Absent a statutory basis for doing so, a bankruptcy court may not deny a debtor’s homestead exemption based on bad faith or prejudice to creditors. Elliott v. Weil (In re Elliott), No. 14-1050, 14-1059 (consolidated) (B.A.P. 9th Cir. Dec. 10, 2014). [Read more…] about Homestead Exemption May Not Be Denied Based on Bad Faith, but . . .
Pre-Bankruptcy Agreement Not To Discharge Debt Unenforceable
A debtor’s agreement prior to filing bankruptcy not to discharge her debt for attorney’s fees was found to be unenforceable under section 523(a)(2) and for public policy reasons. Ziegler v. Kline (In re Kline), No. 14-12815, Adv. Proc. No. 14-227 (Bankr. E.D. Pa. Nov. 20, 2014). [Read more…] about Pre-Bankruptcy Agreement Not To Discharge Debt Unenforceable
Default Interest Rate Inequitable
The lender’s default interest rate was inequitable under both sections 502(b) and 506(b) where, among other factors, the lender was oversecured, ran no realistic risk of loss, and was more financially sophisticated than the debtors. In re Parker, No. 12-03128 (Bankr. E.D. N.C. Nov. 19, 2014). [Read more…] about Default Interest Rate Inequitable
En Banc Rehearing Granted on Sternberg Issue
The Ninth Circuit Court of Appeals has granted America’s Servicing Company’s petition for rehearing en banc in In re Schwartz-Tallard, No. 12-60052 (Petition granted, Dec. 19, 2014). The case arose out of the debtor’s motion for attorney fees relating to ASC’s appeal of a finding that it had violated the automatic stay. The Ninth Circuit found that the debtor’s attorney fees were actual damages under section 362(k)(1). In re Schwartz-Tallard, 765 F.3d 1096 (9th Cir. August 29, 2014), aff’g, In re Schwartz-Tallard, 473 B.R. 340 (B.A.P. 9th Cir. 2012). The court distinguished Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), which held that a debtor’s attorneys’ fees for work on an adversary proceeding seeking damages for a stay violation were not actual damages and thus were not recoverable under 11 U.S.C. § 362(k)(1). In this case, ASC’s appeal challenged both the fee award and the substantive stay violation ruling, therefore, the debtor’s fees were incurred in defending both the damage award and the finding of stay violation.
Oral argument is scheduled for the week of March 16, 2015, though debtor’s counsel has asked for a new date.
College Students Underestimate Their Student Loan Debt
Based on a study using data drawn from two sources linking student survey responses to administrative records on cost and borrowing, a Brookings Institution report has concluded that “a significant share of undergraduate students do not understand how much they are paying for college or how much debt they are taking on.” The report indicated that 28% of college freshmen who have taken out federal student loans, do not think they have any federal debt, and 14% do not realize that they have any debt at all. Not only does a large percentage of students fail to grasp the extent or nature of their loans, but only a bare majority of college freshmen (52%) could estimate their actual costs of college within $5,000 accuracy. The report concludes: “It is possible, even likely, that this lack of knowledge will cause students to be surprised when their financial circumstances become apparent, perhaps when their first loan payment comes due. This surprise, or even fear, may impose an emotional burden on borrowers. More broadly, it may contribute to popular narratives about crushing student loan burdens, which are inconsistent with the reality that these burdens remain manageable for most borrowers (Akers and Chingos 2014).”
Court Removes Wells Fargo’s Brass Knuckles
Like a ray of sunshine through a storm of obfuscation and false compliance, the Bankruptcy Court for the Southern District of New York found that Wells Fargo’s administrative freeze on bankruptcy debtors’ accounts violates the automatic stay, and debtors injured by the violation have standing to seek damages. In re Weidenbenner, No. 14-35443, 2014 Bankr. LEXIS 5009 (Bankr. S.D. N.Y. Dec. 12, 2014). [Read more…] about Court Removes Wells Fargo’s Brass Knuckles
Maintaining Foreclosure Status Quo Does Not Violate Automatic Stay
Where foreclosure is commenced pre-petition, continuance of the state foreclosure process does not violate the automatic stay. Witkowski v. Knight (In re Witkowski), No. 14-34, __ B.R. __ (B.A.P. 1st Cir. Nov. 13, 2014). [Read more…] about Maintaining Foreclosure Status Quo Does Not Violate Automatic Stay
Cert. Granted in Two Bankruptcy Cases
The Supreme Court has granted certiorari in Bullard v. Hyde Park Savings Bank, No. 14-116, and Viegelahn v. Harris (In re Harris), No. 14-400.
Bullard asks whether denial of confirmation is a final appealable order. The First Circuit Court of Appeals found that it was not. Bullard, No. 13-9009 (May 14, 2014) (disagreeing with Mort Ranta v. Gorman, 721 F.3d 241, 248 (4th Cir. 2013)).
Harris asks whether funds paid into a confirmed chapter 13 plan that are still in the trustee’s possession when the bankruptcy is converted to chapter 7 should be refunded to the debtor or paid to creditors. The Fifth Circuit found that the monies were properly distributed to creditors. Harris, No. 13-50374 (July 7, 2014) (disagreeing with In re Michael, 699 F.3d 305 (3rd Cir. 2012)).
Student Loan Debtor May Reject Zero-Payment Plan in Good Faith
Finding the debtor to be “honest but unfortunate,” the bankruptcy court discharged her student loans so that she could “sleep at night without these unpayable debts continuing to hang over her head for the next 25 years.” Lamento v. U.S. Dept. of Educ. No. 14-1054 (Bankr. N.D. Ohio Oct. 31, 2014). [Read more…] about Student Loan Debtor May Reject Zero-Payment Plan in Good Faith
Revocation of Technical Abandonment
Technical abandonment of an estate asset may be revoked if the abandonment was caused by deception by the debtor or inadvertence or mistake on the part of the trustee. Miller v. Reaves (In re Miller), No. 13-1307 (B.A.P. 9th Cir. Dec. 5, 2014). [Read more…] about Revocation of Technical Abandonment