Law Review: Hampson, Christopher- Defamation, Bankruptcy & the First Amendment Ed Boltz Mon, 04/21/2025 - 17:16 Available at:   https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5156187 Abstract: In recent years, a series of high-profile defamation cases has wound up in bankruptcy court, involving such colorful characters as Rudy Giuliani, Alex Jones, and Cardi B. As demands and verdicts swell with the rise of social media in a polarized age, defamation defendants are filing bankruptcy more frequently and at earlier stages of litigation. But that doesn't mean bankruptcy is a magic wand for waving away debt. To the contrary, much defamation debt may be nondischargeable as "willful and malicious" under section 523 of the Bankruptcy Code. Of course, consumer bankruptcy attorneys are all too familiar with bankruptcy's discharge exceptions, but some courts are now starting to apply the exceptions to small businesses attempting to reorganize under subchapter V of the Code — a category that includes Alex Jones's InfoWars. Defamation law is coming to bankruptcy court, and it’s bringing the First Amendment with it. Yet scholars and practitioners have not yet placed these three areas of law — defamation, bankruptcy, and the First Amendment — next to each other. This Article provides both theoretical and practical guidance to litigants and lawyers, showing how bankruptcy’s substantive and procedural rules will process defamation debt, including when the First Amendment protections of New York Times v. Sullivan and related cases are triggered. The ensuing mixture is a cocktail of torts, contracts, civil procedure, federal courts, and constitutional law. When speech injures others, compensation and punishment are in order. Yet forgiveness and a fresh start have their place as well. As to individuals, defamation debt should cause us to reflect on whether our “fresh start” policy in bankruptcy is too anemic. As to business entities, the defamation cases continue to raise the specter of whether chapter 11 makes it too easy for bad actors to shed debt without compensating victims, suffering consequences, or reforming behavior. Either way, attorneys must be prepared to provide forward-thinking legal advice about bankruptcy whenever insolvency is on the horizon.  Commentary: Christopher Hampson's article, Defamation, Bankruptcy & the First Amendment, offers a timely and insightful examination of the intersection between defamation claims, bankruptcy proceedings, and constitutional protections.   Hampson highlights that while bankruptcy is traditionally viewed as a means for debtors to achieve a "fresh start," defamation debts often fall under the "willful and malicious" exception to dischargeability outlined in Section 523 of the Bankruptcy Code. This means that individuals and entities cannot easily escape liability for defamatory actions through bankruptcy. Notably, the article discusses how courts are beginning to apply these discharge exceptions to small businesses reorganizing under Subchapter V, as seen in the case of Alex Jones's InfoWars. Furthermore, the article brings to light the complex interplay between bankruptcy law and First Amendment protections. It raises critical questions about how constitutional defenses, such as those established in New York Times v. Sullivan, are considered within bankruptcy proceedings. This intersection presents a multifaceted legal landscape involving torts, contracts, civil procedure, federal courts, and constitutional law. While  high  profile defamation cases,  including the examples of Rudy Guiliani,  Alex Jones and Cardi B,  often have damage awards  ($148 million,  $965 million and $4 million respectively) that vastly exceed Chapter 13 debt limits,  it is always important to remember that the discharge under §1328(a)(4) and §523(a)(6) are subtly different:   Comparison of Willful and/or Malice Nondischargeability in Chapter 7 and Chapter 13    §523(a)(6)  §1328(a)(4)  To:  An Entity  An individual or the Estate of an individual  For:  Injury to Person or Property  Personal Injury or Death  By:  The Debtor  The Debtor  Intent:  Willful AND Malicious  Willful OR Malicious  Adjudication:  No restriction  Prior Civil Award for restitution or damages   These could result in a defamation claim being dischargeable in Chapter 13,  for example if the award was to a corporate entity rather than an individual.  Contrariwise,  while   §523(a)(6)  requires both willful AND  malicious action,  in Chapter 13  a party need only show under §1328(a)(4)  that the action was either willful or malicious.  (As the article discusses,  the willful AND  malicious standard will nearly always be met in a defamation award.) With proper attribution,  please share this post.    To read a copy of the transcript, please see: Blog comments Attachment Document defamation_bankruptcy_the_first_amendment.pdf (648.34 KB) Category Law Reviews & Studies

