About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for July, 2009
Written by Craig D. Robins, Esq. Many Long Island homeowners have homes that are underwater, meaning that the homeowner owes more on the mortgage than what the home is worth.
What are your options if your home is underwater and you can’t afford to make the mortgage payments any more? One frequently-discussed option is the short sale.
What is a Short Sale?
A short sale, also known as a compromise sale, is when the homeowner sells the property to a bonafide purchaser for less than what is owed on the mortgage. The only way to do this is to persuade the mortgagee that it is in their best interest to do so, and then get their consent.
Short Sales are Very Difficult to Obtain
With the advent of the sub-prime mortgage market and the increasing popularity of securitized mortgages, negotiating with mortgagees has become an exercise in frustration.
No longer is it possible to make a simple call to a lender to discuss a short sale or mortgage modification. It is now necessary to go through many layers of committees that are often ill-equipped to make quick decisions, let alone any decision at all.
During most of the past decade, my firm and I have refused to negotiate short sales and mortgage modifications because of the low likelihood of success.
Even If a Short Sale is Possible, It is Often Not the Best Option
If you have relatively few assets, it is often most advisable to simply file for Chapter 7 bankruptcy and walk away from the house, assuming that you’re eligible for a Chapter 7 filing.
A special benefit arises from the way a Chapter 7 bankruptcy interacts with foreclosure law – You will often be able to stay in your home without making any mortgage payments for well over a year.
If you have assets or high income, you might think that trying to negotiate a short sale is the way to go. Perhaps not. A lender is not about to let someone walk away from many tens of thousands of dollars or more – if they have the financial ability to pay off the difference later on.
One thing is certain: meeting with an experienced Long Island foreclosure defense attorney who is also familiar with bankruptcy is a necessity to get good advice.
Written by Craig D. Robins, Esq.Last week I wrote that a debtor can file an emergency bankruptcy petition within hours if necessary to stop a foreclosure sale, even though it is not wise to leave a bankruptcy filing until the 11th hour. See How Quick Can Bankruptcy Relief Be Obtained? .
Upon thinking about this, I would like to distinguish the difference between an emergency filing, which is necessary to stop an immanent action, and a rush filing, which is usually done because the client is very anxious to file. We’ve had clients who wanted us to file their case almost immediately even though no emergency situation existed.
I’ve learned over the years that clients should not rush the bankruptcy attorney, especially now that both debtor and attorney must comply with all of the various mandates of the new bankruptcy laws.
In order to have a successful case, the bankruptcy attorney must sufficiently review all of the relevant facts and devote the appropriate amount of time to prepare the bankruptcy petition. Then, the attorney must review it with the client for accuracy.
Obviously, in an emergency situation, not all of this is possible to the extent that would be advisable. But absent that, ensuring that the bankruptcy goes smoothly requires spending the necessary time prior to filing the petition.
In any event, a good Long Island bankruptcy attorney such as our firm should be able to fully complete a petition and file it within days if the client has all of the necessary documents and information.
Written by Craig D. Robins, Esq.Yesterday’s Businessweek Magazine contained an insightful article, “Bankruptcies: The Next Wave.”
The author analyzed the current economy and stated that even though credit markets have improved somewhat as of late, and the American economy may be on the road to recovery, that won’t prevent a new run of corporate bankruptcies in the next year.
Here’s why: too many companies loaded up with too much debt to survive the next year without defaulting on their debt obligations. As such, they will need to file for bankruptcy protection under Chapter 11.
There is still too much debt on the balance sheets of corporate America. Banks gave many loans in 2007 when the economy was still strong. However, these loans are now coming due at a time when the economy is still weak and access to additional credit is very tight.
The recent improvement in the stock market may make credit more available. However, banks will only make credit available to financially healthy companies, and not those who may need it the most.
The article concluded by saying: “The irony is that a record number of troubled firms could tumble into bankruptcy next year, at the same time that the economy and credit markets start showing major signs of improvement.”
Unfortunately, the wave of Chapter 11 bankruptcy filings will certainly hit Long Island, as it is home to a number of struggling companies, including retail and restaurants.
