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!
I understand that there is a great deal of confusion over which bankruptcy software program a law firm should buy and which one a virtual bankruptcy assistant should buy. In order to help address these concerns, I am writing this article to help you.
From 1990 to about 2006, it did not matter if you were an attorney or a non-attorney; you could purchase just about any bankruptcy software program you wanted. Back then, bankruptcy petition preparers were alive and well in almost every state. In case you were not around back then, bankruptcy petition preparers were people who filled out the forms of the bankruptcy petition and worked directly with the debtor; no attorney was involved. They charged a really low fee and normally did a poor job. Their inefficiency cost debtors and courts millions of dollars. In fact, many debtors lost homes and other assets due to the poor skills of bankruptcy petition preparers. This is one reason I had for developing Colorado Bankruptcy Training.Com. I wanted to stop the madness and bring professional level skills to the law firms.
What eventually happened to bankruptcy petition preparers? When the bankruptcy law changed in 2005, many bankruptcy petition preparers were out of business by 2006. Under the new bankruptcy law, a Means Test had to be filed with the petition and the Means Test calculations could only be done by an attorney. Bankruptcy petition preparers were often singled out by the court and fined large fees when they tried to prepare the Means Test or select exemptions on Schedule C. In fact, one lady called and said she was fined $40,000 in the state of Oregon for unauthorized practice of law. She then tried to file bankruptcy to get the debt discharged but the court demanded it be classified as a Schedule E Priority debt that had to be repaid 100%.
It was around this time that some of the bankruptcy software companies became more selective about who purchased their software. And they had good cause to take these precautions. However, where the problem comes in today, is when an independent virtual bankruptcy assistant, working under the direction of a bankruptcy attorney, is not permitted to purchase the software they need to legally work for their attorney. For example, in many instances, attorneys may not purchase bankruptcy software but depend on their virtual bankruptcy assistant to prepare and file all their cases. This means the virtual bankruptcy assistant is left to purchase his or her own software. If the software companies will not sell to them, what are they supposed to do?
To confuse the matter even more, some bankruptcy software programs allow non-attorneys to purchase their software but they are prevented from electronically filing a bankruptcy petition. The only way they can electronically file a petition for their attorney is to operate under the software license of the attorney. But this can cause a problem if the virtual bankruptcy assistant is using EZFiling but the attorney is using Collier Top Form.
Still there are other variances with software companies: some will not even sell you a copy of their software unless you are a law firm or licensed attorney. The non-attorney can download free versions of their software but the attorney is the one that must purchased the software license. Then, the attorney can turn around and grant a free license to anyone who works for him or her.
Where Does the Madness End?
Personally, I think the software companies have developed an unnecessary mess. Who cares who purchases their software? They are in business to make a profit, right? What is the big deal anyway? To date, I have talked to people in charge at many different software companies and I have yet to get an answer to this specific question that makes any sense.
However, since I do not own these bankruptcy software companies and I do not have the power to tell them what to do, I have to suffer just like you do. Here are three options you may want to consider:
1. Frederick Rogovy is the software developer for New Hope Software. New Hope Software is the only software company that provides special services to virtual bankruptcy assistants. To view the features available to help virtual bankruptcy assistants who use New Hope Software, visit: http://bankruptcysoftware.com/virtualassistantfeatures.shtml
However, as of this date, New Hope will not sell a copy of their software to a non-attorney. The attorney must make the purchase and then provide the virtual bankruptcy assistant with the registration information to unlock their non-attorney version. (Unnecessary complication? I think so.)
2. If you are just getting started as a virtual bankruptcy assistant, you may not need to spend any money buying bankruptcy software right now. You can continue using demo versions of the different software programs. Then, when you start working for an attorney, use the software the attorney is using.
3. Learn the old-fashioned way: Download the Federal and Local Forms from the bankruptcy court website within your jurisdiction and fill them out. When you download them, they are free and they come as a form-fillable PDF. A link to all the US Bankruptcy Courts, local rules and forms, is at: http://coloradobankruptcytraining.com/links_chapter13plans.html Also check out the other bankruptcy links at: http://www.coloradobankruptcytraining.com/links.html
I realize this method will take the most time to prepare a bankruptcy petition, but there is no cost whatsoever in purchasing bankruptcy software. Electronic filing will be done entirely through PACER.
