In practice, it is not uncommon for bankruptcy debtors to file suit against creditors or debt collectors for stay and discharge injunction violations. Often, they will do so before making any meaningful attempt to communicate with the creditor or debt collector to request that they stop their improper collection efforts.

In a notable decision interpreting the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Bankruptcy Court for the Middle District of Alabama held that Chapter 13 debtors behind on their payments before March 2020 may seek modification of their plan if they suffered from COVID-19 related financial distress.

It is hard to deny the growing sense of uncertainty that has developed since 2011 when the Bankruptcy Rules were amended to add Rule 3002.1 which requires, among other things, a notice to be filed itemizing any post-petition fees, expenses or charges incurred in connection with their claim.  With more and more disputes arising between Chapter 13 creditors, debtors and trustees over the reasonableness and entitlement of those fees it is imperative that creditors understand the best practices for recovering the full amount of their fees and how to defend against any unwanted objections.

Breach letters have been heavily litigated in many states, but up until now, Alabama has generally stayed out of the fray. Not any longer. In September 2017, the Supreme Court of Alabama found that failure to strictly comply with the requirements of the mortgage invalidates a foreclosure sale. Ex Parte Turner, __ Ala__ (2017). In this case, after the borrowers defaulted on their loan, the loan servicer sent a letter notifying them of its intent to foreclose on the property (the “Default Letter”).

The U.S. Bankruptcy Court for the Middle District of Alabama recently held that a mortgage servicer did not violate the discharge injunction in 11 U.S.C. § 524 by sending the discharged borrowers monthly mortgage statements, delinquency notices, notices concerning hazard insurance, and a notice of intent to foreclose.

Moreover, because the borrowers based their claims for violation of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., on the violation of the discharge injunction, the Court also dismissed their FDCPA claims with prejudice.

Recently, the Bankruptcy Court for the Northern District of Alabama joined with a number of courts in finding that a debtor's ability to sell their assets free and clear of any "interests" in property encompassed the right to purge the assets of a state labor department's right to transfer a company's unemployment experience rating to a purchaser of the company's assets.[1]

On January 24, 2011, the Honorable Dwight H. Williams, Jr. of the U.S. Bankruptcy Court for the Middle District of Alabama denied the Federal Deposit Insurance Corporation’s (“FDIC”) request for relief from the automatic stay in the Colonial BancGroup, Inc.

On March 10, 2015, the United States District Court for the Middle District of Alabama issued a memorandum decision in the case of Harrelson v. DSS, Inc. (No. 14-mc-03675), declining to withdraw the reference from the bankruptcy court and holding that the existence of an arbitration agreement and a class action waiver in that arbitration agreement did not require substantial consideration of the Federal Arbitration Act (FAA).

Facts

In this week's Alabama Law Weekly update, we report on two decisions. The first case is from the Alabama Supreme Court and considers whether an employee, who was a significant contributor in the creation of intellectual property patented by his employer, is entitled to a portion of the income that the employer received in a subsequent stock sale. The second decision is from the Eleventh Circuit Court of Appeals and considers the factors for bankruptcy courts to analyze when approving releases of claims against non-debtors, such as officers and directors of reorganized entities. 

Following the Eleventh Circuit’s decision last year in Crawford v. LVNV Funding, LLC, the filing of a proof of claim on a time-barred debt in a bankruptcy case pending in the Eleventh Circuit’s jurisdiction violates the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p (“FDCPA”). But as the U.S. Bankruptcy Court for the Northern District of Alabama recently made clear in Gurganus v. Recovery Management Systems Corp. (In re Gurganus), No. 7:14-ap-70054-BGC, 2015 WL 65089 (Bankr. N.D. Ala. Jan.