Tag Archives: Pro se legal representation in the United States

How Homeowners Can Use Ibanez Case to Fight a Wrongful Foreclosure

26 Monday Mar 2018

Posted by in Bankruptcy, Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, MERS, Mortgage Laws, Mortgage mediation, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Securitization, State Court, Your Legal Rights

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Many homeowners who found themselves in wrongful foreclosure situation may have a valid defense, against the perpetrators of these crimes.

How much does it cost to get justice, when a bank forecloses on your house illegally? Thousands of ex-homeowners don’t pursue their rights to a financial settlement because they assume they couldn’t pay the legal fees.

In fact, it costs less than you fear. Consumer lawyers take a few cases at no charge. More likely, you’ll pay fees — upfront or on a monthly plan — tied to the lawyer’s estimate of the time it will take and your ability to pay. If they win your case, they’ll collect from the financial institution, too.

Before readers attack the “greedy lawyers” for defending “deadbeat” clients who couldn’t repay their mortgage loans, let me quote from a groundbreaking decision of 2011 by the Massachusetts Supreme Court. The court reversed two foreclosures because the banks — Wells Fargo and U.S. Bancorp, acting as trustees for investors — couldn’t prove that they actually owned the mortgages. Judge Robert J. Cordy excoriated them for their “utter carelessness.” The fact that the borrowers owed the money was “not the point,” he wrote. The right to deprive people of their property is a powerful one and banks have to prove they have the legal standing to do so.

American law cannot allow property seizures based on backdated, incomplete, or fraudulent documentation, no matter what the circumstances are. Otherwise, no one’s home is safe. Courts enforce private property rights through the cases brought before them. In other words, lawyers.

The Massachusetts case began not with consumers, but with the banks themselves. They asked the courts to affirm that the foreclosures were valid so they could get title insurance. That pulled the borrowers — Antonio Ibanez and Mark and Tammy LaRace — into the fray. When the horrified courts looked at how the foreclosures had gone down, they said, “no way,” and gave the former owners their property back.

Ibanez, a special ed teacher, bought the home for investment in 2005 and defaulted in 2007 on a $103,500 loan, according to the court papers. Even since, the house has been boarded up. Ibanez filed a Chapter 7 bankruptcy, so he now has title to the home and no obligation on the debt. The mortgage investors will take the loss.

The LaRaces borrowed $103,200 to buy their home in 2005 and also defaulted in 2007. They had an offer on their home, but the servicer foreclosed anyway. (During the trial, the foreclosing law firm admitted that servicers are graded on how quickly they can liquidate a mortgage.)

The LaRaces have moved back into their long-unattended home, but first they had to clean up mold, fix plumbing, and make other repairs. They would gladly resume payments on the mortgage, their lawyer Glenn Russell says. But the trustee bank doesn’t own the loan. The investors don’t own it because the mortgage was never transferred properly. The original lender, Option One, no longer exists. So whom do they pay?

This important case opens the door to thousands of foreclosure do-overs in Massachusetts at the time, and continuing and equally influenced courts in other states, as well. But there hasn’t been a rush by lawyers to get involved, probably because the field is complex and not especially remunerative. No class actions have been certified, as at that time or shortly thereafter, so the cases proceeded one by one. The financial trail can be hard to track (the Massachusetts documents were unwound by mortgage-fraud specialist Marie McDonnell).  The lawyer — often, a sole practitioner — is up against the awesome resources of major financial institutions.

Neither Ibanez nor the LaRaces were charged for their lawyer’s services. Collier had file a claim for wrongful foreclosure and was paid from any settlement. Russell did the same. At the time, Russell also thinks the LaRaces are owed something for the cost of repairing their home.

Very few cases start as pro bono, however. Lawyers who defend consumers have bills to pay, just as the banks’ corporate attorneys do. You may opt to fight it Pro Se using the package from our website, or if you want to fight an unfair foreclosure, you might be offered one of several arrangements:

An upfront fee. “Many of my clients were formerly very successful individuals,” Russell says. On average, the value of the homes of the people who contact him is “somewhat north of $500,000.” He suggests a fee based on their means.

Monthly payments. If you’re not making monthly mortgage payments, some portion of that money could be applied to legal expenses. Collier says he puts the payments into escrow and retains them if he gets the house back (he says he always does, in predatory lending cases).

Bankruptcy payment plans. The clients of North Carolina bankruptcy attorney Max Gardner are usually in a Chapter 13 monthly repayment plan. Each state sets the maximum attorney’s fee, payable as part of the plan.

Mostly, the attorneys get paid by suing the financial institutions, who settle claims or suffer court judgements due to their own illegal activity. People who beat up on consumer lawyers scream that they bring frivolous cases just for the fees. But consumer lawyers only get paid if their case is good, so they’re pretty rigorous about whom they choose to represent. “I was called crazy for practicing in this area of law, as in ‘I would be broke’ by not getting enough fees,” Russell says. “Three years later, I am still here and still living my motto of helping people first.”

Most homeowners are successful fighting there case Pro Se using the package we offer for fighting Foreclosure, as your interest is at stake, and you have the most to lose, not Attorneys. They gets paid whether you win or lose. However, homeowners equally have options when fighting wrongful foreclosure.

If you think you have a case, your toughest challenge isn’t fees, it’s finding a lawyer with the expertise to press your claim successfully, Gardner says. If you don’t have a personal reference for a qualified lawyer, the best place to look is the website of  the National Association of Consumer Advocates. Next best: the National Association of Consumer Bankruptcy Attorneys. In either case, ask if the lawyer has won other securitization, mortgage servicing, and foreclosure cases. “They have to know what documents to ask for,” Gardner says. That’s what wins.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

 

How Homeowners Can Greatly Improve their Chances of Winning on Appeal

24 Wednesday Jan 2018

Posted by in Appeal, Case Laws, Case Study, Discovery Strategies, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, Scam Artists, Title Companies, Trial Strategies, Your Legal Rights

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A seasoned Attorney will tell you that trying cases is one of the most exciting things a litigator does during his or her career but it is also certainly one of the most stressful. While in the trenches during trial, many litigators understandably focus all of their energies on winning the case at hand. But a good litigator knows that trial is often not the last say in the outcome of a case. The final outcome often rests at the appellate level, where a successful trial outcome can be affirmed, reversed, or something in between. The likelihood of success many times hinges on the substance of the record on appeal. The below discusses a variety of issues that trial litigators should keep in mind as they prepare and present their case so they position themselves in the best possible way for any appeals that follow.

Prepare Your Appellate Record From The Moment Your Case Begins

Perhaps one of the biggest misconceptions regarding preserving an adequate record on appeal is when a lawyer should start considering what should be in the record. In short, the answer is from the moment the complaint is filed. At that time, counsel should begin to think carefully about the elements of each asserted cause of action, potential defenses and their required elements, and the burden of proof for each. Every pleading should be drafted carefully to ensure that no arguments are waived in the event they are needed for an appeal. For instance, a complaint should allege with specificity all the factual and legal elements necessary to sustain a claim, while an answer should include any and all applicable affirmative defenses to avoid waiver. See, e.g., Travellers Int’l, A.G. v. Trans World Airlines, 41 F.3d 1570, 1580 (2d Cir. 1994) (“The general rule in federal courts is that a failure to plead an affirmative defense results in a waiver.”). Likewise, if you file a motion to dismiss, ensure that the motion contains all the necessary evidence that both a trial court and appellate court would need to find in your favor. Of particular importance in federal court practice is the pre-trial order. Under Federal

Rule of Civil Procedure 16, the pre-trial order establishes the boundaries of trial. See Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 206 (5th Cir.1998) (“It is a well-settled rule that a joint pre-trial order signed by both parties supersedes all pleadings and governs the issues and evidence to be presented at trial.”). If the pre-trial order does not contain the pertinent claims, defenses or arguments that you wish to present at trial, you are likely also going to be out of luck on appeal.

Later on in the case, as the factual record becomes more fully developed, consider whether amending or supplementing the pleadings or other court submissions are necessary to make the record as accurate as possible. Most states follow the federal practice of allowing liberal amendments. However, these can be contested, particularly late in the process, closer to trial. While appellate review is often for abuse of discretion, formulating a strong motion in favor of or in opposition to an amendment can preserve the issue.

What to Keep in Mind as Your Case Proceeds

As the case develops, consider whether the elements you need to prove your case are sufficiently reflected in the information you obtain during discovery. If not, determine whether there are ways to obtain the information you need well before trial starts. By the time trial arrives, it may be too late to supplement the record to get before the trial judge and the appellate court what you need to win your case. In that regard, anything you have in writing that gets submitted to the court may very well end up being part of the record on review, so make sure it is accurate and understandable. Incomprehensible or incomplete submissions can muddy your appellate record and damage a successful appellate proceeding. In the same vein, make sure anything presented to the court prior to trial that you want to be part of the record is transcribed. Otherwise, there will be an insufficient record on appeal. This is particularly so when it comes to discovery disputes. Although they are common in present day litigation, judges hate discovery disputes. To preserve discovery issues for appeal, be sure to get a ruling, and make sure it is reflected in writing. Moreover, carefully review every pre-trial court order or other judicial communication, including court minutes, to ensure accuracy. Attempting to make corrections during the appellate process may not be possible.

Another significant area for appellate issues is the failure to timely identify experts. This is subject to an abuse of discretion standard of review, so it is important that one builds a record on the issue, particularly regarding any prejudice suffered by the untimely disclosure.

After Discovery Closes – The Motion in Limine

Once discovery has closed, consider carefully any motions in limine you may want to make. Although motions in limine are not strictly necessary, they are helpful in identifying evidentiary issues for the judge and counsel and increase the chances of a substantive objection, sidebar, and ruling when the issue arises at trial. One potential pitfall – some jurisdictions require a party to renew an objection at trial after a motion in limine has been denied, so make sure to do so if necessary. See, e.g., State ex. Rel Missouri Highway and Transp. Com’n v. Vitt, 785 S.W.2d 708, 711 (Mo. Ct. App. E.D. 1990) (“A motion in limine preserves nothing for review. Following denial of a motion in limine, a party must object at trial to preserve for appellate review the point at issue.”) (internal citation omitted). Also, if the Court delivers its ruling on a motion in limine orally, make sure it is transcribed properly by the court reporter.

Now the Trial – What to Keep in Mind

Above all else, when in doubt, object. Objections should be immediate and specifically describe the basis for the objection so the record is clear. Make the argument to win – every objection should be more than just reciting labels, and should provide sufficient information for the trial judge to decide the issue. The goal is not to be coy with the trial judge and hope for a lucky break, but to be prepared to make an argument to win the issue at trial or, alternatively, on appeal. In addition, if you are the party proffering the evidence, make sure the proffer is on the record and that you expressly state why the evidence is being offered. This may require pressing on the judge to get the full objection on the record. If you fail to do so, you risk the appellate court not reviewing the claim on appeal. See, e.g., National Bank of Andover v. Kansas Bankers Sur. Co., 290 Kan. 247, 274-75 (2010) (observing “purpose of a proffer is to make an adequate record of the evidence to be introduced … [and] preserves the issue for appeal and provides the appellate court an adequate record to review when determining whether the trial court erred in excluding the evidence.”). Also, always be careful of waiving any issues for appeal by agreeing to a judge’s proposed compromise on evidentiary issues.

An important but often overlooked consideration is the courtroom layout and dynamics. Well-thought and timely objections will be for naught if they are not transcribed. Sometimes the courtroom layout can make record preservation difficult. For example, if objections are made at sidebar conferences where the court reporter is not present, those objections may not make their way into the appellate record or be dependent on the after the fact recollections of others. See, e.g., Ohio App. R. 9(c) (describing procedures for preparing statement of evidence where transcript of proceedings is unavailable and providing trial court with final authority for settlement and approval). This should be avoided whenever possible.

Beyond objections, make sure all the evidence you need for your appeal is properly admitted by the trial court before the close of your case. All exhibits that were used at trial should be formally moved into evidence if there is any doubt as to whether they will be needed on appeal. If you had previously moved for summary judgment and lost, make sure you take the necessary steps at trial to preserve those summary judgment issues, especially in jurisdictions that do not allow interlocutory appeals.

Another important aspect of the trial is the jury instructions. Jury instructions should always be complete. Remember that the instructions you propose can be denied without error if any aspect of them is not accurate, so break them into small bites so that the judge can at least accept some parts. Specifically object to any jury instructions as necessary before the jury begins its deliberations. See, e.g., Fed. R. Civ. P. 51(c). Failure to do so will waive the right to have the instruction considered on appeal. See, e.g., ChooseCo, LLC v. Lean Forward Media, LLC, 364 Fed. Appx. 670, 672 (2d Cir. 2010) (finding that defendant’s objection to jury instructions and verdict form during jury deliberations did not comply with Fed. R. Civ. P. 51(c) and noting that the “[f]ailure to object to a jury instruction or the form of an interrogatory prior to the jury retiring results in a waiver of that objection.”).

Additionally, when you lodge your objections, make sure you explain why the jury charge is in error since general objections are insufficient. See, e.g., Victory Outreach Center v. Meslo, 281 Fed. Appx. 136, 139 (3d Cir. 2008) (holding that general objection to the court’s jury instructions and proposed alternative instructions, “were insufficient to preserve on appeal all potential challenges to the instructions” and were not in compliance with Fed. R. Civ. P. 51(c)(1)). If possible, have a set of written objections to the other side’s jury charges, and get the judge to rule on that, since judges like to hold such conferences off the record. Also, do not overlook the verdict form. Know that when you agree to a particular form (general or special), that will mean that you are probably taking certain risks and waiving certain arguments one way or the other. Give this thought, and make sure that you know the rules of your jurisdiction on verdict forms so you can object if necessary. See, e.g., Palm Bay Intern., Inc. v. Marchesi Di Barolo S.P.A., 796 F.Supp. 2d 396, 409 (E.D.N.Y. 2011) (objection to verdict sheet should be made before jury retires); Saridakis v. South Broward Hosp. Dist., 2010 WL 2274955, at *8 (S.D. Fla. 2010) (noting that Federal Rule of Civil Procedure 51(c)(2)(B) states that an objection is timely if “a party objects promptly after learning that the instruction or request will be … given or refused” and that the Eleventh Circuit “require[s] a party to object to a … jury verdict form prior to jury deliberations” or the party “waives its right to raise the issue on appeal.”). (internal quotations and citation omitted).

Finally, pay careful attention to the closing argument. This can be an area where winning at trial by convincing a jury may be at odds with preserving the issue on appeal. On the flip side, many litigators are loath to interrupt a closing argument to object. If you need to object to preserve an issue, do so.

