Bankruptcy Case Reviews

Mid-Week Bankruptcy Case Review – Issue 01

Issue 01 – October 20, 2010

This is the first issue of a new publication I plan to publish each week.  The information in this publication is made possible by the Chapter 7 and 13 bankruptcy petition reviews we do for attorneys nationwide.  We felt by sharing this information with other attorneys and law firms, it will help them to pick up specific tips and techniques to help them in their practice.  I hope you enjoy the case review this week that follows.


Some attorneys make the mistake of assuming that all mortgages are eligible for cram and strip downs.  First, we need to establish the fact that cram and strip downs have not been written into law and it is up to each bankruptcy court as to whether they accept them or not.

But let us suppose that cram and strip downs are permissible in your bankruptcy court.  The next step is to qualify the debtors.  Qualifying the debtors for a cram and strip down on their mortgage could take in a wide range of possible scenarios depending on the situation the debtors are in.  This week we encountered a situation where the debtors were unable to qualify for a cram and strip down so I wanted to share it with you.


The debtors (let us call them Bob and Sue) had their home appraised for $275,000.  They owed $200,000 on the first mortgage and $150,000 on the second.  The attorney asked us to prepare a Chapter 13 and propose a cram and strip down for the primary residence.

Now although we are paralegals and the final decision is always given to the attorney, we do warn attorneys when possible objections could occur based upon our many years of experience.  The main reason the cram and strip may not work for Bob and Sue is because they have $275,000 of SECURE property.  If the bankruptcy court seized the home and sold it for $275,000, they could completely pay off the first mortgage company and still have $75,000 left over.  This also means that since $75,000 is left over, the second mortgage company would be able to claim that as SECURE also.  The only amount of the mortgage debt that is underwater and UNSECURED is $75,000 of the second mortgage.

We suggested to the attorney to propose paying $275,000 as secure and $75,000 as unsecured, non-priority inside the Chapter 13 Plan.  This still saved Bob and Sue a great deal of money but it was not the $200,000 they had originally anticipated.  (Note: I am still amazed at how people work to push the bankruptcy system in their favor. Many people today appear to not understand what is meant to act in a fair and moral manner; but this is just my personal opinion.)


Pre-Qualifying Debtors for a Mortgage Cram Down

How Banks are Viewing Cram Downs Proposed in Bankruptcy

Mortgage Cram and Strip Down Questions and Answers

Recommended Book on Foreclosures from The National Consumer Law Center


You can save a great deal of money and ensure you have a well-detailed Chapter 7 or 13 bankruptcy petition before filing.  Here is how it works:  You prepare the petition with as much detail as possible. But before filing the petition, email it to us (PDF or Best Case format) and we provide you with a complete petition review.  This review is provided on the telephone and if a visual is needed for training purposes we will provide that at no additional charge. The costs are only $200 for a Chapter 7 and $275 for a Chapter 13.  To schedule your bankruptcy petition review call Victoria Ring at 719-659-0743.

Talk to you next week ….

Victoria Ring My Bankruptcy School

How Bank of America is Contributing to (and Profiting from) the Decline of the Mortgage Industry

— by Victoria Ring and Sonya Banks

Sonya Banks and I were involved in another bankruptcy case this week where Bank of America has committed fraud and got away with it.  We are finding these types of cases more frequently, and if a little tiny business like ours is witnessing these issues, it must be going on thousands of times every day across the country.

Let me explain this area of fraud, which also involves a very important lesson in bankruptcy.

A debtor and his wife (for sake of example we will call them Phil and Jill) filed a Chapter 7 bankruptcy two years ago and surrendered their home.  When the bankruptcy was discharged, Phil and Jill began looking for a rental to move into.  Before moving out of their home they received a call from their lender, Countrywide (later purchased by Bank of America) who offered them a debt work out so they could continue paying the mortgage.

But little did Phil and Jill know that unless they signed a Reaffirmation Agreement, the lender could foreclose at any time.  The phone call from Countrywide proposing a debt work out was nothing more than Countrywide buying time and profiting from Phil and Jill.  (Note: Of course, Countrywide or Bank of America has no record of these conversations.)

Phil and Jill continued to make the monthly payments as they agreed to with Countrywide/Bank of America.  Two years went by; Jill receives an Intent to Accelerate Sale by registered mail informing her that the house will be sold in thirty days.  Jill immediately calls the bank who has no record of the debt work out call from two years ago.  Although they do have records of her payments to them, they still claim they have the legal right to foreclose whenever they want because she never paid their LATE FEE from two years ago.

Phil and Jill contact a bankruptcy attorney and the attorney hired Sonya Banks and I to research the issue and see what could be done to help them.  What we found was shocking.


The following information is provided by Attorney Ginsberg, who writes in his response to the debtor:

In most cases, when you take out a mortgage loan, you are signing two different types of agreements.  The first type is a promissory note whereby you personally agree to make the payments.  The second type of obligation creates a property lien, meaning that you, as the owner of the property, pledges that property as collateral for the loan.

