Current Events

 

The Bankruptcy Bill Song Contest has announced its winner.  First place goes to our very own Long Island Bankruptcy Court Judge Alan S. Trust, who wrote “Debts in Wrong Places,” a humorous take-off of Garth Brooks’ Friends in Low Places.

 

Steven Horowitz and Gideon Kendall, creators of the Bankruptcy Bill cartoon strip, sponsored the contest and came up with a great new cartoon featuring the comic likeness of Judge Trust that you absolutely must see!!!  Click this link to see this fantastic comic strip:

 

 

When I had told my wife, Arlene, of the contest last fall, she said she had to enter.  Her song, “A Bankruptcy Wife’s Lament,” is about a bankruptcy attorney who is so busy that he ignores his wife and family (me???).

 

Her song won second place!  It is a hilarious take-off on “Sunrise Sunset” from Fiddler on the Roof.

 

My song, “Debt Free Girl,” didn’t win a prize, but I still thing it’s great fun in any event.

 

If you haven’t clicked above to see the original cartoon, you absolutely must click here to see the original Bankruptcy Bill Cartoon of Judge Trust singing his song.

 

 

 

Last April I posted an article about a Long Island process serving company that had been charged with engaging in “sewer service.”  Long Island Process Serving Company Owner Arrested Today for “Sewer Service” .

 

Last week the owner of that company, William Singler, pleaded guilty to fraud in Nassau County Supreme Court.  He admitted that his company failed to properly served thousands of consumers on Long Island and across New York with collection law suits, and then lied about it with false affidavits of service.

 

As a result of his actions, many thousands of New York consumers were denied their due process rights, and only learned that they had been sued when their bank accounts were restrained or their wages garnished.

 

William Singler was the owner of the legal service process serving company, American Legal Process, that had been located on Long Island, in Lynbrook, New York.

 

 

The New York State Attorney General, Andrew Cuomo, revealed various aspects of the fraudulent scheme which included documents saying that one process server personally served lawsuit papers to someone in Brooklyn at 8:19 a.m. one morning, only to serve a second lawsuit 400 miles away, just one minute later.

 

That would require traveling over 20,000 miles an hour, and New York highways currently don’t accommodate such speeds.

 

According to prosecutors, American Legal Process employees routinely made only a cursory attempt to locate debtors, then gave up and submitted false affidavits of service, claiming they had served the debtors with the lawsuit documents.

 

You can click here to read a copy of the actual complaint alleging fraud against New York process service company .

 

 

Attorney General Cuomo is still proceeding with a civil suit to dismiss about 100,000 lawsuits that contain affidavits of service prepared by William Singer’s company, American Legal Process.

The Attorney General accused 35 law firms and two debt collection companies of failing to ensure that servers were following the rules after hiring American Legal Process to serve summonses and complaints. See my post: Bill Collectors Slapped with Class Action Suit .

 

William Singler is expected to face some jail time for his fraudulent and illegal conduct.  He pleaded guilty to a single count of a Class E felony of scheming to defraud, which is punishable by a year in jail.  He is expected to sentenced on March 24, 2010.

 

In my opinion, a sentence of only a year in jail is hardly just punishment for someone who has defrauded a hundred thousand consumers, many of whom faced great difficulty when they were surprised by frozen bank accounts and garnished wages.

 

When Singler appeared before Nassau County Supreme Court Justice Alan L. Honorof, he admitted that he had signed phony affidavits of service, swearing that court papers had been served on defendants in debt collection suits even though he knew many of his employees had broken the law.

 

 

Even though many thousands of credit card collection lawsuits were started improperly, the fact remains that in most cases, the underlying debt is not disputed.  Nevertheless, many consumers who were improperly served now have extra leverage to negotiate a low settlement.

 

Our debt settlement practice has assisted many consumers with resolving such outstanding credit card debts for very beneficial amounts.  We have also helped other consumers totally eliminate their credit card bills with bankruptcy.

 

 

It’s no wonder that I’ve been especially busy helping Long Island homeowners save their homes from foreclosure.  

 

Some recent statistics show that the number of Long Island homes that fell into some stage of foreclosure climbed 37 percent last year, with Suffolk homeowners seeing more such activity than all but one county in the state, according to a newly released breakdown of the foreclosure crisis that was reported in Newsday yesterday.

 

 

 

Foreclosure on Long Island has been especially prevalent.  The data shows that 7,582 Suffolk County homes were in some stage of foreclosure last year.  This represents a 29 percent jump from the preceding year when 5,885 homes were in foreclosure proceedings.

 

Those homes equate to 1.39 percent of Suffolk households, including renters, which is second only to upstate Orange County’s 1.4 percent.

