Put off the division of community property in a marital dissolution at your peril. Hesitate and you risk all of the community property being swept up in a bankruptcy by the other spouse. And you’ll have little control where community property assets fall. Community property is all in The threat begins with the bankruptcy law […] The post Delay Division of Community Property At Peril of Bankruptcy appeared first on Bankruptcy Mastery.

Avoiding bankruptcy malpractice is a learned skill and necessary for professional survival. If word of mouth from happy clients is the world’s best advertising for a bankruptcy lawyer, loud complaints from unhappy clients in the internet age is professional poison. So, for both client and lawyer future wellbeing, it’s worth considering how to avoid bankruptcy […] The post How to avoid bankruptcy blunders appeared first on Bankruptcy Mastery.

M.D.N.C.: Perry v. CitiMortgage, Inc.- Federal Court Presses Pause in Alleged “Phantom Mortgage” Dispute Stafford Patterson Wed, 03/25/2026 - 17:03 Summary: Arthur and Lisa Perry claim that a mystery deed of trust appeared in the public records against their home—one tied to a loan that Arthur Perry insists he never applied for, never authorized, and never received. According to the complaint, Mr. Perry purchased the property in 2005 with a legitimate mortgage, but in 2006 a second deed of trust was recorded in favor of Corinthian Mortgage (d/b/a SouthBanc Mortgage). The problem did not surface until 2019, when the Perrys attempted to sell the property and discovered that the allegedly fraudulent lien prevented the closing. When they contacted the loan servicer, CitiMortgage, they claim the company acknowledged that it had an incorrect Social Security number for Mr. Perry and struggled to produce documentation supporting the alleged loan. Litigation followed—first in North Carolina state court in 2022. That case (“Perry I”) ended with a voluntary dismissal with prejudice in December 2023. The Perrys then filed a new federal lawsuit in 2024 (“Perry II”) asserting similar claims against CitiMortgage and other defendants connected to the loan closing and title work. But that earlier dismissal turned out to be the procedural landmine in this case. The Federal Case Hits the Pause Button The federal district court granted a stay of the case pending the outcome of an appeal in the earlier state-court action. The Perrys are currently asking the North Carolina Court of Appeals to reverse a ruling refusing to convert their earlier dismissal from “with prejudice” to “without prejudice.” That distinction matters enormously. If the dismissal truly was with prejudice, the doctrine of res judicata could bar the Perrys from pursuing the same claims again. Because the state appellate decision could determine whether the federal claims survive at all, the court concluded that a stay was appropriate under the Colorado River abstention doctrine, which allows federal courts to pause proceedings when parallel state litigation could resolve the dispute. The court emphasized the risk of duplicative litigation and inconsistent rulings if both cases moved forward simultaneously. No Default Judgment—At Least Not Yet The Perrys also sought default judgments against two defendants—Corinthian Mortgage and Trust Title—who had failed to appear. The court declined to enter default judgment for now, relying on a long-standing rule dating back to Frow v. De La Vega (1872): when multiple defendants may share related liability, courts should avoid entering default judgments that might produce inconsistent results. Here, many of the Perrys’ claims overlap among the defendants, including allegations tied to the validity—or fraudulence—of the disputed deed of trust. Entering judgment against the defaulting parties now could effectively decide issues that remain contested with CitiMortgage. Accordingly, the motion for default judgment was denied without prejudice until the stay is lifted. Commentary Two takeaways jump out of this decision. 1. The Perils of a “With Prejudice” Dismissal Voluntary dismissals with prejudice are often filed casually—sometimes as part of a negotiated resolution, sometimes simply to end a case that seems unpromising. But once those words appear in the order, they can slam the courthouse door shut for good. That is exactly the fight now unfolding in the North Carolina Court of Appeals. If the dismissal stands as “with prejudice,” the Perrys may never get to litigate whether this alleged mortgage was fraudulent. For lawyers, the lesson is straightforward: be extremely cautious about agreeing to a dismissal with prejudice unless you are certain the case is truly over. 2. A Familiar Consumer Problem: The “Ghost Lien” Substantively, the allegations are troubling but not unheard of. Consumers sometimes discover years later that their property is encumbered by: misindexed mortgages identity-theft loans recording errors or loans tied to incorrect borrower identifiers (such as a wrong Social Security number) Here, the plaintiffs allege CitiMortgage itself acknowledged maintaining the wrong SSN for Mr. Perry. If proven, that fact could become central to whether the loan was ever properly attributable to him. But none of those factual issues will be resolved until the procedural question—whether the claims are barred by the earlier dismissal—is answered first. 3. A Quiet Reminder About Default Judgments The court’s refusal to enter default judgment is also a reminder that default does not automatically equal victory. When claims against multiple defendants are intertwined—as they often are in mortgage or title disputes—courts frequently delay default judgments to avoid inconsistent outcomes. In other words: even when one defendant fails to show up, the case may still have to wait for the others. The Bottom Line For now, Perry v. CitiMortgage is on hold. The real action has shifted to the North Carolina Court of Appeals, where the fate of the earlier dismissal will determine whether the Perrys’ claims live or die. Until then, the alleged phantom mortgage—and the question of how it appeared in the first place—remains unresolved.   To read a copy of the transcript, please see: Blog comments Attachment Document perry_v._citimortgage.pdf (228.76 KB) Category Middle District

