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SUPREME COURT (UNITED STATES and ARIZONA) BANKRUPTCY CASES
IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO. WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.
Failure to return vehicle after bankruptcy filed: , “that mere retention of property does not violate the [automatic stay in] § 362(a)(3).”
City of Chicago v. Fulton– U.S. Supreme Court (1/14/2021) U.S. Supreme Court unanimously overturn precedent, including 9th Circuit precedent, that allowed Debtors and Trustees to get automatic requirement of turnover under 11 U.S.C. §362(a)(3). The Debtors vehicles were impounded by the City of Chicago for parking tickets and other vehicle fines. The Debtor’s filed Chapter 13 and demanded the vehicles return under §362(a)(3)’s provision that bars a a creditor from exercising “control” over property of the estate or the debtor. Ninth Circuit precedent required the creditor turnover the property, including secured creditor who had repossessed the property. In re Del Mission Ltd., 98 F. 3d 1147, 1151– 1152 (CA9 1996). The Supreme Court found that the use of §362(a)(3) to demand return of collateral would render the provisions of Bankruptcy Code §542 turnover requirements superfluous. The mere retention of collateral is not itself a violation of the §362 stay.
Justice Sotomayor, concurring: “Although the Court today holds that § 362(a)(3) does not require creditors to turn over impounded vehicles, bankruptcy courts are not powerless to facilitate the return of debtors’ vehicles to their owners. Most obviously, the Court leaves open the possibility of relief under § 542(a). That section requires any “entity,” subject to some exceptions, to turn over “property” belonging to the bankruptcy estate. 11 U.S.C. § 542(a). The debtor, in turn, must be able to provide the creditor with “adequate protection” of its interest in the returned property, § 363(e); for example, the debtor may need to demonstrate that her car is sufficiently insured” “Ultimately, however, any gap left by the Court’s ruling today is best addressed by rule drafters and policymakers, not bankruptcy judges. It is up to the Advisory Committee on Rules of Bankruptcy Procedure to consider amendments to the Rules that ensure prompt resolution of debtors’ requests for turnover under § 542(a), especially where debtors’ vehicles are concerned. Congress, too, could offer a statutory fix, either by ensuring that expedited review is available for § 542(a) proceedings seeking turnover of a vehicle or by enacting entirely new statutory mechanisms that require creditors to return cars to debtors in a timely manner.”
Does the Fair Debt Collection Practices Act applies to non-judicial foreclosure proceedings?
Holding: Statute of limitations begins to run when the alleged FDCPA violation occurs, not when the violation is discovered.
Rotkiske v. Klemm, 18-328 (US Supreme Court, Dec. 10, 2019) The Fair Debt Collection Practices Act (FDCPA) authorizes private civil actions against debt collectors who engage in certain prohibited practices. An FDCPA action must be brought “within one year from the date on which the violation occurs.” 15 U. S. C. §1692k(d). Respondent Klemm & Associates (Klemm) sued petitioner Rotkiske to collect an unpaid debt and attempted service at an address where Rotkiske no longer lived. An individual other than Rotkiske accepted service. Rotkiske failed to respond to the summons, and Klemm obtained a default judgment in 2009. Rotkiske claims that he first learned of this judgment in 2014 when his mortgage application was denied. He then filed suit against Klemm, alleging that Klemm violated the FDCPA by contacting him without lawful ability to collect. Klemm moved to dismiss the action as barred by the FDCPA’s one-year statute of limitations. As relevant here, Rotkiske argued for the application of a “discovery rule” to delay the beginning of the limitations period until the date that he knew or should have known of the alleged FDCPA violation. Relying on the statute’s plain language, the District Court rejected Rotkiske’s approach and dismissed the action. The Third Circuit affirmed.
Held: Absent the application of an equitable doctrine, §1692k(d)’s statute of limitations begins to run when the alleged FDCPA violation occurs, not when the violation is discovered.
May 15, 2017: Resolving a split of circuits, the Supreme Court held 5/3 in Midland Funding LLC v. Johnson 6-348 (Sup. Ct. May 15, 2017) that a debt collector who files a stale claim that is “obviously” barred by the statute of limitations has not engaged in false, deceptive, misleading, unconscionable, or unfair conduct and thus does not violate the federal Fair Debt Collection Practices Act.
