Summary:
Black’s Chapter 13 plan provided for the mortgage to Chase to be paid as a conduit, through the Trustee. The Motion for Confirmation filed by the Trustee, however, inadvertently provided for direct payment of the mortgage by Black, without reduction of the plan payment. This disconnect lead to the completion of the Chapter 13 plan on November 29, 2012, only four months after confirmation. (As this case was confirmed prior to the Pliler decision from the 4th Circuit, it completed upon payment of all allowed secured claims, of which there were none, and administrative expenses.) Two days prior, a lien holder filed a claim secured by Black’s motorcycle. On November 30, 2012, Black then sought and subsequently obtained an order setting aside the discharge. Despite its attorneys receiving copies of the order setting aside the discharge, during the next several Chase sent Black 13 different letters, including past due notices, fee accrual statements, loan modification offers, etc. In April, May and June of 2013, Black’s attorneys then sent first Chase and then its attorneys notices of the bankruptcy, but still indicated that the mortgage was being paid through the plan. On June 10, 2013, Chase initiated foreclosure proceedings. Black was then granted a modification his plan to cure the delinquency and commence direct payments to Chase starting in September 2013. After this, Black brought suit against Chase for stay violations and under N.C.G.S. § 75 for unfair debt collection practices. Chase moved to dismiss the state law causes of action, arguing that such were pre-empted by 11 U.S.C. § 362.
The bankruptcy court, relying on Lofton v. Carolina Finance, Case No. AP 0700054-8-RDD (Bankr. E.D.N.C. February 21, 2008), held that while there similarities between violations under N.C.G.S. § 75 and 11 U.S.C. § 362, that did not indicate that Congress intended express or implied pre-emption of state law claims by enacting the Bankruptcy Code. Further, while Congress “ clearly intended to occupy the entire field of bankruptcy by enacting the Bankruptcy Code”, the limitation that §362 places on debt collectors did not occupy the entire field of debt collection law. Lastly, there is no conflict between the state laws regulating debt collection and § 362, such that conflict pre-emption applies.
This lack of pre-emption aside, the court found, however, that all of the state law causes of action had as an “indispensable element” the presence of the automatic stay. As such, § 362(k), and not state law, provides the appropriate remedies for any violation and accordingly the state law causes of action were dismissed.
Commentary:
The court also took both sides to task for failing to communicate to more effectively resolve this matter sooner.
For a copy of the opinion, please see:
Black- UDTPA Claims not Pre-empted by 11 U.S.C. § 362
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