About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Recent Bankruptcy Court Decisions
Written by Craig D. Robins, Esq.High Court Issues Decision on Attorneys’ Ability to Give Legal Advice to Bankruptcy Clients
The U.S. Supreme Court ruled today that a provision of the 2005 Bankruptcy Act, which bars attorneys from advising clients to take on more debt before filing for bankruptcy protection, is permissible in certain situations.
I first wrote about this case, Milavetz, Gallop & Milavetz v. United States, a year and a half ago when the Eighth Circuit Court of Appeals ruled that the provision was unconstitutional: Portion of New Bankruptcy Laws Declared Unconstitutional. Court of Appeals Strikes Down Provision which Prevented Attorneys from Advising Clients .
The Court of Appeals had ruled that the provision barring such advice was unconstitutionally broad and violated free-speech rights
Now, the Supreme Court unanimously reversed that ruling, but with a caveat.
Today’s decision, which was written by Justice Sonia Sotomayor, said the provision prohibiting such advice was valid, but should be read narrowly. She said that the law only prohibits attorneys from advising clients to abuse the bankruptcy system.
However, Justice Sotomayer indicated that it would be permissible for lawyers to advise clients contemplating bankruptcy to take on additional debt in certain situations. She wrote that bankruptcy lawyers could advise clients to refinance a mortgage or purchase a reliable car prior to bankruptcy on the grounds that doing so would reduce the debtor’s interest rates or improve the debtor’s ability to repay.
“It would make scant sense to prevent attorneys and other debt relief agencies form advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors,” Sotomayor wrote.
Professionals specializing in bankruptcy “remain free to talk fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case,” Sotomayor wrote.
How This Decision Affects Bankruptcy Attorneys and their Clients
I often encounter a situation where my client’s car lease is about to end. Before the 2005 Bankruptcy Amendment Act (BAPCPA), I would have simply advised the client to immediately surrender the existing car and obtain a new car lease or car loan, as getting a new car is easier to do before filing for bankruptcy than after.
However, BAPCPA contained a provision which prevents attorneys from advising clients to incur debt in contemplation of bankruptcy. So, for the last five years, I’ve been technically unable to give clients such advice.
Today’s Supreme Court decision now clarifies that as long as my advice is not meant to abuse the system, it is considered appropriate. Of course, a bankruptcy attorney cannot advise a client to go out and charge up debt when the client has no reasonable expectation to repay it — providing such advice would be considered abuse, and therefore a violation of the statute.
I view the decision as a victory of sorts because it enables us bankruptcy practitioners to do what we’ve wanted to do all along: give honest and appropriate advice to clients in order to reach a beneficial result, as opposed to taking advantage of the system and defrauding creditors.
Bankruptcy Attorneys Are Debt Relief Agencies
Justice Sotomayer also upheld the BAPCPA’s requirement that attorneys make certain disclosures in their advertisements and ruled that attorneys who provide bankruptcy assistance are debt relief agencies within the meaning of the law.
Having to label bankruptcy attorneys as “debt relief agencies” seems silly, and serves no useful purpose. However, the requirement is rather benign, and more of a nuisance than anything else.
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About the Photo: That’s my son, Max. To see more Max, click: Super Ninja Bankruptcy Attorneys
Written by Craig D. Robins, Esq.When I sat down to write this month’s column for the Suffolk Lawyer, I was prepared to discuss several recent cases interpreting the means test. However, I could not get over the great number of splits of authority over almost every single issue.
The Means Test is the focal point of the drastic revisions that Congress made to the Bankruptcy Code in 2005. That was when the legislature thought it was necessary to tighten the existing bankruptcy law and make it more difficult for consumers to eliminate debt, especially for those who Congress thought could afford to pay something to their creditors.
Unfortunately for bench and bar, the statutory wording of the Code provisions underlying the means test is anything but clear and unambiguous.
Congress Failed in Drafting a Clear-Cut Means Test Statute
Ironically, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) was intended “to improve bankruptcy law and practice by restoring personal responsibility and integrity in the bankruptcy system and ensure that the system is fair for both debtors and creditors.”
Yet, when the new law was enacted in 2005, Bankruptcy scholars across the land declared that so many of the provisions of BAPCPA were so poorly worded that bankruptcy court judges would be perpetually perplexed as they tried to interpret them. They were right. The relatively new statute contains typos, sloppy choices of words, hanging paragraphs, and inconsistencies.
