Covid 19 Foreclosure Moratoriums Extended

 

FORECLOSURE MORATORIUMS

The vaccine rollout is proceeding, but the economic effects of the pandemic are still being assessed.  There is some relief for borrowers whose mortgages are backed or owned by the federal government. The moratorium on foreclosures imposed by the Federal Housing Administration (FHA), Veterans Administration, the U.S. Department of Agriculture (USDA), Fannie Mae, and Freddie Mac will remain in effect until June 30, 2021.

 

The bad news is, eventually the mortgages will have to be paid up.  While it is not known what the government will do regarding the mortgage arrears, some attorneys are anticipating an avalanche of foreclosure filings which may lead to an avalanche of bankruptcy filings.  

 

Keep in mind, the moratorium is not mortgage relief.  Once the moratoriums end, the mortgage arrearage will have to be paid.  You may want to call a consumer advocate attorney in your area to see what options you may have.

Repossession/Bankruptcy: Can I get my car back?

From time to time the Supreme Court of the United States makes a decision regarding a bankruptcy matter. Most recently the Court decided City Of Chicago, Illinois vs. Fulton in January of 2021. In this case, the city of Chicago repossessed a vehicle for failure to pay fines. Shortly thereafter the owner of the vehicle filed a Chapter 13 petition, and demanded a return of the vehicle under a provision of the bankruptcy code known as the Automatic Stay (11 U.S.C § 362). More specifically, 11 U.S.C. § 362(a)(3) prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”

The Court recognized there was a split in authority regarding whether property had to be automatically returned upon the filing of a petition for bankruptcy, or whether it required a motion before the court for a turnover of the property. The Court ended up holding that 11 U.S.C. § 362(a)(3) essentially stopped any affirmative actions to repossess after the bankruptcy had been filed, and did not contain any affirmative provision to automatically return the property. That is, the creditor recognized the creditor was simply holding the property status quo. The procedure for the return of the property should be by motion to the court.

The Court also made it clear this decision was limited to 11 U.S.C. § 362(a)(3), and that there may be other provisions of the bankruptcy code by which the debtor may be able to demand a return of his vehicle, such as 11 U.S.C. § 542, but since that was not before the Court, the Court did not make a ruling as to the applicability of 11 U.S.C. § 542.

This ruling does not seem to have any effect on Florida which follows Bell-Tel Fed. Credit Union, consistent with City Of Chicago, Illinois vs. Fulton, which recognizes the turnover provisions of the bankruptcy code operate as to the property of the estate. In Bell-Tell the Court looked to see if the debtor still had legal or equitable interest in the property. In Bell-Tell the Court held that since the repossession occurred because the debtor breached his agreement with the lender (failure to make payments), the debtor only held a right of redemption, and legal ownership interest in the vehicle passed to the creditor upon the creditor taking possession pursuant to Florida; the vehicle was not part of the estate. If you have a vehicle, or other property that has been repossessed, or you think may be repossessed, I encourage you to seek the advise of a competent bankruptcy attorney in your state.

Bankruptcy Consultation: What To Expect; What To Bring

 Last Updated: September 8, 2020.

So you set up an appointment for a bankruptcy consultation. What next?

First of all, relax. People tend to get nervous, or anxious, when needing to speak with an attorney. Remember that any attorney that agrees to represent you will be your advocate. The consultation is so the attorney can understand you particular situation, and advise you as to what your various options are regarding the filing, or not filing, of bankruptcy.

I know what you are thinking, “not filing”? Make sure you ask the attorney if he or she practices under the Fair Debt Collection Practices Act. Yes, there are some alternatives to filing bankruptcy you may want to try.  You should discuss this with your bankruptcy attorney.

What to Bring:

1. 7 months pay advises (Gross Earned Income and Net Income).
2. Payoff figures on secured assets (approximate)
3. Value of secured assets (approximate)
4. Number of payments left on assets, if less than 60.
5. Year, Make, Model, and mileage of vehicles and motorcycles.

