Y is for Yacht

The letter “Y” is for Yacht. That's right! Can I keep it? Am I off my rocker? After all, we are talking about bankruptcy right? Well, some people, though admittedly not many, have boats, or a yacht, that end up filing a personal bankruptcy.

One of the questions I ask at every consultation is whether or not he or she has any cars, boats, planes, or recreational vehicles. Most, including me at times, think this question is overkill. However, being in Florida, it is not uncommon for debtors to have boats.

The Blog article in the Wall Street Journal reported onSeptember 16, 2010, the following:

A bankruptcy trustee recently won court permission to hire real-estate and yacht brokers to sell the assets of Frederick Darren Berg. Berg’s mansion in Mercer Island, Wash., is listed at $8.2 million, according to the Seattle Business Journal. Located on Lake Washington, the 5,400-square-foot house has four bedrooms, six baths, six fireplaces, a hot tub, wine cellar, wet bar and two kitchens. That’s not to mention its city and mountain views, boat dock and covered parking for four vehicles.

Also up for grabs is Berg’s 70-foot Holland yacht, the Screaming Cora, which Berg says is worth $800,000. Sale proceeds will pay off Berg’s creditors, including Sun Trust Bank (owed $797,450 on a boat loan secured by the yacht) and Commerce Bank of Washington (which holds the $4.38 million home mortgage). [emphasis added]

So, yes, there is at least this bankruptcy proceeding that included a yacht. Normally, boats and planes in the name of the debtor are not exempt from the bankruptcy process. The trustee would take the asset and sell it (assuming there is equity in the asset) in order to distribute the proceeds to creditors.  Of course, in that case, the Trustee is thinking of Y as meaning "yield".

In Florida, however, if someone was living on there boat, or in there RV, they might be able to claim the asset as their homestead property. You see, the Florida Constitution provides for unlimited homestead protection, and though there are not many cases involving yachts being claimed as homestead property, there are a few cases involving boats. Unfortunately, there is not a bright line as to what can be claimed as homestead property, and what can not be claimed as homestead, though the cases provide some very useful insight into how the courts will rule.


So, if you have a yacht, or RV, that you live in, and are curious about whether you will be able to keep the asset after filing bankruptcy, you should consult with a bankruptcy attorney in your area.


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Other articles involving the letter Y are:

Y is for Young vs. the United States (2002)

"Z" is for Zero

Zero.  When you think of zero, what do you think of?  Is zero a verb, noun, or adjective?

Obviously, the word zero can mean many different things.  However, when one is contemplating bankruptcy, the field of meanings may be narrowed a bit.  It could refer to a zero balance in the bank, or perhaps the amount you are eligible to barrow, or the number of creditors continuing to extend credit.

What one may not think of is zero-rate, referring to a value added tax, or zero-sum whereby gains equal losses. If you were to ask a bankruptcy attorney what zero means, you might find he or she refers to a zero percent plan.

So, what is a zero percent plan? The filing of a Chapter 13 bankruptcy includes something called a Plan.  The Plan, once confirmed, or approved by the Bankruptcy Court, controls many aspects of the case as an agreement between creditors, debtors, and the Trustee assigned to your case.  It will include how much money is to be paid to the bankruptcy estate, how often, and for how long; it also includes how those funds are to be distributed.

So, how does zero apply to the Plan?  No, it does not mean No Plan.  It refers to the amount, or percentage of the payments in the plan paid to unsecured creditors, such as credit cards and medical bills.  So, for instance, in the typical Chapter 13 bankruptcy, priority creditors, like the IRS, the Trustee, your attorney, and support payments, would be paid first; then secured creditors, like mortgagees, would be paid.  After they are paid, any additional disposable income is paid to unsecured creditors.  When there is nothing left to pay unsecured creditors (or less than 1%), then you have what is sometimes referred to as a zero percent plan to unsecured creditors.

While some courts allow such treatment of unsecured creditors, others do not.  If you are contemplating filing such a plan, you should check with a bankruptcy attorney in your area to see if this is permitted within the division you are filing in.

Other attorneys speaking about the Letter Z include:
Caldwell Law, LLC

Video For Attorneys - Must See

Most bankruptcy continuing education classes list recent cases, including those in which parties to the case may have done something wrong. Of course, some of the information we are inundated with sticks, while other information needs to be reviewed later. I recently ran across an email with a link to a video. It's only about 7 minutes long, and believe its entertainment value exceeds its educational value. The link to the video is http://www.dailymotion.com/video/xmq5n7_vts-01-1_music

Hope you enjoy it. If you run across other bankruptcy, or trustee, videos you consider a “must see”, please mention them in the comment section below.

New Forms Effective December 1, 2011

New Forms.  That's right; as of December 1, 2011, Rule 3001(c) requires additional information be included in the filing of a proof of claim. More specifically, if the secured property is the debtor's principal residence, an Official Form must be attached to the Proof Of Claim. Additionally, if the claim includes an escrow account, then an escrow account statement, as of the date of the filing of the petition, must be attached.

A failure to include the information has remedies under 3001(D), which states:

If the holder of a claim fails to provide any information required by this subdivision (c), the court may, after notice and hearing, take either or both of the following actions:
     (i) preclude the holder from presenting the omitted information, in any form, as evidence in any contested matter or adversary proceeding in the case, unless the court determines that the failure was substantially justified or is harmless; or
     (ii) award other appropriate relief, including reasonable expenses and attorney's fees caused by the failure. [emphasis added]

So, according to the rule, the remedies are at the Court's discretion.

New Rule 3002.1(b) (effective as of December 1, 2011), deals with payment changes on claims that have the debtor's principal residence as a security interest in Chapter 13 cases. The change must be served no later than 21 days before the new payment is due. However, Rule 3002.1(c) requires an itemized notice to be given, within 180 days of incurrence of any postpetition fees, expenses, or charges that the holder of the claim asserts are recoverable from the debtor or against the debtor's principal residence. This might include, for example, inspection fees, late charges, or attorney's fees.

