ABI Blog Exchange

Does A Pre-Petition Lien On “General Intangibles” Attach To Chapter 5 Avoidance Actions In Debtor’s Bankruptcy? (Keystone v. Hanrahan)

By: Donald L Swanson The opinion is Keystone Savings Bank v. Hanrahan (In re BDC Group, Inc.), Case No. C24-104 in the U.S. District Court for Northern Iowa (decided July 17, 2025). Facts Bank’s security agreements and related UCC financing statements identify Debtor’s “general intangibles” as collateral. Debtor files bankruptcy, and Bank files a proof of... Continue Reading →

Bankr. W.D.N.C.: In re Davis- Private School Educational Expenses for Individualized Educational Program are not a Special Circumstance under Chapter 7 Means Test

Bankr. W.D.N.C.: In re Davis- Private School Educational Expenses for Individualized Educational Program are not a Special Circumstance under Chapter 7 Means Test Ed Boltz Mon, 09/22/2025 - 17:06 Summary: The debtor, earning more than $200,000 annually, sought Chapter 7 relief but was met with a presumption of abuse once the Bankruptcy Administrator corrected her means test. She attempted to rebut that presumption under § 707(b)(2)(B) by asserting “special circumstances,” namely her fourteen-year-old daughter’s sensory processing disorder that, according to the debtor, required enrollment in a private school costing $24,000 per year. Despite extensive testimony and documentation, the Court found that the debtor had not exhausted available alternatives, particularly by failing even to request a Section 504 plan from Charlotte-Mecklenburg Schools. Because the IDEA requires public schools to provide a “free appropriate public education,” the Court held the debtor had not shown that there was “no reasonable alternative” to the private school expense. The motion to dismiss was therefore granted, with 30 days to convert to Chapter 13. Commentary: In re Davis underscores the difficulty debtors face in using the “special circumstances” exception: courts demand exhaustion of reasonable alternatives, especially when statutory protections like the IDEA exist. Could these expenses have been considered under § 707(b)(2)(A)(ii)(II)? It may have been a strategic misstep here to frame the expense as “ special circumstances” rather than as an allowed deduction under § 707(b)(2)(A)(ii)(II). Section 707(b)(2)(A)(ii)(II) allows deduction of expenses “ reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor’s immediate family.” The debtor’s daughter clearly fits the definition of a disabled member of the Debtor's immediate family. Unlike the narrow “special circumstances” exception in § 707(b)(2)(B), this provision is built into the means test itself, so arguably not as stringent a requirement. That said, the statutory language still requires that the expenses be both “reasonable and necessary.” Courts generally place the burden on the debtor to establish that reasonableness, though some case law (e.g., In re Sorrells on post-confirmation modifications) illustrates that once the trustee raises an objection, the ultimate burden of persuasion may shift. Here, the Court’s skepticism that the debtor had even attempted to utilize public school accommodations strongly suggests that the same expenses would have failed the § 707(b)(2)(A)(ii)(II) test as not “reasonably necessary.” Future planning: ABLE accounts and the NC exemption Effective September 1, 2025, North Carolina law exempts ABLE accounts without limitation. That exemption may provide a more viable path for families in situations like Davis. Contributions to an ABLE account for a disabled child could be treated as expenses “for care and support” and—if reasonably calculated—pass through the means test under § 707(b)(2)(A)(ii)(II). Unlike private tuition, ABLE contributions carry the imprimatur of federal and state policy, providing tax-advantaged savings specifically for disabled dependents’ present and future needs. Creditors and trustees may still challenge the amount as excessive, but courts are likely to be more receptive given the statutory framework. Education Attorney Fees as a Deductible Priority Expense Section 330(a)(4)(B) provides that in a Chapter 12 or 13 case, “the court may allow reasonable compensation to the debtor’s attorney for representing the interests of the debtor in connection with the bankruptcy case,” without the requirement—present in Chapters 7 and 11—that the services benefit the estate. That broad phrasing opens the door to compensation for legal services that help a debtor navigate obligations and expenses that are central to the debtor’s ability to propose and perform under a plan. From there: §503(b)(2) elevates compensation awarded under §330 to an administrative expense. §507(a)(1)(A) grants administrative expenses first-priority status. §707(b)(2)(iv), in the means test, explicitly allows deduction of “the total of all amounts…for priority claims” spread over 60 months. Thus, if Ms. Davis’s converts to Chapter 13 and hires an education attorney to pursue an adequate IEP under the IDEA—or to document that no adequate IEP is available—those attorney’s fees could be approved under §330(a)(4)(B), paid as an administrative expense, and deducted in full as a priority claim in the means test or diverting much of any dividend to nonpriority unsecured creditors to the priority administrative expense of hiring an education attorney. Strategic Impact This approach flips the posture of the case. Rather than trying (and failing) to shoehorn private school tuition into the “special circumstances” exception of §707(b)(2)(B), or risk rejection under §707(b)(2)(A)(ii)(II) for lack of reasonableness, the debtor channels resources into obtaining a legal determination. That determination either: Produces an adequate IEP – which may satisfy the Bankruptcy Court that public school is a reasonable alternative, eliminating the tuition issue. Or, Proves no adequate IEP is available – bolstering the case for private school tuition as a “reasonable and necessary” expense, now grounded in legal documentation rather than parental assertion. Either way, the attorney’s fees are deductible as a priority administrative expense, reducing disposable income available to unsecured creditors in Chapter 13. Potential Pathway Back to Chapter 7 If the IEP process confirms that no public alternative is reasonably available, the debtor may then move to convert back to Chapter 7. At that point, the private school tuition would be far better positioned to qualify under §707(b)(2)(A)(ii)(II) as a reasonable and necessary expense for a disabled dependent. In effect, the Chapter 13 detour—funded in part by deductible attorney’s fees—lays the evidentiary foundation for a successful rebuttal of abuse under Chapter 7. Given the case law in the W.D.N.C., including In re Siler, 426 B.R. 167 (Bankr. W.D.N.C. 2010), where Judge Whitley held that even though a 401k contribution was not deductible in a Chapter 7 means test, since it would be deductible if the case was converted to Chapter 13 forcing that conversion was pointless, which has historically taken a more pragmatic view of the Chapter 7 Means in seeking to " avoid absurd results", it seems in Ms Davis' case there many be not only an absurd result, but a rather unkind one as well. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_davis.pdf (337.51 KB) Category Western District

