1 / 47

HOT TOPIC LEGAL UPDATES

HOT TOPIC LEGAL UPDATES. Presented by the AFN’s Legal Services Committee. SPEAKERS. William M. LeRoy - Moderator CEO American Legal & Financial Network “AFN”. Carolyn A. Taylor , Esq. - Panelist Partner Hughes, Watters & Askanase, L.L.P. Kelly Ann Poole , Esq. - Panelist Partner

wanda
Download Presentation

HOT TOPIC LEGAL UPDATES

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. HOT TOPICLEGAL UPDATES Presented by the AFN’s Legal Services Committee

  2. SPEAKERS William M. LeRoy - Moderator CEO American Legal & Financial Network “AFN” Carolyn A. Taylor, Esq. - Panelist Partner Hughes, Watters & Askanase, L.L.P. Kelly Ann Poole, Esq. - Panelist Partner Rosicki, Rosicki & Associates, P.C. Matthew C. Abad, Esq. - Panelist Partner Burke, Costanza & Cuppy L.L.P. Michelle Garcia Gilbert, Esq. - Panelist Attorney Kass, Shuler, Solomon, Spector, Foyle & Singer, P.A.

  3. Pending Legislation H.R. 200 - “The Helping Families Save Their Homes in Bankruptcy Act of 2009 “ S. 61 - “The Helping Families Save Their Homes in Bankruptcy Act of 2009 “ H.R. 225 - “The Emergency Homeownership and Equity Protection Act “

  4. Status of Pending Legislation H.R. 200 - 1/27/09 House subcommittee: Ordered to be Reported (21-Y/ 15-N) (R John Conyers-D/MI +16) S. 61 - 1/6/09 Referred to Senate Committee; Read twice, referred to Committee on Judiciary (S. Richard Durbin-D/Il +7) H.R. 225 - 1/22/09 Committee hearings held (R.R. Miller-D/NC + 13)

  5. Comparison H.R. 200 / H.R. 225 H.R. 200 H.R. 225 Eligibility for Relief § 2 § 2 Prohibit claims –violations § 3 N/A consumer protection statutes --- --- Authority to Modify Mortgages § 4 § 3 Combating Excess Fees § 5 § 4 Confirmation of Plan § 6 § 5 Discharge § 7 § 6 Effective Date § 8 § 7 Date of enactment All cases filed on, before or after date of enactment of Act

  6. Summary of H.R. 200 • Attention on the proposed legislation has been directed to amendments that would allow for cram downs of claims secured by debtor’s principal residence. • Current - Section 1322(b)(2)”... The plan may… modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence…”

  7. Summary of H.R. 200 • Changing the eligibility requirements will increase the number of debtors who will be eligible to file a Chapter 13 and receive the benefits of the proposed cram down legislation.

  8. HR 200 “The Helping Families Save Their Homes in Bankruptcy Act of 2009’’ • SEC. 1. SHORT TITLE. • SEC. 2. ELIGIBILITY FOR RELIEF. • SEC. 3. PROHIBITING CLAIMS ARISING FROM VIOLATIONS OF THE TRUTH IN LENDING ACT. Sponsor: John Conyers, Jr. (D) (Mi) 111th Congress

  9. Eligibility for Relief 11 U.S.C. 109 Proposed Amendments change • Computation of debt to qualify for Chapter 13 [11 U.S.C. 109 (e)] • Mandatory Pre-Filing Credit Counseling [11 U.S.C. 109 (h)]

  10. Computation of debt -- Proposed Does NOT include secured or unsecured debts secured by principal residence if • Current value less than secured debt limit OR • Sold at foreclosure or surrendered and current value less than secured debt limit Eligibility for Relief-Chapter 13

  11. Mandatory Pre-filing Credit Counseling WAIVED IF • debtor files written certification • that received notice the note holder • may commence foreclosure against principal residence Eligibility for Relief-Chapter 13

  12. Claims involving Truth in Lending Violations Prohibited • Secured by principal residence • Subject to right of rescission under Truth in Lending • Not entitled to payment in bankruptcy • Notwithstanding prior entry of foreclosure judgment • Not affect debtors rights under other consumer protection laws 11 U.S.C. 502(b) -Claims not entitled to payment

  13. H.R. 200-Sec. 2- Eligibility for Relief Who may be a debtor (Current) (e) Only an individual with regular income…(and such individual’s spouse) that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $336,900.00 and noncontingent, liquidated, secured debts of less than $1,010,650.00,

  14. Current Eligibility - Chapter 13 • Individual • Regular income • Non-contingent, unliquidated, unsecured debts under limit (< $ 336,900) * • Non-contingent, unliquidated, secured debts under limit (< $ 1,010,650)* * subject to adjustment

