Posted by Kevin on June 3, 2011 under Bankruptcy Blog | 
In a previous post, I reviewed a case in the Eastern District of NY which extended the automatic stay to include actions against an separate, non-filing entity where the debtor is a guarantor. Stay applied.
However, in a recent PA bankruptcy case, the court found that the automatic stay was not violated. In that case, A sued B (eventual debtor), C & D before A filed bankruptcy claiming that A fraudulently transferred property to B & C. A fraudulent transfer occurs when a person owes creditors and owns property (usually real estate). The debtor transfers the property for less than fair market value to a third party (usually a friend or relative) so that the creditors cannot get their hands on the property once the creditor has obtained a judgment.
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Posted by Kevin on May 23, 2011 under Bankruptcy Blog |
It is the law that a bankruptcy filing acts as an automatic stay of most collection efforts against the debtor. But how broad is that protection? In a recent case in the Eastern District of New York (In re: Ebadi), the stay went beyond property owned by the debtor. The debtor was a shareholder of CBC Media Realty. CBC owned a commercial building which it used as collateral for a loan. The debtor personally guaranteed the loan. CBC defaulted on the loan and the creditor obtained a foreclosure judgment. The debtor was named as a defendant in the foreclosure case. Just prior to the sale, the debtor filed a Chapter 13 and notified the foreclosing creditor of the filing. The creditor went ahead with the sale anyway.
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Posted by Kevin on May 18, 2011 under Bankruptcy Blog |
Back in January, 2011, I posted a blog concerning the surrender of a property. On the petition, the debtor must disclose what it intends to do with certain property. You can state that you intend to surrender the property to a secured creditor (like your lender). But, the catch is that the lender does not have to take back the property.
In a recent Chapter 7 case in Maine, HSBC filed a foreclosure action. The borrower filed a Chapter 7 petition and stated its intention to surrender the property. HSBC sent a letter to the debtor saying that it was dropping the foreclosure action but stated that the debtor still owed HSBC pursuant to the Loan Agreement. After two letters from the debtor’s attorney, HSBC acknowledged that the debt was discharged but refused to foreclose and refused to release the mortgage lien without payment.
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Posted by Kevin on May 10, 2011 under Bankruptcy Blog |
The object of a bankruptcy is to get a discharge of your debts. The Code, however, has delineated certain types of debts which are not dischargeable; for example, certain taxes, claims based on a DWI, etc. One of the exceptions to discharge is for debts based on willful and malicious injury by the debtor to another entity or to the property of another entity. The usual example for this type of exception to discharge would be if the debtor beat up and injured someone who then got a judgment. However, this exception to discharge does way beyond the obvious. It can include an intentional breach of contract.
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Posted by Kevin on May 7, 2011 under Bankruptcy Blog |
In NJ, year ending December, 2009 indicates 36420 bankruptcies. Year ending December, 2010 indicates 41366 bankruptcies. This was up 14%. In addition, Chapter 7 filed 3.3 times more than Chapter 13. Remember, we told you that the purpose of the new law, BAPCPA, was to make more people file under Chapter 13. It failed.
Note the the American Bankruptcy Institute indicated that bankruptcies in the US were down 6% from the first quarter of 2010 to the first quarter of 2011. That trend is not happening in NJ which bankruptcies are even or slightly higher.
Posted by Kevin on April 27, 2011 under Bankruptcy Blog |
The means test, as we have stated before, serves as a gatekeeper to who can file under Chapter 7. If you are below the median income based on household size for your region, then you have passed. If you are above median, the next step is to compare your average income for the previous six months against expenses. For expenses, the means test looks at national expenses (food, auto), regional expenses (housing) and actual expenses.
One of the key deductions involves automobiles. The means test has two expense lines which refer to automobiles: ownership costs and operating costs. The ownership cost is a generous $490+ per month which can be applied to two vehicles.
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Posted by Kevin on February 22, 2011 under Bankruptcy Blog |
Of course, they are related. People who cannot pay their mortgages are likely to be people who are having trouble paying other debt, like credit cards.
But, I am talking about strategy. Some of the same arguments that are being used by the cutting edge foreclosure defense attorneys were actually used first by bankruptcy attorneys.
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Posted by Kevin on January 13, 2011 under Bankruptcy Blog |
I was called as a witness in a foreclosure case. The issue, however, dealt with a surrender of a condominium in a Chapter 13. In the Ch 13 Plan official form, a debtor can either continue paying a secured lender (mortgage holder) every month outside the plan and pay the arrearages through the plan; modify the claim by, for example, changing the interest rate; or surrendering the property.
But what does “surrender” mean? Well, to the dismay of many landowners, it does not mean that the lender becomes the owner of the property upon surrender. What has happened many times is that a debtor moves out of the house that he no longer can afford. He expects the lender to take over. But the lender does not take over the property. The debtor may file papers with the bankruptcy court to force the lender to take over the property. But, absent unusual circumstances, the debtor loses this application.
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Posted by Kevin on January 6, 2011 under Bankruptcy Blog |
The quick answer is NO. But, it can keep you from being hired if it is a private sector job.
