When determining whether judicial estoppel should be applied in cases where a debtor has failed to disclose a pending lawsuit in her bankruptcy schedules, the ninth circuit expanded the inquiry into what constitutes “inadvertence” or “mistake” to include a subjective component. [Read more…] about Ninth and Tenth Circuits Differ on Judicial Estoppel Considerations
NACBA Files Amicus in Conversion Case
The NACBA membership has filed an amicus brief in the case of Viegelahn v. Harris (In re Harris), No. 13-50374 (5th Cir. August 20, 2013) seeking affirmance of the lower courts’ opinions. There, the debtor filed a chapter 13 petition, but after a good faith attempt to fulfill his obligations under the plan, he converted to chapter 7. The trustee sought to distribute debtor’s wages collected pursuant to the plan but not yet distributed at the time of conversion. [Read more…] about NACBA Files Amicus in Conversion Case
HAMP Trial Period Plans – Wells Fargo’s Fraudulent Coin Toss
Yesterday, the Ninth Circuit Court of Appeals held in Corvello v. Wells Fargo Bank, N.A., No. 11-16234, that Wells Fargo was contractually obligated under the terms of a HAMP trial period plan (TPP) to offer permanent modifications to borrowers who complied with the TPP by submitting accurate documentation and making trial payments. Such an interpretation of the TPP, the Court stated, “avoids the injustice that would result were Wells Fargo’s position accepted and Wells Fargo allowed to keep borrowers’ trial payments without fulfilling any obligations in return. The TPP does not contemplate such an unfair result.” More scathing was Judge Noonan’s concurrence in which he stated that:
“No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him. “Heads I win, tails you lose” is a fraudulent coin toss. Wells Fargo did no better.”
The Court rejected arguments that Wells Fargo’s failure to return a signed copy of the TPP to the borrower precluded liability. For purposes of the decision, the Court assumed that the borrowers fulfilled all of their obligations under the TPP, as alleged. The Court noted, however, that Wells Fargo could still raise factual disputes during the litigation.
Deed of Trust Is Functional Equivalent of Mortgage for State Foreclosure Purposes
In Cruz v. Aurora Loan Services, No. 11-1133, Adv. Proc. No. 11-90116 (Bankr. S.D. Cal. Apr. 25, 2013), the court was asked to reconsider its earlier determination that the recording requirement of California’s non-judicial foreclosure statute applies to deeds of trust. See Cruz v. Aurora Loan Servs. LLC (In re Cruz), 457 B.R. 806 (Bankr. S.D. Cal. 2011) (“Cruz I“). [Read more…] about Deed of Trust Is Functional Equivalent of Mortgage for State Foreclosure Purposes
Alimony Part of Bankruptcy Estate
Relying on South Dakota treatment of alimony, the BAP for the Eighth Circuit found that post-petition alimony payments were part of the bankruptcy estate. Mehlhaff v. Alfred (In re Mehlhaff), No. 13-6012 (B.A.P. 8th Cir. June 4, 2013). [Read more…] about Alimony Part of Bankruptcy Estate
Disallowed Claim Renders Lien Void Under 506(d)
The Fourth Circuit found that a lender’s lien was extinguished upon debtor’s discharge where the lender’s proof of claim had been disallowed due to the lender’s failure to provide the necessary documents to prove that it had a perfected security interest. National Capital Management v. Gammage-Lewis, No. 12-2286 (June 6, 2013). [Read more…] about Disallowed Claim Renders Lien Void Under 506(d)
Fifth Circuit Deals Blow to Individual Debtors in Chapter 11
The Fifth Circuit has joined the Fourth and Tenth Circuits in applying the absolute priority rule to individual debtors in chapter 11 bankruptcy. In re Lively, No. 12-20277 (5th Cir. May 29, 2013). See also In re Stephens, 704 F.3d 1279 (10th Cir. 2013); In re Maharaj, 681 F.3d 558 (4th Cir. 2012). But see In re Friedman, 466 B.R. 471 (B.A.P. 9th Cir. 2012) (finding that the rule does not apply to individual debtors). [Read more…] about Fifth Circuit Deals Blow to Individual Debtors in Chapter 11
Fourth Circuit Takes on Applicable Commitment Period Issue
The Fourth Circuit has accepted two direct appeals presenting the issue of whether the applicable commitment period for a chapter 13 plan applies when there is no projected disposable income. Both cases first treat the issue of whether an expected change in payments during the course of the plan should be considered when determining the debtor’s projected disposable income at the outset, and then deal with the relevance of the applicable commitment period where the debtor has zero or negative disposable income as calculated by the means test. [Read more…] about Fourth Circuit Takes on Applicable Commitment Period Issue
BAP Explores Requirements for “Automatic Dismissal”
Section 521(i)(1) (a BAPCPA addition to the Code) provides that if a debtor in a chapter 13 case fails to file the documents required by section 521(a)(1) “the case shall be automatically dismissed effective on the 46th day after the date of the filing of the petition.” But does a court really lack discretion to decide not to dismiss, and can the case be dismissed without notice and a hearing? These are a couple of the questions addressed by the BAP for the First Circuit in Soto v. Doral Bank, No. 12-75 (May 8, 2013). [Read more…] about BAP Explores Requirements for “Automatic Dismissal”
Hybrid Plans Rejected by First Circuit BAP
The BAP for the First Circuit rejected confirmation of so-called “hybrid” plans in chapter 13. Bullard v. Hyde Park Savings Bank, No. 12-54 (May 24, 2013). The debtor proposed a plan under which his mortgage (including both residential and non-residential elements) was to be divided into secured and unsecured portions under section 1322(b)(2) with the unsecured portion paid for cents on the dollar through the plan. The secured portion would be paid outside the plan and beyond the completion of the plan period as contemplated by the cure and maintain provision in section 1322(b)(5). The bankruptcy court found that sections 1322(b)(2) and 1322(b)(5) are mutually exclusive and therefore the plan could not be confirmed as proposed. In re Bullard, 475 B.R. 304 (Bankr. D. Mass. 2012). The BAP for the First Circuit accepted the interlocutory appeal. [Read more…] about Hybrid Plans Rejected by First Circuit BAP