Until recently, In re Atari, Inc. was a closed case, but, in a recent decision, the bankruptcy court for the Southern District of New York found that “other cause” existed to reopen the bankruptcy cases. 

Background

On April 26, the CFPB published a proposed rule regarding potential amendments to certain mortgage servicing provisions in RESPA (Regulation X) and TILA (Regulation Z).

On February 5, 2016 the IRS released Chief Counsel Advice Memorandum Number 201606027 (the IRS Memo) concluding that “bad boy guarantees” may cause nonrecourse financing to become, for tax purposes, the sole recourse debt of the guarantor. This can dramatically affect the tax basis and at-risk investment of the borrowing entity’s partners or members. Non-recourse liability generally increases the tax basis and at-risk investment of all parties but recourse liability increases only that of the guarantor.

The Consumer Financial Protection Bureau (CFPB) recently reopened the comment period for its proposed amendments to the mortgage servicing related rules under RESPA and TILA that generally would require servicers to provide modified periodic statements to consumers who have filed for bankruptcy.

Funds passing through a correspondent bank account in New York can create personal jurisdiction over the funds’ recipient, ruled the United States District Court for the Southern District of New York.  In Official Committee of Unsecured Creditors of Arcapita Bank B.S.C. v.

You just got your committee approvals for a new relation. It is a borrower you have been after for some time. Approvals are fairly standard and call for a secured credit facility with a priority all business asset lien.

The borrower is moving nearly all of its accounts to your bank for cash management too. But the borrower claims he needs to keep one account at a mutual since he is holding his breath that there will be demutualization and he will hit it big with stock redemption. You do not have the heart to crush his retirement dreams so you let him keep that other account.

In In re Zair, 2016 U.S. Dist. LEXIS 49032 (E.D.N.Y. Apr. 12, 2016), the U.S. District Court for the Eastern District of New York became the latest to take sides on the emerging issue of “forced vesting” through a chapter 13 plan. After analyzing Bankruptcy Code §§ 1322(b)(9) and 1325(a)(5), the court concluded that a chapter 13 debtor could not, through a chapter 13 plan, force a mortgagee to take title to the mortgage collateral.

Background

The IRS issued a Memorandum on April 15, 2016 clarifying the treatment of nonrecourse debt subject to certain “bad boy” guarantees. The Memorandum takes a position contrary to the recent Chief Counsel Advice (CCA 201606027) and is more in keeping with the general view of the real estate industry.

(Bankr. E.D. Ky. Apr. 15, 2016)

The bankruptcy court dismisses the plaintiff’s complaint because it failed to state a claim. The complaint was based on a factual assertion that the plaintiff’s predecessor had an interest in certain bank account funds. However, the prior 11 U.S.C. § 363 sale order and confirmation order adjudicated otherwise. Thus, the claims were barred by the doctrine of res judicata. Opinion below.

Judge: Wise

Attorneys for Plaintiff: Philip G. Fairbanks, M. Austin Mehr, John M. Simms

(7th Cir. Apr. 14, 2016)

The Seventh Circuit applies Wisconsin state law and holds that a mortgage can attach a lien to a vendor’s interest in a real estate contract and that the lender perfected the lien by recording in the county land records rather than filing a UCC-1 financing statement. The trustee is unable to avoid the lien. Opinion below.

Judge: Hamilton

Attorneys for Trustee: Michael F. Dubis, Christopher R. Schultz

Attorneys for Appellees: Ruffi Law Offices, Sara Lynn Ruffi, Lund Law Office, Brad M. Lund