Written by Craig D. Robins, Esq.As long as a debtor is honest and straight-forward with their bankruptcy attorney about the facts of their case, and as long as the bankruptcy attorney is experienced and qualified to handle the case, there is very little that can go wrong with a consumer’s typical Chapter 7 bankruptcy filing.
Based on my experience, the following situations are where a debtor can get into trouble:
Reason #1: The debtor does not advise the attorney of all of their assets and liabilities and other information, and as a result, the petition is not accurate. If a trustee learns that the debtor withheld important information, the trustee can object to the debtor’s discharge.
Reason #2: The debtor does not use a bankruptcy attorney and instead files a pro se petition. Bankruptcy law, practice and procedure is complicated enough for bankruptcy lawyers; it is even more difficult for the lay person to understand everything that is necessary for a bankruptcy case to go smoothly.
Even if a debtor can prepare the petition on his own, there are still so many requirements under the new bankruptcy laws that it is very difficult to comply with all of them without knowing all of the particularities of the law. The bankruptcy court throws out many pro se bankruptcy cases because the pro se debtor does not do what they are required to do.
Reason #3: The debtor employs an attorney who is not experienced in bankruptcy law. As indicated above, bankruptcy law has become rather complex and complicated and can result in a mine field of traps and pitfalls for the unwary. I’ve personally seen many, many debtors get into trouble because their bankruptcy petitions were filed by general practitioners who were not sufficiently versed in bankruptcy law.
Knowing what assets are protected, knowing what documents must be filed and how, and knowing relevant deadlines are all very important aspects of practicing bankruptcy law which are not that easy to grasp for those who do not regularly practice in the bankruptcy court.
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).
.
Incidentally, the debtor received his discharge three weeks after he passed away.
Written by Craig D. Robins, Esq.This afternoon, the House Judiciary Subcommittee on Commercial and Administrative Law held a hearing examining the role that medical debt plays in consumer bankruptcy.
The hearing, which was titled “Medical Debt – Is Our Healthcare System Bankrupting Americans?,” focused on a recent study I wrote about last week — Are Americans Being Driven Into Bankruptcy by the Health Crisis?
The chairman, Congressman John Conyers, Jr. (D-MI), in his opening statement, said that he wanted to see, at the very least, revisions to the 2005 Bankruptcy Amendment Act, particularly with respect to debtors dealing with significant medical issues.
He suggested eliminating the credit counseling requirement for such debtors, calling it a waste of time and money. He also wanted medical debt debtors to be relieved from the onerous means test requirements.
President Obama previously suggested the need to re-write some of the bankruptcy law (see: Bankruptcy Change Under President-Elect Obama ). Hopefully we will see proposed legislation in the near future.
Written by Craig D. Robins, Esq.Objections to a bankruptcy discharge in a typical New York bankruptcy case are relatively rare. Technically, a creditor has the right to file objections if they feel the debtor engaged in fraudulent conduct regarding the way a debt was incurred, such as lying on a credit application.
A creditor can object to a bankruptcy discharge by filing a lawsuit within the bankruptcy called an adversary proceeding. However, very few creditors will consider bringing an adversary proceeding, even if grounds for doing so exist.
Here are three reasons why:
1. There were a number of cases earlier in the decade which raised the burden of proof that a credit card company or bank must show the bankruptcy court in order to prevail.
2. Adversary proceedings are not cheap. The creditor has to pay a court filing fee of several hundred dollars and they also have to hire bankruptcy counsel.
3. The judges in our district have very burdensome chambers rules for adversary proceedings which require an exceptional amount of work on the part of the bankruptcy attorney. The court expects the lawyers to do the same amount of legal work whether the case involves a $5,000 consumer credit card debt or a $1,000,000 Chapter 11 turnover action.
Keep in mind that creditors, in recent years, have filed far fewer adversary proceedings in consumer bankruptcy cases in New York. Nevertheless, if they believe firmly enough in their position, they may still seek relief.
Written by Craig D. Robins, Esq.Of course not. Clothing is protected. When you file for bankruptcyin the State of New York, a consumer can keep and protect a certain amount of clothing.
