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Consumer bankruptcy developments
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Consumer bankruptcy developments.
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Once again this year the selection of cases is necessarily somewhat arbitrary, with a goal of focusing to varying degrees on cases that are important, interesting, or provocative. While disparities between courts continue to be a notable problem, suggesting a continuing need for better statutory guidance, the lack of statutory reform in 2001 meant that the courts were left to continue fashioning the details of bankruptcy law in common law-like fashion. Perhaps surprisingly, given the modest level of statutory guidance on some issues and the great variety of factual scenarios presented to the courts, there seems to be increasing movement toward consensus on many of the issues discussed this year. While aberrational case law is probably inevitable, any progress toward judicial consensus is encouraging given the lack of statutory reform and the resurgence in bankruptcy filings.
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As in previous years, automatic stay litigation remains a sensitive and important part of the bankruptcy landscape. For example, in Rijos v. Banco Bilbao Vizcaya (In re Rijos), (1) the debtors appealed a bankruptcy court decision denying their requests for sanctions against credit card issuers for willful violation of the automatic: stay provisions of the federal Bankruptcy Code. (2) The bankruptcy court treated the debtors' Motions Requesting Sanctions for Willful Violations of the Automatic Stay as motions for summary judgment, and made findings of fact and conclusions of law without holding a hearing on the debtors' motions. (3) The bankruptcy court then denied the debtors' requests for actual damages, attorney's fees, and punitive damages, even though it found that both credit card issuers (BBV and Citibank) had violated the automatic stay. (4) One creditor's violation (BBV) was found to be willful. (5) On appeal the primary issue was whether the debtors were deprived of procedural due process when the bankruptcy court denied their motions without affording them an opportunity for a hearing. The First Circuit Bankruptcy Appellate Panel (BAP) held that the debtors were denied due process when their motions were denied without an opportunity to present evidence as to the amount of their actual damages, including attorney's fees, and punitive damages. (6)
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A second issue in Rijos was whether Citibank's violation of the automatic stay was willful when its computer system automatically sent the debtors a collection letter after notification of the debtors' bankruptcy petition. The BAP held that Citibank's "computer did it" defense to its liability was not viable. (7) Citibank was required to prove "that it took steps to either prevent or reverse violations of the [automatic] stay," which required the introduction of evidence. (8) The BAP stated that: "Citibank failed to submit admissible evidence to rebut the only inference that can be derived from the undisputed facts, namely that the stay violation was willful." (9) Therefore, the BAP concluded, the bankruptcy court erred in absolving Citibank from liability for the stay violation on grounds of computer error and in dismissing the debtors' motion. (10)
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In another case involving the automatic stay, the First Circuit BAP held that an order denying a creditor's motion for relief from the stay was not a final order from which an appeal would lie. (11) The creditor had appealed the bankruptcy court's denial of its motion for relief from the stay The bankruptcy court had denied the motion for relief because the creditor failed to prove that it had a valid, perfected security interest. (12) The creditor then sought an appeal. A motion for relief from the stay is a summary proceeding. It is not intended to be a full adjudication of the merits of the claim, but a determination of whether the creditor has a claim to property of the estate. An order granting relief from the stay is a final order, and is subject to appeal. An order denying a creditor's motion for relief, however, has not fully adjudicated the parties' interests or the underlying claim. Therefore, the order denying the motion for relief was not a final, appealable order. The First Circuit BAP, however, noted that some jurisdictions have held that a bankruptcy court's denial of a motion for relief is a final order under 28 U.S.C. [section] 158(a)(1). (13)
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In Aiello v. Providian Financial Corp., (14) the U.S. Court of Appeals for the Seventh Circuit affirmed bankruptcy court and district court decisions holding that the debtor was not entitled to an award of damages for violation of the automatic stay when her only evidence of injury was for emotional injury. (15) Recovery of actual damages under Bankruptcy Code section 362(h) for violation of the automatic stay is not intended to include damages for purely emotional injuries. Emotional distress cannot serve as a basis for awarding compensatory damages for an automatic stay violation unless there is some medical or other corroborating evidence to support the debtor's claim which shows that the debtor suffered something more than just fleeting and inconsequential distress, embarrassment, humiliation, and annoyance. In another case, the fleeting embarrassment experienced by a Chapter 7 debtor after her contact with a creditor representative, who badgered the debtor about paying her debt to the creditor in a courthouse hallway following a creditors' meeting, similarly did not support the debtor's claim against the creditor and representative for compensatory damages for the automatic stay violation. (16) The district court decision reversed the bankruptcy court award of $9,000 in damages to the debtor for the creditor's conduct. (17)
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In In re Ratliff, (18) prior to the filing of the debtors' second Chapter 13 petition, the creditor repossessed a vehicle in which it held a security interest. Pre-petition, the creditor also assigned the vehicle to an auction without recourse or reservation. The Ratliff court held that the secured creditor did not violate the automatic stay, even though the auction's sale of the vehicle occurred post-petition. (19) Since there was no stay violation, the debtors were not entitled to sanctions. (20) In In re Johnson, (21) however, the creditors were deemed to have willfully violated the automatic stay when, upon receiving notice of the debtors' bankruptcy, they failed to effect the prompt return of the debtors' property, which had been seized by the sheriff pre-petition pursuant to the creditors' levy. (22) The fact that the sheriff was in possession of the property did not change the result. (23) The sheriff was only following the creditors' directions, and the creditors violated the stay by continuing to maintain that turnover was not required despite notice of the bankruptcy and a request from the debtors' counsel for turnover. (24) The creditors were required to pay the debtors' fees and costs. (25)
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In another case, a bankruptcy judge held that the damages provision of section 362 is meant for "dramatic" violations of the automatic stay, and should not be invoked lightly. (26) The court also concluded that the non-debtor spouse had no standing to move for an award of sanctions under section 362(h). (27) In a one-page opinion, the court noted that the debtor's and her spouse's conduct bordered on violating the requirements of Bankruptcy Rule 9011, the debtor having previously sought similar relief in the proceeding and the present motion appearing to be filed solely for the purpose of delay. (28)
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GOOD FAITH AND SUBSTANTIAL ABUSE
