21 November 2011
Most people that become plaintiffs in a civil suit do so for the first time in their lives. They are unsure what to expect and may underestimate the costs, risks, and time involved. They may think, “I was wronged, therefore I will eventually get the justice I deserve.”
A recent publicized case in United States District Court in Boston is an example of what could happen in a civil case that may help a prospective plaintiff have a better idea of what can happen. Diaz v. Jiten Hotel Mgmt., Inc., No. 2008 cv 10143 (D. Mass. May 5, 2011). The plaintiff pursued a discrimination claim against a former employer for wrongful firing. Along the way, three of the claims were dropped. The defendant filed a motion for summary judgment, and persuaded the court to dismiss another claim. This left an age discrimination claim under both federal and state law. Diaz v. Jiten Hotel Mgmt., Inc., 762 F. Supp. 2d. 319 (D. Mass. 2011).
Before trial, the defendant made a settlement offer of $75K, the plaintiff countered with $100K. Then it appears the negotiations stopped and the defendant walked away from the bargaining table. The parties went to trial and the plaintiff won, but it was approximately an award of less than $8K. The defendant appealed the verdict on various grounds, which is still pending. After the ruling, in a separate motion after the trial, the plaintiff’s attorney who took the case on a contingency basis, asked the court to also award the plaintiff her attorney’s fees. In doing so, she found an unsympathetic judge.
The law generally is that regardless of the amount of the award, when a statute provides the prevailing party to be awarded attorney’s fees, the attorney is entitled to reasonable fees. See Farrier v. Hobby, 506 U.S. 103, 113 (1992). (Please understand that attorney fees are not normally awarded, but only when a statute that provides the same is involved.) To illustrate, if the plaintiff was awarded $10,000 for basic damages, the attorney fees awarded could be $100,000 provided they were reasonable.
In this case, the judge initially reduced the fees sought by 1/3 due to the claims that were dropped or dismissed. Then the judge did something unusual: he considered the facts pertaining to the settlement negotiations. Specifically, the judge (apparently by being informed by the defendant) found that the $75K settlement offer made by the defendant was reasonable. He further decided that the attorney should not get more than what he would have if the settlement went through. The important part of the decision is that the judge considered the facts pertaining to the settlement and the amounts that would have been realized. In doing so, the judge lowered the amount of attorney’s fees even more to the amount that would have been obtained in the settlement amount. Diaz v. Jiten Hotel Mgmt., Inc., No. 2008 cv 10143 (D. Mass. Nov. 8, 2011).
Some observations from this case that likely did not meet the plaintiff’s expectations are in order. First, the plaintiff brought three claims and then dropped them, possibly because they were not as strong when subjected to adversarial scrutiny and/or upon further investigation and discovery. Second, one claim was dismissed by the court. Third, the defendant left the bargaining table after offering $75K and getting a (seemingly reasonable considering the amount of the original offer) counteroffer of $100K. (One would think the parties could have reached settlement based on their level of interest in doing so that was evidenced by the amount of their respective offers .) Fourth, the jury awarded an amount much less than the plaintiff expected (I imagine). Fifth, attorney fees awarded were much less than what was expected, due in large part to the judge taking an unusual position by considering the facts pertaining to the settlement negotiations. Sixth, the failure of the plaintiff to accept the settlement offer, although possibly a bit lower than the plaintiff may have thought she could negotiate for, made a significant difference in the amount both the plaintiff and the plaintiff’s lawyer may receive. Lastly, after a number of years of litigation and a jury trial, the case is still not over, but is on appeal.
One saving grace for the plaintiff is that if the decision is upheld, she has won. She will have a formal decision that states she was wronged. This may mean a great deal to her, but likely the case did not reap the rewards and was significantly more costly in many ways than was expected.
From the defendant’s perspective it may not feel like a big victory. We do not know what the defendant has spent and expects to continue to pay in attorney’s fees. The defendant corporation may feel like it has endured a significant financial penalty of its own in the form of its attorney’s fees already. Also, it has a decision, although on appeal, finding that it broke the law that is public and will affect their reputation, especially concerning its employees. The executives that are responsible for the matter may feel like they have a mark on their professional resume, so to speak.
