Archive for February, 2009

Almost half a billion dollars of Long Island mortgage loans were put into foreclosure from September through December 2008.

Here are the latest statistics showing the number of lis pendens filed on Long Island.

	Long Island Lis Pendens Filings
Fourth Quarter – 2008

A foreclosure proceeding is started when the mortgagee files a document called a lis pendens with the county clerk.

The median mortgage being foreclosed is in the $300,000 to $400,000 range, which is a hefty amount for many Long Islanders to afford.

Many of these homeowners may be able to save their homes by filing for Chapter 13 bankruptcy.
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A Bankruptcy Cartoon Strip

 My bankruptcy attorney colleague, Steven Horowitz, recently collaberated with his artist friend, Gideon Kendall, to come up with a humerous cartoon strip, “Bankruptcy Bill.”   

Written by Craig D. Robins, Esq.

Today, the House of Representatives will consider proposed Congressional bill HR 1106, a housing package that includes the bankruptcy cram-down mortgage modification provision that was previously contained in proposed Congressional bill HR 200 (see my blog post, Will 2009 Bring Major Bankruptcy Law Changes? ).

The proposed legislation would let homeowners bring applications in Chapter 13 bankruptcy proceedings to reduce the principal and interest rate on a mortgage. This would enable debt-strapped homeowners to reduce their monthly payments rather than lose their homes.

If this bill is successful, then it will move over to the Senate.

As a Long Island Chapter 13 bankruptcy attorney, I see many hardworking families on Long Island finding it difficult to keep their homes because of rapidly declining real estate values. Many of these families were sold toxic mortgage products that they can no longer afford.  Many families cannot afford to keep their homes in Chapter 13 bankruptcy proceedings based on the current bankruptcy laws, which do not permit cram-down of first mortgages.

The mortgage and banking industries are against this legislation are have been trying to lobby Congress against passing the bill. However, we Long Island bankruptcy attorneys think the proposed law is a sound solution to a difficult problem.

Last week, President Obama called for such legislation as part of his housing rescue plan. (See my blog post, President Obama Announces Foreclosure Remedy). Although Republicans are against it, Democrats and consumer advocates regard this legislation as crucial to slowing the rapid rate of foreclosures.

If the proposed law is enacted is will have a major impact in stemming foreclosure on Long Island.

Written by Craig D. Robins, Esq.

Hyundai says buy one of our cars  —  If you lose your job you can return the new car

 Hyundai has a new “Assurance Program” that seems to be taking car buyers by storm.

Under the program that began last month, Hyundai allows buyers who lose their income to return their new car to the dealership they bought it from and walk away from the payment with no penalty, no obligation to pay the depreciation costs, and no hit to their credit report.

As a result of the Assurance Program, Hyundai was essentially the only major automaker to report a sales increase in January, when nearly all of its rivals reported huge losses.

Now Hyundai is now taking its Assurance Program to the next level with the “Hyundai Assurance Plus Program.” The Plus means that owners who suffer a disability or lose their job will get payment relief for 90 days or three car payments. The rest of the deal still applies – after 90 days, buyers can decide to return the car at no penalty, or resume making payments.

There are, of course, a few stipulations. Hyundai will assume a maximum liability of $7,500, and you have to make at least two payments before filing a claim. The cap is meant to keep people from returning damaged cars or ones with tens of thousands of miles on them.”

The Plus program will run through the end of April, while the larger Assurance program continues through the end of 2009.

I am not necessarily endorsing Hyundai cars, but can’t help but comment that many Long Island consumers facing potential layoffs later this year might benefit by having this extra degree of financial flexability.

Even without a program such as this, a consumer who files for Chapter 7 bankruptcy on Long Island can generally surrender any vehicle and discharge their obligation on the car loan or lease.

Some Long Island lawyers are suffering from a lack of business, ending up in a black hole of debt, and filing for bankruptcy

The souring economy is affecting the legal profession and a number of attorneys are filing bankruptcy on Long Island

Written by Craig D. Robins, Esq.

Many attorneys are being laid off according to an article in the New York Law Journal last week.

For months, headlines have been filled with stories about large, national companies laying off workers by the thousands. Now, many New York and Long Island law firms are making tough decisions on how to survive the economic crisis by laying off attorneys, too.

Many solo practitioners are hurting as well. Those attorneys who were previously overwhelmed with real estate business just a few years ago are now suffering big time as the glum economy has led to a dearth of business. Real estate attorneys have reported to me that they have virtually no business.

