About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for January, 2010
Written by Craig D. Robins, Esq.Although debt collection law firms are the fierce and hated adversaries of my Long Island bankruptcy clients, I have gotten to know several collection attorneys fairly well over the years.
Some of them are the same age as I am, and we started practicing at the same time, and were members of the same young attorney groups 25 years ago. My practice happened to take me in the direction of helping consumers, whereas some of my colleagues ended up representing credit card companies.
Although my practice only helps consumers and business owners who have financial problems, I like to hear what it’s like on the other side — from those attorneys who actually pursue my clients before they have the opportunity to file for bankruptcy relief or achieve a negotiated settlement.
A Collection Attorney Colleague Recenty Confided In Me
My clients are always complaining about the unabated and aggressive pressure that bill collectors put on them, so it was interesting to have an informal chat with a collection attorney colleague who I’ve known for years and years. He complained that those law firms who specialize in debt collection in New York are not exactly doing so well these days.
He commented that his firm is facing the horrifying prospect of taking in millions of dollars in collection proceeds, but not making any profit whatsoever.
Here’s Why Bill Collectors and Collection Law Firms Will Have a Tough Time in 2010:
1. Debt Collectors and Collections are Under Greater Scrutiny. It’s no secret that the entire debt collection business has come under great scrutiny during the past year as the result of some unscrupulous debt collection practices. I’ve written extensively about this previously. See:
2. It’s Harder to Collect. My colleague complained that he and his firm were working incredibly hard, yet not making much money. Apparently, the economic pressures that are pushing more and more Long Island families to seek bankruptcy relief also mean that collection firms are having a much more difficult time collecting the amounts that they’ve collected in the past.
3. Lenders and Their Collectors Are Paying the Price for Easy Credit. One of the key reasons for the relatively low rate of collectability is that several years ago, banks and lenders were so loose with their credit policies and underwriting standards that they extended credit to too many consumers who weren’t credit-worthy. That translates into greater difficulty collecting on delinquent accounts.
4. Unemployed Debtors Mean No Funds for Creditors. Many consumers do not have the funds to make any payment simply because they are unemployed. Projections for continued unemployment mean continued difficulty into the new year with trying to collect.
5. Changing Sentiment Against Banks, Bill Collectors and Collection Law Firms. We now have a more consumer-friendly atmosphere in which courts tend to side with the consumer as opposed to the creditor. In addition, there are always new debt collection laws and regulations, and the trend is to make it harder for the debt collector and easier for the consumer.
6. BANKRUPTCY. I saved the best for last. Over a million and a half American consumers will probably file for bankruptcy in 2010, and most of them will be able to totally eliminate all credit card debts. This is how my Long Island bankruptcy law firm and I will be helping many consumers in 2010.
Written by Craig D. Robins, Esq.I received a disturbing call from one of my Long Island Chapter 7 bankruptcy clients tonight. Several weeks ago I filed his bankruptcy petition and he wanted me to fax someone a copy of the official court notice of his bankruptcy filing.
When I asked him why, he said that his ex-wife had just sued him in Family Court over support and maintenance issues.
He then said that he had just retained a family law attorney who advised him that the bankruptcy stay would stop the Family Court suit. The client also said that according to his new, family law counsel, sending the ex-wife a copy of the bankruptcy notice of filing would be effective in staying the Family Court hearing scheduled for next week.
Wrong. Wrong. Wrong. It seems that the family law attorney does not understand bankruptcy law involving how the automatic bankruptcy stay works.
The Automatic Bankruptcy Stay Does Not Stop Most Family Court Matters
Generally, the automatic bankruptcy stay, which is provided by Bankruptcy Code section 362(a), stops any activity of any kind to collect a debt. However, section 362(b) provides for certain exceptions, especially most actions involving Family Court matters and domestic support obligations.
Thus, there is no protection in bankruptcy court from the obligations imposed by a Domestic Support Obligation. Here’s what Bankruptcy Code section 362(b)(2)(A)(ii) says:
The Automatic Stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding for –
- the establishment of paternity,
- the establishment or modification of an order for a Domestic Support Obligation such as child support,
- the determination of child custody or visitation issues, or
- the dissolution of marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest. In this instance, the divorce can be granted without first obtaining relief from the Automatic Stay, but the marital property cannot be divided without obtaining such relief.
The Automatic Stay also does not prevent the post-petition collection of Domestic Support Obligations such as alimony or child support –
- from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in said property,
- from automatic wage deduction orders created by a statute or judicial or administrative order,
- from the interception of debtor’s federal or state income tax refunds, or
- from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license.
