the chapter 13 plan may provide for vesting of title to property that the debtor has surrendered in an entity (the mortgagee) without that entity’s consent. In re Watt, No. 14-31295 (Bankr. D. Or. Oct. 15, 2014). [Read more…] about Lender May Be Compelled to Take Title to Surrendered Property
Late Proof of Claim Amendment Rejected
A proof of claim amendment filed after the debtor successfully completed his chapter 13 plan was too late to increase the mortgage arrears. In re Mason, No. 10-4195, 2014 WL 5502385 (Bankr. S.D. Miss. Oct. 30, 2014). [Read more…] about Late Proof of Claim Amendment Rejected
Nevada Banks Take a Gamble when it Comes to HOA Liens
In a 4-3 decision, the Nevada Supreme Court decided that Nev. Rev. St. 116.3116 gives a homeowners’ association (HOA) a superpriority lien based on certain unpaid dues and assessments so as to extinguish the first deed of trust upon foreclosure. SFR Investments Pool v. U.S. Bank, No. 63078 (Nev. S. Ct. Sept. 18, 2014). The court also held that, under the statute, an HOA may use a non-judicial foreclosure.
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Violation of Discharge Injunction and Abuse of Process
There is no private right of action for violation of the discharge injunction but a debtor may move for contempt in the main bankruptcy case. An abuse of process action, however, may be brought in an adversary proceeding and be established by repeated use of protected personally identifiable information of debtors to file unenforceable proofs of claim in Chapter 13 cases. Moore v. Comenity Capital Bank, No. 13-11325, Adv. Pro. 14-1011 (Bankr. E.D. Tenn. Sept. 29, 2014). [Read more…] about Violation of Discharge Injunction and Abuse of Process
Compassion Wins the Day in Modification Case
The bankruptcy court properly exercised its discretion when it found that the chapter 13 debtor did not have to contribute the life insurance proceeds he received upon the death of his wife to repay his creditors in full, where the funds were necessary to his support. <i>Townson v. McAllister (In re McAllister),</i> No. 14-106 (N.D. Ga. Oct. 14, 2014). [Read more…] about Compassion Wins the Day in Modification Case
Court Gets it Wrong in Cure and Maintain Case
Contrary to the principle that “cure and maintain” permits a residential loan debtor to return to status quo ante, the Bankruptcy Court for the Eastern District of North Carolina found that while operation of section 1322(b)(5) reverses a loan acceleration, it does not reverse other contractual consequences of default; specifically an increased interest rate. In re Anderson, No. 13-5843 (Bankr. E.D. N.C. Sept. 5, 2014). [Read more…] about Court Gets it Wrong in Cure and Maintain Case
Strained Reading of “Derived During” Boots Chapter 7 Case
The Tenth Circuit BAP interpreted the phrase “derived during” to mean that all income received during the 6-month look-back period be included in the current monthly income calculation. Based on this, the court found that the debtor was above-median and his chapter 7 case presumptively abusive under section 707(b)(2). When the debtor failed to convert to chapter 13, the bankruptcy court dismissed the case. The BAP affirmed. In re Miller, No. 14-2 (B.A.P. 10th Cir. Oct. 8, 2014). [Read more…] about Strained Reading of “Derived During” Boots Chapter 7 Case
CashCall’s Use of Tribal Arbitration under Attack
An arbitration clause is not enforceable when the specified forum is unavailable. So said the Eleventh Circuit Court of Appeals in Inetianbor v. CashCall, Inc., __ F.3d __, 2014 WL 4922225 (11th Cir. Oct. 2, 2014). [Read more…] about CashCall’s Use of Tribal Arbitration under Attack