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“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for January, 2011
Written by Craig D. Robins, Esq.How many bankruptcy filings will there be this year? According to Professor Bob Lawless of the University of Illinois College of Law, there will be 1,457,787 cases this year.
He made this projection based on a fairly simple model that uses monthly data from the past five years, as well as various other data on consumer credit, the unemployment rate, cyclical monthly effects.
In a recent CreditSlips.org blog post, Prof. Lawless provided his findings which he illustrated with the above graph. The solid black line shows the actual bankruptcy filings from last year. The dotted red line shows what the model would have predicted for 2010, while the solid red line shows the models projections for 2011.
What are the Most Popular Months for Filing Petitions?
Bankruptcy filings often spike in February and March and decline in November and December.
Bankruptcy Filings May Decrease Slightly in 2011
Prof. Lawless also predicts that there will be a downward trend, albeit slight, for several reasons. The linear trend is indicated on the chart with the dotted black line.
1. Many economists expect unemployment to decline. Those who are working are in a better position to handle their finances.
2. There are some signs that access to consumer credit is easing up slightly. This means that some consumers will be able to borrow more easily to avoid bankruptcy.
3. Consumers are not charging as much as they previously did. This means that some consumers may have less debt and that other options may be more appealing than bankruptcy.
The Snowman Ate My Credit Cards
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The snowman ate my credit cards
Written By Craig D. Robins, Esq.
Besieged by a foot and a half of snow that ended early this morning, and unable to leave my driveway to go to work, I awaited the plow by building a snowman with my wife and son.
Alas, the snowman ate my credit cards.
Kudos to my associate, Jason S. Leibowitz, who made it in to the Central Islip Bankruptcy Court this morning for five confirmation hearings before Judge Alan Trust, who rescheduled his calendar to begin an hour later because of the snow.
So what does a snowbound bankruptcy attorney who likes to take pictures do? Here’s your answer — more fine art credit card snow photography:
Craig D. Robins, Esq. quoted in Boston Globe on Foreclosure Defense Issues
Written by Craig D. Robins, Esq.
Because I’ve been so busy representing clients these past few months, I’ve been a little slow in commenting on some national-level periodicals that have quoted me on various bankruptcy and foreclosure issues.
On November 12, 2010, Rachel Beck, writing for AP in an article that appeared in the Boston Globe and several other newspapers, discussed the recent revelation that many foreclosure cases across the nation were based on robo-signed mortgage documents.
As New York has become a hotbed of cases in which judges have expressed their frustration with mortgage lenders who are reckless with their litigation, she asked for my comments.
Here is the article as it appeared:
By Rachel Beck
AP Business Writer / November 12, 2010
Boston Globe
NEW YORK—It isn’t just Justin Bieber videos or stunning plays in a middle-school football game that are getting attention on YouTube these days. Add to the list a former hotel maid explaining how she signs thousands of mortgage documents a year without a clue to what she’s putting her name on.
“I don’t usually read the docs when I sign,” says Dhurata Doko, an employee of Nationwide Title Clearing, a mortgage services company.
“So it is not part of your job to review the document? Your job is just to sign it?” asks Florida foreclosure defense attorney Christopher Forrest during a videotaped deposition of Doko earlier this month.
“I just look for my name and then sign,” she says.
Robo-signing mortgage document handlers have found their way to YouTube, giving a rare live view into the latest mess to rock the troubled housing industry.
The nation’s foreclosure crisis took a turn six weeks ago when it became clear that banks and processing firms had employees sign court documents that had information that was unverified or even false. The reason — or at least the reason lenders give for the sloppy work — is that they are drowning in foreclosures.
Banks have seized more than 909,000 homes through the first 10 months of the year and are on pace to take back more than 1 million homes this year. Now, foreclosures are being challenged in court because of the allegations of fraudulent documents.
Lenders say that this mess has been overblown. Some paperwork might be flawed, the banks acknowledge, but delinquent borrowers still deserve to lose their homes. The depositions say otherwise.
Doko worked as a maid and assembled electronics before joining Nationwide Title Clearing six years ago. She is one of three NTC employees whose video depositions were posted on YouTube by Forrest as part of a foreclosure case he is handling in Florida.
