What is a “Bankruptcy Trustee”?   It is common for clients considering bankruptcy or who have already filed, to ask what a “bankruptcy trustee” is. This question is usually followed quickly by, “What does the bankruptcy trustee do?” The trustee is a person assigned to your bankruptcy case to represent the interests of the people [...]

Payment Plans Are Available You most certainly can get on a payment plan to file a bankruptcy.  In fact, most people do not have the ability to pay the lump sum which is the court costs and the attorneys’ fees, all at one sitting.  What I like to do is offer a client a reasonable+ Read MoreThe post Can I make payments to file a bankruptcy? appeared first on David M. Siegel.

All Creditors Must Be Listed If you are filing bankruptcy, then all of your creditors must be listed.  This includes credit cards, personal loans, auto payments, mortgage payments and any other debt, including debts owed to family members.  I understand that many people have lived off credit cards, they love the convenience of credit cards+ Read MoreThe post Can I keep one of my credit cards and not put it on my bankruptcy? appeared first on David M. Siegel.

   The Court in In re Kelly, 2013 WL 603138 (Bankr. E.D. Mich. 2013) denied the Debtors' motion to value property they had been renting out, determining that under the hybrid approach for determination of whether a property is the debtor's principal residence so as to prevent valuation under §1322(b)(2), since the debtor's plan indicating they were planning to surrender their current home and move into this rental property, it was ineligible for valuation.     The Court recognized three lines of cases on the issue.  The first line simply holds that the property where the debtor resides on the date of the filing of the bankruptcy constitutes the debtor's homestead.  In re Howard, 220 B.R. 716, 718 (Bankr.S.D.Ga.1998); In re Lebrun, 185 B.R. 665, 666 (Bankr.D.Mass.1995); In re Wetherbee, 164 B.R. 212, 215 (Bankr.D.N.H.1994); In re Churchill, 150 B.R. 288, 289 (Bankr.D.Me.1993). See also 2 K. Lundin, Chapter 13 Bankruptcy § 121.2 at 121–3–121–9 (3d Ed.2000).   The second line of cases looks rather to the date the debtor obtained financing on the property, and whether the property was the homestead on this date.  In re Williamson, 387 B.R. 914, 920 (Bankr.M.D.Ga.2008); In re Smart, 214 B.R. 63, 67 (Bankr.D.Conn.1997).  The theory is that the debtor's should not be able to manipulate the application of the anti-modification clause through the timing of the bankruptcy.  The third of cases is the hybrid approach, looking to both the date the loan was incurred, and where the debtor resided when the bankruptcy was filed; but also examining other factors.  Thus, modification was permitted where the court determined that the parties intended the mortgage not to be secured by the principal residence.  In re Baker, 398 B.R. 198 (Bankr.N.D.Ohio 2008).  Modification was denied based on state domicile law where the debtor moved out of the property just prior to filing in In re Salmeron, 2010 WL 1780119 (Bankr.D.Md.2010).    The test in determining principal residence are as follows: (1) where did the debtor reside on the date of filing of bankruptcy? (2) did the debtor move out of their principal residence either shortly before or after the filing of the bankruptcy? (3) did the debtor move into a property debtor had previously used as a rental property? (4) where does the debtor intend to reside for the duration of the bankruptcy? and (5) does the debtor retain title to the property even though debtor is not residing in the property at the time of filing for bankruptcy? (6) did the debtor start renting his/her principle residence to tenants around the time debtor filed for bankruptcy? Applying these factors the Court determined that the property to which the debtors intended to move subsequent to the filing of the case constituted the homestead, despite the fact that the debtors had actually resided on another property for nearly twenty years prior to the bankruptcy, and resided on the other property when the case was filed.  The debtors actually moved from the property two months after the case was filed.    The case raises a number of questions.  Query if the plan had provided for renting out that property, and they changed their mind after the order valuing was entered, perhaps when they had trouble renting the property?  Would that justify vacating a modification order?  How do debtor's prove that they do not intend to move into a rental property?  Also, one of the stated rationale's for §1322(b)(2) is to encourage lenders to finance the purchase of homesteads by insuring that the the loans would not subsequently be modified in bankruptcy.  "[T]he legislative history indicating that favorable treatment of residential mortgagees was intended to encourage the flow of capital into the home lending market. See Grubbs v. Houston First American Savings Assn., 730 F.2d 236, 245–246 (CA5 1984) (canvassing legislative history of Chapter 13 home mortgage provisions)."  Nobelman v. Am. Sav. Bank, 508 U.S. 324, 332, 113 S. Ct. 2106, 2112, 124 L. Ed. 2d 228 (1993).  However, in the case the lender knew the property was a rental property at the time the mortgage loan was initiated.  

Case Overview This is the case of Gary Kaplan from St. Charles, Illinois.  Mr. Kaplan filed a Chapter 7 bankruptcy back in 2001 so he is eligible to file another Chapter 7 should the facts dictate that he file.  He has a townhouse that has a market value of $188,000 and he owes approximately $46,000+ Read MoreThe post Bankruptcy Can Eliminate IRS Debt In Certain Cases appeared first on David M. Siegel.