M.D.N.C.: Tuttle v. NewRez- Repackaging a TILA Violation Won’t Save State-Law Debt Collection Claims Ed Boltz Tue, 03/24/2026 - 15:19 Summary: Judge Thomas Schroeder of the Middle District of North Carolina dismissed a borrower class action against Shellpoint Mortgage Servicing and the trust that owned the loan, holding that the plaintiffs’ North Carolina debt-collection and consumer-protection claims were simply an impermissible attempt to enforce the Truth in Lending Act (TILA) against parties that the statute largely shields from liability. The decision is a useful reminder—especially for consumer litigators—that creative pleading cannot transform a non-actionable federal disclosure claim into a viable state-law debt-collection case. The Background Gregory and Sarah Tuttle refinanced their home in 2005 with the once-ubiquitous 80/20 mortgage structure. After filing a Chapter 7 bankruptcy in 2006, Mr. Tuttle’s personal liability on the second mortgage was discharged. Years later, after the CFPB amended Regulation Z in 2018 to require periodic mortgage statements for borrowers who had gone through bankruptcy, the servicer resumed sending statements. Those statements allegedly included retroactive interest and fees—about $20,000 added to a $54,000 balance. When foreclosure was threatened in 2023, the Tuttles sued, asserting: multiple claims under the North Carolina Debt Collection Act (NCDCA) a claim under the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA) breach of contract under the deed of trust declaratory judgment and class claims on behalf of similarly situated borrowers. The core theory was straightforward: because the servicer failed to send statements for years, it should not be able to collect the interest and fees that accrued during that time. The Court’s Analysis 1. You Can’t Enforce TILA Through the NCDCA The plaintiffs’ main strategy was to argue that the defendants violated the NCDCA by attempting to collect fees and interest that were improperly assessed when no monthly statements were being sent. The problem: TILA’s liability provisions generally apply only to creditors—not servicers or assignees. Judge Schroeder concluded that the entire NCDCA theory depended on proving a TILA violation that could not be enforced against these defendants. Recasting that alleged violation as a state-law debt-collection claim did not work: The alleged NCDCA violations all arise from attempts to collect interest and fees assessed during months when plaintiffs were not sent statements—in other words, from a nonactionable TILA violation. Because the complaint identified no independent North Carolina law making those charges unlawful, the NCDCA claims failed. The court also looked to FDCPA precedent—often used by North Carolina courts when interpreting the NCDCA—and found federal courts have consistently rejected similar attempts to enforce TILA obligations through other statutes. 2. UDTPA Claims Rise and Fall With the Same Theory The unfair-and-deceptive-trade-practices claim fared no better. The complaint itself alleged that the foreclosure efforts violated UDTPA because they violated TILA. Once the court concluded that the alleged TILA violation was not actionable against these defendants, the UDTPA claim collapsed as well. 3. Breach of Contract Claims Also Failed The borrowers also argued the default notice overstated the debt and that the servicer failed to send a notice to Mrs. Tuttle. The court rejected both theories: The “inflated amount” theory again depended entirely on the alleged TILA violation. While Mrs. Tuttle technically should have received a notice as a borrower under the deed of trust, the failure to address the letter to her was not a material breach, since the notice was sent to her husband at the same property and no prejudice was alleged. 4. No Claims = No Class Action With all substantive claims dismissed, the court also dismissed the proposed class allegations. Commentary This decision illustrates an increasingly common problem in post-bankruptcy mortgage litigation: the tension between the CFPB’s statement requirements and TILA’s narrow liability scheme. After the 2018 amendments to Regulation Z, servicers must generally send monthly statements even to borrowers whose personal liability was discharged in bankruptcy. But the enforcement provisions of TILA still largely shield servicers and assignees from damages liability unless the violation is apparent on the face of the loan disclosures. That gap creates a tempting target for creative pleading. The Tuttles tried what many consumer litigants have attempted: repackaging a TILA disclosure issue as a state debt-collection violation. Judge Schroeder joined several other courts rejecting that approach. The ruling essentially says that if the only reason the debt is allegedly inaccurate is because TILA required disclosures that were not provided, and TILA itself does not permit suit against the defendant, state consumer statutes cannot be used to backdoor that claim. But the opinion also quietly highlights a strategic omission in the plaintiffs’ case. The court noted that the Tuttles failed to identify any North Carolina statute or case law that independently made the fees or interest unlawful. One candidate that was never raised is N.C. Gen. Stat. § 45-91, part of North Carolina’s mortgage-servicing statute. That provision generally requires mortgage servicers to provide timely notice when assessing certain fees or charges and to describe the basis for those charges. Had the theory been that the servicer assessed fees without complying with the statutory notice requirements of § 45-91, the plaintiffs might have been able to point to an independent violation of North Carolina law, rather than relying exclusively on TILA. In that circumstance, an NCDCA claim based on attempting to collect unauthorized fees might have looked very different. Whether such a theory would ultimately succeed is uncertain, but it would have addressed