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In Tamecki v. Frank (In re Tamecki), (29) the debtor filed for Chapter 7 relief seeking discharge of $35,000 in credit card debt. His one substantial asset was the equity in a home he owned with his estranged wife. The divorce proceeding was pending when the debtor's bankruptcy petition was filed. The debtor claimed as exempt his share of the home equity The Chapter 7 trustee challenged the debtor's exemption and moved for dismissal of the debtor's petition for lack of good faith under Bankruptcy Code section 707(b). (30) According to the trustee, the divorce would be final soon and the debtor would then be entitled to his unencumbered share of the equity, the funds of which would be sufficient to pay his current debts. The trustee asserted that the debtor acted in bad faith in filing his petition knowing that he would soon be in a position to repay his debts. The bankruptcy court agreed that the debtor failed to file in good faith and dismissed the Chapter 7 petition. (31) The district court and the Third Circuit affirmed the dismissal. (32) When a debtor's good faith has been questioned, the burden shifts to the debtor to prove his or her good faith. The debtor did not meet this burden of proof. (33) The credit card debt was acquired just prior to the bankruptcy filing and the debtor confirmed that his divorce was imminent. The reasonableness of the timing of the accrual of the debt and the filing of the petition was sufficiently questionable as to warrant the court's good faith scrutiny. (34)
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An interesting case from Dallas involved a bankruptcy avoidance strategy that led to a criminal conviction for bankruptcy fraud. (35) The debtor would acquire minor interests in troubled borrower's homes, which he placed into corporations formed for the purpose of filing a bankruptcy petition. The corporation would file a bankruptcy petition, staying foreclosure
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FRAUDULENT AND PREFERENTIAL TRANSFERS
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In Tavenner v. Smoot, (37) a Chapter 7 debtor made a pre-petition transfer of $210,000 in settlement proceeds to a corporation owned entirely by members of his immediate family The Chapter 7 trustee filed an adversary proceeding seeking to avoid the debtor's transfer on grounds that the debtor had made the transfer with intent to defraud his creditors. It was undisputed that had the debtor left the settlement proceeds in his bank account, he could have exempted the proceeds from his bankruptcy estate under Virginia law. The debtor, however, transferred the exemptible funds. The bankruptcy court agreed with the trustee that the transfer was avoidable, (38) and the district court affirmed. (39) The Fourth Circuit agreed that transfers of exemptible property may be avoided by the trustee, rejecting the "no harm, no foul" approach adopted by some jurisdictions. (40) The evidence supported the bankruptcy court's finding that the debtor transferred the settlement proceeds to the corporation with the intent to hinder, delay, or defraud his creditors, and therefore the transfer could be avoided as fraudulent under Bankruptcy Code section 548.
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In James v. Planters Bank (In re James), (41) the creditor obtained a pre-petition judgment against the debtor and garnished his wages. The wage garnishment occurred both before and during the ninety-day preference period. The final garnishment related to the payroll week ending a few days before the debtor filed a petition under Chapter 7 of the Bankruptcy Code. The debtor's employer paid the garnishment by check to the creditor three days after the petition was filed. The debtor filed a complaint to recover the pre-petition wage garnishments and requested that the creditor be held in contempt for violation of the stay The bankruptcy court ruled that the date of the transfer was the date the debtor earned the wages, not the date that the employer sent the money to the creditor or the date the creditor received the money. (42) All garnished wages earned within the ninety-day preference period were deemed to be preferential transfers. (43) The Eighth Circuit BAP affirmed on grounds that the garnishment attached and the transfer of the debtor's interest occurred on the date the wages were earned. (44)
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In Moretti v. Bergeron (In re Moretti), (45) the debtor filed a Chapter 7 petition in October 1994, received a discharge, and the case was closed on January 5, 1996. In January 2000, the debtor filed a motion to reopen his case to add creditors which were omitted from the original filing. There being no response, the case was reopened. The debtor then filed a motion to add four omitted unsecured creditors to his Schedule F. All four creditors objected to the debtor's motion. The bankruptcy court denied the debtor's motion, (46) and the debtor appealed.
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The First Circuit BAP held that the denial of the debtor's motion to amend his schedules to add creditors after the no-asset Chapter 7 case was closed was not an abuse of the bankruptcy court's discretion. (47) There was no abuse of discretion as to either excusable neglect or cause to amend, and the bankruptcy court's denial of leave to amend was affirmed. (48) Pursuant to Bankruptcy Rule 9006(b)(1), a debtor seeking to schedule a creditor after case closure bears the burden of establishing: (i) that failure to amend the list of creditors and the schedule of liabilities before case closure was the result of excusable neglect
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EFFECT OF PLAN CONFIRMATION
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After confirmation, but before the claims bar date, a creditor filed a secured claim in the debtor's Chapter 13 case. The debtor's confirmed plan provided that the creditor's claim would be discharged with no distribution. A copy of the plan was served on the creditor, the creditor did not object to the plan treatment, and the case was confirmed. The debtor thereafter objected to the proof of claim filed by the creditor. The bankruptcy court held that there was no enforceable secured claim, and the confirmation of the Chapter 13 plan barred the creditor's claim by reason of res judicata. (50) On appeal, the BAP upheld the bankruptcy court's decision, stating that the creditor's failure to timely object to the plan provisions, after service of the plan on the creditor, meant that the creditor was later prevented from enforcing even a timely filed secured claim. (51) The BAP concluded that a confirmed plan overrides the principle that a timely filed claim is prima facie evidence of the claim's validity. (52)
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A divided Fifth Circuit panel weighed in on the dischargeability of credit card debt in AT&T Universal Card Services v. Mercer (In re Mercer), (53) and a rehearing en banc was granted by the Fifth Circuit in July 2000. (54) On the rehearing en banc, in an important decision rendered on March 23, 2001, the full panel reversed and remanded the bankruptcy court, district court, and prior Fifth Circuit panel decisions. (55)
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In the first Fifth Circuit Mercer decision, a three judge panel held that companies issuing pre-approved credit cards assume the risk of non-payment, at least during the first few months after the card has been issued. (56) AT&T had opened Mercer's credit card account pursuant to a pre-approved credit application mailed to Mercer, signed by her, and returned. The application requested Mercer to provide her income, age, social security number, and telephone number. AT&T relied on third-party credit agencies to screen potential credit card applicants. After the initial screening, AT&T would match the names provided by the credit agencies against its own internal risk and scoring models to determine creditworthiness. The names that made the AT&T "cut" were sent back to the credit bureau for a second screening and given a risk score. Mercer was given a risk score above AT&Ts minimum. Under the Fair Credit Reporting Act, AT&T is required to make a bona fide offer of credit to anyone passing the screening process. (57) The credit agreement became effective when Mercer used the card or account. The limit on the card was $3,000, which Mercer exceeded within one month through charges and cash advances used for gambling. During this period of time, Mercer had six other credit cards.