Post-Judgment – Final Things to Consider

First, determine whether certain arguments must be made post-judgment to preserve those arguments for appeal. Some arguments (such as those attacking the sufficiency of the evidence) must be made at that time or they are waived. See, e.g., Webster v. Bass Enterprises Production Co., 114 Fed.Appx. 604, 605 (5th Cir. 2004) (holding that failure to challenge back pay award in post-judgment motion waived the issue on appeal absent exceptional circumstances that did not exist). Written motions post-judgment should include all relevant references to trial transcripts and evidence to make as complete and clean a factual record as possible

Second, when the appellate record is being compiled, carefully double check the record to ensure its accuracy. Many times the trial court clerk or court reporter accidentally omits portions of the record. If this is not caught and corrected in a timely manner, you may be stuck with a bad record. Most jurisdictions have procedures in place for supplementing and correcting the record but understand them well in advance so there is adequate time to address any discrepancies before the appellate briefing is due.

Conclusion

Too often even seasoned trial lawyers get tripped up on appeal by not having an orderly and complete record. A litigator must never lose sight of the factual and legal issues in a case and what an appellate court will need to consider in making the desired determinations. As demonstrated above, a winning record requires thought at all stages of the litigation, not just when the notice of appeal is filed. With proper preparation, attention to detail, and forethought, one can ensure that the proper record on appeal is never in doubt.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

Why Do Homeowners Need to File Chapter 7 Bankruptcy

27 Wednesday Dec 2017

Posted by in Bankruptcy, Federal Court, Foreclosure Defense, Judicial States, Non-Judicial States, Pro Se Litigation

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WHY DO YOU NEED TO FILE “CHAPTER 7” PRO SE BANKRUPTCY?

Bankruptcy laws does not require debtors to have an attorney to file for bankruptcy relief. You are allowed to represent yourself in Chapter 7 or Chapter 13 bankruptcy as a “Pro se” debtor. “Bankruptcy” can be a daunting and even frightening, concept.

A better way to deal with these fears was conceived by the founders of our country when they, purposefully, included in the Constitution the “subject of Bankruptcies throughout the United States.” And so, through several incarnations, the present bankruptcy law remains the surest way to obtain a fresh financial start.

Individuals can file bankruptcy without an attorney, which is called filing Pro se.

One out of every 10 Bankruptcy cases is filed WITHOUT a lawyer.

Once you have filed for bankruptcy, your wage garnishment will cease. Creditors included in the filing must stop all collection activity after a bankruptcy is filed, including garnishment proceedings. Your extra wages should help you catch up on your mortgage payments and assist in solving one of your financial troubles.

SO YOU MAY ASK – WHY DO YOU NEED TO FILE “CHAPTER 7” BANKRUPTCY?

Fresh Start
Chapter 7 bankruptcy is a form of debt relief by which you may eliminate unsecured debts such as credit cards, medical bills and personal loans. In most cases, you can keep your home, car and other personal belongings. In order to be eligible for Chapter 7, your income, usually, can be no greater than the medium income for your State, based on the size of your family.

Stop Garnishments
A Chapter 7 is one of the most effective ways to immediately stop garnishments. Garnishments can take a portion of your hard-earned wages, making it nearly impossible for you to afford basic necessities. By filing a Chapter 7 bankruptcy and stopping the garnishment, you will be able to use your income for more important necessities for your family and possibly start saving for your family’s future.

Stop Creditor Harassment
If creditors are bothering you at work or home, harassing your family, friends and neighbors, call at all hours, you can put an end to it immediately simply using our Bankruptcy package to file your Bankruptcy.

Cosigner Is Not Paying
If you cosigned for a friend or relative, and their failure to pay that debt has resulted in collection activity or a lawsuit against you, Chapter 7 can eliminate your liability for the cosigned debt.

Eliminate Repossession Debt
After your vehicle is repossessed, they auction it off to reduce their loss, usually at a sales price much less than the retail value. You are still responsible for the balance on the car, called a “deficiency balance.” Remove the risk of law suits & garnishments arising from the deficiency balance by filing a Chapter 7.

“Reaffirm” Credit Cards You Want to Keep
The process of “reaffirmation” during the chapter 7 bankruptcy, will allow you to retain credit cards for which you, and the credit card company, want the relationship to continue. When you “reaffirm” the debt, you usually must promise to pay the debt you otherwise would eliminate in the proceedings.

End Law Suits
Lawsuits to collect debts are automatically enjoined upon the filing of a chapter 7 bankruptcy. The worry of a judgment with resultant garnishments and levies will no longer be a concern. The creditor must abide by bankruptcy laws and stop the lawsuit!

Rebuild Your Credit
Chapter 7 is one way for you to begin re-establishing your credit by reducing your debt-to-income ratio. With little or no remaining debt, lenders may see that you will be better able to repay your debts in the future. Many people who file Chapter 7 will finance cars after discharge and may even receive solicitation for unsecured credit within months. With our package, your can also see the estimate of what your credit score will be 1 year after the bankruptcy is completed, if you follow the prescribed plan.

Now What?

Our Pro se Bankruptcy package may be able to provide you with many of the following benefits. BUY NOW
(Forms, Pleadings and Guides, Case Law, References – Including Adversary Proceeding).

What Every Homeowner in Foreclosure Need to Know About Bankruptcy Appeals

27 Wednesday Dec 2017

Posted by in Bankruptcy, Federal Court, Foreclosure Defense, Legal Research, Litigation Strategies

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Every appeal requires an appellate advocate to understand and follow a series of rules. When an appeal is from a decision by a federal bankruptcy court, there is yet another layer of rules and complexity to consider. This article briefly identifies a dozen important points
about bankruptcy appeals.

1. The Time for Filing a Notice of Appeal in a Bankruptcy Appeal Is Generally Shorter Than in Other Appeals.
Under 28 U.S.C. § 158(c)(2) and Federal Rule of Bankruptcy Procedure (“Bankruptcy Rule”) 8002(a), a party seeking to appeal a decision by a bankruptcy court has 10 days to file its appeal.1 This is 20 days less than the 30 days a party generally is given under the Federal Rules of Appellate Procedure (“F.R.A.P.”) to appeal from district court to a federal appellate court.2 As with F.R.A.P. 4(a)(5), the Bankruptcy Rules permit some leeway if an appellant misses its deadline. Under the Bankruptcy Rules, a bankruptcy court may allow an appellant who fails to timely file up to 20 additional days to file where that appellant can demonstrate “excusable neglect.”3 After 30 days, however, a bankruptcy appellant loses its right to appeal even if there is excusable neglect.4 Factors to be considered in determining whether there is excusable neglect include the danger of prejudice to the appellee; the length of delay and its impact on the judicial proceeding; the reason for the delay; whether the delay was in the movant’s control; and the movant’s good faith.5

2. An Appellant May Waive an Issue Not Raised at the Outset of its Bankruptcy Appeal.
Under Bankruptcy Rule 8006, within 10 days of filing its Notice of
Appeal, an appellant must file and serve a designation of the items to be
included in the record on appeal and a statement of issues to be presented
on appeal. If an appellant fails to include an issue in this Statement, the
issue is waived even if this had been raised and/or decided by the bankruptcy
court.6

3. Those Who Ignore Deadlines and Procedural Rules May Forfeit Their Appeal.
Bankruptcy Rule 8001(a) authorizes dismissal of a bankruptcy appeal when a party fails to take any required step other than filing its Notice of Appeal. Courts adjudicating bankruptcy appeals may dismiss appeals when a party fails to take a necessary step, such as filing its record designations, statement of issues or its brief.7
While the Bankruptcy Rules permit dismissal, however, certain circuits require the appellate court to weigh a series of factors before it dismisses a case in its entirety. For example, the Third Circuit requires the balancing of six factors before a case is dismissed. These are:
• The extent of the party’s personal responsibility;
• The prejudice to the adversary caused by the failure to meet scheduling
orders;
• A history of dilatoriness;
• Whether the conduct of the party or the attorney was willful or in bad
faith;
• The effectiveness of sanctions other than dismissal, which entails an
analysis of alternative sanctions;
• The meritoriousness of the claim or defense.8

4. In Five Circuits, Bankruptcy Appeals May Be Heard in the First Instance by Two Different Types of Courts.
Under 28 U.S.C. § 158(c)(1), an appellant in an appeal from bankruptcy court may choose in the first instance to appeal either to a district court acting as an appellate court or, if the relevant circuit provides for one, to a Bankruptcy Appellate Panel (“BAP”). Even if the appellant chooses a BAP, however, any other party to the appeal may, no later than 30 days after service of the notice of appeal, ask to have the appeal heard by the relevant district court. The First, Sixth, Eighth, Ninth and Tenth Circuits each have a BAP. If an appeal is to a BAP, then the Bankruptcy judge’s decision will be reviewed by fellow sitting bankruptcy judges.

Usually a BAP consists of three sitting bankruptcy judges in the circuit who are assembled for a particular day of argument. By their very nature, BAPs will consist of judges who have special expertise regarding bankruptcy issues, while district courts may not. The BAP may sit in different places in the circuit. For example, the Eighth Circuit BAP conducts hearing in Omaha, St. Louis, Kansas City, and other locations where its bankruptcy courts sit.

5. BAP Rules Vary by Circuit.
Just like the individual federal circuit courts of appeal, the various BAPs each have their own rules. These vary between each circuit. Any party in a BAP appeal, therefore should know the specifics and particularities of the specific BAP’s rules and should follow these.
Among these specialized rules, for example, are that, in the Eighth Circuit BAP, parties are limited to opening briefs of 6500 words.9 The Ninth Circuit BAP Rules provide that only those portions of transcripts included in the excerpts of the record will be considered in an appeal and that these must include excerpts necessary for the BAP to apply the required standard of review to a matter.10 The First Circuit BAPRules generally limit argument to 15 minutes per side.11 The Tenth Circuit BAP requires that a brief include a statement of related cases—i.e., one that includes the same litigants and substantially the same fact pattern or legal issues – that are
pending in any other federal court.12 The Sixth Circuit BAP Rules provide
for a possible pre-argument conference and mediation.13

6. The Bankruptcy Rules Generally Govern Appeals to the District Court.
As noted in the prior section, BAPs have elaborate rules that govern all aspects of appeals before them. By the terms of the Bankruptcy Rules, these specific rules can supersede conflicting terms in the Bankruptcy Rules. However, when an appeal is to the district court, the Bankruptcy Rules generally apply in the absence of a local rule or district court rule specifically addressing bankruptcy appeals, which are much less common.

While not as comprehensive as the F.R.A.P., the Bankruptcy Rules have 20 provisions governing all aspects of appeals.14 These rules addresses appellate issues, including, among others, the filing and service of appellate papers;15 the filing and service of briefs and appendices;16 the form of briefs and their length;17 motions;18 oral argument;19 disposition of the appeal;20 costs;21 and rehearing,22 among others. (These rules also provide for the accelerated filing of district court appeals, as an appellant is to serve and file its brief within 15 days after entry of the appeal on the docket; the appellant is to serve its brief within 15 days after service of the appellant’s brief and the appellant is to serve its reply within 10 days after service of the appellee’s brief.)23 In the absence of rules to the contrary, opening briefs may be up to 50 pages and reply briefs up to 25 pages.
Under Bankruptcy Rule 8012, oral argument is to be generally allowed in all cases. In practice, however, oral argument is much less common before district courts. When an appeal is before district court, there is some question about whether its decision has precedential effect.24

7. Bankruptcy Appeals Often Include an Extra Tier of Review.
Generally, before an appeal reaches a federal circuit court of appeals, it is adjudicated by either a BAP or a district court. The findings of these first tier courts are not binding on the circuit court of appeals and, the appellate court owes no deference to the decisions by the BAP or district court.
Review by the circuit court of appeals is plenary.25 Nonetheless, some circuit courts have noted that the first tier of appeal acts as a helpful filter.26
An appellate court may reach issues brought up before but not decided by the district court or BAP.27

8. Direct Appeal to the Circuit Court of Appeals Is Allowed in Limited Instances.
Pursuant to Section 1233 of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), a circuit court of appeals has discretion to permit a direct appeal frombankruptcy court where there is uncertainty in the bankruptcy court, either due to the absence of a controlling legal decision or a conflicting decision on the issue and the issue is of great importance, or where the court finds it is patently obvious that the bankruptcy court’s decision either was correct or incorrect, such that the first tier of review in the district court or BAP is less efficient and helpful.28

9. At Each Tier of the Appeal, The Bankruptcy Court Is Given the Same Level of Deference and Same Form of Scrutiny.
Courts in bankruptcy appeals review issues of law de novo and findings of fact for clear error.29 Courts of appeal apply the same standard of review as do BAPs and district courts.30 Courts of appeal generally review issues of procedure under an abuse of discretion standard. These include motions to compromise or to lift a stay, for example.31

10. This Is a Greater Threat of Mootness in Bankruptcy Appeals Than in Other Federal Appeals.
A bankruptcy appeal may become constitutionally moot where events may occur that make it impossible for the appellate court to fashion effective relief.32 Thus, for example, if, while an appeal is pending, a plan is confirmed pursuant to which all assets are distributed, all creditors with allowed claims are paid in full, and the bankruptcy case is closed such that the debtor no longer exists, an appeal against that debtor is moot because there is no meaningful relief that may be granted.33 An appeal may also be considered “equitably moot” where a change in circumstances makes it inequitable for a court to consider the merits of an appeal.34
However, if there remains any possibility that an appeal may result in a tangible benefit to the appellant, it is not moot.35

11. Only Those Persons Aggrieved Have Standing to Bring a Bankruptcy Appeal.
Only those whose rights or interests are directly and adversely affected pecuniarily by an order of the bankruptcy court have standing to bring an appeal.36

