Bankruptcy: Can I End Up In Jail?

Can someone end up in jail for filing bankruptcy?  Well, consider the following announcement I received today regarding a Hillsborough County resident indicted on bankruptcy fraud, mail fraud, and aggravated identity theft charges:
 
From Tampa Florida -- United States Attorney A. Lee Bentley, III announces the return of an indictment charging David W. Griffin (44, Lutz) with one count of mail fraud, nine counts of bankruptcy fraud, two counts of making a false statement under oath during a bankruptcy proceeding, and one count of aggravated identity theft. If convicted, he faces up to 20 years in federal prison for the mail fraud charge, and up to five years on each of the bankruptcy fraud and false statement charges. A mandatory term of two years’ imprisonment for the aggravated identity theft charge would run consecutive to the other penalties imposed. 

According to the indictment, Griffin operated a foreclosure rescue scheme through his companies, Bay2Bay Area Holding, LLC and Business Development Consultants, LLC. The purpose of the scheme was to obtain quitclaim or warranty deeds from distressed homeowners facing foreclosure in return for false promises to rescue their homes from foreclosure by negotiating with creditors, renting the property back to the homeowner to obtain rental income, and falsely promising that the homeowner could repurchase the property from Griffin. To maximize his rental income, it was also a purpose of the scheme to prevent creditors and guarantors, including the Federal National Mortgage Association (“Fannie Mae”) and the Federal Housing Administration, from pursuing lawful foreclosure and eviction actions against homeowners who had defaulted on their mortgages. This was accomplished by filing, or causing to be filed, fraudulent bankruptcies in the names of the homeowners without their knowledge or consent. These fraudulent bankruptcies generated mailings sent from the bankruptcy court to the victim homeowner via the U.S. Postal Service. 

The indictment also alleges that Griffin lied under oath in sworn testimony before the Office of the United States Trustee and the bankruptcy trustee. Under penalty of perjury, Griffin stated that he had no knowledge of a bankruptcy petition filed in the name of his company, Bay2Bay Area Holding Group, when in fact, he prepared the petition and directed an individual to sign his name and file the petition with the United States Bankruptcy Court for the Middle District of Florida. 

An indictment is merely a formal charge that a defendant has committed one or more violations of federal criminal law, and every defendant is presumed innocent unless, and until, proven guilty. 

This case was investigated by the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the Federal Housing Finance Agency - Office of Inspector General, and the U.S. Department of Housing and Urban Development – Office of Inspector General. It is being prosecuted by Special Assistant United States Attorney Chris Poor.

Second Mortgage in Chapter 7: Bank of America, N.A. v. Caulkett

After the Eleventh Circuit determined it to be OK to strip off totally unsecured mortgages, the Supreme Court sent a message that they decided this one incorrectly.

The U.S. Supreme Court, on June 1, 2015, unanimously held in Bank of America, N.A. v. Caulkett, a chapter 7 debtor cannot "strip off" a mortgage, even if it is totally underwater, under § 506(d); the Court reversed the Eleventh Circuit decision.  The Court based its decision on Dewsnup v. Timm, 502 U.S. 410 (1992), in which the Court had held that a chapter 7 debtor cannot "strip down" a partially underwater mortgage under § 506(d).

Writing for the Court, Justice Thomas concluded that "Dewsnup's construction of "secured claim" resolves the question presented here." The Court's decision in Caulkett now indicates that mortgage liens are sacrosanct in chapter 7, without regard to whether they are partially or totally underwater.

It is yet to be seen how this will effect mortgages in Chapter 13 cases, but mortgagees have a plausible argument to extend Caulkett there as well.

My Chapter 13 Is Dismissed: What Happens To My Money?

So, you filed a Chapter 13 and started making payments. Your Chapter 13 Plan was finally confirmed, and the Chapter 13 Trustee started distributing moneys received according to your Plan. Then, something happens, your Chapter 13 is dismissed, and the Trustee still has some of your money. What happens to that money?

 
Well, the various jurisdictions around the country have treated this differently. Some have said the money should be distributed to creditors pursuant to the Chapter 13 Plan. Others have said the debtor(s) should get the remaining funds. The bankruptcy rules and code do not address this issue, and the Local Rules (at least where I practice) are also silent on the issue. 

The Supreme Court recently decided on May 18, 2015 a case on a vary close, or related issue. In the case of Charles E. Harris, III vs. Mary K. Viegelahn, Chapter 13 Trustee (No. 14-400), the case was not dismissed, but the Chapter 13 was converted to a Chapter 7. The Supreme Court held that debtor gets the undistributed money on conversion. The unanimous Supreme Court reversed the Fifth Circuit, holding that, absent bad faith, when the Chapter 13 debtor converts to Chapter 7, any undistributed money held by the Chapter 13 trustee must be returned to the debtor, rather than distributed to creditors. The decision is based on construction of § 348(f) and termination of the Chapter 13 trustee's services upon conversion under § 348(e). 

If you have a questions concerning the money in your Chapter 13 case, you should contact an attorney in your area that practices in the area of Chapter 13 bankruptcies. 

The Denial of Chapter 13 Plan Confirmation Cannot Be Immediately Appealed

In the case of Louis B. Bullard vs. Blue Hills Bank, Fka Hyde Park Savings Bank, desided May 4, 2015, Case 14–116, the Court in a 9-0 vote ruled against the debtor in deciding whether such an order denying confirmation is a “final” order that the debtor can immediately appeal. The Court decided it is not.

Although the Court indicated the case can not be immediately appealed, as the debtor can propose an amended Chapter 13 Plan, it did indicate the Plan would be final if confirmed, or the case dismissed.

PRIVATE STUDENT LOANS: What You Should Do Before Taking Out A Private Student Loan

Private student loans are just that, they are private loans, and usually have variable interest rates.  This means you do not know how much you will be paying in the future.  They do not involve the federal government.  The loan is for the cost of attendance less other financial aid received, which includes average cost to attend one academic year (fall and spring), tuition and fees, room and board, books and supplies, transportation, and personal expenses.  If cost goes up, this will increase the cost of attendance.

So, private student loans are designed to fill in the gap between the other financial aid received and the actual cost of attendance.  The interest rate varies, and is adjustable, but are usually high.  Because of the high interest rates, and variable interest rates, you really don't know how much the loan will cost you, or what your payments will be.

Private student loans are not federal, and as such, don't come with the federal plans, such as income based repayment, student loan forgiveness, benefits for being a teacher, a veteran or a member of the military, or any other benefit associated with federal loans.

You really want to try to get your money somewhere else.

• Look for grants and scholarships; they may look like loans, as they are used for higher education, but the biggest difference is they do not require repayment.  They may be granted based on race, area of study, ethnicity, location, nationality, parents affiliation, religion, etc.  Scholarships are usually granted for area of study and sports.  There are grants and scholarships given out for everything.

• There are educational benefits offered for being associated with the military.

• Think about working part time.  There are always work study programs.  This, of course, needs to be balanced with studying.  This might not be much  money, but will definitely help out.  It will also help with a resume later.

• Next, look for direct subsidized federal student loans.  This means you do not have to pay interest while you payments are being deferred while you are in school.

• Look for ways to lower cost of attending school, such as purchasing used books, or sharing books an supplies.  Sometimes living off campus can save some money.  Use public transportation, bikes, or rail instead of using a car. Try to take as little of a student loan as possible.

Lastly, look at private student loans.

Tax Freedom Day!

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income. In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income. This year, Tax Freedom Day falls on April 24, or 114 days into the year.

So, when is Florida's Tax Freedom Day.  In 2015, it is April 20th, and ranked at #13.

OK, who is 1st and 2nd, and who is 49th and 50th?

1st is Louisiana followed by Mississippi in 2nd place, with Tax Freedom Days of April 2nd and April 4th respectively.  New Jersey and Connecticut are ranked 49th and 50th with each having a Tax Freedom Day of May 13th.

SCAM: Customer Satisfaction Survey

I recently received the following email from the AARP notifying me of a scam:

Dear [recipient],

The email – often from a well-known retailer like Walmart or Macy’s – may start out innocently enough:

You have been chosen to take part in our brief Customer Satisfaction Survey. If you decide to complete this survey, we will send $150 to your confirmed credit or debit card account just for your time. Helping us better understand how our customers feel, benefits everyone. With the information collected we can decide to direct a number of changes to improve and expand our services.  The survey form is attached to this email. Please download the attachment, open it, and follow the instructions on your screen. 
 
Wanting to help, you play along. The first few questions of the survey may ask basic information about which products and/or services you use or instruct you to evaluate the customer service. But then, the form takes a twist. It asks for personal information like credit card, bank account or Social Security numbers, which is later used against you by a scammer.
Take steps to protect yourself.

• Know who you are dealing with.  It’s easy to steal the look and feel (colors, logos and header) of an established retailer or organization. Scammers can also make links look like they lead to reputable websites and emails appear to come from a different sender. Tip: hover over the sender name to make sure the address is valid.
• Legitimate businesses will never ask for your Social Security number, money, password, or bank account information on a customer survey.
• When in doubt, do a quick web search. If the survey is a scam, you may find alerts or complaints from other consumers, and the organization’s real website may have further information.
• Watch out for a reward that’s too good to be true. If the survey is real, you may be entered in a drawing to win a gift card or receive a small discount off your next purchase. Few businesses can afford to give away $150 for completing a few questions.

If you think you have been the victim of a customer service survey scam, file a complaint with the Federal Trade Commission at www.ftc.gov/complaint.