Read any interesting tax returns lately? As bankruptcy lawyers, we’re required to collect them from our clients and funnel them to the trustee. But, are you reading them? Often, as a former employee used to say, they’re dry as dinosaur bones. But almost as equally, they provide new information or clues about assets and activities of your client not previously disclosed. Found in the tax return Let’s start a list of things you might find perusing your client’s 1040: Interest income- does the list of payors match the scheduled accounted or accounts closed in the last year? Distributions from retirement accounts Gains or losses from sales of stock Total income for the year for the SOFA entry Investment real estate Charitable contributions- useful perhaps for means test purposes, and for SOFA transfers Business expenses – useful in projecting net income; remember to exclude depreciation for bankruptcy purposes Interests in partnerships or estates Form 1099 from debt settlement or foreclosures Business assets subject to depreciation Dividend income Student loan interest The plot line in a tax return doesn’t usually make scintillating reading, but it’s worth doing.  There’s no feeling quite as foolish as encountering questions at the 341  meeting that the trustee got from reading the return when you haven’t.  Image courtesy of Makuahine Pa’i Ki’i

Qualified Retirement Plans and BankruptcyWhen people are considering filing bankruptcy, it is very common for them to be concerned about the retention of their assets.  Debtors frequently inquire whether they will be allowed to retain their retirement benefits, such as 401k accounts.  Many people have worked for many years to acquire these assets and do not want to lose them through the bankruptcy proceeding.  There is an exemption for qualified retirement plans, which means debtors will be allowed to keep their retirement benefits as long as they are qualified.  A qualified retirement plan's definition under the United State Bankruptcy Code, Section 513.430.1(10)(f) is "any money or assets, payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan or profit-sharing plan that is qualified under Section 401(a), 403(a), 403(b), 408, 408A or 409 of the Internal Revenue Code of 1986, as amended, except as provided in this paragraph."In a bankruptcy, 401(k) contributions are protected by ERISA (the Employee Retirement Income Security Act).  This generally means the Trustee will not be able to take your 401(k) proceeds, and the proceeds will be protected from creditors.  This applies only if the 401(k) account is still intact.  If the money has been removed from a 401(k) account and put into an unprotected account, such as a checking or savings account, there is no longer protection from the Trustee, who can then access the money and disperse to creditors through the bankruptcy.Another common retirement plan option is a 403(b), which is exempt in a bankruptcy according to Section 513.430.1(10)(f).  This is a annuity that is available to certain organizations and non-profit agencies.  It is similar to a 401(k) and allows employees to contribute tax exempt until the employee withdraws from the plan.  Roth IR As and 457 plans are also generally exempt through the bankruptcy.The reason these retirement plans are generally protected from creditors is because there are usually restrictions on when and how these plans can be withdrawn.  There are usually limits on the age of the person and fees to withdraw from these accounts, as well as tax implications at the time of withdrawal.  Being able to keep these assets allows for debtors to plan for the future and withdraw from these accounts when they reach a certain age and/or retire so they have some form of income at that time.  If you would like more information about this matter, please contact a St. Louis or St. Charles bankruptcy attorney.

What is a Means Test?A means test is an essential portion of the bankruptcy petition that must be filed with the rest of the schedules that comprise a bankruptcy petition.  In a Chapter 7, the official name for the means test is Form 22A:  Statement of Current Monthly Income/Means Test.  In a Chapter 13 bankruptcy, the official name is Form 22C:  Current Monthly Income/Disposable Income.  The means test is what determines whether a person is eligible for file a Chapter 7 bankruptcy.  In a Chapter 13, the means test determines how much a person will be back to their unsecured creditors, if any.In order to complete the means test, the first step is entering all forms of income for the debtor for the six months prior to the month the bankruptcy is filed.  Therefore, if a person is going to be filing a bankruptcy in May, the debtor's income should be entered for the beginning of November through the end of April.  Applicable income includes child support, employee wages, self-employment income, income from rental properties, food stamps, pension income, alimony, etc.  The only income that does not apply in the means test is Social Security income. If the person is under median based on their household size, they are eligible to file a Chapter 7.  If they are over median, additional information will need to be entered, such as mortgage payments, car loans, taxes, mandatory wage deductions, mandatory 401(k) deductions, court-ordered alimony or child support payments, child care, healthcare expenses, health and term life insurance premiums, telecommunication expenses, etc.  There is an automatic deduction based on household size for utilities, food, etc.  Once those specific expenses have been factored, if the DMI (disposable monthly income) is negative, the debtor will still be eligible to file a Chapter 7 bankruptcy based on those expenses.  If the DMI is positive, the debtor will be required to file a Chapter 13 bankruptcy.  The DMI amount will determine what the debtor will be required to pay each month to their unsecured creditors for the next 60 months.  The remainder will be discharged.  When filing a Chapter 13 bankruptcy, debtors will also get a creditor for any 401(k) deductions, regardless of whether they are mandatory.  If you would like more information about the means test, contact a St. Louis or St. Charles bankruptcy attorney.

