About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Chapter 13 Bankruptcy
Written by Craig D. Robins, Esq.I just attended a seminar last week offered through the National Association of Chapter 13 Trustees about HAMP. Here’s some useful information.
Today’s post is Part One. I will continue tomorrow with a detailed discussion of bankrutpcy issues.
What Is HAMP?
HAMP (Home Affordable Modification Program) is one of President Obama’s initiatives to make a dent in home affordability by using the economic bailout program.
It’s a quasi-voluntary program to modify home mortgages with the goal of getting the monthly payment to 31% of gross (pre-tax) income.
The program seeks to provide taxpayer-funded incentives to mortgage servicers and lenders to voluntarily modify mortgages. The program was created in March 2009. This government program earmarked $75 billion for this purpose.
HAMP will reduce a homeowner’s monthly mortgage payment on a TEMPORARY basis. However, the adjustment becomes permanent after the homeowner makes three on-time payments.
The incentive for mortgage lenders in doing this is that the Obama administration is offering big bucks in incentive payments to lenders.
Here is the official link to Home Affordable Modification Program.
Home Affordable Modification Program Has Not Worked Well So Far
To date, results for HAMP have been very disappointing. I wrote about this at length two months ago: Obama’s “Making Homes Affordable” Mortgage Modification Program Failing.
The program has only resulted in 116,000 permanent modifications in the entire country, in which each borrower is saving about $500 per month.
Incidentally, these homeowners typically went from paying 45% of their gross income towards their mortgage, down to 31%, which is the goal of the program.
To date, only 110 mortgage servicers have signed participation agreements. All Fannie Mae and Freddie Mac loans are automatically eligible.
Who Is Eligible for HAMP?
Here are the requirements:
1. You must be the owner and occupant of the home and utilize it as your primary residence
2. You must have a maximum principal balance of $729,750
3. You must have a monthly mortgage payment that is greater than 31% of pre-tax monthly income
4. You must be unable to afford your current payment
5. You must not have applied for HAMP before
Why Have Many Considered HAMP to be a Failure So Far?
Many homeowners applied for HAMP assistance because they thought it would help them avoid bankruptcy. However, a great many mortgage servicers were unprepared to handle HAMP applications and were not able to process the mortgage modification requests quickly enough to offer any real relief.
Some problems were highly publicized. For example, there have been lenders who refused to even acknowledge receipt of mortgage modification documents, and other lenders who lost these documents numerous times for the same homeowner.
To Be Continued This Week
Written 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 .
Written by Craig D. Robins, Esq.Many of our clients are justifiably anxious about meeting with a bankruptcy for the first time.
However, a good, experienced bankruptcy attorney should be able to put the client at ease, review their financial situation, explain whether bankruptcy is a good option, and if so, discuss how a bankruptcy filling will work.
What Documents Should You Bring to the Bankruptcy Attorney?
Getting the most from your first bankruptcy consultation requires that you bring certain financial papers. I’ve learned that in order to best advise clients about bankruptcy and consider all of the various options, I need to know all of the details of their finances.
Here is a list of documents that I typically ask my Long Island bankruptcy clients to bring to their first meeting with me:
• One recent bill from each creditor
• Collection letters and any law suit papers
• As many pay stubs as you can locate for the past six or seven months
• Tax returns for the past two years
• Drivers license and Social Security card
• Collection letters and any law suit papers
• As many pay stubs as you can locate for the past six or seven months
• Tax returns for the past two years
• Drivers license and Social Security card
There are other papers we will need if we go forward with a bankruptcy filing, but the above items usually enables us to meet with the client and review their situation.
Written by Craig D. Robins, Esq.I was prompted to write this blog post because I just filed a Long Island Chapter 7 bankruptcy case and the court scheduled the meeting of creditors for a date that is only 25 days away. With every other case I’ve filed during the past few years, the hearing was always over a month later.
So what’s the story with when the meeting of creditors is held?
What is a Section 341 Hearing?
