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
Forgiving Our Debtors (Unless They Are Prisoners)
Through various provisions in the Bankruptcy Code, Congress has identified debts that should not be forgiven. These include, for example, debts for certain taxes, debts for money obtain through fraud, debts for domestic support obligations, and debts incurred from drunk driving (think, personal injury or wrongful death judgments). Congress has also identified debtors that will be denied a fresh start because they acted badly and contrary to the bankruptcy process. This usually happens when the debtor is not honest and makes false disclosures with respect to assets and property.
Nowhere in the Bankruptcy Code does Congress prohibit prisoners from filing bankruptcy.
While Congress has not precluded prisoners from being debtors, a bankruptcy court in the recent decision In re Moore, 2012 Bankr. LEXIS 3897 (Aug. 24, 2012) has effectively done just that. If you are a prisoner, your case will be dismissed. Why? Because as a prisoner, you are not at liberty to personally attend the meeting of creditors (also known as the 341 meeting). Section 343 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 4002 require the debtor’s presence at the meeting of creditors. However, the Moore court acknowledged that it had discretion to waive debtor’s presence at the meeting of creditors for the physically disabled, gravely ill, or deployed military personnel. But the court concluded that “incarceration did not constitute a good and sufficient reason to waive the debtor’s attendance.” Since issuing its opinion, the court has issued a show cause order why the debtor’s case should not be dismissed for failing to attend the 341 meeting.
So much for forgiving our debtors…
Life After Bankruptcy
Vicki Elmer at the New York Times has written about getting a mortgage after filing for bankruptcy (here). The bottom line is that bankruptcy isn’t the end of the world. Indeed, for many, bankruptcy provides a much needed fresh start, putting people on sounder financial footing and allowing them to rebuild their credit. It is even possible to get a mortgage.
Heritage Pacific’s Debt Collection Practices Garner More Attention
Heritage Pacific Financial, a debt buyer of foreclosed second mortgages, first popped up on my radar screen nearly two years ago. At that time, Heritage was filing multi-defendent complaints in state and federal courts against California home loan borrowers–mostly Latino–claiming that the borrowers fraudulently misstated their monthly income on their loan applications. I suspect that they were trying to get people to settle with them and save filing fees, but at least most federal district court judges recognized that suing multiple defendants on multiple contracts in the same complaint is not proper under Rule 20 of the Federal Rules of Civil Procedure. (See Order here). As a result, those cases didn’t go very far in court. With the multi-defendant model out the door, Heritage turned its attention to bringing non-dischargeability actions against bankruptcy debtors. Court documents show debtors, many chapter 7 pro se debtors, entering into settlement agreements to pay Heritage thousands of dollars over several years. Sadly, in many of these cases, the underlying debt is uncollectable based on state anti-deficiency laws. Heritage cannot show that it has been assigned the original lender’s fraud claim, or Heritage is unable to demonstrate that the borrower made any false statements or that the original lender relied on any false statement.
Several cases are now pending against Heritage in state courts alleging violations of California’s anti-deficiency laws, the Fair Debt Collection Practices Act, the Rosenthal Act (the state’s version of FDCPA) and the state’s unlawful business practices law.
Earlier this week, Rick Jurgens of the Center for Investigative Reporting, wrote a story that focuses on some of the borrowers that have been targeted by Heritage. ABC affiliate, KGO-TV, in conjunction with CIR, also put together a video news story on Heritage.
NCBRC is looking into Heritage’s practice of bringing frivolous non-dischargeability actions in bankruptcy courts throughout California. The United States Trustee should also consider a thorough investigation of Heritage and its bankruptcy practices.