The lessons to be learned are many. Since this is written for prospective plaintiffs, we will mention a few take-aways from that perspective. First is to be emotionally, mentally, and financially prepared for the ups and downs and duration of litigation, and second, take reasonable offers very seriously. Overall, this is just one story that shows from whatever perspective one may have had in the case that man’s justice is imperfect.
Monday, November 21, 2011
Tuesday, November 1, 2011
Will I be able to keep all of my assets if I file for chapter 7 bankruptcy?
2 November 2011
The answer is maybe. But in most cases you will not know for sure that you will keep your assets until the case is closed. For a better understanding, please read on.
This question is common for people to have and for bankruptcy blogs to address. Usually the truth is told that it is impossible to give an informed opinion until a thorough financial analysis by a competent bankruptcy attorney is completed. But overall there is an overwhelming tone of confidence in these blogs that convey the message in all likelihood you will be like most debtors and keep everything. “Don’t worry, you’re all set” these blogs seem to say. It is most likely true that in the end you will keep everything, but what will technically/legally occur during the bankruptcy with regard to the debtor’s assets usually escapes most potential debtors. What will really happen sounds scary to the typical person, which is the following.
When you file, everything you have becomes part of the bankruptcy estate, with very few exceptions that may not apply to you. In other words, generally you legally give up your right to the assets when you file for bankruptcy and (almost always) will not retain your full rights until the case is closed. This also means you cannot do what you want with your assets during the bankruptcy. This concept is typically hard for a debtor to digest and understand. The usual way to try and keep your assets is to claim that they are exempt. If they aren’t, the trustee can take them and sell them to pay your creditors (and himself) and give you the amount of your exemption, if you claimed one and it was not disallowed.
Even if you do claim that the entire amount of value of an asset is exempt, the trustee may disagree with your valuation and could get the right to try and sell it. If the trustee is successful in attaining more than what you said was exempt upon sale, again, you will get the amount of any valid exemption you claimed. This is the new law as of March 2010. Schwab v. Reilly, 130 S. Ct. 2652 (2010). There are cases that illustrate this. If you would like to read about a case involving few different debtors where the trustee obtained the right to sell their houses despite the fact the debtors each claimed a valid exemption in the amount of the equity of their homes, you can read Gebhart v. Gaughan. 621 F.3d 1206 (9th Cir. 2010).
There is a way that might ensure that you could keep one hundred percent of the fair market value of your asset ("100% of FMV") while your case is still pending that will be addressed in a future blog. And there is a way one can try and make sure an asset is retained without having to wait until the case is closed. However, as stated, there are no guarantees. The bottom line is, with rare exception, you will not be absolutely sure you will keep your assets until the case is closed.
These facts would tend to scare the typical person contemplating filing for bankruptcy. Should you be scared? No. But you should understand that very little is guaranteed in life, and if you hear an attorney guarantee that you will keep all your assets in a future bankruptcy under chapter 7, find another attorney.
The answer is maybe. But in most cases you will not know for sure that you will keep your assets until the case is closed. For a better understanding, please read on.
This question is common for people to have and for bankruptcy blogs to address. Usually the truth is told that it is impossible to give an informed opinion until a thorough financial analysis by a competent bankruptcy attorney is completed. But overall there is an overwhelming tone of confidence in these blogs that convey the message in all likelihood you will be like most debtors and keep everything. “Don’t worry, you’re all set” these blogs seem to say. It is most likely true that in the end you will keep everything, but what will technically/legally occur during the bankruptcy with regard to the debtor’s assets usually escapes most potential debtors. What will really happen sounds scary to the typical person, which is the following.
When you file, everything you have becomes part of the bankruptcy estate, with very few exceptions that may not apply to you. In other words, generally you legally give up your right to the assets when you file for bankruptcy and (almost always) will not retain your full rights until the case is closed. This also means you cannot do what you want with your assets during the bankruptcy. This concept is typically hard for a debtor to digest and understand. The usual way to try and keep your assets is to claim that they are exempt. If they aren’t, the trustee can take them and sell them to pay your creditors (and himself) and give you the amount of your exemption, if you claimed one and it was not disallowed.
