This is the case of David Hammons who comes from Skokie, Illinois which is Cook County, Illinois.  He is married to Christine but Christine is going to be a non-filing spouse in this case.  Right off the bat, we are not sure whether this is going to be a Chapter 7 or Chapter 13 so+ Read MoreThe post Bankruptcy Software Will Determine If Chapter 7 Or Chapter 13 appeared first on David M. Siegel.

National Lien Processors called “Bill” yesterday.  Bill filed bankruptcy with me and was discharged in June 2013. Bill told them he filed bankruptcy, and National Lien Processors told him that bankruptcy did not apply to them. That of course is B.S. and they know it.  They told Bill his lawyer better be ready to defend […]The post National Lien Processors 561-409-5490 Collecting after Bankruptcy appeared first on Robert Weed.

  In re McClendon, 2013 WL 5676215 (Bankr. N.D. Miss, October 18, 2013) involved the trustee's request for his 10% fee off of the sale of a piece of property which was sold outside the chapter 12 plan.  The Debtors own and operate a sod farm, and decided after confirmation of the plan to sell a portion of their land for $320,000 with the proceeds going to the creditor holding a lien on the property.  The confirmed chapter 12 plan provided for payment of that secured creditor's claim of $1,043,000 with a 4%, 20 year amortization and a 5 year balloon.  The chapter 12 plan is for a three year term.  The sale does not affect the amount being paid to the secured creditor through the plan, but solely affects the balloon after completion of the plan. The only compensation a standing chapter 12 trustee may receive is the percentage fee provided for by 28 U.S.C. § 586(e). 11 U.S.C. § 326(b).  Before or at the time of each payment to creditors under the plan, there shall be paid ... the percentage fee fixed” for the trustee. 11 U.S.C. § 1226(b)(2). The statutory formula for determining payment of compensation and expenses renders the fee-setting provisions under 11 U.S.C. § 326 inapplicable to a standing chapter 12 trustee.  Section 326(b) provides:In a case under chapter 12 or 13 of this title, the court may not allow compensation for services or reimbursement of expenses ... of a standing trustee appointed under section 586(b) of title 28....11 U.S.C. § 326(b). Accordingly, the Court may not award the Trustee compensation beyond what he is entitled to receive under 28 U.S.C. § 586(e). Michel v. Beard (In re Beard), 45 F.3d 113(6th Cir.1995).The Trustee argued that he was entitled to statutory compensation on any impaired claim being paid during the life of the chapter 12 plan.  The Court distinguished this case from those dealing with the authority of the debtor to make on-going direct payments to secured creditors without paying the trustee.    The trustee is entitled to collect his percentage fee “from all payments received by [him] under plans in the cases under chapter 12 ... for which [he] serves as standing trustee.” 28 U.S.C. § 586(e)(2).  The Court rejected the Trustee's argument that all payments to impaired creditors are payments made under the plan.  However, the sales were not contemplated in the confirmed plan, and did not flow through the trustee's office.  The court found that the sale was not a modification of the confirmed plan.  No change is made in the payments made by the trustee under the plan as originally confirmed.     The court also denied the trustee's request for a surcharge under §506(c).    Section 506(c) of the Bankruptcy Code provides that a “trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.  Since the trustee did not expend any money or effort in effectuating the sale, such a request must fail. 

