bankruptcy

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Relief from Stay Motion Not “Action on a Contract” for Fee-Shifting Purposes

A California statute requiring reciprocal fee-shifting when a contract provides for fee-shifting for the benefit of only one party does not apply when the action is for relief from stay in bankruptcy. Green Tree Servicing, Co. v. Giusto, No. 15-2105 (N.D. Cal. June 20, 2016).

Jacqueline Giusto inherited real property encumbered by a note and deed of trust. When she filed for bankruptcy, she stopped making payments on the note. Green Tree Servicing, as servicer for Bank of America, filed a motion for relief from stay to allow it to initiate foreclosure proceedings. Ms. Giusto filed a brief in opposition, arguing that Green Tree did not have standing to bring the motion. The bankruptcy court agreed. Ms. Giusto then sought to recover costs and attorney’s fees incurred by reason of the motion, arguing that the note’s provision entitling Bank of America to recoup fees and costs incurred in the effort to collect on a debt was made reciprocal by operation of California Civil Code § 1717.  That statute provides: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” [Read more…] about Relief from Stay Motion Not “Action on a Contract” for Fee-Shifting Purposes

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No Equitable Tolling for Section 727(a)(2) Look-Back Period

The one-year look-back period for fraudulent transfers is not subject to equitable tolling. DeNoce v. Neff (In re Neff), No. 14-60017 (9th Cir. June 9, 2016).

In October 2008, Douglas DeNoce obtained a $310,000.00 dental malpractice judgment against Robert Neff. Neff filed a Chapter 13 bankruptcy petition in March 2010, and the following month he quitclaimed property he owned to a revocable living trust that he had created. His bankruptcy was dismissed, and he filed a second chapter 13 petition in June 2010, listing the revocable trust on his schedules. In August 2010, he transferred the property back to himself. Neff subsequently voluntarily dismissed that bankruptcy case. In October 2011, Neff filed a third bankruptcy petition, this time in Chapter 7. DeNoce filed an adversary complaint under section 727(a)(2), arguing that the 2010 quitclaim of the property to the trust was a fraudulent transfer. The court granted Neff’s motion for summary judgment on the basis that the transfer had occurred more than one year before his Chapter 7 bankruptcy. The BAP for the Ninth Circuit affirmed. In re Neff, 505 B.R. 255 (B.A.P. 9th Cir. 2014). [Read more…] about No Equitable Tolling for Section 727(a)(2) Look-Back Period

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Discharge Injunction Does Not Apply to Domestic Support Obligation

The Missouri Department of Social Services did not violate the discharge injunction by collecting on a debt that the bankruptcy court had deemed fully satisfied through the debtors’ successful completion of their chapter 13 plan. Missouri Dept. of Soc’l Serv. v. Spencer, No. 15-6030 (B.A.P. 8th Cir. June 13, 2016).

Michael and Patricia Spencer filed a Chapter 13 bankruptcy petition in which they listed a domestic and child support debt owed by Mr. Spencer to his ex-spouse. The Missouri Division of Child Support Enforcement (Division) filed a proof of claim on behalf of Mr. Spencer’s ex-spouse for approximately $36,000.00. Upon discovering that it had miscalculated the domestic support debt, the Division amended the proof of claim to over $88,000.00. When the Spencers objected to the amended proof of claim, the bankruptcy court held a hearing and found that the original proof of claim was the one that should be allowed. The Division did not appeal this decision or object to confirmation of the plan providing for repayment of the original claim, nor did it object to discharge upon the debtors’ successful completion of their plan. After the discharge order was entered, the Division filed a withholding order with Mr. Spencer’s employer to collect past-due domestic support. Mr. Spencer moved the bankruptcy court for an order of contempt and sanctions. The bankruptcy court, the Division willfully violated the discharge order and awarded sanctions and attorneys’ fees. [Read more…] about Discharge Injunction Does Not Apply to Domestic Support Obligation

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Garnishment as Avoidable Transfer

Two recent cases discussed the issue of whether wages subject to a pre-petition garnishment order but actually garnished within the 90-day preference period were part of the bankruptcy estate.

In Weinman v. Alternative Revenue Systems, Inc. (In re Stevens), No. 15-11776, Adv. Proc. No. 15-1340 (Bankr. D. Colo. March 23, 2016), the case was before the court on the Chapter 7 trustee’s and Alternative Revenue Systems’ (ARS) cross motions for summary judgment. Before the debtors, Kwanza and Mindy Stevens, filed for bankruptcy, ARS obtained a judgment against Mindy Stevens and began garnishing her wages. Approximately three months after the Stevens received their chapter 7 discharge, the trustee brought an adversary proceeding against ARS, arguing that two garnishments made within 90 days of the debtors’ bankruptcy were avoidable transfers under section 547. ARS countered that the relevant transfer date was the date the writ of garnishment was served on the employer rather than the date of each garnishment. Therefore, the transfer took place before the 90-day preference period. [Read more…] about Garnishment as Avoidable Transfer

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Debtor may not modify default interest rate.

