Archive for February, 2009

Written by Craig D. Robins, Esq.

In Taipei, some students, complaining that many consumers have become “credit card slaves,” took part in a demonstration calling for the government to pass a law to help people with their bank debt. The group claims there are more than 600,000 credit cards slaves in Taiwan who suffer from extremely high credit card interest rates and high monthly payments. Long Islanders are not the only ones who are seeking debt relief solutions to eliminate credit card debt.  Many foreign countries have bankruptcy laws that enable consumers to discharge credit card debts in bankruptcy.

Written by Craig D. Robins, Esq.

        This past September, Gov. Patterson and state legislators agreed to slow down the foreclosure process by imposing a new law that required mortgage lenders and banks to provide delinquent homeowners with a 90 day notice of their intent to commence foreclosure. Now, Albany lawmakers, fearing the recession will produce more home evictions, plan to examine the effectiveness of this 90 day warning period and whether additional time is needed.

        The purpose of the 90 day notice is to give homeowners the opportunity to try to reach a settlement with their lender before the foreclosure proceeding is commenced.

        Judging from my own experience with Long Island consumers who have fallen behind, communicating with a mortgagee can be very time consuming and frustrating. Ninety days is often an insufficient period of time to work out debts with a lender. Many mortgagees are also unreceptive and indifferent to modifying their customers’ mortgages.

        Long Island State Senator Brian X. Foley (D – Blue Point), who just became the new chairman of the Senate Banks Committee, will be holding hearings on this issue. Last year, when he was campaigning, he actually backed a one-year moratorium on foreclosures.

        Suffolk County and Nassau County have among the highest mortgage default rates in New York. Many homeowners are able to stop foreclosure and cure their mortgage arrears by filing Chapter 13 bankruptcy.

Written by Craig D. Robins, Esq.

Last week, a new bill was introduced into Congress which is designed to provide a special safety net for individuals who are in a financial crisis due to a personal or family medical debts.

The bill, entitled, the Medical Bankruptcy Fairness Act (H.R. 901), would protect $250,000 of the value of the medically distressed debtor’s residence in a Chapter 7 bankruptcy filing and protect a family caregiver from having their case dismissed or referred to chapter 11 or 13.

The current bankruptcy homestead exemption for consumers filing bankruptcy on Long Island and in New York is $50,000 per person. In effect, the new law would increase that amount to $250,000 when certain requirements of the proposed statute are met. One eligibility requirement is that the amount of medical debt must be more than 25% of debtor’s household income for the prior one-year period. There are other qualifications as well.

The proposed law was introduced by Rep. Carol Shea-Porter (D-N.H.) who stated,”An unexpected emergency or illness should not wipe out everything a family has. My legislation will help protect the homes of families who are struggling with catastrophic medical bills.” Click here to read the text of the Medical Bankruptcy Fairness Act (H.R. 901).

by Craig D. Robins, Esq.

We Have Had Harsher Bankruptcy Laws Since 2005. During President Bush’s administration it became more difficult for individual consumers to seek bankruptcy relief. In 2005, after aggressive lobbying efforts by the credit card and banking industries, Congress agreed to enact harsher bankruptcy laws. The 2005 Bankruptcy Amendment Act became effective on October 17, 2005. Thereafter, consumer filings plummeted.

The Economy Has Severely Deteriorated. Since that time, the country’s economic climate has changed dramatically for the worse. After an incredible boom in the housing market, the real estate bubble started bursting in 2007. The following year saw a total collapse of real estate-backed securities. After months of national headlines focusing attention on the sub-prime mortgage meltdown, news shifted to the tightening credit market and the precipitous drop in the stock market. Numerous companies began closing their doors and laying off employees. As the national housing crisis has worsened, foreclosures have climbed to record levels.

Bankruptcies on the Rise Again. Recently-released data reveals that almost 1.1 million Americans filed for bankruptcy in 2008, a 32 percent increase from the prior year, as a recession has forced many consumers to seek protection from creditors. This is a record number of filings since the laws were changed three years ago.

Shift in Public Policy Now Favors Bankruptcy Change. With the worst financial turmoil this country has seen since the Great Depression, there has been a marked shift in public policy towards bailing out the financial sector and the auto industry, and protecting homeowners who can no longer afford to make payments on their mortgages.

 Obama Will Greatly Influence the Future of Bankruptcy.  Judging by statements that he made during his campaign, President-elect Obama will probably seek to reverse some of the harsh changes that Bush put into law. During the campaign, Obama’s web site contained the statement, “Obama and Biden will reform our bankruptcy laws to protect working people.”

Obama will likely seek to change the bankruptcy laws to help people avoid losing their homes, a step that the Bush administration and the mortgage industry have greatly resisted.

As president, Obama will have the ability to control the actual bankruptcy laws, as well as the interpretation of the current or future bankruptcy laws, in several ways. First, it is unlikely that there will be any harsher measures proposed under the new Democratic administration. Thus, any proposed legislation will undoubtedly be pro-debtor, which Obama will probably support and sign into law.

