Bankruptcy Petition Tips

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!

Schedule B Bankruptcy Petition Tips

Security deposits with landlords

If the debtors are renting, make sure you include the deposit paid to the landlord on Schedule B. Listing this asset does not take money from the debtor; but not listing it could throw up a red flag to the court that you may have left out additional information.

Of course, if there is no security deposit with the landlord you need to make a note for the attorney file in case this question is asked by the Trustee.

Household goods and furnishings (no lien)

Every debtor filing bankruptcy has some type of household goods and furnishings, even if it is an empty guitar case where they keep their clothes.  In addition, even if the debtor is renting a furnished apartment, he or she will have some type of household goods and furnishings such as a trash can, knives, forks, spoons and bowls, etc.  Therefore, this property type needs to always be included on every bankruptcy petition you prepare.

Household goods and furnishings (with a lien)

Any household goods and furnishings with a lien attached to them should be listed separately on Schedule B.  Then, if the debtor’s intend to keep the asset and has the income to continue making the payments, the monthly payment needs to be listed on Line 13(b) of Schedule J.

Wearing apparel

Every person filing bankruptcy will have wearing apparel.  However, debtors often do not think their clothing is worth much money and will normally write $0 as to the value of their clothing when filling out the client intake forms.  However, even if the debtor only owns a pair of sneakers, a t-shirt and a pair of shorts, there is at least a value of $1.00 that is listed under this property type on Schedule B.

One good rule of thumb is to include the number of people in the household when you write the description for this property type.  For example:

Wearing apparel and personal effects for 2 adults, 1 infant and 1 teenager

Next, make sure these family members are all accounted for on Schedule I of the petition.  This also provides backup for the additional expenses you list on Schedule J for such items as baby diapers and formula, school sports expenses, etc.

Furs and Jewelry

If the debtor is married they will normally always own a wedding ring.  Therefore, the court will look for this asset to be listed on Schedule B for any married debtor.  Of course, you may encounter the rare incident where a married person has no wedding ring, but you need to make sure this information is recorded in the file before you decide not to list it on Schedule B.

Interests in Insurance Policies

Often, you do not know about the term life insurance policy until you get to the paycheck stubs and find the deduction from the debtor’s paycheck.  Distinguish between “term” and “whole life” policies for this property type on Schedule B.  And because “term” life insurance policies have no cash value you will leave the amount of “$0” as the market value.  However, “whole” life insurance policies will have a market value.

NOTICE:

Victoria Ring provides petition reviews to help you catch errors before the petition is filed. The cost is only $150 for a Chapter 7 and $250 for a Chapter 13. To schedule your petition review, email or call Victoria Ring at: Email: victoriaring1958@gmail.com Phone: 719-659-0743

How to Save Your Bankruptcy Client $100s on Their Motor Vehicle

Did you know that as a bankruptcy attorney you have several options available to save your clients hundreds, if not thousands of dollars on their motor vehicles?  In fact, by understanding and utilizing these options to help your clients, they will be better able to understand the benefits of paying your fee and utilizing the services of your law firm compared to other law firms in the area who do not offer them the same options.

A free audio is available that you can listen to online right now concerning this topic. Listen to it and help your bankruptcy clients now.  Visit:

http://www.leapautoloans.com/partners/attorneys.aspx

I addition, the changing credit landscape makes the decisions made in bankruptcy increasingly important. In the past few years, the credit landscape has changed dramatically, and auto lending is no exception. The current climate makes it much more difficult to get credit approval for an auto loan post-bankruptcy. LEAP is an auto finance company that specializes in Redemption and Replacement programs for your Chapter 7 clients and you can find out more about them at:

http://www.leapautoloans.com/partners/

A Quick Tip for Qualifying a Chapter 13

I just got off the phone with an attorney in Florida regarding a case he was working on.  Believe it or not, these debtors actually had equity in their home (which is rare to find in this day and age.)  Their home was appraised at $400,000 and they owed $387,000.

