Bankruptcy Case Reviews

WSJ Reports- Bankruptcy Judge Sends a Message to Bank of America

Bank of America has been ordered to pay $10,000 per month for every month it continues to badger a couple to pay off a loan that was discharged in bankruptcy, in a ruling from a prominent judge who says he means to “send a message.” “This is not just a stupid mistake. This is a policy,” wrote Judge Robert Drain of the U.S. Bankruptcy Court in New York. “And frankly, $10,000.00 a month plus attorney’s fees may not mean much to Bank of America, but at least it will send a message that other attorneys may pick up on.” Judge Drain’s decision, memorialized in a written ruling issued Tuesday, documents a barrage of letters and phone calls attempting to collect the debt from Edwin and Michelle Ramos. Chapter 7 bankruptcy relieved them of the obligation to pay off their home loan while preserving the bank’s right to foreclose on its collateral. The calls and letters kept coming to the Ramoses, even after their attorney pointed out that their personal liability had been discharged in bankruptcy. The bank ignored him, he said, and, according to court records, failed to respond to Judge Drain until 10 days after he signed an order imposing sanctions on the lender. In a statement, Bank of America said it’s “resolving the issues with the court” and working with the homeowners “while we continue researching and investigating what transpired.” Judge Drain is not alone in his criticism of Bank of America. In March, U.S. Bankruptcy Court Judge Karen Jennemann in Orlando, Fla., fined the bank $220,000 for repeated violations of court orders involving a loan-modification arrangement. “The Debtors, even to this date, continue to receive statements from BOA claiming substantial additional payments due, erroneous payment amounts, inflated interest rates and incorrect loan type, and purporting to hold over $12,000 of the Debtors’ payments in ‘unapplied funds,’” Judge Jennemann wrote. When it came to the $227,000 home loan of Warren and Mary Houghland, the judge said it should be considered paid. The bank disputed the order, saying it was unfair, and earlier this year settled with the homeowners. Consumer bankruptcy attorneys say not much has improved in lender behavior in spite of promises that the alleged sins of the past won’t be repeated. Long after Bank of America signed on to a widely trumpeted $25 billion home lending industry consent decree requiring it to improve its treatment of borrowers, consumer attorney Thomas Cox of Maine says violations of specific requirements are “routine. I see them all the time.” Consumers with enough spare cash or savvy to hire a lawyer can prevail on lenders to make good on agreements to modify loans, Mr. Cox said. But they’re in the minority, he said. Most distressed consumers hoping for a loan modification are at the bank’s mercy. The consent decree advertised as the answer to industry practices that wrongly forced people out of their homes lacks an enforcement mechanism, Mr. Cox said. In the case of the discharged debt collection, the Ramoses had to not only hire a lawyer but also had to reopen their bankruptcy case. Last week, Bank of America agreed to stop the calls and letters except for informational notices that inform the Ramoses of what they have to do to hold onto their home. Chapter 7 bankruptcy absolved them of the obligation to pay the debt but preserved the bank’s lien on their property. “This is a national problem. It’s happening all over the place,” said New York attorney Michael Schwartz, who represented the Ramoses. “Why is BofA doing it? Because they can.” Article by Peg Brickley

This is only one of numerous violations and corrupt business seen lately by Bank of America… it’s time the bankruptcy attorneys start paying close attention to the FDPCA violations… it could be well worth the effort and beneficial to both counsel and client!

Would This Cause a Creditor to Object to a Chapter 13 Plan?

I worked on a case this past week with a California attorney, practicing in the Riverside Division of the Central District.  The client had a home that carried a mortgage of $402,500; however, the home was appraised at only $178,000.  This is a common occurrence in California.  Although the real estate market crash has affected every state in a large way, the state of California seems to have the largest gap.  And every time I prepare petitions in California, it amazes me at the staggering numbers I encounter.