Even if you do claim that the entire amount of value of an asset is exempt, the trustee may disagree with your valuation and could get the right to try and sell it. If the trustee is successful in attaining more than what you said was exempt upon sale, again, you will get the amount of any valid exemption you claimed. This is the new law as of March 2010. Schwab v. Reilly, 130 S. Ct. 2652 (2010). There are cases that illustrate this. If you would like to read about a case involving few different debtors where the trustee obtained the right to sell their houses despite the fact the debtors each claimed a valid exemption in the amount of the equity of their homes, you can read Gebhart v. Gaughan. 621 F.3d 1206 (9th Cir. 2010).
There is a way that might ensure that you could keep one hundred percent of the fair market value of your asset ("100% of FMV") while your case is still pending that will be addressed in a future blog. And there is a way one can try and make sure an asset is retained without having to wait until the case is closed. However, as stated, there are no guarantees. The bottom line is, with rare exception, you will not be absolutely sure you will keep your assets until the case is closed.
These facts would tend to scare the typical person contemplating filing for bankruptcy. Should you be scared? No. But you should understand that very little is guaranteed in life, and if you hear an attorney guarantee that you will keep all your assets in a future bankruptcy under chapter 7, find another attorney.
Wednesday, October 5, 2011
What can I do if a debt collector is reporting a debt to credit bureaus that I dispute?
5 October 2011
Especially in cases involving incorrect names, identity theft, and prior settled accounts, debt collectors unfortunately collect debts that are not valid or owed. If it happens to you, you should dispute it. A dispute can be made orally to invoke the law. Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998); Palmer v. I.C. Sys., Inc., 2005 WL 30001877 (N.D. Cal. Nov. 8, 2005). However, it would be best to communicate the dispute in writing and be able to establish when the debt collector learned of the dispute. Initially, understand that despite disputing the debt, it most likely will not stop debt collectors from continuing to attempt to collect the debt from you. At this stage, you may want to contact a lawyer to discuss the nature of your dispute to see if you have grounds to take legal action.
If you are concerned about your credit score, the fact that the item is disputed should help. When a consumer disputes a debt in some fashion, the debt collector is required by law to communicate the fact it is disputed, if they are reporting the item to credit bureaus. The Fair Debt Collection Practices Act (“FDCPA”) prohibits:
Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.15 U.S.C. § 1692e(8).
It is also not uncommon for the debt collector to fail to follow this law. This is why after you dispute a debt you may want to check your credit report to see if indeed the debt is being reported correctly. If not, you again may want to consider contacting an attorney to pursue legal action under the FDCPA and maybe the Fair Credit Reporting Act (“FCRA’). The FCRA is another federal law designed to help consumers.
If you feel you have good grounds for your dispute and are not making progress with the debt collector or original creditor, you may also want to dispute the item with the credit bureaus. In that case, there are a number of possibilities that can happen. For one, if the wrongful reporting continues after a certain length of time, you could have a claim under the FCRA.
This post just skims the surface of the FDCPA and FCRA. These are federal statutes that are lengthy, have been in place for many years, and have hundreds of reported cases speaking to their interpretation. So, it is best to proceed with the advice of a lawyer familiar with these laws, even before taking any action with respect to a debt you dispute. In the event that you believe that a debt collector or creditor is collecting or reporting a debt wrongfully, or would like to discuss how to proceed after learning about an invalid debt, feel free to give us a call.
Especially in cases involving incorrect names, identity theft, and prior settled accounts, debt collectors unfortunately collect debts that are not valid or owed. If it happens to you, you should dispute it. A dispute can be made orally to invoke the law. Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998); Palmer v. I.C. Sys., Inc., 2005 WL 30001877 (N.D. Cal. Nov. 8, 2005). However, it would be best to communicate the dispute in writing and be able to establish when the debt collector learned of the dispute. Initially, understand that despite disputing the debt, it most likely will not stop debt collectors from continuing to attempt to collect the debt from you. At this stage, you may want to contact a lawyer to discuss the nature of your dispute to see if you have grounds to take legal action.
If you are concerned about your credit score, the fact that the item is disputed should help. When a consumer disputes a debt in some fashion, the debt collector is required by law to communicate the fact it is disputed, if they are reporting the item to credit bureaus. The Fair Debt Collection Practices Act (“FDCPA”) prohibits:
Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.15 U.S.C. § 1692e(8).