She and her colleagues tell of signing thousands of mortgage documents a day. One worker estimates signing 5,000 documents a day on average, another says she signs her name every 2 seconds. They acknowledge their signatures differ on certain documents.
The videos show that employees didn’t even know the most basic mortgage terminology. For instance, they don’t know what an “assignment of mortgage” is, even though that is crucial in a foreclosure case because it establishes who the final holder of the loan is.
Doko says she only signs documents as a witness. She says she never signs under the title of vice president. Forrest then shows her a document with her name on it. “Beneath your name it says vice president?” Forrest asks.
“I don’t pay attention to that,” responds Doko, looking uncomfortable as she answers.”
But you do agree with me, beneath your name it says vice president … and above your name it says Financial Freedom Senior Funding Corp. So when you sign this document, do you know whether you are signing as vice president of this company or as a witness?” asks Forrest.
“I just sign my name,” Doko says.
Courts, state financial regulators and attorneys general nationwide are investigating whether lenders violated the law by submitting fraudulent documents, often prepared by robo-signers.
The fact that delinquent borrowers face foreclosure is not the issue, but whether the documents used to get them out of their homes are signed by compromised witnesses, says Kendall Coffey, a former U.S. attorney in Miami and author of the book “Foreclosures in Florida.”
“You still need truthful witnesses. Robo-signers aren’t. They are impostors,” Coffey says.
NTC said in a statement to The Associated Press that its employees had been deposed but criticized the placement of the depositions on the Internet.
“It is unethical to imply that long-standing industry practices, which have been found in court to be legal methods of preparing common mortgage related documents, are somehow harmful to consumers,” NTC said.
The big mortgage lenders have been doing their own investigations regarding the entire foreclosure process. Some, including Bank of America and Ally Financial Inc.’s GMAC Mortgage, have started processing foreclosures again, after calling a temporary halt while they reviewed documents.
The courts will have the ultimate say over what happens next. If judges feel that borrowers have been wronged, they can halt the foreclosure process. An Ohio judge ruled on Tuesday that a state challenge to the validity of lender foreclosure documents will be heard in court early next year in Cleveland.
Attorney Craig Robins of Woodbury, N.Y., says he is already seeing some judges taking a stand.
“Many judges have seen so much sloppy and careless paperwork (from lenders) that they are saying ‘enough is enough’,” says Robins, a foreclosure defense attorney who writes the Long Island Bankruptcy Blog. “They won’t rubber-stamp the foreclosure proceedings.”
As the YouTube videos show, there already has been enough rubber-stamping.
This is what shredded mortgage files look like
Written by Craig D. Robins, Esq.
In the news this week was an interesting convergence between the need to investigate mortgage fraud and the desire to maximize the distribution to creditors of a defunct mortgagee.
I first wrote about American Home Loan Mortgage Company in 2007, which was based on Long Island. At the time they were one of the country’s largest mortgage lenders and they quickly and utterly collapsed as one of the earliest victims of the sub-prime mortgage meltdown. (see: The Sub-Prime Mortgage Meltdown ).
In 2009, I wrote how the CEO of the company had engaged in fraud — Ex-CEO Of American Home Mortgage Settles SEC Fraud Charges .
Now we have an issue of what will happen to the many thousands of sub-prime mortgage files sitting in a storage room of the now-abandoned company’s Melville, Long Island headquarters — a five-minute drive from my Woodbury office.
What Happens to Mortgage Files When a Mortgagee Goes Out of Business?
American Home Loan, which hasn’t operated since it collapsed in 2007, has been in a Chapter 7 bankruptcy liquidation proceeding for several years now. Earlier this week, the operating trustee asked the bankruptcy court for permission to destroy 4,100 boxes of loan documents.
The trustee is arguing that the local fire marshal wants the boxes of mortgage files removed as it is posing a fire hazard. The trustee is also complaining that it will cost too much to move them and that they should instead be destroyed.