Weekly News – September 19

No longer kinder & gentler, satellites tumbling out of collateral packages, spirit on the chopping block? STG Logistics analyzed, and much, much more… Creditor Corner Your weekly curated content from…

Law Review: Norbert, Scott- The Supreme Court and the Discharge of Debts in Consumer Bankruptcy

Law Review: Norbert, Scott- The Supreme Court and the Discharge of Debts in Consumer Bankruptcy Ed Boltz Fri, 09/19/2025 - 15:16 Available at: www.ablj.org/the-supreme-court-and-the-discharge-of-debts-in-consumer-b… Abstract: The article examines the U.S. Supreme Court’s eleven decisions on the exceptions to discharge under Bankruptcy Code section 523(a). This jurisprudence is predictable in its focus on statutory text and at the same time remarkable for its almost complete aversion to bankruptcy policy. The limits of a bankruptcy jurisprudence without bankruptcy policy are clearly exposed in the Court’s most recent decision on the exceptions to discharge, Bartenwerfer v. Buckley, where the Court ignored the fundamental bankruptcy policy of granting a discharge to honest but unfortunate debtors, holding that an innocent debtor could not discharge a fraud debt for which she was vicariously liable under state law. Summary: Scott Norberg’s article, The Supreme Court and the Discharge of Debts in Consumer Bankruptcy Cases, surveys the eleven post-1978 Supreme Court decisions interpreting the scope of the discharge, nearly all arising under § 523(a). He finds the Court’s approach to be highly textualist, with a near total disregard for bankruptcy policy. While the Court occasionally mentions the “fresh start” for “honest but unfortunate debtors,” it has not treated that policy as a guiding canon. Instead, the Justices have relied on statutory text, context, and statutory history—while generally avoiding legislative history. The article emphasizes two themes: Bad Acts vs. Other Exceptions – Norberg distinguishes the “bad acts” exceptions (§ 523(a)(2), (4), and (6)) from the rest. Unlike tax, student loan, or support debts (which protect a creditor’s identifiable interest in repayment), the bad-acts exceptions function like § 727(a) objections to discharge: they target dishonest debtors and limit relief to those who truly deserve a fresh start. Creditor-Friendly Results – In eight of eleven cases (seven of nine involving bad acts), the Court sided with creditors, narrowing discharge and limiting fresh starts. Yet, the Court has not articulated a pro-creditor interpretive principle. Rather, it portrays itself as neutral, though its pattern suggests a corrective against perceived pro-debtor lower court rulings. Norberg critiques Bartenwerfer v. Buckley (2023), where the Court held that a debtor could not discharge a fraud debt based solely on vicarious liability for her partner’s fraud. He argues that the Court missed the crucial policy link between § 727(a) and § 523(a): the bad-acts exceptions are about the debtor’s character, not about privileging the fraud creditor’s repayment interests. By ignoring this, the Court imposed nondischargeability on an innocent debtor, undermining the principle that bankruptcy relief should be reserved for the “honest but unfortunate.” The article also observes the influence of non-legal factors: the Solicitor General almost always sided with creditors, and the Court nearly always followed. The absence of a government agency advancing a bankruptcy-policy perspective (in contrast to the SEC or EPA in their fields) leaves the Court without a counterweight to creditor arguments. Commentary: This piece underscores what many consumer lawyers have long felt: the Supreme Court’s bankruptcy jurisprudence is neither guided by coherent bankruptcy policy nor animated by concern for struggling families. Instead, the Court clings to textualism while quietly narrowing the discharge. Norberg’s critique of Bartenwerfer is particularly apt. By allowing nondischargeability based on vicarious liability, the Court ignored the foundational principle that the discharge is meant for the “honest but unfortunate.” If the debtor herself acted without fraud, why should her future be burdened forever? In practice, this decision empowers creditors to weaponize state-law agency theories against debtors who never intended, or even knew of, the misconduct. For practitioners, the takeaway is stark: do not assume the Court will apply bankruptcy’s core policy of fresh starts. Instead, expect strict readings of statutory text that often tilt toward creditors. For debtors’ counsel, that means more vigilance in contesting nondischargeability complaints and more creativity in using Chapter 13, where Congress initially excluded the bad-acts exceptions. Professor Norberg also highlights the systemic problem: without a federal agency advocating for bankruptcy policy before the Court, debtors stand alone against institutional creditors and a DOJ-aligned Solicitor General. He notes that Professor Mann has written that: The absence of a major administrative presence in the Executive Branch has hindered the development of a broad and coherent bankruptcy system. Specifically, the administrative vacuum has left the Supreme Court adrift, under informed about the importance of a robust bankruptcy system to a modern capitalist economy. BANKRUPTCY AND THE U.S. SUPREME COURT (Cambridge University Press 2017)). Professor Mann further observes that “[t]he Solicitor General’s role in bankruptcy cases has been almost diametrically opposed to the role we would have expected from [a hypothetical] United States Bankruptcy Administration: We don’t have a Court left to its own devices in the bankruptcy realm, we have a Court consistently advised by the executive to downplay the significance of the bankruptcy system.” This critique resonates especially in the Fourth Circuit, where the Bankruptcy Administrator system—independent of the Department of Justice—offers at least a measure of structural separation. (Whether bankruptcy judges like to treat the BA as their stand-in is another question.) By contrast, the U.S. Trustee Program, as a DOJ arm, too often reflects prosecutorial instincts rather than the balanced policy judgments bankruptcy demands. With proper attribution, please share this post. Blog comments Attachment Document 4-norberg-the-supreme-court-and-the-discharge-of-debts_final-author-reviewv2.pdf (450.79 KB) Category Law Reviews & Studies

