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Craig D. Robins, Esq. New York Bankruptcy Attorney, Longisland bankruptcy attorney

“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”

Craig D. Robins, Esq.

Bankruptcy Procedure

How Far Can a Bankruptcy Judge Go To Assist Inept Counsel?

Posted on Wednesday (May 16, 2012) at 10:00 pm to Bankruptcy Exemptions
Bankruptcy Practice
Bankruptcy Procedure
Chapter 7 Bankruptcy
Issues Involving New Bankruptcy Laws
Suffolk Lawyer

How far can a bankruptcy judge go to assist inept or inexperienced counsel?Written by Craig D. Robins, Esq.

  

After I wrote about some bankruptcy court decisions last month which involved some quirky and unusual facts (Two bankruptcy attorneys got into trouble over E.C.F. filings), some of my colleagues requested that I continue to discuss similarly odd and interesting cases.  Fortunately, we have one that is fresh off the docket.

 

On April 24, 2012, Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court, here in the Eastern District of New York, happened to issue a decision in just such a case, so we now have appropriate fodder for this month’s column. 

 

The decision, which is just as interesting for what is says, as for what it does not, involves protecting a debtor’s entitlement to receive funds, trying to be creative with exemptions, and seeing how a client might suffer from attorney ineptitude for being unfamiliar with bankruptcy practice and procedure.

 

Perhaps most importantly, it also leaves one thinking about how far a judge can or should go to assist counsel who is clueless.  In re Cho, no. 11-75595-ast, (Bankr. E.D. New York 2012).

 

In August 2011, Mr. and Mrs. Cho filed a typical Chapter 7 consumer bankruptcy petition here on Long Island.  About a month before filing, the debtors’ car lender repossessed their Honda.  Unbeknownst to the debtors at the time, a week before the filing date, the lender sold the vehicle at auction, and the sale resulted in a surplus of $5,000.

 

The debtor’s bankruptcy attorney, a lawyer from Queens who shall remain nameless, advised Chapter 7 Trustee Robert Pryor at the meeting of creditors, that the debtors’ vehicle had been repossessed pre-petition, resulting in a surplus, and that the debtors had received and deposited a check for the surplus post-petition.

 

Debtor’s Attorney Tries to Be Creative – Unsuccessfully

 

The trustee soon demanded that the debtors turn over the entire surplus amount.  Instead of doing that, the debtors amended their Schedule of Assets to include an ownership interest in the vehicle (which they no longer owned).

 

They also amended their Schedule of Exemptions (which opted for New York State exemptions as opposed to the more liberal federal exemptions) to exempt the vehicle in the sum of $4,000 pursuant to C.P.L.R. § 5205(a)(8), and to also increase their cash exemption by $1,000 to cover the additional value of the surplus pursuant to C.P.L.R. § 5205(a)(9).

 

The trustee believed that he was nevertheless entitled to the full surplus amount, so, with the help of his able associate, Michael Farina, he brought a motion to compel the debtors to turn it over.  The debtors responded, acknowledging that they no longer owned the vehicle, but argued that they were entitled to exempt the surplus as cash.   The trustee responded and pointed out that the amended schedules were improperly done and therefore fatally defective.

 

The trustee’s observation was correct.  Eastern District of New York Local Bankruptcy Rule 1009-1(iv) provides that in order for an amendment of exemptions to become effective, the debtor must first file and serve the amended exemptions on the U.S. Trustee, all creditors, and all other parties in interest, and then file proof of service with the court.  Here, the debtors’ attorney both neglected to file, and neglected to serve.

 

One would think that the debtors’ attorney, after reading the trustee’s papers alleging this neglect, would take immediate corrective action.  However, he did not.  At the hearing, which was held in December 2011, Judge Trust generously gave debtors’ counsel a week to comply with the local rule requirement.

 

However, inexplicably, counsel then filed the amendments but neglected to serve them.  This led the trustee to file supplemental objections.  At a subsequent hearing, Judge Trust gave the debtors’ counsel one last opportunity to meet the procedural requirements, which he finally did.  The matter was now marked for submission.

 

The issue before the court was whether the debtors could exempt the surplus cash under New York law, and whether the debtors could exempt the vehicle.

 

In his decision, the judge first pointed out that New York residents who file bankruptcy after June 21, 2011 have an option of selecting either the New York State or federal exemptions, and that the debtors here chose to claim the New York State exemptions.

 

Bankruptcy attorneys know that a debtor can exempt up to $5,000 of cash pursuant to the New York State cash exemption set forth in Debtor and Creditor Law sec. 283(2), provided that the debtor does not utilize the homestead exemption.

 

Judge Trust determined that, at the time of filing, the debtors did not own cash.  Under DCL § 283(2), “cash means currency of the United States at face value, savings bonds of the United States at face value, the right to receive a refund of federal, state and local income taxes, and deposit accounts in any state or federally chartered depository institution.”

