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Craig D. Robins, Esq. New York Bankruptcy Attorney, Longisland bankruptcy attorney

“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”

Craig D. Robins, Esq.

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Is Another Wave of Bankruptcy Reform Ahead for 2013? If So, Elizabeth Warren May Spearhead It

Posted on Wednesday (December 12, 2012) at 6:00 pm to Bankruptcy and Society
Bankruptcy Legislation
Suffolk Lawyer

Elizabeth Warren may lead pro-debtor bankruptcy reform in 2013Written by Craig D. Robins, Esq.

 
 
The Last Wave of Bankruptcy Reform in 2005 Was Very Pro-Creditor
 
 
For eight years leading up to 2005, the banking and credit card industries lobbied Congress incessantly, urging them to believe that American consumers who sought bankruptcy relief were essentially deadbeats.
 
That year, Congress bought into this perception and promulgated a great number of strict changes to the Bankruptcy Code which made it much harder for the typical consumer to discharge debt obligations in bankruptcy.  Consequently, Congress enacted BAPCPA — The Bankruptcy Abuse Prevention and Consumer Protection Act.
 
This bankruptcy reform was designed to pull every last dollar out of hard-working but suffering middle class families who appeared to have an extra dollar or two to spare — at least on paper, according to a series of controversial calculations called the bankruptcy Means Test — a new eligibility requirement for those seeking Chapter 7 relief.
 
This law was a major victory for the banks, and unfortunately, created an inequitable situation for many consumers.
 
A respected Harvard University bankruptcy law professor at the time, who I deemed a hero to the typical middle class families I usually represent in my Long Island bankruptcy practice, was a very outspoken critic of these proposed laws.
 
That was Elizabeth Warren, who was this country’s foremost authority on the sociology of Americans who file bankruptcy.
 
Senator-elect Elizabeth Warren May be Our Best Hope for Consumer-Friendly Bankruptcy Reform
 
Ms. Warren became known for her critical opinions of the practices of the banking and credit card industries, and I have written about her previously in this column.  In 2000 she co-authored a book, “The Fragile Middle Class,” and “The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke,” in 2003.
 
In the latter book she stated, “This year, more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce.”
 
Some commentators have said Ms. Warren has become the country’s most respected and resonant voice on consumer issues since Ralph Nadar’s zealous quest to protect consumers in the 1970s.
 
Now it looks like the Senate Banking Committee is about to get a serious dose of bankruptcy expertise from the protector of the middle class.
 
Ms. Warren defeated her Republican rival last month in one of the most expensive and most watched Senate campaigns of the year – for the Massachusetts seat previously held by the late Ted Kennedy.
 
It is expected that Ms. Warren will land a seat on the high-profile Senate Banking Committee.
 
More importantly, as a staunch advocate of protecting the consumer, an ardent critic of the banking industry and an outspoken critic of BAPCPA, there is a high likelihood that Ms. Warren, now as a lawmaker, will take the initiative to introduce legislation to reform the problems and inequities created by the Bankruptcy Reform Act of 2005.
 
There Is No Doubt that Ms. Warren Will Bring Her Liberal, Pro-Consumer Views to the Senate
 
Ms. Warren created the U.S. Consumer Protection Bureau – a federal agency established in 2010, not only to prevent risky mortgage practices, but also to stop credit card companies from continuing to engage in unfair and predatory business practices.
 
A great many bankruptcy judges across the country, including several in our own district, have officially and unofficially expressed their frustration with many aspects of the new bankruptcy laws and sometimes their personal opinion that many parts of the law are a disaster. 
 
In addition to making it harder for the middle class to get bankruptcy relief, BAPCPA is flawed and poorly drafted.
 
This has resulted in many decisions which have caused judges to stray from a strict interpretation of its hastily-drafted words, which can result in an absurd result, and instead focus on a more common-sense analysis.
 
BAPCPA was drafted primarily by lobbyists, rather than bankruptcy professionals.  A significant problem continues to be a lack of consistency among courts in different jurisdictions for enforcing its provisions.
 
Ms. Warren has pledged to stand up for the little guy against the financial forces of Wall Street.  I predict that when Ms. Warren goes to Washington, the likelihood is that we will see her introduce some substantive pro-debtor legislation to amend the Bankruptcy Code, in which she will seek to reform some of the ill-conceived and poorly-drafted aspects of BAPCPA.
 
She will also likely address issues concerning student loan debt relief, mortgage debt relief, as well as the debt burden on consumers.
 
Ms. Warren’s election to the Senate is wonderful news for bankruptcy attorneys and middle-class Americans alike.
 
 
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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 January  2013 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.      Call        (516) 496-0800  (516) 496-0800    (516) 496-0800  (516) 496-0800 . For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.  
 
 
 
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Suspended Bankruptcy Attorney and Paralegal Punished

Posted on Tuesday (December 11, 2012) at 8:00 pm to Bankruptcy Practice
Chapter 7 Bankruptcy
Recent Bankruptcy Court Decisions
Suffolk Lawyer

Brooklyn Bankruptcy Court punishes bankruptcy attorney and paralegal as a bankruptcy petition preparerWritten by Craig D. Robins, Esq.
 
In Recent Brooklyn Case, Attorney and His Paralegal Flaunted the Bankruptcy Petition Preparer Statute
 
Non-attorney bankruptcy petition preparers can get into a heap of trouble if they do not accurately follow certain Bankruptcy Code provisions designed to protect consumer debtors.
 
