J. Dinkins G. Grange is an attorney in Northeast Florida, helping his clients find solutions to their financial problems, which in some cases includes bankruptcy in some cases. This Blog contains general bankruptcy relevant information. His practice includes representing clients in various areas of civil litigation including Fair Debt Collection Practices Act, Chapter 7 and Chapter 13 bankruptcies, foreclosure defense and probate.
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.
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
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.
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. 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
(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.
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
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.
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.
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
Federal Rules of
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
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.
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.
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.
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
“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.”
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.
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
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.”
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
7) 4 Months Financial Accounts
8) Divorce Papers
9) Completed Bankruptcy Kit
Here is a quick and short explanation
related to the above items.
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.
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.
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.
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.
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.
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-Tand 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).
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.
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.
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.
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.
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
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.
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:
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.
If the claim includes interest,
fees, expenses and other charges incurred before the petition was
filed, the creditor should include an itemized statement.
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.
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
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
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
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
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?
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.
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
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
"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.
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
beenlocated 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
where there are 201 bankruptcy courts throughout the United States
and its territories.
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,
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.
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.
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.”
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.”
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.
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.
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
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
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.
new filing fees will be:
·Chapter 7: $306.00
·Chapter 11: $1046.00
·Chapter 13: $281.00
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.
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!
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.]
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:
a lift of the stay is granted by
the case is dismissed; or
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
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
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,
Florida Statute Section 697.07(4)
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:
the reasonable expenses solely to protect, preserve, and operate the
real property, including, without limitation, real estate taxes and
sums required by the mortgagee or separate assignment of rents
payments to the mortgagee.
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.
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.
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.
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.
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
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
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.
The National Association of Consumer
Bankruptcy Attorneys member only workshop is scheduled for this
October 28th and 29th 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
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 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.
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
The Trustee filed a notice of appeal to the Eighth
Circuit on September 21st.
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.)
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
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
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!
Over the past year or so, Florida has
seen a glut of foreclosure filings, many times involving mortgagees
that are simply not willing to bend to do what really needs to be
done to keep you in your house. This has funneled homeowners either
into surrendering their house and filing a Chapter 7 bankruptcy, or
for those with regular income wanting to keep their house, into a
Chapter 13 bankruptcy. Also, those with regular incomes, two or more
mortgages, with house values that are less than the principle balance
of their first mortgage, Chapter 13 may allow one or more mortgages
to be eligible for a cram-down.
Recently, bankruptcy filings have
fallen off. Maybe the economy is starting to do better. Maybe its
just the time of the year, as bankruptcies typically fall off during
certain months of the year anyway. There is talk of a second dip in
the economy, which may lead to more reductions in pay to the
employed, and more businesses closing, leaving more people out of
For those wishing to try to keep their
home by filing a Chapter 13 bankruptcy, this blog is for you.
Hopefully the following tips you will find useful, and lead to a
successful completion of your bankruptcy.
with a Chapter 13 takes planning, as they are not cookie cutter
events. Every Chapter 13 bankruptcy is unique. There is a lot of
information on the internet about not only Chapter 13 bankruptcies,
but debt relief in general. An excellent source of information
about Chapter 13 bankruptcies can be found at the www.uscourts.gov.
Doing your homework before proceeding to an attorney's office can
greatly enhance your chances of making correct decisions towards the
planning and implementation of your bankruptcy. These decisions can
have a direct impact on your chances of successfully completing the
bankruptcy, and your quality of life during your bankruptcy, which
typically last from 3 to 5 years.
Budget. Budget. Budget. Your
bankruptcy is centered around your living expenses, and your living
expenses may help determine whether a Chapter 13 bankruptcy is
feasible. One of the problems people run into when filing
bankruptcy is having not properly accounted for all necessary living
expenses at the outset. This will determine how much money you will
be able to repay, and your realistic expectations of success in the
Payroll Deductions. During
your Chapter 13 bankruptcy, depending on the jurisdiction you are
filing in, you may need to turn over your tax refund money to the
Trustee. If you plan ahead of time, you can hopefully minimize any
tax refund, thereby putting more money into your pay check. One
major change you will experience is that you will not have the
advantage of being able to depend on receiving a tax refund during
Organize Documents. Your
attorney will be asking for a lot of documents. Some attorneys
place this list on their website, while others have the list in
their office. A typical list will include deeds, mortgages, vehicle
titles or registration, pay advices for 7 months, financial accounts
for 7 months, 12 months evidence of any cash advances, and 4 years
of tax returns. Should you not have your tax returns, you should be
able to order a transcript by filing out Form 4506-T.
You will also need payoff figures for all secured debts, together
with how many payments you have left if less than 5 years.
Don't Hide Anything.
As long as your attorney knows of everything about your assets,
transactions, debts, income, and expenses, he or she should be able
to plan accordingly. I have run into horror stories that have ended
up costing my clients a lot of money because of either hiding things
or misstating the truth. If your attorney doesn't know the truth,
he or she may not be able to help you when things start heading
Arrange Filing Date With Your
Finances. There is a 14 day
window in which to file your Plan after the filing of the
bankruptcy. The Plan is a document, after approved by the Court
through a process called Confirmation, that outlines what moneys
will be paid to the Trustee, and how the Trustee will distribute the
funds. The initial payment is due 30 days after filing.
Pay Without Receiving Bill.
When you file bankruptcy,
because of something called an Automatic Stay, you will probably
stop receiving bills for things you are accustom to paying only
after receiving a bill. For example, if you normally receive a
statement on leased property, and then send in your payment, you
should contact the leasing company and find out where to send the
payment while in bankruptcy, and mail it in. Why does the company
stop sending statements? They are afraid this could be construed as
a collection effort, which has consequences while in bankruptcy with
the automatic stay in place. Also, according to your plan, there
are some payments that you may be making directly to a creditor.
Make sure the payments are timely made.
Miss Work!. OK,
that's a little strong. But you will have to attend a meeting with
your attorney and the trustee after filing. It typically takes
about 5 minutes, and is assigned to a 30 minute time slot, along
with some other bankruptcy filers. You will receive the date and
time of this meeting shortly after filing, and is referred to as a
341 Meeting or Meeting of Creditors. I really don't like the name
Meeting of Creditors because, while creditors can attend, it is
unusual. A more descriptive name would be something like Meeting
With Trustee. Along with the notice containing the date and time of
the 341 Meeting will be a time and date for a Confirmation Hearing.
Check with your attorney to see if you.
That's right, now for the hard stuff, unless you are disciplined to
stick with the Plan, and a budget according to the papers filed with
the Court. The more disciplined you are, the easier it will be.
Few people find it easy to successfully complete a Chapter 13 Plan
and receive a Discharge. Should things not go as planned, get with
your attorney right away, as there may be things he or she can do
through the Trustee or the Court to increase your chances of success
considering your new circumstances.