Failure to schedule causes of action appears to be an endemic problem as shown by the fact that the Fifth Circuit has been asked to apply judicial estoppel to a bankruptcy case once again. However, the latest decision, Love v. Tyson Foods, Inc., No. 10-60106 (5th Cir. 4/4/12), which can be found here, shows just how difficult it is to draw the line between fairness and integrity as Judges Carolyn King and Catarina Haynes disagreed on how the doctrine should apply to a chapter 13 debtor's untimely disclosure. The Court, with Judge King writing the opinion, held that the debtor failed to meet his burden of proof to show a non-disclosure was inadvertent.What HappenedWillie Love was dismissed from Tyson Foods after he failed a drug test. When the company refused to re-test him based on his contention that an antibiotic caused him to erroneously positive, he filed a charge of discrimination with the EEOC. and later filed suit. Along the way, he filed chapter 13 and did not list the claim The defendant successfully moved for summary judgment based on judicial estoppel based on the non-disclosure. While this synopsis is accurate, the following time line gives a more complete understanding of what occurred.Willie Love was dismissed from Tyson on April 2, 2008.He filed chapter 13 on May 1, 2008 and did not list a potential cause of action.Love filed a complaint of discrimination with the EEOC on May 30, 2008.On September 22, 2008, the Debtor confirmed a chapter 13 plan which did not provide for a distribution to unsecured creditors. Love received a right to sue letter from the EEOC on December 16, 2008.The Debtor filed suit on March 12, 2009.On July 16, 2009, Tyson moved for summary judgment.On July 22, 2009, the Debtor amended his schedules to disclose the claim and moved to employ special counsel to pursue the claim. On January 7, 2010, the District Court granted the Motion for Summary Judgment.The Majority OpinionJudge Carolyn King, writing for herself and Judge Jacques Weiner, upheld the summary judgment, finding that the debtor had failed to raise a fact issue as to whether the failure to disclose the asset was inadvertent. The opinion noted that the debtor's brief discussed only two of the elements of judicial estoppel and did not address inadvertence. There are three elements to judicial estoppel: “(1) the party against whom judicial estoppel is sought has asserted a legal position which is plainly inconsistent with a prior position; (2) a court accepted the prior position; and (3) the party did not act inadvertently.”Opinion, p. 4, citing Reed v. City of Arlington. The debtor made the following argument to the District Court:(1) “Plaintiff’s positions are no longer inconsistent as [Love] supplemented his Schedule to list the current case as an asset in his bankruptcy”; (2) “the Defendant has failed to show the bankruptcy court has accepted the Plaintiff’s prior position that he had no contingent claims”; (3) “Plaintiff will not derive any unfair advantage or impose any unfair detriment on any opposing party if not estopped”; and (4) “Plaintiff’s bankruptcy is still pending and any monies paid by Defendant through settlement or judgment in this case would go into the bankruptcy to pay Plaintiff’s creditors first.”Opinion, p. 6. The majority found this explanation to be insufficient, stating:Critically, Love’s arguments before the district court did nothing to refute Tyson’s allegations or explain why Love did not disclose his claims when his disclosure obligations first arose. His first two arguments clearly do not speak to his motive to conceal his claims against Tyson. With respect to Love’s third argument, whether Tyson or Love would accrue an unfair detriment or benefit if the lawsuit were allowed to go forward after Tyson forced Love to disclose his claims is an entirely different issue than whether Love had a financial motive to conceal his claims against Tyson at the time Love failed to meet his disclosure obligations, which is the relevant time frame for the judicial estoppel analysis. (citations omitted). Regarding Love’s fourth argument, Love did state that he would pay his creditors before collecting any money from his claims against Tyson, but he made this assertion only after Tyson brought his nondisclosure to light. Love’s disclosure obligations arose long beforehand, and his statement about his post-disclosure conduct again fails to speak to his motivations while he was obligated to disclose his claims but had not yet done so. Consequently, we agree with the district court’s conclusion that Love ultimately provided “no basis for concluding that [the] failure to disclose th[e] litigation [against Tyson] to the bankruptcy court was ‘inadvertent.’” Thus, the district court did not abuse its discretion by applying judicial estoppel to Love’s claims.Opinion, pp. 6-7. Thus, the Fifth Circuit affirmed the District Court. (The majority opinion included a thoughtful rejoinder to the dissent. While I am not discussing it here, I want to emphasize that the judges engaged each other in a respectful debate). The DissentIn a spirited fifteen-page dissent, Judge Catarina Haynes offered both procedural and substantive reasons why she believed the majority was wrong.First, she argued that judicial estoppel is an affirmative defense. As a result, the Defendant had the burden of proof to show that there was no factual dispute as to any of the three elements. According to Judge Haynes:As the party invoking judicial estoppel on summary judgment, Tyson thus bore the burden of proof and had to prove, not just hypothesize, that Love had knowledge and a motive for concealment. Tyson failed to do so. Dissent, p. 14. Judge Haynes went on to state that even if Tyson