When you file a Chapter 7 and receive your discharge, your personal obligations are extinguished.  However, a Chapter 7 discharge does not eliminate the mortgage company’s lien against your property.  If you reaffirm your mortgage, you are actually reaffirming the promissory note and your personal obligations to pay.


As a bankruptcy attorney it is important to advise your clients of this issue when they are filing bankruptcy.  If the debtors are going to keep their home, advise them NOT to accept deals made over the phone with lenders.  Instead, have them sign a Reaffirmation Agreement to protect the lender from coming back years later and suddenly taking their home like they did to Phil and Jill.

You may want to prepare a handout that is provided to all clients who retain your legal representation that provides them with this important information.  Also, you may want to inform the debtors that they need to check to see if any LATE FEES have been accessed by the lender during the bankruptcy process; as this is what caused the foreclosure for Phil and Jill.


You may be wondering, like Sonya and I were, HOW could a mortgage company do this? What grounds could they have to do this to homeowners who had paid their mortgage payment on time every month and were never aware of any pending LATE FEE from two years ago?  We discovered that when Phil and Jill filed their Chapter 7 bankruptcy petition they were one month behind in payments.  But they caught up the back payment before their 341 Meeting and thought everything was okay.  However, the lender added a LATE FEE for the missed payment and never told Phil and Jill about it.  (How convenient.)

When we discovered this information, we called the attorney, who in turn had Jill call Bank of America about the issue.  Bank of America told her that every monthly payment they made for the past two years was going to interest and penalties and now they owe over $6,000 in late fees.  According to their records, the $1,800 mortgage payment was all going to fees and interest.  It is so amazing how greedy and deceitful banks look at this situation and actually get away with fraud.

Example: I loan you $100.  You said you would pay me $50 for 2 months on the 30th of the month.  At 12:01am on the 30th, I add on a late fee of $25.  I do not tell you. When you pay me $50 this month, $25 goes to the late fee and $25 goes to principle.  But you are now in arrears of $25 on your regular monthly payment so I get to add on another $25 late fee.  Now, when you send in $50 next month, you are no longer making a monthly payment.  Instead, you are simply paying me late fees and penalties.  This is exactly what Countrywide and Bank of America did to Phil and Jill and conveniently never told them until they decided to take their home and sell it on the courthouse steps.


This type of fraudulent activity is going on all across America which is why I titled this article: How Banks Are Contributing to (and Still Profiting) from the Decline of the Mortgage Industry.

For what it is worth, I am outraged over the fact that lenders can get away with doing this to homeowners.  In fact, it just so happened that Phil and Jill had paid on their home for 18 years.  They had raised their children in the home and they were emotionally attached to it.  But does a lender care?  Of course not.  They wanted to treat Phil and Jill like renters for the past two years until they got ready to make some quick cash.  Then they turned over and foreclosed with no notice whatsoever because of a one month late fee that accelerated to $6,000.   This is insane!!

I suppose that Phil and Jill could have hired an attorney to help them fight the fact that they were never notified of a one month late fee that was imposed when they filed bankruptcy.  But does Phil and Jill have the money to afford an attorney right now?  Of course not.  They were faced with less than 30 days to move because Georgia is a non-judicial foreclosure state.  Phil and Jill had no choice but to temporarily move into a hotel which removed their son from his school district.  Their lives are essentially a mess right now; all caused by the greed of Bank of America.

And Bank of America gets many more perks and benefits than poor Phil and Jill will ever get:  (1) They have received thousands of dollars in interest fees for the past 18 years from Phil and Jill so they already made their money on the house; and (2) They can foreclose on the property, sell it for any amount and any remaining balance will get reimbursed by their insurance; plus (3) Bank of America was one of those banks that received bail outs from the taxpayers, promised to help the country get back on its feet by granting small business loans, yet had to be forced by the government to comply, which they never fully did.  (Hint: If they tell one lie, they will tell a million more.)

I was raised to treat people the same way I wanted to be treated.  When I went to school, we called this the Golden Rule.  But for some reason, people who are running banks like Bank of America (and many other thieving, malicious and greedy banks across America) enjoy hurting people and throwing homeowners out of their home.   The entire country is in too great of a financial crisis to do this to homeowners; especially those who have demonstrated honest, loyal and faithful payment histories.  These actions will only lead to larger financial problems for the country and therefore is not a win/win situation; just a one sided greedy one for these types of banks.


For those of you who can remember back twenty years ago; banks did not do these kinds of things to homeowners.  Banks had a respect for homeowners because they were the backbone of their business.  But when banks did not get their way with imposing the Means Test and forcing more people to file a Chapter 13 back in 2005, they found other legitimate (but fraudulent methods) of getting more money.  At this point in time, I believe the only banks you can trust are the banks who did NOT receive benefits from the government bailout money.   (Although a bankruptcy judge told me a few months ago that he strictly deals with cash because he said this is the only way to control your money. Unfortunately, this is often hard to do in the digital society we live in.)

