The documents listed below are those necessary for new Bankruptcy clients. Some documents are instructional to be reviewed to inform you about the Bankruptcy process including the Bankruptcy Chapter descriptions, and how to provide information to be used in your Bankruptcy. Others are actual forms needed to be completed and returned for use in your Bankruptcy. Click below to download each of them.
SIGNIFICANT BANKRUPTCY CASES AND ARTICLES
There are several significant cases which impact Arizona law and should therefore impact Bankruptcy Court results assuming that they are followed. The early cases of Hoganand Vasquez left many issues in the interpretation of Arizona law and did not clarify many U.S. District Court decisions which set Arizona apart from most other jurisdictions, and resulted in law review articles reflecting wonder at what was the source of Arizona law that made it so radically different from other jurisdictions.
Then in January 2014, the Arizona Court of Appeals published the Steinberger Decision which resolved many of the issues left unanswered, and established Arizona as not unlike most other jurisdictions regarding the law of notes and mortgages or deeds of trust secured by real estate. It resolved many other issues including collateral sources and application of credits, and the impact of the Uniform Commercial Code upon transactions secured by real estate. Many authorities, including U.S. District Courts surmised that this Decision was likely to be reviewed by the Arizona Supreme Court, and modified. That issue was resolved recently in September 2014 when the Arizona Supreme Court refused review leaving the Steinberger case as the Law of Arizona. This Decision should have a serious impact upon Bankruptcy and other Federal Courts, and is worth reading.
2015 SUPREME COURT LANDMARK CASE
In January 2015, the U.S. Supreme Court published an unexpected decision which has startled the banking industry as well as the legal community. Congress adopted the Truth in Lending Act to protect consumers and to require disclosures which were intended to standardize the information provided consumer borrowers and permit them to shop credit before electing to be bound by terms of a loan. Those disclosures are particularly important in the purchase of the asset that is likely the largest investment the consumer will make. That would be the purchase of their home. If you have purchased a residence in the last several years you may recall that the purchase could not close for 3days after signatures have been affixed. This was to give you an opportunity to rescind the deal. If you had not been given the disclosures, including the copy for husband and one for wife, then the borrower had three (3) years to rescind. For years letters of rescission by borrowers had been routinely ignored by lenders it being believed that the borrower had to bring action to rescind rather than to simply send a letter noticing a rescission. Then came Jesinoski v. Countrywide Home Loans, on Jan. 13, 2015. This case held that when a letter of rescission is mailed to the lender, and this only need be by ordinary mail, the rescission is effective upon the date mailed. The LENDER must file an action to controvert the rescission within 20 days of the date of mailing. If such action is not done within the time limits, or the entire consideration is not refunded within that time, then the lender cannot enforce the mortgage or Deed of Trust. My experience is that Banks cannot do anything in as short a time as possibly two weeks from receipt. This could mean that a number of borrowers who closed less than 3 years ago could be getting lien free homes. Read the entire case after clicking the button below. There has been some discussion whether a recent modification could be effectively receiving a new loan with a new 3 year limitation.
The U.S. Supreme Court refused review in another recent case out of the 11 Circutit in In re Crawford. The Court of Appeals had reversed the Alabama District Court that said that the Fair Debt Collections Act did not apply to actrs which took place in a Bankruptcy. The act of filing a claim barred by the statute of limitations is now an action that can result in damages in the 11 Circuit. This could lead to Adversary Proceedings by debtors or Trustees where this has occurred and may spread to the other Circuits by virtue of this refusal to review the result.
OTHER IMPORTANT BANKRUPTCY AND 9TH CIRCUIT COURT OF APPEALS CASES
Other case decisions from the Bankruptcy Courts and the 9th Circuit Court of Appeals and its BAP Court have been important in reaching resolution of bankruptcy matters, and will continue to be important. The In re Veal case which is linked below defines the application of Articles 3 and 9 of the Uniform Commercial Code to the claims process and whether the Claim is objectionable.
