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DeGiacomo v. Sacred Heart Univ. Inc. (In re Palladino), ___F.3d___ (1st Cir. Nov. 12, 2019), case number 17-1334
US Court of Appeals for the First Circuit held, on 11/12/19, that where parents pay the college tuition of an adult child (child over 18 years old) to the college, that the parent paying that payment is a gift transfer, and that college can be sued for receiving a fraudulent transfer, if the parent files bankruptcy, after making the tuition payment, to get the tuition payment back from the college. ABI article on 11/15/19 describes this case as follows: The First Circuit starkly held – without any ifs, ands, or buts – that college tuition paid by an insolvent parent…
U.S. Secretary of Education Betsy DeVos Fined $100,000 for Violating an Order ordering the Department of Education to STOP Trying to Collect Student Loans made to Students to attend Corinthian Colleges, a for profit college that closed and filed bankruptcy
U.S. Secretary of Education Betsy DeVos was hit with a $100,000 fine for violating a judge’s order to stop debt collection efforts against former students at bankrupt Corinthian Colleges Inc., Bloomberg News reported. Despite the order, the department went as far as seizing the students’ tax refunds and wages. U.S. Magistrate Judge Sallie Kim in San Francisco issued the fine Thursday, after finding DeVos in contempt of court. Kim ordered the $100,000 to go to a fund held by the students’ lawyers to help the more than 16,000 borrowers who she said suffered damages from the violation. Both sides must…
New California Law
A 10/10/19 article in Credit & Collection e-newsletter reports: A new California law signed by Gov. Gavin Newsom prohibits collection agencies from wiping out bank accounts to pay medical debts. “People who are living paycheck to paycheck need the protection that this bill will provide to give them more financial security,” said Sen. Bob Wieckowski, who authored the legislation. “We do not want people living on the streets because debt collectors, who don’t have the greatest track record for accuracy, claim someone owes an old debt.” Mr. Wieckowski says the legislation doesn’t erase debt, but “gives people the ability to…
California Legislature Declares That Mortgage Debt Is Regulated Under State’s Debt Collection Law
For many years it was unclear whether mortgage debt was covered under the California Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”), which is California’s corollary to the federal Fair Debt Collection Practices Act (“FDCPA”). That issue was resolved on October 7, 2019, when California Governor Gavin Newsom signed into law legislation that expressly includes “mortgage debt” within the Rosenthal Act’s definition of “consumer credit.” Senate Bill 187 (“SB 187”), which is effective January 1, 2020, amends the Rosenthal Act to expressly apply to debt collection activities involving residential mortgage loans. SB 187 also amends the Rosenthal Act so…
2 Bankruptcy Court Opinions are opposite to each other, on Bankruptcy Court Allowing a Late Claim if the Creditor Was Not Listed and did not find out there was a bankruptcy until after the deadline for filing proofs of claim had passed
Bankruptcy Judge Elizabeth Brown of Denver differs with Bankruptcy Judge Michelle Harner of Baltimore on the interpretation of Bankruptcy Rule 3002(c)(6), about whether a Bankruptcy Court can allow a Proof of Claim filed AFTER the deadline (“bar date”) for filing Proofs of Claim has passed, in a bankruptcy case, if the creditor filing the Proof of Claim, after the deadline (“bar date”) did not receive notice of the existence of the bankruptcy case, and did not find out there was a bankruptcy case, until after the deadline (“bar date”) for filing a Proof of Claim had passed. Yesterday we reported…
Big Electric Company Chapter 11 Bankruptcy
Big Electric Company Chapter 11 bankruptcy case in the news: In the Pacific Gas & Electric Co. (“PG&E”) Chapter 11 bankruptcy, the Bankruptcy Court recently ended the “exclusivity period”, in which only debtor PG&E could file a proposed Chapter 11 plan of reorganization. Now the noteholders and wildfire victims have filed a joint alternative proposed Chapter 11 plan, which will compete for confirmation, with PG&E’s proposed Chapter 11 plan. The proposed Chapter 11 plan filed by the noteholders and wild fire victims, would, if confirmed (means approved) by the Bankruptcy Court, give the noteholders control of the company and would…
Ronnoco Coffee v. Westfeldt Brothers Inc., ___ F.4th___ (8th Cir. Sept. 19, 2019), case No. 18-1498
US Court of Appeals for the 8th Circuit Finds No Successor Liability for Buyer which Buys Debtor’s Assets from Bank, at a foreclosure sale held by the Bank, and then Buyer Continues the Business that debtor used to run, using debtor’s employees, and some of debtor’s executives: Bottom Line: Buyer Continuing debtor’s business after buying the assets from the lender at a foreclosure sale doesn’t bring successor liability to Buyer. Through a properly structured purchase of a debtor’s assets at a private foreclosure sale, a purchaser has no successor liability to a debtor’s unpaid creditors, the Eighth Circuit held. The…
Hackler v. Arianna Holdings Company, ___F.3d___ (3rd Cir. 9/12/19)
Re: Avoiding Tax Sales in Bankruptcy: Not All Foreclosures Are Equal When asked whether a foreclosure sale can be avoided in bankruptcy, the first answer that comes to many practitioners’ minds is “no” because of the Supreme Court’s opinion in BFP v. Resolution Trust Corp.[1] The correct answer, though, is a much more nuanced “it depends.” The Third Circuit’s Sept. 12, 2019, precedential opinion in Hackler v. Arianna Holdings Company LLC[2] is an excellent reminder why. The facts in Hackler are relatively straightforward. The Hacklers failed to pay taxes on a parcel they owned in New Jersey, which resulted in…
US Consumer Debt Surges To Record Highs
America has a shocking new “savings and loan” crisis. Consumer debt is surging to record highs, fueled by rising mortgage debt, student loans and a binge on credit card use. And more Americans are flat-out broke, with no emergency savings. “Consumer debt is an ongoing personal financial crisis for many Americans,” said John Madison, CPA and personal financial counselor at Dayspring Financial Ministry. “The ease of obtaining ever-increasing levels of available credit traps many consumers into the illusion that they can buy whatever they want — regardless of their ability to repay the debt they take on.” Despite borrowing beyond…
East West Bank vs. Altadena Lincoln Crossing, LLC
East West Bank vs. Altadena Lincoln Crossing, LLC, 2019 Westlaw 1057044 (US District Court, CD CA 2019): A district court in California has held that a state statute invalidating contractual penalty provisions was inapplicable to a default interest rate clause contained in loan documents. Facts: A lender and a commercial borrower entered into two related real estate construction loan agreements, both of which contained clauses increasing the base interest rate by 5% in the event of default. The agreements also contained late fee provisions, which were intended to compensate the lender for any additional administrative costs arising from late payments.…