About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Foreclosure Defense
Written by Craig D. Robins, Esq.A person’s house is usually their most valuable asset. Understandably, one of the first questions my homeowner-clients ask me is “How will filing bankruptcy affect my home?”
Foreclosures and Collections Are Stopped Cold
The first thing you should know is that as soon as your petition is filed, the automatic bankruptcy stay kicks in.
This means that if you were behind with your mortgage, it now becomes against federal law for the mortgagee to continue any foreclosure proceeding.
If the House is Exempt, There Is No Problem Keeping It
Every state has a homestead exemption statute that sets forth how much equity you can keep in your home, while eliminating debts in a Chapter 7 bankruptcy case. In some states, the homestead exemption is based on federal law.
In New York, the homestead exemption is $50,000 per person. This is based on New York State law. See: Bankruptcy Exemptions in New York .
A husband and wife who file jointly can pool that homestead exemption and protect a total of $100,000 worth of equity. Sometimes Bankruptcy Exemptions Can Be Doubled .
If the House Has a Great Deal of Equity, You Can Still Keep It
Even if there is more than $50,000 of equity per person, then you can still keep you house if you file a Chapter 13 payment plan bankruptcy.
In such cases, the total amount you will have to pay back to your creditors through the plan, which is usually over a period of 60 months, must be at least equal to the amount of unprotected equity.
Sometimes deciding whether to keep a home or not can be a difficult decision.
If You Can’t Afford Your Mortgage or You Do Not Want to Continue Paying Your Mortgage You Can Walk Away (Eventually)
If you can no longer afford to keep your home and you have little or no equity in the home, then you may want to file for Chapter 7 bankruptcy in which case you can walk away from your obligation without any financial recourse from the lender. See: Strategic Mortgage Defaults Increasing .
In such cases, the lender still has the right to eventually foreclose on the home and take it back, but that can take an extended period of time during which you can continue to reside in the house without making any payments. Bankruptcy Can Provide Way Out of Bad, Highly-Leveraged Real Estate.
When the lender eventually does take the property back, it cannot pursue you for any deficiency amount. This is because the bankruptcy had the effect of discharging that debt. One-Fourth of All U.S. Homeowners Are Underwater. What Should These Homeowners Do?
Filing for Chapter 7 When There Is Substantial Unprotected Equity in the House
It is extremely rare that we recommend to a bankruptcy client that they file for Chapter 7 bankruptcy if they have a great deal of unprotected equity in their home. Usually we recommend that they try to sell their home first.
However, we do see situations in bankruptcy court where a homeowner with substantial equity files for bankruptcy. In such cases, the Chapter 7 trustee will seek to sell the home. However, the trustee must pay the debtor the amount of the homestead exemption from the proceeds, which would be $50,000 per person.
If You Have Real Estate and Need Bankruptcy Relief, You Should Consult With Experienced Bankruptcy Counsel
Protecting real estate in bankruptcy can be tricky and must be done the right way. When it comes to houses and homes, there are often many options when dealing with problematic debt situations.
It therefore makes sense to consult with a qualified and experienced Long Island bankruptcy attorney.
Written by Craig D. Robins, Esq.
I am currently in San Francisco where I just attended the annual convention of the National Association of Consumer Bankruptcy Attorneys (NACBA). I write this report from there on May 1, 2010.
[Note: this article was previously published in the May 2010 edition of the Suffolk Lawyer].
[I will soon post a number of photos that I took at the NACBA convention}
Many years ago I discovered how exciting it is to travel across the country to interact with fellow bankruptcy practitioners and learn the latest about strategies for protecting consumer bankruptcy debtors, and tips for running a bankruptcy law office.
Over the course of three days, some of the country’s leading bankruptcy attorneys as well as a number of bankruptcy judges, provide valuable insight at daily programs and seminars.
What I find just as important is trading notes and war stories with other bankruptcy attorneys from across the country and learning about new products and services at the accompanying trade show.