4th Cir.: Sugar & Saser v. Burnett- Reliance on Legal Advice as Defense and Vesting of Assets in the Debtor does not preclude subsequent modification due to appreciation Ed Boltz Mon, 04/21/2025 - 17:07 Summary:  In  Sugar & Sasser v. Burnett, the Fourth Circuit upheld in part and vacated in part a district court’s affirmance of the bankruptcy court’s sanctions arising from a Chapter 13 debtor’s unauthorized sale of her residence. The debtor, Christine Sugar, sold her home during the pendency of her case without prior court approval as required by Eastern District of North Carolina Local Bankruptcy Rule 4002-1(g)(4) and her confirmed Chapter 13 plan, even though the property was partially exempt Despite having claimed  homestead exemption under N.C. Gen. Stat. § 1C-1601(a)(1) for a portion of the equity in her home,  the court of appeals held that such exempts only a dollar value interest in property, not the property itself.  Accordingly,  it  rejected arguments that vesting of the property upon plan confirmation removed it from the reach of the Local Rule or § 1329 modification. The bankruptcy court dismissed her case with a five-year refiling bar and required her attorney  to pay sanctions in the amount of $15,000. The Fourth Circuit affirmed the finding of a violation and the sanctions against counsel, but vacated the dismissal and refiling bar imposed on the debtor, remanding for the bankruptcy court to reconsider those sanctions  because the bankruptcy court failed to account for Sugar’s reliance on the erroneous legal advice of her attorney. Commentary: This decision underscores that confirmation does not confer carte blanche over exempt property. Even where equity is partially protected under a homestead exemption, any property—vested or not—that includes non-exempt value remains subject to procedural safeguards.   The Fourth Circuit's reaffirmation of the distinction between exempting an “interest” versus an “entire asset” is significant. To the extent that vesting of assets in the debtor at confirmation,  rather than retention by the bankruptcy estate,  is allowed (as it should be under Trantham)  that does not  grant unqualified control  to Chapter 13 debtors  to sell property post-confirmation. Here, the court made clear that the proceeds attributable to non-exempt value remain subject to modification under § 1329 and court oversight. For consumer debtors, especially those pro se or guided by overly zealous counsel, this decision highlights that even if local rules such as EDNC LBR 4002-1(g)(4) are improper,  the correct avenue for challenging those is the appellate process  not simply ignoring them. The existence of a potential defense of reliance on advice of counsel also raises thorny ethical issues  for debtors attorneys,  as that would seem to trigger a direct conflict of interest between the debtor and the lawyer,  who may or may not have provided improper or inaccurate advice. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document sugar_sasser_v._burnett.pdf (242.27 KB) Category 4th Circuit Court of Appeals

4th Cir.: Carroll Management v. Dun & Bradstreet- Defamation and Credit Reporting Ed Boltz Mon, 04/21/2025 - 15:46 Summary: In this defamation and unfair trade practices case, six related real estate companies sued Dun & Bradstreet (“D&B”), alleging that the business credit reporting giant published misleading and false credit assessments—labeling them high or moderate risk, including outdated or erroneous legal filings, and creating damaging implications regarding their creditworthiness. The District Court for the Middle District of North Carolina dismissed the complaint with prejudice under Rule 12(b)(6), finding the statements non-defamatory and the Plaintiffs unable to demonstrate injury under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”). The Fourth Circuit affirmed, holding that the proposed amended complaint failed to cure the deficiencies and was futile. Specifically, the Fourth Circuit found that: The statements in D&B’s reports, such as classifications of legal actions and business risk ratings, were accompanied by disclaimers and date stamps that would lead a reasonable reader to understand the possibility of outdated information. The Plaintiffs’ claims of implied defamatory meaning were not supported by factual allegations to plausibly establish falsity or harm. The UDTPA claims failed due to the absence of “actual injury,” as reputational harm alone—especially where defamation claims fail—cannot support UDTPA liability. Having failed to cure these issues through a proposed amended complaint, the Plaintiffs also lost their appeal of the district court’s refusal to permit amendment and the original dismissal with prejudice. Commentary: While Carroll did not involve the Fair Credit Reporting Act (FCRA), its reasoning maps closely onto FCRA jurisprudence—particularly in emphasizing: the importance of context and substantial accuracy; the legitimacy of relying on public records; the necessity of alleging and proving actual harm; and the sharp boundary between commercial and consumer reporting. In practice, Carroll serves as a reminder that pleading vague allegations about “false credit information” may  not survive in any forum—state or federal—unless grounded in specific, provable facts tied to a cognizable injury under the correct statute. See also the law review article by Christopher Hampson,  Defamation, Bankruptcy & the First Amendment,     With proper attribution,  please share this post.  Blog comments Category 4th Circuit Court of Appeals

