Bankr. E.D.N.C.: In re Rogers- Social Security Income not Available for Administrative Claims of Nursing Home Ed Boltz Fri, 04/19/2024 - 18:42 Summary: Bankruptcy Court  denied Brunswick Health & Rehab Center, LLC's application for the allowance of post-petition expenses as an administrative expense under 11 U.S.C. § 503. Brunswick sought to classify approximately $39,821 in expenses related to the ongoing care of debtor Sue P. Rogers as necessary costs to preserve the estate, asserting these costs support her ability to fund her Chapter 13 bankruptcy plan through her social security income.  However, the Trustee and Debtor objected, arguing that these expenses are personal to the Debtor and do not benefit the bankruptcy estate. The court agreed with the objections, stating that the social security income, which is excluded from the debtor’s "Current Monthly Income," cannot be used to fund the plan, and hence, the post-petition expenses are not essential to preserving the estate.  Despite the denial, the court noted that the Debtor’s plan might be supported by the sale proceeds of her real property, potentially covering pre-petition creditors, including Brunswick. Commentary: Ms.  Rogers was admitted to the nursing facility before filing Chapter 13 bankruptcy,  but this result could lead nursing facilities,  which obviously have tremendous day-to-day control over  access,  to attempt to prevent their residents  from consulting with bankruptcy counsel out of justified fears that they will be prevented from being paid from Social Security income.    What if every resident of Brunswick Health & Rehab Center  (or at least those that could not be moved due to non-bankruptcy law) similarly filed Chapter 13 cases?  Those residents (even those without any other assets) would then retain their Social Security income.  Perhaps Chapter 13 is another tool for Medicare Impoverishment that the Elder Law section should keep in its toolbox. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_rogers.pdf (165.65 KB) Category Eastern District

Proposed USED Regulations for Student Loans Ed Boltz Fri, 04/19/2024 - 04:05 Summary: The Department of Education proposes amendments to the regulations governing the waiver of student loan debts under the Higher Education Act of 1965. These changes aim to provide targeted debt relief by specifying conditions under which the Secretary may exercise discretion to waive student debts.  The new rules, which will be open for public comment starting April 17, involve nine specific regulations under the Higher Education Act.  A second set of rules will also be introduced soon to help borrowers facing hardship,  including proposals to authorize the automatic forgiveness of loans for borrowers at a high risk of future default as well as those who show hardship due to other indicators, such as high medical and caregiving expenses. Key provisions include the waiver of outstanding loan balances for borrowers meeting certain criteria related to loan forgiveness eligibility, loans for attendance at institutions affected by specific secretarial actions, and loans linked to institutions or programs with poor financial outcomes. These proposed regulations would, among other things: Cancel excessive interest accumulation, which has significantly increased the debt for over 25 million borrowers.   Eliminating student debt for borrowers who entered repayment at least 20 years ago  for undergraduate debt and 25 years for graduate debt. Authorizing the automatic discharge of debt for borrowers who are otherwise eligible for loan forgiveness under SAVE, closed school discharge, PSLF, or other forgiveness programs, but have not successfully applied due to paperwork requirements, bad advice, or other obstacles. Waive debts for students who attended institutions that lost eligibility due to failure in accountability standards or that closed following such actions. Include provisions specifically for loans associated with closed Gainful Employment programs known for high debt-to-earnings ratios or low earnings. The rationale behind these changes is to alleviate the financial burdens of student loans for borrowers, particularly those affected by institutional failures or mismanagement, thereby reducing the risk of delinquency or default for these individuals. The proposed amendments aim to make the process of obtaining relief more transparent and equitable, providing a clearer path for those whose educational investments did not yield the expected financial value. Commentary: I remain very proud to have been an alternate on the Negotiated Rulemaking Committee that the Department of Education convened to assist in drafting these regulations and believe that these will provide real and meaningful relief for student loan borrowers,  particularly those in such severe financial distress that they file bankruptcy. The proposed amendments to the regulations governing student loan debts by the Department of Education are specifically targeted at providing relief from student loans under certain conditions, which can have significant implications for debtors considering or currently in bankruptcy. Here are the main effects these proposed changes could have on such debtors: Enhanced Discharge Opportunities: Traditionally, student loans are difficult to discharge in bankruptcy due to stringent requirements to demonstrate "undue hardship". The proposed regulations could provide an alternative pathway for relief, particularly for those who have loans tied to institutions that failed to meet educational or financial standards, or that closed under adverse conditions. This could reduce the need for some debtors to seek a student loan discharge through bankruptcy proceedings. Impact on Bankruptcy Proceedings: For those already in bankruptcy or who still need to file due to other debts, having student loans waived could simplify their bankruptcy proceedings. With fewer debts to resolve or reorganize, the process could be quicker and outcomes potentially more favorable.  Coupled with the changes that go into effect on July 1,  2024,  under  34 C.F.R. § 685.209(k)(4)(iv)(K),  which provides that all Chapter 13 Debtors  will receive credit towards their IDR forgiveness period for every month in their case- regardless of payment on the student loans,  bankruptcy provides even greater options for dealing with student loan debt. Potential for Financial Recovery Post-Bankruptcy: Debtors who successfully have their student loans waived due to the regulations may find it easier to recover financially post-bankruptcy. Without the burden of student loan repayments, they might better manage their remaining debts and rebuild their credit faster. Bankruptcy Filings: If borrowers can have their student loans waived under the new rules, this may reduce the total debt burden that leads some individuals to file for bankruptcy. By decreasing the amount of nondischargeable debt (like student loans), the regulations could lessen the financial strain that compels individuals to consider bankruptcy as a viable option.   That said,  bankruptcy can provide,  with both the Student Loan Adversary Proceeding guidance from the DOJ making discharge easier and because starting very soon Chapter 13 debtors automatically will make progress towards IDR forgiveness,  greater options and relief than these regulations alone.   Further,  while some of these forgiveness and relief programs might trigger state and,  if not renewed before 2025, federal tax consequences,  by incorporating that relief to a bankruptcy plan those taxes might be avoided. Since these new regulations,  together with other programs,  are going to be very complicated for borrowers to navigate successfully on their own.  (Especially as the historically negligent,  if not openly hostile, assistance provided by student loan servicers shows no indications of changing.)  That should lead many consumer bankruptcy attorneys to broaden the scope of their practice and breadth of their knowledge to include student loan relief,  both with and without bankruptcy.   To read a copy of the transcript, please see: Blog comments Attachment Document biden-harris_administration_releases_first_set_of_draft_rules_to_provide_debt_relief_to_millions_of_borrowers_u.s._department_of_education.pdf (197.82 KB) Document 2024-07726_negotiated_rule_making_consensus_language.pdf (805.75 KB) Category Student Loan Debt

