bankruptcy

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NACBA and NCLC Enter Fair Credit Reporting Arena

On September 2, 2016, NACBA and the NCLC joined forces to file an amicus brief in a case addressing credit reporting standards under the FCRA. Abeyta v. Bank of America, No. 16-15707 (9th Cir.).

Ginny Abeyta filed for Chapter 13 bankruptcy in June 2010 and completed her plan in April 2014. In October 2014, she requested her credit report and found that Bank of America had reported her debt as “past due” as of July 2010, and in “major delinquency” as of August 2010. There was no mention of her successful Chapter 13 bankruptcy. She requested a reinvestigation of the debt, and the new credit report contained the same inaccuracies. [Read more…] about NACBA and NCLC Enter Fair Credit Reporting Arena

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Limit on Right to Amend Homestead Exemption

Notwithstanding a debtor’s absolute right to amend her schedules, “a debtor can only amend her homestead exemption postpetition if on the petition date the debtor could have legally claimed an exemption for the property in question.” Earl v. Lund Cadillac, LLC. (In re Earl), No. 15-1693 (D. Ariz. Aug. 5, 2016).

When she filed for Chapter 13 bankruptcy, Rachael Anne Earl lived with her husband and four children in the house they had lived in for four years (Claiborne property). Ms. Earl did not have title to the Claiborne property because the property had been sold at a trustee’s sale. At the same time, she owned another single-family home that she had been renting to third parties for four years (Sunnyvale property). After her attempts to overturn the trustee sale of the Claiborne property were unsuccessful, and ten months post-petition, Ms. Earl filed a notice of change of address to the Sunnyvale property and amended her schedules to claim a homestead exemption in that property. Her case was converted to Chapter 7, and the bankruptcy court granted Lund Cadillac’s objection to the amendment to Ms. Earl’s homestead exemption. [Read more…] about Limit on Right to Amend Homestead Exemption

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NACBA and the NCLC Seek Rejection of Brunner Test

NACBA and the NCLC have added their voices to an Eleventh Circuit student loan discharge case. Acosta Conniff v. ECMC, No. 16-12884 (11th Cir.). The amicus brief, filed August 22, begins with a direct attack on the Brunner, hardship test as straying too far from the plain language of Section 523(a)(8) and from congressional intent to permit discharge of student loans under certain circumstances. [Read more…] about NACBA and the NCLC Seek Rejection of Brunner Test

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Fourth and Seventh Circuits Peer Down from the Ivory Tower on FDCPA Issue

The Seventh and Fourth Circuits have joined the fantasy world in which the debtor, the trustee, or the court stands as gatekeepers against debt collectors determined to sneak a collectible debt into the debtor’s chapter 13 plan. Owens v. LVNV Funding, LLC., Nos. 15‐2044, 15‐2082, 15‐2109 (7th Cir. Aug. 10, 2016); Dubois v. Atlas Acquisitions, LLC. No. (4th Cir. Aug. 25, 2016). In both cases, the voice of reason was represented by a dissenting opinion. [Read more…] about Fourth and Seventh Circuits Peer Down from the Ivory Tower on FDCPA Issue

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Mortgage Current Despite PNC’s Claim for Escrow Advances

Where the court previously precluded evidence of unpaid escrow advances due to the creditor’s failure to comply with the evidentiary requirements of Bankruptcy Rule 3002.1(g), and the debtor made all plan payments as well as continuing mortgage payments outside the plan, the debtor was entitled to an order deeming the mortgage current under Rule 3002.1(h). In re Howard, No. 10-52527 (Bankr. N.D. Cal. Aug.15, 2016). [Read more…] about Mortgage Current Despite PNC’s Claim for Escrow Advances

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DOR Collection Violates Confirmation Order

The Florida Department of Revenue violated the bankruptcy court’s confirmation order when it intercepted the debtor’s travel reimbursement funds for payment toward a domestic relations order. Florida Dept. of Rev.v. Gonzalez, No. 15-14804 (11th Cir. Aug. 11, 2016).

Irain Gonzalez’s confirmed chapter 13 plan provided for payment of his domestic support arrearages and for direct ongoing payments on that support obligation. Nonetheless, the Florida DOR intercepted his work-related travel reimbursement money and applied it to the support obligation. Mr. Gonzalez filed a motion for contempt due to the DOR’s contravention of the terms of the confirmed plan. During the contempt hearing, the DOR agreed to release the funds and cease collection efforts. The bankruptcy court granted the motion for contempt and awarded attorney’s fees. In re Gonzalez, No. 11-23183-BKC-LMI, 2012 WL 2974813 (Bankr. S.D. Fla. July 20, 2012). The district court affirmed. In re Irain Gonzalez, No. 1:15-CV-20023-KAM, 2015 WL 5692561 (S.D. Fla. Sept. 29, 2015). [Read more…] about DOR Collection Violates Confirmation Order

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Late-Filed Return Not Honest and Reasonable Attempt to Comply

A tax return filed seven years after it was due and three years after the IRS conducted its independent assessment does not meet the test for an “honest and reasonable” attempt to comply with tax laws. Smith v. IRS, No. 14-15857 (9th Cir. July 13, 2016). [Read more…] about Late-Filed Return Not Honest and Reasonable Attempt to Comply

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District Court Gets it Wrong in Chapter 13 Lien Strip Case

A district court in Maryland mistakenly applied Section 506(d) when it held that a debtor may not strip off a wholly unsecured lien in Chapter 13 where the creditor failed to file a proof of claim. Burkhart v. Community Bank of Tri-County, No. 14-315 (D. Md. July 27, 2016).

Edwin Michael and Teresa Stein Burkhart’s home was subject to several liens, two of which were held by Tri-County and were wholly unsecured. Tri-County did not file a proof of claim in the Burkharts’ bankruptcy. The Burkharts filed an adversary complaint seeking to strip off the wholly unsecured liens under Section 1322(b). Tri-County did not respond, and the Burkharts moved for default judgment.

The bankruptcy court relied on Section 506(d)(2), which provides: “to the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless . . . such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim. . .” Because Tri-County had not filed a proof of claim, the court held that its liens could not be stripped. (The court granted default judgment against PNC, the holder of another wholly unsecured junior lien, because PNC had filed a timely proof of claim). [Read more…] about District Court Gets it Wrong in Chapter 13 Lien Strip Case

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Eighth Circuit Lets the Fox in the Henhouse

The Eighth Circuit held that because of protections offered by the Bankruptcy Code, a debtor cannot file a separate action for violation of the FDCPA when a debt collector files a proof of claim for a stale debt. Nelson v. Midland Credit Management, Inc., No.15-2984 (8th Cir. July 11, 2016).

[Read more…] about Eighth Circuit Lets the Fox in the Henhouse

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Federal Reserve of St. Louis Issues Debt Report

The Federal Reserve Bank of St. Louis issued its inaugural edition of Quarterly Debt Monitor, reporting on trends in consumer debt. The report, titled “Consumer Debt Rises for Tenth Quarter in a Row,” by Don E. Schlagenhauf and Lowell R. Ricketts, compared the four largest metropolitan statistical areas in the district of the Eighth Federal Reserve District with national averages. The focus was on mortgages, home equity lines of credit (HELOC), automobile and student loans, and credit card balances. The article concludes that after a period of deleveraging following the recession of 2007-2009, consumer debt is on the rise again, particularly in the areas of automobile and student loans. Home mortgage debt went up to a lesser degree for people in the 31- to 40-year and 66- to 75-year age ranges, but went down in the age range in between. [Read more…] about Federal Reserve of St. Louis Issues Debt Report