News & Resources

Creditor Alert: Federal Judge Grants Injunction to Temporarily Block Law Slashing Judgment Interest Rate on Consumer Debts

By: Michael L. Moskowitz and Melissa A. Guseynov

We previously reported on the Consumer Judgment Interest Act (S.5724A/A.6474A), enacted on December 31, 2021, which retroactively lowered the post-judgment interest rate from 9 percent to 2 percent. (See here: Consumer Alert: Judgment Interest on Consumer Debt Slashed by Governor Hochul). The reduction would sharply reduce the debt load for consumers who are unable to pay their debts before a judgment is entered.

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Consumer Alert: Judgment Interest on Consumer Debt Slashed by Governor Hochul

By: Michael L. Moskowitz and Michele K. Jaspan

On December 31, 2021, Governor Kathy Hochul signed the Consumer Judgment Interest Act (S.5724A/A.6474A) to protect New Yorkers from the excessive interest rate applied to money judgments arising out of consumer debt, including credit card, medical and student debt, by lowering the post-judgment interest rate from 9 per cent to 2 percent.

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Eastern District of New York Bankruptcy Judge Opts Out of Loss Mitigation Program

By: Michael L. Moskowitz and Melissa A. Guseynov

In a memorandum opinion, dated February 28, 2022, United States Bankruptcy Judge Robert E. Grossman stated he will no longer entertain motions for loss mitigation in chapter 7 or 13 cases assigned to him. He explained the loss mitigation program was implemented in 2009 as a temporary administrative process due to the collapse of the mortgage industry and was never intended to become a “de facto right or a new form of bankruptcy protection.” Thus, while debtors and secured creditors may reach a consensual mortgage modification, it will be on a voluntary basis only and not court-sanctioned, as nothing in the Bankruptcy Code allows a Bankruptcy Court to “forcibly restructure a residential mortgage.”

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New York to Permanently Allow Remote Notarization

By: Michael L. Moskowitz and Melissa A. Guseynov

New York to Permanently Allow Remote Notarization by Michael MoskowitzAs practitioners are aware, notarization is required for numerous sworn statements and affidavits. This typically requires the person executing the document to physically appear before a notary public. However, with the onset of the Covid-19 pandemic, New York allowed remote notarization to take place on a limited and temporary basis. However, on December 22, 2021, Governor Kathy Hochul signed into law Senate Bill 1780C, which permanently provides for electronic notarization with the use of video technology, subject to certain restrictions. The law, which takes effect on June 20, 2022, aligns New York with a majority of states that permit remote notarization.  

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ALERT: COVID-19 Eviction Moratoriums Expire

By: Michael L. Moskowitz and Michele K. Jaspan

Governor Kathy Hochul allowed the moratorium on COVID-related residential and commercial evictions and foreclosures for New York State to expire on January 15, 2022, noting it was never intended to be permanent. The statewide moratorium was extended several times since it was first passed in the early days of the pandemic. For now, tenants can still file for eviction protection and rent relief with the state Office of Temporary Disability Assistance.

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COVID-19 Update-Status of Tenant Evictions and Foreclosures

By: Michael L. Moskowitz and Michele K. Jaspan

On August 12, 2021, the U.S. Supreme Court granted a request from a group of New York landlords to block a part of the state's eviction moratorium, enacted due to the COVID-19 pandemic. Landlords claimed they did not have a way to challenge tenants who sought protection from eviction by submitting a hardship claim form which tenants were allowed to complete citing they experienced economic hardship because of the pandemic. Property owners argued that tenants could use the hardship claims to avoid paying rent even when they have the ability to do so.

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District Court Overturns Decision Regarding Brunner Standard and Dischargeability of Student Loan Debt in Bankruptcy

By: Michael L. Moskowitz and Melissa A. Guseynov

We have reported many times on the judicial treatment of student loan dischargeability in bankruptcy. Last year we reported in detail on the January 2020 decision by Chief Bankruptcy Judge Cecilia Morris wherein she analyzed the treatment of student loan debt in bankruptcy under the “undue hardship” exception of section 523(a)(8) of the Bankruptcy Code. See article here. Chief Judge Morris determined that, based on the seminal Brunner test, a debtor with a gross annual income of $37,500 could discharge over $220,000 of student loan debt. In re Rosenberg, Case No. 18-09023 (Bankr. S.D.N.Y. Jan. 7, 2020). Last month, however, District Court Judge Philip M. Halpern overturned Judge Morris’ decision, finding that neither the debtor nor the lender were entitled to summary judgment. Rosenberg v. Educational Credit Management Corp., Case No. 20-cv-00688 (S.D.N.Y. Sept. 29, 2021). Read the full opinion here.  

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Weltman & Moskowitz Attorneys Named Super Lawyers for 2021

Weltman & Moskowitz, LLP is proud to announce that founding partners Richard Weltman and Michael Moskowitz have once again been selected as Metro New York Area Super Lawyers for 2021. Both Richard and Michael have been recognized as top bankruptcy and debtor and creditors’ rights attorneys for several years.

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Second Circuit Rules that Private Student Loan Debt is Dischargeable in Bankruptcy

By: Michael L. Moskowitz and Melissa A. Guseynov

We have reported extensively over the years regarding the judicial treatment of student loans in bankruptcy, particularly with respect to how federal courts have interpreted section 523(a)(8) of the Bankruptcy Code, which bars a debtor from discharging certain student loan debt. See 11 U.S.C. § 523(a)(8). However, in a recent decision issued by the Court of Appeals for the Second Circuit, the court held that private student loan debt is indeed dischargeable in bankruptcy. In re Hilal K. Homaidan, Case No. 20-1981 (2d. Cir. July 15, 2021).  Read the full opinion here. Significantly, this decision aligns the Second Circuit with the Fifth and Tenth Circuits.

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LENDER ALERT: New CFPB Rules Designed to Assist Mortgage Borrowers Affected by COVID-19

By: Michael L. Moskowitz and Michele K. Jaspan

LENDER ALERT: New CFPB Rules Designed to Assist Mortgage Borrowers Affected by COVID-19 by Michael L. MoskowitzWe have previously written about the rules and procedures pertaining to the COVID-19 pandemic with which lenders must comply.

On June 28, 2021, the Consumer Financial Protection Bureau (CFPB) issued new rules to reinforce the ongoing economic recovery, with an amendment of the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X. The new rule is entitled 2021 Mortgage Servicing COVID-19 Rule or Rule 2021. The rules cover loans on principal residences only, generally exclude small servicers, and will take effect on August 31, 2021.

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Lender Alert: New York to Reduce Statute of Limitations For Consumer Credit Transactions From Six Years to Three Years

By: Michael L. Moskowitz and Melissa A. Guseynov


Paper with On May 25, 2021, the New York Senate passed Bill S153 (“Bill”), called the “Consumer Credit Fairness Act,” which: (i) establishes a 3-year statute of limitations for commencement of a cause of action arising out of a consumer credit transaction; (ii) sets forth a required notice of lawsuit that must be mailed to a defendant; (iii) establishes certain requirements for a complaint, including but not limited to attaching a copy of the contract or instrument to the complaint; and (iv) provides for arbitration of such actions. The Bill was passed in the Assembly on June 2, 2021, and will now be sent to the Governor’s desk for signature or veto.

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Appellate Update: Foreclosure Notice Requirements and Challenge to Standing When the Mortgage to Be Foreclosed is Assigned By MERS

By: Michael L. Moskowitz and Michele K. Jaspan

Appellate Update: Foreclosure Notice Requirements and Challenge to Standing When the Mortgage to Be Foreclosed is Assigned By MERS by Michael MoskowitzWe have previously written about the strict requirements of the requisite notice which must be sent to a borrower before commencement of a residential foreclosure action in New York. New York’s Real Property Actions and Proceedings Law (“RPAPL”) § 1304 requires a mortgage lender to notify a residential home borrower of an impending foreclosure action at least 90 days before the foreclosure action is commenced, using specific statutory language, printed in 14-point type, sent by registered or certified mail, as well as by first class mail, to the borrower (“RPAPL 1304 NOTICE”). The statute does not specifically address whether lender’s counsel may send the RPAPL 1304 NOTICE on behalf of its client. 

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LENDER ALERT: CFPB Proposal for Mortgage Servicing Changes to Prevent Expected Wave of Foreclosures Related to COVID-19

By: Michael L. Moskowitz and Michele K. Jaspan

A new rule proposed by the Consumer Financial Protection Bureau (“CFPB”), would create a new pre-eviction review period to grant millions of Americans more time to figure out payment options before Covid-19 federal mortgage protections expire at the end of June. A copy of the proposal can be found here.

This proposal would also prevent mortgage servicers from initiating a foreclosure against delinquent borrowers until after Dec. 31, 2021. The rule would apply to all mortgages, both federal and private, on a principal residence.

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SCOTUS ALERT: Supreme Court Holds that Retention of Property Does Not Violate Automatic Stay

By: Michael L. Moskowitz and Melissa A. Guseynov  

SCOTUS ALERT: Supreme Court Holds that Retention of Property Does Not Violate Automatic Stay  by Michael MoskowitzIn a recent opinion of interest to creditors and debtors alike, on January 14, 2021, the Supreme Court held that passive retention of a debtor’s property does not violate the automatic stay. City of Chicago v. Fulton, Case No. 19-357 (Sup. Ct. Jan. 14, 2021). Read the full opinion here

When a debtor files for bankruptcy protection, section 362(a)(3) of the Bankruptcy Code operates to “stay” efforts of creditors to collect from a debtor outside of bankruptcy, with certain limited exceptions. If a creditor willfully violates the automatic stay and there is injury to a debtor, section 362(k) of the Code states that the injured party may recover “actual damages, including costs and attorneys’ fees, and in appropriate circumstances, may recover punitive damages.”  

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Debtor Alert: Second Circuit Upholds Federal Homestead Exemption on Debtor’s Nonprimary Residence

By: Michael L. Moskowitz and Melissa A. Guseynov

The Court of Appeals for the Second Circuit recently upheld the lower courts’ decisions holding that a debtor’s non-primary residence qualified for the federal “homestead” exemption under section 522(d)(1) of the Bankruptcy Code. In re Maresca, Case No. 19-3331 (2d. Cir. Dec. 14, 2020). Read the full opinion here.

The facts of this case are straightforward and undisputed. After Debtor and her husband purchased a home, they divorced but continued to own the property jointly. Although Debtor no longer resided at the property, it served as her ex-husband’s primary residence and her son spent several days there every week. In 2016, Debtor filed a chapter 7 bankruptcy petition and claimed a federal “homestead” exemption for the property under section 522(d)(1) of the Bankruptcy Code.

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A Super Sad But True Creditor Success Story: Prevailing Against Debtor’s Scorched-Earth Efforts to Modify Child Support at All Costs

By Richard E. Weltman and Michele K. Jaspan

Judge's gavel being held up by man (legal protection concept)Creditors having significant claims against a bankruptcy debtor often face daunting challenges. Many general practitioners are simply not familiar enough with bankruptcy procedures. Liquidation and reorganization cases have materially different objectives, proceedings move quickly, claims deadlines are strictly observed, and bankruptcy statutes and rules typically favor debtors over creditors. When matrimonial disputes are added to the mix, the bankruptcy court is charged with balancing public policy—protecting the child and custodial parent and deferring to state family court expertise—with the interests of a financially troubled debtor seeking a fresh start. Despite the initial disadvantage, Creditor preparation, diligence and expert help can turn things around.

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Credit Union Alert: Bankruptcy Court Concludes Federal Credit Union Qualifies as a “Governmental Unit”

By: Michael L. Moskowitz and Melissa A. Guseynov

Credit Union Alert: Bankruptcy Court Concludes Federal Credit Union Qualifies as a “Governmental Unit”In a recent opinion of interest, the Bankruptcy Court for the District of New Mexico held that a federal credit union constitutes an “instrumentality of the United States” as included in the definition of “governmental unit” pursuant to section 101(27) of the Bankruptcy Code. In re Marquez, Case No. 19-10284-j7 (Bankr. D. N.M. Sept. 30, 2020). Read the full opinion here.  

In this chapter 7 case, the general bar date (the deadline by which a creditor must file a proof of claim) was July 19, while the bar date for governmental units was October 8. When the trustee contended a federal credit union’s proof of claim was untimely because it was filed on July 22, the credit union objected, stating it was subject to the later governmental bar date.

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New Amendments to Bankruptcy Rules Effective December 1, 2020

By Richard E. Weltman


New Amendments to Bankruptcy Rules Effective December 1, 2020 by Richard WeltmanOn December 1, 2020, several amendments to the Federal Rules of Bankruptcy Procedure took effect. These amendments largely modify rules governing bankruptcy appeals, but also importantly impact Rules 2002 and 2004. Some court filing fees also increased slightly. 

