History: - Bankruptcy act of 1898amended many times and revised extensively in 1930s (great depression) - National Bankruptcy Commission created in 1973created the foundation of the CODE o Bankruptcy Code was adopted in 1978 o Tension between creditors and debtors creditors felt laws were too lenient and debtors were taking advantage - BAPCPA- congress passed it in 2005 o Amendments balanced the field b/n creditors and debtors
Court Organization: - Code: - Odd numbered 1,3,5,7,9,11,12,13,15 - 1,3,5- general provisions applicable in all proceedings unless theres something that explicitly says they dont apply - 7,9,12,13,15- diff types of bankruptcy law proceeding except for 15(covers multinational bankruptcies)- person can only be in one of these proceedings at a time o 7: straight bankruptcy liquidation for consumers and businesses o 9: provisions for bankruptcy of municipality or other govt unit o 11: reorganizing businesses o 12: reorganization filed by family farmers or fisherman o 13: excludes corporations and allows consumers to make payments to crediters over time without having to give up their assets o 15: special ancillary proceeding where US courts assist foregin court that has primary jrisdicition over a foreign debtor - Jurisdictional provisions: Title 28 of US Code ; Criminal Provisions (bank fraud etc.): Title 18 of US Code
Reasons for bankruptcy: - Debtors need for relief - Desire to preserve assets
Problems: 1.2 - Talis is most likely to pay her home mortgage payment possibly her car loan payments as these are the essential elements that impact her day to day life. Losing her home would greatly impact her living situation - Security can increase the amount of collection notices it sends, or it can take the lump sum of 183,366 and take the $1200 per month payment and further divide it into smaller payment amounts over a longer period. Maybe if the payment amount per month is smaller Talis will be more likely to start paying
1.3 - Debtor bought housepaid $15K and signed mortgage for $190K. only paid $10K on mortgage...total debtor put in: $25K - nearby house sold for: 170K with 6% commission; other house sold for $129K (foreclosure) -Mr. Sung should not propose a sale as the foreclosure price is still too low, the bank may not be able to recoup the $180K..they could try and get $170k but they risk missing out on $10K - the bank should wait a few months, but periodically check in to see if Mr. Sung has found employment
- Would answers change if Mr. Sung lived in state with anti-deficiency statute?NO IDEA - If I were a tax appraiser working for the county Id put the value of the house as $190K as then the taxes would be higher and more money would go to the state
Page 23-48 Restrictions on Collection: - Usury laws o When a creditor charges more than a specified rate of interest on a loan, the loan is deemed usurious o The interest, and under certain statutes the original amount owed would be uncollectable and the creditor could face criminal charges - Fair debt collection practices act ( FDCPA)- remedy for debt collection abuses o Creditors cant: Harass, abuse or oppress Use criminal means to harm reputation or property of person Use profane language Cant publish list of names who refuse to pay Advertising sale of debt to incentivize debtor to pay Calling to annoy/harass ppl Calling without disclosing accurate identity Cant lie and say you are lawyer Cant say that not paying will result in being arrested , seizing property/ wages unless its lawful o FDCPA is a strict liability statute BUT if excepts from liability those debt collectors who satisfy the narrow bona fide error defense.....IE: debt collector wont be held liable if he/she shows by a preponderance of evidence that the violation was not intentional and resulted from a bonafide error notwithstanding maintaining procedures -- debt collector has burden of proof! To qualify for bonafide error defense debt creditor has to show: 1. it violated FDCPA unintentionally 2. the violation resulted from a bonafide error 3. it maintained procedures reasonably adapted to avoid the violation
McCollough v. Johnson, Rodenberg and Lauinger - United States Court of Appeals for the Ninth Circuit whether a law firm violated the federal FDCPA by continuing to prosecute a lawsuit against a debtor after it was clear the statute of limitations had run on the debt and by sending discovery requests that asked the debtor to admit facts that were not true - HOLDING: The court of appeals held that the law firms continued litigation of the matter and its discovery requests violated the federal law - FACTS: school custodian Tim McCollough ("McCollough") had credit card account with Chemical Bank & made purchases after Chemical Bank merged with Chase Manhattan Bank ("Chase"); McCollough suffered a brain injury at work and his wife underwent surgery, they fell behind on their credit card bills. McCollough made his last payment on this Chase account in 1999. Chase "charged off" the unpaid balance of $3,000. o Collect America, Ltd ("Collect America") attempts to collect debt purchased by its subsidiary, CACV of Colorado, Ltd. ("CACV"); CACV purchased McCollough's delinquent debt from Chase in 2001 and in 2005 sued McCollough in state court for $3,816.80 o McCollough pro se, replied to the lawsuit by stating "that the statute of limitations is up." CACV dismissed the case and documented the service of the complaint on McCollough and his response in its electronic files. o Collect America got law firm Johnson, Rodenburg & Lauinger ("JRL") to purse collection of McCollough's outstanding debt; Dendy ("Dendy") handled JRL's cases in Montana; Collect America's contract with JRL provides: (1) "Collect America makes no warranty as to the accuracy or validity of the data provided," and (2) JRL is expressly "responsible to determine [its] legal and ethical ability to collect these accounts." o CACV sent JRL electronic file & info on McCollough's account. JRL's "screening procedures flagged a statute of limitations problem