Thus, there is no protection in bankruptcy court from the obligations imposed by a Domestic Support Obligation.
Written and photographed by Craig D. Robins, Esq.
This post is part of a series of biographies and profiles of Long Island bankruptcy trustees and judges.
Long Island Chapter 7 bankruptcy trustee Richard L. Stern, Esq. has been on the Chapter 7 trustee panel for the Eastern District of New York since 1992, where he is assigned cases filed in the Central Islip Bankruptcy Court.
I have personally known “Rick” since 1985 when he was an associate at Holland & Zinker, one of Long Island’s earliest bankruptcy boutique law firms, where he eventually became a partner. Incidentally, Marvin Holland, name partner in that firm, left to serve as a bankruptcy judge in the Brooklyn Bankruptcy Court. He has since retired.
Rick eventually moved on became a partner with Chapter 13 trustee Michael J. Macco many years ago, and they’ve been partners ever since in the firm, Macco & Stern, LLP located in Melville.
As a trustee I find Rick to be fair, reasonable, respectful and even-tempered.
Rick enjoys an exceptionally good reputation in the legal community and the bankruptcy bar. He very frequently speaks at and moderates bankruptcy seminars for the Suffolk County Bar Association.
Few attorneys volunteer more time towards the legal profession than Rick. As for Suffolk County bankruptcy attorneys, he’s probably at the top of the list in this regard. Rick is currently the Dean of the Suffolk Academy of Law and he also serves as a member of the Board of Directors of the Suffolk County Bar Association.
In addition, he’s received numerous awards including the New York State Bar Association Pro Bono Service Awards for 1992 and 1996. The Suffolk County Bar Association recognized him in 1991 and 2002 with a Special Recognition Award from the Pro Bono Foundation for his work in the Pro Bono Project Bankruptcy Clinic and a Director’s Award in 2005.
I attended a dinner in 2003 at which time Rick received a Partners in Justice Award from Nassau/Suffolk Law Services for his pro bono work.
Rick was admitted to practice in 1978. He graduated from Ohio State University in 1974, and he received his law degree from Hofstra Law School in 1977.
Rick and his wife, who live in Nassau County, enjoy the theater. We have seen each other at Broadway Shows. One of his children actually starred in a Broadway musical several years ago – The Will Rogers Follies. I remember Rick sometimes rushing out of Court to take his daughter to appear in the show in the early 1990s.
I took the photo of Rick when he was moderating the Bankruptcy Law Update seminar at the Suffolk County Bar Association in December.
Here’s Rick’s contact info:
Richard L. Stern, Esq.
Macco & Stern, LLP
135 Pinelawn Road, Suite 120 South
Melville, NY 11747
Phone: (631) 549-7900
Macco & Stern, LLP
135 Pinelawn Road, Suite 120 South
Melville, NY 11747
Phone: (631) 549-7900
Written by Craig D. Robins, Esq.It is most unfortunate, but the Obama administration’s $75 billion program to protect homeowners from foreclosure is now seen as a major disappointment.
The New York Times, in a detailed front-page article over the weekend, reported that some economists and real estate experts now contend the program has actually done more harm than good.
Here’s why: Even though the program has lowered the mortgage payments on a trial basis for hundreds of thousands of people, it has largely failed to provide permanent relief.
This is especially evident on Long Island, where the high number of foreclosure filings continue unabated.
The Program Has Not Resulted in Affordable Mortgage Payments for Most Homeowners
Most of the homeowners who have signed up for the program are not able to make their monthly mortgage payments, even if they are lowered somewhat. Consequently, many people still stand to lose their homes through foreclosure.
The Making Homes Affordable program now has many critics who are increasingly arguing that it has raised false hopes among people who simply cannot afford their homes.
Many desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting hard-earned funds they could have saved in preparation for moving to cheaper rental residences. Some borrowers have also been hurt because, unbeknownst to them, their credit ratings became tarnished since they falsely assumed that a loan modification did not result in the lender reporting negative information to the credit reporting agencies.
In addition, the program requires the homeowner to enter into a three-month trial period with no guarantee of permanent success. Another major problem with the program is that lenders can be very fickle in deciding to grant a modification.
The New York Times article pointed out that with the Bank of America, which has over a million outstanding loans that are eligible for modification, less than one percent resulted in permanent modification.
