News & Resources

Creditor Alert: Supreme Court to Settle Circuit Court Split on Whether Filing a Stale Proof of Claim Violates the Fair Debt Collection Practices Act

By Michael L. Moskowitz and Melissa A. Guseynov

We have previously reported on the interplay between the Bankruptcy Code and the Fair Debt Collection Practices Act (“FDCPA”), and the conflicting case law throughout the country regarding whether a creditor violates the FDCPA by knowingly filing a time-barred proof of claim in a bankruptcy case.  

As anticipated, on October 11, 2016, the Supreme Court of the United States granted a petition for certiorari in Midland Funding LLC v. JohnsonAs we previously reported, in May of this year the United States Court of Appeals for the Eleventh Circuit held that debt-collectors may face FDCPA liability for knowingly filing a stale proof of claim in a bankruptcy case.

 

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CIRCUIT SPLIT: Tennessee District Court Holds That Tax Debt Resulting from Late-Filed Tax Return May be Dischargeable in Bankruptcy

By Michael L. Moskowitz and Melissa A. Guseynov

On September 9, 2016, District Judge Waverly D. Crenshaw, Jr., sitting in the United States District Court for the Middle District of Tennessee, held that a debtor’s tax debt relating to a late-filed tax return may be dischargeable in certain circumstances. Biggers v. Internal Revenue Service, 2016 WL 5121893 (M.D. Tenn. Sept. 9, 2016). Read the full opinion here.

This decision widens the judicial split regarding the dischargeability of tax debt for late-filed returns in personal bankruptcy cases. Specifically, the First, Fifth and Tenth Circuits have held that if a debtor’s tax return is filed even one day late, the debt may not be discharged because of the language added to Section 523(a) of the Bankruptcy Code in 2005. However, the Fourth, Seventh, Eighth and Eleventh Circuits adhere to a four-prong test arising out of Beard v. Commissioner, a 1984 Tax Court decision. Courts employing the Beard test focus on the fourth factor, which analyzes whether there was an honest and reasonable attempt to satisfy the requirements of tax law.   

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Welcome to the Weltman & Moskowitz Team, Melissa!

Please help welcome our newest team member, Melissa Dlugokencky!

Melissa will be working closely with our bankruptcy, litigation and foreclosure attorneys. She brings to Weltman & Moskowitz proven legal assisting skills, an undergraduate degree from Dowling College and her paralegal certification from Queens College. Before joining us, Melissa concentrated on litigation and transactional matters at Cohen & Slamowitz (n/k/a Selip  & Styloanou, LLP), and Baker, McEvoy, Morrissey & Moskovits, P.C. You can reach Melissa at md@weltmosk.com.  

We hope you’ll say hello to Melissa the next time you call or stop in.  

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Lender Alert: Bankruptcy Judge Imposes Sanctions on Mortgage Servicer for Ignoring Bankruptcy Rules

By Richard E. Weltman and Melissa A. Guseynov

On September 12, 2016, the Chief Bankruptcy Judge for the District of Vermont directed a mortgage servicer to pay $375,000 in sanctions for failing to adequately notify debtors before imposing certain post-petition mortgage account charges. The court relied upon Rule 3002.1 of the Federal Rules of Bankruptcy Procedure (“Rules”).  In re Gravel, 2016 WL 4765773 (Bankr. D. Vt. Sept. 12, 2016). Read the full decision here.

Rule 3002.1(c) requires creditors to file and serve notice of all fees, expenses, or charges (i) that were incurred post-petition in connection with a claim, and (ii) that the creditor asserts are recoverable against debtor or debtor’s principal residence.  In addition, the rule provides that the requisite notice must be served within 180 days after the date on which the fees, expenses, or charges are incurred.

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Florida Bankruptcy Judge Expands Trustee’s Statute of Limitations to Ten Years

By Michael L. Moskowitz and Melissa A. Guseynov

On August 31, 2016, Bankruptcy Judge Robert Mark, sitting in the Bankruptcy Court located in the Southern District of Florida, held that section 544(b) of the Bankruptcy Code permits a trustee to step into the shoes of the Internal Revenue Service (“IRS”) to avoid a transfer which occurred ten years prior to the petition date. Judge Mark held the trustee could avail himself of the IRS’s ten-year statute of limitations, rather than the three- to six-year period provided by most state statutes. Mukamal v. Citibank NA (In re Kipnis), 16-1045 (Bankr. S.D. Fla. Aug. 31, 2016).

