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“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for June, 2009
Student Loans and Bankruptcy
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Written by Craig D. Robins, Esq.Most debts can be eliminated and discharged in a Chapter 7 bankruptcy case. However, there are some exceptions and student loans are probably the most common exception.
About 20 years ago, Congress amended the Bankruptcy Code to make student loans non-dischargeable.
There is only one way around this rule, but it applies in very few cases. If the debtor can demonstrate that repaying the student loan results in an “undue hardship”, either for the debtor or the debtor’s family, then the bankruptcy court can discharge the loan.
In general, the bankruptcy court will use a three-prong approach to determine if there is undue hardship:
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- The debtor would not be able to maintain a minimal standard of living if forced to repay the loan.
- The hardship will continue for a significant portion of the loan repayment period.
- The debtor has made good-faith efforts to repay the loan before filing bankruptcy.
The standards for prevailing on demonstrating hardship are so strict that I only recall seeing one successful challenge on Long Island in the past twenty years.
Although student loans cannot be discharged in Chapter 7 bankruptcy filings, student loan arrears can be paid through a Chapter 13 bankruptcy payment plan.
Former Federal Reserve Bank Chairman Points Out Disturbing News About Americans and their Pensions
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Written by Craig D. Robins. Esq.I had the pleasure of discussing bankruptcy and the economy with Thomas J. Mackell last week. Mr. Mackell is a former Chairman of the Board of Directors of one of our Federal Reserve Banks. He has since become a crusader for pension reform.
He addressed several attorneys in our office about some of the serious problems facing this country’s economy and retirement systems. He believes America needs a new deal for pension and health care reform.
One extremely interesting and disturbing remark that he made is that the average American spends less time thinking about their retirement income than they do planning their annual two-week summer vacation. It seems Americans fail to properly consider their pension choices.
Mr. Mackell pointed that in the past decade, there has been a great shift in retirement responsibility from the shoulders of the institution to the shoulders of the individual. This has created quite a problem, he believes, because the average individual does not even know the difference between a stock and a bond. He thinks a new hybrid retirement system is necessary.
I am seen holding Mr. Mackell’s book, “When the Good Pensions Go Away: Why America Needs a New Deal for Pension and Health Care Reform,” in which Mr. Mackell discusses the gaping holes in America’s retirement systems and the need for better solutions.
Should I File Bankruptcy?
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Written by Craig D. Robins, Esq.With reports of consumer bankruptcies on the rise, and a continuing bad financial economy, many Long Island consumers are wondering if bankruptcy is for them
I recently wrote how nationwide bankruptcy filings are returning to record numbers. See Bankruptcy Filings Returning to Pre-Amendment Levels
On Long Island, thousand of consumers eliminate debts each year with bankruptcy. Here are some of the considerations in deciding if bankruptcy is an option for you:
1. Do you have lots of debt? Bankruptcy can help if you have a great deal of credit card debt, medical debt, or even legal debt, that you are having difficulty paying back. In a chapter 7 bankruptcy case, this type of debt is discharged. See my website, BankruptcyCanHelp.com.
2. Are you a good candidate for bankruptcy? When the bankruptcy laws changed, a qualification requirement was imposed called the means test. Most consumers on Long Island have no problem passing this test and becoming eligible to file for Chapter 7 bankruptcy. An experienced bankruptcy attorney can help you determine if you qualify.
3. Do you need to save a house from foreclosure? If so, then a Chapter 13 bankruptcy, which involves a payment plan, will enable you to cure mortgage arrears over a five-year period.
4. Are your debts primarily unpaid income taxes, child support, alimony, maintenance, student loans, or court-imposed fines? If so, these debts cannot be eliminated in a bankruptcy proceeding.
Some Long Island bankruptcy lawyers, such as my firm, offer a free consultation to explore these issues. If you are overwhelmed by debt, you should consider using the federal bankruptcy laws to protect you. This year it is estimated that about 1.5 million Americans will.
Written by Craig D. Robins, Esq.It was two years ago that Melanie L. Cyganowski retired from the bench as Chief Judge of the Bankruptcy Court for the Eastern District of New York to pursue a career change into the private sector. (see: Chief Bankruptcy Judge Melanie Cyganowski Stepping Down ). This year she has been quite busy.
The big automakers bankruptcies have kept most of the City’s top bankruptcy attorneys busy, and this was no exception for Judge Cyganowski.
