Quick: tell me all you know about FRBP 7041. Maybe you’re like me and never gave it much thought. My encounter with the rule ended up at the 9th Circuit, so I now know a lot more about how it impacts bankruptcy motion practice. I concluded that the “Withdraw” event on ECF enabled a trap […] The post Don’t Dismiss FRBP 7041 appeared first on Bankruptcy Mastery.

Law Review: Sara Sternberg Greene et al., Getting to Home: Understanding the Collateral Consequences of Negative Records in the Rental Housing Market, 74 Duke Law Journal 269-352 (2024) Ed Boltz Fri, 11/15/2024 - 18:28 Available at:  https://scholarship.law.duke.edu/dlj/vol74/iss2/1   Abstract: The United States faces a rental housing crisis marked by a scarcity of housing supply, leading to intense competition among prospective tenants. This crisis is a particular challenge for the more than one hundred million U.S. residents burdened with negative records such as criminal records, debts in collections, and evictions. Landlords have more access than ever to applicants’ information, yet little is known about how landlords process and think about these records to make housing decisions. This Article draws on theories of cultural sociology to provide a data-driven understanding of how landlords conceptualize the value of several types of personal records and what it means to use them legally and fairly. It offers a window into how decision-makers evaluate and ascribe meaning to records—including negative records, for which tenants can be denied housing—and how these meanings subsequently guide landlords’ rental decisions. Through eighty-eight interviews with landlords, property managers, rental company executives, and tenant-screening company executives, this interdisciplinary, multistate study leverages comparisons across record type and organization size. It shows how access to housing largely depends on cultural understandings of the morality of different types of negative records. Depending on the type of risk landlords perceive, they call upon different cultural archetypes when deciding how and why to include certain records in their decision-making. However, the processes by which landlords incorporate these cultural considerations vary by organizational size and stem from their perceptions of the law. This Article thus provides a key theoretical insight: Landlords operate with broadly shared cultural understandings about the nature of risk and the morality of various types of negative records, but with different conceptions of what it means to make rental decisions legally and fairly. Differences correspond with the structure and size of decision-makers’ organizations. This means that collateral consequences play out differently depending on the type of landlord a prospective tenant is dealing with. As part of this discussion, this Article further provides a novel understanding of how state and local data-use laws, as well as the Fair Housing Act, operate on the ground. Ultimately, the theoretical insights from this study can help inform housing policy going forward.   Commentary:   Of particular pertinence to consumer bankruptcy attorneys and the advice they give to their clients are the consistent comments from landlords,  for both large and small apartment management companies,  that "[p]eople who had filed for bankruptcy often fell into the category of being worthy of  understanding, or, at a minimum, worthy of a second chance."  This counters the fears that people have that they will not be able to find rental housing after filing bankruptcy,  which can often rear its head when clients later assert that no landlords  will rent to them because of bankruptcy.  My suspicion in those circumstances are either that the client is predisposed to assume that a denial of a rental application "must be because of my bankruptcy"  or that  prospective landlords might similarly use the objective fact of a bankruptcy (and again  cultural predispositions about bankruptcy)  instead of more subjective bases (or illegal  reasons)  for a denial to avoid a debate or argument.   That said,  as practical matter,  this reinforces that bankruptcy clients likely need to be both open with their bankruptcy filings when applying for a home rental and persistent in applying to multiple landlords.   With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document getting_to_home.pdf (437.55 KB) Category Law Reviews & Studies

W.D.N.C.: Demons v. VA & Aalaam v. Movement Mortgage- Vapor Money and Mortgages Ed Boltz Thu, 11/14/2024 - 17:08 Summary: In the first of these two unrelated cases,  Ephraim Demons, representing himself, alleged that his mortgage lender (among others)  committed fraud related to his mortgage based on Demons' belief that he created “money” when signing his mortgage. Similarly,   Aalaam alleged fraud and claimed his mortgage loan was invalid under the "vapor money" theory, arguing that banks create money by recording promissory notes as assets and therefore loans don’t need repayment.  The vapor money theory, which asserts that loans funded by credit rather than cash are unenforceable, has been widely rejected by courts as frivolous as it was in these two cases as well. With proper attribution,  please share this post To read a copy of the transcript, please see: Blog comments Attachment Document demons_v._va.pdf (704.61 KB) Document aalaam_v._movement_mortgage.pdf (215.08 KB) Category Western District

