4th Cir.: All American Black Car Service, Inc. v. Gondal — Setoff, Ratification, and the Limits of Lay Testimony in Bankruptcy Litigation Ed Boltz Wed, 10/29/2025 - 17:54 Summary: In this unpublished October 15, 2025, decision, the Fourth Circuit affirmed the rulings of the Bankruptcy Court and the Eastern District of Virginia in a messy dispute arising from the dissolution of a small limousine company, All American Black Car Service, Inc. (“AABCS”). The case reads like a familiar tale of closely-held corporate dissolution gone awry—complete with COVID-era losses, unwritten understandings, and shareholder distrust—transposed into the bankruptcy context. Facts and Procedural History: AABCS had three shareholders: Cheema (51%) and two minority shareholders, Gondal and Sheiryar (each 24.5%), who also worked for the company. When the pandemic gutted revenue and the business ceased paying wages or distributions, the trio agreed to dissolve the corporation, liquidate assets, pay debts, and escrow the remainder for division. Between 2022 and 2023, Gondal and Sheiryar sold ten vehicles for $317,000, paid debts of $88,559.31, and then—contrary to the dissolution agreement—pocketed the remaining $228,000 instead of placing it in escrow. When Cheema revived the corporation in Chapter 11, AABCS filed an adversary proceeding demanding return of the funds and lost profits. At trial, the bankruptcy court (Judge Mayer, E.D. Va.) found Gondal and Sheiryar liable for conversion but granted them a setoff equal to their 49% ownership, reducing judgment to $116,504.76. The court also rejected their defenses of (1) unpaid wages and (2) corporate ratification, and denied AABCS’s request for speculative lost profits. Fourth Circuit’s Holding: The Fourth Circuit (Judges Wilkinson, Thacker, and Heytens) affirmed in full, finding “no reversible error” across four disputed issues: Exclusion of Wage Testimony: Sheiryar attempted to introduce a chart of “market wage rates” from ZipRecruiter and similar websites to justify unpaid compensation exceeding $228,000. The bankruptcy court properly excluded this as impermissible expert testimony, not a lay opinion under Rule 701, because it was based on third-party data—not personal experience. Without that evidence, his claim for unpaid wages failed. Rejection of Ratification Defense: The defendants argued that because the corporation’s 2022 tax return reported the $228,000 as “shareholder distributions,” AABCS had ratified their taking. The court disagreed, noting that the return merely confirmed that sales occurred and that Cheema, a non-lawyer and non-native English speaker, did not understand the legal implications of “ratification.” More importantly, the corporation immediately repudiated the act by suing within weeks. Denial of Lost Profit Damages: AABCS’s appeal on this point was deemed waived for failure to brief it adequately under Rule 28(a)(8)(A). The court noted that two conclusory sentences, without legal or factual citation, do not preserve an issue. Allowance of Setoff: The bankruptcy court’s decision to credit the defendants with their 49% ownership interest was equitable and consistent with Va. Code § 13.1-745(A), which allows distribution of remaining corporate assets after debts are settled. AABCS’s belated argument that Dexter-Portland Cement Co. v. Acme Supply Co., 147 Va. 758 (1926), barred such a setoff was both unpreserved and inapposite. Commentary: Though a relatively small dispute, All American Black Car Service underscores several recurring bankruptcy practice lessons: Lay vs. Expert Testimony: Debtors and insiders often try to shoehorn “market” or “customary” valuations or compensation estimates into lay testimony. The Fourth Circuit continues to enforce Rule 701 strictly—personal experience counts, but quoting internet averages does not. (Practitioners should note similar reasoning in Lord & Taylor, LLC v. White Flint, L.P., 849 F.3d 567 (4th Cir. 2017).) Ratification Requires Intent and Benefit: The decision usefully clarifies that mere bookkeeping or tax reporting—especially in closely held entities—does not establish ratification absent evidence that the corporation intended to approve or benefited from the unauthorized act. Setoff as Equity: Even where insiders misappropriate funds, bankruptcy courts retain equitable discretion to account for ownership interests. This serves as a reminder that bankruptcy courts are courts of equity—but also of accounting, where the math still matters. Appellate Waiver: The Fourth Circuit remains unforgiving toward poorly briefed issues. Two sentences without citations? Waived. While this case originates from Virginia, its reasoning resonates for North Carolina practitioners navigating disputes among small business owners who treat their corporations like joint checking accounts. The equitable setoff here—essentially forgiving nearly half of an admitted conversion—illustrates how bankruptcy courts temper legal rights with pragmatic fairness. For debtor’s counsel, the takeaway is that “what’s fair” may still include a reduction for equity, even when fiduciary misconduct is proven. For creditors or majority owners, it’s another reason to escrow first and trust last. Practice Pointer: For bankruptcy litigators dealing with dissolved entities or partner disputes: Document dissolution and winding-up agreements carefully—preferably with court approval if bankruptcy looms. Distinguish clearly between shareholder distributions, wages, and loan repayments in corporate records to avoid later “setoff” surprises. If asserting unpaid wages or insider compensation, support it with contemporaneous records or testimony grounded in firsthand experience, not online data. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document all_american_black_car_service_inc._v._gondal.pdf (139.12 KB) Category 4th Circuit Court of Appeals