I have previously written about Crystal Cox, a self-styled investigative blogger, who found herself on the receiving end of a judgment for $2.5 million after she posted caustic comments about a bankruptcy trustee.  You can find the prior post here.   One aspect of the District Court's opinion which raised my eyebrows was the court's stingy application of the media privilege.    Under the District Court's view, most bloggers would not be entitled to some of the protections available to the professional media.   Apparently I was not the only one who thought this to be a strange result.   UCLA Professor Eugene Volokh, who blogs at the Volokh Conspiracy is representing Ms. Cox on a pro bono basis in her appeal to the Ninth Circuit.   Scotusblog.com, the leading Supreme Court blog, and the Reporters Committee for Freedom of the Press have weighed in with amicus briefs.     In an unusual twist, the Plaintiff sought to have the Sheriff levy upon and sell the Defendant's right to appeal.   By auctioning off the right to appeal, the Plaintiff could effectively insulate its judgment from judicial review.   Prof. Volokh successfully obtained an order from the District Court blocking this relief.   You can read about it in his own words here.  I am pleased that the Plaintiff's nefarious tactic was rebuffed and that there are some serious amici weighing in.   This case raises important issues about the First Amendment protections applicable to the citizen media.

Introduction to Bankruptcy for Individuals in Phoenix and Tucson Bankruptcy is often a confusing subject. As with most issues involving the law, it can be hard to dig through all the legal jargon used. Especially when you’re feeling stressed about your finances, it can be even harder to understand the process. We’re here to walk [...]

Creditors Should Not Call Creditors should not be calling you after your bankruptcy case is filed.  In some cases, creditors just have not received the required notice under the Bankruptcy Code.  In some cases, notice has gone to the proper address, however, there is a collection firm involved now who did not have knowledge of+ Read MoreThe post Chicago Bankruptcy Attorney David Siegel Advises That During A Bankruptcy Case, Creditors Should Not Be Calling appeared first on David M. Siegel.

Here at Shenwick & Associates, our practice is limited to bankruptcy and real estate. So the intersection of the two, distressed real estate, is our specialty. Many homeowners are suffering from the triple threat of stagnant wages (or unemployment), depreciating home prices and burdensome monthly mortgage payments. Some homeowners have been fortunate enough to have their lenders restructure their mortgages. And others (who are not so fortunate) have had their homes foreclosed on, and have had some or all of their mortgage debt forgiven. But, as with most good things in life, there's a catch. Under § 108 of the Internal Revenue Code, debt relief is considered "relief of indebtedness income" and subject to taxation. In 2007, The Mortgage Forgiveness Debt Relief Act of 2007 (the "Act") was enacted, which generally allows taxpayers to exclude up to $2 million (jointly) or $1 million (if single or married and filing separately) of income from the discharge of debt on their principal residence. Both debt reduced through mortgage restructuring and mortgage debt forgiven in connection with a foreclosure qualify for the relief. The Act applied to debt forgiven in calendar years 2007 through 2012, and was due to expire on Dec. 31, 2012. As part of the negotiations to avoid the "fiscal cliff," Congress extended its provisions to debt forgiven in 2013. The Act doesn't apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition. The Act also doesn't apply to credit card debt or non–residential property. A Chapter 7 bankruptcy filing can discharge debt owed to taxing authorities due to relief of indebtedness income. For strategies on dealing with distressed real estate or avoiding the potential pitfalls associated with relief of indebtedness income, please contact Jim Shenwick.

The“Who’s On First” problem of lien strip service haunted my weekend at the Sacramento Bankruptcy Forum and the week that has followed back in the office. As one judge so kindly pointed out, if it turns out your service of the lien strip motion was inadequate, it will be the debtor’s attorney in the cross hairs. Thanks, judge. Where most bankruptcy issues are relatively small dollar value problems, second mortgages range from tens of thousands of dollars to hundreds of thousands of dollars. Get tagged with screwing this up and you (and your carrier if you have one) are toast. My game plan The unknowns, as I see it: 1) whether good service on the servicer binds the actual owner of the obligation;  and 2) how are you supposed to flush out who actually owns the note to serve them. Since only time and appeals courts will give us the answer to the first question, I’m tackling the second. Completed motions When a mortgage creditor files a proof of claim, you get some bread crumbs in the search for the note’s owner.  But pretty uniformly these days, we are expected to file motions to value collateral before the claims bar date passes. For the cases where I’ve gotten orders valuing collateral, I have some time. I plan to audit the claims register for any claims filed after my motion.  If new players turn up, I’ll serve them with the motion and order, and file a certificate of service. If it appears that it was a servicer who got the motion, I envision a Qualified Written Request . My experience with QWR’s has been that they are slow (60 business days for a response).  Finding the QWR address for the institution is only marginally easier than intuiting who holds the note.  And recipients have no commitment to being forthcoming. (Other than that, it’s a marvelous tool!) In the past, I have not served the beneficiary of the recorded security interest.  I am inclined to go back and do so.  I want to build the argument that if the true holder of the interest in real property can’t be bothered to make their interest part of the public record, why is that my client’s problem? And I’m considering recording the orders that come out of the motion to value, not because they are definitive, but again to trigger the laches defense, in the future. “The debtor’s attempts to void your lien have been public knowledge for X years, Mr. Holder.  Why aren’t you bound to defend your position if you claim to have had no actual notice?” Our Bay Area courts have sometimes taken the position that vesting at confirmation removes the debtor’s property from the estate and deprives the court of jurisdiction. Asked about going back and correcting lien strip errors, one judge suggested modifying the confirmed plan to revest property in the debtor, then bringing an amended motion. New cases Going forward, I plan on embracing Rule 2004 .  It’s hard to imagine language that is broader: On motion of any party in interest, the court may order the examination of any entity. I have some concerns about geography and the  need to get a subpoena from the court where the witness does business. My thought is to see if the court will make an order for either an  examination on a written interrogatory, or a production of documents by mail. I don’t want to be trekking to where ever the servicer is, or calling on friends in far off places to get the frigging banks to tell me who should care about my motion. I’ll report back on how it works. Judge Ludin reported that he was itching to be presented with a motion under §342(f),  seeking to require the banks designate an address for service within his district.  Anyone? Now, I’m for some shut eye. Image courtesy of DVIDSHUBS