All items from Georgia Bankruptcy Blog

In May 2012 the Eleventh Circuit entered its opinion in  In re McNeal and seemingly approved the stripping of wholly unsecured second liens in Chapter 7 cases.  Since this was an unpublished opinion of a panel (and non-binding), and contrary to authority in other Circuits, lawyers have been watching to see what Bankruptcy Courts would do until the issue was decided by the full Circuit or the Supreme Court.  Many Courts in the Circuit, including the Northern District of Georgia, have entered orders allowing the stripping.
In Williams v. Internal Revenue Service (In re Williams), Adv. Proc. No. 12-1027, 2013 Bankr. LEXIS 1107 (Bankr. M.D. Ga. March 15, 2013) (click here for .pdf), the debtors home was worth $210,000.00 and subject to a first-priority lien in the amount of $237,564.00.  The IRS held a second-priority tax lien on the property in the amount of $$77,588.51.  The debtors filed a proceeding to strip the wholly unsecured lien of the IRS.
On summary judgment, Judge Walker ruled in favor of the debtors based on the McNeal case, although he believes it was wrongly decided by the Eleventh Circuit.

In a key decision in the Northern District of Georgia, Judge Hagenau has ruled that a secured creditor is only entitled to a secured claim, pursuant to § 506(b), to the extent of its actual and reasonable fees rather than contractual and statutory fees after a foreclosure sale where the property has not been abandoned.  Most Promissory Notes and Security Deeds call for contractual attorneys fees and expenses upon default.  The contractual and statutory attorneys fees are up to 15% of the loan amount and may or may not be close to the actual fees incurred by the lender. 
In Trauner v. State Bank and Trust Company (In re Solid Rock Development Corp., Inc.), Ch. 7 Case No. 10-72777, Adv. Proc. No. 12-5238, 481 B.R. 221, 2012 Bankr. LEXIS 4845 (September 27, 2012) (click here for .pdf),  SB&T received relief from the automatic stay to foreclose on the Debtor's real property.  The Order lifting the stay stated the following:

On February 18, 2013, the Georgia Supreme Court issued its opinion in Wells Fargo Bank. N.A. v. Gordon, No. S12Q2067, 2013 Ga. LEXIS 158 (Feb 18, 2013).  The case was certified to the Georgia Supreme Court by the Eleventh Circuit Court of Appeals in In re Codrington, 691 F3d 1336 (11th Cir. 2012) (click here for order).
The Court, in short, held that deeds that are not signed by an unofficial witness are not eligible for recording and, if recorded, do not constitute proper notice to put a hypothetical bona fide purchaser (such as a Bankruptcy Trustee) on inquiry notice of the deed.  The effect of this opinion (and the U.S. Bank opinion discussed below) is unclear at this point, but the Georgia Supreme Court has made it clear that the rules regarding deeds are subject to a strict compliance standard and deeds not in compliance are not eligible for recording.  There is little doubt that many Bankruptcy Trustees in Georgia will begin to closely inspect deeds filed with respect to property of bankruptcy estates.  If a security deed is defective, the lien may be avoided and the property sold for the benefit of all creditors.

According to a new study by Robert Lawless and Jennifer Robbennolt (summarized in the Wall Street Journal), Judges are more likely to approve a Chapter 13 plan that includes an apology.  From the Wall Street Journal article:

In the 29-page study, Lawless and colleague Jennifer Robbennolt said they told participating judges about the Millers, a fictional family of four with a $180,000 home, $25,500 in credit card debt and a $26,000 Ford Explorer SUV. Their credit card debt ranged from $9,000 for the husband’s medical expenses to $270 per month spent on their two daughters, ages 10 and 13, for gymnastics.

At the end of their Chapter 13 payment plan, which paid unsecured creditors 18% of their debt over three years, the Millers wrote, “We have no way of keeping up with our bills and repaying everything. It is all we can do to pay the mortgage and keep food on the table. We know that we are responsible for the mess we are in. We are truly sorry.”