We now have bankruptcy courts, U.S. District Courts, and U.S. Courts of Appeal issuing decisions almost daily in an effort to make heads and tails over what Congress intended. The worst part? There are minority and majority views to almost every possible issue, and even a few hybrid views to boot.
Here’s more irony: BAPCPA was supposed to limit judicial discretion. Instead, the legislation, which leaves a great deal to be desired, actually requires significant judicial discretion simply to interpret the statute. Congress failed to create the “bright line” which it intended, a concept Long Island Bankruptcy Court Judge Robert E. Grossman cited in one of his recent opinions.
This confusion has led to a spate of law review articles with deriding, mocking and skewering titles such as “BAPCPA: Trying to Make Sense Out of Nonsense.” I can come up with some of my own: “BAPCPA is Bupkis” and “Mean Streets to the Means Test – An Ugly Road to Bankruptcy Court.”
The Ambiguity of the New Laws Makes Bankruptcy Challenging
The Ambiguity of the New Laws Makes Bankruptcy Challenging
What all this means is that if an issue has not yet been decided in your jurisdiction, counsel has little guidance as to how the local bankruptcy court will rule. So imagine the challenge of trying to advise clients when a judge in Connecticut has held one way, a judge in New Jersey has reached a decision that is totally opposite, and our jurisdiction has not even addressed the issue yet. And then, most issues are also finding their way up to the appellate courts.
BAPCPA has created a wide split among courts, not only upon the interpretation of whether a consumer has too much income to qualify for Chapter 7 relief, but upon the methodology used to calculate what income really is.
Courts seem to be debating endlessly concepts such as whether projected disposable income requires either an “anticipated” or “historical” calculation of income. In other words, do you use a backwards-looking approach or a forwards-looking approach? Judge Grossman has already written a number of decisions seeking to make this distinction. (FYI, he’s a forward-looker.)
The Strict Constructionist Verses the Logical Originalist in Bankruptcy Court
Inconsistencies in BAPCPA language have created two approaches to addressing conflicting interpretations. You have the strict constructionists who believe a statute should be interpreted on its face, regardless of the result, and those who believe that maintaining a logical outcome based on the legislature’s original intent is paramount.
We’ve come to learn that Judge Grossman is of the school of thought “supported by reason.” He recently wrote in one of his decisions interpreting the means test: “Absent clear binding authority in this Circuit, this Court will not adopt a reading of the statute which does not make any sense.”
As Judge Grossman wrote just last week in In re: Rabener, “this Court does not share the view that a rigid application. . . is required because the 2005 BAPCPA amendments were intended to blindly reduce judicial discretion. This Court does not believe that it is required to reach a decision that is absurd on its face merely to satisfy an unsupported argument that eliminating or reducing judicial discretion is more important than reaching a sound conclusion consistent with reason.” In re Rabener, No. 809-75719, slip op. (E.D.N.Y. January 21, 2010).
Do you look at the “plain meaning of the statute” or do you try to ascertain “what Congress originally intended?” Perhaps that depends on which side you’re on.
So what can the bankruptcy practitioner do when courts across the country are divided on issues? Hope for the best. Such uncertainty makes practicing bankruptcy law post-2005 daunting to say the least. But all those divergent decisions sure make for good reading.
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 February 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.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.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.
Chapter 7 Cram-Down of Second Mortgages
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Written by Craig D. Robins, Esq.New Long Island case now permits lien-stripping that was previously impossible
One of the biggest problems that homeowners face in today’s recessionary economy is the loss in value to their homes. It is not uncommon to see houses that have dropped 50% in value over the past few years, leaving many to wonder if it is even worthwhile to keep their home.
One of the biggest problems that homeowners face in today’s recessionary economy is the loss in value to their homes. It is not uncommon to see houses that have dropped 50% in value over the past few years, leaving many to wonder if it is even worthwhile to keep their home.
As such, many homes are “under water” or “upside down” meaning that the homes are worth less than the balance due on the mortgage. In many cases, there are two mortgages and the home is worth less than the first mortgage, making the second mortgage totally unsecured.
Up until recently, there was little recourse available to consumer bankruptcy filers to eliminate mortgages that were underwater. However, a new decision released last month has now changed all that, permitting cram-down of second mortgages in Chapter 7 bankruptcy cases.
