Bankr. W.D.N.C. : In re Perez- No Shortcuts to Appeal—Rule 54(b) Requires More Than “Magic Words” in Perez Adversary Stafford Patterson Mon, 04/13/2026 - 15:57 Summary: Judge Laura Beyer delivers a straightforward—but instructive—reminder that not every adverse ruling is immediately appealable, and that Rule 54(b) remains the exception, not the rule. The Setup In this Chapter 13 adversary proceeding, the debtor, Luis Perez, attempted to bring a third-party claim for unfair and deceptive trade practices against Fernando Ycaza. That claim was dismissed with prejudice. Perez then tried to salvage an immediate appeal by filing a motion asking the court to either: Add Rule 54(b) “magic language” (i.e., no just reason for delay), or Convert the dismissal to without prejudice. The Ruling The court denied both requests—firmly. Applying the Fourth Circuit’s Braswell Shipyards framework, Judge Beyer acknowledged that the dismissal was “final” as to that claim, but emphasized that finality alone is not enough. The real question is whether there is no just reason for delay, and the burden rests squarely on the movant. Perez fell short. The court found: The dismissed and remaining claims were closely intertwined. Future developments could moot the need for appeal entirely. Immediate appeal risked duplicative appellate review. The alleged hardship—delay and expense—was simply the ordinary consequence of litigation, not the “undue hardship” required for Rule 54(b). Just as importantly, the court rejected the notion that labeling a dismissal “with prejudice” somehow entitles a party to immediate appeal. Rule 54(b) doesn’t turn on that distinction. Commentary This is a clean, practical opinion that bankruptcy practitioners should keep handy—particularly in multi-party adversary proceedings where the temptation for piecemeal appeals is strong. Two takeaways stand out: First, Rule 54(b) is not a drafting oversight doctrine. Perez’s motion essentially read as if the court had forgotten to include the required language. Judge Beyer makes clear: those words are not automatic—they must be earned. Second, litigation inconvenience is not “undue hardship.” The desire to avoid delay, expense, or even a second trial is baked into the system. If that were enough, Rule 54(b) would swallow the rule against interlocutory appeals. In short, this decision reinforces what most of us already know—but occasionally need to be reminded of: appeals come at the end, not along the way. To read a copy of the transcript, please see: Blog comments Attachment Document ameris_bank_v._perez.pdf (204.4 KB) Category Western District

4th Cir.: Cook v. Trustee- Fourth Circuit Reins in Equitable Mootness in Chapter 13 — And Quietly Preserves Appellate Rights Post-Bullard Ed Boltz Tue, 04/14/2026 - 02:56 Summary: The Cook v. Chapter 13 Trustee decision is one of those deceptively modest Chapter 13 cases that, on closer inspection, carries outsized importance for consumer practitioners. At first glance, this is a fairly routine plan confirmation dispute: debtor proposes a low-payment plan, trustee objects, bankruptcy court denies confirmation, debtor ultimately confirms a higher-payment plan—and then tries to appeal the denial of the earlier, more favorable plan. The district court dismissed that appeal as equitably moot. The Fourth Circuit reversed. And that matters. A lot. The Holding (In Plain Terms) The Fourth Circuit did two key things: 1. Rejected Equitable Mootness in a Simple Chapter 13 Case The Court emphasized that equitable mootness is a pragmatic, discretionary doctrine—not a jurisdictional bar—and is generally reserved for complex Chapter 11 cases involving numerous parties and irreversible transactions. Here, there was: No asset transfers No unwinding of complex transactions No disruption to third parties Only a request to adjust payments going forward As the Court put it, “there is no egg to unscramble.” That alone doomed the district court’s dismissal. 2. Reached the Merits—and Affirmed the Bankruptcy Court On the substance, the debtor still lost. The bankruptcy court’s denial of confirmation of the first plan—based largely on lack of good faith and inconsistent financial disclosures—was affirmed. So yes, the debtor ultimately loses the battle. But consumer debtors as a whole won something bigger.   The Real Story: A Narrowing of Equitable Mootness This opinion draws a bright line that has long been blurred: Equitable mootness should not be casually applied in consumer Chapter 13 cases. The Fourth Circuit essentially says what many of us have argued for years: This doctrine was built for mega Chapter 11 reorganizations It has no business short-circuiting appeals in individual wage-earner cases The Court’s analysis of the Mac Panel factors is particularly instructive: Failure to seek a stay? Not dispositive. Payments already made? Irrelevant if relief is prospective. Impact on creditors? Minimal and manageable. This is a course correction. The Bigger Win: A Path Around Bullard The shadow looming over all of this is, of course, Bullard v. Blue Hills Bank. In Bullard, the Supreme Court held that: Denial of confirmation of a Chapter 13 plan is not a final, appealable order. That decision significantly constrained appellate review of plan denials—forcing debtors to either: Confirm a different plan, or Seek dismissal to create finality (a risky move) Cook provides a workaround—without saying so explicitly. Here’s how: The debtor confirmed a later plan (creating a final order) Then appealed the earlier denial The district court tried to shut it down via equitable mootness The Fourth Circuit said: Not so fast The Result: Chapter 13 debtors still have a viable path to appellate review of denied plans—so long as they can get to a confirmed plan and frame relief prospectively. That is a significant preservation of appellate rights in the wake of Bullard. Practice Implications (Where This Really Hits Home) For consumer bankruptcy attorneys, this case should immediately change how you think about preserving issues for appeal: 1. Don’t Assume the Door is Closed After Bullard There is a path: Confirm a plan (even under protest) Preserve objections Appeal the denial of the preferred plan 2. Frame Relief Prospectively The Fourth Circuit repeatedly emphasized: No clawbacks No unwinding distributions Just forward-looking adjustments That framing is critical to defeating equitable mootness. 3. Equitable Mootness is Now a Weak Defense in Chapter 13 Expect trustees (and sometimes courts) to continue raising it—but: This opinion sharply limits its reach Especially in routine consumer cases 4. NACBA / NCBRC Impact Notably, amici included the National Association of Consumer Bankruptcy Attorneys and the National Consumer Bankruptcy Rights Center—and their fingerprints are visible in the Court’s reasoning. This is exactly the kind of doctrinal narrowing consumer advocates have been pushing for. Final Take Cook is a quiet but important win for consumer bankruptcy law. Yes, the debtor loses on the merits. But the Fourth Circuit: Rejects overuse of equitable mootness Reinforces meaningful appellate review in Chapter 13 And—most importantly—keeps alive a post-Bullard pathway to challenge plan denials For practitioners, that’s not just academic. That’s leverage. Addendum: Amici NACBA & NCBRC—And a Well-Earned “Told You So” No discussion of Cook v. Chapter 13 Trustee would be complete without recognizing the amicus brief filed by Richard P. Cook (no relation to the debtor) on behalf of the National Association of Consumer Bankruptcy Attorneys and the National Consumer Bankruptcy Rights Center. That brief did not merely participate—it framed the issue the Fourth Circuit ultimately decided. Congratulations Are in Order Credit where it is due: To Richard P. Cook (no relation), for a clear, disciplined brief that stayed focused on the doctrine rather than the debtor’s underlying merits. To NACBA and NCBRC, for continuing to do what they do best—identify systemic risks to consumer bankruptcy rights and intervene at precisely the right moment. This is exactly the kind of case where amicus participation matters: The debtor wins the procedural battle The doctrine is narrowed And appellate rights are preserved for thousands of future Chapter 13 debtors To read a copy of the transcript, please see: Blog comments Attachment Document cook_v._trustee.pdf (163.8 KB) Document cook_v._trustee_amicus_brief_of_nacba-ncbrc.pdf (273.16 KB) Category 4th Circuit Court of Appeals