First, In every single bankruptcy case, be it Chapter 7, 11 or 13, there is an initial meeting at the bankruptcy court called the Meeting of Creditors. In consumer cases under Chapter 7 or Chapter 13, the purpose of the meeting is for the court-appointed trustee to review the case with the debtor by examining the debtor under oath.
Section 341 of the Bankruptcy Code provides for this hearing, which is why it is often referred to as the “341 Hearing.”
The Bankruptcy Rules Provide the Time Frame For Holding the Meeting of Creditors
Although the 341 hearing is usually held about a month after the petition is filed, it can sometimes be held much earlier than that, and other times, much later.
Bankruptcy Rule 2003(a) sets forth the time parameters for the 341 Hearing:
In a Chapter 7 or Chapter 11 case, the meeting must be held no fewer than 20 days, and no more than 40 days after the date the petition is filed.
However, in a Chapter 13 case, the meeting shall be held no fewer than 20 days, and no more than 50 days after the date of filing.
When the bankruptcy court is operating very efficiently, meetings tend to be sooner. When the court is overburdened, or trustees are taking vacations, the time frame is longer.
When the there was a massive rush of bankruptcy filings in September and October 2005 because consumers were anxious to file their bankruptcy petitions before the bankruptcy laws were about to change, the bankruptcy court could not accommodate the great number of cases, and most debtors in New York had to wait 60 to 100 days for their 341 hearings.
There’s Lots of Information About Preparing for the Meeting of Creditors on this Blog
One of the biggest concerns my clients have is how to prepare for the meeting of creditors and what to do about going to the bankruptcy court for the very first time. As such, I have written extensively about this.
If you have a meeting of creditors coming up, the following posts will be helpful:
If You Have a Meeting of Creditors Coming Up Soon on Long Island and You Want to Find Out Info About Your Trustee
I have a series of posts containing biographies of all of the Long Island Chapter 7 and Chapter 13 trustees: biographies and profiles of Long Island bankruptcy trustees and judges.
You Must Provide Identification at the Meeting of Creditors
Here is a post about what identification you need to provide when you go to bankruptcy court: You Need Certain Identification to File for Bankruptcy.
Will Creditors Show Up At the Meeting of Creditors?
It’s very unlikely that creditors will show up: Will Creditors Show Up For My Hearing In Bankruptcy Court? However, here’s a post I wrote about what kind of questions they can ask if they do show up: If a Creditor Shows Up at the Meeting of Creditors in Bankruptcy Court, What Questions Can They Ask? .
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 .
Written by Craig D. Robins, 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
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 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).
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.
Written by Craig D. Robins, Esq.
This post is part of a series of articles that I’ve written this week addressing every aspect you will need to know about filing bankruptcy, protecting tax refunds, and related issues. Links to all posts in this series are at the bottom of the page.
Tax Refunds in Chapter 13 Bankruptcy Cases Filed in New York
Generally, if you file for Chapter 13 bankruptcy in New York, you will be able to keep your tax refund if your Chapter 13 plan provides for a 100% payment to all creditors. If it does not, then you will have to remit any tax refund to the Chapter 13 trustee, who will include it in the distribution to creditors.
If you have a Chapter 13 plan that provides for a payment of less than 100% to unsecured creditors, then you will also have to remit all future tax refunds to the trustee for the period of the plan, which would probably be five years. Here’s why:
A debtor in a Chapter 13 case is required to pay all projected disposable income into the Chapter 13 plan. Tax refunds are considered additional income that the debtor has over-withheld. Thus, when this income comes in, it has to be paid into the Chapter 13 plan.
In those Chapter 13 cases where you have to submit your tax refund to the Chapter 13 trustee, there will be clear and explicit language in the Chapter 13 plan about this, which will also indicate that you are responsible for sending a copy of your tax return to the trustee at the same time that you file it.