In prior blogs, we talked about the court structure. New Jersey is in the 3d Circuit. The 3d Circuit just came down with a ruling concerning whether a private employer violated the law by refusing to hire the debtor. The case originated in Pennsylvania. But the ruling applies to NJ.
Section 525 of the Bankruptcy Code covers this situation. When the Bankruptcy Code was amended in 1978, Section 525 only dealt with “governmental units”. It stated that a governmental unit may not deny employment to, terminate the employment of or discriminate with respect to employment of a person who is or has been a debtor.
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Posted by Kevin on January 4, 2011 under Bankruptcy Blog |
Yesterday, I gave you an overview of the court system. Today, I want to tell you how a case moves through the system.
Most Chapter 7 debtors never see the inside of a court room. That is because their cases are handled administratively by the Clerk and the Trustee. If that happens in your case, be thankful. It means that everything went all right and you got your discharge.
If a creditor challenges a claim or the trustee challenges your right to a discharge or an exemption, you may find yourself in the court system.
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Posted by Kevin on January 3, 2011 under Bankruptcy Blog |
In this blog, I write about the bankruptcy law. The “law” is contained in the statute, court rules and case law. In case law, the courts apply the statute and rules.
The Bankruptcy Court is part of the federal court system. Federal courts are established by the Constitution of the United States. The Supreme Court, the Circuit Courts of Appeal and the District Court are called Article III courts since they were set up under Article III of the Constitution. Bankruptcy Courts were based on Article I, however. In 1978, there was a major change in the bankruptcy statute. One of the major changes was to bring bankruptcy judges under Article III. This meant that they served for life under good behavior and their salaries could not be reduced. It also gave them the powers of a federal district judge in shaping orders. Bankruptcy jurisdiction was still with the District Court which was an Article III Court but was required to be exercised by the Bankruptcy Court.
The Supreme Court knocked that down. Bankruptcy Judges went back to being Article I judges with a 14 year term of office. The District Court had the choice of referring bankruptcy issues to the bankruptcy courts or keeping jurisdiction. All District Courts have opted to refer jurisdiction to the bankruptcy courts. On a constitutional and perhaps academic level, this is a big change, but to the average person who files, it is of little or no consequence. You still file your Petition with the Bankruptcy Court.
In New Jersey, there is one “district” for the entire state. California has numerous districts. Although there is one district, the court has offices and is in session in 3 locations: Newark, Trenton and Camden. For example, if you reside in Bergen, Passaic or Hudson counties, your case is assigned to Newark. If you reside in Monmouth, Ocean or Mercer, your case is assigned to Trenton. If you reside in Cape May or Camden, your case is assigned to Camden.
Posted by Kevin on December 14, 2010 under Bankruptcy Blog |
Sometimes, I get prospective clients who meet with me to discuss a bankruptcy filing. During the course of our conversation, they mention a debt to a friend or a property outside the United States that they do not want to list. Unless I can convince them not to do this, those “prospective clients” never become clients.
I point out that the Bankruptcy Code is set up to give honest creditors a fresh start. Focus on “honest”. That means that you honestly disclose all your assets and liabilities, and all your income and expenses. The debtor actually signs a declaration under the penalty of perjury that the information contained in the Petition is true and complete.
Usually this Civics class approach (do they call it “Civics” anymore?) works and the client flies right. But some still push. Well, if being a good citizen is not enough for you, think of the consequences. You can go to jail.
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Posted by Kevin on November 30, 2010 under Bankruptcy Blog |
Last week, the Wall Street Journal had an article about how second mortgage holders are putting the kabosh on short sales.
Hedge funds are buying out second mortgages for pennies on the dollar. The second mortgage is underwater. The homeowner can sell the property for less than the amount of the first mortgage. For example, the first mortgage is 300K. The second mortgage is 50K. The owner gets a contract for 275K. Owner contacts 1st mortgagee (lender) for short sale. 1st mortgagee agrees. Done deal? Not so fast.
In steps the second mortgagee. The second mortgage is a lien on the property. Unless that lien is taken care of, the new buyer cannot get title insurance and, therefore, cannot get a mortgage loan. Owner is SOL unless it can take care of the second mortgage.
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Posted by Kevin on November 23, 2010 under Bankruptcy Blog |
Last week, Judge WIzmur came down with a written opinion in Kemp v Countrywide. In that case, Countrywide filed a Proof of Claim which was challenged by the debtor on the grounds that Countrywide lacked standing.
What happened was that Countrywide securitized Kemp’s loan, Bank of New York (BONY) was the trustee and should have possession of the note. But, Countrywide never transferred physical possession to BONY. The Court found that BONY could not be a holder under the UCC because it did not have possession of the note. BAC, the new Countrywide entity, was not a holder since it was the servicer. As servicer, it could file the proof of claim as the agent of BONY. However, since BONY never had possession of the note, it was not the holder and, therefore, could not delegate the task of filing the proof of claim to the servicer.
More of the case details will be posted later this week on my blog at fightforeclosurenj.com.
