About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Written by Craig D. Robins, Esq.
So many consumers have complained about debt settlement companies that the federal government has finally taken some action.
Yesterday, the Federal Trade Commission announced a new restriction on debt settlement companies which is designed to address the growing nationwide problem of so-called debt relief companies making outlandish promises of success, but ultimately failing to do anything.
Up-Front Fees Charged by Debt Settlement Companies to be Prohibited
The new rules, which will take effect in the fall, will prevent debt settlement companies from charging any up-front fees before they settle or reduce a customer’s credit card debt.
I have reported previously that I regularly meet with clients who were promised the moon by debt settlement companies; yet these companies ripped them off after charging large up-front fees, failing to achieve settlements, and leaving the consumers in a worse position than they were to begin with. I ultimately end up filing a bankruptcy proceeding for many of these clients. See: Debt-Settlement Firms Misled Consumers According to FTC .
There Has Been Rampant Abuse by Debt Settlement Companies Across the Country
According to an article in today’s New York Times, attorneys general in more than 20 states have brought enforcement actions against debt-relief companies in the past six years. The FTC has also received one of the highest amount of complaints for debt relief companies than any other type of business. The number of consumer complaints has doubled in the past two years.
Unfortunately, the new rules will not protect everyone, and some loopholes leave many consumers open to abuse. The new rules only cover agreements with debt settlement companies made over the phone. They do not cover agreements made on line or through face-to-face meetings.
Written by Craig D. Robins, Esq.Some people erroneously think that they are not allowed to own any assets after filing for bankruptcy. This is not true.
The purpose behind consumer bankruptcy is to give an honest debtor the opportunity for a fresh new financial start.
The bankruptcy laws recognize that in order to get this start, you must be able to keep a reasonable amount of your possessions, such as a roof over your head, clothes on your back, and a reasonable amount of other possessions — this is all so that you can move forward with your life without becoming a ward of the state.
Various Assets are Protected by Various Bankruptcy Exemption Statutes
There are a number of laws called exemption statutes that indicate what possessions you can keep and protect. Click here to see Bankruptcy Exemptions in New York .
Wondering about keeping your clothes? You shouldn’t — Can They Take the Shirt Off My Back In a Bankruptcy Proceeding?
The exemption statute that protects your home is called the homestead exemption. Several years ago, New York increased the amount of its homestead exemption by five times — Surprise Law Enactment – Homestead Exemption Increased .
Almost all retirement accounts are protected in bankruptcy. That’s why If You’re Considering Bankruptcy, Avoid the Temptation of Borrowing From Your Retirement Account .
To learn more about pensions, see Are Pensions Protected in New York Bankruptcy Cases?
I.R.A. accounts are also protected when filing for bankruptcy. How Much Can You Protect In an Individual Retirement Account (IRA) While Filing Bankruptcy in New York?
Tax refunds are often protected in bankruptcy proceedings. To find out more if yours is, read The Issues to Consider in Determining If a Tax Refund is Protected in Bankruptcy .
Written by Craig D. Robins, Esq.Many High-income Debtors with Significant Income Can File Chapter 7 Bankruptcy and Still Pass the Means Test
During the past few years I’ve noticed a fascinating trend: I’m counseling more and more bankruptcy clients with high income and high debt.
During the past few years I’ve noticed a fascinating trend: I’m counseling more and more bankruptcy clients with high income and high debt.
Representing such debtors requires addressing certain special issues which I will focus on in this article which was originally published in the June 2010 Issue of the Suffolk Lawyer, a Bar Association periodical.
Blame the Recession
Perhaps the current drawn-out recession is affecting an increasing number of consumers beyond the low and middle-class – long the bastion of typical bankruptcy filers.
In addition, falling real estate values have wiped out the equity in many people’s homes. Many middle and upper-class Americans have thus lost their ultimate source of long-term savings.
Chapter 7 Bankruptcy Is Usually the Consumer’s Best Choice
Assuming that there’s no need to consider Chapter 13 to stop foreclosure, I always strive to file Chapter 7 bankruptcy petitions for all my clients – but doing so requires that they qualify under the means test. After all, if a Chapter 7 case goes smoothly, the debtor will discharge most or all debts and ideally keep all assets.
For high-income debtors, Chapter 7 eligibility has become rather challenging considering that under the 2005 Bankruptcy Amendment Act (BAPCPA), a consumer debtor will almost certainly face opposition to getting a discharge if he or she does not pass the means test. There is no salary cap for filing Chapter 7 Bankruptcy.
The U.S. Trustee is especially vigilant in reviewing any case that is deemed abusive, or that may even be close to being abusive.