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Mercer filed a Chapter 7 bankruptcy petition and AT&T challenged the dischargeability of the debt under Bankruptcy Code section 523(a)(2)(A). (58) The bankruptcy court concluded that the debt was dischargeable. (59) The court determined that the defendant did not make any representations to AT&T regarding her creditworthiness. (60) Because she made no representations, AT&T could not meet the reliance requirement needed to challenge dischargeability under section 523(a)(2)(A). (61) Both the district court and initial Fifth Circuit panel decisions affirmed the bankruptcy court's decision, (62) though the Fifth Circuit panel had separate concurring and dissenting opinions. The initial Fifth Circuit panel reasoned that the debtor did not make any misrepresentations to the creditor because the card was issued solely on information provided by the creditor's agent. (63) Without a representation, there could be no fraudulent misrepresentation. There was also no implied representation of intent to pay with the debtor's use of a pre-approved credit card. The initial Fifth Circuit panel imposed an enhanced responsibility on credit card issuers for their lending practices, which the court considered to have become increasingly irresponsible. (64) In its discussion this panel also emphasized that a person's financial situation may change over time, so that if a person establishes a good payment history with the creditor, the creditor is justified in relying on that person's intention to pay. (65) However, the initial Fifth Circuit panel specifically declined to adopt the implied representation theory in the use of a pre-approved credit card, on grounds there are no representations of creditworthiness made by the cardholder in that circumstance. (66)
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On rehearing en banc, the Fifth Circuit reversed, holding that each use of the pre-approved credit card by the Chapter 7 debtor was in the nature of an implied representation by the debtor of her intent to repay the credit extended and that the credit card issuer "actually relied," as a matter of law, on the debtor's implied card-use representation regarding her intention to repay the credit card debt. (67) The case was remanded for determination regarding the debtor's intent to deceive and issues concerning the card issuer's justifiable reliance. (68) The court pointed out that "[a]lthough the amount of the debt at stake ... is relatively small, card-debt is involved in many consumer bankruptcies. Accordingly, it is imperative that we clarify the standards governing nondischargeability of card-debt." (69)
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In its en banc decision, the Fifth Circuit also noted that there is no statutory basis for distinguishing between credit cards obtained at the debtor's initiative and those obtained in response to a pre-approved solicitation. (70) Regardless of how the debtor obtained the credit card, his or her intent-to-pay representation and the creditor's actual reliance upon that representation should be treated the same. (71) A credit card's pre-approval, however, "may be relevant as to whether the creditor's reliance was justifiable." (72) The Fifth Circuit en banc decision distinguished between credit card use and credit card acceptance. A representation of intent to pay is made with each credit card use. Each credit card use forms a unilateral contract whereby the card holder promises to pay the debt and the card issuer performs by reimbursing the merchant who accepted the credit card in payment. The debtor's credit card use signifies acceptance of the agreement, including the obligation to pay the charges incurred. By accepting the credit card, however, Mercer was not obligated to use the credit she had available, and therefore made no representations in accepting the card. The bankruptcy court did not address whether Mercer's representations were knowingly false, or consider all the facts and circumstances surrounding the use of the credit card, which factors should be considered in determining whether the debtor's intent to repay as evidenced in the credit card use was false. Nor did the bankruptcy court consider whether the debtor had an intent to deceive. Upon remand, "if the bankruptcy court finds that, by card-use, Mercer made a knowingly false representation of intent to pay, then the separate requisite intent to deceive is also present." (73)
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As to the credit card issuer, it had the burden of proving not only that it actually relied on the debtor's representations, but also that its reliance was justifiable. In the bankruptcy court, the Mercer parties did not devote significant attention to the issue of the creditor's actual reliance.
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The actual reliance inquiry must focus on the representations, through card-use, of intent to pay, even if, for card-issuance, the issuer relied on its investigation of the debtor's creditworthiness, rather than on any representations by her. Again, any such pre-issuance representations, regarding her financial condition, are not actionable under [section]
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523(a)(2)(A), and cannot support actual reliance on subsequent card-use intent to pay representations. (74)
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The case was remanded to be determined, for each representation made by the debtor, whether it was knowingly false, and whether the creditor justifiably relied. (75)
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In Christopher v. Kendavis Holding Co. (In re Kendavis Holding Co.) (76) an involuntary Chapter 11 petition was filed against the debtor
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JOINT AND SEVERAL LIABILITY FOR FRAUD
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The Fifth Circuit held that a debtor whose partner committed fraud could not discharge the liability to the fraud victim. (81) "[I]f a debt arises from fraud and the debtor is liable for that debt under state partnership law, the debt is nondischargeable under [Bankruptcy Code section] 523(a)(2)(A)." (82) This case involved two innocent partners and one bad guy. The dishonest partner defrauded a client. The two innocent partners were unaware of the fraud and did not receive any of the stolen money individually or through the partnership. The defrauded client sued in state court and obtained a money judgment for which the partners and the partnership were liable jointly and in solido. The partnership and the two innocent partners then filed under Chapter 7. The client commenced a nondischargeability action pursuant to section 523(a)(2)(A). The bankruptcy court and the district court ruled against the client, holding that section 523(a)(2)(A) does not bar innocent partners from discharging fraud liability unless: (i) they benefitted from the fraud
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In Tsurukawa v. Nikon Precision, Inc. (In re Tsurukawa), (86) the creditor obtained a state court stipulated judgment against the debtor and her husband which awarded a money judgment for fraud and other causes of action. (87) The debtor filed bankruptcy under Chapter 7, and the judgment creditor filed an adversary proceeding objecting to discharge of its debt. After a trial, the bankruptcy court held the stipulated judgment nondischargeable. (88) The court held that: (i) the debtor participated significantly in the operations of a certain business
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In Synod of South Atlantic Presbyterian Church v. Magpusao (In re Magpusao), (91) the debtor wife's former employer brought an adversary proceeding to except debt from discharge. Over an eight-year period, Mrs. Magpusao embezzled approximately $543,332 from her employer church. Of the embezzled funds, about $162,000 was deposited into a joint bank account. Once discovered, Mrs. Magpusao pled guilty to misappropriation of funds, was convicted of grand theft, and was sentenced to a ten-year prison term. The debtors thereafter filed a Chapter 7 petition and listed the church as an unsecured creditor in the amount of $560,000. The bankruptcy court held that as to the debtor wife, the debt was nondischargeable. (92) As to the debtor husband, however, most of the debt was dischargeable but the debtor husband was responsible for repaying the church for items his wife bought for his benefit that should have caused him to be suspicious as to the source of the purchase funds. (93) The debtor husband should have been suspicious about where his wife was getting the money to buy various gifts, take trips, and start a business.
