David

Davidson County Chancery Court Case Information Now Online

For a few years now, all of the Davidson County Circuit Court’s records have been online at the Davidson County Caselink (subs. req’d).

Now, the case records of the Davidson County Chancery Court are online on the Court’s website. Although it doesn’t provide scanned copies of pleadings (yet), the website contains party information and the dates of relevant pleadings.

As the world moves entirely online, it’s great to see this move from Chancery Court. Will electronic filing of Court pleadings be next?

Santa Fe Holding Company Bankruptcy Case in Middle District of Tennessee Starts the Preference Recovery Process

Yesterday in the Middle District of Tennessee Bankruptcy Court, the Trust (DBMC Restaurants f/k/a DBMC Investments, LLC) created in the Santa Fe Holding Company, Inc. bankruptcy began the process of filing adversary proceedings to recover preferences. So far, about 30 cases have been filed.

This is a process that generally happens after a Chapter 11 Plan is confirmed, in which the post-confirmation entity takes action on the various lawsuits it held as of the bankruptcy filing.

Here, the pleadings, styled “Complaint to Avoid and Recover Avoidable Transfers,” make claims under 11 U.S.C. 547, which is a provision of the Bankruptcy Code that, under certain circumstances, allows a trustee to recover payments made to creditors within 90 days of the bankruptcy filing.

The basic theory is that, the debtor is presumed to be insolvent during those 90 days, and any payments made during that period were selective disbursements (a.k.a. preferential payments) to certain preferred creditors. By these actions, the trustee recovers these preference payments, puts the money into a big pot, and then distributes it evenly to all creditors.

Sounds pretty fair in theory, right? Well, in practice, these actions drive creditors crazy. “Not only did this company bankrupt on the debt, now, two years later, they’re suing me to take back some of the last money they paid me?” My response? “Yes.”

There are a number of defenses to these actions (see 11 USC 547(c)), and I’ll touch on those in a later post. Right now, I’m going to go look at the dockets to see who all is getting sued. So far, this includes: Continue reading “Santa Fe Holding Company Bankruptcy Case in Middle District of Tennessee Starts the Preference Recovery Process”

50 Cent and Young Buck are scheduled for a Big Fight next week in Nashville Bankruptcy Court

Young Buck has filed a Chapter 11 Bankruptcy Case in the Middle District of Tennessee, and the battle is heating up between Young Buck (David Brown) and 50 Cent’s G-Unit Records about what to do with the remainder of Young Buck’s recording contract with G-Unit.

Plus, Young Buck owes $170,983.00 to 50 Cent on a personal loan. Yikes.

The Wall Street Journal Bankruptcy Blog has a good summary of the issues set for hearing on July 19, 2011.

Here is a copy of the Objection to the Young Buck Chapter 11 Plan filed by G-Unit. An interesting excerpt:

…there is a significant question as to whether the Debtor can manage his business affairs throughout the course of the Plan to sustain any level of success going forward to fund the Plan. At the recent 2004 examination of the Debtor, he had trouble identifying where he had been on tour, who had booked his travel, how he had even gotten from one place to another…

Just another day in the Nashville Bankruptcy Courts.

Speaking Engagement: 5th Annual Law Conference for Tennessee Practitioners

The Tennessee Attorneys Memo is hosting the 5th Annual Law Conference for Tennessee Practitioners in Nashville on November 3 and 4, 2011.

They advertise it as “[f]eaturing an all-star cast of prominent Tennessee judges and attorneys and 15 hours of CLE credit, including 3 hours of DUAL credit.”

They’ve invited me to speak on issues surrounding Tennessee collections and Judgment Enforcement, and I always agree to anything where I can be described as an “all-star.”

I’ve spoken at this conference before, and it’s a good event, with tons of materials and smart presenters. I’m planning on jazzing up this year’s creditors rights presentation with a discussion of social media law and the interplay between social media and the Fair Debt Collections Practices act in collections.

You can sign up for one or both days here. I’ll be speaking on Friday.

Nashville Bankruptcy Court Ruling Finds That Delay in Foreclosure Can Lead to Waiver of Rights

The Tennessean wrote about Nashville Bankruptcy Judge Paine’s recent opinion that subordinated a senior lien-holder’s Deed of Trust where the bank delayed foreclosure on the property. The debtor sued the bank for resolution, because homeowners’ association dues were continuing to accrue in her name and, under the Bankruptcy Code, a debtor can remain liable for post-petition HOA dues on property.

