The Bankruptcy Lawyers Blog

Last week, the mortgage modification provision passed the U.S. House of Representatives--but it may not come to a Senate vote.  The banking industry is making its voice heard loud and clear (courtesy of the same folks who brought us BAPCPA), and it's critical that those of us who come in contact every day with the people who so desperately need this relief let our Senators know that we support S. 61 and want it brought to a vote and passed.

Contact information for your Senator is available here: http://www.senate.gov/general/contact_information/senators_cfm.cfm

Similar bills have failed before--this one needs your support now.  Take a moment and make the call.  Ask your friends, family, staff and clients to do the same.  Post this information on your firm's blog or website.  Create options for the millions of people facing foreclosure--people who currently sit across the desk from you every day and learn that you can't provide the help they need most.

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H.R. 1106, which would authorize judicial modification of mortgage loans, may go to a vote in the House of Representatives as early as tomorrow.  The future of the bill is uncertain, with solid Republican opposition and a full-court press from banking industry lobbyists.  While the Mortgage Bankers Association and others in the credit industry claim that the provision would ultimately mean more expensive mortgages, Senator Dick Durbin, who sponsored the companion bill in the U.S. Senate, estimates that about 1/3 of homeowners facing foreclosure in the next two years could be helped directly by this bill.  Credit Suisse offers a more conservative but still substantial estimate of 20%.  Given the projected 8 million + foreclosures in the coming years, that's a lot of homeowners.  Just as importantly, it has the potential to slow the foreclosure spiral and help the housing market stabilize.

Obviously, the provision would put a powerful tool in our arsenals as consumer bankruptcy attorneys and allow us to help a sector of our clientele whose options have been sorely limited up to this point.  Another important point is the key contrast between this and most other foreclosure-prevention plans:  no taxpayer dollars are required to put this plan in motion.  Careless lenders and underwriters will bear their share of the burden.

Versions of this bill have failed before, and this may be the "now or never" moment for the modification provisions.

NACBA has assembled this contact information to make it easy to weigh in on the bill:

 

Here's what you can do TODAY:

1. Phone 1-877-354-4958 between 9am and 6pm Eastern time only. You will be given specific suggestions for the substance of your phone conversation and prompted to enter your zip code.

Depending on your Congressional district, your call will be routed to the office of your Senator, your House Rep, or the White House.

2. Get word out to your clients, staff, family, friends, and colleagues who might also be interested in speaking in support of H.R. 1106.  Please email your contacts today to ask them to phone in on our toll-free 877 number.

Tell them why their call in to their legislator is so important. We want word of this effort to spread.

3. If you blog, you may want to consider writing about HR 1106 and encourage readers to phone in support of H.R. 1106 using the toll-free line.

Thank you in advance for helping us to make this 11th-hour push for passage of H.R. 1106.

TOLL FREE LINE: 877.354.4958

 

There is also a contact form available on the NACBA website at http://www.congressweb.com/cweb4/index.cfm?orgcode=nacba&hotissue=1

 

Please take a moment to make contact today.  The vote could take place as early as tomorrow.

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After carefully working with your client to complete his or her bankruptcy filing, you breathe a sigh of relief. Nice to have another petition filed and off your desk - until you receive notice that your client forgot to give you the name of a creditor to include in the bankruptcy case. Now what?

11 U.S.C Section 523(a) (3) states that a debt not listed in a debtor's schedule is not discharged if the creditor has a claim for the following:

• fraud
• theft
• willful or malicious act against the person filing bankruptcy
• the creditor would have could have received funds from the bankruptcy estate

Assuming that you have none of the above issues with your client, one thing you can do to curb the problem of a forgotten creditor is to have your client pull a recent credit report prior to filing his or her bankruptcy petition. If your client is filing a joint petition with his or her spouse, both parties should give you copies of their most recent individual credit reports.

However, if a creditor is missing, you must file an amendment to add the creditor to your schedules with the U.S. Bankruptcy Court. You can obtain the form from the clerk's office within your jurisdiction. Keep in mind that there is usually a fee associated with the amendment.

