With Thanksgiving almost upon us, I am going to start taking nominations for the Credit Slips first (and possibly last) annual BARF Turkey Award. This distinction looks back at the last twelve months and goes to the most misguided federal or state statute, administrative agency rule or action, or judicial decision in the area of credit and bankruptcy law. For those not in on the joke, "BARF" or "Bankruptcy Abuse Reduction Fiasco" was the more deserving moniker for the 2005 bankruptcy law. In this instance, I am using the term more generically, to describe any law, statute, reg, court decision, whatever.
My first nominee is . . . .
The Second Circuit’s decision in MBNA v. Hill, where the court held that the bankruptcy court had no discretion to deny MBNA’s request for arbitration of its violation of the automatic stay. MBNA admitted it had withdrawn money from the debtor’s bank account after it had received notice of the bankruptcy filing. Although bankruptcy courts have discretion to deny arbitration for matters that are central to the bankruptcy process, the court reasoned that (1) the debtor’s estate had been administered (which wasn’t the case when the adversary proceeding was filed), (2) the debtor brought the case as a class action (irrelevant to the issue of arbitrability), and (3) because districts courts have concurrent but not exclusive jurisdiction over bankruptcy cases a stay "is not so closely related to an injunction that the bankruptcy court is uniquely able to interpret and enforce its provisions" (a flat-out misreading of the procedural provisions creating the bankruptcy courts). The decision could be read to require arbitrability of any proceeding in a bankruptcy case. The only thing that can be said in its favor is that the case is such a poor reading of existing law that it will be ignored.
Other nominations?
Comments
2 responses to “Credit Gobblers”
From an anonymous contributor:
In re Wilkinson, 346 B.R. 539 (Bankr D. Utah 2006)
After debtor filed Chapter 13 petition together with pay advices received from her employer for the period extending some seven months prepetition, the court discovered that one pay advice was missing and that in its place was a pay advice for approximately the same pay period but in the prior year. Debtor filed a copy of the missing pay advice prior to the confirmation hearing, and subsequently filed a motion to find compliance with the section of the Bankruptcy Code governing debtors’ duties or, alternatively, a motion to vacate the order of dismissal. Bankruptcy Judge Judith A. Boulden, J., held that the case had to be dismissed. Here’s the kicker: No party in interest raised the issue. The court raised it on her own motion after reviewing the case prior to a scheduled chapter 13 confirmation.
I have been watching the new bankruptcy act unfold from a practical approach for the last year. lately, a new motion has popped up for relief of automatic stay immediately after the filing of a bankruptcy. It is based upon 362 (a) and (d)and uses the prior nonpayment of the mortgage as grounds for relief of stay. The argument is that the term “cause” is undefined in the statute (362 (d)(1)but that among other things failure to make payments is included. Then the attorneys argue that the homeowner is 10 or 6 payments behind prior to filing the bankruptcy! These motions have been filed within days of the actual bankruptcy filings by the homeowner.
I have not seen a ruling yet but am sure that a judge will allow this type of motion to alleviate the homeowner from the burden of owning the home.
Why bother with an automatic stay if it can be taken out before the 341 hearing.