Monday, October 31, 2011

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, where there are 201 bankruptcy courts throughout the United States and its territories.

Thursday, October 27, 2011

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.

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.”

Tuesday, October 18, 2011

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

Friday, October 14, 2011

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.

Wednesday, October 12, 2011

NACBA Principal Paydown Plan Petition Push

National Association of Consumer Bankruptcy AttorneysThe 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

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

Monday, October 10, 2011

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.

Saturday, October 8, 2011

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.

Friday, October 7, 2011

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.

Wednesday, October 5, 2011

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.

Tuesday, October 4, 2011

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 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 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.

Monday, October 3, 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