Here are the rule changes:

Rule 2002, which governs notice to creditors and other parties, has been amended to (1) add cases under chapter 13 to the rule requiring notice of orders confirming plans; (2) distinguish between voluntary and involuntary cases in connection with notice to creditors with as-filed claims to conform with the proof of claim deadlines under Rule 3002(c); and (3) replace “pursuant” with “under” in several places, most likely to improve readability.

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Chapter 11 Update: Jay Alix Protocol Found Unnecessary and Detrimental to Bankruptcy Transparency

By: Michael L. Moskowitz

Businessman reads Bankruptcy Chapter 11 book.A Houston Bankruptcy Judge’s recent decision brings into question the need for – and efficacy of – the longstanding Jay Alix Protocol. In re McDermott Int’l Inc., 20-30336 (Bankr. S.D. Tex. May 20, 2020). Read the full opinion.

The J. Alix Protocol was originally developed to reconcile the dual nature of chief restructuring officers as both officers of the debtor – and thus insiders – and professionals providing bankruptcy restructuring services to the debtor’s estate. When the Bankruptcy Code initially was developed, the role of chief restructuring officer did not exist. As such, the Bankruptcy Code did not specifically address their retention which, on the surface, appears to fly in the face of section 327’s disinterested standard.1 As a result of this inconsistency, and settlements between restructuring firm Jay Alix and Associates and the Office of the United States Trustee regarding the firm’s retention, the Jay Alix Protocol was established and has been widely followed since. In simple terms, the Jay Alix Protocol provides that debtors should retain restructuring professionals pursuant to section 3632 of the Bankruptcy Code, while applying the relevant disclosure and conflict provisions of section 327(a).

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California Bankruptcy Court Sides With Majority View That Section 362(c)(3)(A) of The Code Does Not Terminate Automatic Stay With Respect to Property of The Estate

By: Michael L. Moskowitz and Melissa A. Guseynov

California Bankruptcy Court Sides With Majority View That Section 362(c)(3)(A) of The Code Does Not Terminate Automatic Stay With Respect to Property of The Estate by Michael L. Moskowitz and Melissa A. GuseynovIn a recent opinion of note, the Bankruptcy Court for the Eastern District of California sided with the majority of courts in holding section 362(c)(3)(A) of the Bankruptcy Code does not apply to property of a debtor’s estate.  In re Thu Thi Dao, Case No. 20-20742 (Bankr. E.D. Cal. May 11, 2020). Read the full opinion here

In this case, Debtor commenced a second chapter 7 bankruptcy case shortly after his prior case had been dismissed for failure to timely file schedules. When the chapter 7 trustee suspected Debtor failed to list all of his assets in the petition, he filed a motion seeking delivery of all unscheduled assets, but was concerned section 362(c)(3)(A) would terminate the automatic stay within thirty days as to such property. The Bankruptcy Court was called upon to clarify whether section 362(c)(3)(A) applied to property of the Debtor’s estate.

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Chapter 11 Debtor Successfully Defeats Pension Fund’s Attempted Dismissal of Case Under Direction of Skilled NY Bankruptcy Law Team

By Michael L. Moskowitz and Adrienne Woods

Weltman & Moskowitz, LLP was retained by one of the few remaining dairies located in New York State to file a chapter 11 bankruptcy petition (“Debtor” or “Client”). Due to a downturn in the industry, Client was forced to close its doors after more than 150 years of operating its family-owned business. While production and other operating costs had steadily increased, sales had significantly decreased leaving the business unprofitable. When the bankruptcy was filed, it was anticipated the business would be sold to a previously-located purchaser (“Purchaser”) with whom Client had been negotiating for several months. Unfortunately, as Client’s business continued to lose customers and profitability fell, the Client was forced to renegotiate the sale price to an exponentially lower number and, ultimately, the Purchaser withdrew its offer entirely. As a result, the client was obliged to liquidate its few hard assets (the client’s business value was primarily tied to business relationships) and collect accounts receivable with a new goal of filing a liquidating plan under chapter 11.

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Lender Alert: Bankruptcy Court Holds It Cannot Bless Foreclosure Sale Inadvertently Completed After Debtor’s Bankruptcy Filing

By: Michael L. Moskowitz and Melissa A. Guseynov

ILender Alert: Bankruptcy Court Holds It Cannot Bless Foreclosure Sale Inadvertently Completed After Debtor’s Bankruptcy Filing by Michael Moskowitzn a recent opinion of significance, the Bankruptcy Court for the Eastern District of New York held that a court cannot legitimize a void foreclosure sale with a nunc pro tunc order. In re David Telles, Case No. 20-70325 (Bankr. E.D.N.Y. April 30, 2020). Read the full opinion here.  

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Bankruptcy Court Reconsiders Brunner Standard and Dischargeability of Student Loan Debt in Bankruptcy

By: Michael L. Moskowitz and Melissa A. Guseynov

Bankruptcy Court reconsiders Brunner Standard and Dischargeability of Student Loan Debt in Bankruptcy  By: Michael L. Moskowitz and Melissa A. GuseynovWe have previously reported on the judicial treatment of student loan dischargeability in bankruptcy. To this end, we have analyzed how federal courts have interpreted 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). In a recent decision from the Southern District of New York Bankruptcy Court, Chief Judge Cecilia Morris analyzed the treatment of student loan debt in bankruptcy under the “undue hardship” exception of section 523(a)(8) of the Bankruptcy Code. Chief Judge Morris determined that, based on the Brunner test, a debtor with a gross annual income of $37,500 could discharge over $220,000 of student loan debt. In re Rosenberg, Case No. 18-09023 (Bankr. S.D.N.Y. Jan. 7, 2020). Read the full opinion here.  

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Lender Alert: New York Permits Defendants in Foreclosure Actions to Assert Standing Defense at Anytime

By: Michael L. Moskowitz and Melissa A. Guseynov

Lender Alert: New York Permits Defendants in Foreclosure Actions to Assert Standing Defense at Anytime by Michael L. Moskowitz and Melissa A. GuseynovWhether a mortgagee has standing to foreclose on a home loan is a frequently litigated issue in mortgage foreclosure actions in New York. Simply put, a mortgage lender has standing to foreclose on a promissory note if it is the holder of the note at issue at the time the foreclosure action is commenced. As is set forth in more detail below, a recently enacted law in New York provides that the defense of “lack of standing” in a foreclosure action is not waived if the defendant fails to raise the defense at the start of the litigation, thus introducing a new level of uncertainty in foreclosures and possibly prolonging an already lengthy, and costly, procedure for lenders.  

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Commencement of a Chapter 11 Case to Obtain Extension of a Real Estate Closing Date May Not Constitute a Bad Faith Filing

Commencement of a Chapter 11 Case to Obtain Extension of a Real Estate Closing Date May Not Constitute a Bad Faith Filing by Michael L. Moskowitz and Melissa A. Guseynov By: Michael L. Moskowitz and Melissa A. Guseynov

In a recent memorandum decision, dated November 12, 2019, a New York Bankruptcy Judge held that filing a chapter 11 petition in order to obtain a 60-day extension of a closing date does not constitute bad faith. In re AAGS Holdings LLC, 19-13029 (Bankr. S.D.N.Y. Nov. 12, 2019). Read the full opinion here.

In AAGS Holdings, a limited liability corporation was under contract to buy certain real property. The contract of sale specifically stated that time was “of the essence.” In addition, if the closing did not take place by the date set forth in the contract, the seller could elect to terminate the contract and retain purchaser’s deposit.

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Lender Alert: Bankruptcy Court Substantially Reduces Post-Petition Fees as Excessive

By Michael L. Moskowitz and Melissa A. Guseynov

Lender Alert: Bankruptcy Court Substantially Reduces Post-Petition Fees as Excessive by Michael Moskowitz and Melissa A. GuseynovIn a recent opinion, the Bankruptcy Court for the Northern District of New York ordered the reduction of post-petition attorney’s fees payable to a lender by nearly half. In re Manuel and Marion Maldonado, Case No. 19-30177 (Bankr. N.D.N.Y. Aug. 6, 2019). Read the full opinion here.  

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Lender Alert: Supreme Court to Resolve Circuit Split on Whether Creditor Inaction Constitutes a Stay Violation

By Michael L. Moskowitz and Melissa A. Guseynov

We recently reported on a Third Circuit opinion, which held that the automatic stay does not require a secured creditor to immediately turnover repossessed property. We noted the circuit split on this issue, explaining that the Second, Seventh, Eighth, Ninth and Eleventh Circuits would find a stay violation in these circumstances while the Tenth Circuit and District of Columbia Circuit would not.  Read the full article here.

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Creditor Alert: Third Circuit Affirms Avoidance of Transfer of Real Estate Through New Jersey’s Tax Foreclosure Procedure as Preferential

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent precedential decision, the Court of Appeals for the Third Circuit affirmed that a transfer of real estate title through New Jersey’s tax foreclosure system may be avoided as a preferential transfer under § 547(b) of the Bankruptcy Code. In re Hackler, 18-1650 (3d Cir. Sept. 12, 2019). Read the full opinion here.

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Update: 1st Circuit Firmly Holds That Tuition Payments by Insolvent Parents Constitute Fraudulent Transfers

By Michael L. Moskowitz and Melissa A. Guseynov

We previously reported on whether insolvent parents’ school tuition payments for an adult child could constitute constructively fraudulent transfers.  As conveyed in our recent article, the Eastern District of New York denied a trustee’s request to recover tuition payments from three colleges. See Pergament v. Brooklyn Law School, Case No. 18-2204 (E.D.N.Y. Nov. 27, 2018).  Now the First Circuit has become the first circuit court to rule on this relevant and rapidly emerging issue. 

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Lender Alert: Third Circuit Joins the Fray and Finds No Stay Violation in Secured Creditors’ Post-Petition Retention of Collateral

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent opinion of note, the Court of Appeals for the Third Circuit held that the automatic stay does not require a secured creditor to immediately turnover repossessed property . In re Joy Denby-Peterson, Case No. 18-3562 (3d Cir. Oct. 28, 2019).  Read the full opinion here.  

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Intersection of Domestic Relations Law and Debtor-Creditor Law – Court of Appeals Holds That Divorcee Is Not a Judgment Creditor of Ex-Spouse

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of interest, the New York Court of Appeals, the highest court in New York State, held that if a divorce judgment grants a spouse an interest in real property and the spouse fails to docket the judgment where the property is located, the spouse’s interest is not subject to attachment by a subsequent judgment creditor that docketed its judgment and seeks execution against that real property. Pangea Capital Mgt., LLC v. Lakian, 2019 N.Y. Slip Op. 05059 (June 25, 2019).  See link here.

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Lender Alert: Remaining Vigilant Throughout Chapter 13 Case is Crucial to Preserving Lender’s Bargained-For Rights

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of interest to mortgage lenders, Bankruptcy Judge Erik P. Kimball, sitting in the United States Bankruptcy Court for the Southern District of Florida, held that a debtor’s chapter 13 plan which incorrectly reduced a home mortgage payment remains valid and binding if lender failed to object to confirmation. In re Edwards, 13-25698 (S.D.Fla. May 22, 2019).

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Creditor Update: Freezing Debtor’s Bank Account May Not Violate the Automatic Stay

By Michael L. Moskowitz and Melissa A. Guseynov

Weltman & Moskowitz has previously reported on noteworthy cases regarding possible violations of the automatic stay with respect to actions taken by lenders relating to debtors’ deposit accounts. In a recent decision of interest, District Judge Kenneth M. Karas, sitting in the Southern District of New York, held that the automatic stay does not prohibit a bank from imposing a temporary administrative hold on a debtor’s bank account. In re Weidenbenner, 15-244 (S.D.N.Y. April 25, 2019).

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Relief May Be In Sight: ABI Commission on Consumer Bankruptcy Issues Recommendations on Student Loan Dischargeability in Bankruptcy

By Michael L. Moskowitz and Melissa A. Guseynov

Student loan indebtedness is one of the most substantial economic problems facing this country today.  According to Federal Reserve data, outstanding student loan debt has tripled since 2006, skyrocketing from under $500 billion to over $1.6 trillion today.  In fact, among all household debt, student loans rank the highest with respect to delinquency rate. A recent survey found that 1 in 15 borrowers has considered suicide due to their student loan debts.

The American Bankruptcy Institute Commission on Consumer Bankruptcy recently issued a final report, which among other things, included research and recommendations for improvements regarding the treatment of student loan debt in bankruptcy.  

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Bankruptcy Litigants Beware: Stay Violations Come in all Shapes and Sizes

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent opinion of note, the Court of Appeals for the Sixth Circuit affirmed the sole owner of a debtor corporation and his lawyers violated the automatic stay by seeking to prosecute claims belonging to debtor. Lowe v. Bowers (In re Nicole Gas Production, Ltd.), 916 F. 3d 566 (6th Cir. 2019). Read the full opinion here.