Law Review: Norbert, Scott- The Supreme Court and the Discharge of Debts in Consumer Bankruptcy

Law Review: Norbert, Scott- The Supreme Court and the Discharge of Debts in Consumer Bankruptcy Ed Boltz Fri, 09/19/2025 - 15:16 Available at: www.ablj.org/the-supreme-court-and-the-discharge-of-debts-in-consumer-b… Abstract: The article examines the U.S. Supreme Court’s eleven decisions on the exceptions to discharge under Bankruptcy Code section 523(a). This jurisprudence is predictable in its focus on statutory text and at the same time remarkable for its almost complete aversion to bankruptcy policy. The limits of a bankruptcy jurisprudence without bankruptcy policy are clearly exposed in the Court’s most recent decision on the exceptions to discharge, Bartenwerfer v. Buckley, where the Court ignored the fundamental bankruptcy policy of granting a discharge to honest but unfortunate debtors, holding that an innocent debtor could not discharge a fraud debt for which she was vicariously liable under state law. Summary: Scott Norberg’s article, The Supreme Court and the Discharge of Debts in Consumer Bankruptcy Cases, surveys the eleven post-1978 Supreme Court decisions interpreting the scope of the discharge, nearly all arising under § 523(a). He finds the Court’s approach to be highly textualist, with a near total disregard for bankruptcy policy. While the Court occasionally mentions the “fresh start” for “honest but unfortunate debtors,” it has not treated that policy as a guiding canon. Instead, the Justices have relied on statutory text, context, and statutory history—while generally avoiding legislative history. The article emphasizes two themes: Bad Acts vs. Other Exceptions – Norberg distinguishes the “bad acts” exceptions (§ 523(a)(2), (4), and (6)) from the rest. Unlike tax, student loan, or support debts (which protect a creditor’s identifiable interest in repayment), the bad-acts exceptions function like § 727(a) objections to discharge: they target dishonest debtors and limit relief to those who truly deserve a fresh start. Creditor-Friendly Results – In eight of eleven cases (seven of nine involving bad acts), the Court sided with creditors, narrowing discharge and limiting fresh starts. Yet, the Court has not articulated a pro-creditor interpretive principle. Rather, it portrays itself as neutral, though its pattern suggests a corrective against perceived pro-debtor lower court rulings. Norberg critiques Bartenwerfer v. Buckley (2023), where the Court held that a debtor could not discharge a fraud debt based solely on vicarious liability for her partner’s fraud. He argues that the Court missed the crucial policy link between § 727(a) and § 523(a): the bad-acts exceptions are about the debtor’s character, not about privileging the fraud creditor’s repayment interests. By ignoring this, the Court imposed nondischargeability on an innocent debtor, undermining the principle that bankruptcy relief should be reserved for the “honest but unfortunate.” The article also observes the influence of non-legal factors: the Solicitor General almost always sided with creditors, and the Court nearly always followed. The absence of a government agency advancing a bankruptcy-policy perspective (in contrast to the SEC or EPA in their fields) leaves the Court without a counterweight to creditor arguments. Commentary: This piece underscores what many consumer lawyers have long felt: the Supreme Court’s bankruptcy jurisprudence is neither guided by coherent bankruptcy policy nor animated by concern for struggling families. Instead, the Court clings to textualism while quietly narrowing the discharge. Norberg’s critique of Bartenwerfer is particularly apt. By allowing nondischargeability based on vicarious liability, the Court ignored the foundational principle that the discharge is meant for the “honest but unfortunate.” If the debtor herself acted without fraud, why should her future be burdened forever? In practice, this decision empowers creditors to weaponize state-law agency theories against debtors who never intended, or even knew of, the misconduct. For practitioners, the takeaway is stark: do not assume the Court will apply bankruptcy’s core policy of fresh starts. Instead, expect strict readings of statutory text that often tilt toward creditors. For debtors’ counsel, that means more vigilance in contesting nondischargeability complaints and more creativity in using Chapter 13, where Congress initially excluded the bad-acts exceptions. Professor Norberg also highlights the systemic problem: without a federal agency advocating for bankruptcy policy before the Court, debtors stand alone against institutional creditors and a DOJ-aligned Solicitor General. He notes that Professor Mann has written that: The absence of a major administrative presence in the Executive Branch has hindered the development of a broad and coherent bankruptcy system. Specifically, the administrative vacuum has left the Supreme Court adrift, under informed about the importance of a robust bankruptcy system to a modern capitalist economy. BANKRUPTCY AND THE U.S. SUPREME COURT (Cambridge University Press 2017)). Professor Mann further observes that “[t]he Solicitor General’s role in bankruptcy cases has been almost diametrically opposed to the role we would have expected from [a hypothetical] United States Bankruptcy Administration: We don’t have a Court left to its own devices in the bankruptcy realm, we have a Court consistently advised by the executive to downplay the significance of the bankruptcy system.” This critique resonates especially in the Fourth Circuit, where the Bankruptcy Administrator system—independent of the Department of Justice—offers at least a measure of structural separation. (Whether bankruptcy judges like to treat the BA as their stand-in is another question.) By contrast, the U.S. Trustee Program, as a DOJ arm, too often reflects prosecutorial instincts rather than the balanced policy judgments bankruptcy demands. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Category Law Reviews & Studies

W.D.N.C.: Ready v. Navient- Court Confirms Student Loan Creditors Must Prove the Validity of Debt

