About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for November, 2010
Written by Craig D. Robins, Esq.
The Bankruptcy Court Now Maintains a Privacy Rule
Over the past several years, the Bankruptcy Court began addressing concerns over privacy and identity theft. As such, we have Bankruptcy Rule 9037 to protect the rights of debtors and other parties.
This statute requires anyone filing documents with the Court to remove or redact certain personal data that can be considered sensitive.
Generally, the following sensitive identity and account information should be modified as indicated:
– only the last four digits of an individual’s Social Security number or taxpayer identification number
– only the last four digits of a financial account number, and not the entire account number
– only the year of an individual’s birthdate, and not the month or exact date of birth
– only the initials of a minor should be stated when referring to children
The Bankruptcy Attorney Is Responsible for Redacting Sensitive Information
Bankruptcy attorneys have the obligation to carefully review all documents prior to filing to ensure that any sensitive information is redacted.
The Court has become so concerned with ensuring compliance that attorneys must now click a box when entering the Court’s ECF (electronic case filing) website, to indicate that they are aware of this requirement.
In those instances when my office has to file pay stubs or other documents that may contain sensitive data, we always review them prior to scanning them. For example, should there be a Social Security number, we redact it with a heavy black marker prior to scanning. In the actual bankruptcy petition, we only include the last four digits of account numbers and the last four digits of the Social Security number.
Special Provision to Restrict Viewing
Although used very rarely, an attorney can bring a special Motion to Restrict Viewing of a particular document to court staff only.
Are Tax Returns Actually Filed with the Bankruptcy Court?
In all consumer bankruptcy cases, the debtor must provide the most recent tax return to the Chapter 7 trustee. In Chapter 13 cases, the last two tax returns are provided.
These returns are not actually filed with the court, but rather delivered to the trustee.
Korn & Spirn — Involuntary Bankruptcy Just Filed Against this Beleaguered Long Island Law Firm
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Written by Craig D. Robins, Esq.
Firm of Lawyer Who Jumped Eight Floors to his Death Now in Involuntary Chapter 7 Bankruptcy in Central Islip Bankruptcy Court
The Long Island law firm of Korn & Spirn has had more than its share of woes this year. In March, partner Jay Korn of Rockville Centre committed suicide at the age of 70 by jumping to his death. He shared aHempstead law practice with Arthur Spirn for more than 30 years in a firm known as Korn & Spirn.
He jumped off the roof of the Hempstead office building where he maintained his law practice, landing on an awning eight stories below. That Wednesday morning in March he died about half an hour later.
The big news after the suicide was that it appeared that Korn defrauded dozens of clients out of millions of dollars in a Ponzi scheme. Nassau County District Attorney Kathleen Rice began investigating him the day after he killed himself.
A large number of clients immediately filed complaints thereafter. Garden City attorney Jerome Resiman, who is representing a number of the alleged victims, called Korn “a mini-Madoff,” according to news reports, and said that Korn promised 15% annual returns on investments.
As of April, there were close to a hundred complaints from victims alleging that Korn defrauded them out of about $30 million. In news reports from that time, The District Attorney’s office commented that neither the firm nor Korn’s partner, Arthur Sprin, were under investigation.
Law Firm of Dead Attorney Investigated for Ponzi Scheme Must Now Answer to Creditors in Bankruptcy Court
Yesterday, three creditors who asserted that they had claims against the law firm partnership filed an involuntary Chapter 7 Bankruptcy Petition against the firm. The case is now pending before Central Islip Bankruptcy Judge Dorothy Eisenberg under Case No. 10-79012
The petitioning creditors are Steve Prince of New York, represented by Thomas J. Perkins, Esq., who claimed he was owed $600,000; Lewis J. Rubin of New York, represented by Herbert Kramer, Esq. of New York, who claimed he was owed $2,565,000; and Ahron Glambosky of East Meadow, represented by David Grill, Esq. of New York, who claimed he was owed $1,250,000. That’s a total of $4.4 million in claims for three creditors.