Bankr. W.D.N.C.: Official Committee of Asbestos Personal Injury Claimants v. DBMP- Attorney-Client Privilege Issues in Bankruptcy Ed Boltz Wed, 04/15/2026 - 16:23 Summary:   What Judge Edwards has done in the DBMP decision—and what In re Wolbert foreshadowed years earlier—is to remind us that attorney-client privilege in bankruptcy is not a static shield. It is a conditional protection, one that can erode—sometimes quickly—once the debtor crosses the line from considering bankruptcy to committing to it. And that line matters. I. The Core Tension: Confidential Advice vs. Mandatory Disclosure Bankruptcy is different. Unlike most litigation, it is built on compelled transparency. As Wolbert explains, the privilege protects candid communications only so long as they are intended to remain confidential. But once those communications are made for the purpose of producing a public filing—the petition, schedules, SOFA—the expectation of confidentiality evaporates. That produces a two-stage framework: 1. Pre-decision phase (privilege intact) Discussions about whether to file Strategy, alternatives, risks Legal advice about exemptions, timing, or consequences These remain privileged because they are not yet destined for public disclosure. 2. Post-decision phase (privilege erosion) Once the debtor has decided to file, communications: Supplying facts for schedules Drafting petitions Explaining assets, transfers, liabilities are no longer confidential in the same way—because they are intended to be published. That is the doctrinal hook both Wolbert and Judge Edwards rely on: privilege is lost when communications are made with the understanding they will be disclosed. II. What Counts as a “Decision to File”? This is where the DBMP analysis becomes especially instructive—and dangerous if misapplied to consumer practice. Judge Edwards did not rely on a formal board resolution alone. Instead, she looked at objective conduct demonstrating commitment: Structural steps (entity formation, restructuring) Movement of significant assets (e.g., $25 million transfer) Implementation of a pre-packaged legal strategy Board-level actions consistent with an inevitable filing In other words, the court inferred the “decision” from actions inconsistent with anything else. Translating that to consumer cases A court could find that a debtor has “decided to file” when: The debtor has retained counsel and paid a bankruptcy-specific retainer The debtor is actively compiling documents for schedules There is no meaningful exploration of alternatives The debtor has taken pre-filing actions uniquely tied to bankruptcy (e.g., asset conversions, timing transfers, stopping payments solely for filing) But—and this is critical—none of those are necessarily dispositive. The real question is: Has the client committed to filing, or are they still evaluating options? III. Can a Retainer Agreement Preserve Privilege? A well drafted retainer agreement may not just be good practice,  but  may be likely essential. A provision stating: "Even though the debtor has consulted with the attorney, viable alternative options, including debt settlement and/or defense, refinancing, etc., an ultimate decision whether to file bankruptcy, what chapter and what, if any plan for reorganization to propose, will not be made until the Debtor has reviewed and signed as complete and accurate the final bankruptcy petition." ” does two important things: 1. It preserves the “pre-decision” characterization It creates a record that: The client is still evaluating alternatives The attorney is still providing advisory services, not merely transcription 2. It rebuts objective inference If later challenged, it helps counter arguments like those in DBMP that: the decision had already been made during document preparation That said, a contract alone is not dispositive. Courts will look at conduct over language. If everything about the representation screams “this filing is happening,” the clause may not save privilege. But it significantly strengthens the argument. IV. Third-Party Assistance: Does It Preserve Privilege? Third-Party Confidentiality Agreements, as sample of which is attached and for which I would welcome comments and suggestsion,  are often necessary to preserve attorney-client privilege for consumers who need the assistance of family or friends—but it is not a magic wand.   A. When third-party involvement does NOT waive privilege Privilege can be preserved when the third party is: An agent necessary to facilitate communication A translator, advisor, or functional equivalent Someone whose involvement is reasonably necessary to the representation Such an agreement hits these points well: Identifies the son as agent/confidant States his involvement is necessary Limits use of information to the representation These are exactly the facts courts look for. B. Where the risk remains Courts are skeptical when the third party is: Merely supportive (emotional or logistical) Not actually necessary to legal advice Functioning as a “family observer” The key vulnerability is this: If the third party’s presence is not necessary, it may be treated as a “stranger,” destroying privilege. A Third-Party Confidentiality agreement tries to solve that by declaring necessity. That helps—but courts will still ask: Could the client have communicated without this person? Was the person adding substantive assistance? Or simply present? V. Joint Interest vs. Agency: Don’t Confuse the Doctrines A common mistake is to treat family members as part of a “joint defense” or “common interest” group. That usually fails. Joint/common interest doctrine requires: Separate clients Separate counsel Shared legal interest in anticipated litigation A parent and adult child helping with finances typically do not meet this test. Instead, the better framework—correctly used in your agreement—is: 👉 Agency / necessary intermediary That is far more defensible in consumer bankruptcy. VI. The “Draft for Publication” Waiver Problem Both Wolbert and the Fourth Circuit authorities it relies on make a broader point: If a communication is intended to result in a public filing, privilege may be waived not just for the final document—but for drafts and underlying communications.   This creates real exposure in bankruptcy practice: Draft schedules Intake notes Emails about asset disclosure Paralegal communications All potentially discoverable once tied to the petition. VII. Practical Takeaways This is where doctrine meets the trenches. 1. Preserve the “decision gap” Maintain a clear distinction between: Consultation phase (privileged) Execution phase (potentially not) Document that distinction. 2. Use retainer language strategically Your proposed clause is not boilerplate—it is litigation positioning. 3. Be careful with third parties Use written agreements (as you did) Frame them as necessary agents Limit their role and participation 4. Assume petition-related facts are discoverable Operate under the working assumption that: Anything used to prepare schedules may be examined later 5. Train staff accordingly Paralegals—like in Wolbert—can become witnesses. That is not theoretical. VIII. The Bigger Picture The throughline from In re Wolbert to the DBMP decision is this: Bankruptcy trades confidentiality for transparency. Attorney-client privilege survives—but only at the margins: before the decision to file outside the scope of required disclosure and only when confidentiality is carefully preserved Everything else risks becoming evidence. To read a copy of the transcript, please see: Blog comments Attachment Document third_party_confidentiality_agreement.docx (15.57 KB) Document in_re_wolbert.pdf (217.17 KB) Document official_committeee_of_asbestos_personal_injury_claimants_v._dbmp.pdf (3.66 MB) Category Western District