Originally the attorney filed a Chapter 13 and tried to strip the second mortgage but the mortgage company filed a Motion for Relief from Stay based on the fact there was equity in the home.  The attorney then converted the case to a Chapter 7 and wanted my help to convert it back to a Chapter 13.

Since this can be a common problem, here is a quick tip I learned from one of the attorneys I worked for handling this issue:

1.  Take the total amount of arrearages owed on the home.  In the case discussed above, this amount was $115,000 (which included attorney fees, foreclosure proceeding fees and non-payment dues covering 24 months.)

2.  Divide the arrearage amount by 60; which is the maximum time a debtor can be in a Chapter 13.  In the case discussed above, this amount was $1,916 per month.

This simple calculation told the attorney that the debtors did NOT have enough disposable income to pay the arrearages; let alone the second mortgage payment itself.  And this saved the attorney in Florida a great deal of time.  Instead of filing a motion to convert the Chapter 7 back to a Chapter 13, the attorney was able to determine immediately that a Chapter 13 would not be possible.

This left the debtors with only two choices: (1) Surrender the home, or (2) Increase their income.

I hope this quick tip helps save you time and money when you encounter the same problem.  If you have any cases you would like for me to help you with, please contact me directly at:

Victoria Ring Cell: 719-659-0743 http://www.chapter713training.com Email: victoriaring1958@gmail.com

 

Cram Downs Are Now Permitted in Ohio

After sending out my last article, I received an email from Michael Warren, an experienced bankruptcy attorney in Chillicothe, Ohio.  He informed me that cram downs are now permitted in Ohio. This is a major breakthrough.  Below is the email I received from Attorney Warren:

“Cram down and strip off are slightly different things.  Cram down (for chapter 13) is accomplished by section 502, claims allowance.

For lien strip off, some courts require a motion (Preston and Hoffman in Columbus), some require an adversary proceeding (Caldwell in Columbus), some say it is done by the confirmation order (Hopkins in Cincinnati).

Cram down means something completely different in the chapter 11 world.”

Then, R. Todd Frahm, a California attorney submitted this from11 USC 1322(b) which says:

(b) Subject to subsections (a) and (c) of this section, the plan may–

(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.

To contact Attorney Warren directly, his contact information appears below:

Michael Wm Warren 6 Consumer Center Dr. Chillicothe, OH 45601 Phone: (740) 774-4357 mwarren@buckeyelegal.com http://www.buckeyelegal.com

Personal Note: I have personally visited this law firm and worked with Attorney Warren. He has one of the most efficiently run and customer-oriented law firms I have ever found. Also, Attorney Warren produces near perfect petitions and rarely has a Deficiency Notice from the Trustee. I consider it an honor to have been able to work with Attorney Warren back in 2006 and thank him for providing this important information to our group.

Please pass this information on to any Ohio bankruptcy attorneys you know. By working together we can do our part to keep Americans in their homes and help them rebuild their lives.

Victoria Ring http://www.chapter713training.com

 

Tip for Bankruptcy Clients who Owe Back Taxes

– by Victoria Ring http://www.chapter7and13training.com

We had a bankruptcy client this week who filed a Chapter 7 but owed the IRS back taxes. The client had made arrangements to pay the back taxes through an IRS-approved payment plan.

When the bankruptcy was discharged the client received a CP504 Form from the IRS which is an Intent to Seize Property. If avoided, the IRS will seize the bank account, garnishee wages and implement any number of collection procedures.

Upon contacting the IRS office, we were informed that when a bankruptcy is filed, payment plans are voided and need to be reinstated. This requires a call to the IRS office, which the debtor can do.

Since most back taxes are included in a Chapter 13 Plan for the trustee to pay; it is important to inform all Chapter 7 clients who owe back taxes of this procedure.

Recommended Tax Attorney

Brian D. Salwowski Attorney at Law 55 Monument Circle #1300 Indianapolis, IN 46204 Office: 317-423-0019 bsalwowski@gmail.com

The Importance of the Right Type of Appraisal When Filing Bankruptcy

— by Victoria Ring

An attorney in Florida called me today to discuss his clients case. An appraisal had been done eight months ago by a real estate agent for $175,000. However, the debtors only owed $161,000 to the first mortgage company and $12,000 to the second for a total of $173,000. The attorney originally filed a Motion to Strip the second lien so that the debtors could afford to keep their home in a Chapter 13.

