Source: https://michaelcurrylawofficedotcom.wordpress.com/2018/03/
Timestamp: 2018-07-22 02:49:52
Document Index: 49699187

Matched Legal Cases: ['§ 521', '§ 105', '§ 521', '§105', '§ 105', '§ 105', '§ 521', '§ 1983', '§105', '§ 521', '§ 524', '§ 521', '§ 521', '§ 521', '§ 524', '§ 521', '§ 521']

March | 2018 | Curry Law Office
The Reaffirming Dead, part two…
The Reaffirming Dead
Part Two – read Part One here.
Kudos to the Honorable Judge for taking the matter seriously and addressing a legitimate question of law … and then coming quickly to the inevitable and obvious conclusion.
From the Middle District of Florida, In re Charles James McHale, Jr., and Susan McHale, Case #10-02527. Entered March 9, 2018.
No Relief is Possible against Mr. McHale or His Estate
The Eleventh Circuit Court of Appeals in Failla recently addressed the issue of possible relief to grant creditor when a debtor fails to perform his intent to surrender property. The Faillas owned a home, filed a Chapter 7 bankruptcy case, indicated they intended to surrender the home, and got a discharge. Yet, post-bankruptcy, they continued to fight their lender’s foreclosure action. The Eleventh Circuit concluded that when a debtor says they intend to surrender property they must surrender it to both the trustee and to the creditor and that “surrender” necessarily prohibits a debtor from contesting a foreclosure action post-bankruptcy.
The authority of bankruptcy courts to craft appropriate remedies when debtors fail to perform their intentions under § 521(a)(2) is found in § 105(a) of the Bankruptcy Code giving bankruptcy courts the discretion to enter any order “necessary or appropriate to carry out the provisions of this title” and the “broad authority…to take any action that is necessary or appropriate ‘to prevent an abuse of process.” The Eleventh Circuit then affirmed the Bankruptcy Court’s order directing the Faillas to stop contesting the pending state court foreclosure action.
However, the Eleventh Circuit did not opine that forcing a debtor to relinquish all defenses in a pending foreclosure action is the only relief possible when a debtor fails to perform his intention under § 521(a)(2), particularly when a debtor indicates he intends to reaffirm a debt as opposed to surrendering his interest in a home. The power granted to bankruptcy courts under §105 is to use their discretion guardedly fashioning an appropriate remedy that preserves the integrity of the bankruptcy system but does not overreach.
When a debtor says he is going to surrender his home and then continues to fight a foreclosure action, in most cases, the appropriate remedy is for the bankruptcy court to squelch the debtor’s defenses. The debtor is doing the exact opposite of what he promised. But, when a debtor states he intends to reaffirm a debt but fails to act, other remedies often are more appropriate, such as confirming the creditor can continue to pursue collection in state court forums irrespective of the debtor’s discharge.
Debtors who agree to reaffirm a debt want to pay their creditors. With a home mortgage, they are not trying to escape financial liability. They are trying to honor their promises to pay. This is different from a debtor who says he intends to surrender his home, has not made a payment for years, and then fights a pending foreclosure action simply to get more time to live for free in a house.
Here, Mr. McHale acted entirely consistent with his intent to reaffirm his debt to Bank of America. He was current on his mortgage payments at all times during the bankruptcy, kept his payments current post-discharge for many months, modified the mortgage with Bank of America when his illness advanced, and only stopped making payments when he died. He was not trying to “game” the system or get any “head start.” Instead, this was an honorable man who tried desperately to preserve the family home until the day he died. The testimony of Mrs. McHale was particularly poignant on the number of calls he made to Bank of America, literally on his deathbed.
Mr. McHale was not trying to flout his obligations to reaffirm the debt. He was trying to pay his creditor.
If the lender, like every other diligent creditor, timely had asked for the Court’s help to compel Mr. McHale to sign a reaffirmation agreement when he was still alive, the request would have been granted. Debtors who state they want to retain property secured by a lien must either sign a reaffirmation agreement or redeem the property. However, Christiana Trust or its predecessor did not make a timely request. They waited over four years after Mr. McHale died before filing their motion to reopen this case. Christiana Trust simply waited too late to ask. I cannot now compel Mr. McHale to do anything. He is dead and beyond the injunctive reach of this or any other court.