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Update: New York Bankruptcy Court Holds That Tuition Payments for Minor Children by Insolvent Parents Are Not Fraudulent Transfers

By Michael L. Moskowitz and and Melissa A. Guseynov

In the last few months, we have reported on several decisions relating to whether a parent’s school tuition payments for an adult child constitute constructively fraudulent transfers.  New York and Connecticut have taken similar approaches in deciding the issue. However, there is still much to be resolved in this developing body of case law.

In a recent decision from the Bankruptcy Court for the Southern District of New York, Geltzer v. Oberlin College (In re Sterman), 18-01015 (Bankr. S.D.N.Y. Dec. 4, 2018), Bankruptcy Judge Martin Glenn held that parents’ tuition payments for their minor children did not constitute fraudulent transfers. Significantly, the age of majority in New York is 21, and not 18, as in many other states. In this case, the parents, who subsequently filed for bankruptcy protection, made certain tuition payments before their children were 21, and other educational payments after they reached the age of majority.

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Update: Connecticut Agrees with New York Precedent That Tuition Payments by Insolvent Parents May Be Fraudulent Transfers

By Michael L. Moskowitz and and Melissa A. Guseynov

We previously reported on whether an insolvent parent's school tuition payments for an adult child could constitute constructively fraudulent transfers. As conveyed in our recent article, the Eastern District of New York denied a trustee’s request to recover tuition payments from three universities. See Pergament v. Brooklyn Law School, Case No. 18-2204 (E.D.N.Y. Nov. 27, 2018). Such attempts by trustees to recover tuition payments from higher education institutions made by parents on their children’s behalf is a relevant and rapidly developing issue with substantial consequences for parents, students and universities.

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DEWSNUP LIVES! Supreme Court Denies Certiorari in Ritter v. Brady

By Michael L. Moskowitz and Melissa A. Guseynov

The United States Supreme Court recently denied a petition for certiorari in a Ninth Circuit case entitled Ritter v. Brady (No. 18-747), seeking to overrule the Court’s 1992 decision in Dewsnup v. Timm, 502 U.S. 410 (1992). This denial suggests the Court will not reconsider Dewsnup anytime soon.

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Has the Bankruptcy System Gone to the 'Dogs?'

By Michael L. Moskowitz and Melissa A. Guseynov

In a decision of first impression out of the Bankruptcy Court for the District of Arizona, Judge Daniel P. Collins, U.S.B.J., held that pet insurance proceeds are exempt under Arizona law and the exemption is not limited to a debtor’s claimed value of their pet. In re Hill, 18-07595 (Bankr. D. Ariz. Nov. 15, 2018).

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School Tuition Payments Made by Insolvent Parents May Be Fraudulent Transfers

 By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of interest, a local chapter 7 bankruptcy trustee appealed Eastern District of New York’s Chief Bankruptcy Judge Craig’s decision denying his request to recover tuition payments from three institutions of higher learning. Pergament v. Brooklyn Law School, Case No. 18-2204 (E.D.N.Y. Nov. 27, 2018). Efforts by trustees to recover tuition payments from higher education institutions made by parents on their children’s behalf is an emerging issue with decisions abounding on both sides of the equation.

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Creditor Alert: Bankruptcy Judge Holds That Lender’s Retention of Voluntary Post-Petition Payment From Non-Estate Funds Doesn’t Constitute Violation of the Automatic Stay

 By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of interest, Bankruptcy Judge John T. Laney, III held that the automatic stay does not prohibit a creditor from retaining a voluntary post-petition payment from non-bankruptcy estate funds on account of a pre-petition claim. In re Adams, 18-40696 (Bankr. S.D. Ga Sept. 12, 2018).

In Adams, debtor owed lender approximately $7,000 in pre-petition debt secured by a lien on certain personal property. After filing for bankruptcy, debtor obtained a loan from a different lender and used those funds to satisfy the pre-petition debt. The pre-petition lender did not seek payment of its debt and did not demand or even encourage debtor’s payment.

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Update: Split Amongst Circuits Regarding Good Faith Defense to a Discharge Injunction Violation May Be Heading to the Supreme Court

 By Michael L. Moskowitz and Michele K. Jaspan

We previously reported there is a split between the First and Ninth Circuits regarding the applicability of the good faith defense when a creditor violates the “discharge injunction.” In Lorenzen v. Taggart, the Ninth Circuit held that a creditor’s good faith belief that an action does not violate the discharge injunction precludes a finding against the creditor for contempt. Conversely, the First Circuit, in IRS v. Murphy, widened the split when it found the government employee who knew debtor received a discharge, could be held in contempt even though the government had a good faith belief the action did not violate the discharge injunction.   

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Creditor Alert: Second Circuit Affirms Dismissal of an Involuntary Bankruptcy Case That Fundamentally Constituted a Two-Party Dispute

By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion of interest to both debtors and judgment creditors, the Court of Appeals for the Second Circuit recently upheld the dismissal of a chapter 7 involuntary bankruptcy petition filed against debtor, Matthew Murray (“Debtor”), over the opposition of judgment creditor Wilk Auslander LLP (“Creditor”). Wilk Auslander LLP v. Murray, 17-1272 (2d Cir. Aug. 14, 2018). Read the full opinion here.

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Beat the Clock: Sears Has Filed Bankruptcy and It's Time to Take Action

By Richard E. Weltman
 
Sears Holdings Corp. filed for chapter 11 relief from creditors in the United States Bankruptcy Court for the Southern District of New York. 
 
The filing was long anticipated and followed months of growing creditor pressure to begin to liquidate inventory in advance of critical holiday sales. In the end, many more Sears stores will close with thousands of suppliers and employees and scores of shopping center owners and managers impacted. 

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Consumer Bankruptcy Update: Bankruptcy Court Cracks Down on “Appearance” Counsel

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent memorandum opinion of interest, the Honorable Sean H. Lane, U.S.B.J., of the United States Bankruptcy Court for the Southern District of New York, held that a debtor’s attorney must disgorge fees received for filing a chapter 7 case where, among other things, counsel improperly utilized “appearance” counsel such that debtor was effectively left unrepresented. In re D’Arata, Case No. 18-10524 (Bankr. S.D.N.Y. Aug. 3, 2018). Read the full opinion here.

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Discharge Injunction Revisited: Question: Is a Creditor’s Good Faith Defense Applicable? Answer: It Depends on Which Circuit the Case Was Filed in.

By Michael L. Moskowitz and Michele K. Jaspan

We recently reported on the success of our client in obtaining the imposition of monetary damages against a creditor for its violation of the bankruptcy discharge injunction. Our local bankruptcy judge ruled in debtor’s favor, despite counsel’s alleged good faith belief that her actions to collect the discharged debt were without malice or in violation of the Bankruptcy Code. Depending on the nature of the debt, creditors may operate under an incorrect presumption that their debt has not been discharged under the provisions of 11 U.S.C. 523 and undertake steps to collect their debt without first seeking a declaratory ruling from the court. Such was the case in a recent First Circuit decision, found here, where the court ruled the Internal Revenue Service (“IRS”) violated the discharge injunction when its employee took deliberate steps to collect on a debt, even though it had an alleged good faith belief the debt was not discharged and the collection actions of the IRS employee did not violate the discharge injunction.

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Debtors Beware: Seventh Circuit Finds That Serial Bankruptcy Filings May Qualify as Bankruptcy Fraud

By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion of interest to debtors and creditors alike, the Court of Appeals for the Seventh Circuit affirmed a debtor’s four-year prison sentence for filing five chapter 13 petitions in what was determined to be a scheme to defraud her creditors. U.S. v. Williams, Case No. 17-2244 (7th Cir. June 6, 2018). Read the full opinion here.

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District Court Finds Debtor’s Leased - but Unused Property - Qualifies as an Administrative Expense Claim

By Michael L. Moskowitz & Melissa A. Gueynov

In an opinion of interest to Chapter 11 practitioners, the United States District Court for the Western District of Louisiana recently held that the rental value of a chapter 11 debtor’s unused leased equipment qualifies for administrative expense status if there are intangible benefits to the estate.  Kimzey v. Premium Casing Equipment LLC, 2018 U.S. Dist. LEXIS 42744 (W.D. La. Mar. 14, 2018). Read the full opinion here.

Kimzey involved oil field equipment leased - but not used - by debtor before filing for bankruptcy relief under chapter 11 of the Bankruptcy Code. Subsequent to its bankruptcy filing, debtor’s assets were purchased by a third party that did not buy the leased equipment. After the sale, lessor sought administrative expense status for the post-petition lease payments due, contending they were actual and necessary costs of preserving the bankruptcy estate.  

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A Cautionary Tale: Don’t Get Burned by the Bankruptcy Discharge Injunction

By Michael L. Moskowitz

Although Weltman & Moskowitz, LLP more often represents creditors in bankruptcy proceedings, the firm also represents a debtor from time to time. We recently represented a former client being harassed for payment by his former matrimonial attorney. What resulted is a playbook of “what not to do” after a debtor-borrower has completed her bankruptcy and received a discharge of her debts.

When a borrower seeks bankruptcy protection, whether under chapters 7, 11 or 13, the first thing the client should do is call us to determine their options. We will review the petition to determine next steps in a chapter 7 case, like the case here. We typically review the electronic docket to determine if there is a basis to object to debtor’s discharge or to the dischargeability of the debt.

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Chapter 13 Update: District Court Affirms Ruling That Trustee Must Return Undistributed Funds to Debtor After Pre-Confirmation Dismissal of Chapter 13 Case

By Michael L. Moskowitz and Melissa A. Guseynov

In an unpublished opinion dated October 19, 2017, the District Court for the Western District of Virginia held that the Virginia Department of Social Services was not entitled to receive funds paid to a chapter 13 trustee (“Trustee”) when debtor failed to confirm his chapter 13 plan. Virginia Dep’t. of Social Services v. Beskin, 2017 WL 4706912 (W.D. VA, Oct. 19, 2017).

In Beskin, debtor filed a chapter 13 bankruptcy petition listing, among other things, a $74,000 child support debt to the Virginia Department of Social Services (“State”). Debtor made plan payments totaling $3,000 to the Trustee, but was subsequently unable to confirm his chapter 13 plan. After debtor’s chapter 13 case was dismissed, State served Trustee with an order pursuant to Virginia’s child support enforcement statute, requiring Trustee hold the $3,000 rather than returning it to debtor. Seeking guidance, Trustee filed a motion with the Bankruptcy Court. The Bankruptcy Court determined Trustee must return the funds to debtor. State appealed to the District Court.

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Third Circuit Holds That Vendor Must Have Physical Possession of Goods For Administrative Expense Priority Claim Pursuant to Section 503(b)(9) of the Bankruptcy Code

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent opinion, the Court of Appeals for the Third Circuit reversed the lower courts’ rulings by holding that a debtor “receives” goods for purposes of section 503(b)(9) of the Bankruptcy Code when the debtor obtains physical possession of those goods. In re World Imports, Ltd., 862 F. 3d 338 (3d. Cir. 2017). Read the full opinion here.

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Lender's Passive Response to Debtor's Inquiry Not an Attempt to Collect a Debt, Nor a Post-Discharge Violation of the Bankruptcy Discharge Injunction

By Michael L. Moskowitz and Michele K. Jaspan

A familiar scenario which Credit Unions and other lenders face is when their borrower obtains a discharge in bankruptcy, but still wishes to maintain a banking relationship with lender rather than try and obtain credit with a different institution. It is also common for Credit Union membership agreements to include standard verbiage that if the Credit Union incurs a loss due to borrower’s activities, or if an account is maintained in a manner to cause a loss to the Credit Union, then, in that instance, the Credit Union may terminate all accounts and services.  

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Second Circuit Holds That Assignees Have Standing Under New York Law as Secured Creditors

By Michael L. Moskowitz and Melissa A. Guseynov

In an unpublished opinion dated July 19, 2017, the Court of Appeals for the Second Circuit (“Second Circuit”) denied a petition for rehearing of a decision by the District Court for the Western District of New York granting standing of an assignee’s rights to enforce individual notes and mortgages. The Court affirmed, among other things, that commercial lenders that advanced money and obtained assignments to pay off the loans of a chapter 11 debtor from individual lenders were entitled to file proofs of secured claims in the debtor’s bankruptcy case, regardless of whether the assignments were properly transferred.  Arnold v. First Citizens National Bank, 2017 WL 3049414 (2d. Cir. July 19, 2017).

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Urgent Creditor Alert: Significant Changes to Bankruptcy Rule 3002 Effective December 1, 2017

By Michael L. Moskowitz and Melissa A. Guseynov

Creditors beware: changes are afoot and attention must be paid to these changes or your rights in bankruptcy may be prejudiced. We have previously written about the practices and procedures required under Rule 3002 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”). However, as of December 1, 2017, certain revisions to Bankruptcy Rule 3002 will both require secured creditors to file proofs of claim and substantially reduce the amount of time provided to creditors to file a proof of claim in Chapters 7, 12 and 13 bankruptcy cases.

