SCOTUS Holds That Inherited IRAs Are Not Exempt Retirement Accounts in Bankruptcy

By Kelly D. Jones,

testament-and-last-will picture for blog

Recently, in an opinion authored by Justice Sotomayor, the U.S. Supreme Court released its unanimous decision in Clark v. Rameker, holding that individual retirement account (IRA) funds that a Chapter 7 bankruptcy debtor inherited from her deceased mother are part of the debtor’s bankruptcy estate and are not protected from liquidation by the Trustee to pay her creditors.

The Supreme Court upheld the Seventh Circuit’s decision disallowing the exemption, by finding that inherited IRAs do not share many of the same important characteristics of non-inherited IRAs and thus, unlike non-inherited IRAs, are not exempt from liquidation pursuant to the Bankruptcy Code. The applicable provision, 11 U.S.C. § 522(b)(3)(C), states that a debtor may exempt “retirement funds to the extent those funds are in a fund or account that is exempt from taxation” as set forth in the Internal Revenue Code. According to the Court, the central distinctions of inherited IRA accounts are that, unlike non-inherited IRAs, the beneficiary of the inherited IRA cannot continue to invest funds into the account, IRS tax rules require withdraw of funds from the account after it is inherited, it is possible to completely drain the account upon transfer, and the withdraws, or complete liquidation, could occur long before the transferee’s retirement age.

The Supreme Court’s decision resolved a circuit split, as the Fifth Circuit had reached a contrary holding in In re Chilton in 2012. It is important to note that “inherited” IRAs are different from “roll over” IRAs, and IRAs that are bequeathed by a deceased spouse to the surviving spouse. Those accounts may still be exempt pursuant to 11 U.S.C. § 522(b)(3)(C), because the IRS rules governing these types of more traditional IRAs do not necessarily exhibit the characteristics highlighted by the Court in Clark. It is also worth noting that some inherited IRAs may still be exempt pursuant to various state exemption schemes, depending on the language of the applicable state exemption statute. Although most bankruptcy attorneys outside of the Fifth Circuit were probably already cautious in advising potential bankruptcy clients with funds in inherited IRAs, but this is another reminder that extremely careful pre-bankruptcy asset determination and planning is certainly a must.

2013 Legislative Session Consumer Law Update

By Eva H. Novick

A number of bills passed in the 2013 legislative session that may impact your practice or your consumer clients. Many of these bills do not have a private right of action; however, you may still want to be aware of these changes when you are giving clients advice or screening potential clients. Of course, since you’re also a consumer, you may want to know about these changes for your “real life” away from the office.

I briefly summarize the bills in three categories: (1) changes to the Unlawful Trade Practices Act, (2) bills related to foreclosure or mortgages and (3) other consumer protection-related bills. The effective date for all of the bills is January 1, 2014 unless otherwise noted. To view the full text of any bill, go to

Unlawful Trade Practices Act

HB 2059 – adds consignment sales to ORS 698.640, a violation of which is a violation of ORS 646.608(1)(v). Adds a new requirement regarding the return of unsold property.

HB 2573 – adds a violation to ORS 646.608 of acting as an immigration consultant for compensation. Exceptions for authorization under federal law and attorneys.

HB 2824 – amends ORS 98.854 pertaining to non-preference tows, a violation of which is a violation of ORS 646.608(1)(ddd). Provides that a tower may tow a vehicle if the vehicle violates a prominently posted no parking sign that warns that parking is prohibited 24 hours a day.

HB 3070 – requires disclosure of shipping and handling charges during a sales transaction. Added to ORS 646.607; no private right of action.

HB 3467A – adds a violation to ORS 646.608. If a person operates a website that posts mug shots and charges a fee to remove the mug shot, the person must take down the mug shot and personal information related to the mug shot for free within 30 days if it receives a written request that contains documentation that all charges were acquitted, reduced to violations, or were expunged.

HB 3489A – changes licensing exemptions for escrow agents to act as debt management service providers. Relates to a violation of ORS 646.608(1)(kkk). Effective date: July 18, 2013.


SB 558 – expands the foreclosure mediation program (“resolution conference”) enacted under SB 1552 (2012) to include judicial foreclosures. There is no private right of action. Effective date: August 4, 2013.