Paying to remove the file boxes to a storage facility costs money — money that would have gone to the creditors of American Home Mortgage who filed claims in the bankruptcy proceeding. The cost of having maintained storage of the files was approximately $15,000 a month.
Two years ago, the trustee had made a similar request which was approved, and several thousand boxes were destroyed at that time after banks and other loan servicers had been given a chance to pick up the files but neglected to do so.
Now there are 4,100 boxes left. My guess is that each box contains 20 files, meaning that the boxes contain the records of nearly 80,000 sub-prime mortgages.
Is Evidence of Mortgage Fraud Being Destroyed by Destroying the Mortgage Files?
Since the earlier batch of files was destroyed, the subject of mortgage fraud has risen to become major headline news.
The robo-signing scandal only became national news this past October when it was revealed that incredible numbers of original mortgage documents were missing and new documents were created for the purpose of bringing foreclosure proceedings. See: New Forelosure Law in New York Requires Attorneys to Verify Foreclosure Papers .
That led the attorneys general in all 50 states to immediately begin investigations into foreclosure procedures, improper mortgage assignments, and all sorts of other mortgage document deficiencies.
Also in the past few months, we have seen massive amounts of evidence turning up all around the country showing that original mortgage loan documents were never transferred as required when the mortgages were securitized and sold to investors.
Now, these ever-so important mortgage files are about to be destroyed. Yesterday the Delaware Bankruptcy Court approved the trustee’s document destruction request.
However, a Legal Aid Society attorney, who also appeared in the proceeding, was successful in requiring the trustee to set aside several hundred of the storage boxes which may contain records still relevant to some pending foreclosures.
She argued that many low income homeowners were victims of deception about how much their mortgage loans would cost, and that the original mortgage files could contain evidence that they had been defrauded. This is another concept I previously wrote about in The Sub-Prime Mortgage Meltdown .
Who Benefits When Mortgage Files Are Destroyed?
As I mentioned, the creditors of the defunct mortgage company stand to receive a (very slightly) larger distribution.
But what about the hapless homeowners who are defending foreclosure proceedings? Perhaps this could be good news for them. Judges are becoming more and more willing to toss out foreclosure suits when the mortgagee is unable to produce various original mortgage documents.
The defense du jour is “show me the note!” A series of recent decisions in foreclosure cases emphasizes the importance of producing original loan documents, holding that they are essential for investors to prove ownership of the mortgages and that the have the right, known as “standing'” to pursue foreclosure. This is something I wrote about a year ago: Mortgage Companies Entitlement to Bring Foreclosure Proceedings: Prove It or Lose It .
If a mortgage which was originated by American Home Mortgage is foreclosed upon (and many tens of thousands are in the foreclosure process now), then it may become easier for the homeowner to defend if the current mortgagee is unable to adequately produce sufficient paperwork.
On the other hand, such document destruction can be the equivalent of a get-out-of-jail card for those business executives in the mortgage industry who took illegal shortcuts. Destroying thousands of files means that valuable evidence that can be used in criminal investigations will be forever gone.
The wholesale destruction of mortgage files has become big news in several other areas of the country this week. A Bankruptcy Judge temporarily blocked the trustee of sub-prime lender Mortgage Lenders Network USA from destroying 18,000 boxes of original loan files after federal prosecutors pleaded that they may be needed as evidence in more than 50 criminal investigations.
Getting Credit After Bankruptcy in 2011
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Written by Craig D. Robins, Esq.Re-establishing credit after filing bankruptcy is one of the most common questions my clients ask me.
That led to me write a rather detailed article about three years ago: Life After Bankruptcy: Getting Credit Has Become Too Easy . When I wrote that post, most of my bankruptcy clients were solicited for new credit cards just weeks after their cases were concluded.
Bouncing Back From Bankruptcy
Most of the concepts that I discussed in that article remain true today and I urge anyone concerned about this to read it: Life After Bankruptcy: Getting Credit Has Become Too Easy .
About a year after I posted it, our current recession started and the credit market tightened up. This made it somewhat more difficult for those emerging from bankruptcy to obtain new credit card accounts. However, credit cards are back in vogue for both issuers and consumers.