Nor is relief possible against Mr. McHale’s estate. The law is clear that bankruptcy courts lack jurisdiction to intercede in non-bankruptcy probate and domestic actions. I appropriately lack jurisdiction to order Mr. McHale’s estate to do anything. Bankruptcy courts may not interfere with the administration of a probate estate. The Eleventh Circuit Court of Appeals has explained that it is inappropriate for bankruptcy courts to decide issues that are better left to specialized state courts. “This idea has been extended to prevent [b]ankruptcy [c]ourts from deciding issues [that] should be decided by a state probate court.” The issue then is whether Christiana Trust has shown good cause why they are entitled to reopen this case to get relief against Mrs. McHale as the surviving widow.
No Relief is Justified against Mrs. McHale
Mrs. McHale contends she has valid defenses to the pending foreclosure action prosecuted by Christiana Trust. Although she may or may not succeed, I cannot find any reason to compel her stop raising these defenses. Mrs. McHale never signed the promissory note payable to Bank of America. She was never personally liable to the lender and was never required to sign any reaffirmation agreement.
Moreover, just because she and her husband filed this joint bankruptcy case, she never assumed liability for her husband’s debts. Section 302(a) of the Bankruptcy Code allows a married couple to file a joint petition. When a joint petition is filed, Federal Rule of Bankruptcy Procedure 1015(b) provides that the Court may jointly administer a married couple’s bankruptcy estates.
Local Rule 1015-1 provides if a married couple files a joint petition, joint administration happens automatically without court order. When a case is jointly administered, “‘the estate of each debtor remains separate and distinct.” So, while this was a jointly administered bankruptcy case, Mr. and Mrs. McHale retained separate and distinct bankruptcy estates. Mrs. McHale did not assume personal liability on the promissory note due to Bank of America simply because she filed a joint bankruptcy petition with her husband.
And, even if another court determines that the principles articulated in Taylor and Failla somehow apply to Mrs. McHale’s situation, I would find that no relief is justified. First, the circumstances now are significantly different than when the bankruptcy was pending. During the bankruptcy case, Mr. McHale was current on his mortgage payments. The lender accepted all of these payments. No default had occurred. No foreclosure was pending or needed.
After the bankruptcy ended, everything changed. Mr. McHale was terminally ill. He lost his income. The lender modified the loan with Mr. McHale. The lender also continued to accept payments under the loan modification for ten months. They only refused these payments when Mr. McHale died. The lender waited two years to file a foreclosure action against Mrs. McHale and dismissed it because they could not prove their case. The lender then filed a second foreclosure action and has sought at least three continuances. Whatever debt was due in the bankruptcy case changed significantly post-bankruptcy due to the actions of both Mr. McHale and the lender. Any claim held by the lender or any defenses held by Mrs. McHale are dramatically different seven years later. Too much has changed to simply require Mrs. McHale to surrender the home because her husband failed to sign a reaffirmation agreement during the bankruptcy case.
Second, the Court critically questions the propriety of the Creditor’s actions. They could have asked for this Court to compel Mr. McHale to execute the reaffirmation agreement when he was alive. The stipulated facts indicate that the lender voluntarily dismissed its first foreclosure action and that they have repeatedly sought continuances in the second foreclosure action, waiting six years to ask the Bankruptcy Court to reopen this case. Mrs. McHale contends she has valid defenses to the foreclosure and that the lender cannot succeed. She very much desires her “day in court.” After listening carefully to the testimony and weighing the evidence, I believe Mrs. McHale’s concerns are valid, although I render no opinion as to whether any of Mrs. McHale’s defenses are legitimate.
Christiana Trust now is asking this Court to order Mrs. McHale to stop pursuing her foreclosure defenses primarily to shortcut their litigation so they do not have to actually prove their case in state court. The arsenal of enforcement powers granted Bankruptcy Courts under § 105 was never intended to reward such creditors trying to game the system.
The spirit of our Bankruptcy Code promises honest debtors a “fresh start.” Creditors are not entitled to use the extraordinary powers bestowed by § 105 as a cudgel to avoid having to actually prove their case in state court. As Bankruptcy Judge Colton held in Ayala, “Failla should not be viewed as carte blanche for post-bankruptcy lender misconduct. Instead, each case must be evaluated on its own facts, and careful consideration should be exercised before issuing any order the impacts pending state court proceedings.”
