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Consumer Bankruptcy Law and Practice: 9.4.6.8 Setoff of Tax Refunds

Section 362(b)(26) permits taxing authorities to set off tax refunds for prepetition tax periods against prepetition tax debts. If there is a pending action to determine tax liability, the taxing authority may hold the refund pending the outcome of the action. However, on motion by the trustee and after notice and a hearing, the court may order turnover of the refund, but only if the taxing authority is granted adequate protection for any secured claim it has under section 506(a) of the Code based on its setoff rights.

Consumer Bankruptcy Law and Practice: 9.6.5 Other Possible Remedies

The same actions that can be penalized as violations of the automatic stay might also be unfair trade practices under state law or violations of federal debt collection protections.358 In some cases it may be a good idea to assert such claims in the alternative because of the availability of enhanced damages. But, in any event, the bankruptcy court has exclusive jurisdiction over sanctions for violation of the automatic stay itself.359

Consumer Bankruptcy Law and Practice: 9.7.3.2.1 For cause

The first of the grounds listed in the statute for relief from the stay is a catchall. It provides that the stay may be lifted “for cause.” While it is clear that a lack of adequate protection, as discussed below, is one such cause, the provision is meant to allow courts considerable discretion to grant relief for other reasons. Thus, legal proceedings against the debtor that have nothing to do with bankruptcy would ordinarily be allowed to go forward. Similarly, the court may lift the stay with respect to other activities that will have no effect on the bankruptcy.

Consumer Bankruptcy Law and Practice: 9.7.3.2.4 Leases involving residential property

Special problems are posed under the stay provisions in cases that involve leases of residential property.513 While it may be quite possible for a debtor to give a lessor adequate protection, perhaps in the form of a security deposit, it is usually difficult to argue that the debtor has equity in the leased premises unless the debtor has a long-term lease at a rate below current market values, or receives other benefits from remaining in possession, such as the special rights available in public housing or in a rent-control jurisdiction.

Consumer Bankruptcy Law and Practice: 9.7.3.3.2 Other tactics

Discovery may be helpful, as always, in narrowing the issues or pointing up flaws in an opponent’s case. In any case, because of the time deadlines involved in stay litigation, a motion for expedited discovery is usually necessary to complete discovery within the thirty days before the preliminary hearing. One positive result of such a motion is often a quick stipulation from the party seeking relief from the stay agreeing that the hearing (and the stay) can be continued beyond the thirty-day deadline.

Consumer Bankruptcy Law and Practice: 9.7.3.3.3 Stays pending appeal

If an appeal is contemplated after the automatic stay is terminated by order of the court or otherwise, it may be essential to obtain a stay pending appeal. The rules provide a fourteen-day delay in the effectiveness of an order granting relief from stay in order to provide time to seek a stay pending appeal, but a court may order otherwise.537 Therefore, if a possible appeal is contemplated, a debtor should argue against any language in the court’s order changing the normal fourteen-day delay of relief from the stay.

Consumer Banking and Payments Law: 6.7.5.2 Consumer Liability for Unauthorized Transfer If Bound by Agency

A consumer can be liable for an unauthorized funds transfer if the consumer authorized the payment order or if the consumer is otherwise bound by the payment order under applicable laws of agency.458 However, it is highly unlikely that a bank would be able to assert that a consumer is bound under the applicable laws of agency. As the First Circuit explained, “ ‘in a very large percentage of cases covered by Article 4A, . . .

Consumer Banking and Payments Law: 6.7.5.3.1 Transfer deemed authorized if validated by agreed-upon, commercially reasonable security procedure

Article 4A provides a second way for a bank to shift liability to the consumer for unauthorized funds transfers.460 A funds transfer is deemed authorized by the consumer if the bank verified the authenticity of the instruction with a security procedure agreed to by the consumer.461 The bank must verify the authenticity of the payment order in good faith using a commercially reasonable security procedure t

Consumer Banking and Payments Law: 6.7.5.3.2 Consumer must agree to the security procedure

To shift the liability of an unauthorized transfer to a consumer, the security procedure used by the bank must be one “established by agreement of a customer and a receiving bank.”464 The term does not apply to “procedures that the receiving bank may follow unilaterally in processing payment orders.”465 The consumer must agree to a specific security procedure, not merely the fact that the bank will use so

Consumer Banking and Payments Law: 6.7.5.5 Consumer Liability for an Unauthorized Transfer Can Be Limited by Agreement or By Showing That It Was Not Caused Directly or Indirectly by the Consumer

Although an unauthorized funds transfer may be deemed authorized because the consumer’s bank verified the authenticity of the instruction with a security procedure agreed to by the consumer—i.e., the bank validated the funds transfer—Article 4A does provide a mechanism for limiting or eliminating the consumer’s liability.494

Consumer Banking and Payments Law: 6.7.8.2 Common Law Claims That Are Not Preempted by UCC Article 4A

Article 4A is not the “exclusive means by which a plaintiff can seek to redress an alleged harm arising from a funds transfer.”568 A plaintiff may assert a common law claim based upon a funds transfer if the claim “(1) arises from circumstances not contemplated in Article 4A or (2) represents rights and obligations not contrary to those set forth in Article 4A.”569 As the First Circuit put it, “courts hav

Home Foreclosures: 10.8.2.1a. The Significance of When the Lease Commenced

The two key predictors under state law as to whether a tenant has rights to remain in the foreclosed property are whether the lease was executed before or after the mortgage and whether a foreclosure is judicial or non-judicial.621 If a lease was consummated prior to creation of the mortgage, the lease generally is treated as not extinguished by the foreclosure, in both judicial and non-judicial foreclosure states.622 This is so because the foreclosure purchaser acquires no greater interest than

Consumer Bankruptcy Law and Practice: Introduction

The Official Forms necessary to commence a case are reproduced in Appendix D, supra. These forms are included as sample completed bankruptcy schedules illustrating how to prepare an initial filing. Other Official Forms are included in blank format.