Accordingly, analyzing the facts of a high-income debtor becomes critical and properly preparing the means test and other bankruptcy schedules becomes crucial.
How Much Income Is “High-income”?
Lately I’ve been regularly filing Chapter 7 bankruptcy petitions for families with incomes well over $100,000. I recently filed two Chapter 7 cases where the family income was over $200,000. I actually wrote a blog post a year ago entitled: Can You File Chapter 7 Bankruptcy on Long Island With a Family Income of $200,000 a Year?
Considering the perceived income limitations for seeking Chapter 7 relief under the new bankruptcy laws, such high-income filings seem difficult or impossible; yet in practice, they are not.
Generally, a high-income debtor is one who has income over $100,000 per year or $10,000 per month. In my bankruptcy practice, high-income debtors are often executives, doctors, assorted professionals, and families of double-income spouses.
General Principle for Filing High-income Cases
General Principle for Filing High-income Cases
A high-income debtor can file for Chapter 7 relief if the debtor a) passes the means test or conversely does not need to qualify for the means test; and b) passes a totality of circumstances test for filing in good faith – often meaning that all of their expenses are reasonable and necessary. See: If I Make Over $100,000 a Year, Can I Eliminate Credit Cards Debts in Bankruptcy?
Many high-income debtors also have relatively high levels of debt. A former executive previously earning several hundred thousand dollars per year can easily have as much credit card debt.
In such cases, the debt must have been incurred in good faith and must not be unreasonably high in relation to the debtor’s income at the time the debt was incurred. Counsel should devote extra time to reviewing the various debts in such cases.
The Business Debt Exception to the Means Test
Many high-income debtors have very substantial debt obligations from failed business ventures, often due to having signed a personal guarantee. A debtor is excused from preparing the means test if the debtor’s debts are not primarily “consumer debts”, and there is a box on the means test for this exclusion.
A “consumer debt” is defined as a debt incurred by an individual primarily for a personal, family or household purpose. On the other hand, some courts have defined “business debt” as debt that is incurred with a “profit motive.” I hope to devote a future column to a more involved discussion about how courts have defined debt as either business debt or consumer debt.
To see a more thorough discussion of this, please see my post: This Debtor Didn’t Have to Do the Bankruptcy Means Test .
Variables Making High-income Debtors More Eligible for Filing
Certain individuals are able to pass the means test much more easily than others. Those that have large families with multiple dependants, large mortgages, two car loans or leases, mortgage arrears and tax arrears are more likely to qualify under the means test because these items can all be used as means test deductions.
Since individuals with large famlies can benefit from increased means test deductions, consider issues in Determining Household Size for the Means Test .
Frequently, individuals with high income receive year-end bonuses. By timing the filing of the petition, the impact of year-end bonuses on the means test can be minimized or even reduced. See my prior post: Advance Planning: File Bankruptcy Before You Get a Year-End Bonus .
The Budget Must Be Reasonable
Even if the debtor passes the means test, that alone is not enough to demonstrate that the case is not abusive, and that it is filed in good faith. All budget items must be reasonable and necessary, based on the debtor’s actual income going forward. This requires a more subjective and equitable assessment of the debtor’s circumstances.
For example, the U.S. Trustee is likely to object to an expense of $2,000 per month for food for a family of four, but will not have any problem with an expense of $1,200, even though that is on the high side.
Some expenses will not pass muster. The U.S. Trustee will likely argue that an expensive summer camp is unreasonable, as sending the kids there is being done at the expense of the creditors.
Issues with Keeping Rental Property
Issues with Keeping Rental Property
High-income debtors are much more likely to have investment real estate in addition to their homes. In such cases, there is an issue as to whether keeping the rental property is reasonable. If the expenses of retaining the property exceed the amount of rental income, then keeping the property will result in a reduced amount of disposable income.
In such a case, the U.S. Trustee will argue that the debtor will have additional income each month to make payments to creditors if the investment property is abandoned.
In such a case, the U.S. Trustee will argue that the debtor will have additional income each month to make payments to creditors if the investment property is abandoned.
Maintaining a Luxury Residence
A high-income debtor is much more likely to have an expensive home. However, there are some cases across the country in which the U.S. Trustee argued that it is unreasonable for a debtor to keep a luxury home with a very high monthly mortgage at the expense of the creditors. This issue has not been addressed in our Circuit.
Alternatives If Debtor Isn’t Eligible for Chapter 7 Relief
If the debtor fails the means test or simply has too much disposable income, then there are still a number of options available. The debtor can file for Chapter 13 relief if his or her secured debts are less than $1,081,400 and unsecured debts are less than $360,475.
If the debt levels exceed these amounts, they can file for Chapter 11 relief. Debt Negotiation is also an option in which the attorney can negotiate settlements with the creditors. See my blog post: Options If You Fail the Bankruptcy Means Test .