had met its burden of proof that the debtor's response was sufficient to raise a fact issue.We should stop here, as I have shown that no summary judgment burden “shifted” to Love. However, even if it did, I disagree that Love failed to respond in kind, creating a material factual dispute on whether he had motive to conceal. Love’s summary judgment response set forth the Supreme Court’s judicial estoppel standard from New Hampshire v. Maine, 532 U.S. 742, 751 (2001). See also Hall v. GE Plastic Pac., 327 F.3d 391, 399 (5th Cir. 2003). There, he disclaimed the third prong of that standard. Indeed, he expressly responded to Tyson’s claim that his “motive” was to gain money “free and clear” by arguing in response that any recovery would not be paid to him but to the estate. He stated:"Plaintiff will not derive any unfair advantage or impose any unfair detriment on any opposing party if not estopped. Plaintiff’s bankruptcy is still pending, and any monies paid by Defendant through settlement or judgment in this case would go into the bankruptcy to pay Plaintiff’s creditors first. To the contrary, if Plaintiff is judicially estopped his creditors would be injured, and would be prevented from receiving any monies from the current case."Thus, if Tyson’s mere allegation that Love’s motive was to gain an unfair personal advantage by taking money “free and clear of creditors” is enough to satisfy its summary judgment burden on “motive,” then Love’s statement that any monies paid “would go into the bankruptcy to pay Plaintiff’s creditors first” should similarly discharge his non-movant’s burden. The majority opinion discounts Love’s argument because it does not use the “magic words” of “motive” or “inadvertence.” We have not so exalted form over substance, particularly in the face of a Supreme Court opinion using the exact language Love used. The majority opinion contends that whether the claim is “free and clear” or not, a potentially deviant debtor may always attempt to “collect any recovery on claims without his creditors’ knowledge.” I agree that there is something problematic about a debtor who conceals assets that do not belong to him in an effort to forever keep his creditors in the dark. This hypothetical deviant, however, does not, as a matter of law, establish Love’s intent to conceal where his only action was an omission and the claim remains property of the bankruptcy estate. Dissent, pp. 17-19.Judge Haynes went further and stated that under Reed v. City of Arlington and Kane v. National Union Fire Ins. Co., that the bankruptcy estate should not have been estopped. She wrote:This case, though different in kind, is controlled by our decisions in Reed and Kane. Both concerned whether a Chapter 7 trustee is estopped from pursuing unscheduled claims on behalf of the estate where the debtor had wrongly concealed claims during the bankruptcy proceeding. (ctiations omitted). We held in both cases that the claims originally brought by the debtors were unabandoned assets of the estate and that “the only way the creditors would be harmed is if judicial estoppel were applied to bar the trustee from pursuing the claim on behalf of the estate.” (citations omitted).It makes no difference under the circumstances of this case that Love is not a trustee as were the parties seeking to avoid estoppel in Reed and Kane. For our purposes, his role as essentially a debtor in possession puts him in an analogous position to a trustee. It follows that because the claim is the property of the estate, and the estate has not been administered, judicial estoppel should not apply to bar relief that would benefit creditors. (citation omitted). The debtors in Kane were virtually indistinguishable from Love in his position as debtor. While the Kanes’ lawsuit was pending in state court, they filed a Chapter 7 bankruptcy. (citation omitted). That bankruptcy resulted in a no-asset discharge. (citation omitted). It was not until a summary judgment motion was offered, arguing that judicial estoppel should apply, that the Kanes filed a motion to reopen the bankruptcy so the Trustee could administer the previously undisclosed lawsuit. (citation omitted). We reversed the district court’s summary judgment application of judicial estoppel, holding that equity did not compel barring the trustee from acting on behalf of the estate. (citation omitted). Indeed, we even highlighted the possibility that the debtors may recover in the event of surplus. (citation omitted).It is true, as the majority opinion points out, that the claims in Reed and Kane were pursued by “innocent Chapter 7 trustees, and not by the debtors themselves.” But Love’s role as both debtor and protector does not make the analogy any less apt. The only real implication of the majority opinion’s distinction is that the trustees in Reed and Kane were “innocent.” This distinction is irrelevant, however, because the debtors in those cases were in the same position as Love, and the characterization of the trustee’s role as “innocent” has nothing to do with the imposition of judicial estoppel where that trustee’s duty, imposed post-disclosure, is to act on behalf of the estate. Dissent, pp. 22-24.In conclusion, she stated:Unlike the litigants in our prior decisions concerning judicial estoppel, Love gains no potential legal advantage from his failure to disclose the claim against Tyson to the bankruptcy court. As Love explained to the district court—albeit somewhat ineloquently—the recovery sought against Tyson would aid his creditors, not defraud them. In this vein, Tyson has not established Love’s motive to conceal. Our precedent counsels against judicial estoppel in these circumstances.Moreover, the court’s equitable discretion must be