The Creditors Appear to be Victims of the Ponzi Scheme
It appears that these creditors were victims of the Ponzi scheme as they indicated that the nature of their claims were funds entrusted for investments and real estate purchases. It was unclear, however, whether they were alleging that the firm had any involvement in Korn’s alleged Ponzi activities other than financial liability.
The creditors served the involuntary petition papers upon Arthur L. Spirn, P.C., the new law firm of the surviving partner, who moved his office to Garden City after the suicide.
The actual involuntary bankruptcy petition was rather short, consisting of only two pages and no schedules.
What is Involuntary Bankruptcy?
When creditors feel that their funds may have been diverted or embezzled, they have several options. They can litigate in state court or they can force the debtor into bankruptcy, which can often enable the litigation to proceed at a faster pace before a trustee who has considerable legal authority.
One of the powerful remedies a trustee in a bankruptcy case has is the ability to recover payments or wrongful transfers that the debtor made.
Once the court appoints a trustee, the trustee has the right to thoroughly examine the debtor and hold the debtor accountable. However, the trustee can also pursue other parties as well if the debtor transferred funds or valuable assets to those parties without receiving reasonable value in return..
In order to force a debtor into an involuntary bankruptcy, there must be at least three petitioning creditors who are owed at least $10,000 combined. The petitioning creditors must also be able to allege that there are no fewer than 12 creditors overall. In addition, the claims cannot be subject to a bona-fide dispute.
After the petitioning creditors file the involuntary bankruptcy petition, the Bankruptcy Court issues a summons that the debtor has 20 days to respond to. In the Korn & Spirn case, Judge Eisenberg issued the summons today.
Involuntary Bankruptcy Cases Involving Ponzi Schemes Seem to Be Getting More Widespread
The victims of Ponzi schemes often use involuntary bankruptcy proceedings to protect their rights. This is the case with Agape World and Bernie Madoff.
Earlier this week I attended the 2010 Bankruptcy Roundtable at the Nassau County Bar Association. One of the interesting presentations that night was given by David Mahoney, Esq. about issues that arise in bankruptcy proceedings involving debtors who had engaged in illegal Ponzi Schemes.
David is an associate in SilvermanAcompora, the firm of Chapter 7 Trustee Ken Silverman who is presiding over the bankruptcy case of Agape World. I wrote about that case previously — Ken Silverman Appointed Chapter 7 Trustee in Agape World Case .
Judge Eisenberg is also the judge in the Agape World case. She will certainly become a judicial expert in Ponzi schemes.
Written by Craig D. Robins, Esq.Over the past several months I have written several articles in which I addressed how HAMP, the Homes Affordable Mortgage Program, has utterly failed to live up to its expectations. (For my most recent post, see: Problems with HAMP — Too Many to Count? ).
I regularly receive comments from my blog readers across the country and wanted to share an e-mail which I just received from a very upset and frustrated homeowner in Hawaii who is seeking help in locating the appropriate agency to complain to about how his bank failed to accommodate him with his HAMP application.
The homeowner initially sent the following letter to someone at HAMP with no reply. He also remarked that he unsuccessfully searched and searched online to find someone to make the complaint to. He asked me to assist him in determining who can help him at this point.
What can be more upsetting than being told you’re disqualified from HAMP because you got laid off, then being told you were approved, and then being told again that you were disqualified. Read on. . .
Actual HAMP Complaint Letter from One of My Blog Readers
Dear HAMP:
The reason for this email is simply this, why does the program only allow ONE chance to get on? Most of the people trying to get on this program are already underwater, already laid-off, already under heavy stress…can’t you allow at least two or three chances?
We applied for the HAMP program with our lender Carrington Mortgage Services and they told us that we needed to make 3 payments on time or else we will be disqualified for the program.
In this trial period I got laid-off of my job and my wife’s hours reduced. We tried selling things, even looked into borrowing money but just couldn’t make the payment.
We were told that we were disqualified and that they (Carrington Mortgage Services) would be willing to help us out if we can make 3 more payments of $2600 on time.
