NCBRC News

by on

Battle of the Valuation Reports

Retail value under NADA, rather than trade-in value, governs the valuation of a car under Section 506(a)(2). In re Burton, No. 17-10979 (Bankr. D. Del. May 16, 2018).

Deborah Burton filed an amended Chapter 13 plan in which she listed the value of her secured vehicle as $8,100 and proposed a 5% interest rate. In support of her valuation, Ms. Burton submitted an appraisal from a car dealership stating the vehicle’s trade-in value, taking into account damage and wear. Ally Financial, the secured holder of the car loan, objected to the valuation and the interest rate, arguing that, based on a National Automobile Dealers Association valuation, the vehicle should have been valued at $11,105, and should be repaid at an interest rate of 7%. Both parties maintained that the holding in Assocs. Commercial Corp. v. Rash, 520 U.S. 953 (1997), supported their valuation. [Read more…] about Battle of the Valuation Reports

by on

No Distribution to Creditors after Chapter 13 Case Voluntarily Dismissed

The Chapter 13 debtors who voluntarily dismissed their bankruptcy case were entitled to the proceeds from the sale of their homestead. Viegelahn v. Lopez, No. 17-50297 (5th Cir. July 31, 2018).

Chapter 13 debtors, Manuel and Dolores Lopez, sold their homestead without prior court approval and did not use the proceeds to purchase another home. Their confirmed plan provided that estate property would not revest in the debtors except upon order of the court. For various reasons, including Mr. Lopez’s arrest and deportation, the Lopezes had difficulty making plan payments. In response to the trustee’s third motion to dismiss, Ms. Lopez sought to use the proceeds from the sale of their homestead for plan payments after she paid approximately $20,000 for mandatory eye surgery. The trustee objected to any hold-back of the sale proceeds. The bankruptcy court agreed to allow Ms. Lopez’s modification, adding that if the Lopezes voluntarily dismissed their bankruptcy, they would be entitled to retain all the proceeds from the homestead sale. The Lopezes moved for voluntary dismissal, and the trustee objected based on bad faith. The bankruptcy judge granted the motion to dismiss and found that the proceeds should be returned to the Lopezes. The district court affirmed the dismissal but reversed on the issue of returning the proceeds. [Read more…] about No Distribution to Creditors after Chapter 13 Case Voluntarily Dismissed

by on

Wells Fargo on the Hook for Misreporting Delinquency

Finding genuine issues of material fact, the district court denied Wells Fargo’s motion for summary judgment on most of the Chapter 13 debtors’ federal and state claims based on Wells Fargo’s misapplication and misreporting of mortgage payments while the debtors were in bankruptcy. Anderson v. Wells Fargo Bank, No. 16-2514, 2018 WL 3426269 (N.D. Tex. July 13, 2018).

Tony and Hanna Anderson were current on their mortgage when they filed their Chapter 13 petition. Their confirmed plan provided for continued payment on the mortgage outside the plan. Though the Andersons made all mortgage payments promptly, the mortgage servicer, Wells Fargo, misapplied the payments and reported the debt as delinquent. The Andersons sent Wells Fargo five qualified written requests for information under RESPA and filed a request for investigation under the FCRA. Wells Fargo admitted its error and sent the corrected information to credit reporting agencies approximately two months later. [Read more…] about Wells Fargo on the Hook for Misreporting Delinquency

by on

Tax Sale May Be Avoided as Constructively Fraudulent

A tax sale was avoidable as constructively fraudulent where the state tax foreclosure sale procedures did not include notice and bidding procedures likely to result in the debtors’ receiving “reasonably equivalent value.” Hampton v. Ontario County, No. 17-6808, and Gunsalus v. Ontario County, No. 17-6810 (W.D. N.Y. July 18, 2018).

In two separate cases with substantially identical facts, the Western District of New York addressed whether the bankruptcy court improperly dismissed the debtors’ adversary proceeding seeking to avoid the transfers of the debtors’ homes in tax sales. [Read more…] about Tax Sale May Be Avoided as Constructively Fraudulent

by on

Rooker-Feldman No Bar to Exercise of Trustee’s Strong-Arm Power

The Sixth Circuit agreed with the position advanced in NACBA / NCBRC’s amicus brief that the Rooker-Feldman doctrine does not preclude application of the trustee’s strong-arm power to avoid a lien notwithstanding a state court judgment of foreclosure. Isaacs v. DBI-ASG Coinvestor Fund III, LLC (In re Isaacs), No. 17-5815 (6th Cir. July 18, 2018).