TIP: The higher the number of exemptions that you provide to your employer on an IRS W-9 tax form, the less the witholding will be, and the smaller the tax refund. In sub-100% Chapter 13 plans, you will want to have as small a refund as possible, because any refund that you do end up receiving just goes to your creditors, and does not benefit you in any way.
Effect of Receiving Tax Refund Before Filing Bankruptcy: Possible Whammy on the Means Test
Yesterday I wrote about How a Tax Refund Can Mess Up Your Bankruptcy Means Test . Well, the same means test that is used in Chapter 7 cases to determine eligibility to file for Chapter 7 relief, is also used in Chapter 13 cases to determine the minimum amount that you have to pay into the Chapter 13 payment plan.
If you file a Chapter 13 petition in the six-month period after receiving a tax refund, then you must include the tax refund in the means test as income. This is because all income received during the six-month means test period must be listed, and income tax refunds constitute income for this purpsoe.
Even though the income tax refund can be pro-rated to reflect receiving it over a twelve-month period, it will nevertheless increase the amount you will have to pay in the means test. However, if you file your bankruptcy petition more than six full calendar months after receiving the tax refund, you do not have to include the tax refund, based on a strict interpretation of the law.
This means that most people who file for Chapter 13 during the second half of the year who have plans that pay less than 100% can expect to pay less into their Chapter 13 plans each month. This is not exactly a logical result, but it’s the result of a very poorly and ambiguously worded means test statute.
Quick Links to All Tax Week Blog Posts About Tax Refunds and Bankruptcy:
Informative Article About Eliminating Taxes in Bankruptcy:
Article About Tax Consequences and Bankruptcy:
Written by Craig D. RobinsA Chapter 13 bankruptcy filing can be a great help to cure mortgage arrears or discharge debts if Chapter 7 is not feasible. However, Chapter 13 is not for everyone. Below are the major eligibility requirements.
Who Can File for Chapter 13 Bankruptcy?
1. Consumers Only. You must be an individual consumer to file. Businesses cannot file, although self-employed individuals who operate their own business can.
2. Regular Income. You must have a regular source of income and it must be sufficient to pay your day-to-day living expenses. There must be enough left over to pay the monthly Chapter 13 plan payments.
3. Jurisdictional Requirements. You must reside in, or have a domicile, a place of business, or property in the United States or a municipality. You do not have to be a U.S. citizen.
4. Prior Bankruptcy. Technically, you must not have had a prior bankruptcy filing dismissed for cause within the last 180 days, but if you had, you may still be eligible to file a Chapter 13 bankruptcy case if you have a change of circumstances.
5. Debt Limitation. Chapter 13 bankruptcy is designed for individuals who do not have an excessive amount of debt. Eligibility requires that your debts cannot exceed $1,010,650 for secured debt (mortgages and car loans). In addition, debts cannot exceed $336,900 for unsecured debt (most other debts like credit card debt, personal loans, medical bills, and utility bills). This amount will increase on March 31, 2010.
6. Credit Counseling. You must complete a credit counseling session within 180 days of filing. This typically consists of a 30 minute phone call.
7. Tax Returns. You must be current on your income tax filings. Chapter 13 laws require that you submit proof that you filed your federal and state tax returns for the four tax years prior to your bankruptcy filing date. If you don’t have all of these tax returns at the time you file the bankruptcy petition, you may get a short extension.
If you’re drowning in debt and live on Long Island, consult a Long Island Chapter 13 Bankruptcy Attorney to discuss whether Chapter 13 bankruptcy might work for you.
Written by Craig D. Robins, Esq.The Debtors Filed 10 Bankruptcy Cases to Delay the Foreclosure
A decision issued Monday by Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court for Eastern District of New York, outlined the excessive measures taken by two Long Island debtors who filed a total of ten bankruptcy petitions over a 12 year period in an effort to stop the foreclosure of their jointly-owned home.
Most of these bankruptcy 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.
