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Posts published in “Bankruptcy”

SD Fla. Bankr. Rejects Mortgagee’s Attempt to Use Borrower’s Surrender in BK to Resolve Contested Foreclosure

The U.S. Bankruptcy Court for the Southern District of Florida recently denied a creditor’s motion to compel the debtor to surrender mortgaged property and also denied the debtor’s motion to stay the case, holding that a chapter 7 debtor who indicates surrender of real property in his statement of intention is not obligated to surrender that property to the lienholder, whether or not the property is administered by the chapter 7 trustee. Disagreeing with other judges in the same district and elsewhere on this issue, the bankruptcy judge held that “[c]ompulsory surrender of real property collateral by a debtor to…

11th Cir. Finds No Irreconcilable Conflict Between FDCPA and Bankruptcy Code

In a much-anticipated follow-up to its 2014 decision in Crawford v. LVNV Funding, LLC, 738 F.3d 1254 (11th Cir. 2014), the U.S. Court of Appeals for the Eleventh Circuit recently held that there is no irreconcilable conflict between the federal Fair Debt Collection Practices Act (FDCPA) and the Bankruptcy Code. In so ruling, the Court reversed the dismissal of two FDCPA cases filed against debt buyers that submitted proofs of claim on debts that were subject to a statute of limitations defense. A copy of the opinion in Johnson v. Midland Funding LLC and Brock v. Resurgent Capital Services, L.P. is available…

7th Cir. Confirms Borrower Lacks Standing to Raise Alleged Violations of Pooling and Servicing Agreement

The U.S. Court of Appeals for the Seventh Circuit recently held that a mortgagor is not a third-party beneficiary under a pooling and servicing agreement under New York law, and therefore lacks standing to challenge purported violations of assignments under the agreement. A copy of the opinion in In re Jepson is available at:  Link to Opinion. A borrower executed a note for a loan secured by a mortgage.  The note was indorsed by the lender in blank and transferred to a residential mortgage-backed securities trust formed and governed by a pooling and servicing agreement (“PSA”).  The trust’s trustee held the…

4th Cir. Confirms Sale Orders in Prior Bankruptcy Precluded Debtor’s Later Claims

The U.S. Court of Appeals for the Fourth Circuit recently affirmed the dismissal of a borrower’s lawsuit against a bank, holding that the district court correctly found that sale orders entered in a prior bankruptcy case were res judicata and precluded the borrower’s new claims. A copy of the opinion in Providence Hall Associates v. Wells Fargo Bank, N.A. is available at:  Link to Opinion. A Virginia-based limited partnership owned real property in several states, and entered into a line of credit and loan secured by deeds of trust or mortgages. The borrower defaulted and filed for bankruptcy protection under Chapter…

8th Cir. BAP Holds Lien Against Only One Tenant by Entirety Avoidable in Bankruptcy

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently affirmed an order of the bankruptcy court granting a debtor’s motion to avoid a judgment creditor’s lien on the debtor’s residence held in tenancy by the entirety with his non-debtor spouse, holding because the lien “fixed” under the Bankruptcy Code and thus impaired the debtor’s claimed exemption, it was avoidable. A copy of the opinion in In re: Casey Drew O’Sullivan is available at:  Link to Opinion. The debtor and his wife purchased their home in Missouri in 1995, taking title by the entireties. A creditor of the husband obtained a…

6th Cir. Rejects Debtor’s Chapter 11 BK Plan as Not Proposed in Good Faith

The U.S. Court of Appeals for the Sixth Circuit recently held that a bankruptcy court clearly erred in its finding that a debtor proposed a Chapter 11 plan in good faith, when the secured mortgagee would be paid only in part and very slowly after 10 years with no obligation by the debtor to maintain the building and obtain insurance, while a second class would be paid in full in two payments of $1,200 each over 60 days. In so ruling, the Sixth Circuit held that the artificial creation of an “impaired” class under section 1124(1) of the Bankruptcy Code,…

