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District Court Holds Condo Association’s Interest Is Not Protected by 1322(b)(2) Because It Is Both A Security Interest and a Statutory Lien (Subtitle: Good Case to Brush Up on Exceptions to Anti-Modification Rule of 1322(b)(2) Regarding HOA and Condo Association Liens)

On May 21, 2019, the United States District Court for the District of New Jersey reversed the dismissal of the Debtor’s chapter 13 petition and remanded it for a redetermination of the feasibility of the proposed plan.  The Debtor was represented by NACBA member Herbert B. Raymond.

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5th Circuit Rules That Bankruptcy Courts May (But Not Shall) Allow Reimbursement of Fees for Filing, Credit Counseling and Credit Reports to Debtor’s Attorneys in Chapter 13

On May 13, 2019, the Fifth Circuit Court of Appeals ruled on an appeal stemming from several cases involving no-money-down chapter 13 business models, wherein the debtor’s attorney agrees to advance the costs of filing fees, credit counseling course fees, and credit report fees on behalf of the debtor. The case pitted the Bankruptcy Court for the Western District of Louisiana (represented by two chapter 13 trustees) against the chapter 13 debtor’s bar.

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Bankruptcy Court Reviews Creditor’s Remedies to Object to Discharge After Deadline Has Expired

On May 10, 2019, the United States Bankruptcy Court for the Southern District of New York ruled on a creditor’s motion to extend the deadlines to object to the Debtor’s discharge.

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Bankruptcy Court Denies Motion to Impose Stay as Untimely and Unavailable

On May 9, 2019, the United States Bankruptcy Court for the Northern District of Mississippi ruled on the Debtor’s Motion to Impose the Automatic Stay and a creditor’s comfort motion affirming that the stay no longer protects Debtor’s property.

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NACBA Applauds Bicameral Congressional Effort to Diffuse the Student Loan Debt Bomb

WASHINGTON, May 9, 2019—The National Association of Consumer Bankruptcy Attorneys (NACBA), the only organization dedicated to protecting and enhancing the […]

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U.S. Senator Sherrod Brown Awarded NACBA’s 2019 Champion of Consumer Rights Award

The National Association of Consumer Bankruptcy Attorneys (NACBA) is pleased to announce that Senator Sherrod Brown (D-OH) has been awarded the prestigious Champion of Consumer Rights Award for 2019. Since 2007, Senator Brown has served American consumers ensuring that consumers’ rights are protected and that the rights of consumer debtors most in need are preserved in bankruptcy relief.

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In a §523(a)(6) Dischargeability Proceeding, the 4th Circuit Rules Collateral Estoppel Does Not Apply When State Court Judgment Did Not Make Specific Findings of Intent

On May 8, 2019, the Fourth Circuit Court of Appeals reversed and remanded an award of summary judgment concerning a dischargeability proceeding under 11 U.S.C. § 523(a)(6).

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Bankruptcy Court Gnaws Whether Dog Bite Non-Dischargeability Claim is De Jure Not A Willful and Malicious Injury

On May 3, 2019, the Bankruptcy Court for the District of New Mexico ruled on Defendants’ motion to dismiss in a dischargeability adversary complaint. The complaint alleges that the City of Albuquerque determined after notice and administrative hearing that the Defendant’s dog was dangerous, and Defendants were irresponsible owners. After this determination the Plaintiff was attacked and injured by Defendants’ dog. Plaintiff sued Defendants in state court and obtained a judgment in the amount of $25,691.08.

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9th Circuit BAP Finds Disclosure of Debtor’s Claim in the SOFA Sufficient for Abandonment (Subtitle: BAP Surveys Cases Nationally on Disclosure and Abandonment)

In an unpublished opinion entered on April 29, 2019, the 9th Circuit Bankruptcy Appellate Panel addressed the thorny issue whether a debtor’s disclosure of an asset in the SOFA but not in the Schedules of Assets and Liabilities precludes abandonment under 11 U.S.C. § 554(c).

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District Court Holds Arbitration Provision in Credit Card Contract Survives Discharge

On May 1, 2019 the District Court for the Eastern District of Pennsylvania granted motions by Debtor’s discharged credit card lenders to compel arbitration of claims made under the Fair Credit Reporting Act.The Debtor filed a chapter 7 bankruptcy and listed the three creditors at issue, First Premier Bank, OneMain Financial, and Citibank (Creditors). The Debtor received a discharge of these debts in November 2016.