 

The judge, following the overwhelming majority of courts, determined that the debtors had a “pre-petition vested right to receive payment” of the surplus which did not constitute “cash.”  A right to receive payment as evidenced by a check in transit is not “cash.”

 

In addition, since the debtors did not have an ownership interest in the vehicle on the date of filing, nor did they have a right of redemption, they could not exempt the vehicle.

 

However, Judge Trust indicated that the debtors could exempt $1,000 of the right to receive payment.  This is because of the relatively new exemption under C.P.L.R. § 5205(a)(9) which permits debtors filing after January 21, 2011, to utilize a $1,000 wildcard exemption for any personal property, provided that the debtor does not claim a homestead exemption.

 

Since the car was only in one spouse’s name, and the debtors did not claim a homestead exemption, they were entitled to one, $1,000 wildcard exemption which could be applied to the surplus.  The judge ordered them to turn over the balance of the surplus to the trustee.

 

Debtors’ Counsel Neglected to Use the Best Exemption to Protect His Clients — a Fact the Judge Did Not Point Out

 

Here’s why I found the decision especially interesting.  First, the debtors’ counsel initially botched up amending the exemptions – not once – but twice.  Judge Trust gave counsel two opportunities to correct the mistake.  Counsel finally figured out what to do on the third try.

 

Of course, we will never know what Judge Trust was thinking, but one can’t help but wonder if his granting counsel an opportunity to remedy the defective filings was also an opportunity for counsel to reconsider the exemption scheme counsel had elected. 

 

Had counsel opted for the much more generous $10,825 federal wildcard exemption provided in the federal exemptions by Bankruptcy Code § 522(5), he would have been able to protect 100% of the surplus.  In essence, it appears that counsel chose the wrong exemption scheme to the detriment of his clients.

 

An Interesting Issue:  How Far Can or Should a Judge Go to Educate Inept or Inexperienced Counsel?

 

However, a judge can and will only go so far in telling inept or inexperienced counsel what to do.  Would it have been out of line for the judge to tell debtor’s counsel that counsel didn’t have a sufficient understanding of law and procedure, and was not following the best legal strategy?  This is not a role that judges have.  They cannot advocate for one party.

 

Just to be clear, we will never know if Judge Trust was aware that debtor’s counsel botched up the exemptions, but if Judge Trust was aware of this issue I would assume that he would take the position that it is not his place to point out that counsel could have protected the entire surplus if the federal exemptions were used.

 

Based on my experience watching cases in court over the past three decades, this seems to be the way almost all judges handle such issues – they will not tell counsel how to practice law, even if that ultimately hurts an innocent client.

 

Accordingly, the debtor-clients here suffered and will have to turn over many thousands of dollars that they could have kept had their attorney had a better understanding of bankruptcy law and selected the better exemption scheme.  And that point is not in the decision.

 

Click this link to see a copy of the Cho decision in Case No. 11-75594-ast. 

 

 

————————-
  
 
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  2012 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  (516) 496-0800   (516) 496-0800   (516) 496-0800   . For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.  
 
 

 

 

 

 

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A Creditor Just Violated My Clients’ Rights by Posting Their Social Security Numbers

Posted on Tuesday (February 8, 2011) at 4:00 pm to Bankruptcy Practice
Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Creditors Engaging in Abusive Bankruptcy Practices

Social Security numbers in bankruptcy cases are sacredWritten by Craig D. Robins, Esq.
 
This morning I reviewed a proof of claim filed in one of our Chapter 13 bankruptcy cases.  It was filed by American General Financial Services, LLC for a $7,000 debt that was incurred two years ago for an in-ground swimming pool.  The local merchant was Island Recreational.  They filed the claim as “secured.”
 
Here’s the problem:  The proof of claim contained an attachment that consisted of the one-page quicky credit application my clients filled out at the time they purchased the pool and applied for financing.  
 
Attaching this document was not the problem; the creditor’s failure to remove or redact my clients’ Social Security numbers was.
 
Social Security Numbers Are Sacred and Confidential in Bankruptcy Proceedings
 
With identify theft becoming a significant concern this past decade, the bankruptcy courts adopted a new privacy rule that was made part of the official Bankruptcy Rules. 
 
Bankruptcy Rule 9037 requires any party filing a document to ensure that any references to Social Security numbers and other sensitive data are deleted or redacted.
 
I previously wrote about this:  Maintaining Privacy in Bankruptcy Court Filings .

 
Getting the Creditor to Immediately Rectify the Situation
 
I immediately e-mailed the creditor’s “Bankruptcy Specialist” who had prepared the proof of claim and advised her that not only did she violate the law, but she was exposing my client to the possibility of identity theft. 
 
Technically the creditor was in contempt of court for violating Rule 9037.
 
I also considered bringing a motion seeking sanctions against the creditor.  However, doing some quick research, I learned that some courts have refused to award sanctions in such instances, stating that Rule 9037 does not provide a private cause of action to do so. 
 