Perhaps it is because I am originally from the Midwest.  I too lost a home to foreclosure.  My house was appraised in 2005 at $210,000; but by 2008, it was worth about $82,000.  So, I am accustomed to witnessing a 40-50 percent gap between the mortgage balance and the appraisal; but California has the highest that I have ever seen.  For example, when I was in Ventura, California; I worked on a case where $920,000 (almost $1 million dollars) was owed to three separate mortgage companies.  The home was appraised at only $250,000.  So in this case, by proposing a cram down, this attorney was able to save his debtor $670,000.  It is shocking to say the least!

Why was a cram down proposed?

For the case I worked on this past week, when the debtors income and expense information was entered into Schedule I and J of the bankruptcy petition, the Chapter 13 Plan calculator in the software told us the debtor did not have enough disposable income to pay the current mortgage payment of $2,500.  However, by reducing the mortgage payment to only $1,500; the debtor would be able to afford to stay in his home.  (The mortgage payment was reduced because the home was crammed down from $402,000 to $178,000.)

If this option would have been permitted in Ohio (where I lived back in 2008 after my hospitalization) I could have filed a Chapter 13 and possibly reduced the amount owed to my mortgage company from $210,000 to $82,000; thereby reducing my monthly payment.  Instead, I lost my home.  But in the state of California, cram downs are permitted and encouraged by the Chapter 13 Trustees office; especially in the Central District of California.  The California attorneys should be overjoyed about this because they have an advantage over most of all the other states, including Ohio.

In order to propose a cram down in the state of California, a separate Motion and Order must be prepared and submitted by the debtor(s) bankruptcy attorney.  More information on these Cram Down documents are available at:

http://www.chapter713training.com/bankruptcy_pleading_packages.html

What is the success rate with the proposal of cram downs?

I am a certified paralegal so I am unable to comment on the law.  However, I can tell you that the cases I have worked on in the state of California have all been successful when proposing a cram down.  This is not to say there have not been objections and amendments to the Chapter 13 Plan along the way; but in all cases I worked on, the attorneys were able to save their clients hundreds, if not thousands of dollars.

I suppose if an attorney lacked a strategy in order to argue in the best interest of his or her debtor, that attorney could be unsuccessful in getting a cram down approved, so let us review one typical example that could happen.

In the case I worked on this past week, the debtor had three motor vehicles, all of which had high monthly payments.  In fact the total motor vehicle payments were $1,100 per month.  Cases that I have worked on in the past have shown me that creditors often object to the fact that a single debtor does not need three motor vehicles.  So, for example, instead of allowing the debtor to keep his Harley Davidson and continue making payments of $675 per month, the mortgage company would prefer this money is paid to them since the debtor already owns a truck he is paying $450 per month for.  When the attorney is already asking the mortgage company to excuse $270,000 in a proposed cram down, it is often unfair to ask them to reduce the mortgage payment to allow $675 to be paid for a third vehicle that is not necessary for the debtors reorganization.

Situations like this happen in almost every bankruptcy case and bankruptcy court across America.  The outcome is not always the same in every state because creditors may or may not file a Proof of Claim or hire a law firm to represent them (among other numerous reasons.)  Besides, many mortgage companies are so overloaded with foreclosures and sale dates that cram downs are approved more often than not.  This is where the bankruptcy attorney needs to take the plunge and at least attempt to save their debtors some money.  The worst that can happen is that the Chapter 13 Plan is amended to comply with the Trustees final decision and request.

Summary

Although I am well known as a training instructor for bankruptcy law firms, I still enjoy preparing new bankruptcy petitions and interviewing clients.  Working inside law firms for the first 26 years of my career taught me a lot and provided me with a great deal of experience. I have to give credit to the excellent bankruptcy attorneys that trained me, as well as the attorneys I work with currently.

