S. Ct.: ​Coney Island Auto Parts v. Burton — Why “boring” bankruptcy cases (that are barely about bankruptcy) still matter Ed Boltz Wed, 01/28/2026 - 15:44 Summary: At first glance, Coney Island Auto Parts Unlimited, Inc. v. Burton, which may be the annual "Kumbaya" bankruptcy"  case that Supreme Court Justices took to try and be (mostly) unanimous before the acrimony of the rest of its docket sets in, looks like a fairly pedestrian procedural dispute—one that barely seems to belong in the bankruptcy canon at all. It is, after all, a civil-procedure case about Rule 60(b)(4), default judgments, and whether a motion to set aside a “void” judgment must still be brought within a reasonable time. The Supreme Court’s answer was a firm yes: Rule 60(c)(1)’s reasonable-time requirement applies even when the judgment is alleged to be void for lack of proper service. The Sixth Circuit was affirmed, and the defendant lost its chance to unwind a six-year-old default judgment. The holding, briefly. Justice Alito, writing for eight justices, focused on text and structure. Rule 60(c)(1) says all Rule 60(b) motions must be made within a reasonable time; the Rule expressly creates a one-year cap for some grounds, but nowhere carves out an unlimited window for void-judgment claims. Even if a void judgment is a “legal nullity,” that does not entitle a litigant to sleep on its rights forever. Due process, the Court reasoned, is satisfied by a flexible “reasonable time” standard—particularly in default cases, where it may be reasonable not to act until enforcement efforts put the defendant on notice. Justice Sotomayor concurred in the judgment, cautioning that the majority wandered unnecessarily into constitutional hypotheticals no party raised. But on the core point—that void does not mean timeless—there was no dissent. Why this “boring” case isn’t boring at all. As SCOTU Sblog recently observed in The Case for Embracing Boring Cases, these disputes only look dull until you’re the one on the wrong end of a default judgment: Additionally, as a few justices noted during oral argument, this case could have consequences for people across the country, particularly those who may not know enough about the law to realize when to take a legal document seriously. The dispute won’t seem very boring if you’re the one in need of more time to challenge a default judgment. That observation lands squarely in the consumer-bankruptcy world. Default judgments often become the predicate for wage garnishments, bank levies, and—critically—credit reporting. The credit-reporting angle bankruptcy lawyers shouldn’t miss. The “Big Three” credit reporting agencies have long tried to sidestep consumer disputes tied to bankruptcy discharges by labeling them “legal” rather than “factual.” This has included questioning whether a judgment or bankruptcy discharge is truly final and settled.  That move took a hit in the Fourth Circuit’s Roberts v. Carter-Young decision, where the court rejected the idea that CR As can avoid their FCRA reasonable-investigation duties simply by invoking a “legal dispute” mantra.  Coney Island Auto Parts reinforces the same instinct from a different angle: procedural rules still matter, even when the underlying defect is serious. Just as CR As cannot ignore bankruptcy discharges by waving the word “legal,” litigants cannot ignore timing rules by waving the word “void.”  The one-year time limit to set aside a judgment or bankruptcy discharge precludes that distinction. Void vs. avoidable — an oblique but important reminder. The Court treats “voidness” as real, but not magical. A judgment may be void, yet still subject to procedural limits on when relief can be sought. That maps closely onto bankruptcy doctrine. Actions taken in violation of the automatic stay—such as liens recorded post-petition—are generally described as void and, in theory, never valid in the first place. By contrast, preferential or fraudulent transfers, including preferential liens, are merely avoidable under provisions like 11 U.S.C. § 548, and remain fully effective unless and until the trustee (or debtor with standing) affirmatively acts to avoid them. When that happens, 11 U.S.C. § 551 steps in to preserve the avoided lien for the benefit of the estate, meaning the value of the lien is captured for creditors as a whole and is not swept back to the debtor through individual exemptions. Practice takeaway. Yes, this is a “boring” case. It does not expand the discharge, redefine estate property, or announce a new consumer-protection doctrine. But it quietly reinforces something bankruptcy practitioners see every day: default judgments, notice failures, and timing rules have long shadows—affecting collections, bank accounts, and credit reports years later. For debtors and consumers, missing a deadline can be just as devastating as losing on the merits. And for lawyers, this case is a reminder that even the dull corners of procedural law can shape outcomes long after the bankruptcy case itself has faded from view. For further analysis and commentary,  please see: Rochelle's Daily Wire:  Supreme Court Holds Void Judgments Must Be Attacked Within a ‘Reasonable Time’   With proper attribution,  please share. To read a copy of the transcript, please see: Blog comments Attachment Document coney_island_sup_ct.pdf (98.13 KB) Category Federal Cases