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In Sholdra v. Chilmark Financial LLP (In re Sholdra), (94) the Fifth Circuit considered the impact of errors in the debtor's bankruptcy schedules. A creditor holding an unsatisfied judgment for $1,470,000 filed an adversary proceeding seeking to deny the debtor's discharge. During a deposition, the debtor testified that some information in his schedules and statement of financial affairs was false. A week after the deposition, the debtor filed amended schedules and a statement of financial affairs supposedly to correct the false statements. The creditor filed a motion for summary judgment to deny the debtor's discharge. The creditor's motion was granted without response by the debtor. (95) The debtor then appealed the dismissal, which was affirmed by the district court. (96) "The district court specifically held that summary judgment was proper because [the debtor] admitted that he knew his schedules and statement of financial affairs contained false information, and because [he] failed to present any evidence to support his contention that his false statements were not made with fraudulent intent." (97) The debtor then appealed, alleging issues of material fact which allegedly precluded the granting of a motion for summary judgment. The Fifth Circuit affirmed the dismissal of the debtor's case. (98) It was undisputed that the debtor made materially false statements in his schedules and statement of financial affairs and amended them only after his falsehoods were confirmed in the deposition. Moreover, the debtor's alleged financial inexperience and his alleged reliance on others did not negate the fact that he knowingly made false oaths.
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In Woods v. United Student Aid Funds, Inc. (In re Woods), (99) the debtor filed a Chapter 13 petition which provided for complete repayment to all holders of unsecured nonpriority claims, including the United Student Aid Fund, Inc. (USAF) debt listed on his schedules. The debtor owed USAF a debt for educational loans made through a governmentally funded program. USAF filed its proof of claim after the claims bar date, and the bankruptcy court denied its claim as untimely. (100) USAF neither attended the hearing regarding the proof of claim nor appealed the bankruptcy court's disallowance. Upon completion of his plan payments, which did not include any payments on the disallowed USAF claim, the debtor received a general discharge from the bankruptcy court. (101) After receiving the general discharge, the debtor filed an adversary proceeding for an order declaring the USAF claim discharged under the general discharge. The parties filed cross-motions for summary judgment. The bankruptcy court denied the debtor's motion, granted USAF's motion, and issued an order finding the debtor liable for the debt, post-petition interest, costs, and attorneys' fees. (102) The bankruptcy court ruled as a matter of law that the student loan debt owed to USAF was not discharged under the general discharge because Bankruptcy Code section 1328(a) (103) specifically exempts from the mandatory discharge provision any educational loans made to a debtor through a governmentally funded program .(104) The district court affirmed. (105) The Fifth Circuit affirmed the district court decision, for the reasons set out in that opinion. (106) Because educational loans made through a governmentally funded program are specifically exempted from discharge, the debtor's motion was denied by all three courts. (107)
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WILLFUL AND MALICIOUS INJURY
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A 2001 Sixth Circuit decision provides an unusual illustration of the "willful and malicious injury" standard for nondischargeability under Bankruptcy Code section 523(a)(6). (108) Chapter 7 debtors' obligations to judgment creditors, for denying the creditor-husband's paternity of a child and falsely claiming that another party was the father even though the debtors were aware of the results of a DNA test indicating that there was a zero percent probability that this other party was the father, were excepted from discharge as one for the debtors' "willful and malicious injury" to the reputation of the judgment creditors. (109) A prior state court judgment to the effect that the debtors' statements were defamatory per se established that the debtors' statements were made with the requisite knowledge that substantial harm or injury would result. And in Snow v. Brown (In re Brown), (110) a judgment debt that arose out of the Chapter 7 debtor's intentional act, strangling a woman to death, was nondischargeable as a matter of law, as one for a "willful and malicious injury." (111) By strangling the deceased, the debtor desired to cause her death or was substantially certain that her death would occur. The debtor offered no justification for his conduct.
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The Supreme Court denied certiorari in Jercich v. Petralia, (112) in which the Ninth Circuit held that a Chapter 7 debtor-employer's "deliberate breach of contract, in electing not to pay wages owed to his employee even though he had [the] funds to do so, and in instead choosing to use [the] funds for ... personal investments, violated [al fundamental policy of California law and rose to [the] level of [al tort." (113) The debt was excepted from discharge as resulting from a "willful and malicious injury" under Bankruptcy Code section 523(a)(6). (114)
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In Bowman v. Bond (In re Bowman), (115) a secured creditor was entitled to relief from the automatic stay because the debtors repeatedly presented plans of reorganization that were not feasible and not confirmable. (116) The debtors admitted that they had no equity in the property, and failed to establish that the property was necessary for a successful reorganization. The collateral was over 1,400 acres of farmland that was not being farmed when the debtors filed. The Eighth Circuit BAP rejected the debtors' argument that they did not have sufficient time to establish their prospects for a successful reorganization. (117) Seven months passed between the filing of the petition and the order granting relief from stay, during which time the debtors made little progress toward reorganization.
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In White v. Coors Distributing Co. (In re White), (118) an oversecured creditor was granted an allowed secured claim that included post-petition interest at the contract rate, as well as reasonable attorney's fees and costs. (119) The collateral was a vehicle. Because the creditor was oversecured, after costs of the trustee sale of the vehicle were deducted from the sale price the creditor was entitled to an allowed secured claim for the amount of principal and interest due at the commencement of the case, post-petition interest at eighteen percent, and reasonable attorneys' fees and costs, up to the amount of the sale price. (120)
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In Ryan v. Homecomings Financial Network, (121) Chapter 7 debtors brought an adversary proceeding to strip-off an unsecured junior deed of trust on their residence pursuant to Bankruptcy Code section 506(d). (122) The residence had a fair market value of $179,000. The balance on the first lien was $181,826. The property was also subject to a consensual second lien having a balance of $47,305. It was agreed that the second lien was a fully allowed claim, but wholly unsecured as to the property The bankruptcy court denied the debtors' motion for a default judgment and dismissed their complaint, declining to strip-off the second deed of trust. (123) The district court affirmed, (124) and the debtors appealed. The Fourth Circuit affirmed, holding that an allowed unsecured consensual lien may not be stripped off in a Chapter 7 proceeding pursuant to section 506(a) and (d). (125) The U.S. Supreme Court's reasoning in Dewsnup v. Timm (126) is clear and is equally relevant and convincing in a case in which a debtor attempts to entirely strip-off, rather than partially strip-down, an allowed but unsecured lien.
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In re Gebhart (127) held that a forty-inch big screen television belonging to Chapter 7 debtors qualified as a "household good" for purposes of Bankruptcy Code section 522(f)(B)(i), (128) which allows a debtor to avoid a nonpossessory, nonpurchase-money security interest in household goods held primarily for the personal, family, or household use of the debtor. (129) The creditor had argued that the television was a luxury item.