In re Welsh is a 9th Circuit BAP (Bankruptcy Appellate Panel) decision that is concerned with the application of the MEANS test and secured creditors vs. unsecured creditors. The debtor used secured debt and the right to offset disposable income to pay that debt even though the items purchased with secured debt might otherwise be thought to be luxury items. The case also has application to the cram down and use of the secured debts to consume income to the loss of unsecured creditors. This case was criticized by courts and creditors but was later affirmed by the full Court of Appeals.
Other cases are Weinstein involving a Chapter 11 1111(b)(2) election, Wiegan regarding the Means test and the self-employed, and both Glanz and Erobobo involving avoidance of assignments of notes where the PSA in a Remic Trust were not followed.
BANKRUPTCY MANUALS AND IMPORTANT BANKRUPTCY ARTICLES
THE SUPREME COURT MAY HAVE ANOTHER SURPRISE FOR THE BANKING INDUSTRY
UPDATE: This is an update to what appears below. On June 1, 2015, the U.S. Supreme Court reversed the Circuit Court of Appeals that had ruled in favor of Caulkett and said that there could be no re-evaluation of the second lien as had been ordered below because the case was governed by the famous Dewsnup decision, and the attorney for Caulkett had NOT asked that Dewsnup be overruled. The Court added that the decision that was requested by Caulkett was almost as illogical as that which had been rendered inDewsnup, and because Dewsnup applies until overruled, Caulkett must be denied relief. The Court then cited authorities that were extremely critical of Dewsnup in a footnote. Though the decision was a 9-0 decision three of the Justices specifically decided that they did not agree with the critical footnote. This writer believes that had the Caulkett counsel asked that Dewsnup be overruled he would have prevailed by 6-3, but he refused. Because the Court does not volunteer relief that is not requested we still have Dewsnup to contend with. If any of you have an interest in challenging this decision and want a Chapter 7 case to remove or even re-value a first or second lien this might be a successful effort unless the Court changes its members. Read the argument available on the left and the link below to the recent decision and draw your own conclusions.
The In re Caulkett over 20 years ago the U.S. Supreme Court decided a case which had an important impact upon the mortgage industry after the 2008 recession when many homes had first and second mortgage balances which far exceeded the value of the real estate. The case was known as the Dewsnup case and it held that in a Chapter 7 bankruptcy Sections 506(a) and 506(d) of the Bankruptcy Code could not be used to revalue the principal balance of a second lien on a residence where the whole value of the lien was not fully secured by the real property value. had any value in the collateral securing it. For years the only service we could provide for debtors was to strip a totally unsecured lien in Chapter 13. The Supreme Court argued the Bank of America v. Caulkett on March 24, 2015, and the transcript of the argument is available to the left by clicking the button. If the Court finds that junior liens can be revalued in Chapter 7, and not just where they are being totally stripped, then revaluing a first lien should be possible too and there is no personal residence exception in Chapter 7 as has been a problem for homeowners since Dewsnup.
Update on February 10, 2017: Following the decision rendered in June 2015, overruling the decision from the Circuit Court of Appeals, leaving us to cope with the prohibitions of Dewsnup, there have been no reported cases winding their way through the judicial system to present a request that Dewsnup be overruled as should have been sought in Caulkett. Part of the reason may be due to the untimely death of Justice Antonin Scalia who wrote the dissent in Dewsnup, had been critical of the decision. There may have been a concern as to how the Supreme Court may react depending upon who would replace him. With the nomination of Judge Neil Gorsuch, 10th Circuit Judge, to the Supreme Court, we may have a reason for optimism that there will be a future challenge to Dewsnup, and that such a challenge would be successful.
In the case of Woolsey v. CitiBank, No 11-4014, 10th Circuit dated September 4, 2012, Judge Gorsuch made clear his disdain for the Dewsnup case, and his comments and observations are in agreement with those of Justice Scalia. Should he be confirmed and sit on the Court, this would be good news for debtors in bankruptcy and give them an opportunity to save their homes. The full decision is set forth below for your review.
Mortgage Modification Mediation
Court Website: www.azb.uscourts.gov/mortgage-modification-mediation
Copyright Brand and Associates, PLLC. All rights reserved.