12. Appellate Courts Take a Broader Notion of “Finality” in Bankruptcy Appeals Than in Other Appeals.
Because of the length of many bankruptcy proceedings and the waste of time and resources that may result if the court denied immediate appeals, federal courts of appeal apply a broader concept of “finality” when considering bankruptcy appeals under 28 U.S.C. § 1291 than in considering non-bankruptcy appeals.37 Courts apply a number of factors in determining whether to assert appellate jurisdiction. These include:
1) the impact on the assets of the bankruptcy estate;
2) the necessity for further fact-finding on remand;
3) the preclusive effect of the court’s decision on the merits in further litigation,
and
4) the interest of judicial economy.38
Each of these issues, of course, could justify an article in itself. I hope
these provide some helpful thoughts and issues to consider when participating
in a bankruptcy appeal.
NOTE
1 Certain types of motions toll this time for filing until the last such motion
is disposed of. See Bankruptcy Rule 8002(b).
2 See F.R.A.P.4(a).
3 Bankruptcy Rule 8002(c)(2); Bankruptcy Rule 9006(b). Of course where
an appeal is from a district court to a federal circuit court on a bankruptcy
issue, F.R.A.P. 4’s 30-day rule applies.
4 See Shareholders v. Sound Radio, Inc., 109 F.3d 873, 879 (3d Cir. 1997).
The law is unsettled as to whether bankruptcy appellate deadlines are “jurisdictional,”
such that objections to untimeliness may be waived if not promptly
made. See In re Fryer, 2007 WL 1667198 (3d Cir. June 11, 2007) (citing
Kontrick v. Ryan 540 U.S. 443 (2004), and Eberhart v United States, 546 U.S.
12 (2005)).
5 See Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’Ship, 507 U.S. 380,
395 (1993).
6 See In re GGM, P.C., 165 F.3d 1026, 1032 (5th Cir. 1999). Of course, one
may not first raise new issues on appeal that were not presented before the
bankruptcy court. See In re Ginther Trusts, 238 F.3d 686, 689 & n.3. (5th Cir.
2001).
7 See, e.g., In re Lynch, 430 F.3d 600 (Cir. 2005); In re Braniff Airways, Inc.,
774 F.2d 1303, 1305 n.6 (5th Cir. 1985).
8 Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d. Cir. 1984).
See also In re Harris, 464 F.3d 263 (2d Cir. 2006) (failure to include required
transcript of oral argument did not warrant dismissal of appeal where lesser
sanctions were available); In re Beverly Mfg. Corp., 778 F.2d 666, 667 (11th
Cir. 1985) (“Dismissal typically occurs in cases showing consistently dilatory
conduct or the complete failure to take any steps other than the mere filing
of a notice of appeal.”).
9 8th Cir. BAP Rule 8010A.
10 9th Cir. BAP Rule 8006-1.
11 1st Cir. BAP Rule 8012-1.
12 10th Cir. BAP Rule 8010-1.
13 6th Cir. BAP Rule 8080-2.
14 Bankruptcy Rules 8001-8020.
15 Bankruptcy Rule 8008.
16 Bankruptcy Rule 8009.
17 Bankruptcy Rule 8010.
18 Bankruptcy Rule 8011.
19 Bankruptcy Rule 8012.
20 Bankruptcy Rule 8013.
21 Bankruptcy Rule 8014.
22 Bankruptcy Rule 8015.
23 Bankruptcy Rule 8009.
24 See In re Shattuck Cable Corp., 138 B.R. 557, 565 (Bankr. N.D. Ill. 1992).
25 See In re Best Prods. Co., 68 F.3d 26, 30 (2d Cir. 1995).
26 See Weber v. United States Trustee, 484 F.3d 154 (2d Cir. 2007) (“In many
cases involving unsettled areas of bankruptcy law, review by the district court
would be most helpful. Courts of appeal benefit immensely from reviewing
the efforts of the district court to resolve such questions”).
27 See Hartford Courant Co. v. Pellegrino, 380 F.3d 83, 90 (2d Cir. 2004).
28 See Weber, 484 F.3d at 157 (citing BAPCPA § 1233, 28 U.S.C.
§ 158(d)(2)(a)(i)-(iii)).
29 See In re ABC-Naco, Inc., 483 F.3d 470, 472 (7th Cir. 2007).
30 See In re Senior Cottages of Am., 482 F.3d 997, 1000-1001 (8th Cir. 2002)
31 See In re Martin, 222 Fed. Appx. 360, 362 (5th Cir. 2007).
32 See In re Focus Media Inc., 378 F.3d 916, 922 (9th Cir. 2004).
33 See In re State Line Hotel, Inc., 2007 WL 1961935 (9th Cir. July 5, 2007);
see also Gardens of Cortez v. John Hancock Mut. Life Ins. Co., 585 F.2d 975,
978 (10th Cir. 1978) (dismissal of bankruptcy petition moots appeal to lift
stay).
34 See Ederel Sport v. Gotcha, Int’l, L.P., 311 B.R. 250, 254 (9th Cir. BAP
2004).
35 See In re Howard’s Express, Inc., 151 Fed. Appx. 46 (Oct. 5, 2005) (conversion
from Chapter 11 to Chapter 7 did not moot appeal because liquidation
was not complete and preference actions remained to be tried, which
could generate assets to satisfy claims of appellants).
36 See In re PWS Holding Corp., 228 F.3d 224, 249 (3d Cir. 2000).
37 See In re Owens Corning, 419 F.3d 196, 203 (3d Cir. 2005).
38 Id.

What Homeowners Need to Know about Lien Stripping in Secured/Valuation of Claims in Bankruptcy & Adversary Proceeding

28 Monday Nov 2016

Posted by in Bankruptcy, Federal Court, Foreclosure Defense, Judicial States, Non-Judicial States, Pro Se Litigation

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SECTION 506 LIEN STRIPPING & VALUATION

11 U.S.C. § 1322 (b): Subject to subsections (a) and (c) of this section, the plan may- (2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence… 11 U.S.C. § 506 (a)(1): An allowed claim of a creditor secured by a lien on property in which the estate has an interest, … is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, … and is an unsecured claim to the extent that the value of such creditor’s interest … is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

I. WHAT DOES IT MEAN TO STRIP THE LIEN? 11 U.S.C. § 506 describes how to determine whether a claim is secured. Section 506(a)(1) explains bifurcation (division) of an allowed claim into secured and unsecured parts—the secured part being “secured” by the collateral’s value, the unsecured part being the remaining amount of the claim in excess of the collateral’s value. For example, an allowed claim of $200,000 with collateral valued at $170,000 is bifurcated between a secured claim of $170,000 and an unsecured claim of $30,000, resulting in “lien stripping” of $30,000. If the $170,000 collateral is related to an allowed first claim of $200,000 and an allowed second claim of $10,000, the $10,000 claim can be “stripped” as well. The distinction may be identified as “stripping down” (or a “cramdown” of) the lien to the value of the collateral or “stripping off” the lien completely.

II. CHAPTER 7 CASES – UNSECURED JUNIOR MORTGAGE MAY NOT BE STRIPPED OFF.
Dewsnup v. Timm, 502 U.S. 410 (U.S. 1987) prohibited Chapter 7 debtors from using 11 U.S.C. § 506(d) to void an undersecured lien on real property. Case law has extended Dewsnup to prohibit lien stripping on wholly unsecured liens (in Chapter 7 cases), holding that unless and until there is a claims allowance process, there is no basis for the debtor to avoid a lien under 11 U.S.C. § 506. The legislative history of Section 506 also makes it clear that lien stripping is permissible in reorganization chapters, but not in Chapter 7. See In re Talbert, 344 F.3d 555 (6th Cir. 2003), Concannon v. Imperial Capital Bank (In re Concannon), 338 B.R. 90 (Bankr.Fed.App. 2006).

III. CHAPTER 13 CASES – UNSECURED JUNIOR MORTGAGE MAY BE STRIPPED OFF.
a. Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993). A “strip down” or “cramdown” of claim that is secured by real property that is the debtor’s primary residence is prohibited. The United States Supreme Court held that after applying 11 U.S.C. § 1322(b)(2) and 11 U.S.C. § 506, a lien “strip down” of an undersecured home mortgage lien is impermissible in a chapter 13 case for a claim secured by the debtor’s principal residence, because it modifies the total package of rights for which such a claim holder bargained.

b. 11 U.S.C. § 1322(b), commonly known as the anti-modification clause, prevents debtors from changing the rights of creditors whose claims are secured only by a security interest in real property that is the debtor’s principal residence. Under various Circuit Court decisions interpreting Nobelman in Chapter 13 cases, §1322(b)(2) protections are no longer available to a creditor whose lien is a junior lien, and where the amount due to the senior lienholder(s) is greater than the value of the property pledged as security to that loan. Such creditor’s claims may be treated as an unsecured claim in the plan and paid consistent with other unsecured claimholders.

c. Majority view: While the anti-modification clause in § 1322(b) uses the term “claim” rather than “secured claim” and, therefore, applies to both the secured and unsecured part of a mortgage, the anti-modification clause still states that the claim must be “secured only by a security interest in … the debtor’s principal residence.” 11 U.S.C. § 1322(b)(2) (emphasis added). If valuation of the property under §506(a) determines that a junior mortgage holder’s claim is wholly unsecured, then the bank is not in any respect a “holder of a claim secured by the debtor’s residence” under §1322(b). Accordingly, the junior mortgage holder simply has an unsecured claim and the anti-modification clause does not apply. On the other hand, if any part of the mortgagee’s claim is secured, then, under Nobleman’s interpretation of the term “claim,” the entire claim, both secured and unsecured parts, cannot be modified.

The several Circuit Courts that have ruled on the issue, including the Sixth Circuit, support the majority position allowing lien stripping of wholly unsecured junior mortgage liens. See Pond v. Farm Specialist Realty (In re Pond), 252 F.3d 122 (2nd Cir. 2001); McDonald v. Master Fin., Inc.(In re McDonald), 205 F.3d 606 (3d Cir. 2000), cert. denied, 531 U.S. 822, 121 S.Ct. 66, 148 L.Ed.2d 31 (2000); Bartee v. Tara Colony Homeowners Ass’n (In re Bartee), 212 F.3d 277 (5th Cir.2000); Lane v. W. Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir.2002); Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220, (9th Cir. 2002); Tanner v. FirstPlus Fin., Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000). The only variance in this uniformity among the circuits is an Eleventh Circuit opinion, which disagrees with the In re Tanner panel that originally decided the issue, but which followed the Tanner decision as established precedent in that circuit. See In re Dickerson, 222 F.3d 924 (11th Cir.2000). See also Domestic Bank v. Mann (In re Mann), 249 B.R. 831, 833 (B.A.P. 1st Cir. 2000); Griffy v. U.S. Bank (In re Griffey), 335 B.R. 166 (B.A.P. 10th Cir. 2005); Waters v. The Money Store (In re Waters), 276 B.R. 879 (Bankr.N.D.Ill. 2002); In re King, 290 B.R. 641 (Bankr.C.D.Ill. 2003).

d. Minority view: While the Circuit Courts are nearly uniform in support of the majority view, some Bankruptcy Courts take a minority view. They hold that a properly perfected mortgage claim is literally “secured only by a security interest in real property that is the debtor’s principal residence” within the meaning of §1322(b), irrespective of whether the claim is wholly or partially secured, or totally unsecured after the application of §506(a). They reason that this view is consistent with the emphasis in the Nobelman decision on the state law contractual rights bargained for by the mortgagor and mortgagee, and with the legislative history which indicates that §1322(b) was intended to encourage the flow of capital into the home lending market and to exempt such Mortgages from valuations and bifurcations as the result of an application of § 506(a). Cases following minority view include Barnes v. American Gen. Fin. (In re Barnes), 207 B.R. 588 (Bankr.N.D.Ill.1997).

e. The Hon. Keith Lundin has expressed support for the minority view, that Nobleman was concerned about protecting the state law rights of the residential mortgagee and did not consider the issue to be a question of valuation. Lundin’s view and the minority view is there is no justification, following the Nobelman decision, for courts to focus on the value, at the date of the petition, of the real property securing a debt as the threshold of whether the rights of the mortgagee may be modified. In the majority view, a mortgagee with $1.00 in equity receives the anti-modification protection of §1322(b), while the mortgagee with no equity does not. Keith M. Lundin, Chapter 13 Bankruptcy, 3d. Ed. §14.1, p. 221 (2000 & Supp. 2004)

f. Lien stripping in the Seventh Circuit:
i. Although every circuit court of appeals that has considered the question has followed the majority view, the Seventh Circuit Court of Appeals has not directly ruled on the issue; thus, lower courts in the Seventh Circuit may follow either the majority or the minority view.
ii. In the Northern District of Illinois, the cases go both ways. Barnes v. American Gen. Fin. (In re Barnes), 207 B.R. 588 (Bankr. N.D. Ill. 1997) (follows the minority view that 11 U.S.C. §1322(b)(2) prohibits stripping off wholly unsecured mortgages.) Waters v. Money Store (In re Waters), 276 B.R. 879 (Bankr. N.D. Ill. 2002) follows the majority position after a thorough analysis of both views. Also in the Northern District of Illinois, the district court in In re Holloway v. United States, 2001 U.S. Dist. LEXIS 16898 (N.D. Ill. Oct. 16, 2001) follows the majority view.

iii. In the Central District of Illinois, In re King, 290 B.R. 641 (Bankr. C.D. Ill. 2003) adopted Waters, supra.
iv. In In re Black, 2002 Bankr. LEXIS 1752 (Bankr. N.D. Ind. 2002), the Northern District of Indiana provides a comprehensive review of cases following the majority and minority views, and decides that stripping off a wholly unsecured mortgage from the debtor’s residence “represents the most appropriate reading of both [11 U.S.C.] § 1322(b)(2) and Nobelman.”

IV. EXCEPTIONS TO ANTI-MODIFICATION: – NOBELMAN EXCEPTIONS – § 1322(b)(2) provides that the Chapter 13 plan may modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence. §1123(b)(5) says the same thing for Chapter 11 cases.

a. Debtor’s Principal Residence –
Principal Residence defined U.S.C. 101(13A) The term “debtor’s principal residence”–(A) means a residential structure, including incidental property, without regard to whether that structure is attached to real property; and (B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer.

b. Liens on attached property or curtilage?

c. When is the Principal Use determined?
i. Origination date or petition date?
ii. Is pre-petition “use planning allowed?”

d. “Secured Only By” – Effect of lien on residence as well as upon other assets.
i. Additional security interests in mortgage escrow accounts. A majority of courts have ruled that the grant of a security interest in an escrow fund for insurance and taxes by a Chapter 13 debtor’s second mortgage did not convey additional collateral. The anti-modification provision continues to apply. The debtor retained no interest in the funds once placed in escrow and so any grant of a security interest in such funds was meaningless and conveyed essentially no interest at all. 1st 2nd Mortgage Co. of NJ., Inc. v. Ferandos (In re Ferandos), 402 F.3d 147 (3d Cir. 2005). See also Boehmer v. Essex (In re Boehmer), 240 B.R. 837(Bankr. E.D.Pa. 1999); Rodriguez v. Mellon Bank, N.A. (In re Rodriguez), 218 B.R. 764 (Bankr. E.D. Pa. 1998); In re Abruzzo, 245 B.R. 201 (Bankr. E.D. Pa. 1999), vacated In re Abruzzo, 245 B.R. 2000 U.S. Dist. LEXIS 4936 (E.D. Pa. Apr. 7, 2000), on remand In re Abruzzo, 249 B.R. 78 (Bankr. E.D. Pa. 2000)
ii. Other view: Residential mortgage debt was not one secured “only by a security interest in real property” that was debtor’s principal home, within meaning of anti-modification provision of Chapter 13, where mortgagee had also been granted security interest in escrow for taxes and insurance premiums; mortgagee had additional security interest in escrowed funds, notwithstanding that, on petition date, that interest had not been perfected by delivery. Stewart v. U.S. Bank, 263 B.R. 728 (Bankr.W.D. Pa. 2001).
iii. Secured by additional assets other than the residence; cross collateralization clauses, overly broad security agreement?
1. Fixtures: will a security interest in fixtures destroy §1322 antimodification protection?
2. Mortgage extending mortgagee’s security interest to non-fixture appliances, as well as other personalty, removed mortgagee’s claim from category of claims secured only by residential realty, for purpose of preventing Chapter 13 debtor from modifying mortgagee’s rights. In re Caster, 77 B.R. 8 (Bankr. E.D. Pa. 1987).
iv. Valuation- Under § 506 (a)(1), “value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest”(emphasis added). If a valuation of the property under §506(a) determines that a junior mortgage holder’s claim is wholly unsecured, then the mortgagee is not in any respect a “holder of a claim secured by the debtor’s residence” and the jr. mortgage holder’s claim may be modified and treated as an unsecured claim.