 

 

In Nassau, the number of homes directly affected by foreclosure last year shot up 48 percent to 6,064 properties, or 1.32 percent of households, up from 2008’s 4,099 homes.  That 1.32 percent put Nassau County fifth in the state for foreclosure activity. Only Queens had more homes directly affected than Suffolk County, 8,248 homes.

 

 

Initially there was much hope that Obama’s federal mortgage help program would do something to stem the tide of foreclosure.  Unfortunately, the help that many struggling homeowners had hoped would come from the program never came. Just last week I reported Obama’s “Making Homes Affordable” Mortgage Modification Program Failing . 

 

As it turned out, 2009 broke monthly records nationwide in foreclosure activity.  To make matters worse, the rescue system was strewn with problems. Loan modification and foreclosure prevention programs have been heavily criticized for being clunky and disorganized.

 

Even though I am quite busy defending foreclosures and helping other homeowners stop foreclosure and pay their mortgages back through a Chapter 13 bankruptcy on Long Island, I will not do mortgage modifications, except in the rarest of situations.  I even wrote about this last summer:  Why I Won’t Negotiate Loan Modifications .

 

 

The number of foreclosed homes in the U.S. last year increased to a record 2.8 million, a 21 percent rise over 2008 and 120 percent over 2007.

 

Half of the foreclosures in the U.S. last year occurred in Arizona, California, Florida and Illinois. California had the most, with 632,573 foreclosed properties (up 21 percent from 2008), Florida posted 516,711 (up 34 percent), Arizona had 163,210 (up nearly 40 percent) and Illinois reported 131,132 (up 32 percent).

 

 

 

 

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.

 

 

The economy is affecting country clubs, too.  After last year’s Wall Street meltdown, country clubs have been hard hit. 

 

Long Island country clubs have been dealt an especially hard blow as many of Bernie Madoff’s investors reside here, and after they have lost big bucks, they no longer have the necessary funds to pay for luxuries like five-figure country club membership fees.

 

The Woodcrest Club, Inc., located in Syosset, New York, filed for Chapter 11 relief on December 10, 2009 in the United States Bankruptcy Court for the Eastern District of New York, in Central Islip.

 

The club’s membership dropped down to just 125 members, from about 300 this past summer.  The Club, which is on 107 prime acres on Long Island’s North Shore, has more than $1 million in unpaid vendor bills and employee wages.

 

The club also incurred large debt from a recent multi-million renovation of its facilities.  To compound the club’s problems, its mortgage contains covenants that are cost prohibitive to incurring subordinated debt or re-financing outside of bankruptcy.

 

 

One of the members came through as a white knight to try to rescue the club.  John Bennardo, a general contractor and resident of Cold Spring Harbor, who’s been a member since 2002, agreed to lend the club, as a debtor-in-possession, about $2 million.  In doing so, he would also become the Woodcrest Club’s general manager and run it for at least five years.    Bennardo is the owner of Manhattan-based Legacy builders.

 

The case is pending under Case No. 09-79481 before Judge Dorothy T. Eisenberg.  The debtor’s attorney is Gerard R. Luckman of the SilvermanAcampora LLP firm in Jericho, New York.  This is the firm of Long Island Chapter 7 trustee Kenneth Silverman.

 

Technically, the debtor is a non-profit, member-owned corporation.  The debtor currently employs twenty-seven employees and has five officers.

 

The Debtor holds title to approximately 107 very desirable acres of real property in the exclusive Village of Muttontown, with a current approximate value of $18,000,000.

 

 

The Debtor’s liabilities total approximately $9,787,000, of which approximately $57,341 is for priority unsecured vacation pay, and approximately $12,900 of withholding taxes owed to the Internal Revenue Service from a hole-in-one contest winner — perhaps the most unusual debt I’ve come across in a bankruptcy proceeding in quite some time.

 

There is approximately $6,624,000 owed to secured creditors. The balance is owed to general trade creditors, arrears on equipment leases, and members that have already paid toward 2010 dues.

 

At the time of filing, there were four pending actions against the debtor, with the following parties as plaintiffs: (i) Wheatley Bakery 2 Inc.; (ii) Sigis Pastry Shop; (iii) Encore Events; and (iv) Big Z. Beverage.

 

The Meeting of Creditors is being held on January 5, 2010 in Room 561 at the Central Islip Bankruptcy Court.  Hearings on post-petition financing and first-day orders occurred earlier this week.  An order authorizing the payment of pre-petition employee wages was signed today.  A status conference before Judge Eisenberg is scheduled for January 14, 2009 in Courtroom 760.

 

Four Suffolk County Supreme Court judges presented a views-from-the-bench program on December 9, 2009 about Mortgage foreclosure.  The well-attended seminar at the Suffolk County Bar Association had over 100 participants.  Cheryl Mintz was the moderator.