N.C. Ct. App.: Harrington v. Laney — Quiet Title Claim Barred by Statute of Limitations Ed Boltz Mon, 10/27/2025 - 18:49 Summary: In Harrington v. Laney (COA24-1071, filed October 15, 2025), Chief Judge Dillon, joined by Judges Murry and Freeman, reversed a Superior Court verdict that had invalidated a deed executed under a power of attorney, holding instead that the plaintiff’s claims were barred by the statute of limitations. Facts and Background: The dispute centered on a family property in Anson County. In June 2016, the plaintiff’s elderly parents executed a power of attorney (“POA”) naming defendant Curtis Laney and a now-deceased co-agent. Acting under that POA, Laney conveyed the parents’ property to himself, later reconveyed it to the plaintiff’s mother, and then executed a 2018 deed giving himself and his wife a remainder interest. When the mother died in 2019, the Laneys became owners of the property. The plaintiff, Robert Harrington, waited until September 2022 to bring a quiet title action, arguing that the POA was void because his mother lacked capacity and the document had been fraudulently obtained. The jury agreed and voided the deeds, but the Court of Appeals reversed. Holding and Reasoning: The Court agreed with the defendants that the applicable limitations period was three years under N.C. Gen. Stat. § 1-52(1) or (9), since the claim “at its core” challenged the validity of a contract—the 2016 POA. Whether the cause of action accrued in 2016 (when the POA was executed) or in 2019 (when title passed under the challenged deed), Harrington filed too late by 2022. The Court rejected arguments that longer limitation periods under §§ 1-38 (possession under color of title) or 1-47 (validity of deeds) applied, emphasizing that this was not a title-possession or deed-recording issue but a contract dispute over authority. Harrington also sought to invoke the “survivor statute,” § 1-22, to toll the limitations period based on his mother’s incapacity before death and his own alleged incapacity thereafter. The Court noted that any representative of his mother’s estate—not just her heir—could have timely brought a claim within one year after her death, but no one did so by June 2020. The suit filed in 2022 was therefore barred. Because the case was resolved on statute-of-limitations grounds, the Court did not reach the remaining issues regarding jury instructions or laches. Commentary: This decision is a textbook example of how North Carolina appellate courts treat disputes over powers of attorney as contract-based actions for purposes of the statute of limitations. Following O’Neal v. O’Neal, 254 N.C. App. 309 (2017), the Court emphasized there is “little reason to draw distinctions between powers of attorney and contracts.” That framing makes the three-year statute under § 1-52(1) controlling, even when the plaintiff’s complaint is styled as one to “quiet title.” For practitioners, Harrington reinforces two lessons: Timing is everything — Claims attacking a power of attorney or self-dealing conveyances must be filed within three years of execution (or at most within one year after the principal’s death under § 1-22). Waiting to challenge such transactions until after probate or subsequent conveyances will likely be fatal. Quiet title ≠ limitless claim — Even though actions under N.C.G.S. § 41-10 have no specific statute of limitations, the underlying theory controls. Where the “quiet title” claim depends on attacking an earlier contract, courts will apply the contract limitations period. While Harrington is an unpublished opinion, it is a useful reminder that North Carolina limitation periods can sharply constrain later challenges to allegedly fraudulent or self-interested conveyances, even within families. Had this dispute instead arisen in bankruptcy (for example, if Harrington had later filed Chapter 7 or 13 and sought to recover the property for the estate), the trustee would likely face the same three-year state-law bar unless federal avoidance statutes (such as § 548 or § 544(b)) extended the lookback period. Practice Pointer: When reviewing prepetition transfers involving family powers of attorney, counsel should determine when the challenged transaction occurred and whether any surviving representative acted within the § 1-22 one-year window. Otherwise, even the most egregious self-dealing may be time-barred. To read a copy of the transcript, please see: Blog comments Attachment Document harrington_v._laney.pdf (94.77 KB) Category NC Business Court

Bankr. E.D.N.C.: Travis v. Adair Realty – Standing Restored After Dismissal; Foreclosure “Rescue” Claims Proceed Despite Omissions in Chapter 13 Petition Ed Boltz Fri, 10/24/2025 - 15:34 Summary: In Travis v. Adair Realty Group, LLC, Adv. Pro. No. 25-00040-5-PWM (Bankr. E.D.N.C. Oct. 8, 2025), Judge Pamela McAfee denied motions to dismiss filed by both the Chapter 7 trustee for Adair Realty Group (“ARG”) and its principal, Robin Shea Adair. The opinion clarifies two key issues for consumer bankruptcy practitioners: (1) when a debtor retains standing to pursue undisclosed claims after a dismissed Chapter 13 case, and (2) how North Carolina’s “foreclosure rescue” statutes can impose personal liability on individuals behind such schemes. Background: Melissa Travis—formerly known as Melissa Leigh Marek—purchased her Holly Springs home in 2015. After defaulting on her mortgage, she contacted Robin Adair, who promoted himself online as a professional who could “help homeowners avoid foreclosure.” In December 2022, Adair met Travis at a UPS Store, where she signed a quitclaim deed conveying a 50% interest in her home to Adair’s company, Adair Realty Group, LLC, in exchange for promises to reinstate her mortgage ($29,344.62), invest $10,000 in repairs, and split sale proceeds once the home was sold. Adair never made the promised reinstatement payment and allowed the foreclosure to proceed in January 2023. On January 12, 2023, Travis filed a Chapter 13 case (No. 23-00091-5-PWM) to halt the foreclosure. That case was dismissed without discharge on March 11, 2024. Critically, her bankruptcy petition failed to disclose both the December 2022 property transfer and any potential claim against Adair or ARG—neither appearing on Schedule A/B nor in her Statement of Financial Affairs. Despite the bankruptcy filing, Adair recorded the deed post-petition. When the property was later sold for $400,050, the surplus proceeds of $155,429.58 were split, with ARG receiving half. Travis then sued Adair and ARG in Wake County Superior Court under N.C. Gen. Stat. §§ 75-1.1 and 75-121 (the “foreclosure rescue” statutes), seeking to void the deed and recover damages. ARG’s subsequent Chapter 7 filing brought the case into bankruptcy court. Chapter 7 Trustee’s Motion – Standing After Dismissed Chapter 13: The Chapter 7 trustee for ARG argued that Travis