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Bankruptcy Court Denies Fee for Debtor’s PI Attorney For Failure to Check PACER and Have Retention Agreement Approved

On March 27, 2019 the Bankruptcy Court for the Southern District of Alabama denied a fee request by Debtor’s personal injury (PI) attorney.Prior to filing bankruptcy Debtor was involved in a car accident. She hired a PI attorney to represent her. When her bankruptcy case was filed, she listed the car accident on her schedules. Subsequently the PI case settled, and the Debtor signed a settlement agreement that indicated she was not in a bankruptcy. The Debtor filed a motion to approve the settlement in the Bankruptcy Court. The trustee demanded that the attorney’s fee be turned over to the bankruptcy estate.

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Bankruptcy Court Rules that Pre-Petition Guilty Plea and Civil Judgment Not Collateral Estoppel in Subsequent Dischargeability Proceeding

On April 25, 2019 the Bankruptcy Court for the Northern District of Illinois ruled on several issues concerning a dischargeability complaint filed against the Debtor.Prior to filing bankruptcy, the Debtor was involved in a physical fight with the Creditor (Salgado). The result of the fight is that Salgado lost the vision in his right eye. The parties disagree who caused the injury.

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District Court Holds That Wells Fargo’s Account Freeze is Not a Violation of the Automatic Stay. (Subtitle: District Court’s Opinion is a Reminder to Warn Clients About Wells Fargo Before Filing Bankruptcy)

On April 25, 2019 the District Court for the Southern District of New York reversed a Bankruptcy Court order that found Wells Fargo had violated the automatic stay.Pursuant to the District Court opinion, Wells Fargo maintains an internal policy known as the Administrative Pledge Policy (the “Policy”). Pursuant to this Policy, if an individual debtor files for bankruptcy and the debtor’s balances on deposit are less than $5,000 in the aggregate, Wells Fargo does not limit the debtor’s access to prepetition account funds; however, if the aggregate amount exceeds $5,000, Wells Fargo places an “administrative pledge” on the accounts, effectively freezing all prepetition funds, and looks solely to the chapter 7 trustee to control payment of account balances that are property of the bankruptcy estate.

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Bankruptcy Court Awards Debtor $204,867.00 in Damages Against Creditor and Creditor’s Law Firm for Post-Discharge Lawsuit of Discharged Debt

On April 23, 2019 the Bankruptcy Court for the Northern District of Oklahoma entered a lengthy 87 page opinion awarding the Debtor $50,000.00 in damages for emotional distress, $54,867.00 for her attorney’s fees, and $100,000.00 as punitive damages against the creditor and creditor’s counsel. NACBA member Ron Brown spearheaded the case along with NACBA member Greggory Colpitts.

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Court Rules No Discharge Violation, Debtor’s Plan Language Didn’t Require Vehicle Lien Release Upon Plan Completion

On April 24, 2019 the Bankruptcy Court for the Northern District of Georgia dismissed an adversary complaint against Portfolio Recovery Associates, LLC (PRA). The complaint asked for damages for PRA’s failure to turnover title to a vehicle paid through the Debtor’s chapter 13 plan.

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Bankruptcy Court Determines Redemption Value of Frankenstein Truck

On April 18, 2019 the Bankruptcy Court for the District of New Mexico entered an order determining the redemption value of a highly modified pickup truck.The Debtor purchased the truck in August of 2014 by obtaining a loan in the amount of $15,715.88 from State Employees Credit Union (Credit Union). Prior to filing bankruptcy, the Debtor made extensive changes to the truck. Originally a 1978 Ford F-150, it was modified to add four-wheel drive and a Super-Cab with the designation of an F-350. The Debtor valued the truck at $600.00 stating it needed repairs including a new transmission. The estimate provided did not include an amount for a transmission.

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Bankruptcy Court Rejects Equitable Tolling Argument to Extend Deadline to File Dischargeability Complaint

On April 16, 2019 the Bankruptcy Court for the District of New Jersey denied the Creditors’ motion to extend the dischargeability complaint deadline.Creditors allege that they were the victims of a fraudulent real estate scheme carried out by one of the Debtors. The Creditors had filed a lawsuit in state court which was pending when the bankruptcy was filed.

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District Court Affirms Chapter 13 Debtor’s Absolute Right to Dismiss Despite Bad Faith, Refuses to Extend Marrama

Noting a split in authority, the District Court for the Northern District of New York found that a chapter 13 debtor has the absolute right to dismiss her bankruptcy.

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Bankruptcy Court Reviews Exceptions to General Rule Denying Discharge for Omitted Debts in Chapter 13 Cases

On April 3, 2019 the Bankruptcy Court for the District of Kansas determined that an unscheduled debt in the Debtor’s chapter 13 case was discharged. The court reviewed several arguments for exceptions from the general rule that unscheduled debts are not discharged in a chapter 13 case.

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Bankruptcy Court Joins Minority, Grants Discharge, and Denies the Trustee’s Motion to Dismiss for Delinquent Post-Petition Mortgage Payments

On March 28, 2019 the Bankruptcy Court for the District of Arizona Denied the Trustee’s Motion to Dismiss based on the Debtors’ post-petition mortgage default. In doing so, she joined the minority position on this issue.

