2009 Consumer Law Recent Developments (Part II)

trustee for stay violations, the court in Campbell v. Ledyard Nat'l Bank (In re Ledyard), 398 B.R. 799 (Bankr. D. Vt. 2008), held that the trustee, although a natural person, represented the estate, which is not an individual, and the trustee had not personally been harmed by a stay violation. Although the trustee could not recover under § 362(k), the trustee could seek sanctions under § 105(a). In Moser v. Mullican (In re Mullican), 2008 WL 5191196 (Bankr. E.D. Tex. Sept. 30, 2008), the court discusses the split of authority on whether a trustee for a corporate debtor could recover under former § 362(h), concluding that a Chapter 7 trustee for individual consumer debtors had standing to pursue stay violation damages, here against the debtors.

3. Avoiding Powers

Mortgage fails to provide constructive notice due to defective acknowledgement. Affirming the BAP in one of a series of avoidance attacks by Chapter 7 and 13 trustees, based on failure of the mortgage acknowledgement to properly follow applicable state law, the Sixth Circuit provides an examination of when the trustee may successfully avoid such mortgages under § 544. There is a dissent taking the position that the alleged discrepancy does not amount to a failure to comply with state law. Burden v. CIT Group/Consumer Fin., Inc. (In re Wilson), 2009 WL 723197 (6th Cir. Mar. 19, 2009).

4. Property of Estate

4.1 Chapter 7 property of estate

Section 363(o) interpreted by Eleventh Circuit. In a Chapter 7 case, after conversion from 13, the debtor attempted to exempt claims raised in an adversary proceeding against his mortgage company under the Truth in Lending Act, but the bankruptcy court held that the TILA claims were "independent rights under federal law," not subject to homestead exemption. The claims were property of the bankruptcy estate, and the Chapter 7 trustee settled the adversary proceeding by selling the claims to the mortgagee. The Circuit court held that § 363(o), added by BAPCPA, did not apply; the sale was of the debtor's claims under the TILA rather than of an underlying credit transaction. The debtor and counsel were also sanctioned by the bankruptcy court for discovery violations, in the amount of the mortgagee's attorney fees and costs, and the sanction was affirmed. MacNeal v. Equinamics, Corp. (In re MacNeal), 2009 WL 97559 (11th Cir. Jan. 15, 2009) (unpublished).

Economic stimulus payment is property of estate. Economic stimulus payment received by the Chapter 7 debtor postpetition is property of the estate without need for proration between pre-and postpetition periods. Since stimulus payment is federal, court looks to federal rather than state law. The trustee argued that the stimulus was tied to a prebankruptcy tax filing, which

©2009 Hon. William Houston Brown