Collections: Credit Reports

Credit reports provide individuals or institutions that have legitimate "need to know" rights with access to important information. This information includes full name, address, social security number, employer, spouse's name, loans, charge accounts, credit cards, bankruptcies, tax liens, and judgments.

Credit reports are governed by state laws and federal law - the Fair Credit Reporting Act (FCRA). In addition, the Federal Trade Commission regulates the credit reporting industry.

The three largest credit reporting agencies are Equifax, Trans Union, and Experian. There are also several local agencies. 

Information will remain on credit reports for varying lengths of time:

* Chapter 7 Bankruptcies - Ten years from the date of filing, regardless of dismissal or discharge.

* Chapter 13 Bankruptcies - Seven years from plan completion.

* All remaining negative information - Seven years.

* Open accounts in good standing - indefinite.

If an individual disputes information reported to the reporting agency, the individual can send notice of the dispute to the agency. The agency will then contact the information provider to verify the information. If the information cannot be verified, it should be deleted. The Agency will then report its findings to the individual. If the individual still disputes the information, the individual may provide a written statement (up to 100 words) to accompany the report. 

If the verification results in a more favorable report for the individual, he may request that the revised copy be sent to anyone who has requested his report within the last six months for credit purposes, or in the past two years for employment purposes. 

Foreclosure: Be Prepared to Conduct Foreclosures

While foreclosure may not be a topic that debtors (or even creditors) want to discuss, like all other aspects of proper business planning, you should.

With more creditors engaging in loans secured by real estate (which I strongly advocate), be that first deeds of trust, second or subsequent deeds of trust, refinances or credit lines, a certain amount of default is to be expected. Being prepared to react to default is imperative.

We represent creditors - from start to finish. We are a full-service creditor’s rights firm. While many attorneys do “collections”, few attorneys have the trained expertise and staff to represent creditors in all four areas of Creditor’s Rights—Collections, Bankruptcy, Real Estate and Foreclosure. WE DO FORECLOSURES. We will handle foreclosure proceedings from demand to final accounting.

Real Estate: Homeowner Associations – Easements

Cases involving HOA powers are frequently fact specific and governing document specific. Recently, the Frederick County Circuit Court decided a case in which a homeowners association was held in violation of the homeowners association’s restrictive covenants and liable for compensatory damages and attorneys’ fees because it removed a wall on a homeowner’s property. The homeowner spent a considerable amount of time and effort improving a portion of a shared roadway that was on his property. He cleared the land, widened the pathway, and built an eight foot retention wall along the pathway. The HOA notified the homeowner that the wall was encroaching on the right of way and told the homeowner that it must be removed at the homeowner’s expense. There was no board of directors hearing or meeting before the decision was made. Without further notice, the wall was removed but the homeowner refused to pay. In addition to tearing down the wall, the HOA installed drainage culverts in the right of way which resulted in silt flowing into the property’s septic system. The HOA filed suit and obtained a General District Court judgment for the expense of removing the wall. The homeowner then appealed the judgment to the Frederick County Circuit Court and filed a complaint against the HOA. The homeowner claimed that the HOA acted outside its authority under the restrictive covenants, which constituted trespass. The HOA filed a counterclaim, alleging breach of contract and violation of the Property Owners’ Association Act (Va. Code Section 55-508). The court held in favor of the homeowner and found that the HOA exceeded its authority under the restrictive covenants. The HOA did not have authority to remove the wall or to install the drainage culverts. In addition, the HOA did not have the ability to charge the homeowner for either the removal of the wall or the installment of the drainage culverts. The court awarded the homeowner compensatory damages of $28,500 (the value of the wall and cost of returning the property to its prior condition) and attorneys’ fees of $48,844. 

It is important to ensure that HOA covenants provide for the powers necessary to take self-help to effect repairs and remove violations. It is also important for HOAs to work through the proper channels and act within its authority granted by restrictive covenants. Failing to do so can be costly for an HOA. We have experience in drafting, reviewing, and amending HOA documents, as well as, representing HOAs in court. 

Bankruptcy: Revocation of Discharge - Fraud - Chapter 7

In the case of Dean v. McDow, the United States District Court at Norfolk, Virginia affirmed a Bankruptcy Court revocation of the debtor’s discharge of indebtedness.

The District Court in Dean stated that the Bankruptcy Court did not err in revoking the debtor’s chapter 7 discharge based on the evidence of fraud in the debtor’s earlier reporting of her pre-bankruptcy transfers of property (antiques, collectibles, furniture and jewelry), and her statements about prior involvement in a business, after her operation of a thrift store called “New to You.”

The District Court found as fact that the debtor received a discharge in her chapter 7 case about two years prior. The Bankruptcy Court later reopened the debtor’s case and revoked her discharge based upon the debtor’s fraud. The debtor raised four grounds on appeal: 1) the complaint to revoke her discharge was not timely filed; 2) the U.S. Trustee did not meet an affirmative duty to investigate the debtor’s bankruptcy and therefore constructively knew of the debtor’s fraud; 3) the debtor did not make false oaths because she lacked fraudulent intent and make her misstatements were de minimums; and 4) the revocation was based upon inadmissible evidence.

The District Court stated that cases dealing with whether the timely filing of a complaint objecting to discharge is jurisdictional are sharply divided. Despite the overall disagreement among the federal courts, the Fourth Circuit has indicated the position it finds more persuasive: the timeliness of a dischargeability complaint is not a jurisdictional prerequisite, but rather presents an affirmative defense similar to the statute of limitations that must be raised in an answer or responsive pleading. The court noted that there was nothing in the debtor’s brief or the 4th Circuit case, Farouki v. Emirates Bank Int’l ltd., to indicate that the dischargeability time limitation of Bankruptcy Rule 4004(a) should be treated differently from Bankruptcy Code Section 727(e)(1). The District Court stated that it was therefore unnecessary to address whether the U.S. Trustee’s complaint was timely filed because the debtor had waived her right to appeal on this point. Failure to raise a non-jurisdictional issue before the Bankruptcy Court will generally be treated by the District Court as a waiver of the right to have the issue heard.

The District Court stated that the debtor argued for the first time on appeal that the errors and omissions of her schedules should have put the U.S. Trustee on notice of possible fraud, triggering an obligation to investigate. Because the U.S. Trustee began investigating possible fraud only after receiving a telephone call concerning the debtor’s bankruptcy about a year after the entry of the discharge order, the debtor argues that the Trustee could not rely upon the “did not know” provision of Bankruptcy Code Section 727(d)(1). The District Court noted again, however, that the debtor did not raise the issue of the trustee’s knowledge in her answer or at trial, and the issue did not fall within the “very limited circumstances” of plain error which would result in a miscarriage of justice. The debtor waived her right to have this issue considered on appeal.

The District Court next noted that the debtor did not dispute that her schedules and Statement of Financial Affairs contained false oaths. Instead, the debtor argued that she lacked the fraudulent intent, and that her omissions were de minimus. The District Court noted that the Bankruptcy Court’s determination of fraud was a factual finding reviewed for clear error. The District Court concluded that the Bankruptcy Court did not commit clear error in determining that the debtor knowingly and fraudulently made false oaths and that the oaths concerned materials facts. Nor could the District Court find error in the Bankruptcy Court’s conclusion that the debtor’s failure to read her bankruptcy papers constituted a reckless indifference to the truth and the functional equivalent of fraud.

Finally, the District Court ruled that the Bankruptcy Court’s admission of certain exhibits relating to the debtor’s fraud, is error at all, did not even approach the standard of error so serious that it went to the integrity of the trial.

Accordingly, the revocation of the debtor’s discharge was upheld.