Tag: personal guarantee

4th Circuit: Ballard v. Bank of America- Equal Credit Opportunity Act


Kellie Ballard co-signed a loan agreement for her husband, Michael Ballard, for a loan (and three subsequent restructuring) from Bank of America (“BoA”) for his business, FoodSwing, even though she has neither an ownership or operating interest in the business. The couple owns, among other assets, a home in Maryland (presumably as Tenants by the Entireties) and a winery in California. In November 2012, Ms. Ballard brought suit against BoA, seeking equitable and injunctive relief under federal and state Equal Credit Opportunity Acts (“ECOA”), alleging that BoA improperly required her to serve as a guarantor.

ECOA makes it unlawful for “any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of .… Read More

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Bankr. E.D.N.C.: In re Coopersmith- Violation of Automatic Stay for Collection Attempts Related to Corporate Guarantor


The Male Debtor, the owner of IPS Construction, personally guaranteed a loan to M.G. Brown, a division of Foreman’s Inc. After IPS failed to pay its debt, M.G. Brown commenced a small claims lawsuit in 2010. After the magistrate entered a judgment in favor of M.G. Brown on January 12, 2011, the Male Debtor appealed and the matter was referred to arbitration. Neither Debtor attended the arbitration and subsequently, on June 1, 2011, the Debtors filed Chapter 13 bankruptcy, listing as a creditor, among others, M.G. Brown. On June 30, 2011, M.G. Brown sent IPS a copy of the arbitration award, with a hand written note implying that the Debtor was attempting to delay payment.… Read More

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Bankr. E.D.N.C.: In re Swartville, L.L.C.- Good Faith Filing of Chapter 11 “Dirt for Debt” Plan to Protect Guarantors


Swartville owed TD Bank $1,615,000, secured by real property and guaranteed by the three principals of the company.  Following default and rather than foreclosing on the property, TD Bank brought suit against the guarantors.  Swartville then filed Chapter 11, proposing to surrender the real property in satisfaction of the debt.  TD Bank objected that such plan was not filed in good faith, as it was intended solely to benefit the guarantors by forcing TD Bank to take the real property in reduction of the debt.

Applying the two-prong good faith test developed by the 4th Circuit in Carolin Corp. v.… Read More

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Bankr. E.D.N.C.: In re Robert Youngblood Construction Co.- No Co-debtor Stay under 11 U.S.C. § 362

Summary: The Youngbloods are guarantors of several loans between Youngblood Construction and BB&T.  Following the filing of the Chapter 11, Youngblood Construction brought a Motion to Extend Stay for the Youngbloods individually.

The Bankruptcy Court recognized that in “unusual circumstances” the Debtor and a third party may share such common identity that judgment against one may “in effect be a judgment or finding against the debtor.” Kreisler v. Goldberg, 478 F.3d 209, 213 (4th Cir. 2007) (citing A.H. Robins Co., v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986)).

In this case, however, the stay should not be extended to the Youngbloods, who could file their own bankruptcy and obtain the requested relief. … Read More

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Bankr. EDNC: BB&T v. Murray- Avoidance of Fraudulent Conveyance; Ultra Vires Acts


A few hours prior to a foreclosure sale, 15 parcels of real property were transferred to the Debtors by three corporations owed by the Debtors.  The Debtors shortly thereafter filed Chapter 11.  BB&T commenced an Adversary Proceeding seeking to avoid the transfers as fraudulent conveyances and because some were made ultra vires and brought a Motion for Summary Judgment.

In determining whether a transfer was a fraudulent conveyance the court first turned to the non-exclusive list of factors found in N.C. Gen. Stat. 39-23.4(b):

  1. The transfer or obligation was to an insider;
  2. The debtor retained possession or control of the property transferred after the transfer;
  3. The transfer or obligation was disclosed or concealed;
  4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
  5. The transfer was of substantially all of the debtor’s assets;
  6. The debtor absconded;
  7. The debtor removed or concealed assets;
  8. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
  9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
  10. The transfer occurred shortly before or shortly after a substantial debt was incurred;
  11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor;
  12. The debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor reasonably should have believed that the debtor would incur debts beyond the debtor’s ability to pay as they became due; and
  13. The debtor transferred the assets in the course of legitimate estate or tax planning.
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Bankr. EDNC: In re Sisler- Burden of Proof in Forgery; Requirements in establishing personal guarantee


A commercial guarantee and Deed of Trust in the amount of $250,000.00 was executed by Prudential Investors, L.L.C., of which the Male Debtor was 50% owner.  The commercial guarantee defined the “guarantor” as the Male Debtor, but the Female Debtor also signed under the word “Guarantor.”  At the same time, the Male Debtor also signed two $100,000.00 notes that included the words “personal guaranty” under the signature line on an addenda to the notes.

The Male Debtor alleged that he had, in fact, forged his wife’s name to the commercial guarantee.  The Court found that the creditor had the burden of both producing persuasive evidence that the Female Debtor had signed the guarantee. … Read More

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