by Herbert Wiggins | Aug 19, 2023 | automatic stay, bankruptcy, BANKRUPTCY LAW, creditors
“STAYING” AWAY FROM CONTEMPT SANCTIONS
Suppose you find yourself in this situation. You’ve been involved in litigation for months against a party you believe defrauded you out of thousands of dollars. After protracted legal proceedings, your judge finally sets a trial date. You are finally going to have your day in court against this person.
But shortly before you go to trial, you receive a tip that your defendant has filed for bankruptcy. And not only that, but you also find out that this person filed for bankruptcy a couple of years ago, in the middle of your case, and did not tell you or your judge. And not only that, but you also find out that the person received a discharge (cancellation of all pre-bankruptcy unsecured debt), and that the trustee determined that the person had no assets. The bankruptcy case is CLOSED.
No problem. You think that, because you have a trial date, all you have to do is go before your state court judge and plead your case for fraud. Surely, your state court judge can grant you relief, and force this fraudulent, thieving defendant to pay you your damages.
What could possibly go wrong? Unfortunately, a lot.
Because the case has closed, there is no more “automatic stay” of 11 USC Sec. 362. There is, however, a “discharge injunction” 11 USC Sec. 524(a), which means that creditors are barred from attempting to collect discharged debts.
Furthermore, the Bankruptcy Court has exclusive jurisdiction over the question of whether these discharged debts are related to fraud. 11 USC Sec. 524 (a)(2), (4) & (6); Grogan v. Garner, 498 U.S. 279, 284 n. 10, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991); Aldrich v. Imbrogno (In re Aldrich), 34 B.R. 776, 779 (9th Cir. B.A.P.1983), cited in Ackerman v. Eber (In re Eber) 687 F.3d 1123 (9th Cir. 2012).
Based on these authorities, you will likely seek to file a dischargeability complaint under 11 USC Sec. 524 (a)(2), (4) or (6), in the Bankruptcy Court; or an action to revoke the discharge under 11 USC Sec. 727 (d), for example, if there are multiple false statements or multiple examples of deception in the defendant/debtor’s bankruptcy papers, such that it appears that the discharge itself was obtained through fraud.
Additionally, the US Supreme Court has ruled that if the Plaintiff or Plaintiff’s attorney is well-versed in bankruptcy law, the failure to observe the discharge injunction (in this case, failure to seek a ruling on fraud in the bankruptcy court) is considered much more knowing and culpable. Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) [Slip Opinion, p. 7]. In other words, to paraphrase a line from Michael Mann’s film, The Insider, “The more you know, the worse (the contempt sanction) gets.”
The point is that you want your client to have the maximum ability to seek a ruling on the defendant’s alleged fraud in State Court. This, however, must await a ruling from the Bankruptcy Court in this regard, and any attempt to circumvent the Bankruptcy Court could easily backfire and be very costly.
by Herbert Wiggins | Feb 23, 2023 | bankruptcy, Fair Lending, mortage, Real Estate
Where homeowner lost property to non-judicial foreclosure, Arizona’s “anti-deficiency law” meant that the junior mortgage, which was unsecured following the foreclosure, had been “abolished,” pursuant to previous Arizona Supreme Court ruling. Therefore, the lender’s reporting of the junior mortgage as a “charge off,” rather than an abolished loan, was inaccurate and misleading. The former homeowner/borrower had a colorable claim against the junior lender, pursuant to the Fair Credit Reporting Act, 15 U.S.C. §§1681, 1681a–1681x. The trial court’s erroneous decision to dismiss borrower’s lawsuit was reversed.
Gross v. Citimortgage, Inc., Citibank, NA, Equifax Information Services LLC, Experian Information Solutions, Inc., & Trans Union LLC (9th Circuit, 2022), 33 F.4th 1246
United States Court of Appeals, Ninth Circuit.
Argued and Submitted 11/17/2021 at San Francisco, California.
