Homestead Cap May Not Apply To Recently-Established Residence On Previously Owned Property

In Greene v. Savage (In re Greene), 09 C.D.O.S. 12414 (9th Cir. October 2, 2009), the court ruled that a debtor who acquires real property more than 1215 days before filing bankruptcy but moved onto the property within the period is not subject to the homestead exemption cap under Bankruptcy Code Section 522(p)(1). The court analyzed the issue under Nevada law and the Bankruptcy Code and held that the 1215-day period in Section 522(p)(1) runs from the time of acquisition, not the time of residency.

In Greene, the debtor purchased a parcel of undeveloped land in Nevada in 1994. In August, 2004, Greene moved onto the property and was living in a trailer, and he recorded a homestead exemption the same month. On August 11, 2005, Greene was cited by Washoe Count for illegally using the trailer as a dwelling, and he told authorities that he slept on the property in a tent. On October 15, 2005, Greene filed a voluntary chapter 7 petition and claimed the property as fully exempt under Nevada's homestead exemption at a value of $240,000. A creditor objected to the claim of exemption and contended that it should be reduced to $125,000 because the debtor moved onto the property and declared his homestead within the 1215-day period provided in Section 522(p)(1). The bankruptcy court agreed, and the district court affirmed. The Ninth Circuit reversed in part and ruled that the debtor was entitled to claim the full amount of the homestead exemption.

Section 522(p)(1) limits the claim of homestead exemption upon a residence acquired during the 1215-day period preceding the petition date, as follows:

Except as provided in paragraph (2) of this subsection and sections 544 and 548, as a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $136,875 [the amount was raised in 2007] in value in —

(A) real or personal property that the debtor or a dependent of the debtor uses as a residence;

(B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;

(C) a burial plot for the debtor or a dependent of the debtor; or

(D) real or personal property that the debtor or dependent of the debtor claims as a homestead.

Section 522(p) was enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) , and the court held that its purpose is to close the so-called “mansion loophole” in which a wealthy debtor may shield assets by purchasing a lavish home in a state with an unlimited homestead exemption such as Texas or Florida shortly before filing bankruptcy.

Following the recent 5^th Circuit case of Wallace v. Rogers, 513 F.3d 212 (5th Cir. 2008), the court held that the first step in the analysis is to consider the homestead laws of the state. The Nevada homestead exemption, which derives from the state's constitution, provides that the homestead shall be exempt from any process of law, and it has been held to be absolute with few exceptions. The Nevada Supreme Court case of Savage v. Pierson, 157 P.3d 697, (Nev. 2007) held that a debtor must hold some form of equity in real property in order to claim the exemption, which “contemplates more than a general ‘interest’ in the property or the right to possession, it contemplates ownership.” Id. at 700-701. Therefore, the court held that although the Nevada the homestead exemption is a broad legal protection, it is not a property interest itself.

Turning to the language of Section 522(p)(1), the court carefully considered the meaning of the terms “interest,” and “acquire” and “amount.” Black's Law Dictionary defines “interest” as “a legal share in something; all or part of a legal or equitable claim to or right in property.” Black’s Law Dictionary 885 (9th ed. 2009). The court cited “possessory interests, leasehold interests, and ownership interests” as examples of interests in real property, and it noted that such interests “run with the land” in that they pass from one purchaser to another. To the contrary, the court held that a homestead is a “personal right or privilege” that does not “run with the land.”

Furthermore, the term “acquire” is at odds with the language used to refer to homesteads, the court held. For example, the verb used to refer to a homestead exemption in Section 522(p) is “claim,” as follows: “real or personal property that the debtor or dependent of the debtor claims as a homestead.” 11 U.S.C. § 522(p)(1)(D) (emphasis added). Furthermore, Black’s Law Dictionary provides that “acquire” means “[t]o gain possession or control of; to get or obtain.” Black’s Law Dictionary 26 (9th ed. 2009). Therefore, the court held that Congress intended a substantive difference by its use of distinct terms and that the term “acquire” refers to gain possession or control “by purchasing or gaining an ownership interest” in property.