We made the three payments, then was later told they couldn’t help us and that the underwriters were not aware that we defaulted the first time.
A few weeks later we get a call from Carrington Mortgage, and now it’s a different representative named Michelle.
She tells us that she may be willing to help us out to get back on some kind of modification. Two days ago she calls and say we are APPROVED for the HAMP program!!
She then gives us the percentage rate, our new monthly etc., at this point my wife an I are moved to tears in joy…the very next day another person calls from Carrington notifying us that we were not approved and that Michelle wasn’t aware that we defaulted the first time. Now they will be foreclosing on our home.
Isn’t there something in this program that gives people in our situation another chance!!!?
Not only have I been laid off, but our mortgage company mislead us twice into thinking we could get some kind of assistance!!!
Please help!!!
[name withheld]
What to Do If You’ve Been Unfairly Rejected for a HAMP Mortgage Modification and Who to Complain to
This is exactly what the above person needs to know. I will cover this topic in a future blog article that I will post in the next day or two.
__________________________
About the Photo — That’s my son, Max Robins, in one of my fine art photos.
Written by Craig D. Robins, Esq.
I am often asked to represent Long Island homeowners with loan modifications and I almost never do. A while back I even commented about Why I Won’t Negotiate Loan Modifications. The reason is that it is extremely difficult, results are often impossible to achieve and the vast majority of homeowners are never approved.
There are several reasons why mortgage banks are reluctant to modify mortgages, and in those rare cases that they do, the lenders move at a painfully slow pace, often at the same time they are continuing with pending foreclosure actions.
Big Banks Have an Incentive to Avoid Mortgage Modifications
Big Banks Have an Incentive to Avoid Mortgage Modifications
Yesterday, in the course of testimony before a Senate committee, another reason emerged. It appears that the big banks have big financial reasons for moving at a snail’s pace to modify mortgages.
Senator Tim Johnson (D-S.D.), who is in line to chair the Senate Banking Committee, said that he had “serious concerns” that banks have been unwilling to offer more generous concessions on the first loans of troubled borrowers because they were afraid of taking big losses on their massive portfolios of second mortgages, according to an article in today’s Congress Daily.
Law Professor Adam Levitin of Georgetown University Law Center testified before the Committee that our country’s four largest banks had more than $400 billion worth of second mortgage liens – which is roughly equal to their collective market capitalization.
The banks carry those second mortgages and home-equity loans on their own books as very significant assets with substantial value. However, the banks would be forced to take immediate losses if they were modified. Instead of carrying very large assets on their books, as they are doing now, they would have to immediately adjust their value.
Levitan testified that “If they start writing off their second lien mortgages, they would have no capital. They would be insolvent.” He then went on to explain that this “creates a strong incentive not to recognize losses and just try to pretend it is not there.”
Why the banks have not already adjusted their books because of a legal obligation to do so, is beyond me, and an issue that should be investigated in and of itself.
In any event, homeowners continue to pull their hair out trying to get their lender or mortgage servicer to modify their mortgage. We now know an additional reason why that is the case.
For more posts about mortgage modification, see the post What If My Home Loan Modification Isn’t Approved? written by my associate, Jason S. Leibowitz.
Also, I have written numerous posts about the failures of the HAMP program, most recently, Problems with HAMP — Too Many to Count?
Why the banks have not already adjusted their books because of a legal obligation to do so, is beyond me, and an issue that should be investigated in and of itself.
In any event, homeowners continue to pull their hair out trying to get their lender or mortgage servicer to modify their mortgage. We now know an additional reason why that is the case.
For more posts about mortgage modification, see the post What If My Home Loan Modification Isn’t Approved? written by my associate, Jason S. Leibowitz.
Also, I have written numerous posts about the failures of the HAMP program, most recently, Problems with HAMP — Too Many to Count?
Central Islip Bankruptcy Judges Alan S. Trust, Robert E. Grossman and Dorothy T. Eisenberg at Bankruptcy Roundtable 2010
Written by Craig D. Robins, Esq.
