Shenwick & Associates Achieves Favorable Settlement in In re Celsius Preference Avoidance Action — Default Judgment VacatedAs regular readers of this blog are aware, Shenwick & Associates has developed a recognized legal specialty in cryptocurrency-related matters, including the defense of preference avoidance actions arising out of the In re Celsius Network LLC bankruptcy proceedings.To date, our firm has successfully resolved numerous Celsius preference avoidance actions on favorable terms for defendants named in adversary proceedings. We are pleased to report a recent matter that underscores the importance of prompt legal intervention, even where a defendant's procedural posture has been significantly compromised.BackgroundOur firm was recently retained by a Celsius adversary proceeding defendant domiciled in Europe who had been sued for in excess of $660,000. Prior to retaining counsel, our client failed to respond to multiple communications from Celsius and did not file a timely Answer to the Complaint. As a result, a Default Judgment was entered against him in both the United States and in the relevant European jurisdiction.Our Representation and ResultFollowing entry and service of the Default Judgment, our client retained James Shenwick, Esq. to seek vacatur of the Default Judgment and to negotiate a resolution of the underlying claim. Our firm promptly moved to vacate the Default Judgment, filed a responsive Answer to the Complaint, and engaged in substantive settlement negotiations with opposing counsel.We are pleased to announce that the matter was resolved for approximately 8% of the original claim amount — a result that represents an extraordinary outcome given the procedural posture of the case at the time of our retention. Notably, the client was also able to fund the settlement using cryptocurrency, providing additional flexibility in satisfying the agreed-upon terms.Contact Shenwick & AssociatesIf you have been named as a defendant in a Celsius preference avoidance action — whether you have already received a Default Judgment or have simply been served with a Complaint — we strongly urge you to contact our office promptly. Delay can have significant legal and financial consequences.James Shenwick, Esq.Shenwick & Associates📞 917-363-3391✉️ [email protected] schedule a telephone consultation, please click the link below:🔗 Schedule a Call with James Shenwick, Esq.Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15Shenwick & Associates counsels individuals and businesses confronting significant debt obligations, as well as creditors navigating bankruptcy proceedings.

4th Cir.: Tederick v. LoanCare, LLC- Consumer Protection Claims Under WVCCPA Are Strict Liability — Intent Not Required Ed Boltz Fri, 03/27/2026 - 14:14 Summary: In Tederick v. LoanCare, LLC, the Fourth Circuit vacated a summary judgment ruling that had dismissed a consumer class action against mortgage servicer LoanCare under the West Virginia Consumer Credit and Protection Act (WVCCPA). The appellate court held that the statute imposes strict liability, meaning that a borrower does not need to prove the servicer intended to violate the law. The decision sends the case back to the Eastern District of Virginia for further proceedings — and it provides an important clarification of how broadly consumer-protection statutes should be interpreted. The Facts: A Familiar Mortgage Servicing Problem Gary and Lisa Tederick refinanced their West Virginia home in 2004 and made regular mortgage payments for years. Like many conscientious borrowers, they often sent extra principal payments along with their monthly payment. Their note required that: payments be applied first to interest, then principal; but prepayments reduce principal once the borrower was current. Between 2005 and 2020, the Tedericks made roughly 180 combined payments that included both the scheduled payment and additional principal. But the servicers — including LoanCare — allegedly misapplied the prepayments, failing to reduce principal when they should have. The result: the borrowers claim they were charged excess interest for years. After attempts to correct the problem failed, the Tedericks paid off the loan in 2020 and then filed a putative class action alleging violations of the WVCCPA. The District Court: “Being Wrong Isn’t Enough” The district court granted summary judgment for LoanCare. Its reasoning was straightforward: Even if LoanCare misapplied the payments, the court believed the WVCCPA required proof that the servicer intentionally used fraudulent or deceptive conduct to collect a debt. Since the record showed, at most, a billing error, the court concluded the statute was not violated. In short, the district court treated the statute as if it required proof of intent to deceive. The Fourth Circuit: That’s Not What the Statute Says The Fourth Circuit disagreed — emphatically. Looking at the language of W. Va. Code §§ 46A-2-127 and 46A-2-128, the court concluded the statute does not require proof of intent. Instead, the provisions prohibit: false representations about the amount or status of a debt, and collecting interest or fees not authorized by agreement or law. Nothing in the statutory text requires that the debt collector intended the violation. Accordingly, the court held: The provisions are strict liability statutes requiring only proof that the violation occurred. The district court’s insertion of an intent requirement was therefore legal error. Legislative Purpose: Protect Consumers, Not Debt Collectors The Fourth Circuit also emphasized the remedial purpose of the WVCCPA. West Virginia’s high court has repeatedly held that the statute must be liberally construed to protect consumers from unfair and deceptive practices. If courts required proof of intent, the panel noted, the statute would lose much of its force. Indeed, the legislature included intent requirements elsewhere in the Act when it wanted them — but not in these provisions. That textual difference mattered. LoanCare’s Curious Appellate Strategy One of the more striking aspects of the opinion is the Fourth Circuit’s pointed commentary on LoanCare’s litigation posture. Before the district court, LoanCare argued vigorously that the statute required intent. On appeal, however, the company attempted to abandon that argument entirely and defend the judgment on different grounds. The panel called this move “perplexing,” noting that LoanCare appeared to have effectively “thrown the district judge overboard.” The Fourth Circuit refused to play along. What Happens Next The Fourth Circuit declined to resolve two additional issues raised by LoanCare: Whether the servicer actually misapplied the payments, and Whether LoanCare might be protected by the bona fide error defense. Because those questions were not resolved below, the case returns to the district court for further proceedings. Why This Case Matters This opinion reinforces several themes that appear again and again in consumer-finance litigation. 1. Consumer protection statutes often impose strict liability Just like the FDCPA, many state statutes are written so that a violation is enough — intent is irrelevant. Servicers and collectors cannot defend violations simply by claiming the error was accidental. 2. Mortgage servicing errors can become systemic The facts here are painfully familiar: borrower sends extra principal servicer misapplies payment interest continues to accrue borrower overpays for years Those “simple billing errors” can quietly generate large amounts of extra interest. 3. The bona fide error defense still matters Strict liability does not mean automatic liability. Debt collectors can still escape liability if they prove: the violation was unintentional, and they maintained procedures reasonably adapted to prevent it. But importantly, that is an affirmative defense — not an element the consumer must prove. Bankruptcy Angle: Why Debtors’ Lawyers Should Care Although this case arises outside bankruptcy, the reasoning will resonate with consumer bankruptcy practitioners. Mortgage servicers frequently appear in bankruptcy cases with payment histories riddled with the same kinds of accounting issues: misapplied principal payments improperly assessed interest or fees incorrect payoff calculations When those errors spill into Rule 3002.1 disputes, stay violations, or adversary proceedings, the same principle often applies: The servicer’s intent usually does not matter. If the numbers are wrong — and the borrower paid too much — liability can follow. Bottom Line The Fourth Circuit’s decision in Tederick v. LoanCare restores the straightforward rule the statute intended: If a debt collector charges interest or misrepresents the amount of a debt, it may violate the WVCCPA even if the mistake was unintentional. For consumers — and their lawyers — that is a significant clarification. For servicers, it is a reminder that “billing errors” can carry real legal consequences. To read a copy of the transcript, please see: Blog comments Attachment Document tederick_v._loancare.pdf (293.52 KB) Category 4th Circuit Court of Appeals

Law Review (Economics): Goss, Jacob and Mangum, Daniel- Liberty Street Economics- Sports Betting Is Everywhere, Especially on Credit Reports Ed Boltz Thu, 03/26/2026 - 14:33 Available at: https://libertystreeteconomics.newyorkfed.org/2026/03/sports-betting-is-everywhere-especially-on-credit-reports/ Summary (Liberty Street Economics + NY Fed Staff Report) The Federal Reserve’s analysis confirms what many consumer bankruptcy attorneys have been seeing anecdotally: legalized sports betting is not just entertainment—it is increasingly showing up as measurable financial distress. Start with the scale. Since Murphy v. NCAA, more than 30 states have legalized mobile sports betting, generating over $500 billion in wagers. Legalization causes sportsbook spending to increase roughly tenfold, driven not by existing bettors gambling more, but by new participants entering the market. But the most important—and troubling—finding is what happens next: Only ~3% of the population takes up betting after legalization, but Delinquencies increase across the entire population, by about 0.3 percentage points, and Among the actual bettors, the implied increase in delinquency is roughly 10 percentage points—essentially doubling baseline distress. And this is not confined neatly within state lines. Because betting requires only physical presence (not residency), there are significant cross-border spillovers: Nearby “illegal” counties experience about 15% of the increase in betting activity, and Nearly 60% of the increase in delinquency seen in legal states. In other words: the financial harm spreads more efficiently than the betting itself. The credit impacts are not evenly distributed. The data show that: Younger borrowers (under 40) drive most of the deterioration