Posted by NACBA - June 20th, 2019
On June 19, 2019 the 7th Circuit Court of Appeals affirmed the decisions of the lower bankruptcy courts.
In four chapter 13 bankruptcies, the City of Chicago impounded vehicles owned by the Debtors for failure to pay multiple traffic fines. After the Debtors filed chapter 13, the City refused to return the vehicles claiming they needed to maintain possession to continue their perfection on them and wouldn’t return the vehicles until the fines were paid.
The bankruptcy courts held that the City violated the automatic stay by exercising control over the vehicles, that no exceptions applied, and ordered the return of the vehicles and sanctions. The City appealed and the 7th Circuit consolidated the appeals in this case.
The Debtors were represented in part by NACBA members John Wonais of the Semrad Law Firm, and Eugene Wedoff. NACBA member Tara Twomey supported the Debtors by filing an amici curiae brief for NACBA and the National Consumer Bankruptcy Rights Center. NACBA member David Yen filed an amicus curiae brief for the Legal Assistance Foundation.
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Posted by NACBA - February 21st, 2019
A bankruptcy court recently ruled on several issues of importance to all potential debtors. First, the court examined the effect of a prior dismissal order (for failure to timely file certain schedules, statements or other documents) on a subsequent bankruptcy petition. Specifically, the court examined the small slice of cases where the automatic stay does not apply in a second case when the Debtor is not an “eligible Debtor” under 11 U.S.C. § 109(g). The court also examined the split in authority on who bears the burden of proof of proving eligibility.
Further the court examined whether a creditor, who unknowingly completed a foreclosure sale during the second case, violated the automatic stay by not promptly undoing the sale upon notification of the bankruptcy. Further the court extensively discussed the different non-traditional methods that creditors can receive binding notice of a bankruptcy and their responsibility thereafter. The court also examined whether a technical violation can turn into a willful violation and whether a creditor has an affirmative duty to correct a technical violation.
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Posted by NCBRC - January 15th, 2019
Under section 362(c)(3), the automatic stay terminates in its entirety after 30 days, when the debtor has had a previous case dismissed within one year of filing the second case. Smith v. State of Maine Bureau of Rev. Servs., 910 F.3d 576 (1st Cir. 2018). Read More
Posted by NCBRC - November 6th, 2018
A New Jersey District Court applied the minority view that a creditor does not have an affirmative duty to return a vehicle repossessed pre-petition upon learning of the debtor’s bankruptcy filing. Denby-Peterson v. Nu2u Auto World, No. 17-9985 (D. N.J. Nov. 1, 2018).
Joy Denby-Peterson entered into a purchase money security agreement for the purchase of her 2008 Corvette. The original seller transferred the debt to Nu2u. When Ms. Denby-Peterson failed to make payments according to the agreement, Nu2u repossessed the vehicle. Ms. Denby-Peterson filed for chapter 13 bankruptcy and initiated an adversary proceeding seeking turnover of the vehicle and actual damages for violation of the automatic stay. The bankruptcy court ordered return of the vehicle, but denied Ms. Denby-Peterson’s motion for sanctions. Read More
Posted by NCBRC - June 26th, 2018
Where the evidence showed assignment of the mortgage to U.S. Bank, but did not show that the underlying promissory note was likewise assigned, U.S. Bank was not a party-in-interest in the debtor’s chapter 7 bankruptcy and its servicer was not entitled to relief from stay. In re Garcia, No. 18-10229, 2018 Bankr. LEXIS 1352 (Bankr. S.D. N.Y. May 8, 2018).
In this case, Bankruptcy Judge Martin Glenn bemoaned the sloppy work of both Miguel Garcia’s chapter 7 counsel and the counsel for U.S. Bank’s servicer, Rushmore Loan Management Services (Rushmore). But it was Rushmore’s failure to include sufficient evidence in its motion that ruled the day. Read More
Posted by NCBRC - March 21st, 2018
The City’s action in booting the debtor’s car after she had filed her bankruptcy petition did not violate the automatic stay where its purpose was to protect public safety. In re Hicks, No. 17-3663 (Bankr. N.D. Ill. Feb. 1, 2018).
Ashina Hicks entered chapter 13 bankruptcy with almost $16,000 in traffic fines owed to the City of Chicago. After her petition, the City booted her car and did not remove the boot until the following day. Ms. Hicks filed a motion to show cause why the City’s action should not be found to be a violation of the automatic stay, and she sought $6,000 in damages for emotional distress, inconvenience and embarrassment. The City countered that its action was within its governmental power to protect the public safety and was not subject to the automatic stay under section 362(b)(4). The court agreed. Read More
Posted by NCBRC - February 27th, 2018
Reasoning that the case involved a lien rather than an administrative freeze on funds in a bank account, the bankruptcy court found that the automatic stay did not require the bank to take affirmative steps to release its citation lien. In re Smiley, No. 17-27169 (Bankr. N.D. Ill. Jan 11, 2018).
J.P. Morgan Chase Bank froze the bank accounts belonging to chapter 13 debtor, Kim Smiley, pursuant to a citation to discover assets filed by Bank of America. Under Illinois law, the citation created a lien on Ms. Smiley’s accounts. After Ms. Smiley filed her bankruptcy petition, Bank of America refused to release the lien and unfreeze the funds. Ms. Smiley sought sanctions for violation of the automatic stay under section 362(k). Read More
Posted by NCBRC - January 29th, 2018
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
Posted by NCBRC - October 26th, 2017
The substance of a lease for personal property mandated that it be treated as a security agreement rather than a true lease, and therefore, the debtors were entitled to bifurcate the debt into secured and unsecured portions for treatment in their chapter 13 plan. In re Price, No. 17-67 (Bankr. E.D. N.C. Sept. 14, 2017).
Co-debtor, Sidney Price, entered into several lease agreements for equipment with Peak Leasing. The agreements provided that, once he had made all payments under them, Mr. Price had the option to purchase the property for $1.00.
In their chapter 13 plan, the Prices sought to treat the lease agreements as a secured debts and bifurcate the claims into secured and unsecured portions under section 1322(b)(2). Peak Leasing countered that the agreements were true leases and sought relief from the automatic stay to allow it to take possession of the property in the event the debtors failed to make the contractual payments. The court entered an interim order permitting modification of the stay pending its determination of the issue of whether the agreements were leases or security agreements. Mr. Price, however, defaulted on his obligations under the order and it was therefore made permanent. The case was before the court on Mr. Price’s motion for reconsideration and relief from judgment. Read More
Posted by NCBRC - July 19th, 2017
The automatic stay does not prevent the government from collecting criminal restitution under the Mandatory Victim’s Restitution Act, 18 U.S.C. § 3613(a). Partida v. U.S. Dept. of Justice, No.15-60045 (9th Cir. July 7, 2017).
Deborah Partida was convicted of embezzlement and theft of labor union funds. She filed for chapter 13 bankruptcy owing over $200,000 in court-ordered restitution for the crime. When the government offset the debt against her current income, she moved to hold it in contempt for stay violation. The bankruptcy court denied the motion and the Bankruptcy Appellate Panel affirmed. Partida v. United States (In re Partida), 531 B.R. 811 (B.A.P. 9th Cir. 2015). Read More
