Bankr. MDNC: Westbrook- Equal Credit Opportunity Act‏

Husband and Wife Debtors were guarantors of a business loan and pledged Deeds of Trust as collateral securing the loans. The Debtors filed Chapter 7 and asserted that by requiring the Wife ot join in the guaranty, the Creditor had violated the Equal Credit Opportunity Act ("ECOA") and the Deed of Trust should be void. Creditor brought a Motion to dismiss arguing that: 1. The Debtors did not have standing under ECOA since as guarantors, they ere not "applicants" under the statute. The Court rejected this finding that ECOA was amend in 1985 to include guarantors in the definition of "applicant" and specifically includes extensions of business credit. 2. The ECOA claims were barred by the statute of limitations. The Court agreed with the Debtors that the Statute of Limitations did not apply since the Debtors raised ECOA defensively to a Proof of Claim filed by the Creditor. 3. The relief requested, viz. voiding of the Deed of Trust, is not available under ECOA. The Court found that for a 12(b)(6) Motion, this determination was not relevant. The Court noted that while other courts are split on whether an ECOA violation can serve as a basis for invalidating a debt, that the Debtors had nonetheless sufficiently plead facts that would give rise to a basis for some relief. This raises several excellent openings to object to Proofs of Claim for joint debts of spouses- 15 USC §1691b and Regulation B prohibit requiring a spouse to join a debt, except if the spouse is a joint applicant. What if the credit application comes pre-printed with both the names of both Husband and Wife? Further, given that eCast and its ilk can't produce credit applications, how could they ever defend against this defense? Further, the holding that the Statute of Limitations does not act as a bar when raised defensively to a Proof of Claim, would seem to revive many other stale causes of action, including TILA, FDCPA, UDTPA etc. Additionally, could this be defensive posture be used to overcome a Chapter 13 Debtor's lack of authority to exercise the Trustee's avoidance powers? Mitchell Case Bankruptcy Court Middle District NC.PDF