Finally, the court explained that the term “amount of interest” refers to an interest capable of quantification. In particular, the exception provided in Section 522(p)(2)(B) provides that the homestead cap does not apply to an “interest transferred from a debtor’s previous principal residence (which was acquired prior to the beginning of such 1215-day period) into the debtor’s current principal residence, if the debtor’s previous and current residences are located in the same State.” Since the residence itself is not transferred, the court held that the exception refers to a monetary value or equity transferred from the previous residence. In accord with the Massachusetts case of In re Lyons, 355 B.R. 387 (Bankr. D. Mass. 2006), the homestead is not a quantifiable interest; it is a classification of property under state law.” Id. at 390.

In light of Nevada law and the language of Section 522(p)(1), the court ruled that the 1215-day period runs from the time the debtor acquired ownership of real property, even if the debtor moved onto the property within the period. Greene has the potential to aid debtors with investment properties in states with generous homestead exemptions similar to Nevada's in that debtors may file bankruptcy relatively soon after establishing residency, notwithstanding the homestead cap in Section 522(p)(1).

By Reno F.R. Fernandez III

"Ride Through" Option Did Not Survive BAPCA

In Dumont v. Ford Motor Credit Company (In re Dumont), C.D.O.S. 11793, 08-60002 (9th Cir. September 15, 2009), the Ninth Circuit held that the "Ride Through" option, which allowed debtors to retain collateral and continue to make payments, did not survive the Bankruptcy Abuse and Prevention Act of 2005 ("BAPCPA").

In 2003, Antoinette Dumont purchased a car from Ford Motor Credit Company. The loan documents contained an "ipso facto" clause, which provided that the loan would be in default if Dumont filed bankruptcy. In 2006, Dumont filed a voluntary chapter 7 petition, and she listed the car as an asset with a value of $5,800. At the time, Dumont owed $8,288 for the car, and she was making payments of $335.78 per month. Dumont filed a Statement of Intention with the bankruptcy court, stating that she would retain the car and continue making payments (Bankruptcy Section 521(a)(2)(A) requires a debtor to file a Statement of Intention with respect to collateral). A discharge was entered in Dumont's case, and three months later Ford repossessed the car even though the payments were current.

Under Ninth Circuit law, a debtor was entitled to retain collateral and continue making payments. See McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668, 673 (9th Cir. 1998). A creditor holding a lien against the collateral was barred from taking possession of the collateral. Dumont successfully moved to reopen her bankruptcy case and alleged that Ford violated the discharge injunction. The bankruptcy court disagreed, and the Bankruptcy Appellate Panel ("BAP") affirmed.

The Ninth Circuit ruled that BAPCPA added a requirement to Bankruptcy Code Section 362(a)(1)(A), requiring debtors to elect one of three options with respect to collateral: redeem (essentially, to "buy back" the property); reaffirmation (to reaffirm the debt with approval from the bankruptcy court); or assumption (to assume the debt). Because Dumont did not elect one of these options in her Statement of Intention, Ford's rights under the loan agreement were revived, including the "ipso facto" clause, and Dumont was in default of the loan.

Judge Graber entered a strong dissent. Noting that BAPCPA has been criticized for its lack of clarity, Judge Graber explained that the text of Bakruptcy Code Section 521(2), which BAPCPA redesignated as 521(a)(2), was left unchanged. Furthermore, Congress made no comment to suggest that it intended to impose a new requirement under Bankruptcy Code Section 362(h)(1)(A) despite the vigorous public debate surrounding the "ride through" issue. In other words, Judge Graber argued that BAPCPA perpetuated the status quo, and he concluded that he would not have overrulled Parker.

By Reno F.R. Fernandez III

Judge Sotomayor's Bankruptcy Record Gets Passing Grade

Bankruptcy bloggers approve of Judge Sonya Sotomayor's bankruptcy record. Judge Sotomayor, whose colleagues on the Second Circuit decided the Chrysler appeals, was not asked whether she believes major assets can be sold free and clear of personal injury claims. Nevertheless, bankruptcy bloggers who canvassed her opinions found "nothing to complaint about."  - Reno

Sale of General Motors Assets Approved

On Monday, July 6, 2009, just over one month after filing for chapter 11 bankruptcy protection, Judge Gerber approved a sale of substantially all of General Motors' valuable assets to a new company known as "New GM." In a 95 page Decision approving the sale, Judge Gerber wrote that there is a "need for speed" in selling GM's assets and the alternative, liquidation, would be a “disastrous” result.