   In In re Vegt, 2013 WL 5652157 (Bankr. N.D. Iowa, October 16, 2013) the Court approved a priming lien on a dairy operation in order to construct a waste storage facility and rotational grazing facility.  The $300,000 loan carries an 8% interest rate increasing to 18% in the event of default and has a six month term.  The loan would prime the existing purchase money mortgage and lien on the property.  The US Dept. of Agriculture, National Resources Conservation Service had approved the debtor for two grants totaling $300,000, which would cover the costs of both projects upon completion.  The priming financier would obtain a lien on the proceeds of such grants.  The current waste storage facility is at capacity, and would be over capacity upon the Debtor's planned purchase of additional cattle, subjecting the debtor to environmental fines or possibly closure by the Iowa Dept. of Natural Resources.   The debtor requested approval under both 11 U.S.C. 364(c) and (d).  The court denied the request under §364(c) as it was inapplicable to the priming lien request.  Under §364(d) the Court can authorizing the incurring of debt and subordinate the lien of an existing senior creditor only if the debtor is unable to obtain credit otherwise, and if there is adequate protection of the senior lienholder.      Section § 364(d)(1)(A) requires the debtor to show that less burdensome financing is unavailable. In re Reading Tube Indus., 72 B.R. 329, 332 (Bankr.E.D.Pa.1987). The debtor does not have to show that it sought credit from every possible lender. Id. The parties do not dispute that Debtors are unable to obtain credit without granting the lender a priming lien. Jeremy testified that he had unsuccessfully requested financing from between 15 and 20 other lenders. Debtors have met their burden under § 364(d)(1)(A).The whole purpose in providing adequate protection for a creditor is to insure that the creditor receives the value for which the creditor bargained prebankruptcy.” In re O'Connor, 808 F.2d 1393, 1396 (10th Cir.1987) (citing House Rep. No. 95–595, 95th Cong ., 2d Sess. 53, reprinted in 1978 U.S.Code Cong. & Admin. News 5787, 5963, 6295).  Debtors carry the burden of proof on adequate protection. In re DB Capital Holdings, LLC, 454 B.R. 804, 822–23 (Bankr.D.Colo.2011).Adequate protection “may be provided by (1) periodic cash payments; (2) additional or replacement liens; or (3) other relief resulting in the ‘indubitable equivalent’ of the secured creditor's interest in such property.” In re Swedeland Dev. Grp., Inc., 16 F.3d 552, 564 (3d Cir.1994) (quoting 11 U.S.C. § 361 (2012)). Debtors do not offer FSBTC cash payments or an additional or replacement lien. Therefore, they must provide FSBTC with “the indubitable equivalent of its interest in the property.” 11 U.S.C. § 361 (2012).   The Court found that the current mortgage holder was currently undersecured, therefore there was no present equity cushion to support the adequate protection.  The court examined the risk to the creditor.  This risk being that the debtor was unable to complete the construction project and the priming creditor called its loan it would have priority over the current mortgage holder in a foreclosure, and the mortgage holder would receive $300,000 less.  However, the Court found that this risk was small.    The Court next examined whether the increase in the value of the collateral protects against risks, consistent with the concept of indubitable equivalence.  Where the increase in the value of the collateral resulting from the priming loan is highly speculative, where time periods and value increases were tight, or where debtors faced red tape or other hurdles, courts generally find there is no indubitable equivalent required for adequate protection.  Here, the time period is short, taking about three months to complete, with a six month financing commitment     The ability to pay off the priming lien is based solely on completion of the construction projects.  Thus, the risk to the mortgage holder is minimal. The fact that a performance bond is required on the projects also minimizes the risk of nonperformance.  Based on the analysis above, the Court found that the two projects in this case will ultimately benefit the estate and improve Debtors' ability to reorganize without unjustifiably jeopardizing the existing mortgage. . The Court concludes that these projects will more likely than not increase the value of the Debtors' property and the mortgage's collateral. The value increase, the short duration of the priming lien financing, and the near-certain payments from the NRCS grants provide the mortgage with an indubitable equivalent that qualifies as adequate protection. However, as an additional layer of protection for the mortgage holder, the Court's approval of Debtors' Motion to Incur Secured Debt is conditioned on Debtors meeting all of the requirements for the NRCS grants prior to new lender taking a priming lien on the collateral.

