The decision to file for bankruptcy is a very important and personal decision.  If you are considering filing for bankruptcy there are a number of things to consider and a number of common pitfalls to avoid.  Even after making the decision to file for bankruptcy you probably still have many questions about how the process works and how long it will be until the bankruptcy is final.As bankruptcy law is quite complex, the first thing you will want to do is schedule a consultation with an attorney.  At this consultation we will take some information, evaluate the case, and answer any questions you may have.  At the end of the consultation we will advise you about whether you qualify to file for bankruptcy, and if so whether you should file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.Should you decide to retain A & L, Licker Law Firm, LLC, an attorney will go over a contract with you.  At this time we will discuss attorney fees, possible payment plans, and all court fees.  We will then go over the information you will need to provide.  This will include creditor information and other personal information.  It is advisable to begin working on this as soon as possible.Once you have made your final payment on attorney fees and have submitted all of your information we will begin work on your case.  From this time it may take a few weeks to work on your case.  Once we have finished our work and you have paid at least half of the court fees we will then file your case.  The filing date is the most important date in a bankruptcy proceeding.  As of the filing date creditors are legally barred from contacting you or trying to collect any money from you.  Should creditors attempt to make contact or collect you should advise them that you have filed for bankruptcy and that you are represented by an attorney.  You may give them your attorney's name and contact information.  Once you have filed your case it generally takes about four months until the bankruptcy is finalized.  At some point you will be called before a trustee who oversees bankruptcy proceedings.  This is a very short meeting where you will be asked a few questions.  Should you retain counsel a lawyer will be at the meeting with you.  When the bankruptcy is finalized you will be notified my mail that your debt has been discharged.

A debtor can obtain a discharge of debt by filing for bankruptcy.  A discharge debt releases the individual's personal liability for many types of unsecured debts.  A discharge prevents creditors from making any collections efforts upon the debtor including phone calls, letters, and threats. Many types of unsecured debt can be discharged, including credit card debt, pay day loans, and medical bills.  Howwever, there are other types of debt that cannot be discharged through bankruptcy.  Some examples of debts that cannot be discharged are certain tax liabilities, student loans, financial responsibility for any injury caused while driving while intoxicated, child support, alimony, condo and subdivision fees, and debts to governmental agencies.  Further, if there are existing liens on property they will not be discharged.  The individual is still responsible for anything not discharged by the bankruptcy proceedings. Discharge varies slightly between Chapter 7 and Chapter 13 filings.  In a Chapter 7 Bankruptcy filing creditors are given notice of the proceedings and are given time to object.  If no objections are received the debt is generally discharged automatically.  The court also has certain requirements and regulations for discharge and may dismiss a case if the requirements are not met in a timely manner.  Some of the requirements of the court are that the individual provide tax documents and complete a course on financial management. The court may also dismiss a case without discharge for any type of fraud, concealment, or failure to account for assets. In a Chapter 13 Bankruptcy discharge of debt occurs when the reorganization plan is paid in full.  In Chapter 13 filings, like Chapter 11 filings, creditors are given the opportunity to object at the plan confirmation hearing.  Creditors may not object to the discharge upon completion of payments under the plan. It is important to note that in Chapter 7 proceedings the court may revoke a discharge under limited circumstances.  The grounds for a revocation closely resemble the grounds of the court to dismiss the case without discharge, including fraud or concealment.  In a Chapter 13 filing the court may revoke either confirmation or the discharge of the plan for fraud. After your debt is discharged is it not legally enforceable and creditors are not legally allowed to attempt to collect a discharged debt.  Should a creditor attempt to collect discharged debt a motion can be filed with the court to reopen the case to address tthe creditor.  The court may sanction creditors for violating a discharge order. Though a creditor may not attempt to collect a discharged debt, you may opt to voluntarily pay the amount that was discharged.  It is imperative to note that this may only be done after a final order has been issued and the bankruptcy is complete.  This most often occurs when the relationship between the parties is of personal importance to the individual, for example, if debts to family or friends were discharged.