If you have decided to declare bankruptcy, you are on your way to relief from pressing debt. As a part of this process, you must decide how you wish to handle financial agreements you entered while you were solvent. There are several options for dealing with executory contracts in bankruptcy cases, each with its own implications. One of our experienced attorneys could help you understand the issues you face as you make your decision. Contact Allmand Law Firm today for guidance. What Is an Executory Contract? An executory contract is an agreement that has not yet been fulfilled. For example, if you agree to purchase an item with payment on delivery, the contract remains executory until the merchandise is delivered and you make payment. Another type of executory contract involves an agreement where you and the other party maintain ongoing obligations to each other, such as: Residential leases Cell phone contracts Gym memberships Home security services with a monthly subscription fee Early in filing for your Chapter 7 or Chapter 13 bankruptcy case, you have to decide whether you want to continue honoring these executory agreements. Talking with one of our attorneys could help you decide if it makes sense to continue with specific contracts. How Bankruptcy Impacts Executory Agreements Many contracts contain language saying that the agreement terminates immediately if one party declares bankruptcy, but these provisions may not be enforceable. According to the federal bankruptcy law under 11 United States Code § 365, you, as the debtor, have a choice about whether to continue with the contract, and the other party must continue to honor the current arrangement until you decide which option to pursue. Assumption You can assume the contract, which means you agree to honor its terms despite your bankruptcy. If you assume a contract, you must resolve any default. The other party is entitled to seek assurances that you will honor your obligations, so you may need to make a security deposit or get a co-signer. Rejection You can choose to reject the contract, which means you will no longer be required to perform under its terms. The other party may file a claim for damages with the bankruptcy court, and your outstanding balance would be treated like the other dischargeable debts in your case. An experienced attorney can help you understand the potential implications of rejecting a specific executory contract in your case. One of our attorneys could explain the potential implications of rejecting a specific executory contract in your bankruptcy case. Assignment If the contract does not benefit you during your bankruptcy, but may be of value to someone else, you may be able to assign it. This means that you would transfer the contract to someone who can handle its obligations. You may still owe a debt to the contract holder if you defaulted before transferring it over, but sometimes the person assuming the contract is willing to cure your default as part of the assignment. Timing The timeframe in which you must decide to assume, reject, or assign your contracts depends on the form of bankruptcy you choose. If you file under Chapter 7, you have 30 days from the filing date to make your choice and notify the bankruptcy trustee, who makes the final decision. If you file under Chapter 13, you typically submit your proposed repayment plan, including your intentions regarding executory agreements, at the time of filing. The final ruling on repayment terms comes at a hearing that typically occurs two to three months after the filing date. Call Us for Help With Executory Agreements in Your Bankruptcy Case Debtors have a choice in how to handle executory contracts in bankruptcy cases. However, making your decision and persuading the trustee or creditor committee to accept it can be a complex process. If you need guidance, contact our team at Allmand Law Firm today. The post Executory Contracts in Bankruptcy Cases appeared first on Allmand Law Firm, PLLC.

Law Review: Herrine, Luke, The Destabilizing Politics of Student Debt (February 09, 2026). Forthcoming in Illinois Law Review Ed Boltz Tue, 04/14/2026 - 20:08 Available at SSRN: https://ssrn.com/abstract=6378922 Abstract: This Article examines why student loans became central to higher education finance in the United States and how they have undermined their own centrality over time. As the liberal constituency for funding redistributive social programs weakened in the 1970s, student loans enabled stable coalitions in favor of federal support for college affordability by bringing together lawmakers with divergent ideological commitments. Three features made student loans effective coalition stabilizers: their structure as demand-side subsidies that avoided federalism concerns and conflicts over university governance; their "political lightness" as credit programs that satisfied fiscal hawks and could be characterized as either government largesse or individual responsibility; and their creation of a sophisticated lobbying industry-including servicers, guaranty agencies, and for-profit colleges-that advocated for their perpetuation. However, stabilizing higher education finance through debt came with significant costs. The insider-driven politics of student loans involved corruption and fraud. The ideology of individual investment obscured structural labor market inequalities. The focus on demand-side subsidy contributed to a market dynamic that made higher education more unequal and more vocationalized. By the 2010s, these costs began to destabilize the very coalitions student loans had assembled: hidden costs became increasingly evident, scandals delegitimized insider politics, and growing borrower distress fueled an outsider politics against student debt. The COVID pandemic accelerated these dynamics, leaving the politics of higher education finance profoundly unstable. Drawing on scholarship from history, political science, sociology, economics, and legal studies, this Article provides a new framework for understanding the political economy of student loans-one that explains their endurance without treating them as inevitable. Along the way, the Article offers insights into the conditions under which higher education finance might be restabilized, whether through a reformed loan program or through a transition to more direct institutional funding and grants. Student Loans: From Political Glue to Political Solvent In Student Debt and the (De)Stabilization of Higher Education, Luke Herrine offers a sharp and—frankly—overdue reframing of how we got here. Student loans were not an accident, nor simply the product of cultural aversion to taxation. Instead, they were a political technology: a way to hold together a fragile coalition that otherwise could not agree on how (or whether) to fund higher education. The brilliance of student loans, at least from a legislative perspective, was their ability to be all things to all people. First, as demand-side subsidies, loans allowed Congress to fund students without deciding which institutions—or states—deserved support. That neatly sidestepped federalism fights, segregation battles, and public/private rivalries. Second, loans carried what Herrine (borrowing from Sarah Quinn) calls “political lightness.” They looked cheap because they were expected to be repaid, and they could be sold simultaneously as government assistance and personal responsibility. In other words, fiscal hawks saw discipline, while progressives saw access. Third, the system created its own lobby—servicers, lenders, guaranty agencies, and for-profit colleges—all of whom had a vested interest in keeping the spigot open. For decades, this worked. Student loans stabilized higher education finance in an era when direct public funding was politically untenable. But—as is so often the case in bankruptcy—what begins as a solution eventually becomes the problem. The Costs Come Due Herrine’s central insight is that the very features that made student loans politically durable also made them economically and socially corrosive. Insider politics bred corruption and fraud. “Human capital” rhetoric masked structural inequality. Debt-fueled tuition increases widened institutional and social disparities. And most importantly, the system shifted risk onto borrowers—without providing meaningful exit ramps. By the 2010s, the consequences were no longer hidden. Rising defaults, borrower distress, and repeated scandals eroded the