Posted by NCBRC - October 18th, 2016
Demanding full payment of a mortgage after the debtor’s default did not accelerate the maturity date such that the limitations period for filing a foreclosure action was moved up. Washington v. Bank of New York Mellon, No. 15-3210 (3rd. Cir. Sept. 30, 2016) (unpublished).
Though the mortgage agreement specified a maturity date of 2037, the debtor, Gordon Washington, argued that when Bank of New York demanded full payment and filed its first foreclosure action in 2007, it activated the mortgage agreement’s acceleration clause and established a new maturity date for the mortgage. The foreclosure action failed for lack of prosecution and the creditor filed a new action after Mr. Washington had filed his bankruptcy petition in 2014. Mr. Washington then sought an order to the effect that the creditor no longer had an interest in the property because the limitations period had elapsed. Read More
Posted by NCBRC - October 13th, 2016
The bankruptcy court did not abuse its discretion in dismissing the debtor’s chapter 13 case for bad faith filing. The fact that the chapter 13 was filed while the debtor’s chapter 7 was still pending was a factor to be considered in the bad faith analysis but was not dispositive. Cuevas v. Chandler (In re Cuevas), No. 15-1032 (B.A.P. 9th Cir. Oct. 5, 2016) (unpublished). Read More
Posted by NCBRC - October 12th, 2016
The Supreme Court today granted certiorari in the case of Midland Funding, LLC. v. Johnson, No. 16-348, in which the Eleventh Circuit found that not only does a proof of claim on a time-barred debt violate the FDCPA, but the FDCPA claim is not in conflict with, nor is it precluded by, the Bankruptcy Code.
This issue has been circulating in various forms throughout the courts as many debt collectors have made it a business practice to file proofs of claim in bankruptcy cases on debts they know to be time-barred and, therefore, uncollectible. Success of this practice depends upon the claim slipping past the debtor and his or her attorney, if the debtor is represented, as well as the bankruptcy trustee. In many cases, trustees have conceded that they do not routinely check proofs of claim for validity based on timeliness. NACBA has taken a stand on the issue, arguing that such practices violate the FDCPA and that the debtor can prosecute the FDCPA claim notwithstanding the existence of the bankruptcy action. Owens v. LVNV Funding, LLC, ___F.3d ___, 2016 WL 4207965 (7th Cir. Aug. 10, 2016); Nelson v. Midland Credit Management, Inc., ___ F.3d ___, 2016 WL 3672073 (8th Cir. July 11, 2016).
Posted by NCBRC - October 7th, 2016
“Debtors who surrender their property in Bankruptcy may not oppose a foreclosure action in state court.” Failla v. Citibank, No. 15-15626 (11th Cir. Oct. 4, 2016). Bankruptcy debtors, David and Donna Failla, opted, under section 521(a)(2)(B), to surrender their home but continued to live in the house and oppose Citibank’s state court foreclosure action. The trustee abandoned the property as having negative value. Citibank moved to compel surrender. The bankruptcy court granted the motion ordering the Faillas to cease opposition to foreclosure in the state court. The district court affirmed. Read More
Posted by NCBRC - October 5th, 2016
The Bankruptcy Appellate Panel for the Eighth Circuit affirmed that a prison inmate’s pay-to-stay debt was dischargeable in bankruptcy. County of Dakota v. Milan, No. 16-6012 (Sept. 22, 2016).
Section 523(a)(7) precludes discharge of a debt for a fine, penalty or forfeiture owing to a governmental unit unless it is compensation for actual pecuniary loss. While it is not necessary that the debt be explicitly stated to be in the nature of fine or penalty, key to the determination of dischargeability is whether the debt is tied to the debtor’s criminal conduct or whether it is tied to recoupment of the government’s actual expenses. Here, the Minnesota law establishing the pay-to-stay system was explicitly designed to help the county recoup some of its $100/day incarceration expenses. Other factors, while not dispositive in and of themselves, also supported a finding of dischargeability, including that the county had discretion to impose the fee or not depending upon the financial circumstances of the inmate and his family, and that the debt was treated through the county’s civil collection system.
The district court decision was blogged here.
Milan BAP 8th opinion Sept 2016
Posted by NCBRC - October 3rd, 2016
In a press release issued on September 29th, by the NCLC, consumer advocates expressed concern over the IRS’s appointment of four private debt collection agencies to collect federal tax debts. The selection of private debt collectors was in response to a law passed by Congress requiring the IRS to outsource tax debts if one of three conditions applies: (1) more than one year has passed without any interaction between the taxpayer and IRS; (2) one-third of the statute of limitations has lapsed and there is no IRS collector assigned; or (3) the IRS is otherwise not working the debt due to lack of resources.