By MIREYA NAVARRO After her husband died, Mary Veronica Santiago fell behind on her bills, and the creditors began to call. So two years ago, she took refuge in bankruptcy, hoping to have her debts wiped away. But far from providing a fresh start and peace of mind, the Chapter 7 filing thrust Mrs. Santiago, 79, who lives in the East Village, into the center of a case that bankruptcy lawyers say poses a major risk to her and the millions of other New Yorkers who live in rent-stabilized apartments. The issue, pending before the United States Court of Appeals for the Second Circuit, is whether a rent-stabilized lease can be treated as an asset in a personal bankruptcy, just like a car or a piece of land, and used to pay off creditors. The trustee overseeing Mrs. Santiago’s bankruptcy thinks so. If that position is upheld, bankruptcy lawyers who are closely monitoring the case say it would make it easier for landlords to evict rent-stabilized tenants if they file for bankruptcy, even when, like Mrs. Santiago, they pay their rent. At a time when housing affordability and income inequality have been driving the debate in the mayoral race, the bankruptcy case could add another element of uncertainty to New York City’s efforts to preserve housing for people with low incomes. Mrs. Santiago has lived for 50 years in a two-bedroom apartment near Tompkins Square Park, in a neighborhood where unregulated apartments rent for thousands more a month than Mrs. Santiago’s rent of $703. Her main income is a Social Security check and, under normal bankruptcy proceedings, her lawyers said, she would have avoided repaying the $23,000 she owes because she had no assets. “I got scared,” she said, noting that her creditors “threatened that they were going to take me to court.” But as her case was nearing conclusion, her landlord stepped in with an offer to buy her rent-stabilized lease and produce the funds to pay off her debt. (Mrs. Santiago’s landlord is not among her creditors, but he was notified of the bankruptcy as a matter of course.) The bankruptcy trustee in charge of marshaling her assets accepted the offer, and that decision, challenged by Mrs. Santiago’s lawyers, has been upheld by both a bankruptcy court and a Federal District Court. In New York City, there were 11,500 individual bankruptcy filings in the 12 months ending June 30, federal bankruptcy court figures show. How many of them involved people with rent-stabilized leases is not tracked by the court. Rent stabilization laws, a defining element of New York real estate for decades, limit rent increases and allow automatic lease renewals and even survivor’s rights to tenants. In recent years, rent-stabilized leases have been deemed assets in some bankruptcy proceedings. Now, for the first time, a federal appeals court is being asked to weigh in. The widow’s lawyers argue that a rent-stabilized lease is a public assistance benefit, just like Social Security or disability payments, and should be exempt from the bankruptcy estate. Treating it like an asset, the lawyers said in court documents, undermines the intent of rent-stabilization laws in New York designed to protect tenants deemed in need of assistance with housing. “This is not what bankruptcy is about,” said Kathleen G. Cully, one of Mrs. Santiago two pro bono lawyers. “What’s next? Are they going to start going after food stamps?” The case, Mary Veronica Santiago-Monteverde v. John S. Pereira, has drawn the interest of bankruptcy experts and legal aid lawyers who see it as a threat to the housing stability of many low-income New Yorkers. Mrs. Santiago’s case was argued before the appeals court last month by Ronald J. Mann, a law professor at Columbia University and a bankruptcy specialist who has argued cases before the United States Supreme Court. New York’s unique rent laws and expensive real estate market make a rent-stabilized lease particularly prized. In New York City, 44 percent of the rental units are rent-stabilized and an additional 2 percent are governed by the more restrictive rent-control regulations, according to figures from the Furman Center for Real Estate and Urban Policy at New York University. At least 2.2 million people live in more than a million rent-regulated units in the city, the center said. Legal aid lawyers who are also watching the Santiago case say the rent laws are essential to help maintain affordable housing in the city — the median income for rent-stabilized tenants is $37,000, compared with $52,260 for market-rate tenants, figures from the city’s Housing and Vacancy Survey show. Some bankruptcy lawyers say they are advising clients with rent-stabilized leases not to file for Chapter 7 bankruptcy or risk being left homeless. “It’s an unfair money-grab,” said David B. Shaev, the New York state chairman of the National Association of Consumer Bankruptcy Attorneys. “To remove this foundation, this safety net, it’s unconscionable.” The trustee in Mrs. Santiago’s case, Mr. Pereira, has an obligation to marshal all assets to get her debt paid, said his lawyer, J. David Dantzler Jr. (The trustees, who are not government employees, receive a commission on the assets they are able to gather.) He said that New York law did not intend for leases to be exempt from bankruptcy estates and that any change to that effect should be left up to the state’s lawmakers. “This is about a fear of what could happen in the future to other tenants in rent-stabilization apartments,” he said. “Our view is that that’s a question for the New York Legislature, not the courts.” But no one should think that bankruptcy is a painless process, he said. “If you file for bankruptcy, there are consequences.” The trustee in Mrs. Santiago’s case has proposed an arrangement in which the landlord would pay her debt, pay the trustee and his lawyer, and allow Mrs. Santiago to live out her years in her apartment at a similar rent under a non-rent-stabilized lease “with no succession rights” that could otherwise have allowed her to pass the apartment on to her 50-year-old son, a personal trainer who lives with her and helps support her. Her lawyers opposed the proposal. In the realm of consumer bankruptcies, Mrs. Santiago’s is small. She owes mostly credit card companies, she said in an interview. But after her husband, Hector Santiago, died in 2011 she could not keep up with the payments. The couple moved into their ground-floor apartment in a five-story brick building on East Seventh Street in 1963. Mr. Santiago was the superintendent of their building and of several others in the neighborhood. The landlord is a limited-liability company whose owner, James V. Guarino, referred questions to his lawyer. The lawyer, Lawrence M. Gottlieb, said in an e-mail that the company “has no intentions of selling the lease or dispossessing Ms. Santiago or renting out the unit for market rent.” At home, in the cluttered apartment where her family has celebrated weddings, birthdays and holidays, and where her ill husband died at age 80, Mrs. Santiago said she regretted filing for bankruptcy. Her lawyers have reassured her that she has a good chance of prevailing, but first thing every morning, Mrs. Santiago said, she checks her front door for an eviction notice. “I’m afraid to find a white paper on my door,” she said with her head down, tearing up as she tugged at the edges of her plastic-covered chair.Copyright 2013 The New York Times Company.  All rights reserved.