Judge Trust issued the decision in each of two separate cases: 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 Barbara Dunleavy, Esq. of the Nassau County foreclosure law firm, Rosicki, Rosicki & Associates, in which she sought in rem relief against the premises, located in Wyandanch, New York.
“In Rem” Relief in Bankruptcy Proceedings
“In rem” relief is when a mortgagee seeks a court order indicating that the bankruptcy stay that arises in any further bankruptcy cases will not affect a particular piece of property. At the conclusion of the hearing on the mortgage company’s motion, which occured on November 24, 2009, Judge trust lifted the stay to enable the mortgagee to proceed, but reserved decision on the issue of granting in rem relief.
At that bankruptcy court hearing , Mr. Smith conceded that he was really looking to stay in the house for as long as he could. That did not bode to well for the the debtors, as the judge concluded that the serial filings were evidence of the debtors’ bad faith, and also evidendce of the fact that the debtors were abusing the bankruptcy process for several years.
The decision issued yesterday, which granted in rem relief, will now make any further bankruptcy filings by these debtors or any others useless, as far as staying the pending foreclosure proceeding.
It was interesting that Judge Trust did not sanction the debtors for their conduct.
More Posts and Articles About In Rem Bankruptcy Relief to Follow
In his decision, Judge Trust provided an interesting and detailed discussion about the law which enables a bankruptcy court to grant in rem relief. I will likely make that the topic of my January 2010 article which will be published in the Suffolk Lawyer, and I will discuss the new statutory aspects set forth in BAPCPA as well as case authorities for granting in rem relief.
Written by Craig D. Robins, Esq.Most clients who we represent do indeed pass the means test in Chapter 7 bankruptcy cases. I would say that at least seven out of eight people who desire to file for Chapter 7 bankruptcy on Long Island are eligible to do so because they pass the means test.
The means test is a formula and bunch of calculations designed to ascertain whether someone has too much income to be eligible to file for Chapter 7 bankruptcy. The Means Test is Often the Key to a Successful Chapter 7 Bankruptcy Case.
So What Are Your Options If You Do Not Pass the Means Test, and You Hope to File for Chapter 7 Bankruptcy?
Fortunately, there are several possibilities, and disposing of debt through a bankruptcy proceeding usually remains an option in one form or another.
Waiting to Become Eligible for the Bankruptcy Means Test Later
Sometimes, someone does not pass the means test because they received a large amount of money in the prior six-month means test period. The means test requires that you include all income that you received in the six full-calendar month period prior to filing. (You don’t include income that you received in the month that you file).
The most common example of a large amount of non-recurring income is a tax refund. Suppose you received the tax refund in May. Then you must count the tax refund in the means test calculation as long if you file your petition between June and November of that year. If you have to include the tax refund, it will have the effect of artificially boosting your income for that period.
However, if you just wait until December or later, then you will not have to include the tax refund as part of the six-month income for the means test calculation.
There are other reasons why waiting to file bankruptcy can help. Some people previously earned a larger amount of income several months ago, but no longer have the ability to earn at the same level for various reasons.
It might be that they were laid off (or their spouse was laid off); or they can no longer earn overtime; or their income will be reduced for other reasons like a new job that doesn’t pay as much.
In such instances, waiting a few months can mean the difference between passing the bankruptcy means test or not.
Engaging in Financial Transactions That May Make You Eligible Under the Bankruptcy Means Test
An experienced bankruptcy attorney is also familiar with all of the intricacies of the means test, and can often recommend other possible ways that may enable a consumer to become eligible.
For example, there is currently an issue as to whether an attorney can recommend to a client that he or she incur debt in contemplation of filing for bankruptcy (This issue is actually before the United States Supreme Court right now).
In any event, if a debtor obtains a new car loan or lease just before filing, the amount of the new monthly car payment can be included as a means test deduction, and this can possibly make the difference between passing the means test or not.
This is just one of several financial transactions that one can do that may make have the effect of qualifying you for Chapter 7 bankruptcy filing under the means test. A good bankruptcy attorney may also suggest other possibilities.
