In a case of first impression, the Eleventh Circuit held that the “explicit, specific, and broad language [in section 362(k)] permits the recovery of attorneys’ fees incurred in stopping the stay violation, prosecuting a damages action, and defending those judgments on appeal.” Mantiply v. Horne (In re Horne), No. 16-16789 (11th Cir. Dec. 5, 2017). [Read more…] about Right to Attorneys’ Fees for Stay Violations Extends to Appeals
Court Won’t Let Bank of America “Buy and Bury” Judgment Against It
“To name and to shame Bank of America on the public record in an opinion that stays on the books serves a valuable purpose, casting sunlight on practices that affect ordinary consumers.” Sundquist v. Bank of America, No. 10-35624, Adv. Proc. No. 14-2278 (Bankr. E.D. Cal. Jan. 18, 2018).
Calling it a “naked effort to coerce this court to erase the record,” the bankruptcy court declined to vacate its 2017 judgment in which it awarded damages for violation of the automatic stay for $1,074,581.50 and ordered an additional $5 million in punitive damages based on Bank of America’s conduct in connection with Erik and Renee Sundquist’s home mortgage. In addition to the award directed to the Sundquists, the 2017 order included a $45 million punitive damage award to be distributed to various public interest entities, which were added to the case as Intervenors. The order also cancelled the Sundquists’ attorney’s contingency fee agreement, citing section 329(b), and ordered payment of her fees on a lodestar basis. Sundquist v. Bank of America (In re Sundquist), 566 B.R. 563 (Bankr. E.D. Cal. 2017) (2017 order) (blogged here). [Read more…] about Court Won’t Let Bank of America “Buy and Bury” Judgment Against It
Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap
“There are certain situations where a debtor claiming federal exemptions under § 522 of the Bankruptcy Code can claim an exemption of a 100% interest in an asset. What we do not decide is whether doing so entitles such a debtor to clear title in that asset and any post-petition appreciation.” Ayobami v. Peake, No. 16-20589 (5th Cir. Jan. 3, 2018). [Read more…] about Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap
Debtor’s Treatment of Student Loan Outside Plan Not Confirmable
The court could not confirm the debtor’s plan proposing to pay all claims in full except her student loan debt, for which she proposed payments on interest only outside the plan. In re Ryan, 17-1507 (Bankr. M.D. Fla. Nov. 7, 2017).
Jenna Ryan’s Chapter 13 petition schedules listed total debts of approximately $173,000, including a student loan debt from the Department of Education of almost $80,000. Her disposable income was $4,417.72. Her plan proposed to pay $1,403.09 per month for sixty months to pay off all debts in full except for the student loan debt. As to that claim, the plan proposed that Ms. Ryan would maintain payments outside the plan. She took the “position that there are no payments due under the terms of the student loan, given the filing of the bankruptcy, so her payments are voluntary and enough to cover the accruing interest payments.” [Read more…] about Debtor’s Treatment of Student Loan Outside Plan Not Confirmable
Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens
The bankruptcy estate’s interest in property does not become superior to a valid senior judgment lien even though the bankruptcy trustee took the steps necessary to avoid a fraudulent transfer and bring the property into the estate. In re Knight, No. 16-584 (Bankr. D. S.C. Nov. 6, 2017).
Apex Bank obtained two judgments against Talmadge Knight in state court. By operation of state law, the judgments resulted in liens on Mr. Knight’s property. Shortly thereafter, Mr. Knight transferred his farm property, Saluda, to Ambler Road, LLC., an entity owned solely by Mr. Knight. Mr. Knight later filed for Chapter 7 bankruptcy. Apex filed two proofs of claim totaling approximately $1.9 million. The trustee filed an adversary proceeding to avoid the transfer of the Saluda property from Mr. Knight to Ambler. That proceeding was settled, and the transfer avoided. The trustee then arranged a sale of the property for $146,000 and moved the court for permission to sell free and clear of liens. The motion contained some inaccuracies about the property and did not mention Apex’s judgment liens. [Read more…] about Code Does Not Entitle Trustee to Sell Free and Clear of Creditor’s Judgment Liens
Bankruptcy Court Lacked Power to Order $375,000 in Punitive Damages
A bankruptcy court lacks inherent or statutory power to award $375,000 in punitive damages based on the creditor’s violation of Rule 3002.1(c) and disregard of a court order. PHH Mortgage Corporation v. Beaulieu, Nos. 16-256, 16-257, 16-258 (D. Vt. Dec. 18, 2017).
The debtors in three Chapter 13 cases had confirmed plans under which they were able to remain in their homes post-petition and pay their mortgages through the trustee. Two sets of debtors, the Gravels and the Beaulieus, completed their payments, and the court issued an order stating that they were current on their mortgages and charges through the completion of their plans. PHH sent all three sets of debtors a monthly statement for fees based on property inspection, late charges, and insufficient funds, all of which were incurred more than 180 days before the statement in violation of Rule 3002.1(c). The trustee moved for sanctions in all three cases for violation of Rule 3002.1(c) and, in the Beaulieus’ and the Gravels’ cases, for violation of the Bankruptcy Court’s Order at the close of their cases. [Read more…] about Bankruptcy Court Lacked Power to Order $375,000 in Punitive Damages
Title-Pawned Vehicle Drops Out of Estate When Not Redeemed Post-Petition
A Chapter 13 plan treating a loan secured by property that had been title-pawned before bankruptcy should not have been confirmed where the debtor failed to redeem the property within the redemption grace period. TitleMax v. Northington, Nos. 16-17467, 16-17468 (11th Cir. Dec. 11, 2017). In so holding, the Eleventh Circuit deemed TitleMax’s continued prosecution of its motion for relief from stay as equivalent to an objection to confirmation.