Date of Valuation –
a. Loan Origination Date or Date of Bankruptcy Petition?

2. Methodology of Valuation. Market value or liquidation value? When a Chapter 11 debtor or a Chapter 13 debtor intends to retain property subject to a lien, the purpose of a valuation under section 506(a) is not to determine the amount the creditor would receive if it hypothetically had to foreclose and sell the collateral. Neither the foreclosure value nor the costs of repossession are to be considered because no foreclosure is intended. . . . The fair market value is not ‘replacement value’ because the house is not being replaced. The fair market value is the price which a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy would agree upon after the property has been exposed to the market for a reasonable time. Taffi v. United States (In re Taffi), 68 F.3d 306, 309 (9th Cir. 1995)

3. Current use or highest-best use? Should not calculate the value of the property on the value such property could demand if it were converted to some other use. The purpose of the valuation is to determine how much the creditor will receive for the debtor’s continued possession . . .. The foreclosure value is not relevant because no foreclosure is intended by the Plan. . . . Consequently, the value has to be the fair market value of what the debtors are using. Taffi v. United States (In re Taffi), 68 F.3d 306, 309 (9th Cir. 1995) Cannot deduct for hypothetical costs of sale – Huntington Nat’l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir. 1994)
v. When is the Lien Stripped Off? The unsecured junior lien is not stripped off at confirmation. To allow lien strip at confirmation would encourage “mischief” such as the debtor’s post-confirmation sale of the property to an unsuspecting purchaser. Under BAPCPA section 1325(a)(5)(B)(i)(I)(bb), the plan must provide that the claim holder “retain[s] the lien securing such claim until … discharge under section 1328….”
1. The junior lien is deemed satisfied and lien should be discharged or released only upon conclusion of the bankruptcy case. In re Jones, 152 B.R. 155 (Bankr. E.D. Mich. 1993).

2. The right to avoid a lien has not fully matured in a Chapter 13 context until a discharge is granted upon successful completion of the Chapter 13 Plan. Accordingly, the order confirming the Debtors’ plan will specifically provide that the Debtors’ house shall remain property of the estate, and shall not re-vest in the Debtors, until the Debtors are granted a discharge. Castle v. Parrish, 29 B.R. 869, 874 (Bankr. S.D. Ohio 1983)

3. A plan is inconsistent with the provisions of Chapter 13 when it purports to effectuate irrevocable lien avoidance on plan confirmation. In re McMillan 251 B.R. 484, 490 (Bankr.. E.D. Mich.2000)

4. If the Debtor is ineligible to receive a discharge due to prior discharge under 11 U.S.C. 1328(f) then the Debtor may not benefit from the lien stripoff. See In re Akram, 259 B.R. 371, 378-79 (Bankr.C.D.Cal.2001); In re King, 290 B.R. 641, 651(Bankr. C.D. Ill.2003)
vi. Hardship discharge? If the Debtor receives only a “hardship discharge” under 11 U.S.C. 1328(b) is the debtor entitled to the benefit of the lien strip and a discharge of the junior mortgage lien?
1. One line of cases holds that a creditor’s lien may be extinguished pursuant to the debtor’s plan. These cases use the following two lines of reasoning: First, the creditor’s lien is void upon the payment of the allowed secured claim pursuant to 11 U.S.C. § 506(d); and second, where §1322(b)(2) does not prevent a modification to the creditor’s lien rights, any concern about the debtor dismissing his case after the creditor’s lien is released, but prior to full payment under the plan, is outweighed by the policy of affording the debtor a fresh start. See, e.g., Bank One, NA v. Flowers, 183 B.R. 509 (N.D. Ill. 1995); In re Nicewonger, 192 B.R. 886 (Bankr.N.D.Ohio 1996); In re Hernandez, 175 B.R. 962 (N.D. Ill. 1994); In re Wilson, 174 B.R. 215 (Bankr. S.D. Miss. 1994); McDonough v. Plaistow Coop. Bank (In re McDonough), 166 B.R. 9 (Bankr. D. Mass. 1994); In re Cooke, 169 B.R. 662 (Bankr. W.D. Mo.1994); In re Schultz, 153 B.R. 170 (Bankr. S.D. Miss.1993); In re Lee, 156 B.R. 628 (Bankr. D. Minn.1993).

2. Another line of cases holds that a debtor may not obtain a release of a secured creditor’s lien until he successfully completes the confirmed plan and receives a §1328(a) discharge. See, e.g., In re Zakowski, 213 B.R. 1003 (Bankr. E.D. Wis.1997); In re Pruitt, 203 B.R. 134 (Bankr. N.D. Ind. 1996); In re Scheierl, 176 B.R. 498 (Bankr. D. Minn.1995);In re Jordan, 164 B.R.. 89 (Bankr. E.D. Mo.1994); In re Jones, 152 B.R. 155 (Bankr. E.D. Mich.1993); Gibbons v. Opechee Distribs. (In re Gibbons), 164 B.R. 207 (Bankr. D.N.H. 1993).

V. IS AN ADVERSARY PROCEEDING REQUIRED? Chapter 13 debtors may not need to file an adversary proceeding to strip the mortgagee’s lien. One court summarized the cases:
[I]t appears that no adversary proceeding is needed simply to value and declare void a totally unsecured claim. The majority of courts therefore hold that “the appropriate procedure for lien avoidance under Section 506 is by motion because lien avoidance is the inevitable byproduct of valuing a claim, which is accomplished by motion pursuant to Bankruptcy Rule 3012.” In re Sadala, 294 B.R. 180, 183 (Bankr. M.D. Fla. 2003) (collecting cases); see also, In re Millspaugh, 302 B.R. 90 (Bankr. D. Idaho 2003); In re Fisher, 289 B.R. 544 (Bankr. W.D.N.Y. 2003) (court allows proceedings to be prosecuted by motion in the absence of a specific objection by the mortgage holder that the proceeding be converted to an adversary proceeding); but see, e.g., In re Kressler, 252 B.R. 632 (Bankr. E.D. Pa. 2000) (espousing the minority view that an adversary proceeding is required); …Once the value of the secured claim is determined, the attendant lien is stripped off automatically under Section 506(d).” In re Sadala, 294 B.R. 180, 183 (Bankr. M.D. Fla. 2003) In re Robert, 313 B.R. 545, 549 (Bankr. N.D. N.Y. 2004).

These Courts have determined that lien stripping is a valuation issue, not a challenge to the “validity, priority, or extent of a lien” of F.R.B.P. 7001, requiring an adversary proceeding.

a. Courts have considered the “lien-stripping” effect of § 506 in the context of:
i. an adversary proceeding. See, e.g., Gaglia v. First Federal Sav. & Loan Asso., 889 F.2d 1304, 1305 (3d Cir. Pa.1989), overruled by Dewsnup v. Timm, 502 U.S. 410 (U.S. 1992); In re Lindsey, 823 F.2d 189, 191 (7th Cir. Ill. 1987); In re Cobb, 122 B.R. 22, 24(Bankr.E.D. Pa.1990); Bellamy v. Federal Home Loan Mortg. Corp., 122 B.R. 856, 857 (Bankr. D. Conn. 1991), aff’d In re Bellamy, 132 B.R. 810 (D.Conn.1991), aff’d In re Bellamy, 962 F.2d 176 (2d Cir. Conn. 1992); Goins v. Diamond Morttg. Corp., 119 B.R. 156, 157 (Bankr. N.D. Ill.1990); In re Garnett, 88 B.R. 123, 124 (Bankr. W.D. Ky.1988), aff’d United States on behalf of Farmers Home Admin. v. Garnett, 99 B.R. 757 (W.D. Ky. 1989); In re Crouch, 80 B.R. 364, 365 (Bankr. W.D. Va.1987); In re O’Leary, 75 B.R. 881, 882(Bankr. D. Or. 1987);
ii. a motion to avoid a lien. See, e.g., In re Jablonski, 88 B.R. 652, 653 (E.D. Pa. 1988); In re Chavez, 117 B.R. 733, 734 (Bankr. S.D. Fla. 1990); In re Marshall, 111 B.R. 325, 326 (Bankr. D. Mont. 1990); In re Demoff, 109 B.R. 902, 903 (Bankr. N.D. Ind.1989); In re Anderson, 88 B.R. 877, 878 (Bankr. N.D. Ind. 1988), In re Robert, 313 B.R. 545 (Bankr. N.D.N.Y. 2004) and,
iii. in an objection to a proof of claim. See, e.g., In re Jablonski, 88 B.R. 652, 653 (E.D. Pa. 1988); In re Chavez, 117 B.R .733, 734 (Bankr. S.D. Fla. 1990); In re Marshall, 111 B.R. 325, 326 (Bankr. D. Mont. 1990); In re Demoff, 109 B.R. 902, 903 (Bankr. N.D. Ind. 1989); In re Anderson, 88 B.R. 877, 878 (Bankr. N.D. Ind.1988).

b. Eastern District Court of Michigan- The Court has not to date required an adversary proceeding in any published opinion. In the case, In re Jones 152 B.R. 155 (Bankr. E.D. Mich. 1993); the Hon. Arthur Spector held that F.R.Bankr.P. 3012 permits § 506 valuations to be requested by motion, and noted that the advisory committee note relating to that rule distinguishes valuation proceedings from those subject to F.R.Bankr.P. 7001, and ruled that the debtor need not file an adversary proceeding to avoid a creditor’s lien under § 506. In re Hoskins, 262 B.R. 693(Bankr. E.D. Mich. 2001)

c. Western District of Michigan- a junior lien which is totally unsupported by any equity in property may be extinguished through Chapter 13 plan confirmation process, without need for adversary proceeding, as long as language in plan is sufficiently clear to put lienholder on notice of debtor’s intentions) (See also, In re Hoskins, 262 B.R. 693(Bankr. E.D. Mich. 2001)(Judge Spector), In re Fuller 255 B.R. 300, 306 (Bankr. W.D. Mich. 2000); In re Hudson, 260 B.R. 421 (Bankr. W.D. Mich. 2001); see also, In re Calvert, 907 F.2d 1069, 1072 (11th Cir. Ala. 1990);
i. Best Practice- Circuits have not specifically ruled. Debtors may wish to be cautious when deciding whether an adversary proceeding is required. If future appellate court decisions decide that an adversary proceeding is required, the lien strip-off may be subject to collateral attack. Cf. Ruehle v. Educ. Mgmt. Corp. (In re Ruehle), 412 F. 3d 679, 680 (6th Cir. 2005) (student loan discharge in plan void because adversary proceeding required).

VI. EFFECT OF DISMISSAL – A dismissal acts to undo bankruptcy and to restore property rights to the position in which they were found at commencement of case, as far as practicable, given facts of each case. Bankr.Code, 11 U.S.C. § 349(b).
i. Unless the court indicates otherwise, the general effect of an order of dismissal is to “restore the status quo ante; “it is as if the bankruptcy petition had never been filed. France v. Lewis & Coulter, Inc. (In re Lewis & Coulter, Inc.), 159 B.R. 188, 190 (Bankr. W.D. Pa. 1993); Lawson v. Tilem (In re Lawson), 156 B.R. 43, 45 (B.A..P. 9th Cir. Cal. 1993)).
ii. The legislative history of 11 U.S.C. § 349 states: The basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case…. Where there is a question over the scope of the subsection, the court will make the appropriate orders to protect rights acquired in reliance on the bankruptcy case. H.R.Rep. No. 595, 95th Cong., 1st Sess., 338 (1977); 1978 U.S.Code Cong. & Admin.News, 5963, 6294.
iii. 11 U.S.C. § 1325(a)(5)(B)(i)(II) requires a plan to provide that if a Chapter 13 case is “dismissed or converted without completion of the plan,” the lien is retained by the lien holder “to the extent recognized by applicable nonbankruptcy law.”

VII. CREDITOR DEFENSES

a. Mortgage is not a “Junior Lien”
i. Failure to record or properly record a senior mortgage. If junior lienholder lacked notice of the prior lien, consider action to determine whether a “junior lien” has priority.
ii. Defective/invalid liens. If a senior lien has defects that render the security instrument void, consider action to determine lien priority (e.g., acknowledgment, signatures, witnesses, description of the property).
iii. Can junior lienholder compel Ch. 13 Trustee or Debtor to avoid a senior lien, thus preserving Jr. lien? No, because any such senior lien avoided would be preserved to the bankruptcy estate to prevent a junior lienholder from improving his position. 11 U.S.C. § 551

b. Valuation of property supports Junior Lien- Appraisals of property may establish that the property actually is worth more than the amount of the senior lienholder’s secured claim.
1. Claims of senior lienholder may be overstated. In a close case, it may be useful to examine the claim of the senior lienholder for components that may improperly inflate the amount of the claim.

Consider objections to the claim for:
a. Fees and costs incurred after the petition was filed;
b. Property taxes, insurance premiums, or property preservation expenses that were incurred after the petition was filed;
c. Fees and costs that are not authorized to be charged to the borrower under the note and mortgage, unless or until notice to the debtor is given;
d. Unlawful fees and costs;
e. Whether funds in escrow account should be credited.
c. Motions to convert case to chapter 7.
i. See note above, regarding §1325(a)(5)(B)(i)(II) (effect of dismissal or conversion)
ii. General grounds to convert case. Strategic reasons to convert to Chapter 7?
The borrower cannot strip lien in Ch. 7 case. Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993); In re Talbert, 344 F.3d 555 (6th Cir. 2003).