the precise concern the court identified: the absence of any state-law prohibition on the charges themselves. For consumer lawyers, the takeaway is strategic as much as doctrinal: Claims tied solely to failure to send periodic statements may be difficult to maintain unless a creditor (not just a servicer) is the defendant. State-law claims need an independent source of illegality—for example a violation of mortgage-servicing statutes like § 45-91, contractual limits in the deed of trust, or other state regulatory requirements. For mortgage servicers, the case provides reassurance that TILA’s liability limits still matter, even after the CFPB expanded the obligation to send statements to borrowers emerging from bankruptcy. And for practitioners in North Carolina, Tuttle is also a reminder that sometimes the strongest claim may not be federal at all—it may be hiding in the state mortgage statutes that govern how those fees are imposed in the first place.   To read a copy of the transcript, please see: Blog comments Attachment Document tuttle_v._new_rez.pdf (194.06 KB) Category Middle District

NC D.CT.: Harris v. Eastern Financial Services- $495/Hour as a “Customary and Reasonable” Rate for Consumer Litigation Ed Boltz Mon, 03/23/2026 - 15:04 Summary: A recent judgment from the Durham County District Court provides a notable data point for attorneys litigating consumer protection cases—and for courts determining reasonable attorney’s fees. In Glennie Harris v. Eastern Financial Services, LLC, the court entered a default judgment arising from a wrongful automobile repossession that violated the Uniform Commercial Code and North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). The court awarded damages, costs, and—most significantly for practitioners—attorney’s fees at a rate of $495 per hour. The Judgment Because the defendant failed to appear, the court entered default and awarded a combination of statutory and trebled damages. Specifically, the judgment included: $500 statutory damages for failing to send notice of deficiency or surplus $1,500 statutory damages for three refusals to provide an accounting $3,780 in actual damages (the value of the repossessed automobile), trebled under UDTPA, bringing the total judgment to $13,340 $301.83 in litigation costs $7,524.00 in attorney’s fees The attorney’s fees were calculated based on 15.2 hours of work at $495 per hour, which the court expressly found to be “customary and reasonable for similar services in the same community.” The court also ordered that the plaintiff owed no deficiency to the lender, closing the loop on the repossession dispute. Congratulations to Suzanne Begnoche First, congratulations are in order to Suzanne Begnoche, who represented the plaintiff and secured both the judgment and the fee award. Consumer protection cases—particularly those involving vehicle repossessions—often involve modest damages but significant legal work to hold creditors accountable. Achieving a fee award that recognizes the true market value of that work is both a win for the client and an important signal to the broader bar. Why the Hourly Rate Matters The most interesting aspect of this decision is not the underlying repossession dispute—it is the court’s explicit recognition of $495 per hour as a reasonable rate for consumer litigation in Durham County. That finding should not be overlooked. Courts determining fee awards frequently rely on the “customary rate in the community.” But too often those rates are anchored to outdated assumptions about what consumer lawyers charge or should charge. When a court makes a clear factual finding—based on evidence—that a $495 hourly rate is customary and reasonable, that finding becomes a useful benchmark for future fee applications. A Benchmark for North Carolina Courts This order should prompt a broader conversation. Whether in state court, federal district court, or bankruptcy court, judges in North Carolina should keep this benchmark in mind when evaluating fee applications. Consumer litigation—whether under UDTPA, the FDCPA, the Bankruptcy Code, or similar statutes—often relies on fee-shifting provisions precisely because individual damages are too small to support traditional contingency litigation. If courts undervalue the hourly rate for that work, they effectively discourage enforcement of consumer protection laws. Recognizing rates approaching $500 per hour reflects the reality of modern legal practice: experienced consumer litigators bring specialized expertise, litigation costs and overhead have increased dramatically, and fee-shifting statutes depend on fully compensatory fee awards. Implications for Bankruptcy Courts Bankruptcy courts in particular should take note. When evaluating attorney’s fees—whether in adversary proceedings, sanctions motions, or statutory fee-shifting contexts—courts frequently look to prevailing market rates. A state court finding that $495/hour is customary and reasonable in the Durham legal market provides a useful reference point when those issues arise in bankruptcy litigation. The Larger Point Ultimately, the lesson here is simple. Consumer protection statutes only work if attorneys are willing to bring the cases. And attorneys will only bring those cases if courts recognize—and compensate—the real market value of their work. This Durham judgment does exactly that. And for that reason alone, it is a decision worth noting. (And again—congratulations to Suzanne Begnoche on both the win and the well-deserved fee award.) To read a copy of the transcript, please see: Blog comments Attachment Document harris_glennie_2026.02.09_judgment-fee_order.pdf (1.22 MB) Category NC Business Court