Comment by Bankruptcy Judge Grossman at Annual Update Seminar Hints at How the Central Islip Bankruptcy Court Will Address Future Decisions Involving Means Test Issues
All three Bankruptcy Court judges from the Central Islip Courthouse in the Eastern District of New York attended the Annual Bankruptcy Roundtable panel discussion last night, which was held at the Nassau County Bar Association.
Over one hundred bankruptcy practitioners from Nassau and Suffolk Counties attended the event.
Of course, the presentation included the annual wrap-up of notable Supreme Court bankruptcy decisions and noteworthy local decisions, as well as some nice presentations by some of our local bankruptcy attorneys about substantive law issues.
What I found most significant, however, was not the typical presentation material, but instead, the substance of a two-minute comment that Judge Robert E. Grossman contributed during a review of the Lanning Supreme Court case.
The Comment from Judge Grossman. . .
Judge Grossman, clearly expressing his frustration and dissatisfaction over the poorly-formulated wording in the BAPCPA means test statute, remarked vehemently, “we can’t figure out what this miserably written statute means!”
He then suggested that we seem to be entering a new judicial period in which Bankruptcy Court judges will have more discretion in reviewing means test issues, especially those concerning a debtor’s expenses.
He remarked that we will likely see “less absolutes,” as he predicted that the appellate courts will focus their holdings by utilizing a “plain language” approach.
I found this comment most important as it clearly shows that Judge Grossman, and likely his fellow colleagues on the bench in Central Islip, will be focusing their analysis of means test issues by using a common sense approach as opposed to a strict constructionist approach that can produce a technically-correct, but absurd and unintended result.
Judge’s Comment Underscores Position Judge Will Take with Analyzing Means Test Issues
I have previously written how BAPCPA was designed to essentially remove judicial discretion from interpreting means test results, and I even commented on the “plain meaning” approach that Judge Grossman took in some of his decisions (see my post, Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts).
Judge Grossman also referred to his year-old Rabener decision, which I also commented on in my post, Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts . In that decision the Judge made clear that he does not believe that the Court should blindly use a rigid application to reduce judicial discretion when reviewing means test issues. He stated that a sound conclusion consistent with reason is paramount.
Now, with comments such as those from Judge Grossman yesterday, it is becoming more and more clear that our Bankruptcy Court will be emphasizing a logical, forward-looking, common sense, plain language approach to analyzing and resolving means test issues.
As an active consumer bankruptcy practitioner who needs to know where his clients stand with the means test, and when to butt heads with a Chapter 13 trustee who takes a nonsensical, yet strict constructionist view of the means test law, today’s comment cements what we are already know — that the Court will most certainly be guided by a common sense approach.
What’s even more important is that in utilizing a common sense approach, the bankrutpcy judges will likely use increased amounts of discretion to reach a reasonable and sound result. So when the Chapter 13 trustee insists that you amend a plan because BAPCPA says so even though it produces a ridiculous result, consider getting an opinion from the judge instead — if the result is reasonable, you now know how the judge will likely rule.
Written by Craig D. Robins, Esq.New Decision Says Avoiding the Lien is Not Dependant on Receiving the Chapter 13 Discharge
One of the extraordinary powers a consumer debtor has is the ability to avoid (eliminate) judicial liens in a bankruptcy case provided certain conditions are met.
In a typical bankruptcy filing the debtor can discharge the personal liability on most debts – both secured and unsecured. However, in rem liens on real estate, including mortgages and judicial liens obtained from judgments, remain protected.
The discharge prevents lien holders from pursuing the debtor personally to collect on the underlying obligation; however, the lien holder maintains the value of its security interest as a lien against the real estate.
Consumer debtors have the ability to avoid judicial liens to the extent that the lien impairs the debtor’s homestead exemption.