In all bankruptcy proceedings certain assets are exempt from being taken, meaning that you are entitled to keep them. These assets are protected by exemptions and are defined by the state. Federal exemptions are not available in Missouri.  These state exemptions are automatic and do not require any other qualification.  For many of the exemptions listed below the amounts can be doubled if you are filing for bankruptcy with your spouse.  However, it is important to note that there are some exceptions to doubling, including the homestead exemption. Some of the most commonly applicable exemptions are as follows: The Homestead Exemption.  Individuals filing for bankruptcy may exempt up to $15,000 of real property or up to $5,000 of a mobile home.  However, in some cases, where a husband and wife own real property in a tenancy by the entirety, the entire value of a home may be exempt if only one spouse is filing for bankruptcy.  To have a tenancy by the entirety a husband and wife must own the property together and must have come into ownership of the property at the same time, by the same deed, and must share complete possession and ownership.  Finally, to exempt the entire value of the home to the husband and wife must not have any other joint debt.  It is important to note that medical bills are considered to be joint debt in the State of Missouri.  This means that if one or both spouse have medical bills this exception does not apply, however, the standard $15,000 exemption still applies.Motor Vehicle Exemptions.  Individuals filing for bankruptcy may exempt up to $3,000, or $6,000 for married filers, for a motor vehicle.  Married joint filers may each apply $3,000 to one car, or if you jointly own only one shared vehicle you may apply the full $6,000 exemption to one vehicle.  An individual filer may not split the exemption among vehicles, regardless of value.Household Goods Exemptions.  Individuals filing for bankruptcy may exempt up to $3,000, or $6,000 for married filers, in household goods.  Household goods include clothing, appliances, furnishings, books, animals, musical instruments, and crops.Jewelry Exemptions.  Individuals filing for bankruptcy may exempt up to $1,500, or $3,000 for married filers, for wedding rings.  Much like motor vehicles, a married couple may split the $3,000 exemption between two rings, one belonging to each spouse.  Here, the couple may not combine the individual exemptions to one ring owned by either spouse under any circumstance.  In addition to wedding rings, individuals filing for bankruptcy may exempt any other jewelry up to $500, or $1,000 for married filers.  Burial Grounds Exemptions.  Individuals filing for bankruptcy may exempt up to $100, or one acre, of burial grounds.Retirement Accounts Exemptions.  Individuals filing for bankruptcy may exempt certain tax exempt accounts, including: IRA's, 401(k)s, profit sharing, and money purchase plans.  However, it is important to note, that certain life insurance policies and annuities may not be exempt if there is a current cash value.Tools of Trade Exemptions.  Individuals filing for bankruptcy may exempt up to $3000, or $6,000 for married filers, for professional books or tools of a trade.  In some cases, a vehicle may fall under this designation, however, using a vehicle to commute to and from work does not qualify under this exemption.Head of Household Exemption.  An individual filing for bankruptcy may exempt any asset up to $1,250 if the filer provides a majority of the income for the household.  If a filer qualifies for a head of household exemption he/she may also exempt $350 for each child under the age of 18 living in the household.Wildcard Exemption.  Individuals filing for bankruptcy may exempt any asset up to $600.  This amount can be stacked on top of other exemptions to increase the exempt value of a particular asset or interest.

Print PageEvery year, I read more cases than I have time to blog about. Here are some cases that I meant to write about but didn't have the time.River Road Partners v. Amalgamated Bank, 651 F.3d 642 (7th Cir. 2011), cert granted, RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166 (2011). The Supreme Court has granted cert to resolve the Philadelphia Newspapers issue of whether a debtor can deny a creditor's right to credit bid in a plan by offering the creditor the "indubitable equivalent." The Third Circuit said yes. The Seventh Circuit said no. You can access all the relevant documents at SCOTUS Blog here.In re DBSD, North America, Inc., 634 F.3d 79 (2nd Cir. 2011). The Second Circuit held that "gifting" where a senior class of claims gives up property in favor of a junior class violates the absolute priority rule where an intervening class of claims is skipped. The Court also held that votes of a competitor could be designated as cast in bad faith.Matter of Davis Offshore, LP, No. 09-41294 (5th Cir. 7/16/11).In re Dronebarger, No. 10-10889 (Bankr. W.D. Tex. 1/31/11), which can be found here. This case is significant as the maiden opinion from Judge H. Christopher Mott, who took the bench in October 2010. The issue was whether the guarantor of a lease could take advantage of the cap on damages resulting from lease termination under section 502(b)(6). In a forty page opinion, the Court said no. The Court's primary reasoning was that section 502(b)(6) was limited to damages arising from termination of a lease. Here, the damages arose from failure to repair the property during the pendency of the lease, not from termination of the lease. As a result, he distinguished the case from In re Mr. Gatti's, Inc., 162 B.R. 1004 (Bankr. W.D. Tex. 1994), where the damages resulted from rejection of the lease in bankruptcy. He also ruled that a guarantor could not take advantage of the cap because his liability arose under a guaranty rather than under the lease. The opinion has an excellent discussion of section 502(b)(6) and should be must reading for any party litigating under that section.Disclosure: My firm became co-counsel to the Debtors subsequent