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Bankruptcy Court Cites Achilles in Well-Heeled Analysis of Sovereign Immunity for the State Revenue Department

It’s going to be an interesting opinion when the first line reads “In mythological lore, the Greek hero Achilles thought himself to be invincible, impervious to the swords and arrows of his enemies.” Judge Taddonio of the Bankruptcy Court for the Western District of Pennsylvania goes on to discuss the sovereign immunity claims by the Pennsylvania Department of Revenue (Revenue) in an opinion dated March 29, 2019.

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Disclosure of Attorneys Fees Is Required if Services Have Any Impact on a Bankruptcy Case

On March 29, 2019, the United States Bankruptcy Court for the Eastern District of New York explained in detail the disclosure requirements under 11 U.S.C. § 329(a) and Fed. R. Bankr. P. 2016(b).

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Illinois District Court Refuses to Adopt Categorical Rule that a Bankruptcy Disclaimer on a Post-Discharge Communication to a Debtor Excuses Debt Collector from Liability

On March 25, 2019, the United States District Court for the Northern District of Illinois denied a motion to dismiss an FDCPA class action lawsuit for collection on a discharged debt.

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Michigan District Court Applies Judicial Estoppel to Employment Discrimination Suit – Despite Debtor’s Disclosure of the Claim to the Bankruptcy Attorney

On March 26, 2019, the United States District Court for the Eastern District of Michigan dismissed the Debtor/Plaintiff’s lawsuit against USF Holland, LLC based on judicial estoppel.

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Illinois Bankruptcy Court Examines Whether Severance Pay is Estate Property

On May 1, 2018 the Debtor was laid off from his job. His employer offered the Debtor a separation agreement offering the debtor the amount of $83,333.33 which was four months of base salary. These payments were to be paid out to the Debtor in bi-weekly installments. In exchange, the Debtor had to agree to a non-compete provision, release of claims, be available to help transition his duties to others, and cooperate with and assist his former employer in connection with any audits, inspections, inquiries or legal proceedings.

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Texas Bankruptcy Court Says Surrender Doesn’t Require Delivery

In 2005 the Debtors purchased a used mobile home with a secured loan from 21st Mortgage Corporation (21st Mortgage). In August 2018 the Debtors filed a chapter 7 bankruptcy petition with the intent of reaffirming the debt to 21st Mortgage. After their 341 Debtors decided to surrender the mobile home to 21st Mortgage.

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Georgia Bankruptcy Court Reviews Case Split on Bases to Amend Plan Under 1329 (Subtitle: When the Original Plan was Confirmed with Inclusion of SSI Benefits, Can the Debtor Later Amend the Plan to Remove That Contribution?)

In this case the debtor had a confirmed plan in which he had pledged some of his fiancé’s SSI income to make his plan payments feasible. The debtor then moved to amend the plan to reduce his plan payment by withdrawing this contribution. This was based on a recent decision by the bankruptcy court concluding SSI is not included in current monthly income, and that it is not per se bad faith to exclude SSI from plan payments. In re Green, 2018 WL 1581635, at *2 (Bankr. S.D. Ga. Mar. 27, 2018).

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7th Circuit Reverses Bankruptcy Courts’ Uniform Rule to Keep Debtor’s Vehicle in Chapter 13 Post-Confirmation Estate

This opinion was based on the consolidated appeals of seven cases. Each of the seven debtors filed a petition for bankruptcy under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Illinois. The uniform confirmation order in this district (in most cases) is that upon confirmation, the property of the estate remains property of the estate. City of Chi. v. Marshall, 281 F. Supp. 3d 702, 704 (N.D. Ill. 2017).

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In Stay Violation Proceeding, Florida Bankruptcy Court Awards Debtor $45,500.00 against the Creditor, $15,000.00 against Creditor’s Counsel, Plus a Show Cause Order Why The Court Shouldn’t Impose Additional Sanctions Against Counsel

The Bankruptcy Court for the Northern District of Florida recently issued an opinion that all debtors’ counsel should read. The court reviewed in detail the requirements of the automatic stay, including the duty to correct a violation, the bases for awards of actual damages (including emotional distress) and punitive damages against both a creditor and the creditor’s counsel.

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11th Circuit Affirms that a Final Discharge Order Moots Creditor’s Appeal of Dismissed Dischargeability Complaint

On March 8, 2019 the 11th Circuit Court of Appeals ruled that an appeal from an order denying a creditor’s complaint to determine dischargeability under 11 U.S.C. § 727 was moot when the debtor obtained a discharge.