lacked standing because her claims were property of her prior Chapter 13 estate and had never been disclosed or abandoned. Judge McAfee rejected that argument, adopting the Second Circuit’s reasoning in Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473 (2d Cir. 2014). Under 11 U.S.C. § 349(b), dismissal “revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case,” including unscheduled assets. Unlike a closed Chapter 7 case, dismissal of a Chapter 13 terminates the estate entirely, restoring the parties to their pre-petition positions and leaving no property in custodia legis. Thus, even though Travis failed to disclose these claims, her right to pursue them reverted to her upon dismissal. Adair’s Motion – Jurisdiction and Personal Liability: Adair argued that the bankruptcy court lacked jurisdiction over claims against him personally and that any recovery would require piercing ARG’s corporate veil. The Court found “related-to” jurisdiction under In re Celotex Corp., 124 F.3d 619 (4th Cir. 1997), because any judgment against Adair would reduce Travis’s claim against the debtor estate. The Court further held that Travis alleged Adair’s direct participation in a “foreclosure rescue transaction,” which under N.C. Gen. Stat. § 75-121(a) makes “any person or entity” personally liable for engaging in or promoting such conduct. No veil-piercing was required. Claims Surviving Dismissal of Chapter 13: Unfair & Deceptive Trade Practices (N.C. Gen. Stat. §§ 75-1.1 and 75-121): Survives. The statute expressly prohibits foreclosure-rescue conduct, whether or not the transaction was “isolated.” Fraud: Survives. The amended complaint met Rule 9(b)’s particularity standard, detailing the misrepresentations, timing, and resulting injury. Unjust Enrichment: Dismissed with leave to amend, as the benefit was alleged to have gone to ARG, not Adair personally. Commentary: Judge McAfee’s decision is significant for consumer practitioners. It reinforces that dismissal of a Chapter 13 case generally fully restores ownership of undisclosed claims to the debtor, preventing trustees from later asserting control. And it underscores that foreclosure-rescue statutes have real teeth, exposing individuals—not just their LL Cs—to personal liability. Professional Responsibility Note – Counsel’s Role in the Omission: While the Court’s opinion did not directly address the performance of Travis’s prior bankruptcy counsel, the undisputed record raises a natural question: Should her former attorney have identified and disclosed these potential claims or the prepetition deed transfer? The December 2022 transfer of a partial ownership interest, coupled with alleged misrepresentations by Adair, occurred weeks before the January 2023 bankruptcy filing. Under Rule 1007(b)(1) and Schedule A/B, such a transfer and any related contingent claims were required to be disclosed. Even if Travis did not fully appreciate the legal significance of the “foreclosure rescue” transaction, counsel arguably had a duty of reasonable inquiry under Fed. R. Bankr. P. 9011(b) to investigate any prepetition transfers or disputes. That said, Judge McAfee’s application of Crawford spared both the debtor and her counsel the harsher consequence of a standing dismissal or judicial-estoppel bar—holding that dismissal of the Chapter 13 case “rewinds the clock.” Still, Travis serves as a quiet reminder that thorough intake and disclosure are the best defenses: even “rescues” gone wrong should be treated as potential litigation assets and properly listed. For debtor’s counsel, however, the case carries a cautionary undertone: the best outcome is still to disclose everything. Had Travis’s prior case resulted in discharge rather than dismissal, the omission could have proven fatal. To read a copy of the transcript, please see: Blog comments Attachment Document travis_v._adair_realty.pdf (186.11 KB) Category Eastern District

If you are behind on mortgage payments and foreclosure proceedings have started, you may be at risk of losing your house surprisingly fast.  How you respond and what you do next is vital. Before answering the notice, talk to a lawyer.  There may be mistakes or problems with the notice that you can challenge, but more importantly, you might have options to help you before you even respond to their notice.  What you do next could be the difference between keeping your house and not. For help, call Young, Marr, Mallis & Associates for a free case review with our NJ mortgage foreclosure defense lawyers at (609) 755-3115. Call a Foreclosure Defense Lawyer Before Responding When you initially get a Notice of Intent to Foreclose (NOI), this tells you that the lender is ready to act against you.  It has a limited time for you to reply before they actually file for foreclosure against you.  That quick time limit might make you want to reply and get things over with, but always call a lawyer first. Having an attorney on your side from the beginning can help set you up for challenges and actions that might take some time to put into motion.  If you wait until after your reply, it can be harder to change course. The Process of Replying to Foreclosure Notices There are actually two different notices you will receive, each of which requires some kind of response or action on your part: Notice of Intent to Foreclose Once you are behind on your mortgage payments, usually by 3 months, the lender will send you an NOI.  This notifies you that they are going to foreclose if things don’t turn around. This notice has to include the reasons they want to foreclose, how much you need to pay to get back on track, some information about your current equity in the property, and your options and resources available. Response At this stage, your main options are to… Let them move forward Pay off the debt Come up with a payment plan to get you back on track Request mediation File for bankruptcy, which might pause foreclosures And more. Talk to a lawyer about your options.  If paying a bit extra to get back on track is an option, you may be able to work things out with the mortgage company and avoid foreclosure. You only get 30 days to act before the lender moves on to filing official proceedings. Foreclosure Complaint When a complaint is filed with the Office of Foreclosure, the foreclosure process has officially started.  