Banks are now eager to seek out new customers and open new accounts as they have retooled their business models to meet relatively new federal regulations that control the entire credit card industry.
Last year credit card solicitations doubled to about 2.75 billion. Financial experts predict that there will be a double-digit increase again this year. This is good news for those considering filing for bankruptcy who are eager to obtain new credit later on. Consumers emerging from bankruptcy are once again seeing their mailboxes flooded with credit card offers according to recent news reports.
Generally, consumers who emerge from bankruptcy are considered sub-prime borrowers, which is the category that includes those with blemished credit. These consumers can often get credit, but will end up paying a higher rate of interest and will likely have a lower credit limit.
The most important aspect of bankruptcy and credit is that the negative weight caused by bankruptcy diminishes over time. The sooner a debtor re-establishes credit with one account, and demonstrates responsibility with that account, the sooner the next account can be opened up, and so on.
The Path to Good Credit After BankruptcyThe first step is to apply for a gas card or small store card — both of which typically come with a small debt limit. It is extremely important to make regular and timely payments. It is also important to use the card, even if it means just charging relatively small amounts. This shows that you can again handle credit responsibly.
Then, after a few months, apply for a sub-prime card. These are regular Visa or Mastercard accounts offered by banks that cater to those with bad credit. The interest rate will be high, there may be a annual account fee, and the credit limit will be low. However, having a card with less than favorable conditions is temporary. Use the card, but try to pay off all balances in a relatively short period or right away.
Perhaps six to twelve months later, after having used and timely paid for purchases on these cards, apply for a more conventional card with better terms.
For More Info About Getting Credit After Bankruptcy
Please see my prior post: Life After Bankruptcy: Getting Credit Has Become Too Easy .
I urge my bankruptcy clients to go to any big-box bookstore and look at the dozen or so books they will have on re-establishing credit. For an investment of ten to fifteen dollars, you can’t go wrong.
Written by Craig D. Robins, Esq.
I am proud to announce that last year this blog won the Blogtastic Award from the Fair Media Counsil at their annual Folio Awards.
The Folio Awards are given to local news and media in the New York metro area (mostly TV and newspaper) to honor significant achievement for work that is relevant to the community.
The Blogtastic Award was awarded to the Long Island Bankruptcy Blog (LongIslandBankruptcyBlog.com) for being the blog that was most relevant to the community. I was recognized as publisher of the blog.
The awards were presented at a luncheon where the keynote address was presented by Dateline NBC correspondent and Emmy-Award winner Chris Hansen, who is the investigative reporter best known for his work on “To Catch a Preditor.”
The award ceremony was attended by over 500 people at the Crest Hollow Country Club in Woodbury and a total of 39 awards were presented.
Nassau County Executive Ed Mangano was one of the award presenters, as were several network news reporters. Other award winners included WNBC, Fox 5, WPIX, WCBS News Radio, Long Island Business News, and Long Island Press.
This past year was the first time there was an award for a blog.
Written by Craig D. Robins, Esq.With so many consumers hurting from the economy, they are often tempted to run to their retirement funds first, as soon as the money runs out, so that they can pay the mortgage or their credit card bills. However, this is often a major mistake.
Fidelity Investments, the powerhouse mutual fund company, recently reported that 11% of its active 401-K plan participants borrowed or withdrew funds from their retirement accounts during a recent twelve-month period. This is up nine percent from a year ago, and represents a ten-year high. Also, the amounts withdrawn are almost triple what they were last year.
The biggest reason consumers give for tapping into their retirement accounts is job loss and reduction of income. However, many consumers are spread very thin financially and simply do not have sufficient funds to make ends meet. It is thus quite tempting to dip into the retirement accounts.
Why Using Retirement Funds to Pay Credit Card Debt Can Be a Major Mistake
First, you lose a lot of the value of what you are taking out. This is because there is a 10 percent IRS tax penalty and also because the funds are taxed as ordinary income.
But here is how you can protect your retirement accounts. Many individuals can discharge and eliminate credit card debt by filing for Chapter 7 bankruptcy. If you can do this, you do not need to waste your precious retirement funds. Some people feel opposed to filing for bankruptcy relief but this can often be the best option to preserve your retirement nest egg.