   The In re Dotson, 2013 WL 5652732 (Bankr. WD Va., Oct. 16, 2013) case involved a request for sanctions for a discharge injuction violation and FDPCA claims.   After the chapter 7 discharge, Bank of America retained United Recovery Group to collect a discharged debt.  United threatened to intercept the debtor's car payment and garnish her wages or bank account unless $3,500 was paid immediately, and also contacted the debtor's mother.  United also indicated that upon receipt of $3,663.15 settlement funds they would 'file a dismissal of the action.'   In fear of the consequences of the actions, the debtor arranged for her mother to give her funds and for a transfer of the funds to United.  Subsequently she contacted her bankruptcy attorney, who demanded return of the funds from United.  Upon failure of such refund counsel filed a motion for sanctions against Bank of America and United Recovery Group for violation of the discharge injunction and for damages under the Fair Debt Practices Collection Act.  A settlement was reached with Bank of America for $2,000, and United failed to respond to the allegations.   The Court denied the FDPCA claim, finding that it did not have subject matter jurisdiction.  The clear weight of authority is that bankruptcy courts do not have jurisdiction over such post-discharge claims because they do not arise under the Bankruptcy Code or “in” the case and their determination can have no effect upon the bankruptcy estate. Furthermore, such “claims are not ‘related to’ [the] bankruptcy case, and bankruptcy courts may not exercise supplemental jurisdiction to hear unrelated claims.”  Harlan v. Rosenberg & Assocs., LLC (In re Harlan), 402 B.R. 703, 714 (Bankr.W.D.Va.2009) (citing other decisions) (Krumm, J.).  This is the case even when the violation in inextricably part and parcel of a creditors attempt to collect a discharged debt.   The dismissal of these claims was without prejudice to bring them in a court of competent jurisdiction.  As to the discharge violation, the court examined the Bank of America settlement and gave credit for the funds reimbursed in that settlement.  The Court also removed fees for the time allocated to the FDPCA claim.  The Court noted that the debtor indicated in an affidavit that she asked United for time to call her bankruptcy attorney, and they indicated that she did not have time to do so, and if she did not act immediately she would owe $6,000.  The Court found this to be adequate to put United on notice of the bankruptcy.  The Court determined that the conduct of United's employee in pressuring the Debtor to pay a debt which had been duly discharged in bankruptcy when, at the very least, the company through its agents acted in reckless disregard of the existence of such discharge, was sufficiently egregious to justify an award of compensatory and punitive damages as well as reasonable attorney's fees to the Debtor.  The court awarded $2,663.15 in compensatory damages, $2,500 punitive damages, and $3,840 in attorneys fees.  In a footnote the Court also explained since the prime intent of the discharge injunction is to give the debtor a fresh start, this places the burden of ascertaining whether a debt is discharged on the creditor.     