This was evident in a case just decided by Judge Carla E. Craig, the Chief Bankruptcy Judge of the Eastern District of New York, sitting in the Brooklyn Bankruptcy Court.
 
To make matters more interesting, the case also involves disgraced attorney, Peter J. Mollo, who was the subject of my column in May 2012:  Two Bankruptcy Attorneys Get Into Serious Trouble Over E.C.F. Filings .
 
Mollo, despite having been suspended from practicing law earlier this year, continued to represent clients and tried to get away with it by forging another attorney’s name on several bankruptcy petitions which he then filed.
 
Judge Craig sanctioned him in a decision dated March 22, 2012.  In re:  Clyde Flowers, (01-12-40298-cec, Bankr. E.D.N.Y.)
 
It seems that Mollo didn’t learn his lesson and immediately embarked upon a new scheme to circumvent his suspension by having his paralegal, Anna Pevzner, continue to meet with debtors and prepare petitions.
 
When the Office of the United States Trustee learned about this conduct in four separate Chapter 7 consumer cases, it quickly brought proceedings against both of them, seeking sanctions and disgorgement of fees.
 
After several evidentiary hearings, Judge Craig issued a 31-page decision on September 28, 2012, in which she severely sanctioned both of them and in doing so discussed the various statutory requirements that bankruptcy petition preparers must adhere to. In re Edith L. Moore, et. al., (12-41111-cec, Bankr. E.D.N.Y.).
 
  
What is a “Bankruptcy Petition Preparer?”
 
A bankruptcy petition preparer (BPP) is essentially a non-attorney who prepares bankruptcy petition legal forms.
 
Congress was so concerned about vulnerable debtors who had been victimized by non-attorney petition preparers who rendered bad legal advice and charged unreasonable fees that in 1994 it implemented Bankruptcy Code section 110 which is devoted to regulating their services.
 
That section defines a BPP as a person, other than an attorney or an employee of an attorney, who prepares a bankruptcy court document for a fee. 
 
Since BPPs are non-attorneys, they are not permitted to give legal advice and may only type documents and charge a reasonable fee for doing so.
 
That means that they cannot assist with determining what assets are exempt or what exemptions statutes to use, nor can they suggest what chapter to file.  They cannot offer advice as to whether a debt is dischargeable or whether a car loan should be reaffirmed.
 
In addition, BPPs may not collect, receive, or handle the court filing fees in connection with a bankruptcy case.  That means that BPPs cannot file petitions with the bankruptcy court.
 
BPPs may not us the word “legal” or any similar term in any advertising.  This is to prevent them from misleading the public into thinking that they are authorized to practice or render legal advice.
 
If a BPP prepares a petition, the BPP must sign it (there is a special area of the petition form devoted to this) and print his or her name, address and Social Security number.
 
The BPP must also disclose, under penalty of perjury, any fee or compensation received for preparing the documents, and the BPP is obligated to file a declaration as to this within ten days of the filing of the petition.
 
Code section 110 also provides for the assessment of various penalties for BPPs who act negligently or with intentional disregard for the Bankruptcy Code and Rules, or if the BPP commits any fraud, or unfair or deceptive act.
 
In such instances the court can award actual damages, and the greater of $2,000 or twice the amount paid to the BPP, and reasonable attorneys fees and costs. 
 
In addition, each failure to comply with a particular subsection of the statute, such as failing to sign the petition, include the Social Security number, disclose the fee, etc., is punishable by a fine of not more than $500.
 
The statute also requires the court to triple the fines if the BPP failed to disclose the identity of the BPP.  As you will see, it was this provision that really socked Mollo and Pevzner big time.
 
Court Imposes $45,000 Sanction Against the Suspended Bankruptcy Attorney and His Paralegal
 
After Mollo was sanctioned in March, potential clients were still contacting him from his advertising, which he did not stop.  Rather than turn them away, he had Pevzner, his paralegal of six years, meet with them, and in some instances, he met with the clients as well.
 
She then prepared the bankruptcy petitions, and rendered legal advice in doing so.  She had the debtors sign a retainer agreement which contained the name of a different attorney who did not have anything to do with these cases.
 
At the hearing, Paralegal Pevzner admitted that she prepared the petitions and claimed that she was not an employee of Attorney Mollo and worked strictly as a “volunteer” for him without salary.
 
Pevzner testified that she was familiar with Bankruptcy Code section 110.  Although Code section 110 required the BPP to sign the petition and provide a declaration as to legal fees, she did not do that either, claiming that this was an “honest mistake.”
 
Judge Craig stated that both Attorney Mollo and Paralegal Peyzner were not credible witnesses and concluded that Pevzner repeatedly violated a number of subsections of the statute and that they both engaged in the unauthorized practice of law.
 
The Judge pointed out that Mollo continued to hold himself out as a bankruptcy attorney, despite his suspension, and despite his representations to the Court in the earlier case.
 
It was clear to Judge Craig that Paralegal Peyzner was the BPP, as she prepared the petitions.  However, the Judge applied an unusual theory and held that Attorney Mollo was vicariously liable for Peyzner’s violations.
 
The judge rejected Peyzner’s claim that she was a volunteer, and instead concluded that she continued to be an compensated employee under Mollo’s direction.  Thus, the Court found that Mollo also violated the same provisions of section 110 under the doctrine of vicarious liability.
 
As for punishment, Judge Craig directed both of them to disgorge all fees received, being $3,100, and in addition, fined them jointly and severally $15,000.  However, it did not stop there.
 