used against the backdrop of the bankruptcy system and the goals it espouses. The outcome affirmed by the majority opinion does not further those goals—either in dissuading future deviant bankruptcy litigants or in protecting third party creditors’ rights. At the very least, the remedy espoused in Reed could be utilized here in preventing unnecessary harm to creditors while preventing an allegedly deviant debtor from “playing fast and loose” with the courts.None of the above represents some effort to “change the law.” Rather it seeks to hold alleged tortfeasors who would reap an admitted windfall to their summary judgment burden of proof. Further, while judicial estoppel certainly should be available in some circumstances, it should not be mechanically applied. It is an equitable doctrine, demanding nuance, not absolutes.The majority opinion discusses a very real concern, that debtors may defraud the bankruptcy system by failing to schedule their claims. Using judicial estoppel to curtail this potential problem, however, is not the answer under all circumstances. There are other legal avenues to punish, and obtain relief from, fraudulent debtors without imposing a windfall on an alleged tortfeasor to the detriment of innocent creditors.Accordingly, I respectfully dissent.Dissent, pp. 26-27.Who Got It Right?This is a difficult opinion. Love v. Tyson Foods, Inc. presents a closer case because the debtor was both the person who failed to schedule the cause of action and later sought to pursue it. However, the case is more ambiguous because (i) the claim had not been filed on the petition date and (ii) the debtor promptly amended his schedules to disclose the claim once the omission was pointed out. In the balance between integrity and fairness implicated by judicial estoppel, is it more important to punish the initial omission or to encourage disclosure, however belated, for the benefit of the creditors?I think that Judge Haynes has the better argument. At a minimum, this was not a case that should have been resolved on summary judgment.First, although it was not clearly discussed by either opinion, the debtor unambiguously contested two out of the three elements of judicial estoppel. The debtor noted that while he had taken an inconsistent position, he had amended his ways. Further, he did not obtain a benefit from taking an inconsistent position. The majority glosses over this point, noting that the debtor had confirmed a plan which did not propose any distribution to the unsecured creditors. However, no chapter 13 plan is final until it is completed. Under 11 U.S.C. Sec. 1329(a), a chapter 13 plan may be modified after confirmation upon request of the debtor, the trustee or a creditor to increase the amount of payments under the plan. Thus, there was still time to include the litigation proceeds in the funds to be distributed to creditors under the plan. Because there were fact issues on the first two prongs of Tyson's affirmative defense, the court should not have reached the third prong.With respect to the third prong, inadvertence, the facts detailed by the majority speak loudly to the practical realities. On the date the debtor filed bankruptcy, he had not filed a charge of discrimination with the EEOC, he had not received a right to sue letter and he had not actually filed suit. While he had an obligation to disclose the potential cause of action, it is far more more believable than not that an unsophisticated debtor could have missed this distinction. As a practicing attorney, I am often frustrated with the wooden terms employed in the schedules. Schedule B21 asks the debtor to disclose:Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims.This language is unlikely to resonate with the typical debtor. It would be much much more useful to ask:Are you suing anyone? Do you want to sue anyone? Has anyone done anything wrong to you?That would be much more useful than asking about "contingent" and "unliquidated" claims, setoffs and tax refunds. (Indeed, my spell check does not believe that "unliquidated" is even a word). On procedural grounds, the court should have ruled that there were fact issues and that summary judgment was improvidently granted. Substantively, Judge Haynes has the better argument as well. This decision does not punish the debtor. The debtor will receive a chapter 13 discharge if he completes his payments. However, the creditors will not receive any distribution. While there were only two unsecured creditors who filed claims in the aggregate amount of $2,305.74, I am sure they would have preferred to receive payment. eCast Settlement Corporation was a creditor in both this case and in Reed. eCast makes its money by purchasing unsecured claims and seeking recovery in bankruptcy. By minimizing the recovery to creditors such as eCast, the Court reduces the amount that eCast and other debt buyers will pay for distressed debt, which will reduce the amount paid to the initial creditor.s While the individual case may only affect two small unsecured claims, it has the potential to affect millions of claims. What Should Be Done?Normally, when two intelligent, articulate judges reach different results, one would hope that the losing party would seek panel rehearing or rehearing en banc to allow the court to reconsider the issue. However, in this case, the court notes that while the debtor had one counsel in the bankruptcy case and another in the district court case, that the debtor was pro se on appeal. The fact that a pro se party made it this far is remarkable. However, it is less likely that an unrepresented party will take the next step, which would be a shame. It would be nice if the Court were to reconsider the matter on its own motion.

