Wednesday, August 31, 2011

Discharging Payday Loans In Bankruptcy: The Payday Lender Is Not Your Friend!

When you file a Chapter 7 bankruptcy you must list all of your assets and debts. Unsecured debts are discharged giving you what is often called a Fresh Start.

Payday Loans are a form of unsecured debt, although many people believe that these debts are secured.

In fact, since the borrower is required to turn over a post-dated check to the Payday lender, most believe that they can go to jail if they do not make good on the check or if the check bounces. I have had potential clients that have been told that they will go to jail for failing to honor a Payday loan.

Telling someone that they will be prosecuted or go to jail is not true. To be guilty of writing a worthless check the person writing the check must have written the check with the intention of defrauding the party receiving the check. Since the Payday lender knowingly accepts a post dated check, the lender knows that the check is not good at the time it receive the check.

Occasionally I will have clients that want to pay back these loans. The "logic" of wanting to pay them back is that the client feels that the Payday lender has done them a favor by lending them the money.

However Payday loans, while marketed as a loans to be used on a one-time basis, are in reality taken out by people when they are their most vulnerable and their most desperate.

The facts are as follows:

The high interest rates (usually shown as a fee for borrowing the money) make it difficult for borrowers to repay these loans. I personally have seen potential clients come in with fees that equate to interest rates of 425% to 600%. To read a detailed example of how much can end up being paid, consider reading: "Payday Loans: How To Borrow $300.00 And Owe $3,000.00″
Because they are difficult to repay, many consumers end up paying additional "fees" in order to roll the loan over. These fees can often end up being paid several times for one loan.
Because of this, many consumers end up paying more in fees than the than the amount they originally borrowed, putting them into worse financial shape then when they started.

Be sure to tell your attorney about your Payday loans so they can be included in your bankruptcy.

By,Kevin Gipson

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Tuesday, August 30, 2011

Keep Your Nest Egg

Don't take money out of your retirement account to ease a temporary economic crunch.

Difficult times come and go; and sometimes they seem insurmountable. When that happens, it might appear wise to tap into the 401k or the IRA and borrow or take some of the funds. Don't do it!

I see bankruptcy clients every day who have used their 401k or their IRA to cover bills. They come to see me after they have reduced or spent all of their retirement! It's too bad they didn't see a bankruptcy attorney or competent financial adviser before that money was gone.

Almost all retirement accounts are considered exempt property. That means that even after filing a bankruptcy, you'll still have it. But your debts, or most of them, will be gone.

Your retirement account is probably the only hope you have for the future. None of us will work forever, and if you deplete the account today, you may well find yourself unable to retire; or not able to afford anything more than a meager existence at that time. And don't expect the Social Security system to bail you out. At the top rate, the monthly pay-out is barely enough to afford reasonable housing and food, much less travel money to see the grandkids or go fishing.

You should also remember that any money you withdraw from a retirement account getstaxed now. And there's a 10% penalty for early withdrawals from an IRA. Those taxes won't go away in the bankruptcy. Not only will you lose an exempt asset you could have kept, but you will incur a new debt too.

So, don't deplete your retirement. Leave it for when you really need it. See a competent bankruptcy attorney in your state before you make the decision.

by Douglas Jacobs

For more information on these matters, please call our office at 305-548-5020.

Monday, August 29, 2011

How To Beat A Debt Buyer’s Claim

Today, I'm going to stand on the shoulders of my colleague Kent Anderson and add to his post on Objecting to Credit Card Claims in Bankruptcy.

You want to do this as a Chapter 13 debtor when you are above median or have unprotected assets. In either situation, you want to kick out as many claims as possible so you can pay 100% of the remaining claims in the shortest time. A Chapter 7 debtor who kicks out enough claims will keep the surplus money after an asset was sold.

The Federal Rules of Evidence (FREs) make it pretty easy to do this.

Let's explore the Rules' requirements. Two Rules apply in particular, (1) Business Records and (2) Authentication.

A debt buyer argues that its business records show that it purchased the debt, or that the original credit card issuer's business records show that the debt was sold to the buyer. Admissable business records must have been made at about the time of the event being recorded, which is the sale of the debt, by a person with personal knowledge of the sale. The testimony introducing the record must be by a person with personal knowledge of this requirement. FRE 803(6).

Ms. Witness takes the stand, or swears out an affidavit, saying that she's the custodian of the records and that "the records were created by a person having personal knowledge of the sale." WRONGO-BONGO !!! Ms. Witness does not personally know this. She's only stated her unsupported conclusion or opinion. INADMISSABLE.

"How did this record of the sale get into your records?" "Who entered it?" "How do you know the person entering it had personal knowledge of the sale?" Get my point? Ms. Witness needs to have her own personal knowledge, not of the sale but of these questions. She can't simply state a conclusion. That's for the court to conclude, based on the detailes provided by a witness.

Authentication is a separate requirement, that the evidence being introduced is what it purports to be. FRE 901(a). The Ninth Circuit Bankruptcy Appellate Panel, in American Express v. Vinhnee, 336 B.R. 437 (2005), translated this in the electronic records world as meaning that the record has not been changed between its original electronic creation and its admission at your trial.

With paper records, there never is a serious question about this. Paper records are so rarely altered that it is insignificant, notwithstanding the accusations of certain predatory mortgage lenders having an "art department" dedicated to alterations.

Electronic records can be hacked or altered more easily. The Vinhnee case recognized this and affirmed the bankruptcy court's denial of a claim when the debt buyer could not prove that the record was authentic, was never altered. Here's what Vinhnee said:

"The logical questions extend beyond the identification of the particular computer equipment and programs used. The entity's policies and procedures for the use of the equipment, database, and programs are important. How access to the pertinent database is controlled and, separately, how access to the specific program is controlled are important questions. How changes in the database are logged or recorded, as well as the structure and implementation of backup systems and audit procedures for assuring the continuing integrity of the database, are pertinent to the question of whether records have been changed since their creation."

Ain't no way, no how, that the debt buyer's witness can testify to this authentication requirement, especialy on top of the business record need to have personal knowledge of how the record was first created.

Debt buying is a huge business with volumes that break records every year. This is how to beat the claims.

By,L. Jed Berliner, Springfield

For more information on these matters, please call our office 305-548-5020.

Saturday, August 27, 2011

Foreclosed Homes Bulldozed by Bank Of America, Wells Fargo, and Chase

BOA is not the only mortgage company suddenly donating land to city or county governments or non-profit organizations. JPMorgan Chase has donated over 1900 homes or lots with demolished homes to city or county government. Wells Fargo also announced their donation in a recent article at DSnews.com:

"Wells Fargo is pleased to have been the first bank working with the Cuyahoga County Land Reutilization Corporation to donate both properties and funds to the Land Bank," said

Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage, says the company will be looking at additional properties it can contribute to the Cuyahoga County Land Bank this year.

Cuyahoga County Land Bank is a Cleveland-area land organization (actual name isCuyahoga County Land Reutilization Corporation, but it is informally known as the Cuyahoga County Land Bank) formed in 2009 by two county commissioners and the county treasurer serving as initial directors and was formed in response to the wave of foreclosures hitting Ohio. The Ohio legislature passed new legislation which provided for the establishment of nonprofit corporations to promote, develop, manage, and facilitate the reclamation, holding, rehabilitation, and reutilization of vacant, abandoned, tax-foreclosed, and other real property. The first one to be established was the Cuyahoga County Land Bank. The Land Bank has now acquired 1,200 properties and promotes collaborative agreements with the foreclosing mortgage lender so that the properties can be revitalized and become an asset to the community.

Mr. Gandel's article goes on to state:

The banks do the deals because once the properties are donated they no longer have to pay taxes or for upkeep. Tax experts say the banks may also be able to get a write off for the donation. That appears to be a better deal than trying to repair some of these homes, which according to a BofAspokesperson are more economical to demolish than fix up. The local governments like these deals because they get free land to develop or use for open space. Cleveland-based Cuyahoga County Land Reuntilization Corp., which inked the deal with BofA, has been one of the most aggressive local government organizations in striking these deals. Housing economists like these deals because they remove homes from the market that would otherwise sell for a low price or not at all, dragging down home prices in general. An oversupply of homes on the market has been once of the big problems plaguing real estate. At the end of June, it would take nine and a half months for the current number of homes on the market to sell. The housing market is considered healthy when supply equals six months of sales. So taking some of these homes off the market for good could remove some of the inventory drag.

Mr. Gandel concludes that banks and other entities are ready to do something new in order to provide stability to the housing market. This writer would suggest….mortgage modification through the bankruptcy process might bring more stability than knocking down houses.

by Karen Oakes

For more information on these matters, please call our office at 305-548-5020.

Friday, August 26, 2011

Get Your Own Economic Stimulus – Through Bankruptcy

The U.S. economy needs a stimulus. Many American households would be better served by filing bankruptcy to free-up some income to support their family, rather than waiting for Congress or the banks to help move us forward.

It doesn't sound right, does it? You file bankruptcy to help the economy?

But right now, President Obama is pursuing a continuation of a payroll tax cut which works out to approx. 2% from the average person's paycheck. That's roughly $1,000 a year of extra income left in the median household's paycheck. Nothing to sneeze at of course. And in middle and lower income families, that money will be spent to help keep everyone afloat — stimulating the economy!

But I can do better than the President for quite a few of those families. The median family currently spends twice that much in consumer, non-mortgage debt service. So the median household's bankruptcy filing, all other things being equal, has a decent chance of freeing up even more money each day and each year than the payroll tax holiday will. Instead of spending several more years living on the edge while you try to payoff the credit cards and payday loans, just get rid of them.

To the extent that debt is discharged through bankruptcy instead of being repaid, there is a loss caused, primarily to the largest banks in this country. However, in theory, these banks are in much better shape than they were 3 years ago. In fact, a problem we have right now is that the banks have money but either will not lend it out or can't find viable borrowers.

So instead of continuing to recapitalize the already-well-capitalized banks, who won't or can't re-lend that money to consumers or businesses, consumers could cut out the middle man. Take the extra couple hundred a month currently being spent to pay off credit cards and, instead, fix the car. Fix up the leaky roof. Buy the kids new clothes. Do it with cash, not on credit. And, yes, save for a rainy day too (maybe the bank will find some borrowers for the money!).

Obviously this prescription is not for everyone. Your mileage may vary. But it's important that folks not simply consider consumer bankruptcy in the context of individual cases but also of its place in society. Individuals are still too highly leveraged. They are trying to pay down debt. And especially by giving up houses they can't afford, some are making dramatic changes in their leverage.

But a consumer-driven economy ultimately needs the consumers to come back — and not driven by overspending on credit. So starting over fresh and using current income to meet current needs could be a jump-start for more than just the individual debtor.

By, by Wendell Sherk

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Thursday, August 25, 2011

WaMu’s $7 Billion Bankruptcy Nears Finish Line

WaMu's $7 Billion Bankruptcy Nears Finish Line

By Peg Brickley

A bankruptcy judge indicated Wednesday that creditors may not have to wait long to find out whether she will confirm Washington Mutual Inc.'s $7 billion Chapter 11 plan.

"I'm a long way towards issuing a decision," Judge Mary Walrath said at the start of a session in which she will hear a final debate over the plan.

The remark is welcome news to creditors who expect to rake in the cash and who have been clamoring for speed in a case that began nearly three years ago. Washington Mutual's first bid to exit bankruptcy failed earlier this year, when Walrath rejected the Chapter 11 plan for assorted defects.

The company said the problems–including over-generous grants of legal immunity–have been fixed, and the plan should be approved as a reasonable way out of the legal wreckage left behind when it lost Washington Mutual Bank, or WaMu, to a regulatory seizure.

"Creditors of the debtors have waited nearly three years for any recovery," Fred Hodara, attorney for the official committee of unsecured creditors, said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del. He is with Akin Gump Strauss Hauer and Feld.

Shareholders and others being left out in the cold under the Chapter 11 plan are mustering their final arguments in a last-ditch effort to defeat it. They said Washington Mutual settled valuable claims related to WaMu for just enough to pay creditors, leaving billions of dollars of damages on the table.

Cash has accumulated in the Chapter 11 coffers as tax refunds stacked up, thanks to a new law that allowed WaMu's former parent to make the most of its losses on the thrift. In the meantime, WaMu's former parent hammered out a settlement with regulators and WaMu's new owner, J.P. Morgan Chase.

The pact splits up the tax refunds and other assets among J.P. Morgan, Washington Mutual and the Federal Deposit Insurance Corp., which is the receiver for WaMu's creditors. It forms the base of the Chapter 11 plan that is awaiting confirmation.

Washington Mutual's plan promises creditors at the top of the heap payment in full at a generous contract rate of interest. Some of the country's most powerful hedge funds–including Aurelius Capital Management, Centerbridge

Partners, Appaloosa Management and Owl Creek Asset Management–will rake in big profits on their Washington Mutual holdings if the plan is confirmed.

Delay has been taking an estimated $40 million per month out of the recovery promised to the lowest-ranking creditors in Washington Mutual's bankruptcy case, a group that also includes the hedge funds.

Shareholders are being shut out of any recovery, along with some other holders of securities that are classified as equity. The official committee that represents shareholders is pushing to sue some of the hedge funds for allegedly misusing confidential inside information for profit. The hedge funds denied insider trading and said they played by the rules during months of on-again, off-again negotiations that finally produced the Chapter 11 plan.

For more information on bankruptcy matters please call our office for an appointment at 305-548-5020.

Wednesday, August 24, 2011

Business Bankruptcy

Business Bankruptcy

Innkeepers USA Trust Deal Terminated
According to a Chatham news release, Chatham LodgingTrust and Cerberus Capital Management have terminated their commitment and obligation to acquire interests in 64 hotels owned by Innkeepers USA Trust. According to the release, Chatham and Cerberus jointly determined to terminate the agreement in accordance with the terms of the agreement as a result of the occurrence of a condition, change or development that could reasonably be expected to have a material adverse effect on Innkeepers#&39; business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects. Chatham#&39;s separate purchase of five Innkeepers hotels, which closed on July 14, 2011, is not affected by this decision.

Borders Group M.O.R. Filed
Borders Group filed with the U.S. Bankruptcy Court a monthly operating report for July 2011. For the period, the Company reported a net loss of $238 million on $152.2 million in revenue.

Nebraska Book Company Plan Support Agreement Approval Sought
Nebraska Book Company filed with the U.S. Bankruptcy Court a motion for approval of a Plan Support Agreement between the Debtors, the 8.625% Noteholders, the AcqCo Noteholders, and Weston Presidio. Under the agreement, in exchange for Weston Presidio's support of the Plan, the Debtors have agreed to provide an enhanced package of New Warrants. The Court scheduled a September 7, 2011 hearing to consider the motion.

AmTrust Financial Corporation M.O.R. Filed
AmTrust Financial Corporation filed with the U.S. Bankruptcy Court a monthly operating report for July 2011. For the period, the Company reported a net income of $554,949 on zero revenue.

Ultimate Escapes Settlements Approved
The U.S. Bankruptcy Court approved Ultimate Escapes' motions for orders approving a settlement between Ultimate Escapes Holdings, Private Escapes Platinum Lucignano and George Thomas Baker and a settlement between Ultimate Escapes Holdings, Private Escapes Villa Cassia and George Thomas Baker.

Imperial Capital Bancorp M.O.R. Filed
Imperial Capital Bancorp filed with the U.S. Bankruptcy Court a monthly operating report for July 2011. For the period, the Company reported a net income of $80,917.40 on zero revenue.

WorldSpace M.O.R. Filed
WorldSpace filed with the U.S. Bankruptcy Court a monthly operating report for July 2011. For the period, the Company reported a net loss of $126,494 on zero revenue.

ShengdaTech Chapter 11 Petition Filed
ShengdaTech filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Nevada, case number 11-52649. The Company, which engages in manufacturing, marketing, and selling nano precipitated calcium carbonate (NPCC) products in China, is represented by Bob L. Olson of Greenberg Traurig. According to Court documents, the Debtor commenced this Chapter 11 case to safeguard assets, restructure its business operations and to allow the Debtor, through its Special Committee, to continue its ongoing special investigation into the financial affairs of the Debtor. The Company filed a motion for entry of an order on shortened time: (i) confirming the employment of Alvarez & Marsal North America, LLC to provide a Chief Restructuring Officer and additional personnel, (ii) confirming the appointment of Michael Kang as C.R.O. to the Debtor, nunc pro tunc as of the Petition Date, and (iii) providing any additional relief required.

Nebraska Book Company Plan Filed
Nebraska Book Company filed with the U.S. Bankruptcy Court a First Amended Joint Plan of Reorganization and First Amended Disclosure Statement. According to the DS, "The Plan shall serve as a motion by the Debtors seeking entry of a Bankruptcy Court order substantively consolidating all of the Estates and its subsidiaries into a single consolidated Estate for all purposes associated with Confirmation and Consummation. If substantive consolidation of all of the Estates is ordered, then on and after the Effective Date, all assets and liabilities of the Debtors shall be treated as though they were merged into the Estate of NBC for all purposes associated with Confirmation and Consummation, and all guarantees by any Debtor of the obligations of any other Debtor shall be eliminated so that any Claim and any guarantee thereof by any other Debtor, as well as any joint and several liability of any Debtor with respect to any other Debtor shall be treated as one collective obligation of the Debtors. Substantive consolidation shall not affect the legal and organizational structure of the Reorganized Debtors' Entities or their separate corporate existences or any prepetition or postpetition guarantees, liens, or security interests that are required to be maintained under the Bankruptcy Code, under the Plan, any contract, instrument, or other agreement or document pursuant to the Plan (including the New Senior Secured Notes Indenture, New Senior Unsecured Notes Indenture, New ABL Facility, New Warrants, Registration Rights Agreement, or Shareholders Agreement, or the identity of the New Board and management), or, in connection with contracts or leases that were assumed or entered into during the Chapter 11 Cases. Furthermore, creditor recoveries will not be adversely affected by substantive consolidation of the Debtors' estates." The Court scheduled an October 4, 2011 confirmation hearing.

Sun-Times Media Group M.O.R. Filed
Sun-Times Media Group filed with the U.S. Bankruptcy Court a monthly operating report for July 2011. For the period, the Company reported a net loss of $549,000 on zero revenue.

For more information on bankruptcy matters please call our office for an appointment at 305-548-5020.

Tuesday, August 23, 2011

Bankruptcy Means Test: New Case Allows Three Vehicle Operating Expenses

If you're considering filing bankruptcy, you probably already know how important it is to properly complete Form B22, the bankruptcy means test, which determines whether you are eligible to file chapter 7, or whether you must instead file a repayment chapter 13 case. The means test also affects how much you must pay into a chapter 13 plan each month towards repaying your debts.

Conventional wisdom has long held that no matter how many motor vehicles you have in your household, you are limited to claiming operating expenses for only two vehicles on the means test form. Now there is good news for debtors, as a Florida bankruptcy court has ruled that expenses can be claimed for any number of vehicles in the household, so long as such vehicles are reasonably needed by the family.

In re Johnson, case no. 8:11-bk-00810-MGW (Bky.M.D.Fla. July 8, 2011), allowed the debtors to claim the standard $239.00 operating expense allowance for three vehicles, as long as the three vehicles were necessary to the family, as well as an extra $200.00 operating/ownership expense for third vehicle. This would allow the debtors to "pass" the means test and remain in chapter 7, rather than being forced to convert to chapter 13.

The debtors in Johnson owned three vehicles, two of which were subject to loans. The third was owned free and clear of liens, and it was used by their teenage daughter to assist in transporting her and her siblings to school, medical appointments and other activities.

The U.S. Trustee objected to the debtors including all three vehicles' operating expenses on the means test in the amount of $239.00 each, pointing out correctly that the means test form only provides for two vehicles, which in turn implied that only one vehicle could be claimed for each of the two married debtors.

The debtors countered that the U.S. Supreme Court's recent ruling in Ransom v. FIA Card Services, 131 S.Ct. 716 (2011), mandated a broad reading of the term "applicable number of vehicles" in the means test form. If they owned and operated three vehicles, they argued, then the applicable number of vehicles for which an operating expense could be claimed was indeed three, regardless of the language appearing on Form B22. It was, after all, only a form.

The court agreed and allowed an operating expense for all three vehicles, as long as it could be shown that all three cars were reasonable necessary for the debtors to have in their household.

If other courts follow this reasoning, it will be easier for chapter 7 debtors with more than two vehicles in their households to pass the all-important bankruptcy means test.

by Craig Andresen

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Monday, August 22, 2011

Why Do I Have to Include ALL My Creditors in Bankruptcy?

One of the most common questions I am asked is why a clients need to list their mortgage, their car loan, the "credit card that payments are current on that's just used for emergencies and I really need" or the loan from Mom on their bankruptcy schedules. While the short answer is, "Because you have to," the full answer is more nuanced than that.

First, the Bankruptcy Code and Rules require that all creditors be scheduled in your bankruptcy filing. This is primarily so that they will receive notice of the bankruptcy filing, and stop all collection activity pursuant to the automatic stay. If they are not scheduled, they do not get notice and do not know to stop. The Bankruptcy Code defines "creditor" as "An entity that has a claim against the debtor that arose at the time of or before" the bankruptcy is filed. This includes the mortgage, the car loan, the credit card, and Mom. (Many people are worried that merely scheduling their mortgage or car loan means that they will lose their house and car. This is not true. The overwhelming majority of people who file for bankruptcy keep everything they have.) Failing to list all of your debts can get you into trouble in your case.

From a creditor's perspective, bankruptcy is all about the same type of claims being treated in the same way. For example, all general unsecured debt–credit cards, medical bills and most personal loans–receive the same distribution in a bankruptcy case, regardless of who is owed the money. This means that Mom gets the same amount as Bank of America. It means that the hospital bill for saving your life is treated the same as the credit card bill for dinner. If you do not schedule all creditors, they cannot be treated the same.

Failing to include all of the required information also is perjury. You sign the schedules under penalties of perjury, stating that you have listed "all entities holding claims". At theMeeting of Creditors, you are typically asked, under oath, whether you listed all of your assets and all of your creditors.

So when your bankruptcy lawyer asks you to list all of your creditors, please make sure that you list all of your creditors!

by Brett Weiss

For more information on these matters, please call our office 305-548-5020.

Sunday, August 21, 2011

Ransom Footnote 8: Illinois Judge Preserves Chapter 13 Car Deduction

by Andy Miofsky, Illinois Bankruptcy Attorney.

A Chapter 13 bankruptcy debtor may deduct the full IRS Standards vehicle allowance even though the actual payment may be less, per a decision by Bankruptcy Judge Laura Grandy in the Southern District of Illinois case of In re Scott, 10-32582 (August 8, 2011).

When the Supreme Court ruled in Ransom v. FIA Card Services, 131 S. Ct. 716, 723-24 (2011) that an over median income debtor could not take an I.R.S. Standards Ownership Cost deduction against Disposable Income, (11 U.S.C. 1325(b)(1)(b)), for a vehicle if the debtor did not have an "applicable" vehicle payment, the Supreme Court refused to indicate whether a debtor could take the full amount of that deduction if the actual vehicle payment was less than the amount of the I.R.S. Standards. The Supreme Court commented in footnote 8 of Ransom at page 727:

"The parties and the Solicitor General as amicus curiae dispute the proper deduction for a debtor who has expenses that are lower than the amounts listed in the Local Standards. Ransom argues that a debtor may claim the specified expense amount in full regardless of his out-of- pocket costs. Brief for Petitioner 24–27. The Government concurs with this view, provided (as we require) that a debtor has some expense relating to the deduction. See Brief for United States as Amicus Curiae 19–21. FIA, relying on the IRS's practice, contends to the contrary that a debtor may claim only his actual expenditures in this circumstance. Brief for Respondent 12, 45–46 (arguing that the Local Standards function as caps). We decline to resolve this issue. [emphasis added] Because Ransom incurs no ownership expense at all, the car-ownership allowance is not applicable to him in the first instance. Ransom is therefore not entitled to a deduction under either approach."

In Scott, Judge Grandy was asked to confirm a Plan that deducted the full I.R.S. Standards vehicle allowance on Form B22C over the objection of the chapter 13 trustee. The trustee suggested the Judge should limit the amount of the deduction to the actual amount of the vehicle loan payment amortized over a 60 month period. A ruling in favor of the trustee would have required debtors to increase the amount of money paid to unsecured creditors during the life of the Plan. Because this decision would affect the calculation of Disposable Income for all over median income debtors with unconfirmed plans in that Bankruptcy District, the practical effect of such a requirement would have caused several active cases to fail in which debtors were already paying as much as they could afford.

Judge Grandy refused to disallow "standard expense deductions for anything that could be considered a debt payment", an interpretation proffered by the trustee of 11 U.S.C. 707(b)(2)(A)(ii)(I)'s "notwithstanding sentence". "Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts". Instead, Judge Grandy focused on the B22C form. Judge Grandy noted the history of the form as being created by the Judicial Conference of the United States – the principal policy making body concerning the administration of the United States Courts comprised of the Chief Justice of the United States, the chief judge of each judicial circuit, the Chief Judge of the Court of International Trade, and a district judge from each regional judicial circuit, with a number of committees and members appointed by the Chief Justice to advise on a wide range of subjects, including rules of practice and procedure and deriving its authority from federal statute 28 U.S.C. 331 [Pretty much her words, not mine]. Judge Grandy also noted the Official Forms prescribed by the Judicial Conference "shall be construed to be consistent with [the Rules of Bankruptcy Procedure] and the Code." Fed. R. Bankr. P. 9009." [Again, better said by her than me].

Form B22C directs debtor to list the applicable I.R.S. Standards vehicle ownership expense on line 28a. From that amount the debtor is directed to deduct the actual amount of the vehicle loan payment on 28b. The resulting amount on 28c is subtracted from the amount of money a debtor is presumed to be able to pay to unsecured creditors. The amount subtracted at line 28b is added back at line 47, in effect giving debtor a full deduction of the I.R.S. Standards no matter the amount of the vehicle loan payment, provided there is a loan payment. [Per Ransom, a debtor is not permitted to claim the I.R.S. Standards if debtor does not have a vehicle loan payment.]

Because the Official Form permitted a debtor to deduct the full allowance, and based on the history and authority behind the form, Judge Grandy accepted the form as an advisory opinion on how to calculate Disposable Income.

For more information on bankruptcy matters please call our office for an appointment at 305-548-5020

Friday, August 19, 2011

Objecting to Credit Card Claims in Bankruptcy

by Kent Anderson

It is becoming more common for debtors to receive notification of a proof of claim in their bankruptcy from a party they have never even heard of, let alone dealt with. This often takes the form of a company claiming to have purchased credit card debt from the credit card company after the debtor filed for bankruptcy. In 2005, these companies accounted for $66 billion in credit card debt affecting over 8 million credit card users.

While it is not always important to a debtor whether or not a claim is paid, there are circumstances in which it can have a significant impact. A Chapter 13 plan can be extended or shortened by the number and dollar amount of claims filed. This can also be important in Chapter 11 and 12 cases.

Bankruptcy Rule 3001 governs what the bankruptcy proof of claim must include in order to be "adequate as it appears," what courts will often call a prima facie showing. How courts interpret this rule varies greatly; in the case of assigned credit card debt, some courts require only an account statement from the original creditor, with no documentation of assignments, while others require a good deal of documentation. A small but growing number of courts will deny a proof of claim for failing to fully comply with every aspect of the rule (see In re Tran, 369 B.R. 312).

A creditor with a claim that has prima facie status will be paid by the trustee unless someone with an interest in the result presents evidence against the claim. If no evidence is introduced, the creditor's claim will be allowed and paid. Consumer debtors are at a disadvantage here. They are being asked to prove a negative with little or no ability to produce this kind of evidence. Consumers rarely keep extensive records of their family purchases.

Look over the proof of claim carefully! Creditors sometimes provide the evidence to defeat their claim within the claim itself. Creditors who buy debt do so in large transactions. Their paperwork gets sloppy. Numbers on one document may not match numbers on another. This kind of mistake isn't enough to defeat the creditor's claim on its own, but it is often enough to shift the burden of proof back onto the creditors.

What the creditor has to do from here is a matter of state law, but often the creditor is required to supply the documents proving the underlying assignment, something these kinds of creditors can rarely do. Many courts are becoming less sympathetic to assigned creditors when they that can't document the assignments. As In re Shank (315 B.R. 799) states, "the fact that a party's business practices make it difficult to produce evidence to prove its case does not permit courts to ignore evidentiary rules in deciding a disputed matter."

For more information on bankruptcy matters please call our office for an appointment at 305-548-5020.

Thursday, August 18, 2011

Is Florida the Next Non-Judicial Foreclosure State?

If the mortgage industry has its way, the passage of a new bill floating around Tallahassee will ensure that Floridians will be displaced from their homes without legal representation or due process. In typical Orwellian style, this bill is entitled the Fair Foreclosure Act – it's anything but . . .

Florida often makes the national news when it comes to foreclosures, and it's never positive. According to a recent 24/7 Wall Street study, three of the ten housing markets most likely to collapse in 2012 are in Florida. Naples, Miami and Ft. Lauderdale all make the top 10, and the rest of the Sunshine State isn't far behind.

In its preamble, the FFA actually says, "Once suit has been filed, the public interest is served by moving foreclosure cases to final resolution expeditiously in order to get real property back into the stream of commerce." Of course, it is this glut of foreclosed homes flooding the real estate market that has all but ensured its collapse. REO properties typically sell far below market value, and when so many REOs exist, it drives the overall market to new lows. The vicious cycle is complete as more homeowners suffer increased losses from a down market.

So the bill's stated purpose is flawed right from the outset, but getting our homes back into the "stream of commerce" really isn't the purpose of the Fair Foreclosure Act. Its sole design is to take Floridians' property without due process or equal protection under the law.

Florida has a proud history of whoring for the mortgage industry, and while states across the country are fighting to restore honor and integrity to our judicial system, Florida has taken a different approach. In Florida, the Supreme Court and our elected state officials are doing what they can to ensure their benefactors . . . the banks . . . get what they want.

Remember Foreclosure Court? It unconstitutionally employed retired senior judges to act as mortgage mercenaries – ramrodding defective foreclosures through the judicial system despite national ridicule. I am actually shocked it fell victim to Governor Scott's massive spending cuts. That must have been a mistake.

Then, with the addition of Pam Bondi as our new Attorney General, the mortgage industry took firm control of our prosecutors as well. Ms. Bondi all but killed any investigation into foreclosure fraud, and fired two assistant prosecutors who gained national attention for piecing together a massive conspiracy by the mortgage industry to defraud our state court judges in foreclosure cases.

BUT, these acts of treason pale in comparison to the Fair Foreclosure Act, which proposes to do the following:

Where the amount of principal and interest equals or exceeds 120% of the just value of the home, it will allow the mortgage company to foreclose without going through the judicial process. That means no foreclosure complaint, no defense, no due process, no justice. It will be as easy to take your home as it is to repo a car.
It will repeal Florida Statutes § 57.105, which awards attorney fees to homeowners who successfully defeat mortgage companies in court. At the same time, it assesses attorney fees against a homeowner and his lawyer (in equal parts) if the mortgage company prevails. The design here is to stop consumer lawyers from taking any more foreclosure cases by making it impossible to make money and even personally expose the lawyer to penalties. Consumer lawyers will have no upside potential and all downside risk.
It will eliminate the right of a homeowner to set aside a wrongful foreclosure, even if the plaintiff committed fraud in the process of taking the home. The ONLY recourse would be awarding money damages. This language is to appease the title companies by retroactively ratifying all that foreclosure fraud that has taken place over the last decade. Once the bank takes your home, you'll never get it back, no matter what.

The typical knee-jerk response is always that these homeowners are people who "got in over their head." But such banking propaganda ignores the fact that 1 in 2 houses in Florida have no equity. So, according to bankers, half of Floridians are irresponsible homebuyers. Wall Street and greedy bankers created this horrible mess, but they want no part of shared sacrifice in cleaning it up. Middle class America didn't cause this problem, and Middle class America shouldn't pay for it.

We Floridians suffer from foreclosure fatigue, and the FFA will send us all over the edge.

By Chip Parker

Wednesday, August 17, 2011

In a suit?

You're filing a bankruptcy case. You're suing someone. You don't have anything yet. Your lawyers says she's not sure your suit is worth anything. So you don't have to schedule it on your bankruptcy papers. Right? Wrong! Big time wrong!! Your bankruptcy schedules constitute your statement under oath that you didn't have a claim. It is an admission that you had no lawsuit or claim at all. So the doctrine of judicial estoppel will be used against you and you will be stiff out of luck. Too bad. No doubt you are strapped if you are filing bankruptcy. Your suit might even be the reason you're strapped. Maybe you had big medical bills. But if you don't list your lawsuit, the trustee won't know about it. If the trustee doesn't know about it, then he might file a no asset report. Then you're home free, right? Wrong again! The defendant in the lawsuit will find out someday that you filed a bankruptcy. Then what happens? The defendant will tell your trustee. Your trustee will reopen your case. You will probably end up losing your discharge. And even if the lawsuit results in enough money to pay your creditors in full, your failure to list the lawsuit in your bankruptcy papers will be used against you.

So if you are filing a bankruptcy case, list all your assets. And that includes all lawsuits you have against anyone for anything. It includes any claims you have even if you don't know what their worth. It includes any claims you have even if there are significant defenses to the suit. Don't get thrown out of court by playing it cute in your bankruptcy case.

For more information on bankruptcy matters please call our office for an appointment at 305-548-5020

Tuesday, August 16, 2011

I Can’t Afford To Pay My Creditors But I Don’t Want My Bass Boat Sold!

Yes, it is quite a lot of fun to be skimming across the water heading to that secret spot where you know the big lunker is lurking. You have had a lot of fun fishing over the years and if you could just get your financial issues behind you, you would spend more time fishing. But things have been tight lately with reduced hours at work and the way gas prices have gone through the roof.

So, you mention your difficulties to a friend or two. Your friends mention that they had to file a chapter 7 case and they got rid of all of their debt. Your friends didn't even have to give up their house or car or anything! You think that sounds like an excellent plan. Get rid of your debt in a chapter 7 case and keep everything.

So, you make an appointment with a bankruptcy lawyer and your lawyer tells you that, because your bass boat is paid for and is worth about $13,000.00, if you file a chapter 7 case, the chapter 7 trustee is going to sell your bass boat. But wait! My friends filed chapter 7 and they didn't lose anything! Your lawyer then politely tells you that he is sure that your friends would be more than willing to prepare your bankrutpcy case for you but nevertheless, if a chapter 7 is filed, the boat will be sold. See here for explanation.

So, what can we do to avoid that situation? Well, a chapter 13 case may just fit the bill.

As stated above, if you have assets over and above what you may exempt, a chapter 7 trustee may sell those assets to generate money to pay your creditors. In North Carolina, bass boats are not exempt and the only exemption that you can claim is under the wildcard exemption of $5,000.00. So, if your bass boat is paid for (you have the title) and it is worth more than $5,000.00 ($10,000 if married and jointly titled), the trustee may be interested in selling the boat to pay your creditors.

Of course, you can offer to pay the trustee the excess equity for your boat and still file a chapter 7. For example, if you offer the trustee $7,000.00 which is the value of the boat ($13,000) less your exemption ($5,000) less the costs of the sale ($1,000), the trustee would probably take the cash and leave your boat alone. The problem is, if you had $7,000 in cash lying around, you would not have been talking to a bankruptcy lawyer in the first place. Of course, the chapter 7 trustee is not interested in "payments."

Again, a chapter 13 bankruptcy case may just fit the bill.

In a chapter 13 case, if you have assets over and above what you can exempt that you wish to keep, you must pay the value of those assets through your chapter 13 plan over the course of several months (depending on the length of your plan) which would be paid out to your general unsecured creditors, then you can keep your bass boat! This is referred to as the "best interests of the creditors" test and is set out at 11 U.S.C. § 1325(a)(4). Basically, if a chapter 7 were filed and the unsecured creditors could expect $7,000.00 to be distributed to them because your boat was sold, then as long as the unsecured creditors are paid $7,000 through your chapter 13 plan, you do not have to sell your boat. Sort of a "no harm, no foul" type thing. (There are other requirements to a chapter 13 plan that must also be met.)

What can create a problem though is your monthly cash flow. Other posters have talked about the importance of cash flow on this blog here. You have to have sufficient income less your reasonable expenses and to make the payments required under your chapter 13 plan to make this work. For example, if you had to pay $7,000.00 to your unsecured creditors, you could expect approximately $135.00 a month to be allocated to your unsecured creditors over a 60 month period. If you do not have that $135.00 a month, then your chapter 13 plan will not work and your case is subject to a dismissal.

If the extra money that you must pay through your chapter 13 plan that is allocated to your unsecured creditors because of the excess assets is more than you can afford, what are your options?

First option: prioritize the assets that are most important to you. If the boat is very, very important to you, then perhaps you should consider surrendering a secured debt such as a car in order to free up cash to make the required payments. Or, go through your monthly expenses and cut expenses so as to free up cash to make the required payments. If having a roof over your head is more important, well, it may be time for the boat to go.

Second option: don't file bankruptcy but lose the boat anyway. If you don't file bankruptcy, you do not face this problem. Or do you? If you try to hide out from your creditors, they will sue you and eventually will find your bass boat that you have parked behind your brother-in-law's shed. They will have a deputy seize the boat to be sold at a sheriff's execution sale. After the boat is sold, you still have your debt problems but now, you no longer have your boat.

Contrary to what a lot of "friends" will tell you, there really is no such thing as a free lunch in bankruptcy. If you have assets over and above what you can exempt, then in order to keep those assets, you must pay for them. A chapter 13 plan allows you to keep those assets as long as you can afford to pay for them under the "best interests of the creditors' test.

by Adrian Lapas.

For more information on bankruptcy matters, please call our offices for an appointment at 305-548-5020.

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