Because Paralegal Peyzner failed to disclose on the petitions that she was the BPP, Judge Craig stated that she was required to triple the fine to $45,000 as provided by the statute.  Hopefully, this duo has finally learned their lesson.
 
As with many things, consumers get what they pay for.  A BPP cannot give legal advice and at most, can only act as a data entry clerk.  There are no requirements that a BPP take any courses or be certified.  Yet, bankruptcy is a highly complex area of the law.
 
There are many horror stories about consumers who lost valuable assets, believing that they were exempt, because a bankruptcy petition preparer drafted the petition. 
 
The Office of the U.S. Trustee takes BPP improprieties very seriously.  Last year they brought 504 actions against BPPs across the country.
 
If you are a consumer looking for a bankruptcy attorney, make sure the attorney is legitimate and currently admitted and in good standing.  If anything seems suspicious, think twice about using that attorney.
 
To see the decision in this case, click here:  In re Edith L. Moore, et. al., (12-41111-cec, Bankr. E.D.N.Y.). 
 
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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 November  2012 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.      Call (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.  
 
 
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Bankruptcy Court Says $5,000 Chapter 13 Legal Fee Is Reasonable

Posted on Thursday (December 6, 2012) at 3:00 am to Chapter 13 Bankruptcy
Lawyer to Lawyer
Recent Bankruptcy Court Decisions
Suffolk Lawyer

Bankruptcy legal fees in Chapter 13 casesWritten by Craig D. Robins, Esq. 

 Recent Brooklyn Bankruptcy Court Decision Reviews Legal Fee Factors
 
What is a reasonable legal fee for a typical Chapter 13 bankruptcy case?  That issue was addressed in a decision just released by Judge Jerome Feller, a bankruptcy judge in the Eastern District of New York, sitting in the Brooklyn Bankruptcy Court.

 

In that case, Chapter 13 trustee Marianne DeRosa objected to a $7,500 flat legal fee that the debtor’s attorney had charged.  She insisted that the debtor’s attorney, Paul Hollender, of New York City, bring a formal fee application to approve his fee.  She then filed opposition to his fee, arguing that it was in excess of the fees customarily charged for routine cases in this district. 

Judge Feller issued a twelve-page decision on October 11, 2012 in which he concluded that reasonable compensation for a routine Chapter 13 filing in this jurisdiction is $5,000.  In re: Nicholas Moukazis, (01-12-42200-jf, Bankr. E.D.N.Y.).  (In her motion papers, Trustee Marianne DeRosa pointed out that the customary Chapter 13 legal fees in this jurisdiction are between $3,500 and $5,000.)

This is important news as Long Island bankruptcy attorneys have at times been at odds with the two Chapter 13 trustees in this district over what a reasonable fee is. 

For a period of time, the other Chapter 13 trustee in our district, Michael J. Macco, insisted that every bankruptcy practitioner charging over $4,000 had to bring a fee application to seek approval of the fee.  Now we have a current judicial determination indicating what is reasonable for routine Chapter 13 cases.

For those who are not familiar with Chapter 13 practice, these bankruptcy proceedings, which involve a payment plan, usually require several court appearances, and often involve at least twice as much work as a typical Chapter 7 case.

Factors In Determining What a Reasonable Bankruptcy Attorney Fee Is In a Consumer Case

Judge Feller began the legal analysis in his decision by reviewing the elementary bankruptcy law concept that the Bankruptcy Court not only has the authority, but the duty, to determine the reasonableness of compensation paid or agreed to be paid for representing a debtor in a bankruptcy case regardless of whether a party in interest objects to it.

The Judge then determined that the following factors were necessary to assess the reasonableness of the legal fee: the necessity of the services rendered, the benefit to the debtor, the time expended, the customary fees and reasonable hourly rates for the services performed, and public policy concerns.

Judge Feller observed that the Moukazis case was unexceptional and uncomplicated.  The debtors’ income was about $150,000 per year.  They owed about $92,000 in unsecured debt.  Their mortgage was current.  The plan proposed a distribution of about 44% to unsecured creditors. 

The debtors retained their attorney about seven weeks before the petition was filed. There was only one meeting of creditors.  The Court confirmed the Chapter 13 plan less than six weeks after that.  The attorney performed the legal work well.

The retainer agreement the attorney used provided for the $7,500 flat legal fee, and also indicated that this was for the bare minimum of possible legal services in a Chapter 13 case. 

The attorney also indicated that he reserved the right to charge additional fees for services such as amendments, attendance at additional meetings of creditors or hearings, and routine motion practice. 

Of the $7,500 fee, the debtors paid $2,000 prior to filing.  In his fee application, the debtor’s attorney claimed he spent 12 hours devoted to the case, and that his paralegals expended a total of 23 hours.

The debtors were actually able to afford the higher fee; however, that did not sway the judge.  He observed that they were paying a portion of the fee through the Chapter 13 plan, and that unless there is a 100% plan, unsecured creditors will effectively pay the fee while receiving a lower pro rata distribution.

Public Policy Considerations Come In To Play In Determining Reasonableness of Bankruptcy Legal Fee

The Judge also commented on the public policy considerations for ensuring that Chapter 13 legal fees are reasonable.

Empirical evidence shows that Chapter 13 cases are much more likely to succeed when debtors are represented by counsel.  Accordingly, in order to ensure that debtors have access to counsel, they should not be overcharged.

Thus, a reasonable fee must be one which protects the debtor, while being generous enough to encourage lawyers to render the necessary and exacting services that bankruptcy cases often require.

Some districts in other parts of the country have “fee caps” in consumer cases which essentially permit bankruptcy counsel to charge any fee up to the cap without having to obtain court approval.  Our district is not one of them. 

Judge Feller, in the decision, expressly stated that “this Court is not hereby endorsing fee limits in Chapter 13 cases” and “does not intend to establish a fee cap in Chapter 13 cases.”

Looking back to other decisions which addressed Chapter 13 legal fees in this district, in 2010, Judge Robert E. Grossman, sitting in the Central Islip Bankruptcy Court, addressed the propriety of a $15,000 fee charged by an attorney who apparently was less than competent in representing the debtor. 

In that case, Chapter 13 trustee Michael J. Macco objected to the fee and the Judge reduced it to $4,000 stating that “the bankruptcy proceeding was not complicated” and the attorney “performed at an incompetent level.”

In his decision (which is now several years old), Judge Grossman pointed out that experienced counsel charged between $4,000 and $4,500 for cases in the district.  He therefore reduced the fee to $4,000 for this attorney and ordered him to disgorge the rest.  The attorney appealed to the District Court, which affirmed.  In re Arebelo, 2011 U.S. Dist. LEXIS 37449, 2011 WL 1336676.

The takeaway here is that an experienced Chapter 13 bankruptcy attorney, who does a proper and professional job, can charge as much as $5,000 for a typical Chapter 13 case, and more if unusual or additional legal work is necessary.

In addition, if the trustee or court challenges the legal fee, the bankruptcy attorney bears the burden of demonstrating the reasonableness of the fee.

Incidentally, this relatively high legal fee is indicative of the large amount of work that a bankruptcy attorney must put into a typical Chapter 13 case, which was made somewhat more complex and complicated by the significant changes to the bankruptcy laws in 2005 (BAPCPA).
 
To see a copy of the Mouzakis decision, click this link:   In re: Nicholas Moukazis, (01-12-42200-jf, Bankr. E.D.N.Y.). 
 
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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 December  2012 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.      Call (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.  
 
 
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Creative Lawyering with Chapter 20 Bankruptcy Case Tests Limits

Posted on Wednesday (December 5, 2012) at 6:00 pm to Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Lawyer to Lawyer
Suffolk Lawyer

Chapter 20 bankruptcy discussed on LongIslandBankruptcyBlog.comWritten by Craig D. Robins, Esq.

 
Judge Rules That Debtor Engaged in Unfair Manipulation of Bankruptcy Code
 
Judge Alan S.Trust, sitting in the Long Island Bankruptcy Court in Central Islip, New York, just issued an interesting decision in a case which the Judge stated “tests the outer limits of how debtors may seek to utilize the Bankruptcy Code and Rules to obtain the maximum advantages of the process known as ‘Chapter 20′.”  In re: Adam John Renz, No. 11-73471-ast, (Bankr. E.D.N.Y., Aug. 1, 2012).
 
What is a Chapter 20 Bankruptcy?
 
First, let’s discuss the concept of “Chapter 20.”  There is no actual Chapter 20 of the Bankruptcy Code.  Instead, this refers to the situation in which a consumer debtor files a Chapter 7 case and receives a discharge, and shortly thereafter files a Chapter 13 case.
 
There are several reasons why debtors may try to use a Chapter 20 strategy.  The objective is to obtain more relief than filing for Chapter 7 or Chapter 13 alone.
 
One common reason why debtors will do so is to discharge their unsecured debts through the Chapter 7 filing and then cure mortgage arrears over an extended period of time with a Chapter 13 plan.
 
Chapter 20 also enables consumers who need Chapter 13 relief, but don’t qualify because they owe more unsecured debt than Chapter 13 jurisdictional requirements permit, to become eligible for Chapter 13 filing.
 
In the past several years, some savvy bankruptcy practitioners have utilized Chapter 20 in a more creative way – to cram down a second mortgage that they could not have done if the debtor only filed for Chapter 7 relief, as most judges do not permit debtors to strip off second mortgages in Chapter 7 cases.
 
This has become a controversial maneuver as some jurisdictions do not permit this, having concluded that a debtor cannot strip off a second mortgage that has already been discharged, or that the second filing was not done to further the purpose of Chapter 13 relief, which is to pay debts through a plan, but instead to seek cram-down relief.
 
It should be noted that once a debtor files for Chapter 7 relief and obtains a discharge, the debtor is not entitled to receive a Chapter 13 discharge unless more than four years have passed from the date of the first filing to the date of the second filing.  Code section 1328(f)(1).
 
Thus, the objective in most Chapter 20 scenarios is not to discharge any debt, but instead, to use the payment plan features of Chapter 13 to cure mortgage arrears over a period of time.
 
Many debtors successfully cram down their second mortgages in Chapter 13 cases in this district and that has become a large part of consumer bankruptcy practice here during the past few years.  To do so, the debtor brings an adversary proceeding against the mortgagee seeking to strip off the second mortgage.
 
The Renz Case – An unsuccessful Chapter 20 Bankruptcy
 
In the Renz case, the debtors filed for Chapter 7 relief in 2009 and received a discharge.  Sixteen months later, they filed a Chapter 13 case.
 
Since less than four years passed from the date of the prior filing, they would not be entitled to a Chapter 13 discharge.
 
The debtor had a second mortgage on his home with with JPMorgan Chase for $100,000 that was clearly underwater.  Chase did not file a proof of claim, so debtor’s counsel, before the bar date, filed one for them.  (Bankruptcy Rule 3004 permits a debtor to file a proof of claim on behalf of a creditor).  As it turned out, Chase failed to file any papers whatsoever in the entire case.
 