In this month’s Suffolk Lawyer column I will provide a brief background on judicial liens and the process to avoid them. I will then discuss an interesting recent decision by Judge Robert E. Grossman which holds that avoiding a judicial lien in a Chapter 13 case should be effective immediately, rather than years later when the debtor receives his discharge.
How do Creditors Obtain Judicial Liens?
When a creditor sues a consumer and obtains a judgment, the judgment can become a lien on real estate that the consumer owns. If the creditor obtains the judgment in Supreme Court, then it automatically becomes a lien on any real estate owned by the debtor in the county where the court is located.
If the creditor obtains the judgment in District Court, then the creditor must file a transcript of judgment with the County Clerk in order to obtain a lien on realty in that county. Judicial liens are always subordinate to any other liens of record such as existing mortgages.
The Debtor’s Right to Avoid Liens in Bankruptcy
When a consumer debtor files for bankruptcy relief – which is usually done under Chapter 7 or 13 – the debtor can avoid judicial liens which impair the debtor’s homestead exemption as long as the formula set forth in Bankruptcy Code Section 522(f) is satisfied.
If the lien only partially impairs the homestead exemption, the debtor can avoid that part of the lien, essentially reducing it.
Procedure for Avoiding Judicial Liens in Bankruptcy Cases
A debtor bringing an application to avoid a judicial lien must do so by motion, as opposed to adversary proceeding. This is usually done prior to discharge.
The debtor actually has the burden of filing the motion. If the debtor fails to do so, the lien remains on the property and survives bankruptcy, although the creditor is prevented by virtue of the automatic stay and order of discharge from pursuing the debtor personally.
Creditors can object to a motion to avoid a judicial lien. The most common ground is a dispute over the valuation of the real estate, thus creating an issue as to whether the debtor’s homestead exemption is actually impaired.
If the debtor is successful, the court will grant the motion and enter an order declaring the judgment to be void as a lien of record. The debtor must then file a certified copy of the order with the County Clerk to remove the judgment lien from the judgment roll.
Issue of the Day: When Should the Order Granting Lien Avoidance Become Effective in a Chapter 13 Case?
In Chapter 7 cases, the order is effective immediately. However, a unique issue exists in Chapter 13 cases. This is because a great number of Chapter 13 cases eventually fail, resulting in dismissal of the case and no discharge for the debtor. An argument can be made that a debtor should not be permitted to finalize the avoidance of a judicial lien by expunging it from the public records of the County Clerk if the Chapter 13 case can be dismissed for non-payment of Chapter 13 obligations a few months later.
So here’s the big question: Should a Chapter 13 debtor be able to avoid a judicial lien shortly after filing the case? Or should the effectiveness of the lien avoidance be dependant upon the debtor demonstrating 100% success with the bankruptcy, which means fulfilling all obligations under the Chapter 13 plan over a period that is three to five years?
Recent Decison: Lien Avoidance Not Subject to Entry of Discharge
In a case where there is no binding caselaw in the Second Circuit, Judge Robert E. Grossman, sitting in the Central Islip Bankruptcy Court in the Eastern District of New York, just issued a decision on October 26, 2010 in which he determined that a Chapter 13 debtor who avoids a judgment lien pursuant to Section 522(f) should not have to wait until discharge for the order to become effective. In re: Kathleen Mulder, no. 10-74217, (Bankr. E.D. New York 2010). In doing so, he reversed the Court’s policy of many years.
In the Mulder case, the debtor owned a home worth $255,000 at the time of filing. There were mortgages on the property totaling $220,000. Thus there was about $35,000 worth of equity. The debtor was entitled to exempt up to $50,000 worth of equity under her New York homestead exemption.
At the time of filing, there was a judgment lien in the sum of $160,000. The debtor, who was represented by my colleague, Donna M. Fiorelli of Garden City, filed a routine motion to avoid the judgment lien. The creditor filed a limited objection arguing that its rights would be severely prejudiced if the Court permitted the debtor to expunge the lien prior to discharge.
The sole issue before the Court was whether Section 522(f) lien avoidance is effective immediately or whether it must be conditioned upon the entry of a discharge in the case. (There was no dispute that the lien should be avoided).
