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.
In an opinion issued today, the Supreme Court held that debtors do not have the right to immediately appeal a bankruptcy court’s decision denying confirmation of a proposed reorganization plan. This decision resolves a circuit split, and confirms the balance of power between debtors and creditors in the plan confirmation process. As the Supreme Court explained, “the knowledge that [a debtor] will have no guaranteed appeal from a denial should encourage the debtor to work with creditors and the trustee to develop a confirmable plan as promptly as possible.”
Big Case for UCC Aficionados
The Seventh Circuit Court of Appeal’s recent decision in State Bank of Toulon v. Covey (In re Duckworth)Case Nos. 14-1561 and 1650 (7th Cir. November 21, 2014) illustrates how a banker’s seemingly minor mistake in drafting secured loan documents granting a lien to secure a non-existent obligation can lead to avoidance of a lender’s security interest by the borrower’s bankruptcy trustee.
On September 9, 2014, the Bankruptcy Court for the Southern District of New York held that certain senior lenders were not entitled to the benefit of their indentures’ make-whole premiums, because they had voluntarily accelerated their notes. As we have reminded our readers several times, careful drafting of what may seem like basic boilerplate provisions is important. Seemingly benign stand-alone provisions may have unintended consequences when linked together in a single agreement.