It is also not uncommon for the debt collector to fail to follow this law. This is why after you dispute a debt you may want to check your credit report to see if indeed the debt is being reported correctly. If not, you again may want to consider contacting an attorney to pursue legal action under the FDCPA and maybe the Fair Credit Reporting Act (“FCRA’). The FCRA is another federal law designed to help consumers.
If you feel you have good grounds for your dispute and are not making progress with the debt collector or original creditor, you may also want to dispute the item with the credit bureaus. In that case, there are a number of possibilities that can happen. For one, if the wrongful reporting continues after a certain length of time, you could have a claim under the FCRA.
This post just skims the surface of the FDCPA and FCRA. These are federal statutes that are lengthy, have been in place for many years, and have hundreds of reported cases speaking to their interpretation. So, it is best to proceed with the advice of a lawyer familiar with these laws, even before taking any action with respect to a debt you dispute. In the event that you believe that a debt collector or creditor is collecting or reporting a debt wrongfully, or would like to discuss how to proceed after learning about an invalid debt, feel free to give us a call.
Monday, September 12, 2011
What happens to my 529 education account if I file for bankruptcy?
What happens to my 529 education account if I file for bankruptcy?
12 September 2011
It depends on a number of factors. But relatively recent changes in bankruptcy law by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) made it more likely you will be able to keep all or at least some of the funds.
BAPCPA was a sweeping change to the bankruptcy code. At the risk of oversimplifying the changes, as the name of the Act may imply, most amendments were debtor unfriendly, but some were debtor friendly. Initially, some background is necessary to understand these changes.
When someone files for bankruptcy, a bankruptcy estate is created that includes, with a few exceptions, all of the debtor’s property in whatever form in whatever place. If property is part of the bankruptcy estate, it is subject to the jurisdiction of the bankruptcy court and could be liquidated which depends on other subjects not discussed in this post. But if property is not part of the bankruptcy estate to begin with, then it cannot be liquidated.
Some of the debtor friendly amendments in BAPCPA were a few additions to the short list of items excluded from the bankruptcy estate under §541 of the bankruptcy code. One amendment covered so-called 529 education accounts. It is not as simple as thinking the entire balance in the account is excluded from the bankruptcy estate. First, the timing of when the funds were contributed to the account is crucial. Second, the designated beneficiary must be a child, stepchild, grandchild, or step-grandchild of the debtor for the tax year when the funds were put into the account. Third, is that funds contributed within 365 days of the petition date remain property of the estate. Up to $5,000.00 of the amount contributed to the account made between 365 and 720 days before the petition date are excluded from the bankruptcy estate. And all amounts contributed to an account more than 720 days before filing the bankruptcy petition are completely excluded. (There are some more qualifications in the code that are not discussed here that should be reviewed prior to settling this question.)
Just because some or all of what is in your 529 education account may be property of the estate means that it must be forfeited. Your bankruptcy lawyer can help you try and retain the funds even if they will be part of your future bankruptcy estate.
I hope that this post shows that bankruptcy may not be simple enough to be able to navigate alone. One may say they do not have a 529 education account so it does not affect them. But if it is this complicated on this somewhat obscure subject of 529 education accounts, it could be this complicated in other subjects that do affect them. I also hope that this post shows why a review of so many documents and an answer to so many of the right questions are needed prior to a bankruptcy filing. Of course, this is if one wants to know whether some of their assets will be liquidated.
If you have questions about how your 529 education account will be treated in bankruptcy or others about insolvency matters, we suggest you engage a competent Massachusetts bankruptcy attorney.
12 September 2011
It depends on a number of factors. But relatively recent changes in bankruptcy law by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) made it more likely you will be able to keep all or at least some of the funds.
BAPCPA was a sweeping change to the bankruptcy code. At the risk of oversimplifying the changes, as the name of the Act may imply, most amendments were debtor unfriendly, but some were debtor friendly. Initially, some background is necessary to understand these changes.
When someone files for bankruptcy, a bankruptcy estate is created that includes, with a few exceptions, all of the debtor’s property in whatever form in whatever place. If property is part of the bankruptcy estate, it is subject to the jurisdiction of the bankruptcy court and could be liquidated which depends on other subjects not discussed in this post. But if property is not part of the bankruptcy estate to begin with, then it cannot be liquidated.