Therefore, you may want to consider finding a local credit union or neighborhood bank and transfer your business there.  You could begin by opening up a free checking and slowly transitioning your business to the new bank.  This is what I did.  I had a Wells Fargo account for my company and found a local neighborhood bank to do business with.  It took about two months, but I now have everything transferred over to the neighborhood bank account and there has been no disruption in my business or personal banking.  To find neighborhood banks in your area, look in your printed or online Yellow Pages.  To find a credit union in your area, visit:


Case Review: The Problems That Can Occur When a Debtor Surrenders Assets in Chapter 13 Plan

Disclaimer: The information in this article is for training purposes only.  This article is written by Victoria Ring, a certified paralegal and bankruptcy specialist, who is not an attorney.

Normally when I work with attorneys on Chapter 7 and Chapter 13 bankruptcy petitions, debtors want to keep everything they own even if they are unable to afford the payment.  However, today, I encountered just the opposite.

A little over two months ago I prepared a Chapter 13 bankruptcy petition for an attorney I work with in the District of Colorado.  The debtor had three older motor vehicles and was 11 months behind on their mortgage.  We were able to propose a cram down to save the debtor about $85,000 on their mortgage as well as cram down on the motor vehicles, thus saving the debtor another $28,000.

The petition was finalized and everything was ready to be filed when the debtor called the attorney to say he was going to surrender two of the motor vehicles.  Because this was only the second petition my attorney had worked on, he naturally thought this would be a good thing for the debtor to do and did not see how it would affect the debtor in a bad way.  Therefore, he approved the transaction and emailed me to so I could update the bankruptcy petition.


It is always helpful to understand why debtors do certain things because it will equip you to handle similar situations in the future.  Therefore, you may be wondering why a debtor would want to give up assets (such as the motor vehicles) when they are filing Chapter 13.  Through my many years of experience, I have often found that the core of the problem is normally derived from bad bankruptcy advice from non-attorneys.

When a person files bankruptcy, they will discuss their personal business with family, friends and neighbors BEFORE they will pick up the phone and ask their attorney for legal advice that they paid for.  And as you know, people who are not attorneys love to give legal advice.  It makes them feel important and knowledgeable.  However, you will find that family, friends and neighbors almost always tell horror stories about assets being taken in the middle of the night and people having to live on the street because they lost their home.  These stories often scare debtors and they will lose sight of what is logical and what is not.

Therefore, attorneys and their law staff need to be aware that this is a common problem when dealing with debtors and make it a point to educate their debtors and answer questions for them as it relates to their case.  A more informed debtor will make life much easier on the attorney and their law firm.

TIP: As a new bankruptcy attorney, you may not have all the answers.  That is why you may want to have your debtors watch some of the videos produced by the Federal Bankruptcy Court, which are excellent in answering many of the questions debtors have about bankruptcy.  The link to these videos is at:

Another good piece of advice to always keep in mind is that people only make changes when they believe the change is going to benefit them.  Therefore, someone has told this particular debtor that it would save them money if they gave up their motor vehicles.  But like all bad advice, this is not always the case.


In the bankruptcy case concerning the Chapter 13 debtor I worked with, the debtor actually caused harm to himself by giving up the motor vehicles.  Here is the breakdown to understand why:

Car No. 1 – Market Value = $6,125.00 Lien Amount: $10,640.00 Cram Down saved debtor: $4,515 Benefit in Chapter 13: Monthly payment would have only been $102.00 because the debt would have been paid prorata over the life of the Plan.

Car No. 2 – Market Value = $5,065.00 Lien Amount: $11,687.00 Cram Down saved debtor: $6,622.00 Benefit in Chapter 13: Monthly payment would have only been $85.00 because the debt would have been paid prorata over the life of the Plan.

THE PROBLEMS THAT DEVELOPED FOR THE DEBTOR As you can see from the data above, filing a Chapter 13 would have benefitted the debtor in several ways in regard to his motor vehicles.  However, by surrendering them, the debtor loses all benefit from the use of the vehicles as well as the financial savings from the cram down.

Secondly, the debtor also could have qualified under 722Redemption.Com to upgrade the vehicles and improve his situation.

Thirdly, the debtor lost the monthly IRS expense allowance which was $950.00 for three motor vehicles but only $260 for one.  This alone increased the Chapter 13 Plan payment by an additional $690 per month.


When the debtor gave up the two motor vehicles, naturally he no longer made a payment to the lienholder.  This gave the debtor an extra $550.00 per month which was applied to the UNSECURE creditors.  Instead of the debtor being in a 15 percent Chapter 13 Plan, they were now in a 30 percent Chapter 13 Plan; which means that the debtor is paying MORE money to the unsecured creditors but gave up a secure asset in the process.

Also, notice that if the debtor would have kept the vehicles, the debts could have been paid PRORATA over the 60 month life of the Chapter 13 Plan.  This reduced the payments from $550 per month to only $187.00.  Again, the debtor lost again by surrendering the motor vehicles.


