Posted by NCBRC - February 24th, 2017
The Supreme Court denied cert. in the case of Smith v. I.R.S., No. 16-497 (U.S.) dashing hopes of a definitive resolution of the issue of whether a late-filed tax return may constitute a “return” within the meaning of the hanging paragraph to section 523(a) (petition denied, (Feb. 21, 2017)). As NACBA/NCBRC argued in its amicus brief in support of certiorari, the question has deeply divided the courts with the Eighth Circuit relying on the accuracy of the documents purporting to constitute the return and permitting discharge if a bankruptcy petition is filed two years after a late-filed return, Colsen v. United States (In re Colsen), 446 F.3d 836 (8th Cir. 2006); the Fourth, Sixth, Seventh, Ninth and Eleventh Circuits, finding that once the IRS has made its own assessment of tax liability the late-filed return is not considered a return for purposes of bankruptcy dischargeability, e.g. Smith v. United States (In re Smith), 828 F.3d 1094 (9th Cir. 2016); and the First, Fifth and Tenth Circuits taking the draconian approach epitomized by McCoy v. Mississippi State Tax Comm’n (In re McCoy), 666 F.3d 924 (5th Cir. 2012), that all taxes described on late-filed returns—even those filed one day late for any reason—are barred from discharge. Unfortunately, given the sharp divide between circuits, treatment of a late-filed return will continue to be based on luck of the geographical draw.
Posted by NCBRC - February 21st, 2017
Where there is little likelihood that the debtor will be able to pay her students loans now or in the future, the fact that an income-based repayment plan may be available does not automatically constitute an “ability to pay.” Fern v. FedLoan Servicing, No.16-6021 (B.A.P. 8th Cir. Feb. 7, 2017).
Sara Fern is a 35 year-old single mother of three who receives food stamps and rental assistance and has a monthly employment income of $1,507. While she receives occasional financial help from her mother, that assistance is expected to end when her mother retires. Her expenses exceed her income by $62/month. Ms. Fern has student loans totaling over $27,000 which have been in forbearance or deferment ever since she left school.
The U.S. Department of Education appealed the bankruptcy court’s finding that Ms. Fern’s student loans were dischargeable based on undue hardship under section 523(a)(8). Read More
Posted by NCBRC - February 17th, 2017
Neither the Code nor the Bankruptcy Rules permit a Bankruptcy Court to grant a “comfort order” allowing a late proof of claim where no objection has been made to the filing. In re Rodriguez, No. 16-70150 (Bankr. S.D. Tex. Feb. 13, 2017).
Karina Rodriguez listed Ovation as a tax lien creditor on Schedule D of her chapter 13 petition. Ovation filed its claim, along with a motion to allow late filing, after the filing deadline had passed. Ovation’s contemporaneous motion objecting to confirmation because the plan did not provide for full payment of its claim was granted pursuant to an agreed order. Read More
Posted by NCBRC - February 13th, 2017
In its monthly complaint report, the CFPB reported that the top three financial products or services receiving complaints in December, 2016, were, in descending order, debt collection, credit-reporting, and mortgages. Mortgage servicers garnered complaints for such things as misapplication of payments and ineffective resolution of borrowers’ problems with their loans. To account for monthly and seasonal fluctuations, the report compares complaints against companies in three-month segments to the same period the prior year. Equifax, Wells Fargo and TransUnion had the dubious honor of being the top three complained–about companies in the period from August to October, 2016. With respect to complaints relating to types of loans, the three-month average for complaints concerning student loans rose by 109% over the same period last year. The three states with the greatest increase in consumer complaints were Alaska, Georgia and Louisiana.
CFPB Monthly-Complaint-Report Feb 2017
Posted by NCBRC - February 8th, 2017
Section 1322(b)(9) does not permit a court to confirm a plan vesting surrendered property in an unwilling creditor. Wells Fargo v. Sagendorph, No. 15-40117 (D. Mass. Jan. 23, 2017).