It has long been recognized that for a secured claim to be “allowed” in bankruptcy, a creditor must file a proof of claim. In its current form, Bankruptcy Rule 3002(a) merely states that an “unsecured creditor or an equity security holder must file a proof of claim or interest …” The fact that Bankruptcy Rule 3002 does not specifically mention secured claims has resulted in conflicting case law as to whether a secured creditor must file proof of claim. As a result, the revised text of Bankruptcy Rule 3002 clarifies that a secured creditor must file a proof of claim in order for the claim to be “allowed.” However, the amended Bankruptcy Rule also provides that a secured creditor’s failure to file a proof of claim does not affect the underlying lien.

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Weltman & Moskowitz Forms Strategic Alliance with Chuhak & Tecson

Founding partners Richard E. Weltman and Michael L. Moskowitz are pleased to announce that effective May 15, 2017, the attorneys at Weltman & Moskowitz, LLP have become Counsel to the Chicago-based Chuhak & Tecson, P.C. law firm. This alliance allows both firms to develop new relationships and to expand Chuhak & Tecson’s presence in New York and New Jersey. Both firms remain independent.  

The new alliance enables Chuhak & Tecson to continue to offer its New York and New Jersey clients many business legal services including lender rights, banking, loan workouts related to conventional and SBA products, bankruptcy and creditor’s rights, counseling, foreclosures, loan documentation, real estate leasing, purchase and sale transactions, and commercial litigation.

 

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Success Story: How Weltman & Moskowitz Successfully Obtained an Order Reinstating a Discharged Mortgage to Protect Its Client’s Interests and Enable Lender to Proceed with Its Mortgage Foreclosure

By Michael L. Moskowitz and Michele K. Jaspan

Recently we were tasked by one of our long-time lender clients to file what should have been a run-of-the-mill residential mortgage foreclosure case in New Jersey after borrower’s failure to make mortgage payments on a first mortgage and credit line mortgage.

Upon receipt of the file, we analyzed the title report and determined only the credit line mortgage appeared of record. We asked the title company to double check the county records since lender advised there were two mortgages in default. Further investigation revealed the first mortgage had erroneously been marked “discharged” instead of another mortgage which had been paid in full. The balance due on the discharged mortgage was more than $300,000 at the time of the default. In the aggregate, the two mortgages totaled in excess of $500,000, excluding costs and expenses.

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Weltman & Moskowitz Announces Expansion of its Litigation Practice and Bankruptcy and Creditors' Rights Group

Weltman & Moskowitz, LLP has announced the expansion of its Litigation Practice and Bankruptcy and Creditors' Rights Groups with the addition of Debra Kramer, Anthony M. Vassallo and Adrienne Woods, three seasoned bankruptcy attorneys. Each is joining the firm as Of Counsel. The expansion allows Weltman & Moskowitz to leverage their talents for the firm’s clients. Debra, Tony and Adrienne will support the firm’s Bankruptcy & Creditors' Rights Group and Litigation Practice for clients in New York and New Jersey.

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New York Bankruptcy Judge Bars Mortgage Modification on Debtor’s Two-Family Mixed-Use Home

By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion dated March 9, 2017, Bankruptcy Judge Alan S. Trust dismissed the Chapter 13 petition filed by Mary C. Addams (“Debtor”) on motion of Michael and Jamie Shapiro (“Shapiros”). The motion to dismiss was based upon Debtor’s inability to confirm a feasible Chapter 13 plan. The Shapiros held a second mortgage lien against Debtor’s two-family house where she lived, as well as rented out part of the property. In response to the motion, Debtor sought to bifurcate the Shapiros’ mortgage into secured and unsecured claims. In re Addams, 2017 WL 944190 (Bankr. E.D.N.Y. Mar. 9, 2017). This opinion diverges from rulings in the First and Third Circuits and may ultimately lead to review by the Supreme Court. Read the full opinion here.

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Lender Alert: Bankruptcy Court Concludes that a Lawful and Non-Collusive Foreclosure Sale Is Not a Preference

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of particular relevance to mortgage lenders, Veltre v. Fifth Third Bank, 2017 WL 387361 (Bankr. W.D. Pa. Jan. 27, 2017), the United States Bankruptcy Court for the Western District of Pennsylvania held that property sold at a properly conducted and non-collusive foreclosure sale may not serve as the basis for a preference action under section 547 of the Bankruptcy Code. This decision focuses attention on the debate over whether a creditor who forecloses on real property receives a preference or fraudulent transfer, even if the foreclosure sale complied with applicable state law.   

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Lender Alert: Bankruptcy Court Holds that Mortgage with Incorrect Legal Description is Avoidable in Bankruptcy

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of consequence to mortgage lenders, the United States Bankruptcy Court for the District of Massachusetts concluded that a Chapter 7 Trustee may avoid a debtor’s mortgage and maintain it for the benefit of the bankruptcy estate. See Eastern Bank v. Benton (In re Thomas H. and Nancy C. Benton), 2016 WL 53581 (Bankr. D. Mass. Jan. 4, 2017). Simply put, the Bankruptcy Court held that, when a mortgage contains a correct street address but an incorrect legal description, the mortgage lien is avoidable by the bankruptcy trustee in his or her role as a hypothetical bona fide purchaser of a debtor’s property under section 544 of the Bankruptcy Code.

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Creditor Alert: Bankruptcy Judge Holds That Claim Filing Deadline Applies to Secured Creditors in Chapter 13 Cases

By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion dated February 6, 2017, the Bankruptcy Court for the Northern District of Ohio disallowed a mortgage servicer’s untimely proof of claim in a Chapter 13 case, holding that secured creditors are subject to the same 90-day deadline for filing proofs of claim as unsecured creditors. In re Dumbuya, 2017 WL 486917 (Bankr. N.D. Ohio Feb. 6, 2017). Read the full opinion here.

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Weltman & Moskowitz Attorneys Named Super Lawyers for 2017

Weltman & Moskowitz, LLP is proud to announce that founding partners Richard Weltman and Michael Moskowitz have both been selected as Metro New York Area Super Lawyers for 2017. This is the fourth 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 firm is also proud to announce that Melissa Guseynov, an associate of the firm, has been selected as a New York Metro Rising Star! This selection is limited to no more than 2.5% of the attorneys in New York State. The Super Lawyers objective is to create a credible list of outstanding attorneys, and the lawyers of Weltman & Moskowitz, LLP are proud to be recognized for their hard work and client dedication.

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Success Story: How Weltman & Moskowitz Bridged the Gap Between Mortgage Foreclosure and Chapter 13 to Successfully Protect Its Client’s Interests

By Michael L. Moskowitz and Michele K. Jaspan

Our firm was tasked by one of our lender clients to file a residential mortgage foreclosure case in New Jersey after borrower’s failure to make mortgage payments. Borrower, assisted by a purported residential foreclosure defense expert, sought to place numerous roadblocks to the foreclosure action, including the filing of an answer containing the usual boilerplate meritless “defenses.” Ultimately, after extensive discovery and unnecessary litigation caused by borrower’s “scorched-earth” tactics, final judgment of foreclosure was rendered in favor of lender. Of course, this is not the end of the story, only the beginning.

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SCOTUS ALERT: Supreme Court Holds That Bankruptcy Courts Lack Power to Utilize Structured Dismissals in Violation of Priority Rules

By Michael L. Moskowitz and Melissa A. Guseynov

On March 22, 2017, the United States Supreme Court held that bankruptcy courts lack the power to dismiss chapter 11 cases by structured dismissal if they provide for distributions that do not adhere to the Bankruptcy Code’s priority rules without the consent of the affected creditors. Czyzewski et al. v. Jevic Holding Corp. et al. (Case No. 15-649) (Sup. Ct.).     

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Chapter 13 Alert: Lenders Must Confirm All Mortgage Payments Made By Borrower During Chapter 13 Plan

By Michael L. Moskowitz and Michele K. Jaspan

We previously reported about Lenders’ Chapter 13 obligations set forth in Bankruptcy Rule 3002.1, entitled Notice Relating to Claims Secured by Security Interest in the Debtor’s Principal Residence (click here). To reiterate, a mortgage lender must provide to debtor, debtor’s counsel, and the chapter 13 bankruptcy trustee, notice of any fees, expenses or charges incurred by lender in connection with its claim, following commencement of the chapter 13 case. In addition, lender must notify the same parties about any changes to the monthly mortgage payments which come due post-petition.

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Lender Alert: New Jersey Bankruptcy Court Allows Debtor to Strip Lien Securing Spousal Obligation

By Michael L. Moskowitz and Melissa A. Guseynov

On September 23, 2016, Bankruptcy Judge Christine M. Gravelle, U.S.B.J. held that a chapter 13 debtor may strip off a wholly unsecured lien on a primary residence where the debtor is the sole owner of the property, even if the non-debtor ex-spouse is liable on the debt which the debtor seeks to strip. In re Mensah-Narh, 2016 WL 5334973 (Bankr. D.N.J.. Sept. 23, 2016).  Read the full opinion here.

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Creditor Alert: Ninth Circuit Holds That Creditor Has an Affirmative Duty to File a Timely Proof of Claim to Participate in Chapter 13 Plan Distributions

By Michael L. Moskowitz and Melissa A. Guseynov

On October 27, 2016, the Court of Appeals for the Ninth Circuit held that a credit union’s proofs of claim were properly rejected by the Bankruptcy Court as untimely, and that the debtor’s acknowledgment of debt owed to the credit union in her bankruptcy schedules was not an informal proof of claim. In re Barker, 2016 WL 6276078 (9th Cir. Oct. 27, 2016). Read the full opinion here.

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Vendor Alert: Delaware Bankruptcy Court Upholds Creditor’s Reclamation Claim

By Michael L. Moskowitz and Melissa A. Guseynov

Generally, the concept of “reclamation” protects vendors in Chapter 11 cases because it provides a way to either retrieve goods delivered to a debtor pre-petition or to recover the value of those goods. On August 24, 2016, Bankruptcy Judge Mary F. Walrath, sitting in the Bankruptcy Court for the District of Delaware, bolstered creditors’ reclamation rights when she overruled an objection to a vendor’s claim for reclamation under section 546(c) of the Bankruptcy Code. In re Reichold Holdings US, Inc., et al., 556 B.R. 107 (Bankr. D. Del. 2016). This decision marks a noteworthy success for vendors asserting reclamation rights under the Bankruptcy Code.

Oftentimes, creditors wait too long before demanding reclamation or stopping delivery of their goods. This may result in a substantially smaller recovery on their claims. Trade creditors may significantly increase their recovery by reacting quickly when their buyer files for bankruptcy. This is crucial because once a chapter 11 case is filed, 11 U.S.C. § 546 controls the reclamation process.

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LENDER ALERT PART II: Changes to New York Foreclosure Laws Effective December 20, 2016

By Michael L. Moskowitz and Michele K. Jaspan

In Part I we highlighted how the amendments to the NY Real Property Actions and Proceedings Law (“RPAPL”), which became effective on December 20, 2016, affect lenders duties and obligations with respect to vacant and abandoned properties in foreclosure. In Part II we will address how the RPAPL amendments impact the foreclosure settlement conferences and pre-foreclosure notices.

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LENDER ALERT PART I: Changes to New York Foreclosure Laws Effective December 20, 2016

By Michael L. Moskowitz and Michele K. Jaspan

On June 23, 2016, Governor Andrew Cuomo signed into law Chapter 73 of the Laws of New York 2016. We addressed the new law in a previous post which you can see here. We will address these changes in two separate blog posts. This first post addresses vacant and abandoned properties. Part II will address changes to foreclosure settlement conferences and the required pre-foreclosure notices.   

This legislation amends the Real Property Actions and Proceedings Law (“RPAPL”) and Civil Practice Law and Rules pertaining to residential mortgage loans and foreclosure. The changes go into effect on December 20, 2016. The new changes include provisions which govern procedures for vacant and abandoned properties, establish timelines for the sale of property post-foreclosure judgment, and provide enhanced protections for homeowners in default of their mortgage.  The new legislation imposes new obligations on lenders which will surely increase costs and add potential liability as follows:

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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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RECENT SUCCESS STORY: Zealous Advocacy Secures Payment in Full for Client in A&P Chapter 11 Cases

By Richard E. Weltman and Melissa A. Guseynov

RECENT SUCCESS STORY - Zealous Advocacy Secures Payment in Full for Client in A&P Chapter 11 Cases By Richard E. WeltmanWhen creditors learn that an entity that owes them money has filed for bankruptcy protection, they often fear their claims will remain unpaid or that they will only collect pennies on the dollar. And while that is typically the outcome for unsecured claimants, in certain circumstances creditors may be able to recover a substantial portion of their debt. In fact, as further described below, with effective counsel, a creditor may recover its claim in full.

