United States District Court, N.D. Alabama, Northeastern Division
ANNEMARIE CARNEY AXON UNITED STATES DISTRICT JUDGE
case is before the court on Defendant MidFirst Bank's
motion to withdraw the general order of reference. (Doc. 1).
The parties have fully briefed the motion. (Doc. 2; Doc. 3;
Doc. 4; Doc. 6). For the reasons discussed below, the court
finds that the motion is due to be denied.
March 23, 2017, Plaintiffs James and Beverly Love filed a
Chapter 13 bankruptcy petition in the Northern District of
Alabama. (Doc. 1 in Case 17- 80917-CRJ13). In connection
with their bankruptcy petition, the Loves filed Schedule D
which identified MidFirst Bank as a secured creditor. (Doc.
12, p. 11 in Case 17-80917-CRJ13; Doc. 3, p. 15). MidFirst
Bank filed a proof of claim in the Loves' Chapter 13 case
in the amount of $77, 308.90 which indicated a mortgage in
the Loves' principal residence. (Claim 7-1 in Claims
Register in Case 17-80917-CRJ13).
the Loves filed their bankruptcy petition, MidFirst Bank sent
the Loves a notice of continuing default. (Doc. 3, p. 2,
¶ 3). On February 26, 2018, the Loves filed an adversary
complaint in the Bankruptcy Court alleging that by sending
the notice of continuing default, MidFirst Bank violated the
Bankruptcy Court's automatic stay. (Doc. 1 in Case
April and May 2018, MidFirst Bank sent Ms. Love monthly
mortgage statements. (Doc. 1, p. 3, ¶ 4; Doc. 1, pp.
13-15; Doc. 3, p. 3, ¶ 5; Doc. 3, pp. 21-22). In May
2018, MidFirst Bank sent the Loves a document titled
“Notice of Mortgage Payment Change.” (Doc. 3, p.
3, ¶ 6; Doc. 3, pp. 23-24). MidFirst claims that it sent
the April 2018 statement to Ms. Love in order to comply with
new Consumer Financial Protection Bureau (“CFPB”)
regulations. (Doc. 1, p. 2, ¶¶ 3-4).
April 19, 2018, the Consumer Financial Protection Bureau
(“CFPB”) amended Regulation Z implementing the
Truth in Lending Act. (Doc. 1, p. 2, ¶ 3). According to
MidFirst Bank, the amended regulation requires that mortgage
servicers “provide modified periodic mortgage
statements to debtors in bankruptcy and discharged
debtors.” (Doc. 1, p. 2, ¶ 3) (citing 12 C.F.R.
§ 1026.41(e) and (f)).
23, 2018, the Bankruptcy Court held a status conference and
hearing in the adversary proceeding to discuss various
discovery matters. (Doc. 38 in Case 18-80024-CRJ). In an
order that the Bankruptcy Court issued on May 24, 2018, the
During the [May 23, 2018] hearing, counsel for the Plaintiffs
alleged that MidFirst Bank sent additional correspondence to
the Plaintiffs after they filed the above-captioned Adversary
Proceeding attempting to collect a debt in violation of the
automatic stay. Counsel for MidFirst Bank argued that the
bank issued the letter pursuant to a recent banking
regulation enacted in April of 2018 which mandates that the
notice contained therein be issued to debtors in bankruptcy
(Doc. 38 in Case 18-80024-CRJ). The Bankruptcy Court ordered
the parties to file briefs “addressing how compliance
with the banking regulation upon which the bank relies does
not violate the automatic stay and discharge injunction under
the Bankruptcy Code.” (Doc. 38 in Case 18-80024-CRJ).
On June 15, 2018, MidFirst Bank filed its brief in compliance
with the Bankruptcy Court's May 24, 2018 order. (Doc. 1,
p. 3, ¶ 5; Doc. 57 in Case 18-80024-CRJ). Also on June
15, 2018, MidFirst Bank filed the instant motion to withdraw
the reference which was docketed in this court on June 19,
2018. (Doc. 1; Doc. 58 in Case 18-80024-CRJ). On June 20,
2018, the Bankruptcy Court held a prescheduled status
conference with the parties to discuss various matters
pending in the adversary proceeding. (Doc. 2, pp. 5-12). The
Bankruptcy Court recessed the hearing pending resolution of
MidFirst Bank's motion to withdraw the reference. (Doc.
2, p. 11).
Bank requests that the court withdraw the reference with
respect to the Loves' adversary proceeding for two
reasons: (1) resolution of this matter will require
substantial and material consideration of the CFPB's
recently enacted mortgage servicing regulations, and (2) a
decision regarding the relationship between the CFPB's
recently enacted mortgage servicing regulations and the
Bankruptcy Court's automatic stay will have district-wide
implications and should be resolved by the district court.
courts possess “original and exclusive jurisdiction of
all cases under title 11” of the Bankruptcy Code. 28
U.S.C. § 1334(a). District courts are permitted,
however, to refer all cases to the bankruptcy court to the
extent that they arise under, arise in, or relate to a case
under title 11. Id. at § 157(a). This court has
entered such a general order of reference. See
General Order of Reference to Bankruptcy Court (entered July
16, 1984 and amended on July 17, 1984). The reference that
applies to this Chapter 13 case, however, is not absolute.
Title 28 U.S.C. § 157(d) provides for the withdrawal of
the reference under limited circumstances, either as a
mandatory matter or as a permissive matter. The court
addresses each theory in turn.