W.D.N.C.: Ready v. Navient- Court Confirms Student Loan Creditors Must Prove the Validity of Debt Ed Boltz Thu, 09/18/2025 - 17:08 Summary: Judge Kenneth D. Bell’s denial of Navient’s motion for summary judgment in Ready v. Navient (W.D.N.C. No. 5:24-cv-00050) is a sharp reminder that even student loan creditors must prove the underlying debt. Navient insisted that Ms. Christy Ready had taken out a 1995 consolidation loan through “Citibank (NYS)” which was later rolled into a 2002 consolidation. Ms. Ready disputed this, questioning the authenticity of the electronic signature on the 2002 note and producing a notarized declaration from a Citibank NA vice president stating that Citibank had no record of any such loan. With this conflict in the evidence, Judge Bell correctly found a genuine issue of material fact, requiring the case to go to trial. Application in Bankruptcy: Rule 3001 and the Burden of Proof: Bankruptcy Rule 3001 requires every creditor—including student loan servicers—to file proofs of claim supported by documentation of the underlying obligation. Without this evidence, a claim loses its prima facie validity. Courts have been clear that the burden begins with the creditor: it must establish both the existence of the debt and that it qualifies under one of the narrow exceptions in §523(a)(8). Only after that showing does the burden shift to the debtor to prove undue hardship. Yet, as Jason Iuliano’s Student Loan Bankruptcy and the Meaning of Educational Benefit demonstrated, courts have too often allowed all creditors, but particularly when related to putative student loans, to bypass these thresholds, assuming without proof that any “educational” debt is both valid and nondischargeable. Ready pushes back against that trend. Discovery as a Tool for Debtors: Importantly, Ready also illustrates that debtors—whether in bankruptcy or not—can use discovery to expose gaps and contradictions in student loan creditors’ claims. In federal and state court litigation, borrowers can demand production of the original loan documents, payment histories, and correspondence. In bankruptcy adversary proceedings, Rule 2004 examinations, interrogatories, requests for admission, and document subpoenas all provide avenues to test the creditor’s assertions. In Ms. Ready’s case, the discovery process unearthed a key discrepancy: Navient’s claim of a Citibank loan was directly contradicted by Citibank’s own declaration that it could find no such record. That factual conflict was enough to defeat summary judgment. The practical lesson is that debtors are not passive bystanders. They can—and should—demand proof. A creditor’s internal database printout is not gospel. (Despite what some large credit unions also believe in avoiding compliance in filing mortgage proofs of claim without complying with mandatory forms.) Without authenticated documentation, the claim falters. Commentary: Another nice win for Shane Perry and Stacy Williams. For consumer bankruptcy practitioners, the practice pointers are clear: Use Rule 3001 as a shield. If a proof of claim lacks proper documentation, object and demand compliance. Leverage discovery aggressively. Whether in bankruptcy adversaries or outside litigation under the FDCPA, FCRA, or state law, discovery is the debtor’s tool to pierce through a servicer’s boilerplate assertions. Remember the sequence. Creditors must first prove a valid debt that falls within §523(a)(8). Only then do questions of “undue hardship” even arise. Takeaway: Ready v. Navient reinforces a simple but powerful principle: calling something a “student loan” does not make it so. It may not even make it a valid debt. Creditors bear the burden of proving both the existence of the debt and its statutory character, and debtors have powerful procedural tools—Rule 3001 objections and discovery mechanisms—to hold them to that burden. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document ready_v._navient.pdf (294.94 KB) Category Western District

E.D.N.C.: Lewis v. Equity Experts IV- Court Approves Opt-Out Class Notice and Neutral Class Website

E.D.N.C.: Lewis v. Equity Experts IV- Court Approves Opt-Out Class Notice and Neutral Class Website Ed Boltz Wed, 09/17/2025 - 16:57 Summary: In the latest chapter of the HOA-collections saga, Judge Flanagan approved the form of class notice in Lewis v. EquityExperts.org, LLC, confirming that this Rule 23(b)(3) class will proceed on an opt-out basis and authorizing a neutral, administrator-run class website—with tight guardrails on content. The court rejected EquityExperts’ push for an opt-in regime or claims-form gating, pointing to Rule 23(c)(2)(B) and due-process precedent ( Phillips Petroleum v. Shutts) favoring opt-out classes—especially where small claims must be aggregated to be economical. The notice will be mailed (individual notice still required) and posted online by CPT Group; the website can host only the notice, Amended Complaint, Class Certification Order, Order on Reconsideration, and this Order—no advocacy or extra commentary. The parties must file the finalized notice and specify the method of individual notice within 14 days. Why this matters (and how we got here): If you’ve been following along at ncbankruptcyexpert.com, this tracks the arc we’ve covered: Part I (background on fee practices): “EDNC: Lewis v. EquityExperts.org — Excessive Fees Illegal under FDCPA” (Mar. 21, 2024) — laying the groundwork that add-on “collection costs” and attorney fees in HOA matters can violate the FDCPA when not authorized or reasonable. Link: https://ncbankruptcyexpert.com/2024/03/21/ednc-lewis-v-equityexpertsorg… Part II (class certification): “EDNC: Lewis v. EquityExperts.org II — Class” (Jan. 25, 2025) — detailing certification of a Rule 23(b)(3) damages class targeting systemic fee-inflation tactics. Link: https://ncbankruptcyexpert.com/2025/01/25/ednc-lewis-v-equityexpertsorg… Part III (pleading sharpened): “EDNC: Lewis v. EquityExperts — Part III Amended Complaint (Class Action Against HOA Agent)” (June 4, 2025) — aligning the claims with certification rulings and clarifying the class theory. Link: https://ncbankruptcyexpert.com/2025/06/04/ednc-lewis-v-equityexperts-pa… This notice order cements key mechanics for moving the class forward: opt-out governance, a narrow and neutral information hub, and a timeline to finalize and disseminate notice. It also flags that defendant’s causation and merits attacks belong at summary judgment or decertification after fuller discovery, not at the notice stage. Practice Pointers for Consumer Debtor Attorneys HOA & Servicer Add-Ons = Class Exposure: Systemic “collection costs,” lien-notice fee stacks, and attorney-fee markups remain fertile FDCPA/State UDAP ground—especially in Chapter 13 cases where proofs of claim mirror the same add-ons. The class-action posture here keeps pressure on uniform practices rather than one-off skirmishes. Opt-Out is the Default—and Powerful: Courts in (b)(3) classes will hew to Rule 23 and Shutts: absent members are in unless they exclude themselves. Defense efforts to convert to opt-in or force claim-forms at the threshold often fail when the class was already certified and claims are uniform. Keep this in mind when you see creditors arguing “individualized causation” at the notice stage; that fight usually belongs later. Neutral Notice Infrastructure: Where defendants point to “inflammatory” plaintiff-side websites, courts will often split the baby by mandating an administrator-controlled site with strictly limited content. That can actually streamline administration (and avoid later notice challenges). If you’re structuring class notice in your own matters, propose administrator hosting and a tight document list up front. Bankruptcy Cross-Over: Many class members will also be current or future debtors. Coordinate: (a) ensure proofs of claim don’t include the challenged fees; (b) use Lewis-style rulings to object under § 502(b)(1) and state-law fee limits; (c) consider Rule 3002.1 implications when fees relate to residential mortgages; and (d) preserve class relief alongside individual claim objections so your client isn’t whipsawed by “everybody pays a little” practices. EquityExperts.org specifically advertises that it can assist with filing proofs of claim ( https://www.youtube.com/watch?v=9YFPLZX6-30), which indicates that the Bankruptcy Administrators and Chapter 13 Trustees should be looking for these issues as well. Discovery Timing & Decertification: Defense hints about “no causation” frequently presage a late-stage decertification or SJ bid. Build a record now—uniform templates, standardized fee schedules, batch communications, and accounting codes—so the class theory remains cohesive when the merits arrive. Bottom Line: Lewis keeps moving. With an opt-out class and a neutral class website in place, notice is next and the merits loom. For consumer practitioners, this is a playbook: challenge standardized fee inflation, resist premature individualization, and use class tools to reform practices that nickel-and-dime homeowners—inside and outside bankruptcy. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document lewis_v._equityexperts_iv.pdf (98.77 KB) Category Eastern District