 

The program enabled the judges to provide some important insight into the rapidly-growing area of foreclosure litigation, especially considering a flurry of new legislation dealing with foreclosure procedural law and practice.

 

 

Judge Ralph F. Costello commented on the lack of a sufficient number of Supreme Court judges that are necessary to adjudicate the ever-increasing number of foreclosure cases.  He acknowledged the difficulty that the Office of Court Administration would have to provide additional judgeships, but felt that it was entirely reasonable to find budgeting to enable each judge to hire a second full-time law clerk. Doing so, he believed, would enable each judge to double their caseload.

 

There was an in-depth discussion about Governor Patterson’s new comprehensive foreclosure legislation which was just passed last month.  The bill will greatly strengthen protections for homeowners, tenants and even neighborhoods, which can be plagued by blight.

 

 

Judge Peter H. Mayer discussed the concept of standing and assignment, which is becoming an increasing source of consternation for mortgage companies.  Apparently, there are many problems resulting from the sale of mortgages on the secondary mortgage market.  Many foreclosing plaintiffs lack standing to bring the foreclosure suit, which can result in the dismissal of the case.

 

 

Judge Thomas F. Whelan broke his discussion into two sections, dealing with how the Court responds to foreclosure matters if an answer is filed, and if no answer is filed.  He discussed the importance of asserting affirmative defenses if available, and also addressed the new Request for Judicial Form that is now used in foreclosure actions.
 
He also discussed how the law clerks review cases to make sure that certain prerequisites have been met, such as adherence to the relatively-new 90-day foreclosure notice rule, whether parties appeared at mandatory settlement conferences, whether the subject property is owner-occupied (if so, special protections under the new statute exist), and whether additional default notices as required by the CPLR have been provided.

 

 

Judge Jeffrey Arlen Spinner, who is in charge of the Mortgage Foreclosure Conference Part, discussed the relatively new requirement of mandatory settlement conferences for all foreclosure proceedings involving sub-prime mortgages.

 

“My role as a judge is to be impartial.  I try to broker a settlement, if that’s at all possible,” said the judge.  He commented on the high number of these conferences, now numbering between 100 and 120 each Tuesday, saying “we’re buried in cases; we’re buried in motions.”

 

Ray Vorhees, Law Secretary to Judge Mayer, also addressed the audience to highlight the fact that the legislative intent of these various statutes is to protect homeowners, and that the court must and will honor the import of such legislative intent.

 

 

Towards the end of the evening, Cheryl Mintz asked Judge Spinner to comment on the case everyone wanted to hear about – Horoski – and the audience expressed their excitement.  This was the very recent case in which the Judge totally cancelled the mortgage in a foreclosure proceeding citing the bank’s egregious conduct. [See Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action ].
 
Judge Spinner, however, mentioned a prohibition on commenting publicly on any case that is pending.  He did mention that a new issue had arisen in the case which will result in the matter appearing before him on his calendar in the next few weeks.

 

In response to some pressing commentss about the case from one rather-insistent attendee, Judge Spinner did mention that his decision was one that is based in equity, rather than one based on law.

 

 

I am quite proud to post the song my wife, Arlene Gross Robins, wrote for the Bankruptcy Bill song contest.

 

Arlene, a full-time newspaper reporter, is especially witty and regularly writes song parodies and satire for her family and friends.

 

 

Click on this link to see the original version of Sunrise Sunset on Youtube.

 

 

  

“A BANKRUPTCY WIFE’S LAMENT”

(To the tune of “Sunrise, Sunset” from “Fiddler on the Roof”)

Once I had a hubby who’d come home nights
We’d have our dinner; share a song
Life was so happy – filled with de-lights
What went wrong?

[REFRAIN]
Chapter seven
Chapter thirteen
Filing is his life
Rescuing clients from their huge debts
At the expense of his son and wife

When the BAPCPA laws were changed in ‘05
I thought we’d have a nice reprieve
Debtors would no longer discharge their debts
Or so, I did believe

Chapter seven
Chapter thirteen
Filing is his life
Rescuing clients from their huge debts
At the expense of his son and wife

But now there were hurdles one must jump through
Credit counseling and a means test: de rigeur
Lawyers learned laws like they were brand new
And, thus, charged more

Chapter seven
Chapter thirteen
Filing is his life
Rescuing clients from their huge debts
At the expense of his son and wife

For a few years our son got to know his poppa
Then the economy went bad
Now dad works 24/7, non-stopp-a
And we’re so sad

Chapter seven
Chapter thirteen
Filing is his life
Rescuing clients from their huge debts
At the expense of his son and wife

As the recession slowly recedes
We’re hoping our attorney will come home
If not there’s divorce settlement proceeds
Either way, I’m raising our son alone

Chapter seven
Chapter thirteen
Filing is his life
Rescuing clients from their huge debt
At the expense of his son and wife

 

**************************************************************

  

 

 

 

A Suffolk County homeowner who fell behind on her mortgage was sued by the mortgagee, IndyMac Bank, in a foreclosure proceeding that just produced one of the most startling results I have ever seen in foreclosure litigation.