4th Cir.: Ford v. Sandhills Medical- Data Breach not Related To Protections for the Provision of Medical Services Ed Boltz Mon, 04/15/2024 - 22:20 Summary: Ford brought claims against Sandhills for negligence, breach of implied contract, invasion of privacy, and breach of confidentiality due to the mishandling of her personally identifying information (PII). This information was stolen from a third-party computer system used by Sandhills in a cyberattack. Ford's lawsuit stemmed from her concerns about the misuse of her stolen data, which was used to fraudulently apply for a loan in her name. Sandhills argued that they were immune from the lawsuit under 42 U.S.C. § 233(a), which provides immunity for entities performing “medical, surgical, dental, or related functions.” They claimed that the storage and protection of PII were part of these related functions because the data was collected as a condition of providing medical treatment. The district court accepted this argument and granted immunity to Sandhills, substituting the United States as the defendant, which led Ford to appeal the decision. The United States Court of Appeals vacated and remanded the district court's decision. The appellate court concluded that Sandhills' data security practices did not constitute a "related function" under the law because these functions must be closely associated with the delivery of medical, surgical, or dental services. Since the mishandling of PII occurred in a data breach by a third party and was not directly related to the provision of healthcare services, § 233(a) did not apply. The court noted that treating data security as a related function would overly broaden the scope of the statute and could lead to misuse of the immunity provision. Commentary: While most of the medical creditors in North Carolina (and hopefully nationwide)  seem to have learned the sometimes costly lesson that the disclosure of PII,  medical or otherwise,  in Proofs of Claim filed in bankruptcy cases is improper,  this case does reject the immunity argument.  By looking at whether data security practices are a "related function"  to providing  protected medical services,  this decision could also be used to narrow the "learned profession" to North Carolina debt collection restrictions.   To read a copy of the transcript, please see: Blog comments Attachment Document ford_v._sandhills.pdf (191.96 KB) Category 4th Circuit Court of Appeals