VIII. SETTLEMENT CONSIDERATIONS /CREDITOR CONCEDES THAT LIEN STRIP IS AUTHORIZED- WHAT NEXT?
a. Seek a judgment, plan provision, or order that protect junior lienholder until conclusion of the case.
i. Order should confirm lien is preserved until successful completion of all payments and issuance of § 1328(a) Order of Discharge.
ii. The judgment and the order confirming the plan should state that any property encumbered by liens securing an allowed secured claim shall remain property of the estate until the plan is fully performed.
iii. Seek favorable judgment provisions that protect the junior lienholder until the case is concluded, such as “Future Default” provisions , and provisions requiring maintenance of adequate hazard insurance coverage, and prompt payment of property taxes.

b. Make a close examination of Debtor’s Income and Expenses and file timely objections to under reported income, and unsubstantiated, unreasonable and luxury expenditures, to maximize dividends to unsecured creditors.

c. Consider valid objections to untimely or defective claims of other unsecured creditors to maximize junior lienholder’s pro rata share.

d. Monitor plan payments, prompt payment of property taxes, and maintenance of adequate hazard insurance and seek dismissal in appropriate circumstances.

IX. OTHER EXCEPTIONS:
a. Short Term Mortgages – First Union Mortg. Corp. v. Eubanks (In re Eubanks), 219 B.R. 468 (B.A.P. 6th Cir. 1998) (Section 1322(c)(2) creates a statutory exception to the protection from modification for “short term” home mortgages in Chapter 13 cases; debtor can bifurcate undersecured second mortgage and pay allowable secured portion in full with interest consistent with § 1325(a)(5), while paying unsecured portion with other unsecured claims.)


Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

What Homeowners Should Know About Appeals at the 9th Circuit

28 Monday Nov 2016

Posted by in Appeal, Bankruptcy, Fed, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Landlord and Tenant, Litigation Strategies, Non-Judicial States, Pleadings, Pro Se Litigation, Trial Strategies, Your Legal Rights

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The Ninth Circuit uses a limited en banc system for en banc matters because of its size, with 11 judges comprising an en banc panel;

The Chief Judge is always one of the 11 en banc judges;

The Ninth Circuit currently has 29 active judges and 15 judges on senior status;

Active judges are expected to hear 32 days of oral arguments per year;

Judges are assigned to hear cases by rotation, and no preference is given for judges from those jurisdictions;

Oral argument are scheduled on certain dates;

Filings for are currently down 3% compared to last year;

Pro Se filings account for 51% of the documents filed with the court;

The largest category of pro se litigants are prisoners;

48% of all immigration appeals in the US are filed in the Ninth Circuit;

From the entry of the final order of the lower court or agency to final Ninth Circuit disposition: 32.6 months
From the filing of the law brief to oral argument or submission on briefs: 8.7 months in the Ninth Circuit (4.1 months nationally);

The court is permitted to move cases up in priority;

Priority is set by a staff attorney who assigns a number to each case based on a point system: 1, 2, 3, 5, 7, 10, and 24. Cases assigned 1 or 2 go to the screening panel for disposition. Cases assigned 24 always get oral argument, and involve matters like the death penalty. Cases assigned 3, 5, 7, or 10, will depend on the number of parties, the types of issues, etc. These cases may get oral argument, or be submitted on briefs;

The assignment of the panel of judges is separate from assignment of cases;

Panels are set 1 year in advance;

The clerk’s office assigns cases based on a formula that includes priority 99% of petitions for rehearing en banc are rejected – a judge on the court must initiate the process for en banc rehearing, and a judge may do so even if there is no petition for rehearing en banc filed;

If there is a second appeal to the court in the same case, the case is first presented to the original panel to see if they want to decide the second appeal – usually the panel will take back the case in approximately 1/4 to 1/3 of cases – if you want the same panel, file a motion to ask to have the case assigned to the same panel, but give good reasons why;

Generally, most general civil appeals where the parties are represented by attorneys will get set for oral argument – but about 20-25% that are assigned to oral argument will ultimately be submitted on briefs instead.

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

How Can Nevada Homeowners Effectively Handle Foreclosure Matters

08 Friday Apr 2016

Posted by in Affirmative Defenses, Appeal, Federal Court, Foreclosure Defense, Pro Se Litigation

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Why Is It Impportant For Nevada Homeowners to Protect their Homes?

In Nevada, homeowners must be aware of mortgage loans and foreclosure laws inorder to be few steps aheads of unscrupulous elements that would do whatever it takes to snatch away your home right under your nose.

Why You Need to Know About Nevada Mortgage Loans

When you take out a loan to purchase residential property in Nevada, you typically sign a promissory note and a deed of trust. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The deed of trust provides security for the loan that is evidenced by a promissory note.

How Can you Handle the Issues of Missed Payments

If you miss a payment, most loans include a grace period of ten or fifteen days after which time the loan servicer will assess a late fee. (Loan servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans.)

The late fee is generally 5% of the overdue payment of principal and interest based on the terms of the note. To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement.

What Are Your Option About Missing Quite a Few Payments

If you miss a few mortgage payments, your mortgage servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement (such as a loan modification, forbearance, or payment plan) so you can avoid foreclosure.

How Can You Handle Pre-Foreclosure Loss Mitigation Review Period

Under the federal Consumer Financial Protection Bureau servicing rules that went into effect January 10, 2014, the mortgage servicer must wait until you are 120 days delinquent on payments before making the first official notice or filing for any nonjudicial or judicial foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (If a servicer’s sole purpose of providing a notice is to inform you that you are late on your payments and/or explain what your loss mitigation options are, the servicer can deliver the notice within this pre-foreclosure period.)

What About Deed of Trust, What You Need to Know

Nevada deeds of trust often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)

The letter must specify:

  • the default
  • the action required to cure the default
  • a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
  • that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.

What Types of Foreclosure Procedures Is there In Nevada

In Nevada, most residential foreclosures are nonjudicial. This means the lender can foreclose without going to court as long as the deed of trust contains a power of sale clause.

What is Notice of Default and Election to Sell

In Nevada, Non-judicial proceedings is used to foreclose most home. The Nevada nonjudicial foreclosure process formally begins when the trustee, a third-party, records a Notice of Default and Election to Sell (NOD) in the office of the recorder in the county where the property is located, providing three months to cure the default.

A copy of the NOD must be sent to each person who has a recorded request for a copy and each person with an interest or claimed interest in the property by registered or certified mail within ten days after the NOD is recorded recordation.

What Are the Requirements for Posting NOD?

If a residential foreclosure, a copy of the NOD must be posted in a conspicuous place on the property 100 days before the date of sale.

Are there Any Affidavit Required

The trustee or beneficiary (lender) must record a notarized affidavit along with the NOD that states, based on a review of business records, including all of the following information.

  • The full name and business address of the current trustee or the current trustee’s personal representative or assignee, the current holder of the note secured by the deed of trust, the current beneficiary of record and the current servicer of the obligation or debt secured by the deed of trust.
  • That the beneficiary under the deed of trust, the successor in interest of the beneficiary or the trustee is in actual or constructive possession of the note secured by the deed of trust; or that the beneficiary or its successor in interest or the trustee is entitled to enforce the obligation or debt secured by the deed of trust.
  • That the beneficiary or its successor in interest, the servicer of the obligation or debt secured by the deed of trust or the trustee, or an attorney representing any of those persons, has sent to the borrower a written statement including the amount needed to cure the default, the principal amount of the debt, the accrued interest and late charges, a good faith estimate of all fees, contact information for obtaining the most current amounts due, and each assignee of the deed of trust.

What Other Alternatives Do I Have to Stop the Foreclosure?

You have 3 alternatives, sometimes 4.

Your alternatives are:

1). Try to call your alleged lender to see if you can get a reasonable person on the phone. Don’t panic, just be prepared as over 90% of the people you speak to on the phone are programmed to act certain way.i.e, if you are lucky as 99.9% you’ll get a recording and will have to leave a message, unfortunately, you have less that 20% of getting a call back response. You’ll know very early that the alleged lender, definitely not with your best interest at heart.

2). Nevada law requires that borrowers who are in foreclosure be given the option to participate in mediation if the property is owner-occupied.

The trustee must mail to the borrower (by registered or certified mail, return receipt requested) an Election to Mediate Form no later than ten days after recording the NOD. If the borrower wants to elect mediation, the form must be completed and returned within 30 days.

3). You can commence litigation to immediately stop the foreclosure, but you have to be prepared to whether the stop as you’ll experience various emotions during the litigation proceedings, but with time, you’ll get used to it.

3) Bamkruptcy is another method to stop foreclosure, but it will not be in your best interest if you just found yourself in foreclosure situation. We recommend Bankruptcy as the last resort and this is why?

If you are a homeowner with a mortgage payment, say like $1000/mth. If you have missed payment that is 1 year or more. Your Chapter 13 bankrupcty payments will be difficult for you to make once in bankrupcty because you will still make the Normal monthly payment and then some portion of the missed payments, which is sometimes, nealy half of the monthly payment. So if you make a payment of $1000 before the foreclosure began, you’ll now have to make ($1500 (Regular + Potion Payments) to catch up. So you ask yourself, if you can’t afford the original payment of $1000, before you went into foreclosure, how can you afford the higher payments.

In Nevada, You Have What is called Danger Notice

At least 60 days prior to the date of the sale, the trustee must provide the borrower(s) with a separate “Danger Notice” stating that they are in danger of losing their home to foreclosure, along with a copy of the original promissory note.

The notice must be:

  • personally served to the borrower
  • left with a person of suitable age and discretion (if the borrower is not available) and a copy mailed, or
  • if a person of suitable age and discretion is not available, then the notice may be posted in a conspicuous place on the property, left with a person residing in the property, and then mailed to the borrower.

What do you need to know about Notice of Sale

After expiration of the three-month period following the recording of the NOD, the trustee must give notice of the time and place of the sale by recording the notice of sale and by:

  • Providing the notice of sale to each required party by personal service or by mailing the notice by registered or certified mail to the last known address 20 days before sale.
  • Posting the notice of sale on the property 15 days before the sale.
  • Posting the notice of sale for 20 days successively in a public place in the county where the property is situated and on the property 15 days before sale.
  • Publishing a copy of the notice of sale three times, once each week for three consecutive weeks, in a newspaper of general circulation in the county where the property is situated.

Notice to Tenants

If the property is tenant occupied, a separate notice must be posted in a conspicuous place on the property and mailed to the tenant no later than three business days after the notice of sale is given.

Reinstatement Before Sale

In the case of owner-occupied housing, the borrower gets a right to reinstate by paying the arrearage, costs, and fees. This right expires 5 days prior to the date of the foreclosure sale.

The Foreclosure Sale

The foreclosure sale must be between the hours of 9:00 a.m. and 5:00 p.m. All sales of real property must be made:

  • at the courthouse in the county in which the property or some part thereof is situated (in counties with a population of less than 100,000), or
  • at the public location in the county designated by the governing body of the county for that purpose (in counties with a population of 100,000 or more).

The property will be:

  • sold to the highest third-party bidder or
  • revert to the foreclosing lender and become REO

Deficiency Judgment Following Sale

When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower.

In Nevada, a lender may obtain a deficiency judgment following foreclosure, but the amount of the judgment is limited to the lesser of:

  • the difference between the total debt and fair market value of the home, or
  • the difference between the total debt and foreclosure sale price.

For loans taken out after October 1, 2009, deficiencies are prohibited for purchase money loans (that have not been refinanced) held by a bank or other financial institution for single-family residences occupied continuously by the borrowers.

Redemption Period

A redemption period is the legal right of any mortgage borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, in order to reclaim the property. In Nevada, there is no redemption period following a nonjudicial foreclosure sale.

Eviction Following Foreclosure

If you don’t vacate the property following the foreclosure sale, the new owner will likely:

  • offer you a cash-for-keys deal (where the new owner offers you money in exchange for you agreeing to move out), or
  • give you a three-day notice to quit (leave) before filing an eviction lawsuit.

To learn more about foreclosure in general, ways to defend against foreclosure, and programs to help struggling homeowners avoid foreclosure

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

Why Homeowners Must Time Correctly Before Appealing Adverse Decisions

03 Sunday Apr 2016

Posted by in Appeal, Federal Court, Foreclosure Defense, Judicial States, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Your Legal Rights

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CASE STUDY: 989 F.2d 1074

Effective Foreclosure Defense requires timing. If you time correctly, you can save your home. Homeowners presently in litigation must time correctly when appealling adverse ruling to avoid conflict of Jurisdiction. This case shows how wrong timing before filing a Notice of Appeal resulted to Dismissal of Appeal for Lack of Jurisdiction.

989 F.2d 1074

25 Fed.R.Serv.3d 62

Don Byron REILLY; Mary Lou Reilly, Plaintiffs-Appellants,
v.
Bruce HUSSEY, Attorney; Robert J. Phillips, Attorney;
Federal Land Bank of Spokane, Defendants-Appellees.

No. 91-35903.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted Nov. 2, 1992.
Decided March 23, 1993.

Don Byron Reilly and Mary Lou Reilly, pro se.

W. Arthur Graham, Cent. Coast Farm Credit, Arroyo Grande, CA, for defendants-appellees.

Appeal from the United States District Court for the District of Montana.

Before: WRIGHT, HUG, and POOLE, Circuit Judges.

EUGENE A. WRIGHT, Circuit Judge:

The Reillys appeal pro se the district court’s order dismissing their adversary complaint. Because their notice of appeal was filed while a motion for rehearing was pending in the district court, we lack jurisdiction to hear their appeal.

