NACBA Principal Paydown Plan Petition Push

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


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

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

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

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

Length of Time of Automatic Stay in Chapter 7

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

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

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

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

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

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

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

Bank Is Not Necessarily Entitled To Rental Income

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

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

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

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

(c) Make payments to the mortgagee.

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

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

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

Bankruptcy Filings Lower in 2011

 

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

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

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

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

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

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

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

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

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

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

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

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

Broadmoor Room Cutoff for NACBA Member Only Event is Thursday

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

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

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

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

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

The Florida Supreme Court Taking Another Look At Mediation Program

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

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

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