W.D.N.C.: Cann v. Bankr of America- Fair Credit Billing Act Dispute Letter Ed Boltz Thu, 11/14/2024 - 17:06 Summary: The court reviewed Bank of America’s motion to dismiss claims made by Plaintiff D’Voreaux Cann, who alleged violations of the Truth in Lending Act (TILA) and Fair Credit Billing Act (FCBA). Cann claimed the bank failed to provide accurate disclosures, closed his account without notice, and did not adequately respond to a billing dispute. However, the court found Cann’s complaint lacked a specific billing error as required by the FCBA. Cann’s blanket assertion that all past, present, and future statements were billing errors did not meet the statutory requirements for notice, and thus, did not trigger any obligation on the bank's part. Consequently, the court recommended granting Bank of America’s motion to dismiss. Commentary: The Fair Credit Billing Act (FCBA) covers billing errors for open-end credit accounts, like credit cards, charge accounts, and home equity lines of credit (HELOC). The FCBA does not cover closed-end credit, such as student loans,  auto loans, mortgages, and home equity loans.   The FCBA protects consumers from unfair billing practices, including: Unauthorized charges Charges with an incorrect amount or date Calculation errors Charges for goods or services that weren't delivered Statements mailed to the wrong address The consumer must include in their letter their name, account number, and a clear description of the disputed charge and why they're disputing it.  A sample dispute letter from the Federal Trade Commission (FTC)  can be found here: Sample Letter for Disputing Credit and Debit Card Charges The FCBA then requires creditors to acknowledge receipt of the complaint within 30 days and investigate the dispute within two billing cycles.  Failure by the creditor to comply can result in  actual damages, statutory damages of up to $5,000,  attorney's fees and twice the finance charge due to any billing error. Just as  Requests for Information under the Real Estate Settlement Procedures Act (RESPA) often are the first step in mortgage disputes in bankruptcy,  sending an FCBA dispute letter could   be a preliminary step taken  before an objection to a Proof of Claim filed by a credit card lender (or its agents and successors),  potentially leading to damages and shifting of attorney's fees. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document cann_v._bank_of_america.pdf (190.47 KB) Category Western District

Law Review: Collusive Foreclosure Sales: The Forgotten Legacy of Northern Pacific v. Boyd Ed Boltz Wed, 11/13/2024 - 15:58 Available at: : https://ssrn.com/abstract=4692732 or http://dx.doi.org/10.2139/ssrn.4692732 Abstract: In BFP v. Resolution Trust Corp. (1994), the Supreme Court ruled that mortgage foreclosures could not be fraudulent conveyances – unless the foreclosure was “collusive.” It gave no clue what made mortgage foreclosures collusive. But in 1913, the Supreme Court defined collusive mortgage foreclosures in a famous railroad receivership case – Northern Pacific R. Co. v. Boyd. Boyd is usually thought to be the origin of the absolute priority rule in bankruptcy reorganization. Actually, it was a mortgage foreclosure sale. What made the sale collusive is that some of the shareholders of the defaulting railroad were also the shareholders of the new corporation formed to buy the assets of the defaulting railroad. The case is usually thought to be a fraudulent conveyance case. (Justice Willam O. Douglas thought so.) But it’s not. It is a case of piercing the corporate veil between the defaulting railroad and the buying railroad. Piercing the veil is inconsistent with a fraudulent conveyance theory. Furthermore, the court in Boyd did not need to pierce the veil. The plaintiff in the case (Boyd) was a secured creditor with an equitable lien on the sold assets, and the buying railroad (along with its purchase money secured lender) were bad faith purchasers subject to the lien. This was so even though the mortgage foreclosure was no fraudulent conveyance. It seems to be the case that bankruptcy’s absolute priority rule was born in a manger lined with judicial error. Boyd lives on in state law under the name of “mere continuation” of a corporate entity.  With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document collusive_foreclosure_sales_the_forgotten_legacy_of_i_northern_compressed.pdf (934.46 KB) Category Law Reviews & Studies