Rebecca Rose, a law student on the St. John’s Law Review, recently wrote a summary of of the Matthys case which held that Disclosure of Social Security Number Does Not Give Debtors a Private Right of Action
 
Meanwhile, other courts have stated that sanctions are necessary to deter this type of conduct and have indeed awarded them.  I found a great article in the ABI Journal about this — Rule 9037: Consequences of Failure to Redact “Personal Data Identifiers”  However, the link is only available to ABI members. 
   
However, since the Second Circuit did not have any case law on the subject, I decided it would probably not be worthwhile to test the waters on this. 
 
In any event, I tend to be a pragmatist, and I was mostly concerned about achieving a quick resolution and an appropriate disposition of the problem for my clients.
 
The Offensive Proof of Claim was Removed and Amended
 
The creditor’s Bankruptcy Specialist, within minutes of receiving my e-mail, contacted me and agreed to resolve the problem — and she did so in a very pleasant and apologetic manner.
 
Within an hour, she had gotten the Bankruptcy Court Clerk to permanently remove the offensive document from the court’s records.  
 
This was fortunate because some bankruptcy courts in other jurisdictions handle such matters differently — they will only block the offensive material temporarily while requiring counsel to bring a motion for a protective order, a significant amount of work.
 
She then filed an amended proof of claim, now treating the debt as unsecured, rather than secured.  This will save us a little time later when we need to reconcile the filed claims in preparation for proceeding towards confirmation of the Chapter 13 plan.
 
Sure, I could have been meaner and more aggressive.  I could have fought for some sanctions or attorney’s fees.  However, I resolved the problem rather quickly, and the creditor made my life a little easier by amending the proof of claim.  I think I did OK for my client. 
 
Had the creditor’s Bankruptcy Specialist been nasty or unresponsive or not conciliatory, I would have handled the matter most differently.
 
Of course there was a possibility that someone paid the government an ECF fee to view the proof of claim, but I think the possibility that a person with illicit intent did so within a relatively-short period is exceptionally unlikely.
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Going to Your Bankruptcy Court Hearing — The Meeting of Creditors

Posted on Tuesday (February 23, 2010) at 2:30 am to Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy

Meeting of Creditors in Bankruptcy CourtWritten by Craig D. Robins, Esq.
 
 
In every consumer bankruptcy case, whether it is a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, there will be an initial hearing at the bankruptcy court about one month after the case is filed.  If you filed for bankruptcy, you are required to attend.
 
 
What’s Happens at the Meeting of Creditors in Bankruptcy Court?
 
The purpose of the hearing is for the court-appointed trustee to ask you questions about your financial situation, the reason why you have debt problems, and whether you have any non-exempt assets.
 
This meeting is rather informal, as it is not in a courtroom, and it is not before a bankruptcy judge.  Instead, it is in a hearing room, and it is before a trustee, who is a bankruptcy attorney, and not a judicial officer.  See my post: Don’t Call the Bankruptcy Trustee, “Your Honor”.
 
As a matter of fact, the bankruptcy law even bars bankruptcy judges from attending the Meeting of Creditors.  See:  Bankruptcy Judges Are Barred by Law From Attending the Meeting of Creditors .
 
A bankruptcy trustee presides over the meeting by calling cases, one at a time.  When your case is called, you sit at a table in the front of the room with your bankruptcy lawyer, and the trustee asks questions after you’ve been sworn in.  To learn more about trustees, see What Is a Bankruptcy Trustee?
 
Most meetings are relatively short and uneventful.  Although they will typically last just a matter of a few minutes, you may wait as much as 60 to 90 minutes for your hearing.  The meetings are recorded by an electronic device, and there is a microphone on the table.
 
Since the meetings are somewhat informal, you do not have to get dressed up or wear a suit.
 
The Meeting of Creditors is also commonly referred to as the “341 Hearing” or “341 Meeting” because it is Bankruptcy Code section 341 that contains the law regarding such meetings.
 
Role of the Bankruptcy Trustee
 
The trustee is charged with several obligations which include making sure the bankruptcy petition is properly prepared, making sure any assets you intend to keep are protected by exemption statutes, ensuring that you properly completed the Means Test, and ascertaining whether you have any non-exempt assets that can be sold for the benefit of creditors.
 
It is usually rare, but not uncommon, that a trustee determines that there are non-exempt assets.  The most common types of non-exempt assets include cars, tax refunds and personal injury law suits.  In each case, if the asset is worth more than the exemption amount, the trustee can administer the asset.  For more information about whether a trustee will pursue an asset, see:  The Back-Door Politics Behind Trustees Pursuing Non-Exempt Assets.
 
If you live in New York, you can check some of the most common bankruptcy exemptions here:  Bankruptcy Exemptions in New York.
 
If the trustee does try to sell an asset, he is entitled to be compensated for doing so.  Information about this is in this post:  How Does a Chapter 7 Bankruptcy Trustee Sell Assets .
 
Some clients primarily speak a second language like Spanish, and need the assistance of an interpreter.  In the Central Islip Bankruptcy Court, the court now provides interpretation services at the Meeting of Creditors.  See:  Interpreters in Bankruptcy Court .
 