The move, described by the NCLC as “a terrible development for taxpayers,” raises concerns due to the already dubious collection practices of many debt collectors. In fact, one of the four agencies, Pioneer Credit Recovery, was terminated last year by the Department of Education for providing inaccurate information to borrowers. There is also concern over the potential for an increase in scams involving phony tax collectors.
Although debt collectors must send at least two written notices before calling the tax debtor, and debtors are permitted to tell the collector not to call, consumer advocates are seeking further protections, such as excluding from the program low-income taxpayers and those who owe taxes under the Affordable Care Act.
Posted by NCBRC - September 29th, 2016
Midland Funding, LLC., has filed a petition for certiorari seeking Supreme Court review of the Eleventh Circuit decision in Johnson v. Midland Funding, LLC., 2016 U.S. App. LEXIS 9478, No. 15-11240 (May 24, 2016), petition for cert. filed, No. 16-348, (Sept. 16, 2016). In Johnson, the court expanded its earlier decision in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), cert. denied, ___ U.S. ___, 135 S.Ct. 1844, 191 L.Ed.2d 724 (2015), to find that not only does a proof of claim on a time-barred debt violate the FDCPA, but the FDCPA claim is not in conflict with, nor is it precluded by, the Bankruptcy Code. Read More
Posted by NCBRC - September 27th, 2016
An adversary proceeding alleging fraudulent transfer was not an “action on a contract” for purposes of application of the contract’s fee agreement. Jones v. Cheplick (In re Jones), No. 15-2148 (E.D. Cal. Sept. 22, 2016).
David Jones was President and majority shareholder of Telecomm Engineering which was a party to a lease agreement with Wally Cheplick. When Telecomm defaulted on its lease obligations, Mr. Cheplick obtained a judgment against it for $55,656.00. Telecomm failed to pay the judgment and forfeited the property. Mr. Jones filed for chapter 7 bankruptcy, and Mr. Cheplick filed an adversary proceeding, under sections 523 and 747, seeking to recover the Telecomm judgment on the grounds that Mr. Jones had fraudulently transferred Telecomm’s assets to avoid paying creditors. The bankruptcy court held a hearing in which it found insufficient evidence of fraud to support nondischargeability. The court, however, denied Mr. Jones’s motion for attorney’s fees. Read More
Posted by NCBRC - September 22nd, 2016
A late-filed tax return is not an “equivalent report” for purposes of dischargeability. Nilsen v. Mass. Dept. of Rev., No. 16-10148 (D. Mass. Sept. 6, 2016). Johan Nilsen filed several of his state and federal tax returns one to five years late. Neither the IRS nor the state department of revenue had conducted their own assessment of Mr. Nilsen’s taxes prior to his filing. After some of his debts were discharged in chapter 7 bankruptcy, Mr. Nilsen filed an adversary complaint seeking to discharge his tax debts. The bankruptcy court granted the tax authorities’ motion for summary judgment finding that the tax debts were nondischargeable under section 523(a)(1)(B). In re Nilsen, 542 B.R. 640 (Bankr. D. Mass. 2015). Read More
Posted by NCBRC - September 20th, 2016
A debtor may not deduct “ownership costs” under the IRS National and Local Standards for a non-purchase-money security interest in his car. Feagan v. Townson (In re Feagan), No. 16-108 (N.D. Ga. Sept. 6, 2016).
When he filed for chapter 13 bankruptcy, Brian Keith Feagan, an above-median debtor, deducted “ownership costs” for his vehicle based on payments he made on a post-purchase loan secured by the vehicle. Mr. Feagan paid $51.43 per month on a “title pawn” secured by his vehicle which he deducted on the Means Test as “payments on a secured debt” under section 707(b(2)(A)(iii). He also deducted $517.00 from his income as a vehicle ownership expense under the IRS Local Standards based on that loan. His proposed plan did not pay unsecured creditors in full. In order to avoid duplicative deductions, the bankruptcy court required Mr. Feagan to reduce his ownership costs deduction by the amount of his average monthly payment on the secured debt for a total reduction of his projected disposable income by $465.57. The bankruptcy court then confirmed the plan over the trustee’s objection. Read More