Although there is a specific dollar amount for personal effects which include clothing, for all practical purposes, all usual and ordinary clothing is exempt and protected. The fact is that a trustee has no interest in trying to liquidate someone’s used duds.
There are only two possible exceptions. One would be an expensive fur coat which actually has to be separately itemized on the schedule of assets in the bankruptcy petition. The other exception might be a collection of expensive designer dresses.
.
However, in over twenty years of representing consumer debtors, I have yet to file a bankruptcy case with either.
A debtor will probably be able to keep even once-expensive designer clothes
I did have one client several years ago whose husband, while he was working, earned several hundred thousand dollars a year. The wife had spent over $500,000 on designer clothes in the five-year period before they retained me. In fact, their largest creditor was Barneys, the famous New York clothing store, which was owed about $200,000.
We never had to address how a trustee would handle the designer clothes because the matter was resolved without a bankruptcy filing.
Looking at what happened to former vice-presidential candidate Sarah Palin’s designer clothes, which were very much in the news last fall, the Republican National Committee eventually determined that they only had nominal value and turned them all over to Goodwill, even though they had cost many tens of thousands of dollars. So chances are that even if a consumer who was previously affluent files for bankruptcy owning some designer clothes, the trustee will not care less about them.
The bottom line: used designer clothes, even if they have potential value, are not easy to liquidate. Therefore, even if they may be technically non-exempt, a debtor will probably end up being able to keep them.
Written by Craig D. Robins, Esq.We are seeing new trends in New York Chapter 7 bankruptcy cases
During the past half year, the psychology of clients meeting with us has changed dramatically. We are seeing more and more New York consumers who previously would never have contemplated a bankruptcy filing. Now they see Chapter 7 bankruptcy as a reasonable solution to their debt problems.
These clients have always paid their bills on time and did not take risks. Unfortunately for them, however, they suffered a financial calamity: they were laid off from work or their hours were reduced, they became involved in matrimonial issues such as separation or divorce, or they encountered substantial unanticipated medical expense.
Other clients experienced a sudden drastic increase in expenses caused by a rate change with an adjustable rate mortgage. And to make matters worse, many of these clients have homes that no longer have any equity.
The fact is that in New York, especially Long Island, the high cost of living makes coping with a financial calamity extremely difficult, if not impossible.
For those that are eligible, Chapter 7 bankruptcy can eliminate all credit card debt, medical bills, and many other financial obligations. It also enables homeowners to walk away from real estate that is no longer worth keeping.
Consumers in New York and Long Island who have suffered a serious financial calamity should recognize bankruptcy as an option and explore its immediate and long-term benefits with an experienced bankruptcy lawyer.
Written by Craig D. Robins, Esq.During the real estate boom that ended about two years ago, numerous Long Island consumers gobbled up Florida real estate as an investment. Unfortunately, as we all know, the real estate bubble burst, especially in previously-red-hot real estate markets like South Florida, and almost every one of these investors lost their entire investment and more.
During a time of “build it and they will come,” speculators ran rampant from around the nation, driving up the prices of Florida condominiums to a feverish pitch. Since then, the values of these units have dropped incredibly and many are worth much less than one-half of the original purchase price.
In the past 18 months, our Long Island bankruptcy practice has helped numerous consumers who have suffered extreme losses from these Florida real estate investments, not to mention real estate investments in other previously-hot areas such as Las Vegas.
In every case, the clients purchased the out-of-state real estate with financing, leaving open the possibility of large deficiency judgments from mortgage foreclosure proceedings. When the real estate values plummeted, the owners could not sell and were stuck.
Our bankruptcy firm has filed a number of Chapter 7 bankruptcy cases for these New York residents, enabling the New York consumers to simply walk away, as well as eliminate their existing credit card debt. In every case, our client was successful in discharging their obligations on the investment properties.
For those that have toxic real estate investments, it would be prudent to meet with an experienced bankruptcy attorney to discuss how a bankruptcy filing might offer a successful resolution and opportunity for a fresh new financial start.