to the court's opinion. We were not involved in the claims issue. Another interesting historical note is that Eric Taube represented the landlord in both Mr. Gatti's and Dronebarger. I represented the Debtor in Mr. Gatti's. In re Wren Alexander Investments, LLC, No. 08-52914 (Bankr. W.D. Tex. 2/17/11). You can find the opinion here. This case goes to show that not all second acts are for the better. Charles Pircher is a former banker who went to prison during the bank scandal of the 1980s. After prison, he managed a series of professional employee organizations which minimized workers compensation costs by forming new entities to take advantage of lower rates given to new companies. The PE Os were supposed to pay wages and remit taxes to the government. They failed to accomplish the latter, resulting in a large IRS tax liability.One of the PE Os acquired a ranch in Medina County, Texas. It proved to be a good investment because it was purchased for $630,000 in 1999 and was sold for $5,250,000 in 2009. Pircher used money from the PE Os to build a 10,000 square foot house, a 12,000 square foot horse stable and a 39,000 square foot quarter horse arena. While Pircher said that he had an informal agreement to pay the money back at some point, no documents were drafted and he paid no rent.The first owner of the property, United Capital Investment Group, Inc., took out a hard money loan to pay off the original purchase price, to build improvements on the property and to pay Pircher's criminal restitution obligations. When the IRS started filing tax liens against the PE Os, Pircher transferred the property to Medina Heritage, Ltd., an entity he controlled. While the deed was dated prior to the filing of an IRS tax lien, it was not recorded until afterwards. The consideration for the transfer was assumption of the existing liabilities on the property.The property was then transferred to Wren Alexander Investments, Ltd., the debtor in this case. Wren Alexander was controlled by a close business associate of Pircher's. The purchase price was the amount necessary to pay off the existing liens (although not the tax lien). Pircher's stated intent in selling the property was to get it out of his name while retaining control. The IRS filed a nominee lien against Wren Alexander Investments, Ltd.Wren Alexander filed chapter 11 and the property was sold. The Debtor filed an objection to the claim of the IRS. The principal issue was whether the tax lien was valid against the transferee of the property. Judge Ronald King has an excellent discussion of Texas fraudulent transfer law. Judge King found that the transfer from United Capital to Medina Heritage was a fraudulent transfer because the property was sold for less than reasonably equivalent value while insolvent. The found that this provision could not be used to avoid the second transfer because the IRS was not an existing creditor of Wren Alexander. However, he did find that the transfer could be avoided as one made with actual intent to hinder, delay or defraud. The result was that the IRS received the remaining proceeds in the amount of approximately $1.2 million.Munoz v. James S. Nutter & Co., Adv. No. 10-3039 (Bankr. W.D. Tex. 2/22/11).In re Schott, No. 10-54276 (Bankr. W.D. Tex. 3/15/11).Turbo Aleae Investments, Inv. v. Borschow, Adv. No. 09-3005 (Bankr. W.D. Tex. 4/8/11).Legal Xtranet, Inc. v. AT&T Management Services, LP, Adv. No. 11-5042 (Bankr. W.D. Tex. 5/24/11), which can be found here. This was a case involving a motion to remand. The Court found that state law contract disputes were non-core proceedings subject to mandatory abstention and that disputes over the tax liability of AT&T did not qualify for even "related to" jurisdiction. The most interesting part of the opinion is the Court's lament over AT&T's successful attempt at forum shopping. Judge Leif Clark wrote:The court is reluctant to reward AT&T’s blatant forum shopping in this case. AT&T filed a jury demand and refused to consent to a jury trial in this court in an effort to bolster its argument that the parties’ dispute could be timely adjudicated in state court: AT&T’s refusal to consent to a jury trial here meant that even if the court retained jurisdiction over the parties’ dispute, the case would have to be tried in the federal district court, assuring AT&T that it would have a different judge to hear the case. That would also almost certainly mean that the case would not likely be heard for quite some time. Furthermore, it is not entirely clear that the parties’ dispute, as it currently stands, involves any factual issues for a jury to decide – the request of declaratory relief will not go beyond the terms of the contract itself unless there is ambiguity in the agreement (or unless the contract itself is found to point outside itself for the determination or application of its terms). Thus, AT&T’s jury demand machinations appear to be nothing more than an effort to forum shop. Nonetheless, as noted above, the question is not whether the case can be more timely adjudicated in state court than in the bankruptcy or district court; the question is simply whether it can be timely adjudicated in state court. AT&T established that it could be timely adjudicated in state court, and the court’s determination to that effect did not depend upon a finding that the case could not be timely adjudicated in the district court. And there is nothing in section 1334(c)(2) that permits a court to deny relief on grounds that the effort is motivated by a desire to forum shop. Indeed, the sad truth is that the structure of bankruptcy jurisdiction actually encourages and rewards forum shopping strategies. There is little this court can about that, other than to encourage Congress to consider the consequences that seem to flow from the current structure.Opinion, at p. 17. It seems unlikely that Congress will be moved to change section 1334(c)(2).In re Village at Camp Bowie I, LP, No. 10-45097 (Bankr. N.D. Tex. 8/4/11).Kirschner v. Agoglia, Adv. No. 07-3060 (Bankr. S.D. N.Y. 11/30/11).