Linda Isaacs and her husband entered into a mortgage agreement with GMAC Mortgage Corporation. The contract provided in the “description of security” that “By signing this Mortgage, we hereby mortgage, grant and convey [the collateral],” and, in the “priority of advances” section, that “The lien of this Mortgage will attach on the date this mortgage is recorded.” Shortly after signing the agreement, Ms. Isaacs filed for Chapter 7 bankruptcy. She scheduled GMAC as a secured creditor, not realizing that it had not yet recorded the mortgage. GMAC recorded the mortgage while the automatic stay was in effect. Ten years after Ms. Isaacs obtained her Chapter 7 discharge, the successor to GMAC sought an order of foreclosure against the Isaacs. The state court issued a default order of foreclosure, and one day before the scheduled sale, Ms. Isaacs filed for Chapter 13 bankruptcy. [Read more…] about Rooker-Feldman No Bar to Exercise of Trustee’s Strong-Arm Power

by on

Fee-Only (almost) Plan Not Bad Faith

“In this Court’s view, attorney fees, which are governed by 11 U.S.C. § 328, should not be intertwined with § 1325(b)(1)’s requirement that debtors pay either 100% of general unsecured claims or all of their disposable income.” In re Jones, No. 17-40497, 2018 Bankr. LEXIS 1244 (Bankr. S.D. Ill. April 26, 2018).

Chapter 13 debtor, Gary Jones, proposed to pay secured creditors directly, and pay into the plan $100.00 per month, with that amount going first to pay his attorney’s and the trustee’s fees in full, and then to pay 7.4% to his general unsecured creditors. Even though the attorney’s fees were below the court-approved no-look fee and Mr. Jones could not afford to pay more into the plan, the trustee objected to confirmation on the basis that the plan was not filed in good faith.

Applying a totality of the circumstances inquiry into the issue of good faith, the court overruled the trustee’s objection. [Read more…] about Fee-Only (almost) Plan Not Bad Faith

by on

Post-Petition Condo Fees Dischargeable

Condominium association assessments that become due after the debtor has filed for chapter 13 bankruptcy are dischargeable. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. 16-35384 (9th Cir. July 10, 2018).

When Chapter 13 debtor, Penny Goudelock, stopped her condominium association (CA) payments in 2009, Sixty-01 initiated foreclosure proceedings. In March 2011, Ms. Goudelock moved out of her condominium. She filed for bankruptcy and surrendered her unit. Sixty-01 filed a proof of claim for $18,780.35 for unpaid pre-petition assessments and noted that the assessments continued to accrue at $388.46 per month. The mortgage lender foreclosed on the property in February 2015, and Ms. Goudelock completed her plan in July, 2015. Sixty-01 moved the bankruptcy court for an order finding that the CA assessments that accrued between the time Ms. Goudelock filed her bankruptcy petition and the time the mortgage lender foreclosed were not dischargeable. The bankruptcy court granted summary judgment in favor of Sixty-01, and the district court affirmed. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. C15-1413-MJP, 2016 WL 1365942 (W.D. Wash. Apr. 6, 2016). [Read more…] about Post-Petition Condo Fees Dischargeable

by on

Collateral Estoppel Applied to “Death Penalty” Default Judgment

Where the family court litigation was resolved in favor of the debtor’s ex-husband after the court struck the debtor’s pleadings in a sanctions order, the elements of collateral estoppel applied to preclude the debtor from challenging the state court orders in her subsequent Chapter 7 bankruptcy case. Dahlin v. Dahlin, No. 16-36169, Adv. Proc. No. 17-3425 (Bankr. S.D. Tex. May 15, 2018). [Read more…] about Collateral Estoppel Applied to “Death Penalty” Default Judgment

by on

Debtor Must Exhaust Administrative Remedies to Get Damages and Fees from IRS

A debtor seeking recovery of damages, fees, or costs from the IRS in connection with a discharge injunction violation must first exhaust administrative remedies as required by the Internal Revenue Code. In re Thal, No. 09-12434, In re Slattery, No. 11-20554, 2018 Bankr. LEXIS 1308 (Bankr. S.D. Fla. May 8, 2018).

The Chapter 13 debtors, Lucy Thal and Robert Slattery, filed plans in their separate bankruptcy cases under which they paid priority IRS tax debts in full and treated their remaining tax liability as general unsecured debt. Both debtors completed their plans and obtained discharges. Nonetheless, after discharge, the IRS sent both debtors levy notices. It also intercepted a portion of Ms. Thal’s social security benefits, which it later returned, and Mr. Slattery’s tax refunds, which it did not return. In both cases, the debtors filed motions for contempt for violation of the discharge injunction. [Read more…] about Debtor Must Exhaust Administrative Remedies to Get Damages and Fees from IRS

by on

Debtors Restricted by District Form in Treatment of Tax Refund

A District Form Chapter 13 Plan’s treatment of debtors’ tax refunds as disposable income was not contrary to the Code and could not be altered by individual debtors. In re Vega-Lara, No. 17-52553 (Bankr. W.D. Tex. May 4, 2018).

Carlos Vega-Lara and Aura Cecilia Vega filed an amended Chapter 13 plan using the court’s District Form plan as required by the bankruptcy court. Their plan proposed to pay priority claims and administrative costs at 100% and unsecured nonpriority creditors at 24%. [Read more…] about Debtors Restricted by District Form in Treatment of Tax Refund