To curtail the dilemma of dealing with a forgotten creditor during or after a bankruptcy filing, just remember that there are certain steps you can take to make sure your client has a complete list of all debts owed. Due diligence in this area will mean less stress for you and your client.

 

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During tax season, it is especially important that you review with your client the pros and cons of filing bankruptcy prior to the client receiving his or her tax refund. You should inform your client that if he or she submits a petition to the court prior to getting a tax refund, it could be considered as property of the bankruptcy estate. Also, keep in mind that if your client's refund is not covered by state exemption laws, the refund will become a part of the bankruptcy estate.

As a starting point, find out if your client has filed his or her income tax return and whether or not a refund is expected. Based on this information, you can better advise your client concerning the feasibility of saving all or part of the refund from the bankruptcy estate. Careful planning on your part, may assist your client in preserving much needed funds in tough economic times.

 

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As you are in the process of completing bankruptcy petitions for your clients, keep in mind that you can use electronic filing. Also make note that most, but not all, bankruptcy appeals courts now offer electronic filing.

To gain access to electronic case filing on the appellate level, you must register with PACER (Public Access to Court Electronic Records). If you already have a PACER account, you will then need to create a separate Appellate PACER account and indicate the circuit(s) you are requesting.

For more information, contact the PACER Service Center.

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It's a hollow victory to be told that you were right after the damage is done, so we can take small pleasure in the fact that the New York Federal Reserve has taken note that the 2005 bankruptcy reform might have harmed the economy.  In fact, three researchers at the New York Fed are calling the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act "seismic".

As bankruptcy attorneys across the country pointed out in the days (and years) leading up to the passage of BAPCPA, making it more difficult to file for bankruptcy didn't make resources magically appear in the hands of cash-strapped debtors who might otherwise have been filing for Chapter 7 bankruptcy.  Some people would be prevented from discharging debts, but that didn't mean they'd have the means to pay them.

The credit industry, long on optimism and low on reason, clung to the idea that consumer debtors could be forced to pay their credit card bills and other unsecured debts, even if they didn't have enough money to do so.

Turns out they were right, according to these researchers.  According to the report, debtors who could otherwise have filed for Chapter 7 bankruptcy, discharged unsecured debts and put their limited resources into saving their homes were instead forced into Chapter 13 bankruptcy, where funds that might otherwise have paid mortgages were diverted to unsecured debt.  Before BAPCPA, relative mortgage performance improved as the number of bankruptcy filings increased, but that trend has reversed. 

The study appears to leave some open questions, and many bankruptcy experts--even those who were firmly opposed to BAPCPA--appear skeptical about the extent of the impact.  Read the full report from the New York Federal Reserve here: Seismic Effects of the Bankruptcy Reform

 

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DePaul Law School, in conjunction with the Commercial Law League of America, will hold its Annual Symposium on Thursday, April 16th, 2009 at the Westin Michigan Avenue Hotel in Chicago, Illinois.

The theme for the symposium will be Into the Sunset: Bankruptcy as Scriptwriter of the Dénouement of Financial Distress.

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If you receive notification from a creditor stating that a purchase money security interest (PMSI) is attached to property currently in your client's possession, there are a few things to remember before you decide to dance to the music of the creditor.

Initially, make sure that the creditor provides the appropriate documentation to prove that a PMSI is attached to the described property. If you fail to provide a due diligence approach for your client, you may end up with a situation where your client turns over property to a creditor that he or she could have kept because it was unsecured. Also, without the PMSI documentation, your client possibly could pay for property that is dischargeable in the bankruptcy proceeding.

So, make sure you do your homework when a creditor claims a PMSI. By providing a thorough investigation into the matter, you will assist your client in rooting out any unsubstantiated PMSI claims

 

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As you are preparing bankruptcy petitions for your clients, it may be a good idea to inform each client that he or she must give you a complete list of all creditors. This list should include creditors which are currently being paid as well as those which are not being paid. Make sure your clients also list debts which are currently in dispute and those debts which they think might be owed.

Basically, you should communicate to your clients that picking and choosing which creditors to list is not a viable option. All creditors must be listed in the bankruptcy and client discretion on the issue is not a choice.

 

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