Bankr. E.D.N.C.: Sink v. Albrecht- Pre-Bankruptcy TBE Conversion Avoided Ed Boltz Fri, 03/20/2026 - 14:35 Summary: Bankruptcy exemption planning often walks a fine line between legitimate preparation and avoidable transfer. In In re Albrecht, Judge Pamela W. McAfee of the Bankruptcy Court for the Eastern District of North Carolina addressed where that line falls when a debtor converts jointly owned real property into a tenancy by the entirety shortly before filing bankruptcy. The court ultimately held that the maneuver crossed the line and constituted both a constructively and actually fraudulent transfer avoidable by the Chapter 7 trustee. The Facts Lucas Albrecht and his partner, Kirsten Moore, purchased a Raleigh residence in 2020 as joint tenants with rights of survivorship while unmarried. They lived there together for nearly five years. In February 2025—immediately before filing bankruptcy—two things happened: The couple married, and The next day they executed a deed transferring the property to themselves as tenants by the entirety. Twenty-seven days later, Albrecht filed Chapter 7. Before the transfer, his one-half interest in the home could be reached by individual creditors. After the transfer, the property became tenancy-by-the-entirety property, shielding it from those creditors under North Carolina law. The Chapter 7 trustee, Kevin Sink, sued to avoid the transfer under §548 and the North Carolina Uniform Voidable Transactions Act. Issue #1: Was There Even a “Transfer”? The debtors argued that nothing meaningful had changed—the same property was owned by the same two people—so there was no transfer at all. Judge McAfee disagreed. The Bankruptcy Code defines “transfer” extremely broadly, covering any mode of disposing of or parting with property or an interest in property. Under North Carolina law, the shift from joint tenancy to tenancy by the entirety changes the legal rights in important ways: A joint tenant may unilaterally alienate his interest. A spouse holding property as tenants by the entirety cannot alienate without the other spouse’s consent. Just as importantly, the retitling extinguished the ability of Albrecht’s individual creditors to execute on the property. That change in legal rights—both the debtor’s and the creditors’—was enough. The court held the deed was a transfer under §101(54). Issue #2: Reasonably Equivalent Value? The debtors next argued that even if there was a transfer, it was not constructively fraudulent because each spouse gave and received the same thing: an interest in the same property. Some courts (notably in the Eighth Circuit) have accepted that debtor-focused analysis. But the Fourth Circuit takes a different approach. Following In re Jeffrey Bigelow Design Group, courts must examine the net effect on the debtor’s estate and unsecured creditors. From that perspective, the result here was obvious: Before the transfer: creditors could reach Albrecht’s equity. After the transfer: they could not. Because the transfer reduced the assets available to unsecured creditors, the debtor did not receive reasonably equivalent value. Constructive fraud was therefore established. Issue #3: Actual Fraud and the Badges of Fraud The court also found actual intent to hinder, delay, or defraud creditors based on multiple badges of fraud, including: Transfer to an insider (spouse) Debtor retained possession and control Transfer involved substantially all assets Debtor was insolvent Lack of reasonably equivalent value These factors created a presumption of fraudulent intent, which the debtors failed to rebut. The opinion also notes repeatedly that the marriage and re-titling occurred “on the advice of counsel.” That fact did not change the outcome of the avoidance action. As Judge McAfee explained, disclosure of the transfer and reliance on legal advice do not negate the presence of other badges of fraud or prevent the trustee from avoiding the transaction. Commentary 1. Exemption Planning Is Allowed—But Not Unlimited The opinion carefully acknowledges the well-known principle from Ford v. Poston: debtors are generally allowed to convert non-exempt property into exempt property before filing bankruptcy. But Albrecht shows the limit. Exemption planning is permissible until it crosses into fraudulent transfer territory—particularly when the move effectively removes assets from creditors without any offsetting value. 2. The Fourth Circuit’s Creditor-Focused Approach Matters The key analytical move in this opinion is the reliance on Jeffrey Bigelow and its creditor-focused test for reasonably equivalent value. That approach makes outcomes like this almost inevitable. From a debtor’s perspective, nothing changed—they still owned the house. From the creditors’ perspective, however, the estate lost a reachable asset. And in the Fourth Circuit, that is the perspective that counts. 3. Timing Still Matters—A Lot Even though eve-of-bankruptcy conversions are not automatically fraudulent, timing remains powerful circumstantial evidence. Here, the sequence was difficult to ignore: Five years living together unmarried Marriage Immediate deed to TBE Bankruptcy filed 27 days later Courts rarely treat that kind of chronology as coincidence. 4. A Cautionary Tale for Pre-Bankruptcy Planning For practitioners, Albrecht is a reminder that certain planning strategies—particularly those involving tenancy-by-the-entirety conversions shortly before filing—require careful analysis. One notable feature of the opinion is that Judge McAfee repeatedly emphasized that the marriage and re-deeding were undertaken “on the advice of counsel.” That observation cuts in two directions. On the one hand, acting on advice of counsel may help demonstrate that the debtor did not independently act with deceitful intent, potentially providing some protection against allegations of bad faith, denial of discharge, or even more serious accusations such as criminal bankruptcy fraud. But that same fact does not prevent the transfer from being avoided, and it may shift the spotlight elsewhere. When a strategy designed to move assets beyond the reach of creditors fails under fraudulent transfer analysis, the legal advice that prompted the maneuver can come under scrutiny. In short, Albrecht illustrates the asymmetry of failed pre-bankruptcy planning: the debtor may simply lose the benefit of the transfer, while the attorney who recommended the strategy may face the harder questions afterward. It is also a reminder of a practical strategic point in consumer bankruptcy practice. Aggressive or innovative exemption planning