Some of the debtor friendly amendments in BAPCPA were a few additions to the short list of items excluded from the bankruptcy estate under §541 of the bankruptcy code. One amendment covered so-called 529 education accounts. It is not as simple as thinking the entire balance in the account is excluded from the bankruptcy estate. First, the timing of when the funds were contributed to the account is crucial. Second, the designated beneficiary must be a child, stepchild, grandchild, or step-grandchild of the debtor for the tax year when the funds were put into the account. Third, is that funds contributed within 365 days of the petition date remain property of the estate. Up to $5,000.00 of the amount contributed to the account made between 365 and 720 days before the petition date are excluded from the bankruptcy estate. And all amounts contributed to an account more than 720 days before filing the bankruptcy petition are completely excluded. (There are some more qualifications in the code that are not discussed here that should be reviewed prior to settling this question.)
Just because some or all of what is in your 529 education account may be property of the estate means that it must be forfeited. Your bankruptcy lawyer can help you try and retain the funds even if they will be part of your future bankruptcy estate.
I hope that this post shows that bankruptcy may not be simple enough to be able to navigate alone. One may say they do not have a 529 education account so it does not affect them. But if it is this complicated on this somewhat obscure subject of 529 education accounts, it could be this complicated in other subjects that do affect them. I also hope that this post shows why a review of so many documents and an answer to so many of the right questions are needed prior to a bankruptcy filing. Of course, this is if one wants to know whether some of their assets will be liquidated.
If you have questions about how your 529 education account will be treated in bankruptcy or others about insolvency matters, we suggest you engage a competent Massachusetts bankruptcy attorney.
Tuesday, September 6, 2011
The new bankruptcy rules are coming!
6 September 2011
The United States Supreme Court has approved significant changes to the Rules of Bankruptcy Procedure that will take effect 1 December 2011. The most notable changes are to Bankruptcy Rule 3001 regarding requirements for creditors in the claims they make in bankruptcy cases in general; and the addition of Bankruptcy Rule 3002.1 regarding how parties are to handle claims by secured creditors against the debtor’s principal residence in chapter 13 cases. These rules are aimed to curb ongoing, recurring problems in claims in general, and claims in chapter 13 bankruptcy cases in particular, that have caused much consternation to debtors and their attorneys. Overall, these soon-to-come changes appear to be welcomed by the debtor’s bar and judges.
Rule 3001 will require all parties making claims to itemize any interest, fees, expenses, or other charges associated with their claims. It will require claims involving a security interest to state the amount necessary to “cure” any default. It will require claims involving a security interest in the debtor’s primary residence to attach an Official Form and if an escrow account is involved, a further escrow account statement must also be attached. If the Court finds that the creditor failed to provide this information, it may preclude the creditor from raising the omitted information in a further proceeding and/or award reasonable attorney fees “caused by the failure [to provide the information].”
Rule 3002.1 only applies to claims made in chapter 13 cases involving the debtor’s primary residence. However, in those types of cases the changes are significant and new steps applicable to every such case will be added. It requires a secured creditor to notify the debtor of any changes in mortgage payments no later than 21 days prior to when the new amount goes into effect while the chapter 13 case is open. It also requires a secured creditor to file an itemized statement of any fees, expenses, or charges incurred in connection with its claim after the bankruptcy case was filed, again using an Official Form. It allows a trustee or debtor to challenge this itemized statement and obtain a determination from the bankruptcy court on whether the fees, etc. are required to cure a default of the mortgage on the debtor’s primary residence. (Curing this default is arguably the most important relief available in chapter 13 and the most sought after relief from chapter 13 debtors.) George E. Bourguignon, Statutory Interpretation of Bankruptcy Code § 1322(C)(1): Arguing for a Bright-Line Approach to the Debtor’s Statutory Right to Cure a Residential Mortgage Default, Article, 7 U.C. Davis Bus. L. J. 461 (2007).
The last portion of Bankruptcy Rule 3002.1 will arguably make the most change in chapter 13 bankruptcy practice. After the debtor completes the payments required under his plan, the trustee (or debtor if the trustee fails to) must send a notice of final cure. The secured creditor must respond or consequences may flow. Without providing every detail, basically the rule is attempting to flush out and decide for good whether the debtor has cured the default, and decide this before the case closes. (In other words, there is no more arrearage due and he is back on track with the mortgage and only need to pay the usual monthly payment going forward.) It will be quite interesting if in practical reality the rule achieves its goal on this score.