In the case, In re Sheryl Lynn Pigg, U.S. Bankr. Adv. Case No. 10-00642A, BAC Home Loans took possession of and secured a flood damaged vacant home by changing the locks and posting notice of the possession. In her Chapter 7 Bankruptcy, the Debtor surrendered all interest in the property to the Bank. But, despite all that, the Bank never actually foreclosed–the property just sat vacant.

During that time, however, the HOA continued to accrue post-petition unpaid dues, which the Debtor continues to be liable for under 11 U.S.C. § 523(a)(16).

The Debtor filed the Bankruptcy lawsuit in order to cut off her liability for the dues, either by having the Judge rule that BOA is liable by virtue of its possession or by forcing BOA to foreclose.

The Bankruptcy Court ruled that the Bank had taken possession of the property and, as a result, was liable for the accruing HOA dues. But, rather than just using the text of the HOA obligations under the Master Deed (which supported the same result), the Court used its equitable powers under the Bankruptcy Code to order a sale, under Section 363, of the property, with the Bank’s lien claim subordinated to the costs of the Trustee’s sale and to the HOA debts owed (and HOA attorney fees). The Court expressly found that “the Bank and the HOA have consented to the sale by their inaction.”

This is an interesting ruling, because nothing in the Bankruptcy Code allows a Court to subvert the priority of a valid and properly perfected property lien. Here, using only its equitable powers, the Court fashioned a fair outcome, but a clear departure from state law lien priority statutes.

In light of this opinion, lenders may need to be aware of any delays in initiating the foreclosure process. Nothing in state law expressly requires that banks foreclose under any time deadline, but this opinion suggests that lenders open themselves up to attack where they wait. This is dangerous new precedent.

A copy of the full opinion is here: Pigg Opinion Bankruptcy Court

Debt Settlement Advice: Bring Proof that You’re Broke or Don’t Bother Making an Offer

I’m a creditor rights attorney, and, with the economy the way it is, I’m filing collection lawsuits left and right.

In most cases, the borrowers are too broke to hire a lawyer to respond, so they ignore the lawsuit and let a judgment be entered against them. In some cases, however, the borrowers are pro-active and call me to make a settlement proposal.

In the past, when property still had equity and people were just one loan application away from a $40,000 Home Equity Loan, creditors weren’t listening to low-ball offers. Even today, it’s still not true that banks will happily accept 10% of whatever they’re owed.

If you’re going to make a low-ball offer, support it with proof that you’re paying them the last pennies you have. You need to show the creditor:

A recent financial statement;
A list of all assets, such as cars, real property, cash, other bank accounts;
A list of all debts (which shows the creditor who else is chasing you);
Copies of recent bank statements;
Recent pay stubs;
A budget showing your monthly expenses; and
Anything else that proves that you don’t have the money to make a better offer.

Again, the rumors of debt settlements for pennies on the dollar are wildly exaggerated. Creditors will accept discounted payments, but they aren’t approaching these proposals blindly. When in doubt, they decline bad proposals.

If you want a steep discount, you have to work for it, and assembling the information listed above is step one in the process.

Creditor Issues in Memphis Bankruptcy of Rusty Hyneman Sound Like Law School Exam

Law school exams are a strange creature. Generally, they present a crazy set of facts with a dozen twists and turns, all of which raise different legal issues. The student’s goal is to spot and discuss those issues.

I thought I was reading a law school exam question when I read this Commercial Appeal article about the Bankruptcy filing by Memphis developer Rusty Hyneman.

Hyneman is real estate developer, who has fallen on hard times, and his creditors are aggressively coming after him. Last week, one bank showed up with the sheriff to seize all personal possessions.

But, Hyneman was ready: he had documents showing that he didn’t own any of the stuff in his 12,000 square foot house free and clear. He had pledged it as security to another creditor…his dad.

Now, the banks are in issue spotting mode. They are alleging that the lien granted to the elder Hyneman is a fraudulent conveyance. They are attacking the priority of the father’s lien. They are attacking Hyneman’s proposed sale of his assets to repay his dad. Finally, they are arguing that the proposed purchaser of the assets is a sham entity.

Man-o-man, that’s four legal issues right there, and you can bet there will be a few more.

The best part about the story? The Judge handling this case is Judge Paulette Delk, my former Article 9 professor in law school. This Hyneman case will be a breeze for her, since she’s dealt with law school exams questions with more issues raised than this.

