Stripping of Unsecured Mortgage Without Discharge In Chapter 13

A recent Federal Appeals Court ruling in re: Fisette, No. 11-6012 (8^th Cir. BAP Aug. 29, 2011) ruled that an unsecured junior mortgage can be stripped off in a Chapter 13 bankruptcy. In the case at hand, the debtors filed a Chapter 7 bankruptcy and received a discharge of their unsecured debts. The mortgages on the home were not reaffirmed. Thereafter, they filed a Chapter 13 bankruptcy (this is known among bankruptcy practitioners as a Chapter 20 bankruptcy). Because of the timing of the filing of the Chapter 13, the debtors were not eligible for discharge in the Chapter 13, however this would allow them to catch up on their mortgage payments. Within the Chapter 13 Plan, the debtors proposed to strip off the 2^nd and 3^rd mortgages that were totally unsecured; that is to say, the value of the house was less than the balance of the first mortgage. This was proposed pursuant to section 506(a) and 1322(b)(2).

The Federal appellant court agreed that these two sections of the bankruptcy code should be read together, and rejected the idea that the stripping of the mortgages would only be applicable upon discharge. I believe this case provides the first Federal Appellant decision regarding the stripping of an unsecured lien on real property without a Chapter 13 discharge.

Orlando Division Automobile Valuations in Chapter 7 Become Stricter

An automobile valuation in a Chapter 7 bankruptcy often ends up being determined by a judge in the Middle District of Florida, however, different divisions within the district may rule differently on how valuations are determined. In the Jacksonville division, bringing in an expert to testify can be very helpful in presenting information to the Judge to assist him in arriving at a property value. Why is the value important? It can determine how much one will have to pay to keep their nonexempt asset, that is, how much they will have to pay to their bankruptcy estate to be able to keep their car.

It has recently been reported through another attorney's blog that at least one judge in the Orlando Division of the Middle District of Florida is arrived at a formula in determining what the market value of a automobile is. Historically, they have been accepting CarMax appraisals, which were lower than NADA or Blue Book. All parties, including the Trustee, accepted the values from CarMax because it was assumed the values were based on arms-length transactions, and were true indicators of value. Also, in instances where the Trustee auctioned a vehicle, they were unable to get NADA values at the sale.

It was reported in the post that recently the Court valued an automobile according to the average of trade-in and retail sales value. This was the apparent result of the Court believing the CarMax values were trade-in values, and ignored actual sales values. In the Orlando Division, this is creating to stricter approach to determining values of automobiles. We will have to wait and see if this trend is adopted by the other courts within the district.

NACBA Extends Member Only Workshop Early Registration Deadline

EARLY BIRD DISCOUNT EXTENDED TO SEPTEMBER 16^th!

You can register on-line at www.NACBA.org or mail/fax in the registration form.

• The Workshop will be held Friday-Saturday, October 28-29, 2011, at the legendary Broadmoor in Colorado Springs, CO.

• Registration is open to current NACBA Members and their support staff.

• Support staff may attend without member attorney if employed by member firm.

• Registration of support staff by mail or fax only.

• Registration of multiple firm attendees by mail or fax only.

• Registration fee includes: breakfast, lunch, Friday night Reception, printed materials for one pre-selected Track, and a flash drive containing materials for all Tracks.

• You may attend any session in any of the three concurrent tracks. When you register, you will be asked to identify the one Track that you plan to attend and for which you will receive written materials. You may attend any session from any Track that you wish, however, and will be able to pre-purchase the written materials for the other two tracks when you register.

SCHEDULE:.

The program features three distinct Tracks, each of which run for both days of the program. You have the option of attending any Track, any session. The Tracks are:

·         Track 1: Fundamentals: Getting the Best Bankruptcy Results for your Clients

·         Track 2: Digging Down Into the Mortgage Mess: Improving Your Offense and Defense

·         Track 3: The Business of Law

We will also be offering a limited-enrollment Brief Writing seminar, taught by Amicus Director Tara Twomey: Learn to write the brief you need in the time that you have and understand what judges want and need!