is often safer in a Chapter 13 case than in Chapter 7. In Chapter 13: the debtor retains the ability to voluntarily dismiss the case if a court rejects the strategy, and more commonly, the debtor can negotiate with the trustee and propose a plan that pays creditors enough to resolve or neutralize a potential avoidance claim. Chapter 7 offers no such flexibility. A Chapter 7 trustee is affirmatively incentivized to pursue recoveries because trustees receive a statutory commission on distributions and may also recover attorneys’ fees for litigation that brings assets into the estate. As a result, trustees have strong incentives to identify and monetize assets, whether through avoidance actions or other litigation. In that environment, a strategy that might simply require a plan adjustment in Chapter 13 can become full-blown litigation in Chapter 7. ✅ Bottom Line: In the Fourth Circuit, converting jointly held property into tenancy by the entirety on the eve of bankruptcy can be avoided as both constructively and actually fraudulent when the effect is to place equity beyond the reach of individual creditors. And for practitioners considering aggressive exemption planning, Chapter 13 may provide a far more forgiving forum than Chapter 7. To read a copy of the transcript, please see: Blog comments Category Eastern District

Bankr. E.D.N.C.: Sink v. Albrecht- Pre-Bankruptcy TBE Conversion Avoided Ed Boltz Fri, 03/20/2026 - 14:35 Summary: Bankruptcy exemption planning often walks a fine line between legitimate preparation and avoidable transfer. In In re Albrecht, Judge Pamela W. McAfee of the Bankruptcy Court for the Eastern District of North Carolina addressed where that line falls when a debtor converts jointly owned real property into a tenancy by the entirety shortly before filing bankruptcy. The court ultimately held that the maneuver crossed the line and constituted both a constructively and actually fraudulent transfer avoidable by the Chapter 7 trustee. The Facts Lucas Albrecht and his partner, Kirsten Moore, purchased a Raleigh residence in 2020 as joint tenants with rights of survivorship while unmarried. They lived there together for nearly five years. In February 2025—immediately before filing bankruptcy—two things happened: The couple married, and The next day they executed a deed transferring the property to themselves as tenants by the entirety. Twenty-seven days later, Albrecht filed Chapter 7. Before the transfer, his one-half interest in the home could be reached by individual creditors. After the transfer, the property became tenancy-by-the-entirety property, shielding it from those creditors under North Carolina law. The Chapter 7 trustee, Kevin Sink, sued to avoid the transfer under §548 and the North Carolina Uniform Voidable Transactions Act. Issue #1: Was There Even a “Transfer”? The debtors argued that nothing meaningful had changed—the same property was owned by the same two people—so there was no transfer at all. Judge McAfee disagreed. The Bankruptcy Code defines “transfer” extremely broadly, covering any mode of disposing of or parting with property or an interest in property. Under North Carolina law, the shift from joint tenancy to tenancy by the entirety changes the legal rights in important ways: A joint tenant may unilaterally alienate his interest. A spouse holding property as tenants by the entirety cannot alienate without the other spouse’s consent. Just as importantly, the retitling extinguished the ability of Albrecht’s individual creditors to execute on the property. That change in legal rights—both the debtor’s and the creditors’—was enough. The court held the deed was a transfer under §101(54). Issue #2: Reasonably Equivalent Value? The debtors next argued that even if there was a transfer, it was not constructively fraudulent because each spouse gave and received the same thing: an interest in the same property. Some courts (notably in the Eighth Circuit) have accepted that debtor-focused analysis. But the Fourth Circuit takes a different approach. Following In re Jeffrey Bigelow Design Group, courts must examine the net effect on the debtor’s estate and unsecured creditors. From that perspective, the result here was obvious: Before the transfer: creditors could reach Albrecht’s equity. After the transfer: they could not. Because the transfer reduced the assets available to unsecured creditors, the debtor did not receive reasonably equivalent value. Constructive fraud was therefore established. Issue #3: Actual Fraud and the Badges of Fraud The court also found actual intent to hinder, delay, or defraud creditors based on multiple badges of fraud, including: Transfer to an insider (spouse) Debtor retained possession and control Transfer involved substantially all assets Debtor was insolvent Lack of reasonably equivalent value These factors created a presumption of fraudulent intent, which the debtors failed to rebut. The opinion also notes repeatedly that the marriage and re-titling occurred “on the advice of counsel.” That fact did not change the outcome of the avoidance action. As Judge McAfee explained, disclosure of the transfer and reliance on legal advice do not negate the presence of other badges of fraud or prevent the trustee from avoiding the transaction. Commentary 1. Exemption Planning Is Allowed—But Not Unlimited The opinion carefully acknowledges the well-known principle from Ford v. Poston: debtors are generally allowed to convert non-exempt property into exempt property before filing bankruptcy. But Albrecht shows the limit. Exemption planning is permissible until it crosses into fraudulent transfer territory—particularly when the move effectively removes assets from creditors without any offsetting value. 2. The Fourth Circuit’s Creditor-Focused Approach Matters The key analytical move in this opinion is the reliance on Jeffrey Bigelow and its creditor-focused test for reasonably equivalent value. That approach makes outcomes like this almost inevitable. From a debtor’s perspective, nothing changed—they still owned the house. From the creditors’ perspective, however, the estate lost a reachable asset. And in the Fourth Circuit, that is the perspective that counts. 