In a Chapter 13 Bankruptcy you can pay mortgage arrears, or back due payments, through your plan.  To complete your plan, you will need to stay current on your ongoing mortgage payment, which can be paid through the plan or outside the plan.  On occasion, things come up, and debtors are unable to make the ongoing mortgage payments.  If you miss payments while you are in a bankruptcy, your mortgage company can file a motion for relief from stay or a motion for adequate protection.  This motion will assert, in one form or another, that you have not made post-petition payments as required by the bankruptcy code and that the creditor would like the automatic stay to be lifted.  If you are not current, there is a good chance that they stay will be lifted.  Once the automatic stay is lifted your mortgage company may begin foreclosure proceedings and you may lose your home. However, there may still be options available.  In some cases, lenders will  consent to a stipulation agreement.  At its core this simply means that the two parties have come to an agreement on some matter.  Within a bankruptcy context, it means that the parties agree that the payments are past due.  Further, you can take you back due post-petition payments (any missed payments since you have filed for bankruptcy) and pay them in payments over a six month period.  If you do a stipulation agreement you will be required to pay your stipulation payment, or "stip payment", in addition to your ongoing mortgage payment.  It is important to note, that at this stage, your lender may have added attorney's fees or court costs to the amount you owe, all of which will have to be paid within six months.  If you miss any payments, either stipulation payments or your ongoing mortgage payments during this time, the creditor will likely pursue the motion for relief and may foreclose upon your house. If you cannot afford this option you will want to speak to your attorney as soon as possible about your options with regard to your property.  Once a motion for relief is granted there is very little that can be done.  A motion for relief does not necessarily mean that your lender will foreclose upon your property, but it does mean that they legally can should they choose to pursue this option.If you still have questions, or would like to schedule an appointment, contact a St. Louis Bankruptcy Attorney today!

A case involving an elderly woman and egregious violations of the discharge has generated a bit of buzz in the blogosphere. I first noticed it here on the Huffington Post. I decided to write about this case because I was frustrated with trying to verify the posts and because I think ithe case offers a good example of how to efficiently deal with a discharge violation. The case is In re Anita Smith, No. 6:08-bk-01035, which can be found here. What HappenedThe Debtor filed a chapter 7 petition on February 15, 2008. One of the debts that she listed was a mortgage debt owing to Countrywide Home Lending. The debtor surrendered the property during the chapter 7. The Debtor received a discharge on June 6, 2008 and Countrywide received notice of the discharge. Bank of America acquired Countrywide and obtained a judgment of foreclosure upon the real property. At some point, Bank of America began calling the Debtor to try to try to collect upon the debt. Neither the opinion nor the motion say when the calls started, but on June 24, 2010, the Debtor's lawyer sent a polite letter to Bank of America informing them that they were violating the discharge. The calls continued. In fact, at least fifty calls were made after the first letter.The Debtor's attorney sent a second letter on November 16, 2011. The second letter informed Bank of America that the Debtor "is 79 years old, in deteriorating health, and has been hospitalized recently." The calls continued.The Debtor called Bank of America twice in November and December 2011 to ask them to stop calling.The calls continued. There were forty-nine calls during a three week period from November 16, 2011 to December 6, 2011.At this point, Debtor's counsel filed a Motion to Reopen the Case and a Motion for Sanctions.Bank of America did not appear for the sanctions hearing.The Court's RulingThe Court did not have any problem finding a violation of the discharge. It stated:Bank of America's behavior was intentional, egregious, and extreme. It blatantly and willfully ignored the discharge injunction, despite having received multiple notices of the discharge and requests to discontinue its collection efforts. Bank of America acted in bad faith. Its repeated telephone calls to the Debtor were vexatious and oppressive. Bank of America committed ninety-nine separate willful violations of the Debtor's discharge injunction.Opinion, p. 5.The Court awarded actual damages of $10,000.00 for "significant aggravation, emotional distress, and inconvenience." Opinion, p. 5. The Court stated:Emotional distress constitutes actual damages. (citation omitted). Emotional distress is expected to occur where the conduct is egregious or extreme. (citation omitted). Significant emotional distress is readily apparent where the conduct is egregious and corroborating medical evidence is not required. (citation omitted). Entitlement to emotional distress damages exists "even in the absence of an egregious violation, if the individual in fact suffered significant emotional harm and the circumstances surrounding the violation make it obvious that a reasonable person would suffer significant emotional harm. (citation omitted.).The Debtor's emotional distress is readily apparent due to Bank of America's intentional, egregious and extreme conduct. She is not required to present corroborating medical evidence. (citation omitted).Opinion, pp. 8-9.The Court awarded actual damages of $10,000.00 and attorney's fees of $1,500.00.What the Debtor and the Debtor's Attorney Did RightMy firm is in the unusual position that we both represent debtors in bankruptcy and defend debt collectors accused of violating the stay or the discharge. In the former capacity, it is not unknown to get hit with a complaint that goes on for pages and pages of boilerplate allegations based on a few isolated contacts with no cease and desist letter from counsel.In this case, counsel sent not one but two cease and desist letters. In the second letter, counsel specifically informed Bank of America that his client was elderly and, as a result, very sensitive, to continued calls. Counsel also had the Debtor document the continuing violations. The Motion for Sanctions details forty-nine (49) specific violations, identifying them by date and time.Debtor's counsel also showed considerable restraint in filing a motion for sanctions rather than a complaint. While many plaintiff's lawyers prefer to file an adversary proceeding, there is no reason why contempt cannot be dealt with by motion. In this case, the debtor's attorney was able to proceed from motion to written opinion in a mere six weeks with only five hours of attorney time. Debtor's counsel was able to obtain relief for his client in a prompt, efficient manner. In my opinion, counsel placed his client's well-being ahead of his ability to recover fees, which is commendable.A Note on Accuracy in the BlogosphereBlogs sometimes get a bad reputation. When my daughter was doing a research project recently, her professor forbade the use of blogs as authority on the basis that they were "just someone's opinion." At A Texas Bankruptcy Lawyer's Blog, I make it a practice to provide case citations and links to original documents so that the reader can verify the accuracy of my comments. In this case, neither the initial post from The Bankruptcy Law Network nor the followup on The Huffington Post, provided much information from which the facts could be verified. Indeed, it is entirely possible that we are writing about different cases. I found the case that I wrote about above by researching recent opinions from Judge Arthur Briskman involving Bank of America. However, the case that I wrote about involved ninety-nine (99) violations, while the other posts refer to a case with thirty-eight (38) violations. While the failure to provide attribution may have led me to a more egregious case, it could just as well have caused the reader to dismiss it as unsubstantiated rumor.

What is a motion for relief?A motion for relief is filed by your creditor who has a secured interest in your property, such as a motor vehicle or your residence. If you don’t make your monthly payments to the trustee and you fall behind, your creditor most likely will file a motion for relief from the automatic stay. The automatic stay protects you from actions of your creditors. When the motion for relief is granted, the car creditor can repossess your vehicle and the mortgage company can start foreclosure proceedings for your house.What does the sentence “Movant requests, upon entry of an order granting relief from stay, that it be exempted from further compliance with Fed. Rule Bankr. P. 3002.1 in the instant bankruptcy case.” in the motion for relief mean?On December 1, 2011 several amended and new Federal Rules of Bankruptcy Procedure became effective. One is Rule 3002.1 which is listed further below. The language above that bankruptcy attorneys will see more often, is more a request for a comfort order. After relief is granted, the secured creditor is not obligated to comply with Rule 3002.1, the property is no longer property of the estate and there is no secured claim anymore.Rule 3002.1. Notice Relating to Claims Secured by Security Interest in the Debtor’sPrincipal Residence(a) IN GENERAL. This rule applies in a chapter 13 case to claims that are (1) secured by asecurity interest in the debtor’s principal residence, and (2) provided for under § 1322(b)(5)of the Code in the debtor’s plan.(b) NOTICE OF PAYMENT CHANGES. The holder of the claim shall file and serve on thedebtor, debtor’s counsel, and the trustee a notice of any change in the payment amount,including any change that results from an interest rate or escrow account adjustment, no laterthan 21 days before a payment in the new amount is due.(c) NOTICE OF FEES, EXPENSES, AND CHARGES. The holder of the claim shall file andserve on the debtor, debtor’s counsel, and the trustee a notice itemizing all fees, expenses, orcharges (1) that were incurred in connection with the claim after the bankruptcy case wasfiled, and (2) that the holder asserts are recoverable against the debtor or against the debtor’sprincipal residence. The notice shall be served within 180 days after the date on which thefees, expenses, or charges are incurred.