 

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Lender Alert: Two New York Federal Courts Find No FDCPA Violation -Where Debtor Account Numbers Appear on Collection Envelopes

By Richard E. Weltman and Melissa A. Guseynov

Lender Alert: Two New York Federal Courts Find No FDCPA Violation By Richard E. WeltmanWe have previously reported on the nuances of the federal Fair Debt Collection Practices Act (“FDCPA”) and the pitfalls to lenders who fail to strictly adhere to its requirements. However, in two recent unrelated federal court decisions, Judge Colleen McMahon of the District Court for the Southern District of New York and Judge John Curtin of the District Court for the Western District of New York, both concluded that the mere appearance of an account number on a collection envelope, without more, does not violate FDCPA.

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Lender Advisory: E.D.Pa. Clarifies Interplay Between FDCPA and Bankruptcy Code

By Richard E. Weltman and Melissa A. Guseynov

Lender Advisory: E.D.Pa. Clarifies Interplay Between FDCPA and Bankruptcy Code By Richard E. WeltmanIn a recent decision important to lenders, Torres v. Asset Acceptance, LLC, the Hon. Eduardo C. Robreno, U.S.D.J., held that filing a stale proof of claim in bankruptcy court cannot form the basis of a claim under the Fair Debt Collection Practices Act (“FDCPA”).

The facts are as follows: Margaret Torres filed for relief under Chapter 13 in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Creditor, Asset Acceptance, thereafter filed a proof of claim for “money loaned.”

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Best Practices Alert: Obtain Court Order When Extending Bankruptcy Deadlines

Best Practices Alert: Obtain Court Order When Extending Bankruptcy Deadlines By Michael L. MoskowitzBy Michael L. Moskowitz and Michele K. Jaspan

Attorneys who litigate are often faced with statutory deadlines. When the need arises to extend deadlines, it is not unusual for extensions to be routinely granted between counsel, often informally. But how often do bankruptcy practitioners, in particular, have stipulations extending statutory deadlines “So Ordered” by the court? Apparently, not often enough.

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Foreclosure Advisory: Mortgagee's Lack of Good Faith May Lead to Forfeiture

By Michael L. Moskowitz and Melissa A. Guseynov

Foreclosure Advisory: Mortgagee's Lack of Good Faith May Lead to Forfeiture By Michael L. MoskowitzIn the recent case of Federal National Mortgage Assoc. v. Singer (Case No. 850039/2011, Sup Ct, NY County, July 21, 2015), Manhattan Supreme Court Justice Peter Moulton determined that two mortgage banks, Federal National Mortgage Association and Bank of America, N.A. (“Lenders”), must forfeit more than $100,000.00 in accrued mortgage interest for acting in bad faith regarding borrower requests for mortgage modifications.   

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One Size Fits Some: Defending Preference and Fraudulent Transfer Claims

By Richard E. Weltman

One Size Fits Some:  Defending Preference and Fraudulent Transfer Claims By Richard E. WeltmanMost debtors see bankruptcy as a way to wipe out debt at the expense of creditors. This is sometimes true, but only part of the story. The bankruptcy code also protects creditors in many important ways. One way is by preserving the equal distribution of a debtor’s assets. One of the bankruptcy code provisions that seeks to level the playing field respecting equal asset distribution among unsecured creditors is section 547.

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Supreme Court Asked to Resolve Circuit Split Regarding Consumer Bankruptcy Fraud

By Richard E. Weltman and Melissa A. Guseynov

Supreme Court Asked to Resolve Circuit Split Regarding Consumer Bankruptcy Fraud By Richard E. WeltmanThe United States Supreme Court has been asked to resolve another split among the circuit courts assessing fraud in consumer bankruptcy cases. At issue is whether debtors in chapter 7 and chapter 13 cases can have their debt discharges blocked under section 523(a)(2)(A) of the bankruptcy code, following pre-petition efforts to transfer assets away from creditors without directly misleading them. The First and Seventh Circuit Courts of appeal have both issued holdings that directly conflict with a recent ruling by the Fifth Circuit. The Second Circuit has not directly addressed whether a court may find “actual fraud” absent a specific finding of misrepresentation by a debtor.

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2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 5

Harris v. Viegelahn

Debtor Who Converts to Chapter 7 Is Entitled to Return of Funds Not yet Distributed By Chapter 13 Trustee

 By Michael L. Moskowitz and Melissa A. Guseynov

2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 5 By Michael L. MoskowitzOn May 18, 2015, in Harris v. Viegelahn, the United States Supreme Court unanimously held that undistributed plan payments made by a debtor from his or her wages, and held by a Chapter 13 trustee at the time of the case’s conversion to Chapter 7, must be returned to the debtor. Harris v. Viegelahn, 135 S.Ct. 1829 (2015). The decision resolves a Circuit split, as well as an issue that has divided bankruptcy courts for decades.

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2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 4

Wellness International Network Ltd. v. Sharif

Bankruptcy Judges May Render Final Decisions on Legal Disputes Arising in Bankruptcy if All Parties Consent

By Michael L. Moskowitz and Melissa A. Guseynov

2015 MID-YEAR REVIEW OF SUPREME COURT BANKRUPTCY DECISIONS: PART 4 By Michael L. MoskowitzOn May 26, 2015, in Wellness International Network Ltd. v. Sharif, the Supreme Court held that Article III of the United States Constitution permits bankruptcy judges to adjudicate so called “Stern” claims, with the parties’ knowing and voluntary consent. Wellness International Network Ltd. v. Sharif, 135 S.Ct. 1932 (2015).   

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2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 3

Bullard v. Blue Hills Bank 

Orders Denying Bankruptcy Plan Confirmation
are Not Final Orders for Purposes of Appeal

 By Richard E. Weltman and Melissa A. Guseynov

2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 3

This term, in Bullard v. Blue Hills Bank, the United States Supreme Court unanimously decided that orders denying plan confirmation do not constitute final orders from which an appeal may be immediately taken as a matter of right.  The decision resolves a significant circuit split and may shift the balance of power in bankruptcy cases against debtors seeking to confirm plans and emerge from the bankruptcy process on their own terms.

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2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 2

Baker Botts LLP v. Asarco LLC

Litigation Fees Incurred By Counsel in Defense of Bankruptcy Fee Application are not Compensable

By Michael L. Moskowitz and Michele K. Jaspan

2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 2 By Michael L. MoskowitzThe Supreme Court recently ruled that bankruptcy courts may not award legal fees to professionals for the costs incurred in defending their fees. The decision in Baker Botts, LLP v. ASARCO, LLC, written by Justice Clarence Thomas for the majority, held that section 330(a) of the United States Code does not give bankruptcy courts the discretion to award fee-defense fees under any circumstances. Thus, the Supreme Court affirmed the ruling by the Court of Appeals for the Fifth Circuit which reversed the bankruptcy court’s fee award to Debtor’s counsel for costs incurred in defense of its $120 million fee application.  The Baker Botts firm sought to recover in excess of $5 million for time spent litigating in defense of their fee application in Asarco’s Chapter 11 bankruptcy case.

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2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 1

Bank of America, N.A. v. Caulkett

Junior Mortgages Remain Viable Liens Even if Residential Property is Completely Underwater in a Chapter 7 Case

By Michael L. Moskowitz and Michele K. Jaspan

2015 Mid-Year Review of Supreme Court Bankruptcy Decisions: Part 1 By Michael L. Moskowitz and Michele K. JaspanThe United States Supreme Court recently reversed a ruling from the Eleventh Circuit in the case of Bank of America, N.A. v. Caulkett, which had permitted individual chapter 7 debtors to “strip” junior liens off their homes when the first mortgage lien was underwater. The Supreme Court held that a debtor in a chapter 7 proceeding may not void a junior mortgage lien under section 506(d) of the Bankruptcy Code when the debt owed on a senior mortgage lien exceeds the current value of the collateral, if the creditor’s claim is both secured by a lien and allowed under section 502 of the Bankruptcy Code.

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Petters Update: Minnesota Supreme Court Ruling May Affect Clawback Lawsuits

By Michael L. Moskowitz and Melissa A. Guseynov

 Petters Update: Minnesota Supreme Court Ruling May Affect Clawback LawsuitsWe have previously reported on Thomas Petters’ $3.5 billion Ponzi scheme and the resultant “claw back” lawsuits currently pending in the Minnesota bankruptcy court. Read that report here.

In Ponzi scheme clawback litigation, a trustee, receiver or creditor will often utilize the Ponzi scheme “presumption” to prove the fraudulent intent of a transferor in connection with fraudulent transfer claims by establishing that the debtor operated a Ponzi scheme, and that the transfers at issue were made in furtherance of that scheme. In particular, the Ponzi scheme presumption proves that, among other things, the person or entity running the scheme had actual intent to defraud investors.

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LENDERS BEWARE: How One Borrower Acquired His House Practically for Free

By Michael L. Moskowitz and Michele K. Jaspan

LENDERS BEWARE: How One Borrower Acquired His House Practically for FreeIn the case of In re Washington, No. 14-14573-TBA, 2014 WL 5714586 (Bankr. D.N.J. Nov. 5, 2014), the United States Bankruptcy Court for the District of New Jersey held that the mortgagee and mortgage servicer (“the Mortgagees” or “Plaintiff”) were time-barred under New Jersey state law from enforcing borrower’s default under both the note and mortgage. As a result, the borrower hit the jackpot and was entitled to own his home, free and clear of the mortgage debt, even though he only made three mortgage payments before the loan went into default.

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Get It Right the First Time: Best Practices for Mailing and Recording the New York RPAPL 90-day Pre-Foreclosure Notice

By Michael L. Moskowitz

 Get It Right the First Time: Best Practices for Mailing and Recording the New York RPAPL 90-day Pre-Foreclosure Notice By Michael L. MoskowitzNew York’s Real Property Actions and Proceedings Law (“RPAPL”) § 1304 requires a mortgage lender to notify a residential home borrower of an impending foreclosure action at least 90 days before the foreclosure action is commenced, using specific statutory language, printed in 14 point type, sent by registered or certified mail, as well as by first class mail, to the borrower. The emphasis of this article is the peril which will befall a lender if it fails to timely register the statutorily mandated notice.  

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Lenders Beware: Automatic Freezing of Debtor’s Account Without Legal Review Can Be Costly

By Michael L. Moskowitz

Lenders Beware: Automatic Freezing of Debtor’s Account Without Legal Review Can Be Costly By Micahel MoskowitzIn December 2014, the Chief U.S. Bankruptcy Judge for the Southern District of New York, Cecelia Morris, handed a setback to lenders (In re Weidenbenner, Bankr. S.D.N.Y., No. 14-35443, 12/12/14), when she concluded a financial institution violates the automatic stay imposed upon the filing of a chapter 7 petition pursuant to 11 U.S.C. §362, simply by freezing a debtor’s bank account where it turns out no right of setoff exists.

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Lender Alert: New Jersey Appeals Court Holds that Homeowners May Sue Over Denial of Mortgage Modifications

By Michael L. Moskowitz

Lender Alert: New Jersey Appeals Court Holds that Homeowners May Sue Over Denial of Mortgage Modifications By Michael L. MoskowitzA New Jersey Appeals Court recently held that homeowners who enter into trial agreements to modify their mortgages under the Federal Home Affordable Modification Program (“HAMP”), and comply with the terms thereof, may commence suit for breach of contract, and possibly consumer fraud, if lenders deny them permanent modifications.

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Supreme Court Hears Argument on Debtors’ Efforts to Strip-Off Underwater Mortgages in Chapter 7

By Michael L. Moskowitz

Supreme Court Hears Argument on Debtors’ Efforts to Strip-Off Underwater Mortgages in Chapter By Michael L. Moskowitz{2:25 minutes to read} On November 17, 2014, the Supreme Court agreed to review two appeals filed by Bank of America against homeowners who filed Chapter 7 bankruptcies and then sought to “strip off” the lender’s underwater mortgage liens. In Bank of America, N.A. v. Caulkett (No. 13-1421) and Bank of America, N.A. v. Toledo-Cardona (No. 14-163), the Court of Appeals for the Eleventh Circuit ruled in favor of the homeowners, leading to Bank of America’s appeals to the Supreme Court.

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Most Recent Success Story: Tenacity and Preparation Save Creditor’s Late Claim

by Richard E. Weltman

Most Recent Success Story: Tenacity and Preparation Save Creditor’s Late Claim by Richard E. Weltman{3:36 minutes to read} When representing a creditor in a bankruptcy case, it helps when counsel understands that being told it is “too late” to file a claim may not be the last word. The filing of a late claim may still be possible in certain circumstances. 

Our client, a personal injury attorney, represented the administrator of his wife’s estate in a wrongful death lawsuit. The decedent was severely burned when her clothing caught fire.

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Weltman & Moskowitz Forms Strategic Alliance with Saiber, LLC

WELTMAN & MOSKOWITZ FORMS STRATEGIC ALLIANCE WITH SAIBER, LLC By Richard E. Weltman & Michael L. MoskowitzFounding partners Richard E. Weltman & Michael L. Moskowitz are pleased to announce that effective January 1, 2015, the attorneys at Weltman & Moskowitz have become Counsel to the New Jersey-based Saiber law firm. This alliance will allow both firms to develop new relationships and opportunities.