C District Ct. (Mecklenburg): Hurd. v. Priority Automotive- Treble Damages for Unfair and Deceptive Trade Practices

C District Ct. (Mecklenburg): Hurd. v. Priority Automotive- Treble Damages for Unfair and Deceptive Trade Practices Ed Boltz Tue, 09/16/2025 - 16:21 Summary: Brad Hurd purchased a 2018 Honda Accord from Priority Automotive Huntersville for $26,400. Unbeknownst to him, the vehicle had been in an accident in 2017, while still a dealership demonstrator, with repairs exceeding $10,000 (more than 25% of the car’s value). North Carolina law, N.C. Gen. Stat. § 20-71.4, required disclosure of such damage. Instead, Priority affirmatively answered “NO” on the damage disclosure statement and gave Hurd a purchase agreement with the wrong VIN. When Hurd later sought to trade in the Accord, a CarFax report revealed the undisclosed wreck. Even then, Priority’s sales manager attempted to conceal the accident by withholding or substituting vehicle history reports. The District Court found violations of N.C. Gen. Stat. § 75-1.1 (Unfair and Deceptive Trade Practices), awarded Hurd $16,172 in actual damages (the difference between purchase price and value), trebled under Chapter 75 to $48,516, plus $2,800 compensatory damages for lost time, $10,000 in punitive damages, and $118,725 in attorneys’ fees. In total, the dealership was ordered to pay over $180,000, including fees and costs. Commentary: Very nice work by Shane Perry. This state court judgment is a striking reminder of the robust remedies available under North Carolina’s Unfair and Deceptive Trade Practices Act. The court not only trebled actual damages, but also awarded punitive damages and a six-figure attorneys’ fee award. Consumer debtor attorneys will immediately contrast this with the much smaller recoveries often seen in bankruptcy court for stay or discharge violations. While bankruptcy judges in North Carolina do award compensatory damages and attorneys’ fees, punitive damages are typically restrained, often capped in the $1,000–$5,000 range, and fee awards are rarely as expansive as those seen in Chapter 75 cases. Bankruptcy judges also tend to be hostile to parallel claims that stay or discharge violations are illegal under N.C.G.S. 75 as well, avoiding trebling damages and often making their findings of creditor abuse rather impotent- as Jamie Dimon, the CEO of JPMorgan Chase, said to Sen. Elizabeth Warren when confronted with his bank's illegal activities- “So hit me with a fine. We can afford it.” The lesson is that consumer protection litigation in state court can generate fee-shifting and punitive exposure far beyond what bankruptcy courts would award. In a case like Hurd’s, had Priority’s conduct arisen in the context of a bankruptcy stay violation—for example, wrongfully repossessing or concealing a vehicle—damages would likely have been limited to actual harm and more modest sanctions. For debtor’s counsel, this underscores the value of a dual approach: Bankruptcy court for quick, clear enforcement of federal rights like the stay and discharge. State court Chapter 75 claims for broader deterrence and meaningful fee awards, particularly in auto fraud, mortgage servicing, or collection abuse cases. Hurd’s case also illustrates the importance of transparency: a $26,000 Accord turned into a $180,000 liability because of concealment and cover-up. Bankruptcy courts, by contrast, often temper their awards out of concern for proportionality and the continued functioning of creditor systems. State courts applying Chapter 75 show no such reluctance. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document hurd_v._priority_automotive_huntersville.pdf (4.63 MB) Category NC Courts

Chapter 15-Related Rulings: Trends and Practical Lessons for Cross-Border Restructurings