FACTS AND PROCEDURAL HISTORY

2 In February 1977, the Reillys negotiated a loan from the Federal Land Bank of Spokane and gave as security a deed of trust to a ten-acre tract of land in Ravalli County, Montana. By February 1986, the Reillys were in default on the loan, having missed two annual payments, and had failed to pay real property taxes. The Bank initiated foreclosure proceedings.
3 The Reillys first attempted to avoid foreclosure by filing a Chapter 11 petition in the U.S. Bankruptcy Court, District of Montana, in January 1986. The court lifted the automatic stay so that the Bank could continue with pending foreclosure proceedings in Montana state court. The property was sold at a nonjudicial foreclosure sale in March 1987. The Reillys’ appeal to the Bankruptcy Appellate Panel for the Ninth Circuit was dismissed as moot.
4 In February 1987, while that appeal was pending, the Reillys sought to prevent foreclosure by filing an adversary proceeding in the bankruptcy court. They sought to void the deed of trust on the ground that the legal description was erroneous. The court dismissed their complaint, finding the deed valid under Montana law and not voidable under the Bankruptcy Code. The Reillys appealed to the U.S. District Court, District of Montana, which dismissed the appeal with prejudice.
5 In June 1988, on a creditor’s motion, the bankruptcy court converted the Reillys’ bankruptcy to a Chapter 7 proceeding. The Reillys appealed. Following the conversion, the bankruptcy court modified its order lifting the automatic stay to allow the Bank to continue an unlawful detainer action in state court. That court found the Reillys guilty of unlawful detainer and issued an order of ejectment. In October 1989, the BAP affirmed the conversion. Five weeks later, the Montana Supreme Court dismissed the Reillys’ appeal of their ejectment, finding that the issues raised were based solely on federal bankruptcy law and had already been decided in the federal proceedings.
6 In May 1989, the Reillys filed a second adversary complaint in the bankruptcy court, which is the basis of this appeal. The Reillys again complained, among other things, that the original order lifting the stay was improper. The bankruptcy court granted the Bank’s motion to dismiss the complaint.
7 The Reillys appealed. In March 1991, they filed an amended brief in which they argued, apparently for the first time, that because Judge Peterson failed to disqualify himself at the outset, all decisions of the bankruptcy court should be set aside.1 On June 4, 1991, the district court affirmed the bankruptcy court on all issues. First, the court held that the Reillys were barred by res judicata and collateral estoppel from challenging the order lifting the stay. Second, they failed to state a claim for relief under the Agricultural Credit Act of 1987 because the Act confers no private right of action. Third, res judicata barred their challenge to the validity of the deed of trust. The district court did not rule on whether Judge Peterson should have been disqualified.
8 Having suffered yet another adverse decision, the Reillys sought a hearing before us. The fate of their appeal is determined by the timing of their filings following the district court order. On June 14, 1991, they filed in the district court a motion to reconsider. On July 3, 1991, while their motion to reconsider was pending, they filed a notice of appeal. On July 29, 1991, the district court entered an order denying the motion to reconsider.
 JURISDICTION
9 We have jurisdiction to hear appeals from bankruptcy proceedings in which the district court or bankruptcy panel exercises appellate jurisdiction. 28 U.S.C. § 158(d). Such appeals are governed by the Federal Rules of Appellate Procedure, as amended in 1989. Fed.R.App.P. 6.
10 Rule 4(a)(4) of the Federal Rules of Appellate Procedure provides that a notice of appeal filed before the disposition of a post-trial motion “shall have no effect.” However, Rule 4(a)(4) does not apply in bankruptcy proceedings in which the district court or bankruptcy panel exercises appellate jurisdiction. Fed.R.App.P. 6(b)(1)(i). In contrast, Bankruptcy Rule 8015, which governs motions for rehearing2 by the district court or the bankruptcy appellate panel, is silent on the effect of appeals filed before a motion for rehearing is decided. See Bankr.Rule 8015, 11 U.S.C.A. (West Supp.1992). Rule 6(b)(2)(i) provides that, if a timely motion for rehearing is filed under Rule 8015, the time for appeal to the court of appeals runs from the entry of the order denying the rehearing.

11 The Advisory Committee on Appellate Rules deliberately omitted any provision regarding the effect of an appeal filed before the entry of an order denying a rehearing because it wished to “leave undisturbed the current state of law in that area.” Fed.R.App.P. 6, Advisory Committee Notes, 1989 Amendment, subdivision (b)(2). At the time of the amendment, this circuit had held that a notice of appeal in a bankruptcy case is null if it was filed while a motion for rehearing was pending in the district court. In re Stringer, 847 F.2d 549, 550 (9th Cir.1988). That holding is left undisturbed by the 1989 amendment of Fed.R.App.R. 6, and we reaffirm Stringer in this context.

12 In their zeal to pursue all possible avenues of review, the Reillys filed a notice of appeal while their motion for reconsideration was pending before the district court. Their notice of appeal was premature and a nullity: “[I]t is as if no notice of appeal were filed at all. And if no notice of appeal is filed at all, the Court of Appeals lacks jurisdiction to act.” Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 61, 103 S.Ct. 400, 403, 74 L.Ed.2d 225 (1982) (per curiam). Because the Reillys failed to file a notice of appeal after the district court denied their motion for reconsideration, we are without jurisdiction to hear their appeal.
13 Our holding does not deprive the Reillys of an opportunity to be heard. They have had their day in court; indeed they have had their days in many different courts. Clearly, they continue to feel aggrieved; but just as clearly, an unfavorable decision does not necessarily mean that a court has failed to fairly consider their arguments.
14 This appeal is dismissed for lack of jurisdiction.
15 DISMISSED.
1Bankruptcy Judge John L. Peterson presided over the chapter 11 proceedings and both adversary proceedings in the bankruptcy court. In June 1986, in the original bankruptcy hearing, Judge Peterson advised the parties of his wife’s minority stock interest in a creditor of the bankruptcy estate. He gave the parties the option of signing a remittal of disqualification or waiting for another bankruptcy judge. Both parties voluntarily signed the remittal

Under 28 U.S.C. § 455(e), a judge is not allowed to “accept from the parties to a proceeding a waiver of any ground for disqualification” based on the financial interest of the judge’s spouse. The Reillys did not seek review of the disqualification issue, however, until some five years and numerous proceedings later. While § 455 contains no explicit timeliness requirement, we have required that a motion to disqualify or recuse a judge under this section must be made in a timely fashion. Molina v. Rison, 886 F.2d 1124, 1131 (9th Cir.1989).

Moreover, in August 1990, while the present action was pending in district court, the Reillys filed a complaint with the Judicial Council of the Ninth Circuit alleging misconduct by Judge Peterson. We issued an order concluding that “[i]f the judge’s failure to recuse himself, despite the parties’ remittal, was conduct prejudicial to the effective and efficient administration of the business of the courts, appropriate and corrective action has been taken and this complaint therefore should be closed.” In re Charge of Judicial Misconduct, No. 90-80054, at 4 (9th Cir. Jan. 11, 1991).

2The Reillys filed a motion for “reconsideration.” The terms “rehearing” and “reconsideration” are used interchangeably. See In re Shah, 859 F.2d 1463, 1464 (10th Cir.1988); In the Matter of X-Cel, Inc., 823 F.2d 192, 194 (7th Cir.1987)

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

Wrongful Mortgage Foreclosure Monetary Awards – Case in Review

30 Wednesday Mar 2016

Posted by in Federal Court, Foreclosure Defense, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Non-Judicial States, State Court

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CASE IN REVIEW 1:

Jury awards $5.4 million to couple after finding fraud in foreclosure case

Houston Chronicle  |  December 9, 2015   Jury awards couple $5.4 million in foreclosure case against Wells Fargo and its mortgage servicer.  David and Mary Ellen Wolf were several payments behind on their home mortgage and knew that foreclosure loomed.  They were puzzled, though, when a foreclosure notice came early in 2011 from Wells Fargo because they hadn’t done business with that bank. Click Here to Read More

CASE IN REVIEW 2:

NY Federal judge slams Wells Fargo for forged mortgage docs

Judge Robert Drain has a message for Wells Fargo: “Forged” foreclosure documents don’t cut it in New York’s federal courts. Click Here to Read More

 

 

How Homeowners Can Effectively Use Automatic Stay Provisions of the Bankruptcy Code

27 Sunday Dec 2015

Posted by in Bankruptcy, Case Laws, Case Study, Foreclosure Crisis, Foreclosure Defense, Judicial States, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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I. Introduction.

A. Scope.

1. Section 362(a) of the Bankruptcy Code (the “Code”) contains a broad
statutory stay of litigation and lien enforcement, effective automatically on the commencement of a bankruptcy case. 11 U.S.C. § 362(a) (“. . . a petition [commencing a case] . . . operates as a stay, applicable to all entities . . .”.).

2. Purpose – Time to Reorganize. This automatic stay gives a trustee or
chapter 11 debtor-in-possession1 a breathing spell from creditors by stopping all collection efforts, harassment, and all foreclosure actions, allowing a debtor to attempt a reorganization plan. See, e.g., In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994) (“[t]he purpose of the automatic stay provision is to afford the debtor a ‘breathing spell’ by halting the collection process. It enables the debtor to attempt a repayment or reorganization plan with an aim toward satisfying existing debt.”);
Maritime Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991) (“automatic stay allows debtor breathing spell from creditors and stops collection efforts”); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004) aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay is a “fundamental protection provided to a debtor for the purpose of stopping all creditor collection efforts and harassment of the debtor and to provide … a fresh start.”); Shaw v. Ehrlich, 294 B.R. 260, 267 (W.D. Va. 2003), aff’d, 99 Fed. Appx. 466 (4th Cir. 2004) (“stay protects debtors, as well as creditors, by providing debtors a breathing spell from collection efforts”).

3. Policy Rationale – Debtor Asset Protection. Behind the stay is a clear
policy rationale: “to grant complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor’s assets before orderly distribution to creditors can be effected.” S.E.C. v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000) (quoting Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 271 (3d Cir. 1984)). See also Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816, 825 (5th Cir. 2003) (“purposes of the bankruptcy stay under 11 U.S.C. § 362 ‘are to protect the debtor’s assets, provide temporary relief from creditors, and further equity of distribution among the creditors by forestalling a race to the courthouse.'”) (quoting GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 1985)); Mann v. Chase Manhattan Mortgage Corp., 316 F.3d 1, 3 (1st Cir. 2003) (“automatic stay provision is designed to forfend against the disorderly, piecemeal dismemberment of the debtor’s estate outside the bankruptcy proceedings”).

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1 Code § 1107(a) gives a chapter 11 debtor-in-possession the “rights,” “duties” and “powers” of a trustee.
See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 517 n. 2 (1984). See also Fed. R. Bankr. P. 9001(10) (“‘Trustee’ includes a debtor in possession in a Chapter 11 case.”).

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4. Procedural Safeguards for Secured Creditors. The Code still imposes
procedural safeguards for the benefit of the secured creditor (e.g., “adequate protection” against erosion of collateral value; time limits on stay modification requests; limits on counterclaims against secured lender seeking stay modification). As shown below, it attempts to reconcile the rights of the secured creditor with the needs of the debtor and its unsecured creditors. See United Savings Assn. of Texas v. Timbers of Inwood Forest Associates, Ltd. (In re Timbers of Inwood Forest Associates, Ltd.), 484 U.S. 365, 376 (1988) (“ . . . lack of any realistic prospect of effective reorganization will require” modification of stay of lien enforcement”).

II. The Automatic Stay.

A. When Effective.

1. The stay is automatic upon filing of the petition commencing a case under Code chapters 7 (liquidation), 9 (municipal debt adjustment), 11 (reorganization),13 (individual debt adjustment), or chapter 15 (cross-border cases) with respect to foreign main proceedings. See e.g. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002) (“the automatic stay requires an immediate freeze of the status quo by precluding and nullifying post-petition actions”); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994) (“[a]utomatic stay is effective immediately upon filing of bankruptcy petition”) (citing Shimer v. Fugazy (In re Fugazy Express, Inc., 982 F.2d 769, 776 (2d Cir. 1992));

2. The stay acts as a specific and definite court order to restrain creditors
from continuing the judicial process or collection efforts against debtor. See e.g. In re San Angelo Pro Hockey Club, Inc., 292 B.R. 118 (Bankr. N.D. Tex. 2003) (automatic stay is self-executing injunction, constituting an order issuing from bankruptcy court); In re Bottone, 226 B.R. 290, 297 (Bankr. D. Mass. 1998) (“as long as the Chapter 13 case is pending . . . the automatic stay … restrains postpetition creditors from taking action against property of the estate”) (quoting In re Woodall, 81 B.R. 17, 18 (Bankr. E.D. Ark. 1987)).

3. Unless modified by the court, the stay is effective for the duration of a
bankruptcy case, and generally cannot be waived by the debtor. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (held, because automatic stay serves interests of both debtors and creditors, it may not be waived and its scope may not be limited by debtor); In re Atrium High Point Ltd. Partnership, 189 B.R. 599 (Bankr. M.D.N.C. 1995) (before enforcing a debtor’s prepetition waiver of automatic stay bankruptcy court must look at circumstancesunder which prepetition waiver arose); but see In re Excelsior Henderson Motorcycle Mfg. Co., Inc., 273 B.R. 920 (Bankr. S.D. Fla. 2002) (court enforced prepetition agreement under which chapter 11 debtor waived automatic stay).

B. Jurisdictional Basis of Injunctive Power.

1. The district court has “exclusive jurisdiction of all of the property,
wherever located, of the debtor as of the commencement of [the] case.” 28 U.S.C. § 1334(d). A bankruptcy court is a “unit of the district court.” 28 U.S.C. § 151. Section 362 implements this jurisdiction and is supplemented by § 105(a), which authorizes a court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Code.

2. The broad jurisdictional base of Section 362 confirms the court’s inherent power to protect property within its jurisdiction and to prevent any divestiture of that jurisdiction. Isaacs v. Hobbs Tie & Timber Co., 51 S. Ct. 270, 282 (1931) (held, jurisdiction of bankruptcy court respecting property of debtor’s estate having attached, actions brought in other courts could not affect it). See In re Mohawk Greenfield Motel Corp., 239 B.R. 15 (Bankr. D. Mass. 1999) (“the automatic stay protects the bankruptcy court’s exclusive jurisdiction over the debtor and its property”) (citing In re Soares, 107 F.3d 969, 975 (1st Cir. Mass. 1997)).