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NJ Court: Bank Has Duty to Prevent Injury in Foreclosed Home

By Richard E. Weltman

NJ Court: Bank has Duty to Prevent Injury in Foreclosed Home By Richard E. Weltman{1:54 minutes to read} Wells Fargo Bank, as the owner of a foreclosed home in New Jersey, owed a duty of care to a prospective homebuyer who was injured when she tripped on a piece of glass while touring the home, a federal court judge in Newark ruled on January 28, 2015.

In reaching his decision, U.S. Magistrate Judge Michael A. Hammer explained that commercial lenders taking possession of a residential property through mortgage foreclosure assume the position of the owner, and thus assume the owner’s non-delegable duty to protect visitors from reasonably foreseeable injuries due to potentially dangerous conditions.

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Success Stories: 2 Bankruptcy Adversary Proceedings Withdrawn Early, Saving Time & Resources - Part 2

By Michael L. Moskowitz

Success Stories: 2 Bankruptcy Adversary Proceedings Withdrawn Early, Saving Time & Resources - Part 2  By Michael L. MoskowitzIn our previous article, we shared the story of a personal injury attorney that was recently sued in an adversary proceeding filed in the United States bankruptcy court. Weltman & Moskowitz successfully established that the complaint was without merit and Plaintiff agreed to withdraw the complaint before answers were required to be filed or discovery ensued. In doing so, we saved our client the time and expense associated with protracted litigation.. Today, we bring you the story of another client of ours, a large regional banking institution, in the same position with the same successful results.

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Success Stories: 2 Bankruptcy Adversary Proceedings Withdrawn Early, Saving Time & Resources - Part 1

By Michael L. Moskowitz

Success Stories: 2 Bankruptcy Adversary Proceedings Withdrawn Early, Saving Time and ResourcesTwo of our clients, one, a large regional bank, and the other, a personal injury attorney, were both recently sued in adversary proceedings filed in the United States bankruptcy courts. Weltman & Moskowitz successfully established that both complaints were without merit and each plaintiff agreed to withdraw the complaint before answers were required to be filed. In doing so, we saved these clients significant legal fees and expenses and the distractions associated with protracted litigation.

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CASE STUDY: BANKRUPTCY RULE 3002.1(c)

Lenders Must Strictly Comply with Chapter 13 Noticing Procedures to Avoid Possible Motion Seeking Sanctions for Inadvertent Stay Violation

By Richard E. Weltman

CASE STUDY: BANKRUPTCY RULE 3002.1(c) The Federal Rules of Bankruptcy Procedure were amended late in 2011 to include Rule 3002.1, entitled Notice Relating to Claims Secured by Security Interest in the Debtor’s Principal Residence. Simply put, a mortgage lender must provide to the debtor, debtor’s counsel, and the chapter 13 bankruptcy trustee, notice of any fees, expenses or charges incurred by lender in connection with its claim, following commencement of the chapter 13 case. The lender must use Official Form B10, Supplement 2, found here.  A deviation from the use of this official form and its noticing procedure can result in an unwanted motion seeking damages for technical violation of the bankruptcy stay. The lesson here for lenders is to be careful and adhere to strict protocols.

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Supreme Court Rules Inherited IRAs are Not Protected in Bankruptcy

Supreme Court Rules Inherited IRAs are Not Protected in Bankruptcy By Michael L. Moskowitz and Melissa A. GuseynovPartner Michael L. Moskowitz and Associate Melissa A. Guseynov co-authored an article published in the December 2014 issue of Nassau Lawyer. They discussed the Supreme Court decision that inherited IRAs are not protected in bankruptcy, a timely topic Weltman and Moskowitz has been following and reporting on regularly.

Read an excerpt of the article below.

Supreme Court Rules Inherited IRAs are Not Protected in Bankruptcy 

By Michael L. Moskowitz and Melissa A. Guseynov

On June 12, 2014, in a unanimous 9-0 decision in Clark v. Rameker, the United States Supreme Court ruled that inherited individual retirement accounts(IRAs) are not retirement funds within the meaning of the Bankruptcy Code.1 This decision resolves a split among the federal appellate courts about the status of IRAs that parents leave to their children and others.

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NY’s Highest Court to Rule on NYC Debt Collection Statute

By Richard E. Weltman

NY’s Highest Court to Rule on NYC Debt Collection Statute By Richard E. WeltmanNew York State’s highest court recently agreed to consider whether New York City's effort to limit law firms’ ability to collect debts violates the state's exclusive power to regulate attorney conduct.

The Court of Appeals will take up two certified questions from the United States Court of Appeals for the Second Circuit, which ruled that the case — in which Eric Berman PC and Lacy Katzen LLP contest the legality of Local Law 15 — raises unresolved and significant issues about the scope of New York State’s exclusive authority to regulate attorney activities. Berman v. City of New York, 2014 WL 5463299 (Oct. 29, 2014).

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ALERT: New York’s Highest Court Rules for Debtor’s Right to Protect Rent-Stabilized Lease in Bankruptcy

By Michael L. Moskowitz

ALERT: New York’s Highest Court Rules for  Debtor’s Right to Protect Rent-Stabilized Lease in Bankruptcy By Michael L. MoskowitzA long journey has finally come to an end for Mary Veronica Santiago-Monteverde (“Debtor”), an elderly widow, who has resided in a Manhattan rent-stabilized apartment for more than 40 years. We have reported previously on Debtor’s opposition to her chapter 7 trustee’s efforts to sell her rent-stabilized lease to her landlord as a so-called asset of the bankruptcy estate.   

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ALERT: Update on Debtor Efforts to Strip-Off Underwater Mortgages in Chapter 7 Supreme Court Grants Certiorari to Mortgage Lender

ALERT: Update on Debtor Efforts to Strip-Off Underwater Mortgages in Chapter 7  Supreme Court Grants Certiorari to Mortgage Lender By Michael L. MoskowitzWe have previously reported on an Eleventh Circuit case entitled Bank of America, N.A. v. David Lamar Sinkfield (No. 13-700), in which the Supreme Court denied Bank of America’s petition for certiorari regarding whether section 506(d) of the Bankruptcy Code allows a debtor to remove or strip-off a wholly unsecured—or “underwater”—mortgage lien in chapter 7 bankruptcy. See the original article here.

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Update on NYC Rent Stabilization: City and State Officials Advocate for Debtor

Update on NYC Rent Stabilization: City and State Officials Advocate for Debtor By Michael L. MoskowitzWe have reported several times in connection with the chapter 7 case of Mary Veronica Santiago-Monteverde (“Debtor”), an elderly widow, who has resided in a rent-stabilized apartment in New York City since the 1970s. To see the prior articles click here.

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NY Appellate Division Sets Boundaries on Mandatory Foreclosure Conferences Held Pursuant to NY CPLR §3408

By Michael L. Moskowitz

NY Appellate Division Sets Boundaries on Mandatory Foreclosure Conferences Held Pursuant to NY CPLR §3408The New York Supreme Court Appellate Division for the Second Department recently clarified that New York’s CPLR§ 3408, which requires parties in a residential foreclosure action to participate in a settlement conference, was not applicable where the mortgage collateralized a personal guaranty of a commercial loan to a corporation. Independence Bank v. Valentine, 113 A.D. 3d 62 (2d. Dept 2013).  

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LEGISLATIVE UPDATE - New York State Promulgates New Rules for Consumer Debt Collection Lawsuits

By Michael L. Moskowitz

LEGISLATIVE UPDATE - New York State Promulgates New Rules for Consumer Debt Collection Lawsuits By Michael L. MoskowitzOn September 17, 2014, the New York state court administrators announced stricter rules for creditors seeking judgments against consumers in debt collection lawsuits. Applicable only to debt incurred in connection with consumer credit transactions,[1] the new rules are specifically intended to prohibit creditors from collecting a debt: (i) that a consumer has already paid off, (ii) that was not incurred by that particular consumer; and (iii) where the six-year statute of limitations has expired.

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Weltman & Moskowitz Secures Dismissal of Federal Lawsuit

Weltman & Moskowitz Secures Dismissal of Federal Lawsuit By Richard E. WeltmanA logistics and warehousing company came to Weltman & Moskowitz, LLP, a New York and New Jersey business litigation law firm, because it believed it was wrongfully named as a defendant in a multi-party federal lawsuit commenced in the Southern District of New York by the insurer subrogee of the consignor. Insurer alleged that our client had acted as a freight forwarder and bailee with respect to certain cargo damaged by Superstorm Sandy in October 2012.

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Weltman & Moskowitz Founding Partners Named Super Lawyers for 2014

Weltman & Moskowitz Founding Partners  Named Super Lawyers for 2014Weltman & Moskowitz, LLP is proud to announce the selection of its founding partners, Richard E. Weltman and Michael L. Moskowitz, as Super Lawyers for 2014. This honor is a product of a rigorous investigative process by the publishers of Law and Politics.  Attorneys are selected based on professional accomplishments, licenses and certificates, peer recognition and personal achievements. The final published list represents no more than 5% of the lawyers in each state. 

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Tri-Chapter Golf Tournament Raises $10.5K for CUPAC

Tri-Chapter Golf Tournament Raises $10.5K for CUPACOn August 11, Michael Moskowitz was part of the winning foursome at a golf outing that helped raise more than $10,500 for the state’s Credit Union Political Action Committee (CUPAC). The Catskill-Hudson, Westchester-Rockland and Metropolitan Chapters held the event. Nearly 80 golfers participated in the tournament.

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Stern v. Marshall Update: Sixth Circuit Confirms Bankruptcy Court Power to Enter Money Judgments in Non-Dischargeability Actions

By Richard E. Weltman

Stern v. Marshall Update: Sixth Circuit Confirms Bankruptcy Court Power to Enter Money Judgments in Non-Dischargeability ActionsIn its recent decision, Hart v. Southern Heritage Bank, 2014 WL 1663029 (6th Cir. April 28, 2014), the Sixth Circuit Court of Appeals determined that the United States Supreme Court’s seminal holding in Stern v. Marshall, 131 S. Ct. 2594 (2011) does not preclude a bankruptcy court from issuing final judgments in non-dischargeability challenges under section 523(a)(2)(B) of the Bankruptcy Code.

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More Judicial Oversight to Expedite NY’s Mandatory Foreclosure Conferences

More Judicial Oversight to Expedite  NY’s Mandatory Foreclosure ConferencesNew York’s Office of Court Administration recently announced relief for lenders and homeowners frustrated by high case volume delays affecting mandatory foreclosure settlement conferences in certain courts. Litigants will soon enjoy immediate and direct access to judges at these conferences in Kings, Queens, Nassau and Suffolk counties, the four counties with the highest foreclosure case volumes in the state.

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New York Courts Target Rules on ‘Zombie Debts’

By Richard E. Weltman

New York Courts Target Rules on ‘Zombie Debts’ By Richard E. WeltmanResponding to what he termed a “continuing stream of complaints,” New York’s Chief Judge Jonathan Lippman on May 1 announced that New York courts are proposing new rules to crack down on the filing of so-called “zombie debts,” insufficiently documented claims for default judgments against consumer debtors.

Judge Lippman wants creditors seeking to collect the debts—some of which may have been sold and resold by third-party credit buyers—to prove the obligations are actually outstanding and owed by those named in collection actions before New York courts will enforce them on behalf of creditors.

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Update: Supreme Court Rules That Inherited IRAs Are Not Protected In Bankruptcy

By: Michael L. Moskowitz

Supreme Court Rules That Inherited IRAs Are Not Protected In Bankruptcy By Michael L. MoskowitzLess than three months ago, we reported on a case in which the Supreme Court heard oral argument concerning whether or not inherited IRA accounts constitute retirement funds. See previous article (Supreme Court to Decide Dispute Regarding Inherited IRAs in Bankruptcy) here. On June 12, 2014, in a unanimous decision, the Supreme Court, in Clark v. Rameker, 13-299, ruled that inherited IRAs are not retirement funds within the meaning of the Bankruptcy Code.

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Update on Bankruptcy Exemptions: Bankruptcy Court Order Protects Debtor from Eviction

Update on Bankruptcy Exemptions: Bankruptcy Court Order Protects Debtor from EvictionWe recently reported on whether a bankruptcy debtor’s rent-stabilized lease constitutes an exempt asset in the form of a “local public assistance benefit” under New York Debtor and Creditor Law. The case is presently under consideration before the New York Court of Appeals.

Weltman & Moskowitz began following the case in October, when we reported on the chapter 7 trustee’s efforts to sell the rent-stabilized lease of Mary Veronica Santiago-Monteverde (“Debtor”), a 79-year-old widow. Many readers have been following the debtor’s opposition to the chapter 7 trustee’s efforts to sell the debtor’s interest in her rent-stabilized lease to the landlord as an asset of the bankruptcy estate.