legitimacy of the entire system. What had once stabilized higher education finance began to destabilize it, producing today’s volatile and litigation-heavy landscape. COVID merely accelerated a process already underway. Commentary: The Bankruptcy Angle—“Fiscally Light” Through Legal Fiction From a bankruptcy perspective, there is an additional layer that the article hints at but does not fully develop—and it is a critical one. Making student loans non-dischargeable (and eliminating any meaningful statute of limitations for federal loans) has been perhaps the most effective—if least transparent—piece of legislative engineering in this entire system. That move accomplished two things: It reinforced the illusion of collectability. If a debt can never be discharged and never expires, it can always be booked as an asset. It made student loans appear “fiscally light” for budget scoring purposes. The Congressional Budget Office can treat these loans as largely collectible—even when real-world repayment rates tell a very different story. The result is a kind of legislative sleight-of-hand: Relief measures (whether forgiveness, IDR reforms, or bankruptcy discharge) are scored as massive “costs,” while the underlying loan portfolio is treated as if it were fully realizable. Anyone who has practiced consumer bankruptcy—or reviewed student loan adversaries—knows that assumption borders on fiction. A System Coming Unmoored Herrine closes by noting that the old coalition has fractured. The insider politics have lost legitimacy, borrower activism has grown, and even basic repayment terms are in flux. That leaves us in a transitional moment: Student loans are no longer politically stable; Direct funding models (grants, free college) remain contested; And the legal system—particularly bankruptcy courts—continues to struggle with doctrines built for a very different era. From this vantage point, the current push—whether through DOJ guidance, evolving “undue hardship” standards, or legislative proposals—may be less a reform of student loans than an attempt to unwind a decades-long political compromise. Bottom Line Student loans were never just about financing education. They were a political workaround—one that allowed Congress to fund higher education without appearing to do so. But like many forms of disguised debt, the true costs were merely deferred. And now, as bankruptcy practitioners are seeing with increasing frequency, those costs are coming due. To read a copy of the transcript, please see: Blog comments Attachment Document student_debt_and_the_destabilization_of_higher_education.pdf (742.67 KB) Category Law Reviews & Studies

Law Review: Elengold, Kate, It's All Debt To Me (February 01, 2026). U.C. Davis. L. Rev. (forthcoming 2027), Ed Boltz Mon, 05/11/2026 - 14:45 Available at SSRN: https://ssrn.com/abstract=6497639 or http://dx.doi.org/10.2139/ssrn.6497639 Abstract: Michelle owes $15,000 to a bank for credit card debt. Reid owes $15,000 to Memphis Memorial, a private hospital. Shirley owes $15,000 to the Raleigh Housing Authority. Josh owes $5,000 to the state of Louisiana and $10,000 to the Internal Revenue Service. Each debtor owes the same amount. None of them can afford to pay. From their perspective, the debt is the same. But the law does not treat these four debtors the same. The law provides them with widely divergent protections and affords their creditors different collection tools. Michelle, Reid, Shirley, and Josh experience their debt and its collection differently because the "law of individual debt" is comprised of aspects of various doctrines, including contract, tort, consumer, civil rights, bankruptcy, tax, and constitutional law. This Article reveals and explains how relevant aspects of these doctrines combine to allow for divergent experiences for four similarly-situated debtors. This Article then argues that the law of individual debt is organized around (1) the identity of the creditor and (2) whether the creditor voluntarily contracted to extend credit to the debtor. With that context, it offers an organizational structure to describe this phenomenon—a "debt ladder" comprised of (1) private voluntary debt, (2) private involuntary debt, (3) public voluntary debt, and (4) public involuntary debt. Mapping debtor protections and creditor powers across the four rungs leads to a shocking conclusion: when descending the debt ladder, legislators have simultaneously decreased debtor protections while increasing creditor powers. This places public involuntary debtors at the bottom of the ladder in an untenable position—suffering under crushing debt and subject to punitive collection tools. After having excavated the law, developed the scaffolding, and mapped the effects, this Article challenges scholars and policymakers to consider whether the whole is worth the constituent parts. Summary: This article takes what most consumer debtors instinctively understand—that a dollar of debt is not treated equally under the law—and gives it a rigorous framework. By walking through four hypotheticals (credit card, medical, public housing, and tax debt), the author demonstrates that the legal consequences of debt are driven less by amount owed and more by who the creditor is and how the debt arose. That insight leads to the “debt ladder,” organized along two axes: Public vs. Private Creditors Voluntary vs. Involuntary Debt From there, the article maps how legal protections shrink—and collection powers expand—as one descends the ladder:   Category Debtor Protections Creditor Powers Private Voluntary (e.g., credit cards) Strong (FDCPA, defenses, bankruptcy discharge) Limited Private Involuntary (e.g., medical debt) Moderate Growing Public Voluntary (e.g., student loans) Weakening Expanding Public Involuntary (e.g., taxes, fines) Minimal Extremely strong The conclusion is stark: those least able to avoid debt (public involuntary debtors) face the harshest collection regimes and the fewest protections. Commentary: This is one of those articles that feels obvious once you read it—and then you realize just how uncomfortable the implications are. 1. The “Debt Ladder” Is Real—And Bankruptcy Lawyers See It Daily Consumer bankruptcy practice has always been the proving ground for this kind of theory. Credit card debt? Dischargeable, negotiable, regulated. Medical debt? Increasingly aggressive, but still somewhat constrained. Student loans? Welcome to adversary proceedings and DOJ “guidance.” Taxes? Non-dischargeable (mostly), priority, and backed by sovereign power. The Bankruptcy Code doesn’t just reflect the ladder—it codifies it. Sections like § 523(a), priority claims under § 507, and collection tools outside bankruptcy (offsets, garnishments, license suspensions) all reinforce the hierarchy. And, as the article correctly notes, the further you move toward public, involuntary debt, the more the system starts to look less like contract law and more like punishment. 2. A Missing Third Axis: Location, Location, Location The article’s two axes are compelling—but in practice, there is a third axis that may be just as determinative: Where the debtor (and the debt) is located. This is not a minor refinement—it is often outcome determinative. North Carolina vs. Other States Take North Carolina as an example: Chapter 75 (UDTPA) often effectively extends FDCPA-like protections even to original creditors. That is not always the norm nationally. In contrast, states like: The Terrible Two:  Michigan & Rhode Island have been gutted by court decisions that interpret the statute as being applicable to almost no consumer transactions. These decisions were issued over ten years ago, yet the state legislatures still have not corrected them. Exempt Most Original Creditors:  Alabama, Florida, Louisiana, Nebraska, New Hampshire, Ohio, and Virginia  protect  most lenders and creditors from UDAP statutes, while another 14 leave significant gaps or ambiguities in their coverage of creditors. are frequently cited as providing limited or no UDAP/consumer protection coverage for original creditors. (See National Consumer Law Center, Unfair and Deceptive Acts and Practices, 50-state survey.) That means collection  efforts, even extending to abusive harassment and lies,  for Michelle’s $15,000 credit card debt are treated very differently depending on where she lives—not just what type of debt it is. 3. Statutes of Limitation: A Quiet but Powerful Divider Even more concrete examples: North Carolina: 3-year statute of limitations on most consumer debt based on a written contract. Tennessee: 6 years. Illinois, Indiana, Kentucky, Louisiana, Missouri, Rhode Island, West Virginia, and Wyoming:  10 years. Maine: 20 years. That’s not just a procedural footnote—it fundamentally alters leverage: In NC, time is often the debtor’s ally. In TN, creditors have twice as long to pursue collection,  in Maine nearly 7 times as long. And the kicker? The governing law may depend on where the debtor lives now, not just where the debt was incurred.  