Attorneys who did well handling volume sub-prime mortgage closings are now victims of the sub-prime mortgage meltdown themselves.

Wall Street layoffs, mortgage foreclosures on a massive scale and a freeze in the financial transaction sector have affected Long Island attorneys across all practice areas, some more than others. Often, the smaller the law firm, the bigger the impact. There have been stories in the news about attorneys having to wait tables in order to make ends meet.

“Buyers are backing out of deals, walking away from down payments, banks are requiring 50 percent equity when it used to be 30 or 20 percent,” said Eric C. Rubenstein, a partner in Long Island, New York’s Ruskin Moscou Faltischek lawfirm, who co-chairs the firm’s real estate practice. Corporate and retail Long Island bankruptcy filings have also led to reduced legal work for many lawyers.

“I believe every project is affected by the recession,” said Steven R. Schlesinger, an Long Island attorney partner in Garden City, N.Y.’s Jaspan Schlesinger.

Many Lawyers Filing Bankruptcy on Long Island

I have regularly represented Long Island lawyers who, themselves, have needed bankruptcy relief. See my blog post about Long Island lawyers filing for bankruptcy.

However, I have never experienced so many attorneys seeking my bankruptcy advice as I have in the past year. The most common type of bankruptcy that my lawyer clients file is a Chapter 7 bankruptcy, which enables them to eliminate debts and get a fresh financial start.

If you are a lawyer and overwhelmed by debt, you should consider obtaining debt relief by filing for bankruptcy.

Written by Craig D. Robins, Esq.

President Barack Obama this week reiterated his support for bankruptcy reform during an appearance in Arizona, where he unveiled his $75 billion mortgage foreclosure prevention plan.

In several blog posts during the past two months I discussed how President Obama would likely reshape bankruptcy law during the early part of his administration (Will 2009 Bring Major Bankruptcy Law Changes? and Bankruptcy Change Under President-Elect Obama)

On February 18, 2009, he issued his bankruptcy proposal that would enable homeowners to change the terms of their mortgage in a Chapter 13 bankruptcy proceeding.

However, details of what President Obama would like in the Chapter 13 bankruptcy proposal are somewhat sketchy. He indicates that Chapter 13 cram-downs should be a final option; debtors must first ask their mortgage company for a loan modification and certify they have made reasonable efforts to cooperate with the lenders; and the cram-down would only apply to existing mortgages which have balances that are under Fannie Mae and Freddie Mac loan limits.

The bold plan removes restrictions that prevent Fannie Mae and Freddie Macfrom guaranteeing loans for mortgages valued at more than 80 percent of a home’s value. That rule prevents families from refinancing at historically low interest rates if they owed more than their homes are worth. Obama also says he will announce uniform rules for the mortgage industry to help homeowners restructure subprime loans. Lenders who want federal assistance will have to agree to the rules. Lenders will agree to lower interest rates and the feds will make up part of the gap between the old and new payments.   However, the finer points of the proposal need to be worked out.

This legislation would prove a godsend for thousands of homeowners on Long Island who face possible foreclosure.

Currently, bankruptcy judges on Long Island can effectively strip away a debtor’s second mortgage in cases where the value of the home is less than what is owed on the first mortgage. But judges remain powerless to alter the terms of a primary mortgage on one’s principal residence. Obama’s proposal seeks to change that.

Three weeks ago, the House Judiciary Committee reported to the full House H.R. 200, which would give Chapter 13 bankruptcy judges the authority sought by the president. A nearly identical bill — S. 61, sponsored by Senator Richard Durbin, D-Ill. — is pending in a Senate committee.

 Bankruptcy Counsel Have Duty to Verify Info

by Craig D. Robins, Esq.

One of the more intimidating features of the 2005 Bankruptcy Amendment Act is that it explicitly places actual liability on the debtor’s attorney for costs, sanctions, and legal fees for basically making a mistake.

In essence, the new laws impose a very strict duty of due diligence on the part of the debtor’s attorney to not only ensure that a consumer debtor is qualified to file a Chapter 7 case, but to also verify a great deal of the information set forth in the petition.

If the court determines that a debtor’s attorney has neglected this duty, it can impose serious economic penalties. That is exactly what happened in a recent case out of the Idaho Bankruptcy Court, decided December 16, 2008 (In re Dean, No. 08-00227-jdp (Bankr.D.Idaho).)

