Month: May 2016

E.D.N.C.: Wells Fargo v. Farag- Determination of Priority of Mortgage Liens

Summary:

The Farags (who were eventually represented by my law firm in their Chapter 13 bankruptcy- all statements in this posting are taken solely from the court decisions) obtained a line of credit in 2002 with Wells Fargo, secured by their real property. This was refinanced in 2004 by PNC, which, based on a pay-off statement from Wells Fargo, paid the balance owed and requested that the Deed of Trust be marked as satisfied and record. Wells Fargo failed to do so and the Farags continued to take advances from the line of credit totaling over $300,000.00.

Upon filing Chapter 13 on March 29, 2012, the Farags indicated that the real property would be surrendered.… Read More

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E.D.N.C.: BB&T v. Construction Supervision Services- Requirements for Super-priority Claim under § 507(b)

Summary:

BB&T held secured claim against property of the estate. During the initial Chapter 11, BB&T received $62,900 in adequate protection payments. When the case eventually converted and assets were liquidated, paying the secured claim of BB&T, it nonetheless sought a super-priority claim under 11 U.S.C. § 507(b) for its post-petition interest, costs and fees.

In order to hold a super-priority claim BB&T was required to show the following:

1. The adequate protection payments provided ultimately proved to be inadequate.
2. The creditor must have a claim allowable under § 507(a)[(2)by way of an administrative expense claim under § 503(b)).
3.… Read More

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Bankr. E.D.N.C.: In re Royal- Reclassification of Secured Claim in Plan Modification

Summary:

The Royals sought to modify their Chapter 13 plan to surrender a 15-year old motor vehicle that was increasingly expensive to maintain due to mechanical problems. The court denied this modification, first finding that the Royals had provided not evidence of a substantial and unanticipated change in financial circumstances beyond these mechanical problems. Following Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.2d 528, 532-33 (6th Cir. 2000), the court held that that 11 U.S.C. § 1329(a) allows for a reduction in the payment of claims but not for a reduction or modification of the claim itself.

Commentary:

AS the Royal opinion notes, following In re Miller, 2002 WL 31115656 (Bankr.… Read More

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Bankr. E.D.N.C.: In re Napoleon- Assigned Insurance Proceeds not an Asset of the Bankruptcy Estate

Summary:

Separately, both Mr. and Ms. Napoleon signed assignments of insurance proceeds to Bio-Medical for kidney dialysis treatment Ms. Napoleon received. After litigation over the amounts owed and distribution of pre-petition insurance proceeds, the Napoleons filed Chapter 13 bankruptcy and subsequently received addition insurance checks ad amended their exemptions to claim $4,999.00 under Mr. Napoleon’s wildcard. Bio-Medical objected.

Relying largely on In re Helms, 467 B.R. 374 (Bankr. W.D.N.C. 2012), the court held that assigned insurance proceeds are not part of a Debtor’s bankruptcy estate and accordingly could not be exempted.

Commentary:

Insert your Battle of Waterloo jokes below.

Given that Bio-Medical’s counsel was located in Winston-Salem and the Napoleon’s live in High Point, it is not unreasonable to speculate why Bio-Medical did not seek a change of venue to the Middle District.… Read More

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N.C. Ct. of Appeals: U.S. Bank v. Pinkney- Chain of Indorsements of Note

Summary:

The Pinkneys executed a mortgage note (“the Note”) in favor of Ford Consumer Finance, secured by a Deed of Trust. The Note was later indorsed to Credit Based Asset Servicing and Securitization (“CBASS”), which, in turn, assigned the Note to U.S. Bank, as Indenture Trustee, and lastly to U.S. Bank, without recourse.

When U.S. Bank later sought to foreclose and a judgment for money owed, the Pinkney moved to dismiss that action on the basis that U.S. Bank was not the holder of the Note, which did not contain the “magic words” denoting a that it was, under the Uniform Commercial Code, N.C.G.S.… Read More

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N.C. Ct. of Appeals: In re Smith- Conditions Precedent to Confirmation of Plan

Summary:

Mr. Smith filed Chapter 11 bankruptcy after Wells Fargo commenced foreclosure on real property. The amended proposed plan provided for the cram-down of the secured claim held by Wells Fargo to $60,000.00. The Confirmation Order provided “that confirmation is expressly conditioned upon [Mr. Smith] providing for the payment of all claims assertable against [Mr. Smith’s] estate as specified in the Plan and in this Order.” The Chapter 11 case was, however, dismissed at Mr. Smith’s request two years later, after which Wells Fargo recommenced foreclosure. The Superior Court, hearing the foreclosure on appeal, held that the pursuant to 11 U.S.C.… Read More

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