So this “debt ladder” isn’t just vertical—it’s also geographic, with state lines acting as trapdoors or safety nets   Hint for all of you debtors in Maine, Illinois, Indiana, Kentucky, Louisiana, Missouri, Rhode Island, West Virginia, and Wyoming- If you have debts (including private student loans) that have been in  default for more than 3  years,  move from to North Carolina for 91 days  and those will be disallowed in your Chapter 13 bankruptcy as stale.  Our beaches and mountains are lovely,  as is our Statute of Limitations. 4. Bankruptcy: The Only System That Attempts to Flatten the Ladder (But Doesn’t Quite Succeed) Bankruptcy is supposed to be the great equalizer. And to some extent, it is: Automatic stay halts collection across all categories Chapter 13 creates a structured repayment environment Discharge wipes out most private debt But even here, the ladder persists: Student loans (§ 523(a)(8)) Taxes (§ 507, § 523(a)(1)) Domestic support obligations (priority + nondischargeable)   5. The Most Troubling Insight: The System Targets the Least Voluntary Debtors The article’s most powerful—and unsettling—conclusion is this: The less choice a debtor had in incurring the debt, the harsher the legal treatment. That flips traditional notions of fairness on their head. Medical debt (involuntary)? Less protection. Government fines or taxes (often unavoidable)? Even less. Criminal justice debt? Practically none. This isn’t accidental—it’s structural. 6. Where This Goes Next (And Why It Matters for Practitioners) For consumer bankruptcy attorneys, this framework is more than academic—it’s a roadmap: Case strategy: Identify where a client sits on the ladder. Venue strategy: Consider relocation, exemptions, and state law differences. Litigation strategy: Use UDAP/FDCPA where available—but recognize jurisdictional limits. Policy advocacy: Push for reforms that flatten the ladder, particularly for public involuntary debt. And for policymakers, the challenge is even clearer: Is a system that systematically strips protections from the most vulnerable debtors actually serving any coherent public purpose? Final Take This is a preliminary draft—but already a significant contribution. The “debt ladder” is a powerful organizing principle. But once you add the third axis of geography, the picture becomes even more complex—and more troubling. Because at that point, the question isn’t just: What kind of debt do you have? It becomes: Where do you live—and how much protection does your state think you deserve? To read a copy of the transcript, please see: Blog comments Attachment Document its_all_debt_to_me.pdf (1006.25 KB) Category Law Reviews & Studies

Law Review: Joseph A. Smith Jr., Thirty Years, Give or Take: Reflections on My Life in Banking, 30 N.C. Banking Inst. 1 (2026). Ed Boltz Mon, 05/04/2026 - 14:53 Available at: https://scholarship.law.unc.edu/ncbi/vol30/iss1/5 Summary: Joseph A. Smith, Jr.’s Thirty Years, Give or Take: Reflections on My Life in Banking is both a personal memoir and a structural history of modern American banking, told through three distinct phases of his career: as bank counsel in the 1990s, North Carolina Commissioner of Banks in the 2000s, and Monitor of the National Mortgage Settlement in the aftermath of the Financial Crisis. Across those roles, Smith traces the dramatic transformation of banking from a decentralized, quasi-utility model into a highly consolidated, market-driven financial system dominated by a handful of large institutions. In the 1990s, Smith describes the rapid consolidation of regional and community banks driven by deregulation, including the repeal of geographic and functional restrictions such as those embodied in interstate banking laws and the Glass-Steagall framework. What began as an effort to allow regional banks to compete with money-center institutions ultimately resulted in the erosion of local banking and the rise of national financial conglomerates. This shift also brought a cultural change within banking—from relationship-based lending toward a sales-oriented, profit-driven model that expanded into securities, insurance, and other financial products. As Commissioner of Banks in the early 2000s, Smith oversaw a system that appeared healthy but was increasingly exposed to risk, particularly through heavy concentrations in commercial real estate lending. He candidly recounts the difficulty regulators faced in addressing these risks during the “Indian Summer” before the crisis, when banks were well-capitalized and markets were booming. When the Financial Crisis hit, that apparent stability quickly unraveled, leading to widespread loan defaults, bank failures, and emergency regulatory interventions. Smith and his colleagues were forced into a triage role, attempting to stabilize institutions, raise capital, and manage failures while navigating tensions with federal regulators enforcing strict “prompt corrective action” rules. Finally, Smith’s role as Monitor of the National Mortgage Settlement placed him at the center of the government’s response to widespread mortgage servicing abuses following the crisis. He describes the Settlement as a massive, coordinated effort to impose servicing standards and deliver relief to distressed homeowners, while also acknowledging the operational complexity of overseeing institutions shaped by years of mergers and acquisitions. In hindsight, Smith views the Settlement as a pragmatic intervention that helped restore order to a chaotic system, even as it fell short of satisfying public demands for accountability. The article closes with a measured reflection: the evolution of banking over these thirty years produced both growth and instability, and the task of balancing innovation, regulation, and public trust remains unfinished. Commentary 1. An Unmentioned Legacy: North Carolina’s Foreclosure, Servicing, and Exemption Reforms What is largely unmentioned in Smith’s memoir—but critical to understanding his full impact—is the extent to which his tenure as North Carolina Commissioner of Banks coincided with, and helped implement, some of the country's most foresighted mortgage and foreclosure legislation.  During this period, North Carolina enacted a series of statutory reforms under N.C. Gen. Stat. Chapter 45 that directly addressed mortgage servicing conduct and foreclosure prevention. These included the Mortgage Debt Collection and Servicing provisions and the Emergency Program at N.C.G.S. § 45-90 et seq., which imposed early notice requirements and created meaningful opportunities for loss mitigation well before foreclosure. Notably, these protections predated and predicted—and in several respects exceeded—the later federal framework embodied in Bankruptcy Rule 3002.1, particularly in their emphasis on transparency, timely communication, and borrower protections. In addition, the Emergency Program to Reduce Home Foreclosures at N.C.G.S. § 45-100 et seq. established a coordinated statewide infrastructure for foreclosure prevention, including counseling, data tracking, and structured intervention. These efforts were complemented by H.B. 1817 (2007), North Carolina’s Predatory Lending Law, which strengthened safeguards against abusive lending practices when many jurisdictions had yet to act. Between 2007 and 2012, the North Carolina Commissioner of Banks (NCCOB) functioned as the primary state regulator for mortgage lenders, brokers, and servicers—overseeing compliance, implementing these statutory protections, and administering