The Court overruled the judgment creditor’s objection and permitted the debtor to immediately expunge the lien, finding nothing in the Code to prohibits this. In reaching this conclusion, the Court adopted the minority view in this country and essentially changed the policy of the Court in Central Islip (or at least those cases before Judge Grossman).
The Court pointed out that other provisions of the Code protect the creditor, in particular, Section 349 which provides that when a case is dismissed, all property rights are restored to the position in which they were found at the commencement of the case. Thus, Section 349 automatically reinstates liens avoided by Section 522(f).
However, as a practical matter, this is not automatic, and if the debtor expunges the lien and the case it later dismissed, it places a burden on the judgment creditor to immediately take steps to protect itself.
Judge Grossman pointed out that the minority view seeks to preserve the function of Section 349 if the case is dismissed. “Courts which condition lien avoidance on the entry of a discharge perceive a weakness in the Code that could adversely affect judgment lienholders. . .” However, he found good cause to part from this view because the Code does not explicitly provide for this.
It appears that Judge Grossman’s approach here greatly differs from his approach in other cases. Here he has taken a strict constructionist approach, stating, “the Court finds that the words of Section 522(f) are clear, and when reading a statute, if the meaning is clear, the analysis ends there.”
He also quoted another decision stating, “Congress ‘says in a statute what it means and means in a statute what is says there.’” He concluded, “While this Court shares a similar frustration with what appears to be drafting deficiencies of the Code, this Court is bound by the plain meaning of the statute.”
Yet, most of Judge Grossman’s previous decisions have been more geared towards reaching a logical outcome, as opposed to citing strict constructionist grounds, something I addressed in my March 2010 column —Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts . In any event, this decision is a win for the consumer.
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 NOVEMBER 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 Mastic, Patchogue, Commack, West Babylon, Coram, 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, EsqConsumer bankruptcy filings are heading to record levels since the bankruptcy laws were changed five years ago.
According to recent nationwide data, about 1.3 million bankruptcy cases have been filed in the fist ten months of this year.
Last year, there were 1.2 million bankruptcy filings in the same period.
At this rate, we will likely see about 1.6 million filings by the end of the year.
The year with the highest number of filings was 2005 when consumers rushed to file their bankruptcy petitions before the new bankruptcy laws went into effect. In that year there were about 2.0 million filings.
The recession and difficult financial times are the main contributors to the large number of filings.
The trend is also continuing that a larger percentage of consumers ar filing for Chapter 7 bankruptcy relief, rather than Chapter 13. Currently, about 30% of nationwide filings are Chapter 7. See my post: More Chapter 7 Cases Being Filed Nationally — New Trend.
Written by Craig D. Robins, Esq.The website for the Bankruptcy Court for the E.D.N.Y. has been updated again. This website covers the bankruptcy courts in Central Islip and Brooklyn.
According to a release from the Court, the goal of redesign was to provide Court information to visitors in a more accessible format. Maybe I was more used to it, but I liked the general look and feel of the old website.
Once I become more acustomed to the new site, however, it should be more efficient to use. The new Bankruptcy Court website now has separate sections for the various types of individuals who will be visiting the site. There is an attorney section, a pro se section, a trustee section and a creditor section.
The Court has indicated a desire to further customize the attorney section to make it more user friendly for bankruptcy counsel.
To Access Bankruptcy Court Website for Central Islip and Brooklyn, Click This Link:
Written by Craig D. Robins, Esq.Some Recommendations for the “Strategic Planning Program” of the Bankruptcy Court for the Eastern District of New York
I write this while attending the National Association of Consumer Bankruptcy Attorneys Annual Workshop in Puerto Rico. I flew down here with my associate, Jason Leibowitz, and my good friend, Kerie Stone, who is the Chairperson of the Bankruptcy Committee of the Suffolk County Bar Association.
In between attending workshop sessions, Kerie and I chatted about her participation in a Strategic Planning Program which is designed to improve the efficiency of our bankruptcy courts in Central Islip and Brooklyn.
She said that upon her return to New York, she will be attending meetings with a committee of our bankruptcy judges, an efficiency expert being flown in from Washington, some of the court clerks, and some of the trustees — all in an effort to make our court run better.
Since I am an active and proactive Long Island bankruptcy attorney, Kerie asked me to come up with my own suggestions that she can relay to the Committee. I quickly came up with two. Here they are:
The Judges Should Unify Courtroom Practices and Procedures
We currently have seven different bankruptcy judges. Unfortunately, that means we have seven different sets of chambers rules, seven different sets of calendar procedures, and seven different sets of protocols.
For example, for the same type of court application, some judges permit counsel to submit notices of presentment whereas other judges require motions accompanied by court appearances. Also, different judges have different requirements (or permit their trustees to have different requirements) for the provisions they want contained in a Chapter 13 plan. It simply does not make sense that we do not have a uniform Chapter 13 plan for our district.
It would therefore be great if the judges could work together to unify their chamber rules and procedures.
Judges Should Improve Communications with the Bankruptcy Bar as to Expectations from Counsel
Attorneys would be able to practice much more efficiently if they knew what the judges expect from them. In addition, court practice would be much smoother if a larger percentage of attorneys handled matters in the manner the court would prefer.
As such, perhaps the judges can hold annual presentations to the bankruptcy bar during which time they can review how they would like counsel to handle or address various matters.
Many of our judges periodically provide presentations at continuing legal education seminars where attorneys can attend for a fee. However, my experience has been that most judges concentrate their discussions on substantive law issues, as opposed to procedural aspects that would make court practice more efficient.
What we need are periodic presentations at no cost where the sole purpose would be for the judges to discuss the court’s policies and procedures with the bankruptcy bar in an effort to make bankruptcy court practice more efficient. The judges could also consider other methods to educate the bar as to their expectations for bankruptcy practice.
Problems with HAMP — Too Many to Count?
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Written by Craig D. Robins, Esq.HAMP is quite the conundrum. It offers to save a homeowner’s home by enabling homeowners to modify the mortgage and make the monthly payments more affordable; yet it appears to be quite a failure in terms living up to expectations as to what the program is supposed to do.
I am currently in Puerto Rico attending a symposium of the National Association of Consumer Bankruptcy Attorneys. I participated in a program today which addressed various HAMP issues as they relate to Chapter 13 bankruptcy. The program began with HAMP bashing.
This is something I’ve written about extensively over the past several months in posts such as: Problems Continue with HAMP and Federal Mortgage Programs — Is HAMP Dying? and WARNING: HAMP Can Drive Homeowners Into Bankruptcy
The workshop certainly confirmed the negative opinions that I previously formed about the HAMP program.
For one, “it’s more complex than the federal debt,” said Henry Hildebrand, III, Esq., one of the speakers who happens to be a Chapter 13 bankruptcy trustee from Tennessee.
Problems with HAMP
HAMP, which is the acronym for the Homes Affordable Mortgage Program, was supposed to be one of President Obama’s solutions to the mortgage meltdown our country experienced during the time he ran for office. Unfortunately, the HAMP program is plagued by numerous problems. Here are some of them:
Lenders Have Minimal Incentive to Cooperate. HAMP is not a law. It is a contractual deal that the U.S. Treasury Department has made with mortgage servicers and their investors to voluntary modify a mortgage for a homeowner.
If the mortgage is modified in a certain way, the lender gets paid a fee by the government. This fee is in essence the carrot supposedly dangled in front of the mortgagee to get them to participate. However, the fees are relatively minimal.
Homeowners Can’t Enforce HAMP. The problem here is that this “contract” does not directly involve the homeowner. It is a contract between the mortgage servicer and the federal government. As such, the homeowner has relatively few legal rights to enforce the provisions of the statute.