The new official forms for Proof of Claim (B10), Attachment A (B10A), Notice of Mortgage Payment Change (B10S1), and Notice of Post Petition Mortgage Fees, Expenses, and Charges (B10S2), should be used starting today, December 1, 2011.

Implementation of Rule 3001 and 3002.1

In a previous post, I mentioned there are changes being made to Rule 3001 and 3002.1, among other changes to the Rules. As with many changes, for the changes to become effective, it is necessary to structure an implementation period.

The National Academy For Consumer Bankruptcy Education is holding a webinar regarding the implementation of these rules on November 30 at 2:00 PM EST. Their invitation to their webinar states as follows:

Join our panel of experts in this joint production of the NACTT and the NACTT Academy to gain common sense, practical answers to questions about implementation of the new rules.  Trustees and practitioners need to prepare for the new rules which take effect on December 1st. This webinar will focus not only on the rules but on the best ways for creditors, trustees and debtors to respond to the requirements imposed.

Title:  Implementation of Changes to Bankruptcy Rules 3001(c) and 3002.1 

Date: Wednesday, November 30, 2011  

Time: 2:00 p.m. EST
 

Sorry about the format, but remember this is blog, and as such, has limited formatting capabilities.

If interested, you can register by CLICKING HERE.

I hope to follow up this blog post after the webinar as to some of the details regarding the implementation of these rules.

Q is For Quick

So, what do I mean by "Quick".  After all, after a bankruptcy consultation, planning for bankruptcy, coming up with the money, filling out the petition, schedules, statement of intentions, statement of financial affairs, and means test, you can finally file.  Oh, don't forget the financial counseling certificate.

Handling all these can be time consuming, and for some, stressful.  So, what does one do when they are in a hurry to get filed in order to prevent things such as wage or bank account garnishment, or eviction order being issued by the court?

Fortunately, the code allows for emergency filings, which I place into the category of quick.  It allows for the filling of a minimal number of documents, with the remaining documents being filed within a specific time frame.  This allows for an automatic stay to be put in place quickly, thereby stopping collection activities and most civil law suites.  The automatic stay will remain in force until lifted by the court or the case is dismissed.

Changes to the Federal Rules of Bankruptcy Procedure

There are a number of new Bankruptcy Rules and amendments to Official Forms that will be going into effect on December 1, 2011 and they are listed below.

Federal Rules of Bankruptcy Procedure

• Bankruptcy Rule 1004.2 (republication of a new rule requiring entity filing a chapter 15 petition to state the country of the debtor's main interest, filer to list each country in which a case involving debtor is pending, and setting deadline for challenging the statement asserting the country of the debtor's main interest) 

• Bankruptcy Rule 2003 (requires the filing of a statement upon adjourning a meeting of creditors or equity security holders) 

• Bankruptcy Rule 2019 (expands the scope of the rule’s disclosure requirements by requiring disclosure in chapter 9 and chapter 11 cases by all committees or groups that consist of more than one creditor or equity security holder, as well as entities or that represent more than one creditor or equity security holder. It also authorizes the court to require disclosure by an individual party in interest when knowledge of that party’s economic stake in the debtor would assist the court in evaluating the party’s arguments) 

• Bankruptcy Rule 3001 (prescribes in greater detail the supporting information required to accompany certain proofs of claim)

• Bankruptcy Rule 3002.1 (new rule implements § 1322(b)(5) of the Bankruptcy Code, which permits a chapter 13 debtor to cure a default and maintain payments of a home mortgage) 

• Bankruptcy Rule 4004 (permits a party under limited circumstances to seek an extension of time to object to a debtor’s discharge after the time for objecting has expired)

• Bankruptcy Rule 6003 (clarifies that the requirement of a 21-day waiting period before a court can enter certain orders at the beginning of a case, including an order approving employment of counsel, does not prevent the court from specifying an effective date for the order that is earlier than the date of its issuance)

• Bankruptcy Form 1 (implements new Bankruptcy Rule 1004.2)

• Bankruptcy Forms 9A - 9I (conforming amendments to the pending amendment of Bankruptcy Rule 2003(e)) 

• Bankruptcy Form 10 (clarifies that, consistent with Rule 3001(c), writings supporting a claim or evidencing perfection of a security interest - not just summaries - must be attached to the proof of claim) 

• Bankruptcy Form 25A (changes the effective date consistent with 2009 time-computation rules amendments)

Duval Clerk Sues MERS

Here is a copy of an article from Mortgage Servicing News

County and state officials are turning up the heat on MERS, as recent lawsuits filed in Florida and Delaware challenge the validity and accuracy of the mortgage industry-controlled loan registry.