Here Are Some Highlights of the Bankruptcy Convention
New Trend in Interpreting the Means Test
In a half-day program which addressed the means test, the speakers concluded that both the United States Trustee and our country’s bankruptcy judges have become more lenient in interpreting the means test in Chapter 7 cases. There are three reasons for this trend.
Apparently, the current recessionary climate and sentiment against large banking institutions is resulting in the U.S. Trustee bringing fewer Section 707 motions alleging that the debtor filed an abusive case.
In addition, more and more debtors are providing information to the U.S. Trustee’s office in cases where there are means test issues. This enables the U.S. Trustee to evaluate the issue of abuse and reach a conclusion that the U.S. Trustee should not object.
Finally, there seems to be a greater number of experienced bankruptcy attorneys who know what red flags to look out for and consequently these experienced attorneys refrain from filing abusive cases.
Wide-Spread Concern Over Bankruptcy Judge Salaries
Judicial salaries are relatively low. It appears that we are losing a large number of bankruptcy judges because the level of judicial pay is so low. When there is a vacancy on the bench, this causes the bankruptcy court’s entire case load to slow down, which means unhappiness and dissatisfaction to litigants and all others involved.
This was indeed the case just two three years ago here, in the Eastern District of New York. Our Chief Bankruptcy Judge for the district, Hon. Melanie L. Cyganowski, left the bench to pursue a much more profitable position as a partner in a leading bankruptcy firm.
I interviewed Judge Cyganowski at that time and she clearly indicated that her reason for leaving the bench was because of her unreasonably low judicial salary. See: Chief Bankruptcy Judge Melanie Cyganowski Stepping Down.
HAMP Bankruptcy Update
There was ample discussion about President Obama’s Home Affordable Modification Program (HAMP) which seems to be rife with problems as an unusually small percentage of homeowners actually get permanent relief.
Here’s why:
a) there is a major lack of communication on the part of the lender;
b) lenders are continuing to threaten homeowners with foreclosure even as the lender is evaluating the homeowner for a modification, and even if the homeowner has been approved for a trial term; and
c) lenders are arbitrary in granting relief.
On a positive note, however, a new law is going into effect on June 1, 2010 that, among other things, makes it illegal for a lender to discriminate against a bankruptcy debtor because he or she is in the HAMP program.
The new law will also provide certain protections to Chapter 13 debtors as mortgagees will be precluded from objecting to discharge.
Lower Prices for Credit Counseling
When the 2005 Bankruptcy Amendment Act first went into effect in 2005, there were only four approved credit counseling agencies in our jurisdiction (E.D.N.Y.), and they all charged the same rate – $50 per credit counseling session.
There must have been about 20 credit counseling companies exhibiting at the trade show and many now charge fees as low as $15 per session.
In addition, they gave out so much shwag that my ten-year-old son, Max, will be delighted to receive from me upon my return a large number of squeeze toys, flashlights, keychains, fancy chocolates, playing cards, puzzles, T-shirts and what-not that I picked up from these exhibitors.
My hard-working office staff will also be the recipient of a good deal of this booty.
Emerging Technologies for Consumer Bankruptcy Practices
One of the most crowded exhibitor booths belonged to a OTB, an company that created BK Express, a comprehensive practice management system which is designed for consumer bankruptcy attorneys.
I actually just set up my office to use this software which is basically a special shell designed to work on top of LexisNexis’s Time Matters system.
Problems with MERS Mortgages and Foreclosure Defenses
In a very dynamic session, we were told that 50% of all residential mortgages in this country are nominally owned by MERS, which is Mortgage Electronic Registration Systems, a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.
The problem with MERS-recorded mortgages is that MERS really does not own the mortgage, thereby creating an interesting argument that MERS does not have any standing in bankruptcy court.
I previously wrote about special defenses that a homeowner can assert to defend a foreclosure action involving a MERS mortgage. See: A New Powerful Mortgage Foreclosure Defense — Compliments of MERS.
If your client has a MERS mortgage, consider looking at the pooling and service agreement to make sure that there was a true and valid assignment at every link of the chain, including delivery and acceptance of assignment documents. If there was not, you may have a good objection to a MERS proof of claim or motion to lift the stay.