4th Cir.: Davis v. Capital One-TCPA Expert Excluded, Class Not Ascertainable

4th Cir.: Davis v. Capital One-TCPA Expert Excluded, Class Not Ascertainable Ed Boltz Mon, 09/15/2025 - 17:31 Summary Clarence Davis began receiving prerecorded debt-collection calls from Capital One, despite never having been its customer. The problem arose because his cell phone number had previously belonged to a delinquent Capital One account holder. Even after Davis twice told Capital One to stop calling, the robocalls continued briefly. Davis filed a putative class action under the Telephone Consumer Protection Act (TCPA), seeking to represent all non-customers nationwide who had received Capital One robocalls in the past four years. His case hinged on expert testimony proposing a methodology to identify affected individuals through phone company records, the FCC’s Reassigned Numbers Database, and data broker lookups. The district court excluded Davis’s expert under Rule 702 and Daubert, finding her methodology untested, error-prone, and incapable of reliably separating customers from non-customers. Without an admissible expert methodology, Davis’s class could not satisfy the Fourth Circuit’s “ascertainability” requirement for Rule 23(b)(3) classes. The court denied certification, though it awarded Davis $2,000 individually for Capital One’s TCPA violations. On appeal, the Fourth Circuit affirmed. The panel held the district court acted within its discretion both in excluding the expert and in concluding that the proposed class was not readily identifiable without individualized inquiries. Commentary Although not a bankruptcy case, Davis v. Capital One illustrates two familiar themes for consumer debtor attorneys: (1) the difficulty of aggregating widespread but low-dollar statutory violations into effective class relief, and (2) the judicial gatekeeping role over expert testimony that often decides whether a consumer class case succeeds or fails. The Fourth Circuit has previously recognized in Krakauer v. Dish Network that the TCPA is designed to function through class actions, since individual claims are too small to pursue. Yet, as in Davis, the hurdle of ascertainability—peculiar to this Circuit—often defeats such suits at the certification stage. For debtors’ counsel, this decision is another reminder that large-scale systemic creditor misconduct may escape classwide accountability, leaving only individual statutory damages. There is a quiet but important bankruptcy angle here: many debtors we represent arrive in Chapter 13 or 7 after being hounded by misdirected or unlawful robocalls. The TCPA provides a strict-liability remedy, but unless paired with creative lawyering or individual adversary proceedings, class-based deterrence is elusive in the Fourth Circuit. Finally, the opinion underscores the contrast between circuits. Other courts of appeals have softened or rejected strict ascertainability requirements. Here, the Fourth Circuit insists on a class that is “readily identifiable” without extensive individualized fact finding, even where doing so undercuts Congress’s intent to curb robocalls. For consumer advocates, this decision reaffirms the uphill struggle to vindicate small-dollar statutory rights in this jurisdiction—whether under the TCPA, the FDCPA, or even recurring bankruptcy stay and discharge violations. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document davis_v._capital_one.pdf (178.36 KB) Category 4th Circuit Court of Appeals

Weekly News – September 12

A deep dive into Spirit Airlines, new guidance issued prohibiting judge shopping, Echostar mega deal surprise, Texas Two Step doesn’t fly in Delaware, and much, much more… Creditor Corner Your…

Here’s What We Need for our Next Meeting

Here’s what we usually need for our next meeting On this page, I’m introducing Lexria, my virtual file clerk. Lexria gathers the necessary information and required documents.we need for our next meeting. I call our next meeting the Be Happy meeting. At the Be Happy meeting, we review the information that we need to get […] The post Here’s What We Need for our Next Meeting appeared first on Robert Weed Virginia Bankruptcy Attorney.

Bankr. E.D.N.C.: In re Sugar- Discharge Allowed After Reliance on Counsel Mitigates Sanctions

Bankr. E.D.N.C.: In re Sugar- Discharge Allowed After Reliance on Counsel Mitigates Sanctions Ed Boltz Fri, 09/12/2025 - 16:19 Summary Judge Warren’s most recent opinion in In re Sugar (Bankr. E.D.N.C. Aug. 15, 2025) follows remand from both the U.S. District Court and the Fourth Circuit Court of Appeals. The case began with the dismissal of Christine Sugar’s Chapter 13 in 2023, coupled with a five-year nationwide bar on refiling, after she sold her residence without prior court approval in violation of E.D.N.C. Local Bankruptcy Rule 4002-1(g)(4). At the time, the court viewed Sugar as defiant and unapologetic, making dismissal with prejudice appear justified. On appeal, however, the District Court and the Fourth Circuit (in Sugar v. Burnett, 130 F.4th 358 (4th Cir. 2025)) questioned whether reliance on advice of counsel had been adequately considered. The Fourth Circuit remanded with instructions to reassess sanctions in light of her attorney’s role. On remand, represented by new counsel, Sugar testified credibly that she had repeatedly disclosed her inheritance and contemplated sale of her house to her attorney, but was affirmatively advised she could keep and use the funds and that no court approval was needed to sell her home. The court found this advice “poor and erroneous,” and concluded Sugar reasonably relied on it. Vacating its prior order, the bankruptcy court allowed her discharge to enter and invited the Bankruptcy Administrator to review possible professional discipline. Commentary This decision continues the long-running saga of Sugar, now spanning multiple layers of appellate review. At each turn—from dismissal, to sanctions, to affirmation by the District Court, to remand by the Fourth Circuit, and finally to discharge—her case highlights the tension between local rule compliance, debtor candor, and attorney responsibility. The Fourth Circuit’s intervention is notable. Unlike its earlier refusal to extend grace to the debtor in Purdy (where a debtor’s repeated bad faith filings justified dismissal with prejudice), here the appellate court recognized that attorney advice could mitigate even seemingly blatant violations. Similarly, while In re Beasley, Case No. 21-02322-5PWM, involved sanctioning an attorney for nondisclosure, in Sugar the focus shifted to how that nondisclosure misled both the debtor and the court. The contrast is instructive: Purdy underscores that when the debtor alone is culpable, harsh remedies like multi-year bars may be sustained. Beasley demonstrates that courts will not hesitate to sanction attorneys who conceal material information. Sugar sits uncomfortably between these poles, reminding us that when an attorney’s “crusade” or misinterpretation of local rules leads a debtor astray, punishment of the debtor herself may be inequitable. For consumer debtor attorneys, the case is a cautionary tale with two utilities: Reliance on counsel is not an absolute defense, but if documented through emails and testimony, it can mitigate sanctions and even reverse a dismissal years later. Local Rule compliance is not optional. Even if a practitioner believes a rule is inconsistent with the Code, pursuing a test case requires full and frank disclosure to the client of the risks—especially the possibility of dismissal with prejudice. The Sugar opinions (bankruptcy, district, and circuit) now join Purdy and Beasley as part of the small but growing body of Fourth Circuit consumer bankruptcy case law emphasizing professional responsibility. While debtors may ultimately receive a second chance, attorneys who misadvise or conceal face not only sanctions but potential referral to the State Bar. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_sugar.pdf (202.82 KB) Category Eastern District

Does Bankruptcy Stop Wage Garnishment in Pennsylvania?