However, this decision created a major problem: The home was NOT underwater. In other words, the debtors actually had equity in their home since the appraisal came in at $175,000 and the debtors only owed a total of $173,000.

This fact alone made the home ineligible for a cramdown or strip. These are normally only successfully proposed and confirmed if there is NO EQUITY. In fact, the true value of the home (which needs to be less than what is owed) is the basis of the argument for the debtor attorney. Without that basis, the mortgage company will always file a Motion for Relief from Stay.

The Florida attorney was considering allowing the case to be dismissed and refile as a Chapter 7. Unfortunately, this solution would have caused the debtors to lose their home due to the fact that they were several months behind in their second mortgage.

The Solution

Since the amount owed cannot be changed, the answer is to review the amount of the appraisal.  We found there were two things wrong with it:

1.  Age of the Appraisal

The appraisal was already 8 months old. With the real estate market changing almost on a daily basis, it would be wise to get a new appraisal and present this as the actual market value of the home, especially if the amount came in lower than $175,000.

2.  The Type of Appraisal

Just like you list the yard sale or pawn shop value on a bankruptcy petition for personal property; there are two different types of appraisals for real property.

The first type of appraisal is a real estate appraisal, which is the most common. Because attorneys do not normally educate their debtors about the two different types, most debtors will call the real estate agent in their area. They never tell them they are filing bankruptcy so the appraiser determines a value as if the clients were reselling their property. This price almost always includes a six-percent padding for the commission of the real estate agent. Therefore, a standard real estate appraisal is often higher than the true market value.

As we know, the bankruptcy court can only liquidate real and personal property for the market value, not the real estate or replacement value. In fact, the court normally gets less than the market value, which is then turned over to the creditors for distribution and the debtors lose the asset.

The second type of appraisal is often called a DRIVE BY appraisal. These types of appraisals are often less expensive because the appraiser normally never enters the home. When an appraiser knows the appraisal is for a bankruptcy filing, he or she will compare the comps in the neighborhood a determine a more true market value without all the commission money padding.

Attorneys Should Team with Area Appraisers

One of the most useful tools a bankruptcy attorney can have is to know several good appraisers in their area.  These appraisers should know the difference between a standard real estate appraisal and a market value appraisal. Then, attorneys can provide their clients with a list of these appraisers to obtain a true market value of their home plus save their clients some money compared to a full real estate appraisal.

The Moral of the Story

Although you cannot rely 100-percent on Zillow, the attorney and I were able to determine that the home listed for $162,000. This tells us that the $175,000 appraisal done 8 months ago is probably incorrect. The Florida attorney obtained a new appraisal and hopefully will be able to get the Chapter 13 Plan confirmed so that the debtors can stay in their home.

Notice how one simple adjustment changed the lives of the debtors. It is often the little things that matter the most; so I hope this article helps to save the homes of many debtors by attorneys advising their clients to obtain the correct type of appraisal for a bankruptcy filing.

Resources

Chapter 7 and Chapter 13 Online School http://mybankruptcyschool.com

Testimonials From Students http://mybankruptcyschool.com/testimonials

Assistance With Marketing and Other Training http://www.victoria-ring.com

Contact the Author: Victoria Ring Phone: 719-375-1504 Email: victoriaring1958@gmail.com

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)

Cheat Sheet for Preparing Schedule B

Disclaimer: The following materials were developed by a paralegal for training purposes only.  They are meant only to be used by attorneys and those working under the direction of attorneys. Any other use constitutes unauthorized practice of law.

What is a cheat sheet? It is a tool that provides you with quick tips for different assets on Schedule B as it relates to most no-asset, consumer based, bankruptcy cases.  Use of this tool will remind you to check and reference the common information needed on this Schedule as well as other areas of the petition so that your petition is more consistent and accurate; but by no means is this material exclusive and applicable to all cases.