The most recent lawsuit was filed by a county clerk in Florida, and seeks class action status to represent the state's 67 counties. The complaint alleges the use of MERS does not comply with state property laws and has cost municipalities millions in unpaid recording fees.
Jim Fuller, the clerk of Duval County, filed suit against Merscorp Inc. and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc., on Oct. 31, claiming civil conspiracy, unjust enrichment, as well as fraudulent and negligent misrepresentation. The suit also seeks a hearing to determine the validity of tracking note transfers on the MERS System and a court injunction to prohibit the use of MERS in Florida.
“MERS has usurped the rights and privileges of the Florida Clerks of Court by establishing, maintaining and inducing lenders to use its private recording system, which unlawfully interferes and competes with the public recording system,” the suit, filed in state circuit court, reads.
Merscorp spokesperson Janis Smith said the suit's allegations are inaccurate and false.
“The MERS System is not a legal system of record or a replacement for public land records. No interests are transferred on the system—they are only tracked,” Smith, Merscorp vice president of corporate communications, wrote in a response to emailed questions. “MERS does not have or maintain any document recording system, public or private, and does not do anything to compete with or supplant the public records for land located in the County records.”
Tim Volpe, a Jacksonville, Fla.-based attorney serving as outside counsel for Duval County, claims that when MERS is named on county land records, it creates an illegal disconnect between the mortgage document and the promissory note that allows the owner of the promissory note to change without being recorded in land records—keeping borrowers in the dark about who holds their debt.
“Both the note and mortgage are to be recorded. The principle issue we're trying to get at is the punitive distinction of MERS being the mortgagee while the note is shifted from one to another up through the typical securitization process,” Volpe said in a phone interview. “The principle concern about the disconnect is that the public records are not complete insofar as the true beneficial owner of the mortgage is not reflected in the public records.”
In previous challenges to mortgage liens filed in the name of MERS, the Reston, Va.-based company has relied on agency laws to defend its position as both the legal holder of the mortgage, and as an agent acting on behalf of the owner of the promissory note.
Smith said MERS is the true owner of the mortgage, and is not, in the complaint's words, a “straw man” placeholder listed in public records.
“The 'owner of the loan' is the party who has possession of the promissory note, but the promissory note is not, and has never been, and is not required to be disclosed or filed in the public records,” she wrote.
Following a subpoena issued against MERS earlier this year, on Oct. 27, Delaware Attorney General Joseph “Beau” Biden filed a lawsuit claiming MERS engages in deceptive trade practices. The complaint cites a review of 100 foreclosures in New Castle County during 2010 that showed discrepancies between MERS records and the entities that participated in the foreclosure.
In a press statement, Smith said the claims in the Texas case are without legal or factual merit and that MERS complies with state laws. In a separate statement about the allegations in Delaware, Smith said the MERS business model is “straightforward and transparent,” adding that “[T]he lawsuit they filed was unexpected, and we disagree with the allegations made in their complaint.”

Items Needed For Filing Bankruptcy

I usually hand out a card with a checklist of what items I need from my clients before filing bankruptcy. This is provided as a convenience, however, I still receive calls from time to time asking what is need when they misplace my checklist.  .......So, here is the list:

1) 7 Months Pay Stubs

2) 7 Months Pay Stubs, Spouse

3) 4 Years Tax Returns

4) Deeds, Titles / Registrations

5) Credit Reports

6) Contracts/Leases

7) 4 Months Financial Accounts

8) Divorce Papers

9) Completed Bankruptcy Kit

Here is a quick and short explanation related to the above items.

1. 7 Months Pay Stubs. Pay advices are need for 2 reasons. First, the local bankruptcy rules (for the Middle District of Florida) actually require pay advices by submitted to the Trustee after filing. This is a deviation from the literal language of the bankruptcy code. This consist of 60 days of pay advices prior to filing.
   
   
   The second reason pay advices are needed is for calculating gross income to determine whether or not it is abusive to file a Chapter 7 bankruptcy, according to the bankruptcy code. The attorney must use 6 months of pay advises, like pay stubs (showing gross income), ending the end of the month immediately preceding the filing. So if you filed on July 31, you would need pay advices from January 1 through June 30 for calculating annualized income for this purpose.
   
   
   If pay advices (pay stubs) are lost, go to your employer (or previous employer, as the case may be) and ask for a printout of your pay information. You may need to explain, you need the information contained within the pay stubs of your checks.
   
   
2. 7 Months Pay Stubs, Spouse. Same as #1 above, but if the debtor is married, the “second reason” listed in #1 applies to household income. Hence, both spouses income needs to be disclosed.
   
   
3. 4 Years Tax Returns. The bankruptcy code requires the last 4 years of tax returns must have been filed prior to filing bankruptcy. Although the trustees generally only require 2 years be sent to them, I always send all 4 years (because of the language of the bankruptcy code).  Currently that is your tax return for years 2011, 2012, 2013 and 2014.
   
   
   If you have misplaced your copy of your return, or filed electronically and simply never had a copy, you can request a transcript, for free, of your returns from the Internal Revenue Service, or you can go by their local office and get a transcript while you wait. To order a return online by going to the Order Your Transcript page, or you can fill out a 4506-T and fax in your request; the faxed form will allow your transcript to be mailed to an address other than the one they have on file for you (such as your attorney).
   
   
4. Deeds, Titles / Registrations. I like to see any and all deeds, titles, and registrations prior to filing to confirm how things are titled, and anticipate any questions the trustee might bring up. Most trustees ask for a copy of these documents within initial correspondence they mail to the debtor(s). After review the documents, I usually hand them back to my client and explain the trustee will be asking for a copy of them; do NOT send the original.
   
   
5. Credit Reports.  My clients provide me with credit reports.  You can also get a copy of your credit report from Annual Credit Report.com.  Although there are numerous sites indicating they offer free credit reports, this is the only site authorized for providing you the free credit report you are entitled to annually according to the Federal Trade Commission's web site.
   
   
6. Contracts/Leases. These documents most trustees will want to see a copy of, and the exact language is important for the attorney to review to determine what needs to be disclosed, and how it needs to be disclosed, within the bankruptcy paperwork for filing.
   
   
7. 4 Months Financial Accounts. The amount of financial statements requested by trustees varies greatly. I have found the information contained within these reports tends to be the most important, and should be reviewed by your attorney.
   
   
8. Divorce Papers. If divorced within the past 4 years, I require the papers. Sometimes they can be found online, in the public records. This information may be needed for filing out the papers to be filed with the Clerk of the Bankruptcy Court. Most trustees will ask for a copy of these papers.
   
   
9. Completed Bankruptcy Kit. Most of my clients provide me with this information online, so there is no need to actually bring in a kit. However, a few of my clients do not have access to a computer. For those clients, they will be provided a “bankruptcy kit” to complete and return to my office.