Few Bankruptcy Attorneys From New York
I was rather surprised the very small turn-out from our state. Out of about 1,600 bankruptcy attorneys who attended the convention, there must have been fewer than 20 from New York, and only one other member, I believe, from the Suffolk County Bar Association. That was Allison Shields, who was actually one of the speakers – she spoke on managing a successful bankruptcy practice.
By Craig D. Robins, Esq.For several years I have volunteered for the mortgage foreclosure clinics put on by the Nassau County Bar Association.
Tonight, Gale Berg, Director of Pro Bono Activities for the Bar Association, will be discussing the Foreclosure Clinic Program on “Long Island Talks” tonight on News 12, between 7:00 and 7:30 p.m.
Pictured above right is our associate, Jason S. Leibowitz, Esq., who recently volunteered at one of the Clinic’s events in which he provided free foreclosure advice to Nassau County homeowners.
Written by Craig D. Robins, Esq.
HAMP Not Working As Planned
Recent figures show that only a small fraction of homeowners are seeing any kind of permanent relief under the federal Making Homes Affordable Program (HAMP), and fewer consumers are applying for the program, leading one well-known economics blog to suggest that the program is dying.
Thus, a major effort by President Obama’s administration to assist homeowners and keep them out of foreclosure appears to be failing.
On Monday, the government issued data showing that HAMP only helped 300,000 defaulting households obtain permanent relief by way of new loans. Yet, there appear to be over four million households in danger of losing their homes through foreclosure.
The government previously estimated that HAMP would help 1.7 million households.
I Just Received a Call from a Typical Frustrated HAMP Applicant
Yesterday, I received the umteenth complaint from a Long Island homeowner, struggling to use HAMP to save their home.
The homeowner, who lives in Medford (Suffolk County), complained that they applied for HAMP; they were approved for the trial program; they made regular monthly mortgage payments during the trial period for almost half a year while trying to provide all of the requested documentation; they did provide all of the docs; they were then turned down.
Understandably, the homeowner was not happy. Yet, this seems to be a regular occurrence with HAMP applicants — they apply; they make their payments; many encounter difficulties with their lender; they are ultimately turned down.
This led me to write a blog post over two months ago — WARNING: HAMP Can Drive Homeowners Into Bankruptcy . Sometimes it doesn’t even make sense to try to make the program work when you can just stay in the home for a period of time and eliminate all liability on the mortgage through a Long Island bankruptcy filing.
Fewer Homeowners Are Now Applying for HAMP Assistance
The New York Times just reported yesterday that the number of homeowners that enrolled in the trial phase of the HAMP program in April 2010 was only a about a third of the number who signed up in September 2009.
The article suggested that a key reason for the reduced interest in HAMP may be that many homeowners are feeling that it is more financially advantageous to default, pay nothing to live in their home for a substantial period of time, and then just walk away from the home.
This is what’s called ’strategic default” — which I wrote about at length just last week — Strategic Mortgage Defaults Increasing .
One Popular Financial and Economics Blog Says HAMP is Dying
Yesterday, the Calculated Risk Blog reviewed the slow-down in HAMP applications and came to the conclusion that HAMP is dying.
The above-chart is courtesy of the Calculated Risk Blog.
Another Possible Reason for HAMP Denial – Insufficient Income
It seems that a lot of homeowners applied for the program, only to be declined later on — after their income was verified.
Apparently, many mortgage servicers who were administrating the HAMP program on behalf of the mortgage company did not bother to verify income at the beginning of the trial period, and only did so towards the end.
Had they done so early on, they would have learned that a good number of applicants did not have sufficient income to make the program work, and they could have alerted those applicants right away, rather than giving them false hope.
Consequently, the administration is now requiring mortgage loan servicers to verify income at the beginning of the application process, rather than at the end.
Homeowners: Think Twice About Applying for HAMP
Even if a homeowner gets approved for a permanent HAMP modification, they only stand to save $500 a month. For those living on Long Island where the cost of living is high, saving just $500 a month can be just a nominal amount.