3. Timing Still Matters—A Lot Even though eve-of-bankruptcy conversions are not automatically fraudulent, timing remains powerful circumstantial evidence. Here, the sequence was difficult to ignore: Five years living together unmarried Marriage Immediate deed to TBE Bankruptcy filed 27 days later Courts rarely treat that kind of chronology as coincidence. 4. A Cautionary Tale for Pre-Bankruptcy Planning For practitioners, Albrecht is a reminder that certain planning strategies—particularly those involving tenancy-by-the-entirety conversions shortly before filing—require careful analysis. One notable feature of the opinion is that Judge McAfee repeatedly emphasized that the marriage and re-deeding were undertaken “on the advice of counsel.” That observation cuts in two directions. On the one hand, acting on advice of counsel may help demonstrate that the debtor did not independently act with deceitful intent, potentially providing some protection against allegations of bad faith, denial of discharge, or even more serious accusations such as criminal bankruptcy fraud. But that same fact does not prevent the transfer from being avoided, and it may shift the spotlight elsewhere. When a strategy designed to move assets beyond the reach of creditors fails under fraudulent transfer analysis, the legal advice that prompted the maneuver can come under scrutiny. In short, Albrecht illustrates the asymmetry of failed pre-bankruptcy planning: the debtor may simply lose the benefit of the transfer, while the attorney who recommended the strategy may face the harder questions afterward. It is also a reminder of a practical strategic point in consumer bankruptcy practice. Aggressive or innovative exemption planning is often safer in a Chapter 13 case than in Chapter 7. In Chapter 13: the debtor retains the ability to voluntarily dismiss the case if a court rejects the strategy, and more commonly, the debtor can negotiate with the trustee and propose a plan that pays creditors enough to resolve or neutralize a potential avoidance claim. Chapter 7 offers no such flexibility. A Chapter 7 trustee is affirmatively incentivized to pursue recoveries because trustees receive a statutory commission on distributions and may also recover attorneys’ fees for litigation that brings assets into the estate. As a result, trustees have strong incentives to identify and monetize assets, whether through avoidance actions or other litigation. In that environment, a strategy that might simply require a plan adjustment in Chapter 13 can become full-blown litigation in Chapter 7. ✅ Bottom Line: In the Fourth Circuit, converting jointly held property into tenancy by the entirety on the eve of bankruptcy can be avoided as both constructively and actually fraudulent when the effect is to place equity beyond the reach of individual creditors. And for practitioners considering aggressive exemption planning, Chapter 13 may provide a far more forgiving forum than Chapter 7. To read a copy of the transcript, please see: Blog comments Attachment Document albrecht_trustee_brief.pdf (187.76 KB) Document albrecht_brief.pdf (272.13 KB) Document albrecht.pdf (201.05 KB) Category Eastern District

Filing for bankruptcy is not a simple process, and most people hire experienced bankruptcy attorneys to help them. However, you are not required to have a lawyer and may file for bankruptcy without legal representation. Be warned, proceeding without a lawyer is not a good idea. You should talk to an attorney about your situation. You should have a lawyer help you file for bankruptcy. These proceedings are known for being complicated, and it is very easy to make a mistake on your own. Certain mistakes could lead to a total dismissal of your case, and you will not be able to take advantage of the benefits of bankruptcy, such as having debts discharged. An attorney can help you make sure your bankruptcy petition is accurate and complete to avoid any errors that could cost you everything. Ask our New Jersey bankruptcy lawyers for a free, private case assessment by calling Young, Marr, Mallis & Associates at (609) 755-3115. Do I Need a Lawyer to File for Bankruptcy in New Jersey? While bankruptcy petitioners may file their cases without a lawyer, doing so is unwise. There are too many things that could go wrong, and the average person likely does not have the skills or experience needed to navigate complex bankruptcy laws and hearings. Filing for Bankruptcy Pro Se When a person files for bankruptcy on their own without a lawyer, it is called filing pro se. You have the right to represent yourself in almost all legal proceedings, including bankruptcy cases, and you can do so if you truly wish. However, filing pro se is usually not a good idea. Only those with experience in bankruptcy law and legal procedures should consider filing their case pro se. Is it a Good Idea to File for Bankruptcy without a Lawyer? It is not a good idea to file for bankruptcy without help from a lawyer. The process is far more complex than most people realize, and too many things could go wrong. Your bankruptcy petition must include very specific information about your finances. Not only does the court need a full list of all your assets, but your current financial situation will determine whether you are even eligible for bankruptcy. When Should I Hire a Bankruptcy Lawyer? You should hire a bankruptcy attorney before you file anything with the bankruptcy court. If you file your petition on your own, it may be possible to hire a lawyer later, but it is best to have a lawyer on your side before you file anything. Your initial petition is crucial and will set the tone for the remainder of your case. Our New Jersey bankruptcy lawyers must be sure to include all your relevant financial and banking information, including various assets or properties you own that could be liquidated. You may also protect certain assets by claiming certain bankruptcy exemptions in your initial petition. Many people are unaware that exemptions even exist, but a lawyer should know how to claim them to protect