At this point, you are the actual defendant in court proceedings and should have a lawyer. You can, again, allow the foreclosure to go through, but your better option is to contest the foreclosure if there are problems with the process or if the lender made mistakes in administering your mortgage. You may also be able to file for bankruptcy, pausing any collection and foreclosure efforts. Answer Your legal filing in response is called an answer.  In this document, your NJ mortgage foreclosure defense lawyer will explain any legal arguments against the foreclosure, such as discrimination, improper notice, or mistakes in identifying the proper borrower. You get 35 days to file an answer, so do not delay in calling a lawyer. What Do I Say to the Mortgage Lender? Do not talk to your mortgage lender on your own if they have started the foreclosure process against you.  Always consult with a lawyer about your options first before trying to handle any of these legal processes. If you are going to handle things on your own, do not make any promises you cannot follow through on, or else you might lose out on later opportunities to correct or cure your back payments if the mortgage company stops trusting you. Can I Stop Foreclosure? If you are able to make up the back payments, payment plans are often accepted.  It is typically harder and more expensive for mortgage companies to go through foreclosure than it is to simply give you a couple of extra months to catch up. In any case, mortgage companies are not afraid to go through with foreclosure when they need to, so you should have a lawyer on your side. FA Qs on Responding to Mortgage Foreclosure What is the Foreclosure Process? After you have received a Notice of Intent to Foreclose, you need to respond and make new arrangements, or else face a formal Foreclosure Complaint.  From there, you get time to give an answer, and the case can proceed to hearings and decisions. There are many options you have in the middle to negotiate, file counterclaims, and seek help from an attorney. Can I Stop Foreclosure? If you respond quickly and have a plan in place, foreclosures can often be stopped after a NOI is sent.  If you are unable to financially handle ongoing payments, bankruptcy might also help protect you or delay foreclosures. Sometimes there is no way to stop the process, but you still have rights that need to be protected, and we may be able to force the mortgage company to follow every step of the process while you work up the financial power to get your mortgage back on track. Do I Need a Lawyer? You may be thinking that a lawyer is too expensive if you are in financial trouble and can’t afford your mortgage.  However, foreclosure defense is incredibly important, and getting a lawyer can mean the difference between the mortgage company taking your house and a well-negotiated plan that lets you keep your home moving forward. How Long Do I Have to Answer a Foreclosure Notice? After a Notice of Intent to Foreclose is filed, the lender needs to wait 30 days for your response before they can file the Foreclosure Complaint.  You have 35 days to provide an answer to a Foreclosure Complaint. What Are My Options in Foreclosure? Foreclosure cases often have a lot of options, and what is best for your case will depend on your situation.  You can let them foreclosure or pay off the debt, but options somewhere in between – such as a renegotiated payment plan – are often the best option. Can Bankruptcy Stop Foreclosure? Filing for bankruptcy gives you an automatic stay, which can halt collection attempts against you.  This can typically halt foreclosure in its tracks and give you breathing room on your debt. However, bankruptcy is not appropriate for everyone.  If you are just behind because of temporary issues and will be able to recover, you may be best setting up a payment plan or renegotiating the terms of your mortgage with the help of a lawyer. Call Our NJ Mortgage Foreclosure Defense Lawyers Today For a free case review, call our Trenton, NJ mortgage foreclosure defense lawyers at Young, Marr, Mallis & Associates at (609) 755-3115.

Bankr. W.D.N.C.: In re Joiner – §1111(b) Election Survives Subchapter V Lien Modification Rights Ed Boltz Thu, 10/23/2025 - 17:56 Summary: In In re Joiner, Case No. 25-30396 (Bankr. W.D.N.C. Oct. 2 2025) (Judge Ashley Austin Edwards), the court addressed the intersection between Subchapter V’s debtor-friendly lien modification authority under § 1190(3) and a creditor’s long-standing right under § 1111(b)(2) to elect to have an undersecured claim treated as fully secured. Facts: Joseph and Krista Joiner filed under Subchapter V, personally guaranteeing a $1 million SBA-backed business loan from Pinnacle Bank that was also secured by their Charlotte residence. Pinnacle filed a proof of claim for roughly $1.2 million, asserting a secured portion of $463,768 based on an $805,000 appraisal, after accounting for a senior Truist lien of $341,000. When Pinnacle elected under § 1111(b)(2) to treat its entire claim as secured, the Joiners objected, arguing that § 1190(3) — which allows an individual Subchapter V debtor to modify a lien on a principal residence if the loan proceeds were primarily used for the small business — took precedence and rendered § 1111(b) inapplicable. Pinnacle countered that § 1111(b) applies in all Chapter 11 cases, that § 1181(a) lists the provisions inapplicable to Subchapter V and does not exclude § 1111, and that Congress intended both sections to coexist. Holding: Judge Edwards overruled the debtors’ objection, holding that § 1190(3) does not override a creditor’s right to make a § 1111(b) election. Citing Collier on Bankruptcy and In re VP Williams Trans, LLC, 2020 WL 5806507 (Bankr. S.D.N.Y. Sept. 29 2020), the court emphasized that § 1181(a)’s silence regarding § 1111 indicates Congress meant for the election to remain available in Subchapter V cases. The court also noted that Pinnacle’s loan might not even qualify under § 1190(3), as it appeared secured by more than just the residence. Commentary: This decision marks the first published Western District of North Carolina ruling squarely addressing whether an individual Subchapter V debtor’s new lien-modification power can negate an undersecured creditor’s § 1111(b) rights — and answers “no.” The reasoning mirrors traditional Chapter 11 practice: § 1111(b) protects secured creditors from