At the moment, I am looking to add three attorneys to my workload and I can assure you extremely professional, dependable and high quality paralegal services from someone who has been around the block several times.  My prices are only $350 to prepare a basic Chapter 7 and $450 for a Chapter 13.  If the case is more complicated or is a business bankruptcy filing, the price will be slightly higher.  My turnaround time is 72 hours unless rush service is requested. No payment is required until the bankruptcy petition is prepared to your satisfaction.  Electronic filing services are also included.

I hope you will consider my services the next time you need a Chapter 7 or 13 bankruptcy petition prepared.  In the meantime, be sure to download your free Client Intake Forms at: http://www.chapter713training.com/client_intake_forms.pdf

Have a wonderful week.  (Victoria Ring, Office: 719-375-1504)

 

Mid-Week Bankruptcy Case Review – Issue 7

Issue 07 – January 27, 2011

RE:  HOW AN ATTORNEY COULD HAVE SAVED $250 AND A GREAT DEAL OF TIME

In this issue I am going to discuss a problem with a Chapter 13 client that has happened twice during the past month. Perhaps this article will help so that the same thing does not happen to you.

An attorney (new to the Chapter 13 field) had his clients take the time to fill out the 30 page intake forms, another several hours gathering up all their documentation as well as $3,000 to pay the attorney for representation in a Chapter 13.  However, when we received the paperwork, we found the client only earned $2,000 per month; yet her mortgage payment was $2,700 per month.  It was impossible for this client to pay out more than she earned; which translates into the fact that this client had no money left over to fund a Chapter 13 Plan.

Before writing this article, I spoke with an experienced attorney about this topic.  She said that one possibility could have been to cram down the mortgage to the market value of $218,000, thereby causing a proposed mortgage payment of $800 instead of $2,700.

Unfortunately, the attorney told me that she has only proposed this type of drastic reduction once before and the mortgage company immediately filed an objection.  Since she believed it to be her fault for causing this problem she did not charge the clients any extra money for filing an answer to the objection.  The end result was that this attorney could only reduce the mortgage payment from $2,700 to $1,800; which was still too expensive for the client to pay.  She and her client were still back in the same boat they started out in with a great loss of time and money.

Another option may have been for the client to take in a roommate or family member to live with them and pay the mortgage payment.  However, these types of situations are very shaky because the rental income can be lost overnight and the client is left unable to fund the Chapter 13 Plan and the case is ultimately dismissed.  Again, the attorney and her client would be back in the same boat they started out in with an even greater loss of time and money.

How the Attorney Could Have Saved $250 and a Great Deal of Time

I spent a total of 2 hours working on this case and billed the attorney $250.  However, I developed a PreQualification Screening tool that attorneys can use free of charge and avoid these unnecessary charges altogether.  To try it out visit http://www.bankruptcyintakeonline.com

The PreQualification Screening form is NOT designed for importing into your bankruptcy software.  It is a free tool that can be customized to your law firm needs as well as personalized with your law firm information and even placed on your server.  Try it out now and find out how it will immediately save your law firm money and time. ________________________

Disclaimer: This article is written for training purposes only and should not be considered legal advice. The author is not an attorney and has never attended law school. The information in this article is written from the 30+ years of knowledge working as a paralegal in the legal industry and from experiences learned while working under the direction of licensed bankruptcy attorneys throughout the Unites States.

REFERENCE LINKS

PreQualification Screening Form http://www.bankruptcyintakeonline.com

Free Attorney Training Videos http://www.youtube.com/user/msvictoriaring Free Tools for Attorneys http://www.bankruptcylinks.info/about/free-stuff and http://www.bankruptcylinks.info/about/free-supplies

Enroll in the Chapter 7 or Chapter 13 Online School http://mybankruptcyschool.com/

Petition Preparation and Chapter 13 Plans http://www.myparalegalteam.com Bankruptcy Research Links http://www.bankruptcylinks.info/about/research Help When Preparing Petitions http://www.bankruptcylinks.info/about/prepare-petitions