 

The judge determined that the lender engaged in “unconscionable, vexatious and opprobrious” conduct in attempting to foreclose the property.  The judge concluded that the appropriate penalty was to cancel the mortgage in its entirety, essentially punishing the mortgagee and bestowing a windfall on the homeowner.

 

Thus, the mortgagee, even though they brought the foreclosure action against the homeowner, ended up losing the entire value of the mortgage.

 

The case, IndyMac Bank v. Yano-Horoski, was decided Novermber 19, 2009 by Suffolk County Supreme Court Justice Jeffrey A. Spinner.

 

 

In a stinging and especially eloquent decision, Judge Spinner highlighted the relatively new law in New York which mandates pre-foreclosure settlement conferences between lenders and borrowers of sub-prime loans, and the problems caused by IndyMac’s wantonly-indifferent attitude towards participating in those conferences.

 

Judge Spinner determined that IndyMac refused to negotiate, and instead, treated the homeowner in a “harsh, repugnant, shocking and repulsive” manner by spurning what he thought could have been a “win-win” situation.

 

The homeowner, Ms. Yano-Horoski lives in East Patchogue.  She took out a $292,500 mortgage in 2004.

 

 

The lender apparently refused to participate in any kind of settlement on the ground that the homeowner defaulted on a forbearance agreement.  However, it later came out that the lender did not even mail the forbearance agreement to the homeowner until after payments were due.

 

The judge stated:  “Defendant, through Plaintiff’s duplicity, found herself to be in unique and uncomfortable position of being placed in default of the ‘agreement’ even before she had received it.”

 

In addition, the judge blasted Karen Dickinson, the regional loss mitigation manager for IndyMac, stating that she had an “opprobrious demeanor” and a “condescending attitude.”

 

To make matters worse for IndyMac, they claimed that $527,437 was due when almost all other documents indicated that the amount actually due, was less than $300,000.

 

The judge concluded that the banks’ conduct was “wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf.”

 

In addition, Judge Spinner determined that merely sanctioning the lender was not enough and would not benefit the homeowner.

 

The law firm of Steven J. Baum, who we regularly interact with in our bankruptcy and foreclosure defense practice, represented IndyMac.

 

 

What is important about this case is that it illustrates the changing tide against mortgagees, lenders and banks.  Whereas years ago mortgagees got away with murder, now judges won’t tolerate any improprieties. 

 

Thus, there is all the more reason to defend foreclosure proceedings if the lender engaged in any bad faith conduct.  An experienced foreclosure defense attorney can review a foreclosure situation and advise the homeowner of their legal rights.

 

I previously wrote that Many New York Foreclosure Suits Are Dismissed Because They Are Defective .

 

In a case earlier this year, I personally was successful in having the Nassau County Supreme Court dismiss a foreclosure proceeding on technical grounds.  See Long Island Foreclosure Case Dismissed!

 

 

 

I previously wrote about debt collector law firms in New York that had gotten in trouble with the law.  Debt Collectors Shut Down by Attorney General .

 

Now it is coming to light that a large regional collection firm in Georgia crashed and burned amid allegations that the firm failed to file collection law suits on behalf of their clients and also used funds for those suits to pay the firm’s own expenses.

 

The firm, Trauner, Cohen & Thomas, located in Sandy Springs, Georgia, dissolved after operating for more than 30 years. 

 

What led to the firm’s demise?  Several of the firm’s clients, who are banks and credit card companies, sued the firm, alleging various gross improprieties.

 

NCO Financial Systems, (a company I regularly deal with on behalf of my Long Island bankruptcy clients as they purchase massive amounts of delinquent debt), brought suit against the Trauner collection firm alleging that it gave the firm more than $1.3 million to reimburse the firm for filing fees and other expenses of collection suit litigation relating to more than 15,000 lawsuits the firm was to handle on NCO’s behalf.  Instead, the collection firm used the funds for its own operating expenses and inflated it reimbursement requests according to the pleadings.

 

Midland Credit Management brought another suit on similar grounds, alleging that they were defrauded $1.7 million.  A third suit alleges that the Trauner collection law firm is affiliated with a collection company, National Asset Recovery Inc., and that this company and the law firm defaulted on $1.7 million in loans.  There are even more similar law suits filed by Zenith Acquisition Corp. and Northstar Capital Acquisition.

 

One wonders if the financial pressures that many of these debt collection firms are suffering from encourages them to take shortcuts and violate consumer rights.  Congress recently issued a scathing report about the illicit practices of bill collectors:  Credit Card Debt Collectors Ripped in Federal Report .