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Home Foreclosures: 3.6.3.2 Acquisition of Notes and Mortgages Through Merger and Purchase of Financial Institutions

Homeowners often face foreclosures by entities claiming to have acquired a loan through a merger or by the acquisition of assets from a different financial institution. As discussed above, state contract and property laws determine how rights under notes and mortgages must be transferred. State banking statutes or other commercial laws typically define the legal effect upon the assets of two financial institutions when they merge or one institution buys all the assets of another.

Fair Debt Collection: 4.8.9.1 Generally

The term [“debt collector”] does not include . . .

(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . (iii) concerns a debt which was not in default at the time it was obtained by such person;660

Fair Debt Collection: 4.8.9.2 When Does Default Occur?

The FDCPA does not define default and courts are not consistent as to standards as to when a debt is considered in default. Certainly, a debt is in default by the time the creditor characterizes a debt as a bad debt, has handed it over for collection, or has written it off—if not before then.682 A debt can be in default prior to the creditor sending a formal notice of default.683

Fair Debt Collection: 4.9.1 Overview

(j) Limited-content message means a voicemail message for a consumer that includes all of the content described in paragraph (j)(1) of this section, that may include any of the content described in paragraph (j)(2) of this section, and that includes no other content.722

Fair Debt Collection: 4.9.2 Required Information in a Limited-Content Message

(1) Required content. A limited-content message is a voicemail message for a consumer that includes:

(i) A business name for the debt collector that does not indicate that the debt collector is in the debt collection business;

(ii) A request that the consumer reply to the message;

(iii) The name or names of one or more natural persons whom the consumer can contact to reply to the debt collector; and

Consumer Bankruptcy Law and Practice: 10.4.2.2 Procedure for Use of Avoiding Powers

The Federal Rules of Bankruptcy Procedure prescribe the procedure to be followed for lien avoidance by the debtor. Rule 4003(d) provides that lien avoidance under 11 U.S.C. § 522(f) shall be by motion in accordance with Bankruptcy Rule 9014, or by serving a chapter 12 or chapter 13 plan on the lienholder in the manner provided for in Rule 7004.396 However, transfer or lien avoidance under 11 U.S.C.

Consumer Bankruptcy Law and Practice: 10.4.2.3.2 Limitations on power to avoid judicial liens

As with the other avoiding powers, if the lien only partially impairs the exemption, only that part may be avoided. Thus, if a $3000 judgment lien encumbers an otherwise unencumbered house worth $17,000, in which an interest of $15,000 can be claimed as exempt and in which an interest of $2000 is not exempt, only $1000 worth of the lien can be avoided.438 The other $2000 is deemed an encumbrance on the interest in the house that may not be claimed as exempt.

Consumer Bankruptcy Law and Practice: 10.4.2.3.3 Avoidance of liens on property that may be claimed as exempt under § 522(b)(3)(B)

A final issue that may arise under this section is whether a lien may be avoided if that lien is on joint property, such as property owned as tenants by the entireties when, but for the lien, the property could be claimed as exempt under section 522(b)(3)(B). Creditors have argued that because the lien made such property subject to process immediately before the commencement of the case, the property could not be claimed as exempt in the first place under section 522(b)(3)(B), and that therefore the avoiding powers do not even come into play.

Consumer Bankruptcy Law and Practice: 10.4.2.5 Power to Exempt Property Recovered by Trustee—§ 522(g)

A power of the debtor utilized somewhat less often is provided in section 522(g). This provision allows the debtor to exempt any property that the trustee recovers using the various trustee powers to recover property.487 Thus, if such property comes into the trustee’s hands, the debtor may claim it as exempt, as long as the prebankruptcy transfer of the property from the debtor was not voluntary and the debtor did not conceal the property.

Consumer Bankruptcy Law and Practice: 10.4.2.6.1 Introduction

More likely to be used are the provisions of section 522(h), which give the debtor the wide panoply of avoiding powers available to the trustee under sections 544, 545, 547, 548, 549, 553 and 724(a) in cases in which the trustee does not choose to avoid a transfer.504

Consumer Bankruptcy Law and Practice: 10.4.2.6.3 Statutory liens—§ 545

Under section 545, certain statutory liens may be avoided. These include any lien that first becomes effective upon insolvency or insolvency proceedings of various types, liens that could be defeated by a bona fide purchaser on the date of commencement of the case, liens for rent and liens of distress for rent. Such liens may be avoided even if they have already been enforced by a sale before the filing of the bankruptcy case.542

Consumer Bankruptcy Law and Practice: 10.4.2.6.4.1 Overview

By far the most frequently used trustee avoiding power is the power to avoid preferences, codified in 11 U.S.C. § 547. With certain exceptions, set forth in section 547(c) and (i), the trustee may avoid any transfer of property of the debtor:

Consumer Bankruptcy Law and Practice: 10.4.2.6.4.2 Exceptions to preference avoiding power

The major exceptions to the preference avoiding power are listed in section 547(c).571 The first is for exchanges that are intended to be and are, in fact, “substantially contemporaneous” exchanges for new value, for example, cash purchases, purchases paid for immediately by check, or security interests securing new value.572 The Code does not define “substantially contemporaneous.”573 Also excepted are transfers made prior to the debtor’s receipt

Consumer Bankruptcy Law and Practice: 10.4.2.6.5 Fraudulent transfers—§ 548

Besides the power to avoid transfers fraudulent under state law that is bestowed upon the trustee through section 544, the Code also contains its own fraudulent transfer avoidance power, in section 548.

Under the Code’s definition, the trustee may avoid a transfer or obligation if the transfer612 or obligation was made or incurred within two years before the case was filed and: