Can I File a Chapter 13 Bankruptcy: Who Can File?

So, after speaking with some attorneys (not your bar buddy that professes he knows the law) and doing some research, you believe a chapter 13 bankruptcy is what you need in order to achieve the relief you looking for. So now the BIG question is, “Am I eligible?”

That's right. Not just anyone can file a chapter 13. First, only an individual (or unincorporated business) can be a debtor in a chapter 13. This precludes a corporation or partnership from filing this chapter of bankruptcy; they may have to look at either a chapter 7 or chapter 11.

Secondly, this chapter of bankruptcy requires you have regular income. How this income is defined changes from one jurisdiction to another, but for the purpose of this discussion, we will presume you have a job that pays you on a regular basis, or you have bills paid for you on a regular basis. That's right, if someone else is paying you bills on a regular basis, this will be considered income an may help you in your filing of your bankruptcy.

Next, we need to look at your level of debt. Did you know you can actually have too much debt to be able to file bankruptcy. According to section 109(e), your unsecured debts must be less than $360,475, and your secured debts must be less than $1,081,400. I know what you are thinking...where in the world did they ever come up with these numbers? These numbers are actually based on the consumer price index, and change periodically.

Some other things you should consider include whether you have previously filed a chapter 13. That is, if you previously filed a chapter 13 bankruptcy, how long to you have to wait in before being able to file another chapter 13 bankruptcy?  An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).

And just like filing a chapter 7, an individual must have received credit counseling from an approved credit counseling agency, either in an individual or group briefing, within 180 days before filing. See 11 U.S.C. §§ 109, 111. (Note: there are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling.)

So, there is a little more to filing an chapter 13 bankruptcy than you thought, isn't there? If you are thinking of filing a Chapter 13 (especially a chapter 13), you should seek the advise of a competent bankruptcy attorney in your area. Many attorneys offer free consults for people contemplating bankruptcy.

Mail Scam

From time to time, I run across a new for of fraudulent activity, otherwise known as a Scam, and when I do, I try to disseminate it by posting it here. I know this is not directly bankruptcy related, but any time I come across something that could end up costing one of my clients money, or their identity to be stolen, I consider it relevant.

Recently in Palm Beach, Lee County, Florida, the news media reported a scam involving the United States Postal Service. The report is as follows:

If you're planning on shipping holiday packages this season, beware. The Lee County Sheriff's Office wants to warn you about bogus emails claiming to be from the post office or other shipping companies.

Fraud specialist, Beth Schell, with the sheriff's office, says the emails contain false information about a package that could not be delivered.

How to tell it's not real?

"Some of the grammar and the spelling was incorrect. On the top it said USPS. But inside the label they forgot one of the 'S's," explained Schell.

Here's the most important thing: the USPS says it will never send an email regarding packages it cannot deliver. "Basically the consumer needs to be aware of receiving any emails they don't solicit with instructions to click," Schell said.

If you do click, it could activate a virus that can steal your personal information.

Can I Go To Jail For Filing Bankruptcy?

File bankruptcy and go to jail? I know what you are thinking, “You kidding, right?”.  Whenever you ask someone about this, you hear there is no way you could end up in jail; after all, there is no Debtor's Prison in the United States.  

Well, the simple filing of the bankruptcy is not what can put one in jail, however, the circumstances surrounding the filing could. For example, if you make a false statement on the papers filed with the court which are signed under penalty of perjury (which is almost everything that is filed), one of the penalties for doing so in bankruptcy is not only having the case dismissed, but referred to the U.S. Attorney for prosecution. That's right, this becomes a criminal offense.

Next, you are probably thinking this never happens. If it did, then you would have heard about it, right?

Well, think again. The following is a short article of a high profile case involving bankruptcy fraud:

Federal prosecutors in Los Angeles are asking that former All-Star outfielder Lenny Dykstra serve a 2½-year prison sentence for pleading guilty to bankruptcy fraud and money laundering.

Prosecutors said in court documents filed Thursday that a 30-month sentence is appropriate for Dykstra because he has acted as if he was above the law for years.

Dykstra could face 20 years in prison after pleading guilty in July to charges that he hid and sold sports memorabilia and other items which were supposed to be part of his bankruptcy filing.

Dykstra is currently serving a three-year prison sentence after pleading no contest to grand theft auto and providing a false financial statement.

He is scheduled to be sentenced Dec. 3.

Homestead Exemption: Should I Claim?

So, you are in Florida, need to file bankruptcy, and your house is upside down.  Well, not literally; upside down means your house is worth less than what is owed on it.  In Florida, if you do not claim a homestead exemption in your bankruptcy, you are eligible for a $4,000 wild card exemption.  This means you will be able to keep $4,000 of property that would otherwise be property of the bankruptcy estate, and sold by the trustee (usually sold back to the debtor).

So, what is the problem?  The problem arises when you do not claim the household exemption, you expose your property to being administered by the Trustee.  That is, the trustee could sell your house.  Of course, if you claim the homestead exemption, the property is protected, though the creditor may continue to hold a secured lien.