Government Influence Apparent

The U.S. Government and the Treasury played an active role in GM's case. Judge Gerber set the tone of the Decision by citing a speech by President Barack Obama early on, as follows:

What I'm talking about is using our existing legal structure as a tool that, with the backing of the U.S. Government, can make it easier for General Motors . . . to quickly clear away old debts that are weighing [it] down so that [it] can get back on [its] feet and onto a path to success; a tool that we can use, even as workers stay on the job building cars that are being sold. What I’m not talking about is a process where a company is simply broken up, sold off, and no longer exists. We’re not talking about that. And what I’m not talking about is a company that’s stuck in court for years, unable to get out. (Decision, 12).

GM is developing a new small-car plant in Orion, MI, and the chief factors in choosing its location were the plant's carbon footprint and the local unemployment rate. GM assures that there was no "political meddling" in its choice, according to the Wall Street Journal.

Sale to be Funded by Government Loans; Saturn Likely to be Liquidated

The sale will be funded by loans from the governments of the United States, Canada and the City of Ontario (Decision, 14). The U.S. loan was contingent upon the approval of the sale on or before July 10, 2009. (Decision, 35-36). Following the sale, the US Treasure will own 60.8%, the Canadian governments will own 11.7%, a new GM employee benefits association will own 17.5%, and, assuming a reorganization plan is confirmed, “Old GM” will own 10% of the new company (Decision, 19-20). Old GM is set to receive approximately $45 billion in assets, plus the value of equity interests that it will receive in New GM. (Decision, 18). Saturn and certain other entities will be left with Old GM and liquidated. (Id.)

Lack of National Health Care Played Role

Judge Gerber noted that lack of a national health care system made GM less competitive than it could have been. One of the U.S. Treasury's conditions for providing funding was negotiation of a new agreement with the United Auto Worker's Union, which was accomplished (Decision, 20). A concession by the employees was agreement to a new health care structure. Judge Gerber opined that the lack of a public health care system and GM's attempts to provide health care benefits directly kept the company from being competitive, as follows:

Workers in the U.S. do not have government provided healthcare benefits of the type that the employees of many of GM’s foreign competitors do. Over the years, GM and the other members of the Big Three committed themselves to offer many of those healthcare benefits, resulting in decreased competitiveness and enormous liabilities. GM tried to reduce the costs of healthcare benefits for its employees, but these costs continued to substantially escalate. Many of these costs were in the form of obligations to pay healthcare costs of union employees on retirement. (Decision, 21-22).

As part of the new deal, rather than provide health care benefits directly, New GM will make contributions to the new employee benefits association (Decision, 22).

Sale Approved Over Objection of Creditors

The sale was approved over the objection of certain bondholders. The sale to New GM was a so-called “Section 363” sale, free and clear of liens and other interests, including certain personal injury claims. Section 363 of the Bankruptcy Code provides that a debtor's assets may be sold free and clear of the interests of third parties under certain circumstances, and the sale may be accomplished quickly, prior to confirmation of a reorganization plan.

Several bondholders objected to the sale, arguing that a debtor cannot circumvent the protections of chapter 11 and short circuit the plan confirmation process by selling substantially all of its assets through a Section 363 sale (Decision, 26). It is important to note that creditors, such as bondholders, are entitled to vote upon a reorganization plan, but there is no vote prior to a Section 363 sale. Nevertheless, the Second Circuit Court of Appeal does not limit Section 363 sales to emergency situations, and substantially all of a debtor's assets may be sold if there is some articulated business rationale for the sale, such as the need to preserve a company's going concern value (Decision, 30-31). In support of his Decision, Judge Gerber cited from the Chrysler cases, as follows:

A debtor may sell substantially all of its assets as a going concern and later submit a plan of liquidation providing for the distribution of the proceeds of the sale. This strategy is employed, for example, when there is a need to preserve the going concern value because revenues are not sufficient to support the continued operation of the business and there are no viable sources for financing.(Opinion, 34, quoting from In re Chrysler LLC, 405 B.R. 84, 96 (Bankr. S.D.N.Y. 2009).