N.C. Ct. of App.: Eagles v. Integon Indemnity Corp.: Receivership as the End-Run (Again), Standing Still Matters, and Bankruptcy’s Shadow Looms Large Ed Boltz Fri, 01/23/2026 - 15:25 Summary: The North Carolina Court of Appeals’ January 21, 2026 decision in Eagles v. Integon Indemnity Corp. is not a bankruptcy case—but it reads like one written in bankruptcy ink. Anyone who followed In re Carter and In re Black will immediately recognize the terrain: catastrophic tort judgments, frustrated collection efforts, insurers accused of bad-faith failure to settle, and creative procedural maneuvering to get at insurance-related causes of action that otherwise sit beyond the creditor’s direct reach. At bottom, Eagles is about who gets to sue whom, when, and from where. And like Carter and Black before it, the answer turns on standing, jurisdiction, and courts’ deep skepticism of procedural shortcuts designed to manufacture leverage rather than resolve insolvency. The Holding (In Plain Terms) After a $40 million drunk-driving verdict—the largest in North Carolina history—the judgment creditors hit the familiar wall: executions returned unsatisfied. They then sought appointment of receivers to pursue potential bad-faith and unfair-trade-practice claims against the insurer, Integon Indemnity, based on alleged failure to settle within policy limits. Integon tried to seize the initiative by filing its own declaratory judgment action in Forsyth County—but did so in the name of the wrong corporate entity. That mistake proved fatal. Because the plaintiff lacked standing at the moment of filing, the trial court never acquired subject-matter jurisdiction. Everything that followed in that action—motions, amendments, rulings—was a nullity. The Court of Appeals vacated the Forsyth County orders and remanded with instructions to dismiss without prejudice . Meanwhile, the receivers’ Nash County action survived intact. Venue was proper, there was no basis to stay in favor of a null action, and Integon’s attempts to force the case elsewhere failed. Standing is not a technicality. It is jurisdictional. And you do not get to fix it later. Why This Sounds So Familiar: Carter and Black Revisited: If this all feels déjà vu, it should. In In re Carter, the Middle District of North Carolina allowed an involuntary Chapter 7 to proceed over insurer objections, holding that insurers lacked standing to derail the case and that potential first-party bad-faith claims were legitimate estate assets worth preserving through bankruptcy . The bankruptcy court rejected the notion that using bankruptcy to marshal those claims was inherently abusive.   (For more see:  Bankr. M.D.N.C.: In re Carter- Standing in Involuntary Bankruptcy; Good Faith in Filing Involuntary Bankruptcy) By contrast, In re Black landed on the opposite end of the spectrum. There, the court dismissed an involuntary petition as filed in bad faith, condemning it as a single-creditor collection device whose real purpose was to conscript a bankruptcy trustee into pursuing non-assignable insurance claims. The opinion is a cautionary tale—fact-intensive, ethics-laden, and deeply skeptical of “bankruptcy as leverage” . Eagles sits squarely between those poles. Like Carter, it validates the idea that fiduciaries (there, a trustee; here, receivers) may pursue insurers for failure-to-settle claims when traditional collection tools fail. Like Black, it underscores that courts will not tolerate procedural gamesmanship—especially when jurisdiction is manufactured or assumed rather than properly invoked. The Bankruptcy Subtext (Even Outside Bankruptcy): What makes Eagles particularly interesting for bankruptcy practitioners is how closely it tracks bankruptcy doctrine without ever invoking the Code: Standing is measured at filing. Just as in bankruptcy, you cannot amend your way into subject-matter jurisdiction. Procedural consent doesn’t cure jurisdictional defects. Participation, delay, or strategic silence cannot validate a void action. Fiduciary collection tools are scrutinized. Whether it’s a trustee under § 541 or a receiver under state law, courts look hard at motive and structure. The case is also a reminder that receivership and bankruptcy are often competing—or complementary—routes to the same end: getting control of causes of action that belong to the debtor, not the creditor. Carter shows when bankruptcy can work. Black shows when it backfires. Eagles shows that even outside bankruptcy, the same fault lines apply. Bottom Line: Eagles v. Integon Indemnity Corp. reinforces three durable lessons: Standing is foundational. Get it wrong at filing, and nothing else matters. Courts will tolerate creative collection strategies—but not jurisdictional shortcuts. The Carter–Black spectrum still governs. Whether in bankruptcy court or state court, the legitimacy of using fiduciary proceedings to reach insurer liability turns on good faith, proper parties, and procedural integrity. For insurers, this is a warning shot: receivership-based bad-faith litigation is not going away. For judgment creditors, it’s a reminder that precision matters. And for bankruptcy lawyers, it’s further proof that our doctrines—standing, estate property, good faith—continue to shape outcomes well beyond the walls of the bankruptcy court. With property attribution,  please share this post.   To read a copy of the transcript, please see: Blog comments Attachment Document eagles_v._integon_indem._corp.pdf (210.62 KB) Category NC Court of Appeals

Law Review: Barbieri, Paolo and Bottazzi, Laura and Di Giacomo, Giuseppe-​ Debtor Protection and Health Insurance: Evidence From Personal Bankruptcy Reform (June 19, 2024). Ed Boltz Wed, 01/21/2026 - 15:40 Available at:   https://ssrn.com/abstract=4892813 Abstract: The authors  investigated how the use of bankruptcy as an implicit health insurance varies across households, focusing on heterogeneity by asset holdings, race, marital status, and educational attainment. Using a difference-in-differences design based on the 2005 bankruptcy reform, the authors found that the reform modestly increased health insurance coverage among middle-income households unlikely to lose assets under Chapter 7, with stronger effects for married and less educated households. The reform primarily affected White households, suggesting racial disparities in bankruptcy use. Treated households also showed increased healthcare utilization and spending. These