It is relatively rare that a creditor will show up.  Generally speaking, credit card companies, which constitute the most common type of creditor, will never show up.  I discussed this in my post:  Will Creditors Show Up For My Hearing In Bankruptcy Court?  However, If a Creditor Shows Up at the Meeting of Creditors in Bankruptcy Court, What Questions Can They Ask?
 
As far as questions at the Meeting of Creditors that the trustee asks you, it is very important to answer each question accurately and honestly, but you should not provide any additional information, other than simply answering the question.  For more about how you should answer questions, see this post:  How Much Should You Say at the Meeting of Creditors in Bankruptcy Court?
 
When Is the Meeting of Creditors?
 
This is the topic of an article I recently wrote:  When Is My Meeting of Creditors in Bankruptcy Court?.  Generally, the meeting is about one month after the date of filing.  There is a lot of information on this post.
 
What Can Go Wrong at the Meeting of Creditors?
 
The vast majority of hearings at the Meeting of Creditors go very smoothly and last just a few minutes.  If your bankruptcy attorney did a good job in drafting the bankruptcy petition and preparing you for the meeting, everything should go find.
 
Nevertheless, lots of things can happen at the Meeting of Creditors to complicate things.  Several years go I wrote a lengthy series of articles for the Suffolk Lawyer about how to address unusual issues that may arise at the Meeting of Creditors in bankruptcy court. 
 
If you have a Meeting of Creditors coming up, this series of articles should be extremely useful:
 
 
Preparation for the Meeting of Creditors is Key
 
I cannot stress how important it is to have your bankruptcy attorney prepare you for the meeting of creditors.
 
In my Long Island bankruptcy practice, we review with each client the various questions the trustee will most likely ask, as well as our client’s responses, to ensure that the meeting will go smoothly.  We usually do this a few days prior to the meeting.
 
Are You Curious About Your Bankruptcy Trustee?
 
If your hearing is in the Central Islip Bankruptcy Court, which is in the Eastern District of New York, you can read profiles about each trustee and see their picture, most of which I took.  Here is the link:  Bankruptcy Trustee Profiles .
 
Can the Trustee Decline to Grant You Bankruptcy Relief at the Meeting of Creditors?
 
The answer is “absolutely not.”  The purpose of the meeting is for the trustee to obtain information about your case.  The trustee does not have the ability to take any action against you or decide whether or not you are entitled to a discharge.
 
Only a bankruptcy court judge can do such things.  Also, every debtor is entitled to a discharge unless a proceeding is brought challenging discharge — and these are very rare.
  
Directions to the Central Islip Bankruptcy Court on Long Island
 
If your meeting of creditors is in Central Islip, here’s how to get to the court:  Directions to Central Islip Bankruptcy Court – Long Island .
 
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Serial Bankruptcy Filers Eventually Get the Ax

Posted on Monday (February 1, 2010) at 1:00 am to Bankruptcy Procedure
Chapter 13 Bankruptcy
Foreclosure Defense
Issues Involving New Bankruptcy Laws
Recent Bankruptcy Court Decisions
Suffolk Lawyer

 Filing multiple Chapter 13 bankruptcy cases to stop foreclosureWritten by Craig D. Robins, search Esq.
 
 
Some debtors like bankruptcy so much, they come back for more, and more, and even more. . .  sometimes using multiple bankruptcy filings to delay foreclosure proceedings for years.  But when is enough, enough?
  

What Can Mortgagees and the Bankruptcy Court Do in Situations Involving Extreme Serial Filings?

In the past three months, Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court on Long Island, addressed this issue in several cases.  The most recent one caught my eye based on the incredible number of related bankruptcy filings, as well as the unbelievable amount of time the debtors were able to thwart the system and delay foreclosure.

Serial Filings in Bankruptcy Cases

Some debtors file successive Chapter 13 petitions because each time they file, they get the benefit of the stay, which stops a foreclosure proceeding dead in its tracks.
 
Technically, Bankruptcy Code section 109(e) prohibits a debtor from refiling another case for 180 days, if the prior case was dismissed because the debtor neglected to make necessary payments or maintain other debtor responsibilities.

However the bankruptcy court has become rather liberal in permitting debtors to engage in repeated filings and will typically give the debtor the benefit of the doubt as long as the debtor can demonstrate a change of circumstances.

Nevertheless, some debtors clearly take advantage of the system, and by their sheer audacity (and desperation), give bankruptcy a bad name for those who file in good faith.  The vast majority of bad faith serial filings are done by pro se debtors.

Any experienced bankruptcy attorney knows that judges will not hesitate to sanction counsel for filing a case in bad faith.  The law is very clear that a case cannot be filed for the sole purpose of delay, without any good faith intent to follow through with a Chapter 13 plan.
 