Proof Of Claim: What To Look For

So, you just filed a Chapter 13 bankruptcy. You filed you Petition, your Plan, and attended the Meeting of Creditors. At the Meeting of Creditors, no creditors showed up. How about that. You checked the mail, and just received a Statement Of Claim form, that is similar to the one received from the Clerks office earlier, but with this difference; now the form is filled in with information from a creditor.

What should you do with it? Is the information correct? Well, hopefully you are receiving these forms after December 1, 2011, as new rules governing these forms goes into effect on that date. Here is a brief breakdown of what you should be receiving after that date:

1. If the claim is based on a written document, there should be a copy of that document inclosed with the claim form. If the creditor no longer has the form, because it was lost or destroyed, there should be some sort of explanation included that explains what happened to the document.
2. If the claim includes interest, fees, expenses and other charges incurred before the petition was filed, the creditor should include an itemized statement.
3. If the statement includes a security interest, such as a mortgage or vehicle loan, there should be a statement as to the amount necessary to cure any default, as of the date of the petition.
4. If the claim is on your principal residence, there will be a form attached for this claim. The escrow balance should be disclosed, if any, as of the date of filing the petition.

So, what if the creditor decided they just didn't want to go to the trouble to file all this stuff. Now what? Well, the new language actually puts some enforcement provisions in place. The Court may do 1 of 2 things. First, it may prevent the creditor from presenting the information later; the creditor has the burden to show the failure to include the documents and information “was substantially justified or harmless”. Or the court can award such other relief as it sees fit, including reasonable attorney fees and reasonable expenses.

The Letter F is for Forms

If you have been following JayFleischman's blog about the alphabet soup of bankruptcy, beginningwith the letter A, for Abandonment, then it is no surprise the letterB is for Bank Account, C is for Creditor, and D is for, you guessedit, Debtor. But, I bet you didn't think E would be for Executory Contract. I thought this was interesting.

Well the next on the list is F. What could this stand for? Well, it could stand for a four letter word; something you say when you receive a call from a debt collector, or one of their hart to hart letters that you through to the side and don't open because you know what is inside. Well, fortunately, we are not going down that road. At least, not in this blog, as I, and my clients, believe in taking the upper road.

F stands for Forms, and not just any forms. These are the official forms for filing bankruptcy, and as chance would have it, the specific form F refers to is called Schedule F. Why they call it a schedule, instead of a form, I really don't know, but if I were to guess, I would say it sounds more official, or politically correct. Yes, it's called a schedule, but it sure looks like a form to me.

So, why is this form important? Well, of the schedules that are filed in a Chapter 7 or Chapter 13 bankruptcy, which consist of Schedule A through Schedule J, this is be far the most widely used. This is where all the non-priority unsecured debts are listed; debts like credit card and medical bills are listed on this form. Generally, when I ask someone who they owe money to, it goes on this form as long as it is not the IRS (depending on the year taxes are due from), or a domestic support obligation (alimony, child support), or a secured creditor (mortgagee, auto loan).

It consist of the name of the creditor, along with anyone else associated with the debt, like a debt collector, their respective addresses, the amount of the debt, and whether or not the debt is disputed. It is very important to list all creditors that should be listed on this form, as if you forget to list someone, you not only could still owe that creditor after your discharge (which is what I thought the letter D should be for), but you may be prohibited from discharging the debt in a subsequent bankruptcy.

I wonder if creditors, after receiving a commencement letter indicating someone has filed bankruptcy, thinks of a four letter word beginning with F while placing the paper in the debtor's file.

Bankruptcy: From A to Z

Do you remember back in the early days of school, books were simple, sometimes with pictures, in which you would begin to learn how to read, which would eventually lead to further learning about the ways and wonders of the world. Step by step instruction is nothing new. Sometimes it is in an organized fashion, and sometimes it is in bits and pieces like a puzzle, and does not fully come to gather until all the pieces are known and put in their proper place.

As you can imagine, the bankruptcy code a similar to both. It is an organized bunch of bits and pieces. One of the first steps in understanding the bankruptcy code is to understand its terminology, as the bankruptcy code, similar to many other fields or professions, has its own lingo.

So where is a good place to start learning the lingo of bankruptcy. Well, perhaps a good start might be to learn it like we learned in our early years of school; learning from “A to Z”. Is this unorganized? You bet. But there is a well known bankruptcy attorney, Jay Fleischman, that has a site called Legal Practice Pro, and is going to post on his blog site over the next 26 days, terms as they apply to bankruptcy, starting with A and ending with Z. Well, actually, he starts with an introduction. If you are interested in viewing some of these blogs, you can find his introduction at

http://www.consumerhelpcentral.com/bankruptcy-alphabet-introduction/

and his first letter, A, at

http://www.consumerhelpcentral.com/bankruptcy-alphabet-abandonment/
 

After reading his post, please feel free to let me know what you think by commenting below.

Over time, I will be adding content to this blog, at random, concerning various letters of the alphabet, and applying an explanation of each letter as it may apply to bankruptcy.  Some may think of this a being the bankruptcy alphabet, but I think that is misleading, as it is not meant to be inclusive the terms related to bankruptcy.  As such, I am categorizing it as "Bankrupthabet". 

What does it mean.  Well, bankrupthabet, as of now is undefined.  A common phrase among attorneys is, "I know it when I see it".  This stems from a court case concerning the definition of pornography.  So, how would you define the picture to the left?

State Housing Agency Temporarily Suspends Foreclosures On Brrowers Who Rent Out There Homes

The following is a reprint from the Sacramento Bee, published October 28, 2011.


The California Housing Finance Agency has softened its hard stance on borrowers who rent out their properties, saying it will temporarily suspend any foreclosure actions it has initiated against such homeowners.
The move comes after a report released Monday by the state Senate Office of Oversight and Outcomes found that CalHFA, which makes low-interest loans to first-time buyers, has filed foreclosure notices on 21 homeowners who were still current on their state loans.