heterogeneous effects highlight how the reform may have deepened existing health and financial inequalities. Commentary: The recently released paper “Debtor Protection and Health Insurance: Evidence From Personal Bankruptcy Reform” adds rigorous empirical support to something consumer bankruptcy lawyers have understood intuitively for decades: for a meaningful slice of middle-class households, bankruptcy functions as a form of implicit health insurance. When that protection is weakened, families respond—sometimes by purchasing or retaining health insurance, and sometimes by forgoing care or absorbing greater financial risk. Using the 2005 BAPCPA reforms as a natural experiment, the authors show that tightening access to Chapter 7 modestly increased private health insurance coverage—but only for a narrow group: middle-income households with few or no non-exempt assets, particularly married and less-educated households. At the same time, the reform increased health-care utilization and spending, largely through private insurance rather than out-of-pocket payments. The takeaway is not that BAPCPA “worked,” but that bankruptcy protections and health insurance are substitutes at the margin. Reduce one, and households scramble—if they can—to shore up the other. 1. Policy Implications: Why This Paper Strengthens the Case for Higher Bankruptcy Exemptions Particularly from a North Carolina policy perspective, this paper is gasoline on a fire that has already been smoldering for years. Bankruptcy exemptions are health policy The authors confirm that asset exemptions matter. The households most affected by BAPCPA were those who did not expect to lose property in Chapter 7. In other words, bankruptcy provided a credible safety net only because exemptions were sufficient to protect basic household stability. When that safety net was weakened, households responded by reallocating risk—often at significant cost. This matters enormously in a state like North Carolina, where: Homestead, vehicle, and wildcard exemptions lag well behind inflation; Medical debt remains a dominant driver of financial distress; and Health insurance coverage is increasingly fragile as premiums rise and subsidies phase out. If bankruptcy operates as implicit health insurance, then inadequate exemptions are effectively a cut to consumer health protection, especially for families living one diagnosis away from insolvency. The ACA subsidy cliff makes this urgent The paper’s findings land at exactly the wrong moment for consumers. With Affordable Care Act subsidies expiring or shrinking, many middle-income households face sharply higher premiums. The paper suggests that when formal insurance becomes less affordable, families will predictably lean more heavily on bankruptcy as a risk-management tool—unless bankruptcy itself is made less protective. That combination—weaker insurance support and weak exemptions—is a recipe for deeper inequality, delayed care, and worse financial outcomes. The authors explicitly warn that BAPCPA’s effects “extended well beyond filing behavior,” reshaping health and financial inequality. A clear legislative lesson For legislators, especially in North Carolina, the message is straightforward: Raising exemptions is not a giveaway. It is a stabilizer. Adequate exemptions reduce the need for households to make destructive tradeoffs between health, debt, and shelter. This paper provides empirical backing for what consumer advocates have long argued: bankruptcy policy is inseparable from health policy, whether lawmakers acknowledge it or not. 2. Practice Guidance: What Consumer Bankruptcy Attorneys Should Do with This Data This paper is not just academic. It should meaningfully shape how consumer bankruptcy attorneys identify risk, counsel clients, and prepare cases—especially in the coming ACA transition period. Spotting clients at heightened risk The households most sensitive to changes in bankruptcy protection look very familiar: Middle-income families, Limited non-exempt assets, Often married, Often without a college degree, Reliant on employer-based insurance or ACA plans. When such clients present with: Rising medical debt, Lapsed or downgraded health insurance, Hesitation to seek care due to cost, That is a bankruptcy red flag, not just a budgeting issue. Health insurance belongs in the intake—and the Means Test The paper reinforces the importance of health insurance as a core component of bankruptcy analysis, not an afterthought. Under 11 U.S.C. § 707(b)(2)(A)(ii)(I), debtors are entitled to deduct the cost of “reasonably necessary” health insurance. As premiums rise post-subsidy, that deduction will matter more, not less. Consumer attorneys should: Rigorously document actual premium costs, Anticipate increases when subsidies expire, Push back on artificial caps or skepticism about “reasonableness.” This research supports the argument that health insurance is not discretionary consumption—it is a risk-management necessity, especially when bankruptcy protections have already been narrowed. Counseling beyond the petition Perhaps most importantly, the paper validates a broader counseling role for bankruptcy attorneys. The authors show that insurance coverage increases preventive care and reduces out-of-pocket exposure. That means: Advising clients on maintaining coverage post-discharge is part of competent representation; Timing of filing may matter when insurance transitions are imminent; Chapter choice and exemption planning intersect directly with health-care access. In short, bankruptcy lawyers are already operating at the intersection of health, debt, and family stability. This paper simply provides the data to prove it. Bottom Line: This study confirms what decades of consumer practice have revealed: bankruptcy fills gaps left by a fragmented and expensive health-insurance system. When lawmakers weaken bankruptcy protections without strengthening health coverage, households absorb the shock—unevenly, and often painfully. For North Carolina, the policy lesson is clear: raising exemptions is a necessary response to rising medical and insurance costs, not an indulgence. For practitioners, the lesson is equally clear: health insurance status is bankruptcy analysis, especially as ACA subsidies fade and premiums climb. The law may pretend these systems are separate. This paper shows they never were. With proper attribution, please share. To read a copy of the transcript, please see: Blog comments Attachment Document debtor_protection_and_health_insurance_evidence_from_personal_bankruptcy_reform.pdf (1.41 MB) Category Law Reviews & Studies