Bankruptcy Amendment Act Made Serial Filings More Difficult

 
When Congress overhauled the bankruptcy laws in 2005 (BAPCPA), it imposed several new provisions designed to stop the problem of bad faith serial filers.  I wrote about some of these changes in my Suffolk Lawyer column in November 2005:  Consumer Bankruptcy Debtors Face New Limitations for Repeat Filings .
 
In particular, there are new exceptions to the automatic stay.  For example, if a debtor had one pending bankruptcy case in the preceding year, then the automatic stay only lasts 30 days, effectively shifting the burden to the debtor to make an application to extend the stay.  If there was more than one filing in the prior year, then the debtor is not entitled to any automatic stay at the time of filing.
 
Even with these provisions, debtors soon learned to game the system.  After one spouse’s bankruptcy was dismissed, the other spouse would then file, and then this “tag team” filing approach would go on for years.  Although this conduct was nothing new, Congress addressed this problem too, with an “in rem” provision in BAPCPA.
         
Debtors Filed 10 Cases to Delay Foreclosure
 
On December 21, 2009, Judge Trust issued companion decisions in two separate, but related cases, outlining the excessive measures taken by two Long Island debtors who filed a total of ten bankruptcy petitions over a 12-year period to stop foreclosure on their jointly-owned home.  In re Janet Blair (Case No. 09-76150-ast) and In re Allen Gary Smith (Case No. 09-77562-ast).
 
The decision was precipitated by a motion brought by the mortgagee, seeking “in rem” relief against the premises.  Most of these filings were Chapter 13 cases filed over a four-year period between 2005 and 2009.  Almost all of them were filed on the eve of a scheduled foreclosure sale.
 
In Rem” Relief in Bankruptcy Proceedings Stops Foreclosure Delaying Tactics
 
In rem” relief is when the bankruptcy court grants an order indicating that a particular piece of property will not be affected by any future bankruptcy stays, effectively eliminating any benefit of the “tag-team” filing approach.  “In rem” originates from the Latin phrase for a lawsuit directed against property, rather than a person.
 
In the Blair / Smith cases, the judge immediately lifted the stay and subsequently granted in rem relief, stating that the serial filings were evidence of the debtors’ bad faith, and also evidence of the fact that the debtors were abusing the bankruptcy process for several years.
 
Statutory Authority for In Rem Relief.  In his decision, Judge Trust, delivered a well-written and detailed analysis behind the statutory authority providing for in rem relief.  In doing so, the judge essentially reiterated his holding in a two-month-old similar decision, which has since been published.  In re Montalvo (416 B.R. 381).
 
One of BAPCPA’s amendments was the addition of Section 362(d)(4) which provides the statutory authority to grant in rem relief.  Pursuant to Section 362(d)(4), the Court can grant in rem relief from the stay as to a mortagee’s interest in the property, such that any and all future filings by any person or entity with an interest in the property will not operate as an automatic stay against the owner and its successors and/or assigns for a period of two years after the date of the entry of such an order.
 
To obtain this relief, the mortgagee bears the burden of showing that the various petitions filed by debtors are part of a scheme to hinder, delay and defraud the mortgagee.
 
A key issue in such cases is whether the court can infer an intent to hinder, delay and defraud creditors when it appears that there have been multiple, strategically timed bankruptcy filings.  Judge Trust took the established view that holds that the mere timing and filing of several bankruptcy cases is an adequate basis from which a court can draw a permissible inference.
  
However, Judge Trust also observed that the debtors demonstrated no intent to make the bankruptcy work.  They did not make plan payments, show up in court, or provide the trustee with required documents.
 

Standard of Proof in In Rem Litigation

 
Judge Robert E. Grossman also addressed this issue just over a year ago, and wrote about the standard of proof necessary to obtain in rem relief.  In re Lemma (394 B.B. 315 (Bank.E.D.N.Y. 2008).
 
In that case, which involved a third Chapter 13 filing (with debtor representation by my friend, Babylon bankruptcy attorney Michael A. Kinzer), the judge concluded that the mortgagee was not entitled to in rem relief (and not even entitled to dismiss the case).
  
The reason why Judge Grossman denied the mortgagee’s application was because the mortgagee, as the party seeking in rem relief, had the burden of proving that the current filing was part of a scheme; that the scheme involved the transfer of real property, or multiple bankruptcy filings; and that the object of the scheme was to hinder, delay and defraud the mortgagee.
 
The mortgagee in that case was unable to provide the court with any evidence  other than the fact that the debtors filed three petitions.
 
Thus, multiple filings, alone, are not adequate to find intent to hinder, delay and defraud.
 
 
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 January 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 Patchogue, Commack, 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.
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Bankruptcy Issues Facing Same-Sex Couples

Posted on Tuesday (December 1, 2009) at 12:30 am to Bankruptcy and Society
Bankruptcy Procedure
Matrimonial Issues & Bankruptcy
Suffolk Lawyer

There are many bankruptcy issues facing gay and lesbian couples in same-sex marriagesWritten by Craig D. Robins, Esq.
  