The report, dubbed "Good Deeds Punished," said that many of those borrowers had moved out into larger residences but were forced to rent out their first-homes because they were unable to sell them in the down real estate market.

The agency's reversal was announced Friday by Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Senate Transportation and Housing Committee Chair Mark DeSaulnier, D-Concord, who had asked CalHFA to reconsider.

"The agency is making the right decision during difficult economic times," said Steinberg. "Struggling families who are working to do the right thing in meeting their obligations shouldn't be saddled with an extra, unnecessary burden."

CalHFA had previously said it believes that federal law bars renting in such cases.

Where Do I File Bankruptcy?

So you have decided to file bankruptcy. Now the question is, “Where do I file?”. Well, the answer to that, in most cases, is simple. You file in the jurisdiction where you have lived for the past 180 days. The Federal Code referencing this, 28 USC 1408(1) states:

Except as provided in section 1410 of this title, a case under title 11 may be commenced in the district court for the district - (1) in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principal place of business, in the United States, or principal assets in the United States, of such person were located in any other district [emphasis added]

Notice the language of the statute states “been located for one hundred and eighty days” instead of referencing where your residence is. For the Middle District of Florida, where I practice, that means if you were lived in Baker, Bradford, Citrus, Clay, Columbia, Duval, Flagler, Hamilton, Marion, Nassau, Putnam, St. Johns, Sumter, Suwannee, Union or Volusia County, in Florida, for the past 180 days, then you would file in Jacksonville.

So, what happens if you have not lived in the jurisdiction you are in for the past 180 days? Then you have to look at where you lived for a majority of the past 180 days. That could be where you currently reside, or it may be in another jurisdiction. A jurisdictional map can be found at www.uscourts.gov/courtlinks, where there are 201 bankruptcy courts throughout the United States and its territories.

Principal Paydown Plan Under Serious Consideration By Congress

The Principal Paydown Plan proposed by the National Association of Consumer Bankruptcy Attorneys (NACBA) is now under serious consideration by congress thanks to Edward DeMarco, the Acting Director of the Federal Housing Finance Agency, and Representative Zoe Lofgren. I would like to extend a sincere thanks to all who sign the petition. The following statement was disseminated to the membership of the NACBA.

UNITED STATES CONGRESS

For Immediate ReleaseOctober 26, 2011
 

FHFA Director Praises Principal Paydown Plan as “Promising” and “Credible”
Pledges to Provide Members an Assessment in Two Weeks

Washington, DC (Oct. 26, 2011)—During a meeting today with 19 Members of Congress, Edward DeMarco, the Acting Director of the Federal Housing Finance Agency (FHFA), praised a principal reduction proposal by Rep. Zoe Lofgren and pledged to provide an assessment within two weeks of how it could be implemented.

Rep. Elijah E. Cummings, the Ranking Member of the House Committee on Oversight and Government Reform, hosted the meeting with Rep. Dennis Cardoza, Co-Chair of the Housing Stabilization Task Force, to discuss additional measures to address the foreclosure crisis.

Members lauded the latest move by FHFA.  In response to DeMarco’s comments, Cummings said, “If Mr. DeMarco actually works with us to implement this proposal, it would be an important step to address this crisis, especially on the heels of his announcement Monday that he will implement the President’s plan to help responsible American homeowners refinance at today’s historically low rates.”

Rep. Lofgren stated, “I am encouraged that the Federal Housing Finance Agency is considering a plan similar to the one I’ve long advocated. Allowing homeowners to pay down the principal balances on their mortgages more rapidly in conjunction with Chapter 13 filings is a sensible solution.  Linking this to the bankruptcy process will help those who truly need it and avoid the administrative failures that have plagued other modification initiatives. I believe this plan is entirely consistent with FHFA’s obligation to minimize taxpayer losses in Fannie Mae and Freddie Mac, and I look forward to Director DeMarco’s answer two weeks from now.”

Rep. Lofgren’s proposal would allow homeowners in Chapter 13 bankruptcy to pay down loan principal and reduce negative equity during a five-year period with no interest.  In exchange, homeowners would agree to settle claims against servicers, thereby avoiding litigation and reducing taxpayer liability.

During today’s meeting, Mr. DeMarco said his legal team had already begun reviewing the proposal.  “Based on initial feedback,” he said, the proposal “has a lot of promise,” “strikes me as being responsible,” and appears to be a “credible way” to address the crisis while recognizing various interests in mortgaged properties.  He committed to Members that he would provide a more detailed assessment of the proposal within two weeks.

Today’s meeting was a follow-up to a previous meeting Cummings and Cardoza hosted on October 6, 2011, during which Members pressed DeMarco to implement the President’s recent proposal to eliminate barriers faced by underwater homeowners seeking to refinance their mortgages at current market interest rates.  DeMarco announced on Monday that FHFA would be taking several steps to reduce these barriers.

Cummings issued a release on Monday stating, “I commend the President for proposing this idea in his speech to Congress, and I thank Mr. DeMarco for listening to the concerns of Members and their constituents.  The changes announced today will provide additional relief for middle-class Americans and an important boost for our economy.  But we must not stop here.  Economists warn that the housing crisis is ‘ground zero’ for the economy and jobs, and this is only one modest step towards addressing it.”

Is filing bankruptcy expensive?

Well, hold on, because the Judicial Conference of the United States adopted a new court fee schedule on September 13, which will become effective November 1, 2011. Yep, they need more money; as the revenue generated by the fee change will go into the Judiciary’s budget.

The new filing fees will be:

  

·            Chapter 7: $306.00

·            Chapter 11: $1046.00

·            Chapter 13: $281.00

There are also other fee changes. As of the writing of this blog, the Middle District of Florida has not posted the new fee schedule. However, with a little searching on the internet, I found a new fee schedule posted for the Eastern District of Michigan that can be found by Clicking Here.