What is a Cram-down in Bankruptcy? Also known as a “strip-off”, a cram-down is when a debtor modifies the rights of a mortgagee, who is a secured creditor, by having the bankruptcy court strip off the secured status of the mortgage because there is insufficient value in the property to secure any part of it.
A cram-down removes the mortgage as a lien on the premises.
Cram-downs in Chapter 13 Bankruptcy Cases
The existing state of the law has been that only Chapter 13 debtors had the unique ability to cram-down mortgages, and then, only the second mortgage. Chapter 7 debtors did not have any ability to cram down any mortgage.
The reason for this is that the provision for cram-down is § 1322(b)(2), located in Chapter 13 of the Bankruptcy Code, which limits debtors from cramming down first mortgages.
The Lavelle Case Changes the Law
On November 25, 2009, Central Islip Bankruptcy Judge Dorothy T. Eisenberg issued a decision permitting Chapter 7 debtors to cram-down second mortgages. In re: Mark T. Lavelle, et. al (09-72389-478, Eastern District of New York).
An unusual aspect of this case is that the debtors did not even file an application seeking to cram-down their mortgage – it fell in their lap. The debtors are typical consumers residing in Levittown who sought Chapter 7 relief in April 2009. They were represented by Long Island bankruptcy attorney Norman M. Mendelson, Esq.
The home was in the name of the husband and it was worth $400,000. The balance owed on the first mortgage was $411,000 and the balance on the second mortgage was $9,900. Both mortgages were held by Bank of America.
In May 2009, the mortgagee, represented by Steven J. Baum, P.C. filed a motion seeking relief from the stay on the second mortgage based on the fact that the debtor had no equity in the property.
However, the debtor defended that motion by filing opposition in the form of a cross-motion seeking to avoid the mortgagee’s lien on the second mortgage under Bankruptcy Code § 506(a), arguing that the creditor only had a secured claim to the extent of the value of its collateral, and an unsecured claim for the balance.
However, the debtor defended that motion by filing opposition in the form of a cross-motion seeking to avoid the mortgagee’s lien on the second mortgage under Bankruptcy Code § 506(a), arguing that the creditor only had a secured claim to the extent of the value of its collateral, and an unsecured claim for the balance.
The debtor argued that even though this was a Chapter 7 case, the ability of the Court to modify wholly unsecured liens against a debtor’s residence in a Chapter 13 case under § 1322(b)(2) should be extended to Chapter 7 cases.
Judge Eisenberg, in a very complicated and complex, technically-worded decision which discussed two Supreme Court cases, first noted that the debtor’s motion should have been brought by adversary proceeding, but nevertheless permitted the debtor to proceed by motion, which she pointed out was “technically incorrect.”
The Distinction Between ‘Strip-Down” and “Strip-Off”
The Court addressed the 1992 Dewsnup Supreme Court decision which held that a Chapter 7 debtor may not “strip down” a first mortgage to the fair market value of the property. However, there is a difference between “stripping down” a mortgage and “stripping off” a mortgage.
Stripping-down refers to removing that portion of a mortgage that is unsecured, which is done pursuant to § 506. On the other hand, “stripping off” is essentially cramming down a mortgage, which means removing its lien status altogether.
The Judge observed that since Dewsnup, the issue of whether wholly unsecured liens may be “stripped off”, as opposed to “stripped down”, has been a contentious issue between various bankruptcy and district courts and their respective Courts of Appeals.
Judge Eisenberg then discussed the 1993 Supreme Court case of Nobelman which barred Chapter 13 debtors from relying on § 506 to bifurcate an undersecured mortgage to secured and unsecured components. (I wrote an article about Nobelman for the Suffolk Lawyer 16 years ago).
However, the Nobelman case only applies to situations where a portion of the mortgage remains secured, and the Supreme Court did not address situations where the mortgage is totally unsecured. Consequently, debtors have been able to cram-down totally unsecured second mortgages in Chapter 13 cases.
However, the Nobelman case only applies to situations where a portion of the mortgage remains secured, and the Supreme Court did not address situations where the mortgage is totally unsecured. Consequently, debtors have been able to cram-down totally unsecured second mortgages in Chapter 13 cases.
Cramming-Down Mortgages in Chapter 7 Cases
Judge Eisenberg, after utilizing a rather complex analysis, determined that the second mortgage was wholly unsecured (which means that § 506(a) does not apply), and that the plain meaning of § 506(d) required the lien to be voided. The Judge went on to say that there was no logical reason that this result should be any different in a Chapter 7 context as opposed to a Chapter 13 situation.