Any homeowner considering a HAMP remedy should be very wary about slightly lowering their monthly mortgage payments if they will nevertheless continue to struggle under a very high debt load.
For those homeowners who would still like to explore HAMP and get additional information, please see this post: Seeking HAMP (Homes Affordable Mortgage Program) in Bankruptcy — Eight Things to Know.
Strategic Mortgage Defaults Increasing
Posted on
Written by Craig D. Robins, Esq.Many homeowners who have lost all of the equity in their homes are making the decision to simply walk away from their home on a voluntary basis, even though they can afford to remain.
Why would they do that? Because it is no longer economically feasible to keep the home when they can rent a similar home for much less.
Strategic Defaults Triple in the Past Two Years
A recent Morgan Stanley report reveals that about 12 percent of all mortgage defaults are now “strategic” which is a great increase from mid-2007, when the level was only 4 percent.
The report also stated that strategic defaults tend to increase based on how much more the borrowers owe in house debt over and above what their homes are worth. In other words, the worse the investment, the greater the chance the homeowner will walk away.
What is the Technical Definition of a “Strategic Default”?
According the Morgan Stanley analysts, a default is “strategic” only when the homeowners who hadn’t been previously delinquent were making on-time payments one month, then skipped them for the next three, even while staying current on other consumer debt of at least $10,000.
Strategic Default is Best Approached in Conjunction with a Chapter 7 Bankruptcy Filing
If a homeowner stops paying the mortgage, he or she will often be able to stay in the home with their family for an extended period of time — all without having to make any further payments. In New York, which is a judicial foreclosure state, the foreclosure process now rarely takes less than a year.
A good foreclosure defense attorney can often come up with genuine defenses, which, if asserted, can extend the time that the homeowner has in the house even more.
However, at some point, there will inevitably be a foreclosure sale at which time the lender can obtain a deficiency judgment against the homeowner in certain states such as New York, Florida and New Jersey.
However, if the homeowner’s strategy is to file a Chapter 7 bankruptcy in conjunction with the strategic default, the homeowner can also discharge the deficiency debt.
So if home ownership becomes more of a nightmare than a dream, remember that there are options out there.
Written by Craig D. Robins, Esq.Steven J. Baum, P.C. is a foreclosure Factory. It is Long Island’s largest foreclosing law firm.
If you live in New York, and you are in foreclosure, then there is a very high chance that the foreclosure law firm suing you is Steven J. Baum, P.C., located in Buffalo, New York.
Over the past several years, the Baum law firm has become one of the largest foreclosure factories in the country, representing dozens of banks in foreclosure cases.
Last year they filed a staggering 12,551 foreclosure lawsuits, which comes out to about 50 a day. Many of the foreclosure cases we defend for our Long Island clients were brought by Steven J. Baum, P.C.
More Foreclosure Cases Mean More Complaints
It seems that as foreclosure firms expand and become literal foreclosure factories, they tend to do sloppy work and make frequent mistakes.
There have been a multitude of complaints against the Baum law firm. Here are some complaints as revealed in a recent New York Post article:
Failing to Divulge Mortgage Payments
Blanca Garcia filed for bankruptcy In the White Plains Bankruptcy Court. Baum’s firm filed papers claiming Garcia was in arrears. However, Garcia demonstrated that she actually made payments and showed the court her receipts which had not been credited to her account. Even though Garcia’s bankruptcy attorney provided this proof of payment, Baum’s firm still ignored the receipts and sent an attorney to bankruptcy court to argue that the mortgage was in arrears.
Creating Questionable Assignments
Over the past several years, the Baum law firm has become one of the largest foreclosure factories in the country, representing dozens of banks in foreclosure cases.
Last year they filed a staggering 12,551 foreclosure lawsuits, which comes out to about 50 a day. Many of the foreclosure cases we defend for our Long Island clients were brought by Steven J. Baum, P.C.
More Foreclosure Cases Mean More Complaints
It seems that as foreclosure firms expand and become literal foreclosure factories, they tend to do sloppy work and make frequent mistakes.