When you file for bankruptcy, the bankruptcy court issues an “automatic stay.” This stops creditors and collectors from coming after you, but can it stop everything? Is wage garnishment covered […]

Law Review: McLaughlin, Christopher- NC School of Government Tax Foreclosures: An Overview

Law Review: McLaughlin, Christopher- NC School of Government Tax Foreclosures: An Overview Ed Boltz Thu, 09/11/2025 - 20:50 Summary McLaughlin’s bulletin provides North Carolina counties with a primer on tax foreclosure. Local governments can use either: Mortgage-style foreclosure (G.S. 105-374) – a full civil action, with attorney’s fees chargeable to the taxpayer. In rem foreclosure (G.S. 105-375) – a streamlined, judgment-based process with a capped $250 administrative fee. The article covers lien priority, redemption rights, surplus distribution, and the mechanics of sales and upset bids. It also notes that counties may foreclose even against tax-exempt organizations (if taxes accrued before the exemption) or property owned by debtors who previously went through bankruptcy, once the automatic stay no longer applies. Commentary For consumer debtor attorneys, the key intersection is with bankruptcy and constitutional law: Automatic stayin Bankruptcy – McLaughlin states foreclosure can resume once a bankruptcy ends by dismissal or discharge. But under § 362(c), the stay continues against property of the estate until case closure (or abandonment), meaning a county may need stay relief even post-discharge. Counties rarely press this distinction, but debtor counsel should. County motions for relief – Counties, like any secured creditor, can seek stay relief under § 362(d), though cost often deters them. This can buy debtors critical time to cure arrears or negotiate. This option is not presented in the article. Tyler v. Hennepin County – The Supreme Court made clear that keeping more than is owed in taxes is a taking. North Carolina already requires that surplus proceeds from the initial foreclosure sale be turned over to the clerk of court for distribution. But what about the subsequent sale scenario? Under G.S. 105-376, if a county is the high bidder and takes title, it holds the property “for the benefit of all taxing units” and may later dispose of it. Current law lets the county keep any surplus above taxes when it later resells. After Tyler, t hat practice may be constitutionally suspect. The Court’s reasoning—that equity beyond the tax debt is still the homeowner’s property—suggests that if the county resells for more than the taxes owed, the excess belongs to the former owner, not the county. Consumer attorneys should be prepared to argue that Tyler extends to this scenario. A county cannot avoid the Takings Clause by first bidding in the taxes, taking title, and then capturing the homeowner’s equity on resale. Just as Minnesota could not legislate away surplus equity, North Carolina counties cannot sidestep it through G.S. 105-376. Practical leverage – Even if courts have yet to apply Tyler this way, raising the issue can help debtor counsel negotiate with counties—particularly in hardship cases or where a homeowner has substantial equity at risk. Takeaway McLaughlin’s bulletin outlines the procedural mechanics counties rely on, but in a post- Tyler world, debtors and their attorneys should not assume counties can lawfully pocket resale profits after acquiring property for back taxes. That question is ripe for litigation, and until resolved, consumer attorneys should press Tyler arguments whenever equity remains in a foreclosed home. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document tax_foreclosures_an_overview.pdf (483.42 KB) Category Law Reviews & Studies

A Refresher On § 1112(b) “Bad Faith” Dismissal For Debtor’s Solvency (In re Dandurand—Part 3)

By: Donald L Swanson It’s helpful, every now and then, to receive a refresher on basic bankruptcy laws. We have such a refresher — on a creditor’s motion to dismiss for “bad faith,” based on Debtor’s solvency at filing and absence of pre-petition defaults. This article is the third-of-three in a “refresher” series based on the... Continue Reading →

W.D.N.C.: Black v. Brice-Upholds Business Judgment Rule, Rejects Caremark Claim

W.D.N.C.: Black v. Brice-Upholds Business Judgment Rule, Rejects Caremark Claim Ed Boltz Tue, 09/09/2025 - 16:43 Summary: Schletter, Inc., a Delaware-incorporated solar racking manufacturer based in Shelby, NC, lost market competitiveness when its FS Uno system fell behind the competition. CEO Dennis Brice, after months of analysis and with approval from its German parent company, launched a new “G-Max” product intended to be cheaper, lighter, and easier to install. To meet aggressive delivery deadlines in contracts with steep liquidated damages, development was rushed, no testing was performed, costs and production capacity were misjudged, and customers struggled with installation. The product rollout failed, customer claims mounted, and Brice was terminated in 2017. Schletter filed Chapter 11 in 2018. Post-confirmation, Plan Administrator Carol Black sued Brice for breach of fiduciary duty under Delaware law, arguing he acted for the benefit of the German parent (continuing licensing fees) rather than the debtor, and that ignoring “red flags” about the G-Max launch constituted a Caremark oversight breach. The bankruptcy court granted summary judgment for Brice, applying the business judgment rule. On appeal, the district court affirmed: Wholly-owned subsidiary status – Under German corporate practice, the unissued 5% treasury shares didn’t change that Schletter Germany held 100% of outstanding stock. Brice’s fiduciary duty was to the parent, so licensing fee decisions could not be a loyalty breach. No Caremark claim – Alleged “red flags” (lack of testing, risky contract terms, inadequate capacity) were hindsight critiques of business risk, not evidence of knowing illegality or bad faith. Business judgment rule applied – The decision to launch G-Max was a rational attempt to address competitive decline, and nothing rebutted the presumption of good faith. Because the business judgment rule shielded Brice, the court did not address his indemnification clause defenses. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document black_v._brice.pdf (266.43 KB) Category Western District

M.D.N.C.: Brown v. First Advantage Background Services Corp. & Ashcott, LLC- Default Judgment for FCRA as to Liability not Damages