undervaluation risk by allowing them to receive payments equal to their total claim, while § 1190(3) merely expands which claims a Subchapter V debtor may modify. Judge Edwards viewed the two provisions as co-existing, not conflicting — much as §§ 1123(b)(5) and 1111(b) have co-existed since 1978. Practice Pointer: For Subchapter V debtor’s counsel, this means that even when § 1190(3) allows modification of a lien on a principal residence, an undersecured creditor can still invoke § 1111(b) and require the plan to treat its full claim as secured. That can substantially increase plan payment obligations and alter feasibility calculations. Before proposing a § 1190(3) modification, counsel should: Confirm collateral scope. If the loan is secured by more than the residence, § 1190(3) may not apply at all. Anticipate § 1111(b) elections. Run feasibility models assuming full-claim treatment. Negotiate or value early. Early stipulations or agreed valuations can mitigate post-election surprises. For creditors, Joiner reaffirms that the § 1111(b) election remains a powerful tool—even in the more debtor-friendly confines of Subchapter V. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_joiner.pdf (253.34 KB) Category Western District

W.D.N.C.: Shaf International v. Mohammed – Only the Receiver Can Ride This Motorcycle Ed Boltz Wed, 10/22/2025 - 16:33 Summary: In Shaf International, Inc. v. Mohammed (W.D.N.C. Sept. 22, 2025), Judge Reidinger affirmed the Bankruptcy Court’s grant of summary judgment to the debtor, holding that a single creditor lacks standing to assert fiduciary duty claims against the officer of an insolvent corporation where the injury alleged is common to all creditors. Background: Shaf International sold motorcycle gear to Jafrum International, a company owned and operated by debtor Jaffer Sait Mohammed, who personally guaranteed the corporate debt. When Jafrum collapsed, it sold its inventory to an affiliate of Vance Leathers, a Florida company, for $436,000—satisfying Vance’s $311,000 debt and leaving other creditors, including Shaf, unpaid. Shaf later obtained a $661,239 judgment in New Jersey and then sued Mohammed in an adversary proceeding, alleging “constructive fraud while acting in a fiduciary capacity” and “willful and malicious injury,” asserting that he diverted assets and favored one creditor over others. The Court’s Holding: The District Court agreed with both the Bankruptcy Court and long-settled North Carolina law that fiduciary duties of corporate officers run to the corporation itself, not to individual creditors—unless the injury is “peculiar or personal” to that creditor. Where multiple creditors share the same injury—here, the debtor’s alleged preference for one creditor over the rest—only a receiver, trustee, or derivative action on behalf of all creditors has standing. Shaf’s arguments that its judgment and large claim size made it unique fell flat: the court noted that a judgment creditor is still an unsecured creditor of the same class as others, and “being the largest” does not confer exclusivity. Similarly, Shaf’s claim that the debtor’s post-sale employment with his wife’s company (which later did business with the buyer) was a form of self-dealing failed both factually and legally, as any resulting injury again would have been suffered equally by all creditors. Practice Pointer: This case reaffirms that individual creditors cannot repackage collective injuries into personal claims simply by invoking fiduciary language or alleging bad faith. Where a debtor-officer allegedly strips or favors assets in the wind-down of an insolvent corporation, only a receiver, trustee, or derivative plaintiff acting for all creditors may bring a fiduciary breach or constructive fraud action. For creditor’s counsel, this underscores two key points: Preserve corporate claims early—consider seeking appointment of a receiver or filing an involuntary bankruptcy before assets vanish. Don’t mistake nondischargeability for standing—even if a debt might fit §523(a)(4) or (a)(6), the underlying claim must still be one the creditor can legally bring. And for debtors’ counsel: when closing a business, ensure any payments to insiders or favored creditors are scrupulously documented and defensible—because while individual creditors can’t sue, the trustee (or a vigilant receiver) certainly can. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document shaf_international_v._mohammed.pdf (242.34 KB) Category Western District

E.D.N.C.: Saffold v. First Citizens Bank – Failure to Accurately Report Balance following Settlement can constitute Breach of Settlement, but Compliance with Notice Procedures Required Ed Boltz Tue, 10/21/2025 - 17:52 Summary: In Saffold v. First Citizens Bank (No. 5:24-CV-487-M-RJ, E.D.N.C. Sept. 30, 2025), Chief Judge Myers denied—albeit without prejudice—the bank’s motion to dismiss a Fair Credit Reporting Act (FCRA) claim brought by consumer Amanda Saffold. The dispute arose from a 2020 settlement between Saffold and First Citizens resolving prior collection activity that she alleged violated consumer protection laws. The settlement included mutual releases, a representation by the bank that it would discharge the debt and cease collection, and a clause requiring either party to give 14 days’ written notice before alleging breach. Saffold later discovered that TransUnion continued to report her account as delinquent and disputed the entry, asserting that First Citizens failed to correct its reporting in violation of the FCRA. The bank sought dismissal, arguing the settlement’s release barred the claim and that it had no continuing duty to ensure credit reporting accuracy. The court rejected both substantive defenses. Applying North Carolina contract law, Judge Myers found that Saffold’s promise not to sue was dependent on the bank’s promise to “fully release and forever discharge” her debt. If the bank continued to report a balance, that would breach the agreement and relieve Saffold of her obligation not to pursue further claims. The Court also held that the settlement did more than simply end collection—it extinguished the debt itself, and therefore, continuing to report it as due could violate both the contract and the FCRA. However, Saffold failed to allege that she complied with the agreement’s notice provision. Her dispute through TransUnion did