Complete Bankruptcy Motion Package (over 300+ templates) http://www.bankruptcytrainingproducts.com/home/complete-bankruptcy-motion-package

Initial Intake Form Package http://www.bankruptcytrainingproducts.com/home/initial-intake

Nationwide Bankruptcy Attorney Help Line For assistance with petitions and marketing: 719-659-0743 (Victoria Ring)

 

Mid-Week Bankruptcy Case Review – Issue 6

Issue 06 – December 18, 2010 RE: THE IMPORTANCE OF A THOROUGH ASSET SEARCH

As an independent paralegal I am often approached by people who want to file bankruptcy but have no clue how to start the process. This is an opportunity for me to provide them with the names of two or three attorneys that I work with, which in turn provides me with an income for doing the paralegal work under the direction of the attorney.

After the clients have signed the retainer agreement and paid their fee, I begin by meeting the clients in a comfortable location (i.e., their home, the office in my home, a quiet area inside Panera Bread, etc.)  If the attorney has no prior experience in bankruptcy he or she will accompany me to this meeting. If not, I provide a written summary of our meeting for the client file.

It was during one of these meetings that I met two very nice people that I grew to like.  In fact, I took a special interest in helping them because the reasons they were filing bankruptcy was through no fault of their own.

Through the post-bankruptcy process I met with both clients two times and made them a part of the entire intake process.  (I live by the rule that an informed client is an easy client to work with.)  We also exchanged numerous phone calls and emails in addition to the meetings.  With all this communication you would think that I would have done a complete and thorough asset search, but I accepted the clients at their word. When they told me they had no additional real property I accepted this statement as fact.

When all the work had been done and we sat down to meet with the attorney to sign the bankruptcy petition, the client said:  Hey, does the land my wife was deeded by her dad matter?  The attorney and I stopped dead in our tracks and looked at each other in shock.  The attorney asked several questions which revealed a piece of property worth about $150,000.  Even when the property was divided by thirds, the clients portion was still a whopping $50,000.  This changed the entire petition and all the work I had done would need to be updated, which delayed the petition process.

The lesson here is that no matter how nice, kind, honest and sincere a person is, each person interprets their assets in various ways.  When I asked the clients why they did not tell me about the piece of land before, they said that the wife had not signed the deed so they didn’t think it was in her name.  (Notice how consumers with no legal experience interpret the law.)

Learn from my mistake (which I will never make again):  If you will take the extra second or two to see the world from the perspective of the client, you will save yourself a great deal of time and eliminate a great deal of drama in your law firm operations.  And never forget to do a thorough asset and liability search; the minimum being a PACER search and a search at your local County Recorders office (or tax records office) for additional real property and foreclosures that could be associated with the clients.

Perhaps the links below will help you to protect the clients, the law firm and the bankruptcy system as a whole. Do your part and do a good job, which ultimately saves you time, money and frustration.

Online Resources for Doing Background Checks

Also begin by doing a free search of court records at: http://www.pacer.gov/ The site below offers links to military records, court records, inmate searches, vital statistics (background checks cost a small fee) http://www.publicrecordcenter.com/ Use of the links on the following site is absolutely free, although some state or county agencies may charge fees for accessing public records. http://publicrecords.onlinesearches.com/ and http://www.blackbookonline.info/

It also would not hurt to always do a search in the Sex Offender Registry http://www.nationalsexoffenderregistry.net Paid Services (average price $2 to $60) Note: I suggest attorneys only utilize paid services for criminal and background checks if you discover assets and liabilities that could constitute fraud by the client(s.) https://www.intellicorpintouch.com/productsandservices/

________________________

Disclaimer: This article is written for training purposes only and should not be considered legal advice. The author is not an attorney and has never attended law school. The information in this article is written from the 30+ years of knowledge working as a paralegal in the legal industry and from personal experiences working under the direction of licensed bankruptcy attorneys.

