Part III: Modifications Post-Discharge
Individuals have several options when filing bankruptcy. Chapter 13 is often preferred for individuals with regular income who wish to keep their homes and other secured assets. In a Chapter 13 filing, the court will approve the debtor’s three-to-five-year payment plan, which generally provides for curing any pre-petition delinquency, maintaining payments on secured debt, and a pro rata payment to unsecured creditors based on the debtor’s disposable income. After a Chapter 13 debtor completes his plan, he will receive a discharge of some of his remaining, unpaid debts.
Welcome to Part II of our series on the servicing of discharged mortgage debt (catch up on Part I). This part will discuss communications to discharged borrowers and evaluate various disclaimers that can be utilized.
UNCITRAL has recently published its Model Law on Recognition and Enforcement of Insolvency-Related Judgments (MLREIJ), with a recommendation that nations adopt it into their domestic law. You can find a complete copy of the text of MLREIJ here (on the UNCITRAL website).
Mortgage servicers are plagued by their nebulous relationships with the borrowers who discharge their personal liability in bankruptcy. Issues arise when the borrower whose debt has been discharged continues to engage with the mortgage servicer. These activities include making monthly payments and requesting and participating in loss mitigation. There are few, if any, bright line rules regarding this common scenario.
What you need to know
The Federal Court – in a much-litigated wider contest about the ownership of the luxury yacht, “Dragon Pearl” drifting in an intriguing cross-border insolvency – has clarified the limitations for foreign entities and their insolvency appointees in pursuing action in Australia to un-wind antecedent transactions (by attempting to use the voidable transaction provisions of the Australian Corporations Act).
Insolvency and restructuring professionals need to know:
On December 22, 2018, the federal funding for certain agencies lapsed, and the United States government entered into a partial shutdown. The U.S. Department of Justice (DOJ), including the United States Trustee Program (USTP), was one of the agencies that shut down. United States Trustees (“UST”) representing the USTP appear and litigate in a multitude of bankruptcy proceedings. USTs also actively participate in out-of-court settlement discussions, plan negotiations, and the like.
What you need to know
The Federal Court – in a much-litigated wider contest about the ownership of the luxury yacht, "Dragon Pearl" drifting in an intriguing cross-border insolvency – has clarified the limitations for foreign entities and their insolvency appointees in pursuing action in Australia to un-wind antecedent transactions (by attempting to use the voidable transaction provisions of the Australian Corporations Act).
Insolvency and restructuring professionals need to know:
What you need to know
On 7 December 2018, amendments to the Australian Insolvency Practice Rules(Corporations) came into effect, which overhaul the manner in which assigned debts can be deployed in formal corporate insolvencies. These changes have the potential to significantly impact commonly used techniques for a solvent parent/group entity looking to control the formal insolvency of a subsidiary or affiliate.
What you need to know
The High Court has decided not to hear an appeal about the ability of the Linc Energy Limited (Linc Energy) liquidators to disclaim property of the company - this means the liquidators could disclaim that property, including any obligations under the specific environmental protection order (EPO) issued under Queensland's environmental legislation. The current position stands that the disclaimer notice had the effect of avoiding obligations of both the company and its liquidators under the EPO.