programs such as the State Home Foreclosure Prevention Project (2008). In that role, Smith and NCCOB were not merely responding to crisis conditions; they actively shaped a regulatory and consumer protection framework that mitigated harm and preserved homeownership across the state. Equally significant—and often overlooked—this period also marked the last time the North Carolina General Assembly, with the support of the Commissioner of Banks, meaningfully updated the State’s homestead exemption, increasing it from $18,500 to $35,000. At the time, that adjustment reflected then-current housing values and provided a modest but meaningful protection for homeowners in bankruptcy. But that was more than a decade ago. With the dramatic escalation in housing prices across North Carolina, the current $35,000 homestead exemption is increasingly disconnected from economic reality. A revision to approximately $100,000 would more accurately reflect present-day housing values and restore the exemption’s intended function—preserving a meaningful stake in a debtor’s home. Critically, such reform should not require another systemic collapse like the Housing Crisis to prompt legislative action. North Carolina has already experienced—and continues to face—serious economic disruptions, yet the exemption remains stagnant. The contrast is striking: while the National Mortgage Settlement sought to impose uniform national standards after the crisis had already unfolded, North Carolina—under Smith’s leadership—had already begun constructing a proactive, statutory architecture to regulate servicing practices, prevent avoidable foreclosures, and protect homeowner equity. Though understated in the memoir, that contribution represents another central pillar of Smith’s legacy. 2.  The Missing Piece: Bankruptcy Integration Here is a revised version with two prefatory paragraphs that set up your critique while maintaining the ncbankruptcyexpert tone and integrating the additional points: 1. The Missing Piece: Bankruptcy Integration Before turning to the bankruptcy-specific shortcomings of the National Mortgage Settlement (“NMS”), it is important to recognize that many of its limitations were neither accidental nor entirely avoidable. As Joe Smith candidly acknowledges, the Settlement was the product of political compromise, legal uncertainty, and the practical constraints of coordinating federal and state actors with divergent priorities. Enforcement authority was inherently limited: the Monitor’s office relied on sampling methodologies, banks were permitted an error tolerance (often cited around 5%), and only a fraction of loan files were actually reviewed. At the same time, while the headline numbers suggested massive borrower relief, much of that “relief” came in the form of short sales and loan modifications—outcomes that frequently aligned with servicer balance-sheet objectives as much as, if not more than, homeowner recovery, rather than direct compensation to borrowers who had been harmed. Nor did the Settlement fully eliminate the very practices it sought to curb. “Dual-tracking”—the simultaneous pursuit of foreclosure while negotiating loan modifications—persisted in various forms despite being formally prohibited. The broader foreclosure crisis continued largely unabated for many families, and the Settlement was widely criticized for placing only a modest financial cost on systemic misconduct, including the “robo-signing” and document fabrication scandals that had undermined the integrity of foreclosure proceedings. In that sense, the NMS was best understood not as a comprehensive fix, but as a stabilizing intervention—one that imposed some discipline and delivered some relief, but left deeper structural issues unresolved. Against that backdrop, one of the most consequential—and least discussed—limitations of the NMS was its failure to adequately consider and integrate with the consumer bankruptcy system, even as bankruptcy courts were serving as the primary forum for homeowners attempting to save their homes. The NMS operated as if loss mitigation existed in parallel to bankruptcy, rather than within it. That was a fundamental miscalculation. By 2009–2012, tens of thousands of homeowners were filing Chapter 13 precisely to: Stop foreclosure sales, and Create a structured environment to cure arrears and negotiate with servicers. But the NMS did not meaningfully require servicers to engage with those cases in a bankruptcy-aware manner. It could—and should—have required: Systematic amendment of Proofs of Claim when loan modifications were granted; Proactive outreach to Chapter 13 debtors, rather than waiting for borrowers (or their counsel) to navigate opaque servicing channels, would have recognized the reality that many bankruptcy courts—indeed, all three districts in North Carolina—were forced to develop their own loan modification or loss mitigation programs to administer and efficiently process mortgage modification applications within pending cases. Those court-created systems were, in many respects, highly effective but necessarily fragmented, varying by district and dependent on local rules, portals, and judicial oversight. The National Mortgage Settlement could—and should—have built on that groundwork by establishing a uniform, systematized loss mitigation framework applicable across all bankruptcy courts (and even adaptable to state court foreclosure proceedings). This framework would reduce inconsistency, eliminate duplicative infrastructure, and ensure that similarly situated homeowners nationwide had equal and streamlined access to mortgage relief. Instead, consumer attorneys were left to bridge the gap—often through litigation under Rule 3002.1 or contested matters that should never have been necessary. 3. Loss Mitigation: Passive vs. Proactive The NMS required servicers to offer relief—but in practice, it often functioned as a reactive system: Borrowers had to apply; Documentation hurdles persisted; Bankruptcy status frequently complicated or delayed review. This stands in sharp contrast to what was needed in Chapter 13 cases: a proactive, system-driven identification of eligible borrowers, especially those already under court supervision and making plan payments. As later experience with programs like HAMP, HHF, and HAF demonstrates, servicers can engage borrowers in bankruptcy without violating the automatic stay—they simply need to be required to do so. 4. The Cash Payment Problem: A Missed Opportunity One of the more glaring omissions in the NMS was its treatment of cash payments to borrowers. Approximately 400,000 homeowners received modest checks—typically between $1,480 and $2,000. These payments were: Symbolically important, but Practically vulnerable in bankruptcy. The NMS could—and should—have: Explicitly exempted these funds from administration in bankruptcy cases; or At minimum, required servicers to notify Chapter 13 Trustees and debtor’s counsel of such payments. Instead, these funds were left in a gray area—creating the risk that trustees might seek turnover, despite the payments being remedial in nature. Notably, this lesson was eventually learned. During the COVID-era relief programs, the U.S. Trustee Program signaled that it would look dimly on efforts to capture modest relief payments for creditors—an approach that could have, and should have, been adopted during the NMS era. 5. HAF: Repeating (and Slowly Correcting) the Same Mistake The subsequent Homeowner Assistance Fund (HAF) initially repeated this same structural oversight. Treasury guidance only “discouraged” states from excluding borrowers based on bankruptcy status, rather than mandating inclusion. Predictably, many states—including North Carolina—initially excluded or limited access for debtors in active bankruptcy cases, forcing course corrections only after: Advocacy, and The looming threat of litigation under 11 U.S.C. § 525 (prohibiting discrimination based on bankruptcy). As contemporaneous policy analysis made clear, excluding debtors in bankruptcy was both counterproductive and legally dubious: Many homeowners file bankruptcy precisely to preserve their homes while seeking relief; Assistance programs function best when integrated with Chapter 13 plan