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About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the JUNE 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Filing bankruptcy without an attorney can be extremely difficult
Written by Craig D. Robins, Esq.
When Congress changed the bankruptcy laws in 2005, they made filing for bankruptcy extremely complex and complicated.
The fact is that is it is extremely difficult to file for bankruptcy without an attorney.
Recent figures indicate that about nine out of ten self-prepared bankruptcy petitions are dismissed because the “pro-se” debtors did not properly fulfill their obligations under the new bankruptcy laws. “Pro-se” is the Latin legal term for someone who is representing himself or herself without a lawyer.
Filing Bankruptcy on Long Island without an attorney is further complicated because in addition to attending to obligations under the federal bankruptcy laws, you must also adhere to the Local Bankruptcy Rules for the Eastern District of New York.
Representing Yourself in Bankruptcy is Often A Mistake
Filing for bankruptcy is much more involved than reading a “How to File Bankruptcy” book. It takes a keen understanding of federal and state law.
Many debtors who represent themselves are not aware of what assets they can protect, and what assets they cannot protect. I have seen many a case where the trustee has taken assets from a pro-se debtor because they were not exempt and protected.
The Means Test Can Be Very Complicated
Every person filing bankruptcy must complete the means test and must do so properly. If the means test is not prepared the right way, it can constitute grounds for the Bankruptcy Court to dismiss your case.
The means test is one of the most involved and controversial aspects of filing bankruptcy today. See: Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts.
Click here to see a variety of articles about the bankruptcy means test.
Documents Must Be Filed with the Court and Provided to the Trustee
The new laws also require that a debtor provide a number of documents to the trustee in a timely fashion. I have observed that with a great number of pro-se Chapter 7 filings, the trustees have refused to examine the debtor because the debtor failed to provide the proper documents.
In addition, I have never, ever seen a Chapter 13 pro-se debtor who provided all of the necessary documents to the Chapter 13 trustee when they were required to do so.
Finally, if you do not file other mandatory documents with the court on a timely basis, the court will dismiss your case.
You Must Know What Information Must be Provided in the Bankruptcy Petition
The petition, itself, is rather complicated. With most of the cases we file, the petition is close to 50 pages long.
You must also understand what particulars about your financial situation to include. For example, What Income Has to be Disclosed in a Bankruptcy Petition?
Retaining an Experienced Bankruptcy Attorney is a Wise Investment
An experienced bankruptcy attorney will know how to quickly and efficiently put together your petition, file your case in the proper way, and then represent you in Court.
When it comes to seeking to eliminate a substantial amount of debt, it makes sense to do it the right way. Many experienced bankruptcy attorneys, such as my Long Island Bankruptcy Law Office, offer free consultations.
Please see the much more detailed article I wrote last year: Bankruptcy Attorney Representation — How Important Is It?
Written by Craig D. Robins, Esq.A person’s house is usually their most valuable asset. Understandably, one of the first questions my homeowner-clients ask me is “How will filing bankruptcy affect my home?”
Foreclosures and Collections Are Stopped Cold
The first thing you should know is that as soon as your petition is filed, the automatic bankruptcy stay kicks in.
This means that if you were behind with your mortgage, it now becomes against federal law for the mortgagee to continue any foreclosure proceeding.
If the House is Exempt, There Is No Problem Keeping It
Every state has a homestead exemption statute that sets forth how much equity you can keep in your home, while eliminating debts in a Chapter 7 bankruptcy case. In some states, the homestead exemption is based on federal law.
In New York, the homestead exemption is $50,000 per person. This is based on New York State law. See: Bankruptcy Exemptions in New York .
A husband and wife who file jointly can pool that homestead exemption and protect a total of $100,000 worth of equity. Sometimes Bankruptcy Exemptions Can Be Doubled .
If the House Has a Great Deal of Equity, You Can Still Keep It
Even if there is more than $50,000 of equity per person, then you can still keep you house if you file a Chapter 13 payment plan bankruptcy.
In such cases, the total amount you will have to pay back to your creditors through the plan, which is usually over a period of 60 months, must be at least equal to the amount of unprotected equity.
Sometimes deciding whether to keep a home or not can be a difficult decision.
If You Can’t Afford Your Mortgage or You Do Not Want to Continue Paying Your Mortgage You Can Walk Away (Eventually)
If you can no longer afford to keep your home and you have little or no equity in the home, then you may want to file for Chapter 7 bankruptcy in which case you can walk away from your obligation without any financial recourse from the lender. See: Strategic Mortgage Defaults Increasing .