Posted by Kevin on November 10, 2010 under Bankruptcy Blog |
There has been a lot of press in the last month about so-called “robo-signers” and false affidavits being submitted in both bankruptcy and foreclosure matters. What are the courts doing to combat this?
Many commentators talk in terms of the courts’ right to impose sanctions (usually translated into monetary fines and payment of the non-offending party’s legal fees) but the fact of the matter is that courts are reluctant to impose sanctions.
In the case of In Re Butler, which was a Chapter 13 case in New Jersey, a credit union filed for relief from the automatic stay claiming that the debtors had missed 18 monthly payments on its SUV. The debtors provided proof to the court, by bank statements and wire transfer authorizations, that all payments but one were made. The hearing was postponed. During the interim, the credit union withdrew its motion.
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Posted by Kevin on October 30, 2010 under Bankruptcy Blog |
You bought your house for $300,000 in 1997. By 2003, the value went up to $420,000. You refinanced at $380,000 with an adjustable rate mortgage The value of the house increased to $460,000 by 2005. You wanted to consolidate your credit card debt so you draw down $60,000 on a home equity line (HELOC) in 2006. Things are going all right but then your mortgage adjusts upward and you owe another $600 per month. The HELOC payment goes up too. Then, someone gets sick or loses a job, you miss a couple of mortgage payments. Before you know it, you are in financial trouble. You are thinking about bankruptcy.
If you do file bankruptcy, should it be under Chapter 7 or 13. A Chapter 7 will take care of credit cards and medical bills but can’t do much about the mortgages because they are what is called secured debt. A Chapter 13 can save your house but do you have to make payments on both mortgages? Maybe- Maybe not. Under certain circumstances a Chapter 13 debtor can eliminate that second mortgage.
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Posted by Kevin on October 24, 2010 under Bankruptcy Blog |
Say you bought a car and financed it. The lender will have a lien on the car. You lose your job and file a Chapter 7 bankruptcy. What happens to the car?
Under the new Code, a debtor can elect to do one of three things: surrender the car to the lender; redeem the car for fair market value usually in one payment; or reaffirm the entire debt and continue making payments.
Here is an interesting case involving a surrender of a car. It took place in Maine. That is in a different circuit from New Jersey but the ruling is instructive- that means that the bankruptcy courts in NJ will take heed.
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Posted by Kevin on October 11, 2010 under Bankruptcy Blog |
You are behind on your mortgage 6 months. Your monthly payment, including taxes and insurance, is $3,000 per month. Your lender has filed a foreclosure complaint. What to do? Can filing bankruptcy help? The answer, like most answers involving legal issues, is that it depends. First of all, the filing of any bankruptcy acts as an automatic stay on most efforts to collect a debt including foreclosure. So, if you are facing a sheriff’s sale, the automatic stay will halt that sale. But, for how long?
In a Chapter 7, the stay lasts until the Trustee abandons the property, a creditor obtains relief from the automatic stay from the court, or the earlier of the time that the case is closed or a discharge is granted or denied. A trustee will usually abandon property if he or she determines that there is no equity in the property. That means that the mortgage is greater than the value of the property. This will happen about the time of the first meeting of creditors which occurs about 4-6 weeks after the filing. The trustee sends out a notice of abandonment. If no one objects , then the abandonment is processed by the clerk and notice is sent out to creditors. The whole process takes about 8 weeks and the foreclosure marches on.
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Posted by Kevin on November 3, 2009 under Bankruptcy Blog |
One of the first questions that a client asks is, can I keep my stuff? In a Chapter 13, you always keep the stuff you want to keep. In a Chapter 7, you have to understand the rules concerning exempt property to answer that question.
In New Jersey, we use the federal exemptions in about 99% of the cases because you get to keep more of your stuff. Note that if a husband and wife file a joint petition, the debtors get double the exemption.
The basic exemptions are as follows:
- for your residence, $21,625 (or $43,250 for married, joint filers);
- $3,450 in value for one motor vehicle ($6900 for 2 vehicles for married, joint filers);
- $11,525 ($23,050 for married, joint filers) in household furnishings, goods, wearing apparel, appliances, and the like;
- $1450 ($2900 for married, joint filers) in jewelry;
- $1,150plus up to $10,825 of any unused exemption on your residence (double for married couple) which can be applied to any property. This is known as the wild card exemption.
- most retirement accounts are exempt.
Besides exemptions, there are other rules which apply to motor vehicles subject to a loan and real property subject to a mortgage. It is well advised that you consult with an experienced bankruptcy lawyer to answer the questions, “Can I keep my car?“, “Can I keep my house?”
Posted by Kevin on under Bankruptcy Blog |
For most debtors, their car is the second most important asset after their home (for males under 30, it may be #1). Even in a densely populated State like New Jersey, you need your car to get to work, do your food shopping, and to take care of emergencies. If you are thinking about filing bankruptcy, it is only natural to worry about whether you can keep your car.
Well, the answer is that in a Chapter 13, the debtor chooses whether she wants to keep her car. In a Chapter 7, the debtor can usually keep her car.
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