M.D.N.C.: Brown v. First Advantage Background Services Corp. & Ashcott, LLC- Default Judgment for FCRA as to Liability not Damages Ed Boltz Mon, 09/08/2025 - 17:34 Summary: When Charles Brown applied for a long-haul truck driving job with a FedEx contractor, he did what every applicant expects—passed the interview and drug test—only to have his offer rescinded after a background check falsely claimed he had felony convictions. The root cause: Defendant Ashcott, LLC, hired by First Advantage to run criminal records searches, (Good Grief!) matched another “Charles Brown” from Philadelphia (with a different middle name and Social Security number) to him, and reported that the match was based on Brown’s *full* name and SSN—something that simply could not be true. Brown sued both First Advantage and Ashcott under the Fair Credit Reporting Act (FCRA). After settling with First Advantage, he pursued a default judgment against Ashcott. The court found Ashcott properly served, that its conduct violated § 1681e(b) by failing to follow reasonable procedures to assure maximum possible accuracy, and that the error was a proximate cause of Brown’s lost job and emotional distress. However, damages were another matter. Brown asked for $100,000 compensatory (for a year’s lost wages and distress) and $100,000 punitive damages. Evidence showed he had other employment until April 2023 and some income thereafter, so his lost wage calculation did not match reality. The court granted default judgment *as to liability*, denied punitive damages for lack of evidence of a willful violation, and set the matter for a damages hearing unless Brown supplements his proof to account for other income during the relevant period. Commentary: The opinion is a tidy reminder for consumer advocates that FCRA liability is not just about “false” reports—it’s about whether the background screener reasonably matched the data. Here, Ashcott claimed a perfect match on SSN when the middle name and SSN were actually different. That misstatement essentially doomed them once they defaulted. From a practice standpoint, this case illustrates: The importance of damages proof: Even with liability conceded, a plaintiff must prove actual damages with specificity, especially if there was other income or mitigation. Bankruptcy attorneys are well familiar with similar challenges when proving lost wages in discharge injunction or stay violation actions. The uphill battle for punitive damages: Without facts showing reckless disregard or intentional misconduct, courts will not presume willfulness from mere negligence. Parallel lessons for bankruptcy cases: Consumer debtors wrongfully denied employment due to inaccurate credit or criminal background reports may have viable FCRA claims, but those claims must be backed by documentary proof of lost earnings and clear causation—especially if those damages will be property of the estate and subject to trustee oversight. The factual irony here is that, had there been a Chapter 13 case, the false report’s economic harm (which would not be protected as under the personal injury exemption) could have impacted the debtor’s ability to fund a plan—yet the litigation and any recovery could also have been estate property. This makes a strong argument for debtor’s counsel to consider FCRA claims not just as side litigation, but as tools to protect the debtor’s fresh start and preserve plan feasibility. With proper attribution, please share this post. Blog comments Attachment Document brown_v._first_advantage.pdf (112.31 KB) Category Middle District

M.D.N.C.: Brown v. First Advantage Background Services Corp. & Ashcott, LLC- Default Judgment for FCRA as to Liability not Damages

M.D.N.C.: Brown v. First Advantage Background Services Corp. & Ashcott, LLC- Default Judgment for FCRA as to Liability not Damages Ed Boltz Mon, 09/08/2025 - 17:34 Summary: When Charles Brown applied for a long-haul truck driving job with a FedEx contractor, he did what every applicant expects—passed the interview and drug test—only to have his offer rescinded after a background check falsely claimed he had felony convictions. The root cause: Defendant Ashcott, LLC, hired by First Advantage to run criminal records searches, (Good Grief!) matched another “Charles Brown” from Philadelphia (with a different middle name and Social Security number) to him, and reported that the match was based on Brown’s *full* name and SSN—something that simply could not be true. Brown sued both First Advantage and Ashcott under the Fair Credit Reporting Act (FCRA). After settling with First Advantage, he pursued a default judgment against Ashcott. The court found Ashcott properly served, that its conduct violated § 1681e(b) by failing to follow reasonable procedures to assure maximum possible accuracy, and that the error was a proximate cause of Brown’s lost job and emotional distress. However, damages were another matter. Brown asked for $100,000 compensatory (for a year’s lost wages and distress) and $100,000 punitive damages. Evidence showed he had other employment until April 2023 and some income thereafter, so his lost wage calculation did not match reality. The court granted default judgment *as to liability*, denied punitive damages for lack of evidence of a willful violation, and set the matter for a damages hearing unless Brown supplements his proof to account for other income during the relevant period. Commentary: The opinion is a tidy reminder for consumer advocates that FCRA liability is not just about “false” reports—it’s about whether the background screener reasonably matched the data. Here, Ashcott claimed a perfect match on SSN when the middle name and SSN were actually different. That misstatement essentially doomed them once they defaulted. From a practice standpoint, this case illustrates: The importance of damages proof: Even with liability conceded, a plaintiff must prove actual damages with specificity, especially if there was other income or mitigation. Bankruptcy attorneys are well familiar with similar challenges when proving lost wages in discharge injunction or stay violation actions. The uphill battle for punitive damages: Without facts showing reckless disregard or intentional misconduct, courts will not presume willfulness from mere negligence. Parallel lessons for bankruptcy cases: Consumer debtors wrongfully denied employment due to inaccurate credit or criminal background reports may have viable FCRA claims, but those claims must be backed by documentary proof of lost earnings and clear causation—especially if those damages will be property of the estate and subject to trustee oversight. The factual irony here is that, had there been a Chapter 13 case, the false report’s economic harm (which would not be protected as under the personal injury exemption) could have impacted the debtor’s ability to fund a plan—yet the litigation and any recovery could also have been estate property. This makes a strong argument for debtor’s counsel to consider FCRA claims not just as side litigation, but as tools to protect the debtor’s fresh start and preserve plan feasibility. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document brown_v._first_advantage.pdf (112.31 KB) Category Middle District

Is Bankruptcy or Loan Modification Better for Stopping Foreclosure in Pennsylvania?

Loan modification and bankruptcy are two different approaches to addressing the threat of foreclosure. Loan modification might only pause foreclosure, while bankruptcy might stop it altogether, and is typically the […]