Although the complaint against him alleged violations of the Bankruptcy Code and he was ultimately sanctioned for ethical violations under Virginia Rules of Professional Conduct, a lawyer with UpRight was given due process in his sanctions hearing where the complaint specified the alleged misconduct and he was afforded the opportunity to prepare and present a defense. U.S. Trustee v. Delafield, No. 21-1632 (4th Cir. Jan. 11, 2023). Read More
Tag Archive: Sanctions
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UpRight Isn’t
Posted by NCBRC - January 26th, 2023
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Motgagee Sanctioned for Non-Compliance with Rule 3002.1(b)
Posted by NCBRC - January 24th, 2023
The mortgage creditor’s failure to comply with notice requirements of Rule 3002.1(b) when escrow and interest rates changed during bankruptcy, led the court to determine that the debtors were current on their mortgage payments and to sanction the mortgagee. In re Kinderknecht, No. 17-12530 (Bankr. D. Kans. Jan. 18, 2023). Read More
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Wells Fargo and False Loan Forbearance Class Action
Posted by NCBRC - December 20th, 2022
The court denied a motion to dismiss the debtors’ class action adversary complaint against Wells Fargo based on Wells Fargo’s inaccurate notices to various bankruptcy courts that the debtors’ loans had been placed in COVID forbearance at the debtors’ request. Harlow v. Wells Fargo & Co., No. 17-71487, Adv. Proc. No. 20-7028 (Bankr. W.D. Dec. 12, 2022). Read More
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Servicer Sanctioned for Post-Foreclosure Dunning
Posted by NCBRC - September 28th, 2022
The bankruptcy court did not err in finding the mortgage servicer violated the discharge injunction or in awarding over $10,000 in sanctions where the servicer continued to dun the debtor for payment after the debtor had received her chapter 7 discharge and relinquished the home in a foreclosure sale. Berry v. Fay Servicing, LLC, No. 21-8005/8007 (B.A.P. 6th Cir. Sept. 9, 2022). Read More
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Mortgage Creditor Sanctioned for Miscalculating Claim
Posted by NCBRC - September 16th, 2022
The debtor was entitled to attorney’s fees and a reduction in the mortgagee’s arrearage claim where the mortgagee failed to reduce the arrearage by the entire amount the debtor had paid in his prior chapter 13 bankruptcy. In re Simmons, No. 22-680 (Bankr. D. S.C. Aug. 31, 2022). Read More
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Taggart Contempt Standard Applies in Chapter 13
Posted by NCBRC - June 21st, 2022
A bankruptcy court in the District of South Carolina found that the objective standard in a civil contempt proceeding, under which the creditor may assert a fair ground of doubt as to whether its conduct violated a court order, applies in the context of a contempt action based on violation of a chapter 13 discharge order. In re Seaver, No. 20-2238 (Bankr. D. S.C. May 13, 2022). Read More
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Scotus Denies Cert in Fee Harvesting Case
Posted by NCBRC - June 14th, 2022
The Supreme Court denied certiorari in the case of Sensenich v. PHH Mortgage Corp., No. 21-1322 (cert denied, June 13, 2022). The Chapter 13 Trustee sought reversal of the Second Circuit decision that the bankruptcy court lacked the power to monetarily sanction PHH Mortgage Corp. for its fee harvesting practice which violated Bankruptcy Rule 3002.1. The Second Circuit held that the bankruptcy rule did not allow for punitive damages. The circuit court also held that the award could not be justified under the court’s inherent power because the bankruptcy court did not analyze that ground.
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Stay Still Attaches to Undisclosed Property 30 Years after Bankruptcy
Posted by NCBRC - May 26th, 2022
Plaintiff’s attorneys were liable for monetary contempt sanctions for violating the automatic stay due to their failure to investigate the plaintiff’s bankruptcy petition which was filed decades earlier to determine whether he had disclosed his interest in mineral rights in land that was the subject of a current state lawsuit. In re McConathy, No. 90-13449 (Bankr. W.D. La. May 20, 2022).
In 1990, the debtor and his wife filed a chapter 7 bankruptcy petition for which they received a discharge. On two occasions they reopened their bankruptcy to disclose previously undisclosed assets and in both cases the assets were addressed and the case closed. However, unbeknownst to the bankruptcy court and chapter 7 trustee, at the time he filed his petition, the debtor owned mineral rights on land in Kansas. Read More
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Debtor Not Entitled to Attorney Fees Under State Statute for Alleged Bankruptcy Misconduct
Posted by NCBRC - January 19th, 2022
The debtor was not entitled to an award of attorney fees under a state fee-shifting provision when she prevailed on her opposition to the creditor’s time-barred claims where the bankruptcy litigation was not connected to the substance of the claims but was a procedural issue dependent on misconduct of parties or attorneys and, therefore, federal law was controlling. LVNV Funding, LLC v. Andrade-Garcia, No. 21-1115 (B.A.P. 9th Cir. Jan. 11, 2022). Read More
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No Punitive Sanctions for Rule 3002.1 Violation
Posted by NCBRC - August 3rd, 2021
In a decision taking the teeth out of Rule 3002.1’s notice requirement, the Second Circuit found that the Rule does not permit imposition of punitive sanctions. PHH Mortgage Corp. v. Sensenich (In re Gravel), No. 21-1 (2d Cir. Aug. 2, 2021). In a well-reasoned dissent, Judge Bianco argued that the majority incorrectly limited the scope of sanctions available under the Rule.
These three consolidated cases (In re Gravel (21-1), In re Beaulieu (21-2), In re Knisley (21-3)) came before the bankruptcy court upon motions by the Trustee seeking sanctions against PHH for assessing fees against the debtors, in 25 statements per debtor, without complying with the requirement in Rule 3002.1(c) that a mortgage creditor “shall file and serve on . . . the trustee a notice itemizing all fees, expenses, or charges” that the creditor “asserts are recoverable against the debtor” and serve this notice “within 180 days after the date on which the fees, expenses, or charges are incurred.” The trustee also sought sanctions for violations of the court’s Current Orders in the Gravel and Beaulieu cases. Those orders stated that the debtors, who had completed their plans, were current on their mortgages, and prohibited PHH from challenging that finding in “any other proceeding.” (The Knisleys had not yet completed their plan when the trustee filed for sanctions, so there was no similar order involved in that case). Read More
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