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not facially unconstitutional, here disagreeing with the Milavetz panel. Applying the "doctrine of constitutional avoidance," the Fifth Circuit "construes the statute to prevent only a debt relief agency's advice to a debtor to incur debt in contemplation of bankruptcy when doing so would be an abuse of the bankruptcy system[,]" basing its conclusion on numerous portions of BAPCPA that discourage bankruptcy abuse, including expanded case dismissal and means testing provisions; "placement of section 526(a)(4) among three provisions meant to curb abuse of the bankruptcy system by debt relief agencies likewise suggests that the statute was only intended to curb abuse." By reversing the district court's holding that § 526(a)(4) was facially unconstitutional, the panel also dissolved the injunction against enforcement. Finally, § 526(b) does not violate the bankruptcy attorney's "First Amendment rights because it does not unduly burden her or her clients, and is narrowly tailored to promote the government's compelling interest in ensuring that consumer debtors are aware of basic bankruptcy information." Hersh v. United States, __ F.3d ___, 2008 WL 5255905, at
* 11-12 5th Cir. Dec. 18, 2008).
Loan servicer doesn't violate stay by filing proof of claim based on increased postpetition mortgage payments. Reversing in part the bankruptcy court's determination that the loan servicer willfully violated the automatic stay when it increased postpetition escrow payments, the Fifth Circuit held that when the loan contract provides for escrow payments to be held in escrow until the tax or insurance obligations are due, the unpaid escrow obligations accruing prepetition are "claims," even though the servicer had not yet paid the tax or insurance, and that the servicer did not violate the stay by including in its proof of claim language increasing the postpetition payment to recoup the prepetition escrow arrearage. The servicer did not actually collect the increased payments, and when the debtors objected to the proof of claim, the bankruptcy court sustained their objection; therefore, the Circuit Court's holding is limited: The loan servicer's filing of a proof of claim, which includes an assertion of increase in escrow payments, in itself does not violate the stay. Campbell v. Countrywide Home Loans, Inc., 545 F.3d 348 (5th Cir. 2008).
©2009 Hon. William Houston Brown