Bankr. M.D.N.C.: In re Sinclair — Automatic Stay Does Not Block Enforcement of Federal Restitution Lien Ed Boltz Tue, 01/20/2026 - 15:41 Summary: In In re Sinclair, the Judge Kahn held that the automatic stay in a Chapter 13 case does not prevent the United States from continuing a district-court civil action to enforce a criminal restitution lien against real property formerly owned as tenants by the entirety—even though the bankruptcy debtor herself was not the criminal defendant. The debtor filed Chapter 13 and listed her Durham residence as estate property. Years earlier, her spouse (or ex-spouse, depending on which part of the record you read) had been convicted of wire fraud and ordered to pay restitution. Under the Mandatory Victims Restitution Act (MVRA), a restitution lien arose in 2008 and attached to all of the criminal defendant’s property and rights to property, including his undivided one-half interest in the entireties property. The government later filed a civil action seeking a forced sale of the entire property, with proceeds attributable to the criminal defendant’s former interest applied to restitution and the balance paid to the debtor. After the bankruptcy filing, the debtor argued that the automatic stay barred continuation of the civil action because (1) she—not the criminal defendant—now owned the property, and (2) the property was now property of the bankruptcy estate. The court rejected both arguments and ruled that the stay never applied in the first place. Holding: Relying heavily on its earlier decision in In re Turner and the district court’s affirmance, the court held that: The MVRA’s enforcement provision, 18 U.S.C. § 3613(a), applies “[n]otwithstanding any other Federal law,” including the Bankruptcy Code and the automatic stay. Once a restitution lien validly attaches to a criminal defendant’s property or rights to property, that lien survives later transfers—including transfers to a spouse—and may be enforced through a judicial sale. The fact that the debtor is not the “person fined,” and that the property is now property of the bankruptcy estate under § 541, does not alter the analysis. Because the restitution lien attached when the criminal defendant held an interest, the government may proceed with enforcement notwithstanding § 362. The court therefore entered an order declaring that the automatic stay does not apply to the pending district-court action and denied stay relief as unnecessary. Commentary: This is a sobering but unsurprising opinion, and one that bankruptcy lawyers in North Carolina need to have firmly on their radar. The takeaway is simple and harsh: federal criminal restitution liens are nuclear-grade collection devices. Once they attach, they behave much like federal tax liens—and the MVRA makes explicit that Congress intended exactly that result. Entireties law, § 541 estate-vesting arguments, and the automatic stay all yield to the “notwithstanding any other Federal law” language of § 3613. What makes Sinclair particularly painful is that the debtor herself was not the criminal wrongdoer. Yet the court correctly recognized that allowing a restitution debtor to neutralize enforcement simply by transferring property to a spouse—or by the spouse filing bankruptcy—would “eviscerate” the statute. Bankruptcy is powerful, but it is not a safe harbor from criminal restitution. For consumer practitioners, this case is a reminder to ask hard questions early: Is there criminal restitution? Has a lien attached? When did it attach? And does the client understand that Chapter 13 cannot stop a forced sale when the United States is enforcing a restitution judgment tied to a spouse’s prior property interest? For debtors, the result feels brutal. For Congress, it is exactly what was intended. And for the rest of us, Sinclair reinforces that when bankruptcy law collides with federal criminal enforcement, bankruptcy usually loses. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_sinclair.pdf (586.68 KB) Category Middle District

Bankr. W.D.N.C.: In re Ford (Ford III) — When “Tribal Sovereignty” Arguments Collapse into Contempt, Sanctions, and a Permanent Loss of Discharge Ed Boltz Mon, 01/19/2026 - 15:04 Summary: If Ford II was the Court firmly closing the door on pseudo-tribal sovereignty arguments, Ford III is what happens when a debtor keeps pounding on that door long after it has been shut—and padlocked. In an extraordinary 82-page opinion, Judge Ashley Austin Edwards brings this long-running pro se Chapter 7 saga to its inevitable conclusion: terminating civil contempt only because the case has reached its endpoint, reducing accrued sanctions to judgment, permanently denying the debtor’s discharge, barring further filings without court permission, and referring the matter to both the U.S. Attorney and Mecklenburg County District Attorney for potential criminal investigation. What Changed from Ford II? Nothing doctrinal—and that is the point. As discussed in the prior blog post (Bankr. WDNC: Re Ford II—Court Rejects Tribal Sovereignty Claims, Denies Recusal), the Court had already: Rejected claims that property transferred to a purported “tribal” LLC was outside the