Click here to download a copy of the brochure.

NEW!  NACBA ORIENTATION FOR NEW MEMBERS

Want to learn more about NACBA and how to get the most from your membership? Come to our New Member Orientation session on Thursday, October 27^th at 7:30pm. Learn about NACBA Member benefits, using the listservs, the history and mission of NACBA, the staff and State Chair structure, and accessing NACBA’s website and your account information

NACBA GROUP EVENT:  NACBA’s Train on the historic Pikes Peak Cog Railway

Private coach buses will depart from the Broadmoor at Noon to take NACBA members to Pikes Peak Cog Rail for the 8.9 mile journey up the tallest cog rail in the country; the round trip to the summit takes just over 3 hours. On board the train, lunch will be served to passengers. At the top of the peak, passengers will have 30 - 40 minutes outside the train to take pictures and explore before beginning the journey back down. Everyone should be back to the hotel no later than 5:30 p.m.

Inherited IRAs Exempt in Florida

While IRAs are exempt from creditor's claims, and are able to be claimed as an exempt asset in bankruptcy, it is not clear according to the applicable exemption statute in Florida as to whether an inherited IRA is also exempt. For example, should a debtor become entitled to a beneficial interest in a decedent's IRA while they are in bankruptcy, it is not clear whether the decedent's interest in the IRA could be rolled over into the debtor's IRA and become an exempt asset of the debtor. Well, during the last session of the Florida legislature, they decided to make it clear, that these funds are indeed exempt.

The relevant statute can be found at F.S.221.22(c)(2).

NASHVILLE BANKRUPTCY JUDGE FINDS HOMEOWNER ASSOCIATION FEE SOLUTION

The 2005 revision of the bankruptcy code was drafted with a provision that states the owner of the property is responsible to post-petition homeowner association fees. So, where's the problem. The problem rest with Chapter 7 debtors that wish to surrender their real property through the course of the bankruptcy; the mortgagee, or holder of the mortgage, does not have to take the property. That means, if the mortgagee refuses to take the property, the debtor could incur significant accruing debts after the filing of the bankruptcy. If the bank chooses to delay the foreclosure, and refuses to take ownership of the property, the debtor is responsible for the accruing homeowner association fees, and in Florida, those fees follow the owner, personally, and not the property.

Judge George C. Paine, II, a bankruptcy judge in Nashville, decided to draft a solution to this problem.. This is not an easy task, as the court is limited in the scope of what it can do. For example, the courts have consistently held they can not force the mortgagee to take the property. Judge Paine decided to use the Court's equitable power under section 363 to order the property sold in a case involving Bank of America. What a simple, and logical solution to a daunting problem. Normally, the Trustee is the one that is responsible for handling a sale of assets for the bankruptcy estate. This almost always occurs when there is equity in the asset being sold sufficient to distribute money to unsecured creditors after deducting money to pay the secured creditor and administrative expenses. This is a clear departure from tradition. It is not known if the Court's order would withstand the scrutiny of an appeal.

This appears to be a win/win for all parties. The debtor can divorce himself of the accruing homeowner association fees, and the mortgagee may be able to circumvent the need for a foreclosure sale. Hopefully we will see other courts adopt some version of Judge Paine's Order.

A copy of an article about the aforementioned can be found at http://creditorsrights101.com/2011/07/06/nashville-bankruptcy-court-ruling-finds-that-delay-in-foreclosure-can-lead-to-waiver-of-rights/

Bankruptcy Attorneys and Wine: How to Find

“Discount Bankruptcy”, “Affordable Bankruptcy”, “Attorney For Bankruptcy Best Price”, “Bankruptcy Special”. How do you Google to find a bankruptcy attorney? I, of course, have no idea what you type into search engines to find an bankruptcy attorney, but based on phone call I receive on a regular basis, I imagine the aforesaid search phrases are within the scope of what people use. These calls are typically someone indicating that they have made up their mind that they need to file bankruptcy, and want to know what it will cost. 