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As a matter of first impression in Illinois, in Sears, Roebuck & Co. v. Conry, (130) the Illinois Appellate Court held that signed credit card receipts for consumer goods, which incorporated a department store's security agreement by reference and granted the store a security interest in the items purchased, were sufficient to establish a signed security agreement between the purchaser and the store. (131) Therefore, Sears could enforce its purchase money security interest with respect to the collateral based on these receipts, even though it could not produce a signed credit card application or a separately signed security agreement. (132)
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DETERMINATION OF VALUATION
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In In re Fareed, (133) the debtor's proposed Chapter 13 plan provided for the payment of a creditor's allowed secured claim. The creditor's valuation of the collateral securing its claim was not challenged by the debtor or any other party in interest prior to confirmation of the plan. Therefore, the value of the creditor's secured claim was fixed at the time of confirmation, in the amount stated in the creditor's proof of claim. The debtor was barred from subsequently challenging the valuation in the proof of claim. (134)
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In In re Duggins, (135) the value placed upon an undersecured creditor's collateral in the debtor's confirmed Chapter 13 plan was binding on the creditor, even though the creditor had filed a proof of claim three days prior to the confirmation hearing which assigned a higher value to the collateral than that provided in the plan. (136) The creditor had received adequate notice that its rights would be modified by the plan, yet it did not contest the plan's valuation of its secured claim before the plan was confirmed. The creditor's proof of claim was not a proper substitute for a timely objection to confirmation of the Chapter 13 plan. (137)
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In Baker v. Health Services Credit Union (In re Baker), (138) a new certificate of title for a repossessed vehicle had not been issued on the date the car owner filed a Chapter 13 petition. Therefore, the debtor still had an ownership interest under Florida law
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In Chrysler Financial Corp. v. Nolan (In re Nolan), (143) a Chapter 13 debtor filed a motion to modify her confirmed Chapter 13 plan in order to surrender the automobile securing the creditor's claim, reclassify the deficiency owed on the vehicle as unsecured, and incur new credit in the amount of $10,000 to purchase another vehicle. The bankruptcy court granted the debtor's motion to modify, (144) and the creditor appealed. The district court reversed, (145) and the debtor appealed. As a matter of first impression, the Sixth Circuit held that Bankruptcy Code section 1329, (146) governing post-confirmation modifications of a Chapter 13 plan, only permits modification of the amount and timing of payments, not the total amount of the claim. (147) Therefore, the debtor could not unilaterally modify her plan by surrendering the collateral to the secured creditor, leaving the creditor to sell the collateral and apply the proceeds toward the claim and having any resulting deficiency classified as an unsecured claim.
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In its analysis in Nolan, the Sixth Circuit held that: (i) "section 1329(a) does not expressly allow the debtor to alter, reduce or reclassify a previously allowed secured claim" (the statute only allows the debtor a right to request alteration of the amount or timing of specific payments)
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In In re Stamm, (152) Chapter 13 debtors were not allowed to modify their sixty month "pot" plan, (153) under which the debtors had agreed to make fixed payments to the trustee for a maximum five year term. (154) Creditors failed to file claims in the amount and volume anticipated and scheduled by the debtors. Therefore, it appeared that the disbursements to unsecured creditors would actually be higher (13.4%) than the ten percent dividend originally provided in the debtor's Chapter 13 plan. Generating a reasonable dividend to unsecured creditors was sufficient cause for refusing to shorten the plan from its original term, even though the original term was beyond the thirty-six month minimum. (155)
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In two separate Chapter 13 cases, the trustee objected to confirmation of plans which allowed debtors to devote a portion of their monthly income to pension contributions and pension loans, while not providing for a 100% payout on creditor claims. The bankruptcy court held that the debtors' contributions to pension programs and repayments of pension loans were "disposable income" that the debtors had to devote to their plans. (156) The district court affirmed. (157) On appeal, the Second Circuit adopted a flexible approach and held that "[i]t is within the discretion of the bankruptcy court judge to make a decision, based on the facts of each individual case," whether pension contributions of Chapter 13 debtors represent a "reasonably necessary expense" for that debtor, or whether they are part of the debtor's "disposable income," which the debtor must devote to payments under the Chapter 13 plan. (158) The district court decision was vacated and remanded. (159)
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In In re Merlo, (160) the debtor, a citizen of another country without resident alien status, was allowed to file a Chapter 13 bankruptcy petition without a social security number. (161) Under existing United States law, the debtor was unable to obtain a social security number because of his status. Section 109 of the Bankruptcy Code (162) does not require a social security number as a condition of being a debtor. Federal Rule of Bankruptcy Procedure 1005 requires a debtor to list a social security number. (163) Where compliance with the rules is impossible, however, a person is not excluded from bankruptcy protection.
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In re Miano (164) held that a creditor is not bound by an order confirming a Chapter 13 plan after obtaining post-confirmation relief from the automatic stay. (165) If a debtor fails to fulfill his obligations under a plan, he cannot reasonably expect his creditors to remain bound by it.
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In In re Mendez, (166) an automobile finance company that allowed Chapter 13 debtors to continue using [the] automobile that secured its claim, in return for [the] debtors' promise to continue making their regular monthly payments and to maintain insurance on [the] vehicle, [was] granted [al superpriority claim for [the] balance owing on its contract with [the] debtors, after [the] debtors had allowed their insurance to lapse and [the] automobile was destroyed in a collision. (167)
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The creditor's loss was caused by the automatic stay, which prevented it from repossessing the vehicle. In addition, the creditor was sufficiently vigilant in protecting its rights by independently seeking to verify that the debtors had obtained insurance coverage and by promptly objecting to the debtors' attempted surrender of the collateral after it discovered that the insurance coverage had lapsed and that the vehicle had been destroyed.
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The Jamo case (168) involves automatic stay issues, reaffirmation agreements, and bankruptcy remedies, including injunctive relief, mandating a nonconsensual "agreement," but deserves separate discussion because its implications go beyond these specific issues. The Jamo lower court decisions have been discussed widely in legal circles over the past year, including meetings of the Consumer Financial Services Committee of the Business Law Section of the American Bar Association (sponsor of this Survey), as new ground was broken in terms of judicial involvement in private contract negotiations.
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However, on March 26, 2002, the First Circuit Court of Appeals reversed the First: Circuit BAP and district court decisions. (169) The facts of the lower court decisions are briefly as follows. In their Chapter 7, the debtors filed nine proposed reaffirmation agreements, proposing to reaffirm unsecured as well as mortgage debt. The debtors subsequently filed an adversary complaint against the creditor, seeking damages and injunctive relief on grounds the creditor's negotiating position during the reaffirmation discussions ("linking" reaffirmation of the secured and unsecured debts) violated the automatic stay. The bankruptcy court agreed and issued an injunction prohibiting foreclosure of the creditor's mortgage and compelling the creditor to enter a reaffirmation agreement covering the mortgage alone. (170) The creditor appealed to the First Circuit BAR which chose to follow Green v. National Cash Register Co. (In re Green). (171) Green specifically recognized that a creditor can refuse a reaffirmation for any or no reason, but then concluded that to do so for this reason violates the general prohibition of the automatic stay at section 362. (172)
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Neither Jamo nor Green explain why or how a creditor's apparently legitimate bargaining position during negotiations for a reaffirmation agreement, specifically authorized at Bankruptcy Code section 524(c), is transformed into a coercive and willful violation of the automatic stay that "transcends" normal rules of law.