This is the case of Gail Sanders who lives on 60th St. in Chicago, Illinois.  She is interested in filing a Chapter 7 bankruptcy to eliminate credit card debt.  Gail has never filed bankruptcy before.  She is not a homeowner.  She is renting.  Her landlord is St. Edmunds Commons.  She has a yearly lease which+ Read MoreThe post Chapter 7 Fresh Start Recommendation appeared first on David M. Siegel.

My Case Was Dismissed, Now What? Chapter 7 Part 2 Your bankruptcy case was dismissed and now you want to know what options you have. It first depends on what chapter of bankruptcy you filed and then on why the case was dismissed.Chapter 7It is not so common that a Chapter 7 is dismissed. The only obligations that a Debtor has after the filing of a Chapter 7 is to attend the Trustee’s 341 Meeting of creditors, complete the Financial Management Course, also known as the 2ndcertificate or FMC, and providing any requested information to the trustee. Given there are so few obligations, most Chapter 7’s see completion without dismissal or other issues.However, cases can dismissed for failing to comply with the obligations mentioned above. If the Debtor or Debtors do not appear at the Trustee’s 341 Meeting of creditors the trustee will continue it to another date for Debtor or Debtors to appear. However, if Debtor or Debtors do not appear at the continued Trustee’s 341 Meeting of creditors, the trustee can move for dismissal of the case.Failure to comply with trustee’s requests is an unfortunate way to have your case dismissed without discharge. If the trustee requests any information from you directly or through your attorney and you fail to comply with the request, the case will likely be dismissed. If your case is dismissed you do not receive a discharge even if documents of discharge were previously received. Discharge can be revoked for failure to comply. Here is a common example: You attend your Trustee’s 341 Meeting of creditors and the trustee asks that you forward him a copy of your upcoming year’s taxes once they are filed. You say okay, and go on about life. You receive notice of your discharge, wiping all of your dischargeable debts away. Now you do not have to send anything to the trustee right? Wrong, and unfortunately an all too common wrong.One uncommon but certainly possible way to have your Chapter 7 bankruptcy dismissed is for ineligibility to receive a Chapter  7 discharge. In order for you to be eligible for receive a discharge in a Chapter 7 bankruptcy, you must not have previously received a Chapter 7 through a case that was filed within 8 years of the filing of the new bankruptcy case. 

My Case Was Dismissed, Now What? Part 1Your bankruptcy case was dismissed and now you want to know what options you have. It first depends on what chapter of bankruptcy you filed and then on why the case was dismissed.Chapter 7It is not so common that a Chapter 7 is dismissed. The only obligations that a Debtor has after the filing of a Chapter 7 is to attend the Trustee’s 341 Meeting of creditors, complete the Financial Management Course, also known as the 2ndcertificate or FMC, and providing any requested information to the trustee. Given there are so few obligations, most Chapter 7’s see completion without dismissal or other issues.However, cases can dismissed for failing to comply with the obligations mentioned above. If the Debtor or Debtors do not appear at the Trustee’s 341 Meeting of creditors the trustee will continue it to another date for Debtor or Debtors to appear. However, if Debtor or Debtors do not appear at the continued Trustee’s 341 Meeting of creditors, the trustee can move for dismissal of the case.Failure to complete the Financial Management Course, also known as the 2ndcertificate or FMC will not end in dismissal of the case but it will result in closing of the case without discharge. Receiving a discharge of your debt is the reason a bankruptcy is filed so closing of your case without discharge means that all of your debt is still owed and defeats the whole purpose of you filing for bankruptcy. To avoid this, complete your Financial Management Course right after the case is filed so that after your Trustee’s 341 Meeting of creditors, there is nothing for you to do unless your attorney or the trustee requests additional information.Failure to comply with trustee’s requests is an unfortunate way to have your case dismissed without discharge. If the trustee requests any information from you directly or through your attorney and you fail to comply with the request, the case will likely be dismissed. If your case is dismissed you do not receive a discharge even if documents of discharge were previously received. Discharge can be revoked for failure to comply. Here is a common example: You attend your Trustee’s 341 Meeting of creditors and the trustee asks that you forward him a copy of your upcoming year’s taxes once they are filed. You say okay, and go on about life. You receive notice of your discharge, wiping all of your dischargeable debts away. Now you do not have to send anything to the trustee right? Wrong, and unfortunately an all too common wrong. 

My Case Was Dismissed - Now What?