Judge Gerber also quoted from the U.S. Supreme Court's recent Piccadilly Cafeterias case. Although the propriety of a 363 sale was not the main issue, the Justices wrote:

Chapter 11 bankruptcy proceedings ordinarily culminate in the confirmation of a reorganization plan. But in some cases, as here, a debtor sells all or substantially all its assets under § 363(b)(1) before seeking or receiving plan confirmation. In this scenario, the debtor typically submits for confirmation a plan of liquidation (rather than a traditional plan of reorganization) providing for the distribution of the proceeds resulting from the sale. Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc.,128 S.Ct. 2326, 2331 n.2 (2008).

The Judge found that a quick 363 sale was necessary to avoid liquidation, and he noted that: “As the Court’s Findings of Fact set forth at length, GM, with no liquidity of its own and the need to quickly address consumer and fleet owner doubt, does not have the luxury of selling its business under a plan.... And if that is not by itself enough, the U.S. Treasury’s willingness to fund GM is contingent upon the approval of the 363 Transaction by July 10.” (Decision, 35-36). The bondholders argued that the Judge should delay the sale of GM's assets in hopes that the U.S. Treasury would offer a better deal, but he declined to play “Russian Roulette” with the U.S. Government. (Decision, 38).

Sale to be Free and Clear of Personal Injury Claims

Judge Gerber clarified that the sale will be free and clear of personal injury claims, including accident- and asbestos-related claims (Decision, 57-61). The Judge cited to the Chrysler cases, where Justice Ginsburg briefly stayed the sale of the debtor's assets. One blogger suggests that the Justice might have misgivings about the sale cutting off personal injury tort claimants from recovery (see ”What's Bothering Ruthie?”). While the law of the Second Circuit clearly holds that Section 363 permits sale free and clear of personal injury claims, there are conflicting authorities from other circuits. Did the Supreme Court miss an opportunity to clarify Section 363?

Shakeup Expected

One thing is clear: It is no longer business as usual at GM. Frederick "Fritz" Henderson, GM's CEO, says “Business as usual is over at GM,” and he expects hundreds of middle managers to be let go in the coming weeks, reports the Wall Street Journal.

By Reno F.R. Fernandez III

Bankruptcy Synopsis

Overview of Chapter 7, Chapter 11 and Chapter 13 Bankruptcy

Bankruptcy Synopsis

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Listen to Chrysler and GM Hearings Online!

The Bankruptcy Court for the Southern District of New York has made available recordings of hearings in the Chrysler and General Motors chapter 11 bankruptcies! Listen to the recordings here. Please feel free to post any comments and questions about the hearings.

Defrauded Investors May Force Madoff Into Bankruptcy

Bernard Madoff’s investors won a ruling Friday that allows defrauded investors to force him into personal bankruptcy to ensure that all his assets are used to pay the investors. U.S. District Judge Louis Stanton, Southern District of New York, granting a request by victims of Madoff’s Ponzi scheme to allow them to file an involuntary chapter 7 bankruptcy petition against Madoff, over objections from the Securities and Exchange Commission and the Justice Department. Judge Stanton reversed his ruling on December 18, 2008 that prevented the investors from filing such a petition. As of today, no petition has been filed.

In a four-page opinion, Judge Stanton held: “The concern that appointment of a bankruptcy trustee will increase administrative costs or delay recovery by victims is speculative and outweighed by the benefits to Mr. Madoff’s victims.” Judge Stanton further reasoned that bankruptcy may enable creditors to reach Madoff’s assets that are not proceeds of his fraud, increasing the pool of assets beyond those which are forfeitable under criminal statutes and helping investors who unwittingly bought into Madoff’s Ponzi scheme through so-called feeder funds.

The SIPC investigation of the assets of Bernie Madoff’s New York-based firm, Bernard L. Madoff Investment Securities LLC, is ongoing, and investigators have uncovered approximately $1 billion in assets which will be used to compensate investors. Prosecutors have identified over $100 million in real estate, cash, bonds, art, automobiles, boats and other assets owned by Madoff and his wife, Ruth, which prosecutors intend to seize.

On March 12, 2009, Madoff pleaded to defrauding investors by perpetrating a $65 billion Ponzi scheme, and he faces as many as 150 years in prison at his sentencing in June.