Print PageA landmark case involving ethics and technology has reached its conclusion with an opinion from the Third Circuit Court of Appeals that an attorney cannot blindly rely on information provided by an automated system, especially when the accuracy of that information has been called into question. In re Taylor, 655 F.3d 274 (3rd Cir. 2011). I have previously written about the bankruptcy court decision here and the district court opinion here. The Court of Appeals set the tone for the opinion with its opening statement: This case is an unfortunate example of the ways in which overreliance on computerized processes in a high-volume practice, as well as a failure on the part of clients and lawyers alike to take responsibility for accurate knowledge of a case, can lead to attorney misconduct before a court. In re Taylor, at 277. What Happened The Taylor case illustrates the that can arise when a consumer debtor finds himself in a battle with a faceless computer. The Taylors and HSBC had a dispute over whether flood insurance was required on the Taylors’ property. As a result, the Taylors sent in their payments minus the disputed amount. HSBC placed the partial payments into suspense until a full payment was received an imposed late fees on the payment. When the Taylors filed for chapter 13 bankruptcy, HSBC sent a referral to the Udren Law Firm to file a motion for relief from automatic stay. The referral was processed through the NewTrak technology system. The Court of Appeals described the process as follows:HSBC does not deign to communicate directly with the firms it employs in its high-volume foreclosure work; rather, it uses a computerized system called NewTrak (provided by a third party, LPS) to assign individual firms discrete assignments and provide the limited data the system deems relevant to each assignment. The firms are selected and the instructions generated without any direct human involvement. The firms so chosen generally do not have the capacity to check the data (such as the amount of mortgage payment or time in arrears) provided to them by NewTrak and are not expected to communicate with other firms that may have done related work on the matter. Although it is technically possible for a firm hired through NewTrak to contact HSBC to discuss the matter on which it has been retained, it is clear from the record that this was discouraged and that some attorneys, including at least one Udren Firm attorney, did not believe it to be permitted. In re Taylor, at 278-79. A non-lawyer employee with the Udren Firm used the information provided by NewTrak to prepare the motion for relief from automatic stay. A managing attorney at the Udren Firm reviewed the motion and authorized it to be filed under her electronic signature. The motion recited that the Debtors had not made payments for three post-petition months but added that there was a suspense balance of $1,040. The motion asserted that there was a total arrearage balance of $4,367. The motion listed a different payment amount than the amount listed in the proof of claim filed by a different firm on behalf of HSBC. Finally, the motion asserted that the Debtors had no equity in their property. The Debtors responded to the motion and attached copies of canceled checks payable to HSBC. The Debtors also objected to the proof of claim filed by HSBC. HSBC’s counsel responded to the claims objection asserting that all amounts in the proof of claim were accurate, even though they conflicted with the numbers contained in the motion for relief from stay. The Court had this to say about the firm’s due diligence in filing the motion: Doyle did nothing to verify the information in the motion for relief from stay besides check it against "screen prints" of the NewTrak information. She did not even access NewTrak herself. In effect, she simply proofread the document. It does not appear that NewTrak provided the Udren Firm with any information concerning the Taylors' equity in their home, so Doyle could not have verified her statement in the motion concerning the lack of equity in any way, even against a "screen print." In re Taylor, at 279. At the hearing, a young attorney from the Udren Firm acknowledged that the Debtors had made post-petition payments, but sought to proceed with the motion anyway because the Debtors had failed to respond to requests for admission. The bankruptcy court denied the request to enter the RF As as evidence, noting that the firm "closed their eyes to the fact that there was evidence that . . . conflicted with the very admissions that they asked me [to deem admitted]. They . . . had that evidence [that the assertions in its motion were not accurate] in [their] possession and [they] went ahead like [they] never saw it." (App. 108-109.) The court noted: Maybe they have somebody there churning out these motions that doesn't talk to the people that--you know, you never see the records, do you? Somebody sends it to you that sent it from somebody else. In re Taylor, at 281. The Court directed the Udren Firm to obtain a payment history from HSBC so that the amounts owed could be determined. However, at a subsequent hearing, the young attorney informed the Court that he had submitted the request through NewTrak but had not received a reply. He also informed the Court that he was not allowed to communicate directly with his client. The understandably perturbed Court issued an order for the firm and three of its attorneys to appear and respond to the Court’s concerns about how the case had been handled. After four hearings, the Court concluded that the young associate, the managing attorney who signed the pleadings, the head of the firm, the firm itself and HSBC had all violated Rule 9011. The Court imposed creative, but largely symbolic sanctions. As explained by the Court of Appeals: Because of his inexperience, the court did not sanction Fitzgibbon. However, it required Doyle to take 3 CLE credits in professional responsibility; Udren himself to be trained in the use of NewTrak and to spend a day observing his employees handling NewTrak; and both Doyle and Udren to conduct a training session for the firm's relevant lawyers in the requirements of Rule 9011 and procedures for escalating inquiries on NewTrak. The court also required HSBC to send a copy of its opinion to all the law firms it uses in bankruptcy proceedings, along with a letter explaining that direct contact with HSBC concerning matters relating to HSBC's case was permissible. In re Taylor at 281-82. The sanctions were aimed more at shaming the firm than financially penalizing it. Ordering the head of the firm to learn how NewTrak worked sent a symbolic message that he was out of touch with how his own law firm worked. Requiring Doyle, the bankruptcy managing attorney, the