(d) FORM AND CONTENT. A notice filed and served under subdivision (b) or (c) of thisrule shall be prepared as prescribed by the appropriate Official Form1,and filed as asupplement to the holder’s proof of claim. The notice is not subject to Rule 3001(f).(e) DETERMINATION OF FEES, EXPENSES, OR CHARGES. On motion of the debtor ortrustee filed within one year after service of a notice under subdivision (c) of this rule, thecourt shall, after notice and hearing, determine whether payment of any claimed fee, expense,or charge is required by the underlying agreement and applicable nonbankruptcy law to curea default or maintain payments in accordance with § 1322(b)(5) of the Code.(f) NOTICE OF FINAL CURE PAYMENT. Within 30 days after the debtor completes allpayments under the plan, the trustee shall file and serve on the holder of the claim, thedebtor, and debtor’s counsel a notice stating that the debtor has paid in full the amountrequired to cure any default on the claim. The notice shall also inform the holder of itsobligation to file and serve a response under subdivision (g). If the debtor contends that finalcure payment has been made and all plan payments have been completed, and the trusteedoes not timely file and serve the notice required by this subdivision, the debtor may file andserve the notice.(g) RESPONSE TO NOTICE OF FINAL CURE PAYMENT. Within 21 days after service ofthe notice under subdivision (f) of this rule, the holder shall file and serve on the debtor,debtor’s counsel, and the trustee a statement indicating (1) whether it agrees that the debtorhas paid in full the amount required to cure the default on the claim, and (2) whether thedebtor is otherwise current on all payments consistent with § 1322(b)(5) of the Code. Thestatement shall itemize the required cure or postpetition amounts, if any, that the holdercontends remain unpaid as of the date of the statement. The statement shall be filed as asupplement to the holder’s proof of claim and is not subject to Rule 3001(f).(h) DETERMINATION OF FINAL CURE AND PAYMENT. On motion of the debtor ortrustee filed within 21 days after service of the statement under subdivision (g) of this rule,the court shall, after notice and hearing, determine whether the debtor has cured the defaultand paid all required postpetition amounts.(i) FAILURE TO NOTIFY. If the holder of a claim fails to provide any information asrequired by subdivision (b), (c), or (g) of this rule, the court may, after notice and hearing,take either or both of the following actions:(1) preclude the holder from presenting the omitted information, in any form, as evidencein any contested matter or adversary proceeding in the case, unless the court determinesthat the failure was substantially justified or is harmless; or(2) award other appropriate relief, including reasonable expenses and attorney’s feescaused by the failure

The answer here, like many things, is that it depends.  Filing for bankruptcy can stop the immediate action of a foreclosure or repossession, but cannot always permanently stop the foreclosure or repossession.  If you are behind on mortgage payments or car payments, your lender may discuss foreclosure or repossession.  To stop a foreclosure you must file your bankruptcy prior to the foreclosure sale.  Once a property has been foreclosed upon there is nothing that we can do.  To stop a repossession, ideally you will file prior to the repossession.  However, in situations involving a car, you may be able to get your vehicle back within 14 days of the repossession assuming that it has not been sold by that time.  However, to do this, you will likely incur storage, towing, and other fees that will have to be paid prior to getting your vehicle back. So, we can stop the immediate action.  If you have mortgage arrears or past due car payments a Chapter 7 might not be your best option.  If this applies to you, you can spread out the past due payments over a longer period through a Chapter 13 filing.  This may mean that you have to pay back some of your creditors, but you will get to keep you house or car.  If you still want to file a Chapter 7 you would need to become current to keep the property.  A Chapter 7 will stop the immediate action, but cannot permanently stop a foreclosure or repossession if you are not current on payments. Perhaps the biggest issue is that you have to be able to afford ongoing payments.  In many cases, when filing for bankruptcy, to keep your home or vehicle, the lender will want you to do a reaffirmation agreement, stating that you will assume the loan under the original terms.  For the lender and the court to accept this you have to show that you can afford the ongoing payments.  In some cases, the debtor can now afford the payment because he/she will not be making other payments.  In other cases, the debtor may not be able to afford the ongoing payments and may end up in the same position again, only this time he/she may not be eligible to re-file for bankruptcy.If you have any questions, or would like to speak with an attorney, contact a St. Louis Bankruptcy Attorney today!