In the past, the practice has been to simply not claim the homestead exemption when the home is upside down, thereby entitling the debtor to the wildcard exemption.  After all, the property has negative equity, and who would want to purchase property for more than what it is worth.  Also, the trustee could only administer the estate (sell the property) if there is money to distribute to unsecured creditors.

Well, there are some Trustees in Florida currently administering property that is upside down.  Apparently, the Trustees have found investors willing to pay a small sum to acquire parcels of real property.  The investors acquire property with a low monthly mortgage payment, with financing in place, and rent the property for enough to hopefully show a positive return on their investment.  This is happening despite the property be acquired blindly, that is, the investor has no idea how much money will need to be spent on the property in order to put it into rentable condition.

In the specific case I am thinking of, as of today, an investor may be acquiring property in one of my cases, only having to bring the electric up to code, and repairing the roof.  There may be, of course, unknown problem, such as termite damage, mold, and possible plumbing problems.  After all, this property is owned by a debtor that is filing bankruptcy.  They have not had money necessary to properly maintain the property.

It will be interesting to see if this trend continues as investors acquire these properties with increased risk.

LATEST SCAM: Pay Up or Go To Jail

“Pay Up, or you are Going To Jail!!” 

Have you ever received a phone call like this one from a credit collection agency. As you may have already guessed, this is a clear violation of the Fair Debt Collection Practices Act, and may be a criminal violation of federal and/or state code depending on the debtor, such as a handicapped or elderly person.

Recently, a client of mine received such a phone call. The person left a message on a voice mail system stating my client would go to jail if the funds were not paid today, and left a return number. It appeared on the surface this person had a lot of nerve. Not only does it appear the person was committing a clear violation of the Federal Code, but had the nerve to leave the message on voice mail.

What would you do if you received such a call? Would you call them back? Would you call an attorney?  Would you file bankruptcy ASAP? 

In this particular situation, my client called the creditor, instead of the call-back number, to find out why jail was being threatened.  After all, clearly credit collection companies, also known as debt collectors, can not make such statements.  This is also out of character for this particular creditor, with whom my client has had a good business relationship.

 It turns out, the creditor had never given this account to a credit collection company for collection. The creditor has no idea how anyone was able to obtain person information about my client, and assured my client they would never threaten jail for not paying.

How is this a scam? 

It appears the call originated from over seas, as when the number left on the voice mail was returned, the person on the other end of the phone spoke with an accent. The person also refused to disclose the name of their company.

In short, this was a SCAM. Someone overseas found out my client owed a particular creditor money, and was able to obtain my client's phone number. When my client asked for the name of the company, the person on the other end hung up. Had the conversation continued, I imagine the scam artist would have asked for personal information, such as bank account numbers, date of birth, social security number, etc.

So, if someone calls you with a threat that could lead you to disclosing personal information, call your creditor and find out what is really going on. It could be a scam attempting to get you to disclose personal information. Don't disclose personal information when you do not initiate the call from a number you have independently of any number left on a recording device.

NACBA ALERT: Debt Settlement Schemes

The following was taken from an October 17, 2012 release by the National Association of Consumer Bankruptcy Attorneys entitled:

NACBA:   COSTLY DEBT SETTLEMENT SCHEMES PREY ON THE MOST DEBT-BURDENED CONSUMERS STRUGGLING TO RECOVER FROM ECONOMIC DOWNTURN

What a Half Million Unwary Consumers Don’t Know:  Schemes Only Work for 1 in 10 Who Pay for Them; Consumer Alert:  Debt Settlement Programs Seen as “#1 Threat to America’s Most Indebted Consumers.”

As few as one in 10 unwary consumers who are lured into so-called “debt settlement” schemes actually end up debt free in the promised period of time, making the risky schemes the No. 1 threat facing America’s most deeply indebted Americans, according to a major new consumer alert issued today by the nonprofit National Association of Consumer Bankruptcy Attorneys (NACBA).

Available online at http://www.nacba.org, the NACBA consumer alert notes:  “Already struggling with home foreclosures, harsh bank and credit card fees, and other major financial challenges, America’s most deeply indebted consumers are now falling victim to a major new threat:   so-called ‘debt settlement’ schemes that promise to make clients ’debt free’ in a relatively short period of time.  Unfortunately, most consumers who pursue debt settlement services find themselves facing not relief but even steeper financial losses. Even the industry acknowledges – though not in its ever-present radio and online advertising – that debt settlement schemes fail to work for about two thirds of clients. Federal and state officials put the debt-settlement success rate even lower – at about one in 10 cases – meaning that the vast majority of unwary and uninformed consumers end up with more red ink, not the promised debt-free outcome.”

The private debt-settlement industry remains robust.  More than 500,000 Americans with approximately $15 billion of debt are currently enrolled in debt settlement programs, according to industry estimates.  And there is room for further growth:   One in 8 U.S. households has more than $10,000 in credit card debt.

Durham, NC bankruptcy attorney Ed Boltz, NACBA Board member and incoming NACBA president, said:   “Based on what bankruptcy attorneys are seeing across the nation, we believe that debt settlement schemes are the number one problem facing America’s most deeply indebted consumers today. Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn.   These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.” 