Currently a partner with the New York firm, Otterbourg, Steindler, Houston & Rosen, Judge Cyganowski was tapped to advise GMAC Financial Services, which is the financing arm of General Motors, with matters involving the General Motors bankruptcy.
While Chief Judge, she spent a great deal of time trying to make the Long Island and Brooklyn bankruptcy courts more efficient. She has continued with such laudable efforts by recently co-chairing the New York State Bar Association Task Force on the State of Our Courthouses. The task force just issued a report aimed at improving the conditions and modernizing the state’s judicial facilities. The 55-page report can be viewed here: Task Force Report.
Earlier this year, Judge Cyganowski appeared as a commentator on Fox Business News to discuss Ponzi scammer Bernie Madoff’s possessions and bank accounts, and what steps might be taken to go after any fraudulently transferred assets. You can see the video here: Judge Cyganowski Video on Fox. In the interview, she commented on issues that previously came before her on a regular basis as a bankruptcy judge in Central Islip, such as fraudulent transfers, gifts given without sufficient consideration, and sufficiency of good faith defenses.
Judge Cyganowski has also been teaching some classes at St. John’s University School of Law, in their L.L.M in Bankruptcy Master of Laws program. She teaches the class, “Bankruptcy Ethics, Fraud and Malpractice” with Southern District of New York Bankruptcy Judge Cecelia Morris.
To round out her dedication to the bar, Judge Cyganowski has also chaired the New York State Bar Association’s Nominating Committee.
In addition, Judge Cyganowski just moderated a dinner program last week at the Jericho Milleridge Inn, sponsored by the Turnaround Management Association and New York Institute of Credit, entitled “Chapter 7 and 11 – Can They be Lucky Numbers?” Unfortunately, because of some other commitments, I couldn’t attend that program.
Written by Craig D. Robins, Esq.If you are wealthy enough and in bankruptcy, can you get the Chapter 7 trustee to make a house call for the meeting of creditors? In a recent case, the answer was yes.
My friend and colleague for over 20 years, Long Island bankruptcy attorney Salvatore LaMonica, is the newest Chapter 7 trustee appointed to the panel in the Southern District of New York. Congratulations to Sal!
One of his first cases was the Chapter 7 filing of disgraced Manhattan lawyer Marc Dreier, who is accused of defrauding hedge funds of $700 million. See: Long Island Bankruptcy Lawyer Salvatore LaMonica Named as Trustee in Major Swindler Case.
Because Dreier was under house arrest, and because Sal believed that there may have been valuable non-exempt assets in Drier’s multi-million dollar Manhattan townhouse, Sal did not hesitate to arrange to conduct the meeting of creditors there.
Because Dreier was under house arrest, and because Sal believed that there may have been valuable non-exempt assets in Drier’s multi-million dollar Manhattan townhouse, Sal did not hesitate to arrange to conduct the meeting of creditors there.
It was a good decision. Shortly thereafter, Sal arranged to auction off the townhouse and Drier’s two Hamptons waterfront properties, together valued at about $15 million.
This house call was certainly out of the ordinary. Usually, when a debtor is incarcerated or under house arrest, the debtor’s attorney will either make arrangements to get permission to go to court for the meeting of creditors, or will try to have it done over the phone.
Written by Craig D. Robins, Esq. and Dean Weber, Esq.
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Credit card debts can often be substantially reduced with Debt Negotiation
When you have debt problems, sometimes filing bankruptcy is the best solution. But sometimes it isn’t. When bankruptcy isn’t a perfect fit, debt negotiation may be. This involves negotiating settlements with the creditors who are typically credit card companies and banks.
As the sheer number of people defaulting on their credit cards continues to increase, rising to unprecedented levels, credit card companies are doing something that they have historically scorned: settling credit card accounts for substantially less than what is owed.
With unemployment topping 9 percent and more, this approach by credit card companies has increased drastically. Credit card companies have even gone so far as to authorize front-line employees with the power to cut good deals. We’ve been noticing this in our debt negotiation practice as we’ve been achieving some incredibly good settlements lately.
According to the Federal Reserve, 6.5% of credit card debt was at least 30 days past due in the first quarter – the highest percentage since the Fed began tracking the number in 1991.
What does this all mean for the average consumer who owes tons of money on their credit cards? Well, it means that now may be a very good time — perhaps the BEST time — to settle their debts with the credit card companies.