  I had spent at least six hours with the clients over several months, strategizing about extracting them personally from a cratering business situation, when he said, “Oh, I haven’t told you about…” Others at the meeting said my eyes popped and I’m sure my face fell. He owned another business corporation, which had assets, filed tax returns, and stood utterly apart from the holdings we’d been dealing with. Now, what possessed him to overlook this entity over such a protracted period of time I cannot say.  Stress perhaps.  Other issues threatened to bite, while this corporation was perhaps an opportunity without (yet) troubles. But it fed into a theme in my professional life last week: unexpected assets. Another client in a second or third meeting last week came round to owning up to title to the corporation’s domain names, some trade marked intellectual property,  and a potentially valuable customer list. So, the call today is to keep digging as you look for assets. Business wrinkles The usual suspects, if you will, are business people, particularly if they have incorporated a business once operated as a proprietorship.  Assets bought by the individual frequently don’t get transferred to the business entity.  Or, for tax purposes, they create a separate entity to lease some asset or provide some service to the business. When the business is a separate legal entity, it often owes the shareholders for loans, funds advanced, use of individual assets. Wait, wait, there’s more But it’s not just business folk who hold unexpected assets. At the Northern California Bankruptcy Forum, Folsom bankruptcy attorney Gary Gale presented a confidence-shattering list of things to ask about not in my current client patter. And another presenter, who works for trustees, talked about accessing Google Street View and Google Maps to see what was visible on the debtor’s property.  He reported finding tractors, multiple unlisted vehicles, livestock, and outbuildings containing who-knows-what. Get better digging implements If we assume that it’s inattention or distraction, not the desire to deceive, that leads clients to omit stuff, then we have to become good listeners and linguists. Listen for the clues to activities or locations not yet mentioned.  Scour the tax return for depreciation on things you haven’t heard about, the paystub for deductions you can’t identify. Widen your vocabulary.  My friend Charlotte bankruptcy attorney Susanne Robicsek memorably tells about asking a client if they had a couch in their living room.  No, the client replies.  A davenport?  No, again.  A sofa?  Oh, yes, we’ve got a sofa. So, don’t take “no” as the final word. Less than obvious assets Let’s start a list of assets that may elude us: Accrued vacation pay Paypal accounts Insurance claims Class action membership Health savings accounts Liquor licenses Timeshares or vacation club points Claims for as yet unreimbursed business expenses Domain names and  websites Trade marks or trade secrets Book royalties Renewal commissions Realtor commissions on pending transactions Loans made to closely held businesses Vested rights in trusts and estates Stock or options in companies not (yet) public Business leases in the individual’s name Season tickets Airline tickets or paid for vacations Security deposits for utilities or rentals Legal claims not yet filed Keep digging.  There are undoubtedly more.  Image courtesy of Mary MacTavish.

Filing bankruptcy gives protection of an automatic stay to the Debtor. This means the creditor is prohibited from taking any action against a debtor or a debtor’s property for example foreclosure on a home or repossession of car.A motion for relief is filed by a creditor for seeking relief from the automatic stay for various reasons. One of the reasons is to foreclose upon the real estate or property, if the debtor is behind on payments.  This can also be done to a car from the debtor. Sometimes the creditors file for relief to pursue the debtor’s insurance coverage. Such relief is granted if creditor agrees to limit the collection of his judgment to the insurance.   If relief is granted to the creditor it does not mean that the estate will be removed from debtor or the creditor gets the ownership of the property, it only removes the stay or allows the creditor to move ahead with the best remedies available to the creditor to collect the claim against the debtor. Creditors can seek for relief in both Chapter 7 and Chapter 13. Usually if a debtor filed a Chapter 7 he needs to be current with the mortgage payment or car installment. If a debtor is behind on mortgage payments, or to stop repossession of the car he could file chapter 13 and he can pay arrearages through the plan. For ongoing mortgage payments he has two options either pays the ongoing mortgage payments outside the plan or pays them through the plan. The creditor will file for the relief if the client is not current with post-petition payments.There are few ways to defend against the motion for relief.  It is always good to be current on the payments, but it also depends on your interest in the property. If you are in a chapter 13 you have the option of entering into a stipulation agreement. In a stipulation agreement you can make the post-petition arrearages over six months.  Including the payment in chapter 13 plan will keep you current with post-petition mortgage payments. If at the hearing the motion for relief was granted, the remedy for it is to file a motion to vacate the order if the debtor is current on their mortgage payments and could prove to court that they were current when the relief was granted. The only other option available after relief is granted is to file a consent motion to vacate the order on motion for relief if the mortgage company agrees to the motion.There are situations when you cannot be current but keeping track of the bills and paying them on time will help you and your family.  If you have any questions contact a St. Louis Bankruptcy Attorney today.