It’s not an uncommon sight, especially in light of the burst of the housing bubble in recent years: a debtor in bankruptcy has two mortgages on a property with a fair market value of less than the amount of the senior mortgage. The junior mortgage lien is then wholly underwater, so that creditor would receive nothing from the sale of the property. The question then becomes, can the debtor void those liens in a Chapter 7 bankruptcy proceeding? The Supreme Court, in an increasingly rare show of unanimity, said “No.”
Foreclosure defense and bankruptcy often go hand in hand, but sometimes it seems like the left hand doesn’t talk to the right. This has proven especially common with bankruptcy plans that propose to “surrender” real property encumbered by a mortgage. The term “surrender” is not defined in the bankruptcy code. As a result, lenders and borrowers often interpret the term differently. For example, most lenders interpret surrender to mean not defending a foreclosure.
On Jan. 21, in Official Committee of Unsecured Creditors of Motors Liquidation v. JPMorgan Chase Bank (In re Motors Liquidation), No. 13-2187, (2d Cir. Jan. 21, 2015), the U.S. Court of Appeals for the Second Circuit addressed whether a UCC-3 termination statement, which was improperly filed as part of the repayment of an unrelated loan, may be considered effective to terminate the security interest in question, even where none of the parties intended that result.
In re RML Dev., Inc., 528 B.R. 150 (Bankr. W.D. Tenn. 2014) –
A mortgagee sought to modify a sale order to (1) modify the bid procedures and (2) confirm that it had a right to credit bid.
Setoff is commonly encountered in bankruptcy and non-bankruptcy situations. If there are mutual debts between two entities, either may generally offset the debts. These debts frequently arise where one entity is a vendor to a customer and selling on credit, and at the same time is also making occasional purchases on credit from the customer. If one entity owes $100 to a second entity but is owed $300 by this second entity, these mutual debts may be offset, leaving just the $200 owed by the second entity.
The United States Bankruptcy Appellate Panel for the Eighth Circuit recently held that filing a proof of claim on a time-barred debt is not, alone, a prohibited debt collection practice under the federal Fair Debt Collection Practices Act.
A copy of the opinion is available at: Link to Opinion.
On July 28, 2015, the Federal Reserve Board and the FDIC provided guidance to 119 firms that will be filing updated resolution plans in December 2015. These firms include three nonbank financial companies: American International Group, Inc., Prudential Financial, Inc., and General Electric Capital Corporation. Based on a review of the plans submitted in 2014, the agencies have provided direction to each firm with respect to their upcoming resolution plans.
In an interesting decision with important implications for both Chapter 15 practice and financial institutions’ global credit risk analyses, a US Chapter 15 court (the “Court”) granted recognition of a number of Brazilian proceedings involving entities within the OAS Group. See In re OAS S.A. et al., Case No. 15-10937 (SMB) (Bankr.
In a post-housing crisis economy, many homeowners, facing a plummet in home values, found themselves trapped in homes that are worth less than the amount they owe bank. Those homeowners have sought refuge in Chapter 7 bankruptcy proceedings, attempting to strip down the first mortgage and leaving many junior lienholders holding nothing but the bag—until now. In a big win for lenders, the U.S.
Will Congress Finally Act?
This is the fourth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. We discuss here the Commission’s efforts to require that debtor’s management act in a more transparent fashion. For copies of this or any prior articles about the Commission, please contact any BakerHostetler bankruptcy attorney.