Earlier this year, NACBA focused national attention on the “student debt bomb,” which then was identified as the fastest growing consumer debt problem being handled by consumer bankruptcy attorneys.

Richard Thompson, a Rialto, California, retiree and victim of a debt settlement scheme, said:    “I was told they could settle my $89,000 in debts for a total of $39,000 if I made payments of $1,800 for 22 months.  I was contacted about a chance to settle $15,000 debt for $6,000 but my debt-settlement company ignored the offer.   In fact, I paid them a total of $25,200 as they kept on ignoring settlement offers from creditors.  I thought they were taking care of me by bringing my debt down, but all they were doing was taking my money.   I ended up with $25,000 more in debt than I started out with.   Before I retired I worked 25 years as a manager, now I have had to go back to work as a part-time security guard to help make ends meet.”

Bankruptcy attorney Trisha Connors, a NACBA member from Glen Rock, New Jersey who has testified before the New Jersey Law Revision Commission on debt settlement abuses, said:   “Over the last three years, I have worked with 12 different for-profit debt settlement companies and over 25 clients who came to me after their debt settlement program failed to serve them.  The results with each client were the same:  exorbitant fees being paid, settlement (at best) of one small credit card debt, and mounting late fees and penalty interest charges on the unsettled debts.  When clients informed the debt settlement companies of their desire to exit the program, the firms kept all or most of the accumulated savings for debt reduction as ‘fees.’  Every person I dealt with who had been current on their debts prior to contacting a debt settlement program told me that the sales representative told him the only way to be successful in the program is to stop paying credit card bills.”  

Ellen Harnick, senior policy counsel, Center for Responsible Lending, said:   “Debt settlement companies require clients to default on their debts before they will negotiate.  This adds late fees and penalty interest to their debt and frequently results in the client being sued by creditors.  Since only a tiny proportion of debts are actually settled by these companies, clients are typically left worse off than they were when they started.”

In addition to highlighting the stories of three victims of debt settlement schemes, the NACBA consumer alert notes the following:

•    There is now across-the-board agreement on the danger that debt settlement schemes pose to consumers.  The Better Business Bureau has designated debt settlement as an “inherently problematic business.”  Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.” Across the country, the U.S. Government Accountability Office (GAO),  the Federal Trade Commission, 41 state attorneys general,  consumer and legal services entities, and consumer bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.

•    Debt settlement schemes encourage consumers to default on their debts.  Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments.  Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began:  They are deeper in debt, with their credit scores severely harmed. 

•    “Self help” may be the best answer for smaller debt burdens.   If you have just a single debt that you are having trouble paying (such as a single credit card debt) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself.  Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer.  Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability.  Also be prepared to pay income taxes on any of the forgiven debt.

•    Nonprofit credit counseling agencies can help, but must be vetted carefully.  If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see if there is a way for you to get out of debt.  But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.  Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary” contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at www.usdoj.gov/ust.  If a credit counseling organization says it is “government approved,” check them out first.

•    Bankruptcy will be an option for some consumers.  Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts.  If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the only option available for stopping those actions.  There are two primary types of personal bankruptcy:  Chapter 7 and Chapter 13.  Chapter 13 allows people with a stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession.  In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three to five year period.  After you have made all the payments under the plan, you receive a discharge of all or most remaining debts.  For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income.  Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in over 90 percent of cases.  To learn more about bankruptcy and whether it makes sense for you, go tohttp://www.nacba.org/Home/AttorneyFinderV2.aspx.

NACBA urges consumers to steer clear of any companies that:

•    Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.

•    Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee-- a percentage of the money you’ve allegedly saved.

•    Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments. 

•    Suggest that there is only a small likelihood that you will be sued by creditors.  In fact, this is a likely outcome.  Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you.  Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. 

•    State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.   

Boltz emphasized:  “Many different kinds of services claim to help people with debt problems.  The truth is that no single solution works in all cases.  Bankruptcy is an option that makes sense for some consumers, but it’s not for everyone.  For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it.   What makes sense for each consumer will depend on their individual circumstances.  We encourage everyone to get the facts and do what makes the most sense in their situation.”

Foreclosure Affirmative Defenses

These are some, but by no means all of the affirmative defenses which may or may not be applicable in your case. (The following was taken from suethebanker.com)

1. Standing. The Plaintiff/Note Owner is not registered to do business in your state and therefore unable to maintain this action and the court does not have jurisdiction.

2. Failure To Name Indispensable Parties. The complaint fails to join all indispensable parties, specifically the loan originator and the loan servicer(s). Willey v. W. J. Hoggson Corporation, 90 Fla. 343, 106 So. 408 (1925), contends that since the note and mortgage involved were payable to a business trust, any action on those instruments must be brought by all the members of the trust-not just the trustees.

3. Failure to Show Ownership of Note & Mortgage. The complaint fails to adequately show the chain of title of the Note and Mortgage (called a “Deed of Trust” in non-lien theory states) demonstrating that Plaintiff /Note Owner is in fact the real party in interest (i.e. owner of the Note) with standing to bring this action.