Third, Christiana Trust was not injured by Mr. McHale’s failure to sign a reaffirmation agreement. The remedy sought by the lender, requiring Mrs. McHale to forfeit her foreclosure defenses, is not a logical or justified punishment to impose on Mrs. McHale. Let’s assume Mr. McHale did perform his intention under § 521, and he signed a reaffirmation agreement with the lender during his bankruptcy. If he had, the post-bankruptcy events would have occurred exactly like they did regardless of whether a reaffirmation agreement was signed or not. Mr. McHale still would have defaulted on his payments post-bankruptcy, and the lender still would have filed a foreclosure action and still would have had to prove its case. So, the fact that a reaffirmation agreement was or was not signed is absolutely irrelevant to Mrs. McHale’s current situation.
Christiana Trust is not prejudiced. The lender is trying to get a “pass” on proving their case in state court, not seriously arguing that Mr. McHale’s failure to sign a reaffirmation agreement damaged them.
Christiana Trust relies heavily and mistakenly on a recent per curiam and unpublished decision of the Eleventh Circuit Court of Appeals−Jones v. Citimortgage. In Jones, the debtor, acting pro se, sued his mortgage lender and a state court judge in the United States District Court for the Northern District of Georgia. The procedural history is convoluted and confused. It is unclear if the Debtor intended to reaffirm, redeem, or surrender his home to Citimortgage during his bankruptcy. But, we know he did sue Citimortgage in federal district court in a 58-count complaint asserting various civil rights claims under U.S.C. §§ 1983 and 1985, the Fair Housing Act, a violation of his bankruptcy discharge, the Fair Credit Reporting Act, and various state statutes. The Eleventh Circuit dismissed the majority of Mr. Jones’s complaint with prejudice but sent the count relating to the discharge violation back to the appropriate Bankruptcy Court. In dicta, the Appellate Court cited In re Taylor and In re Failla for the established proposition that debtors must redeem or reaffirm their secured debts if they want to retain property.
But, the Eleventh Circuit in Jones is utterly silent as to what is the proper remedy under §105 of the Bankruptcy Code when a debtor fails to perform their stated intention, the issue in this case. Jones merely restates established law and imposes no new nuance with one possible exception. The Eleventh Circuit in Jones confirmed that a debtor who arguably failed to perform his intent under § 521(a)(2) still was entitled to return to the bankruptcy court to seek relief against his lender for violating his discharge. Significantly, the Eleventh Circuit opined that, even though the Debtor failed to surrender, reaffirm, or redeem, he could continue “to maintain mortgage liability payments on a principal residence after discharge without reaffirming the debt, and a creditor can take such payments rather than pursue an in rem foreclosure” under § 524(j) of the Bankruptcy Code. So, at least according to the Eleventh Circuit in this unpublished opinion, if a creditor voluntarily accepts payments post-bankruptcy, they may lessen or lose their ability to force a debtor to comply with his obligations under § 521(a)(2). The take-away lesson from Jones, if any, is that creditors who accept post-bankruptcy payments from debtors who do not sign reaffirmation agreements may lose their ability to force compliance with § 521 of the Bankruptcy Code when the debtor later defaults post-bankruptcy.
Christiana Trust has failed to establish cause to reopen this case. No relief is possible against Mr. McHale because he is dead and beyond the injunctive power of this or any other court.
No relief is possible against Mr. McHale’s estate because this Court lacks jurisdiction.
And, no relief is justified against Mrs. McHale. She is not now and never was personally liable to the lender. Mr. McHale’s failure to sign or to not sign a reaffirmation agreement caused no prejudice to the lender. They still would have to pursue a foreclosure action. And, given the change in circumstances due to the passage of time, Mr. McHale’s death, the lender’s post-bankruptcy modification of the loan, Mrs. McHale’s current foreclosure defenses necessarily are different from those during the bankruptcy when the Debtors were current on their payments. The only appropriate result in this case is to allow the Florida State Court to continue its in rem foreclosure action to conclusion. The only limitation is that Mrs. McHale, if she ever had any liability to the lender given she never signed the promissory note, certainly has no in personam liability to Christiana Trust or its predecessors after her bankruptcy discharge.