3. Section 362(a) stays, among other things:

a. a secured creditor from collecting accounts receivable of debtor.
Matter of Pernie Bailey Drilling Co., Inc., 993 F.2d 67 (5th Cir. 1993)
(account receivables were property of the estate; court must lift stay for
creditors to gain access to receivables);

b. a creditor’s dissolution of a debtor corporation. 11 U.S.C.
§ 362(a)(3); Hillis Motors, Inc. v. Hawaii Automobile Dealers’ Assoc.,
997 F.2d 581 (9th Cir. 1993) (held, dissolution proceeding constituted
exercise of control over debtor’s property);

c. foreclosure proceedings in other courts instituted against debtor’s
property prior to commencement of bankruptcy case. 11 U.S.C.
§ 362(a)(1); see In re Vierkant, 240 B.R. 317, 322 (B.A.P. 8th Cir. 1999)
(citing Kalb v. Feuerstein, 308 U.S. 433 (1940); In re Soares, 107 F.3d
969 (1st Cir. 1997)) (post-petition state court default order signed by judge
two weeks after bankruptcy filing violated automatic stay);

d. a landlord’s proceeding to recover possession of leased premises.
11 U.S.C. § 363(a)(5); 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc.
(In re 48th St. Steakhouse, Inc.), 835 F.2d 427 (2d Cir. 1987) (serving
notice of termination on assignee of restaurant lease rather than on debtor, which still had interest in the property, violated automatic stay); and

e. an IRS sale of property seized prior to commencement of case.
11 U.S.C. § 362(a)(8); United States v. Whiting Pools, Inc., 462 U.S. 198
(1983) (IRS may also be compelled to turn over levied property under
Code § 542).

f. arbitration proceedings that not only concern claims asserted
against the debtor, but also concern the debtor’s claims against a third
party. ACandS, Inc. v. Travelers Casualty and Surety Co., 425 F.3d 252
(3d Cir. 2006), cert. denied, 126 S. Ct. 2291 (2006). (although arbitration
was commenced by debtor, continuation of arbitration proceedings
violated automatic stay because, unlike trial, it is impossible in arbitration
to definitely classify arguments presented (i.e., claims and counterclaims);
arbitration award, which effectively terminated debtor’s insurance
coverage, is invalid because it diminishes estate property); In re Edwin
Epstein Jr. Operating Co., Inc., 314 B.R. 591 (Bankr. S.D. Tex. 2004)
(held, automatic stay applied, not only to prevent non-debtor party to
arbitration proceedings from asserting claims against debtor for tortious
interference and slander of title, but also to prevent arbitrators from
hearing debtor’s claims to replace this non-debtor party as operator of oil
and gas wells based on debtor’s asserted ownership interests therein).

III. Scope and Duration of Stay.

A. Scope of Section 362.

1. Property of Estate. The bankruptcy court’s injunctive power is ordinarily
limited to protecting property belonging to a debtor. Property of the estate is defined in Code § 541(a)(1) (“. . . all legal or equitable interests of the debtor in property as of the commencement of the case.”). See In re Lankford, 305 B.R. 297, 301 (Bankr. N.D. Iowa 2004) (“All recognizable interests of the debtors or the estate are afforded the protection of § 362(a)…This includes a mere possessory interest in real property without any accompanying legal interest.”). See also In re Moffett, 356 F.3d 518 (4th Cir. 2004) (held, chapter 13 debtor’s statutory right of redemption was sufficient interest in automobile that was repossessed prepetition to be included in estate property). But see In re Jasper, 325 B.R. 50, 55 (Bankr. D. Me. 2005) (credit union’s policy of revoking membership benefits of members who caused credit union a loss does not violate automatic stay); In re Santangelo, 325 B.R. 874 (Bankr. M.D. Fla. March 22, 2005) (district court did not violate automatic stay by approving class action
settlement for claims against mortgage lender; rather, court gave prospective class members, including debtor choice of remaining class members or opting out of class); In re Medex Regional Laboratories, LLC, 314 B.R. 716 (Bankr. E.D. Tenn. 2004) (proceeds of debtor’s directors’ and officers’ liability insurance policies were not property of estate and were not protected by automatic stay, even though policies also provided coverage to debtor for indemnification claims, because the debtor had not provided any indemnification to non-debtor insiders and such indemnification claims were merely hypothetical). Compare In re Arter &
Hadden, L.L.P., 335 B.R. 666 (Bankr. N.D. Ohio 2005) (proceeds of debtor’s
directors’ and officers’ liability insurance policies are property of estate because policies also provided coverage to debtor and there was no reason why direct suit against debtor is either practically or procedurally untenable).

a. Property Outside the Scope. The stay is not applicable to actions
against property that is neither the debtor’s nor the estate’s. Rodger v.
County of Munroe (In re Rodgers), 333 F.3d 64 (2d Cir. 2003) (debtor’s
mere possession of title to real property is not sufficient to find property to
be property of estate or to bar delivery of deed to purchaser by operation
of stay); Chugach Timber Corp. v. Northern Stevedoring & Handling
Corp. (In re Chugach Forest Prods., Inc.), 23 F.3d 241 (9th Cir. 1994)
(court refused to extend stay to boat that was not property of debtor’s
estate but on which assets of debtor had been transferred) (11 U.S.C.
§ 541(b)); In re Howell, 311 B.R. 173, 179 (Bankr. D. N.J. 2004)
(automatic stay does not preclude estranged spouse from seeking equitable distribution of non-estate property such as exempt property, postpetition earnings, property excluded from the estate, property abandoned by the trustee or debtor surplus); NLRB v. McDermott, 300 B.R. 40 (D. Col. 2003) (automatic stay did not protect property of debtor’s wife’s). Examples of property outside the stay’s scope are:

(i) Foreclosure. If a lender completes foreclosure before the bankruptcy filing, neither the debtor nor the estate has any interest in the property and the automatic stay does not apply. In re Theoclis, 213 B.R. 880 (Bankr. D. Mass. 1997) (held, foreclosure sale had terminated debtor’s interest in property.); In re Williams, 247 B.R. 449 (Bankr. E.D. Tenn. 2000) (when foreclosure sale of debtor’s residence became final prior to commencement of chapter 13 case, residence did not become property of estate and was not protected by automatic stay);

(ii) Abandonment. Abandonment terminates the stay as to abandoned property. In re Holly’s, Inc., 140 B.R. 643 (Bankr. W.D. Mich. 1992) (once abandonment of debtor’s property is effectuated, or foreclosure of real and personal property is completed, taxing entity is entitled to enforce its
statutory in rem rights against property.). But see In re Thompson-Mendez, 321 B.R. 814, 819 (Bankr. D. Md. 2005) (trustee’s deemed rejection of debtor’s residential lease by failure to timely assume it did constitute
abandonment such that lease was no longer protected by automatic stay).

2. Entities Affected by the Stay. Section 362(a) applies “to all entities,”
including any “person, estate, trust, governmental unit.” 11 U.S.C. § 101(15). This broad definition of “entity” eliminates the need to define who is a “creditor,” “secured creditor” or other person affected by the stay.

B. Duration of the Stay. Unless the court orders otherwise (i.e., unless creditor gets automatic stay modified), the stay “continues until such property is no longer property of the estate.” 11 U.S.C. § 362(c)(1). The stay of all other acts continues until case is closed or dismissed, or, if debtor is an individual, until debtor is granted or denied a discharge. 11 U.S.C. §§ 362(c)(2)(A), (B) and (C). See also In re Allen, 300 F.3d 1055, 1059 (9th Cir. 2002) (automatic stay “prohibits action against the bankruptcy estate only until the bankruptcy court confirms a plan reorganizing the debtor’s property”); Middle Tennessee News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077 (7th Cir. 2001) (automatic stay remains in effect until bankruptcy court disposes of case or grants relief from stay); In re Spirtos, 221 F.3d 1079, 1081 (9th Cir. 2000) (“So long as there are assets in the estate, then, the stay remains in effect”); Eastern Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir. 1998) (order “terminating” automatic stay operates from date of order’s entry); Lomagno v. Salomon Brothers Realty Corp., 320 B.R. 473, 481 (B.A.P. 1st Cir. 2005), aff’d, 429 F.3d 16 (1st Cir. 2005) (automatic stay not retroactively imposed when dismissal order set aside on due process grounds); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004), aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay “continues until the bankruptcy case is closed, dismissed, or discharge is granted or denied, or until the bankruptcy court grants some relief from the stay.”) (citing Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.3d 1194, 1206 (3d Cir. 1991)); U.S. v. White, 466 F.3d 1241 (11th Cir. 2006) (debtor discharged and automatic stay terminates on date of confirmation of debtor’s reorganization plan even when plan contains a later effective date). If a case is filed by or against a debtor who is an individual and a case of the debtor was pending within the preceding one year period but was dismissed, the automatic stay “with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.” 11 U.S.C. § 362(c)(3)(A). See Jumpp v. Chase Home Finance, LLC (In re Jumpp), 356 B.R. 789 (B.A.P. 1st Cir. 2006) (interpreting § 362(c)(3)(A) automatic stay terminates only in regard to debtor; stay continues, though, in regard to property of estate).

  • As of October 17, 2005, automatic stay terminates 60 days after a request for relief from stay unless final decision on request is rendered by court within the 60-day period or period is extended by agreement or by court for specific period of time found necessary for good cause.2

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2 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted on April 20, 2005, and many of its provisions became effective on October 17, 2005.

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IV. Acts Stayed. Section 362(a) is broad in scope, but specifically lists eight categories that are subject to its injunctive power.

1. “Commencement or continuation . . . of a judicial, administrative, or other proceeding against the debtor . . . to recover on a prepetition claim against a debtor.”3 Code § 362(a)(l) (emphasis added):

a. Appeals: stay covers all proceedings originally brought against the
debtor, regardless of whether the debtor is appellant or appellee.4 Halmar
Robicon Group, Inc. v. Toshiba Int’l Corp., 127 Fed. Appx. 501, 503 (Fed.
Cir. 2005) (automatic stay only operates as against actions in which debtor
is in defensive posture); Nielson v. Price, 17 F.3d 1276, 1277 (10th Cir.
1994) (“[t]he 362(a)(1) stay applies to actions that are ‘against the debtor’
at their inception, regardless of the subsequent appellate posture of the
case”); Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d 371, 373 (10th
Cir. 1990) (operation of stay should not depend upon whether district
court finds for or against the debtor). But see In re Mid-City Parking,
Inc., 322 B.R. 798 (Bankr. N.D. Ill. 2005) (debtor may unilaterally waive
protections of automatic stay by pursuing appeal without first obtaining
bankruptcy court order lifting stay; debtor could not be held liable for
damages to creditor-appellee arising from debtor’s alleged “willful stay
violation).

b. Administrative proceedings: See In re Krystal Cadillac Oldsmobile
GMC Truck, Inc., 142 F.3d 631 (3d Cir. 1998) (postpetition
determinations by Pennsylvania’s Board of Vehicle Manufacturers,
Dealers and Salespersons, ordering termination of franchise agreement
violated automatic stay); In re Best Payphones, Inc., 279 B.R. 92 (Bankr.
S.D.N.Y. 2002) (administrative law judge’s post-petition decision in
proceeding commenced pre-petition ‘but concluded after debtor’s chapter
11 filing’ was void and without effect because it violated automatic stay).
But see Board of Governors of Federal Reserve System v. MCorp
Financial, Inc., 502 U.S. 32 (1991) (Section 362(a) does not apply to
ongoing, nonfinal administrative/regulatory proceedings, and action of
Board of Governors was excepted from the stay under Section 362(b)(4)
of the Code (the “governmental unit” exception)).

c. Partnerships. Actions against partners and their property are not
protected in first instance by the filing of a partnership petition. Bankers
Trust (Delaware) v. 236 Beltway Inv., 865 F. Supp. 1186 (E.D. Va. 1994)
(automatic stay does not protect partnership debtor’s individual general
partners); O’Neill v. Boden-Wert Real Estate USA Funds I, Ltd., 599
So.2d 1045 (Fla. App. 2d Dist. 1992) (held, automatic stay did not stop action against general partner in partnership debtor or against general
partner’s general partner).

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3 “‘[C]laim against the debtor’ includes claim against property of the debtor.” 11 U.S.C. § 102(2).
4 Actions against non-debtors and against co-defendants are not stayed. See sub-section (e) infra.

d. Shareholders of corporate debtor. Bankruptcy court has no jurisdiction
over stock of corporate debtor that belongs to third party shareholders.
See e.g. In re Marvel Entertainment Group, Inc., 209 B.R. 832, 838 (D.
Del. 1997) (“automatic stay provisions of the Bankruptcy Code are not
implicated by the exercise of shareholders’ corporate governance rights.”).

e. Actions against surety, co-debtor, or guarantor are not stayed.5 See
e.g. Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816,
825 (5th Cir. 2003) (“[by its terms the automatic stay applies only to the
debtor, not to co-debtors under Chapter 7 or Chapter 11”); In re Third
Eighty-Ninth Associates, 138 B.R. 144 (S.D.N.Y. 1992) (suit against
guarantors of chapter 11 debtor was not a “back-door” attempt to acquire
assets of debtor); In re Rohnert Park Auto Parts, Inc., 113 B.R. 610
(B.A.P. 9th Cir. 1991) (automatic stay does not prevent creditors from
suing co-debtors).

f. Actions are not stayed against non-debtor co-defendants.6 See e.g.
Queenie, Ltd. v. Nygard Intl., 321 F.3d 282, 287 (2d Cir. 2003) (debtor’s
filing of bankruptcy petition stayed his appeal and that of his wholly owned corporation7, but not that of co-defendants); 555 M Mfg., Inc. v.
Calvin Klein, Inc., 13 F. Supp. 2d 719 (N.D. Ill. 1998) (automatic stay
protection not available to debtor’s solvent co-defendant in breach of
contract case). But see Woodell v. Ormet Primary Aluminum Corp., 808
N.E.2d 402, 407 (Ohio Ct. App. 2004) (automatic stay applies to claims
against debtor’s employee co-defendants only to the extent that the causes of action against them arise from their status as employees of the debtor).

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5 In limited circumstances, courts have asserted their equitable powers under 11 U.S.C. § 105(a) to enjoin the continuation of litigation against non-debtors when the debtor’s trustee demonstrates that continuation of litigation against non-debtors imminently and irreparably threatens the debtor’s reorganization prospects. E.g. In re United Health Care Org., 210 B.R. 228, 233 (S.D.N.Y. 1997) (staying action against non-debtor principals and officers of debtor when enforcement of judgment imminently and irreparably threatened non-debtors’ ability to fund debtor’s plan); North Star Contracting Corp. v. McSpeedon (In re North Star Contracting Corp.), 125 B.R. 368, 370-71 (S.D.N.Y.1991) (staying action against non-debtor president of debtor when, among other things, continuation of action would distract vital non-debtor and there was no distinct cause of action against him, but merely an action commenced solely to circumvent the stay).