By Reno F.R. Fernandez III

Actions Against Non-Debtor Spouse May Violate Discharge Injunction

In Lumb v. Cimenian, 2009 WL 427836 (1st Cir. BAP Feb. 23, 2009), the First Circuit Bankruptcy Appellate Panel (“BAP”) held that post-discharge actions against a non-debtor spouse of a chapter 7 debtor can violate the discharge injunction of Bankruptcy Code Section 524.

In this case, the debtor had entered into a business transaction with a creditor which did not substantially involve the debtor’s wife. The debtor later filed a voluntary chapter 7 petition. Thereafter, the creditor sent a letter to the debtor’s lawyer threatening to take legal action against the debtor’s wife. The creditor subsequently sued the debtor’s wife, who successfully defended the lawsuit. The creditor appealed, and the Supreme Court of Main affirmed, observing that the lawsuit was devoid of “even the slightest merit” and awarding $50,000 in attorney fees to the wife.

The debtor brought an adversary proceeding against the creditor in bankruptcy court, alleging that the creditor’s lawsuit against his wife amounted to a violation of the discharge injunction of Bankruptcy Code Section 524 in that the creditor’s actions were an effort to coerce him into paying the discharged debt. The bankruptcy court ruled in favor of the creditor, holding that the discharge offered no protection to the wife because she had not filed the bankruptcy.

The debtor/husband appealed, and the BAP reversed the bankruptcy court, ruling that: “Although we are not aware of any case in which a creditor was found to have violated the discharge injunction by virtue of actions taken against a third party, we note that the prohibition in section 524(a)(2) is not limited to actions by creditors against the debtor to collect on a discharged debt."

The Truth in Lending Act in Bankruptcy

Bankruptcy Court May Require Debtor To Demonstrate Ability To Tender

In Yamamoto v. Bank of New York (In re Yamamoto), 329 F.3d 1167 (9th Cir. 2003), the Ninth Circuit held that a bankruptcy court may require the debtor to demonstrate that it can tender the rescission amount under the Truth in Lending Act ("TILA"). In Yamamoto, the bankruptcy court gave the debtor sixty days to prove that it could tender rescission and, when the debtor failed to do so, the court dismissed the debtor's TILA action. The Ninth Circuit affirmed the bankruptcy court's ruling and held that a bankruptcy judge can modify the sequence of events in a TILA action.

Debtor May Use TILA Defenses To Object To Creditor’s Claim After One-Year Bar To TILA Lawsuit Has Run

The one-year statute of limitations for initiating a TILA action does not prohibit a debtor from using TILA to object to a proof of claim filed by creditor because the TILA claim may be raised under a "recoupment" theory rather than as an affirmative defense. In re Norris, 138 B.R. 467 (Bankr. E.D. Pa. 1992); In re Jones, 122 B.R. 246 (Bankr. W.D. Pa. 1990).

Debtor Cannot Use Right to Rescind To Defeat Creditor’s Claim After Rescission Claim Has “Expired”

A debtor may not use right of rescission after the three-year period to object to a creditor’s claim has run. The debtor’s right to "recoupment" exists despite a limitation on the time for initiating an action, but it does not exist where the underlying right has been extinguished. TILA provides for a three-year “expiration” period on the right of rescission, not merely a limit on time for filing suit. Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998).

TILA Claims Belong To Bankruptcy Estate After Debtor Files Bankruptcy Petition

Under 11 U.S.C. § 541(a), a debtor’s claims under TILA become property of the bankruptcy estate, including pending actions. Thereafter, the debtor lacks standing and only the bankruptcy trustee may assert the claims. Riggs v. Government Emp. Financial Corp., 623 F.2d 68, 73 (9th Cir. 1980); In re Branch, 368 B.R. 80, 84 (Bankr. D.Colo. 2006), citing In re Boganski, 322 B.R. 422 (9th Cir. BAP 2005).