  15. Regular income: “steady source” • Job on payroll (receives IRS W-2) • Self employment (receives IRS from 1099) • Retirement, pension, social security, disability • May include regular 3rd party contributions Eligibility for Relief-Chapter 13

  16. Non Contingent • Is not reliant upon other circumstances or activities to formulate the amount of the debt • Liability to pay depends upon the occurrence of an outside event

  17. Liquidated • Capable of ready and precise determination • Viewing documents • Mathematical calculation

  18. Eligibility Comparison • In a Chapter 13, a debtor can’t have more than $1,010,650 in total secured debt. This means that if a debtor either has a home or apartment with greater than $1,010,650 in mortgages on it, or has more than one property — such as a primary home subject to a mortgage and 2nd investment property subject to a mortgage — with total debt on all properties greater than $1,010,650, then Chapter 13 is not an option.

  19. Proposed: Add at end of Sec. 109 (e) ‘‘For purposes of this subsection, the computation of debts shall not include the secured or unsecured portions of— ‘‘(1) debts secured by the debtor’s principal residence if the current value of such residence is less than the secured debt limit; or ‘‘(2) debts secured or formerly secured by real property that was the debtor’s principal residence that was sold in foreclosure or that the debtor surrendered to the creditor if the current value of such real property is less than the secured debt limit.’’

  20. Proposed: Eligibility • Individual • Regular income • Non-contingent, unliquidated, unsecured debts < $ 336,900.00, + Non-contingent, unliquidated, secured debts < $ 1,010,650.00 Exceptdoes not include mortgage on principal residence when: • value is less than the secured debt limit • principal residence is sold in foreclosure or surrendered and the value is less than the secured debt limit

  21. Eligibility Comparison Example: John’s property has decreased in value. His primary residence is currently valued at $600,000. He has a 1st mortgage on his primary residence in the amount of $400,000. and a 2nd mortgage in the amount of $350,000. He has a second piece of property currently valued at $400,000. and a mortgage on that property in the amount of $350,000.

  22. Eligibility Comparison • Current John’s total secured debt is $1,100,000. It is above the secured debt limit of $1,010.650. Therefore he would be prohibited from filing a Chapter 13 bankruptcy. • Proposed The value of John’s principal residence is $600,000, which is less than the secured debt limit of $1,010,650. Therefore, in computing the total secured debt, for purposes of eligibility John would not include the $750,000. in debts secured by the principal residence. John would be permitted to file a Chapter 13 bankruptcy.

  23. Mandatory Credit Counseling Current 109(h) “…an individual may not be a debtor …unless such individual has, during the 180-day period preceding the date of filing of the Petition… received from an approved…credit counseling agency a briefing…that outlined the opportunities for available credit counseling…”

  24. Proposed: Add at end of Sec. 109 (h) ‘‘(5) The requirements of paragraph (1) shall not apply in a case under chapter 13 with respect to a debtor who submits to the court a certification that the debtor has received notice that the holder of a claim secured by the debtor’s principal residence may commence a foreclosure on the debtor’s principal residence.’’. Mandatory Debt Counseling

  25. Waiver-Mandatory Credit Counseling Has received notice • Written, verbal, either? • At what point in time ? May commence foreclosure • Initial call from debt collector? • 30 day demand (notice of default and intent to accelerate)? • Loss mitigation contact?

  26. 11 USC 502 – Claim Allowance (a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest …objects.

  27. 11 USC 502 (b) –Claim Allowance Except as provided in subsections (e) (f), (g), and (h) and of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in … and shall allow such claim in such amount, except to the extent that--

  28. Exceptions to Claim Allowance Except to the extent (1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured; (2) such claim is for unmatured interest;

  29. 11 USC 502(b)-Claims excluded from payment Except to the extent (3) if such claim is for a tax assessed against property of the estate, such claim exceeds the value of the interest of the estate in such property; (4) if such claim is for services of an insider or attorney of the debtor, such claim exceeds the reasonable value of such services;

  30. 11 USC 502(b)-Claims excluded from payment Except to the extent (5) such claim is for a debt that is unmatured on the date of the filing of the petition and that is excepted from discharge under section 523(a)(5) of this title; or (6) if such claim is the claim of a lessor for damages resulting from the termination of a lease of real property, such claim exceeds (stated amount)

  31. 11 USC 502(b)-Claims excluded from payment Except to the extent (7) if such claim is the claim of an employee for damages resulting from the termination of an employment contract, such claim exceeds (stated formula); or (8) such claim results from a reduction, due to late payment, in the amount of an otherwise applicable credit available to the debtor in connection with an employment tax on wages, salaries, or commissions earned from the debtor; or

  32. 11 USC 502(b)-Claims excluded from payment Except to the extent (9) proof of such claim is not timely filed, except to the extent tardily filed as permitted…

  33. Proposed: Add at end of Sec. 502(b) ‘‘(10) the claim for a loan secured by a security interest in the debtor’s principal residence is subject to a remedy for rescission under the Truth in Lending Act notwithstanding the prior entry of a foreclosure judgment, except that nothing in this paragraph shall be construed to modify, impair, or supersede any other right of the debtor.’’

