Type: Amicus
Date: July 26, 2022
Description: Whether a bankruptcy debtor can be held liable for another person’s fraud, which cannot be discharged in bankruptcy, even when she was not aware of the fraud.
Result: Pending
Scotus Denies Cert in Fee Harvesting Case
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.
Sample Case 1
Holding
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Issue
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Coverage
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Supreme Court Finds Denial of Confirmation not Appealable Order
The Supreme Court unanimously decided today that denial of confirmation is not a final, appealable, order. Bullard v. Blue Hills Bank, 575 U.S. ___, No. 14-116 (U.S. May 4, 2015). [Read more…] about Supreme Court Finds Denial of Confirmation not Appealable Order
Cert. Denied in LVNV v. Crawford
The Supreme Court has declined to take up the issue of whether filing a stale proof of claim in a bankruptcy case violates the FDCPA. Previously, the Eleventh Circuit found that a proof of claim to collect a stale debt in chapter 13 violates the Fair Debt Collection Practices Act. In Crawford, however, the Eleventh Circuit side-stepped the issue of whether an irreconcilable conflicts exists between the Bankruptcy Code and the FDCPA, such that creditor’s conduct in bankruptcy would not be actionable under the FDCPA.
Supreme Court Hears Oral Argument in Ch. 7 Lien Stripping Cases
Today, the Supreme Court heard oral arguments in Bank of America, N.A. v. Caulkett, and Bank of America, N.A., v. Toledo-Cardona. At issue is whether Chapter 7 debtors may strip off junior mortgages where there is no value in the collateral to support the junior lien. Here’s the transcript. Well worth the read!
Supreme Court Doubleheader
NACBA filed amicus briefs on Monday in two Supreme Court cases: Harris v. Viegelahn, 14-400, and Bullard v. Blue Hills Bank, 14-116.
Harris asks whether funds paid into a confirmed chapter 13 plan that are still in the trustee’s possession when the bankruptcy is converted to chapter 7 should be refunded to the debtor or paid to creditors. At the time of conversion, the trustee was holding funds originally designated for the debtor’s mortgagee, but more than $4,300 in funds were not disbursed because the mortgagee obtained relief from stay and foreclosed on the debtor’s home. Neither the trustee nor the debtor sought to modify the plan. Instead, the debtor converted the case to Chapter 7. Several days after debtor filed his notice of conversion, the trustee distributed the funds she had on hand to unsecured creditors. Harris moved to compel a refund of the money. The bankruptcy court granted the motion, and the district court affirmed. The Fifth Circuit reversed and found that the monies were properly distributed to creditors. Harris, No. 13-50374 (July 7, 2014) (disagreeing with In re Michael, 699 F.3d 305 (3rd Cir. 2012)).
NACBA’s brief in Harris argues that the Code’s plain text as well as the policies that animate the Code require that undisbursed funds be returned to the debtor.
Bullard asks whether denial of confirmation is a final appealable order. In Bullard, confirmation of the plan depended solely on the resolution of a disputed legal issue that has divided the bankruptcy courts. The bankruptcy court denied confirmation of debtor’s proposed plan, and after granting leave to appeal, the bankruptcy appellate panel affirmed. The First Circuit held that because the debtor could theoretically, though not realistically, submit a new plan, the decision of the bankruptcy appellate panel was not final. By contrast, if the bankruptcy appellate panel had ruled in the debtor’s favor and reversed the bankruptcy court, then its order would indisputably be final, and the First Circuit could conclusively determine the issue and resolve the split among the lower courts.
NACBA’s brief in Bullard argues that giving creditors, but not debtors, the ability to appeal decisions relating to plan confirmation is unjustified, that the alternatives proposed by the court—dismissal or refile and object to debtor’s plan—are problematic, and that allowing such appeals is unlikely to overburden the courts.
Bullard Amicus Brief of Bank of America
Supreme Court Hears Homestead Surcharge Case
The US Supreme Court heard arguments yesterday in the case of Law v. Siegel (In re Law), No. 12-5196. That case involves the issue of whether a bankruptcy court has the power under section 105(a) to impose a special surcharge by taking the debtor’s homestead exemption due to debtor misconduct.
NCBRC filed an amicus brief on behalf of the NACBA membership, arguing that while section 105(a) grants equitable power to the court to effectuate the terms of the Bankruptcy Code, it does not permit the court to contravene other sections of the Code or bypass its otherwise applicable provisions. In sections 522(c) and (k), Congress specified that exempt property cannot be used to pay pre-petition debts or administrative expenses. In addition, in sections 522(o) and (q), Congress specified conditions under which a homestead exemption may be compromised as a result of the debtor’s misconduct. Section 105(a) permits a court to use its equitable power to “carry out the provisions” of the Code, not to override or contradict them.
The transcript of the argument can be found here. Law v Siegel transcript
Stern v. Marshall Construed
Interpreting the Supreme Court decision in Stern v. Marshall, 131 U.S. 2594 (2011), the Bankruptcy Court for the Eastern District of Kentucky found that it had subject matter jurisdiction over debtor’s state common law counterclaims but did not have jurisdiction over the counterclaims based on Kentucky’s usury and consumer protection statutes. In re Tolliver, No. 09-2076 (Bankr. E.D. Ky. February 2, 2012). The issue arose in an adversary proceeding in which the debtor objected to a proof of claim filed by Ocwen Federal Bank, as servicer to Bank of America. Debtor filed counterclaims advancing state statutory and common law claims based on Ocwen’s alleged charging of unauthorized and duplicative fees and costs, and improperly inflating debtor’s balance, causing her to default. [Read more…] about Stern v. Marshall Construed