REFERENCE LINKS

Free Attorney Training Videos http://www.youtube.com/user/msvictoriaring Free Bankruptcy Training Articles http://chapter7and13bankruptcyblog.com/

Free Tools for Attorneys http://www.bankruptcylinks.info/about/free-stuff and http://www.bankruptcylinks.info/about/free-supplies

Enroll in the Chapter 7 or Chapter 13 Online School http://mybankruptcyschool.com/ Bankruptcy Research Links http://www.bankruptcylinks.info/about/research Help When Preparing Petitions http://www.bankruptcylinks.info/about/prepare-petitions

Complete Bankruptcy Motion Package (over 300+ templates) http://www.bankruptcytrainingproducts.com/home/complete-bankruptcy-motion-package

Initial Intake Form Package http://www.bankruptcytrainingproducts.com/home/initial-intake

Bankruptcy Attorney Help Line Main Office: 719-659-0743 (Victoria Ring)

Mid Week Bankruptcy Case Review – Issue 6

Issue 06 – December 11, 2010

RE: THE TRIED AND TRUE METHOD OF BUILDING YOUR LAW PRACTICE

We had a couple who originally wanted to file a Chapter 13 so they could keep their home. However, they were unable to pass the Means Test.

Is this a problem? You bet it is.  Many attorneys who are practicing consumer bankruptcy today did not obtain proper training before starting their practice. Many of them opened up a Chapter 7 and 13 practice because they wanted to make extra money without realizing the consequences of that decision.

Besides, the majority of attorneys believed that preparing the bankruptcy petition was nothing more than filling out a set of forms.  I know this because there are many virtual bankruptcy assistants today who are working for attorneys and charging them $300 for preparing the petition based upon the assumption the forms are easy to prepare. They do this because the majority of them provide poor quality work and have little or no law firm experience.  Any experienced, reliable virtual bankruptcy assistant who provides paralegal level quality is going to charge double or triple that rate.

Unfortunately, if you combine an attorney with no prior bankruptcy training with a virtual bankruptcy assistant who provides poor quality work, you end up with a big mess.  So, I decided to write this article, based around a very important topic and help you to avoid this situation.

Using the Means Test as the Qualifier

The Means Test was developed to provide a way for the legal system to determine if a client is eligible to file a Chapter 7 or 13.  However, when the debtors qualify for a Chapter 7 on the Means Test but want to keep their home, attorneys will do a wide variety of manipulation to either lower expenses or raise the income, just to satisfy the debtor.

This  is FRAUD and the attorney and possible the virtual bankruptcy assistant can get in a lot of trouble. Here are some things that could happen if the debtors qualify for a Chapter 7 and the attorney places them in a Chapter 13 just to save their home:

1.  The Trustee and/or the creditors may object to the Chapter 13 Plan simply because the debtors are below the median on the Means Test. If this happens and the trustee demands the case be converted, the attorney and staff have wasted a lot of time and money. It would have been less costly to do the Chapter 7 in the first place that the debtors qualified for.

2.  The debtors will be unable to make the Plan payment and everyone loses; the court, the attorney and the debtor.

3.  Once Schedule I and J of the bankruptcy petition is filed, if adjustments are later made to the Chapter 13 in order to qualify the debtors for a Chapter 7, the attorney will need to provide the court with detailed reasons as to why and precisely how the income and expenses changed from the original that was filed.  If not, the attorney could be sanctioned for filing a fraudulent bankruptcy petition.

4.  The debtors will be locked into the Chapter 13 Plan for a period of 3 to 5 years.  This could mean that they will be unable to earn more money without paying it to the court. This also means that if their income should drop, they may be forced by the court to convert to a Chapter 7.  And upon conversion, the assets and liabilities the debtor was paying back in the Chapter 13 could cause devastating financial results. Back to our debtors

An attorney I worked for encountered the problem that many attorneys across America encounter. He had debtors who qualified as a Chapter 7 but they wanted to file a Chapter 13. I was hired to act as the paralegal and convince them why it was to their advantage to file a Chapter 7 and let their house go.  Unfortunately, these are skills that need to be trained and attorneys with no bankruptcy experience and $300 per petition virtual bankruptcy assistants will often never question or catch this error; which is causing catastrophes in the lives of debtors nationwide. In fact, it is becoming an epidemic that my heart is hurting to solve.