These changes will make the claims process more complicated and add to the administrative and legal burden on all parties, especially in chapter 13 cases and on secured creditors of mortgages on the debtor’s primary residence. The changes will give the debtor more tools to combat unsubstantiated claims. But indirectly they may cause higher attorney’s fees by increasing the attorney’s obligations to object to claims that do not meet the new requirements that would not have been objected to previously. Exactly how much these amendments will change bankruptcy practice will remain to be seen, but we can confidently say they will change the practice to some degree. We can also say that indirectly these new rules will make it even more important for a chapter 13 debtor to obtain competent counsel to get the most from using the new rules that less competent counsel may not.
The United States Supreme Court has approved significant changes to the Rules of Bankruptcy Procedure that will take effect 1 December 2011. The most notable changes are to Bankruptcy Rule 3001 regarding requirements for creditors in the claims they make in bankruptcy cases in general; and the addition of Bankruptcy Rule 3002.1 regarding how parties are to handle claims by secured creditors against the debtor’s principal residence in chapter 13 cases. These rules are aimed to curb ongoing, recurring problems in claims in general, and claims in chapter 13 bankruptcy cases in particular, that have caused much consternation to debtors and their attorneys. Overall, these soon-to-come changes appear to be welcomed by the debtor’s bar and judges.
Rule 3001 will require all parties making claims to itemize any interest, fees, expenses, or other charges associated with their claims. It will require claims involving a security interest to state the amount necessary to “cure” any default. It will require claims involving a security interest in the debtor’s primary residence to attach an Official Form and if an escrow account is involved, a further escrow account statement must also be attached. If the Court finds that the creditor failed to provide this information, it may preclude the creditor from raising the omitted information in a further proceeding and/or award reasonable attorney fees “caused by the failure [to provide the information].”
Rule 3002.1 only applies to claims made in chapter 13 cases involving the debtor’s primary residence. However, in those types of cases the changes are significant and new steps applicable to every such case will be added. It requires a secured creditor to notify the debtor of any changes in mortgage payments no later than 21 days prior to when the new amount goes into effect while the chapter 13 case is open. It also requires a secured creditor to file an itemized statement of any fees, expenses, or charges incurred in connection with its claim after the bankruptcy case was filed, again using an Official Form. It allows a trustee or debtor to challenge this itemized statement and obtain a determination from the bankruptcy court on whether the fees, etc. are required to cure a default of the mortgage on the debtor’s primary residence. (Curing this default is arguably the most important relief available in chapter 13 and the most sought after relief from chapter 13 debtors.) George E. Bourguignon, Statutory Interpretation of Bankruptcy Code § 1322(C)(1): Arguing for a Bright-Line Approach to the Debtor’s Statutory Right to Cure a Residential Mortgage Default, Article, 7 U.C. Davis Bus. L. J. 461 (2007).
The last portion of Bankruptcy Rule 3002.1 will arguably make the most change in chapter 13 bankruptcy practice. After the debtor completes the payments required under his plan, the trustee (or debtor if the trustee fails to) must send a notice of final cure. The secured creditor must respond or consequences may flow. Without providing every detail, basically the rule is attempting to flush out and decide for good whether the debtor has cured the default, and decide this before the case closes. (In other words, there is no more arrearage due and he is back on track with the mortgage and only need to pay the usual monthly payment going forward.) It will be quite interesting if in practical reality the rule achieves its goal on this score.
These changes will make the claims process more complicated and add to the administrative and legal burden on all parties, especially in chapter 13 cases and on secured creditors of mortgages on the debtor’s primary residence. The changes will give the debtor more tools to combat unsubstantiated claims. But indirectly they may cause higher attorney’s fees by increasing the attorney’s obligations to object to claims that do not meet the new requirements that would not have been objected to previously. Exactly how much these amendments will change bankruptcy practice will remain to be seen, but we can confidently say they will change the practice to some degree. We can also say that indirectly these new rules will make it even more important for a chapter 13 debtor to obtain competent counsel to get the most from using the new rules that less competent counsel may not.
Wednesday, August 31, 2011
What happens if my first bankruptcy filing was dismissed and I file for bankruptcy again?
1 September 2011
The answer is that there are ramifications if the first case was dismissed within a year of the second filing.
Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) and most of its provisions became effective in October 2005. This law was a sweeping change to the bankruptcy code. Section 362(c)(3)(A) was one of the provisions of BAPCPA which was meant to curb a perceived abuse from repeat filings. It limited the automatic stay, the benefit of bankruptcy to the debtor that prohibits most collection activity once a case is filed, to only 30 days when a person files a second case within one year of the dismissal of the first case.
There has been some disagreement over the extent of the effect of section 362(c)(3)(A). The majority has concluded that the stay ends with respect to the debtor and property of the debtor, but continues with respect to property of the estate. In re Jump, 356 B.R. 789, 791 (1st Cir. B.A.P. 2006). The minority of courts have concluded the automatic stay ends completely (that means with respect to the debtor, the debtor’s property, and property of the estate) 30 days after the case is filed.
If you find yourself asking what all of this means and continue to wonder what the protection you will obtain from filing your second case (which would be most people) we suggest that you engage an experienced bankruptcy practitioner who may be able to provide more guidance. This could include explaining the three portions of the automatic stay’s protection and how it applies to your concerns and assets. It could also include having a better idea on how the judge assigned to your future case may rule on the issue. It could also include discussing what could be done to try to extend the automatic stay despite the repeat filing.
If you are contemplating bankruptcy and have filed a case that was dismissed within the past year, you may want to know more about the actual extent of the benefit of the automatic stay, if any, when you file. Please give us a call if you would like to learn more about this issue and how it may apply to your particular situation.
The answer is that there are ramifications if the first case was dismissed within a year of the second filing.
Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) and most of its provisions became effective in October 2005. This law was a sweeping change to the bankruptcy code. Section 362(c)(3)(A) was one of the provisions of BAPCPA which was meant to curb a perceived abuse from repeat filings. It limited the automatic stay, the benefit of bankruptcy to the debtor that prohibits most collection activity once a case is filed, to only 30 days when a person files a second case within one year of the dismissal of the first case.
There has been some disagreement over the extent of the effect of section 362(c)(3)(A). The majority has concluded that the stay ends with respect to the debtor and property of the debtor, but continues with respect to property of the estate. In re Jump, 356 B.R. 789, 791 (1st Cir. B.A.P. 2006). The minority of courts have concluded the automatic stay ends completely (that means with respect to the debtor, the debtor’s property, and property of the estate) 30 days after the case is filed.
If you find yourself asking what all of this means and continue to wonder what the protection you will obtain from filing your second case (which would be most people) we suggest that you engage an experienced bankruptcy practitioner who may be able to provide more guidance. This could include explaining the three portions of the automatic stay’s protection and how it applies to your concerns and assets. It could also include having a better idea on how the judge assigned to your future case may rule on the issue. It could also include discussing what could be done to try to extend the automatic stay despite the repeat filing.
If you are contemplating bankruptcy and have filed a case that was dismissed within the past year, you may want to know more about the actual extent of the benefit of the automatic stay, if any, when you file. Please give us a call if you would like to learn more about this issue and how it may apply to your particular situation.
Monday, August 1, 2011
Can I get a loan modification while in chapter 7 bankruptcy?
1 August 2011
The answer is yes. However, chapter 7 may not be the way to go if a loan modification is your goal. Many considerations are in order.
People desirous of a loan modification want to keep their residential home, but at the same time they may not be able to afford the current monthly payments required. It could also be that they are in default because they are late on their payments and have an arrearage that they cannot pay in one lump sum that the mortgage servicer requires. It could be both, cannot afford the on-going monthly required payments and they are in default and have an arrearage that they cannot pay in one lump sum. Whatever the reason, the people want the original terms of their mortgage contract(s) changed to allow them to avoid foreclosure and afford their residential home.
They have also usually had a difficult time communicating and dealing with their mortgage loan servicer(s). This makes people want to somehow force the mortgage servicer’s hand or somehow get its attention. And this goal, getting the mortgage servicer’s attention, is sometimes the reason people state they want to file a chapter 7 bankruptcy. However, there are very serious ramifications to filing chapter 7 and some of them could affect your ability to obtain a loan modification, forever. Initially, one point concerning chapter 7 bankruptcy is in order.