Florida Bankruptcy Court Denies Mortgagee’s Motion to Reopen Chapter 7 Case

The U.S. Bankruptcy Court for the Southern District of Florida recently denied a mortgagee’s motion to reopen a Chapter 7 case to compel the surrender of real property, due to a five-year delay in filing the motion. In so ruling, the court agreed with an earlier ruling from the U.S. Bankruptcy Court for the Middle District of Florida (In re Plummer, 513 B.R. 135 (Bankr. M.D. Fla. 2014)), distinguishing “surrender” from “foreclosure,” and holding that a creditor cannot use the Bankruptcy Code to circumvent the obligations imposed by state law. A copy of the opinion in In Re Kourogenis is available…

7th Cir. Holds Lender’s Inquiry Notice Allows Avoidance of Security Interest in Bankruptcy

The U.S. Court of Appeals for the Seventh Circuit recently held that a lender that is on inquiry notice that its security interest in the collateral had been fraudulently conveyed may lose its secured status. However, the Court also held that the lender’s negligence here did not amount to “purposeful avoidance of the truth” sufficient to justify application of the doctrine of equitable subordination, which allows a bankruptcy court to reduce the priority of a claim in bankruptcy. A copy of the opinion in In Re Sentinel Management Group, Inc. is available at: Link to Opinion. The bankrupt debtor was a…

Illinois Bankruptcy Court Rejects Crawford, Finds Time-Barred Claims Permissible ­

A recent decision from a United States Bankruptcy Court in the Northern District of Illinois provides a detailed analysis of why proofs of claim on “time-barred” debt do not violate the federal Fair Debt Collection Practices Act (FDCPA) or the Bankruptcy Code. The decision, Glenn v. Cavalry Investments, LLC, is among the growing number of decisions rejecting Crawford v. LVNV from the Eleventh Circuit Court of Appeals. A copy of the opinion is available at: Link to Opinion. The debtor, Darryl Glenn, voluntarily commenced a chapter 13 bankruptcy in August 2014.  The creditor, Cavalry Investments, filed a timely proof of…

MD Fla Holds Bankruptcy Code Precludes FDCPA Claim for Filing POC on Time-Barred Debt

The U.S. District Court for the Middle District of Florida recently dismissed allegations that a debt buyer violated the federal Fair Debt Collection Practices Act by filing a proof of claim on time-barred debt, holding that such claims are precluded by the Bankruptcy Code, and that the FDCPA does not provide a private right of action against debt collectors who file time-barred proofs of claim in bankruptcy court. A copy of the opinion in Castellanos v. Midland Funding LLC is available at:  Link to Opinion. The plaintiff individual owed a credit card debt and filed for bankruptcy protection under Chapter 13 of…

2nd Cir. Holds Debtor Can Bring Post-Discharge FDCPA Claims in District Court

The U.S. Court of Appeals for the Second Circuit recently held that a debtor in bankruptcy can pursue claims under the federal Fair Debt Collection Practices Act in district court for trying to collect a discharged debt, reversing a judgment dismissing the FDCPA claims and requiring the plaintiff seek relief in bankruptcy court. A copy of the opinion in Garfield v. Ocwen Loan Servicing, LLC is available at:  Link to Opinion. The debtor defaulted on her mortgage loan and filed for Chapter 13 bankruptcy, agreeing in her reorganization plan to pay the arrearage on her mortgage in monthly payments.  The debtor received…

5th Cir. Allows Bankruptcy Trustee to Recover Expenses from Secured Creditor

The U.S. Court of Appeals for the Fifth Circuit recently held that section 506(c) of the Bankruptcy Code, 11 U.S.C. § 506(c), permits a trustee to recover from a secured creditor the expenses the trustee incurred while maintaining a property during bankruptcy. A copy of the opinion in In re Domistyle, Inc. is available at:  Link to Opinion. The debtor in this case was placed into receivership in April 2013.  The receiver initiated Chapter 11 proceedings on the belief that the debtor had enough equity to reorganize.  One of the debtor’s most valuable assets was an industrial building situated on 17 acres…