Accordingly, it is ORDERED that the Motion to Reopen Case and to Compel Surrender is DENIED.
Tagged Chapter 7, mortgage, reaffirming
The Reaffirming Dead … (bankruptcy beyond the grave)
Company asks Bankruptcy Court to compel a dead man to surrender his home.
Although it sounds like the beginning of a spoof of a “Walking Dead” skit, the court in Florida took a serious look at the issue.
From the Middle District of Florida, In re Charles James McHale, Jr., and Susan McHale, Case #10-02527. Entered March 9, 2018:
Debtors filed this routine and uneventful Chapter 7 bankruptcy case over eight years ago on February 19, 2010. They received their discharge on July 1, 2010. In their Statement of Intentions, the Debtors indicated they wanted to reaffirm the mortgage debt encumbering their home, which was held by Bank of America. Only the husband Debtor, Charles, signed the promissory note connected to the mortgage. The Debtor/wife, Susan, had no debt to reaffirm.
Bank of America never sent the husband a reaffirmation agreement for him to sign. Instead, the lender sent a letter to the Debtors’ lawyer inviting him to explore the bank’s “home retention programs” with his clients. Bank of America had actual knowledge of the bankruptcy filing but filed no proof of claim with the Bankruptcy Court and took no action in this Chapter 7 case.
Similarly, husband never prepared, signed, or filed any reaffirmation agreement with the Bankruptcy Court. But, he always acted consistently with his intent to reaffirm the debt. He was current with his payments when his bankruptcy case was filed and remained current when he received a discharge. He made multiple payments, all accepted by the lender, after his bankruptcy case was closed.
Trust acknowledges the Debtors were current on their mortgage payments when they filed bankruptcy on February 19, 2010, and they made all future payments through February 2011. Husband, by this point, was dying. Because he could no longer earn his regular income and despite his declining medical condition, husband valiantly tried to restructure the loan.
Bank of America eventually offered a loan modification to Mr. McHale in August 2011. Debtors made ten full payments under the temporary loan modification agreement that was only supposed to last for three months. Bank of America accepted every payment, the last one being made by the Debtors’ daughter on May 23. Husband died on April 26, 2012.
Bank of America refused to accept any of the many later payments tendered by wife. The lender also refused to issue a permanent loan modification or to assist wife, the surviving Debtor, with restructuring the mortgage encumbering her home. The testimony was uncontroverted that wife, assisted by her family, was willing and able to continue paying for her home. Bank of America simply failed to work with their borrower’s widow.
Bank of America and later the Trust instead pursued two separate foreclosure actions against wife. The first foreclosure case was filed on January 4, 2013. Because the lender could not procure a witness to prove its alleged debt, Trust voluntarily dismissed the first foreclosure on October 3, 2014.
Trust filed a second foreclosure action on May 19, 2015. The second foreclosure action remains pending. Trust, not the wife, has asked to continue the trial in this second foreclosure case at least three times. Then, on June 18, 2016, almost six years after the Debtors received their discharge in this bankruptcy case and three and a half years after the initial foreclosure action was filed, Trust filed its motion to reopen this closed Chapter 7 case. Trust argues the Debtors did not properly reaffirm the debt then due to Bank of America, and the Bankruptcy Court should compel the surrender of the home.
Section 350(b) of the Bankruptcy Code allows a bankruptcy court to reopen a case for “cause.” Bankruptcy courts use their discretion to determine whether the moving party has demonstrated sufficient cause to reopen the case based on the circumstances and equities of the case. The decision to reopen a long-closed bankruptcy case rests on a balancing test weighing the benefits and prejudices to the creditors and the debtors as well as many other equitable factors. Courts also should consider the suitability of alternative forums and how long a movant waited to seek reopening, requiring a more compelling justification to reopen when the delay is extensive.
Under § 521(a)(2)(A) of the Bankruptcy Code, a Chapter 7 debtor who owes money to a secured creditor with a lien must decide whether they want to surrender the property secured by a lien or, if they would like to retain the property, whether they want to reaffirm or redeem the debt.