Instead of writing off bankruptcy as on option, you should consider meeting with an experienced Long Island bankruptcy attorney who can discuss exactly how a bankruptcy filing could benefit you and help you safeguard the retirement funds.
Generally all retirement funds are exempt and protected by federal statutes such as ERISA or state statutes that permit consumers to exempt retirement funds even though they eliminate their debts in bankruptcy.
Written by Craig D. Robins, Esq.The Executive Office of the United States Trustee issued a news release this week stating that the U.S. Trustee just entered into a settlement agreement with Capital One to resolve allegations that the bank attempted to collect on debts that had previously been discharged.
Apparently, a number of consumers across the country filed for bankruptcy years ago, and in the process, discharged their debts to Capital One. When these consumers later filed a subsequent Chapter 13 bankruptcy, Capital One filed a proof of claim in the new bankruptcy case, but on the old debt, even though that debt had been discharged.
Once a debt is discharged, a creditor is forever barred from collecting it, even if the debtor later files another bankruptcy case involving a Chapter 13 payment plan.
The investigation revealed that Capital One filed 15,500 claims totaling approximately $24.7 million on debts that were previously discharged in bankruptcy, and that they received payment of approximately $2.35 million.
The reason for the erroneous claims simply boils down to some very sloppy business practices. Here, Captial One neglected to identify which customers had previously filed for bankruptcy protection — something they should have and could have easily done.
All creditors have an obligation to maintain adequate procedures to ensure that they do not violate the discharge protections that bankruptcy offers. Here, one of the country’s largest banks failed in that regard.
Capital One will refund each consumer or bankruptcy estate with the amount that was improperly collected as a result of the erroneous claim. Consumers and bankruptcy trustees need not take any further action.
In addition, Capital One will also be paying the attorney’s fees of those bankruptcy attorneys who objected to the erroneous claims.
The case that the U.S. Trustee raised this issue in was the In re: Galley Case out of Massachusetts, going back to 2008 (United States Trustee v. Capital One Bank (USA) N.A., Adversary Proceeding No. 08-01272 (Bankr. D. Mass.).
Written by Craig D. Robins, Esq.Being in Foreclosure is Bad Enough but Don’t Compound Problems by Damaging House in Retaliation
Public sentiment these days is that mortgage banks are evil for bringing so many foreclosure proceedings against suffering homeowners in a difficult economic climate, especially when there are frequent headlines about lenders engaging in shoddy and improper foreclosure tactics.
So whether justified or not, many homeowners are angry that the big banks are seeking to foreclose on their homes when times are tough. Some of these angry homeowners want to “get back” at the bank. However, if you are a homeowner in a foreclosure situation, be careful how you vent that anger.
Foreclosure Rage Becoming More Prevalent
There are numerous stories of homeowners in foreclosure who have intentionally damaged their homes upon moving in an effort to punish the bank — something we can call “foreclosure rage.”
Some homeowners are taking out their frustration on the lender in an effort to get even by vandalizing their own home.
While it is usually acceptable to take items of reasonable value, such as appliances, others, in an act of foreclosure rage, totally gut the home, strip it of almost everything, including flooring and plumbing, and then maliciously inflict serious damage by destroying walls, pouring cement down the toilet, creating floods by leaving the water on, and exposing the house to the elements and vermin by removing windows and doors.
However, as one recent case shows, the immediate emotional relief that damaging the house brought was certainly not worth it.
One Homeowner Goes on the Foreclosure Rage Rampage
A homeowner who went on the war path against the mortgagee in a fit of foreclosure rage recently paid the price.
Michael Zahniser of Illinois had just been served with foreclosure papers. The next day he removed the back door of his house and stripped the interior. He also removed cabinets, countertops, doors, light fixtures, gutters, pieces of siding, and tile floors. He left the house with no door and a gaping hole in the wall.
He subsequently filed a Chapter 7 bankruptcy to eliminate any obligation on the mortgage deficiency, and presumably to eliminate other obligations like credit card debt.