Cash on Hand

It is not required in all states to use the “Cash on hand” property type on Schedule B.   However, if it is required in your state, make sure the cash on hand amount you list reflects the money left over AFTER the debtor has paid their allowable expenses (rent, mortgage, car, groceries, etc.) as well as their attorney fee.

Checking, Savings, etc.

Make sure the amount for this asset reflects the money left over AFTER the debtor has paid their allowable expenses (rent, mortgage, car, groceries, etc.) as well as their attorney fee.

Also, make sure you check your state exemption allowance to ensure the debtors are fully protected. For example: if the debtor reports $1,500 in a checking account but the state exemption allowance is $500, this leaves $1,000 of unexempt equity.  This could cause problems for the debtor as well as the attorney.  Not only could the debtor lose the asset but the attorney will spend time defending the matter with the trustee and creditors.

Note:  In some states and jurisdictions, bank statements are filed as an Attachment to Schedule B when the bankruptcy petition is filed.  The bank statements are required to be current and normally in date order, spanning a period of six (6) months in most cases. Security deposits with landlords

If the debtors are renting, make sure you include the deposit paid to the landlord on Schedule B. Listing this asset does not take money from the debtor; but not listing it could throw up a red flag to the court that you may have left out additional information.

Household goods and furnishings (no lien)

Every debtor filing bankruptcy has some type of household goods and furnishings, even if it is an empty guitar case where they keep their clothes.  In addition, even if the debtor is renting a furnished apartment, he or she will have some type of household goods and furnishings such as a trash can, knives, forks, spoons and bowls, etc.  Therefore, this property type needs to always be included on every bankruptcy petition you prepare.

Household goods and furnishings (with a lien)

Any household goods and furnishings with a lien attached to them should be listed separately on Schedule B.  Then, if the debtor’s intend to keep the asset and has the income to continue making the payments, the monthly payment needs to be listed on Line 13(b) of Schedule J.

Books, Pictures, other Art Objects, Collectibles

99.9% of all debtors will have assets to be recorded under this property type on Schedule B.  Standard items I have encountered when dealing with the average no-asset case are Hummel, Tiffany, and Avon collectibles as well as family photo albums.  Normally, most of these items are exempted; but if you encounter a situation where the debtors have assets with unexempt equity, the attorney may order an appraisal to protect the debtor.

Wearing apparel

Every person filing bankruptcy will have wearing apparel.  However, debtors often do not think their clothing is worth much money and will normally write $0 as to the value of their clothing when filling out the client intake forms.  However, even if the debtor only owns a pair of sneakers, a t-shirt and a pair of shorts, there is at least a value of $1.00 that is listed under this property type on Schedule B.

One good rule of thumb is to include the number of people in the household when you write the description for this property type.  For example:

Wearing apparel and personal effects for 2 adults, 1 infant and 1 teenager

Next, make sure these family members are all accounted for on Schedule I of the petition.  This also provides backup for the additional expenses you list on Schedule J for such items as baby diapers and formula, school sports expenses, etc.

Furs and Jewelry

If the debtor is married they will normally always own a wedding ring.  Therefore, the court will look for this asset to be listed on Schedule B for any married debtor.  Of course, you may encounter the rare incident where a married person has no wedding ring, but you need to make sure this information is recorded in the file before you decide not to list it on Schedule B.

Firearms and Sports, Photographic and Other Hobby Equipment

Some assets under this property type can be used to make money. If so, the asset needs moved to Item 29: Machinery, Fixtures, Equipment and Supplies Used in Business.

If the asset is NOT used to earn income; add the words “for personal use only” in the description.  Example:  digital camera for personal use only

Interests in Insurance Policies

Often, you do not know about the term life insurance policy until you get to the paycheck stubs and find the deduction from the debtor’s paycheck.  Distinguish between “term” and “whole life” policies for this property type on Schedule B.  And because “term” life insurance policies have no cash value you will leave the amount of “$0” as the market value.  However, “whole” life insurance policies will have a market value. Alimony, Maintenance, Support and Property Settlements

ONLY list this asset on Schedule B if the debtor is OWED money.  This area of Schedule B is NOT for recording alimony, maintenance and support income from an ex-spouse.  Ongoing income that the debtor is receiving for alimony, maintenance or support from an ex-spouse needs to be listed on Schedule I.  Only the arrears would be listed on Schedule B under this property type.