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The other issue examined by the BAP was the appropriateness of the remedy granted by the bankruptcy court, essentially "erasing" the debtor's default and compelling the creditor to "agree" with the debtor's terms for reaffirmation. The BAP noted that, "absent any extraneous considerations, the bankruptcy court cannot require either party to enter into a reaffirmation agreement." (173) The BAP then embraced an estoppel theory, utilizing the broad equitable powers granted the bankruptcy courts under Bankruptcy Code section 105(a), (174) to uphold the bankruptcy court's imposition of a nonconsensual reaffirmation "agreement" on the creditor. (175)
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The BAP decision was also appealed. The issue on appeal to the First Circuit was one of first impression on a circuit level: whether in a Chapter 7 case, a creditor, who owed both secured and unsecured debt, may insist upon reaffirmation of the unsecured debt as a condition to reaffirmation of the secured debt. The bankruptcy court held that a reaffirm all or nothing position was a per se violation of the automatic stay. (176) In order to better understand the relationship between reaffirmation and the automatic stay, the court reviewed the interplay between the reaffirmation process and the automatic stay, and concluded that the primary requirement of the reaffirmation process is a "meeting of the minds." (177) The text of section 524(c) uses the word "agreement" no less than nineteen separate times. The Court concluded that section 524(c) envisioned reaffirmation agreements as the product of fully voluntary negotiations by all parties. (178) Arising from this conclusion are the undeniable facts that both the debtor and creditor must consent to the reaffirmation agreement, and, just as the debtor is not required to reaffirm, a creditor also retains the right to reject any and all reaffirmation proposals, for whatever reason. The court noted, however, that section 524(c) does afford a reaffirming debtor some protection from undue pressure to reaffirm a discharged debt. (179)
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As to the interplay between the reaffirmation process and the prohibitions of the automatic stay, the court refused to take a hard-lined approach that would prohibit all post-petition contracts between debtors and creditors. (180) Instead, the First Circuit endorsed a sensible rule, namely that a creditor may discuss and negotiate terms for reaffirmation with a debtor as long as the creditor refrains from coercive or harassing tactics. (181)
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Specifically addressing the issue of whether a creditor's attempt to condition reaffirmation of a secured debt upon reaffirmation of separate unsecured debts should be deemed coercive tactics, the court reversed both lower courts and rejected the proposition that a creditor's refusal to reaffirm a secured debt unless the debtor simultaneously agreed to reaffirm additional unsecured debt constituted a per se violation of the automatic stay. (182) Importantly, the court noted that the Bankruptcy Code does not outlaw linking the reaffirmation of secured and unsecured debt. (183) Reaffirmation agreements are consensual, and the debtor has the option of walking away from an unattractive proposal.
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The First Circuit then reviewed the creditor's actions in the reaffirmation process to determine whether the credit union's conduct amounted to a violation of the automatic stay. The bankruptcy court had condemned the credit union for improperly bringing leverage to bear on the debtor's reaffirmation decision and for threatening the debtor with foreclosure. (184) The record on appeal failed to support the lower court's findings, and the First Circuit already rejected the "per se" violation rule in the first part of its decision. The court noted that the reaffirmation process itself contemplates give and take between the parties, and the parties involved in the process will not necessarily be negotiating from equal positions. (185) After reviewing the credit union's actions, the court held that its actions were not impermissibly coercive and that the creditor had not violated the automatic stay. (186) The bankruptcy court's imposition of attorney's fees and costs, and granting of injunctive relief was based upon the court's erroneous determination of a stay violation and therefore improper. (187) The First Circuit also held that section 105 not withstanding, the bankruptcy court lacked the power to modify the proposed reaffirmation agreement, compel the credit union to enter into a judicially-crafted reaffirmation agreement, or award monetary sanctions in the form of attorney's fees and costs. (188) The case was remanded to the BAP with directions to vacate the bankruptcy court's judgment and to remand the matter to the bankruptcy court for further proceedings. (189)
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The First Circuit did not address the larger issue of at what point a creditor's negotiating position regarding reaffirmation may become coercive or harassing. The court only reviewed the creditor's actions in this particular case. While noting that there is a fine line between hard=nosed negotiations and predatory tactics, the court stated that creditors as a class have a highly developed instinct for self-protection, which instinct should be brought to bear in the reaffirmation agreement negotiating process. (190)
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CERTIFICATE OF TITLE LIEN ENTRY AND PREFERENCE ISSUES
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Preferential transfer issues under Bankruptcy Code section 547 (191) affect more than just certificate of title lien entry perfection, and indeed more than creditor liens generally. Section 547 is part of an arsenal of trustee "strong-arm" powers designed to protect the bankruptcy estate against all manner of preferential transfers, including preferential liens of any type. (192) But many of the cases allowing avoidance of liens under section 547 involve certificate of title lien entry, (193) apparently due to the difficulty of meeting certain section 547 deadlines in certificate of title transactions (for reasons discussed below) and the potential for conflict between state certificate of title lien entry grace periods (designed to address this problem) and the preferential transfer rules in section 547.
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The basic issue in these cases is whether the definition of "perfection" at section 547(e)(1)(B) recognizes and incorporates state priority rules (and hence certificate of title lien entry grace periods) for purposes of the section 547(c)(3) purchase money exception to the preference rules. To qualify for that exception, section 547(c)(3)(B) requires "perfection" within twenty days, and section 547(e)(2)(B) appears to define perfection for this purpose by reference to state law (which includes certificate of title lien entry grace periods). (194) But in Fidelity Financial Services, Inc. v. Fink, (195) the U.S. Supreme Court rejected this view, concluding that the twenty-day grace period at section 547(c)(3)(B) conflicts with and therefore preempts inconsistent state law grace periods. (196)
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To some, the Fink rationale seems inconsistent with the plain meaning of the statutory language at section 547(e)(1)(B) and the overall structure of the Bankruptcy Code (which consistently recognizes state law grace periods and priorities (197)), as well as questionable public policy in that it uses preference rules designed for entirely different reasons to create a dramatic divergence between bankruptcy and non-bankruptcy priorities in ordinary commercial and consumer transactions. (198) But Fink seemed to settle the issue, and bankruptcy courts have had little choice but to follow it, despite the resulting disruption of common expectations for parties engaged in certificate of title transactions. (199) The resulting opportunity for a borrower to purchase a vehicle and then avoid the security interest (essentially getting the car for free if it is exempt property in a no-asset case) by filing bankruptcy within ninety days, if the creditor is unable to meet the section 547(c)(3)(B) twenty-day deadline, may provide a strong incentive (or at least a welcome bonus) for a bankruptcy filing in the right circumstances.