Generally, my consultations last approximately an hour, with some being a little longer. It is helpful to have the items on the above list. A short discussion of each is as follows:

1. 

   Pay advises, such as pay stubs, or other document reflecting the gross income and withholding you have had during the past 7 months, for you and your spouse (even if the spouse is not filing). If you and your spouse live in separate households, make sure to let the attorney know, as special rules may apply to your situation.
2. Payoff figures are needed to determine how much longer you have to pay, and how much, if any, equity you have in the property.
3. Value. This is need in many situations to, again, determine how much equity is in the property. The equity is important because is helps determine what assets you have from a bankruptcy perspective.
4. Number of Payments. This is important should your income be more than the median income for a household of you size in the state in which you live, to determine which form of bankruptcy you may be able to file. It may also be useful in advising you what to expect depending on when you file.
5. Year, Make, Model and mileage. This is useful in determining value and other useful information, such as deductions, when filing. Again, it can help in being able to advise you as to what to expect through the various forms of bankruptcy, or in some cases, what to expect if seeking other forms of debt relief.

While a consultation can still be done without these items, being the documents ask for often helps in facilitating the consultation and enables the client to receive much more accurate information regarding their particular case.

Exemptions: Florida Retirement

 

 A Chapter 7 Bankruptcy is a process one goes through regulated by the Federal Code, Federal Bankruptcy Rules, State Laws, Local Rules, and Court decisions. This chapter of bankruptcy allows one to discharge most debts, however, it does not allow one to keep a lot of stuff while discharging their debts. What one can keep is usually referred to as exempt property.

The exempt property for cases filed in Florida is composed of items according to Federal Law and State Law. Traditionally, the property exempt in Florida would have to be specifically waived in order for the property to lose its exemption status, including retirement funds such as 401(k) accounts. There recent case law that could significantly effect these exemption rights on a case by case basis.

If you are planning on filing Chapter 7 or 13 in Florida, I highly recommend you seek the advise of a local bankruptcy attorney regarding your exemptions, and possible complications that could arise.

Impound: Can I Get My Car Back If I File Bankruptcy?

The following question has been posed to the Supreme Court of the United States in City Of Chicago v. Robbin L.Fulton, et. al.:

Whether an entity that is passively retaining possession of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bankruptcy Code’s automatic stay, 11 U.S.C § 362, to return that property to the debtor or trustee immediately up-on the filing of the bankruptcy petition.

A filed bankruptcy petition does 2 things. First, it creates a bankruptcy estate which holds all of the debtor's rights to property, or as the bankruptcy code states, all legal or equitable interests in property. Secondly, an automatic stay automatically operates to automatically stop creditors from collecting debts. including “any act … to exercise control over property of the estate,” referring to the bankruptcy estate. Because this automatically operates, it does not require a court order, and a creditor violating this stay provision may be subject to sanctions.

However, there is a competing code provision providing turnover of property of the bankruptcy estate requires a court order, and is not operate automatically like the automatic stay. An action call an adversarial proceeding has to be filed with the Court requesting the turnover of property. This allows for the debtor to provide a defense. The creditor can also be sanctioned, but only after the Court has ruled.

The Courts are divided. There are five courts of appeals—the Second, Seventh, Eighth, Ninth and Eleventh Circuits—align with the first position of the automatic stay imposing a duty to automatically turn over property, while the Tenth and District of Columbia align with the second position of requiring a court order.

In this case, the City of Chicago lawfully impounded a vehicle because of unpaid fines and penalties after the debtor was caught driving on a suspended license. When the city initially filed its claim, it was filed as unsecured, then amended after confirmation of the Chapter 13 Plan to reflect a secured claim.

So, the question before the Court is fairly straight forward; when must turnover occur? Immediately upon the filing of the bankruptcy petition, or after an adversarial proceeding?

Status of case: Currently awaiting the Court's decision as to whether to it will grant the petition for writ of certiorari.

