Starting now, all creditors must exercise more caution when trying to collect against discharged bankruptcy debtors, because a creditor’s good faith belief that the discharge injunction did not apply is no longer a viable defense. On Monday, June 3, 2019, the U.S. Supreme Court clarified the standard for awarding sanctions against a creditor for violation of the discharge injunction, unanimously holding that a court may hold a creditor in civil contempt for violating a discharge order if there is “no fair ground of doubt” that the discharge order barred the creditor’s conduct.

In Lagos v. United States, 584 U.S. ___ (2018), the Supreme Court issued a unanimous ruling that limits the ability of corporate victims of fraud to seek reimbursement of legal fees for internal investigations. The case began when GE Capital discovered that Sergio Lagos falsified numerous invoices for his company, which he used as collateral to obtain tens of millions of dollars in loans from GE Capital.

Bankruptcies and other debt restructuring activities for health care providers are on the rise, and recent headlines related to the industry suggest further stormy weather ahead. Please join Dykema attorneys Mark Andrews and Lea Courington as they discuss the intersection of healthcare and insolvency. What is the current state of the industry? Why are nursing homes, hospitals and other healthcare institutions in financial trouble? What factors are changing reimbursement rates? What effect does litigation have on the success or failure of the nursing home industry?

When a defaulted borrower files a bankruptcy petition, two important events occur: (1) a bankruptcy “estate” comprised of certain assets of the debtor is created; and (2) all collection efforts (and pending litigation) against the debtor or its assets are automatically stayed. Accordingly, the court’s determination of whether items are or are not property of the debtor and of the bankruptcy estate is of critical importance to the creditor’s ability to collect on its debt.

On October 11, 2016, the United States Supreme Court granted certiorari in the matter of Johnson v. Midland Funding LLC, on appeal from the Eleventh Circuit Court of Appeals, in order to resolve whether a conflict exists between the Fair Debt Collection Practices Act (“FDCPA”) and the Bankruptcy Code. In Midland Funding, the appellate court found a debt collector to have violated the FDCPA by filing a proof of claim on time-barred debt in a Chapter 13 bankruptcy.

The Consumer Financial Protection Bureau has issued yet another suite of regulatory changes related to mortgage servicing. The rules add additional protections for borrowers—and therefore increased requirements for servicers—as well as clarify certain issues that have been the subject of questions and confusion by servicers.

Final Servicing Rule

Michigan Court Rule 2.622 (the “Receivership Rule”) governs the appointment of receivers. The Receivership Rule was amended in 2014 to provide more explicit guidance on what courts and attorneys should consider when nominating a receiver. Specifically, the 2014 amendments addressed concerns that trial courts were disregarding qualified nominations made by the parties to the litigation in favor of judicial discretion in appointing a disinterested party to maintain the receivership estate.

A Supreme Court ruling this week should give creditors a powerful tool to collect their debts from debtors who try to transfer assets before seeking bankruptcy protection. The primary reason an individual may turn to personal bankruptcy is to protect assets from creditor collection while obtaining a “discharge” from debts. Such protection is increasingly necessary where an individual is being pursued by one or more creditors, particularly where those creditors may have obtained (or are about to obtain) judgments against the individual.

The U.S. Supreme Court decided on Monday, June 1, 2015, that Chapter 7 debtors may not rid themselves of second-mortgage liens in cases where, at the time of the bankruptcy, the first mortgage is undersecured. The decision reverses two Eleventh Circuit rulings that would have made such liens disappear under Section 506(d) of the Bankruptcy Code. 

A bankruptcy case^[1] (no surprise) has produced another instructive court ruling on post-acceleration enforceability of a prepayment (make-whole) premium provision contained in a debt instrument. This latest lesson comes via the U.S. District Court for the Southern District of New York, affirming a ruling of that district’s U.S.