In the last two entries, I shared my observations of honesty and dishonesty in the bankruptcy process. It has been an issue that has been crawling under my skin for many months now. And in this last installment of Honesty and Bankruptcy, I explain why that is.
Archive for the ‘Chapter 13’ Category
Honesty and Bankruptcy, Part II: Feeling Dishonest
Sunday, November 1st, 2009
It seems that many people are hypersensitive over H1N1. I was at the market yesterday and an older man sneezed, and by the looks on the faces of those standing around him, you’d have thought someone nearby was pointing and shrieking that he was a leper. Just because someone is sneezing or coughing doesn’t mean they have the swine flu. Just because someone is in bankruptcy or needs bankruptcy protection doesn’t mean they are dishonest. And just because someone feels like they did something dishonest does not mean that they don’t deserve bankruptcy protection. In other words, feeling dishonest is not the same as being dishonest.
Honesty and Bankruptcy, Part I: Day of the Living Dishonest
Saturday, October 31st, 2009
When rapper Chris Brown beat up his then girlfriend Rhianna, there was an odd reaction from much of Hollywood. As Adam Carolla and Dr. Drew were recently discussing on Carolla’s podcast, Hollywood’s reaction – especially at red carpet events – seemed less than honest and at times downright pathetic. Some were praising Brown for being a “good person” who was going through a difficult time. But only a few stood forward and publicly denounced Chris Brown as a pathetic loser who viciously assaulted his girlfriend… something no one can legitimately justify. The podcast echoed in my mind this week when I was faced with a debtor who was – to put it mildly – outrageously dishonest. So much so that I was forced to look this person in the eye and say “you know, you’re not coming across as an honest but unfortunate person entitled to bankruptcy protection.” I thought I was being polite. Their response left me thinking even more.
I cannot share the details. Instead, let me share this clever allegory that I believe aptly illustrates exactly how things went in my meeting with this debtor.
When You Discover that You Are a Creditor in a Bankruptcy Case…
Monday, October 12th, 2009
Last week, I was in the clerk’s office and overheard two people ask the clerk which forms needed to be filed in a bankruptcy case. But this person was not a debtor – they were a creditor. Their landlord had filed bankruptcy. The former tenant was looking for their security deposit back, and was going to sue the debtor in small claims. I couldn’t help myself – and I butted in.
“You need relief from the automatic stay.”
“The stay applies even to me?” one asked.
“It applies to everyone.”
After that short exchange, I thought I would put together a short checklist of things to do when your landlord – or someone else you know who also happens to owe you money – files a petition seeking bankruptcy protection.
Social Networking Sites and Bankruptcy: The Intersection is Dead Ahead
Wednesday, September 30th, 2009
There are a growing number of social networking sites out there on the world-wide-interwebs that people are latching onto. In fact, both the firm and I have latched onto Facebook (we just lauched our Fan page this week!). So I was intrigued after recently reading that a growing number of domestic relations attorneys were beginning to scour sites like Facebook in an effort to get information on opposing parties. At first, I found it merely interesting as I once practiced domestic relations law. But the subject gnawed on me for several days. Then, earlier this week, I read that collection agencies are trolling sites like Facebook looking for debtors. Then it dawned on me: if collectors are doing it, and divorce attorneys are doing it, there really is nothing stopping any party in any legal case from looking into Facebook or other social networking sites in an effort to gain a legal advantage of any opposing party. And this rings true in the world of bankruptcy.
‘Extend and Pretend’ Doth Not A Modification Make
Tuesday, July 28th, 2009
Today’s editorial in USA Today chides lenders for playing the “extend and pretend” game with mortgage modifications. The piece is one of the first of what I hope is a larger chorus of supporters of amending the Bankruptcy Code to permit modifications on residences.
There’s just one problem with this game of “extend and pretend.” It’s bad for everyone concerned, including the banks. As the number of houses in foreclosure grows, it damages neighborhoods and pushes down home values.
The best thing Congress could do to aid hard-pressed homeowners is to alter bankruptcy law to allow judges to modify troubled mortgages, as they do with virtually all other debts. This common-sense change would give lenders more incentive to make modifications themselves, rather than lose control to a bankruptcy judge.
It’s time to start pressuring Washington about this again. And this time, we need to be sure that Washington hears from everyone. Start talking.
Reactive vs. Proactive
Thursday, July 23rd, 2009
I’ve mentioned that sometimes it’s better to proactive than reactive. Being proactive is calling a bankruptcy attorney when you sense that the barn out back may be a fire hazard. Being reactive is calling a bankruptcy attorney when the barn is burning, you can’t remember where you put the garden hose while you wonder if water bill has been paid.