In other words, if the mortgage servicer does not convert the trial period into a permanent modification, can the homeowner enforce the servicer to do so? Perhaps this can be pursued under a breach of contract legal theory, but there does not seem to be much case law right now on this.
No One Can Enforce HAMP. The dilemma continues: who is supposed to enforce HAMP provisions? The difficulty here is that HAMP is a contract and not a law – there is no regulatory control.
In response to this concern, the government at least recently set up an enforcement mechanism by threatening to take away $100 or $300 per case. Big deal.
Setting Up a HAMP Application Takes an Eternity. A major problem is how long it takes for the mortgage servicer to set up the HAMP trial period.
Who hasn’t been on hold for over an hour with a servicer? Who hasn’t had documents lost or misplaced by the servicer? Who has had incredible difficulty communicating with the servicer? These are all common problems that seem to cause extensive delays before the trial period can commence.
Hamp Forms Are Sub-Standard. Norma Hammes, another speaker and a former NACBA president, complained that the forms for calculating the homeowner’s expenses are so deficient that she had to create her own forms.
Hamp Forms Are Sub-Standard. Norma Hammes, another speaker and a former NACBA president, complained that the forms for calculating the homeowner’s expenses are so deficient that she had to create her own forms.
The HAMP Application Website is Sub-Standard. Ms. Hammes also voiced frustration about the application framework. “It’s really a nightmare” she said about the HAMP website portal for submitting information.
Program Will End Relatively Soon. At this time, the HAMP probram is slated to end in 2012.
HAMP Does Not Stop the Foreclosure Process. I think this is just incredible. Many clients have come to me for bankruptcy assistance, complaining that they applied for HAMP relief, yet, at the same time, the mortgage lender continued a foreclosure proceeding.
Said Ms. Hammes, “I’ve never seen my clients so discouraged about the legal system and lose faith on the rule of law. This is all because of their experience with the HAMP program. They know they’ve submitted everything. It appears the government does not care. They are devastated.”
The HAMP Trial Plan Can Go On and On. The so-called three-month trial plan is never three months. The lenders cannot get their acts together enough to do what they need to do within three months. The trial periods are frequently longer, even though they are supposed to be just three months.
HAMP is a Gamble. It is a almost like a lottery. If you are lucky, you win the HAMP gamble and save your home. HAMP really does work for some people, but not for most. However, this gamble contains big risks — read on.
Most People in HAMP Eventually Default. The sad fact is that most people who go into the HAMP modification trial program default with their monthly obligations.
The HAMP Paperwork Is Written In Code. This may be a minor issue, but you have to learn code to fill out a HAMP application. That is because the HAMP paperwork is replete with acronyms. BN is the Borrower Notice. EB is hte Eligible Borrower. FA is the Foreclosure Attorney. FD is the Foreclosure Deadline. FPED is the Forbearance Plan Effective Date. FPN is the Forbearance Plan Notice.
There are a dozen additional acronyms!!! Henry Hildebrand commented (only half-jokingly) that he thought this was intentional to scare away homowners.
And For the Biggest Problem with HAMP. . . . . .
Most Homeowners Are Worse-Off After Applying Than Before. For those who apply for HAMP relief, mortgage arrears build up. That means that for those who are not approved ( and these homeowners constitute the vast majority of people who apply), they will owe substantial amounts upon receiving their denials.
The mortgage payments are contractual obligations. Thus, if the homeowner pays a reduced monthly mortgage payment during the trial period, and the homeowner is not approved, then the homeowner will owe the original contractual amount — which is substantially more than the amount they paid during the trial period.
In addition, the homeowner’s credit is destroyed. The homeowner’s FICO score is destroyed. The homeowner is much worse off now than before!
In essence, the mortgage lender is saying, “Sorry you don’t qualify after you applied to us — and PS – now you owe us all of the missed payments. We are going to foreclose on your home.”
So is that enough problems with HAMP?
More Info About HAMP
Here are some other posts that I’ve written about the HAMP process.
Norma Hammas and Henry Hildebrand answering questions at NACBA Bankruptcy Symposium