Filing Chapter 13 Bankruptcy Instead of Chapter 7 Bankruptcy
Most people who do not qualify for a Chapter 7 bankruptcy filing because they did not pass the means test can still file for Chapter 13.
If they do, they still get immediate debt relief through the same automatic bankruptcy stay that stops all creditor action in Chapter 7 cases. However, they will have to pay something to their creditors, usually over a five-year period of time. This is done by making monthly payments to a Chapter 13 trustee.
The good news, though, is that frequently, the amount paid back is a small fraction of the amount owed — sometimes as little as ten percent.
When No Bankruptcy Offers a Feasible Solution, Debt Settlement Can Be the Answer
Very few of our clients who desire to file bankruptcy do not qualify for one chapter or another. However, there is always an option for those who can’t file bankruptcy or do not want to file. That is debt settlement.
Debt settlement, which is not to be confused with debt consolidation, is when we negotiate settlements with the credit card companies (or their collection attorneys), often for less than 50%, and frequently for as little as 25%.
Doing so, however, requires the ability to fund lump-sum settlements, as the best credit card settlements are only available when the settlement amount is paid in full.
No One Ever Said that the Means Test in Bankruptcy Was Fair
To the contrary, the means test was the most controversial aspect of bankruptcy reform when the laws were changed about four years ago.
The means test tends to actually reward those with significant secured debt by making it easier to qualify for Chapter 7 filing. Thus, if you have a high mortgage and several car loans or car leases, it is easier to pass the means test and be eligible to file for Chapter 7 bankruptcy.
An Experienced Long Island Bankruptcy Attorney Can Evaluate Your Means Test Eligibility
The means test is rather complex and complicated. Retaining an experience bankruptcy attorney is your best way to ascertain whether you qualify for Chapter 7 bankruptcy filing, and if not, to learn what your other options are.
To see a bunch of other posts that I’ve written about the means test, please click : Information about the bankruptcy means test.
Written by Craig D. Robins, Esq.The instant a bankruptcy petition is filed, an “automatic bankruptcy stay” goes into effect, making it illegal under federal law for creditors to take any further steps to collect on a debt. This is the first step to getting debt relief in any bankruptcy case.
So who notifies the bill collectors and creditors about the bankruptcy filing, and how do they find out that you filed for bankruptcy? I previously wrote: How Quick Will Creditors Stop Calling Me If I File Bankruptcy?
Once the bankruptcy petition is filed with the bankruptcy court, the Court sends out a “Notice of Commencement” form which, in a Chapter 7 case, is also known as a “Notice of Chapter 7 Case, Meeting of Creditors and Deadlines.”
This notice is uniform throughout the country as it is on Official Form 9A. The court typically mails the notice between two and four days after the petition is filed.
The Court sends the notice to all creditors and interested parties listed in the petition. Thus, it is important to make sure that you provide correct and accurate addresses for all creditors in the petition.
The notice contains your name and address; your Social Security number; the date of filing; the name and address of the bankruptcy court where the case is pending; the chapter of bankruptcy you filed for relief under (usually Chapter 7 or Chapter 13); the name of the judge; the name, address and phone number of the trustee; the date, time and location for the meeting of creditors; the deadline for filing objections to discharge; the deadline for filing objections to exemptions; a notation as to whether a “presumption of abuse” exists (in Chapter 7 cases); a notice to creditors that they may not engage in collection actions; and a schedule of explanations of common bankruptcy terms and concepts.
This notice is the only time the Court will send a creditor any documentation containing your Social Security number.
Violating the automatic bankruptcy stay is a very serious offense. What Are Your Rights If a Creditor Violates the Automatic Bankruptcy Stay?
If creditors call you after filing because they have not yet received this notice, you can tell them that you filed for bankruptcy and give them the chapter (usually 7 or 13), the case number, and the name of the Court. For most of my clients that would be “the Bankruptcy Court for the Eastern District of New York.”