Other Liquidated Debts Owing Debtor Including Tax Refund

Tax refunds and “anticipated” tax refunds would only be recorded under this property type on Schedule B if they are received (or to be received) within the next 90 days.  Therefore, recording a tax refund in this area is only required during certain months of the year.

Automobiles, Trucks, Trailers, and Other Vehicles

722Redemption.Com is an excellent resource for debtors who are in need of transportation but are unable to qualify for a loan to get a motor vehicle.  Simply refer them to this website where they will complete a short form and submit it to US Bank.  A representative will call them, discuss their case and make recommendations.  The attorney or law firm does not need to do anything except refer the debtor to:  http://www.722redemption.com

The 910 Day Rule: Do not forget that if the debtor has been making payments on their motor vehicle for a period of 910 days (about 2.5 years) or longer they may be eligible for a cram down.  In other words, the debtor may only need to pay back the market value of the motor vehicle, not what is owed on it; and the interest is normally reduced also.  This can save the debtor hundreds of dollars.

Note:  The rules surrounding 910 day vehicles are new and the law in this area is still developing.  Prior to the enactment of BAPCPA in October, 2005, there were no such rules. Therefore, when you talk with attorneys about this topic they may not have heard of it because they are not up to date as they may need to be.  You should also be aware that the rules on 910 day claims vary from state to state.

If the debtor is going to keep the motor vehicle that is in their possession, make sure to include the monthly payment under Item 13(a) of Schedule J.

Motor vehicles that have been repossessed, returned and are no longer in the debtor’s possession are NOT recorded on Schedule B.  Instead, the debt is listed on Schedule F so that it can be discharged in the bankruptcy.  Schedule B is only for assets that are in the debtor’s possession.

Office, Equipment, Furnishings and Supplies

A typical use for this property type by the average consumer is a computer and printer. If the debtor uses their computer and printer for business purposes, list it under this property type.  If they only use their computer and printer for personal use, the items should be placed under “Household goods and furnishings” instead.

If the debtor does use these items for business purposes, make sure you complete Items 1 as well as 18-25 on the Statement of Affairs as well as recording the income from the business on Schedule I.

Animals

This property type on Schedule B is only for listing animals with market values of $600 or more including animals that are used to earn an income.  If the animal is used to earn an income, that income needs to be reported on Schedule I; and if the income is considered to be a business, Items 1 and 18-25 of the Statement of Affairs needs to also be completed.

Quick Tips

Every time you encounter a lienholder and the debtor’s are going to continue paying for the asset, immediately place the monthly payment on Schedule J.  This will help you to maintain consistency and accuracy as well as having these portions of Schedule J completed when you get to this area of the petition.  (Of course, if the debtor’s are going to surrender an asset and no longer make monthly payments, the payment would NOT be placed on Schedule J.)

Debtors either OVERestimate or UNDERestaimate market values for their assets.  That is why you need to question every single figure the debtors provide to you.

It is suggested that you wait until you have finalized the petition before you select exemptions for Schedule C. This is because you normally find additional assets as you work through the petition and if there is an asset that needs to share exemptions with another asset, you will be able to distribute them for a more accurate protection of all assets.