UPDATE: The Middle District has their fee schedule by at http://www.flmb.uscourts.gov/filingfees/new.htm

NACBA's Principal Paydown Plan Gets Giant Boost

Following is a  recent letter I received from the National Association of Consumer Bankruptcy Attorneys regarding the Principal Paydown Plan.

Dear NACBA Member:
On Wednesday, we wrote to bring you up-to-date on activities of NACBA’s Legislative Committee in support of the Principal Paydown Plan (PPP).  Just as that email went out, we learned that the PPP figured prominently in a “call to action on housing” sent to President Obama by 32 members of the California delegation in the U.S. House of Representatives.  The letter to President Obama reads in relevant part:
“One promising possibility would be a temporary reduction in the interest rates of certain homeowners who file for Chapter 13 bankruptcy, so that the entirety of their monthly payments would go to paying down their principal balances for five years. Coordination with the bankruptcy process would make these reductions more likely to succeed than other types of loan modifications, while also limiting the program to those who truly need it and avoiding the administrative failures that have plagued many other initiatives. Such a plan could be implemented for mortgages held by Fannie Mae and Freddie Mac, as we believe that such a plan would be entirely consistent with FHFA’s obligation to minimize taxpayer losses in the Enterprises. This plan could also be implemented as part of the nationwide settlement currently being negotiated by a group of state attorneys general.”
The endorsement by the California delegation of the PPP signals a growing recognition among policymakers that Chapter 13 bankruptcy is an appropriate forum for addressing the foreclosure crisis.  On Thursday, the Democrats on two House Committees  -- Judiciary and Oversight and Government Reform – included mortgage modifications in bankruptcy court (such as the PPP) as an approach to fixing the housing market and the broader economy in their suggestions submitted to Congress’ deficit reduction committee.  And, in correspondence last month with Members of Congress, Edward DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), said NACBA’s PPP has “some attractive features” and indicated that he has instructed his legal staff to study it further. 
A number of NACBA members have taken the time to meet with their lawmakers in recent weeks and months, either in Washington, at home, or both, impressing upon them the harsh realities our clients face when it comes to dealing with mortgage servicers in the hope of saving their home from foreclosure.  A growing number of lawmakers have agreed to lend support to the PPP and to be helpful in any way they can to see it implemented.
If you have not already joined in this outreach effort, we encourage you to do so.  While our team in Washington does a terrific job representing us before lawmakers and staff, there is no substitute for hometown constituents providing the local perspective on these issues.  The relationship you will build with your lawmakers will go well beyond the current foreclosure crisis and be of tremendous help as we tackle other issues, such as student loans and fraudulent mortgage claims.  At the local level, our issues become personal and we have an opportunity to illustrate the impact of policy decisions on everyday people.   Angie and Zach, working with our legislative team in DC, are poised to help you set up a meeting and support you throughout the process.  Please contact Angie Thies-Huber, NACBA’s Field Director at (614) 929-5375 and Zach Manifold, NACBA’s Field Coordinator at (614) 317-7180.
Thank you for your support of NACBA!

Ike Shulman 
NACBA Legislative Committee Chair

P.S.  More information about the Principal Paydown Plan is available here.

NACBA Principal Paydown Plan Petition Push

The National Association of Consumer Bankruptcy Attorneys has a proposal (the “Principal Paydown Plan”) to reduce mortgage balances and help increase home values, but they need your help in order to put it into effect. The Principal Paydown Plan would give bankruptcy judges the ability to force a loan modification of certain Chapter 13 bankruptcy debtors’ first mortgages.


They are making a Final Push to get signatures on a petition.

CLICK HERE to see a one-page explanation of how the Principal Paydown Plan could help [your clients/relatives/etc.]

The Petition can be found at http://wh.gov/g8d.

To all that have signed the petition, THANK YOU very much!

Length of Time of Automatic Stay in Chapter 7

Most people file a Chapter 7 bankruptcy to discharge debts, and often are very concerned about long the Chapter 7 will last. The good news is many of the protections debtors are looking for when they file bankruptcy they receive upon filing with the Court.

During consultations, almost everyone wants to know how long the bankruptcy will last. This appears to be an emotional question, and as such, I usually tell them everything they will probably have to do in the case will be done during the first 30 days, and explain the trustee will ask for documents during this time, followed by a meeting with the Trustee, called a Meeting of Creditors. Then its just a sit back and wait for the discharge. But if the protection they are looking for is relief from collection activities by creditors and debt collectors, then, as to most creditors, that is immediate upon the filing of the bankruptcy petition with the Clerk of the Bankruptcy Court.

The reason creditors and debt collectors are unable to try to collect during bankruptcy is because of something called the “automatic stay”. This is a stay ofcollection activities during the bankruptcy, and usually remains in effect until one of the following occurs:

1. a lift of the stay is granted by the court;
2. the case is dismissed; or
3. a order of discharge is entered by the Court.

If this is not your first bankruptcy filing, then the automatic stay may be limited in time unless extended by the Court, or not put in place at all until ordered by the Court. If you have previously filed, you should seek the advise of a local bankruptcy attorney prior to filing regarding the automatic stay, and how it applies to your particular situation.

There are situations when clients are concerned about when they will receive their discharge. This usually comes about from a creditor that really doesn't fully understand the bankruptcy process. Many times a landlord will not want to enter into a rental agreement until after the discharge has been entered. The answer to this is a discharge is usually entered in 3 to 4 months after the Meeting of Creditors, which is about 4 to 5 months after filing.

For debts that are not discharged, should there by any, the automatic stay is usually still effective during the course of the bankruptcy; however, upon the automatic stay being lifted, the creditors are then free to proceed with collection efforts as to those non-discharged debts. In this case, debtors are given some breathing room for the time the automatic stay is in place.