There have been a multitude of complaints against the Baum law firm. Here are some complaints as revealed in a recent New York Post article:
Failing to Divulge Mortgage Payments
Blanca Garcia filed for bankruptcy In the White Plains Bankruptcy Court. Baum’s firm filed papers claiming Garcia was in arrears. However, Garcia demonstrated that she actually made payments and showed the court her receipts which had not been credited to her account. Even though Garcia’s bankruptcy attorney provided this proof of payment, Baum’s firm still ignored the receipts and sent an attorney to bankruptcy court to argue that the mortgage was in arrears.
Creating Questionable Assignments
I’ve written extensively about mortgage companies that bring foreclosure proceedings when then they do not have proper legal standing to do so. See Many New York Foreclosure Suits Are Dismissed Because They Are Defective. Here, the Baum firm has brought numerous actions when their mortgage clients failed to have proper legal standing. See also: Mortgage Companies Entitlement to Bring Foreclosure Proceedings: Prove It or Lose It .
Judge Jeffrey Arlen Spinner, sitting in Suffolk County judge took it upon himself to investigate a filing by Baum’s firm when it attempted to foreclose on the home of Gloria E. Marsh. “A careful review,” the judge wrote in a four-page order, “reveals a number of glaring discrepancies and unexplained issues of substance.”
Judge Spinner determined that the Baum law firm filed the action before the date it claimed its client took ownership of the mortgage To see a copy of the decision, click: GMAC Mortgage v. Marsh — Decision of Judge Spinner Denying Order of Reference.
Judge Jeffrey Arlen Spinner, sitting in Suffolk County judge took it upon himself to investigate a filing by Baum’s firm when it attempted to foreclose on the home of Gloria E. Marsh. “A careful review,” the judge wrote in a four-page order, “reveals a number of glaring discrepancies and unexplained issues of substance.”
Judge Spinner determined that the Baum law firm filed the action before the date it claimed its client took ownership of the mortgage To see a copy of the decision, click: GMAC Mortgage v. Marsh — Decision of Judge Spinner Denying Order of Reference.
For another highly publicized decision written by Judge Spinner, see: Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action.
Filing Botched Assignment Papers
In the bankruptcy of Matthew Austin, Baum’s firm tried to prove that its client owned the mortgage to Austin’s house by filing an assignment of that mortgage from a Florida company signed by an executive of that company — but it was notarized in Buffalo, NY.
“To the extent assignor flew to upstate New York to appear before a notary in the law offices of Steven J. Baum, PC, defies all logic,” the lawyer said in court papers. “Clearly this is a manufactured document intended to defraud the Court.”
Improper Conduct in Bankruptcy Court
Earlier this year, a New York Bankruptcy Court judge said he has “probably cause” to believe that lawyers for the Baum law firm acted inappropriately.
What Can You Do If You Are In Foreclosure?
In assisting clients with Long Island mortgage foreclosure defense, we routinely come across situations where the paperwork submitted by the foreclosing bank is not in order.
However homeowners have rights afforded by the law. A bank cannot foreclose unless they do it the right way and all of their papers were prepared properly. If they are not, then the homeowner has a meritorious defense to the foreclosure action.
Even if the bank eventually corrects the problems, a homeowner can usually add many additional months or years to the time that they can stay in their home. It therefore pays to meet with an experienced Long Island foreclosure defense attorney.
Who Is Steven J. Baum?
Mr. Baum, only 41 years old, took over his father’s sleepy Buffalo law practice several years ago, moved it to Amherst, New York, and then super-sized it with a 500 employees — truly making it into a factory.
He also started his own legal document processing company — Pillar Processing.
Who Are Baum’s Clients?
The list goes on and on. Bank of America, Chase, Wells Fargo, HSBC, US Bank, GMAC Mortgage, Deutsche Bank, Sovereign Bank, Citibank, OneWest, M&T Bank, Bank of New York Mellon, to name just a dozen, according to court records.