Bankruptcy counsel also filed a cram-down adversary proceeding against Chase seeking a determination that the second mortgage was wholly unsecured.  Since Chase never responded to the adversary proceeding, the debtor obtained a default judgment.
 
The judgment specifically provided that “the claim held by Chase, secured by a mortgage lien on the Debtors’ real property . . . [shall] be deemed a wholly unsecured claim, and that the entire subordinate mortgage lien be declared null and void upon the filing by the Chapter 13 Trustee of a Certification of Completed Chapter 13 Plan.”
 
Here’s the kicker: two weeks later, debtor’s counsel filed a letter with the Court withdrawing the Chase claim.  He also amended the Chapter 13 plan calling for a one hundred percent distribution to unsecured creditors.  However, since the proof of claim had been withdrawn, Chase stood to receive no distribution whatsoever.
 
Chapter 13 Trustee Marianne DeRosa thereafter filed an objection to confirmation, arguing that the plan was not proposed in good faith, that the debtor did not have statutory authority to withdraw the proof of claim, and the debtor had sufficient income to satisfy the Chase claim in full.
 
Debtor’s counsel argued that the plan was proposed in good faith and that Chase’s failure to participate or file papers in any part of the proceedings was a tacit acceptance of debtor’s withdrawal of the Chase claim.
 
Judge Trust determined that the debtor’s actions here went too far and that the case “exemplifies an unfair manipulation of the Bankruptcy Code.” 
 
The judge noted that while the debtor appeared to have sought bankruptcy protection in good faith, the circumstances concerning the Chase claim demonstrate an attempt to abuse the purpose and provisions of Chapter 13.   As such, the Judge sustained the trustee’s objections to the plan.
 
Judge Trust held that the debtor did not have any cognizable basis for withdrawing the proof of claim and that it should be treated as an allowed unsecured claim.  He also held that the debtor had the ability to pay the Chase claim in full.
 
Although debtor’s counsel argued that the Chase mortgage debt had been discharged by the prior Chapter 7 case, the Court held that the debtor was required to satisfy the terms of a proposed plan before the mortgage lien could be stripped off.  Since the debtor’s gambit did not work, the case will likely be dismissed.
 
Here’s what I gleaned from this decision.  In a Chapter 20 case before Judge Trust, the debtor must file it in good faith and for the purposes that Chapter 13 is intended for.  In addition, the debtor can cram down the second mortgage, but should expect to pay it as an unsecured debt through the plan.
 
Creative lawyering and using novel theories to test the bounds of the law and to achieve extraordinary results is the mark of a smart attorney.  Many great results have been obtained this way.  After all, you don’t know where the limits are until you’ve exceeded them.  However, counsel must be careful not to tread too far over the line, which may have been the case here.
 
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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 October  2012 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.      Call (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.  
 
 
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Delinquent Student Loan? Consider Bankruptcy to Aleviate Debt Burden

Posted on Tuesday (September 11, 2012) at 8:00 pm to Benefits of Bankruptcy

Bankruptcy discharges credit card debt, making it easier to pay student loansWritten by Craig D. Robins, Esq.
 
In an interesting cover story this week, the New York Times wrote about Debt Collectors Cashing In on Student Loans.
 
Apparently, debt collectors have become very excited at the prospect of working for student loan lenders, and see great profits in chasing consumers on student loans.  So even though many borrowers are suffering and struggling to pay off their student loans, the debt collection industry is cashing in.
 
The article mentioned that the number of individuals who have taken out student loans in recent years has exploded, and so has the number of who have fallen seriously behind.
 
If you are behind with a student loan, you are not alone.  About one in six borrowers with a student loan is in default.  That’s almost six million Americans!
 
What You Can Do If You Are Behind on a Student Loan
 
Most consumers who are delinquent on student loans also have a substantial amount of credit card debt.
 
However, the difference between student loan debt and credit card debt is that credit card obligations can be discharged in a bankruptcy whereas student loan debts cannot.
 
If a consumer is just barely getting by and trying to pay a little to each creditor, then they would be much better off eliminating their credit card and other dischargeable debts, so that they can then concentrate on a repayment plan with the student loan.
 
Almost all student loan lenders will work with a delinquent borrower to create a long-term payment arrangement, often based on the amount of the borrower’s income.
 
While it may be possible to hide from bill collectors chasing down credit card debt, it is not so easy when it comes to student loans, which are backed up by the federal government.  Unlike credit card companies, the federal government has extraordinary collection tools such as seizing tax refunds and garnishing paychecks and Social Security payments.
 
Also, unlike a statute of limitations for collecting credit card debt, which is six years in the state of New York, and fewer years in some other states, there is no statute of limitation for collecting student loans
 
Bottom Line:  If you owe student loans, you will likely end up paying them back at some point or another, but if you can eliminate credit card debt in bankruptcy if you qualify.
 
 
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What Happens When a Debtor Forgets to Schedule a Personal Injury Suit

Posted on Tuesday (August 21, 2012) at 3:43 pm to Bankruptcy Practice
Chapter 7 Bankruptcy
Personal Injury and Bankruptcy
Recent Bankruptcy Court Decisions
Suffolk Lawyer

bankruptcy and personal injury -- make sure causes of action and law suits are scheduled in the bankruptcy petitionWritten by Craig D. Robins, Esq.

 
A Consumer Bankruptcy Debtor Can Lose Standing to Litigate if Lawsuits Are Left Out of the Petition
 
There is one question that Chapter 7 bankruptcy trustees like to ask debtors twice at the meeting of creditors: “Are you currently suing anyone or do you have the right to sue anyone?”
 
