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The Applicability of Contempt Sanctions in Bankruptcy

first_img The Week Ahead: Nearing the Forbearance Exit 2 days ago Bankruptcy 2020-01-19 Seth Welborn The Best Markets For Residential Property Investors 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago The Applicability of Contempt Sanctions in Bankruptcy Subscribe Demand Propels Home Prices Upward 2 days ago Home / Daily Dose / The Applicability of Contempt Sanctions in Bankruptcy Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Demand Propels Home Prices Upward 2 days ago Tagged with: Bankruptcy Fabrizio & Brook, P.C Related Articles Share Savecenter_img January 19, 2020 2,056 Views Servicers Navigate the Post-Pandemic World 2 days ago Previous: Microsoft Invests $250M in Seattle Housing Next: The Ties Between ‘Global Uncertainty’ and Housing Trends Governmental Measures Target Expanded Access to Affordable Housing 2 days ago  Print This Post The Best Markets For Residential Property Investors 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Editor’s note: This feature originally appeared in the January issue of DS NewsAn order for discharge in bankruptcy acts as an injunction against any act to collect, recover, or offset a discharged debt. This includes the commencement or continuation of a lawsuit for same. The United States Code sections 524 and 105 authorize a court to impose civil contempt sanctions when a discharge order is breached and, as we know, for the most part, this has been strictly enforced.The majority of courts treat violation of a discharge order close to strict liability. As long as a creditor acted deliberately, with knowledge of the bankruptcy case, civil sanctions may be appropriate. A subjective belief that an action was in compliance, or otherwise exempt from the bankruptcy discharge, would not insulate a creditor from civil contempt.A minority of circuits have followed a more lenient, subjective standard wherein a creditor would not be held in civil contempt simply by establishing that it had a good faith belief that the discharge order did not apply to its claim, even if this belief was unreasonable.The Supreme Court issued a unanimous decision this past June, establishing a new standard for holding a creditor in contempt for violation of a discharge injunction [In re Taggart, 139 S Ct 1795 (2019)]. The court created a standard based on “objective reasonableness.” In other words, the court should not impose contempt sanctions where there is a fair ground of doubt as to the wrongfulness of the defendant’s conduct.In Taggart a prepetition lawsuit for injunctive relief resumed after the debtor’s chapter 7 bankruptcy discharge had entered. The plaintiff was successful in the lawsuit and proceeded to file an action to recover its post-petition attorney fees. The state court held that the discharge injunction did not apply to this debt and granted plaintiff’s post-petition attorney fees. The defendant reopened the bankruptcy action and filed a motion for contempt for violation of the discharge order. The bankruptcy court entered an order for contempt and sanctions for violation of discharge despite the state court’s finding that the discharge did not apply to this debt. After several appeals, the Ninth Circuit, applying a subjective standard of review, ultimately reversed the ruling for contempt and sanctions against plaintiff. The defendant, Taggart, appealed to the Supreme Court and was granted certiorari.Taggart argued that the plaintiff was in violation of the discharge injunction because it was “aware of the discharge” and “intended the action.” This is the strict liability standard applied in the majority of circuits. The Ninth Circuit disagreed because plaintiff was advised by the state court that the discharge did not apply to collection of these post-petition attorney fees and therefore had a “good faith belief” that the discharge injunction did not apply to its action. The Ninth Circuit relied on a subjective standard used in a minority of circuits.Both standards were problematic in that the strict liability standard could lead to sanctions in cases even with a cautious creditor with a reasonable belief that the discharge was not applicable (i.e. a lower court opinion). Alternately, the subjective standard would rely too heavily on “difficult to prove states of mind” leading to costly litigation for both creditors and debtors. In an attempt to create something in between the majority strict liability standard and the less common, subjective standard, the Supreme Court created what may be referred to as an “objective reasonableness” standard. Using this standard, a bankruptcy court may only impose civil contempt sanctions for violating discharge “if there is no fair ground of doubt as to whether the order barred the creditor’s conduct … when there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful under the discharge order.”The Supreme Court created an objective standard that takes into account reasonableness and good faith. This allows creditors to be somewhat less risk averse in servicing mortgage loans after a bankruptcy discharge. A less strict standard for sanctions is not only beneficial to creditors but could also be beneficial to debtors seeking information about their loans or post-bankruptcy loss mitigation options. It also minimizes some of the conflict creditors face in complying with financial protection rules requiring disclosure such as the FDCPA and FCRA with less threat of sanctions for conflicting with bankruptcy regulations. About Author: Rose Marie Brook Sign up for DS News Daily in Daily Dose, Featured, Loss Mitigation, News, Print Featureslast_img read more

‘Culture of arrogance’ says Union Tribunal

first_imgUPDATED Thursday 6th December A report issued by the tribunal investigating last term’s Union Presidential election is highly critical of key figures involved in the allegations, Cherwell24 has learned.Disqualified candidate, Krishna Omkar, is reprimanded in the report for showing a “disturbing arrogance” towards the rules of the Union and the tribunal. In particular, Omkar is alleged to have intimidated a key witness from giving evidence at the tribunal.The witness, a senior figure at the Oxford Student, was said to appear “intimidated and upset” while giving her evidence, and produced a text message from Omkar that appeared to corroborate her claims.The electoral malpractice charges against Krishna centre on a meeting held at Magdalen College the evening before the election, which was supposedly a ‘slate party’. Krishna and his associates are alleged to have been ‘lining’, a practice whereby candidates encourage members to vote for a string of other candidates, all of whom attract votes for one another.Alex Priest, Returning Officer of the Union, said, “I am aware that in the past there have been slates but they’re bad for the Union because they mean the wealthy and the popular but not necessarily hard-working get ahead…They’re inherently unfair.” When approached, Krishna declined to comment due to Union regulations.The panel of three who authored the report also state their ‘dismay’ that outgoing Union President Luke Tryl and “at least one Deputy Returning Officer” were present at the ‘slate’ meeting, when their positions “demanded the discouraging of electoral malpractice.”Several other members came under fire for displaying “a startling lack of integrity”, for seeking to disrupt the tribunal proceedings, and the panel lambaste what they see as a “culture of arrogance” where “overt and complacent disregard for the Rules is tolerated.”Under the tribunal ruling, Krishna Omkar is disqualified from standing in a re-run of the polls next term, although it is suggested that Charlotte Fischer, another Presidential candidate who brought the original complaints, will not seek to stand either. UPDATE: Krishna Omkar today lodged a formal appeal against the tribunal’s ruling. Union Returning Officer Alex Priest told Cherwell24 that “Mr Omkar has lodged an appeal on the grounds of Rule 33(d)(i) (1), (2), and (3).” These relate to: breach of tribunal procedures as outlined in the rules, that the decision of the tribunal was founded on an error of law, and that there has been a breach of any of the Principles of Natural Justice. Further details of Omkar’s claims based on these grounds are not known.It is not yet known when the hearing will take place. However, the Appellate Board must report back within 28 days of Notice of Appeal.The Appellate Board is convened by the Returning Officer under the instructions of the Senior Officers of the Union, and consists of three members of Convocation, which is the body formed by all graduates of the University. Check back to Cherwell24 for more coverage as events unfold.Additional reporting, Laura Pitellast_img read more