With notable increases in credit card and auto loan delinquencies Credit scores decline modestly, but delinquency rises more meaningfully over time The Liberty Street piece distills this bluntly: sports betting is now “everywhere,” and increasingly, it is “on credit reports.” Commentary: If this feels familiar, it should. Bankruptcy lawyers have seen this movie before—just with different props: Payday loans in the 2000s Title lending and subprime auto in the 2010s And now, sports betting apps with push notifications and instant deposits The difference this time is friction. Or rather, the complete lack of it. You no longer need to drive to a casino, walk past a row of blinking machines, and make a conscious decision to gamble. Instead: Your phone buzzes You tap You deposit (often on credit) And you chase losses in real time That is not just gambling—it is high-frequency, algorithmically nudged financial behavior. And the data confirms what behavioral economics would predict: a small percentage of users drive outsized harm, but the system-wide impact shows up in delinquency, not winnings. What This Means for Bankruptcy Filings Expect this to become a quiet but meaningful driver of filings, particularly in Chapter 13: Credit Card Load-Up + Cash Advance Cycling Many debtors will fund betting through revolving credit, leading to rapid utilization spikes and eventual default.   Auto Loan Defaults (especially subprime) The data already shows rising auto delinquencies. That is a pipeline straight into repossession and subsequent bankruptcy.   Younger Debtors Entering the System Earlier The under-40 cohort is disproportionately affected—meaning earlier financial collapse and longer lifetime credit impairment.   “Unexplained” Budget Failures in Chapter 13 Trustees and practitioners will increasingly encounter plans that fail not because of income loss, but because of ongoing gambling leakage.   Potential Litigation Angles Unfair/deceptive practices (targeted marketing, inducements) Credit extensions tied to gambling platforms Data-driven nudging that may begin to resemble predatory lending dynamics How the Bankruptcy System Should Prepare This is where things get practical—and where the system is currently behind. 1. Intake and Screening Must Evolve We need to start asking directly: “Do you use sports betting apps?” “How often?” “How are you funding it?” Because otherwise, this shows up later as “mysterious budget shortfalls.” 2. Trustee and Court Awareness Chapter 13 trustees should be alert to: Repeated post-petition overdrafts Unexplained disposable income gaps Payment instability tied to seasonal betting cycles (NFL season spikes are real, per the data) 3. Treatment: This Is Not Just ‘Bad Choices’ Gambling disorder is a recognized behavioral addiction. That means: Referral pathways to gambling counseling (analogous to credit counseling) Integration with mental health and addiction treatment Possibly even conditions in plans where appropriate (carefully, and with due regard for feasibility) 4. Means Test and Disposable Income Questions There is an unresolved tension here: Are gambling losses “reasonably necessary expenses”? (No.) But what about treatment costs? (Much stronger argument under § 707(b)(2)(A)(ii) and § 1325(b)) Expect litigation eventually on how to treat both. 5. Policy Level: The Externality Problem The Fed paper highlights a classic issue: States that don’t legalize still bear the bankruptcy and credit fallout, but get none of the tax revenue. That is a recipe for: Continued expansion of legalization Without corresponding investment in consumer protection or treatment infrastructure Final Thought The most striking statistic is not the tenfold increase in betting. It is this: a 3% participation increase produces a system-wide deterioration in credit performance. That is the hallmark of a product that: Concentrates harm Spreads consequences And hides in plain sight—until it shows up in bankruptcy schedules Bankruptcy practitioners should treat this not as a curiosity, but as the next wave of consumer financial distress—one that is faster, more digital, and more psychologically engineered than anything that came before. To read a copy of the transcript, please see: Blog comments Attachment Document sports_betting_is_everywhere_especially_on_credit_reports_-_liberty_street_economics.pdf (1.52 MB) Document sports_betting_across_borders_spatial_spillovers_credit_distress_and_fiscal_externalities.pdf (9.39 MB) Category Law Reviews & Studies

E.D.N.C.: Terrance v. Coastal Federal Credit Union- Affirms $5,000 Sanction for Stay Violation – But Limits Recovery to the Debtor Actually Targeted Ed Boltz Thu, 03/26/2026 - 14:18 Summary: In Terrance v. Coastal Federal Credit Union, the U.S. District Court for the Eastern District of North Carolina affirmed a bankruptcy court decision imposing $5,000 in sanctions for a willful violation of the automatic stay, while rejecting several broader arguments raised by the pro se debtors on appeal. The decision provides a useful reminder of two points frequently litigated in stay-violation cases: Who is entitled to damages under §362(k), and How much procedural help courts must give pro se litigants. The Facts: Bankruptcy Filed — But the Calls Kept Coming Jaden and Jesse Terrance filed a joint Chapter 7 petition on April 8, 2025. The Coastal Federal Credit Union credit card debt at issue, however, was owed only by Jaden Terrance, not