obtain three hours of CLE in professional responsibility sent the message that she needed this education. Requiring Udren and Doyle to conduct a training session on the requirements of Rule 9011 and how NewTrak worked was intended to correct their behavior. Finally, the requirement that HSBC send a copy of the opinion to all of its attorneys was meant to remedy the perceived view that such contact was forbidden. The District Court reversed all of the sanctions, even those against HSBC, which had not appealed. The District Court found that Debtor’s counsel was equally at fault, that the Bankruptcy Court seemed more interested in sending a message to the bar in general than addressing the failings of counsel in the specific case and that Udren could not be sanctioned under Rule 9011 because he had not signed any pleadings. The U.S. Trustee appealed to the Third Circuit. The Third Circuit Opinion The Third Circuit affirmed the District Court’s ruling that Udren, as shareholder of the firm, could not be sanctioned since he did not sign any pleadings. However, it reversed the remainder of the District Court ruling and reinstated the sanctions against Doyle, the Udren Firm and HSBC. In doing so, it provided a valuable guide to the requirements of Rule 9011 in the age of technology. What’s a Reasonable Attorney to Do? The Court of Appeals pointed out that merely making a false statement is not enough to invoke Rule 9011. The relevant inquiry is what the attorney could reasonably have believed. The concern of Rule 9011 is not the truth or falsity of the representation in itself, but rather whether the party making the representation reasonably believed it at the time to have evidentiary support. In determining whether a party has violated Rule 9011, the court need not find that a party who makes a false representation to the court acted in bad faith. "The imposition of Rule 11 sanctions . . . requires only a showing of objectively unreasonable conduct." In re Taylor, at 282. The Court of Appeals identified four statements that were either false or misleading: In this opinion, we focus on several statements by appellees: (1) in the motion for relief from stay, the statements suggesting that the Taylors had failed to make payments on their mortgage since the filing of their bankruptcy petition and the identification of the months in which and the amount by which they were supposedly delinquent; (2) in the motion for relief from stay, the statement that the Taylors had no or inconsequential equity in the property; (3) in the response to the claim objection, the statement that the figures in the proof of claim were accurate; and, (4) at the first hearing, the attempt to have the requests for admission concerning the lack of mortgage payments deemed admitted. As discussed above, all of these statements involved false or misleading representations to the court. In re Taylor, at 283. It is not a good sign when an opinion identifies multiple cases of false or misleading statements to the court. The Court of Appeals went on to find that the attorneys had not acted reasonably.We must, therefore, determine the reasonableness of the appellees' inquiry before they made their false representations. Reasonableness has been defined as "an objective knowledge or belief at the time of the filing of a challenged paper that the claim was well-grounded in law and fact." (citation omitted). The requirement of reasonable inquiry protects not merely the court and adverse parties, but also the client. The client is not expected to know the technical details of the law and ought to be able to rely on his attorney to elicit from him the information necessary to handle his case in the most effective, yet legally appropriate, manner. ***Central to this case, then, is the degree to which an attorney may reasonably rely on representations from her client. An attorney certainly "is not always foreclosed from relying on information from other persons." (citation omitted). . In making statements to the court, lawyers constantly and appropriately rely on information provided by their clients, especially when the facts are contained in a client's computerized records. It is difficult to imagine how attorneys might function were they required to conduct an independent investigation of every factual representation made by a client before it could be included in a court filing. While Rule 9011 "does not recognize a 'pure heart and empty head' defense," (citation omitted),, a lawyer need not routinely assume the duplicity or gross incompetence of her client in order to meet the requirements of Rule 9011. It is therefore usually reasonable for a lawyer to rely on information provided by a client, especially where that information is superficially plausible and the client provides its own records which appear to confirm the information. That is, an attorney must, in her independent professional judgment, make a reasonable effort to determine what facts are likely to be relevant to a particular court filing and to seek those facts from the client. She cannot simply settle for the information her client determines in advance-- by means of an automated system, no less--that she should be provided with. *** More generally, a reasonable attorney would not file a motion for relief from stay for cause without inquiring of the client whether it had any information relevant to the alleged cause, that is, the debtor's failure to make payments. Had Doyle made even that most minimal of inquiries, HSBC presumably would have provided her with the information in its files concerning the flood insurance dispute, and Doyle could have included that information in her motion for relief from stay--or, perhaps, advised the client that seeking such a motion would be inappropriate under the circumstances. With respect to the Taylors' case in particular, Doyle ignored clear warning signs as to the accuracy of the data that she did receive. In responding to the motion for relief from stay, the Taylors submitted documentation indicating that they had already made at least partial payments for some of the months in question. In objecting to the proof of claim, the Taylors pointed out the inaccuracy of the mortgage payment listed and explained the circumstances surrounding the flood insurance dispute. Although Doyle certainly was not obliged to accept the Taylors' claims at face value, they indisputably put her on notice that the matter was not as simple as it might have appeared from the NewTrak file. At that point, any reasonable attorney would have sought clarification and further documentation from her client, in order to correct any prior inadvertent misstatements to the court and to avoid any further errors. Instead, Doyle mechanically affirmed facts (the monthly