It took two meetings before the couple were finally convinced to surrender their home, walk away and start over fresh again.  But once they made the decision, they knew it was right for them.  In fact, they were so overjoyed and happy it made all our efforts worthwhile.  In fact, here is an email the debtors recently sent me:

Dear Victoria:

My husband and I cannot thank you enough for taking time to work with us. We have heard many horror stories of attorneys who never care about their clients. It is rare to find someone like you and the attorney to actually take time to sit down and talk with us.  You both answered all our questions and made it so easy to get in touch with you by email or phone. We cannot thank you enough.  Without you taking the time to care about us, we would have mistakingly filed a Chapter 13 and be in the same situation we are in today in 5 years. By filing a Chapter 7, which we really qualified for and could afford, we are able to walk away from the past and begin all over again. We should be back on our feet this time next year and we owe it all to the honesty and concern you and your attorney showed to me and my husband.  We have already recommended two new clients to the law firm. These are friends who were scammed by bankruptcy attorneys and left in bad shape. We know you can help them because you helped us.  May God bless you. Summary of This Article

The email above was published to help you understand that the old tried and true method of providing high quality customer service to your clients is still the method that will work to build your law firm. Besides, good customer service will never cost you anything. It will do nothing except help you and your law firm grow by leaps and bounds.

REFERENCE LINKS

Free Attorney Training Videos http://www.youtube.com/user/msvictoriaring Free Tools for Attorneys http://www.bankruptcylinks.info/about/free-stuff and http://www.bankruptcylinks.info/about/free-supplies Enroll in the Chapter 7 or Chapter 13 Online School http://mybankruptcyschool.com/ Bankruptcy Research Links http://www.bankruptcylinks.info/about/research

Help When Preparing Petitions http://www.bankruptcylinks.info/about/prepare-petitions

Complete Bankruptcy Motion Package (over 300+ templates) http://www.bankruptcytrainingproducts.com/home/complete-bankruptcy-motion-package Initial Intake Form Package http://www.bankruptcytrainingproducts.com/home/initial-intake

Bankruptcy Attorney Help Line Main Office: 719-659-0743

 

Mid-Week Bankruptcy Case Review – Issue 5

When Donny Debtor came into the office to review his bankruptcy petition before filing, we asked him if he had any other credit cards that were not listed on Schedule F. He said he had a JC Penny and Macy card but wanted to keep them in case of an emergency. This is a typical situation that is played out in law firms thousands of times per day. In fact, it happens so frequently that debts are often left out of petitions; thus creating major problems. Therefore, if you learn anything from this article, learn to always ask debtors these questions before filing the bankruptcy petition: Read the rest of this entry »

Mid-Week Bankruptcy Case Review – Issue 4

Issue 04 – November 15, 2010

RE: UNEXEMPT EQUITY IN A CHAPTER 7

When Mary Doe (fictitious name) filed her Chapter 7 bankruptcy petition, the attorney used the Kelly Blue Book TRADE IN value for her car on Schedule B; which was $5,200.  The attorney was not aware that the local Trustee used the PRIVATE PARTY value from the Edmunds website.  The Trustee claimed that by using Edmunds and the Private Party value, he determined the market value of the car to be $7,800 instead of $5,200 and objected to the granting of a discharge until the unexempt equity ($4,500) was paid or the items would be seized and sold by the court.