Writing the opinion for the majority in favor of the debt collector, Justice Stephen G. Breyer said that the conclusion on one issue — false, deceptive or misleading — was “reasonably clear.” The second issue — unfair or unconscionable — presented a “closer question,” he said. The dissent replied that “Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts. This practice is both ‘unfair’ and ‘unconscionable.’”
Despite existing laws governing collection of debts Midland now opens the door for debt buyers to purchase claims that are far outside the deadline for collection (referred to as “stale claims”) for pennies on the dollar and file a proof of claim in a bankruptcy with the hope they will collect money in the bankruptcy. Why? Because trustees and debtors normally do not object to this type of claims. The Supreme Court seemed to think (wrongly in my opinion) that chapter 13 bankruptcy trustees review each and every claim in detail.
INHERITED IRAs: The US Supreme Court ruled [opinion, PDF] unanimously in Clark v. Rameker, (13-299 6/12/2014) that funds held in inherited individual retirement accounts (IRAs) are not “retirement funds” for bankruptcy purposes. Section 522 of the Bankruptcy Code exempts tax-exempt retirement funds from the bankruptcy estate.
In Arizona, as with some other states, state exemptions may protected these inherited IRAs, even if they are not protected under federal law(s). A.R.S. Section 33-1126.
Is an order denying a motion for relief from the automatic stay is a final order under 28 U.S.C. § 158(a)(1)?
Ritzen Group Inc. v. Jackson Masonry, LLC (18-938) (decided 1/14/2020)
Whether an order denying a motion for relief from the automatic stay is a final order under 28 U.S.C. § 158(a)(1).
Does a creditor’s good-faith belief that the discharge injunction does not apply precludes a finding of civil contempt?
Taggart v. Lorenzen No. 18–489. Argued April 24, 2019—Decided June 3, 2019
In BFP v. Resolution Tr. Corp., 511 U.S. 531 (1994), the Supreme Court held that a mortgage foreclosure sale conducted in accordance with state law was shielded from avoidance under the Bankruptcy Code’s fraudulent conveyance provision, 11 U.S.C. § 548.
AZ Supreme Court - Statute of Limiations on Debt Collection - Mertola LLC v Alberto J Santos/Arlene Santos
Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ Supreme Court, 7-27-18) Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.
Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2). We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.
FINAL WORD (for now): BMO Harris Bank N.A. v. Wildwood Creek Ranch, No. CV-14-0101-PR (AZ Sup. Ct. 1/23/2015 – vacated Court of Appeals decision in Wildwood and, in essence overturning Mueller) Finding: 1) there must be a completed structure on the property suitable for dwelling purposes and, 2) even the homeowner who has not yet moved into the completed residence would be entitled to anti-deficiency protection. “Mueller’s emphasis on intent arguably would extend anti-deficiency protection to owners of a vacant lot so long as they intend to build and eventually live in a residence.” ‘Our holding in Mid Kansas clarified, for purposes of the anti-deficiency statute, both what constitutes a dwelling” and when property is “utilized for” a dwelling. A structure is a “dwelling” if it is suitable for residential purposes and a person resides in the structure, or the structure is intended for such use. Id. at 128, 804 P.2d at 1316. Thus, a property contains a “dwelling” for purposes of the anti-deficiency statute when a borrower has purchased but not yet occupied a home, given that the structure is suitable and intended for human abode.”
NOTE: History: Property not yet fully constructed does not qualify as “limited to and utilized for one or two family dwelling” Borrowers never intended on residing in the real property. DEFICIENCY allowed.: Mid Kansas, id at 129, 804 P2d at 117. But the Court of Appeals put a bizarre twist on that concept in M&I vs Mueller, (Az Ct Appeals, Div 1, 12/27/11) 1 CA-CV 10-0804, CV 2009-031468 (explanation – in Mid Kansas, where the borrower was a corporation that never intended to occupy the property, the Muellers intended to live in the single-family home upon its completion.