State of New York: New York Court of Appeals Rules Voluntary Discontinuance Revokes Prior Acceleration

There are nine changes in the Bankruptcy code under the CAA, which extends additional support from the federal government both individual and business debts due to the COVID pandemic. Of these nine bankruptcy changes only three directly affect the residential mortgage industry. These are:

1. Chapter 13 only – Order of discharge entered albeit mortgage debt still in default. Even when the debtor has not cured the mortgage debt under chapter 13, a discharge order may be entered where 2 requirements are satisfied:

Governments worldwide are currently implementing unprecedented restrictions on individuals, businesses and other entities in an effort to combat the COVID-19 pandemic, and are also planning a variety of fiscal and monetary stimulus measures in an effort to try to offset the economic damage likely to result from these health and safety motivated restrictions.

In the Bankruptcy Court case of In Re Rensin[1], a debtor filed for personal bankruptcy almost sixteen years after creating a Cook Islands Trust in which he was the settlor and beneficiary. At the time of creating the trust, the debtor had no creditor issues and funded the trust with monies he received from the sale of a business, totaling $9 million.

When a creditor is looming, the debtor may be tempted to give away assets to friendly parties so that the creditor will not have recourse to seize as many assets. This was the impetus behind our laws today that hold such actions as voidable transactions (also known as fraudulent transfers) when the intent behind such actions is motivated by the goal of depriving the creditor of reachable assets, or when such actions render the debtor insolvent or the debtor was already insolvent.

What happens to a trademark license when the brand owner goes bankrupt? This is a question to be addressed by the Supreme Court in Mission Product Holdings, Inc. v.

In the recent case of In Re Todd, No. 15-11083 (Bankr. N.D.N.Y. March 23, 2018), the United States Bankruptcy Court for the Northern District of New York held that a debtor’s inherited Individual Retirement Account (“IRA”) is property of the debtor’s bankruptcy estate and consequently not exempt from creditors under New York law.

In the recent case of Garcia v. Garcia, the guarantor of a loan (Morris) is sued by the bank to honor his guarantee obligation of about $1.5 million. The debtor was not able to pay under the guarantee, so the bank obtained a charging order against the debtor member’s 50% LLC interest. The bank wanted access to the funds in that LLC, but the third-party manager of the LLC refused to pay any distribution to the debtor member. As a result, the debtor member filed Chapter 7 bankruptcy.

There has been a recent rash of discussions on whether foreign trusts are truly better for asset protection purposes than DAPTS (domestic asset protection trusts), especially DAPTs created by someone who does not reside in one of the states that has enacted DAPT law.

Trusts can protect your assets, to a certain extent. Foreign and domestic asset protection trusts can protect them even more, if you structure them correctly. The jail time starts when you wait until you already have creditors banging on the door before you relinquish control or a beneficial interest in one of these trusts. Unfortunately for one person in California this April, courts call that a “fraudulent transfer,” especially if you do not seem to be getting anything of value in return (other than, of course, being able to exclude assets from a bankruptcy).