By Richard E. Weltman and Melissa A. Guseynov

When 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.

By Richard E. Weltman and Melissa A. Guseynov

We 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.

By Richard E. Weltman and Melissa A. Guseynov

In 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.”

By 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.

By Michael L. Moskowitz and Melissa A. Guseynov

In 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.   

By Richard E. Weltman

Most 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.

By Richard E. Weltman and Melissa A. Guseynov

The 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.

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

On 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.

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

On 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).   

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

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.

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

The 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.

The 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.

By Michael L. Moskowitz and Melissa A. Guseynov

We 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.

By Michael L. Moskowitz and Michele K. Jaspan

In 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.

By Michael L. Moskowitz

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. The emphasis of this article is the peril which will befall a lender if it fails to timely register the statutorily mandated notice.  

By Michael L. Moskowitz

In 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.

By Michael L. Moskowitz

A 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.

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.

Media Contact: Michael L. Moskowitz 212.684.7800

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

For Immediate Release

NEW YORK, NY – On March 26, 2015, 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 27th Annual Marvin Hazan Moot Court Competition. Mr. Moskowitz participated as a jurist for the eighth consecutive year. The tournament was co-sponsored by the Maurice A. Deane School of Law at Hofstra University.

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.

Founding 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.

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.

By Michael L. Moskowitz

In 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.

By Michael L. Moskowitz

Two 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.

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

By Richard E. Weltman

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.

Partner 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.