When clients do nothing until faced with a foreclosure notice, they are being reactive… which unfortunately places me in a reactive posture. After years of doing both, I’m certain that being reactive makes an otherwise average case more difficult and more expensive, because but for a scheduled auction some people would just hope that the finances will get better. But it’s that auction that pushes some people into finally getting their ‘house in order’, albeit quickly… and hopefully not too late. And for one of my clients, getting his house in order was what he wanted me to help them with.
After being retained by a reactive client, one of the first things I did was send a letter off to an attorney representing a lender. I let them know that I was representing the client for a bankruptcy case, and I asked that he please send copies of notices to me so that I may ensure everyone is properly listed on the petition and creditor matrix. A few weeks later, I received a copy of a notice of scheduled auction which I sent off to my client with note reminding him that his petition needed to be filed before the scheduled auction. The letter also reminded my client of the documents and information I needed to ensure that the paperwork was properly completed when filed.
About 10 days later, and about 2 weeks before the auction, the lender’s attorney calls me and leaves me a message. He wants to know if I still plan on filing a petition, since he has to hire an auctioneer, and go through the costs of publishing. He tells me he wants to avoid all of those costs if my client is going to file bankruptcy. defih8q45j
That put me into a bit of a predicament. (more…)
Thinking About a Consult?
Tuesday, July 21st, 2009
Today, as I found myself on the phone repeating myself – a lot. It then occurred to me that I could probably explain how our consult process works here on the website. In other words, how do you get from reading this website and digesting the information to getting some face-time with a lawyer (i.e., me).
Here’s how.
Things I Won’t Do
Thursday, July 9th, 2009
Among the many reasons why I blog on this site is to give people a perspective of me that will help them decide whether I am the right attorney for them. Sometimes the things I write about concern my legal expertise in bankruptcy, and other times, I blog about my observations about bankruptcy law in this peculiar economic climate. And occasionally, I can write about real events that may, or may not, help readers understand why sort of an attorney they are getting if they pick up the phone and call.
This week, I received a call from a homeowner from an affluent Massachusetts suburb. This homeowner was a real estate professional – and I probably do not need to mention that real estate professionals of all shapes and sizes are taking a beating in this economy (and have been for some time). Like many in that industry, the income was sporadic, and at times nonexistent. Other than commissions from closings, there is no other source of income. The homeowner has not been gainfully employed with regular income since 2005.
The home mortgage has not been paid for almost a year and a foreclosure auction has been scheduled sometime next month. Credit cards have not been paid for at least 18 months. The homeowner has – like many – been consistently robbing Peter to pay Paul.
There is no equity in the property; the house is under water. The house also has an estimate market value of more than $575,000.
As the mortgage has not been paid, the only bankruptcy alternative for this debtor would be a chapter 13 (the homeowners debt did not exceed the Section 109(e) cap). However, for a chapter 13 to work, the homeowner needs income. And a chapter 13 is not a quick, cheap and easy process – unlike most chapter 7 cases. We could also explore requesting a modification of the mortgage, but a back-up plan – i.e., a chapter 13 filing – would be prudent if the modification was not approved, or if the lender refused to reschedule the auction pending the modification request.
I then asked an important question: “What do you have for cash on hand? How much money do you have now?”
The question is important because the answer tells me much. Since the mortgage has not been paid, I assume – or hope – that a homeowner has put some money aside to bring the mortgage current. In other words, they have taken some money as a “housing payment” and segregated it – either in a separate account, or in the same account with the discipline to not spend it. I also ask because it is important for me to gauge whether the homeowner will be able to afford chapter13 – not only in terms of fees and costs, but in terms of regular monthly payments to creditors and the chapter 13 trustee that in most cases, must begin shortly after the case is filed.
The debtor responded: about “$1,100.” Without missing a beat, the caller then offered assurances that money would come in the future, and that the homeowner could make it work. I declined representation. Here’s why.
The Elephant in the Room: Married Same-Sex Debtors
The decision to seek bankruptcy protection is never easy, and when two people are involved, it is not necessarily easier. Married opposite-sex debtors have the option of seeking bankruptcy protection jointly in one case. But as a growing handful of states recognize same-sex marriages or its legal equivalent (“unions”), and as the legitimacy and constitutionality of the Defense of Marriage Act (or DOMA) continues to be litigated in courts across the country, same-sex debtors seeking bankruptcy relief face even tougher decisions.
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Tags: Commentary - Legal, Consumer Rights, Defense of Marriage Act (DOMA), Joint Debtors
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