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Weltman & Moskowitz Founding Partners Named Super Lawyers for 2016

Weltman & Moskowitz, LLP is proud to announce that Richard Weltman and Michael Moskowitz have both been selected as Metro New York Area Super Lawyers for 2016. This is the third consecutive year each has been recognized as a top bankruptcy/debtor and creditors’ rights attorney. This honor is a product of a rigorous investigative process by the publishers of Law and Politics. Attorneys are selected based on professional accomplishments, licensing and certifications, peer recognition and personal achievement. The final published list represents no more than 5% of the lawyers in each state. The Super Lawyers objective is to create a credible list of outstanding attorneys, and the partners of Weltman & Moskowitz, LLP are proud to be recognized for their hard work and client dedication.

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Lenders Beware: Bankruptcy Judge Orders Mortgage Lender to Pay $250,000 in Punitive Damages for $297.72 Stay Violation

By Michael L. Moskowitz and Melissa A. Guseynov

In June, a Bankruptcy Judge for the Northern District of Ohio calculated $250,000 in punitive damages against a mortgage lender for violating the automatic stay by incorrectly filing a proof of claim on a car loan that had not been transferred to that lender. In re Mocella, 552 B.R. 706 (Bankr. N.D. Ohio 2016).

Here, the originating lender held a mortgage on debtors’ residence as well as a car loan. As part of a bulk transfer of loans, the originating lender assigned the mortgage to a new lender. The car loan was not transferred. Due to a bookkeeping error, the new lender mistakenly thought the car loan had been transferred to it, along with the mortgage loan. As a result of this error, the new lender filed a proof of claim for both the mortgage and car loan.

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Creditor Alert: Debt Collectors May Face FDCPA Liability for Filing Stale Bankruptcy Claims

By Michael L. Moskowitz and Melissa A. Guseynov

We’ve previously covered the interplay between the Bankruptcy Code and Fair Debt Collection Practices Act (“FDCPA”). Recent litigation has focused on debtor challenges to time-barred proofs of claim. This has resulted in conflicting statutory interpretation. In a recent decision, the United States Court of Appeals for the Eleventh Circuit held that debt collectors, defined as a type of creditor under the FDCPA, may face FDCPA liability for knowingly filing a time-barred proof of claim in a bankruptcy case. Johnson v. Midland Funding, LLC, 2016 WL 2996372 (May 24, 2016).

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CREDITORS TAKE NOTICE: Filing of Stale Claim in a Bankruptcy Case May Not Violate the Fair Debt Collection Practices Act

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision out of the United States Bankruptcy Court for the Northern District of Illinois, Judge Benjamin Goldgar dismissed Debtor’s adversary proceeding complaint in which the debtor alleged the debt collector violated the Fair Debt Collection Practices Act (“FDCPA”) by merely filing a proof of claim. In re Murff, 2015 WL 3690994 (Bankr. N.D. Ill. June 15, 2015).

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Supreme Court Agrees to Resolve Circuit Split Regarding Structured Dismissals

By Michael L. Moskowitz

The United States Supreme Court (SCOTUS) has agreed to resolve another bankruptcy issue which has split the circuit courts. This time, the high court will address a chapter 11 reorganization issue. The most recent SCOTUS decisions have focused primarily on consumer bankruptcy issues.

At issue here is whether bankruptcy courts may dismiss chapter 11 cases when property is distributed in a settlement that does not comply with the priority scheme for distributions set forth in Section 507 of the Bankruptcy Code.

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Lender Alert: New York Legislation Requires Lenders to Maintain Abandoned Homes Before Foreclosure

By Michael L. Moskowitz

On June 23, 2016, New York Governor Andrew Cuomo signed into law legislation which amends section 1307 of the New York Real Property Actions and Proceedings Law (RPAPL). The new law becomes effective 90 days from June 23, 2016.

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SCOTUS: False Representation Now Unnecessary to Find Consumer Bankruptcy Fraud

By Richard E. Weltman and Melissa A. Guseynov

SCOTUS: False Representation Now Unnecessary to Find Consumer Bankruptcy Fraud by Richard E. WeltmanWe previously reported on the split among the federal circuit courts of appeal concerning circumstances under which a debtor’s discharge with regard to a particular debt may be denied based on actual fraud if, prior to filing, the debtor transferred assets away from creditors without directly misleading them. In Husky International Electronics, Inc. v. Ritz, the United States Supreme Court settled the split of opinion among the lower courts, holding that debtor’s actual misrepresentation is not a necessary prerequisite to demonstrate “actual fraud” under section 523(a)(2)(A). Husky Inter. Elect., Inc. v. Ritz, 136 S.Ct. 1581 (2016).

