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Thought for the Day:
Bankruptcy related insights and information
Judge Glenn allows stripping of 2nd mortgage in chapter 20 filed by wife when mortgage was initially joint but property quit-claimed to her per divorce order.
In re: Lavette S. Bailey, Debtor. Lavette S. Bailey, Plaintiff, v. Deutsche Bank Nat'l Trust Co., as Tr. for Ameriquest Mortg. Sec., Inc., Asset-Backed Pass-Through Certificates, Series 2005-R11 Defendant., No. 3:16-AP-125-PMG, 2017 WL 587980 (Bankr. M.D. Fla. Feb. 13, 2017)
Judge Williamson rules that car towing and storage company (Collateral Bankruptcy Services) violated §362(a)(3) by maintaining possession of vehicle delivered to them pre-petition rather than delivering vehicle to chapter 7 trustee as required by §542(a); however court allowed them to enforce lien for pre-petition storage fees.
In re: Stefan Kaschkadayev, Debtor., No. 8:16-BK-10041-MGW, 2017 WL 587982 (Bankr. M.D. Fla. Feb. 14, 2017)
Counsel for debtor sanctioned on signing reaffirmation agreement, court complained not only of not meeting with client, but also of not explaining in detail reduction of expenses making agreement feasible and not negotiating with creditor. Duties of counsel set out.
Possibly underused statute: §1322(f): A plan may not materially alter the terms of a loan described in §362(b)(19) [401k type loans], and any amounts required to repay such loans shall not constitute "disposable income" under §1325.
Complaint alleges Navient misapplied payments, told borrowers they had to make higher payments than required, failed to notify borrowers regarding rights to lower their payments, deceived borrowers regarding release of co-borrowers, and misreported discharged student loans (under disability discharges) as defaults on credit reports.
Judge Colton rules that when creditor files an unsecured claim, it cannot successfully challenge a request to avoid the lien after chapter 13 payments are completed. In re Barrera, No. 8:10-BK-26730-RCT, 2016 WL 6990876 (Bankr. M.D. Fla. Nov. 29, 2016)
"A lawyer shall conduct him/herself in accordance with the standards of professional integrity and personal courtesy set forth in the Civility Principles of the United States District Court for the Eastern District of Michigan," and that "[t]he lawyer shall abstain from disrespectful, disruptive and/or abusive behavior, and will at all times act with dignity, decency and courtesy."
In re Emanuel, No. 11-MC-51061, 2016 WL 6476452, at *5 (E.D. Mich. Nov. 2, 2016)
Regulation Z requires monthly mortgage statements, showing due date, amount due, and payment breakdown (principal, interest, and escrow), disclosure of charges since last statement, and list of transactions since last statement. Contact information for the mortgage, principal balance due, current interest rate, next date any interest rate may change, and whether there is a prepayment penalty also must be disclosed.
If the loan is delinquent, then information must be disclosed showing the date of the delinquency, the amount to cure, an account history for up to 6 months showing the amount due from each billing cycle, a disclosure of loss mitigagtion options, a notice whether foreclosure has been commenced, and a reference to homeowner counselling.
Mortgages in a pending bankruptcy are exempt, and there is some caselaw indicating that if a chapter 7 was filed and the mortgage not reaffirmed, this may not be required. It should be required after completion of a chapter 13 unless the plan provided for surrender of the property.
11th Circuit affirms sanctions against Dept. of Revenue for garnishment in collection of child support, finding action violated confirmed plan provisions. - Tampa bankruptcy attorneys take note.
FYI to Tampa bankruptcy attorneys: Kelly Remick is now taking the position that cure & reinstate and mortgage modification cases must run at least 3 years even if the ongoing mortgage payment is the only thing being paid in the plan.
Thank you Tampa Bay Bankruptcy Bar Association!
Just in case anyone didn't know, exempting a vehicle (nevermind a vehicle purchased shortly prior to filing chapter 7) and claiming it as exempt, does not prevent the creditor from repossessing it after the discharge; nor does the repossession constitute "grand theft auto," "criminal stalking," and "providing false information to a law enforcement officer"
McFarland-Rourk v. Drive Time Credit, Inc., No. 4:15-CV-163 (CDL), 2016 WL 3014679, at *1 (M.D. Ga. May 24, 2016)
Interesting case distinguishing recoupment based on contract from recoupment based on legislation (ie overpayment of social security benefits), finding that post-petition entitlements do not arise from same transaction as prepetition debt, and therefore are not eligible for recoupment.