Paul Sagendorph’s chapter 13 plan proposed to surrender property on which Wells Fargo held the sole lien, and vest title in Wells Fargo notwithstanding Wells Fargo’s objection. The bankruptcy court held that the Code permitted Mr. Sagendorph’s treatment of the secured debt and confirmed the plan. In re Sagendorph, No. 14-41675 (Bankr. D. Mass. June 2015). Read More
Posted by NCBRC - February 6th, 2017
Cross-collateralized loans were not immune from cramdown where they did not have a “close nexus” to the purchase of the collateral vehicles for purposes of the 910-claim exception to cramdown, and motor vehicles are not “any other thing of value” for purposes of the second exception. In re McPhilamy, No. 16-10238 (Bankr. S.D. Tex. Jan. 31, 2017).
In their chapter 13 plan, the debtors, Sean and Bertha McPhilamy, sought to treat as unsecured five of the seven claims held by Rio Grande Federal Credit Union (RGFCU). The claims were based on loans cross-collateralized by two motor vehicles, a Honda Civic and a Chevy Camaro. The loans were executed at least within 910 days, and in some cases within one year, of the McPhilamy’s bankruptcy. The plan proposed to treat the other two of the seven claims (claims 10 and 12) as secured because they were for loans used to purchase the two vehicles at issue. Those two debts exceeded the value of the vehicles.
Though RGFCU did not object to confirmation, the trustee moved to dismiss or convert on the basis that the debtors had failed to propose a confirmable plan. Read More
Posted by NCBRC - January 31st, 2017
Financially distressed debtors seeking the fresh start offered by bankruptcy, often lack the resources to pursue important issues at the appellate level. In an effort to equalize the playing field between consumer debtors and their creditors, the NACBA Board created the National Consumer Bankruptcy Rights Center (NCBRC or “Nicbric”), a 501(c)(3) organization. Since its inception in 2010, NCBRC has provided support to consumer bankruptcy debtors and their attorneys in cases of national importance. NCBRC fulfills its mission through three programs. Under the Amicus Program, NCBRC has filed briefs in cases addressing such vital issues as the invidious practice of debt collectors filing stale claims and the misapplication of judicial estoppel by the courts. In its Pro Bono Appellate Program, NCBRC has worked with attorneys from leading bankruptcy firms around the country who have donated over 300 hours to the amicus project. Finally, NCBRC’s Educational Program is devoted to supporting the bankruptcy bar by providing education on current issues in consumer bankruptcy. To this end, NCBRC’s Project Director, Tara Twomey, is an active participant in in-person and on-line training programs.
To learn more about NCBRC in general and to read about specific cases in which NCBRC filed amicus briefs in 2016, go to NCBRC Year in Review 2016.
In order to continue this great work we need your help. Consider making a contribution today by clicking here.
Posted by NCBRC - January 27th, 2017
A news release issued by the Department of the Treasury, announced a $65 million fine against ServiceLink Holdings, formerly Lender Processing Services (LPS), for servicing deficiencies by LPS relating to its foreclosure services. The news release can be found here.
Posted by NCBRC - January 25th, 2017
A state property tax refund intended to “provide property tax relief to certain persons who own or rent their homesteads,” is not “government assistance based on need,” for purposes of Minnesota exemptions. Hanson v. Seaver (In re Hanson), No. 16-6023 (B.A.P. 8th Cir. Jan. 6, 2017).
Upon objection by the chapter 7 trustee, the Bankruptcy Court found debtor, Sheri Lynn Hanson, was not entitled to the public assistance exemption based on her refund under the Minnesota Property Tax Refund Act. Read More
Posted by NCBRC - January 23rd, 2017
Provisions in a deed of trust, including an obligation for the debtor to maintain an escrow account, are incidental to the residential security interest and do not remove the claim from bankruptcy’s anti-modification provision. Birmingham v. PNC Bank, No. 15-1800 (4th Cir. Jan 18, 2017).
Chapter 13 debtor, Gregory John Birmingham, filed an adversary complaint seeking to cram down his mortgage with PNC and arguing that the anti-modification provision did not apply because PNC’s claim was not secured solely by his residence. Specifically, Mr. Birmingham pointed to the provisions in the lending agreement requiring him to: 1) maintain an escrow account to cover obligations such as property taxes, 2) maintain property insurance, and 3) assign to PNC any proceeds from third parties arising out of judgments, settlements or other actions involving the property.
The bankruptcy court granted PNC’s motion to dismiss and the district court affirmed. Read More