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Despite Fink, some courts have moderated the impact of this problem, in various ways. Fluharty v. Citizens National Bank (In re Homer) (200) involved a lien entry perfection that was noted on the certificate of title just over a month after the end of the section 547(c)(3)(B) twenty-day grace period. The court rejected the trustee's effort to avoid the security interest as a preference, on grounds the security interest was perfected under state law within the twenty-day bankruptcy grace period by submission of the certificate of title and lien entry form to the appropriate office. (201) While this is the standard rule for a "delivery" (as opposed to a "notation") state, and does not directly contradict Fink (where the delivery was outside the twenty days), it is noteworthy for its recognition that section 547 determines the date of "perfection" by reference to state law.
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Another approach is illustrated by Roost v. U-Lane-O Credit Union (In re Lockhart). (202) Again a trustee sought to avoid a security interest on grounds the lien entry was perfected outside the section 547(c)(3)(B) grace period, due to the creditor's inability to timely obtain the certificate of title from the prior lienholder. As a result of this delay the lien entry was submitted to the Oregon Department of Motor Vehicles some seventy-seven days after the security interest was created. The court declined to allow the trustee to avoid the security interest, on grounds the continuous chain of events comprising the transaction together constituted a contemporaneous exchange of value excepted from avoidance under Bankruptcy Code section 547(c)(1). (203) While this was undoubtedly true, there remains a danger in such circumstances that a court may impose a rigid ten-day limit under Bankruptcy Code section 547(e)(2)(A) (204) (defining the date of a "transfer" for purposes of section 547). It is unfortunate that Fink has generated a need to litigate such issues and that this important matter has not been resolved with greater clarity.
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(1.) 263 B.R. 382 (B.A.P 1st Cir. 2001).
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(2.) 11 U.S.C. [section] 362 (2000).
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(3.) In re Rijos, 260 B.R. 330 (Bankr. D.P.R. 2001).
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(6.) In re Rijos, 263 B.R. at 393.
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(11.) In re Henriquez, 261 B.R. 67, 70-72 (B.A.P 1st Cir. 2001).
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(13.) Benedor Corp. v. Conejo Enters. (In re Conejo Enters.), 96 F.3d. 346, 351 (9th Cir. 1996)
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(14.) 239 F.3d 876 (7th Cir. 2001).
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(16.) Patton v. Shade, 263 B.R. 861, 867 (Bankr. C.D. Ill. 2001)
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(17.) Patton, 263 B.R. at 868.
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(18.) 260 B.R. 526 (Bankr. M.D. Fla. 2000).
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(21.) 262 B.R. 831 (Bankr. D. Idaho 2001).
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(26.) In re Huminski, 262 B.R. 274, 275 (Bankr. D. Vt. 2000).
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(29.) 229 F.3d 205 (3d Cir. 2000).
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(30.) 11 U.S.C. [section] 707(b) (2000)
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(31.) In re Tamecki, 229 F.3d at 207.
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(35.) United States v. Daniels, 247 F.3d 598 (5th Cir. 2001).
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(37.) 257 F.3d 401 (4th Cir. 2001), cert denied, 122 S. Ct. 926 (2002)
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(38.) Tavenner, 257 F.3d at 405.
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(39.) Tavenner v. Smoot (In re Smoot), 265 B.R. 128 (Bankr. E.D. Va. 1999).
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(40.) Tavenner, 257 F.3d at 407.
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(41.) 257 B.R. 673 (B.A.P. 8th Cir. 2001).
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(45.) 260 B.R. 602, 604 (B.A.P. 1st Cir. 2001)
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(46.) In re Moretti, 260 B.R. at 605.
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(49.) 11 U.S.C. [section] 9006(b)(1) (2000).
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(50.) Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370, 374 (B.A.P. 1st Cir. 2001).
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(53.) 211 F.3d 214 (5th Cir. 2000).
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(54.) 246 F.3d 391, 399 (5th Cir. 2001).
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(56.) Mercer, 211 F.3d at 218.
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(57.) See generally Anne P. Fortney & Linda B. Dubnow, The New Fair Credit Reporting Act--New Duties
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(58.) 11 U.S.C. [section] 523(a)(2)(A) (2000).
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(59.) AT&T Universal Card Servs. v. Mercer (In re Mercer), 220 B.R. 315, 317 (Bankr. S.D. Miss. 1998).
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(60.) Id. at 315, 326-27.
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(62.) Mercer, 246 F.3d at 400.
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(63.) Mercer, 211 F.3d at 217.
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(67.) Mercer, 246 F.3d at 415-16.
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(76.) 249 F.3d 383, 385 (5th Cir. 2001).
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(78.) Christopher v. Kendavis Holding Co. (In re Kendavis Holding Co.), No. 3:98-CV-1866-M, 2000 WL 769226 (N.D. Tex. June 14, 2000).
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(79.) Kendavis Holding Co., 249 F.3d at 388.
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(81.) Deodati v. M.M. Winkler & Assocs. (In re M.M. Winkler & Assocs.), 239 F.3d 746, 751 (5th Cir. 2001).
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(83.) Deodati v. M.M. Winkler & Assocs. (In re M.M. Winkler & Assocs.), 209 B.R. 397, 404-05 (Bankr. N.D. Miss. 1996).
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(84.) Winkler, 239 F.3d at 751-52.
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(86.) 258 B.R. 192 (B.A.P. 9th Cir. 2001)
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(87.) In re Tsurukawa, 258 B.R. at 194.
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(91.) 265 B.R. 492 (Bankr. M.D. Fla. 2001)
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(92.) In re Magpusao, 265 B.R. at 501.
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(94.) 249 F.3d 380 (5th Cir. 2001), rehearing denied, No. 00-10208, 2001 U.S. App. LEXIS 15978 (5th Cir. July 12, 2001), cert. denied, 122 S. Ct. 619 (2001).
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(99.) 233 F.3d 324 (5th Cir. 2000).
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(103.) 11 U.S.C. [section] 1328(a) (2000).
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(105.) In re Woods, No. CIV.A. 99-03211, 1999 WL 1224784 (E.D. La. Dec. 7, 1999).
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(106.) Woods, 233 F.3d at 325.
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(107.) See generally Richard E. Coulson & Alvin C. Harrell, Consumer Bankruptcy Developments, 54 BUS. LAW. 1433, 1443-46 (1999) (discussing 1998 statutory revisions).