Enforcement and Domestication of Foreign Judgments in Tennessee: Simple Under The Uniform Enforcement of Foreign Judgments Act

To creditors’ chagrin, judgments aren’t enforceable across state lines. Before a Tennessee judgment can be enforced against the debtor’s assets in Florida, the creditor has to “domesticate” that judgment, which requires that a second action be filed in the new state to recognize the out-of-state judgment.

Fortunately, this process is governed by a commonly adopted act, the Uniform Enforcement of Foreign Judgments Act (Tenn. Code Ann. § 26-6-101, et. seq.), which creates a stream-lined process for creditors to follow.

It’s generally just a two step process. The creditor must (1) file an authenticated copy of the judgment and (2) file a supporting Affidavit. In most cases, the judgment of the sister state will be entitled to “full faith and credit” by the new court.

There are limited grounds for attack on domestication. The defendant doesn’t get to re-litigate the case; instead, he or she can only contest procedural defects, like no service of process or fraud. These issues must be raised in the 30 days after service of the domestication action.

On June 30, 2011, the Tennessee Court of Appeals issued a new opinion, at Cadlerock, LLC v. Sheila R. Weber, which provides a good summary of the issues and law presented on foreign judgment enforcement actions. This Act isn’t often litigated, but this is a good case to have handy, just in case.

Your Legislature Gets One Right: Revised Tenn. Code Ann. § 35-5-101 Allows Postponement of Foreclosure Sales

There are a number of reasons why a lender would postpone a foreclosure sale, but the most common is that the borrower and lender are trying to resolve the default and avoid the sale. This usually involves the payment of enough money to bring it current (or “current enough”). These efforts often fail, because time runs out, and the lender doesn’t want to incur the expense of cancelling and later re-publishing the sale notice.

In the past, Tennessee law has been unclear as to, first, whether a published sale can be postponed, and, second, whether the lender needs to re-run the Sale Notice publication for a postponement.

As to the first question, most lenders look at their mortgage instrument, to see whether there is express language allowing adjournment. Absent that, the lender will not postpone the sale.

As to the second, there has been no real consensus, other than a vague “it depends on how long the postpone is for.”

In this past session, the Tennessee Legislature provided an answer, in changes to Tenn. Code Ann. Sec. 35-5-101, effective July 1, 2011, which allow for postponements for up to one year after the initial sale date and require certain notices to the borrower.

This is a law that should be good for both borrowers and lenders. It provides lenders with some assurance that they can slow the process down and negotiate with their borrowers, but without the risk of introducing a defect into their sale process. For borrowers facing potential foreclosure, it provides more time to get the issues resolved.

A rare case where everybody wins.

Using Social Media to Collect Debt: If You Can Navigate the Ethical Minefield, It Works 5% of the Time

A new trend in lawyer Continuing Legal Education are seminars advocating use of Social Media to Collect Debts. The seminars either advocate for social media as the tool of the future or caution that it is an ethical trap for debt collectors.

It’s a hot issue in debt collection. NPR did a story on this last year, and the Federal Trade Commission recently conducted a “Debt Collection 2.0” workshop on the issue. Frankly, it’s such a new issue that the Fair Debt Collection Practices Act (FDCPA) doesn’t exactly fit, but it’s close.

It’s definitely a trap for the debt collector, especially given that the FDCPA seems to apply to all communications, regardless of whether it’s a letter, e-mail, or friend request. Does a creditor have to identify themselves as a debt collector under the Act in an initial friend request? Does the friend request (i.e. an “initial communication”) have to be followed by the Act’s required debt validation warning (15 USC 1692g)?

I have no idea. My philosophy is, when in doubt about ethics, choose the safe route. Here, the safe route is avoiding affirmative contact but, if the profile is public, then by all means use whatever you can publicly find.

Just yesterday, I was trying to locate a defendant who had disappeared–all of the searches kept going back to his old house, where the residents swore he no longer lived. But, I found an online profile for him on Map My Walk, a site that allows people to track their running and walking routes. You can guess the rest: everyday, his walks started and ended at the address that I had, providing confirmation of his address (and what time he was home in the afternoon).

At one time, I saw social media as the future of debt collection, especially in the early days of social networking sites (Myspace, Friendster, early Facebook), when people didn’t think twice about privacy settings. Now, people are more savvy about online privacy. (And it’s not necessarily to dodge debt collections–it’s more likely to avoid the boss seeing your party photos.)

Even though people can post pictures of their new car or brag about their promotion at work, most people know better. But, not everybody knows better–and, if they are going to put it online where anybody can see, they can’t complain when a debt collector finds it.

My final take? It’s not the wave of the future in collections. It’s a box to check in the process, but not the solution to finding debtors or their assets.