4. Unclean Hands. Plaintiff/Note Owner, or its predecessor(s) in interest, had unclean hands in their course of dealing with Defendant/Property Owner.  Further, Plaintiff/Note Owner may have dealt in bad faith in wrongfully refusing loan reinstatement or modification.

5. Violation of TILA. Plaintiff/Note Owner, or its predecessor(s) in interest, violated various provisions of the Truth in Lending Act (“TILA”), which is codified at 15 U.S.C. section 1601 et seq. and Regulation Z section 226 et seq. by inter alia:

a) failing to deliver to the Defendant/Borrower two (2) copies of notice of the right to rescind (with all of the pertinent statutory disclosures);

b) failing to properly and accurately disclose the “amount financed”;

c) failing to clearly and accurately disclose the “finance charge”;

d) failing to clearly and accurately disclose the “total of payments”;

e) failing to clearly and accurately disclose the “annual percentage rate”;

f) failing to clearly and accurately disclose the number, amounts and timing of payments scheduled to repay the obligation;

g) failing to clearly and accurately itemize the amount financed. In the case of a secondary lien, the transaction was subject to TILA and rescission rights since it was a consumer credit transaction involving a lien or security interest placed on the Defendant/Borrower’s principal dwelling, and was not a residential mortgage as defined in 15 U.S.C. 1602(w), because the mortgage was not created to finance the acquisition of the dwelling. As a result, Defendant/Borrower is entitled to rescind the transaction and may elect to do so.

6. Violation of RESPA. Plaintiff/Note Owner, or its predecessor(s) in interest, violated various provision of the Real Estate Settlement Procedure Act (“RESPA”), which is codified at 12 U.S.C. section 2601, et seq. by, interalia:

a) Failing to provide the Housing and Urban Development (HUD) special information booklet, a Mortgage Servicing Disclosure Statement and Good Faith Estimate of settlement/closing costs to Defendants/Borrowers at the time of the loan application or with three (3) days thereafter;

b) Failing to provide Defendants/Borrowers with an annual Escrow Disclosure Statement for each of year of the mortgage since its inception;

c) Giving or accepting fees, kickbacks and/or other things of value in exchange for referrals of settlement service business, and splitting fees and receiving unearned fees for services not actually performed;

      d) Charging a fee at the time of the loan closing for the preparation of truth-in-lending, uniform settlement and escrow account statements.

7. Violations of HOEPA. Plaintiff/Note Owner, or its predecessor(s) in interest violated various provisions of the Home Ownership Equity Protection Act (“HOEPA”) pursuant to 15 USC § 1639 et seq. by failing to make proper disclosures to Defendants/Borrowers and committed intentional predatory lending by including prohibited terms. These violations provide an extended three (3) year right to rescission and enhanced monetary damages for the Defendants/Borrowers.
   
   
8. Extortionate Extension of Credit. Plaintiff, or its predecessor(s) in interest, are guilty of an extortionate extension of credit, which is defined as “any extension of credit whereby it is the understanding of the creditor and the debtor at the time an extension of credit is made that delay in making repayment or failure to make repayment could result in the use of violence or other criminal means to cause harm to the person, reputation, or property of any person.”  In this case, Plaintiff/Note Owner, or its predecessor(s) in interest, are guilty of such an extension of credit because at the time of the loan, it was understood that Defendants’/Borrowers’ failure to repay the loan could result in the use of criminal means by the Plaintiff/Note Owner to cause harm to Defendants’/Borrowers’ or others’ persons, reputation or property, including trespass on Defendant/Borrower’s property, perjury, mail and wire fraud, and Racketeer Influenced and Corrupt Organization (RICO) violations, as long as Plaintiff/Note Owner, or its predecessor(s) in interest, thought they would not be caught.
   
   
9. Fraud. The alleged Note and Mortgage and other loan documents, were induced by the fraud of the Plaintiff/Note Owner, or its predecessors in interest and its co-conspirators, and are therefore void and unenforceable. Specifically, the originator of the loan and its co-conspirators made the following representations:

a) Before the loan was made, the originator and/or its co-conspirators (hereinafter referred to collectively as “Plaintiff/Note Owner, or its predecessor(s) in interest”) represented to Defendants/Borrowers that they had superior knowledge, information, skill and ability to Defendants/Borrowers in making mortgage loans, and that they would be looking out for the best interests of Defendants/Borrowers in the financing process and, in effect, protecting and promoting Defendants’/Borrowers’ benefit;

b) Before the loan was made, the Plaintiff/Note Owner, or its predecessor(s) in interest, represented to Defendants/Borrowers that:

               (1) Defendants/Borrowers would receive the best mortgage available
               (2) that it would be a “good” loan, and
               (3) it would be of substantial benefit to Defendants/Borrowers.

c) The representations described in a) and b) above were made for the purpose of inducing Defendants/Borrowers to enter into the loan transaction.

d) The representations were false and known by Plaintiff/Note Owner, or its predecessor(s) in interest, to be false at the time the representations were made and at the time the loan was made, in that:

(1) The Plaintiff/Note Owner, or its predecessor(s) in interest, did not have superior knowledge, information, skill and ability to Defendants/Borrowers in making mortgage loans as represented or did not use the same for the benefit and best interest of Defendants/Borrowers;
(2) The Plaintiff/Note Owner, or its predecessor(s) in interest, did not look out for Defendants’/Borrowers’ best interest or protect and promote Defendants’/Borrowers’ benefit;
(3) Defendants/Borrowers did not receive the best loan available;
(4) The loan was not a “good” loan;
(5) The loan was not in Defendants’/Borrowers’ best interest, but rather was in the best interest and to the benefit of the Plaintiff/Note Owner, or its predecessor(s) in interest;
(6) Defendants/Borrowers reasonably relied on the representations by the Plaintiff/Note Owner, or its predecessor( s) in interest, to their detriment.
(7) The Plaintiff/Note Owner, or its predecessor(s) in interest, failed to disclose all costs, fees and expenses; charged excessive fees, gave kickbacks and made payments of fees to parties not entitled to receive them, and failed to provide Defendants/Borrowers with all disclosures required by law.
(8) To confuse, bamboozle and defraud Defendants/Borrowers, the Plaintiff/Note Owner, or its predecessor(s) in interest intentionally scheduled the closing with insufficient time at the closing for Defendants to have the time to actually read the documents requiring Defendants’ signature.

(9) Plaintiff/Note Owner, or its predecessor(s) in interest, with the intent to defraud, intentionally failed to provide the loan closing documents in advance of the closing.

(10) The only parties who benefited from the loan were the Plaintiff/Note Owner, or its predecessor(s) in interest, and their service providers.

10. Payment. Defendants/Borrowers have made all payments required by law under the circumstances; however Plaintiff/Note Owner, and/or its predecessor(s) in interest, improperly applied such payments resulting in the fiction that Defendants/Borrowers were in default.  Defendants/Borrowers are entitled to a full accounting through the master transaction histories and general ledgers for the account since a dump or summary of said information cannot be relied upon to determine the rightful amounts owed.

Further, the principal balance claimed as owed is not owed and is the wrong amount, the loan has not been properly credited or amortized. Additionally, Plaintiff/Note Owner, and/or its predecessor(s) in interest, placed Forced Insurance on the property and is attempting to collect on property taxes, insurance and fees not owed.

11. Violation of Unfair and Deceptive Trade Practices Act. The Plaintiff/Note Owner, and/or its predecessor(s) in interest, also violated the Unfair and Deceptive Trade Practices Act, F.S. 501.201, et seq. By:

a) Failing to promptly and/or properly pay taxes or insurance premiums when due, so that the maximum tax discount available to Defendants/Borrowers could be obtained on Defendants’/Borrowers’ property and so that insurance coverage on the property would not lapse.

b) Failing to provide Defendants/Borrowers with an annual statement of the escrow account kept for payment of taxes and insurance.

c) Failing to properly disclose at or prior to closing all costs, fees and expenses associated with the loan;

d) Charging excessive fees and making payments of fees to parties not entitled to receive them;

e) Obtaining a yield spread premium (YSP) based upon the “selling” of a higher interest rate, and/or non disclosure of the range of interest rates for which Defendants/Borrowers qualified.

12. Unconscionability. In light of all of the foregoing defenses, and on the face of the purported loan documents, the terms and circumstances of the Note and Mortgage were unconscionable when made and were unconscionably exercised, it is unconscionable to enforce the Mortgage by foreclosure.

13. Rescission. The mortgage and note which are the subject of this action have been rescinded and therefore the mortgage(s) and note(s) are void.

14. Lack of Jurisdiction. This court lacks jurisdiction over the subject matter. It appears on the face of the complaint that a person other than the Plaintiff/Note Owner was the true owner of the claim sued upon at the time this action was filed and that the Plaintiff/Note Owner is not the real party in interest and is not shown to be authorized to bring this foreclosure action.

15. Failure to Provide FDCPA Notice. Plaintiff brought this action without providing notice to Defendants/Borrowers of Defendants’/Borrowers’ right to dispute the debt, pursuant to the Fair Debt Collection Practices Act. Plaintiff/Note Owner is required to notify Defendant/Borrower, pursuant to 15 U.S.C §§ 1601, et seq., that Defendant/Borrower may dispute the debt and Plaintiff/Note Owner is required to provide verification of the debt.

16. Duress.
    a) Plaintiff/Note Owner alleges ownership of the note and mortgage in question.
    b) Plaintiff/Note Owner is liable for actions of the named mortgage company and/or its agents.
    c) The named mortgage company, and/or its agent, used unjustified pressure to make Defendants/Borrowers sign the mortgage and note, including telling Defendants/Borrowers that they would be liable for the closing costs if they did not go through with closing.
    d) Defendants/Borrowers were harmed by the named mortgage company.

17. Failure to State a Claim for Which Relief May Be Granted.
    
    a) Plaintiff filed a claim to re-establish a lost note.
    b) Plaintiff claims the right to re-establish such note under Fla. Stat. §673.3091.
    c) Fla. Stat. §673.3091 provides only for re-establishment of negotiable instruments as defined under Fla. Stat. §673.1041.
    d) The note at issue is not a negotiable instrument as defined under §673.1041 because it does not contain an unconditional promise to pay and/or other requirements to qualify as a negotiable instrument.
    e) Therefore Fla. Stat. §673.1041 does not apply to transfer or enforce the promissory note at issue in this foreclosure action.
    f) Therefore, Plaintiff has failed to state a claim for which relief may be granted.