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(108.) 11 U.S.C. [section] 523(a)(6).
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(109.) Kennedy v. Mustaine (In re Kennedy), 249 F.3d 576, 582 (6th Cir. 2001).
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(110.) 263 B.R. 832 (Bankr. S.D. Ohio 2000):
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(112.) Petralia v. Jercich (In re Jercich), 238 F.3d 1202 (9th Cir. 2001), cert. denied, 533 U.S. 930 (2001)
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(115.) 253 B.R. 233 (B.A.P 8th Cir. 2000).
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(117.) Bowman, 253 B.R. at 240.
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(118.) 260 B.R. 870 (B.A.P 8th Cir. 2001).
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(121.) 253 F.3d 778 (4th Cir. 2001).
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(122.) 11 U.S.C. [section] 506(d) (2000)
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(123.) Ryan, 253 F.3d at 779-80.
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(126.) 502 U.S. 410 (1992).
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(127.) 260 B.R. 596 (Bankr. S.D. Ga. 2000).
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(128.) 11 U.S.C. [section] 522(f)(B)(i) (2000).
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(129.) Gebhart, 260 B.R. at 599.
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(130.) 748 N.E. 2d 1248 (Ill. App. Ct. 2001).
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(133.) 262 B.R. 761 (Bankr. N.D. Ill 2001).
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(135.) 263 B.R. 233 (Bankr. C.D. Ill. 2001).
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(138.) 264 B.R. 759 (Bankr. M.D. Fla. 2001).
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(140.) 264 B.R. 776 (Bankr. S.D. Fla. 2001).
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(143.) 232 F.3d 528 (6th Cir. 2000).
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(144.) Chrysler Fin. Corp. v. Nolan, 234 B.R. 390, 391 (Bankr. M.D. Tenn. 1999).
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(146.) 11 U.S.C. [section] 1329 (2000).
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(147.) Nolan, 232 F.3d at 535.
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(149.) Id. at 533 (citing 11 U.S.C. [section] 1325(a)(5)(B)).
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(151.) Id. at 534 (citing 11 U.S.C. [section] 1329(a)).
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(152.) 265 B.R. 10 (Bankr. D. Mass. 2001).
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(153.) In a "pot" plan, the trustee distributes the entire "pot" of available assets to unsecured creditors rather than a fixed percentage of the creditors' claims. Id. at 12.
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(155.) Id. (citing In re Witkowski, 16 F.3d 739, 747 (7th Cir. 1994)).
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(156.) New York City Employees' Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124, 126 (2d Cir. 2001).
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(160.) 265 B.R. 502 (Bankr. S.D. Fla. 2001).
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(162.) 11 U.S.C. [section] 109 (2000).
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(163.) See Fed. Bankr. Civ. P. 1005 (2002).
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(164.) 261 B.R. 391 (Bankr. D.N.J. 2001).
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(166.) 259 B.R. 754 (Bankr. M.D. Fla. 2001).
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(168.) Katahdin Fed. Credit Union v. Jamo (In re Jamo), 262 B.R. 159 (B.A.P 1st Cir. 2001).
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(169.) Jamo v. Katahdin Fed. Credit Union (In re Jamo), 283 F.3d 392 (1st Cir. 2002).
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(170.) Jamo v. Katahdin Fed. Credit Union (In re Jamo), 253 B.R. 115 (Bankr. D. Me. 2000).
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(171.) 15 B.R. 75 (Bankr. S.D. Ohio 1981), cited in, In re Jamo, 262 B.R. at 164-65.
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(173.) Jamo, 262 B.R. at 167. The BAP did not explain the meaning of the term "extraneous" in this context, an important point in that some extraneous considerations will nearly always be involved in such scenarios. In developing such a rule it might be more appropriate to require "extraordinary" circumstances, given the traditional role of that concept as a basis for equitable remedies. See generally DAN B. DOBBS, REMEDIES ch. 2 (1973).
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(174.) 11 U.S.C. [section] 105(a), cited in Jamo, 262 B.R. at 167.
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(175.) Jamo, 262 B.R. at 167.
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(176.) Jamo, 253 B.R. at 128-29.
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(177.) Jamo, 283 F.3d at 397.
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(181.) Id. (following Cox v. Zale Delaware, Inc., 239 F.3d 910, 912 (7th Cir. 2001)
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(191.) 11 U.S.C. [section] 547 (2000).
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(192.) See generally Glessner v. Massey-Ferguson, Inc., 353 F.2d 986 (9th Cir. 1965)
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(193.) See, e.g., HARRELL & MILLER, supra note 192 at 791-98.
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(194.) See generally Alvin C. Harrell, The Supreme Court Finks on Purchase-Money Grace Periods, 52 CONSUMER FIN. L.Q. REP. 114 (1998).
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(195.) 522 U.S. 211 (1998)
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(196.) Fink, 522 U.S. at 220-21.
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(197.) See, e.g., 11 U.S.C. [subsection] 362(b)(3), 546, admittedly not applying here but probably because this issue is specifically addressed in [section] 547(e)(1)(B), as a companion provision consistent with [subsection] 362 and 546, together providing an overall uniform recognition of state law grace periods.
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(198.) See, e.g., Harrell, supra note 194.
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(199.) The extended grace periods in state certificate of title laws typically reflect the realities of certificate of title lien entry: The lien cannot be entered until the certificate of title is obtained, either from the prior lien holder or after issuance by the appropriate state agency. The mechanics of this process often are such that it cannot be done within twenty days as required by the Fink decision, thereby dooming an entire range of important transactions to potential avoidance under section 547, despite clearly articulated state policies to the contrary and an apparent deference to those policies of [section] 547(e)(1)(B). See, e.g., Buffalo Metro. Fed. Credit Union v. Mogavero (In re Cooley), Nos. 00-CV-0345E(M), BK-98-13159B, 2001 U.S. Dist. LEXIS 1513 (W.D.N.Y. Feb. 13, 2001)
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(200.) 248 B.R. 516 (Bankr. ND. W. Va. 2000).
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(202.) No. 699-67650-aer7, 2000 Bankr. LEXIS 1854 (Bankr. D. Or. Dec. 15, 2000).
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(204.) 11 U.S.C. [section] 547(e)(2)(A).
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Jon Ann Giblin and Alvin C. Harrell *
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* Jon Ann Giblin is an associate with the law firm of McGlinchey Stafford in Baton Rouge, LA. Alvin C. Harrell is a Professor of Law at Oklahoma City University School of Law, Executive Director of the Conference on Consumer Finance Law, and Editor of the Annual Survey. He also is a member of the Oklahoma Bar Association.
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