Burr & Forman

01.26.2018   |   Articles / Publications

Burr Alert: Eleventh Circuit Holds That a Creditor’s Due Process Claim Can Be Inadvertently Waived By Inaction

On December 11, 2017, in a case entitled In re Iliceto,1 the Eleventh Circuit Court of Appeals affirmed the district court’s decision,2 which held that Nationstar Mortgage, LLC (“Nationstar” or the “Creditor”) received notice reasonably calculated under all the circumstances to apprise it that its status as a secured creditor was being challenged by Robert Iliceto (“Iliceto” or the “Debtor”) in his Chapter 13 bankruptcy proceeding,3 even though the Debtor did not notify Nationstar that he was objecting to the validity of its mortgage. Citing inaction on the part of the Creditor for more than a year and a half, the Court determined that Nationstar was not denied due process when the district court invalidated its mortgage lien.

Factual Background
In In re Iliceto, the Debtor filed for Chapter 13 bankruptcy, listing a mortgage held by U.S. Bank, inter alia, on Schedule D. U.S. Bank then filed a proof of claim, including its service address. Some months later, Nationstar filed papers indicating that U.S. Bank’s claim had been transferred to Nationstar, and listed its address for service. The Debtor filed an objection to U.S. Bank’s claim, which was served on U.S. Bank but not on Nationstar. The Debtor then filed a proof of claim in Nationstar’s name,4 followed by an objection to the proof of claim asserting that Nationstar is the proper transferee but not the proper assignee. The Debtor neglected to serve these papers on Nationstar, and there is no evidence that Nationstar received notice of the objection.

Ultimately, Nationstar did not respond to the objection, so the bankruptcy court issued an order sustaining the objection and declaring that Nationstar only had an unsecured claim in the amount of $507,209.79, and that any claim to the real property would be void upon entry of the Debtor’s discharge. Notably, this order was served on Nationstar. After various other filings, the Debtor filed a motion to deem Nationstar’s mortgage extinguished because it was an unsecured claim that had been discharged.

Download the full version, “Burr Alert: Eleventh Circuit Holds That a Creditor’s Due Process Claim Can Be Inadvertently Waived By Inaction” written by Samantha Alves Orender.

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