Bank Is Not Necessarily Entitled To Rental Income

If you have rental properties with tenants paying rent, do you ever wonder what would happen to those properties, and rental income, if you were to file a Chapter 7 bankruptcy? Does a demand letter from the mortgagee for the rental income mean all the rental income must go to the mortgagee? Well, not necessarily.

Florida Statute Section 697.07(4) states, “Upon application by the mortgagee or mortgagor, in a foreclosure action, and notwithstanding any asserted defenses or counterclaims of the mortgagor, a court of competent jurisdiction, pending final adjudication of any action, may require the mortgagor to deposit the collected rents into the registry of the court, or in such other depository as the court may designate. However, the court may authorize the use of the collected rents, before deposit into the registry of the court or other depository, to:

(a) Pay the reasonable expenses solely to protect, preserve, and operate the real property, including, without limitation, real estate taxes and insurance;

(b) Escrow sums required by the mortgagee or separate assignment of rents instrument; and

(c) Make payments to the mortgagee.

The intent of the statute is to provide additional security that the property will have its taxes paid, insurance paid, and be maintained to prevent the wasting of the property.

In re: One Fourth Street North, Ltd., a 1989 bankruptcy case out of the Middle District of Florida, the debtor was authorized to use rents to maintain the property and pay its ordinary operating expenses. The court recognized Florida intends for the assignment of rents to be made upon judicial determination as to the mortgagee's rights to the rents.

So, upon the filing of bankruptcy, you have the ability to petition the court for a determination of how the rental income should be used, how much should be sent to the mortgagee, and how much should be deposited with the Court.

Bankruptcy Filings Lower in 2011

 

Recently, I received a call from a local newspaper reporter asking about statistical information regarding bankruptcies. That set me in motion to see if I could find some statistics. The following is an article from the National Bankruptcy Research Center.

The middle of the year offers two perspectives on bankruptcy filings. In the short term, June filings were up from May (120,000 in June compared to 115,000 in May). And because June is not usually a high month for filings, this is a 10% increase on a seasonally adjusted basis. But the broader perspective suggests less of a concern. Filings were still lower than last year’s torrid rate (down by 5% from June 2010). And most importantly, filings for the first half of 2011 remain substantially below filings for 2010, down by 8%.

Nationwide, 2011 filings to date amount to about 3000 filings per million adults, about one in every 330 people. But national disparities show that this really is an average – reflecting starkly higher and lower filing rates across the country. As has been true for some time, the highest filing rates are concentrated in the Southwest and a swathe cutting up from the Southeast. Thus, on a population-adjusted basis, Nevada still has the highest rate by far, more than twice the national filing rate (6345); Utah, Georgia, and Tennessee follow (in that order), all with more than one and a half time the national average. At the other end of the spectrum, six jurisdictions this year have filings less than half the national average. In ascending order, they are Washington, D.C., Alaska, South Carolina, Vermont, North Dakota, and Texas. Texas’s place on that list (with 1424 filings/million adults) is noteworthy, since its population far exceeds that of all the other low-filing state’s combined. Also of note among large states is New York’s remarkably low rate (1645/million adults), only slightly more than half the national rate.

Another noteworthy trend is the sharp disparity in changes in filing rates since last year. Confirmation that the fall in filings has spread throughout the nation comes from the short list of states with filing increases over last year: only Delaware and Utah (both up by 10%). At the other end of the distribution, although most states have seen filings fall, several states have seen truly remarkable drops: filings are down by 29% in Vermont and by 20% or more in Washington DC, West Virginia, and North Dakota.

The most interesting point in filing trends comes from comparing Nevada and California. Although Nevada has had the highest filing rate in the country every month since the beginning of 2010, its filings during 2011 have fallen 16% this year compared to 2010. By comparison, neighboring California’s 2011 filings are almost identical to its 2010 filings. Its large population makes this important to national trends: in June, for example, more than one in every six bankruptcy filings nationwide was in California. The end result is that California has steadily risen through the ranks this year so that by mid-year its overall filing rate (4500 filings/million adults) is almost one and a half the national average.

This analysis was performed on data collected by the National Bankruptcy Research Center (NBKRC) by NBKRC contributor Professor Ronald Mann of the Columbia Law School.

Can A Trustee Make You Leave Your Home in Chapter 7?

With the continuing bad economy, people are finding themselves in a situation where their real estate values are decreasing faster than their principal balance on their mortgage. They also find themselves in a situation where their unsecured debts, like credit cards and medical bills, with increased interest rates on the debt owed, is becoming unmanageable. That is when they start looking for answers to their debt problem with local bankruptcy attorneys.

When one files bankruptcy, there are certain things that the bankruptcy code allows one to keep, while secured debts on personal property may be either surrendered, redeemed, or reaffirmed. The amount of how much property one can keep while filing bankruptcy varies state to state depending upon their particular laws.

In Florida, if one has homestead property, the homestead is exempt. That's right, you can keep your home. However, if you are upside down, that is, if your mortgage balance is higher than the value of the real property, then one can simply avoid claiming the property as homestead and receive an additional $4,000 exemption, known as a wild card exemption; that's another way of saying you can keep an additional $4,000 of personal property.

This sounds simple, however, there is one trustee in the Jacksonville Division that has been sending letters out to debtors telling them to vacate their house when it is not claimed as exempt. How can he do that? Well, technically, the trustee has a choice of either administering the property or surrendering the property. This means the trustee has to either maintain the property for the estate and, most often, sell the property to receive funds to distribute to creditors, or surrender the property to the debtor, as it has no value to the estate. The real problem lies when the Trustee tells someone to vacate the premises when the Trustee has no intention of administering the property. That is, no one to maintain the property, pay expenses, cut the grass, and sell it. This, theoretically, exposes the owner, the debtor, to liability.

So, what is one to do? If you have an idea, please comment below.