with McCollough's debt." Grace Lauinger ("Lauinger") wrote to CACV on January 4, 2007, to CACV that Statute of Limitations has expired on this file as of August 21, 2005. Lauinger asked CACV to provide JRL "with an instrument in writing to extend the Statute of Limitations." CACV responded to JRL that McCollough made a $75 partial payment on June 30, 2004; Based on a 2004 payment, five-year statute of limitations in Montana would not have expired until 2009. o info CACV gave on 2004 payment was incorrect 2004, was the return of court costs to CACV for a collection complaint and summons that CACV had prepared in 2003 BUT JRL did not request additional information from CACV & relied on CACV info and JRL filed a lawsuit against McCollough in Montana state court on April 17, 2007, which included a request for attorneys' fees. o McCollough responded to complaint saying SOL was up bc he had no dealings with CC in over 8 yrs o Lauinger sent email to Collect America asking for further documentation, but Collect America had none b/c age of the account-- Despite fact that Collect America could give more information, Dendy continued to prosecute lawsuit against McCollough o August 2007, CACV informed Lauinger that McCollough had not made a partial payment in 2004. Lauinger noted this new information in JRL's file on McCollough. Lauinger could not recall whether she directly informed Dendy of this new information, but the information was accessible in McCollough's electronic file. Dendy continued to prosecute the lawsuit. In October 2007, Dendy served requests admissions which requested that McCollough admit facts that were not true such as that he had never disputed the debt, he had no defense, and he had made a payment in 2004. CACV instructed Dendy to dismiss lawsuit & Montana court dismissed the lawsuit against McCollough with prejudice McCollough brought lawsuit against JRL in federal district court alleged violations FDCPA; federal district court granted partial summary judgment in favor of McCollough on his FDCPA claim after finding that JRL filed a time-barred lawsuit against McCollough and continued to prosecute the lawsuit after it knew that the lawsuit was time-barred. A jury found in favor of McCollough on his remaining claims. - REASONING: court of appeals rejected JRL's claim that district court erred in granting summary judgment in favor of McCollough on his FDCPA claims o FDCPA bans debt collectors from engaging in abusive and unfair practices o Lawyers who regularly collect debts through litigation are included within the FDCPA's definition of "debt collector." ; FDCPA is a strict liability statute but narrow defense "if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error JRL claimed that it had maintained adequate preventive measures by using a system that flags potential statute of limitations problems. court of appeals said JRL's bona fide error defense failed as a matter of law JRL erred by relying without verification on CACV's representation and by overlooking contrary information in its electronic file JRL thus presented no evidence of procedures designed to avoid the specific errors that led to its filing and maintenance of a time- barred collection suit against McCullough." ALSO JRL's relying on CACV's email of partial payment was unreasonable as a matter of law b/c JRL's contract with Collect America expressly disclaimed accuracy and validity of information provided by Collect America and provided that JRL was responsible for determining its ethical and legal ability to collect the account electronic file confirmed that a payment had not been made & McCollough had asserted SOL defense in earlier lawsuit and McCollough told JRL that debt was outside SOL - trial court did not err in granting summary judgment in favor of McCollough on his claim that JRL violated the FDCPA by requesting attorney fees in its Montana collection action - trial court was correct that requests for admission served by JRL violated FDCPA as a matter of law o JRL argued "that FDCPA should not be read to cover discovery procedures such as requests for admission" even though it covers the filing of complaints and the service of settlement letters during litigation o Court said look at debt collector acts "from the standpoint of the least sophisticated debtor." service of requests for admission containing false information upon a pro se defendant without an explanation that the requests would be deemed admitted after thirty days constitutes 'unfair or unconscionable' or 'false, deceptive, or misleading' means to collect a debt
Credit reporting: FICO- fair issac company5 categories Payment history; amounts owed; length of credit history; recent credit use; types of credit in use
Formal Remedies for Nonpayment of Debt: -- when debtors dont pay creditors can invoke formal legal remedies - Secured Creditors- Repossession o Secured creditor: one who holds a lien (security interest) on certain property belonging to the debtor that will serve as collateral to secure the debt o Voluntary security interest in real property= mortgage o Security interest is create by complying with state law requirements from Article 9 of UCC Purchase money security interest (PMSI): lien that comes up when funds are loaned to purchase the collateral (car loan) Non PMSI: collateral is already owned by debtor before borrowing ( homeowner uses home equity for home equity loan) o Usually PMSI gets priority as a lien and non PMSI is a second or junior lien When lien is created good idea to perfect itcreditor registers it in public record in a state office giving notice of the lien to whole world it cements the liens power