Average Property Tax Amount on Single Family Homes Up 2.7 Percent Across U.S. in 2024 Ed Boltz Mon, 04/21/2025 - 15:40 Available WITH INTERACTIVE MAPS at:  https://www.attomdata.com/news/market-trends/home-sales-prices/2024-annual-tax-report Summary: ATTOM released its 2024 Property Tax Analysis for 85.7 million U.S. single-family homes which shows that $357.5 billion in property taxes were levied on single-family homes in 2024, down 1.6 percent from 2023. The average tax bill rose 3% to $4,172 in 2024 despite a slight dip in effective tax rates.  Home values rebounded 4.8% to an average of $486,456 after a decline in 2023.  Effective tax rates decreased slightly to 0.86%, down from 0.87% in 2023.  Commentary: Interestingly,  at +21/1%,  the Raleigh-Durham metro area  had the largest increase in average tax bills,  while Charlotte, NC  had the largest decrease at -7.3 %. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document attoms_2024_u.s._property_tax_analysis_for_single-family_homes_compressed.pdf (406.22 KB) Category Law Reviews & Studies

E.D.N.C.: Macedon v. North Carolina- Dismissal of Sovereign Citizen Action Challenging Foreclosure Ed Boltz Mon, 04/21/2025 - 06:10 Summary: In this foreclosure-related action, the district court  dismissed with prejudice a pro se complaint challenging a completed non-judicial foreclosure under a mélange of constitutional, statutory, and sovereignty-based theories.       The court applied the Rooker-Feldman doctrine to bar the borrower’s attempt to unwind a state-court authorized foreclosure order, underscoring that federal courts nearly always  lack jurisdiction to review or reverse state court foreclosure rulings.     The court also found that assistant clerks acting in their judicial capacities—here, approving a foreclosure—are immune from suit as individuals, being  shielded by Eleventh Amendment sovereign immunity.   The  Plaintiff’s complaint was also dismissed for numerous defects: lack of jurisdiction, failure to state a claim, and incomprehensible legal theories.  Commentary: This is not the end of this case,  as it has been (as is  de rigueur for sovereign citizen lawsuits)  appealed to the Fourth Circuit Court of Appeals.  At least the complaint wasn't signed with a bloody thumbprint. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document macedon_v._north_carolina.pdf (285.04 KB) Category Eastern District

4th Cir.: Fluharty v. Philadelphia Indemnity- No Standingor Settlement Control for Trustee in D&O Policy Dispute Ed Boltz Fri, 04/18/2025 - 19:32 Summary: In two intertwined bankruptcy cases—one corporate (Geostellar, Inc.) and one personal (David and Monica Levine)—the respective trustees sought a declaratory judgment that they, not David Levine, controlled the right to settle claims under a $3 million wasting D&O policy issued by Philadelphia Indemnity. Their aim: to access the policy proceeds as the only meaningful source of recovery for claims that would otherwise be discharged. But both the bankruptcy court and the district court found the trustees lacked standing The Court of Appeals affirmed,  holding that  the Geostellar Trustee lacked standing because the policy did not provide first-party coverage to the debtor-corporation—only to individual directors and officers. And under West Virginia law, third-party plaintiffs cannot sue an insurer unless coverage is denied or a judgment is unpaid—neither of which applied.   The Levine Trustee lacked standing because any personal liability of Levine had already been discharged. As such, the estate had no economic interest in the outcome of the adversary action or in the right to settle the claim. Section 541(a)(1) did not help either trustee, because the proceeds of the D&O policy were not estate property. Courts have consistently held that when a policy offers only direct coverage to directors and officers (rather than indemnity to the debtor entity), the proceeds belong to the insured individual—not the estate. Implications for Consumer Bankruptcy and Debtor Protections While primarily a corporate insurance case, In re Levine carries several important implications for individual consumer debtors and Chapter 7 and 13 trustees: Commentary: North Carolina is even more restrictive on the rights of third-party plaintiffs  than West Virginia appears to be, which have led to involuntary bankruptcies being filed in order that a Trustee can assert this sort of claim against automobile insurers for the eventual benefit of third-party plaintiffs as creditors.  See In re Carter. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document fluharty_v._philadelphia_indemnity.pdf (145.17 KB) Category 4th Circuit Court of Appeals

