It pays to read mortgage documents carefully to determine whether the bank or Servicer complied with contractual conditions precedent prior to bringing adverse action against the debtor upon default. In In re Demers, No. 13-11539 (Bankr. R.I. June 5, 2014), American Servicing Co. (ASC) failed to comply with such conditions and was denied recovery of nearly $2,000.00 in claimed fees and costs associated with initiation of foreclosure proceedings. [Read more…] about Failure to Follow Condition Precedent to Foreclosure Precludes Recovery for Costs
Eleventh Circuit Joins Fourth in Allowing Chapter 20 Lien Strip
Yesterday, the Eleventh Circuit joined the Fourth Circuit in affirming the debtor’s ability to strip a wholly unsecured lien in chapter 13 where no discharge is available. In re Scantling, No. 13-10558 (June 18, 2014).
After reviewing the historical development of lien stripping under the Bankruptcy Code, the court, relying on its previous decision in Tanner v. Firstplus Financial, Inc., 217 F.3d 1357 (11th Cir. 2000), stated that in order for a claim to be “secured” and trigger the antimodification provisions of § 1322(b)(2), the collateral must have at least some value. In this case, it was undisputed that the amount owed on the first mortgage exceeded the property value, leaving no collateral value to support the junior mortgages. The court stated that though BAPCPA amended the discharge provision of 1328(f), it did not amend the two operative sections for lien stripping in chapter 13: §§ 506 or 1322(b)(2). Therefore, the court concluded the analysis for lien stripping in chapter 13 cases is the same irrespective of whether the debtor is eligible for a discharge.
The court rejected creditor’s argument based on In re Gerardin, 447 B.R. 342 (Bankr. S.D. Fla. 2011), that its claim was an “allowed secured claim” for purposes of section 1325(a)(5)(B)(i). Section 1325(a)(5)(B)(i) provides that creditors holding allowed secured claims retain their liens until (1) payment in full under applicable non-bankruptcy law, or (2) discharge. As the Eleventh Circuit correctly noted in this case the creditor did not hold an allowed secured claim, and therefore section 1325(a)(5)(B)(i) was inapplicable.
Tuition Deferment Dischargeable
“[W]hen a private educational institution finances a deferred payment of its tuition and related fees owed by one of its students that did not involve a third party loan or an exchange of funds,” the debt is not excepted from discharge under section 523(a)(8). Institute of Imaginal Studies v. Christoff, No.13-10808, A.P. 13-3186 (Bankr. N.D. Cal. June 11, 2014). [Read more…] about Tuition Deferment Dischargeable
The Bell Tolls for Inherited IRAs
In a unanimous decision authored by Justice Sotomayor, the Supreme Court found that “[t]he text and purpose of the Bankruptcy Code make clear that funds held in inherited IRAs are not ‘retirement funds’ within the meaning of §522(b)(3)(C)’s bankruptcy exemption.” Clark v. Rameker (In re Clark), No. 13-299 (U.S.S.Ct. June 12, 2014). [Read more…] about The Bell Tolls for Inherited IRAs
Debtor’s Claim to Equitable Distribution from Spouse’s Pension Property of Estate
Where no Qualified Domestic Relations Order (QDRO) has yet been entered, the debtor’s claim for equitable distribution of her ex-husband’s pension is property of the estate and the trustee is free to negotiate a settlement agreement with respect to that pension. Walsh v. Urmann (In re Urmann), No. 11-21606 (Bankr. W.D. Pa. Apr. 15, 2014). [Read more…] about Debtor’s Claim to Equitable Distribution from Spouse’s Pension Property of Estate
Contributions to 401(k) One Factor in Abuse Analysis
401(k) contributions may be considered when determining whether the debtors’ chapter 7 case should be dismissed for abuse pursuant to section 707(b)(3)(B). In re Nunna, No. 13-5679 (Bankr. M.D. Fla. May 13, 2014). In Nunna, the Acting U.S. Trustee filed a motion to dismiss the debtors’ chapter 7 case as abusive. The bankruptcy court granted the trustee’s motion. [Read more…] about Contributions to 401(k) One Factor in Abuse Analysis
Trustee May Not Compel Use of Non-Estate Property in Modified Plan
Relying on Eleventh Circuit precedent, a Georgia bankruptcy court found that a debtor could not be compelled to contribute life insurance proceeds received more than 180 days post-petition to his modified chapter 13 plan. In re McAllister, 2014 WL 1624106 (Bankr. N.D. Ga. April 3, 2014). [Read more…] about Trustee May Not Compel Use of Non-Estate Property in Modified Plan
Chapter 7 Lien Strip Issue in Eleventh Circuit Unclogged
Cases have been piling up in the Eleventh Circuit challenging that court’s position that a chapter 7 debtor may strip a wholly unsecured lien. See In re Brown No. 13-14298 (lead case). But that court’s recent decision in Bank of Amer. v. Toledo-Cardona, No. 13-15855 (May 15, 2014) (relying on McNeal), and more significantly, its denial of petitions for rehearing and rehearing en banc in the case of McNeal v. GMAC Mortg., LLC, 735 F.3d 1263 (11th Cir. 2012) pet. den. (May 20, 2014), suggest that movement toward Supreme Court resolution may be in the offing. [Read more…] about Chapter 7 Lien Strip Issue in Eleventh Circuit Unclogged
Filing Fee Increase
The Judicial Conference of the United States has approved several bankruptcy-related fee increases starting on June 1, 2014. The new fees will be:
Chapter 7: $335 (up from $ 306)
Chapter 9: $1,717 (up from $1,213)
Chapter 11: $1,717 (up from $1,213)
Chapter 12: $275 (up from $246)
Chapter 13: $310 (up from $281)
Chapter 15: $1,717 (up from $1,213)
The last increase in filing fees was on November 1, 2011.
Trustee Stands in Shoes of Creditor upon Avoidance of Lien
In a methodical and thorough opinion, the First Circuit found that “preservation of a lien entitles a bankruptcy estate to the full value of the preserved lien–no more and no less.” Under this principle, the court found that the trustee did not have the power to sell the debtor’s homestead where the trustee avoided the primary lien on the residence but the debtor was current on the mortgage and her homestead exemption exceeded the value of the property. DeGiacomo v. Traverse (In re Traverse), No. 13-9002 (1st Cir. May 23, 2014). [Read more…] about Trustee Stands in Shoes of Creditor upon Avoidance of Lien