Regardless if you are a new attorney or a seasoned attorney, you should never provide a client with a definite yes or no answer until you have had the opportunity to examine the issue from all angles.  I was at a legal seminar one time and an attorney said: Attorneys never answer questions with yes or no; they always answer with – IT DEPENDS.  The other attorneys in the room laughed, but all of us is aware this is an excellent response if you need more time to research the issue.

Therefore, instead of feeling like you are trapped into providing bankruptcy advice when you are unsure what that advice entails; listen to the client and make sure you get all the facts.  Tell your client that you will need to review their case before you can provide them with an answer.  Assure them that every bankruptcy case is different and what may work for one person may not work for them.  This will provide you with some extra time to either research and get the answer online, contact an attorney mentor, or contact our office at 719-659-0743 and we will try to help you.


As a new bankruptcy attorney or an experienced attorney new to bankruptcy, you may want to join the National Association of Consumer Bankruptcy Attorneys and the American Bar Association.  Both of these organizations provide you with access to a wide range of tools including the ability to join private forums and ask questions to experienced attorneys.

Another way to network is to find out if your local Bar Association offers classes and meetings for bankruptcy attorneys.  If so, make sure you attend and pass out your business card.  Not only is this a terrific way to find attorneys who are mentors but also you build your practice by accepting referrals from other attorneys who are often overloaded with Chapter 7 and 13 work.

A final suggestion is to join a social networking group such as LinkedIn and join all the bankruptcy attorney groups.  From your LinkedIn profile, click on GROUPS and do searches on the key words: bankruptcy attorney, bankruptcy court, chapter 7 attorney and chapter 13 attorney.  LinkedIn provides you with the ability to join up to 50 groups, so join as many as you possibly can.  Once you are a member, you can post questions to other attorneys and get help.


TRAINING REFERENCE Have a wonderful week and keep working on ways to improve your skills in Chapter 7 and 13.

Has Your Bankruptcy Client Used Their Credit Cards Within the Past 90 Days?

The importance of why obtaining this information from the client is essential because it could prevent you from unnecessary Adversary Proceedings filed against your client in bankruptcy. Read the rest of this entry »

Bankruptcy Case Review

a lesson in client intake interviews and conflicting information

For the three weeks I have been working on one particular bankruptcy case.  Why is it taking so long?  The clients have been very difficult to interview and the husband and wife keep providing conflicting information.  Therefore, I decided to write this article to help you when you face the same problems, if you have not encountered them already.

The petition began like any other normal petition.  I entered the initial data into the bankruptcy software and compiled a list of questions to ask the clients.  When I called the client back I discovered the phone number the attorney provided was her work phone, so I apologized for the interruption and set up an appointment to talk with her after hours when she was at home.

The first problem I encountered was the inability to understand the clients due to their heavy Filipino accent.  However, I did my best to get the answers to some of the questions.  For other questions, the wife handed the phone to her husband and I tried to communicate with him the best I could.  However, the husband could not understand who I was and was very reluctant to talk with me.  I had no choice at this time but to end the interview, let the attorney know my dilemma and ask him how he wanted me to proceed.

It took approximately 2 weeks before the attorney had the opportunity to talk with the clients and inform them of my role.  I was instructed by the attorney to call the clients and finish the interview.  Hint:  If you are an attorney, you should always let your clients know the names of people who may call them to obtain information.  This way you save a lot of time for your office and staff as well as confusion for your client.

Finally, after leaving voice mails for the clients and eventually getting in touch with them for a second interview, I was able to conduct 80% of the interview in about 2 hours time.  The reason I was unable to complete the interview is detailed in my notes to the attorney which are provided below.  However, the debtor(s) did nothing but hurt themselves by refusing to provide me with the crucial information I needed.  Now the attorney has to spend time getting it before we file the petition.  So eventually, they will have to answer the questions whether they want to or not.

When you encounter situations like this, it does not always mean that the debtor(s) are committing fraud or trying to be fraudulent in their answers.  Instead, some clients are reluctant to answer questions because they are afraid it could get them in trouble, so they ask you or me to answer the questions for them.

For example: in one part of my conversation with the debtor, I asked him how much his family spent per month in food.  He said they spent $6,000.  You and I both know that this amount is too extreme and overinflated.  The IRS allowance for this family of 4 is only $1,370, so I immediately knew that this would not pass through the bankruptcy court without problems.  I told the debtor that $6,000 was much higher than the IRS allowance and that I needed a more realistic figure.  The debtor told me to make up any number that I needed to.  I told him that if I did, I would be committing unauthorized practice of law.  The debtor needed to provide me with a figure and that figure could not be $6,000.

But instead of trying to be sensible, the debtor became upset and started playing mind games.  He told me to try $5,000; but I told him this was too high.  Next he told me to try $4,500.  This immediately told me he was playing games and had no intention of providing me with an accurate figure to reflect his own household budget.  It was at this point that I stopped playing the game and told the debtor that he could discuss the matter with his attorney.