Thus, the Judge voided the lien on the second mortgage. Since this was a Chapter 7 case, the debt, now considered an unsecured debt, became totally discharged. A big win for the consumer.
What Does This Bankruptcy Decision Mean for Consumers and Society?
There is a record number of homeowners facing foreclosure, and there appears to be a groundswell of support by politicians, bankruptcy attorneys and consumer groups for a change to the Bankruptcy Code to deal with this. As such, perhaps some judges, like Judge Eisenberg, are taking a position rooted in public policy that recognizes the existing problem.
Many provisions in bankruptcy law have favored the mortgagee and secured lender over the past two decades. It now looks like the tides may be shifting in the other direction.
This case will likely result in a number of Chapter 7 cram-down proceedings being brought. As the Judge put it:
“Arguments that debtors will benefit from possible windfalls, are not persuasive. Markets are uncertain, and it is not certain such a scenario will ever occur. Secondly, the creditors’ right to foreclose will not result in any present monetary gain for the creditor since there is no value in the property for them.”
“Bankruptcy is not intended to benefit either the creditor in securing a potential increase in property value, or the debtor. However, where the future is unknown, bankruptcy principles of giving the debtor a fresh start should apply.”
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 December 2009 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Patchogue, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Written by Craig D. Robins, Esq.Last week I wrote a post in which I said that You Need Certain Identification to File for Bankruptcy . I did have one unusual case in which my client could not obtain the necessary photo ID.
Several years ago I represented a disabled woman through the Volunteer Lawyers Project. She had no photo identification when she came to my office and had never driven a car in her life. In addition, she had never worked. As you can imagine, she never received a driver’s license or any other kind of photo identification.
I sent her to the NYS Department of Motor Vehicles to get an official New York State identification card, but they refused to give her one because she had no other sources of identification to prove who she was.
When I filed her bankruptcy case in the Central Islip Bankruptcy Court, the Chapter 7 trustee, Allan B. Mendelsohn, eventually agreed to examine her at the meeting of creditors, but did not officially close the meeting. I then brought a motion to waive the identification requirements after reviewing the matter with the Office of the United States Trustee. The motion was granted, the trustee closed the meeting of creditors, and the debtor received her discharge.
Written by Craig D. Robins, Esq.Husbands and wives can file a joint bankruptcy petition. When both spouses need bankruptcy relief, it is quite easy to file a joint petition, and it is half the work of filing two separate petitions. See my post: Married Consumers Can File for Bankruptcy With or Without the Spouse .
But what about couples that have been together for so long that they’ve considered themselves married for decades, even though they were never legally married?
A recent case from California highlights the notion that only legally-married couples can file a joint petition. In that case, the two debtors had been living together in a relationship for so long that they considered themselves married, and they even told their attorney that they were married. They therefore filed a joint bankruptcy petition as if they were husband and wife.
However, when they appeared for their meeting of creditors, it came out that they never became legally married. The trustee was then compelled to bring a motion to dismiss the case. All was not lost, however, because at the request of the female debtor, the court permitted her to amend the petition so she could complete the bankruptcy. Her partner, however, had to file a new case. [In re Lucero, 2009 Bankr. LEXIS 2125 (Bankr. C.D.Cal. July 6, 2009)].
Written by Craig D. Robins, Esq.
Several times in the past month this issue has arisen with my Long Island bankruptcy clients: Can they deduct their children’s college tuition expenses on the means test? The means test does not provide any specific category for doing so.
I previously addressed this issue a few months ago: Can You File For Bankruptcy and Still Pay Your Child’s College Tuition? I will now expand upon that prior post.
Unfortunately, those bankruptcy courts which have addressed this issue have found no statutory support for such deductions.
Certain educational expenses can be deducted on the means test. These include deductions for elementary and secondary education expenses, although the amount is limited.
The means test also permits debtors to deduct expenses for contributions to family members, but this category is also limited to elderly, chronically ill or disabled family members.
Accordingly, at this time, there does not appear to be any way to include a debtor’s contributions to their children’s college expenses on the means test.
The following are some recent cases involving college expense deductions.