not constitute notice under the contract, which required direct written notice to the bank’s counsel. Because she had not alleged that she sent such notice, her complaint was procedurally deficient. Nonetheless, the court denied the motion to dismiss without prejudice and granted her leave to amend by October 14, 2025, to allege proper notice. Commentary: The Saffold decision is a helpful illustration of how consumer credit reporting disputes often live at the intersection of federal statutory rights and private settlement contracts. Even when a creditor agrees to “discharge” a debt, its obligations may continue through the accuracy duties imposed by the FCRA. Yet, as this case shows, procedural precision still matters—particularly when settlements include notice-and-cure provisions. For consumer and debtor counsel, one practical takeaway is to ensure that settlement agreements explicitly address post-settlement credit reporting duties. Rather than relying on general release language or “cessation of collection” clauses, consider including a clause such as: Credit Reporting Accuracy Provision: Creditor agrees to report to all consumer reporting agencies to which it furnishes information  an update to their records to reflect that the Account has been satisfied, settled in full, or otherwise carries a $0 balance with no past-due status. Creditor shall not report or cause to be reported any derogatory information regarding the Account after the Effective Date of this Agreement. Such a provision transforms the creditor’s obligations from implicit to enforceable, reducing ambiguity about whether continued derogatory reporting constitutes a breach. In sum, Saffold reminds practitioners that settlements resolve disputes only when they are drafted—and followed—with the same care as any other legally binding agreement. A promise to “forever discharge” the debt should also mean a promise to stop saying otherwise to the credit bureaus. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document saffold_v._first_citizens_bank.pdf (180.19 KB) Category Eastern District

M.D.N.C.: Joyce v. First American Mortgage Solutions – Stream of Consciousness Meets the FCRA and Mortgage Reports Ed Boltz Mon, 10/20/2025 - 18:37 Summary: Judge Schroeder’s September 30, 2025 portrait of  the property report as a  CRA  in Joyce v. First American Mortgage Solutions, LLC (No. 1:23-cv-1069) denied the defendant’s motion for judgment on the pleadings, allowing a Fair Credit Reporting Act (“FCRA”) claim to proceed where a “Property Report” combined another consumer’s judgments with the plaintiff’s file and was then used by a lender to deny him a loan. And "yes i said yes I will yes"—perhap because the plaintiff’s name really is James Joyce— while the complaint and claims read a bit like Ulysses: full of detail, meandering through definitions and disclaimers, they were ultimately coherent enough to survive dismissal. Background: Joyce applied for a debt-consolidation loan with Members Credit Union. At the credit union’s request, First American Mortgage Solutions prepared and sold a “Property Report.” The report—supposedly about the borrower’s property—listed judgments against “James Joyce d/b/a AMPM Appliance” and “James F. Joyce,” neither of whom were the plaintiff. The credit union, seeing those supposed debts, denied the application. Joyce sued under 15 U.S.C. §1681e(b), alleging that First American failed to follow “reasonable procedures to assure maximum possible accuracy.” The Court’s Ruling: First American argued that the report wasn’t a “consumer report” because it was about property, not personal creditworthiness, and that its End User License Agreement (EULA) expressly disclaimed any FCRA use. Judge Schroeder wasn’t persuaded. Taking the allegations as true, the court found the complaint plausibly alleged that: The report contained personal information (judgments and liens attributed to “James Joyce”); It was prepared for a lender in direct response to a credit application; and The lender actually used it in deciding to deny credit. The court refused to consider First American’s attached EULA and “title abstract,” holding they were neither integral to nor authenticated within the pleadings. Even if they had been, disclaimers cannot defeat plausible allegations of intent. As Judge Schroeder noted, citing Kidd v. Thomson Reuters Corp., “an entity may not escape regulation as a ‘consumer reporting agency’ by merely disclaiming an intent to furnish ‘consumer reports.’” Commentary: Judge Schroeder stopped short of declaring all property reports “consumer reports,” but left open that possibility depending on how they are used. That uncertainty should prompt both lenders and vendors to revisit their compliance policies. And if the irony of a plaintiff named James Joyce alleging that his credit file was “mixed” isn’t poetic enough—consider this case a reminder that the FCRA, like modernist literature, demands attention to detail. One might even say that this decision brings stream-of-consciousness to the stream of commerce. Practical Implications: Judge Schroeder’s opinion continues the recent Middle District trend (see Keller v. Experian I and II) that focuses on the real-world use of a report, not its label. If a report—whether called a “title search,” “property profile,” or “data supplement”—is used to assess a consumer’s credit eligibility, it may fall under the FCRA. For consumer practitioners, Joyce reminds us that: “Mixed file” errors remain actionable, even when made by secondary data vendors; Mortgage-related data companies can be “consumer reporting agencies” if their reports influence credit decisions; and EUL As and disclaimers can’t contract around statutory duties. For creditors, the takeaway is straightforward: if you use such reports in deciding whether to extend credit, you assume FCRA compliance risk—no matter how the vendor markets it. And while Joyce involved a straightforward consumer loan, its reasoning has implications far beyond. In North Carolina’s Loss Mitigation/Mortgage Modification (LMM) Programs—available in the Eastern, Middle, and Western Bankruptcy Courts—mortgage servicers and their vendors routinely generate “property verification,” “valuation,” or “title update” reports as part of the modification process. If those reports contain personally identifiable credit information (e.g., judgments, liens, prior bankruptcies) and are used to determine a debtor’s eligibility for a modification or short refinance, they could meet the FCRA’s definition of a “consumer report.” The FCRA applies to any “communication of information by a consumer reporting agency bearing on a consumer’s creditworthiness, credit standing, or capacity,” used or expected to be used to determine credit eligibility. 