bankruptcy estate, Rejected arguments that bankruptcy courts lack authority over such property, Rejected recusal motions premised on alleged bias against “tribal” litigants, and Ordered the debtor to comply with routine, baseline Chapter 7 obligations: disclose assets, disclose income, turn over bank records, tax returns, and leases. Ford III is not about novel law. It is about persistent noncompliance. The Core Findings Judge Edwards methodically documents what practitioners will instantly recognize as a pattern—not confusion, not misunderstanding, but strategic obstruction: False schedules and testimony, including repeated denials of rental income, bank accounts, and transfers; Asset transfers to an LLC labeled as “tribal property”, while simultaneously asserting personal ownership and control whenever convenient; Refusal to comply with Rule 2004-style disclosures, including bank records, leases, tax returns, and documentation of the “tribal courses” supposedly generating future income; Improper filings on behalf of an LLC, despite repeated warnings that an entity must appear through counsel; Serial motions attacking the Court’s Article I authority, jurisdiction, and legitimacy—arguments already rejected multiple times. At bottom, the Court found that the debtor’s conduct made it impossible to administer the estate and impossible to trust anything filed or said. Civil Contempt, Then What? The Court formally terminated civil contempt, but only because it had run its course—not because the debtor ever meaningfully purged it. Accrued fines were reduced to judgment, making them enforceable like any other debt. More importantly, the Court imposed the ultimate bankruptcy sanction: Permanent denial of discharge. Not dismissal. Not conversion. Not a temporary bar. A permanent loss of the fresh start—a remedy reserved for the most egregious cases of bad faith and abuse of process. Reporting to Prosecutors In a move that should still make practitioners sit up straight—but for a different reason—the Court’s criminal referral was not directed at the Debtor personally, but instead at the Tribal entities and individuals purporting to provide “jurist” or legal instruction and guidance. The Court referred the matter to both federal and state prosecutors based on evidence suggesting the unauthorized practice of law, including the marketing and provision of quasi-legal advice that appeared to shape the Debtor’s filings, testimony, and litigation strategy throughout the case. That step remains rare. And it serves as an important reminder that while bankruptcy courts routinely deal with bad facts and bad arguments, they draw a sharp line when third parties appear to be selling legal advice outside the bounds of licensure, especially when that advice is then deployed in active federal litigation.. Whether this court (or others in North Carolina)  will in the future similarly  refer other entities that act as lawyers without either being licensed in North Carolina or complying with its laws (Looking at you out of state  mortgage servicer attorneys)  remains an open question. Practice Commentary: The Real Lesson of Ford III This case is not really about tribal sovereignty. It is about a phenomenon bankruptcy judges are seeing with increasing frequency: Pro se debtors armed with internet-derived “jurisdictional” theories, Claims that ordinary disclosure rules do not apply, Arguments that bankruptcy trustees are “trespassing” on private or sovereign property, And a belief that repeating a rejected argument often enough will eventually make it true. Ford III makes clear that there is no safe harbor in Chapter 7 for litigating ideology instead of complying with the Code. For consumer practitioners, the takeaway is straightforward: Bankruptcy relief is powerful, but it is conditional. Disclosure is not optional. Courts will give leeway to unrepresented debtors—but not infinite patience. And when a case crosses from confusion into obstruction, the consequences escalate quickly. As the Court’s tone makes unmistakably clear, this was not a debtor who “made mistakes.” This was a debtor who refused the rules of the system while demanding its benefits. Ford III is what happens when that experiment fails. As always, this case is worth reading not for new doctrine, but for its clarity about the limits of patience—and the very real risks of treating bankruptcy court as a forum for testing sovereign-citizen-adjacent theories. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_ford_iii.pdf (1.81 MB) Category Western District

Bankr. W.D.N.C.: In re Black Pearl Vision, LLC — Claims against MCA Survive (Mostly), RICO Lives to Fight Another Day Ed Boltz Fri, 01/16/2026 - 14:33 Summary: In Black Pearl Vision, LLC v. Pearl Delta Funding, LLC, the Bankruptcy Court for the Western District of North Carolina (Judge Ashley Austin Edwards) issued a careful and consequential order granting in part and denying in part a motion to dismiss brought by two New Jersey–based merchant cash advance companies. The debtor alleged that what was labeled a “Revenue Purchase Agreement” was, in substance, a loan bearing an effective annualized interest rate of nearly 52%, secured by sweeping UCC liens, a personal guaranty, and aggressive default remedies—including ACH sweeps of 100% of revenue. Over roughly nine months, the debtor paid almost $200,000 on an advance of about $143,000. At the pleading stage, the court refused to accept the MCA label at face value. Applying well-established principles that substance controls over form, the court held that the debtor plausibly alleged the agreement was a loan rather than a true sale of receivables, particularly where the funder bore little to no risk of nonpayment and reconciliation provisions were allegedly illusory. That determination alone allowed the debtor’s constructive fraudulent transfer claims under § 548 to survive dismissal. The