- Unsecured Creditors- Judgment and Execution o Can sue to collect from debtor that refuses to pay o Can result in default judgment- debtor has no defense or they cant afford an attorney Winning plaintiff (creditor) becomes a judgment creditor Creditor then gets a writ (court order)writ of execution or attachment/ fifay Writ tells sheriff or marshal to look for non exempt property of the debtor, seize it and sell it and pay proceeds to judgment creditor until judgment is full paid; once sheriff has levied debtors property a lien attaches and creditor becomes a judicial lien creditor o b/c lien creditor has non consensual property interest it has to sell property through formal procedure -- cant retain property in place of debt ...sheriff has to advertise for public sale and sell to highest bidder Execution: whole process from writ issuance to seizure Levy: process of seizure of the property
- 3 rd Parties- Garnishment o writ of garnishmentattaches debt owed to the debtor for the benefit of the debtors judgment creditor can direct employer to pay wages to the creditor rather than the employee; creditor can garnish bank to get funds from a checking account 2 parts: set of Qs to determine whether the party served with writgarnishee (employer or bank) owes any money to the debtor command to the garnishee to withhold payment or return debtors propert pending order from court
- Commonwealth Edison v. Denson o D owed money to ConEd who delivered a writ of garnishment on Ds employer, CAT. CAT sent ConEd money but not the full amount because they were already withholding money for child support. The court held that support order deductions should be taken into account when computing the amount of the debtors earnings. Rationale: the law must allow only a deduction of an amount that is the lesser of state law or 25%. State law may establish priorities because there are none in federal law. Support orders and garnishments should be considered together which means that the garnishee does not get a too large chunk of the remaining money. Congress has stepped in to protect the debtors family in this respect. there is a limit on how much can be taken from a debtor through the process of garnishment and when determining this, the support he must pay for children must also be considered A bank is not required to consider federal wage restrictions on a direct deposit paycheck. This is because there would be a lot of difficulty in tracing the funds. o Setoff: banks are usually the easiest way to reach the debtor but the bank will have the right to set off. This means that the bank is also a creditor and it may use the deposit account of the debtor to pay off the other debts first. The garnishor then gets the rest of that
- Problems: 2.1 o There are FDCPA violations in the typical collection letter 1692e: false deceptive / misleading representationspecifically section 4 as non payment of any debt will result in arrest no indication that such legal action can take place as well 72 hours may be arbitrary 1692f: property the collection letter is alluding to may be exempt section 8 using a post card (is that a letter too?) section 7 2.2 o first check to see what the lease contract included o look at the contract agreement b/n Chalmers and the law firm under FDCPA some measures are okay to take against debtors the student hasnt listed any justifications or responses to the allegations for non payment under McCullough I can have a defense if the allegations were a bonafide mistake
2.3 o no sean does not have a right to keep the computer o normally if the state did not have a governing rule on exemptions the computer could be seized, but in this case Sean was an unsecured creditor, therefore there was no collateral other than the IOU o Sean could try and seize alternative property that Mona may own that would satisfy the $100, he could also try and proceed with a garnishment proceeding to collect the outstanding amount from Monas place of work
2.4- Under UCC9609 secured party on default has right to take back collateral...but sometimes courts will look at the means the creditor uses. - in this case the company will probably be help responsible for employment negligence as Bruno was authorized to act accordingly to reposes the car; he failed to use common sense and check the car before taking it - Isabel- is at fault in that she was in default but we are not given any additional information on how long her payments were in default from...but if she purposely left the kid in the car when she knew the collectors were trying to take the car then she may be liable - Jermaine- hes a child so he probably doesnt have any legal issues Bruno- most likely he is legally in trouble as he caused emotional distress, and technically unintentionally kidnapped Isabels kid; he could have also knocked on the door or honked to let Isabel know that he was taking the car
2.5 Watkins can raise suit against Highland and the mortgage company. He can notify Highland that their inability to review his responses and correct the outstanding amounts have cost him his mortgage. Additionally Watkins can sue the mortgage company for failing to follow up directly with highland on the matter assuming that the issue is still within the SOL period - No it would not matter if the dispute was over $40 instead of $4K
2.6 2/1- writ of garnishment 2/1- bank account has -10 balance 2/5- 5K amount in bank 2/9- sheriff served writ 2/9- wayne writes check for $500 ... bank pays it on 2/10 2/15-bank answers writ 2/16- waynes direct deposit of $300 arrives
Writ answer was due 2/20
Who gets what? - first need to see what garnishment protocols state has as - only a certain percentage of wages can be withheld -- according to the total of disposable earnings of the employee o according to US dept. of labor: either 25% of the wage can be garnished OR 30 times the minimum wage Whichever is lesser will be used o Bank will get its $10 overdrawn amount + any penalties first o Then phone company will get $500 - Bank could theoretically get $1250 or 30 times w/e the minimum wage of the state o Or out of the $1250 the bank will be paid first and then the telephone company
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Roy Jeffcoat Carolina Homebuilders, Inc. v. Blyth Eastman Paine Webber, Inc., Energy Conversion Corporation v. Blyth Eastman Paine Webber, Inc., 896 F.2d 1367, 4th Cir. (1990)