15 U.S.C. §1681a(d)(1). A mortgage modification is an extension of credit. Thus: Servicers that request or rely on such reports in deciding whether to offer modification terms are “using” consumer reports; Vendors that compile and sell those reports to servicers could qualify as “consumer reporting agencies”; and Debtors denied modifications due to inaccurate entries (e.g., misattributed judgments, erroneous liens, or mistaken prior foreclosures) might assert FCRA claims akin to Joyce. Even within bankruptcy, where the LMM process is court-supervised, the fact that servicers use these reports to make credit determinations may implicate the FCRA’s procedural and accuracy requirements—especially when those same reports later form the basis for Rule 3002.1 payment changes, escrow recalculations, or denials of post-petition loss mitigation. With proper attribution,  please share this post.    To read a copy of the transcript, please see: Blog comments Attachment Document joyce_v._first_american_mortgage.pdf (168.17 KB) Category Middle District

Divorce and bankruptcy can be unpleasant, but they may be necessary to help you get a fresh start. They also tend to take a large financial toll, and one may affect the other. Talk to your lawyer about how filing for bankruptcy could impact your assets in a divorce or vice versa. While bankruptcy may help discharge certain debts, many debts related to divorce proceedings may not be discharged. For example, alimony and child support are almost never eligible for discharge through bankruptcy. Equitable distribution payments from dividing assets might be eligible for discharge, but only under certain bankruptcy chapters. Your attorney can help you decide which to file for first and how to protect your assets. To get a free, confidential review of your case from our Pennsylvania bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519. Can Divorce-Related Debts Be Discharged if I File for Bankruptcy? Many debts may be discharged through bankruptcy, but debts related to divorce may be handled differently. Debts That Can Be Discharged? Our Allentown, PA bankruptcy lawyers may help you discharge various debts. Credit cards, unpaid medical bills, personal loans, and even old utility bills may be eligible for discharge. However, you must determine whether these debts are joint debts shared with your spouse. If they are, creditors may still come after your spouse for these debts if they do not also file for bankruptcy. Debts Ineligible for Discharge? Certain debts related to divorce proceedings might not be eligible for discharge, depending on how you file. Debts that the court deems to be domestic support obligations, such as alimony or child support, are almost never eligible for discharge. Debts related to equitable distribution payments when assets are divided in a divorce may be discharged, but only under Chapter 13. How Are Assets Divided in Divorce if Someone Files for Bankruptcy? How assets are divided in a divorce proceeding may be heavily influenced by bankruptcy proceedings and vice versa. Equitable Distribution Payments Equitable distribution payments result from how assets are divided in a divorce. Many states, including Pennsylvania, emphasize dividing assets in the way most equitable for the case. As such, you may owe your spouse money or valuable assets in a divorce. Your equitable distribution payments to your spouse may or may not be eligible for discharge. If you file for Chapter 7 bankruptcy, these debts are almost never eligible for discharge. However, they may be eligible under Chapter 13. Joint Debts If you are jointly liable for debts with your spouse, the debts may be discharged only for the spouse filing for bankruptcy. For example, if you and your spouse are jointly liable for credit card debt, the debt may be discharged for you but not for your spouse, unless they file for bankruptcy with you. In that case, creditors could come after your spouse for the debt, but not you. Should I File for Bankruptcy Before or After Divorce in Pennsylvania? Whether you should file for divorce or bankruptcy first is something you should discuss with your lawyer, as the answer depends on your assets and specific needs. Bankruptcy Before Divorce If assets are liquidated during bankruptcy, they obviously cannot be subject to equitable distribution during divorce. Similarly, bankruptcy proceedings may significantly alter your financial status. Your finances are a key factor in how courts determine support obligations, like alimony. If you have much less financial resources, your support obligation might be reduced. Again, talk to your lawyer about this before making any important decisions. Divorce Before Bankruptcy If you file for divorce before filing for bankruptcy, you may be able to offload certain debts onto your spouse as part of the terms of a divorce settlement. Debts and assets may both be divided as equitably as possible. If debts are assigned to your spouse in the divorce, you may lighten your load when it comes to filing for bankruptcy. This may be a good idea if your spouse is responsible for most of your debt, although you should ask your lawyer first. How Different Bankruptcy Chapters Affect Divorce-Related Debts There is more than one way to file for bankruptcy, and each bankruptcy chapter may have a different impact on divorce-related debts. Chapter 7 Chapter 7 bankruptcy focuses on liquidating assets to pay debts, and any debts left unpaid after everything is liquidated may be discharged if they are eligible. After a divorce, domestic support obligations like child support or alimony are almost never eligible for discharge under Chapter 7. It may also be difficult to liquidate assets you hold jointly with your former spouse. Similarly, equitable distribution payments may not be discharged. Chapter 13 Chapter 13 requires bankruptcy petitioners to develop aggressive payment plans to repay debts over several years. Once the payment plan is