Debtor, Gustavius Wilber, entered into a title pawn agreement with TitleMax, pledging his car as security for a loan. After the payment due date for the loan expired but before the statutorily-mandated redemption period had lapsed, Mr. Wilber filed for chapter 13 bankruptcy and proposed a plan to repay the loan with interest. TitleMax filed a motion for relief from stay. At the confirmation hearing, which took place after the redemption period had lapsed, TitleMax continued to press for relief from stay but specifically indicated that it was not objecting to confirmation of the plan. The bankruptcy court confirmed the debtor’s plan and later denied TitleMax’s motion for relief from stay. In re Wilber, 551 B.R. 542, 544–47 (Bankr. M.D. Ga. 2016). The district court affirmed. Title Max v. Northington, 559 B.R. 542, 545 (M.D. Ga. 2016). [Read more…] about Title-Pawned Vehicle Drops Out of Estate When Not Redeemed Post-Petition
$119,000 Sanctions for Discharge Injunction Violations
Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation, notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence. Ocwen Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017).
Debtors, Christopher and Valerie Marino, surrendered their real property in their Chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June 2013 through April, 2015, Ocwen, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” Ocwen also made approximately one hundred calls to the Marinos seeking payment on the discharged debt. [Read more…] about $119,000 Sanctions for Discharge Injunction Violations
Traffic Fines Not Given Priority in Chapter 13
Claims based on post-petition traffic fines are not administrative expenses entitled to priority in chapter 13 bankruptcy. City of Chicago v. Marshall, No. 17-2308 (lead case) (N.D. Ill. Nov. 27, 2017).
Bankruptcy debtors in seven separate cases and two courts incurred post-petition traffic fines in the City of Chicago. The City moved the courts to prioritize its claims as “administrative expenses” under sections 503 and 507(a). The courts denied the City’s motions. [Read more…] about Traffic Fines Not Given Priority in Chapter 13
Fourth Circuit Side-Steps Retirement Contribution Issue
Finding that the trustee did not raise the statutory issue of whether and when a chapter 13 debtor may make voluntary contributions to his retirement account, the Fourth Circuit found no clear error in the bankruptcy court’s factual finding of good faith. Gorman v. Cantu (In re Cantu), No. 17-1034 (4th Cir. Dec. 18, 2017) (unpublished).
Ricardo Cantu’s chapter 13 plan proposed to pay $51,240 toward his $148,346 unsecured debt over five years. The plan payments were based on a disposable income calculation which contemplated $338 in monthly repayments to two retirement accounts which Mr. Cantu had taken out against his government-backed Thrift Savings Plan. The trustee argued that one of the loans from the TSP would be paid off shortly after commencement of the plan, and applying the forward-looking approach, the anticipated reduction in retirement contributions should be considered in calculating Mr. Cantu’s disposable income. The trustee also objected to Mr. Cantu’s inclusion of domestic support payments in the amount of $1,625 per month, when his divorce decree ordered monthly payments of $1,500. Mr. Cantu countered that once he paid off the loan from the TSP he intended to resume making contributions in the same amount to that Plan. He also maintained that the discrepancy between the divorce decree and his actual payments was a result of a scrivener’s error in the divorce decree.
With respect to Mr. Cantu’s voluntary contributions to his retirement account, the bankruptcy court adopted the majority view that such payments may be deducted from the disposable income calculation under section 1325(b), so long as they are made in good faith. The court rejected the two contrary approaches under which 1) voluntary retirement contributions may be made only if they were being made prior to bankruptcy and in the same amount, and 2) voluntary contributions are prohibited in all circumstances. The court then addressed the factual issues of whether the contributions were proposed in good faith and whether the domestic support payments were accurate. The court resolved both issues in Mr. Cantu’s favor. In re Cantu, 553 B.R. 565 (Bankr. E.D. Va. 2016). The district court affirmed.
On appeal, the Fourth Circuit side-stepped the statutory issue of which approach to voluntary retirement plan contributions to adopt, concluding that the trustee did not appeal the bankruptcy court’s application of the majority view, but instead, limited his argument to whether the bankruptcy court correctly resolved the factual issue of good faith. The circuit court found that the bankruptcy court did not commit clear error. Mr. Cantu had been making regular contributions to his TSP until he was forced to stop when he took out hardship loans against the account. In addition, the amount of his contributions was far less than the allowable contribution amount.
The court also found that the bankruptcy court did not commit clear error in accepting Mr. Cantu’s testimony, supported by a pre-divorce Separation Agreement, that the divorce decree did not accurately reflect the agreement between the ex-spouses.
Finding that the bankruptcy court’s factual conclusions were supported by the evidence, the circuit court affirmed.
Judge Thacker concurred in part and dissented in part. She maintained that the trustee in fact raised the issue on appeal of whether and when a debtor may make voluntary contributions to a retirement account, and the court should have taken the opportunity to take a position on the issue. With respect to the domestic support payments, Judge Thacker opined that the bankruptcy court was bound to apply the only court-ordered payments, to wit: those specified in the divorce decree, and that it overstepped by applying, instead, an amount not reflected in that document.