In such cases, the lender still has the right to eventually foreclose on the home and take it back, but that can take an extended period of time during which you can continue to reside in the house without making any payments. Bankruptcy Can Provide Way Out of Bad, Highly-Leveraged Real Estate.
When the lender eventually does take the property back, it cannot pursue you for any deficiency amount. This is because the bankruptcy had the effect of discharging that debt. One-Fourth of All U.S. Homeowners Are Underwater. What Should These Homeowners Do?
Filing for Chapter 7 When There Is Substantial Unprotected Equity in the House
It is extremely rare that we recommend to a bankruptcy client that they file for Chapter 7 bankruptcy if they have a great deal of unprotected equity in their home. Usually we recommend that they try to sell their home first.
However, we do see situations in bankruptcy court where a homeowner with substantial equity files for bankruptcy. In such cases, the Chapter 7 trustee will seek to sell the home. However, the trustee must pay the debtor the amount of the homestead exemption from the proceeds, which would be $50,000 per person.
If You Have Real Estate and Need Bankruptcy Relief, You Should Consult With Experienced Bankruptcy Counsel
Protecting real estate in bankruptcy can be tricky and must be done the right way. When it comes to houses and homes, there are often many options when dealing with problematic debt situations.
It therefore makes sense to consult with a qualified and experienced Long Island bankruptcy attorney.
Brooklyn Bankruptcy Judge Milton E. Milton will be interred in St. Patricks Cemetery in Huntington. I took this image of my son, Max, there, several years ago.
Written by Craig D. Robins, Esq.
Judge Milton Funeral Information
The following is the latest information about the funeral service and visitation arrangements for the Honorable Judge Dennis E. Milton who passed away on May 31, 2010.
Obituary: Please see: Brooklyn Bankruptcy Judge Dennis E. Milton Passes Away
Home: Greenlawn, NY
Date of Death: May 31, 2010
Age: 59
Birthdate: March 15, 1951
Place of Birth: Staten Island, NY
Service Information: Saturday, June 19, 2010; St. Patricks Church, Huntington, NY
Visitation: M. A. Connell Funeral Home Inc., Huntington Station, NY
Thursday, June 17, 2010 7-9
Friday, June 18, 2010 7-9
Interment: St. Patricks Cemetery, Huntington, NY
Want to Be a Bankruptcy Judge?
Posted on
Bankruptcy Judge Position Available
Written by Craig D. Robins, Esq.
From time to time bankruptcy judgeships open up around the country for various reasons.
A judge may retire or sadly, as was the case with the late Judge Dennis E. Milton, a judge may pass away, leaving a vacant bench that must be filled. [Click here to see the Bankruptcy Judge Dennis E. Milton obituary that I wrote last week].
Bankruptcy judgeships may also open if Congress passes the Bankruptcy Judgeship Act of 2010, which I also wrote about last week: Pay a Buck — Get a Bankruptcy Judge .
I just received an e-mail about an opening in the Ninth Circuit for a bankruptcy judgeship in the Western District of Washington — Seattle.
Since most bankruptcy practitioners are curious about what’s involved with applying for a bankruptcy judgeship, even if they have no plans to do so, here’s some information:
How Far in Advance do Bankruptcy Judgeships Become Available?
The selection process usually takes a good 10 months to complete. The open position in Seattle is not available until January 2011.
How Long is the Term?
A bankruptcy judge is appointed to a term of 14 years which is renewable, subject to applicable reappointment procedures.
How Much is the Current Salary for a Bankruptcy Judge?
The current salary is $160,080 per year. If you are applying from here in New York, and are accepted, you will not get any relocation expenses.
I wrote a more detailed post last year: How Much Do Long Island Bankruptcy Judges Earn?
What is the Selection Process Like for Bankruptcy Judges?
It is open and very competitive. I wrote about this last year — How Are Long Island Bankruptcy Judges Appointed?
Basically, all applications are screened by a local Merit Screening Committee which then selects a limited number of judicial candidates for interviews. The committee also contacts references.
From this initial group, the Committee narrows down the applicants who then receive a further interview by a new committee composed of Circuit Judges. The judges then submit their recommendation to the Court of Appeals.
What Are the Basic Qualifications for a Bankruptcy Judge?
Applicants must be admitted to practice before the highest court of at least one state, be a member of good standing in every bar in which they are a member of, and have at least five years of legal practice experience.
What Checks to Bankruptcy Judge Applicants Go Through?
Nominated applicants must undergo both FBI and IRS background investigations prior to appointment.
Are You Actually Interested?
If so, contact the Ninth Circuit official website for more information. The deadline is August 5, 2010. Incidentally, there is also a judical bankruptcy opportunity in the Central District of California — Los Angeles — but the deadline is June 17, 2010.
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