From the courts point of view, this scenario makes perfect sense. Mary is asking the court and her creditors to forgive her of over $200,000 in debt resulting from a foreclosure and medical bills.  In exchange, she only needs to pay the court $4,500 in unexempt equity.  But from a human point of view this news is devastating because Mary is penniless. After paying her basic living expenses, she has less than $5 in cash to live on.  How can she pay the court $4,500?

Some people may say that Mary should find a job and increase her income; but Mary lost the muscle control in her hips and legs from 18 years of uncontrollable diabetes. She now must use a cane to walk short distances and a wheelchair for longer distances. Therefore, Mary is severely limited in her ability to earn an income outside the home.

In addition, Mary’s car is her only mode of transportation and she has no living relatives or friends that live close enough to provide daily transportation to meet her basic needs. If Mary loses her car, she will be unable to get to the doctor and the grocery store, thereby causing her to eventually become an award of the state as she would be forced on welfare simply to survive.

POSSIBLE SOLUTION NO. 1

The Chapter 7 may be able to be dismissed due to the fact that Mary would be placed in a hardship (much worse than she would have been prior to filing bankruptcy) if the present bankruptcy were to continue.  However, in order to dismiss the case, it would require the filing of a pleading and a court hearing would need to be scheduled in order to render a Judge’s decision on the matter.  Mary may also need to hire an attorney to represent her at the hearing, which she clearly cannot afford.

Note: Debtors are normally prevented from dismissing a Chapter 7 case when unexempt equity is involved, which is different from how unexempt equity is treated in a Chapter 13 filing.

But there is a problem; once the Chapter 7 case would be dismissed, Mary would be back to Square One and still owe her creditors $200,000; therefore, they would begin collection procedures again.  Since Mary has already revealed her car as an asset in the bankruptcy filing, the creditors will know this asset exists and would naturally file a lien against it and take the car anyway.

POSSIBLE SOLUTION NO. 2

Working with the attorney we naturally came to the conclusion that Possible Solution No. 1 was not in the debtor’s best interest.  Eliminating this solution left us with the only possible choice and that was to come to an agreement with the Trustee on the amount of unexempt equity Mary needs to pay back.

To do this, the debtor had to agree as to the true market value of her car.  She visited three different automobile dealers: (1) dealers who sold new and used cars; (2) dealers who only sold used cars; and (3) Buy Here Pay Here car lots.  She obtained a written proposal from each which amounted to $6,400, $6,700 and $6,900 respectively.

The attorney called the Trustee and convinced him to allow the lower $6,400 estimate simply because Mary was penniless and unable to afford to replace her current vehicle.  In doing so, this left Mary with unexempt equity of $3,100.  Due to Mary’s financial condition, the Trustee also agreed to accept monthly payments in the amount of $258.34 so she could keep her car.

Problem:  Although this appears to be a better solution for Mary compared to Possible Solution No. 1, where is Mary going to get the extra $258.34 per month to pay the Trustee?  Besides, if Mary agrees to make these payments, the Trustee will want to know where this extra money was obtained and why it was not included as income on Schedule I when the petition was filed.

Important Lesson:  Many Trustee’s use this approach when a Chapter 7 is filed because they are able to determine if the debtor has lied about their true income. By placing a debtors assets on the line and threatening to take them away, debtors often come up with extra money and then the Trustee can dismiss the case because the debtors committed perjury by misrepresenting their income on Schedule I.

At this point is when a discussion with Mary was necessary in order to resolve the issue.  When I contacted Mary (on behalf of the attorney) she said that her ex-husband offered to make the necessary monthly payment so that she would not lose her only mode of transportation.  Once the Trustee accepted the newly proposed amount of unexempt equity. Mary’s cousin mailed a check for $258.34 to the Trustee every month and satisfied the court’s requirement.

What if …?

What would have happened if Mary told us she would pay the $258.34 to the Trustee each month to keep her car?  Before making a proposal to the Trustee we would need to know where she obtained this additional money and why it was not reported on Schedule I.