When considering debt negotiation, we believe that it is very important to retain an experienced debt negotiation attorney – one who is experienced enough to negotiate the best possible settlement. There are many debt settlement companies out there who are not acting in the best interests of the consumer. On several occasions I’ve written posts about this debt settlement companies engaging in false and deceptive practices (for example, please see Debt Settlement Industry Criticized by New York Times ).
As experienced Long Island bankruptcy attorneys dealing with credit card companies on a daily basis, we know that creditors would rather have a piece of something now than absolutely nothing down the road.
This is exactly why now may be the best time to consider your options, such as scheduling a free consultation with an experienced bankruptcy and debt negotiation attorney to discuss your best options for forging a new, debt-free future.
What happens if a Chapter 7 debtor realizes that he or she forgot to include a creditor after the case has closed?..
Wrritten by Craig D. Robins, Esq.
If you’re a regular bankruptcy practitioner, this will sound all too familiar. You file a routine Chapter 7 bankruptcy petition, the case goes unremarkably, the debtor gets a discharge, and the case is closed.
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Then, sometime thereafter – it could be days, months or years – the debtor calls to say that he or she inadvertently omitted a creditor. The anxious client explains that this failure was an innocent mistake.
Then, sometime thereafter – it could be days, months or years – the debtor calls to say that he or she inadvertently omitted a creditor. The anxious client explains that this failure was an innocent mistake.
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Counsel might then instinctively think, “no problem.” The case can be reopened by motion, and an application can be brought to amend the schedule of creditors to include the omitted one. Right?
Counsel might then instinctively think, “no problem.” The case can be reopened by motion, and an application can be brought to amend the schedule of creditors to include the omitted one. Right?
Confusing Case Law Has Made Resolving this Issue Difficult
But, not so fast. There have been a great number of cases on this issue, with widely differing theories and conclusions. Some have held that you can re-open, and some have held that you can’t.
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Some bankruptcy courts routinely grant debtors’ motions to amend schedules to list previously omitted creditors. One line of cases focuses on whether there is prejudice to creditors or whether there was fraud.
Some bankruptcy courts routinely grant debtors’ motions to amend schedules to list previously omitted creditors. One line of cases focuses on whether there is prejudice to creditors or whether there was fraud.
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Some courts will refuse to permit the case to be reopened, because they believe omitted debts are non-dischargeable. Yet other courts will refuse to permit the case to be reopened because they believe that omitted debts are automatically discharged even if they are not listed, and therefore reopening the case serves no purpose.
Some courts will refuse to permit the case to be reopened, because they believe omitted debts are non-dischargeable. Yet other courts will refuse to permit the case to be reopened because they believe that omitted debts are automatically discharged even if they are not listed, and therefore reopening the case serves no purpose.
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Even in our own jurisdiction, I have seen different judges over the years have different policies with this issue. Understandably, there has been a good deal of confusion as to the appropriate remedy dealing with the problem of the omitted creditor.
Even in our own jurisdiction, I have seen different judges over the years have different policies with this issue. Understandably, there has been a good deal of confusion as to the appropriate remedy dealing with the problem of the omitted creditor.
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So what is the Long Island bankruptcy lawyer to do?
So what is the Long Island bankruptcy lawyer to do?
Recent Case Provides Some Guidance
In April, Brooklyn Bankruptcy Court Judge Dennis E. Milton addressed this issue in the case of In re: Coppola (96-21661). Although the decision contained a nice discussion of the two main approaches, it still left undetermined what the appropriate protocol is in this district.
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In that case, the debtor filed a motion to reopen his Chapter 7 bankruptcy case for the purpose of amending the schedule of creditors. He did this over 11 years after he filed his petition. The debtor hoped to include a debt owed to his former business partner.
In that case, the debtor filed a motion to reopen his Chapter 7 bankruptcy case for the purpose of amending the schedule of creditors. He did this over 11 years after he filed his petition. The debtor hoped to include a debt owed to his former business partner.
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The Court, however, after conducting a trial, determined that the debtor was not a credible witness and that the debtor’s failure to disclose the debt was either the result of recklessness or intentional design. Because of that, and the significant delay, Judge Milton denied the application.
The Court, however, after conducting a trial, determined that the debtor was not a credible witness and that the debtor’s failure to disclose the debt was either the result of recklessness or intentional design. Because of that, and the significant delay, Judge Milton denied the application.
