4th Cir.: Paxton v. LVNV- Statute of Limitations for FCRA not Tolled by Fraudulent Concealment Ed Boltz Sat, 11/09/2024 - 21:37 Summary: The Fourth Circuit Court of Appeals affirmed the dismissal of  Paxton’s claims against LVNV Funding, LLC, and Jacob Law Group, PLLC. Paxton had alleged violations of the Fair Debt Collection Practices Act (FDCPA) and state law. The district court dismissed her FDCPA claims as time-barred, as the last alleged FDCPA violation occurred on May 7, 2020, but Paxton did not file her complaint until July 2021, exceeding the one-year statute of limitations. Paxton argued for tolling based on fraudulent concealment, claiming improper service and pursuit of judgment in a state where she no longer lived, but the court found her allegations insufficient. Consequently, the court also declined to exercise supplemental jurisdiction over her state claims. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document paxton_v._lvnv.pdf (122.99 KB) Category 4th Circuit Court of Appeals

Love and Marriage. Fries and Catsup. Chips and Dip. Like these famous pairings, divorce and bankruptcy are frequent companions. When a couple goes their separate ways, often the most substantial marital accumulation is debt. The questions we get as bankruptcy practitioners usually revolve around whether to file a bankruptcy case before or after the divorce.  […] The post Navigate The Marital Debt Thicket In Bankruptcy appeared first on Bankruptcy Mastery.

Bankr. MD: In re Klemkowski- Online Access to Mortgage Account during Chapter 13 Ed Boltz Fri, 11/08/2024 - 17:20 Summary: Judge Harner of the Maryland bankruptcy Court  evaluated whether CitiMortgage Inc. and its servicer Cenlar FSB violated the automatic stay under 11 U.S.C. § 362(a)(3) by denying debtor Ms.  Klemkowski access to her online payment portal after she filed for bankruptcy. Before the bankruptcy filing, Klemkowski had used this portal to make mortgage payments, but her access was revoked upon her filing. She argued this change impeded her ability to comply with her repayment obligations. The court ruled that the right to use the online portal (just another twig in the bundle of sticks), as per the prepetition agreements, became part of Klemkowski's bankruptcy estate, and that the servicer’s unilateral denial of access post-filing effectively violated the automatic stay by altering her contractual rights. However, the court found no sufficient evidence to award monetary damages since Klemkowski continued to make payments through other means, though less conveniently. The stay violation was deemed void ab initio, and the court allowed further proceedings to determine appropriate remedies, potentially including restoring portal access to uphold the debtor’s contractual rights within the bankruptcy framework. Commentary: It would seem that,  again coupled with  Trantham,  a debtor could propose a nonstandard plan provision  that required mortgage servicers to allow online access, because not only does nothing in the Bankruptcy Code prohibit such a provision,  but the refusal by mortgage servicers is,  in Judge Harner's words,  "troubling and inconsistent with the general policies underlying the Code and consumer protection laws." As an example,  the MDNC Local Form Plan at 8.2d  already  provides that: The Holder shall continue to send monthly statements to the Debtor in the same manner as existed pre-petition and such statements will not be deemed a violation of the automatic stay. Recognizing that in 2024  online access is essential and essentially the same as periodic monthly statements  seems only a modest step further,  with a such a nonstandard  provision perhaps being: The Holder shall continue to send monthly statements to the Debtor and to allow the Debtor online access to their account in the same manner as existed pre-petition and neither such statements nor information provided through the online access will not  be deemed a violation of the automatic stay. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_klemkowski.pdf (302.95 KB) Document mdnc_loop_1-1-2020.docx (162.43 KB) Category Middle District