mortgage payment) that her own prior filing with the court had already contradicted. Doyle's reliance on HSBC was particularly problematic because she was not, in fact, relying directly on HSBC. Instead, she relied on a computer system run by a third-party vendor. She did not know where the data provided by NewTrak came from. She had no capacity to check the data against the original documents if any of it seemed implausible. And she effectively could not question the data with HSBC. In her relationship with HSBC, Doyle essentially abdicated her professional judgment to a black box. (emphasis added). In re Taylor, at 284-85. Kudos to the U.S. Trustee As a preliminary matter, it is important to recognize the role played by the U.S. Trustee. While the Debtor’s counsel at least raised the issues which allowed the Court to conduct its investigation, the Court of Appeals indicated that Debtor’s counsel was not much better than the Udren firm: Taylor's counsel was also ultimately sanctioned and removed from the case. Counsel did not perform competently, as is evidenced by the Taylors' failure to contest HSBC's RF As. She also made a number of inaccurate statements in her representations to the court. However, it is clear that her conduct did not induce the misrepresentations by HSBC or its attorneys. As the bankruptcy court correctly noted, "the process employed by a mortgagee and its counsel must be fair and transparent without regard to the quality of debtor's counsel since many debtors are unrepresented and cannot rely on counsel to protect them." In re Taylor, at 282, fn. 10. As a result, it is important that the U.S. Trustee’s Office stepped in to protect the integrity of the system. This author has sometimes been critical of the U.S. Trustee’s Office. However, in this case, they did exactly what they should have done—to represent the broader interest of integrity in bankruptcy in a situation where debtor’s counsel was either unable to do so (in the case of Debtor’s initial counsel) or had no financial incentive to do so (presumably with respect to Debtor’s substitute counsel). What It Means The meaning of the opinion is that attorneys are professionals and cannot “abdicate (their) professional judgment to a black box.” In age of massive defaults, creditors cannot be faulted for wanting to minimize their costs. However, the attorney is more than an automaton communicating the demands of the client. If attorneys were mere mouthpieces for their clients, there would be no need for them. Instead, the client could simply generate form pleadings using an automated system. Attorneys exist to exercise professional judgment on behalf of their clients. While attorneys can and must be advocates for their clients, Rule 9011 imposes a duty to review the information provided by the client and determine whether it appears to be reasonable. More importantly, once information which once appeared reasonable is placed into doubt, the attorney has a duty to communicate with the client and determine which facts can reasonably be supported. I believe that attorneys should be skilled craftsman rather than assembly line workers. In this case, a $540 dispute over flood insurance was magnified by a factor of nearly ten times. While it might have been reasonable to rely on the initial information provided by the client through NewTrak, this certainly became unreasonable when the Debtor provided canceled checks showing that payments which the computerized record said did not exist had been made. The significance of Taylor is that for lawyers to continue to have meaning, they must bring something to court above the mere repetition of what their client told them. The Taylor case represented an existential threat to the continuing relevance of attorneys. If the attorney does nothing more than repeat information provided by the client through an automated system, then there is no justification for requiring the additional cost represented by the participation of an attorney. Fortunately, the Third Circuit Court of Appeals provided a justification for the continued involvement of skilled counsel and gave support to the many creditors’ counsel who perform their duties with judgment and skill. The Final Word We appreciate that the use of technology can save both litigants and attorneys time and money, and we do not, of course, mean to suggest that the use of databases or even certain automated communications between counsel and client are presumptively unreasonable. However, Rule 11 requires more than a rubber-stamping of the results of an automated process by a person who happens to be a lawyer. Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a "form pleading" she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry. Therefore, we find that the bankruptcy court did not abuse its discretion in imposing sanctions on Doyle or the Udren Firm itself. However, it did abuse its discretion in imposing sanctions on Udren individually. In re Taylor, at 286.

Car Financing SeminarThis is a free seminar to help solve car financing problems because of a low credit score.Weiss Toyota, Prestige Financial, St. Louis Community Credit Union and the Licker Law Firm, will be present to answer all questions about how to optain a loan for car financing.Attendance is limited, please register by either calling (314) 644-9501 or online at: http://www.thecreditrepairman.net/home/free-seminar-to-help-solve-car-financing-credit-problems.htmlThe seminar will be on Wednesday Evening, January 25, 2012, 6:30pm to 8:00pm at the Marriott Hotel, St. Louis Airport, 10700 Pear Tree Lane, St. Louis, MO 63134. Free Seminar to Help Solve Car Financing Credit Problems.Let Our All-Pro Team Show You How To Tag All The Bases As You Get Home SAFE And Score With A New or Pre-Owned Car! 1st Base – Jimmy Kavadas, The Credit Repairman15-years of helping people with credit problems including bankruptcy. Testimonials at www.thecreditrepairman.net 2nd Base – Attorney Tobias LickerA specialist in bankruptcy filing and client counseling. A good man! www.lickerlawfirm.com 3rd Base – Christine Feeney – Prestige Financial A lender that specializes in helping people with credit problems and obtaining car financing now. https://www.gopfs.com/ HOME – St. Louis Community Credit Union – Leonard Riley, Vice President,SLCCU helps consumers re-establish credit through an easy-to-understand program that helps with saving and paying on time. Welcome to the community.™ www.stlouiscommunity.com  