Where In New York Are Baum’s Foreclosure Actions Filed?
Steven J. Baum’s law firm filed 12,551 foreclosure actions in the New York area last year.
Long Island
Nassau 2,210
Suffolk 3,083
Nassau 2,210
Suffolk 3,083
New York City Boroughs
Queens 2,231
Brooklyn 1,592
Staten Island 692
Bronx 678
Manhattan 119
Queens 2,231
Brooklyn 1,592
Staten Island 692
Bronx 678
Manhattan 119
Upstate Suburbs
Westchester 796
Rockland 444
Orange 706
Westchester 796
Rockland 444
Orange 706
Totals: 12,551 or 241/week or 48/day
That’s a lot of foreclosures!
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.I have discussed many times this year about the concept of defending a foreclosure proceeding by objecting to a mortgagee’s standing to bring the foreclosure suit on the basis that they do not actually own the mortgage. Many New York Foreclosure Suits Are Dismissed Because They Are Defective .
A recent comment that appeared on the on-line version of the Wall Street Journal posed an interesting take on this:
The real estate bubble was fueled, in large part, by mortgage companies who loaned to anyone on anything, then sold the paper to the banks — who repackaged this paper to sell to other investors.
Everyone passing around the paper like players at the roulette table. No-one checked the bona-fide representations of the borrowers. No-one checked the collateral. Everyone passed around paper while the little ball raced around the wheel of fortune.
If these gamblers were too busy in the casino to make sure their paperwork was properly updated and recorded . . . .tough!
That leads to the fundamental principal in any legal case pending in a court of law: the plaintiff must prove its case. Banks and mortgage companies must certainly adhere to the law and are now being called to task by the court when they fail to do so. See my post: Judicial Sentiment Against Foreclosing Banks Reaching All-Time High .
If a mortgage lender wants to bring a foreclosure proceeding, it must be able to demonstate that it actually owns the papers it is seeking to foreclose on. Homeowners who are being sued in foreclosure should consult legal counsel to ascertain how to protect their rights.
Written by Craig D. Robins, Esq.According to a recent article in the Wall Street Journal, the number of homeowners who have no equity in their property has swelled to 23%, threatening prospects for housing recovery.
As of September 2009, over ten million households in this country had negative equity in their homes. This is a situation that is also most evident on Long Island.
When a home is totally “underwater” or “upside-down,” that means the homeowner is paying more for the home than the home is worth. Many underwater homes were financed with sub-prime mortgages and the sub-prime borrowers are now having difficulty making monthly mortgage payments.
Options When Your Home is Underwater
There are several options available to homeowners whose homes are underwater. When the homeowner is also behind with the payments, Chapter 7 bankruptcy, to those who are eligible, provides the ability to walk away from the home and mortgage debt, while typically being able to stay in the home for a period of 12 to 24 months without making any mortgage or real estate tax payments, and not incurring any adverse income tax consequences.
Most homeowners whose homes are underwater owe their mortgage lenders an average of 20% more than what the home is worth. For the typical Long Island family who has no equity in their home, that means that they owe their mortgage company $60,000 to $100,000 more than the fair market value of the house. I’ve had many Long Island clients whose home values dropped many hundreds of thousands of dollars.
When a home is underwater, the homeowner can’t refinance or sell the home. Although there is always the possibility of loan modification, it appears that modifying a mortgage is often difficult. I recent wrote about Obama’s “Making Homes Affordable” Mortgage Modification Program Failing .
The Big Question for Underwater Homeowners: Do You Stay or Do You Go?
Families who owe more to their mortgage banks than what the property is worth certainly face a serious dilemma: Keep making payments and hope for the best — or walk away, and give up their home. Even if you are current on your mortgage, continuing to pay it may not be the smartest thing to do.
What I am seeing here on Long Island is that so many families are finding it necessary to dip into their savings just to make their mortgage payments. This is not prudent.
When someone’s home is underwater, they lack the cushion of equity that would protect them if illness or job loss slashes the family’s income. Refinance is just not a possibility. This, in turn, makes them more vulnerable to foreclosure because they can’t count on selling the home as doing so will not bring in enough proceeds to satisfy the existing mortgages.