In re Angwin, No. 15-11120-B-7, 2016 WL 1395378 (Bankr. E.D. Cal. Apr. 5, 2016)
Supreme Court decision: actual fraud can include debts incurred without false representations such as fraudulent conveyance schemes.
Husky Int'l Elecs., Inc. v. Ritz, No. 15-145, 2016 WL 2842452 (U.S. May 16, 2016)
Panel trustees should be aware of case involving trustee suspended from panel for, inter alia, not calling in interpreter, being overly agressive and rude to debtor.
Pereira v. United States Dep't of Justice, No. 16 CIV. 2599 (NRB), 2016 WL 2745850 (S.D.N.Y. May 11, 2016)
Orlando District Court affirms Judge Jennemann's order that statute of limitations does not prevent foreclosure five years after accellearation of debt where foreclosure is based on separate default from first accelleration or judgment. "While it is true that a foreclosure action and an acceleration of the balance due based upon the same default may bar a subsequent action on that default, an acceleration and foreclosure predicated upon subsequent and different defaults present a separate and distinct issue."
In Re: Richard S. Anthony RICHARD S. ANTHONY, Appellant, v. OCWEN LOAN SERVICING, LLC & U.S. BANK NATIONAL ASSOCIATION, Appellees., No. 6:15-CV-1302-ORL-31, 2016 WL 2586659, at *3 (M.D. Fla. May 5, 2016)
Judge Kimball held that a debtor may not obtain a discharge of the tax debt in such a case, because an untimely tax return is not a "return" within the meaning of 11 U.S.C. § 523(a)(1)(B) and the so-called hanging paragraph. In so determining, this Court adopted the reasoning of McCoy v. Mississippi State Tax Commission (In re McCoy), 666 F.3d 924 (5th Cir.2012). In the meantime, two other circuit courts of appeal have ruled consistent with this Court's prior ruling. See Fahey v. Mass. Dep't. of Revenue (In re Fahey), 779 F.3d 1 (1st Cir.2015); Mallo v. IRS (In re Mallo), 774 F.3d 1313 (10th Cir.2014).
In re Johnson, No. 13-20774-EPK, 2016 WL 1599609, at *1 (Bankr. S.D. Fla. Apr. 18, 2016)
Judge Jennemann finds that homestead only attaches to residence of Debtor where 1/2 acre plot inside city limits includes both debtor's residence and separate residence occupied by her adult daughter.
In re Fowler, No. 6:14-BK-02625-KSJ, 2016 WL 1444195, at *1 (Bankr. M.D. Fla. Apr. 12, 2016)
And...a promising student loan case.
The Court finds that the debt in this case is dischargeable in that the loans do not fall within section 523(a)(8)'s "student loan" discharge exception, and default judgment in favor of the Debtor is appropriate. Although the loans underlying this debt were (arguably) used for educational purposes, the uncontested facts of this case are that the loans were not made, insured or guaranteed by the government and thus the debt does not fall within section 523(a)(8)(A)(i); nor were these loans "qualified education loans" as that term is defined by the Internal Revenue Code, because the foreign medical school was unlicensed and unaccredited, and thus the debt does not fall within section 523(a)(8)(B). Finally, the Court finds that the debt does not fall within section 523(a)(8)(A)(ii) because it did not arise from "an obligation to repay funds received as an educational benefit, scholarship, or stipend." Although there is some case law authority to suggest that section 523(a)(8)(A)(ii) should be read broadly to encompass any debt resulting from an educational endeavor, the Court finds that the provision cannot be interpreted to include private loans such as the loans we have in this case.
In re Decena, No. 15-72903-REG, 2016 WL 1371031, at *1 (Bankr. E.D.N.Y. Apr. 4, 2016)
Finding that where there is a conflict between schedules IJ and the means test, for an above-median income, disposable income is property computed based on the means test. In re Smith, No. 15-12507-JDW, 2016 WL 1357581(Bankr. N.D. Miss. Apr. 4, 2016)
District Court decision from Washington finding that postpetition condo association dues on surrendered condo, accruing throughout virtually entire chapter 13 case, are nondischargeable when association sat on its hands curing case, virtually ignoring 11 U.S.C. 523(a)(16)'s limitation to chapter 7 discharge.
