WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on Nov. 14 declined to hear a bankruptcy case in which a lender had contended that it did not violate the automatic stay in bankruptcy when it exercised its rights under the Real Estate Settlement Procedures Act and reanalyzed a debtor couple's escrow account to determine how much money the couple needed to deposit to cover taxes assessed after they had filed their bankruptcy petition (Countrywide Home Loans Inc. v. Francisco Rodriguez, No. 10-1285, Chapter 13, U.S. Sup.).
After Francisco and Anna Rodriguez filed for Chapter 13 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey, the couple filed an adversary complaint against their lender, Countrywide Home Loans Inc., contending that it had violated the automatic stay by requiring them to deposit more money into their escrow account.
The Bankruptcy Court ruled in favor of the Rodriguezes, and Countrywide appealed directly to the Third Circuit U.S. Court of Appeals. The Third Circuit divided on the issue, with the majority ruling in favor of the couple. Countrywide appealed to the Supreme Court.
Countrywide contended in its petition for a writ of certiorari that the case involved "an important, recurring and industry-wide issue" for companies servicing residential mortgages and that the Third Circuit's opinion had the possibility of affecting more than 300,000 Chapter 13 cases each year.
The Rodriguezes argued that certiorari was not warranted because the Third Circuit's opinion was "in accord with" long-established definitions of a "claim" in bankruptcy.
[Editor's Note: Full coverage will be in the Nov. 16 issue of the LexisNexis Bankruptcy Report. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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