Equitable Approach vs. Mechanical Approach
Judge Milton stated that in deciding motions to reopen bankruptcy cases where the debtor has failed to disclose a creditor on his schedules, courts have developed two approaches.
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Under the “mechanical approach” courts have denied motions to reopen no-asset cases, finding that the debt owed to an omitted creditor is discharged “as a matter of law.” Under this approach, there is no reason to reopen a bankruptcy case, provided that it is a no-asset case and the debt is not otherwise excepted from discharge.
Under the “mechanical approach” courts have denied motions to reopen no-asset cases, finding that the debt owed to an omitted creditor is discharged “as a matter of law.” Under this approach, there is no reason to reopen a bankruptcy case, provided that it is a no-asset case and the debt is not otherwise excepted from discharge.
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Based on my own familiarity with cases here, I would say that prior to this decision, most judges in the Central Islip Bankruptcy Court utilized this approach.
Based on my own familiarity with cases here, I would say that prior to this decision, most judges in the Central Islip Bankruptcy Court utilized this approach.
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Judge Milton then explained that under the “equitable approach,” courts consider whether the debtor’s omission was the result of fraud, recklessness or intentional design, or if it would prejudice the creditor’s rights. Good faith is an important element. Courts adopting this approach have held that motions to reopen no-asset cases to list omitted creditors should be liberally granted.
Judge Milton then explained that under the “equitable approach,” courts consider whether the debtor’s omission was the result of fraud, recklessness or intentional design, or if it would prejudice the creditor’s rights. Good faith is an important element. Courts adopting this approach have held that motions to reopen no-asset cases to list omitted creditors should be liberally granted.
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Judge Milton did not use the mechanical approach, and instead relied upon the equitable approach. He did so because the facts of the case (the debtor’s bad faith) would have produced an unfair result by permitting the debt to be discharged under the mechanical approach.
Judge Milton did not use the mechanical approach, and instead relied upon the equitable approach. He did so because the facts of the case (the debtor’s bad faith) would have produced an unfair result by permitting the debt to be discharged under the mechanical approach.
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The judge found the debtor lacked good faith as it appeared the debtor had known about the debt for years, but neglected to amend earlier. It also appeared that the debtor lied about this knowledge at trial. The court also found that the length of time that elapsed between the filing of the petition and the request to reopen the case also suggested bad faith and prejudiced the debtor.
The judge found the debtor lacked good faith as it appeared the debtor had known about the debt for years, but neglected to amend earlier. It also appeared that the debtor lied about this knowledge at trial. The court also found that the length of time that elapsed between the filing of the petition and the request to reopen the case also suggested bad faith and prejudiced the debtor.
Practical Tips
For most garden variety situations where the debtor omits a typical credit card debt and advises the attorney within a few years, the courts here will probably be unwilling to permit counsel to reopen the case to add the creditor, asserting that, under the mechanical approach, the debt is dischargeable. In such cases, consider sending a certified letter to the creditor stating that the debt has been discharged, together with copies of the notice of commencement and order of discharge.
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However, in situations where the creditor raises objections to this approach, be prepared to file a motion to reopen, in which case the court will probably consider the various factors in the equitable approach.
However, in situations where the creditor raises objections to this approach, be prepared to file a motion to reopen, in which case the court will probably consider the various factors in the equitable approach.
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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 June 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.
Chapter 15 Bankruptcy
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Written by Craig D. Robins, Esq.Rare and unusual “Chapter 15″ bankruptcy case filed on Long Island
Everyone is familiar with Chapter 7, 11 and 13 bankruptcies. However, the 2005 Bankruptcy Amendment Act created a whole new category of bankruptcy filing: Chapter 15.
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What is Chapter 15 Bankruptcy?
A Chapter 15 bankruptcy filing is one in which a foreign company that has sought bankruptcy protection in its own country also files a case here so that the United States recognizes the foreign insolvency proceeding on an ancillary basis.
An international debtor would want to file a Chapter 15 proceeding here if it has assets and debts in this country. This enables the various courts in different countries to work together and avoid conflicts.
The technical name for a Chapter 15 bankruptcy case is an “Ancillary Cross Border Case”. Detailed information about Chapter 15 bankruptcy is available on the U.S. Courts official website: Chapter 15 Ancillary and Other Cross-Border Cases.