Same-sex couples have many more issues to contend with than heterosexual  married ones — especially when it comes to filing bankruptcy in New York.  Everything about the federal bankruptcy law is geared towards the conventional family.
  
Alas, nowhere in the bankruptcy statutes is there sufficient guidance for dealing with non-conventional family units, let alone same-sex couples who were married in other states.
 
That does not mean that gay or lesbian consumers in committed relationships can’t file for bankruptcy; it just means that they have to approach the bankruptcy petition and means test more carefully.
 
Having represented a number of gay and lesbian individuals and couples, the following issues routinely come up in providing bankruptcy advice.  Unfortunately, some of the answers are not necessarily so clear.
 
Can a same-sex unmarried couple file a joint bankruptcy? 
 
There is no difference between gay or straight non-married couples.  Only married couples can file a joint bankruptcy petitions.
 
Can a same-sex couple that is legally married in another state file a joint bankruptcy petition in a New York Bankruptcy Court?
 
Recently, a handful of states adopted legislation recognizing same-sex marriage.  They include Massachusetts, Connecticut, Iowa, Vermont, Maine, and for a short time, California.
  
Consequently, many New York residents in same-sex committed relationships eagerly went to these state to tie the knot.  What if one of these gay or lesbian married couples now wants to file a joint bankruptcy petition in a New York bankruptcy court:  can they?
 
Here we have a conundrum.  According to the Defense against Marriage Act, a federal law dating back to 1996, a state is not required to recognize a same-sex marriage in their state even if the couple was legitimately married in another state.  However, Governor Paterson did not feel that this produced a fair result and issued a directive in May 2009 requiring all state agencies to recognize same-sex marriages performed out-of-state.
 
Bankruptcy is a federal procedure based on federal laws.  When these laws fail to address certain issues, such as legitimacy of marriage, then state law can be used to amplify the federal law.  Since New York does not currently have any law that explicitly recognizes such marriages (Governor Paterson’s directive only applies to state agencies), then it appears that the a New York bankruptcy court would not be able to recognize an out-of-state same-sex marriage.
 
I have not yet had the opportunity to file a joint case involving a same-sex married couple, but given that opportunity, I certainly would give it a try.  The Office of the United States Trustee would then have the difficult decision on whether they should seek to dismiss the case.
  
Even if they raised such objections, a sympathetic judge could nevertheless rule in favor of the debtors and come up with some legal justification for permitting the joint bankruptcy filing.  It is just a question of time before we see such a filing in a New York bankruptcy court.  Earlier this year I even placed a post on my bankruptcy blog offering to do such a filing on a pro bono basis, just to set a precedent.
 
How do you calculate the size of the household for means test purposes when you have a same-sex couple with a domestic partnerships?  
 
The real issue here is essentially no different for any two partners or roommates living together, whether they may be straight or gay.  Simply calculate all of the people who occupy the household, whether they are related or unrelated.
 
Do you include a same-sex partner’s income on the means test? 
 
The means test only requires a debtor to include the income of the spouse.  If you are representing an individual debtor who is in a same-sex unmarried relationship in which the parties share their finances, the best approach is to come up with a specific monthly contribution amount from the non-filing partner.
 
If the individual debtor is in a same-sex marriage, the debtor can conceivably argue that the spouse’s income and finances should be included in the means test, or, alternatively, argue that the spouse is merely a roommate, considering that New York has yet to make the arrangement legal, and that the income does not need to be included.
 
Does the United States Trustee look any differently at bankruptcy petitions filed by debtors who have same-sex partners?
 
My experience has been that the United States Trustee’s office does not treat debtors in same-sex relationships any differently than debtors in straight relationships.  However, I do get the feeling that they may want to avoid any politically-charged controversy involving gay rights issues.
 
What’s down the road? 
 
Eventually, Congress may recognize the existence of same-sex marriages and domestic civil unions in bankruptcy proceedings and provide statutory authority for dealing with such issues.  Until that happens, we can only look towards the time when New York legalizes same-sex marriage. 
 
In October, Governor Patterson called same-sex marriage a civil right and announced that he wanted the legislature to take quick action and adopt such legislation.
 
.
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 November 2009 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 Patchogue, Commack, 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.
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You Can Bring Your Own Security Guard to the Meeting of Creditors

Posted on Saturday (August 22, 2009) at 10:15 am to Bankruptcy Procedure
Chapter 11 Bankruptcy

Security at Bankruptcy HearingsWritten by Craig D. Robins, Esq.
 
The United States Trustee Manual has some unusual and interesting provisions buried in its many pages.  One concerns bringing your own security guards to the meeting of creditors in Chapter 11 bankruptcy cases.  This is somewhat unusual considering that bankruptcy proceedings tend to be non-controversial and non-violent.
 
Section 3-5.14 of the Manual concerns security at section 341 meetings.  It provides that if the debtor believes that there may be security problems at a particular meeting, it should notify the United States Marshal’s Service in advance. 
 
In addition, the provision further states that the debtor may hire security guards to be present at the meeting to deter potential security problems.
 