The reason trustees like to ask this question twice is because many debtors forget to tell their attorneys that they have a cause of action, which can be a valuable asset worth administering.
 
Causes of action are considered assets that must be disclosed in the bankruptcy petition.  Because of their unusual nature (they’re intangible, unliquidated and contingent), many consumer debtors just don’t think about them like they would a more typical asset like a car or bank account.
 
Consequently, many debtors don’t tell their bankruptcy attorneys about them even when asked.
 
A debtor who neglects to list such an asset can end up in a heap of trouble – sometimes losing the possibility of exempting the asset or seeking recovery, or in extreme cases, losing the ability to obtain a bankruptcy discharge.
 
Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court, issued a decision a few years ago in which he denied a debtor’s application to re-open a case to pursue a P.I. cause of action.  In this month’s column I will discuss non-disclosed causes of action which can be a P.I. case or any other right to sue.
 
Bankruptcy Code Provides for Duty of Disclosure
 
The debtor’s obligation to disclose a cause of action is based on Code section 521(a) which requires a debtor to schedule “contingent and unliquidated claims of every nature” and provide an estimated value of each one.
 
The trustee has the ability to step into the debtor’s shoes and pursue any litigation claims the debtor has.  It is therefore essential that the debtor disclose all contingent and unliquidated claims so that the trustee can make a determination of whether to pursue those claims for the benefit of the debtor’s estate.  In re: Costello, 255 B.R. 110 (Bankr. E.D.N.Y. 2000).
 
When a debtor inadvertently omits a cause of action or pending suit from the bankruptcy schedules in the petition, and the trustee catches this at the meeting of creditors, the resolution is usually simple.  The trustee directs debtor’s counsel to amend the schedules and the trustee investigates the viability of pursuing the cause of action.
 
However, resolving a non-disclosed cause of action becomes much trickier once the bankruptcy case is closed, and that has a lot to do with the concept of standing.
 
There are Issues with Re-Opening a Bankruptcy Case to Amend Schedules to Include an Omitted Law Suit or Cause of Action
 
Here’s the typical scenario:  Debtor had a cause of action stemming from injuries suffered in an accident.  However, the debtor neglected to tell his or her bankruptcy attorney about it.  Then, for whatever reason, when questioned by the trustee about the right to sue anyone, the debtor testified that he or she did not have the right to sue anyone.  The case then was routinely closed and the debtor received a discharge.
 
Then, a year or two passes during which time the debtor’s personal injury attorney brings suit and is about to settle the case.  However, defense counsel advises P.I. counsel that they did a bankruptcy search and discovered that the plaintiff filed for bankruptcy relief but failed to schedule the cause of action for the accident.  They tell the surprised P.I. attorney, “Sorry, there’s no longer any settlement money on the table because your client lacks standing as a plaintiff in the P.I. case!” 
 
That’s because even after a bankruptcy case is closed, non-disclosed causes of action and litigation remain the property of the bankruptcy estate, unless abandoned by the trustee.  Case law provides that if the trustee never knew about the potential estate property, the trustee could not have abandoned it. 
 
Thus, even though the bankruptcy case was closed, the cause of action is still the sole property of the trustee, and the debtor lacks standing to commence or continue a the suit.  Upon learning of this, P.I. counsel will invariably make a frantic call to debtor’s former bankruptcy counsel.
 
So what can bankruptcy counsel do in this situation after getting the frantic call?  Nationally, there are two schools of thought – estopping the trustee and estopping the debtor.  In the Fifth, Seventh, Tenth, and Eleventh Circuits, the Courts have found that the trustee should not be estopped from commencing or continuing a suit, as the trustee is the real party in interest.
 
These Courts, however, punish the debtor, who they say should be estopped so that any excess proceeds, instead of going to the debtor, instead go back to the defendant.
 
The reasoning here is to protect the integrity of the bankruptcy process while preserving assets of the estate for distribution to creditors.  Doing so deters dishonest debtors who fail to disclose assets, while at the same time, protecting the rights of creditors.
 
However, there does not seem to be any appellate authority in the Second Circuit.  My personal experience with these situations is that the court will permit trustees to reopen a case to administer a non-disclosed asset in most situations, provided that there is no egregious evidence of bad faith on the part of the debtor.
 
Keep in mind that if the asset was not disclosed, then the debtor did not avail him or herself of any applicable exemption, such as the personal injury exemption, now a minimum of $7,500.
 
If debtor’s counsel were to try to re-open the case and amend the schedule of exemptions, the trustee would likely object.  The best case scenario may be to negotiate a disposition with the trustee in which the debtor gets half the exemption.
 
In one case before Judge Trust, the debtor sought to re-open the case to amend schedules to include a non-disclosed P.I suit against the Long Island Rail Road.
 
Even though the debtor had already retained separate P.I. counsel prior to the bankruptcy, the debtor did not tell his bankruptcy attorney about it and did not truthfully answer the trustee’s questions about pending lawsuits.
 
The District Court, where the P.I. case was pending, permitted the suit to be dismissed upon learning of the prior bankruptcy filing, stating that the debtor lacked standing.  When the debtor sought to re-open the bankruptcy case to get standing, Judge Trust refused to permit the debtor to do so, citing the debtor’s lack of good faith.
 
In the March 2010 opinion, Judge Trust, using colorful football terminology, stated that debtor’s motion to re-open appeared to be “an effort to make an end run around the District Court’s dismissal order.”  In re: Carlos Meneses (05-86811-ast,  Bankr.E.D.N.Y.).
 