18. Failure to Timely Serve Complaint.
    a) Complaint was filed on February 13, 2008.
    b) However, Defendant was served on July 3, 2008.
    c) Pursuant to Fl. R. Civ. Pro. 1.070(j), Defendant is required to be served within 120 days after filing of the initial pleading.
    d) Plaintiff served Defendant approximately 170 days after filing the initial pleading.
    
    
19. Fraud in The Inducement.
    i. Plaintiff alleges ownership of the note and mortgage in question.
    ii. Plaintiff is liable for actions of ABC Mortgage and/or its agents.
    iii. ABC Mortgage and/or its agents made false statements and/or omissions regarding a material fact;

iv. ABC Mortgage and/or its agents knew or should have known the representation was false;
v. ABC Mortgage and/or its agents intended that the representation induce plaintiff to act on it; and
vi. Mr. Doe suffered damages in justifiable reliance on the representation.

National Association of Consumer Bankruptcy Attorneys 2012 Fall Workshop

The National Association of Consumer Bankruptcy Attorneys 2012 Fall Workshop (for members only) is scheduled to be held November 1 through November 3 at the Ritz-Carlton on Amelia Island in Florida. This is just north of Jacksonville, Florida, and close to the historical town of Fernandina.

As in previous years, there will be a new member orientation on Thursday, November 1, at 7:00 p.m. followed by a with a beach party starting at 8:00 p.m. For those that remember the workshop held in Puerto Rico, this will be even better. After all, this is being held at the Ritz-Carlton.

The real workshops, together with the Plenary Session, will be held Friday from 8:00 a.m. (breakfast at 7:00 am) till 5:30 p.m. with a reception following. On Saturday, from 8:00 a.m. (breakfast at 7:00 am) till 5:00 p.m.

To get the early bird rate, registration must be received by 5:00 p.m. On September 28, 2012.

To view a copy of the brochure, go to http://nacba.org/Portals/0/Documents/Amelia%20Island/Amelia%20Island%20Brochure%20pages%207.pdf and a copy of the registration form can be found at http://nacba.org/Portals/0/Documents/Amelia%20Island/4Pages%20from%20Amelia%20Island%20Brochure-registration-form.pdf

Home Owner Association Fees: Should I Pay Them?

SO, you filed a Chapter 7 bankruptcy, and you are surrendering your home which is located in a subdivision with home owner association fees. If you are surrendering the house to the mortgagee, should you continue to pay home owner association fees?

At first glance, you might think if the house is being surrendered in the bankruptcy, why should I need to continue to pay home owner association fees? After all, after the bankruptcy, I will not own the house anymore, right?

Well not necessarily. Sometimes the mortgagee does not want the property, for any number of reasons. The property could be contaminated. Guess who would be responsible for cleanup. That's right, the owner. The property could also have problems, like being in the bottom of a sink hole. The mortgagee could end up with property there is very little, or no market for, but just be obtaining liability. Another reason has recently come to light, related to home owner association fees. In Florida, the owner is personally responsible for the payment of the fees.

How does this apply to bankruptcy?

Although one can list within their Statement of Intentions for real property to be surrendered, the Courts have said one can not make the mortgagee to take the property. Hence, until the bank owns the property, they are not responsible for the homeowner association fees. Just as you do not want to have to pay the home owner association fees, the bank does not want to be stuck with them either.

So, obviously your question would be, how can one make the bank take the property? Well, I, along with numerous other attorneys, are trying to find an answer to that question. As of now, as far as I know, you can not. In Florida, the transfer of real property requires both delivery and acceptance. The problem is, although you can give something to away, you can not make one take it.

The home owner association fees, generally, are discharged up to the date of the filing of the bankruptcy. Association fees incurred post petition (after the filing of the bankruptcy) are not discharged, and are personally assessed to the property owner(s). What does that mean? Well, it means the owners are personally responsible for the fees, even after home owner association foreclosures on the property, that is, unless the association can satisfy the amount due to them from the sale of the property though the foreclosure proceeds.

In short, one can loose their real property through foreclosure, and still be stuck with being responsible for the payment of home owner association fees. You should consult with your attorney concerning this.

Phishing and Bankruptcy

Can I fight the law suit? Of course. But what happens if I loose? The plaintiff will allege I made payments on the card. Even though I did not make the payments, how can one prove a non-event? Well, the answer is, it can be proven. What is not known is what it will cost to prove this. This can get expensive. For example, to prove a document does not contain your signature might require the hiring of a hand writing expert. That's right, an expert witness.

Any number of various things can lead one to having to consider bankruptcy as a means of relief. The most common include credit card debt and medical expenses. Not as common are people that have had their identity stolen. I know what you are thinking. Identity stolen? Bankruptcy?