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Kansas Bankruptcy Court Denies Motion to Extend Deadline to Object to Discharge When Debtor Has Been Cooperative, Courts in the 10th Circuit Must Strictly Enforce the Discharge Objections Deadline.

On March 7, 2019 the Bankruptcy Court for the District of Kansas denied a creditor’s motion to extend the deadline to file an adversary proceeding to determine dischargeability of the underlying debt. On September 25, 2018 the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. The Bank of Holyrood (Bank) is a creditor who filed a claim for more than $600,000.00. Bank’s counsel entered its appearance within two weeks of the bankruptcy filing, attended the 341 meeting of creditors and the trustee’s 2004 exam of the Debtor.

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Bankruptcy Court Approves Higher Hourly Rate for Attorney Who Attended CLE

The Bankruptcy Court for the Western District of Michigan has a three-tiered presumptive hourly rate for chapter 13 debtor’s attorneys. The first, at $175.00 per hour, is the lowest tier. The second, at $220.00 per hour, is for attorneys who have attended at least seven hours of CLE and certified attendance and chapter 13 expertise to the court. The third, at $250.00 per hour, is for attorneys who are certified by the American Board of Certification (ABC).

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6th Circuit BAP Holds Creditors Have a Duty to Act to Stop Civil Contempt Proceedings

On March 4, 2019 the Bankruptcy Appellate Panel of the 6th Circuit Court of Appeals ruled on multiple issues important to debtors.

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7th Circuit Clarifies Issues Regarding The “Finality” of Lower Court Orders on Appeal

On February 26, 2019, the 7th Circuit Court of Appeals ruled whether a district court’s ruling on an interlocutory appeal from the bankruptcy court was “final.” Under 28 U.S.C. §158(d)(1) the circuit court only has jurisdiction from appeals from all final decisions.

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9th Circuit Rules on Whether Chapter 20s Are Per Se Bad Faith Filings and Whether An Obvious Intended Lien Avoidance Action Affects Eligibility Under 11 U.S.C. § 109

The 9th Circuit Court of Appeals, in an unpublished opinion, recently ruled on two important issues. The Court examined whether filing a chapter 13 bankruptcy soon after completion of a chapter 7 is a bad faith filing per se. The Court also examined whether the amount of a wholly unsecured lien should be considered in determining debtor’s eligibility under the secured or unsecured debt caps found in §109(e) when the debtor’s obvious intention is to strip off the lien.

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Nebraska Bankruptcy Court Rules §506(b) Is Not A Blank Check for Over-Secured Creditors, Knocks off $38,355.85 of Excessive Fees and Charges

The Bankruptcy Court for the District of Nebraska recently reviewed the reasonableness of the fees and charges claimed by a mortgage creditor on an over-secured loan. Prior to filing for protection under Chapter 13 of the Bankruptcy Code, the Debtor owned two properties, one residential and the other business, and pledged them as collateral for an SBA loan through the creditor. He subsequently fell behind on payments and was not able to pay the balloon amount. The properties are collectively valued at $220,000.00 and the principal and interest balance at filing was less than $70,000.00. The creditor’s claim also included $13,592.20 for late charges and $41,365.85 for expenses for appraisals, assessments and other fees. The Debtor objected to the reasonableness of the charges and expenses.

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Maryland Bankruptcy Court Holds Failure to Produce Writings Doesn’t Invalidate Credit Card Claims

The Bankruptcy Court for the District of Maryland recently ruled whether several claims based on an open-ended credit card agreements could be disallowed for failure to provide the Debtors documents supporting the claim. The Debtors’ counsel had requested the creditors to deliver copies of the writings on which each of the claims was based and other documents including copies of all monthly statements to copies of all notices of transfer of the account. When the creditors failed to supply the information, the Debtors objected to those claims and asked that they be disallowed.

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Bankruptcy Court Addresses Eligibility, Non-formal Notice of Bankruptcy and a Creditor’s Affirmative Duty to Correct Technical Violations of the Automatic Stay

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.

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Bankruptcy Court holds Debtor is Entitled to Chapter 13 Discharge even if Co-Debtor is Delinquent on Post-Petition DSO Payments

A bankruptcy court recently reviewed the issue whether a debtor can receive a discharge under § 1328 even if her co-debtor husband is delinquent on a post-petition DSO payment. The court examined the requirements for discharge using the plain language of § 1328(a).

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Bankruptcy Court Rejects Ditech’s Standing to file Mortgage Claim

A bankruptcy court recently expunged a claim of Ditech Financial LLC (Ditech) asserting that it was the creditor and the servicer of a note secured by an investment property (the “Property”) owned by the Debtors. Ditech filed a petition for bankruptcy in Case No. 19-10414 (Bankr. S.D.NY February 11, 2019). The order was entered in another proceeding before a different judge after Ditech’s bankruptcy was filed.

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