Opinion Issued 5/16/2022.
by Herbert Wiggins | Feb 10, 2023 | mortage, Real Estate
San Diego County Debtor Filed Bankruptcy Petition in 2021. Bankruptcy Court Held, and 9th Circuit Court of Appeals Agreed, that California’s $600K 2021 Homestead Exemption Applied in its Entirety. That Exemption is then Added to the Mortgage Balances and Other Liens on the Property, and Where, as Here, the Sum of Those Figures Exceeds the Value of the Real Estate, the Debtor May Avoid the Trustee’s Claims. Debtor was Not Limited to the Statutory Exemption Amount at the Time the Lien was Incurred (2014).
Barclay [US Trustee] v. Boskoski [Debtor] (9th Circuit, 2022) 52 F.4th 1172;
Argued and Submitted 9/23/2022, at Pasadena, California.
Opinion Issued 11/14/2022.
by Herbert Wiggins | Nov 17, 2022 | Fair Lending, Red Lining
During the years of the Financial Crash (2007-2012), one could read in the press about something called “predatory lending,” or “lending discrimination,” or “disparate treatment,” or “disparate impact.” These concepts and legal doctrines were important because they spoke to the fact that persons of color were treated deceptively or unfairly, or tended to receive subprime loans, or loans that they could not repay, or were preyed upon by certain lenders. The end result was that minority borrowers were much more likely to have their homes foreclosed upon than were Caucasian borrowers.
Central to the effects of the Financial Crash upon minority borrowers, in particular, was the belief among certain lenders that they could do whatever they wanted with regard to minority borrowers.
A recent ruling from Pennsylvania points to the continued need for vigilance with regard to lending discrimination. The US Department of Justice and the Consumer Financial Protection Bureau sued Trident Mortgage for redlining practices against borrowers of color in the Philadelphia area. Consumer Financial Protection Bureau v. Trident Mortgage Company LP, Case No. 2:22-cv-02936, U.S. District Court for the Eastern District of Pennsylvania.
In its press release of July 27, 2022, announcing the settlement with Trident Mortgage, the Department of Justice stated that:
“Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color, or national origin of residents of those communities. The complaint in federal court today alleges that from at least 2015 to 2019, Trident failed to provide mortgage lending services to neighborhoods of color in the Philadelphia Metropolitan area, that its offices were concentrated in majority-white neighborhoods, and that its loan officers did not serve the credit needs of neighborhoods of color. The complaint also alleges that loan officers and other employees sent and received work e-mails containing racial slurs and referring to communities of color as ‘ghetto.’ ”
The director of the Consumer Financial Protection Bureau, Rohit Chopra, stated the importance of fighting discrimination, when he said, in connection with the Trident settlement, “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”
The Department of Justice, in commenting on the consent order, stated that the Truth in Lending Laws and other anti-discrimination laws must continue to be enforced. 15 USC §§1601, et seq (Truth in Lending Act); 15 USC §1691 (Equal Credit Opportunity Act); 15 USC §1681 et seq. (Fair Credit Reporting Act). Courts will have an important role, looking to the letter of the anti-discrimination laws, their intent, and to the reality on the ground, rather than finding excuses to look the other way, and blame the victim, simply because confronting reality may be uncomfortable or inconvenient.
Warning: These Posts Does Not Constitute Legal Advice; Please Consult An Attorney
by Herbert Wiggins | Oct 6, 2022 | bankruptcy, BANKRUPTCY LAW
Where trustee failed to file the adversary proceeding within the time required by law, he could not undo the error by claiming that he had timely filed an adversary complaint in the wrong case. The facts of the InterWorks bankruptcy had nothing to do with the improper file, and thus there was no “relation back” effect based on the late-filed adversary proceeding in the Interworks case. Additionally, the fact that the trustee dismissed the adversary proceedings that he started in the improper case nullified any application of the relation back doctrine; when he dismissed the improper case, there was nothing for the new pleading to “relate back” to.
Furthermore, there was no equitable tolling, so the adversary action was barred. FRCP 15(c)(1)(B); 11 USC 108(a) & 546 (a).
In re Interworks (Chapter 7) CC-22-1027-STL [Unpublished decision of the Bankruptcy Appellate Panel for the 9th Circuit, filed 8/19/2022]