Bankr. E.D.N.C.: In re Smith- Tax Lien attachment to Tenancy by the Entirety Property in Chapter 13 Ed Boltz Fri, 04/18/2025 - 19:30 Summary: Following the 4th Circuit decision in In re Morgan a Chapter 7 trustee can reach entireties property to pay IRS debt even without a pre-existing tax lien.  The Trustee's  calculation:  After subtracting the statutory exemption of $70,000 (comprising the $35,000 homestead exemption that would be available to both Mr. Smith and his non-filing spouse under N.C. Gen. Stat. § 1C-1601(a)(1)), the Trustee contends that there is $90,456.90 in equity above exemptions. To reach the value that would be paid to the IRS in a hypothetical liquidation under chapter 7, the Trustee subtracts from that figure $6,838 in attorney's fees, a priority claim of $18,152.50, and the chapter 7 trustee's fee of $15,542. The Trustee maintains that the remainder, $49,924.40, would be paid to the IRS as the only general unsecured creditor that could reach the tenancy by the entireties property.  The Debtor's calculation: Mr. Smith's calculation of non-exempt equity also starts with a property value of $336,000 and factors in liquidation costs and total liens to reach the property's net value, but diverges from the Trustee's calculation by dividing the net value in half, providing Mr. Smith's non-filing spouse with one-half of the value, and leaving Mr. Smith with an interest of $80,557.78. From there, he subtracts his homestead exemption of $35,000, the priority claim of $18,152.50, attorney's fees of $6,838, and the hypothetical chapter 7 trustee's fee of $15,542, leaving $4,645.54 in non-exempt equity to be paid to the general unsecured claim of the IRS. Judge McAfee recognized the Morgan holding, but found that in Chapter 13, a debtor can still propose a plan that only commits the value of their 50% interest in the entireties property, noting that  pursuant to N.C.G.S. §§ 41-58, -59, -63,  spouses have  clearly recognized equal ownership and distribution rights in entireties property, including upon sale or conversion to personal property. Accordingly, the court found that under both state and federal law, the IRS lien should be treated as attaching only to the debtor’s one-half share. Commentary: Though rooted in statutory interpretation, the court’s decision was bolstered by equitable considerations: The debt was incurred before the marriage, the property was originally owned by the now-wife, and it would be unjust to use her equity to pay the debtor’s prior tax liability. While the court emphasized it was ruling on law, this factual backdrop underscores the fairness of its outcome and the "equity of mercy is not strained"  either,  rather than merely a doctrinaire reliance on the Code. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_smith-_secured_tax_lient.pdf (277.65 KB) Category Eastern District

