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Another Debtor Ripped Off by a Foreclosure Relief Scam (Part One)

By Jonathan on September 9, 2009

This afternoon (September 9), I had a chance to observe a very interesting case heard by one of the judges in the Northern District of Georgia. The issue at hand was a motion filed by a mortgage creditor to “validate” a foreclosure that had been cried out on the courthouse steps back in July.

The mortgage creditor went first and presented her client’s case: the debtor had filed a bankruptcy on the morning of July 7, 2009 minutes before the lender sold the debtor’s house on the courthouse steps. The lender was not aware of the filing and proceeded to foreclose. When the lender’s attorney returned from the courthouse, he discovered that a bankruptcy had been filed, so he did not record the deed.

Instead, the lender retained bankruptcy counsel who filed a motion have the bankruptcy annulled and the foreclosure validated. If validated title would pass and the lender would now be the title owner of the property. In such a situation the debtor’s bankruptcy would offer no protection and the debtor would be subject to eviction.

The mortgage company’s attorney noted that this was the fifth bankruptcy filed by the debtor and his wife, and the third case filed this year to stop a foreclosure. In none of the cases filed this year did the debtor or his wife make any payments to the trustee or pay anything to the mortgage company. In none of these cases did the debtor or his wife file any of the required bankruptcy paperwork.

Clearly the debtor and his wife were acting in bad faith, argued the mortgage company’s lawyer, and they should not be allowed to misuse the bankruptcy process.

What would the debtors have to say? [Read more…] about Another Debtor Ripped Off by a Foreclosure Relief Scam (Part One)

What Happens if my Chapter 13 Case is Dismissed?

By Jonathan on August 27, 2009

Earlier this week, I wrote a post entitled Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss. In that post I spoke about the relatively common scenario whereby a Chapter 13 debtor will fall behind on payments to the trustee or an unexpected claim will cause the plan to run longer than 60 months. In such a case, the trustee will file a motion to dismiss and the debtor and counsel will have an opportunity to propose a cure to the delinquency. Usually this cure takes the form of a lump sum payment immediately with the remaining delinquency paid to the trustee over time.

What happens if the proposed cure is not feasible for the debtor? In such a case, the judge would sustain the trustee’s motion to dismiss or the debtor would not oppose the motion. Either way, the debtor’s Chapter 13 case will be dismissed.

When a Chapter 13 case is dismissed, creditors can immediately pursue all non-bankruptcy alternatives. If there is a home and mortgage delinquency involved, the mortgage lender can start foreclosure proceedings. If there is a car payment involved, the car lender can immediately start the repossession process. Credit card lenders can restart collection efforts including calls and letters. [Read more…] about What Happens if my Chapter 13 Case is Dismissed?

Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss

By Jonathan on August 25, 2009

As you may know, Chapter 13 cases function as payment plans whereby you send your Chapter 13 trustee a monthly payment and the trustee disburses those funds to creditors. Since Chapter 13 cases usually last five years it is not surprising that sometimes a debtor may fall behind on payments, even if the payments are made through an automatic payroll deduction.

A certain percentage of my Chapter 13 clients will fall behind because of illness, job loss, family emergencies, or an employer’s failure to send in withheld funds. Sometimes employers stop withholding funds for no particular reason.

Whatever the cause if you fall behind on your payment schedule to the Chapter 13 trustee, you will eventually face a trustee “Motion to Dismiss.” In the Northern District of Georgia, each of our three trustees use a computer system that periodically produces reports identifying cases that have gone delinquent and the system thereafter spits out a form motion to dismiss.

A motion to dismiss may also arise if claims (usually tax claims) come in higher than expected, thereby causing the plan to run more than 60 months.

What should you do if you receive a Motion to Dismiss in your case? [Read more…] about Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss

An Unexpected Inheritance While in Chapter 7

By Jonathan on July 11, 2009

This past week, I received a call from one of my Chapter 7 clients. Earlier this week, he had received a call from his brother advising him that he was a beneficiary of the estate of a great aunt who had passed away earlier this year. According to my client, his interest in this estate was in the form of a 1/9 share of two parcels of property. The other 8 shareholders were cousins, some of whom he barely knows. My client estimates that the value of the property is between $400,000 and $500,000, meaning that 1/9 of this bequest is worth $50,000 at most.

What happens now and what can this case teach us?

The Bankruptcy Code provides that an inheritance becomes part of a debtor’s Chapter 7 estate if the decedant (i.e. the great aunt) died before the case was filed or within180 days after the filing. It does not matter if the estate was not probated or funds distributed – the relevant date is the date of death of the person leaving the property, which triggers the claim of the debtor.

In my client’s case, his great-aunt died earlier this year, before he filed his Chapter 7 case.

Because the inheritance is property of the estate, I will need to amend the petition to reveal this asset. Since my client did not use up his “wildcard” exemption, I can exempt about $5,000 of the inheritance. This means that when the estate is settled, my client will get a check for $5,000.

Because this inheritance is part of the estate, the Chapter 7 trustee steps into my client’ s shoes for purposes of liquidating the estate’s interest. What will most likely happen – the trustee will contact the executor and the other beneficiaries and ask them to buy out the estate’s interest, possibly at a discount since the asset is not liquid. I would not be surprised to see the trustee settle the estate’s claim for $30,000 or possibly even less. [Read more…] about An Unexpected Inheritance While in Chapter 7

Can I Leave Selected Debts Out of my Bankruptcy Filing?

By Jonathan on June 30, 2009

I get this question at least once a week – “I need to file bankruptcy but I don’t want to include my [mortgage] [car loan] [debt to my brother] [credit card co-signed by my company] [medical debt]. Let’s leave this debt off my petition.

Sorry – can’t do it. As North Carolina bankruptcy lawyer Adrian Lapas writes in his recent post in the Bankruptcy Law Network blog:

When you sign your bankruptcy petition, you are certifying to the United States Bankruptcy Court, under penalty of perjury, that the petition and schedules attached to it lists all of your assets and all of your debts. All means all! You do not get to pick and choose which debts you list in your bankruptcy case.

Not only must you include all of your creditors but you may also have to include other “interested parties.” In the Northern District of Georgia, for example, the Chapter 13 trustee requires all debtors who are subject to child support orders to include the custodial parent as a priority creditor in their Chapter 13 petitions. [Read more…] about Can I Leave Selected Debts Out of my Bankruptcy Filing?

9th Circuit Court of Appeals Permits Discharge of Student Loans in Chapter 13 Plans

By Jonathan on June 26, 2009

My Bankruptcy Law Network colleague Michael Doan reports that the 9th Circuit Court of Appeals has ruled that the Bankruptcy Code permits debtors to discharge student loan debt in Chapter 13. A San Diego based federal judge relied on the 9th Circuit case to hold that the student loan was dischargeable if the student loan creditor did not object after receiving notice that the plan provided for less than 100% payment to the student loan creditor. The holding of this case – Needelman vs. PHEAA – is available as a download from Michael’s post.

The gist of the judge’s ruling in Needelman is that the Order of Confirmation of the Chapter 13 plan controls treatment of creditors. The judge recognized that the Bankruptcy Code specifically provides that (federally backed) student loans are not subject to discharge absent an adversary proceeding filed by the debtor, but he concluded that the confirmation order that fixed the percentage of payment to unsecured creditor controls the rights of that creditor.

What does this mean to a debtor filing bankruptcy in the Northern District of Georgia? [Read more…] about 9th Circuit Court of Appeals Permits Discharge of Student Loans in Chapter 13 Plans