In a unanimous decision delivered by Justice Scalia, the Supreme Court held that so long as the borrower notifies the lender within three years of the transaction, his rescission is timely. Jesinoski v. Countrywide Homes, 574 U. S. ____ (2015), No. 13-684 (Jan. 13). [Read more…] about TILA Rescission Effective upon Notification
It’s Alive! – McCoy Adopted by Tenth Circuit
The Tenth Circuit has concluded that late-filed tax returns are not “returns” for dischargeability purposes unless filed by the IRS in cooperation with the debtor. Mallo v. IRS (In re Mallo), __ F.3d __, 2014 WL 7360130 (Dec. 29, 2014) (consolidated with In re Martin, 14-1488). [Read more…] about It’s Alive! – McCoy Adopted by Tenth Circuit
Sixth Circuit Reverses Denial of Amendment to Exemptions
The Sixth Circuit found that prejudice to creditors was unlikely to be a legitimate basis for denying a debtor’s motion to amend her schedules to increase her exemption claim and that even if it were a legitimate basis, the trustee failed to show the existence of such prejudice. Westry v. Lim (In re Westry), No. 14-1440 (6th Cir. Dec. 30, 2014). [Read more…] about Sixth Circuit Reverses Denial of Amendment to Exemptions
Bankruptcy Reopened to Add Insurance Proceeds to Estate
The bankruptcy court properly reopened the debtor’s Chapter 7 case to permit the trustee to administer insurance proceeds where the debtor’s interest in the funds pre-dated his bankruptcy even though he did not acquire the funds until post-discharge. Wojcik v. Gold (In re Daher), No. 14-8028 (B.A.P. 6th Cir. Dec. 4, 2014). [Read more…] about Bankruptcy Reopened to Add Insurance Proceeds to Estate
National Bankruptcy Conference Chimes in on Wellness and the Constitutional Validity of Consent
In Wellness International Network Ltd. V. Sharif, a creditor (WIN) sought a finding that a state court judgment against the debtor was non-dischargeable in the debtor’s Chapter 7 bankruptcy and that a trust for which the debtor was the trustee was, in fact, an alter ego of the debtor and therefore liable for his debts. In the bankruptcy court, the debtor failed to respond to discovery requests and court orders, and, as a result, the court ordered default judgment to WIN. The debtor appealed to the district court of Illinois and during the pendency of that appeal, the Supreme Court decided Stern v. Marshall. The district court dismissed the debtor’s Stern objection as untimely. At the Seventh Circuit, the court found that the dischargeability of the debt was a core matter properly decided by the bankruptcy court. The court remanded the alter ego issue to the district court for a determination of whether it was core or noncore and concluded that, if it was core, the bankruptcy court lacked constitutional authority to decide it and the parties could not waive objection to the lack of authority. Wellness International Network Ltd. v. Sharif, 727 F.3d 751, 774 (7th Cir. 2013), cert. Granted, 134 S. Ct. 2901 (July 1, 2014) (No. 13-935). [Read more…] about National Bankruptcy Conference Chimes in on Wellness and the Constitutional Validity of Consent
Homestead Exemption May Not Be Denied Based on Bad Faith, but . . .
Absent a statutory basis for doing so, a bankruptcy court may not deny a debtor’s homestead exemption based on bad faith or prejudice to creditors. Elliott v. Weil (In re Elliott), No. 14-1050, 14-1059 (consolidated) (B.A.P. 9th Cir. Dec. 10, 2014). [Read more…] about Homestead Exemption May Not Be Denied Based on Bad Faith, but . . .
Pre-Bankruptcy Agreement Not To Discharge Debt Unenforceable
A debtor’s agreement before filing bankruptcy not to discharge her debt for attorney’s fees was found to be unenforceable under section 523(a)(2) and for public policy reasons. Ziegler v. Kline (In re Kline), No. 14-12815, Adv. Proc. No. 14-227 (Bankr. E.D. Pa. Nov. 20, 2014). [Read more…] about Pre-Bankruptcy Agreement Not To Discharge Debt Unenforceable
Default Interest Rate Inequitable
The lender’s default interest rate was inequitable under both sections 502(b) and 506(b) where, among other factors, the lender was oversecured, ran no realistic risk of loss, and was more financially sophisticated than the debtors. In re Parker, No. 12-03128 (Bankr. E.D. N.C. Nov. 19, 2014). [Read more…] about Default Interest Rate Inequitable
En Banc Rehearing Granted on Sternberg Issue
The Ninth Circuit Court of Appeals has granted America’s Servicing Company’s petition for rehearing en banc in In re Schwartz-Tallard, No. 12-60052 (Petition granted, Dec. 19, 2014). The case arose out of the debtor’s motion for attorney fees relating to ASC’s appeal of a finding that it had violated the automatic stay. The Ninth Circuit found that the debtor’s attorney fees were actual damages under Section 362(k)(1). In re Schwartz-Tallard, 765 F.3d 1096 (9th Cir. August 29, 2014), aff’g, In re Schwartz-Tallard, 473 B.R. 340 (B.A.P. 9th Cir. 2012). The court distinguished Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), which held that a debtor’s attorneys’ fees for work on an adversary proceeding seeking damages for a stay violation were not actual damages and thus were not recoverable under 11 U.S.C. § 362(k)(1). In this case, ASC’s appeal challenged both the fee award and the substantive stay violation ruling; therefore, the debtor’s fees were incurred in defending both the damage award and the finding of stay violation.
Oral argument is scheduled for the week of March 16, 2015, though debtor’s counsel has asked for a new date.
College Students Underestimate Their Student Loan Debt
Based on a study using data drawn from two sources linking student survey responses to administrative records on cost and borrowing, a Brookings Institution report has concluded that “a significant share of undergraduate students do not understand how much they are paying for college or how much debt they are taking on.” The report indicated that 28% of college freshmen who have taken out federal student loans do not think they have any federal debt, and 14% do not realize that they have any debt at all. Not only does a large percentage of students fail to grasp the extent or nature of their loans, but only a bare majority of college freshmen (52%) could estimate their actual costs of college within $5,000 accuracy. The report concludes: “It is possible, even likely, that this lack of knowledge will cause students to be surprised when their financial circumstances become apparent, perhaps when their first loan payment comes due. This surprise, or even fear, may impose an emotional burden on borrowers. More broadly, it may contribute to popular narratives about crushing student loan burdens, which are inconsistent with the reality that these burdens remain manageable for most borrowers (Akers and Chingos 2014).”