Research Paper: Murto, Michael, Student Loans and College Majors- The Role of Repayment Plan Structure (February 22, 2024). Consumer Financial Protection Bureau Office of Research Working Paper No. 24-01 Ed Boltz Mon, 04/15/2024 - 21:11 Abstract:   This paper highlights the role loan repayment plan structure has in students’ human capital investments. I link academic records from a major public university to credit records to assess the empirical evidence for shifting major selection. After an expansion in Income Driven Repayment (IDR) options increased generosity and use, borrowers are more likely to select majors with worse initial labor market outcomes but higher wage growth, consistent with theoretical predictions. These results are robust to specifications that account for nonrandom selection into borrowing status as well as compositional shifts in borrowers over time. This sheds light on how changes in student loan repayment plans affected major selection and, given the new SAVE plan, how students may respond in future human capital investments. Commentary: As something of a mathematical Casca (which discloses my English Literature degree),  I cannot really comment on or even understand much of the statistical analysis here as "it was Greek to me".  Here''s a short one (which hopefully survives into Google group and Listserv emails):             2019 Yi,c =  ∑         γcLoanP cti,c + ϕc + βcXi,c + εi,c             c=2009 My Sigma ignorance aside, This research does indicate that IDR plans "offer insurance against low monetary returns and offer the flexibility to trade off these initially low income realizations with higher income growth."  This does not,  however, support the recurring rants in the media regarding the humanities, especially the Gender Studies  Straw-person,  that student loan relief encourages  pursuit of degrees that have perpetually low income and low income growth. To read a copy of the transcript, please see: Blog comments Category Student Loan Debt

N.C. Ct. of App.: Dan King Plumbing v. Harrison- New Jury Trial following Appellate Remand Ed Boltz Mon, 04/15/2024 - 19:36 Summary: The dispute originated from plumbing and HVAC services provided by Dan King  at  Harrison's  home. After services were rendered, Dan King filed a small claims action for unpaid monies, which was dismissed, leading to an appeal and a counterclaim by Harrison alleging misrepresentation and contractual breaches, among other issues. The case escalated to a trial where the jury found in favor of Harrison, awarding damages for breach of contract and unfair and deceptive trade practices (UDTP). Upon that first appeal, the NCCOA affirmed some parts of the trial court's decisions but found errors in others, particularly concerning the jury's findings on the UDTP claims. The case was remanded for further proceedings, specifically to explore whether Harrison's reliance on Dan King's misrepresentations about duplicate warranties was reasonable and whether expert testimony was required to support claims of substandard workmanship. Subsequent hearings involved interpreting the appellate court's remand orders. The trial court, under a new judge, interpreted the orders to necessitate a new trial for the duplicate warranties claim under the UDTP action and for the workmanship claim under the breach of contract action. The Court of Appeals affirmed the trial court’s decisions, finding no abuse of discretion in ordering a new trial for the specified issues. This decision was based on the need for further exploration of facts not sufficiently addressed in the original proceedings, particularly the lack of evidence on whether the Defendant's reliance on the Plaintiff’s misrepresentations was reasonable and the absence of expert testimony on the workmanship quality.Commentary: This case highlights the complexities of appellate remands and the discretionary powers of trial courts in interpreting and implementing higher court directives. The decision reaffirms the trial court's role in seeking additional evidence and clarifications to resolve legal disputes comprehensively.  An unmentioned but likely basis for conducting a completely new trial  would also seem to be that the new trial judge,  supported by the Court of Appeals,  expected that it would be difficult and an unfair burden to reconvene the same jury a second time.   To read a copy of the transcript, please see: Blog comments Attachment Document dan_king_plumbing_v._harrison.pdf (134.5 KB) Category NC Court of Appeals

Research Paper: The Effects of Medical Debt Relief: Evidence from Two Randomized Experiments Raymond Kluender, Neale Mahoney, Francis Wong, and Wesley Yin NBER Working Paper No. 32315 Ed Boltz Mon, 04/15/2024 - 18:39 Abstract: Two in five Americans have medical debt, nearly half of whom owe at least $2,500. Concerned by this burden, governments and private donors have undertaken large, high-profile efforts to relieve medical debt. We partnered with RIP Medical Debt to conduct two randomized experiments that relieved medical debt with a face value of $169 million for 83,401 people between 2018 and 2020. We track outcomes using credit reports, collections account data, and a multimodal survey. There are three sets of results. First, we find no impact of debt relief on credit access, utilization, and financial distress on average. Second, we estimate that debt relief causes a moderate but statistically significant reduction in payment of existing medical bills. Third, we find no effect of medical debt relief on mental health on average, with detrimental effects for some groups in pre-registered heterogeneity analysis. Commentary: Relief for medical debt alone  perpetuates the assumption that there are some debtors who are innocent and deserving of relief and others,  whether for student loans,  credit cards, etc.,  that are not. The minimal benefits of medical debt relief on financial outcomes,  credit scores or mental health demonstrates the limits of piecemeal debt forgiveness.  A likely reason being that people burdened with medical debt likely have substantial other financial burdens (with those other debts often resulting from the same health issues as the medical debt).  This should be remembered for other targeted debt relief,  including student loans,  which might merely divert a debtor's financial resources to other creditors.  Bankruptcy remains,  with the most glaring exception being automatic relief for student loans,  the only real and complete form of debt relief.   While it would be obviously self-interested to suggest that charities such as RIP Medical Debt  hire private consumer debtor attorneys to file bankruptcies for those in serious financial distress,  it would certainly be reasonable for those to support Legal Aid organizations,  where a $100  contribution could relieve far more than $10,000 in debt. To read a copy of the transcript, please see: Blog comments Attachment Document the_effects_of_medical_debt_relief_evidence_from_two_randomized_experiments-1-64_compressed.pdf (429.44 KB) Document the_effects_of_medical_debt_relief_evidence_from_two_randomized_experiments-65-126_compressed.pdf (804.05 KB)