Court Describes Facts as “an Unfortunate Tale.” Kelly I. Beeman is an experienced bankruptcy attorney in Boise, Idaho. Not only has he practiced bankruptcy law for 25 years, but he actually served many years as both a Chapter 7 and Chapter 13 bankruptcy trustee.

In December, 2007, consumer debtors Michael and Peni Dean, who were in a dismal financial situation, retained Beeman to file a typical consumer Chapter 7 bankruptcy case. For these services, Beeman charged a fee of $1,875.

The debtors’ principal asset was a 2003 Hurricane motorhome. This asset was quite important because Mr. Dean used it as his residence when working at a job several hundred miles away.

The Deans told Beeman that they had just borrowed money a few months earlier from Mrs. Dean’s mother in order to purchase the motorhome, and that the mother had been granted a security interest to secure the debtors’ promise to repay the loan.

Beeman was wary as to whether the security interest was adequately perfected since the debtors were unable to produce any evidence of the security interest. Fearing that there may be a problem with the enforceability of the mother’s secured interest in a bankruptcy case, Beeman became concerned that he might have a conflict of interest if, in representing the debtors, he also helped one of their creditors (the mother) perfect the lien.

The Attorney’s Initial Advice is Good. Consequently, Beeman advised the debtors that they should seek independent legal counsel to advise and assist them in perfecting the mother’s lien before any bankruptcy petition was filed. Beeman referred the debtors to another attorney in Boise. So far, so good. Beeman was doing a admirable job.

Well, it turned out that the debtors did seek the advice of the other attorney, but they decided not to retain him because they felt his fees were too high. Instead, they attempted to perfect the mother’s security lien on their own, but they did not do it properly. Hence, and unbeknownst to them, there was not a valid security lien.

The Attorney Neglects His Duty of Due Diligence. When the debtors returned to Beeman to sign their petition, they told him that they had indeed contacted the other lawyer, and that the lien on the motorhome was now in order. They did not tell Beeman that they actually attempted to perfect the lien on their own. Beeman did ask to look at the new paperwork.

Based on the debtors’ assurances that the motorhome was no longer an issue, Beeman filed the petition in February, 2008. He listed the motorhome as an asset in Schedule “B,” and also listed the mother’s secured lien in Schedule “D.”

The Debtors Lose a Valuable Asset. As you can imagine, the trustee, Jeremy Gugino, discovered that there was not a valid lien and he eventually liquidated the motorhome as a non-exempt asset of the bankruptcy estate. The debtors did receive their discharge. However, the trustee also brought a motion against Beeman, alleging that the debtors got “short changed” because the attorney could have prevented the debtors from losing this valuable asset had he exercised his duty of due diligence to verify that the lien was perfected. To partially assuage this bad result, the trustee requested the court to order Beeman to disgorge his fees.

Attorney is Sanctioned. The court stated that one of the important purposes of the Bankruptcy Code (section 329) is to ensure that attorneys provide competent representation to debtors. The court concluded that because Beeman did not make an adequate inquiry in to the status of the mother’s lien prior to filing the petition, the attorney did not competently represent them. The judge stated that Beeman could have exercised more care and initiative. The judge ordered Beeman to disgorge half of his fee.

The judge drew particular attention to a new provision in the new law (section 707(b)(4)(D)) which states that “the signature of an attorney on the petition shall constitute a certification that the attorney has no knowledge after an inquiry that the information in the schedules filed with the petition is incorrect.”

The judge also commented that this duty of inquiry need only be a reasonable one. Here, Beeman’s prior substantial experience also did him in. The judge stated that Beeman should have known better after having dealt with so many similar issues as a Chapter 7 trustee himself.

Practical Advice to Attorneys. The reason why attorneys are charging increased legal fees under the new laws is simple – there is a much greater time commitment to exercise the new due diligence requirements. You are being paid for this, so don’t skimp on your obligations.

Practical Advice to Consumers. If the debtors in this case had actually followed through with their attorney’s advice, they would not have lost their motorhome. The lesson is don’t be penny-wise and pound-foolish. Sometimes an investment in legal services is necessary to protect valuable assets. In the above case, everyone lost out (except the creditors.)

 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 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 Medford, 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.

by Craig D. Robins, Esq.

Foreclosure Filings

September            535

October                 477

November             378

December             429

January                  713

 Last month, the number of foreclosure filings on Long Island jumped by 66% over the preceding month.

A foreclosure proceeding commences when the mortgage company files a document called a “lis pendens” with the County Clerk.

Shortly thereafter, the mortgage company arranges to have a process server personally deliver the foreclosure “summons and complaint” to the homeowners.