In re Baker, No. 08-13987, 2009 Bankr. LEXIS 193 (Bankr. N.D. Ohio Jan. 30, 2009): Recognized that special circumstances might justify allowance of college expenses for adult children, but found that this case does not rise to that level because it is not apparent that the debtor has made a reasonable effort to mitigate her expenses as her adult child could live with the debtor rather than on her own.
In re Saffrin, 380 B.R. 191 (Bankr. N.D. Ill 2007): Held that a debtor may not deduct his daughter’s college expenses because the Code only allows education expenses related to elementary or secondary education.
In re Boyd, 378 B.R. 81 (Bankr. M.D. Pa. 2007): Found that a debtor may not expense her adult daughter’s college education because the Code does not expressly provide such deduction and it does not qualify as another necessary expense.
In re Hess, No. 07-31689, 2007 Bankr. LEXIS 3553 (Bankr. N.D. Ohio Oct. 15, 2007): Found that “[w]hile a parent’s desire to assist a child…pursuing a college degree is laudable, a debtor is not free to do so at the expense of her unsecured creditors.”
In re Featherston, No. 07-60296, 2007 Bankr. LEXIS 4578 (Bankr. D. Mont. Sept. 28, 2007): Held that a debtor may not deduct college expenses for adult children because children are not elderly, chronically ill or disabled as required by the Code to qualify as an acceptable contribution to family members.
In re Goins, 372 B.R. 824 (Bankr. D. S.C. 2007): Held that the Code limits education expenses to those related to elementary and secondary school.
In re Hicks, 370 B.R. 919 (Bankr. E.D. Mo. 2007): Found that a debtor paying college expenses of an adult child is a luxury, not a necessity, and that the Code does not provide any support for allowance of such deduction.
Written by Craig D. Robins, Esq.Recent Decision by Judge Grossman settles matter for the time being
In July 2008, my friend and colleague, Long Island bankruptcy Attorney Scott R. Schneider, filed a typical Chapter 7 bankruptcy petition for a consumer debtor, Anthony J. Vitta, in the Central Islip Bankruptcy Court.
Nine months before, the debtor had been arrested by the Nassau County Police Department and charged with selling drugs. As part of that proceeding, Nassau County seized various assets that the debtor owned pursuant to the New York Civil Forfeiture law.
In the month prior to filing the bankruptcy petition, the debtor pled guilty to felony charges and agreed to execute a stipulation of settlement which would permit Nassau County to keep the seized property.
The trustee, Kenneth Kirschenbaum, who then learned about this, immediately brought an adversary proceeding against Nassau County, seeking a turnover of the seized property, alleging that it was property of the debtor’s bankruptcy estate.
In October 2008, before the debtor could be sentenced, he committed suicide. What followed was a battle between trustee Kenneth Kirschenbaum and the County of Nassau.
Nassau County argued that the debtor’s interest in the seized property was terminated when the debtor pled guilty and agreed to execute the stipulation to forfeit the property. Thus, the County argued, the debtor had no interest in the seized assets at the time the bankruptcy petition was filed.
The bankruptcy trustee argued that the debtor had retained an interest in the assets at the time he filed for Chapter 7 bankruptcy relief and that these assets belonged in the debtor’s bankruptcy estate.
In entertaining a motion for summary judgment in March 2009, Judge Robert E. Grossman concluded that the seized property was property of the debtor’s estate as of the date the bankruptcy petition was filed because the civil forfeiture proceeding did not divest the debtor of title to the property. Judge Grossman ordered Nassau County to turn over the assets to the bankruptcy trustee.
Nassau County was not pleased at all with the decision. The County quickly brought a motion seeking reconsideration. The judge confirmed his prior conclusion in a written memorandum decision just released last week which denied the County’s motion. However, even though he reached the same result, he revised his rationale.
Judge Grossman provided a fairly detailed legal analysis. As it turns out, New York state law provides that the death of a criminal defendant abates a criminal action. This then left the status of the forfeiture action up in the air. He distinguished the difference between pre-conviction and post-conviction forfeiture crimes.
Since the criminal action against the debtor died with the debtor, so, too did the stipulation. Thus, the County no longer had a lien on the property.
The matter may not be totally over, however. Judge Grossman permitted the County to commence a forfeiture action against the seized property, although he commented that Trustee Kirschenbaum has the right to assert any defenses it has under the Bankruptcy Code including those granted under Bankruptcy Code § 544(a).
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Incidentally, the debtor received his discharge three weeks after he passed away.