National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

NCBRC News

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One of Three Illinois Cases Gets it Right in FDCPA Case

Three cases out of the Northern District of Illinois address the issue of whether filing a proof of claim in Chapter 13 bankruptcy for a stale debt can be the basis for an FDCPA claim. In Murff v. LVNV Funding (In re Murff), No. 13-44431, Adv. Proc. 14-790 (Bankr. N.D. Ill. June 15, 2015) and LaGrone v. LVNV Funding (In re LaGrone), 525 B.R. 419 (Bankr. N.D. Ill. Jan. 21, 2015), the courts essentially found the element of deception for a FDCPA violation is not present in the context of a bankruptcy case. In Avalos v. LVNV Funding (In re Avalos), No. 13-40865, Adv. Proc. 15-91(Bankr. N.D. Ill. June 12, 2015), Judge Schmetterer found that the determination of whether debt-collector conduct is deceptive is an issue of fact to be addressed on a case-by-case basis. [Read more…] about One of Three Illinois Cases Gets it Right in FDCPA Case

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First Circuit Opinion Heavy on Vocabulary, Light on Logic

In an opinion that would have benefited from Gertrude’s advice to Polonius “More matter, with less art,” the First Circuit found that a debtor may be sanctioned for inadvertent failure to comply with a court order despite lack of harm to creditors, trustee or court. Charbono v. Sumski, No. 14-2151 (1st Cir. June 15, 2015). [Read more…] about First Circuit Opinion Heavy on Vocabulary, Light on Logic

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Court Rejects Bank’s “Devil Made Me Do It” Defense

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

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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 of 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 fulfills 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, directors, or partners in several financial institutions including J.P. Morgan.

The order and the settlement can be found here.

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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 concerning the footnote in which Justice Kennedy, Justice Breyer, and Justice Sotomayor did not join.  The case should not affect lien-stripping in the reorganization chapters. For example, the decision preserves the application of 506(a) and the use of 1322(b)(2) to strip liens in chapter 13. [Read more…] about Court Reaffirms Dewsnup in Chapter 7 Cases