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Update on Debtor Efforts to Strip-Off Unsecured Mortgage Liens: Supreme Court Denies Certiorari to Mortgage Lender in Sinkfield

Update on Debtor Efforts to Strip-Off Unsecured Mortgage Liens: Supreme Court Denies Certiorari to Mortgage Lender in SinkfieldThe United States Supreme Court recently denied a creditor’s petition for certiorari in an Eleventh Circuit case entitled Bank of America, N.A. v. David Lamar Sinkfield (No. 13-700). The issue concerns whether section 506(d) of the Bankruptcy Code allows a debtor to remove or strip-off a wholly unsecured—or “underwater”—mortgage lien in chapter 7 bankruptcy.

 

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Bankruptcy Fees Rise as of June 1

The United States Judicial Conference recently approved changes to the federal court miscellaneous fee schedules, including certain bankruptcy filing fees.

As of  Sunday, June 1, 2014, the filing fees for most bankruptcy matters will rise. These fees are collected from both debtors and creditors accessing the federal bankruptcy courts, whether in person or online.

 

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Corporate Governance Best Practices: Learning from Public Companies

By Richard E. Weltman

Most businesses across New York and New Jersey are owned and managed by a small number of shareholders or members. These closely held companies very often fail to employ even minimal corporate governance formalities like those found in their publicly traded counterparts.

 

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Update On NYC Rent Stabilization: Bankruptcy Law Meets Public Policy

By Michael L. Moskowitz

Last October we reported on the travails of Mary Veronica Santiago (“Debtor”), a 79-year-old widow embroiled in a dispute with her chapter 7 bankruptcy trustee John Pereira. The issue is whether the “value” in her New York City rent-stabilized lease can be considered an exempt asset protected from sale in a bankruptcy case. At stake is the Debtor’s ability to continue to reside in her apartment free of creditor claims. Given the many thousand rent protected tenants, this is where public policy and federal bankruptcy law intersect. To see the prior article click here.

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NY Court of Appeals Confirms Judgment-Debtors May Not Sue Banks Directly for EIPA Violations

New York’s highest court recently announced that account holders do not have a private right of action to sue banks for alleged violations of the Exempt Income Protection Act (“EIPA”). Cruz v. TD Bank, 2013, NY Slip. Op. 07762 (November 21, 2013). EIPA exempts certain Social Security, veterans, disability and unemployment benefits from creditor restraining orders and requires banks to inform affected account holders of their right to obtain exemptions from collection.

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Michael Moskowitz Participates in the Plainview-Old Bethpage JFK HS's 26th Annual Moot Court Competition

News Release Update  

MICHAEL MOSKOWITZ PARTICIPATES IN THE PLAINVIEW-OLD BETHPAGE JFK HIGH SCHOOL’S 26th ANNUAL MOOT COURT COMPETITION, HELD ON APRIL 3, 2014.

Media Contact:    Michael L. Moskowitz  212.684.7800

E-mail:   mlm@weltmosk.com or rew@weltmosk.com

For Immediate Release

NEW YORK, NY – On April 3, 2014, Michael L. Moskowitz, a founding member of Weltman & Moskowitz, LLP, participated as one of the judges in the Plainview-Old Bethpage John F. Kennedy High School’s 26th Annual Marvin Hazan Moot Court Competition.

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Supreme Court to Decide Dispute Regarding Inherited IRAs in Bankruptcy

On March 24, 2014, the United States Supreme Court heard oral arguments in the matter of Clark v. Rameker (In re Clark). The court appeared to be divided over reconciling the plain language of the Bankruptcy Code with what could be considered a windfall for the debtor. Clark involves the dispute over whether creditors can reach a debtor’s non-spousal inherited individual retirement account (“IRA”) in bankruptcy.

The Bankruptcy Code allows debtors to claim certain property as exempt by utilizing exemptions under state law or those specifically provided in the Bankruptcy Code.[1] Sections 522(b)(3)(C) and (d)(12)[2] allow debtors to exempt retirement funds, even where the state has opted out of the federal exemptions.

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New Federal Mortgage Disclosures Merit Lenders’ Careful Attention

In a major change, the Consumer Financial Protection Bureau (“CFPB”) will soon require financial mortgage lenders to offer borrowers a greater disclosure at loan closings. The new disclosures replace existing Truth-In-Lending Statements, HUD-1 Settlement Statements and Good Faith Estimate disclosures.

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BAPCPA: Monumental Failure or Work in Process?

In 2005, after 12 years of Congressional wrangling, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”).

 

The avowed purpose of BAPCPA was to reduce abusive filings by limiting consumer debtor’s access to chapter 7 relief. The financial service industry argued the change was needed to curb consumers’ “profligate spending” and perceived lax bankruptcy rules. By reducing access to chapter 7, lenders suggested that they would see increased distribution from those new chapter 13 cases due to limitations placed upon chapter 7 flowing from the so-called “means test.”

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Creditors Face Liability for Misrepresentations from Their Third-Party Debt Collectors

The U.S. Court of Appeals for the Second Circuit recently held that creditors may be liable under the false name exception to the Fair Debt Collection Practices Act (“FDCPA”) if they falsely represent to debtors they retained a third-party collection agent, when in fact the agent made no “bona fide” effort to collect.

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Understanding Reaffirmation Agreements

Attached is a wonderful reference guide published by the City Bar Justice Center titled Understanding Reaffirmation Agreements. A reaffirmation agreement is a contract between a debtor and creditor wherein the debtor agrees the creditor’s debt will survive the bankruptcy discharge. The authority for entry into a reaffirmation agreement can be found in 11 U.S.C. §524(c). Debtors and creditors alike are typically barraged with misinformation regarding when reaffirmation agreements are appropriate.

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Creditor’s Rights Update: New York Bankruptcy Court Declares Debt Owed to Sexually Abused Child Non-dischargeable in Mother’s Bankruptcy

Not every debt is entitled to be forgiven in bankruptcy. In a recent Northern District of New York bankruptcy decision, Chief Bankruptcy Judge Robert Littlefield Jr. held that a woman’s $3.75 million default judgment against her mother for negligent infliction of emotional distress would be excepted from discharge in her mother’s subsequent bankruptcy case. In re Irene Chaffee (Chaffee v. Chaffee), No. 07-90171 (Bankr. N.D.N.Y. September 3, 2013).

 

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Upcoming Event: January 29, 2014 - Partner Michael Moskowitz Speaks on Consumer & Corporate Bankruptcy Issues

Michael Moskowitz will be a featured speaker at the New York State Bar Association’s Annual Meeting on January 29, 2014. Mr. Moskowitz’s panel, one of  three to be presented by the Young Lawyers Section, will focus on consumer and corporate bankruptcy issues.  insert excerpt info here.

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Madoff update: Minnesota Bankruptcy Court Dismisses Ponzi Complaint for Trustee’s Failure to Name Specific Creditor Under State Court Fraudulent Transfer Claim

By Michael L. Moskowitz

Having represented numerous defendants in Ponzi-scheme adversary proceedings in the Second Circuit (New York), Weltman & Moskowitz closely follows the case law arising out of the massive Ponzi-scheme run by the now infamous Bernie Madoff. Uncovered in 2008, the resulting Madoff bankruptcies spawned dozens of decisions by the Bankruptcy Court, District Court and Second Circuit.  

 

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Weltman Judges 2013 Mock Trial Invitational at Yale University

NEW HAVEN - Partner Richard E. Weltman sat as a judge for the 18th Annual Yale Mock Trial Invitational on December 7 and 8, 2013. Details about the 2013 Yale Mock Trial Invitational can be found here.

The two-day event in New Haven, Connecticut fielded 42 teams from undergraduate colleges and universities across the United States. The student competitors, who serve as both attorneys and witnesses, emulate a jury trial based upon a fictional case using rules similar to the Federal Rules of Evidence. The 2013 competition results can be found here

 

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Rent Stabilization & Bankruptcy: Nightmare for NYC Tenants or Boon for Landlords and Owners?

We recently re-tweeted an article published in The New York Times on Monday October 21, 2013, entitled “Widow’s Bankruptcy Case Poses Risk to Rent-Stabilized Tenants.” 

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ALERT - William K. Harrington to replace Tracy Hope Davis as U.S. Trustee for Region 2

William K. Harrington, the U.S. Trustee for Massachusetts, New Hampshire, Maine and Rhode Island (Region 1), has been designated by Attorney General Eric Holder also to serve Region 2 replacing Tracy Hope Davis effective Nov. 27. 

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Chapter 13 Creditor’s Success Story Starts With Engagement of Skilled NY Bankruptcy Law Team

One of our lender clients, a New York City-based Federal Credit Union, came to us with a dilemma.

It seems the credit union was not receiving post-petition mortgage payments from its borrower, a chapter 13 debtor. Nor was the client receiving distribution payments from the debtor’s chapter 13 trustee. The lender had relied upon foreclosure counsel to handle the chapter 13 filing. Unfortunately, foreclosure counsel, not familiar with chapter 13 practice, only filed a Notice of Appearance and nothing else, not even a proof of claim.

 

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Loss Mitigation: How Borrower Bankruptcies Impact Lenders

Between 1998 and 2007, home mortgage debt nearly tripled from 4 trillion dollars to 10 trillion dollars. This mortgage boom resulted from easy lending and questionable subprime market practices. When the housing bubble burst, the economy tumbled. Many borrowers found themselves both unable to make mortgage payments and owners of real property worth less than what they owed. In response, many homeowners filed bankruptcy petitions either under chapter 7 to surrender their home, or chapter 13 to stop a foreclosure, repay pre-petition arrears, and hold on to their home.

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ALERT – Judicial Committees Publish Proposed Amendments to Bankruptcy Procedures and Forms

By Michael L. Moskowitz

On August 15, 2013, the Committee on Rules of Practice and Procedure of the Judicial Conference of the United States released their proposed amendments to the Bankruptcy Rules and Forms. The proposed amendments, rules committee reports, and other information are posted on the Judiciary’s website.  

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Debt Collection Firm Sanctioned for ‘Unintentional Error’ Under FDCPA

In a recent Southern District of New York decision, Judge Lorna Schofield held that Kucker & Bruh, LLP (“K&B”), a debt collection firm, violated the Fair Debt Collection Practices Act (“FDCPA”), by misrepresenting the character, amount and legal status of rent arrears allegedly owed by 82-year-old tenant Rafael Lee.

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Ediscovery Update: Sanctions Imposed For Less Than ‘Innocent’ Destruction Of Emails

A third revisit to purposeful evidence destruction—even when found to be “not malevolent”—was not a charm for the party doing the damage, according to a recent decision by Honorable Shira A. Scheindlin, who practically invented the “spoliation of evidence” sanction in New York’s federal district court for the Southern District about 10 years ago.

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“Shadow Docket” Reform Moves New York Foreclosure Cases to Settlement Conferences

On July 31, 2013, Governor Andrew Cuomo signed the so-called “Shadow Docket” Bill in connection with New York residential foreclosure actions. The bill adds a new section 3012-b to New York Civil Practice Law and Rules (“CPLR”). The new law also amends CPLR § 3408.

The new law is intended to promote the honesty and transparency in the residential foreclosure process by clarifying the obligations of lenders’ attorneys to the court and eliminating the growing number of “shadow docket” cases. Such cases are held in legal limbo while awaiting critical information necessary to trigger the scheduling of mandatory settlement conferences.  The Office of Court Administration estimates that as of July 7, 2013, there are between 5,000 to 7,000 shadow foreclosure cases.

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ALERT: Peninsula Hospital Trustee Files Multiple Adversary Proceeding Cases

On August 15, 2013, Lori Lapin Jones, as Trustee of Peninsula Hospital Center, a chapter 11 bankruptcy case pending in the Eastern District of New York (Brooklyn Vicinage), filed more than three dozen adversary proceeding cases seeking to recover hundreds of thousands of dollars in money or property for the benefit of the debtor’s creditors.

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Student Loans in Bankruptcy Update

In re Marlow, the United States District Court for the Eastern District of Tennessee affirmed that the debtor failed to demonstrate that paying his graduate and law school student loans constituted an undue hardship pursuant to the Brunner test, which was adopted by the Sixth Circuit.  In re Marlow, 2013 WL 3515726, at * 3 (E.D. Tenn. 2013).

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Second Circuit Confirms Madoff Trustee Lacks Standing to Assert Common Law Claims against Third-Party Financial Institutions

In Picard v. JPMorgan Chase & Co. (In re Bernard L. Madoff Invest. Secs. LLC), the United States Court of Appeals for the Second Circuit held last month that the “doctrine of in pari delicto" precluded Irving H. Picard, the trustee under the Securities Investor Protection Act (“SIPA”), from pursuing JP Morgan Chase & Co., HSBC Bank PLC, and other third-party defendants, on behalf of defrauded customers for certain common law claims.  In re Bernard L. Madoff Investment Securities, LLC, 2013 WL 3064848 (2d. Cir. June 20, 2013).