Chapter 7 bankruptcy for the individual should be viewed as a personal liquidation. Although individuals filing chapter 7 bankruptcies should use it and think of it as an important step in their financial turnaround, it is not a financial tool designed for a personal reorganization per se. Because chapter 7 bankruptcy is a liquidation, it is not designed to cure a residential mortgage default, which is what most people seeking a loan modification need, as a chapter 13 bankruptcy is. The point to understand is that chapter 7 bankruptcy is not designed or usually the best tool to save your home. So, you will need someone legally savvy enough to use this tool (chapter 7 bankruptcy) to perform a task it was not originally designed for. (For you car buffs out there, think of using a screw driver to remove an oil filter. It can be done, but the screw driver was certainly not designed for it.)
A loan modification must be achieved during the chapter 7 bankruptcy, and before a certain deadline in the case, or one’s ability to modify the loan ends permanently. Achieving a loan modification during bankruptcy also triggers a number of considerations that requires an adept bankruptcy professional to assess and handle. Not to mention the fact you are still dealing with the same mortgage servicer that has probably shown itself to be quite difficult to deal with in the first place. Essentially, you should consider filing a chapter 7 bankruptcy as the firing off a starting pistol in a race to make an agreement with the mortgage servicer before a particular deadline occurs and as the only and last shot to attaining the loan modification.
All this to say, if you seek to attain a loan modification and are considering chapter 7 as a part of the plan to achieve this, we suggest that you team up with a qualified bankruptcy professional before taking the plunge, if you still wish to do it after attaining counsel at all.
The answer is yes. However, chapter 7 may not be the way to go if a loan modification is your goal. Many considerations are in order.
People desirous of a loan modification want to keep their residential home, but at the same time they may not be able to afford the current monthly payments required. It could also be that they are in default because they are late on their payments and have an arrearage that they cannot pay in one lump sum that the mortgage servicer requires. It could be both, cannot afford the on-going monthly required payments and they are in default and have an arrearage that they cannot pay in one lump sum. Whatever the reason, the people want the original terms of their mortgage contract(s) changed to allow them to avoid foreclosure and afford their residential home.
They have also usually had a difficult time communicating and dealing with their mortgage loan servicer(s). This makes people want to somehow force the mortgage servicer’s hand or somehow get its attention. And this goal, getting the mortgage servicer’s attention, is sometimes the reason people state they want to file a chapter 7 bankruptcy. However, there are very serious ramifications to filing chapter 7 and some of them could affect your ability to obtain a loan modification, forever. Initially, one point concerning chapter 7 bankruptcy is in order.
Chapter 7 bankruptcy for the individual should be viewed as a personal liquidation. Although individuals filing chapter 7 bankruptcies should use it and think of it as an important step in their financial turnaround, it is not a financial tool designed for a personal reorganization per se. Because chapter 7 bankruptcy is a liquidation, it is not designed to cure a residential mortgage default, which is what most people seeking a loan modification need, as a chapter 13 bankruptcy is. The point to understand is that chapter 7 bankruptcy is not designed or usually the best tool to save your home. So, you will need someone legally savvy enough to use this tool (chapter 7 bankruptcy) to perform a task it was not originally designed for. (For you car buffs out there, think of using a screw driver to remove an oil filter. It can be done, but the screw driver was certainly not designed for it.)
A loan modification must be achieved during the chapter 7 bankruptcy, and before a certain deadline in the case, or one’s ability to modify the loan ends permanently. Achieving a loan modification during bankruptcy also triggers a number of considerations that requires an adept bankruptcy professional to assess and handle. Not to mention the fact you are still dealing with the same mortgage servicer that has probably shown itself to be quite difficult to deal with in the first place. Essentially, you should consider filing a chapter 7 bankruptcy as the firing off a starting pistol in a race to make an agreement with the mortgage servicer before a particular deadline occurs and as the only and last shot to attaining the loan modification.
All this to say, if you seek to attain a loan modification and are considering chapter 7 as a part of the plan to achieve this, we suggest that you team up with a qualified bankruptcy professional before taking the plunge, if you still wish to do it after attaining counsel at all.
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