Remember: As a non-attorney, you should do everything you can (within your scope of power) to obtain the information you need to compile a well-detailed bankruptcy petition.  If the client refuses to provide that information or cooperate with you, do the best you can to get as much information as you can, then document details of the interview (as I have done below) and turn the matter over to your attorney. Ask your attorney how they want you to move forward and wait on their instruction.

MY NOTES TO THE ATTORNEY REGARDING THIS CASE provided for training purposes only


From what I can understand, the clients have 2 sons with 2 separate student loans.  The first son (who is 21) has a student loan with Great Lakes for which the debtor co-signed.  This means that the debtor may need to start paying $300 per month for this student loan debt beginning in June 2010.

However, debtor claims that these are his student loans; however, he acknowledges that he did NOT attend school.  Because debtor did not attend school, the student loans must be in the name of the son who did attend.  I am sure that Great Lakes had to place the student loan in the name of the student, not the parent.  Yet, debtor says that I am totally wrong and became very upset.

Bottom line: We do not care if debtor wants to pay the student loan for his son who is able to work and pay his own debt; my ONLY concern is if the Chapter 7 bankruptcy will be over in order time to allow for this $300 monthly payment.  By allowing for this $300 monthly payment, Debtor’s income could be reduced on Schedule I; but the expense may not even be allowed by the court since the debt does not belong to debtor.  This is the part the debtor is not able to understand.  I do not believe the loan is solely in his name and that his son is the only one responsible for it; but if I am wrong, please let me know.

Since debtor is unable to clarify this information and provide me with a suitable explanation, I have NOT listed these loans since they are currently NOT due and at this point, are not in default and not the responsibility of the debtor(s).


The debtor(s) currently have both sons living with them.  One son is 21 and the wife said he has a job; however, the husband said he is still looking for a job.  The problem is, the 21 year old is NOT in school and therefore may not qualify as a dependent on the bankruptcy petition regardless of whether he is working or not.

However, the second son, who is 20 years old, is still in college and will not be graduating until 2012. Again, the student loan would not even be due until this date, yet debtor said he wants to plan ahead and include the amount in his bankruptcy.  In fact, he got angry because I told him the court may not allow for this student loan repayment and therefore I was not placing it on Schedule J unless the attorney advised me otherwise.  I tried over and over again to explain to the client that we were only concerned with TODAY not tomorrow; yet, he became more agitated and upset with me.

Therefore, I listed both sons on Schedule I but the attorney may receive objection from the trustee.  Hopefully the trustee will allow the son who is still going to college as a dependent but it cannot be guaranteed.  The clients both need to get their stories straight before they go to court.  You may want to counsel them only to say YES and NO and not to start telling stories since their stories are always conflicting.


The debtor(s) listed on their client intake forms that they had a debt owed to GE Money Bank in the amount of $6,194.47 but it was a credit card.  Since the account number they provided was not a credit card number, I talked with them about it.

I discovered that the debt was SECURE because they purchased 4 television sets.  However, the debtor was unable to describe the TVs to me.  I cannot believe that 4 televisions are worth over $6,000 unless they are of a better quality than the $800 the debtor claims.  First he told me the televisions were very OLD (but would not tell me how old).  Next he told me he owed GE Money Bank $3,000 but added some more stuff in January (less than 90 days ago) that brought the total to $6,000.  When I asked him what items he had previously purchased for the original $3,000 debt, he said it was for the television sets.  When I asked him what he purchased in January, he again said it was the television sets.

This conversation continued like this for almost 15 minutes and I tried every way to try and help the debtor understand that I needed a complete inventory of the GE Money Bank debt but he kept giving me conflicting information.

My thoughts: Since this debt is such a touchy subject, debtor may have purchased these items less than 90 days ago because he knew he was filing bankruptcy.  As you know, any debt made within the past 90 days could be subject to non-discharge and the clients may have to pay this debt or give up the televisions.

Please find out:

1.   A complete inventory of everything included in the $6,194.47 debt 2.   A complete inventory of any purchases made to GE Money Bank within the past 90 days, which includes January. 3.   A complete description (brand name and size of screen) for each television set 4.   The monthly payment made to GE Money Bank 5.   Are they behind in payments?  If so, which months? 6.   Do they plan to catch up the back payments or surrender the televisions?


In general conversation debtor mentioned that he has a court appearance set for March 23 to appear for a speeding ticket.  When I tried to find out about the ticket the debtor refused to go into detail. The only information I could pull from him was the court date and the amount of the fine, which is $332.  I did a search online through PACER as well as the Los Angeles Traffic Court but I could not locate any records on this traffic violation.