6 Courts may stay actions against a non-debtor third-party defendant under “unusual circumstances” when “there is such identity between the debtor and third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment … against the debtor.” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). See also In re Nat’l Century Fin. Enter., 423 F.3d 567 (6th Cir. 2005) (commencement of civil action to recover accounts receivable held in collection account in debtor’s name violated automatic stay even though debtor was not named as defendant because action sought to recover estate property); Global Industrial Technologies, Inc. v. Ace Prop. & Cas. Ins. Co. (In re Global Industrial
Technologies), 303 B.R. 753 (W.D. Pa. 2004), vacated in part, modified in part on other grounds, 2004 WL 555418 (Bankr. W.D.Pa. Mar. 19, 2004) (held, state court action brought by insurers for declaratory judgment regarding non-debtor’s rights in insurance policies it shared with debtor violated automatic stay even though debtor was not named as defendant in state court action because outcome of state action could affect debtor’s rights in shared insurance); Teachers Ins. & Annuity Assoc. of America v. Butler, 803 F.2d 61, 65 (2d Cir. 1986) (referred to A.H. Robins decision as case with “unusual circumstances”). Compare In re Transervice Logistics, Inc., 304 B.R. 805 (Bankr. S.D. Ohio 2004) (declining to extend automatic stay to non-debtor co-defendants because, unlike situation
in A.H. Robins, defendant-debtor only faced one suit, not thousands, and thus would not be barraged by discovery and litigation).

——————

g. Proceedings or claims arising post-petition are not subject to automatic
stay, although successful plaintiff must obtain relief from stay if it seeks to enforce judgment against estate.8 Bellini Imports, Ltd. v. Mason & Dixon Lines, Inc., 944 F.2d 199 (4th Cir. 1991) (automatic stay did not bar
institution of action arising out of alleged postpetition breach of contract);
Erickson v. Polk, 921 F.2d 200 (8th Cir. 1990) (lessor of farmland did not
violate automatic stay when it retook possession of property following
postpetition expiration of lease); In re Dominguez, 312 B.R. 499 (Bankr.
S.D.N.Y. 2004) (prepetition lapse of debtor-taxpayer’s redemption period
may constitute “cause” for lifting stay to allow tax authority to exercise its
rights in debtor’s real property; it did not relieve taxing authority’s
obligation to move first for modification of stay).

h. Automatic stay does not apply to post-petition defensive actions in a
prepetition lawsuit brought by a debtor. Stanwyck v. Beilinson, 104 Fed.
Appx. 616 (9th Cir. 2004).

2. Enforcement of prepetition judgment against debtor or its property (11
U.S.C. § 362(a)(2)). See generally Delpit v. Commissioner, 18 F.3d 768 (9th Cir. 1994) (held, appeal to enforce pre-petition judgment was subject to the automatic stay).

3. “[A]ny act” to obtain possession of debtor’s property, or to exercise
control over such property. 11 U.S.C. § 362(a)(3).

__________________________________

7 The court ignored its own precedent in coming to this bizarre result, but justified it by reasoning that adjudication of a claim against the wholly-owned corporation would have an “immediate adverse economic impact” on the debtor. But see Feldman v. Trustees of Beck Ind., Inc. (In re Beck Ind., Inc.), 725 F.2d 880 (2d Cir. 1973) (court cannot enjoin suit against solvent independent subsidiary of debtor merely because stock is held by debtor in reorganization); In re Unishops, Inc., 374 F.Supp. 424 (S.D.N.Y. 1974) (bankruptcy court lacks jurisdiction to grant
a stay of court proceedings against subsidiaries).

8 Judiciary Code, 28 U.S.C. § 959(a), provides relief to holders of postpetition claims against a debtor from having to obtain leave from bankruptcy court to pursue claims arising from “acts or transactions in carrying on business connected with [estate] property.” 28 U.S.C. § 959. Section 959’s exception to the automatic stay is limited to postpetition claims arising from operation of the debtor’s business, and does not include acts associated with liquidation or administration of the bankruptcy estate. See In re Crown Vantage, Inc., 421 F.3d 963, 971-72 (9th Cir. 2005) (postpetition claim against trustee arising from liquidation of estate not subject to § 959 because not related to business operation); Carter v. Rogers, 220 F.3d 1249, 1254 (11th Cir. 2000); In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993) (malicious prosecution claims against trustee arising from avoidance actions are not based on acts arising from business operation and thus not subject to § 959).

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a. A credit union that accepts and retains postpetition deductions from
chapter 13 debtor’s salary violates automatic stay. See, e.g., Town of
Hempstead Employees Federal Credit Union v. Wicks, 215 B.R. 316
(E.D.N.Y. 1997) (credit union’s four-month-long administrative hold on
chapter 13 debtors’ savings accounts violated automatic stay).

b. Letters of Credit. See, e.g., In re Kmart Corp., 297 B.R. 525 (N.D. Ill.
2003) (letters of credit are not property of debtor’s estate subject to
automatic stay; beneficiary not prevented from drawing on letter of credit
when account party is in bankruptcy); In re A.J. Lane & Co., Inc., 115
B.R. 738 (Bankr. D. Mass. 1990) (held, payment by third party on letter of
credit not stayed because it did not involve a transfer of debtor’s assets).

c. Creditors’ actions against debtor to obtain property fraudulently
transferred by debtor prior to bankruptcy are barred by the automatic stay.
See, e.g. Constitution Bank v. Tubbs, 68 F.3d 685 (3d Cir. 1995) (bank’s
action against guarantors for fraudulent conduct triggered automatic stay
when each guarantor filed a bankruptcy petition during fraud action).

d. Mortgagees’ postpetition foreclosure against real property subject to
deed naming debtor’s spouse a sole owner violated automatic stay because, although debtor only had arguable interest in the property, the
determination should be made by bankruptcy court before mortgagees
foreclosed. In re Chesnut, 422 F.3d 298 (5th Cir. 2005).

e. Debtor’s Tax Benefits. Circuits apparently are split regarding whether
a debtor’s tax benefits (e.g., net operating losses) are property of the estate, thus subject to the automatic stay. See In re UAL Corp., 412 F.3d 775
(7th Cir. 2005) (finding bankruptcy court’s injunction restricting trading in
debtor’s securities to protect tax benefits to be “problematic on the merits,” and questioning court’s reliance on Bankruptcy Code §§ 105(a) and 362 as basis for trading procedures order). Compare In Prudential Lines, Inc., 928 F.2d 565 (2d Cir. 1991) (finding debtor’s tax benefits to be estate property, and that automatic stay thus enjoined debtor’s parent from taking worthless stock deduction on parent’s tax return).

4. Any act to create, perfect, or enforce any lien against debtor’s property
(but not the perfection of mechanic’s lien9 — §§ 362(b)(3) and 546(b) — or when perfection occurs within the 10-day period after the time of effective transfer of the property, under §§ 362(b)(3), and 547(e)(2)(A)). 11 U.S.C. § 362(a)(4). See In re Fuller, 134 B.R. 945 (B.A.P. 9th Cir. 1992) (held, automatic stay prevents creation or perfection of lien, even by operation of law).

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9 The mechanic’s lienor will ordinarily be able to perfect its lien after bankruptcy for work performed prior to bankruptcy. See generally, In re Yobe Electric, Inc., 728 F.2d 207, 208 (3d Cir. 1984) (per curiam) (service of notice of intent to file mechanic’s lien did not violate stay since under state statute “perfection of mechanic’s lien ‘relates back’ to the installation of the first material”); In re Lionel Corp., 29 F.3d 88 (2d Cir. 1994) (held, no automatic stay violation resulted from mechanics’ lienors’ post-petition serving notice of lien upon lessors and
chapter 11 debtor lessee, when New York law permitted perfection of filed mechanics’ lien after another entity had acquired rights to the property).

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a. Sections 362(b)(3) and 546(b)(1)(A), read together, set the
boundaries of this exception.

(i) Section 362(b)(3) subjects a creditor’s right to “perfect, or
to maintain or continue the perfection of, an interest in property” to
Section 546(b) of Code. 11 U.S.C. §362(b)(3).

(ii) In turn, Section 546(b) limits the trustee’s powers to avoid statutory liens by providing that they “are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection.” 11 U.S.C. §546(b)(1)(A) (emphasis added); see, e.g., In re AR Accessories Group, Inc., 345 F.3d 454, 458 (7th Cir. 2003) (held, priming statute need not contain language expressly providing for retroactive perfection in order to trigger exception provided in 11 U.S.C. §546(b)(1)(A)); In re
Hayden, 308 B.R. 428 (B.A.P. 9th Cir. 2004) (held, towing operator did not violate automatic stay in refusing to surrender possession of debtor’s vehicle, which was towed prepetition, unless debtor first paid towing charges because towing operator was merely acting to maintain or continue possession of its lien, not to enforce it).

5. Any act to create, perfect, or enforce a lien against debtor’s property for
prepetition claims. 11 U.S.C. § 362(a)(5). See, e.g., In re Birney, 200 F.3d 225
227 (4th Cir. 1999) (Section 362(a)(5) prohibits “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title”).

6. “Any act to collect, assess, or recover a prepetition claim against the
debtor.” 11 U.S.C. § 362(a)(6). Pertuso v. Ford Motor Credit Co., 233 F.3d 417,
423 (6th Cir. 2000) (a course of conduct violates § 362(a)(6) if it “(1) could
reasonably be expected to have a significant impact on the debtor’s determination as to whether to repay, and (2) is contrary to what a reasonable person would consider to be fair under the circumstances”) (quoting In re Briggs, 143 B.R. 438 453 (Bankr. E.D. Mich. 1992)); see also In re Diamond, 346 F.3d 224, 227-28 (1st Cir. 2003) (settlement negotiations challenging Chapter 7 debtor’s discharge do not violate the automatic stay per se, but creditor’s threat to seek revocation of debtor’s real estate license during negotiations was coercive, thus dismissal of debtor’s complaint proper); In re Optel, Inc., 60 Fed.Appx. 390 (3d Cir. March 25,
2003) (sale agreement between creditor and debtor provided that debtor either pay $6 million lump sum payment or, if creditor requested, $10 million over time; held, automatic stay prohibited creditor from requesting the $10 million deferred payment, therefore creditor was only entitled to distribution on $6 million claim); In re Jamo, 283 F.3d 392, 399 (1st Cir. 2002) (“a creditor may engage in post petition negotiations pertaining to a bankruptcy-related reaffirmation agreement so long as the creditor does not engage in coercive or harassing tactics”).

7. Setoffs of any prepetition debt owing to the debtor. 11 U.S.C. § 362(a)(7).
See Newbery Corp. v. Fireman’s Fund Ins. Co., 95 F.3d 1392 (9th Cir. 1996)
(right of setoff is subject to automatic stay provisions of chapter 11); Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) (temporary administrative freeze by bank not a stay violation or setoff; intent to settle accounts permanently is required for setoff within meaning of automatic stay provisions). Compare Jimenez v. Wells Fargo Bank, N.A., 335 B.R. 450 (Bankr. D. N.M. Dec. 21, 2005) (temporary administrative freeze by bank, without right of setoff, violated automatic stay); In re Calvin, 329 B.R. 589 (Bankr. S.D. Tex. 2005) (bank’s administrative freeze of debtor’s account violated automatic stay when bank was not creditor of debtor and thus had no right of setoff); In re Cullen, 329 BR. 52 (Bankr. N.D. Iowa 2005) (bank’s administrative freeze of account jointly held by debtor and debtor’s father violated automatic stay because freeze was intended to continue indefinitely until bankruptcy case was closed; bank did not have valid
right of setoff because funds in account were property of debtor’s father and mutuality requirement for setoff thus was lacking).

a. N.B.: The automatic stay, however, does not prevent a creditor
from exercising its right of recoupment.10 See, e.g., In re Slater Health
Center, Inc., 398 F.3d 98 (1st Cir. 2005) (right of recoupment entitled
government to recoup prepetition overpayments to debtor-health care
provider by reducing postpetition payments to debtor); In re Holyoke
Nursing Home, 372 F.3d 1 (1st Cir. 2004) (same); In re Anes, 195 F.3d
177 (3d Cir. 1999) (held, doctrine of recoupment did not apply so as to
permit pension plans to deduct loan payments from debtors’ postpetition
paychecks because the payments were not part of the same transaction); In
re Delicruz, 300 B.R. 669 (Bankr. E.D. Mich. 2003) (“recoupment reduces
or extinguish[es] a debt arising from the same transaction, and is not
stayed by the bankruptcy”). But see York Linings Int’l, Inc. v. Harbison-
Walker Refractories Co., 839 N.E.2d 766 (Ind. App. 2005) (although
automatic stay does not bar creditor from exercising right of recoupment,
stay does prevent creditor from asserting counterclaim for recoupment in
litigation because such a counterclaim seeks affirmative relief).

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10 “Recoupment” has been defined as follows: “. . . so long as the creditor’s claim arises out of the identical transaction as the debtor’s, that claim may be offset against the debt owed to the debtor, without concern” for the Code’s setoff limitations. In re University Medical Center, 973 F.2d 1065, 1080 (3d Cir. 1992). Recoupment in bankruptcy has been narrowly construed by courts because it violates the basic bankruptcy principle of equal distribution. In re B & L Oil Co., 782 F.2d 155, 158 (10th Cir. 1986) (“[a] fundamental tenet of bankruptcy law is that . . . [once] a petition is filed, debts that arose before the petition may not be satisfied through post-petition transactions. This is seen in bankruptcy restrictions on setoffs [and recoupment].”); In re McMahon, 129 F.3d 93,
97 (2d Cir. 1997) (“in light of the Bankruptcy Code’s strong policy favoring equal treatment of creditors, recoupment . . . should be narrowly construed”).

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8. Commencement or continuation of a proceeding before the United States Tax Court concerning the debtor. 11 U.S.C. § 362(a)(8). See, e.g., Halpern v. C.I., 96 T.C. 895 (U.S. Tax Ct. 1991) (held, automatic stay bars commencement or continuation of any proceeding in Tax Court, regardless of whether claim relates to prepetition or postpetition tax year deficiencies).

  • As of October 17, 2005, § 362(a)(8) is limited to proceedings
    concerning corporate debtor’s tax liability for taxable period the
    bankruptcy court may determine or, if debtor is individual, to tax
    for taxable period ending before date of order for relief.

9. Only affirmative acts are stayed. Section 362 applies only to affirmative
acts against the debtor or its estate.

a. The automatic stay does not affect, and the court may not exercise
its equitable powers to stay or toll, the automatic transfer of rights such as
that occurring by the expiration of a statutory period of redemption.
Canney v. Merchants Bank (In re Frazer), 284 F.3d 362 (2d Cir. 2002)
(did not stay mortgagee’s act of recording a certificate of non-redemption;
held, expiration of statutory period is not an “affirmative act” and
automatic stay did not apply).

b. Omissions and waivers are not stayed by the Code because they
are not affirmative acts. See e.g. Mann v. Chase Manhattan Mortg. Corp.,
316 F.3d 1, 6 (1st Cir. 2003) (mortgagee’s failure to submit
preconfirmation request, pursuant to bankruptcy statute governing rights
of oversecured creditors, to have its postpetition attorney fees included in
its allowed secured claim was not sort of overt, affirmative act that
violates stay).

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