Broadmoor Room Cutoff for NACBA Member Only Event is Thursday

The National Association of Consumer Bankruptcy Attorneys member only workshop is scheduled for this October 28^th and 29^th in Colorado Springs, and is being held at the historic Broadmoor. I understand that staying at the Broadmoor is an event in itself. There are rooms set aside for the event, at a convention price. The deadline for getting a room at the discounted price is this Thursday, October 6.

For those that show up a day early, like myself, there is a Cog Railway to Pikes Peak. It may be interesting this year, as it looks like there is an early snow in part of the country. It's the beginning of October and Pennsylvania has already seen some snow. If that's the case, just think of what there could be at 14,115 feet. If you do plan to go on the Pikes Peak tour, you are cautioned about altitude sickness. I am from Florida, about 14,114 feet lower than Pikes Peak, and really don't know what I am in for. The highest I have ever been, in a non-pressurized plane, was 12,500 feet, and at that altitude I was becoming woozy.

While the sites might be beautiful, it does look as if we are in for an early winter. Several parts of the country have winter storm warnings today. It is certainly great to get away from the heat, and having to run the air conditioner all day. However, with the early winter comes the necessity of having to heat your home. And with heating your home comes the fuel or electric bills. Although gas prices have recently fallen, the price of diesel is still about the same. Gas prices have fallen .$50 per gallon, while diesel has only fallen about $.08 per gallon.

Even though the economy is still in shambles, the level of bankruptcy filings has fallen off considerably over the past month. With and early winter, we may be looking at a resurgence in filings in order to handle the extra bills that pay check to pay check people have either failed to budget for, or have been unable to budget for. Also, in the past, one has been able to borrow money to get by. Currently, money is extremely tight, and those that used to borrow money may not be able to now. Those that have depended on credit cards to get by over the holidays may find that their paid down card now has a lower credit limit.

Don't forget, the cut off on the room block at the Broadmoor is this Thursday, October 6, 2011.

The Florida Supreme Court Taking Another Look At Mediation Program

The Florida Supreme Court put in place a mandatory program wherein all homestead properties would have the opportunity to participate in mediation, thereby smoothing out the court title wave of foreclosures. It was expected to help the caseload by having debtors presented with options to foreclosure, such as deed-in-lieu, short sale, or mortgage modification.

On Monday, the Court ordered a review of the mediation program, which has had very limited success in finding alternative avenues of keeping mortgagors in their homes. On average, only 3.6 percent of the cases referred to mediation between March 2010 and March 2011 were deemed successful in arranging an agreement between the plaintiff and defendant.

Five judges and a court administrator have been appointed to evaluate the success of the program, and make a recommendation as to whether the program should be continued, modified, to discontinued. The committee has until October 21 to submit its findings. Public comments are being submitted to the committee through today at www.floridasupremecourt.org.

Eighth Circuit BAP Allows Strip Off of Wholly Unsecured Lien in Chapter 20

The Eighth Circuit BAP found that a chapter 13 debtor may strip off a wholly unsecured lien on his principal residence even where the debtor is not entitled to discharge. In re Fisette, 11-6012 (B.A.P. 8th Cir., August 29, 2011). In so holding the court joined the other Circuit and BAP courts that have held that the reasoning in Nobelman v. Am. Savings Bank, 508 U.S. 324 (1993) establishes the right to strip off wholly unsecured residential liens. Turning to the issue of whether ineligibility for discharge under section 1328(f)(1) precludes the otherwise permissible lien stripping, the court stated: “We hold that the strip off of a wholly unsecured lien on a debtor’s principal residence is effective upon completion of the debtor’s obligations under his plan, and it is not contingent on his receipt of a Chapter 13 discharge.” Unlike the courts that have found that section 1325(a)(5) precludes lien-stripping in a chapter 20, the Fisette court recognized that, pursuant to the statutory language, the requirements of section 1325(a)(5) were not applicable to a claim that was not an allowed secured claim. The court concluded its analysis with a finding that the creditors whose liens were stripped would be entitled to distribution of the estate along with the other unsecured creditors. 
 

The Trustee filed a notice of appeal to the Eighth Circuit on September 21st.

Tara Twomey of the Amicus Project assisted in writing debtor’s brief. 

The Fisette decision has since been used in supplemental briefing in several ongoing cases dealing with this issue including: In re Waterman, No. 11-139 (M.D. Fla.); Lindskog v. M&I Bank, No. 11-476 (E.D. Wisc.); In re Sadowski, No. 10-21894 (Bankr. D. Conn.)

Source: NACBA September 2011 Newletter

Help Families Avoid Foreclosure, Stabilize the Housing Market, and Boost the Economy: Adopt the Principal Paydown Plan

Experts agree that in order for the economy to recover, the housing market first must be stabilized by preventing avoidable foreclosures. While there is no single solution to the foreclosure crisis, one promising approach is the Principal Paydown Plan, which would provide immediate relief for qualified homeowners in bankruptcy who find themselves underwater on their mortgages. By reducing the interest rate on mortgages to 0% for 5 years, monthly payments would be lowered and every dollar applied to the principal. This Plan would provide help for many American families trying to stay in their homes, stabilize communities, and bolster the housing market and economy as a whole. Developed by the National Association of Consumer Bankruptcy Attorneys (NACBA), the plan is ready for immediate adoption.

The NACBA has been urging the Obama Administration to adopt the Principal Paydown Plan ("PPP") as one meaningful step to address the current foreclosure crisis. Last week the Administration launched an effort to encourage the American public to create, share and sign petitions that communicate views about the government’s actions and policies. We know the Principal Paydown Plan has promise – help us make sure it gets the attention it warrants. You can click here to sign the petition.


*Please note that you must create a whitehouse.gov account to sign the petition, however, it only takes about two minutes to do that. It’s fast and easy!

Related Links:

• An Executive Summary of the Principal Paydown Plan
• A Detailed Explanation of Principal Paydown Plan
• Why We Need the PPP NOW!

On behalf of the NACBA,Thank You to everyone that signs the petition.