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An addition to the debtor’s residential property, which he constructed post-mortgage and pre-bankruptcy petition and which he used as a rental unit, made the property multi-use and rendered the anti-modification provision inapplicable . In re Berkland, No. 17-10821 (Bankr. D. Mass. April 6, 2018).

Kenneth Berkland took out a mortgage to purchase his residential property. He later built an addition to the property to be used rent-free by his in-laws. His brother-in-law later moved in and paid $300 per month in rent. At the time he filed for chapter 11 bankruptcy, the value of his property was less than the amount owed on his mortgage and he sought to strip down the debt into secured and unsecured portions under section 1123(b)(5), a provision that mirrors section 1322(b)(2). The servicer for the mortgagee, Specialized Loan Servicing, LLC, objected on the basis that the property was subject to the anti-modification provision applicable to debt secured “only by” the debtor’s residence. Read More

The district court went beyond the issue of whether the bankruptcy court properly denied the debtor’s motion for reconsideration, and addressed the unappealed substantive issue of whether the chapter 7 trustee, Kevin McCarthy, properly discharged his duties when he generated substantial fees and costs in pursuit of certain creditor claims. Skubal v. McCarthy, No. 1:17-cv-936 (E.D. Va. May 16, 2018).

Chapter 7 debtor, Megan Skubal, co-owned two real estate parcels as joint tenants with her father, Thomas Skubal. When she filed for bankruptcy, two unsecured creditors filed proofs of claim for a total of approximately $600. The trustee then contacted two additional unsecured creditors to urge them to file proofs of claim. Those creditors were Ms. Skubal’s student loan lender, ASC Education Services, to whom Ms. Skubal owed $46,171.47, and Midland Credit Management, for a credit card debt of $25,818.06. As both creditors declined to file proofs of claim, and despite the U.S. Trustee’s opposition, Mr. McCarthy filed the proofs of claim on their behalf. Mr. McCarthy then sought to sell Ms. Skubal’s real property to pay the $600 claims, the student loan claim, the credit card claim, and his fees and administrative expenses. Read More

In confirming the debtor’s chapter 13 plan, the bankruptcy court noted that “[a] debtor’s attorney fees are considered to be administrative priority claims and have priority above other claims . . .[under section] 507(a)(2).” In re Amaya, No. 17-70280 (Bankr. S.D. Tex. April 11, 2018).

In Evette Amaya’s chapter 13 bankruptcy, Propel Financial Services, LLC., filed a proof of claim in the amount of $25,303.63 secured by a tax lien on Ms. Amaya’s homestead. Ms. Amaya proposed a plan providing for two monthly payments in the amount of $1,100, and the remaining fifty eight monthly payments in the amount of $1,200. The plan specified that both Ms. Amaya’s counsel, to whom she owed $2,968.00 and Propel would be paid pro rata from month one through month fifty eight of the plan. The plan also provided that, subject to disposition of an avoidance motion, secured creditors would retain their liens. The trustee had her own internal distribution procedures under which she would pay Ms. Amaya’s counsel prior to other creditors. Read More

A transfer of a tax sale certificate from the initial tax purchaser to the bankruptcy creditor was an avoidable preference where it resulted in the creditor obtaining greater value than it would have received in a chapter 7 liquidation. Hackler v. Arianna Holding Company, LLC., No. 17-6589 (D. N.J. March 22, 2018).

The chapter 13 debtors, Frank and Dawn Hackler, owned real property valued at $335,000. The property was sold in a tax sale to Phoenix Funding Inc. Phoenix sent a notice of foreclosure to the Hacklers then assigned the tax lien to Arianna Holding Company, LLC. The Hacklers filed for chapter 13 bankruptcy but that case was dismissed due to their failure to attend the 341 meeting of creditors. A month later, Arianna obtained a Final Judgment in Foreclosure vesting the property in itself. Within three months, the Hacklers again filed for chapter 13 bankruptcy listing the value of Arianna’s lien at $45,000. The Hacklers filed an adversary proceeding against Arianna seeking to avoid the transfer from Phoenix. The bankruptcy court found the transfer was an avoidable preference under section 547(b) and granted summary judgment in favor of the Hacklers. In re Hackler, 2017 Bankr. LEXIS 2437 (Bankr. D. N.J. Aug. 28, 2017). Read More