The NACBA membership filed an amicus brief in the Supreme Court case of Law v. Seigel (In re Law), No. 12-5196 (Sept 3, 2013), in an effort to defend the debtor’s homestead exemption against surcharge. In that case, the lower court, ostensibly pursuant to its power under section 105(a), imposed the surcharge to pay trustee fees resulting from litigation necessitated by debtor misconduct. See Law v. Siegel (In re Law), 435 Fed. Appx. 697, 2011 WL 2181198 (9th Cir. 2011). [Read more…] about NACBA Amicus Filed in Supreme Court Exemption Case
Wells Fargo Socked with Damages in Excess of $3 Million – Again
Upon the death of its mortgagor, the hulking beast that is Wells Fargo blindly slouched toward foreclosure heedless of the fact that it had sold an accidental death insurance policy to the mortgagor. The decedent’s personal representative, filed a complaint in state court alleging: 1) Wrongful foreclosure and breach of the covenant of good faith and fair dealing; 2) unconscionable and unfair trade practices; 3) breach of contract; 4) violation of the Home Loan Protection Act; and 5) attorneys’ fees under NMSA § 48-7-24. The court found Wells Fargo liable under each of the five claims except the claim for violation of the Home Loan Protection Act. Dollens v. Wells Fargo Bank, CV 2011-05295, Letter Decision (N.M. Dist. Ct. Aug. 27, 2013). [Read more…] about Wells Fargo Socked with Damages in Excess of $3 Million – Again
Ninth Circuit en Banc Decision Overrules Kagenveama
In a blow to debtors, the Ninth Circuit, in an en banc decision, has reversed its position with respect to the applicable commitment period when the debtor has less than or equal to zero disposable income. Danielson v. Flores (In re Flores), No. 11-55452 (9th Cir. Aug. 29, 2013). [Read more…] about Ninth Circuit en Banc Decision Overrules Kagenveama
Constitutional Authority Objection Not Waivable
In Stern v. Marshall, 131 S. Ct. 2594 (2011), the Supreme Court established that a bankruptcy court lacks constitutional authority to enter a final judgment on a debtor’s state law counterclaim despite Congress’s grant of statutory authority to do so. In Wellness Int’l Network v. Sharif, No 12-1349 (7th Cir. Aug 21, 2013), the seventh circuit held that a constitutional objection based on Stern is not waivable. [Read more…] about Constitutional Authority Objection Not Waivable
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
Lien Avoidance Four Years after Discharge
How late is too late to amend schedules to include a secured creditor and claim a homestead exemption for purposes of section 522(f) lien avoidance? The BAP for the Ninth Circuit addressed the question in the case of Green v. HAPO Community Credit Union (In re Green), No. 12-1486 (Aug. 12, 2013), in which it reversed the bankruptcy court’s dismissal of the debtor’s motion to avoid lien and ordered that, upon remand, the lower court grant the motion. [Read more…] about Lien Avoidance Four Years after Discharge
Kansas EITC Exemption Constitutional
Despite relentless attacks by the bankruptcy trustees Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, has once again been deemed constitutional. Nazar v. Lea (In re Lea), No. 12-1297 (D. Kans. Aug. 16, 2013), consolidated with Parks v. Hudson (In re Hudson), No. 12-1298. The exemption benefits low-income families with dependent children by treating the excess of EITC credit over taxes owed as an overpayment of taxes and refunding the difference. [Read more…] about Kansas EITC Exemption Constitutional
Discharge Precludes Deficiency Judgment from Post-Discharge Foreclosure
Does the debtors’ chapter 13 discharge extinguish their liability for a deficiency arising from a post-discharge foreclosure sale of their principal residence by a secured creditor whose claim was paid outside the plan? The Bankruptcy Court for the Eastern District of North Carolina said that it does. In re Rogers, No. 08-8341 (Bankr. E.D. N.C. July 8, 2013).
The issue came before the court when the creditor moved for an order that the earlier discharge did not relieve the debtors’ of personal liability on the post-discharge deficiency. The first hurdle the debtors overcame was the court’s finding that, for discharge purposes, the debt was “provided for” by the plan. The mortgagee had filed a proof of claim and the plan specified that the debtors would continue the payments on the mortgage outside the plan according to the terms of the lending documents. There was no deficiency to be cured through the plan. In Rake v. Wade, 508 U.S. 464, 473-74 (1993), it was established that any plan that describes treatment of a debt, even if that treatment is outside the plan, “provides for” the debt.
The court next found that even though the debtors’ payments on the debt extended beyond the life of the plan, section 1322(b)(5)’s “cure and maintain” provision was not implicated because there was no arrearage to cure through the plan. Therefore, section 1328(a)(1), which states that debts provided for under section 1322(b)(5) were nondischargeable, did not prevent the outcome sought by the debtors.
Finally, the court rejected the argument that by relieving the debtors of the burden of paying the deficiency, the court was “modifying” its rights in violation of section 1322(b) as interpreted by the Court in Nobelman v. American Savings Bank, 508 U.S. 324, 326 (1993). The court found that, in confirming debtors’ plan which merely referenced the lending agreement, the court had not altered the creditor’s rights in any way not permitted by the Code. While the discharge released the debtor from personal liability under Dewsnup v. Timm, 502 U.S. 410, 414 (1992) and Johnson v. Home State Bank, 501 U.S. 78, 84 (1991), in rem liability remained post-discharge and the creditor was able to avail itself of its rights under state law to foreclose based on that liability. The court concluded that, as it had found in its earlier decision in In re Lane, No. 97-06850-8-JRL (Bankr. E.D. N.C. July 13, 2006), “[t]he discharge extinguished their personal liability with respect to any past, present or future judgment arising from SECU’s claim, which was provided for under the debtors’ plan and discharged under § 1328(a).”
No Presumption of Validity of Claim under Rule 3002.1
On January 3, 2013, the Chapter 13 trustee filed “Trustee’s Notice of Final Cure Payment and Motion to Deem Mortgage Current,” filed under Rule 3002.1(f) seeking an order that the debtor’s mortgagee was current, that all escrow deficiencies had been cured, and that all fees had been satisfied in full. The mortgage creditor filed a timely objection under Rule 3002.1(g), arguing that the debtor had incurred post-petition arrearages of $25,798.02. However, the creditor did not present any evidence of any disbursements to substantiate the arrearage. The court found that supplemental claims did not enjoy a presumption of validity and, because the debtor had made all payments required by the amended plan, it granted the trustee’s motion. In re Rodriguez, No. 08-80025 (Bankr. S.D. Tex. July 8, 2013). [Read more…] about No Presumption of Validity of Claim under Rule 3002.1
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.