The mortgage lender, Byron Bank, was not amused and brought an adversary proceeding in bankruptcy court arguing that Mr. Zahniser should not be able to discharge his obligation to the bank under Bankruptcy Code section 523(a)(6). That section provides that debtors who willfully and maliciously injure someone’s property cannot escape liability for doing so.
Last month, the bankruptcy court found that the bank proved that the debtor intended to cause injury to the bank’s interest in the house and that the debtor acted willfully and maliciously.
The bankruptcy court also determined that the items that the debtor took and the state that he left the house in demonstrated that he was not merely trying to collect what would have been valuable for himself, but rather, that he was trying to deny value to the mortgage bank.
In determining what part of the bank’s deficiency claim should be non-dischargeable, the court ascertained the amount necessary to rehabilitate the house, and that amount was $50,000. The court also added $19,000 in attorney’s fees to that. The case is Byron Bank v. Zahniser, 2010 Bankr. LEXIS 4623 (Bankr. N.D.Ill, December 13, 2010).
In some ways the homeowner here was lucky. The bank sought to have the entire deficiency held non-dischargeable. However, the court only permitted that part which was caused by the malicious injury to be non-dischargeable.
Almost all mortgages have boiler plate language that prevents a homeowner from engaging in this type of conduct. If you are a homeowner in foreclosure, think twice as to how you should vent your frustration and anger against the bank.
Written by Craig D. Robins, Esq.Tax Refunds can be a big deal when factored into a bankruptcy filing — for two main reasons.
Be Mindful of the Bankruptcy Exemptions for Tax Refunds
First, tax refunds can only be protected up to a certain amount. When you file for bankruptcy, you can protect various assets, and tax refunds is one of them — but only up to a certain amount.
In what is very good news for New York residents, the exemption for tax refunds will increase after January 23, 2011. See: The New, New York Bankruptcy Exemption Statutes for 2011 . I will post a detailed article in the next few weeks about protecting a tax refund while utilizing the new, New York state exemption.
Basically, each person who files who need to protect their home with a homestead exemption, can also protect up to $1,000 worth of cash, money in the bank, and tax refunds.
For those who do not need the homestead exemption, they may be able to use the federal exemptions, which up until now has not been a choice for New York bankruptcy filers. The federal exemptions provide for a wildcard exemption that can enable you to protect other miscellaneous assets up to $11,975 per person That is very generous!
Be Wary of the Effect of the Refund on the Bankruptcy Means Test
Second, the tax refund is considered income for purposes of calculating the means test, and adding the tax refund to the means test can make it harder for some people to become eligible for Chapter . For those filing Chapter 13, a tax refund can result in having to pay a larger Chapter 13 monthly payment. See: How a Tax Refund Can Mess Up Your Bankruptcy Means Test
Tax Refunds and Bankruptcy is such an important topic that last year I devoted an entire week’s worth of posts to the subject: Tax Refunds and Bankruptcy — Everything You Need to Know . I will write a few additional posts this year.
Be Careful How You Spend Your Refund If You Are Planning to File for Bankruptcy
In the meantime, if you get your tax refund, be careful how you spend it. You should not repay any loans to friends or family members because doing so could be considered making a “preferential payment.”
A preferential payment is when you “prefer” a certain creditor, even unintentionally, and that creditor gets more than he or she would have gotten otherwise. If you file bankruptcy within a year of paying back a family member, under certain circumstances, the bankruptcy trustee has the right to sue the family member to recover the money and bring it back into a “bankruptcy estate” so that it can be distributed in a fairer manner to all creditors.
Also, don’t spend the money frivolously by taking a vacation or buying luxury goods. Doing so can be considered inconsistent with the good faith necessary to receive a bankruptcy discharge.
So what can you spend your refund on? Bankruptcy attorney’s fees is one. Many of my clients are able to file for bankruptcy relief in the Spring, because that is when they typically receive their tax refund.
Tax refunds can also be spent on household repairs, car repairs, food, clothing, mortgage or rent payments, car payments, property taxes, fuel oil, child support arrears and some other reasonable items. However, seeking advice from an experienced bankruptcy attorney is your best bet.