07 B 19360, 08 A 00300
Prior to filing his chapter 7 bankruptcy petition, the debtor sought to rescind two mortgage loans from the defendants. After the bankruptcy case commenced, the chapter 7 trustee filed an adversary complaint requesting enforcement of the debtor's right to rescind the loans. The trustee alleged that the debtor did not receive two copies of the Notice of Right to Cancel in connection with each loan as was required by the Truth in Lending Act (“TILA”). The trustee asserted that the debtor properly exercised his right to rescission through written notice to the defendants within the three-year time limit provided in 15 U.S.C. § 1635(f) of TILA. The defendants filed a motion to dismiss the trustee's rescission claims as time-barred because he did not file those claims in court within three years after seeking rescission of the loans. At issue was whether a consumer who provides timely notice to a creditor is also required to file a lawsuit seeking to enforce rescission within the time limit set forth in § 1635(f). The Court found that TILA does not preclude the trustee’s suit to enforce the debtor’s right of rescission after the passing of the three-year period because the debtor timely exercised his right to rescind the loans within the three-year period. Therefore, the defendants’ motion to dismiss was denied.