If Mary had recently received a raise in salary, we would need to amend Schedule I to report the new income and obtain pay check stubs (which would be used as Exhibits) to verify the increase in salary. If Mary said she rented a room in her home to get the extra money we would need a copy of the rental agreement.

But in Mary’s case, her ex-husband agreed to make the payments because he knew that Mary was penniless and would be on welfare if she lost her car.  In addition, the ex-husband knew he could not buy a reliable replacement vehicle for $3,100.  In this case, the ex-husband wrote a letter to the Trustee stating that he agreed to make the payments and the ex-husband made these payments directly from his personal checking account throughout the payment duration.

Are You An Overworked Bankruptcy Attorney?

We are accepting new attorney clients. Please give me a call at 719-465-2442 to discuss your bankruptcy case needs. I am normally in the office from 10:00 am to 8:00 pm Mountain Standard Time.

Talk to you next week ….

Victoria Ring Colorado Bankruptcy Training http://www.coloradobankruptcytraining.com

Homeowners = Losers and Lenders = Winners

Many bankruptcy attorneys that we prepare petitions for are normally apprehensive regarding cram downs and strips downs of mortgages. Although I have written many articles about these topics, one angle I have not covered before is the angle of NOT proposing cram downs or strip downs at all. This is great news for those bankruptcy attorney practicing in states where they encounter problems with the courts when they try to propose cram downs and strip downs to help their debtors. Read the rest of this entry »

Mid-Week Bankruptcy Case Review – Issue 3

Issue 03 – November 3, 2010

COMPLIANCE WITH SCHEDULE C EXEMPTIONS

One very confusing fact for attorneys new to bankruptcy is that the debtor(s) need to reside in the state they are filing bankruptcy in for a period of 730 days (2.3 years) in order to be entitled to use that particular state’s exemption allowances on Schedule C.  (Ref: 11 USC Section 522(b))

THE CASE OF JANE DOE

Debtor (who moved from Oregon) had been a resident of Montana for a period of 710 days prior to filing her Chapter 7 bankruptcy petition.  The attorney was under the assumption that as long as Jane resided in Montana for longer than 180 days (as indicated on the Voluntary Petition) that she was eligible to file in that state.

However, this assumption was only partially correct.  Even though the debtor was eligible to file in Montana due to the 180 day venue requirement; the debtor still had to reside in Montana a full 730 days in order to be eligible to be covered under Montana’s exemption allowance on Schedule C.  The debtor was short by only 20 days.

After the 341 Meeting, the Trustee objected to the use of the exemption allowances.  An answer was filed amending Schedule C so that the exemption allowances reflected the exemption allowances for Oregon instead of Montana.

WHAT WOULD HAVE HAPPENED IF?

As you know, exemption allowances are the protection of a debtor(s) assets listed on Schedule A and B.  In the case of Jane Doe, she surrendered her home and car and had nothing but $5,000 in personal property that no one would have wanted anyway.  However, since Jane Doe was desolate, if these assets were not protected by exemption allowances, the court may require her to pay $5,000 out of pocket to the state of Montana.  Unfortunately, this debtor would have been unable to do this financially, which means that her clothing and other assets could have been seized by the court, sold for any dollar amount and the money turned over to the creditors.

DOES YOUR LAW FIRM NEED PARALEGAL ASSISTANCE WITH CASES?

Call Victoria Ring at 719-465-2442 or Sonya Banks at 770-601-4730, or for more information, visit: http://www.virtualpetitions.com

Talk to you next week ….

Victoria Ring Colorado Bankruptcy Training http://www.coloradobankruptcytraining.com

Mid Week Bankruptcy Case Review – Issue 02

The case review this week is a clear indication of why attorneys need to pre-qualify their debtors before accepting them as clients. Not only do you need to protect yourself from accepting fraudulent cases but also from cases that cost you a great deal of time and money. This is necessary to build a strong law firm that is not only profitable but beneficial to the community it serves. Read the rest of this entry »