Bankr. MD: In re Klemkowski- Online Access to Mortgage Account during Chapter 13 Ed Boltz Fri, 11/08/2024 - 17:20 Summary:   Judge Harner of the Maryland bankruptcy Court  evaluated whether CitiMortgage Inc. and its servicer Cenlar FSB violated the automatic stay under 11 U.S.C. § 362(a)(3) by denying debtor Ms.  Klemkowski access to her online payment portal after she filed for bankruptcy. Before the bankruptcy filing, Klemkowski had used this portal to make mortgage payments, but her access was revoked upon her filing. She argued this change impeded her ability to comply with her repayment obligations. The court ruled that the right to use the online portal (just another twig in the bundle of sticks), as per the prepetition agreements, became part of Klemkowski's bankruptcy estate, and that the servicer’s unilateral denial of access post-filing effectively violated the automatic stay by altering her contractual rights. However, the court found no sufficient evidence to award monetary damages since Klemkowski continued to make payments through other means, though less conveniently. The stay violation was deemed void ab initio, and the court allowed further proceedings to determine appropriate remedies, potentially including restoring portal access to uphold the debtor’s contractual rights within the bankruptcy framework. To read a copy of the transcript, please see:   Commentary:   It would seem that,  again coupled with  Trantham,  a debtor could propose a nonstandard plan provision  that required mortgage servicers to allow online access, because not only does nothing in the Bankruptcy Code prohibit such a provision,  but the refusal by mortgage servicers is,  in Judge Harner's words,  "troubling and inconsistent with the general policies underlying the Code and consumer protection laws."   As an example,  the MDNC Local Form Plan at 8.2d  already  provides that:   The Holder shall continue to send monthly statements to the Debtor in the same manner as existed pre-petition and such statements will not be deemed a violation of the automatic stay.   Recognizing that in 2024  online access is essential and essentially the same as periodic monthly statements  seems only a modest step further,  with a such a nonstandard  provision perhaps being:   The Holder shall continue to send monthly statements to the Debtor and to allow the Debtor online access to their account in the same manner as existed pre-petition and neither such statements nor information provided through the online access will not  be deemed a violation of the automatic stay.   With proper attribution,  please share this post. Blog comments Attachment Document in_re_klemkowski.pdf (302.95 KB) Document mdnc_loop_1-1-2020.docx (162.43 KB) Category Middle District

Bankr. E.D.N.C.: In re Grand Valley MHP- Appointment of Chapter 11 Trustee Ed Boltz Fri, 11/08/2024 - 15:57 Summary: The bankruptcy court appointed an interim Chapter 11 trustee, John C. Bircher III, to oversee the bankruptcy cases of several entities owned by Neil Carmichael Bender II. The decision follows concerns about mismanagement, conflicts of interest, and the complex financial entanglement among Bender's companies. The court found that Bender’s management practices, including fund transfers between entities without clear accountability and his substantial personal withdrawals amid financial strain, indicated gross mismanagement. Creditors supported appointing a trustee, citing concerns about Bender’s transparency and the companies’ unsound financial practices. The court held that appointing a trustee was both warranted by cause and in the best interest of creditors and the estate, noting that Bender’s operational decisions compromised the entities' reorganization potential. The trustee will assess whether separate trustees are necessary to address possible conflicts between the estates. Bender’s continued control was deemed unsuitable to fulfill fiduciary responsibilities essential for fair debt management and reorganization, and Bircher’s appointment may become permanent after further assessment. With proper attribution,  please share this post.    To read a copy of the transcript, please see: Blog comments Attachment Document in_re_grand_valley_mhp_et_al.pdf (339.31 KB) Category Eastern District

Bankr. M.D.N.C.: In re Autry- Denial of Debtors' Motion to Convert Ed Boltz Fri, 11/08/2024 - 15:55 Summary: The bankruptcy court denied Russell and Mildred Autry's motion to convert their Chapter 7 bankruptcy case to Chapter 13, citing their bad faith. The Bankruptcy Administrator had objected to the conversion, presenting evidence that the Autrys had concealed their ownership of a property in Ocean Isle Beach, North Carolina, which they had purchased with proceeds from the sale of another property in Tennessee. The Autrys failed to disclose this property in their initial filings, inaccurately stated that they resided in a travel trailer, and omitted other relevant financial information, such as homeowners' insurance and real estate taxes. Despite the Autrys amending their schedules after the § 341 meeting of creditors, the court found their explanations for the omissions lacking in credibility. The court concluded that their consistent concealment of the Ocean Isle property and related misrepresentations showed bad faith, which justified denying their request to convert to Chapter 13 under the principles established in Marrama v. Citizens Bank of Mass. Thus, the court upheld the Bankruptcy Administrator’s objection, denying the motion to convert. Commentary: It would not be a wild guess to assume that the Trustee, as indicated by his questions (transcribed into the opinion) at the Meeting  of Creditors,  was fully aware of the Ocean Isle beach  property and merely gave the Autrys one last opportunity to honestly disclose this asset (and enough rope to hang themselves.)   This is likely because the cost of detailed asset and liability searches,  through such programs as WestLaw PeopleMap, have become much less expensive.  Failing to use this or similar services going forward by consumer debtor attorneys may be tantamount to malpractice. With proper attribution,  please share this post.    To read a copy of the transcript, please see: Blog comments Attachment Document in_re_autry.pdf (470.6 KB) Category Middle District