Debtors must choose one of these three options. They cannot simply continue making payments to the lender because it would allow them to turn a recourse loan into a non-recourse obligation giving them a “head start” instead of a “fresh start.” Here, Mr. McHale chose to reaffirm the debt due to Bank of America.
Section 524(c) of the Bankruptcy Code governs reaffirmation agreements and the reaffirmation process. Reaffirmation allows a debtor to reaffirm the debt it owes to a creditor and excuses that creditor’s debt from the debtor’s discharge. To reaffirm a debt, the parties must come to an agreement where the otherwise dischargeable debt is renegotiated. Section 524(c) provides certain requirements that must be met for a reaffirmation agreement to be valid and binding. For example, a reaffirmation agreement must be executed before the discharge is granted and certain disclosures must be made by the creditor that contain specific language outlined in the statute. “Case law construing § 524(c) … supports the conclusion that the requirements … must be strictly complied with in order for a reaffirmation agreement to be enforceable.” As Chief Bankruptcy Judge Williamson noted in the In re Pitts decision, it is up to the creditor to protect its own rights. If a debtor does not fully proceed through the reaffirmation process, the creditor should seek to ensure the agreement is properly executed.
But, § 521(a)(2)(B) of the Bankruptcy Code requires debtors to perform some act consistent with their stated intention within 45 days. Mr. McHale did not reaffirm the debt within 45 days. Mrs. McHale’s testimony was credible and unrebutted, however, that the Debtors’ lawyer never explained to Mr. McHale what he needed to do to reaffirm the mortgage debt. Nor did the lender take any action during the bankruptcy to compel Mr. McHale to sign a reaffirmation agreement or otherwise comply with his duties under § 521. Rather, both parties continued the status quo for years following the bankruptcy discharge and closing.
Mr. McHale made regular monthly payments to Bank of America. The lender accepted these payments and eventually modified the mortgage loan long after the bankruptcy case was closed. The lender has filed and dismissed one foreclosure action. A second, still-pending foreclosure action was filed. Christiana Trust waited until June 2016, almost six years after Mr. McHale received his bankruptcy discharge in July 2010, to ask the bankruptcy court to reopen this case to force the deceased Mr. McHale and his surviving widow to surrender the family home because Mr. McHale failed to sign a reaffirmation agreement.
The issue now is what relief, if any, is appropriate against Mr. McHale, his estate, and his widow, Mrs. McHale? Is there any relief possible against Mr. McHale or his estate for his failing to sign the reaffirmation agreement? Should I automatically compel the surviving widow, who never was obligated to reaffirm the debt, to surrender her defenses in the pending foreclosure action, as Christiana Trust seeks? Are there other factors that dictate another remedy or no relief?
Read the answers to these excellent questions as the Order concludes here.
Tagged Chapter 7, Mortgages, reaffirming
Student Loan providers kicking out Income Driven Plan participants after bankruptcy?
Here is a notice from NACBA (the National Association of Consumer Bankruptcy Attorneys).
I want to share it with my clients and attorneys who subscribe to my blog.
“In direct violation of 11 USC 525, NACBA has received distressing news from members that the Department of Education and its student loan servicers are kicking bankruptcy debtors out of their Income Driven Repayment plans. This can happen if debtors file Chapter 7 or Chapter 13 and regardless of whether they were current on the student loan payments.
This potentially illegal expulsion, even if temporary, can upend the debtor’s progress towards getting a Public Student Loan Forgiveness or other cancellation of their loans, resulting in clients angry with their attorney or worse.
NACBA is immediately mobilizing to address this concerning situation.
John Rao, Attorney for the National Consumer Law Center, Dr. Rajeev Darolia, Associate Professor of Public Policy at the University of Kentucky and Mark Redmiles, Assistant Director, United States Attorney’s Office will discuss this latest violation of 11 USC 525 on Sunday, April 22, 2018 at 10:15 AM, NACBA’s Annual Convention in Denver, CO. The panel will offer suggestions to keep your clients on track with their student loan payments. This information will also assist in expanding your practice.
If you have been contacted by the Department of Education and or its student loan servicers with similar news as it relates to your clients, please contact NACBA.”