I also have some clients who unrealistically think about holding out in the hope that the real estate market will rebound a great deal. However, based on all of economists’ predictions, that is most unlikely, at least for many, many years. Thus, keeping an underwater mortgage could be considered a “losing bet.”
One bet is certain, and that is getting sound advice from an experienced Long Island bankruptcy attorney who also engages in foreclosure defense. Meeting with counsel will enable the homeowner to ascertain the various options and determine if walking away is the best option. Counsel can also help the homeowner, whose thoughts about the home might be clouded because of emotional attachment, see the real picture.
Written by Craig D. Robins, Esq.It is most unfortunate, but the Obama administration’s $75 billion program to protect homeowners from foreclosure is now seen as a major disappointment.
The New York Times, in a detailed front-page article over the weekend, reported that some economists and real estate experts now contend the program has actually done more harm than good.
Here’s why: Even though the program has lowered the mortgage payments on a trial basis for hundreds of thousands of people, it has largely failed to provide permanent relief.
This is especially evident on Long Island, where the high number of foreclosure filings continue unabated.
The Program Has Not Resulted in Affordable Mortgage Payments for Most Homeowners
Most of the homeowners who have signed up for the program are not able to make their monthly mortgage payments, even if they are lowered somewhat. Consequently, many people still stand to lose their homes through foreclosure.
The Making Homes Affordable program now has many critics who are increasingly arguing that it has raised false hopes among people who simply cannot afford their homes.
Many desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting hard-earned funds they could have saved in preparation for moving to cheaper rental residences. Some borrowers have also been hurt because, unbeknownst to them, their credit ratings became tarnished since they falsely assumed that a loan modification did not result in the lender reporting negative information to the credit reporting agencies.
In addition, the program requires the homeowner to enter into a three-month trial period with no guarantee of permanent success. Another major problem with the program is that lenders can be very fickle in deciding to grant a modification.
The New York Times article pointed out that with the Bank of America, which has over a million outstanding loans that are eligible for modification, less than one percent resulted in permanent modification.
Sometimes Filing Chapter 7 Bankruptcy and Staying in the Home for Two Years Is the Best Solution
In my Long Island mortgage foreclosure defense and bankruptcy practice, I regularly meet with Long Island homeowners who have fallen behind with their mortgage payments and are facing foreclosure. Sometimes, walking away from an unaffordable home is the best option.
Here’s why: the homeowner can usually stay in the home for well over a year, and often as much as two years or more — without making any mortgage payments to the mortgage company or paying any real estate taxes to the town.
Sometimes referred to as a “strategic default,” because the homeowner intentionally stops making the payments, it often has to be done in conjunction with a Chapter 7 bankruptcy filing which will enable the homeowner to eliminate any subsequent deficiency on the mortgage after the lender eventually takes the property back.
The Obama Program Fails to Recognize that Some Homeowners Simply Can’t Afford Reduced Mortgage Payments
Although President Obama certainly had the right idea to help the American public prevent foreclosure, the program is not working. The New York Times article reported that Treasury officials appeared to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.
As a result, there is a new, unadvertised federal program called the Foreclosure Alternatives Program, which aims to encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages, which are referred to as short sales.
Whatever the merits of its plans, the Times concluded that Washington has clearly failed to reverse the foreclosure crisis.
In 2008, more than 1.7 million homes were “lost” through foreclosures. Last year, more than two million homes were lost, and a recent projection anticipates that this year’s number will swell to 2.4 million.
I have found that Increasingly, more and more of my clients in a foreclosure situation are inclined to walk away and accept foreclosure, rather than continue to make payments on properties in which they have no equity.
Assuming a homeowner is eligible for Chapter 7 bankruptcy relief, filing bankruptcy will enable the homeowner to eliminate any liability on the mortgage and, at the same time, eliminate all existing credit card debt as well. This is one way my firm regularly provides help to Long Island families in foreclosure.