However, the debtor may retain standing to prosecute TILA claims if the trustee abandons the claims. Abandonment may “ratify” debtor’s standing if debtor made an “understandable mistake” in initiating or continuing a TILA action, as opposed to a strategic manipulation. Cullen v. Bank One Corp., 145 Fed. Appx. 192, 193 (9th Cir. 2005) (unpublished opinion), citing Dunmore v. United States (In re Dunmore), 358 F.3d 1107, 1112-1113 (9th Cir. 2004).
Moreover, the debtor may retain standing if the TILA claims are covered by the debtor’s exemptions such as the “wildcard” exemption provided in 11 U.S.C. § 522(d)(5). Matter of Smith, 640 F.2d 888 (7th Cir. 1981); In re Siegle, 257 B.R. 591, 595 (Bankr. D.Mont. 2001).

The debtor is not entitled to TILA protections where the debtor illegally encumbers property owned by the bankruptcy estate. For example, in In re Crevier, 820 F.2d 1553 (9th Cir. 1987), the Ninth Circuit ruled that the debtor who mortgaged a residence after filing chapter 7 bankruptcy petition failed to state a cause of action under TILA because title to residence vested in the bankruptcy estate and debtor could not convey a security interest therein. Id. at 1556-1557.

Attorneys Prosecuting TILA Claims On Behalf Of Bankruptcy Estate Must Seek Court Approval For Employment

A trustee or debtor-in-possession may employ an attorney who represented the debtor, for a special purpose only upon court approval. 11 U.S.C. § 327(e). An attorney’s fees are not entitled to priority over other creditors unless the court approved the retention, and a nunc pro tunc order authorizing payment is justified “only in exceptional circumstances where the attorney provides a satisfactory explanation for failure to obtain approval in advance.” In re Occidental Financial Group, Inc., 40 F.3d 1059, 1062 (9th Cir.1994); but see Palmer v. Statewide Group, 134 F.3d 378 (9th Cir. 1998)(unpublished opinion)(attorney successfully prosecuting TILA claim for debtor, did not seek approval for employment, was entitled to award of attorney fees because work was done pre-petition; attorney was a general creditor of the debtor).

New Provisions Added By BAPCPA: TILA Claims Survive Sale “Free And Clear” Of Other Interests.

A trustee or debtor-in-possession may sell property of the bankruptcy estate “free and clear” of interests other than the estate’s interests, including liens, under certain circumstances. 11 U.S.C. § 363(f). The Bankruptcy Abuse and Consumer Protection Act Of 2005 ("BAPCPA") added a new provision that preserves a consumer’s TILA claims and defenses through the sale of the debt “free and clear” of other interests, as follows:

Notwithstanding subsection (f), if a person purchases any interest in a consumer credit transaction that is subject to the Truth in Lending Act or any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of Federal Regulations (January 1, 2004), as amended from time to time), and if such interest is purchased through a sale under this section, then such person shall remain subject to all claims and defenses that are related to such consumer credit transaction or such consumer credit contract, to the same extent as such person would be subject to such claims and defenses of the consumer had such interest been purchased at a sale not under this section.

11 U.S.C. § 363(o). This provision is applicable, for example, where the debtor is a mortgagee and the bankruptcy trustee sells a mortgage to a buyer. In this case, the entity entitled to TILA claims and defenses will be a third party, not the debtor.

TILA Does Not Apply To Debt Reaffirmation Agreements

After the debts are discharged in bankruptcy, the debtor may voluntarily reaffirm debts, but the reaffirmation agreement is binding only if the procedure in 11 U.S.C. § 524(c) and (d) are followed, including filing the agreement with the court and a hearing, if applicable. In re Kamps, 217 B.R. 836, 841 (Bankr. C.D. Cal. 1998). TILA does not apply to reaffirmation agreements. “In specifying the new disclosures required when there is a change in a credit agreement, Regulation Z states that no new disclosures are required where the change results from ‘an agreement involving a court proceeding.’” In re Bassett, 255 B.R. 747, 759 (9th Cir. BAP 2000), aff'd in part, rev'd in part on other grounds, 285 F.3d 882 (9th Cir. 2002).

Bankruptcy Discharge Does Not Offset TILA Claims

A creditor cannot apply a bankrupt’s debts to reduce the debtor’s award of damages for TILA claims. Debts discharged in bankruptcy cannot be offset against claims for statutory damages under TILA. Newton v. Beneficial Finance Co. of New Orleans, 558 F.2d 731 (5th Cir. 1977).