complete, remaining debts may be discharged. Like Chapter 7, you cannot discharge domestic support obligations under Chapter 13. However, unlike Chapter 7, debts related to equitable distribution payments may be discharged, depending on your circumstances. FA Qs About How Bankruptcy Affects Divorce-Related Debts in Pennsylvania Can Alimony or Child Support Debts Be Discharged Through Bankruptcy? No. Debts related to domestic support obligations, including alimony and child support, may not be discharged through bankruptcy. After your bankruptcy case is complete, your former spouse may still pursue payment for these debts. What Happens to Joint Debts I Share with a Spouse After Bankruptcy? Since spouses share joint debts, creditors may still go after one spouse for these debts even if they are discharged for the other spouse through bankruptcy. Both spouses would need to file for bankruptcy together to have these debts completely wiped out. Does Bankruptcy Affect Equitable Distribution of Assets During Divorce? Yes, but only if you file for Chapter 7 bankruptcy. Under Chapter 13, equitable distribution payments may be discharged. However, they may not be discharged through Chapter 7. Should I File for Divorce or Bankruptcy First? Your filing may vary based on your assets and your spouse’s cooperation. In some cases, it may be better to coordinate a divorce and divide assets before filing for bankruptcy. In others, someone might want to file for bankruptcy and wipe out certain debts before filing for divorce. What Should I Do if I File for Bankruptcy and a Divorce? Speak to your attorney about how to coordinate your finances so that you can afford both the divorce and bankruptcy proceedings. Bankruptcy may reduce your disposable income, making it much harder to afford certain divorce debts. A divorce court may be willing to alter the terms of your support obligations, considering your changed financial status. Which Bankruptcy Chapter Should I File Under if I am Also Getting Divorced? If you have divorce-related debts you want discharged, Chapter 13 could help you, depending on the nature of those debts. Under Chapter 7, most divorce-related debts are ineligible for discharge, although you should speak to your attorney about this first. Contact Our Pennsylvania Bankruptcy Attorneys for Assistance Now To get a free, confidential review of your case from our Berks County, PA bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.

M.D.N.C.: Keller v. Experian II – No Standing to Sue, Even for a “Suspicious Mail Policy” Delay Ed Boltz Fri, 10/17/2025 - 16:38 Summary: In this sequel to Keller v. Experian I, 2024 WL 1349607 (M.D.N.C. Mar. 30, 2024), Judge Thomas Schroeder once again dismissed Eric Keller’s Fair Credit Reporting Act (FCRA) suit against Experian—this time for lack of Article III standing rather than for failure to state a claim. Background Keller’s saga began when a refinancing snafu between Truist and TD Auto Finance led to erroneous late payment reporting on his car loan. After Experian flagged Keller’s initial dispute letter as “suspicious mail,” it delayed forwarding the dispute to Truist. Once Experian eventually did so, Truist confirmed—incorrectly—that the loan was delinquent. In Keller I, Judge Loretta Biggs held that this was a legal dispute, not a factual one, and thus outside Experian’s reinvestigation duties under 15 U.S.C. §1681i. She dismissed Keller’s individual FCRA claims, leaving only a putative class action claim challenging Experian’s “suspicious mail policy.” Keller II: The Standing Showdown Experian next argued that Keller lacked Article III standing because his alleged injury—a delay in processing his dispute—was not “fairly traceable” to any inaccuracy in his credit file. Judge Schroeder agreed. While Keller alleged he was denied a mortgage loan due to Experian’s inaction, the court found that the delay itself did not cause that injury. Even if Experian had promptly acted, Truist would have repeated its same erroneous report, and Keller’s credit file would have remained unchanged. The harm flowed from Truist’s records, not from Experian’s temporary hesitation. The court also noted Keller could have directly disputed the information with Truist under 12 C.F.R. §1022.43, further breaking the causal chain. The court thus found no injury “fairly traceable” to Experian—and therefore no standing. Amendment Futility Keller’s proposed Second Amended Complaint alleged multiple duplicative tradelines and data conflicts within Experian’s report. Judge Schroeder was unmoved, finding these allegations simply restated the same underlying dispute with Truist—still a legal disagreement, not a factual inaccuracy a CRA could resolve. The amendment would be futile. Class Action Dismissal Because a named plaintiff without standing cannot represent a class, the entire case was dismissed without prejudice. The court declined to allow substitution of another representative since no class had been certified and no other injured party had been identified. Commentary Keller II closes the loop on a dispute that began with Experian’s overzealous fraud-screening policy. Where Keller I held that Experian wasn’t responsible for resolving legal disputes between borrower and lender, Keller II finds that even if Experian’s internal procedures delayed a reinvestigation, no actionable injury resulted. This decision exemplifies how, post-TransUnion v. Ramirez and Spokeo, courts in the Fourth Circuit continue to demand a concrete and traceable injury—not just a statutory violation or procedural misstep—before FCRA plaintiffs can proceed. For consumer attorneys, Keller II reinforces two key lessons: Causation matters—even procedural delays or CRA negligence require a clear factual link to a real-world credit denial. Parallel disputes with furnishers should be pursued directly and promptly under §1022.43, especially when the CRA’s role is limited. And for CR As, Keller II provides further validation that their “suspicious mail” safeguards, though frustrating to consumers, are unlikely to result in standing-worthy claims absent concrete harm. See prior coverage: M.D.N.C.: Keller v. Experian I – Reinvestigation Duties Limited to Factual, Not Legal Disputes (July 15, 2024). With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document keller_v._experian_ii.pdf (153.67 KB) Category Middle District