By MARY WILLIAMS WALSH Retired police and firefighters from Central Falls, R.I., have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments. If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees. “This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.” As cities, towns and counties struggle with fiscal pain, there has been speculation that they could shed their pension obligations in bankruptcy. Some have said it might, in fact, be easier for local governments to drop those obligations than it is for companies, which use a different chapter of the bankruptcy code. Large steel companies, airlines and auto suppliers like Delphi have terminated pension plans in bankruptcy. “But it’s a fight that municipalities haven’t been willing to fight,” said David Skeel, a law professor at the University of Pennsylvania who writes frequently on bankruptcy. Municipalities have been reluctant because public pensions are protected by statutes and constitutional provisions meant to make them nearly airtight. And even if the rules could be broken in bankruptcy, that would present a different problem. Local officials who want to cut pensions do not, as a rule, want to shortchange their bondholders for fear of not being able to borrow in the future — yet bankruptcy law requires that both types of creditors be treated equitably. Rhode Island sought to sidestep the issue with a law that gave bondholders more protections than retirees. Central Falls’s retirees used that issue to gain some bargaining power, extracting a commitment from the state to seek extra money for the next five years. The extra money is not a sure thing, though, and would not cover all the cuts to the retirees over those years. The last American city to work its way through Chapter 9 bankruptcy was Vallejo, Calif., which finished the process this year. It had to navigate similar stumbling blocks. Initially, it planned to cut its workers’ and retirees’ pensions, but it changed course when California’s giant state pension system, which administered Vallejo’s plan, threatened a costly and debilitating court battle. Vallejo instead cut pay, health care and other benefits, as well as city services and payments to its bondholders, and left the pensions intact. Even though the bondholders faced a loss, all parties eventually agreed they had been treated equitably, and the state passed a law making it easier for Vallejo to continue borrowing. The episode strengthened the perception that public retirement plans were unalterable, even in bankruptcy. “Central Falls is undermining that,” said Mr. Skeel, who wrote about Vallejo’s bankruptcy for a coming issue of The University of Chicago Law Review. Central Falls had little choice. For years, its government failed to contribute enough to its police and firefighters’ pension fund, and the fund effectively ran out of money this fall. The city, which had also promised the retirees comprehensive health benefits, could not cover the pension and health payments out of its general revenue. The police and firefighters have known for months that drastic cuts were looming. Last month, the unions representing active workers negotiated new contracts, which called for workers to complete at least 25 years to receive pensions, instead of 20. Workers will also have to meet much more rigorous standards to qualify for disability pensions. Until now, 60 percent of Central Falls police officers and firefighters have retired on full disability pensions, drawing the inflation-protected and tax-free payments even when they embarked on new careers. One of them, at 43, has become a prominent personal-injury lawyer and can be seen in television ads shooting baskets and pretending to fall down a manhole. That retiree, Robert Levine, a former police officer, said his disability was the result of an on-duty car crash where he was not at fault, and that his pension had been granted lawfully after his condition was certified by three different doctors. The retirees, who are not represented by the unions, voted in favor of their pension reductions last week. The cuts would be up to 55 percent of each retiree’s benefits, which now vary widely, from about $4,000 to $46,000 a year, depending on final salary, years of service and other factors. A few retirees would give up more than $25,000 a year. Central Falls’s police and firefighters do not participate in Social Security. The new agreement also reduces the annual cost-of-living adjustments and requires retirees to start contributing toward the cost of their health benefits. But it does not take disability pensions away from retirees — something that could become a sticking point. In the negotiations, the state’s revenue director promised to seek money from the state — enough to pay most retirees a supplement of several thousand dollars a year for five years. Having recently enacted a big and painful package of pension cuts for state workers and teachers, Rhode Island legislators say they are in no mood to help a city’s retirees who stripped their own pension fund, often collecting disability pensions when they were well enough to work. The retirees’ lawyer, Mr. McGowan, won support for the state money by threatening to challenge a state law enacted just before Central Falls declared bankruptcy last summer. The law protects holders of general-obligation bonds issued by Rhode Island and its municipalities by giving them priority in bankruptcy. Without the law, investors could find themselves subject to the same losses as the retirees. The state law was intended to prevent a contagion effect, in which Central Falls’s bankruptcy would frighten investors away from other cities’ bonds, driving up borrowing costs across the state. The idea of shielding municipal bondholders during bankruptcy is controversial, however. “It’s not clear to me that you ought to be protecting bondholders,” said Mr. Skeel. “It seems unfair to me that you’re singling out one type of creditor to bear the burden, and another type not to.” Mr. McGowan, the retirees’ lawyer, said he had threatened to sue Central Falls’s bondholders on the argument that the state law had given them a “voidable fraudulent transfer”— an abusive deal that could be undone by a bankruptcy court. He said the state did not want such a challenge, so it agreed to push for pension supplements. Theodore Orson, who represents Central Falls’s state-appointed receiver in the bankruptcy, said negotiations would have been impossible without the law. He said he thought Chapter 9 should be amended to give cities the ability to shield their bondholders if they could show a compelling need to do so. But that would take an act of Congress, and federal lawmakers, at odds over their own debt and deficit, show no interest in taking on the cities’ fiscal woes. “One thing I think we’ve demonstrated in Rhode Island is, we really have a functional state government,” Mr. Orson said. “We are pulling together and making what we believe to be difficult decisions that you don’t see Congress making right now.”Copyright 2011 The New York Times Company.  All rights reserved.