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Bankruptcy Update: New Jersey Bankruptcy Judge Allows Debtor to Retain Inherited IRA

By Michael L. Moskowitz and Melissa A. Guseynov

Bankruptcy Update: New Jersey Bankruptcy Judge Allows Debtor to Retain Inherited IRA by Michael L. Moskowitz and Melissa A. GuseynovIn 2013 the Supreme Court held that funds held in an inherited non-spousal IRA were not exempt under Section 522 of the Bankruptcy Code. You can read our blog article on Clark v. Rameker here. However, in a New Jersey bankruptcy court decision handed down last month, Bankruptcy Judge Christine M. Gravelle held that an inherited IRA is not property of the debtor’s bankruptcy estate, regardless of whether it would be characterized as an exempt asset under the Bankruptcy Code. In re Norris, 2016 WL 2989234 (Bankr. D.N.J. May 20, 2016).

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Bankruptcy Update: Seventh Circuit Holds That Tenant’s Pre-Petition Termination of Lease May be Voidable in Bankruptcy

By Michael L. Moskowitz and Melissa A. Guseynov

Bankruptcy Update: Seventh Circuit Holds That Tenant’s Pre-Petition Termination of Lease May be Voidable in Bankruptcy by Michael L. MoskowitzOn March 11, 2016, the Court of Appeals for the Seventh Circuit held that a tenant debtor’s pre-petition lease termination may be voidable as a fraudulent conveyance or a preferential transfer in the tenant’s subsequent bankruptcy case. In re Great Lakes Quick Lube LP, 816 F.3d 482 (7th Cir. 2016).

In this case, fifty-two days prior to filing for bankruptcy protection, Great Lakes Quick Lube LP (“Debtor”), surrendered two profitable commercial leases to its landlord for various business-related purposes. Following Debtor’s chapter 11 filing, its official committee of unsecured creditors commenced an adversary proceeding seeking to void the lease terminations, arguing the lease terminations were either preferential or fraudulent transfers. After trial, the Bankruptcy Court ruled in favor of Debtor holding, among other things, that the lease terminations did not constitute transfers. The decision was directly appealed to the Seventh Circuit.

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Madoff Update: Mere Suspicion of Fraud Not Enough to Extend Trustee “Claw-Back” to Six Years

By Michael L. Moskowitz

We have previously reported on Bernard Madoff’s massive Ponzi scheme and the resultant “clawback” lawsuits pending in the bankruptcy and district courts for the Southern District of New York.

In a decision dated March 14, 2016, Bankruptcy Judge Stuart Bernstein granted partial relief to an investment fund seeking to dismiss a “clawback” lawsuit filed by Irving Picard, the trustee for Bernard L. Madoff Investment Securities, LLC (“BLMIS”). Judge Bernstein found that Trustee Picard could not recover fictitious profits and principal recoveries in the six years before bankruptcy because there was no showing the investment firm had “actual” knowledge of Madoff’s fraud.

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Bankruptcy Update: District Court Prohibits Chapter 13 Debtors From Compelling Mortgagee to Accept Title to Surrendered Property

By Michael L. Moskowitz and Melissa A. Guseynov

Bankruptcy Update: District Court Prohibits Chapter 13 Debtors From Compelling Mortgagee to Accept Title to Surrendered Property by Michael L. Moskowitz and Melissa GuseynovWe previously reported on In re Sherwood, a Southern District of New York bankruptcy decision, wherein the court held a debtor could not confirm a chapter 13 plan over a lender’s objection where the plan would vest title to surrendered property in the mortgagee without its consent. See In re Sherwood, 2016 WL 355520, at * 7 (Bankr. S.D.N.Y. Jan. 28, 2016).

In a recent appeal of a bankruptcy court decision, the District Court for the Eastern District of New York agreed with In re Sherwood and other “persuasive authority,” in confirming that a secured creditor’s rights under the Bankruptcy Code are “impermissibly compromised by a Chapter 13 plan that provides for non-consensual” vesting of collateral. HSBC Bank USA, N.A. v. Zair, 2016 WL 1448647, at * 1 (E.D.N.Y. April 12, 2016).

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Condominium Associations in New Jersey Score Big Win Protecting Pre-Petition Liens in Consumer Bankruptcy Cases

By Michael L. Moskowitz

Condominium Associations in New Jersey Score Big Win  Protecting Pre-Petition Liens in Consumer Bankruptcy Cases by Michael L. MoskowitzPost-petition claims of condominium associations for common charges have always held a protected status when a consumer debtor files for bankruptcy relief. Under 11 U.S.C. §523 (a)(16), as amended in 2005, chapter 7 debtors who retain legal, equitable and/or possessory ownership interest in their condominium unit remain liable for post-petition condominium charges.