Debtor stated that he already paid the fine but still he needed to appear in court.  I suggest you check this out.  If the $332 was the entire fine paid in full, it needs noted on the bankruptcy petition. If the $332 is only a partial payment, I need to know that also.  Additionally, I need to know the:

1.   Case number 2.   Case caption 3.   Parties in the case 4.   Date of ticket 5.   Name and address of the court handling this matter


Debtor could not tell me if he was behind in payments on the 2002 BMW.  If he is behind, he will need to catch up those payments before the 341 Meeting or a potential objection could be challenged by the creditor since this case will more than likely be a Chapter 7.  In the petition we have asked the creditor to accept a LOWER monthly payment as well as a CRAM DOWN.  The original amount owed was $14,474 on the 2002 BMW but the Nada Guides has a market value of $6,025.  We are saving the debtor(s) $8,449.00 but if they do not show a good faith effort to catch up any past due balances, the deal could be lost and receive an objection from the creditor.

If they are only 1 month behind in payments, this may not be an issue; however, debtor was unable to provide me with this information and became upset when I asked him the question several times so I gave up.


I hope my notes help you when you work on future petitions.

A Typical Example of an INSIDER DEBT in Bankruptcy

— by Victoria Ring, Colorado Bankruptcy Training

I worked on a bankruptcy petition this week that involved a couple who had worked at the same job for 25 years.  They owned no real property and no unexempt personal property.  Their credit card debts totaled only $33,000 and they owned 2 older cars with very low market values.

What would be your first question when faced with a bankruptcy petition like this?

Your first question should be:  Why are these people filing bankruptcy? There has been no change in their income; they own very little and owe very little debt.  Something is missing from the puzzle and before I could go any further I had to find out what it was.

I immediately contacted the attorney by email as well as a voice mail (never totally rely on email) about the problem.  He called the debtors and found out that one of the reasons for the additional expenses was that their son graduated from college and they were paying back his student loans.

This is a typical example of an INSIDER DEBT in bankruptcy!  Learn how to recognize these and you will help to prevent fraud.

Although the debtors I prepared the petition for were probably honest people, many people could say that they are making the student loan debt for their son, when in actuality the son is making the payment and the debtor’s are pocketing the extra cash.  Creditors look for loop holes like this and this is a typical example of why bankruptcy cases are held up in court for many months.

Think about this: Typically, it is the son’s responsibility to pay the student loan debt.  Even if the debtors produce proof of payment that they actually paid the student loan payment, it would be impossible to prove that the son did not give them the cash to reimburse the payment they made.  This would give the debtors extra money each month to spend that the creditors would prefer to have.

Keep learning, take care and have a wonderful week!

New VBAs Trained This Week and Update

— by Victoria Ring

Clay Holland is really busy this week putting together the TWO DAY Atlanta Bankruptcy Seminars so I thought I would catch you up on my week.


Yes, Clay is finalizing the date and then he will make the announcement.  Stay tuned for more details from Clay a little later.


February 15 and 16 I spent training Charloma Banks.  Charloma lives in Plymouth Virginia and it was her first trip to Colorado.  Charloma had taken the time to do a great deal of studying on her own prior to coming for her training.  The first day was spent addressing the questions she had regarding the materials and reviewing a variety of techniques for developing a website.

After returning to her hotel room, Charloma spent most of the evening redesigning her website to reflect the new marketing information she learned.  When I picked up Charloma the second day for her training, I was impressed with the extra effort she put forth.  We then spent several hours rewriting and revising the wording so that it was more informative.  As Charloma learned, your website should be YOUR BEST.  It can be compared with putting on a tuxedo or a 3-piece business suit and attending a governmental social gathering.  That is how good your website should look in order to attract good business.


Suzie McKenzie is really a cool chick.  She and a couple of friends jumped in their car, in Dallas Texas, and drove to Colorado Springs.  Although the normal drive time is 15 hours, Suzie and her friends left 4 days ago and stopped and vacationed along the way.  I trained Suzie and her friend on February 18 and 19.

Suzie has owned and operated her own advertising and publishing business for many years; but like the real estate industry, the publishing world is experiencing financial difficulty too.  It appears that right now, bankruptcy is about the ONLY growing field in America.

However, since Suzie has owned her own business for many years, there is no doubt that she will be ready to start working for attorneys within a short period of time.  Plus, Suzie has an outgoing and caring personality which is a perfect fit for working with clients in Chapter 7 and Chapter 13 bankruptcy.


I am presently in the final development stages of a new product for attorneys called:  PRE-QUALIFY INTAKE FORM.  This is a four-page questionnaire, consisting of mostly YES and NO questions.  This makes it easy for the client to fill out in less than 5 minutes while at the attorneys office.

Using the accompanying INTERPRETATION TOOL, the attorney will quickly learn how to glance down the PRE-QUALIFY INTAKE FORM and get a good, general idea as to the complexity of this case.  This information will allow the attorney to make the determination whether to accept the case or how much of a fee to charge.  The more complex the case, the higher the fee.

As soon as the product is available for sale I will announce it to my PERSONAL LinkedIn Group.  If you are not subscribed to my LinkedIn Group, visit: and click on ADD VICTORIA RING TO YOUR NETWORK (upper right)


Bankruptcy Petition Case Review

The problem: There is not enough left over for the debtors to make a Chapter 13 Plan payment.