Although in my training materials, I use Best Case to train with, it is because this software has shown to reduce the learning curve and make training easier to comprehend. However, just because students train with Best Case, after they learn the basic skills; they can use ANY software program they want. I know one Certified VBA (Linda Rantz at www.rantz.biz) who uses all the bankruptcy software programs out there. She said it is the only way she can be assured to be compatible with any attorney she works for. Sounds good to me.
A paralegal working for a bankruptcy attorney in Pennsylvania called today to tell me about her experience with Best Case software. Her attorney is a registered user of Best Case and the paralegal had called them because they had to upgrade their license from a Chapter 7 to a Chapter 7 and 13.
While the paralegal was on the phone with Best Case, she asked the sales person about preparing petitions for attorneys outside of her area. The sales lady told the paralegal that she could NOT prepare Chapter 13s for any other district except the district the attorney was in. Even if she prepared a bankruptcy petition that was not in the same district but within the state of Pennsylvania she would have to pay another $150 to $200 for the Chapter 13 Plan.
The paralegal called me because she felt something was wrong and that Best Case had misrepresented the federal forms. She asked me how Best Case could do this; so I explained to her the scam some bankruptcy software companies are using to sell federal forms. Of course this scam is one of those legitimate scams. In case you did not know, a legitimate scam is one where the customer is still ripped off, but the thief operates the scam legitimately. Best Case is using this age old scam and eventually it will harm them; but who am I to judge?
What is the Scam?
First, you need to be aware that every federal form pertaining to bankruptcy is provided free by the government because consumers have the right to represent themselves. (This is why the first form in a bankruptcy petition is called a Voluntary Petition; the petition is filed by the debtor voluntarily).
Back to the subject, you should never be required to pay for a federal form. The bankruptcy software companies like Best Case know this; so they sell the federal forms under the disguise that their forms work with their software. Big deal! But they will make you think their forms are the best thing since sliced bread so they can sell them to you and laugh all the way to the bank.
You can verify that my statements are true by viewing the FREE federal forms I provide on the Colorado Bankruptcy Training website at:
Every one of these forms are fillable; which means that you can open up the document, click on a line and begin typing in the information on your computer. This is often faster compared to printing out the document and filling it out by hand. One tip though: Only Adobe provides software that makes forms fillable; therefore, you must download the free Adobe Reader in order for the fill-in-the-blank capability to properly work.
How To Use the PDF Version Instead of the Paid Version
Prepare the petition in your bankruptcy software as you normally would. For any forms that are blocked out (such as the Chapter 13 Plan) simply download them from the website link above. Allow the software to still compile the data and figures for the form; but instead of spending $150 or $200 to purchase an unlock code, simply transfer those figures onto the PDF document and you are good to go. The PDF will need to be filed separately with the court, but who cares? For most people, spending 2 extra minutes to save a great deal of money is worth it.
Of course, if you want the convenience of purchasing an unlock code for your bankruptcy software; there is nothing wrong with that. The part that bothers me is that software companies like Best Case are forcing law firms to believe they cannot even do a Chapter 13 outside of their district unless they purchase a $150 or $200 module of the Chapter 13 Plan. This is a lie and I would certainly question the integrity of a company that implemented these types of sales tactics just to take money from people.
Want to Know More?
Article: Free Chapter 13 Plans and Local Forms (explains more about the scam in more detail): http://www.chapter7and13bankruptcyblog.com/archives/139
Article: Which Bankruptcy Software Should You Purchase? http://www.chapter7and13bankruptcyblog.com/archives/145
Pass This Information Along
If the paralegal had not contacted me about this topic today, the law firm could have ended up paying out thousands of dollars for forms they can obtain free from their local bankruptcy court website.
Please pass along this information to any legal or paralegal related groups that you belong to. Knowledge is power and knowledge in this area will prevent scams like this continuing. Thanks for your help and support.
** This article will help you to understand important basic information if you are an attorney just getting started or transitioning to the field of debtor bankruptcy law.
An attorney called me today. She was in a hurry and wanted to know what software she needed that would prepare a bankruptcy petition in about an hour. I told her that none existed. She then proceeded to tell me about an attorney who had a software program that imported credit reports, filled in all the creditor addresses and did everything, including filing her petition at the press of a button. I explained to her that almost all bankruptcy software programs perform these same functions; but there is no bankruptcy software program that is going to practice law for her. She was disgusted at my response but it is the same response I get from new attorneys quite often.