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Don’t Be Fooled: Bankruptcy Exemptions & Dollar Amounts Rose Again on Apr 1

By Richard E. Weltman

Don’t Be Fooled: Bankruptcy Exemptions & Dollar Amounts Rose Again on April 1 By Richard E. WeltmanA 3% cost of living adjustment became effective for new bankruptcy cases filed on and after April 1, 2016, according to the Judicial Conference of the United States. This means certain dollar amounts relating to small business chapter 11 cases, preference claims, means testing, and property exemptions went up. These adjustments to the federal Bankruptcy Code are automatically issued every three years to keep up with inflation.

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Lender Advisory: Second Circuit Approves Debtor’s FDCPA Lawsuit After Receiving Bankruptcy Discharge

By Michael L. Moskowitz and Melissa A. Guseynov

Lender Advisory: Second Circuit Approves Debtor’s FDCPA Lawsuit After Receiving Bankruptcy Discharge by Michael L. MoskowitzIn a recent decision of relevance to lenders, Garfield v. Ocwen Loan Servicing, LLC (“Ocwen”), 2016 WL 26631 (2d Cir. Jan. 4, 2016), the Court of Appeals for the Second Circuit held that a debtor may commence a lawsuit to dispute a lender’s collection practices under the Fair Debt Collection Practices Act (“FDCPA”) after receiving a discharge in bankruptcy.  

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Lender Alert: Chapter 13 Debtor Can't Compel Secured Lender to Accept Title to Surrendered Collateral

By Michael L. Moskowitz and Melissa A. Guseynov

Lender Alert: Chapter 13 Debtor Can't Compel Secured Lender to Accept Title to Surrendered Collateral by Michael L. MoskowitzIn a recent opinion, Bankruptcy Judge James L. Garrity, Jr., sitting in the Southern District of New York, held that a debtor cannot confirm a chapter 13 plan over a lender’s objection where the plan would compel the transfer of title to the secured creditor, explaining that forcing title onto the creditor would transform the creditor’s right to recover its collateral into an obligation, thereby rewriting the Bankruptcy Code and the underlying loan documents. In re Sherwood, 2016 WL 355520, at * 7 (Bankr. S.D.N.Y. Jan. 28, 2016).

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Lenders’ Best Practices in Foreclosure Cases Revisited: Mortgagees’ Lack of Good Faith May Lead to Assessment of Sanctions by Courts

By Michael L. Moskowitz and Michele Jaspan

Lenders’ Best Practices in Foreclosure Cases Revisited: Mortgagees’ Lack of Good Faith May Lead to Assessment of Sanctions by Courts by Michael L. MoskowitzWe previously reported on cases where lenders are forced to forfeit accrued mortgage interest as a result of a court’s finding of “bad faith,” regarding borrower requests for mortgage modifications. The foreclosure courts are continuing to find new ways to sanction lenders as evidenced below.

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Foreclosure Alert: Failure to Establish Proper Mailing Practices Can Lead to Foreclosure Case Dismissal

By Michael L. Moskowitz and Michele Jaspan

Foreclosure Alert: Failure to Establish Proper Mailing Practices Can Lead to Foreclosure Case Dismissal by Michael L. MoskowitzWe previously reported on the importance of strict compliance with the mailing of the 90-day pre-foreclosure notice pursuant to RPAPL §1304 (“Notice”). Such strict compliance has become fodder for defendants’ lawyers as failure to give such notice to all persons signing either the note or mortgage, as a borrower, is a fatal defect. Lender’s failure to comply with this important condition precedent will result in case dismissal.

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Lender Update: Louisiana Bankruptcy Judge Allows Chapter 7 Debtor to Strip-Off Wholly Unsecured Judicial Lien

By: Michael L. Moskowitz and Melissa A. Guseynov

Lender Update: Louisiana Bankruptcy Judge Allows Chapter 7 Debtor  to Strip-Off Wholly Unsecured Judicial Lien by Michael L. MoskowitzA chapter 7 debtor in Louisiana recently succeeded in avoiding a $180,000 judgment lien on her home after a bankruptcy judge concluded that the United States Supreme Court's holding in Dewsnup v. Timm, 502 U.S. 410 (1992) is not applicable to non-consensual judicial liens. In re Mayer, 2015 WL 7424327 (Nov. 20, 2015).  

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Supreme Court Expected to Take Close Look at Student Loan Debt in Bankruptcy: ‘Fresh Start’ or ‘Undue Hardship’?

By Richard E. Weltman and Melissa A. Guseynov

Supreme Court Expected to Take Close Look at Student Loan Debt in Bankruptcy: ‘Fresh Start’ or ‘Undue Hardship’ By Richard E. WeltmanWe have previously reported on judicial treatment of student loan debt dischargeability in bankruptcy—more specifically, how federal courts construe section 523(a)(8) of the Bankruptcy Code, which prohibits bankruptcy courts from discharging most student loan debt “unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents.” 11 U.S.C. § 523(a)(8).  

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