Bankruptcy Automatic Stay: Stopping Eviction, Foreclosure and Collection Efforts

As we near the end of the month of July, in the middle of this pandemic year of 2020, with Florida dividing their attention between the weather that comes with hurricane season and the spread in Covid 19, Florida is also looking at the possible end of the moratorium on foreclosures and evictions while waiting to see if congress passes another stimulus package. While people have been out of work, with mounting debt from credit cards, doctor's bills, utility bills, mortgage payments or rent, and vehicle payments, things are starting to come to a head.

While bankruptcy is something that should be turned to after exhausting other options, bankruptcy should be kept on your radar screen when considering alternatives. You can try to negotiate with creditors, in that many would prefer to limit the expenses of having to file a law suit to get their money or goods. If negotiation fails, the creditor may be open to allowing a third party to negotiate, such as a mediator. Of course, you have the trump card (no pun intended in this election year), the card of bankruptcy.

What can bankruptcy do? When one files a petition for bankruptcy, it causes certain provisions of the bankruptcy code to automatically kick in by operation of law. One very important provision is something called the “automatic stay” under 11 USC § 362 that provides for a “stay” regarding many things pertaining to the commencement or continuation of an action or proceeding against the debtor if it was for something that happened prior to filing bankruptcy.

If you have a question about whether or not this provision of the bankruptcy code will stop a proceeding in your particular case, you should seek the advise of a competent local bankruptcy attorney. Because of the pandemic, some attorneys, such as myself, are offering virtual consultations, either by phone or by internet video conferencing through platforms such as Google Team or Zoom.

If you think you may need the help of something like bankruptcy, you should seek the advise of a local bankruptcy attorney sooner rather than later. I am located in Middleburg, Florida, which is located in the Middle District of Florida; as such I am familiar with the local rules and traditions of the courts in my area.  Rules and traditions change from jurisdiction to jurisdiction, so you should seek the advise of a local bankruptcy attorney.  I highly recommend you DO NOT try to plan for filing bankruptcy based on intuition, that is, without speaking with a bankruptcy attorney. Bankruptcy is complicated and does not necessarily operate the way many people think it does. In preparing for bankruptcy, going at it alone could cause you to unintentionally put yourself into a position of either not being able to file bankruptcy, or running into unintended consequences from doing so. Bankruptcy usually takes planning, and when done properly, can be an uneventful experience.

Covid 19: Tsunami of Evictions, Foreclosures and Bankruptcies

WE ARE about to see a tsunami of bankruptcies and foreclosures as the result of Covid 19 pandemic.

Over the past couple of months, the legal profession throughout the United States has been forecasting a tsunami of clients running to attorneys.  One of the consequences of the current pandemic is very simple.  People are out of work, either temporarily or permanently, at least with their most recent employer.  And of many of the people back to work, there hours have been cut, as employer's businesses, especially in the hospitality industry, is only at a small percentage of what it should be.  This is a result of the pandemic as a substantial portion of the population is staying at home.

Lately the government, both nationally and locally, has taken action to provide relief to debtors and renters, to the dismay of mortgagees and landlords, in putting a moratorium on evictions and foreclosures.  So debtors out of work would not have to worry about being evicted or foreclosed on.  However, with a landlord not receiving rent, and being unable to evict a tenant, the landlord involuntarily gets behind on mortgage payments.

So, what is the result of the end of the moratorium on legal actions involving real property?  I predict we will see a mountain of foreclosures and bankruptcies like we have not seen in a long time.  The end of the moratorium will be the equivalent of opening the flood gates.  Numerous agencies will be hit hard, including those public and private agencies dealing with the homeless.

Of the limited avenues of relief available to debtors, the Federal Government has Title 11 of the United States Code available, more affectionately known as "Bankruptcy".  There are currently 4 chapters of bankruptcy under which an individual can file, known as a Chapter 7, 11, 12, and 13.  Each chapter is unique and serves several purposes.  While one can research these on their own, I recommend setting up a consultation with an local bankruptcy attorney to get advise concerning your particular situation, as the provisions of the bankruptcy code are complicated.  I also recommend setting an appointment sooner rather than later, as you may have trouble getting in to see someone if you wait too long.