I can’t imagine a situation where this would be necessary, but if a Chapter 11 debtor has plenty of enemies, this provision can provide some additional protection.
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If a Creditor Shows Up at the Meeting of Creditors in Bankruptcy Court, What Questions Can They Ask?

Posted on Friday (August 21, 2009) at 5:45 am to Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Chapter 7 Bankruptcy

If a Creditor Shows Up at the Meeting of Creditors in Bankruptcy Court, What Questions Can They Ask?Written by Craig D. Robins, Esq.
 
I previously wrote that it is highly unlikely that creditors will show up at the meeting of creditors, which is also known as the section 341 hearing.  See Will Creditors Show Up For My Hearing In Bankruptcy Court? .
 
However, in the unusual instance that a creditor does attend, what questions can they ask the debtor?
 
Creditors are entitled to ask the debtor questions about the debtor’s assets and liabilities. However, they are not permitted to cross-examine the debtor as if the trustee was a judge.
 
Sometimes creditors will ask improper questions or become argumentative.  In such instances, any experienced bankruptcy attorney will direct his or her client not to respond to the question, and will also admonish the creditor as to the proper scope of questioning. The trustee will probably do so as well.
 
Also, a creditor cannot use the meeting as a fishing expedition to ask the debtor very general questions. Although a creditor has the right to ask numerous relevant questions, there is not enough time to ask many questions at a meeting of creditors, and trustees will not permit it. 
 
If a creditor wants to ask a lot of questions, they must request an additional examination hearing just for them, which is called a “section 2004 exam” because it is done pursuant to a Bankruptcy Rule 2004.  Section 2004 exams are extremely rare and occur in less than one percent of all consumer cases.
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In the unlikely event there is a section 2004 exam, it would either be held at the Long Island Bankruptcy Court in Central Islip, or more likely, at the attorney’s office of the creditor or trustee requesting it.
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How Long Does a Chapter 7 Bankruptcy Case Take in New York?

Posted on Wednesday (August 19, 2009) at 5:15 am to Bankruptcy Procedure
Chapter 7 Bankruptcy

How Long Does  a Chapter 7 Bankruptcy Case Take in New York?Written by Craig D. Robins, Esq.
 
A bankruptcy filing immediately stops bill collectors.  The entire process typically lasts three and a half months.
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The first part in any bankruptcy case is preparing the petition and filing it with the bankruptcy court. 
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Once a client retains us, it usually takes anywhere from a few days to a few weeks to gather the necessary information, prepare the petition, and have it signed, although in emergencies, this can be done in a day.  Prior to filing, the debtor must also take a mandatory 30-minute credit counseling session, which can be done by telephone or on-line.
 
Once we file the petition, which we do electronically (right from our office into the court’s computer), the protections of the bankruptcy stay go into effect, making it illegal for any creditor to contact the debtor.
 
About one month after filing, there will be a brief meeting in the Bankruptcy Court called the meeting of creditors.  This is when the trustee will ask the debtor questions. 
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With most of our Long Island bankruptcy clients, attending the meeting of creditors is basically the end of their obligations in the bankruptcy process, although they also have to do a second, thirty-minute credit counseling session, called debtor education, which is also done over the phone or by computer.
 
In some cases, however, the trustee will request some additional documents to review, such as bank statements, tax returns or deeds.
 
Creditors technically have 60 days from the date of the meeting of creditors to file objections to discharge.  This is very rare and occurs in far less than one percent of all cases filed.  The date which is 60 days after the meeting of creditors is called the “bar date” because creditors are barred from filing any objections after that time.
 
Once the bar date passes, and assuming the debtor has taken the debtor education course (we have to file a certificate with the court indicating that), then the bankruptcy court clerk’s office will process the final paperwork and issue the order of discharge and close the case. 
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In most instances, this usually occurs about three and a half months after the date the bankruptcy petition was filed.  At that point, all dischargeable debt (such as credit card debt) has been forever eliminated and the debtor is on his or her way to enjoying their fresh, new financial start.
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How Much Should You Say at the Meeting of Creditors in Bankruptcy Court?

Posted on Friday (August 14, 2009) at 7:30 am to Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy

How Much Should You Say at the Meeting of Creditors in Bankruptcy Court?Written by Craig D. Robins, Esq.
 
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Every consumer debtor who files for bankruptcy, be it Chapter 7 or Chapter 13, will be examined by the trustee at a hearing called the meeting of creditors.  Also known as the section 341 hearing, it is held at the bankruptcy court about a month after the bankruptcy petition is filed.
 
If you live on Long Island, your hearing will be at the Central Islip Bankruptcy Court.  If you live in Brooklyn or Queens, your hearing will be at the Brooklyn Bankruptcy Court.
 
During the examination, which frequently lasts just a matter of minutes, the trustee will question the debtor in the presence of their attorney.  The trustee will ask questions about the debtor’s assets and liabilities, and the reasons why the debtor sought bankruptcy relief.
 