The practical tip here is to question your client and question again about possible causes of action or potential claims.  Also, if you later discover an omitted asset, amend your schedules immediately.
 
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Homeowners: Don’t Be Scammed by Forensic Audit of Mortgage Docs

Posted on Wednesday (June 20, 2012) at 1:00 am to Foreclosure Defense
Mortgages & Sub-Prime Mortgage Meltdown

homeowners-scammed-by-forensic-analysisWritten by Craig D. Robins, Esq.
 
Unfortunately, homeowners who can barely afford their monthly mortgage payments or who are in foreclosure are in a very vulnerable position and can become easy prey for con-artists.
 
Beware of companies offering “forensic audits” and promises of obtaining new payment terms for a mortgage or a receiving a loan modification.
 
The Federal Trade Commission recently petitioned a U.S. District Court in California to shutdown a company that was allegedly offering pricey forensic audits together with claims that the company had a 100% chance that they would uncover violations of federal and state mortgage law that would entitle the homeowner to a mortgage modification or other relief.
 
A forensic audit is basically a review of various loan documents, closing papers, correspondence from the lender, and foreclosure papers to determine if the lender violated any laws in providing the mortgage or enforcing payment of it.
 
In our Long Island foreclosure defense practice, we regularly review such papers and documents to ascertain what defenses may be asserted in a foreclosure proceeding, but we do not make any promises or representations.
 
However, some unscrupulous con-artists have been setting up shop under the guise of offering a forensic loan analysis.  For over a year, the Federal Trade Commission has labeled these audits as a new twist on foreclosure rescue fraud.
 
The FTC states that these so-called auditors, for a fee of many hundreds or even thousands of dollars, use half-truths and outright lies to sell services that promise relief to homeowners in distress.
 
In particular, the FTC has said that there is no evidence that forensic mortgage loan audits will help a consumer get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.  
 
It is unfortunate, but many of our clients come to us to defend them in a foreclosure case after having been taken advantage of by one of these unscrupulous companies.  We do NOT offer forensic audits of mortgages, but do review all mortgage documents when we represent clients with defending a foreclosure on Long Island.
 
Last week the FTC effectively shut down a very large operation based in California, as well as several websites that it operated which offered bogus relief.  The companies were owned by Ryan Zimmerman and went by several names including Consumer Advocates Group Experts, LLC.  

The FTC has advice for consumers about mortgage modification and foreclosure rescue scams.  For more information see the website Your Home and the publication Forensic Mortgage Loan Audit Scams: A New Twist on Foreclosure Rescue Fraud.
 
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You Can Discharge Social Security Overpayments in Bankruptcy

Posted on Friday (June 15, 2012) at 1:00 pm to Bankruptcy Tips Consumers Should Know
Benefits of Bankruptcy
Chapter 7 Bankruptcy
Tax and Bankruptcy Issues

Social Security overpayments can be discharged in bankruptcyWritten by Craig D. Robins, Esq.
 
There are many types of debts that can be discharged in a Chapter 7 bankruptcy filing.  Most consumers seek to discharge credit cards debts, medical bills, loans, etc.  Some consumers have the Social Security Administration (SSA) chasing them down as well.
 
This is because the SSA, after they paid benefits to a particular consumer, determined that they paid too much for one reason or another, and they demanded the consumer to pay the overpayment back.  What happens most frequently is that the applicant, who was receiving Social Security benefits, goes back to work but the SSA continues to make payments.
 
When the SSA learns that there has been an overpayment, it makes a demand that the overpayment be repaid within 30 days.  These overpayments can add up to a sizable amount.  Can this type of obligation be discharged in a bankruptcy filing?
 
Yes.  In general, Social Security overpayments can be eliminated by filing for Chapter 7 bankruptcy.  They can be treated as typical unsecured debt in Chapter 13.
  
Although claims owed to some governmental entities are entitled to special treatment in a bankruptcy filing, the Social Security Administration is not.  They are treated like any other general unsecured creditor.  That means that a consumer seeking Chapter 7 relief can discharge a debt owed to the SSA.
 
However, all creditors have the ability to challenge discharge if it appears that the debtor incurred the debt through fraud or fraudulent pretenses.  The SSA technically has the right to object to discharge if it appears that the debtor knew or should have known that he or she was not entitled to the Social Security benefits.
 
That being said, I have never seen an instance of the SSA challenging discharge in my 25+ years of practicing consumer bankruptcy on Long Island.  Nevertheless, it would be wise to consult with an experience bankruptcy attorney if you owe Social Security debt.
 
Once a bankruptcy petition is filed, the SSA must immediately stop all proceedings to collect the overpayment.  Not only is this statutory bankruptcy law, it is also SSA policy on bankruptcy filings.
 
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Future Robo-Signers Could Be Heading to Prison in Foreclosure Fraud Cleanup

Posted on Thursday (June 14, 2012) at 9:00 pm to Foreclosure Defense
Mortgages & Sub-Prime Mortgage Meltdown

Robo-Signing may come to an end in New York if foreclosure Fraud bill is enactedWritten by Craig D. Robins, Esq.
 
Foreclosure Fraud Prevention Act of 2012 Bill Introduced Today in New York
 
The concept of Robo-Signing exploded onto the foreclosure scene about two years ago when it came to light that mortgage companies and foreclosure attorneys were taking illegal shortcuts.
 