structures. Ultimately, HAF programs evolved to better accommodate bankruptcy—but only after repeating the same initial mistake seen in the NMS. 6. The Practical Reality: Bankruptcy as the Front Line Smith’s narrative underscores a broader point that the NMS only partially grasped: Consumer bankruptcy—especially Chapter 13—is the primary operational forum for saving homes in times of systemic mortgage distress. Any large-scale mortgage relief program that fails to integrate with that system will: Underperform, Create unnecessary friction, and Shift the burden onto debtor’s counsel and bankruptcy courts. Bottom Line: Joe Smith’s work on the National Mortgage Settlement was substantial, serious, and—on its own terms—successful. It imposed discipline on servicers, delivered meaningful relief, and helped stabilize a collapsing system. And, as underscored by the publication of his memoir in the North Carolina Banking Institute Journal, Smith’s career reflects a remarkable breadth of service—placing him squarely among the giants of North Carolina banking AND mortgage regulation. But from the perspective of consumer bankruptcy practice, the NMS reveals a critical lesson: Relief programs that ignore bankruptcy do so at their peril—and at the expense of the very homeowners they are meant to help. The next generation of interventions—whether legislative, regulatory, or settlement-based—must do better: Integrate with Chapter 13 from the outset; Protect relief payments from creditor capture; and Require servicers to engage proactively with debtors already under court supervision. Otherwise, we will continue to relearn the same lesson—one foreclosure, one contested claim, and one avoidable motion at a time. To read a copy of the transcript, please see: Blog comments Attachment Document thirty_years_give_or_take_reflections_on_my_life_in_banking.pdf (420.75 KB) Category Law Reviews & Studies

N.C. Ct. of App.: Figueroa v. Monsivais: When Dirt Meets Equity: Unrecorded Deals, “Desperate” Sellers, and the Limits of North Carolina’s Race Recording Statute Ed Boltz Thu, 04/16/2026 - 15:27 Summary: The Figueroa v. Monsivais decision reads like a law school exam question—but with very real consequences for families who paid cash, moved in, and still ended up without title. The Setup: Cash Paid, Possession Taken—But Nothing Recorded Three plaintiffs entered into separate agreements with a seller (Monsivais) to purchase portions of a parcel and associated mobile homes. They paid substantial sums—$15,000 down plus installments in one case, and $30,000 outright in another—and took possession, making improvements and living on the property. But critically, none of those contracts were recorded. Enter Byrd Farms, who later acquired a deed to the same property—and recorded it. The Court’s Holding (In Plain Terms) The Court of Appeals split the baby: ✅ Affirmed: No abuse of discretion in denying a constructive trust against the original seller (Monsivais); money damages were sufficient. 🔁 Reversed & Remanded: Summary judgment for Byrd Farms was improper because there is a genuine issue of fact about whether it paid “fair consideration”—a prerequisite to protection under North Carolina’s recording statute. Commentary: 1. The Ruthless Simplicity of North Carolina’s Recording Act North Carolina remains a pure race jurisdiction—a doctrine that continues to produce harsh outcomes: “No notice, however full or formal, will supply the want of registration.” That means: Even if Byrd Farms knew about the plaintiffs’ prior deals, Even if those deals were fully performed, 👉 Failure to record is fatal—unless the later purchaser is not truly “for value.” This is not a bug. It’s the system. And it reflects a policy choice: certainty of title over equitable fairness. 2. “For Value” Is Doing a Lot of Work Here The most important move in this opinion is subtle but significant: The court refused to assume Byrd Farms qualified as a bona fide purchaser for value. Why? Because the evidence was… messy: The purchase price changed repeatedly The buyer didn’t know what he actually bought The reported excise tax didn’t match what was paid The seller was, in the buyer’s own words, “desperate” and hadn’t eaten That last fact matters more than it might seem. North Carolina law doesn’t require full market value—but it does require “a price which would not cause surprise.” And here, the court is signaling: 👉 If this deal smells like opportunism—or worse—equity may re-enter the picture. 3. Constructive Trust: Still a Remedy of Last Resort The plaintiffs pushed hard for a constructive trust. The court declined—at least as to the original seller. That’s an important reminder: A constructive trust is not a cause of action It is a discretionary equitable remedy And trial courts get wide latitude in choosing money damages instead Even where fraud is essentially admitted (via default), appellate courts are reluctant to second-guess the remedy. 👉 Translation: You don’t get a constructive trust just because the facts feel unfair. 4. The Quiet Bankruptcy Parallel: “Unrecorded Interests Get Crushed” For bankruptcy practitioners, this case should feel very familiar. This is essentially the state-law version of § 544(a)—the strong-arm clause: A trustee (or hypothetical BFP) can avoid unrecorded interests Possession and payment often don’t save you Equity gives way to formal perfection rules The lesson carries over cleanly: 👉 If it’s not recorded, it’s not real—at least not against the world. 5. Mobile Homes: The Sleeper Issue The opinion repeatedly hints at confusion over whether the mobile homes were: Included in the real estate transfer, or Separate titled personal property That ambiguity likely contributed to the “fair consideration” problem. For practitioners, this is a recurring trap: Mobile homes can be real property, personal property, or both (depending on titling) And failing to align those systems creates exactly this kind of litigation Practice Pointers (Because This Will Happen Again) For Bankruptcy Attorneys: This is a clean fact pattern for: § 544 avoidance analysis Equitable vs. legal interest disputes Also a reminder to scrutinize: “Cash deals” Family transactions Unrecorded land contracts For Litigators: Don’t concede “BFP for value” too quickly Attack: Consideration Certainty of terms Knowledge of defects This case shows that door is still open Bottom Line Figueroa v. Monsivais is a cautionary tale dressed as a property dispute: The recording statute remains unyielding Equity is not dead—but it is conditional And “value” is the lever that can pry open an otherwise closed system On remand, everything will turn on a deceptively simple question: 👉 Did Byrd Farms actually pay enough—and for what exactly? If not, the plaintiffs may yet get what they thought they bought. To read a copy of the transcript, please see: Blog comments Attachment Document figueroa_v._monsivais.pdf (173.28 KB) Category NC Court of Appeals

 SBA EIDL Loan Defaults: What Small Business Borrowers Need to Know  The New York Times recently published an informative article titled "Repaying COVID-Era Loans Is a Big Burden on Small Business" (March 30, 2026), highlighting the serious difficulties small business owners are facing in repaying SBA Economic Injury Disaster Loans (EIDL) received during the COVID-19 pandemic. The article reinforces what we have been observing firsthand at Shenwick & Associates.  Background The SBA issued approximately $378 billion in EIDL loans to small businesses during the pandemic. Based on our experience, approximately 70% of borrowers have defaulted or will default on their repayment obligations. At Shenwick & Associates, we have been contacted by or have represented over 250 borrowers who have defaulted on SBA EIDL loans. Those loans ranged from $20,000 to $2,000,000. Loans exceeding $200,000 required a personal guarantee from the principal borrower, and interest rates were approximately 3% to 3.2%. Previously, borrowers experiencing financial hardship could apply for a loan modification that reduced their required monthly payment to 10% of the scheduled amount for a six-month period. That hardship payment program has since ended. Borrowers who are more than 90 days delinquent are now being referred to the U.S. Department of the Treasury for collection. As a precursor to referral, the SBA issues a 60-day demand letter to borrowers who are more than 60 days past due, advising that failure to cure the delinquency will result in referral to Treasury for collection action.  