Only One Chapter 15 Case Has Ever Been Filed on Long island
In the three and a half years since Chapter 15 cases have been in existence, only one has been filed in the Eastern District of New York: an Israeli company, Gold & Honey, Ltd. The case, which was filed here earlier this year, emanated from a bankruptcy case filed in Tel-Aviv-Jaffa District Court.
The Chapter 15 case was filed by my friend and colleague, Paul H. Deutch, Esq., an associate at the New York firm of Troutman Sanders. Paul was previously a law clerk for Judge Conrad Duberstein. The case is currently pending in the Central Islip Bankruptcy Court before Judge Trust.
Written by Craig D. RobinsThese Supreme Court decisions will govern how consumer bankruptcy attorneys represent their clients and what we can expect with some important consumer bankruptcy issues
The United States Supreme Court has granted certiorari to review decisions in three bankruptcy matters and is considering whether to review others.
Constitutionality of New Bankruptcy Laws
I wrote about one of these cases previously when the Court of Appeals had issued a decision concerning the constitutionality of the 2005 Bankruptcy Amendment Act. See Portion of New Bankruptcy Laws Declared Unconstitutional. Court of Appeals Strikes Down Provision which Prevented Attorneys from Advising Clients . Milavetz, Gallop & Milavetz, P.A. v. U.S., 541 F.3d 785 (8th Cir., Sept. 4, 2008).
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In that case the Supreme Court will be addressing whether consumer bankruptcy attorneys have the First Amendment right to advise bankruptcy clients that theymay incur new debt prior to filing.
Exemptions and Valuing Assets
The Supreme Court will also be reviewing the case of In re Reilly, 534 F.3d 173 (3rd Cir., July 21, 2008), which held that, by claiming an exemption in an amount identical to the stated value of the asset, the debtor put the trustee on notice of the debtor’s intention to exempt the full value of the asset, regardless of what that value might turn out to be or whether there was a limitation on the amount of the available exemption.
Discharging Student Loans Through Chapter 13 Plans
In addition, the Court announced this week that it will review the case of in Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193 (9th Cir., Dec. 10, 2008). In that case, the Ninth Circuit Court of Appeals ruled that the treatment of a student loan debt in a confirmed Chapter 13 plan of which the student loan creditor has actual, timely notice binds the creditor if the creditor fails to object to confirmation of the plan, even if the debtor has not established “undue hardship” as called for in Code § 523(a)(8).
The downside of the Supreme Court review is that the lower court decisions by the Court of Appeals are rather debtor-friendly. Since the current makeup of the Supreme Court often results in conservative decisions, there is a possibility that these cases could be overturned, which would not be good for consumer debtors or their attorneys.
The Issue of Calculating Income on the Means Test
In addition, there is another very important case which the Court is considering whether to review. That case is In re Lanning, 545 F.3d 1269 (10th Cir., Nov. 13, 2008), which holds that a Chapter 13 debtor’s projected disposable income is calculated in a forward-looking, rather than a mechanical, manner.
A forward-looking approach is what Judge Grossman, in our Long Island Bankruptcy Court in Central Islip, used to analyze the Chapter 13 case of Almonte, which I wrote about in a post discussing his decision: Cash Advances Are Not Pre-Petition Income .
Are Bankruptcy Judges Overworked?
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Written by Craig D. Robins, Esq.These days bankruptcy judges are very overworked. The number of bankruptcy filings in recent years has skyrocketed; yet, Congress has not added any new bankruptcy judges since 1992.
In addition, the Bankruptcy Amendment Act of 2005 made bankruptcy law much more complex and created numerous issues that continue to be actively litigated today, taking up the court’s valuable time. The new bankruptcy laws not only make the filing experience more time consuming for debtors, but they also require the court to spend more time ensuring compliance as a result of the increased complexity of the new laws.
One of the organizations that I am a member of is the National Association of Consumer Bankruptcy Attorneys (NACBA). They are the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy.
This morning, NACBA President Carey Ebert testified before the House Judiciary Subcommittee on Commercial and Administrative Law on the need for additional bankruptcy judgeships. She advised Congress that the number of bankruptcy cases are increasing, but the number of judges has remained the same. The bulging bankruptcy caseloads from consumers seeking financial relief in these recessionary times will soon start putting a serious strain on the bankruptcy courts.
Judicial resources such as having a sufficient number of bankruptcy judges are necessary to effectively and efficiently adjudicate the rights and responsibilities of parties in bankruptcy cases and proceedings.