Bankr. E.D.N.C.: In re Billy Haddock & Son Farms- Approval of Settlement Ed Boltz Mon, 04/15/2024 - 17:55 Summary: The United States Bankruptcy Court, Eastern District of North Carolina, considered a Motion to Approve Compromise where defendants Brian  and June Haddock agreed to pay $25,000 to the Trustee in satisfaction of all claims held against them by the bankruptcy estate. Nutrien Ag Solutions, Inc. opposed the motion. The court held a hearing to consider the reasonableness of the proposed settlement. Overruling the objection, the court analyzed the case under  the following factors:  Complexity of the matter;  Likely expense of trial and collection;  Estimated time or duration of trial;   Possible difficulties of collection;  The amount of the objecting parties' claim; and Deference  to a trustee's business judgment. See Protective Comm. for Indep. S'holders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968) and  In re Health Diagnostic Lab'y, Inc., 588 B.R. 154, 168 (Bankr. E.D. Va. 2018).  Given the financial circumstances of the defendants and the potential difficulties in collecting a larger judgment,  the court found that the proposed settlement was reasonable,  but given that Nutrien Ag Solutions'  claim accounted for 77% of all claims,  the  court stayed a final decision  pending the resolution of an objection to its claim. Commentary: While it may seem that this opinion,  which delays its own finality pending the resolution of the objection to Nutien Ag Solutions's claim this summer,  puts the cart before the horse and is something of an advisory opinion (which may be perfectly permissible from bankruptcy courts in the 4th Circuit following Kiviti v Bhatt),  this may in reality have been a judicial thumb on the scale to encourage settlement of that claims objection. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_billy_haddock_and_son_farms_a_nc_general_partnership_debtor_john_c_bircher_iii_trustee_billy_h.pdf (144.3 KB) Category Eastern District