Sometimes Filing Chapter 7 Bankruptcy and Staying in the Home for Two Years Is the Best Solution
In my Long Island mortgage foreclosure defense and bankruptcy practice, I regularly meet with Long Island homeowners who have fallen behind with their mortgage payments and are facing foreclosure. Sometimes, walking away from an unaffordable home is the best option.
Here’s why: the homeowner can usually stay in the home for well over a year, and often as much as two years or more — without making any mortgage payments to the mortgage company or paying any real estate taxes to the town.
Sometimes referred to as a “strategic default,” because the homeowner intentionally stops making the payments, it often has to be done in conjunction with a Chapter 7 bankruptcy filing which will enable the homeowner to eliminate any subsequent deficiency on the mortgage after the lender eventually takes the property back.
The Obama Program Fails to Recognize that Some Homeowners Simply Can’t Afford Reduced Mortgage Payments
Although President Obama certainly had the right idea to help the American public prevent foreclosure, the program is not working. The New York Times article reported that Treasury officials appeared to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.
As a result, there is a new, unadvertised federal program called the Foreclosure Alternatives Program, which aims to encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages, which are referred to as short sales.
Whatever the merits of its plans, the Times concluded that Washington has clearly failed to reverse the foreclosure crisis.
In 2008, more than 1.7 million homes were “lost” through foreclosures. Last year, more than two million homes were lost, and a recent projection anticipates that this year’s number will swell to 2.4 million.
I have found that Increasingly, more and more of my clients in a foreclosure situation are inclined to walk away and accept foreclosure, rather than continue to make payments on properties in which they have no equity.
Assuming a homeowner is eligible for Chapter 7 bankruptcy relief, filing bankruptcy will enable the homeowner to eliminate any liability on the mortgage and, at the same time, eliminate all existing credit card debt as well. This is one way my firm regularly provides help to Long Island families in foreclosure.
Written by Craig D. Robins, Esq.Some Well-Known Collection Law Firms May Have to Make Significant Payments to the Debtors They Have Sued For Having Engaged in Dirty and Dishonest Conduct
Victims of debt collectors who cheat their way to getting judgments may be getting their due.
As reported in the New York Times last week, a class action lawsuit was just filed in U.S. District Court in Manhattan. The suit alleges that a network of bill collectors engaged in the deceitful act of “sewer service.”
This is when a debt collector fails to serve the legal lawsuit documents and then files a false affidavit claiming the notice has been properly served. When the debtor doesn’t show up in court or file an answer to the collection summons and complaint, the collection law firm then obtains a default judgment.
Usually the victim does not learn about the judgment until he or she is surprised when their bank account is frozen. The judgments can also ruin a person’s credit report.
The New York Attorney General Began Investigating Sewer Service Last Year
I wrote several posts about sewer service last year, which led to several investigations by New York’s Attorney General. See Attorney General Investigating Process Servers for Taking Illegal Shortcuts.
The difficulties with the economy has put new scrutiny on the scheme as more and more people are being sued by debt collection firms.
In April, Attorney General Andrew Cuomo actually arrested the owner of a Long Island process-serving company, American Legal Process, for engaging in the practice. Long Island Process Serving Company Owner Arrested Today for Sewer Service. In addition, he closed down several debt collection firms the following month: Debt Collectors Shut Down by Attorney General .
The AG’s official investigation suggested that on hundreds of occasions, process servers claimed to be in several places at once, often over distances impossible to cover in a day. The New York Attorney General’s office is seeking to vacate more than 100,000 court judgments statewide obtained by debt collection law firms that used American Legal Process Company as their process server, and the Attorney General has expanded its inquiry into other firms as well.
Class Action Suit Encompasses Many Defendants Involved in the Collection Law Suit Process
The class-action lawsuit is pursuing the entire debt collection chain, starting with the debt-buying companies, the collection law firm they hired to collect the debt, and the process-serving firm used to serve debtors.
The suit names five debt-buying firms with variations of the names L-Credit and LR Credit. All are subsidiaries of Leucadia National, a $6 billion publicly traded holding company.
Mel S. Harris & Associates, the collection law firm named in the suit, is one that I have dealt with for years as they have a very high volume debt collection practice.
In my Long Island debt settlement and bankruptcy law firm, we regularly represent people who have complained that they were never served with lawsuit papers before learning about judgments against them. In almost all cases, however, the clients acknowledged that they owed the debt.
We are usually able to negotiate a very beneficial settlement or eliminate the debt entirely through bankruptcy.