One key issue for debtors is:  How much should you talk, in response to the trustee’s question?
 
The simple answer is:  As little as possible.
 
Many of the questions the trustee will ask require a simple “yes” or “no” answer, and that’s all you should respond with:  “yes” or “no”.  Providing any additional information can only get you into trouble by opening up a can of worms that could lead to the trustee to ask even more questions.
 
If the trustee asks a question that requires that you explain something, you should do so accurately and honestly, but also as simply as possible.
 
I have seen many debtors, who, being a little nervous, say far too much, and provide additional information that the trustee did not ask for.  Remember, only answer the trustee’s question and do not volunteer any other information.  As long as you answer the question truthfully, then you’re O.K.
 
The only exception is if you have a very compelling reason as to why you fell into debt, such as being unable to work because of a serious illness.  In such instances, you should talk about your compelling medical issues as much as possible.
 
Incidentally, assuming you have an experienced bankruptcy attorney who has prepared you for the meeting of creditors as we do, you should not be surprised by the trustee’s questions, as your attorney will have already reviewed them with you.
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Filing Second Bankruptcy is Simple as 2 – 4 – 6 – 8

Posted on Wednesday (August 12, 2009) at 5:15 pm to Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Issues Involving New Bankruptcy Laws
Life After Bankruptcy

Can I File Bankruptcy Again? Yes; Filing a Second Bankruptcy Petition is as Simple as 2 - 4 - 6 - 8Written by Craig D. Robins, Esq.
 
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For lack of a better term, I often have “repeat customers” coming back to see me at my Long Island bankruptcy law offices.  It is unfortunate, but consumers who have totally eliminated all of their debts in a bankruptcy filing years ago can sometimes find themselves in debt again — especially in these difficult economic times.
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The other possibility is that they liked bankruptcy so much the first time around, they want to do it again.
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“Can I File Bankruptcy Again?” 
 
This is the question I get from every one of these clients.  Fortunately, the answer is YES!  However, when the bankruptcy laws were changed in 2005, various waiting periods were imposed.  In every case, you can file bankruptcy again; it’s just a question of how long you have to wait.
 
Four Important Notes About Filing a Second Bankruptcy Case
 
The first important note you need to know is that the waiting period starts from the date you filed your prior bankruptcy petition and ends on the date you filed your second bankruptcy petition.
 
The second important note is that you only have to wait if you received a discharge in your prior case.  If you did not receive a discharge, you can file immediately.  For example, if you filed a Chapter 13 bankruptcy case, and it was dismissed because you were unable to make payments, you do not have to wait at all to re-file a second case (provided, of course, that you meet other necessary criteria — speak to an attorney about this).
 
The third important note is if your prior case was a Chapter 13 bankruptcy case in which you paid back your unsecured creditors at least 70%, then you do not have to wait at all.
 
The final important note is that the waiting period does not prevent you from filing again; it just prevents you from getting a discharge.  You can still file without waiting — you just do not get the benefit of the discharge.  Why would you do this?   If the sole purpose of re-filing is to stop foreclosure, you probably do not need to wait several years, as you still get the benefit of the bankruptcy stay in a Chapter 13 case as well as the ability to cure arrears with a payment plan.
 
The Waiting Periods Are 2, 4, 6 and 8 Years
 
Two Years
 
If your prior case was a Chapter 13 bankruptcy case and your new case will be Chapter 13, then the waiting period is only two years.
 
Four Years
 
If your prior case was a Chapter 7 bankruptcy case and your new case will be Chapter 13, then the waiting period is four years.
 
Six Years
 
If your prior case was a Chapter 13 bankruptcy case and your new case will be Chapter 7, then the waiting period is six years.
 
Eight Years
 
If your prior case was a Chapter 7 bankruptcy case and your new case will be Chapter 7, then the waiting period is eight years.
 
Important Note for homeowners in foreclosure:  Even if you do not qualify to file again based on the above criteria, you can still file for Chapter 13 if the primary concern is curing mortgage arrears.  In this instance, you will not receive a Chapter 13 discharge, but you will be able to cure all of your mortgage arrears and stop foreclosure.
 
The Above Waiting Periods Can be Tricky, So Get Good Bankruptcy Advice
 
Since the new bankruptcy laws made repeat filings somewhat complicated, it makes sense to meet with an experienced bankruptcy attorney who can give you the appropriate advice about filing a second bankruptcy.
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These Waiting Periods to Re-File Bankruptcy Apply In Every State
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A number of my blog readers located outside of New York have asked if these guidelines apply in their home state.  They do.  The waiting periods are the same no matter what state you file in.
 
For more info about repeat filings, see my full-length post that was published in the Suffolk Lawyer —  Consumer Bankruptcy Debtors Face New Limitations for Repeat Filings .  That post also contains info about specific issues concerning multiple filings in Chapter 13 cases.
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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »

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Craig D. Robins, Esq.
35 Pinelawn Road, Suite 218E, Melville, NY 11747.

Tel : 516 - 496 - 0800

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