I talked with an attorney today who said:  For a Chapter 13 Plan, I thought all I needed to do was take the amount left over between Schedules I and J and this was the Plan payment.

Unfortunately, in 90% of the cases, it is not that simple.  For example: Today I had a married couple who owed three mortgages on their home.  Here are the particulars:

$420,000 – Current market value of home

$320,000 – First mortgage $  20,000 – Second mortgage $200,000 – Third mortgage $  20,725 – Exemption allowance

Adding up $320 + $20 + $200 we have a total of $540.  The home is valued at $420, leaving the debtors with $120 in equity.  Minus out the exemption allowance and the debtors are UNDERWATER by  approximately $100.  This means that the attorney could propose a cram down on the THIRD mortgage and save the debtors $100,000.

This is a good thing, right?  Wrong.  Even with the cram down, the debtors only have $2,300 left over every month to make a Chapter 13 Plan payment.  After plugging in the figures into the Chapter 13 Plan, it would take a MINIMUM of $3,000 in a monthly payment just to cover the mortgage obligation, and still then, the unsecure creditors would only be paid 9 percent  (which could be a problem.)


Some attorneys, when faced with a problem like this will reduce the expenses on Schedule J just to get the case filed.  But these are the types of things that will drive a Trustee insane.  Also, these are the types of things that can embarrass an attorney in court in front of their clients because they have not done their job properly.  They took the easy way out and left the Trustee to figure it out.


The best approach to solving this dilemma is for the attorney to meet with the debtors and explain the situation.  The attorney should start by giving the debtors a copy of Schedule J and ask them to look over the figures and let them know if everything looks okay.   After the debtors approve the figures (or change them) the attorney can explain the problem to the debtors in terms they will be better able to understand.

The attorney may say something like:  Since the figures are correct on Schedule J, you can see that you have $2,300 left over per month.  However, since your house payment is almost $2,000 that leaves you with only $300 to pay on your cars and the $250,000 in credit card debt.  As you can see, there is not enough money to do that.  Can you look over Schedule I and J and let me know if you can find an extra $700 so that I can make the Chapter 13 Plan work?

This puts control in the debtors hands and allows them to feel they are taking an active role.  If debtors understand issues, they will be more cooperative in staying in the Chapter 13 Plan.  However, if the debtors are unable to come up with a solution, at least they will be able to understand the problem and the attorney can explain different options.


If the debtors are unable to afford their home or do not anticipate increasing their income, the best solution would be to surrender the home.  This would give the debtors a fresh start and since there are only two of them, they could downsize and still leave a comfortable lifestyle.

However, people are attached to their THINGS, like homes and cars.  In fact, they are so emotionally attached that they cannot stand for a day to pass unless they have that particular home or particular car in their possession.  I personally do not understand it.  Everything in life comes and goes.  Everyone has a time when they have money and a time when they do not.  During the times when I have less money, I spend less and adjust my spending habits.  When I have money again, I celebrate and spend more.

Unfortunately, many people today are not willing to make sacrifices, but I hope this article at least puts the problem into a more understandable perspective.

Bankruptcy Petition Questions and Answers

The following questions and answers were submitted to Victoria Ring either at a teleconference or by email during this past week. The best of the best were chosen to be published below.  The answers are provided by Victoria Ring who is not an attorney.  Therefore, the information provided in this material is for training purposes only and no whole or part should be regarded as legal advice.


If a lady is filing bankruptcy and she is pregnant at the time of filing, is the unborn child considered a dependent on Schedule I of the bankruptcy petition?


No. An attorney explained it like this to a client one time who asked the same question: We do not know if your child will die at birth, be given up for adoption, raised by a family member or any other number of factors that could alter the dependent status of the unborn child.  Therefore, the child is not eligible to be a dependent until after the birth.

But, if the bankruptcy is still ongoing at the time the child is born and the child will be the dependent of the female filing bankruptcy, Schedule I and J would need to be Amended to allow for the dependent claim as well as the monthly expenses to care for the infant.


Am I to understand that I do not have to use a Certificate of Service when I initially file the bankruptcy petition?  That means I only need to use the Certificate of Service afterwards?


You are correct.  The Creditors Matrix within the bankruptcy petition serves the place of the Certificate of Service.


If a bankruptcy case is closed, can it be reopened so the attorney can file an amendment?


It depends on several factors.  How long has the case been closed? What are the reasons for reopening the case? Can the attorney prove to the Judge that there is good enough reason to reopen the case?  Was the case discharged or dismissed? (There is a big difference.)  Therefore, in order to sufficiently answer this question, you need to contact the Help Desk of your local bankruptcy court and obtain the rules for reopening a closed bankruptcy case so that your attorney can review them and make a decision whether to do so or not.


During an online search I found a motorcycle that was titled in the name of the debtor but the motorcycle was not reported on the client intake forms.  When I asked the debtors about it, the wife said it was repossessed and the husband said it was sitting in their garage.  Who should I believe?


No one.  Your job as a non-attorney is not to make legal decisions. Make sure you document this problem and point it out to the attorney.  The attorney will need to determine the best way to handle the situation.