HB 2528 – amends definition in ORS 86.205 to remove cap on amount in real estate loan agreement that is subject to requirement to pay interest to borrower on funds that lender collects for lender’s security protection provision.

HB 2568 – amends time of and information required in notices of sale in foreclosures. Changes amount of time a trustee may postpone a sale.

HB 2569A – permits law firms to be trustees of trust deeds.

HB 2929B – relates to trustee’s sale of foreclosed property. Permits trustee to rescind sale within 10 days in certain circumstances. Requires trustee to provide notice of rescission within 10 days after the date of sale, specifies contents of notice, and requires trustee to record affidavit regarding notice. Requires trustee to refund purchase price to purchaser within three days after date of notice. Requires trustee to register with the Secretary of State or DCBS.

HB 3389A – limits lender’s ability to reject short sales. Before approving a short sale, a lender may not require a nonprofit that purchases property to enter into an agreement that limits or bars the homeowner from owning or occupying the property. Provides exceptions. Effective date: July 19, 2013.


SB 237 – relates to billing errors for public utilities.

SB 525B – amends the Unlawful Debt Collection Practices Act (ORS 646.639). A debt collector is prohibited from using the seal or letterhead of a public official or public agency. Although not under ORS 646.639, the bill also prohibits public agencies and public officials from allowing a collection agency to use the agency/official’s seal or letterhead and from getting paid by the collection agency to use the seal or letterhead.

SB 574A – allows a representative of an individual under 16 years old who is incapacitated or has a court-appointed guardian or conservator to place a credit freeze on the individual’s consumer report. Effective date: June 13, 2013.

SB 577C – relates to motor vehicle service contracts and protection products.

HB 2346 – amends ORS 646A.588 pertaining to portable electronics insurance policies and consent to receive statutorily required notices and correspondence by e-mail. Effective date: May 13, 2013.

HB 2706 – allows self-storage facilities to charge late fees. Amends notice and sale requirements for liens. Amends liability for motor vehicles, watercraft and trailers.

As-Is Means As-Is…Right?

By Jordan Roberts

The common belief of most consumers, and indeed most lawyers, is that when someone buys a used car “as-is” they have given away all right to complain about the future performance of the car. Certainly, many car dealers feel this is the case as “you bought it as-is” is a common refrain for consumers that try to complain after a sale.

Fortunately for consumers, most people, lawyers included, are mistaken.

Because the “lemon law” applies only to new cars, a bad used car case most often falls under the Oregon Unlawful Trade Practices Act, ORS 646.606, et seq.

In the provision most relevant to used car transaction, ORS 646.608(1)(t) makes it a violation for a dealer to fail to affirmatively disclose “any known material defect or material nonconformity.”

Because the UTPA sets up a negligence framework, it is also a violation for a dealer to fail to disclose material nonconformities or defects that the dealer has “negligently disregarded when the dealer or broker should have known, prior to sale or lease of a motor vehicle.” OAR 137-020-0020(o).

So how does the UTPA interact with an “as-is” clause? The good news for consumers is that, essentially, it doesn’t. Despite the fact that most lawyers, and almost every car dealer, will attempt to use the “as-is” clause as a defense at some point in litigation or negotiation, Oregon courts have consistently held that an “as-is” clause does not defeat a UTPA claim.

The issue was first addressed in Hinds v. Paul’s Auto Werkstatt, Inc., 107 Or App 63 (1991).

The seller defendant claimed that because it used a standard “buyer’s guide” with a standard as-is clause pursuant to 16 CFR§455.2 it was protected from a UTPA claim for failure to disclose known material defects. The trial court found for the defendant, stating that the “clear intent” of the buyer’s guide “is to make certain that a buyer purchasing a used car ‘as is’ is aware of the full consequences of the agreement.” Id. at 65 n. 3. However, the Court of Appeals rejected this argument and reversed the trial court, stating that because 16 CFR§455.2 is silent as to “disclosure of known defects” the UTPA requirement that a seller disclose defects that it knew of or should have known of is not affected. Id. at 65.