A wage garnishment is one of the most devastating forms of collecting a debt. General creditors, such as credit cards and medical bills, can often take up to 25% of the debtor’s net pay. Debts owed to taxing authorities, such as the IRS, more may be taken. With many people living paycheck to paycheck, a wage garnishment can ruin a family budget. Fortunately, the bankruptcy code provides an equally powerful countermeasure. Once a bankruptcy petition is filed, the powerful “automatic stay” goes into effect. The automatic stay is an order of the bankruptcy court for creditors to cease collection efforts on a debt. Since wage garnishments are collection efforts, wage garnishments must cease. When the Stay Applies. The stay takes effect when a Voluntary Petition is filed. When filed, a notice is sent to all creditors, informing them of the stay. The notice is usually sent out within a day or two of filing. Rather than waiting, a copy of the Notice can usually be obtained from the Clerk of the Bankruptcy Court where the case was filed. For St. Louis and St. Charles residents, the Bankruptcy Court is located downtown St. Louis. It can then be hand delivered, faxed or electronically delivered to the creditor. Since an employee’s wages are being garnished, a copy should go to the employer’s HR department. If the debtor’s wages are presently being garnished, it is best to notify the creditor and the employer as soon as possible to stop the garnishment. The stay remains in effect until the court orders otherwise. Most debts are discharged, so the wage garnishment will cease permanently. If the debt is not dischargeable, such as recent tax obligations, the creditor can reinstitute a wage garnishment. However, the debtor is at least provided breathing space to arrange a payment plan with that creditor. If the nondischargeable debt is a tax obligation, the debtor may consider filing a Chapter 13 bankruptcy. In those cases, the debtor may pay back the tax obligation, without incurring further interest, through a repayment plan. Those in Missouri may consider consulting a St. Louis bankruptcy attorney for guidance. When the Stay Does Not Apply. The stay does not apply to domestic support obligations, i.e. child support and alimony payments. If a wage withholding order is in effect for either of these obligations, the bankruptcy court will not stay the order, and the support will continue to be deducted from the debtor’s wages. Under the newer Bankruptcy Abuse Prevention Act, if a debtor had a previous bankruptcy dismissed within a year of commencing the present case, the stay will not be automatic. Thus, a garnishment could continue. However, the debtor may file a motion with to extend the stay. Under the new law, a new petition filed within a year of dismissal of the earlier case is presumed to have been done in bad faith. This is only a presumption and the debtor may demonstrate facts to the court showing that the second filing is done in good faith. A wage garnishment can be devastating, but there may be methods of stopping it. In Missouri, contacting a St. Charles bankruptcy attorney should be consulted as soon as possible.

Print PageJudge Richard Posner of the Seventh Circuit recently offered the following advice to appellate attorneys:When there is apparently dispositive precedent, an appellant may urge its overruling or distinguishing or reserve a challenge to it for a petition for certiorari but may not simply ignore it. We don’t know the thinking that led the appellants’ counsel in these two cases to do that. But we do know that the two sets of cases out of which the appeals arise, involving the blood-products and Bridgestone/Firestone tire litigations, generated many transfers under the doctrine of forum non conveniens, three of which we affirmed in the two ignored precedents. There are likely to be additional such appeals; maybe appellants think that if they ignore our precedents their appeals will not be assigned to the same panel as decided the cases that established the precedents. Whatever the reason, such advocacy is unacceptable.The ostrich is a noble animal, but not a proper model for an appellate advocate. (Not that ostriches really bury their heads in the sand when threatened; don’t be fooled by the picture below.) The “ostrich-like tactic of pretending that potentially dispositive authority against a litigant’s contention does not exist is as unprofessional as it is pointless.”Gonzales-Servin v. Ford Motor Company, No. 11-1665 (7th Cir. 11/23/11), pp. 4-5. You can find the opinion here. To illustrate his point, he included the two photographs set forth below.It is good to know that in these times of budget shortfalls that federal judges still have access to Photo Shop. This was indeed a case where two pictures were worth a thousand words.

Many Missouri residents wonder what the Chapter 7 bankruptcy test are and how they are used to determine eligibility for Chapter 7 bankruptcy relief. It turns out that the means tests used to determine Chapter 7 bankruptcy eligibility are a series of number-based tests that use information about a debtor's income and expenses to determine eligibility for Chapter 7 bankruptcy relief. Here is a quick overview of how these means tests are used to determine eligibility for Chapter 7 bankruptcy relief. --The first test determines if a debtor earns less than the median Missouri household income for a given year. This is an important calculation because debtors who earn less than Missouri's state's household's average income are automatically eligible to file for Chapter 7 bankruptcy. --If the debtor fails this first test, debtor's attorney must then determine the debtor's disposable income. Bankruptcy courts determine debtor's disposable income because they use this information to determine if a debtor can afford to pay at least some of his debts. As a result, debtors who fail the first means test must provide information about how much they spend for different items such as childcare, charitable contributions and secured payments on car and house. Bankruptcy courts use this information to determine a debtor's disposable income by subtracting the sum of these expenditures from the debtor's monthly income. If the remaining income is greater than what is allowed by the U.S. bankruptcy code for your household, you will not be allowed to file for Chapter 7 bankruptcy in most cases. Instead, you could be required to file for Chapter 13 bankruptcy reorganization that will require you to pay at least some of your debts back to your creditors. The factors used to determine your household's income vary in Missouri because each city and county uses income guidelines that vary by population. Therefore, if you need help understanding how the means tests are used to determine Chapter 7 bankruptcy process, please contact a St. Louis bankruptcy attorney or a St. Charles bankruptcy attorney for a free consultation. Asking a St. Louis bankruptcy attorney or a St. Charles bankruptcy attorney for information about these means tests can help you determine if filing for Chapter 7 bankruptcy relief is worthwhile. This is the case because they can help you use the results of the means tests to help you develop the best way to handle your overwhelming debts. To ask for your free consultation, please call us today for an appointment. We'd be happy to help you see how hiring a St. Louis bankruptcy attorney or a St. Charles bankruptcy attorney can help you use the U.S Bankruptcy Code's means tests to your advantage.