court did, however, draw an important line on usury. Consistent with prior North Carolina bankruptcy decisions applying New York law, the court reiterated that corporations may not use usury affirmatively as a sword. Criminal usury can be raised defensively, but not as an independent basis for affirmative avoidance. Still, that did not doom the case: the debtor adequately pled lack of reasonably equivalent value based on the stark disparity between what it received and what it paid. On RICO, the result was mixed. The court held that the debtor plausibly alleged a violation of 18 U.S.C. § 1962(a) (investment of income derived from the collection of unlawful debt), but dismissed the § 1962(c) claim for failure to plead the required distinction between the “person” and the “enterprise”—a fixable pleading defect, with leave to amend. Commentary: Why This Case Matters Beyond Merchant Cash Advances This opinion should be read as part of a much larger enforcement roadmap, not just an MCA skirmish. First, the court’s willingness to let RICO theories based on unlawful debt survive—even while trimming defective pleadings—should catch the attention of out-of-state lenders and service providers doing business in North Carolina. The logic here is not limited to MC As. It applies with equal force to: Out-of-state title lenders making loans to North Carolina residents at interest rates flatly prohibited by North Carolina law, while taking liens against vehicles through contractual sleight of hand or choice-of-law clauses; and Debt settlement or “credit relief” companies that market into North Carolina, collect fees, and provide services without complying with North Carolina licensing, fee, and conduct restrictions. Second, the decision reinforces a crucial point for bankruptcy practitioners: you do not need to win the usury fight outright to create leverage. Even where state law limits affirmative usury claims, § 548 fraudulent transfer analysis looks to economic reality, not labels. If a debtor paid far more than it received, under coercive terms, while insolvent or undercapitalized, that alone may support avoidance and recovery. Third—and this is where things get uncomfortable for repeat players—the court’s discussion of RICO “unlawful debt” opens the door to pattern-based litigation. Many of these businesses operate on a national scale using near-identical contracts, ACH authorizations, guarantees, and enforcement playbooks. If those arrangements are unlawful as to principal or interest under applicable state law, RICO is no longer theoretical. It becomes a real risk multiplier, especially once discovery begins. Finally, for North Carolina practitioners, this case fits squarely into a growing body of law pushing back on attempts to export high-cost lending and fee-based financial products into the state under foreign law labels. Bankruptcy courts are increasingly willing to look past contractual formality and ask the only question that matters: who bore the risk, and who really paid the price? Expect this opinion to be cited not just in MCA disputes, but in title-loan, litigation-funding, and debt-relief cases where out-of-state actors assumed North Carolina law would never catch up with them.   To read a copy of the transcript, please see: Blog comments Attachment Document black_pearl_vision_v._pearl_delta_funding.pdf (520.12 KB) Category Western District

 Currently Not Collectible (CNC) Status and Defaulted SBA Loans“Currently Not Collectible” (CNC) status can, in limited cases, be used to temporarily pause collection activity on a defaulted SBA loan. CNC is not an SBA program and is not available immediately after default. It may only be requested once the loan has been charged off, assigned to the SBA, and referred to the U.S. Treasury or IRS for collection. At that stage, collection efforts may include the Treasury Offset Program, private collection agencies, or IRS cross-servicing. If the IRS is the active collector, a borrower may request CNC status by demonstrating financial hardship. To qualify, the borrower must show that there is no disposable income after basic living expenses. If approved, CNC may temporarily stop wage garnishments, levies, and aggressive IRS collection actions. However, CNC does not eliminate the SBA debt or stop interest from accruing. Tax refunds may still be intercepted, and the account can be reactivated if the borrower’s financial condition improves. Even with CNC status, the SBA retains the right to enforce guarantees and resume collection efforts in the future.Borrowers or advisors with questions about defaulted SBA loans and borrower alternatives should contact Jim Shenwick, EsqJim Shenwick, Esq  917 363 3391  [email protected] click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

W.D.N.C.: Bethea v. Equifax — Defaults Aren’t Windfalls, and “Shotgun Pleadings” Miss the Target Ed Boltz Tue, 01/13/2026 - 15:40 Summary: In Bethea v. Equifax (W.D.N.C. Dec. 19, 2025), Judge Kenneth Bell offers both a procedural refresher and a cautionary tale for consumer litigants hoping to convert technical missteps into instant victory. The plaintiff sued Equifax, Navy Federal Credit Union, and Goldman Sachs, alleging inaccurate and unauthorized accounts on his credit reports, along with failures to reasonably investigate disputes under the Fair Credit Reporting Act (FCRA) — and, for good measure, invoking the Gramm-Leach-Bliley Act (GLBA). Navy Federal ,  the  the largest credit union in the United States  with about $191.8 billion in total assets,  miscalculated its response deadline by four days. The Clerk entered default and the plaintiff moved for default judgment. But the Court set aside the default, emphasizing that federal courts prefer deciding cases on the merits, particularly where the defendant acted promptly and the plaintiff suffered no real prejudice. The Court then dismissed the complaint — not on default grounds — but because it lacked factual specificity, lumped defendants together, and didn’t clearly explain what was inaccurate in the report. The GLBA claim failed outright because there is no private right of action. The dismissal was without prejudice, allowing refiling — but only with specific allegations tied to each defendant. Commentary: Courts Forgive Institutional Mistakes — But Are They Equally Forgiving to Consumers? The Court’s reasoning here is doctrinally sound. Defaults are disfavored. Cases should be decided on the merits. A vague FCRA complaint shouldn’t proceed just because the defendant was four days late. But the opinion also invites a harder question — one bankruptcy and consumer lawyers see every day: Do courts extend the same patience to consumers who default? Consider the contrast. When creditors miss deadlines “Good cause” No prejudice Resolve on the merits Defaults set aside When consumers miss deadlines In debt collection suits, foreclosure proceedings, and even bankruptcy adversaries — consumers who: don’t file an answer within 30 days don’t respond to a motion misunderstand service are pro se and confused often find themselves hit with: default judgments foreclosure orders wage garnishments liens sometimes years later discovering what happened And courts frequently emphasize finality and procedural compliance, not “deciding claims on the merits.” Yes, there are good judges who bend toward justice and give leeway — but those decisions are far less routine than the institutional forgiveness shown to banks, mortgage servicers, and national credit bureaus. Why the asymmetry matters Institutional defendants benefit from: Tall Building Lawyers calendaring systems in-house litigation teams repeat-player credibility Consumers operate with: anxiety limited legal understanding chaotic financial and life circumstances no counsel in most collection cases Yet the procedural expectations applied to each group often look identical on paper — and very different in practice. ⚖️ Could Navy Federal Have Sued Its Own Lawyers for Malpractice? While it’s easy to say Navy Federal “dodged a bullet,” the reality is that the real exposure from the blown deadline lay not with the credit union, but with its lawyers. Missing a response date is classic malpractice territory — the duty is clear, the breach obvious, and the potential consequences severe.    A further question is not whether Navy Federal could have sued its lawyers, but whether those lawyers had an ethical duty to recognize that their own potential liability created a conflict of interest requiring disclosure — and perhaps withdrawal. By missing the deadline, counsel became personally invested in persuading the court that the mistake was harmless and should be forgiven. That means their interests arguably diverged from Navy Federal’s, whose best option might have been independent advice about potential claims, strategy, and risk. At a minimum, that conflict should have been disclosed to Navy Federal; some would argue it should also have been candidly addressed with the court, and even with Bethea, to avoid any appearance that counsel was litigating primarily to protect themselves. Whether courts would actually require that level of transparency is another matter — but the issue reminds us that when procedural errors occur, lawyers are not just advocates, they may be witnesses and parties with skin in the game, and the rules of professional responsibility are supposed to account for that. The lesson in Bethea: This opinion is a reminder to: 1️⃣ Draft well-pleaded, fact-specific FCRA complaints. 2️⃣ Avoid relying on technical defaults as strategy. 3️⃣ Continue pushing courts to apply their “preference for merits decisions” consistently — including when consumers stumble. If default is a disfavored “windfall,” that should be true whether the party asking for relief is Navy Federal — or a working family trying to save a home from foreclosure. ⚖️ Takeaway Bethea is doctrinally correct — but it highlights an uneven playing field. Creditors get grace. Consumers get judgments. The challenge for consumer advocates is not simply litigating well-pleaded cases — but continuing to press courts to extend the same mercy to the people the system was supposedly built to protect.   To read a copy of the transcript, please see: Blog comments Attachment Document bethea_v._equifax.pdf (315.08 KB) Category Western District

N.C. Bus. Ct.: Meridian Renewable Energy LLC v. Birch Creek Development, LLC- Effect of Bankruptcy Filing on Third Parties in Lawsuit Ed Boltz Mon, 01/12/2026 - 15:18 Summary: The Business Court addressed what happens when one party in multi-party commercial litigation files bankruptcy — here, Pine Gate Renewables’ Chapter 11 filing — while litigation continues between the remaining parties. Judge Houston held: Claims against Pine Gate are stayed under §362. The stay does not extend to Meridian’s contract and tort claims against Birch Creek. The competing declaratory judgment claims are dismissed without prejudice, because deciding them would necessarily involve determining Pine Gate’s contractual rights while Pine Gate is frozen in bankruptcy. Everything else proceeds.  