Additionally, in Parrott v. Carr Chevrolet, Inc. the defendant argued that it was protected by an “as-is” clause and that a broad interpretation of ORS 646.608(1)(t) would “effectively nullify” a car dealer’s ability to use an “as-is” clause. 156 Or App 257, 270 n. 9 (1998), affirmed 331 Or 537 (2001). The court disagreed, stating that an “as-is” clause “calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty” whereas “ORS 646.608(1)(t) addresses the failure to disclose known material defects.” Id. (emphasis added).

Once again, the courts discussed as-is clauses only in the context of “warranties” and refused to extend that language to cover a dealer’s failure to disclose material defects and nonconformities.

While there are plenty of pitfalls and nuances to taking on a bad used car case, the presence of an “as-is” clause should not scare lawyers from investigating further and potentially taking the case.

In the end, an “as-is” clause will not bar recover under a valid UTPA theory.

Oregon Court of Appeals Affirms Deutsche Bank et al. v. Delaney

By David Koen

On February 26, 2014, the Oregon Court of Appeals affirmed without opinion the Multnomah County Circuit Court’s decision in Deutsche Bank National Trust Company, as Trustee for Indymac INDX Mortgage Loan Trust 2005-AR8, Mortgage Pass-Through Certificates Series 2005-AR8 v. Delaney, No. A151655, 261 Or App 477 (2014).

Defendants’  appeal included three assignments of error:

(1) the Circuit Court erred in excluding the pooling  and servicing agreement at issue with respect to alleged discrepancies concerning the conveyance of the loan at issue;

(2) the Circuit Court erred in refusing to give effect to an order in another case granting Defendants’ motion to compel discovery; and

(3) the Circuit Court erred in excluding evidence of payments on the loan to plaintiff by certain non-party entities.

Bankruptcy Filing Fees in Oregon Set to Increase

By Michael FullerThe Underdog Lawyer ®

On June 1, 2014, consumer bankruptcy filing fees in Oregon and across the country are set to increase.​


Click here to view the District of Oregon’s new bankruptcy filing fee schedule. The new Chapter 7 filing fee is $335. The new Chapter 13 filing fee is $310.

Consumers may apply to pay their fee in installments.

Individuals earning less than $1,458 per month (150% of the current poverty line of $972 per month) can apply to waive their filing fee. However, consumers who qualify for the waiver may not even need bankruptcy protection to avoid garnishment.


For example, the first $218 of a consumer’s take-home paycheck each week is exempt and cannot be garnished by creditors.

Low-income consumers may qualify for the free Bankruptcy Clinic, sponsored by the Oregon State Bar’s Debtor-Creditor Section.


​To learn more about the clinic, contact its chair, attorney Rich Parker.

Seventh Circuit Court Of Appeals Holds That A Settlement Offer On A Time-Barred Debt Without Any Indication That The Statute Of Limitations May Have Expired Can Be In Violation Of The FDCPA.

A recent decision by the Seventh Circuit in the consolidated appeals of McMahon v. LVNV Funding, LLC and Delgado v. Capital Management Services, L.P. , suggests that debt collectors need to take heed when collecting on debts for which the limitations period related to the underlying claim has expired. In both cases, the consumer plaintiffs had alleged that specific collection attempts violated various provisions of the Fair Debt Collection Practices Act  (“FDCPA”) (15 U.S.C. § 1692, et seq.). In McMahon, the dunning letter sent to the consumer was an attempt to collect on an alleged utility debt that originated about 14 years prior. In Delgado, the alleged debt was about eight years old. In both cases, the applicable limitations period had long since passed. Perhaps the most notable fact regarding both collection letters is that neither of the letters directly threatened litigation on the time-barred debts, as previous case law already supports FDCPA violations for such conduct (e.g., Herkert v. MRC Receivables Corp., 655 F. Supp. 2D 870 (N.D. Ill 2009). However, favorably citing a Federal Trade Commission Report titled A Broken System: Protecting Consumers In Debt Collection Litigation and Arbitration , the Court reasoned that it’s likely that many consumers do not understand their rights (not to be sued) with regard to time-barred debts, and therefore may be misled into believing that if they do not pay the settlement amount that the debt collector will then initiate litigation. The Court also addressed concerns that in the absence of any explanation that the limitations period has expired, unsophisticated consumers could be coaxed into making even a small payment on the debt, unaware that such a payment may restart the limitations period pursuant to state law. This holding by the Seventh Circuit decision stands in conflict with previous sister circuit court decisions, by the Third Circuit in Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3rd Cir., 2011) and by the Eight Circuit in Freyermuth v. Credit Bureau Services , 248 F.3d 767 (8th Cir., 2001), and is likely to cause some ripples throughout the debt collection industry.

