In an interview on WBZ-1030AM Radio in October, I was asked if I thought the changes in the bankruptcy laws were “fair.” My response: “ask me in a year.” Well, the Bankruptcy Abuse Prevention and Consumer Protection Act is here. As Gene Wilder gleefully shrieked in Young Frankenstein, “IT’S ALIVE!” One of the most important new requirements under the law is the need for get a "ticket" to the bankruptcy court. It's not worth shrieking about, but it is worth making sure that consumers contemplating filing bankruptcy know about it.

Under the new bankruptcy laws, a consumer debtor must complete “budget and credit counseling” before filing a bankruptcy petition. The consumer must file a certificate of completion from a nonprofit budget and credit counseling agency approved by the US Trustee. Consumer bankruptcy attorneys are routinely referring to this certificate as the “ticket” to bankruptcy court. Counseling may be available on the phone, in person or over the internet depending on the agency. The costs of this counseling are the consumer’s responsibility. Fair or not, it’s a requirement that all consumer bankruptcy debtors need to abide by.

The problem we attorneys are consistently seeing lies with those waiting until the last minute to file bankruptcy. Procrastination is now a luxury that virtually all debtors cannot afford. While there might be circumstances that might enable a consumer to file bankruptcy without that “ticket”, BAPCPA is still evolving in the courts and frankly, there is no clear exception to the credit counseling prerequisite.

Until exceptions to the requirement are set in stone, if they ever are, consumers contemplating bankruptcy must assume that they will need to obtain that “ticket” before they can file. Perhaps more simply stated: plan accordingly. Consumers who wait until the eve of a foreclosure sale, or who call bankruptcy counsel as the repo man’s tow truck is pulling into the driveway might find themselves in an unpleasant and irreversible situation that could have been avoided. The time to speak to bankruptcy counsel – and to get that “ticket” - is well before then.

Is this new requirement fair? Ask me in October.

Posted by Bill McLeod at 12:21 PM | Permalink | Comments (0) | TrackBacks (1)

It is bad enough that the new bankruptcy laws are making bankruptcy more arduous and expensive for debtors, but now Congress is set to stick it to debtors once again…by increasing filing fees.

As of October 17, BAPCPA’s increased filing fees for Chapter 7 cases went from $209 up to $274. Chapter 13 cases - which involve payment plans - actually went down from $194 to $189.

Now, a provision in the Deficit Reduction Act of 2005 increases filing fees for Chapter 7 cases another $25 to $299 and fees for Chapter 13 cases another $85 to $274. The biggest increase: Chapter 11 filing fees will jump from $1,039 to $2,789. Both the House and the Senate passed the bill but a procedural move in the Senate has sent the bill back to the House for another vote. The House is scheduled to vote on the bill when after it returns on January 31.

The effective date of the bill is 60 days after the President signs it. Mark your calendars accordingly.

Posted by Bill McLeod at 5:28 PM | Permalink | Comments (0) | TrackBacks (0)

This morning, while I was waiting for my case to be called, the US Bankruptcy Court in Boston issued a preliminary injunction against Bryon Martinez d/b/a Homestead Financial Corporation of Lynn, Massachusetts. The case is an Adversary Proceeding – a lawsuit filed in the bankruptcy court (Morse v. Martinez, Docket no. 05-1471) . The injunction prohibits him and his company from “preparing any bankruptcy documents for any person in any United States Bankruptcy Court in the District of Massachusetts …and from soliciting payment or receiving payment for providing any bankruptcy services or preparing any bankruptcy documents for any person in any [Massachusetts Bankruptcy Court]." The preliminary injunction is in effect until a full trial takes place.

According to the Complaint filed by the US Trustee, Martinez is a bankruptcy petition preparer (although not an attorney) who found his “clients” by combing through public records searching for folks who were facing foreclosure. He filed bankruptcy petitions on behalf of bankruptcy debtors, but did not disclose his status as a bankruptcy petition preparer (which is required by the US Bankruptcy Code). He would then tell his clients he would attempt to obtain refinancing of their homes, once the bankruptcy petition was filed.

According to sworn statements, Martinez provided legal advice to bankruptcy debtors, and in some cases, completely wrong and unlawful advice – such as altering income, expense, asset and debt disclosures. The complaint alleges that he would also refer some of his customers to attorneys, but he accompanied the people to meetings, and provided the attorneys with completed questionnaires, which are routinely used by bankruptcy attorneys as one of many ways of collecting and verifying information that is included in bankruptcy filings.

The Complaint alleges that Martinez is engaged in the unlawful practice of law and not complying with the US Bankruptcy Code. The US Trustee seeks a permanent injunction prohibiting him from preparing bankruptcy petitions for people in Massachusetts, disgorgement of all fees for engaging in the unlawful practice of law and additional damages for unfair and deceptive acts and practices. So far, Martinez has not defended himself against the allegations. A request for default is pending.

Unfortunately, for every guy like Martinez out there, there likely will be another to fill his shoes. While people facing foreclosure should always explore all available options, one of those options must include meeting and talking with a competent bankruptcy attorney who can listen to all facts and give honest and complete advice that can be relied on. According to the US Trustee, that is not Mr. Martinez and Homestead Financial Corporation.

If you do not live in Massachusetts, you can locate a bankruptcy attorney by going to the website of the National Association of Consumer Bankruptcy Attorneys.

Posted by Bill McLeod at 5:30 PM | Permalink | Comments (0) | TrackBacks (0)

Today, a unanimous Supreme Court ruled that the US government can offset Social Security benefits to collect delinquent student loans – even loans that have been outstanding for more than ten years.

The case is Lockhart v. United States.

Posted by Bill McLeod at 6:34 PM | Permalink | Comments (0) | TrackBacks (0)