your property and assets. Possible Complications When Filing for Bankruptcy Without a Lawyer Again, filing for bankruptcy is complicated. There are numerous laws and legal procedures to navigate, and mistakes can be all too easy to make. Some mistakes could cost you everything, which is why you should hire a bankruptcy lawyer before filing anything. Disclosing Your Assets A crucial element of filing for bankruptcy is disclosing your assets. This requires that we provide a full explanation of all your financial assets, including bank accounts, properties, investments, and any other accounts or property. These disclosures must be full and complete. Failing to disclose certain assets may be considered fraud. Even if the failure is only an error, it could set your case back and cost you a lot of time. You might even face sanctions from the court. A lawyer can help you make sure your disclosures are complete and accurate so everything goes smoothly. Legal Errors or Mistakes Mistakes can lead to the dismissal of your case. For example, petitioners who file without a lawyer might accidentally forget to include certain creditors in the case, fail to disclose certain assets, or attempt to hide assets, not realizing that their actions are highly illegal. An attorney knows how to avoid mistakes and, if they do occur, how to correct them before they become a serious problem. Navigating Complex Bankruptcy Laws Filing for bankruptcy is much more than submitting some paperwork and showing up to court. There are important decisions to make and numerous hearings to attend. You must navigate complex legal procedures while understanding how to use the bankruptcy system to your advantage. Obviously, this is incredibly difficult, and a petitioner should not proceed without help from an experienced lawyer. FA Qs About Filing for Bankruptcy Without a Lawyer in New Jersey Am I Allowed to File for Bankruptcy Without a Lawyer in New Jersey? Yes. You are allowed to file for bankruptcy without a lawyer, known as filing pro se, but doing so is not advisable. Filing for bankruptcy is a complex process, and simple mistakes could lead to major consequences. Are There Any Good Reasons to File for Bankruptcy Without an Attorney? No. Many petitioners want to make the bankruptcy process more affordable by foregoing a lawyer and saving money on legal fees. While this is understandable, it is still not a good idea. Your attorney should be able to reach a fee agreement you can afford so you can get legal assistance. Should I Hire a Lawyer Before Filing for Bankruptcy? Yes. You should have a lawyer helping you from the very beginning. Hiring a lawyer after your case has already begin may make the case more difficult for your attorney, thereby complicating your case. How Can a Lawyer Help Me Through the Bankruptcy Process? Your attorney can help you prepare your initial petition, which must contain crucial information about your finances, creditors, and assets. If any of this information is incorrect or incomplete, the entire case could be dismissed. Your attorney can help you make sure all paperwork and documentation are accurate and complete, and that your case moves as smoothly as possible through the courts. What Happens if I Make a Serious Mistake in My Bankruptcy Case Without a Lawyer? You will be held responsible for any errors or mistakes in your bankruptcy case, and the court will not go easy on you because you do not have a lawyer. Your case could be dismissed because of serious mistakes, and you will not be afforded the relief of having any debts discharged. Contact Our New Jersey Bankruptcy Lawyers for Support Today Ask our Cherry Hill, NJ bankruptcy lawyers for a free, private case assessment by calling Young, Marr, Mallis & Associates at (609) 755-3115.

4th Cir.: Herlihy v. DBMP- Fourth Circuit Upholds Stay in DBMP “Texas Two-Step” Asbestos Bankruptcy Ed Boltz Thu, 03/19/2026 - 14:26 Summary:  The Fourth Circuit has again weighed in on the now-familiar “Texas Two-Step” asbestos bankruptcy strategy—and once again sided with the debtor. In , the court affirmed the denial of a motion by several asbestos claimants to lift the automatic stay in the Chapter 11 case of DBMP, LLC, the entity created when building-products manufacturer CertainTeed split its asbestos liabilities into a new subsidiary that then filed bankruptcy in the Western District of North Carolina. The panel majority, in an opinion by Judge Niemeyer, concluded that the bankruptcy court properly applied the Fourth Circuit’s longstanding Robbins factors and that the claimants had not shown the filing was made in bad faith. Judge King dissented vigorously, warning that the Fourth Circuit risks becoming a “safe haven” for wealthy corporations using bankruptcy to avoid jury trials in mass-tort litigation. The Backdrop: A Classic “Texas Two-Step” The case arises from CertainTeed’s effort to resolve massive asbestos liabilities using a strategy increasingly seen in mass-tort bankruptcies. Facing tens of thousands of asbestos claims and billions in defense and settlement costs, CertainTeed executed a Texas divisional merger in 2019. The maneuver split the company into two entities: New CertainTeed, holding most assets and operations DBMP, assigned the asbestos liabilities DBMP received some assets and, more importantly, an uncapped funding agreement obligating the parent enterprise to fund asbestos liabilities and bankruptcy costs. DBMP then filed Chapter 11 to pursue a §524(g) asbestos trust, a special bankruptcy mechanism designed to resolve both present and future asbestos claims. The filing automatically stayed roughly 60,000 asbestos lawsuits nationwide. The Claimants’ Motion The appellants—two mesothelioma plaintiffs and the estate of another victim—sought limited relief from the automatic stay so they could proceed with their state-court tort suits. Their central argument: DBMP’s bankruptcy was filed in bad faith because the enterprise was solvent and capable of paying claims outside bankruptcy. According to the claimants, the bankruptcy existed only to delay litigation and force settlement negotiations. The Fourth Circuit’s Holding The Fourth Circuit affirmed the denial of stay relief. 