The Author, Kelly D. Jones , is a solo consumer rights attorney located in close-in SE Portland.

New Ruling Subjects Mortgage Companies to FDCPA Liability

By Michael Fuller, Portland Trial Attorney

new legal opinion subjects mortgage companies to FDCPA liability for falsely implying that a law firm has been retained to collect on past-due accounts.

Creditors Not Regulated by the FDCPA

The Fair Debt Collection Practices Act (FDCPA) (15 USC § 1592a(6)) doesn’t generally regulate creditors collecting their own accounts. For example, the FDCPA doesn’t prohibit Verizon Wireless from directly harassing a consumer.

However, if Verizon Wireless turns a past-due account over to a third party for collections, the third party debt collector is subject to liability for harassment under the FDCPA.

Exception for Creditors Using “False Names”

Last week, the Second Circuit Court of Appeals held that the FDCPA applies to original creditors who give the false impression they have hired a third party law firm to collect debts.

How the “False Names” Exception Works

Under the case of Maguire v. Citicorp (2nd Cir. 1998), a creditor can be liable under the FDCPA if it:

  1. uses a name that falsely implies a third party is involved in collecting its debts,
  2. pretends to be someone else, or
  3. uses a pseudonym or alias.

The Money Store’s Law Firm Constituted a “False Name”

The case, Vincent v. The Money Store (2nd Cir. 2013), highlights a loophole used by many mortgage companies to escape liability under the FDCPA.

How the Loophole is Supposed to Work

‘The Money Store’ services Ms. Vincent’s mortgage.

Mortgage ServicingThe Money Store, in a letter sent by its law firm, allegedly charges Ms. Vincent improper mortgage fees.

If The Money Store is sued under the FDCPA, it argues the FDCPA doesn’t apply to it because the alleged misrepresentations were made by an independent third party law firm.

If a law firm is sued under the FDCPA, it argues that the FDCPA doesn’t apply to it because it was not “collecting debt” but merely sending a mortgage statement.

Why ‘The Money Store’ Fell Under the ‘False Name’ Exception

The Money Store’s letters told homeowners that a law firm had been retained to collect a debt for its client.

Lying Debt CollectorHowever, evidence showed that the threat was hollow; the law firm was simply a mass processor of letters. The Money Store actually maintained possession over its files. The law firm later shut its doors.

The Court reasoned that because the law firm did not engage in actual bona fide debt collection, a jury could find that The Money Store made false implications as to the name of the entity collecting its debts.

What This Means For Homeowners and Mortgage Companies

The opinion should have a positive impact on consumers seeking to hold mortgage companies and law firms accountable for alleged abuses in the foreclosure process, says consumer protection attorney Kelly Jones.

“The Vincent decision is a logical and necessary application of the ‘false name exception.’ A creditor shouldn’t be able to retain its exempt status under the FDCPA when it rents the name or letterhead of a law firm or other debt collector in order to further intimidate consumers and increase its collections rates,” says Jones.

Second Circuit Court of Appeals

The opinion is binding and must be followed by judges in the Second Circuit (Connecticut, New York, and Vermont). In all other states, the opinion serves as non-binding persuasive authority.


The Fifth and Seventh Circuits have reached the same conclusion under different circumstances. For more information, read Taylor v. Perrin (5th Cir. 1997) and Boyd v. Wexler (7th Cir. 2001).

About the Author: Michael Fuller is a Portland trial attorney and chair of the Olsen Daines law firm’s Consumer Protection Group. You can follow him on Google+Twitter, and visit his blog at

Click here to read more from this author about a Ninth Circuit case dealing with FDCPA liability in the mortgage fraud context called Corvello v. Wells Fargo Bank (9th Cir. 2013).

New Rules Help Consumers Fight Back Against RoboCallers

By David Venables

In 1991 the Telephone Consumer Protection Act (TCPA) (47 U.S.C. 227 et. seq) was passed into law, allowing individuals to file actions for receiving unsolicited telemarketing calls, faxes, pre-recorded phonecalls or automated calls.  In 2012, the Federal Communications Commission (FCC), which implements the TCPA, revised its regulations and on October 16, 2013, those new protections for consumers went into effect.

