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.

Dealing With Student Loans In Chapter 13

I recently received the following letter (in pertinent part) from the National Association of Consumer Bankruptcy Attorneys (NACBA):

Following an excellent last with in bankruptcy court with an attorney for the Department of Education, I wanted to let others know that, with huge amounts of assistance and advice from John Rao and NACBA, borrowers are likely soon going to be able to enroll in income driven repayment plans while in a Chapter 13 bankruptcy case.

My case will be, and the Department of Education agrees, the first time where a Chapter 13 Debtor has been allowed to enroll in a IBR. Previously, they have simply refused or ignored requests, depriving Chapter 13 debtors of some very valuable options regarding their student loans.

This will be a huge development and one that will open up many other opportunities for student loan debtors, including starting down the road to obtaining cancellation or, even better, Public Loan Forgiveness while in bankruptcy.

It may also lead to being able to have defaults on student loans waived through bankruptcy, rather than rehabilitating or consolidating loans, with the resulting 18.5% penalty. Just imagine marketing Chapter 13 as a way to help get clients back on track with student loans without taking that hit!

Also, currently there are no real options for curing a default under a income driven repayment plan, meaning that once a problem arises, the borrower may have to start again at square one. Chapter 13, however, allows the cure or waiver of ANY default, including under an IBR.

And, as a practical concern, joining income driven repayment of student loans with Chapter 13 bankruptcy, not only helps deal with the borrower's entire financial situation, but it provides a mechanism for paying attorneys' fees for this assistance. (Attorneys' fees in excess of the regular bankruptcy fees!)

There are very real complications with this, from the specific language to be used, to enrolling borrowers in an IBR, to bankruptcy issues such as separate classification, good faith and feasibility.

And while we believe that these options for debtors are available under the Code and in plan confirmation even over objections raised by the government, we have worked to get the consent of the Department of Education, so as to avoid unnecessary litigation for you in the future. We have also started to discuss these issues with both the UST and Chapter 13 Trustees, who are increasing conscious of the fact that the inability to deal with student loans is impacting bankruptcy filings and are sympathetic to this idea.

CHASE To Pay $50M To More Than 25,000 Homeowners

The U.S. Trustee Program (USTP) has entered into a national settlement agreement with JPMorgan Chase Bank, N.A. (Chase) requiring Chase to pay more than $50 million including cash payments, mortgage loan credits and loan forgiveness to over 25,000 homeowners who are or were in bankruptcy, according to a USTP press release today. Chase will also change internal operations and submit to oversight by an independent compliance reviewer. The proposed settlement has been filed in the U.S. Bankruptcy Court for the Eastern District of Michigan, where it is subject to court approval. In the proposed settlement, Chase acknowledges that, in bankruptcy courts around the country, it filed more than 50,000 payment change notices that were improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices. More than 25,000 notices were signed in the names of former employees or of employees who had nothing to do with reviewing the accuracy of the filings. The rest of the notices were signed by individuals employed by a third-party vendor on matters unrelated to checking the accuracy of the filings. Chase also acknowledges that it failed to file timely, accurate notices of mortgage payment changes and failed to provide timely, accurate escrow statements.