Some clients call all the local attorneys asking what their fee is for bankruptcy. There are a number of problems with this. First, generally the fee depends on what is involved in the case, as well as which chapter is filed. If any information is given by the caller about their financial situation, this creates a need to document information for the caller to prevent future conflict of interests. It also triggers the need to provide and have the caller sign the Debt Relief documents required by the 2005 bankruptcy law. So any attorney that gets information over the phone without also getting the name, address, and indentifying information is not acting ethically. More important to the client, it takes 30-60 minutes of detailed information to determine what potential problems are in the case, and any good attorney should insist on this before making a recommendation or quoting a price. Despite our firm taking much more time than most in this process, we often are advised that the fees we ultimately quote are substantially less than the fees quoted by other firms.
We recently had a discharged chapter 7 case where Defense Finance and Accounting Service (DFAS) was offsetting military retirement checks against a pre-petition obligation for overpayment of postal health insurance benefits. After contesting initial correspondance advising them this was a violation of the discharge injunction, we filed a motion for order to show cause against the US/DFAS for violation of the discharge injunction. The US Attorney responded citing 5 USC §8906(3)(1)(B)(ii) purporting to allow 'recovery' of advance payments, and claiming this gave them the right to setoff the debt. In correspondance DFAS also alleged a right of recoupment.
After seeking time to file briefs in the matter, the US Attorney agreed to a resolution agreeing to refund all funds taken post-petition and to not seek any further collection of the funds. Under bankruptcy law, absent a specific provision regarding dischargeability of the debt, the right to setoff is limited to offsetting a prepetition debt against a prepetition obligation. The right of recoupment only allows offsetting a prepetition obligation against a postpetition obligation if it is the same transaction or series of transactions, neither of which applied in this situation.
Counsel should be aware of the limits to any right to collect funds owed prepetition against funds owed postpetition. There is no special right to the US Government absent specific dischargeability statutes.
Mike Barnett. http://hillsboroughbankruptcy.com/
Found another nondischargeability statute I never saw before. 42 USC §254o(d)(3)(A). This includes liability under a default in contract where the debtor received money (either loan or other funds) in exchange for a contract to work in healthcare for a specified time in a rural community. If the contract is not complied with they are liable for double damages for the portion of time not completed, plus interest. The law provides that statutes of limitations do not apply to the obligation, and the obligation is nondischargeable for 7 years after the first payment on default comes due AND only if the court determines that requiring repayment would be unconscionable.
Judge Williamson denies motion to compel surrender where foreclosure is 2 1/2 years after chapter 7.
On December 6, 2011, the Debtor received her chapter 7 discharge.4 Two-and-a-half years later, Deutsche Bank (BAC Home Loans' successor-in-interest) sued to foreclose its mortgage on the Debtor's property.5 The Debtor opposed the foreclosure action by filing various defensive motions and was ultimately able to get it dismissed on summary judgment.6 Now the Debtor is seeking fees and costs against the Bank in the foreclosure action.7 The Bank says that the Debtor's efforts—successful as it turns out—to oppose its foreclosure action after she has received her chapter 7 discharge is contrary to her stated intent to surrender the property.
In re Guerra, No. 8:11-BK-15663-MGW, 2016 WL 350849, at *1 (Bankr. M.D. Fla. Jan. 28, 2016)
Advisory to Debtor attorneys: in one recent audit of a chapter 7, the auditors are alleging that funds from the sale of a former residence of the debtor are income for purposes of the means test. Note this conclusion appears to be contrary to the case of In re Leach, No 08-61028-13, 2009 WL 1010552 (Bankr. D.Mont. Feb. 26, 2009). The case law does appear clear that if the debtor is in the business of buying and selling the property sold, then the income is included in the means test; according to some cases without regard to the basis of the property sold. Similar results if the property sold was investment property. Where neither of those applies I believe case law is less clear, but at the least the auditors hired by the US Trustee appear to believe it is income (though if non-recurring, should be backed back out of the means test as special circumstances).
Judge May ruled Wednesday on one of my objections to a mortgage claim that the mortgage company was not allowed inspection fees incurred prior to the notice of default/accelleration when the note provided for payment of costs and expenses 'if the Note Holder has required me to pay immediately in full as described above...' in the notice of default section. Case 8:15-bk-07322-KRM. Many of the older notes have similar provisions, which could even provide a basis for challenging attorneys fees and costs if no notice of default/accelleration occured prior to incurring such fees and costs.
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