The new TCPA regulations require that businesses have prior express written consent for (1) all autodialed and/or pre-recorded calls or texts sent to cell phones and (2) all pre-recorded calls made to residential land lines for marketing purposes.  This rule eliminates the “prior business relationship” exception that allowed businesses to contact consumers with pre-recorded messages or automated dialers if there was a prior business relationship, such as a prior purchase from the business.  Additionally, the new rules require that consumers provide unambiguous written consent before receiving automated phone calls.  Consents obtained before October 16, 2013 will not apply and a business cannot require consent as a condition of purchasing the goods or services.  Consumers who have received these prohibited calls, texts, or faxes are entitled to statutory damages for each call, and may be entitled to treble damages if the violations are found to be willful.  47 U.S.C. 227 (b)(3).

Oregon Foreclosure Avoidance Program begins August 4th

By Anna Braun, Consumer Law Section Executive Committee

The Oregon Foreclosure Avoidance Program goes into effect August 4.[1] After that date, most lenders must request a face-to-face meeting (called a “resolution conference”) with the homeowner prior to commencing a judicial or non-judicial foreclosure. A homeowner does not have to wait for the lender and may initiate the process through any approved housing counseling agency.

Only those lenders that commenced fewer than 175 foreclosures in the prior calendar year are exempt from the requirement. (Lenders claiming the exemption must submit a sworn affidavit to the Oregon Department of Justice.)


A non-exempt lender that intends to foreclose must request a resolution conference and receive a Certificate of Compliance before filing a complaint for judicial foreclosure or recording a Notice of Default. The request is submitted to the service provider, Mediation Case Manager (MCM),that was chosen by the Attorney General’s office to coordinate this program.

A homeowner will receive an initial notice with instructions and a date range for the resolution conference. At this point a HOMEOWNER MUST PAY A FEE WITHIN 25 DAYS TO PRESERVE THE RIGHT TO A RESOLUTION CONFERENCE.  The fee is $175 but will be reduced to $50 if the homeowner is low income.

If no fee is paid, MCM will cancel the resolution conference. At that time the foreclosing lender will receive a certificate to file when commencing a foreclosure that shows they complied with the program and the homeowner did not participate.

If the fee is paid, the homeowner will receive a second notice with the exact date and time of the resolution conference, which will be scheduled within 75 days of the first notice. Between that notice and the conference, a homeowner must meet with a housing counselor and submit required documents to the lender through a secure online portal. A housing counselor will assist the homeowner at no charge in preparing the best possible proposal to the lender.  After the homeowner submits his documents, the lender must provide the homeowner with information about the loan, including the owner’s name, a payment history, and an itemized list of all fees and charges.

At the resolution conference, an agent of the lender must attend in person and either have complete authority to negotiate and commit the lender to an agreement or have another person with authority participate by phone. The homeowner must also attend in person. The conference will be conducted by a facilitator trained in mediation and basic foreclosure issues.  Any agreement reached must be in writing and signed by both parties. A lender is not required to offer a modification if the homeowner is not eligible.

After the resolution conference concludes, the lender will receive a certificate of compliance good for one year that the lender must record if foreclosing nonjudicially or attach to the complaint if foreclosing judicially. The certificate must be valid and unexpired at the time the foreclosure is commenced (but not at the time the foreclosure is completed).

If the lender does not comply with the program requirements, it will receive a non-compliance notice and must foreclose judicially. To foreclose judicially, a lender must attach to the complaint either an affidavit showing they were exempt from the program or a certificate of compliance or a notice of non-compliance.

If a lender commences a foreclosure either with a notice of non-compliance or no attachment of the documents listed above, a party may move to abate or dismiss the foreclosure and if a motion is granted the court may award attorney fees and costs to the moving party.

Other enforcement of the program is the responsibility of the Oregon Attorney General’s office.[i]

[1] SB 558 was enacted by the Oregon legislature in the 2013 session.

[i] Many thanks to premier foreclosure defense lawyer (and Consumer Law Section Treasurer) Kelly Harpster for her help on editing this article.