WEB SITE REFERENCES

An excellent blog to read for good information from knowledgeable bankruptcy attorneys is http://www.bankruptcylawnetwork.com/

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

Free Supplies for Law Firms http://www.bankruptcylinks.info/about/free-supplies

Free Office Related Supplies for Law Firms http://www.bankruptcylinks.info/about/free-stuff

Free Bankruptcy Training Videos http://www.youtube.com/user/MsVictoriaRing

Attorney Marketing Links http://www.bankruptcylinks.info/about/marketing-links

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What to Do When a Debtor Wants to File a Chapter 7 but the Means Test Qualifies Them for a Chapter 13

— Victoria Ring, Colorado Bankruptcy Training

For those of you just entering the field of debtor bankruptcy, this article will be very helpful to you because it addresses a very common problem that occurs when working with debtors.  The common problem is that debtors want their cake and eat it too. This statement may sound a little harsh but allow me to explain:

I am finding that many new attorneys entering the bankruptcy field do not have the training to screen their clients before sending us the petitions for input.  One of the easiest methods for an attorney to screen their clients is to find out how much equity is in their home before taking the case. During the intake it only takes a minute or two to find out approximately how much the debtors owe on their mortgage.  Then, while the client is still in the office, go to a computer and do a search on www.zillow.com.  Although Zillow is certainly not a court authority by any stretch of the imagination, it will tell you immediately the approximate amount of unexempt equity the debtor may have.

For example: I had a case today for a California debtor who had just divorced. There was $200,000 of equity in the home.  Since the debtor was divorced, he only had to claim $100,000 of this equity.  Under the 704 California exemptions, the debtor was provided with a healthy $75,000, leaving him with $25,000 that was UNEXEMPT.  Was the debtor happy about the $75,000 exemption?  Of course not.  The debtor was angry because he wanted to keep the $25,000 plus have all his debts excused.  Although most debtors may not realize it at the time, in reality they are being unfair and asking the attorney to commit fraud by making this selfish demand.

Unfortunately, most of the new bankruptcy attorneys that I work with do not understand the bankruptcy law well enough to properly advise their client.  Instead, they accept the case, have the client fill out the intake forms, pay the fees and send the paperwork to my team.  We input the petition and discover the problem with the equity in the home.  By this time, the attorney has invested his or her time, the debtor has spent several hours gathering information and we have worked inputting the case.  When we discover this problem we alert the attorney, the attorney talks to the client and the debtor decides not file bankruptcy.  The attorney is forced to refund some of the money because the attorney did not know how to properly explain the advantages to the debtor of filing a Chapter 13 instead.  In fact, if the attorney had called to discuss this case with me, I could have taught him how to turn this unhappy client from a Chapter 7 to a positive Chapter 13 because I deal with these issues all the time.

For example, this particular debtor had $38,000 in Schedule F debts and $25,000 of unexempt equity in his home.  The debtor did not want to surrender his interest in the property because he wanted to make sure his ex-wife and children had a home to live in.  This is admirable, but the court and creditors look at numbers because they are not emotionally tied to debtors. New attorneys must learn these types of skills so they can help the debtor understand why it may or may not be to their advantage to file bankruptcy at this time.

But for the particular debtor in our scenario, it would have been to his advantage to file a Chapter 13.  First of all, we could have proposed a 100% Plan which would have more than likely protected the $25,000 of unexempt equity.  Secondly, the Chapter 13 would have eliminated $73,000 in interest charges over the 5 year Plan period, the debtor would have paid off his student loan in full as well as the unpaid personal income taxes from 2002.  By presenting these positive factors to the debtor, the attorney may have saved this case and never had to refund money.  Plus the debtor would be happier once he understood the advantages.

(Note:  A key to good marketing is to point out advantages for the client.  If you can show a client how much money you can save them and how, they often will do whatever is necessary to comply with your requests and invest their time and money making it happen.  This is what makes a happy client and this is what generates referrals.)

But in this case, the attorney did not call to discuss the matter with me.  He simply told the client that he would have to pay $25,000 or lose his home.  This naturally scared the debtor to death and he decided not to file. Who can blame him?

It amazes me when things like this happen; and they happen quite frequently.  In fact, it may be shocking to you also.  I hope so, because I want this article to be shocking enough to help to prevent this from happening to you.  Also, please understand that this article is not intended in any manner to provide legal advice.  I am not an attorney and I am not trying to predict what a bankruptcy court to do by writing this article.  I am simply trying to help you understand the concept of fairness so you will know how to better deal with situations exactly like this in the future.

I wish you the best of success and encourage you to continue learning and working hard to protect the debtor; but in a fair and balanced way.

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