Treasury Collection Remedies Once a loan is referred to Treasury, the following collection tools become available: 1.    Seizure of federal tax refunds owed to the defaulted borrower 2.    Offset of up to 15% of Social Security payments for individual borrowers or guarantors 3.    Garnishment of up to 15% of wages of individual borrowers or guarantors 4.    Seizure of federal payments owed to the borrower, including payments to defense contractors, Medicaid reimbursements, and payments to medical providers serving Medicaid patients In addition, a 30% penalty is assessed on the outstanding loan balance upon referral to Treasury. Treasury has also engaged five collection agencies to pursue collection action on referred loans.  Comments and Observations from Jim Shenwick 1.    Act before referral to Treasury. Borrowers who have defaulted or are struggling to meet their payment obligations should contact the SBA promptly to explore a workout arrangement. Resolving the default at the SBA level avoids both the 30% penalty and the more aggressive collection mechanisms available to Treasury. 2.    Recall from Treasury is extremely difficult. Once a loan has been referred from the SBA to Treasury, it is very difficult — as a practical matter — to have the loan recalled. Proactive engagement with the SBA is far preferable to attempting to unwind a Treasury referral. 3.    Personal guarantees add significant complexity. If the loan exceeded $200,000 and an individual provided a personal guarantee, the matter becomes considerably more complex. Any workout must address the obligations of both the borrower entity and the individual guarantor. 4.    Tax consequences for LLC members. If the loan was made to a pass-through entity such as a limited liability company and the loan balance is discharged or forgiven, the LLC members may recognize ordinary income under Section 108 of the Internal Revenue Code. Treasury will issue a Form 1099-C to the LLC members reflecting the cancellation of debt income. 5.    Exercise caution with three-year repayment plans. The collection agencies retained by Treasury are actively promoting three-year repayment workout arrangements. In our experience, these plans are often economically unworkable for most borrowers and should be carefully evaluated — ideally with legal counsel — before any agreement is signed. 6.    Ten-year repayment plans are available from Treasury. Treasury will offer eligible defaulted borrowers a 10-year repayment plan; however, both the borrower and any guarantor must provide extensive financial disclosure and documentation as a condition of approval. 7.    Offers in compromise remain elusive. The Times article references an SBA spokesman who indicated that the agency is accepting offers in compromise on defaulted loans. However, based on our experience representing over 250 borrowers, no client has yet been able to successfully negotiate or obtain an accepted offer in compromise on a defaulted SBA EIDL balance, although that hopefully will change. Borrowers and guarantors who have defaulted on SBA EIDL loans are encouraged to contact Jim Shenwick, Esq. to discuss their situation, available options, and strategy. 📞 917-363-3391 📧 jshenwick@gmail.com 📅 Schedule a 15-minute telephone consultation Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min  

N.C. Ct. of App.: Israel v. Zachary- Landlord Interference With Tenant’s Property Leads to Conversion Liability (Damages Remanded) Ed Boltz Thu, 04/02/2026 - 15:13 Summary: In Israel v. Zachary, the North Carolina Court of Appeals affirmed that a landlord who interferes with a tenant’s efforts to retrieve property after eviction can be liable for conversion and unjust enrichment, though the court vacated the damages award for lack of sufficient valuation evidence. The Dispute Stephen Israel leased roughly 97 acres of farmland in Alamance County. After the lease expired, a dispute arose over whether it had been extended. While the landlord, Janet Zachary, pursued summary ejectment, Israel attempted to remove farm equipment and structures he had brought onto the property during the lease. The trial court found that Zachary interfered with those efforts—contacting the sheriff and confronting individuals helping Israel move equipment. After the writ of possession issued, Israel attempted to retrieve the remaining property within the statutory seven-day period but was slowed by health issues and weather. When he returned to finish removing the equipment, deputies ordered him off the property. The equipment remained there for years, exposed to the elements. The trial court concluded that Zachary had converted the equipment and been unjustly enriched, awarding $45,584 in damages. The Court of Appeals The Court of Appeals largely affirmed. First, it held there was competent evidence that Zachary interfered with Israel’s efforts to remove his property, supporting liability for conversion. Second, the court rejected the argument that the property was automatically abandoned after seven days under North Carolina’s eviction statutes. Those statutes allow disposal of tenant property only if the landlord follows specific procedures and does not block the tenant’s retrieval efforts. However, the court vacated the damages award. Although the record contained purchase prices and insurance valuations, it lacked evidence establishing the difference in fair market value before and after the alleged damage, which is required to calculate depreciation. The case was therefore remanded for a new damages determination. A Parallel Issue in Consumer Finance This decision also raises an interesting question for consumer creditors: when does insisting on procedural rights become “conversion”? In many consumer cases—particularly in bankruptcy—debtors do not voluntarily surrender collateral. Instead, they insist that creditors follow the proper legal procedures: In bankruptcy, a creditor must obtain a Motion for Relief from the Automatic Stay before repossessing collateral. Outside bankruptcy, the creditor must pursue replevin or claim-and-delivery remedies in state court. Creditors sometimes portray that insistence as wrongful “retention” of collateral. But the procedural protections exist for an important reason: due process ensures that the property is actually delivered to the correct party and not seized, stolen, or disposed of improperly. In other words, insisting on statutory procedures is not obstruction—it is the system working exactly as designed. A Practical Alternative: “Cash for Keys” Of course, the formal legal route—stay-relief motions, replevin actions, hearings, and orders—can be expensive and adversarial. If creditors truly want quick possession of collateral, there is often a simpler solution: pay the consumer to cooperate. In mortgage and foreclosure cases this practice is widely known as “Cash for Keys.” Rather than litigating possession, the creditor offers a modest payment to the occupant in exchange for an orderly turnover of the property. The same concept could work just as well in consumer repossession cases. Instead of spending thousands of dollars on attorneys’ fees and court costs, a creditor might simply offer a few hundred dollars for the debtor’s assistance in delivering the collateral promptly. That approach reduces litigation, preserves due process, and avoids disputes over who actually converted what. Takeaway: Israel v. Zachary is a reminder that interfering with someone’s ability to retrieve their property can easily create conversion liability. But it also highlights a broader point: when possession of property is disputed, the safest path is usually the procedural one—or better yet, a negotiated one. <strong>To read a copy of the transcript, please see:</strong> </strong><embed height="500" src="https://ncbankruptcyexpert.com/sites/default/files/2026-04/israel-v-zachary_0.pdf" width="100%"></embed> Blog comments Attachment Document israel-v-zachary.pdf (271.2 KB) Category NC Court of Appeals