Economics Review: Greene, Claire, Perry, and Julian, Stavins, Joanna- Consumer Payment Behavior by Income and Demographics Ed Boltz Fri, 11/08/2024 - 15:53 Available at:  https://www.bostonfed.org/publications/research-department-working-paper/2024/consumer-payment-behavior-by-income-and-demographics.aspx Abstract: Despite the introduction of an array of innovations and new payment options for consumers over the last decade, income and demographics remain significant predictors of payment behavior. Using data from a 2023 consumer payments diary, we find that income, age, and education are significant predictors of which payment instruments consumers adopt and use. These associations hold not only for traditional payment instruments—cards and paper—but also for innovations such as mobile apps; buy now, pay later (BNPL); and cryptocurrency. In 2023, less educated consumers were significantly less likely than other consumers to adopt any payment instrument, especially checks and electronic payments, even when we control for income and employment. After controlling for education, we find that high-income consumers used credit cards significantly more relative to other consumers. Younger and more educated consumers were most likely to adopt mobile payment apps. Women, Black and Latino consumers, and those who had filed for bankruptcy in the previous year were significantly more likely to have used BNPL. Men were nearly three times as likely as women to adopt cryptocurrency. Key Findings: The most significant factors affecting the adoption and use of any payment instrument in 2023 were income, age, education, and credit scores—the same factors that were important a decade ago. Consumers’ assessments of the characteristics of a payment instrument also influenced their decision on whether to adopt that instrument. Consumers’ choices concerning payment innovations, including the use of mobile payment apps, BNPL, and cryptocurrency, were affected by demographic and financial attributes. In addition to age, education, and income, race affected BNPL use and the acquisition of cryptocurrency. Higher self-reported FICO scores were associated with a higher likelihood of adopting a checking account and using credit cards, and with a lower likelihood of using cash and debit cards.  Implications: Patterns in the adoption and use of payment instruments that were identified in studies from more than a decade ago have persisted: Age, education, and income remain the most important determinants for the adoption and use of paper, card, and electronic payment instruments. The same demographic and financial factors also significantly affect the adoption and use of new payment options, including mobile apps and BNPL. Commentary: The significantly higher likelihood that women, Black and Latino consumers and those who had filed bankruptcy use "Buy Now, Pay Later" (BNPL) payment methods,  might also be a part of the explanation,  in addition to the "debt sweatbox",  implicit racial biases in steering debtors' chapter choice,  and others,  for why members of those demographic groups tend to choose Chapter 13,  which is often a BNPL bankruptcy,  over  Chapter 7,  with its upfront costs. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document consumer_payment_behavior_by_income_and_demographics.pdf (851.87 KB) Category Book Reviews

4th Cir.: Fernandez v. Rentgrow- Standing for FCRA Violation Requries Evidence that Misleading Information was read and understood Ed Boltz Fri, 11/08/2024 - 15:52 Summary: In Fernandez v. RentGrow, Inc., the Fourth Circuit Court of Appeals vacated and remanded the district court’s class certification in a case where plaintiff Marco Fernandez sued RentGrow under the Fair Credit Reporting Act (FCRA). Fernandez alleged that RentGrow included misleading Office of Foreign Assets Control (OFAC) alerts (flagging potential matches to a U.S. Treasury list of criminals) in its tenant screening reports without adequate accuracy procedures, harming his reputation. The district court certified a class, reasoning that all affected individuals suffered harm simply from the dissemination of inaccurate information. The Fourth Circuit disagreed, holding that concrete reputational harm for Article III standing requires more than just disseminating a report; the recipient must read and understand the misleading information. Evidence showed the property manager reviewing Fernandez’s report did not comprehend the OFAC alert, meaning no reputational harm occurred. Since Fernandez lacked standing, the court ordered the lower court to re-evaluate class certification based on this understanding of harm and standing requirements. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document fernandez_v_rentgrow.pdf (176.89 KB) Category 4th Circuit Court of Appeals

