The Bankruptcy Court for the Southern District of New York denied U.S. Bank’s motion for relief from stay on the basis that U.S. Bank had failed to show that it had standing to obtain such relief. In re Idicula, No. 12-12120 (Bankr. S.D. N.Y. Jan. 10, 2013). [Read more…] about U.S. Bank Fails to Establish Standing to Seek Relief from Stay to Foreclose
Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
The Bankruptcy Appellate Panel for the Tenth Circuit found that Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, is constitutional. Williamson v. Westby (In re Westby), No. 12-27 (B.A.P. 10th Cir. Feb. 4, 2013). [Read more…] about Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
New CFPB Rules Fail to Resolve Problem of Dual-Tracking on Delinquent Mortgages
On January 17, 2013, the Consumer Financial Protection Bureau enacted mortgage servicing rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act provisions relating to the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). [Read more…] about New CFPB Rules Fail to Resolve Problem of Dual-Tracking on Delinquent Mortgages
Fairness for Struggling Students Act
Illinois Senator Richard Durbin began the 113th Congress by reintroducing the Fairness for Struggling Students Act of 2013, S. 114, proposing to make private student loans, like other consumer debts, dischargeable in bankruptcy. In presenting the legislation, Senator Durbin said:
The first two pieces of legislation I will introduce this Congress deal with what I think is one of the biggest threats to millions of working families – the growing student loan debt crisis. Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions like buying a home or starting a family. It’s not only young people facing this crisis, it is parents, siblings, and even grandparents who co-signed private loans long ago and are still making payments decades later. It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.”
Federal student loans have been essentially non-dischargeable since 1978 but it was not until the Bankruptcy Code underwent upheaval in 2005 that private student loans were accorded the same favored treatment. Although private student loans comprise only about 20% of the total student loan debt, private loans tend to be substantially more onerous for borrowers. They typically have higher interest rates, limited or no availability of deferment or forbearance, and no income-based repayment plans. In addition, they are not subject to the consumer protections in place for federal student loans.
Senators Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Al Franken (D. MN), Tom Harkin (D-IA), and Elizabeth Warren (D-MA), are co-sponsors of the bill. Other organizations that have publically called on Congress to amend student loan treatment in bankruptcy are the American Association of University Women, the Consumer Financial Protection Bureau, the U.S. Department of Education, The Institute for College Access and Success, and Sallie Mae.
NACBA has actively fought for a return to pre-2005 treatment of private student loans and NACBA members have an opportunity to make their voices heard at the 2013 Capitol Hill Meeting in Washington on February 26-27. You can register for this event through the NACBA website, www.NACBA.org.
NACBA Amicus Opposes “Carve-Out” Agreement
NACBA has filed an amicus brief in the Fourth Circuit case of In re Reeves, No. 12-2127. In that case, the trustee, claiming authority under section 724(b), sought to sell the debtor’s fully encumbered residential property to give effect to an agreement the trustee had entered into with the IRS, a lienholder, under which the IRS agreed to “carve out” a portion of its share of the proceeds from any sale of the property. That portion would then go toward administrative costs and unsecured creditors. [Read more…] about NACBA Amicus Opposes “Carve-Out” Agreement
Absolute Priority Rule Found to Apply to Individual Debtor
The Tenth Circuit joined the Fourth Circuit in finding that BAPCPA did not abrogate the absolute priority rule with respect to individual debtors in chapter 11 bankruptcy. In re Stephens, No. 11-6309 (10th Cir. Jan. 15, 2013) (agreeing with In re Maharaj, 681 F.3d 558 (4th Cir. 2012)). [Read more…] about Absolute Priority Rule Found to Apply to Individual Debtor
Whether Inheritance Received More than 180 Days Post-Petition Is Property of Estate
The Fourth Circuit has agreed to hear a direct appeal to address the issue of whether an inheritance received more than 180 days post-petition is property of the Chapter 13 estate. Carroll v. Logan (In re Carroll), No. 13-1024. The debtors received a $100,000.00 inheritance after the 180-day period had lapsed and the trustee sought to modify the plan to include those funds. The bankruptcy court found that the inheritance was part of the estate and granted the trustee’s motion. In re Carroll, 2012 WL 5512356 (Bankr. E.D. N.C. Nov. 14, 2012). [Read more…] about Whether Inheritance Received More than 180 Days Post-Petition Is Property of Estate
Debtor Has Standing to Argue Failure to Comply with Terms of PSA
A Michigan state court found that a debtor may oppose foreclosure on the basis that the assignment of the mortgage to the foreclosing party was in violation of the Pooling and Service Agreement and, therefore, ineffective. HSBC Bank, USA v. Young, No. 11-693 (Cir. Ct. Mich. Oct. 16, 2012). HSBC conducted a foreclosure by advertisement and bought the property at the foreclosure sale. When it moved the court for possession of the property the debtor challenged the legitimacy of the foreclosure on the basis that the assignment of the note and mortgage from Wells Fargo to HSBC took place after the note was in default in violation of the terms of the PSA. [Read more…] about Debtor Has Standing to Argue Failure to Comply with Terms of PSA
NACBA Argues that Possession Necessary for Turnover Obligation
NACBA has filed an amicus brief in the case of In re Henson, No. 11-16019 (9th Cir.), seeking a finding by the Ninth Circuit that the trustee may not use his turnover power under section 542 to require a debtor to pay into the estate funds that are no longer in the debtor’s possession. In this case, the debtor had written a check prior to bankruptcy which was not cashed until after the bankruptcy filing. Instead of using his avoidance power under section 549 to recover the funds from the payee, the trustee sought to obtain the money from the debtor, thereby exposing the debtor to double payment and allowing the payee to receive more than he would have been entitled to through bankruptcy distribution. [Read more…] about NACBA Argues that Possession Necessary for Turnover Obligation
NACBA Files Amicus in Bifurcated Lien Treatment in Chapter 13
NACBA has filed an amicus brief in the case of In re Bullard, No. 12-54 (B.A.P. 1st Cir.). That case involves a chapter 13 plan under which a mortgage is bifurcated into secured and unsecured portions with the unsecured portion being paid, pro rata, through the plan, and the secured portion being paid according to the terms of the contract outside the plan and extending beyond the plan period. The trustee objected to the plan arguing that if modification is permitted under section 1322(b), the payments on the mortgage must be completed within the plan period. In its brief, NACBA argues that the plain language of section 1322 permits such lien treatment. Specifically, “[a]ll section 1322(b)(5) requires is that the debtor cure any arrearage and make payments on the creditor’s secured claim according to the contract during the life of the plan. Section 1322(b)(2) is permissive allowing debtors to modify certain claims. Section 1322(d) limits the life of the plan to five years. These sections do not require the debtor to pay the claim in full while the case is pending, nor do they preclude the debtor from making payments on the long-term obligation after the plan has been completed.”
David Barnes drafted NACBA’s brief.