Consumer Bankruptcy

November 2021 brought with it a first-of-its-kind, incredibly successful event with ABI’s Consumer Practice Extravaganza Nov. 3-12 (CPEX21). Attendees learned about all aspects of consumer bankruptcy practice from intake to post-filing, and from basic chapter 7 cases to cryptocurrency. One common theme may have gone unnoticed, however: access to justice.

The Second Circuit’s August 2021 decision in In re Gravel[1] has already received considerable attention and generated much debate. Gravel involved the Vermont bankruptcy court’s initial entry of $375,000 in sanctions against a mortgage creditor based on the creditor’s inclusion of fees on a monthly mortgage statement — fees that were not included in the “amount due” on the statement and for which it did not file notice under Bankruptcy Rule 3002.1(c). The bankruptcy court entered $300,000 contempt sanctions in two chapter 13 cases based on the chapter 13 trustee’s request for violation of its “deem current” orders at the end of the cases, and $75,000 sanctions in the same two cases plus a third case as “other appropriate relief” as provided in Rule 3002.1(i), the remedy provision.

Co-Chairs Chris Hawkins and Michelle Bass thank all committee members for their support and participation this year. Despite the continuing challenges presented by COVID-19, we were able to maintain momentum in 2021 after a very productive 2020.

https://connect.abi.org/webmail/107412/795351011/0559c3a0f45ca40da3ece0…

In City of Chicago v. Fulton  (Fulton), [1] the Supreme Court settled a split among circuits regarding the correct interpretation of § 362(a)(3), which prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over of property of the estate. [2] The Court held that mere retention was not an “act” prohibited under § 363(a)(3). The Court’s holding was based on the plain meaning of the statute and the perception that the majority interpretation rendered the turnover statute, § 542, both surplusage and contradictory to § 362(a)(3).

In July, the Second Circuit issued an opinion favoring the dischargeability of certain private student loans in what appears to be a growing circuit trend. This trend correlates with the call for student loan reform, which has been at the forefront of the news in recent months.

The childhood riposte “none of your beeswax” has some legal analogs; among them is the doctrine of standing. Standing limits the scope of legal rules, including the automatic stay. [1] Many courts agree that acts in violation of the automatic stay are not voidable but void. [2] If this is true, who may assert that voidness? Whose “beeswax” is an automatic stay violation? In Bank of New York Mellon v. Enchantment at Sunset Bay Condo Ass’n (“Enchantment”), [3] the Ninth Circuit addressed and affirmed a nondebtor’s standing to assert a stay violation where such a violation is void rather than voidable.

In a pair of decisions, the U.S. Bankruptcy Court for the Western District of Texas took on two fundamental issues arising in an adversary proceeding for nondischargeability concerning a judgment for defamation arising out of alleged sexual misconduct. In Joseph Mazzara v. Donna Shute Provencher,[1] the bankruptcy court grappled with the following issues: (1) whether defamation findings in state court are binding in bankruptcy; and (2) whether messages in “private” Facebook groups are discoverable.

February 2020 brought some good news for borrowers hoping to discharge their student loans in bankruptcy with Judge Cecelia Morris’s decision in Rosenberg v. N.Y. State Higher Educ. Servs. Corp.[1] That hope seemed to be quashed again by the Second Circuit in March in an appeal by a different debtor in Tingling v. United States Dep’t of Educ.,[2] but a closer reading of the underlying facts should give most borrowers — particularly those who have made payments on their loans in the past — some reason to avoid despair.