Secondly, Obama will have the ability to shape the judicial interpretation of bankruptcy law for years to come as he will likely be in a position to nominate at least one, if not two, associate justices of the Supreme Court. As Supreme Court decisions often come down to a five-to-four vote, any appointments that Obama makes may end up being determinative of how existing bankruptcy law is interpreted.

Cram-Down Legislation Just Introduced in Senate.  Congressional Democrats have wasted no time in advancing legislation to change bankruptcy rules, with the aim of reducing home foreclosures . On January 6, 2008, Senator Richard Durbin (D-Illinois), the second-ranking Democrat of the U.S. Senate, introduced legislation that would permit debtors in bankruptcy to erase or “cram-down” some mortgage debt.

The legislation, S. 61, is entitled the “Helping Families Save Their Homes in Bankruptcy Act.”

Current bankruptcy law only permits homeowners to cram-down second mortgages, and then, only if the mortgage is totally under-secured by the value of the property. Consumer debtors have been prohibited from modifying mortgages with a cram-down since a 1993 Supreme Court decision that banned the practice.

Senator Durbin previously introduced this new cram-down legislation in 2007, but due to Republican opposition, the measure failed to pass on several occasions The proposed law was almost passed several weeks ago when it was included in the $700 billion bank bailout bill. However, it was removed just before the package finally passed.

Obama Will Likely Sign Cram-Down Laws. There is a good chance the legislation will pass in 2009. President-elect Obama co-sponsored Senator Durbin’s bill in 2008 and said that it would be a priority in 2009. There is also a strong possibility that legislators will attach the bill to Obama’s proposed economic recovery stimulus package now being drafted in Congress, which means that it could be approved as early as February.

There Will Still Be Opposition. The financial services industry will certainly try to fight the proposed reform, claiming that it will increase the cost of obtaining mortgages as banks will absorb large losses and will need to pass along this cost to consumers. However, the circumstances under which the bill previously failed have changed significantly, and home foreclosures are reaching epidemic proportions. With roughly two million foreclosures expected this year, politicians refusing to support the bill will certainly be unpopular. Although the legislation might need to work its way through Congress over a period of several months, many pundits predict that the bill will indeed become law.

Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the February 2008 issue of the Nassau 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.

Written by Craig D. Robins, Esq.

Fortunoff, one of Long Island’s most established retailers, with a main store in Westbury, just filed for Chapter 11 bankruptcy relief on February 4, 2009.

As the recession and economic downturn impacts the Long Island economy, we will see more and more consumers and retail establishments seeking bankruptcy relief in this harsh financial environment. It appears that hard-pressed consumers are curbing discretionary spending as they worry about slumping home prices, recession worries, tight credit, and dwindling retirement accounts.

The Westbury store is one block away from where the Westury bankruptcy court was located before it moved to Central Islip.

This is not Fortunoff’s first Chapter 11 filing. They previously filed for bankruptcy protection in February 2008 when, pinched by the housing downturn, they were unable to borrow money to meet expenses.

The chain, which has 1,700 employees, exited bankruptcy when it was sold last year to NRDC Equity Partners, the owner of Lord & Taylor department stores.

Written by Craig D. Robins, Esq.

Chapter 7 trustees are generally bankruptcy attorneys who have applied to the Office of the United States Trustee to become a trustee. There are currently only nine active Chapter 7 bankruptcy trustees on all of Long Island. This is much less than the 17 trustees we had for most of the 1990’s.

The Chapter 7 trustees are assigned to a “panel of trustees.” When a Long Island debtor files a chapter 7 petition in the Central Islip Bankruptcy Court, the clerk’s office randomly assigns one of the trustees on the panel to the case.

Even though the term for a Chapter 7 trustee is just one year, the Office of the United States Trustee has not created any new openings for trustees in over 17 years. Trustees can seek to have their terms rolled over for successive one-year periods. During the past 17 years, several trustees retired or sought removal from the panel.

 Below is a list of the active Chapter 7 bankruptcy trustees on the panel of trustees for the Central Islip Bankruptcy Court in the Eastern District of New York, which covers bankruptcies filed on Long Island.

• Neil H. Ackerman, Esq
• R. Kenneth Barnard, Esq.
• Kenneth Kirschenbaum, Esq.
• Allan B. Mendelsohn, Esq.
• Marc Allen Pergament, Esq.
• Robert L. Pryor, Esq.
• Kenneth P. Silverman, Esq.
• Richard L. Stern, Esq.
• Andrew M. Thaler, Esq.

 Here are some former trustees who are no longer on the panel.

• Bonita R. Bequet, Esq. (removed from panel. Moved out of state)
• Marilyn A. Frier, Esq. (retired)
• C. Steven Hackeling, Esq. (removed from panel. Now a state court judge)
• Robert Lifson, Esq. (removed from panel. Now a state court judge)
• Ronald Lipshie, Esq. (deceased)
• Richard J. McCord, Esq. (removed from panel for Long Island. On panel for Brooklyn)
• Gregory Messer, Esq. (removed from panel for Long Island. On panel for Brooklyn)
• Ed Zinker, Esq. (removed from panel)