4th Cir.: Williams v. Brooksby- Bid Rigging at Foreclosure Auctions Ed Boltz Wed, 11/13/2024 - 15:54 Summary: Brian C. Williams and others sued defendants Craig Orson Brooksby, Lynn Pinder, Tonya Newell, and additional parties, alleging violations of the Sherman Act, North Carolina’s antitrust law, and unjust enrichment due to bid rigging at  Homeowner Association foreclosure auctions. The jury found that the defendants conspired to limit competition through bid rigging and engaged in unfair practices, including attempts to extort plaintiffs, and awarded damages. The district court also ordered defendants to reconvey a deed to plaintiff Mike Gustafson’s former spouse, which had been obtained through bid rigging and misrepresentation. On appeal, the defendants argued insufficient evidence, errors in jury instructions, and improper injunctive relief. However, the circuit court affirmed the district court’s decisions, finding that defendants failed to properly renew their evidence sufficiency motion post-verdict, and did not show plain error in the jury instructions. The court dismissed as moot the challenge to the injunctive relief, as the deed had already been reconveyed. Ultimately, the appeal was dismissed in part and affirmed in part. Commentary: It is also troubling that none of the other parties,  including the HOA attorneys or County Clerks,  paid enough attention to these HOA foreclosure sales to prevent this. For more details on this abuse  see: Charlotte Observer-  Deceit, rigged bids and extortion: How HOA foreclosures can open the door to predators With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document williams_v._brooksby.pdf (148.22 KB) Document deceit_rigged_bids_and_extortion_compressed.pdf (841.51 KB) Category 4th Circuit Court of Appeals

Bankr. M.D.N.C.: In re Oasis Cigar Ed Boltz Tue, 11/12/2024 - 15:52 Summary: Diggs Restaurant Group and other creditors  argued that Oasis Cigar Club's Chapter 7 filing was unauthorized, as they claimed the company’s members had not voted to approve the filing. Oasis Cigar Club responded that its board of directors had authorized the filing, providing relevant documentation, though the movants questioned the legitimacy of the board’s authority and claimed judicial estoppel should prevent the company from asserting that the board had authority. The court ruled that the burden of proof to show a lack of authority rested on the movants, who failed to provide sufficient evidence to meet this burden. The court also declined to apply judicial estoppel, citing a lack of evidence that Oasis Cigar Club had intentionally misled any court regarding its governance  and “the longstanding principle that judicial estoppel applies only when ‘the party who is alleged to be estopped intentionally misled the court to gain unfair advantage,’ and not when ‘a party’s prior position was based on inadvertence or mistake.’” Martineau, 934 F.3d at 393 (quoting John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d 26, 29 (4th Cir. 1995)).. Consequently, the motion to dismiss was denied, allowing the bankruptcy case to proceed. Commentary: The portion of this opinion requiring a showing that a party "intentionally misled the court to gain unfair advantage" in order for judicial estoppel to apply  is useful for the recurring cases where defendants in personal injury or mass tort cases attempt to block Plaintiff Debtors  from maintaining their undisclosed claims.  They must both show that the debtor intentionally misled a court,  not merely inadvertently failed to disclose the often long-forgotten claim,  but that such nondisclosure  was to gain unfair advantage.  With an unlimited North Carolina exemption for personal injury claims,  finding that unfair advantage would be difficult.   With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_oasis_cigar.pdf (431.57 KB) Category Middle District

Bankr. W.D.N.C.: In re Gabriel Custom Homes Ed Boltz Tue, 11/12/2024 - 15:51 Summary: Trident, the Debtor’s main creditor, argued that the  bankruptcy filings were part of a “scheme to delay, hinder, or defraud creditors,” as outlined in Section 362(d)(4) of the Bankruptcy Code, due to multiple bankruptcy filings affecting the same property. However, the court found that Trident did not present sufficient evidence to prove this claim. Multiple factual issues, including the Debtor’s relationship with the property’s tenant and details of the lease, were not substantiated with evidence by either party. The court emphasized that it could not make assumptions based on pleadings alone and denied Trident’s motion without prejudice, allowing the issue to be raised again if more evidence is provided. The court also denied the Debtor’s motion to disqualify Trident’s counsel as moot. Finally, the Debtor was ordered to file a Disclosure Statement and Plan of Reorganization within 30 days. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_gabriel_custom_homes.pdf (319.78 KB) Category Western District