Identity theft can totally disrupt ones life. I know. I have had it happen to me. I unknowingly and unwillingly had a credit card placed in my name. The first I knew of the credit card was when I received a law suit for the credit card not being paid. I looked at my credit report and discovered the card had been out for a couple of years!  The holder of the card somehow actually made payments on the card until the card was maxed out.

Then you have to ask, is is cheaper to file bankruptcy?

I recently received an email warning of a new phishing email that has been distributed to online stock trading customers. Apparently the email states your account statement is available online, and prompts you to click on a link that will potentially download unwanted software to your computer. 

This leads me to the realization that something as simple as clicking on a link within an email can lead one to having to consider bankruptcy as a source of relief.

What Do I Need To List When Filing Bankruptcy?

Filing Bankruptcy; do you need to list everything? What if you don't want to bankrupt your favorite credit card? Those questions are generally followed by not wanting to disclose a transaction recently consummated. After all, how will they (bankruptcy court) know?

I promptly, and directly, explain to my client:

1. the bankruptcy code requires complete financial disclosure, and
2. the bankruptcy papers filed with the court are signed under penalty of perjury.

If you get caught, the Federal Court will ruin your day!  That's right, they will make an example out of you.  I do not want my name associated with such activity.  This can lead to criminal sanctions; perhaps you have heard of something called "Fraud"; this is in addition to penalties provided within the bankruptcy code and rules.  Sometimes proper planning can accommodate my client's goals, but proper disclosure is a must.

Case in point. United States v. Turner (11th Cir., 2012).

In this case out of Alabama, Mr. Turner failed to disclose the receipt of an insurance check he deposited into a solely owned LLC, of which he was the only signatory on the account. He also failed to disclose his LLC.

A jury convicted Mr. Turner of one count of bankruptcy fraud, and four counts of making false entries in his bankruptcy filings with the intent to impede, obstruct or influence his bankruptcy case.

He was sentenced to 27 months incarceration, followed by 3 years of supervised release, and payment of $28,500 restitution and $500 special assessments.  As of the writing of this blog, one count, Count 6, was vacated on appeal, and the case has been sent back to the lower court for resentencing.

Bankruptcy: Can My Taxes Be Discharged?

Can Taxes owed to state or federal entities be discharged in bankruptcy? Well that depends. The bankruptcy code outlines what taxes may be discharged. For a brief overview, there are six requirements (you must meet all six requirements):

1. THREE YEAR RULE: The three year rule: for the tax year in question, the most recent due date for filing the return is more than three years old;
2. TWO YEAR RULE: A tax return has been filed at least two years preceding the filing date of the bankruptcy;
3. TWO HUNDRED AND FORTY DAY RULE: The tax claim was assessed at least more than 240 days preceding the filing date of the bankruptcy;
4. TAX IS ASSESSABLE BUT NOT YET ASSESSED;
5. NON-FRAUDULENT RETURN; and
6. NO WILLFUL TAX EVASION.

Obviously, the above is only a preliminary test to see if you need to look further to see is a tax due to a state or federal entity may be discharged. If you think taxes you owe might be dischargeable, you should seek the advise of a bankruptcy attorney.

Scams: Memorial Day

Scams do not take a holiday, they look for a holiday.  According to a recent article in the Los Angeles Times (May 6, 2012)  entitled "Scam Watch: Memorial Day, Foreclosure Rescue, Investment Scheme", Memorial Day has become an active day for criminals.  It appears both active duty military, veterans, and their families are targeted by scammers.   

 

According to the article, the scams include criminals soliciting money over the phone for military charities, as well as calls from people alleging they are from the Veterans Administration, and asking for credit card, bank account, or other financial information.

The article also notes some recent scams, including one committed by Frederic Alan Gladle from Austin, Texas, who delayed foreclosure for a fee.  He would submit false documents in bankruptcy court, thereby delaying the foreclosure proceedings.  Earlier this month he received 61 months in federal prison.

Another person was able to raise money by alleging his company was about to be acquired by Microsoft.  He received 22 years in federal prison.

Eleventh Circuit Rules On Allowing Lien Stripping in Chapter 7

UPDATE: Since the posting of this blog, the Supreme Court has reversed the Eleventh Circuit: 

See http://jacksonville-bankruptcy-grange.blogspot.com/2015/06/second-mortgage-in-chapter-7-bank-of.html

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Lien Stripping in a Chapter 7 case?  The 11th Circuit Court of Appeals says it is OK, which is a minority decision.

The 11^th Circuit Court of Appeals recently interpreted a Supreme Court ruling differently than most other courts in other jurisdictions. If you have been studying bankruptcy, then you know the courts require a discharge in a Chapter 13 as a prerequisite to stripping off of a lien to real property. So, what does this mean. Essentially, if you have a second mortgage that is completely unsecured (the balance of the 1^st mortgage is more than the value of the property, so the second mortgage is unsecured), the only way to get rid of the second mortgage is to obtain an order from the court allowing a strip off of the lien upon receiving a discharge in a Chapter 13.