Remember the old saying: What looks too good to be true, probably is? All adults should know by now that anything that appears to be simple and easy actually requires a skill. I wrote an article one time about how horrible I was at trying to bag my own groceries at the store. I explained that even something that sounds like it could be simple (like bagging groceries) still takes a skill that is only learned by practice.
Therefore, every person reading this article needs to reprogram their brain to understand that no bankruptcy software program is going to THINK for you. Software programs only make some jobs easier. You still need to go in and check data, categorize it, determine priorities and much more. No software program is going to do that no matter how much you pay for it.
HOW DID THIS RUMOR GET STARTED? LETS EXAMINE A REAL LIFE SITUATION:
John Q Public is sitting at home watching television. He hears the rumor (started by the new media) that he can save his home if he files a Chapter 13 bankruptcy. John Q Public is 9 months behind on his mortgage and facing a foreclosure because he lost his job. Mr. Public rushes to the phone to call Ms. Attorney and tell her he wants to file a Chapter 13.
Note: For those of you who work within the bankruptcy system, you already know this statement by the media is only partially true. The media conveniently leaves out the fact that a person cannot qualify to file a Chapter 13 if they are unemployed and have no money left after paying their basic living expenses. That is the catch; however, John Q Public does not know that.
Ms. Attorney, who, through a lack of training, offers to file a Chapter 13 for John Q, Public. Ms. Attorney uses her bankruptcy software program to prepare the bankruptcy petition. Ms. Attorney has little or no training in preparing the petition and she spends from 6 to 8 hours just correcting and adjusting information (that the software cannot do). She was unaware of this when she purchased the software because she was under the assumption that it did everything for her.
Next, Ms. Attorney is overwhelmed by the fact that she has also not been properly trained in how to gather all the necessary information for preparing petitions, properly counseling her clients and how to filter out clients who do not qualify for bankruptcy and help them through debt counseling or some other form of assistance. Without this basic knowledge, new bankruptcy attorneys are going to be in for a very rocky road ahead; especially since there is no software program that is going to do all of this for them.
What happens next is another nightmare. After Ms. Attorney enters in all the income for John Q Public and his wife, John Q Public does not qualify for a Chapter 13. In a situation like this some attorneys will try to still push the bankruptcy through by finding an income from another source or suggest the debtor get a part-time job so he or his wife can qualify to file a Chapter 13.
Or, if Ms. Attorney manages to get the bankruptcy petition filed by some other method, she will still risk extreme embarrassment at the 341 Meeting when she is in front of the client, creditors and the Trustee. When the Trustee finds these issues and brings them to the table, many attorneys will simply stop accepting Chapter 13s or stop doing bankruptcy altogether rather than face this situation again. This is sad; because the result was only caused from a lack of training and knowledge in building her practice. Another old saying: An ounce of prevention is worth a pound of cure.
LOGICAL POINTS TO CONSIDER
If you are a seasoned bankruptcy attorney, I urge you to pass this information on to new attorneys. In doing so, you and I are helping to improve professionalism and positive growth within the bankruptcy field. If you are a new attorney, I urge you to study the following logical points:
1. If a bankruptcy software program existed that could do all the thinking for you, why would someone need to hire a bankruptcy attorney? Why not just buy the software and call it a day?
2. If the bankruptcy court allows an attorney to charge $1,000 or more for a Chapter 13, do you not think there must be more work involved? Some attorneys think the software does the work for them; but remember that the court does not just grant a large sum like this to an attorney without good reason.
3. If you were going to open a pizza shop, would it be a good idea to learn how to make pizza first? If you are going to start a new bankruptcy practice, would it be a good idea then to learn about the process first? The least a new attorney can do is login to the American Bankruptcy Institute and view the free training videos at:
Although these videos were made for attorneys to place on their websites to inform their clients about bankruptcy, they are still excellent in helping new attorneys understand the basics. I always tell my students to study the law from a legal perspective as well s the consumer perspective. It provides you with a better balance of knowledge that will carry throughout the life of your law career.
ONE SOLUTION TO CONSIDER
The videos from the American Bankruptcy Institute will NOT show you how to gather information from your clients, prepare the petition or run your practice. That education has never been taught to attorneys and either they learn the skill through trial and error or from an experienced paralegal.
As the author of this article, I would be more than happy to talk with any attorney who is considering getting involved in the bankruptcy field. You can email me at: firstname.lastname@example.org
I hope this information helps you.