 How to Compromise an SBA Defaulted Loan that has been transferred to Treasury Offset Program (TOP)   In a prior blog post we discussed “How to Recall Defaulted SBA Loan from Treasury Offset Program TOP” which blog post can be found at https://shenwick.blogspot.com/2024/04/how-to-recall-defaulted-sba-loan-from.html If you have a defaulted SBA loan that has been transferred to the Treasury Offset Program (TOP) and you are unable to recall the loan from TOP to the SBA, your options are: 1. Do nothing, 2. Close the business, 3. Negotiate a Compromise with TOP, or 4. File for bankruptcy and halt the TOP offset with the automatic stay provided by Section 362 of the Bankruptcy Code. In this blog post we will discuss how to Compromise an SBA Defaulted Loan that has been transferred to TOP. Please note that the forms required to be submitted to TOP to Compromise the claim are different from the offer in compromise forms submitted to the SBA for an offer in compromise. Documents Required: 1  Provide a letter on your letterhead explaining the reasons for the default on the SBA loan, why it should be reduced or compromised, the original amount of the defaulted SBA loan, the proposed amount to compromise the defaulted SBA loan, the source of funds for this settlement, and a detailed explanation of the financial hardship involved for you or your business. 2  A Financial Statement for Business or Individual (which can be obtained online from TOP, Department of Treasury Compromise Forms) must be completed and submitted. 3   Submit the last 2 years of the Business or Individual tax returns. 4   The proposed payment should be a lump sum payment. 5   Submit 2 Months of  bank statements for the individual or the business & 6   Submit 2 utility bills for for the individual or the business. Then  call TOP at 800-676-5737 to determine who the documents should be faxed or emailed to.  Please note that compromising a claim with TOP is difficult to do! For those clients or advisors who would like to discuss compromising their  SBA Defaulted Loan (that has been transferred to TOP)  with Jim Shenwick, Esq. please call Jim Shenwick, Esq  at 917 363 3391 or email him at  jshenwick@gmail.com Or please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min We held individuals & businesses with too much debt!---How to Recall Defaulted SBA Loan from Treasury Offset Program TOP https://shenwick.blogspot.com/2024/04/how-to-recall-defaulted-sba-loan-from.htmlTreasury Offset Program (TOP) and SBA EIDL Loanshttps://shenwick.blogspot.com/2024/04/treasury-offset-program-top-and-sba.htmlU.S. Seeks to Collect on Up to $20 Billion in Delinquent Covid Loanshttps://shenwick.blogspot.com/2024/03/us-seeks-to-collect-on-up-to-20-billion.htmlSBA EIDL Loan Charge Offshttps://shenwick.blogspot.com/2024/02/sba-eidl-loan-charge-offs.htmlSBA EIDL LOANS & CIVIL & CRIMINAL PENALTIES & BANKRUPTCY FILING Shttps://shenwick.blogspot.com/2024/01/sba-eidl-loans-civil-criminal-penalties.htmlDefaulted SBA EIDL Loans: In Reversal, U.S. to Heighten Efforts to Collect Billions in Unpaid Covid Loanshttps://shenwick.blogspot.com/2023/12/defaulted-sba-eidl-loans-in-reversal-us.htmlSBA EIDL Loan Defaults and the Statute of Limitations 12-24-2023https://shenwick.blogspot.com/2023/12/sba-eidl-loan-defaults-and-statute-of.htmlSBA EIDL Penalties if an SBA EIDL Loan is Not Repaidhttps://shenwick.blogspot.com/2023/12/sba-eidl-penalties-if-sba-eidl-loan-is.htmlMisuse or Misapply SBA EIDL Loan Proceeds and Chapter 7 Bankruptcy Filingshttps://shenwick.blogspot.com/2023/08/misuse-or-misapply-sba-eidl-loan.htmlSBA EIDL HARDSHIP PROGRA Mhttps://shenwick.blogspot.com/2023/07/sba-eidl-hardship-program.htmlDefaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Codehttps://shenwick.blogspot.com/2023/07/defaulted-sba-eidl-loans-limited.htmlOffers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.htmlEIDL LOAN WORKOUTS AND BANKRUPTCY    https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.htmlEIDL Loan Default Questions & Answers https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.htmlEIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMIS Ehttps://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.htmlEIDL Defaulted Loanshttps://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.htmlNew Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.htmlEIDL LOANS and SBA OFFER IN COMPROMISE PROGRA Mhttps://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.htmlPPP & EIDL Fraudhttps://shenwick.blogspot.com/2022/08/ppp-eidl-fraud.htmlBetter to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loanshttps://shenwick.blogspot.com/2022/11/better-to-connect-what-small-business.html  

The initial meeting with a prospective bankruptcy client is the most important work I do as a bankruptcy lawyer. It’s also the hardest. The results of that meeting lay the groundwork for the entirety of the case. The challenge is establishing rapport with an utter stranger, who’s in distress, and persuading them to spill all […] The post Why listening is a bankruptcy lawyer’s superpower appeared first on Bankruptcy Mastery.

4th Cir.: Harrell v. DeLuca- Summary Judgment regarding Fraud Ed Boltz Mon, 04/15/2024 - 08:59 Summary: The Harrells alleged that DeLuca made false representations about the property and sued for fraudulent inducement, constructive fraud, breach of contract, and violations of the Virginia Consumer Protection Act. The district court granted summary judgment favoring DeLuca on the fraud claims related to certain misrepresentations, but found in favor of the Harrells on a breach-of-contract claim related to uncompleted work specified in the Construction Agreement. The Fourth Circuit found the district court's grant of summary judgment on the fraud claims inappropriate, highlighting that there was a genuine dispute of material fact regarding the materiality of the misrepresentations. The appellate court vacated and remanded the summary judgment on these claims. The appellate court also addressed the Harrells' claim for constructive fraud based on DeLuca's alleged misrepresentation about obtaining necessary permits. It determined that the district court improperly applied the source-of-duty rule without clearly establishing whether DeLuca's statements were about current facts or future promises. Consequently, this part of the summary judgment was also vacated and remanded for further proceedings. Lastly, the appellate court agreed with the Harrells that the district court did not make clear findings on whether DeLuca breached the Sales Contract, which was important because this contract contained a provision for recovering attorney's fees, unlike the Construction Agreement. The court remanded this issue for explicit findings. To read a copy of the transcript, please see: Blog comments Attachment Document harrell_v._deluca.pdf (191.65 KB) Category 4th Circuit Court of Appeals