A “cure and maintain” plan permits deceleration of the loan but does not allow a debtor to return to the pre-default interest rate. Anderson v. Hancock (In re Hancock), No. 15-1505 (4th Cir. April 27, 2016).

The Andersons purchased residential property from the Hancocks, financed in the amount of $255,000 by the sellers. The Andersons signed a thirty-year note agreeing to pay $1,368.90 per month, including interest payments at 5%. In the event of a default, the note provided that the interest rate would increase to 7%. The note also entitled the Hancocks to accelerate the loan. When the Andersons defaulted on the loan, the Hancocks imposed the default interest rate, notified the Andersons of acceleration of the loan, and instituted foreclosure. The debtors filed Chapter 13 bankruptcy proposing to cure the arrears and maintain payments at the 5% interest rate through the life of the plan. The Hancocks objected to the plan on two bases. First, they argued that the calculation of arrears was too low because it was based on the pre-default interest rate. Second, they maintained that all future payments on the loan should be at the 7% interest rate. [Read more…] about Debtor may not modify default interest rate.

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Compassion and Common Sense Enter Student Loan Discharge Arena

Where there was sufficient evidence to corroborate the debtor’s credible testimony of medical disability indicating the likelihood of her inability to work in the future, the second prong of Brunner is satisfied even though there may be more or better corroborating evidence the debtor could have presented. Nightingale v. North Carolina State Educational Assistance Authority, 2016 Bankr. LEXIS 1667, No. 13-10834, Adv. Proc. No.13-2060 (Bankr. M.D. N.C. April 14, 2016). [Read more…] about Compassion and Common Sense Enter Student Loan Discharge Arena

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SSA May Not Recoup Overpayment from Future Benefits

Finding no logical relationship between the debtor’s obligation to repay pre-petition overpayments and her entitlement to future social security benefits, a bankruptcy court in the eastern district of California denied the Social Security Administration’s request for recoupment. United States v. Angwin, No. 15-11120, Adv. Proc. No. 15-1080 (Bankr. E.D. Cal. April 5, 2016). [Read more…] about SSA May Not Recoup Overpayment from Future Benefits

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Certainty of Hopelessness that Judge Will See Reason

In a sanctimonious opinion divorced from reality, devoid of compassion, and logically flawed, a district court for the Middle District of Alabama found that the debtor failed to establish a “certainty of hopelessness” with respect to future ability to pay off her student loans and directed the bankruptcy court to find the debts nondischargeable. ECMC v. Acosta-Conniff, No. 15-220 (M.D. Ala. May 2, 2016). [Read more…] about Certainty of Hopelessness that Judge Will See Reason

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Notice of Abandonment Not Required under 554(c)

Where the debtor’s asset was included in his Chapter 7 schedules, the trustee certified in his Final Report that the estate had been fully administered, and the case was closed, the asset was abandoned. In re Robertson, 2016 Bankr. LEXIS 931, No. 14-20984 (Bankr. D. Utah, March 24, 2016).

Michael Lynn Robertson listed his breach of contract claim against Banner Bank (successor to Far West Bank) on his schedules when he filed for Chapter 7 bankruptcy. The trustee communicated with counsel for both Mr. Robertson and Banner Bank but neither the trustee nor the Bank took any action with respect to the claim. The trustee filed his Report of No Distribution and the court closed the case, both actions accomplished by text entry. [Read more…] about Notice of Abandonment Not Required under 554(c)

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Misapplication of Plan Payments Violates Discharge Injunction

The secured creditor violated the discharge injunction when it misapplied plan payments and then claimed default and late charges post-discharge. Scott v. Caliber Home Loans, 2015 WL 9986691, No. 09-11123, Adv. Proc. No. 14-1040 (Bankr. N.D. Okla. July 28, 2015).

When Patricia J. and Michael A. Scott filed their chapter 13 petition, the predecessor to Caliber Home Loans filed a claim for $180,527.66 with an arrearage of $19,073.96 and ongoing monthly payments of $1,414.19. The Scotts’ plan included paying off their mortgage arrears and maintaining their mortgage payments to Caliber. They made all their plan payments and prior to discharge, Caliber filed a Notice of Post-Petition Mortgage Fee, Expenses, and Charges of $2,061.82. The Scotts paid that amount through the plan. One month before discharge Caliber filed its Statement in Response to Notice of Final Cure Payment stating the debtors had cured the mortgage arrears and were current on their mortgage payments. The debtors received their discharge in March, 2014, and the trustee sent his Notice of Final Cure on April 21, 2014. On May 1, 2014, Caliber mailed a statement to the Scotts stating that they were delinquent in the amount of $3,139.97 for past due monthly payments and uncollected “Late Charges.” Caliber sent a notification that the Scotts were in default and that it had the right to undertake collection action including foreclosure. [Read more…] about Misapplication of Plan Payments Violates Discharge Injunction