Economics Review: Catherine, Sylvain and Ebrahimian, Mehran and Yannelis, Constantine, How Do Income-Driven Repayment Plans Benefit Student Debt Borrowers? (October 07, 2024). Ed Boltz Mon, 11/11/2024 - 15:56 Available at:    https://ssrn.com/abstract=4980610 Abstract: The rapid rise in student loan balances has raised concerns among economists and policymakers. Using administrative credit bureau data, we find that nearly half of the increase in balances from 2000 to 2020 is due to deferred payments, largely driven by the expansion of income-driven repayment (IDR) plans, which link payments to income. These plans help borrowers by smoothing consumption, insuring against labor income risk, and reducing the present value of future payments.  We build a life-cycle model to quantify the welfare gains from this payment deferment and the channels through which borrower welfare increases. New, more generous IDR rules increase these transfers from taxpayers to borrowers without yielding net welfare gains. By lowering the average marginal cost of undergraduate debt to less than 50 cents per dollar, these rules may also incentivize excessive borrowing. We demonstrate that an optimally calibrated IDR plan can achieve similar welfare gains for borrowers at a much lower cost to taxpayers, and without encouraging additional borrowing, primarily through maturity extension.  Commentary: Particularly to the extent that unpaid balances,  in the mass aggregate,  are used by the Congressional Budget Office  (CBO)  for not only "scoring"  the costs of  any student loan relief,  whether bankruptcy discharge or otherwise,  and also by opponents to relief to waive an red flag about how massive the amount of student  loan debt there is (with the imputation of equally massive borrower  irresponsibility,  data  showing that half of the increase in these balances is due to deferred payments  is a helpful counter.   This is especially true when coupled with other findings that  "deferred payments"  were often the result of improper  student loan servicing,  as servicers often found it more profitable to grant extended and repeated forbearances rather than enrolling borrowers in appropriate Income Driven Repayment plans. It does appear that the Department of Education,  in its most recently promulgated rules regarding nonbankruptcy hardship relief,  has attempted to recognize something of this same thing in gauging the financial impact of that relief. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document how_do_income-driven_repayment_plans_benefit_student_debt_borrowers_compressed_1-1-38.pdf (333.31 KB) Document how_do_income-driven_repayment_plans_benefit_student_debt_borrowers_compressed_1-39-71.pdf (814.65 KB) Category Law Reviews & Studies

4th Cir.: Universal Life Insurance v. Lindberg- Arbitration Award Affirmed Ed Boltz Mon, 11/11/2024 - 15:38 Summary: The Fourth Circuit Court of Appeals affirmed the district court’s decision granting summary judgment to Universal Life Insurance Company (ULICO) in a breach of contract case against Greg E. Lindberg. The case arose from a guaranty agreement signed by Lindberg, which held him personally liable for an arbitration award against his company, Private Bankers Life and Annuity, Ltd. (PBLA). ULICO initiated arbitration after accusing Lindberg of improperly transferring $524 million from a ULICO trust account to PBLA. The arbitration panel ruled in ULICO's favor, ordering PBLA to pay $524 million, which PBLA failed to do. ULICO then pursued Lindberg in court for the amount under the guaranty agreement. The district court found the agreement unambiguous and held Lindberg liable. On appeal, the Fourth Circuit found no error in the district court's judgment and upheld the ruling Commentary: For (just a few of the) other decisions related to Greg Lindberg,  see: 4th Cir.: Dash BPO v. Lindberg- Dismissal for Failure to Adequately Plead Fraudulent Concealment N.C. Ct. of App.: Causey v. Southland- Shareholders Cannot Intervene to Insurance Company Liquidation United States v. Greg E. Lindberg With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document universal_life_v._lindberg.pdf (115.23 KB) Category 4th Circuit Court of Appeals