Today, New York lawmakers introduced a bill that would make it a felony for mortgage servicer managers or their employees who commit foreclosure fraud.
 
The bill, which was drafted by New York State Attorney General Eric Schneiderman, provides that mortgage servicers who “authorize, prepare, execute or offer for filing false documents in a pending or prospective residential foreclosure action” can face up to a year in jail and a $1,000 fine.  In addition, multiple acts of robo-signing would be treated as a Class E felony punishable with up to four years in prison.
 
As a foreclosure defense attorney on Long Island, I’ve seen many families’ lives crushed when banks brought improper foreclosure proceedings against them.  We have been fortunate to have some of these cases dismissed.  This legislation offers foreclosure accountability — a concept that has been duly lacking.
 
In a press release, the Attorney General stated, “For many middle class New Yorkers, their life savings is in their home.  To take away people’s homes under fraudulent circumstances is a crime deserving of jail time.”
 
The proposed legislation imposes a very stringent duty of accountability, something which barely exists with any teeth today.  It appears that this bill, if enacted, will provide the strong criminal-law deterrent we need to prevent such abhorrent activity from continuing.
 
Robo-signing describes the process whereby mortgage companies and their foreclosure attorneys sign numerous documents in robotic fashion without verifying the facts attested to in those documents.  About two years ago, as the U.S. foreclosure crisis reached a head, it became apparent that robo-signing was a major and widespread problem throughout the country in a great number of foreclosure proceedings.  I wrote extensively about this problem previously, and my law office has successfully used this as a defense in many cases.  See Craig Robins Mentioned in New York Times Cover Story About Sloppy Foreclosure Lawyers Who Represent Lenders .  See also Boston Globe article about Robo-Signers.
 
Incidentally, Nevada enacted legislation in October which made foreclosure fraud a felony.  As a result, the number of foreclosure filings in that state dropped to almost zero while banks and their attorneys made sure their cases were clean and correct.  It would be nice to see lenders who bring foreclosure proceedings in New York make sure that there cases are 100% clean and proper at the time of filing.
 
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Should You Reaffirm a Mortgage in Bankruptcy?

Posted on Tuesday (June 12, 2012) at 8:00 pm to Bankruptcy Tips Consumers Should Know
Chapter 7 Bankruptcy
Uncategorized

There is rarely any benefit to reaffirming a mortgage in a Chapter 7 consumer bankruptcy case in New YorkWritten by Craig D. Robins, Esq.
 
Reaffirming a debt in bankruptcy means that you continue to be obligated on the debt as if you hadn’t sought bankruptcy protection.  Debtors sometimes reaffirm their car loans because there are special bankruptcy code provisions that require them to do so. 
 
However, this requirement does not apply to real estate.  Debtors do not have to reaffirm a mortgage debt.
 
Most Debtors Should Not Re-affirm a Mortgage
 
Generally, there is no reason to reaffirm a mortgage obligation unless the mortgagee has agreed to modify one or more of the mortgage terms so that keeping the mortgage is much, much more beneficial.
 
Possible changes could include a lower interest rate, a lower monthly payment, placing arrears on the back end, deeming a default as cured, etc.
 
However, if your payments are current, there is usually no tangible benefit to reaffirm a mortgage loan.  The only possible benefit is that the mortgage company will continue to report your stream of future on-time payments (assuming that you make them) to the credit reporting agencies.
 
Most lenders will stop such reporting to credit reporting agencies once a bankruptcy is filed, even if the homeowner continues to make monthly payments, a process commonly referred to as retain and pay.  Of course, the downside to reporting payments is that if you are late, you will hurt your credit score.
 
Also remember that if you reaffirm the mortgage and can’t make the payments, the mortgage company can and likely will sue you for money.  They cannot sue you for money if you refuse to reaffirm.
 
Reaffirming a mortgage debt requires a comprehensive multi-page reaffirmation agreement that must be filed with the court.  The reaffirmation agreement also requires the debtor’s bankruptcy attorney to indicate that he or she has read the agreement and that it does not impose any undue hardship on the client.
 
Some attorneys, for good reason, will not sign this.  In addition, some judges will not permit a debtor to reaffirm a mortgage loan unless the debtor is incurring some kind of valuable benefit for doing so.
 
There Are Benefits for Not Signing a Mortgage Reaffirmation Agreement
 
Keep in mind that Chapter 7 bankruptcy has the effect of discharging a debtor’s financial obligation to pay the mortgage.  That means that if the debtor stops paying the mortgage, the most the mortgagee can do is foreclose on the home and take it back.  If there is a bankruptcy discharge, then the mortgagee can never pursue the mortgagor for any money, even if there is a large deficiency.
 
Eliminating personal recourse on the mortgage is a very powerful tool that many of my clients can later fall back on if they no longer desire to keep their home.  Having the ability to strategically default on a mortgage is very valuable.
 
In my practice, I rarely see mortgage lenders who are willing to change the terms of a first mortgage.  Therefore, there are very few instances where reaffirming a mortgage is advisable.
 
Incidentally, I regularly receive “proposed” reaffirmation agreements from mortgage companies all the time.  Some arrive by overnight mail; some by e-mail marked urgent.  It upsets me when I see this because I think there are inexperienced bankruptcy attorneys out there who feel that the reaffirmation agreement, which just arrived by Federal Express, must be signed. 
 
I have never seen an unsolicited reaffirmation that offers any benefit, and they all get quickly filed in my circular filing bin.
 
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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »

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Craig D. Robins, Esq.
35 Pinelawn Road, Suite 218E, Melville, NY 11747.

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