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District Court Affirms Order Modifying Automatic Stay to Allow Nonfiling Co-Debtor to Receive Statements and Negotiate a Cure and Remands for Bank to Comply

By Karl Johnson posted 04-18-2019 06:51 PM

  
​BANKRUPTCY BULLETIN
Editors-in-Chief
Karl Johnson, Hellmuth & Johnson, PLLC
Jeffrey Klobucar, Bassford Remele, P.A.
Contributing Editor: Ian Rubenstrunk, Winthrop & Weinstine, P.A.
Judge_Nelson___SunTrust_Bank_v__Hamlin.pdf

In Suntrust Bank v. Hamlin, et al., 2019 WL 318394, the district court affirmed and remanded the bankruptcy court’s order on Suntrust’s motion for relief from the automatic stay under 11 U.S.C. §§ 362(d)(1) and 1301(c)(2).

 

Suntrust Bank, the appellant, moved for relief from the automatic stay in order to foreclose on a vehicle owned by a non-filing codebtor.  Suntrust argued that it was entitled to relief because the loan was in arrears and the debtors’ plan did not account for full repayment of the arrearage. Additionally, Suntrust argued that the value of the vehicle was less than the amount owed under the loan.  The Bankruptcy Court held a telephonic hearing on the motion, wherein the non-filing codebtor indicated that the only reason she stopped making payments was because Suntrust terminated her online access to her account, which is how she historically made payments. Counsel for Suntrust confirmed that access to the online account had been terminated upon the debtors’ filing for bankruptcy. Hamlin also explained at the hearing that she was willing to work with Suntrust to cure the arrears.

 

The bankruptcy court denied the motion and directed Suntrust to work with Hamlin on a schedule to repay the arrears. In the event the parties were unable to reach a resolution, the bankruptcy court explained that Suntrust could then renew its request for relief from the automatic stay.  Suntrust then appealed the bankruptcy court’s decision and purportedly did not reach out to the non-filing codebtor, arguing that such a communication would have been a violation of the automatic stay.

 

The district court cited three reasons to affirm and remand.  First, the district court questioned whether it had jurisdiction because it was unclear whether the order was a final order.  The district court explained that the record suggested the order merely deferred a ruling on the motion, pending the outcome of a negotiation, in which case the order would not have been final or appealable. Second, the district court found that the bankruptcy court did not abuse its discretion in modifying the stay to allow for a negotiation before it would ultimately grant Suntrust’s request to move forward with foreclosure. The district court noted that there was nothing in the record to suggest that the relief would never be granted, but instead that a negotiated resolution should be attempted first. Third, the district court rejected Suntrust’s argument that negotiating with Hamlin would have been a violation of the stay when such negotiation was explicitly ordered by the bankruptcy court.

 

Ultimately, the district court remanded the matter to the bankruptcy court and directed Suntrust to comply with the bankruptcy court’s order to first engage in a negotiation for the cure of the payment arrears with the non-filing codebtor.

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