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Tide May be Turning for Student Loan Dischargeability in Bankruptcy

Several recent decisions demonstrate that courts are reconsidering the treatment of student loan debt dischargeability in bankruptcy under the “undue hardship” exception of section 523(a)(8) of the Bankruptcy Code. If the trend continues, the long-standing Brunner test may become a mere “relic of times gone by.” Roth v. Educational Credit Management Corp., 490 B.R. 908 (9th Cir. BAP 2013).

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Lenders Who Fail to Comply With CPLR 3408 Risk Significant Penalties

As lenders are aware, foreclosure proceedings in New York have changed considerably subsequent to the enactment of CPLR § 3408 and similar legislation, which placed additional obligations on lenders commencing a foreclosure action with respect to a homeowner’s primary residence. 

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ALERT -- RECENT OPINION OF THE SECOND CIRCUIT COURT OF APPEALS REGARDING REPOSSESSED COLLATERAL AND POTENTIAL DAMAGES – In re Weber

Last month the Second Circuit Court of Appeals (“Second Circuit”) issued a decision of interest to all secured lenders. The case, Christopher Weber v SEFCU, rejected the reasoning of the District Court for the Northern District of New York in the Alberto case that had allowed a secured creditor to essentially sit on repossessed collateral until the debtor makes an offer of adequate protection.  This decision now becomes the law of New York and Connecticut, unless the matter is appealed and reversed by the United States Supreme Court which is highly unlikely.

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CPLR §3215(c) Mandates Moving For Entry of Judgment Within One Year After Default Or Face Dismissal – A Cautionary Tale and A Success Story

Our client, a major New York-area Credit Union, hired outside counsel to file a residential foreclosure action involving a home loan. The complaint, filed by another law firm, was not verified by an officer or employee of the foreclosing lender.  Rather, it was signed only by the attorney.  Defendant homeowner failed to file an answer to the complaint...

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A Lawyer Representing Herself in a Commercial Dispute May Well Have a Fool for a Client

In a tangled commercial dispute, a law firm and its principal owner, without counsel, sued a well-respected New York City business equipment and technology services company for breach of contract.  Problem was, the law firm targeted the wrong party in a grudge match over a faulty printer...

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FEDERAL SEQUESTER CAUSES U.S. TRUSTEE TO SUSPEND DEBTOR AUDITS FOR NOW

As authorized in Section 603(a) of Public Law 109-8, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the United States Trustee Program (USTP) established procedures for independent audit firms to audit petitions, schedules, and other information in consumer bankruptcy cases. Pursuant to 28 U.S.C. § 586(f), the USTP contracted with independent accounting firms to perform audits in cases designated by the USTP.  Due to budgetary constraints, the USTP has indefinitely suspended its designation of cases subject to audit and has notified the independent accounting firms performing the audits.  Pursuant to Section 603(a) of BAPCPA and 28 U.S.C. § 586(a)(6), after the conclusion of the fiscal year the USTP will make public information concerning the aggregate results of the debtor audits performed during fiscal year 2013.

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9 Videos About Bankruptcy Basics

The United States Courts created 9 videos to help explain the basics of filing for bankruptcy relief. Whether you are a debtor or a creditor, these resources will be helpful to understand bankruptcy process.

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Creditors Need to Take Notice of the Recent Amendments to the Federal Bankruptcy Rules Which Affect the Filing of Proofs of Claims

The Advisory Committee on Bankruptcy Rules for the Judicial Conference of the United States which is made up of federal judges, bankruptcy attorneys, and others, proposed amendments to Bankruptcy Rules 1007, 2015, 3001, 7054, and 7056. This Alert focuses on Bankruptcy Rule 3001.

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NEW YORK’S COURT OF APPEALS SAYS FEDERAL CREDIT UNIONS MUST PAY NEW YORK’S MORTGAGE RECORDING TAX

NEW YORK, NYOn October 18, 2012, the New York Court of Appeals held that federal credit unions are subject to New York State’s Mortgage Recording Tax.  The Mortgage Recording Tax requires a payment to New York State of one half of one percent (.5%) for the privilege of recording a mortgage.rpt info here.

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Richard E. Weltman Attends International Executives Association Leadership Conference in Reno

Richard E. Weltman, legal counsel to the International Executives Associate (IEA) and a member of the Board of Directors of the Executives Association of New York City, attended the IEA Leadership Conference held  October 2-4, 2012 in Reno, Nevada. The conference was hosted by the Executives Association of Reno.

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New Bankruptcy Rule 3002.1: A Trap for Unwary Secured Creditors?

On December 1, 2011, changes to the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) complicated the filing of proofs of claim by secured creditors in chapter 13 cases. These new rules require secured creditors to file and continually update filed proofs of claim.

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ELEVENTH CIRCUIT REVERSES LOWER COURTS AND PERMITS LIEN STRIPPING IN CHAPTER 7 CASE

NEW YORK, NYThe U.S. Court of Appeals for the Eleventh Circuit recently ruled that chapter 7 bankruptcy debtors can strip off, or cancel, wholly unsecured mortgage liens. The per curiam opinion, issued May 11, 2012, marks a significant departure from the standard Chapter 7 practice in most districts.

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The Student Loan Crisis: Is there a Bankruptcy Solution?

Higher education costs continue to sky rocket with no end in sight. Students are incurring potentially crushing amounts of debt. Americans owe more than $1 trillion dollars in student loans, which has now surpassed the national credit card debt. While the surge in educational debt is worrisome, an even larger concern is private student loans. Private loans are a riskier way to finance education than through their federally subsidized counterparts.

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OUT-OF-COURT WORKOUT OR CHAPTER 11?

As credit markets tighten, professionals and business owners alike have trouble finding access to credit to fund and grow business operations. Media reports indicate loans are harder to obtain and asset-to-debt ratios are stricter than ever. As cash dwindles the debt load rises. For the overwhelmed business owner bankruptcy is only one answer. There are other alternatives.

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CREDIT UNION LENDER MUST IMMEDIATELY RETURN TO DEBTOR REPOSSESSED VEHICLE UPON NOTICE OF BANKRUPTCY FILING

On December 22, 2010, an upstate New York bankruptcy court in an adversary proceeding filed by debtor Christopher Weber against SEFCU (“Credit Union”), granted Credit Union’s motion for summary judgment. 

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HOW TO DEAL WITH LOUSY CREDIT REPORTS?: Why Knowing What Your Creditors are Saying About You Can Help You Take Charge

Often people with less than perfect credit scores are surprised that locating one standardized credit profile or a “uniform” credit report is more myth than reality. Judgments, repossessions, slow payment history, tax liens--as well as bankruptcy filings--are reported to a varying degree by creditor filings or with public record databases maintained by one of the three largest consumer credit reporting agencies (“CRAs”). Sometimes adverse information is reported by other sources as well. In order to learn how badly your credit rating may have been damaged, you must first identify what personally identifiable credit information has been reported about you to the CRAs.

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Game Changing Year-End Legislation Offers More Choices to New Yorkers Facing Personal Bankruptcy

NEW YORK, NY - On December 23, 2010, outgoing Governor David Paterson signed major new legislation increasing the New York homestead exemption and other New York property exemptions. The law makes New York more competitive with other states. A chart of the major changes is set forth below.

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Protecting Consignment Sales From Retailer Bankruptcies: Are Your Goods and Receivables at Risk?

NEW YORK, NY - On November 26, 2008, Big box retailer bankruptcy filings are expected to mushroom following predicted tepid holiday sales this year, posing vexing challenges for their suppliers.

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U.S. Trustee Rolls Out Debtor Audits

NEW YORK, NY -The United States Trustee's Office of the Department of Justice has rolled out a new program targeting chapter 7 and 13 debtors to random audits of their bankruptcy petitions, schedules and related tax and financial disclosures.

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Collect with Confidence: 12 ways to get paid when Key Customer or Supplier Files (or Threatens) Bankruptcy

Whether you sell goods or services, your chance of doing business with a company now or soon to be embroiled in bankruptcy proceedings is probably not as remote as you'd hope it to be. While it may not be your job to keep another business from falling in with the chapter 7 or chapter 11 crowd, it makes sense to limit your exposure to the financial woes of a key customer or supplier.

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As expected, bankruptcy filings fall sharply in year after reform

NEW YORK, NY -December 7, 2006. According to Richard E. Weltman, a pre-eminent bankruptcy lawyer with offices in New York and New Jersey, 2006 bankruptcy filings nationwide are down from one year ago, although there is some indication the trend may reverse in first quarter 2007 as a result of rising interest rates on adjustable-rate mortgages, among other factors.

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CONGRESS PASSES MAJOR BANKRUPTCY REFORM BILL AND DELIVERS BILL TO PRESIDENT BUSH FOR SIGNATURE

NEW YORK, NY - By a vote of 302 to 126, on April 14, 2005, the U.S. House of Representatives passed a bankruptcy reform bill which will become, for the most part, effective 180 days after it is signed into law by President Bush on April 20. The reform bill, which has stalled in Congress for more than seven years, will make filing for bankruptcy more difficult and costly, and will enhance the rights of creditors.

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Supreme Court Shields Individual Retirement Accounts From Creditors

NEW YORK, NY - The Supreme Court ruled on Monday April 4, 2005, that creditors may not seize Individual Retirement Accounts when people file for bankruptcy.

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Senate Reintroduces 2005 Version of Bankruptcy Reform Bill

NEW YORK, NY - As anticipated, Senator Charles Grassley(R-Iowa) introduced comprehensive bankruptcy reform legislation, revised for the 2005 legislative session, last week with several co-sponsors including a democratic senator.

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To Settle or Not to Settle: U.S. Supreme Court Reverses Archer v. Warner

NEW YORK, NY -- The rules regarding settlements of pre-bankruptcy lawsuits just got tougher for debtors as a result of the Supreme Court's 7-2 opinion reversing and remanding to the Fourth Circuit Court of Appeals its decision last year in re Warner (Archer v. Warner), 283 F.3d 230 (4th Cir. 2002).

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To Settle or Not to Settle: U.S. Supreme Court Grants Certiorari in Archer v. Warner

NEW YORK, NY -- In a prior release, available on our What's New page, dated April 11, 2002, Michael Moskowitz, a New York bankruptcy practitioner counseled that even bankruptcy experts and courts can and often do disagree about how best to advise a potential bankruptcy debtor facing substantial, arguably non-dischargeable, fraud or intentional, tort claims. Until now it has largely depended on where a debtor lives.

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Fast Track for Bankruptcy Reform Act as it sails through House

NEW YORK, NY -- Sweeping consumer bankruptcy reform has been promised and much ballyhooed in the media for several years. While bankruptcy experts around the nation are uncertain about the ultimate fate of major reform legislation, according to Michael L. Moskowitz, a bankruptcy attorney who has closely followed the bills, the House adopted the most recent bankruptcy reform legislation late Wednesday, March 19, 2003, that would toughen bankruptcy rules for individuals and corporations.

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To Settle or Not to Settle: New Questions Raised About Pre-Bankruptcy Settlements

NEW YORK, NY -- Even bankruptcy experts and courts can disagree about whether and how to settle a potentially non-dischargeable fraud or intentional tort claim.

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Do 'All or Nothing' Reaffirmations Violate The Automatic Stay? No says the First Circuit Court of Appeals, emphatically

NEW YORK, NY -- Section 524(c) and (d) of the Bankruptcy Code set forth the basis for reaffirmation agreements in chapter 7 bankruptcy cases. A reaffirmation is an agreement to pay a dischargeable debt that meets the requirements of these sections. Any other agreement to pay a discharged or dischargeable debt is without legal effect. These sections of the bankruptcy code are a result of coercive and deceptive tactics used by creditors to secure reaffirmation of discharged debts.

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TIPS FOR IMPROVING YOUR CREDIT RATING

Many people with less than perfect credit find it difficult to obtain accurate credit information. And credit reports, even when obtained, regularly contain errors or omissions. Judgments, repossessions, slow payments, compromises, liens, and bankruptcies are irregularly reported by lenders or haphazardly acquired from public record databases by consumer reporting agencies ("CRAs").

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Statement of Client's Responsibilities

(As adopted by the New York Administrative Board of the Courts)

Reciprocal trust, courtesy and respect are the hallmarks of the attorney-client relationship. Within that relationship, the client looks to the attorney for expertise, education, sound judgment, protection, advocacy and representation. These expectations can be achieved only if the client fulfills the following responsibilities:

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CONSUMER BANKRUPTCY REFORM STALLS AGAIN: IS IT ABOUT TIME FOR A SECOND LOOK?

Sweeping consumer bankruptcy reform has been promised and much ballyhooed in the media for several years now. As the current bills languish in Congress, bankruptcy experts around the nation are kept guessing about the ultimate fate of major reform legislation.

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Statement of Client's Rights

(As adopted by the New York Administrative Board of the Courts)

1. You are entitled to be treated with courtesy and consideration at all times by your lawyer and the other lawyers and personnel in your lawyer's office.

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