While, on the surface this may seem fine, but after questioning them a little, in almost every case, they have made up their mind about filing bankruptcy without ever knowing anything about bankruptcy. All they know is they are having financial difficulty, and the cure for this disease is called “bankruptcy”. Its analogous to saying I'm sick, give me some medicine. Bankruptcy is simply much more complicated than that.

Actually, for Chapter 7 and Chapter 13 bankruptcies, most competent bankruptcy attorneys charge within a range of prices that are pretty close to each other. Many courts have established a presumptively reasonable fee attorneys can charge for these bankruptcies. Of course, some attorneys might charge less than others because they need the work. But you will seldom find attorneys charging more than the presumptive fee because then they have to answer to the Court as to why they are charging a higher fee.

So, how should you search for an attorney. Well, I relate it to purchasing a bottle of wine. Have you ever shopped for wine and found you have absolutely no idea how good the wine is based on price? I have found it's nearly impossible to tell the quality of the wine based on price. The same goes for bankruptcy. One should be searching for the quality of the attorney, in such ways as his or her experience, and fit, just like all wines do not fit all people. This can not be determined by price. Finding the cheapest attorney is a total crap shoot. 

One should check out whether the attorney does adversarial hearings, and if so, does it cost extra; how long the attorney has been doing bankruptcies, what organizations he or she is active with that relates to bankruptcy, his or her training and experience, and how long it will take that attorney to get your bankruptcy filed once the attorney has all the information need to generate the paperwork for the Court. You can also check with other people that may have used, or know, a specific attorney you are thinking about using to get feedback. See if you can find out the attorney's reputation in the community, and among other attorneys.

Try to find the attorney that is truly a good fit for you, giving you the time you require to alleviate stress some experience in going through the bankruptcy process, has a personality that clicks with yours, has the proper education and experience to make you comfortable that you have a competent attorney, and of course, a price you will be happy with. Once you have found this, the bankruptcy will not only be easier on you, but you can rest assured that nothing unexpected should happen through the process.

Asset Disclosure In Bankruptcy

If you are a do-it-yourself type of person, and decided to file bankruptcy on your own, make sure you provide complete disclosure within your schedules. One of the more frequent questions I receive during consultations is whether or not they need to disclose all assets, and if they don't, how would they ever find out.

Keep in mind, that's the job of the trustee, and I'm not about to second guess his or her ability to find assets that have not been disclosed. Every trustee has a story that could be made into a movie.

The United States Trustee Program takes the hiding of assets very seriously. In 2009, 1,611 bankruptcy and bankruptcy related cases were referred to the United States Attorneys' offices for investigation and prosecution. And 2009 was not to be outdone by 2010 when 1,721 cases were referred. The trustee in your case has a statutory duty to refer cases, and the United States Attorneys' office has a statutory duty to prosecute actions that “relate to the occurrence of any action that may constitute a crime”. Furthermore, the trustee has a duty to assist in the prosecution.

Of the cases referred in 2011, actions involving concealment were only outdone by actions of false oath. The other actions that round out the top 5 are Tax Fraud, Bankruptcy Fraud Scheme, and ID theft or the use of a false Social Security Number. Everyone that comes into my office for a bankruptcy consultation is given a required disclosure sheet, and then I read the following line I have prepared to them, “A person who knowingly and fraudulently conceals assets, or makes false oath in connection with the case shall be subject to fine, imprisonment, or both and all information furnished by you is subject to examination by the Attorney General”.

So, if you have a question as to whether or not to include something in your schedules and Statement of Financial Affairs, or to omit it, I highly suggest you include it. I have not seen anyone prosecuted for including too much information, as long as it is truthful.