Tagged Discharged debts, student loans
I have started a page on Mighty Networks.
https://curry-law-things-that-matter.mn.co/home
Here is a quote from CEO Gina Bianchini:
“Mighty Networks are designed to scale a social model where people start off as strangers and want to build relationships with each other around a specialty, profession, interest, cause, discipline, value system, condition, identity, life stage, diagnosis or passion. … Mighty Networks are designed for strangers to build relationships with each other when a network has tens, if not hundreds of thousands of members.”
Here is an article covering its debut. https://www.fastcompany.com/40401906/gina-bianchini-is-taking-on-facebook-once-again-with-mighty-networks
Time will tell if Mighty Networks builds itself into a good contact point with local clients or more akin to LinkedIn used (by me at least) for professional networking. From my business standpoint, frankly, I prefer the former as it generates interest to my potential clients.
Join me! Why not?
I do want to keep with the current social media trends – an attorney that relies solely on phone book ads will not build a new client base. That is why I continue to blog and to post on Facebook and Twitter.
I hope that Mighty Networks helps potential clients get to know my firm exists and what it does. As Earl Nightingale said, “Our rewards will always be in exact proportion to our service.”
This is another way I can be of service…
Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/)has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.
Whether you live in Mount Vernon, Salem, Centralia, McLeansboro, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!
You can also access his website at http://www.mtvernonbankruptcylawyer.com
Tagged Mighty Networks, Networking, Social Media
“Can I keep using my credit cards?”
You decided you are filing for bankruptcy; for sure, no question that it is going to happen. You are saving up the paperwork and the fees. Can I still use the credit cards?
The same goes for cash advances and money from the loan companies.
A creditor can object to the bankruptcy if you have charge on their cards (or got a loan from them) just before you file bankruptcy. It is fraud. Not a “go-to-jail” fraud, but fraud regardless
“When did you see your attorney about bankruptcy?” “July 1st.”
“When did you get that $2,000.00 cash advance on your credit card?” “July 2nd.”
You see the problem with that. I don’t side with creditors very often, but here I do: It’s not fair to them to run up their bill and file bankruptcy.
And think of it this way: the credit cards will cancel the accounts when you file your case, so in a very short time you will not be able to use them. Best to start now.
Tagged Credit cards, FAQs
Free Fallin’ … Financially
Celebrity Spotlight: Tom Petty
Thomas Earl Petty (October 20, 1950 – October 2, 2017) was an American singer-songwriter, multi-instrumentalist, record producer, and actor. Petty served as the lead singer of Tom Petty and the Heartbreakers formed in 1976. He was also a member and co-founder of the late 1980s supergroup the Traveling Wilburys with George Harrison, Bob Dylan, Roy Orbinson and Jeff Lynne.
In 1979, he was involved in a legal dispute when ABC Records was sold to MCA Records. He refused to be transferred to another record label without his consent, insisting the sale cancelled his liability. MCA sued for breach of contract resulting in Petty being a half-millions dollars in debt. In May 1979, he filed for bankruptcy and was signed to the new MCA subsidiary Backstreet Records
European Court Finds It’s Not Possible to Trademark a Color
From Mediation.com
Although famous for the iconic red soles, shoe designer Christian Louboutin recently experienced a blow to his recognized signature when a European court that it was not possible to trademark a color.
Louboutin filed a trademark infringement lawsuit in 2012 against a Dutch shoe retailer that sold shoes with the famous red soles that were not part of Louboutin’s premium brand. The Dutch retailer sold the shoes to customers for a much lower price point than the famous brand. Louboutin’s trademark was registered in the Netherlands as well as Belgium and Luxembourg and was described as the color red that was applied to shoe soles.
The case made its way to the highest court in the European Union, which found that the red soles could be refused the protection of the trademark. The case was remanded to the Dutch court to determine how to proceed. The decision comes as a major blow to a well-known fashion designer. Famous designers have often sought protection in court from knock-off designers and others that take advantage of the original designer’s creative license.
The decision was also contrary to a recent decision made in favor of Mr. Louboutin in a United States federal appeals court. That court identified the red soles as a source-identifying trademark that provided protection to his brand. However, the recent decision could imply that the designer may not be able to protect his signature red soles from other international designers.
Tagged European law, news