Do you really train attorneys?  I find that hard to understand.


Why is it so hard to understand? Attorneys do not obtain training in how to prepare bankruptcy petitions and pleadings when they attend law school. They are trained in the legal aspects of the various chapters within bankruptcy; but they are not trained in the actual day-to-day operation of the bankruptcy law firm.  This is where I provide the service and it is one of the most fulfilling jobs I have.


I am interviewing a prospective attorney client whose full-service bankruptcy practice includes Chapters 7, 11, and 13, and creditor representation.  He is a solo practitioner (25 yrs in bankruptcy) and is done with the hassle of training staff.  Do you (at a fee, of course) provide any personalized training in Chapter 11 and creditor representation?


I would never recommend that a Chapter 11 be done virtually.  You must be able to work in the law firm office.  Why?  In a Chapter 11 there is no trustee so the rules change considerably compared to a Chapter 7 and 13.  Additionally, a CPA is normally hired to maintain bookkeeping records and report to the bankruptcy court every month.  Finally, you also should have some working knowledge of corporate law to work with Chapter 11s.

As you know, I am solely dedicated to John Q public which is why I ONLY provide training in Chapter 7 and Chapter 13. Perhaps you have a Chapter 11 confused with a small business owned by a debtor.  Unless a debtor owes $1 million in Schedule F debts, the debtor still can file a Chapter 7 or Chapter 13 for their sole proprietorship business.

Questions and Answers from Bankruptcy Professionals

The following questions and comments were submitted through email to Victoria Ring. The answers are provided by Victoria Ring who is not an attorney.  Therefore, the information provided in this article is for training purposes only and no whole or part should not be regarded as legal advice.


I have a debtor that owns a home based business.  In addition to what her company grosses, she has paid herself a salary for the past 6 months from her business.  On the Means Test, do I have to average the amount she paid herself from the business (Line 3), and in addition, average the monthly net business income (Line 4)?  Or, do I fill in Line 4, only?  Please help!!! First time I’ve had this situation.   My attorney is waiting for Form.


First of all you need to fill out the Business Income and Expense worksheet that is included in most of the bankruptcy software programs. If you are using Best Case software, scroll down to the VERY BOTTOM of the list of forms. There is a folder named SUPPLEMENTAL FORMS.  Inside that folder is a form named BUSINESS INCOME AND EXPENSES.

Fill this form out and make sure it is filed as an attachment to Schedule I when the petition is filed.

Take the AVERAGE NET INCOME (Line 23) and enter this figure into Line 3 of the Means Test.  If you refer to the form you will see that Line 3 states: Net Payroll Other Than Debtor.)  Therefore, you will NOT include the money the debtor pays herself from the business on this particular worksheet form.

Since we now understand this information, we can reasonably deduce that the money the debtor pays to herself needs to be listed on LINE 7 or LINE 13 of Schedule I.  Check with your attorney to be sure.

Also remember to remind the attorney that he or she needs to obtain 6 months of bank statements from the debtor’s business account as well as her personal account.  The attorney will need this to verify the debtors’ earnings reported within the bankruptcy schedules.

Note: In some states, the attorney will simply take the bank statements with them to the 341 Meeting and hand to the Trustee. In other states, when the bank statements are used as pay advices, they would need to be filed with the bankruptcy petition (sometimes the court even requires a cover sheet.)  Always check your local rules of procedure to address questions at this level.


The debtor is married but is filing as an individual.  I included the husbands’ income in the Means Test because they do not live in separate households.  My problem is that I am not sure how to complete the Statement of Affairs for the husband.  I put the wifes income for 2009, 2008, and 2007 but do I also need to include the husband income for the same years even though he is not filing bankruptcy?  I was told only put 2009 for the husband because its only this year that counts for CMI.  It just does not look right to me and I wanted to run it by you.


They may do things different in California but in all the petitions I have done (if the husband is not filing) we would place the husband’s income under Item 2 of the Statement of Affairs.  It would be listed as Spousal Contribution.  The husbands income would also be listed under Schedule I as well as the Means Test.

However, you may want to call your local California Help Desk because I have found that California has many strange customs that is totally different from other states.  I learn so much when I visit California, so make sure you check out my response to make sure you are complying with the court rules.


This is my first bankruptcy petition and I need some help.  I am filing a petition for my client and I am in California.  As you know, this is a community property state.  If a husband and wife are divorced and living in separate residences, and the husband wants to file bankruptcy without his wife, will the wife be responsible for the debts that are discharged and the husband does not pay?


I did a little online research and I found the following information at which states (in part):

…. Community property and common law (also called “equitable distribution”) are the two types of martial property ownership. The vast majority of states apply the equitable distribution rules; nine states apply the community property rules. If you live in a common law property state, your spouse’s bankrupt estate will include his/her separate property and half of the jointly-held marital property. The non-bankrupt spouse will not have to worry about the effects of the bankruptcy on his or her separate property.