by Jesse. Although Coastal quickly received notice of the bankruptcy, a glitch in newly implemented collection software failed to properly flag certain Visa accounts. As a result: Coastal sent two emails, placed 16 collection calls, and reported the account as “30 days past due” to a credit bureau after the bankruptcy filing. The calls stopped only after the debtor finally connected with a Coastal employee and informed them directly of the bankruptcy. At the sanctions hearing, Jaden Terrance testified that the repeated calls triggered significant psychological distress tied to PTSD and depression, and that the stress caused her to miss administering a medication to her spouse, Jesse, who suffers from hereditary angioedema, resulting in a serious medical episode. The bankruptcy court found the violation willful and awarded $5,000 in damages, but declined to award punitive damages. The debtors appealed. The District Court: Affirmed Across the Board Judge Louise Flanagan affirmed the bankruptcy court’s ruling in full. 1. Only the Targeted Debtor Can Recover Stay Damages The most significant legal issue concerned whether Jesse Terrance could recover damages even though the debt belonged solely to Jaden. The district court held no. Although a joint bankruptcy petition was filed, the Fourth Circuit treats joint filings as administratively combined but legally separate estates. Because Coastal attempted to collect only from the debtor whose name was on the account, only that debtor could claim a stay violation. The court rejected the argument that a spouse harmed by the violation could recover damages based on foreseeability or household impact. In short: Filing a joint petition does not expand §362(k) to cover non-obligor spouses who were not the target of the collection activity. 2. Courts Do Not Have to Act as Lawyers for Pro Se Debtors The Terrances also argued the bankruptcy court should have admitted exhibits for them or instructed them more clearly on how to prove damages. The district court rejected that as well. While courts must give pro se litigants some leeway, they are not required to act as advocates. The bankruptcy judge explained that the documents attached to the motion were not yet in evidence, and it remained the debtors’ responsibility to formally introduce them. The court noted that the bankruptcy judge nevertheless considered testimony describing the documents, which mitigated any prejudice. 3. No ADA or Due Process Violation The debtors also argued the bankruptcy court should have paused the hearing or provided accommodations when Jaden Terrance became emotional during testimony due to PTSD. The district court disagreed. The transcript showed the judge allowed time for her to compose herself, permitted Jesse Terrance to finish the closing statement, and otherwise gave the debtors a full opportunity to present their case. That satisfied both due process and the ADA’s requirement of reasonable modification. 4. $5,000 Was Within the Court’s Discretion The bankruptcy court found that the calls and emails caused real emotional distress beyond ordinary bankruptcy stress, particularly given the debtor’s medical history and the consequences for the household. Still, punitive damages were denied. The reason: the violations stemmed from a software error in a newly implemented system, which Coastal corrected immediately once the problem was discovered. Under Fourth Circuit precedent, that did not rise to the level of reprehensible conduct warranting punishment. Commentary Two aspects of this case are worth noting for consumer bankruptcy practitioners. 1. The Decision Reinforces a Narrow Reading of §362(k) The Terrances attempted to push a creative theory: that a spouse harmed by the stress and consequences of a stay violation should also be able to recover damages. From a policy perspective, the argument has some appeal. Bankruptcy stress rarely affects only one person in a household. But the court applied the Fourth Circuit’s traditional rule: the automatic stay protects the debtor against collection on that debtor’s obligations, not the household generally. Unless the creditor’s conduct is directed at the second spouse, there is no independent stay violation as to that person. 2. Even “Accidental” Stay Violations Can Be Expensive Coastal’s defense boiled down to: “Our new collections software malfunctioned.” That explanation avoided punitive damages — but not liability. Once a creditor receives notice of bankruptcy, any intentional collection act with knowledge of the stay is “willful,” even if caused by internal mistakes. Sixteen calls and two emails were enough to produce a $5,000 sanction, despite the creditor stopping immediately once the problem was discovered. That’s a useful reminder to creditors implementing new technology: automation errors are still your responsibility. The Bottom Line The district court’s decision leaves the bankruptcy court’s ruling intact: Willful stay violation: Yes Damages awarded: $5,000 Punitive damages: No Recovery by non-obligor spouse: Not allowed For practitioners, Terrance underscores the continuing strength of the automatic stay — but also the limits on who can claim damages when that stay is violated. To read a copy of the transcript, please see: Blog comments Attachment Document terrance_v._coastal_federal_credit_union.pdf (199.82 KB) Category Eastern District

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