  34. Truth in Lending (TILA) Rescission[15 USC 1601 et seq] Purpose: • enable consumer to evaluate • cost of cash vs. credit • cost of credit among lenders Applies: • home equity, second lien, refinance (owner occupied) • secured by principal dwelling • each consumer with ownership interest (not just borrowers)

  35. TILA RESCISSION Applies: • home equity, second lien, refinance (owner occupied)* • secured by principal dwelling • each consumer with ownership interest (not just borrowers) * No rescission: purchase money; construction; refinance of second home or investment/rental property

  36. TILA Right of Rescission Lender Must Deliver: • 2 copies of notice of right to rescind; and • 1 copy of “material disclosures” * to each consumer entitled to rescind * Annual percentage rate; method of determining finance charge and balance upon which imposed; amount of finance charge; amount financed; total of payments; number of payments and due dates

  37. TILA Right of Rescission Notice: • on separate document that identifies the rescission period; and • clearly and conspicuously discloses • security interest in principal dwelling • consumer’s right to rescind • how to exercise rescission with form designating lender’s address

  38. TILA Right of Rescission To Exercise: • consumer notifies lender by mail, telegram, telegraphic or other written means • at Lender’s designated address • exercise by one consumer effective to all Deemed Given: • when mailed, filed, sent by other means, or delivered to lender’s designated address

  39. TILA Right of Rescission Timing: the later of • midnight of third business day after consummation of the transaction; or • delivery of notice of right to rescind; or • delivery of all required disclosures

  40. TILA Right of Rescission Time computation: • 3 full business days • all calendar days except Sunday/ federal holidays Example: Closing: Thursday, January 15, 0001 all material disclosures given Runs: Friday, Saturday and Monday Ends: Midnight, Monday, January 19, 0001

  41. TILA Right of Rescission Waiver: • only for “bona fide personal financial emergency” * with • a dated written statement describing the emergency, waiving the rescission right ; and • signed by all consumers entitled to rescind • preprinted forms prohibited * Personally or financially devastating, natural disaster, medical emergency

  42. TILA Right of Rescission Disbursement of Loan Proceeds: • rescission period expires; and • lender reasonably certain no rescission If exercise by mail, effective upon deposit when mailed, even if received 4 – 5 days after closing • written confirmation from all consumers of no rescission (dated after closing)

  43. Effect of TILA Rescission • security interest void • consumer must return principal • consumer no longer liable for any amount, including finance charges • w/in 20 days of receipt of rescission lender must • refund any money/property given in transaction; and • terminate the security interest

  44. TILA Right of Rescission Effect of Non-Compliance • the 3 day rescission does not begin run until all disclosures and the rescission notice given • rescission may occur for up to 3 years • the security interest is void • must refund all finance charges and other fees collected over life of loan

  45. TILA Right of Rescission Lender Defenses: Unintentional Violation Bona Fide Error • show by preponderance of evidence • not intentional and • resulted from bona fide error • notwithstanding maintenance of procedures reasonably adapted to avoid such errors

  46. Unanswered Questions • Are the bona fide error /unintentional violation defenses available to lenders? • How is the challenge to the claim raised? Claim objection? Motion? Adversary proceeding? • Who can raise the challenge? The Debtor? The Trustee? A party in interest? • Do the amendments apply to all other consumer protection statutes? Both state and federal? Or only to those with rescission as a remedy?

  47. ConclusionQuestion & Answer Period If you have any further questions that were not addressed in this presentation, or want to contact one of our speakers, please email Matt Bartel, COO of AFN, at mbartel@e-afn.org. Thank you for your participation in this webinar. Please complete the brief survey which you will be directed to at the conclusion of this presentation. * AFN provides the information contained in these webinars as a public service for educational and general information purposes only, and not provided in the course of an attorney-client relationship. It is not intended to constitute legal advice or to substitute for obtaining legal advice from an attorney licensed in the relevant jurisdiction.

More Related