1. Robbins Still Governs Stay Relief The court applied the familiar In re Robbins balancing test for lifting the automatic stay: Whether the dispute primarily involves state law Whether lifting the stay promotes judicial economy Whether the estate can be protected while litigation proceeds elsewhere The bankruptcy court concluded—and the Fourth Circuit agreed—that lifting the stay would: Flood courts with asbestos cases Undermine efforts to treat claimants consistently Potentially destroy the Chapter 11 case Thus, the Robbins factors weighed strongly against relief. 2. Bad Faith Could Justify Stay Relief—But Wasn’t Shown Importantly, the Fourth Circuit acknowledged that bad faith can constitute “cause” under §362(d). But the court held that the claimants failed to show either: Subjective bad faith, or Objective futility of the reorganization. DBMP, the court said, was pursuing exactly what Congress designed §524(g) to address: companies facing decades of asbestos claims seeking to centralize and equitably resolve them through a trust. 3. Solvency Is Not Disqualifying The majority also rejected the claimants’ central premise—that a solvent company cannot use Chapter 11. Section 524(g) contains no insolvency requirement, and Congress specifically envisioned solvent companies using bankruptcy to manage long-tail asbestos liability and ensure fair treatment of future claimants. The Dissent: Bankruptcy as Corporate Escape Hatch Judge King’s dissent pulls no punches. He describes the Texas Two-Step strategy as a “corporate sleight-of-hand” designed to dump asbestos liabilities into a shell company and force victims into bankruptcy proceedings rather than jury trials. In his view: DBMP was never financially distressed. The bankruptcy was engineered entirely by lawyers under a project code-named “Project Horizon.” The maneuver deprived thousands of claimants of their constitutional right to a jury trial. King warns that the Fourth Circuit’s jurisprudence risks turning the circuit into a haven for mass-tort defendants seeking bankruptcy protection without financial distress. Commentary From a bankruptcy-policy perspective, Herlihy continues a clear trend: the Fourth Circuit remains receptive to large-scale mass-tort restructurings. The decision does three important things. 1. It reinforces the circuit’s tolerance for Texas Two-Step bankruptcies Although the panel emphasized that the legality of the divisional merger itself was not before it, the practical result is the same: the strategy remains viable so long as the debtor can plausibly pursue a §524(g) plan. This follows earlier decisions involving Bestwall, another Western District of North Carolina asbestos bankruptcy. 2. It narrows the path for claimants seeking stay relief The court effectively signals that individual plaintiffs will rarely succeed in lifting the stay in a mass-tort bankruptcy. Allowing even a handful of cases to proceed, the court reasoned, would quickly lead to “hundreds, if not thousands” of similar requests and could unravel the entire bankruptcy process. 3. It highlights a growing policy divide The dissent reflects a broader national debate: Proponents say §524(g) trusts produce faster, fairer compensation for all claimants—including those who have not yet developed disease. Critics argue the strategy strips victims of jury trials and allows profitable companies to manage liability on their own terms. Until Congress intervenes—or the Supreme Court takes a more aggressive stance—the Fourth Circuit appears comfortable allowing these reorganizations to proceed. ✅ Bottom line: For now, the Western District of North Carolina remains a favorable venue for asbestos-related Chapter 11 cases. Unless a challenger can prove both subjective bad faith and objective futility, courts in this circuit are unlikely to lift the automatic stay and send claims back to the tort system. To read a copy of the transcript, please see: Blog comments Attachment Document herlihy_v._dbmp_llc.pdf (425.79 KB) Category 4th Circuit Court of Appeals

Chapter 7 Bankruptcy Audits Are Back: What You Need to Know If you’re considering Chapter 7 bankruptcy, audits are active again—and they’re being enforced more frequently than in recent years. ? Why Audits Chapter 7 audits were created under BAPCPA (2005) to verify the accuracy of filings. Audits are: ✅ Random – selected at random for review ⚠️ Triggered – high income, large assets, or unusual facts Congressional Goal: Protect honest filers and maintain trust in the bankruptcy system. The bankers’ goal: Make filing for bankruptcy harder and more expensive. ? Audit History Timeline Year Status 2006 Program launches, audits fully active 2013 Suspended due to budget constraints 2014 Resumed at reduced levels 2020 Paused due to COVID-19 2023 Resumed, activity increasing One way to make your life easier in case of bankruptcy audits. Close unnecessary bank accounts. Even when enforcement paused, the audits never went away—they were always required by law. ⚡ Audit Triggers: What Can Draw Attention High income (e.g., over $250,000) Large or unusual assets Odd expenses Example: One of my high-income clients received an audit notice this month. The income and expenses were very high. enormous mortgage and enormous car payments. Those big payments help eligibility for Chapter 7, but also trigger the audit. ? What This Means for You Make sure you list all your bank accounts. Or better yet, close the ones you are not using.  Leaving out the bank accounts you “hardly ever use” is an obvious way to get in trouble on the audit. Ensure your budget is consistent and accurate. Don’t just throw down the first thing that comes into your head.  Take a few minutes to think about it. Being thorough keeps your filing smooth and gives you peace of mind if the government picks your case for audit. ✅ Bottom Line Audits may have seemed rare in recent years, but now they are active again. Be careful about what you tell the bankruptcy court.   The post Chapter 7 Audits are back appeared first on Robert Weed Virginia Bankruptcy Attorney.