Commentary: This opinion is yet another reminder that the automatic stay is powerful — but it isn’t contagious. §362 protects the debtor — not everyone standing near the debtor North Carolina courts continue to follow the rule that unless there are extraordinary circumstances, the stay applies only to the debtor, not co-defendants trying to enjoy a free litigation vacation. Birch Creek’s argument that everything should grind to a halt failed for the same familiar reason: joint obligors remain jointly liable, and North Carolina law expressly allows the plaintiff to proceed against one. Why dismiss the declaratory judgment claims? Because those claims weren’t really narrow clarifications — they were invitations to declare everyone’s rights under multi-party agreements, including Pine Gate’s. Issuing sweeping declarations while Pine Gate is barred from defending itself would risk prejudicing the debtor and potentially interfering with the administration of the bankruptcy estate. So the Court wisely declined to play advisory bankruptcy court. Where Chapter 11 complicates things more than people expect: It’s especially important to read this opinion in light of the Supreme Court’s recent decision in the Purdue Pharma case. There, SCOTUS made clear that bankruptcy courts cannot impose broad, non-consensual third-party releases that permanently protect non-debtors simply because a debtor filed a plan. But — and this is where practitioners must be careful — Chapter 11 plans can STILL contain negotiated provisions that, in practice, insulate or benefit third parties — especially if creditors consent or receive consideration. Indemnification provisions, channeling injunctions tied to specific settlements, and claims procedures can all functionally limit litigation rights even if they don’t look like Purdue-style releases. Translation: If Pine Gate’s Chapter 11 plan ultimately includes provisions affecting litigation involving Birch Creek, Meridian, or the joint venture structure, those plan terms may later change the playing field. That means: ? Reviewing the actual Chapter 11 plan — not merely relying on §362 — becomes critical. Contrast: Chapter 13 is very different — and much stronger for co-debtors This opinion also highlights something consumer bankruptcy lawyers already know: The Bankruptcy Code can give far more protection to co-debtors in Chapter 13 than in Chapter 11. Under 11 U.S.C. §1301, the automatic codebtor stay prevents creditors from pursuing a co-signer on a consumer debt while the Chapter 13 is pending — unless the bankruptcy court grants relief. So whereas Birch Creek got no shelter from Pine Gate’s Chapter 11 filing: A mom who co-signed her son’s car note, A spouse on a joint credit card, A parent who co-signed student-style consumer financing, would generally enjoy protection in a Chapter 13 filed by the primary debtor until the court says otherwise. In other words: ✔ Chapter 11 → debtor-focused stay, limited extension to others ✔ Chapter 13 → explicit statutory shield for consumer co-debtors The takeaway: The Business Court struck the right balance: Protect the debtor where federal law requires, Keep commercial litigation moving otherwise, Avoid issuing declarations that might accidentally step on the bankruptcy court’s turf, And quietly remind practitioners that bankruptcy strategy doesn’t stop at the automatic stay — it runs through the plan. And for consumer practitioners, the comparison underscores that Chapter 13 contains protections that simply don’t exist in commercial Chapter 11 practice. To read a copy of the transcript, please see: Blog comments Attachment Document meridian_renewable_energy_llc_v._birch_creek_dev._llc.pdf (149.57 KB) Category NC Business Court

    At Shenwick and Associates, we regularly represent individuals and businesses facing financial distress, including borrowers who have defaulted on Small Business Administration (SBA) loans. Over the past several months, we have observed a marked increase in aggressive collection activity by the SBA and the U.S. Department of the Treasury against borrowers and guarantors of defaulted SBA loans.   Heightened Enforcement Activity in Late 2025 and 2026 Beginning in the last quarter of 2025 and continuing into 2026, collection efforts by the SBA and the Treasury have intensified. These efforts are not limited to letters or informal demands. Instead, we are seeing the government use a broad range of statutory collection tools, including: Retention of private collection agencies to pursue defaulted SBA loans; Administrative wage garnishment of up to 15% of a debtor’s wages, without the need for a court judgment; Seizure of federal tax refunds through the Treasury Offset Program; and Offset of Social Security benefits, with up to 15% of monthly payments taken from individuals who are personally liable for, or who guaranteed, SBA loans.   These collection actions are being taken against both primary obligors and personal guarantors of SBA loans. If you signed a personal guarantee, your personal income and federal benefits may be at risk.   The “They Won’t Collect” Myth We recently met with a new client who told us that their accountant had advised them: “Don’t worry about a defaulted SBA loan—the SBA isn’t really collecting on those loans.” Unfortunately, that advice is simply wrong!   Based on our recent experience and the increasing number of calls we are receiving, it is clear that the SBA and Treasury authorities are actively pursuing collection of defaulted SBA loans. Assuming that the government will not act is a mistaken and risky strategy that can result in wage garnishments, lost tax refunds, and reduced Social Security income. Take Action Early If you have defaulted on an SBA loan, or if you personally guaranteed an SBA loan that is now in default, it is critical to take proactive steps. Options may exist to address the debt, such as a mitigate collection efforts, or restructure or resolve the obligation, or a bankruptcy filing and or a payment plan with Treasry—but those options are often time-sensitive.   Consulting with an experienced bankruptcy and workout professional can make a meaningful difference in protecting your income, your retirement income and your financial future.   If you are facing collection activity related to a defaulted SBA loan, we encourage you to seek qualified legal advice sooner rather than later. For those clients or their advisors who have questions with respect to defaulted SBA loans, please contact Jim Shenwick, Esq.   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!