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August 2019 Archives

Marital Settlement Agreement Does Not Relieve Debtor of Non-Dischargeable Liability

In U.S. Dep't of Educ. v. Carrion (In re Carrion), BAP No. SC-18-1234-FBKu (May 31, 2019), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that a debtor remained personally liable for the entire amount of a student loan debt despite a marital settlement agreement ("MSA") providing for his former wife to assume half of the debt. While married, the debtor borrowed $21,894 from the U.S. Department of Education ("Department") to pay tuition for his son's college education. In June 2011, the debtor and his then wife filed a joint chapter 7 bankruptcy petition, listing the student loan as debt belonging to the debtor husband. Two years later, in their dissolution proceeding, the husband and wife entered into a marital settlement agreement providing that they would each be liable for half of the educational loan. The debtor commenced an adversary proceeding against the Department alleging that the debt was void because the promissory note was executed as a result of identity theft and that the educational debt was discharged. The bankruptcy court rejected the identity theft argument, but found that only one half of the educational loan was nondischargeable under 11 U.S.C. § 523(a)(8).

Declaration By Assignee's Agent Confirming Agent is in Possession of Original Promissory Note Establishes Standing to Seek Relief from the Automatic Stay

In Harms v. Bank of New York Mellon (In re Harms), BAP No. NC-18-1284-STaB (July 9, 2019), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that an assignee of a beneficial interest under a deed of trust had established its standing to seek relief from the automatic stay by producing a declaration by the assignee's agent confirming that the agent was in possession of the original promissory note. The dispute between the parties arose from a promissory note ("Note") secured by a deed of trust which had been assigned to Bank of New York Mellon ("BONYM"). The Debtor asserted that BONYM had not presented admissible or sufficient evidence to support its claim that it possessed the original Note or otherwise was entitled to enforce the Note. The BAP reviewed a supplemental declaration filed by BONYM ("Declaration") where the declarant ("Declarant") identified herself as the Assistant Vice President for Bank of America, N.A. ("BofA"), the servicing agent for BONYM. In the Declaration, the Declarant stated she had reviewed the collateral file maintaining the Debtor's loan and was able to confirm that BofA was and is in possession of the original Note. The Debtor objected that (1) Declarant had not claimed to have personally seen the Note or personally verified BONYM's possession of the Note, and (2) Declarant's knowledge was based on inadmissible hearsay.

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