   A Bloomberg article https://news.bloomberglaw.com/bankruptcy-law/senate-proposal-would-grow-small-business-bankruptcy- eligibility  is reporting that a new Senate proposal aims to increase the debt limits for Subchapter V bankruptcy eligibility for small businesses. This proposal would restore the higher debt limit of $7.5 million for Subchapter V filings, up from the current limit of about $3 million. The expansion would allow more businesses to take advantage of Subchapter V's benefits, which include a more streamlined and cost-effective restructuring process compared to traditional Chapter 11 bankruptcies. The potential revival of the higher debt limit comes after a significant drop in small business bankruptcy filings following the expiration of the previous $7.5 million threshold. Subchapter V, introduced in 2019, initially applied to businesses with less than $2.7 million in debt but was expanded to $7.5 million in 2020 as part of COVID-era business relief. This expansion was extended in 2022 but eventually expired, reverting the eligibility requirement to about $3 million. We are monitoring these developments and will continue to report on updates to Subchapter V.  We help individuals and businesses who have too much debt!Jim Shenwick, Esq  917 363 3391  [email protected]  Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min We help individuals & businesses with too much debt! 

Law Review Note: Reilly, Jack- The Timing of a Debtor's Petition for Bankruptcy can Determine if a Pending Title Pawn Contract becomes Property of a Debtor's Estate Ed Boltz Thu, 11/07/2024 - 19:27 Available at:   https://scholarship.law.stjohns.edu/cgi/viewcontent.cgi?article=1365&context=bankruptcy_research_library Abstract: Section 541 of title 11 of the United States Code (the "Bankruptcy Code") determines whether property comes into a debtor's bankruptcy estate falling under the protection of the automatic stay afforded by section 362 of the Bankruptcy Code. Bankruptcy Code section 541 defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case[.]" What constitutes a debtor's "legal or equitable interest" in property is determined by state property law, making state law the determining factor in whether a debtor's interest in a specific property constitutes property of the estate. The state law inquiry of whether property is property of the estate has led to divergent outcomes in factually similar or identical bankruptcy cases in different jurisdictions. In cases involving the debtor pawning an item of value and subsequently filing a bankruptcy petition, these differing outcomes are not always due to the differences in state pawn statutes. This memorandum examines how bankruptcy courts determine whether pledged property in a title pawn transaction enters a debtor's bankruptcy estate. Section I gives a brief overview of the transaction which is the title pawning of an item. Section II details three Bankruptcy Code sections that are relevant to the determination as to whether a title pawned item constitutes property of the estate. Section III analyses the timeline of a title pawn contract to demonstrate how the time of filing for bankruptcy impacts whether the pledged collateral is placed in the debtor's bankruptcy estate or is forfeited to the pawnbroker. Commentary: This note recognizes that because under California law,  a title lender is required to provide notice to the debtor before obtaining legal title to a vehicle,  with the filing of a bankruptcy,  the automatic stay prevents the title lender from sending that notice.  This is contrasted with Georgia,  where title to automatically passes upon the failure of the debtor to timely redeem the property.  But  the automatic stay of §362(a)  applies to "all entities",  which  includes  the debtor also.  And although  City of Chicago v. Fulton established that merely maintaining the status quo did not violate the automatic stay,  the failure to act is itself an act. So isn't the debtor's  failure to redeem  itself a violation of the automatic stay and hence void, with the pledged collateral remaining an asset of the estate until the court grants relief to the debtor to not redeem? With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document the_timing_of_a_debtors_petition_for_bankruptcy_can_determine_if.pdf (346.43 KB) Category Law Reviews & Studies