 

Most courts around the country have interpreted the Supreme Court ruling as disallowing the strip off of a lien when it disallowed the cram down of a lien in a Chapter 7. Well, the 11^th Circuit (the Middle District of Florida is in the 11^th Circuit) court of appeals has just ruled a mortgage can be stripped off in a Chapter 7 bankruptcy. (In Re: Lorraine McNeal). The court said, for the most part, the Supreme Court has never ruled on a strip off of a lien, just a cram down, and as such, they are free to interpret this part of the bankruptcy code.

So, will the local bankruptcy courts follow the 11^th Circuit? We do not know. This case just came down. You see, even though the 11^th Circuit ruled, this is actually a persuasive ruling the local bankruptcy court should consider. Of course, all cases have to be decided by the Court on a case by case basis.

Home: Can The Trustee Take It?

As a bankruptcy attorney in Jacksonville, Florida, I practice in several areas of debt relief, including foreclosure defense.  The following blog is created with the intent of provoking discussion, addressing bankruptcy, Trustees, and the debtors wishing to retain their homes, when the mortgage is upside down.

So do you want to be in bankruptcy? Of course not. And if you are also having your house foreclosed on, you certainly don't want that either. So when you go to your local attorney, you are advised as to whether or not you should file bankruptcy, and what chapter you can file. You may also be advised as to whether or not you can keep your house. If you are looking to discharge you debts through bankruptcy, and upside down on your house (that is, your 1^st mortgage is higher than the value of the real property), you may find this blog post interesting.

In Florida, there is reportedly a case where a debtor decided not to claim a homestead exemption on Schedule C of his bankruptcy paperwork, thereby allowing the debtor to claim a $4,000 wild card exemption; this is another way of saying the debtor can get though the bankruptcy and keep an extra $4,000 worth of property. The Trustee and the mortgagee came up with the bright idea of paying the Trustee to short sale the house. This would allow the mortgagee to foreclose on the house in a very efficient and timely manner, put some money in the Trustee's pocket, and avoid having to possibly fight a judicial foreclosure.

The problem with this lies with the duties of the Trustee, as the duties outlined in the bankruptcy code do not include the trustee acting as a foreclosure attorney. Another problem lies with the property itself. If there is no equity, is the property a bankruptcy asset. There is a very strong argument that can be made that the property, with no equity, is not an asset of the bankruptcy estate.

UPDATE:  The practice of at least one of the Trustees in the Jacksonville Division is to ask the bank to pay him to short sale the property.  This is possible if 1) the debtor does not claim the property as exempt homestead property, and 2) the bank agrees.  If you are filing the the Jacksonville Division, make sure you get the advise of an attorney before choosing to NOT claim your property as homestead.

A second case in Florida deals with the Trustee deciding to tell a debtor to get out of their house when the house is not claimed as exempt. Under the bankruptcy code, a trustee either has to administer the asset or abandon it. If the debtor simply moved out of the property, the debtor may be subject to fines and penalties for not maintaining the house. These fines and penalties would not be discharged in the bankruptcy because they occurred post petition. Of course, we still have the problem of whether or not the property is even property of the bankruptcy estate to begin with.

A third case deals with the trustee charging the debtor rent to stay in the house. That's right! The problem here is to some extent obvious; that's right, the house may not be a bankruptcy trust asset to begin with. But something you may not have though of is, does the Trustee really want to be a landlord, that is, they would be responsible to maintaining the property. As far as I know, the typical Trustee does not want to deal with landlord type problems; you know, the faucet leaks, the plumbing is stopped up, the grass need mowing, etc. It is also my understanding, in some jurisdictions, a landlord, or in this case perhaps a property manager, would need to be licensed by the state.

Should a Trustee be able to take a house with no equity? To what extent does the bankruptcy code require the trustee to maintain the asset? If you have any thoughts of enlightenment on this issue, please let me know below.

Other notable sites beginning with H:

Harassment by Creditors Southgate, Michigan Bankruptcy Attorney, Christopher McAvoy

Hardship Discharge Philadelphia Bankruptcy Lawyer, Kim Coleman

Hearing Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell

Home is Where the Heart Is San Francisco Bankruptcy Attorney, Jeena Cho

Homeowner's Association Dues Marin County Bankruptcy Attorney, Catherine Eranthe

Homestead Colorado Springs Bankruptcy Lawyer Bob Doig

Honest but Unfortunate Debtor Wisconsin Bankruptcy Lawyer, Bret Nason

Honesty Cleveland Area Bankruptcy Lawyer, Bill Balena

Honesty (and Fraud Avoidance) Philadelphia Suburban Bankruptcy Lawyer, Chris Carr

House Northern California Bankruptcy Lawyer, Cathy Moran

House Los Angeles Bankruptcy Attorney, Mark J. Markus

Household New York Bankruptcy Lawyer, Jay S. Fleischman

Household Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein

Household Size Hilo Bankruptcy Attorney, Stuart T. Ing

How Much Is Your Home Worth? St. Clair Shores Michigan Bankruptcy Attorney Kurt OKeefe

Household Median Income Livonia, Michigan Bankruptcy Lawyer, Peter Behrmann

Hearings Birmingham Bankruptcy Attorney, Elizabeth Johnson

Hijacking Christine A. Wilton, Lakewood, Ca Bankruptcy Lawyer