“Now I can’t even rent an apartment” Chuck, not his real name, talked to me last month about filing bankruptcy. He’d been trying to “resolve” his debts through one of the newer debt settlement outfits, Five Lakes.   After 18 months in a debt settlement program, Chuck can’t even rent an apartment. He had been paying Five Lakes for eighteen months and his credit score kept going down. Why was that? Why Debt Settlement/Debt Consolidation Wrecks Your Credit The big idea behind Five Lakes and others is that you stop paying your debts: “Making your creditors wait for payment encourages them” to give you a better deal: in theory. Of course every month you don’t pay, the creditors ding your credit with another delinquency.  And when you reach a settlement–if you do–with the first one or two creditors, the others still aren’t getting paid. They still keep reporting you as late and keep dragging your credit score down further. Each month you are late is reported as a delinquency in credit reporting vocabulary. And the delinquencies just pile up. Bankruptcy Stops Credit Report Delinquencies When you file bankruptcy, your creditors have to stop credit-reporting.  That means you do NOT get his with a new late report delinquency every month. Your credit takes one last hit and that’s it.  You can start the process of rebuilding your credit. That’s why studies show, most people experience an immediate improvement to their credit scores after filing bankruptcy. As soon as the bankruptcy is over–usually three and a half months in a Chapter 7–you can get new credit cards and start building good credit, while your former problems fade into the past.  In a debt settlement situation, those late payment keep chasing you. In a few years after bankruptcy, your credit can be good as new.       The post Why is Bankruptcy Better for Your Credit Score than “Debt Consolidation” appeared first on Robert Weed Bankruptcy Attorney.

“Now I can’t even rent an apartment” Chuck, not his real name, talked to me last month about filing bankruptcy. He’d been trying to “resolve” his debts through one of the newer debt settlement outfits, Five Lakes.   After 18 months in a debt settlement program, Chuck can’t even rent an apartment. He had been paying Five Lakes for eighteen months and his credit score kept going down. Why was that? Why Debt Settlement/Debt Consolidation Wrecks Your Credit The big idea behind Five Lakes and others is that you stop paying your debts: “Making your creditors wait for payment encourages them” to give you a better deal: in theory. Of course every month you don’t pay, the creditors ding your credit with another delinquency.  And when you reach a settlement–if you do–with the first one or two creditors, the others still aren’t getting paid. They still keep reporting you as late and keep dragging your credit score down further. Each month you are late is reported as a delinquency in credit reporting vocabulary. And the delinquencies just pile up. Bankruptcy Stops Credit Report Delinquencies When you file bankruptcy, your creditors have to stop credit-reporting.  That means you do NOT get his with a new late report delinquency every month. Your credit takes one last hit and that’s it.  You can start the process of rebuilding your credit. That’s why studies show, most people experience an immediate improvement to their credit scores after filing bankruptcy. As soon as the bankruptcy is over–usually three and a half months in a Chapter 7–you can get new credit cards and start building good credit, while your former problems fade into the past.  In a debt settlement situation, those late payment keep chasing you. In a few years after bankruptcy, your credit can be good as new.       The post Why is Bankruptcy Better for Your Credit Score than “Debt Consolidation” appeared first on Robert Weed Bankruptcy Attorney.

Bankr. E.D.N.C.: Sliwinski v. Sliwinski- Chapter 13 Debtor cannot Use § 363(h) to force the sale of jointly owned property Ed Boltz Thu, 04/17/2025 - 16:27 Summary: Judge McAfee held that a Chapter 13 debtor lacks standing to invoke 11 U.S.C. § 363(h) to force the sale of property jointly owned with a non-debtor spouse, because §1303 does not grant the debtor that specific trustee power. That authority rests solely with the Chapter 13 trustee, and the debtor cannot bootstrap it via § 363(b) or similar cross-referenced sections.   The court emphasized that Congress intentionally excluded § 363(h) from the list of trustee powers extended to debtors under § 1303. Attempts to read § 363(h) as “incorporated” through § 363(b) were rejected as legally unsound. This reiterates that expressio unius est exclusio alterius is not just a maxim—it’s binding when rights to sell co-owned homes are at stake. Commentary: While Chapter 13 debtors enjoy expanded powers to use, sell, or lease estate property under § 1303, this decision draws a bright line at § 363(h). Debtors seeking to fund plans through the sale of co-owned assets must either: obtain consent from the co-owner, proceed under state law partition proceedings, or involve the trustee to pursue a § 363(h) sale. The last could be accomplished, despite a hesitant trustee,  by the debtor first commencing an Adversary Proceeding under Rule 7001(3)  for a sale under § 363(h) and then filing a motion  under Rule 19(a)(2) to join the Trustee as a necessary and even involuntary plaintiff.  The factors for the court to consider include: (1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document sliwinski_v._sliwinski.pdf (167.18 KB) Category Eastern District