Nassau Lawyer

by Craig D. Robins, Esq.

We Have Had Harsher Bankruptcy Laws Since 2005. During President Bush’s administration it became more difficult for individual consumers to seek bankruptcy relief. In 2005, after aggressive lobbying efforts by the credit card and banking industries, Congress agreed to enact harsher bankruptcy laws. The 2005 Bankruptcy Amendment Act became effective on October 17, 2005. Thereafter, consumer filings plummeted.

The Economy Has Severely Deteriorated. Since that time, the country’s economic climate has changed dramatically for the worse. After an incredible boom in the housing market, the real estate bubble started bursting in 2007. The following year saw a total collapse of real estate-backed securities. After months of national headlines focusing attention on the sub-prime mortgage meltdown, news shifted to the tightening credit market and the precipitous drop in the stock market. Numerous companies began closing their doors and laying off employees. As the national housing crisis has worsened, foreclosures have climbed to record levels.

Bankruptcies on the Rise Again. Recently-released data reveals that almost 1.1 million Americans filed for bankruptcy in 2008, a 32 percent increase from the prior year, as a recession has forced many consumers to seek protection from creditors. This is a record number of filings since the laws were changed three years ago.

Shift in Public Policy Now Favors Bankruptcy Change. With the worst financial turmoil this country has seen since the Great Depression, there has been a marked shift in public policy towards bailing out the financial sector and the auto industry, and protecting homeowners who can no longer afford to make payments on their mortgages.

 Obama Will Greatly Influence the Future of Bankruptcy.  Judging by statements that he made during his campaign, President-elect Obama will probably seek to reverse some of the harsh changes that Bush put into law. During the campaign, Obama’s web site contained the statement, “Obama and Biden will reform our bankruptcy laws to protect working people.”

Obama will likely seek to change the bankruptcy laws to help people avoid losing their homes, a step that the Bush administration and the mortgage industry have greatly resisted.

As president, Obama will have the ability to control the actual bankruptcy laws, as well as the interpretation of the current or future bankruptcy laws, in several ways. First, it is unlikely that there will be any harsher measures proposed under the new Democratic administration. Thus, any proposed legislation will undoubtedly be pro-debtor, which Obama will probably support and sign into law.

Secondly, Obama will have the ability to shape the judicial interpretation of bankruptcy law for years to come as he will likely be in a position to nominate at least one, if not two, associate justices of the Supreme Court. As Supreme Court decisions often come down to a five-to-four vote, any appointments that Obama makes may end up being determinative of how existing bankruptcy law is interpreted.

Cram-Down Legislation Just Introduced in Senate.  Congressional Democrats have wasted no time in advancing legislation to change bankruptcy rules, with the aim of reducing home foreclosures . On January 6, 2008, Senator Richard Durbin (D-Illinois), the second-ranking Democrat of the U.S. Senate, introduced legislation that would permit debtors in bankruptcy to erase or “cram-down” some mortgage debt.

The legislation, S. 61, is entitled the “Helping Families Save Their Homes in Bankruptcy Act.”

Current bankruptcy law only permits homeowners to cram-down second mortgages, and then, only if the mortgage is totally under-secured by the value of the property. Consumer debtors have been prohibited from modifying mortgages with a cram-down since a 1993 Supreme Court decision that banned the practice.

Senator Durbin previously introduced this new cram-down legislation in 2007, but due to Republican opposition, the measure failed to pass on several occasions The proposed law was almost passed several weeks ago when it was included in the $700 billion bank bailout bill. However, it was removed just before the package finally passed.

Obama Will Likely Sign Cram-Down Laws. There is a good chance the legislation will pass in 2009. President-elect Obama co-sponsored Senator Durbin’s bill in 2008 and said that it would be a priority in 2009. There is also a strong possibility that legislators will attach the bill to Obama’s proposed economic recovery stimulus package now being drafted in Congress, which means that it could be approved as early as February.

There Will Still Be Opposition. The financial services industry will certainly try to fight the proposed reform, claiming that it will increase the cost of obtaining mortgages as banks will absorb large losses and will need to pass along this cost to consumers. However, the circumstances under which the bill previously failed have changed significantly, and home foreclosures are reaching epidemic proportions. With roughly two million foreclosures expected this year, politicians refusing to support the bill will certainly be unpopular. Although the legislation might need to work its way through Congress over a period of several months, many pundits predict that the bill will indeed become law.

Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the February 2008 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

The New Laws are Now in Effect. The new laws that all consumer bankruptcy attorneys have dreaded for quite some time are now upon us. On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, this country’s most sweeping bankruptcy legislation in decades, became effective. During the last month there was a flood of bankruptcy filings as cash-strapped consumers tried to get a jump on the new laws that will make filing much tougher for people to erase their debts.

Learning About the New Laws. The new laws are rather complex. Our Bar Association recently presented a three-hour C.L.E. seminar which seemed merely to provide an overview on just some of the new provisions. After attending a two day symposium and workshop in Florida sponsored by the National Association of Consumer Bankruptcy Attorneys last month, I believe that it would be difficult for a bankruptcy practitioner to effectively represent clients without such a thorough review. The National Association of Consumer Bankruptcy Attorneys announced that it will be offering some additional symposiums in the near future. Over 1,500 attorneys attended the one in Orlando. If you have the opportunity to attend any full-day seminars, I would urge you to do so. Just learning the intricacies of the means test can take an entire day.

Many, Many New Laws to Learn. Discussing the provisions of the new law could easily fill a thousand of these columns. The means test is a major component. Its ostensible purpose is to determine, after a series of calculations, whether a debtor who seeks to file for Chapter 7, would be abusing the bankruptcy laws because the debtor could afford to pay something back to their creditors. In addition to this totally new procedure, there are new provisions for determining property of the estate and calculating exemptions. There are new procedures for valuing assets. There are new laws concerning the automatic stay, which will not be so automatic in some instances. Treatment of secured claims has changed and debtors will likely have to reaffirm secured debts, a procedure that had been mostly done away with in this jurisdiction during the past decade. Matrimonial obligations are now treated totally differently in a way to designed to protect the innocent spouse. There are new exceptions to discharge. There are also greater limitations upon re-filing after a previous petition has been filed. And don’t forget, debtors must receive credit counseling as a condition to filing for bankruptcy relief, and budget counseling as a condition to receiving a discharge, and you will certainly need to assist them with this.

The Means Test: A New Horror. The essence of the new law is the means test, a six-page, fifty-five-line item, computational form that makes the most complicated tax return form look like a walk in the park. This form alone will intimidate the most seasoned practitioner and will likely have the effect, intended or not, of preventing many people from filing for bankruptcy for various reasons.

Be Prepared to Do Due Diligence With Each Case or Be Sanctioned. The number one concern that most consumer bankruptcy attorneys probably have about the new law is that it imposes a tremendous responsibility and potential liability on the attorney. The attorney must now conduct a reasonable investigation to verify the accuracy of the information provided by the client. In addition, the attorney must determine that the petition and all other information provided to the court and the trustee is well-grounded in fact. Finally, the attorney must certify that a Chapter 7 petition is not an abusive filing. The penalties for violating any of the new liability provisions can be strict and can include fee disgorgement plus actual damages including attorney’s fees and costs and possible civil penalties. These new responsibilities, combined with attorney liability, will likely cause many lawyers to leave the consumer bankruptcy practice, and will result in an increase in fees charged by those who stay.

New Mandatory Disclosures. Debtor’s attorneys are now required to make certain disclosures about the nature of legal services offered and the consequences of filing for bankruptcy. In addition, you are required to warn your clients of the penalties for failing to make less than a full and honest disclosure to the bankruptcy court. The consumer bankruptcy attorney must make these disclosures, notices and warnings no later than three days after you first offer legal services to the client. Failure to do so can mean additional sanctions.

Revising Your Advertising. If you advertise bankruptcy legal services, even by merely mentioning that you or your firm does bankruptcy, then be advised that the new law will restrict the way that you may advertise in the future. You must now identify yourself as a “Debt Relief Agency” in any advertisement and contain a disclosure essentially stating that you help people file for bankruptcy.

Revising Your Legal Fees. As a result of the additional amount of time that you will need to spend with each bankruptcy matter, combined with the added potential attorney liability, many attorneys are anticipating that they will end up doubling their existing fees. Legal fees of $2,000 to $3,000 for Chapter 7 cases and $3,500 to $5,000 for Chapter 13 cases may become the norm, although it is too early to determine. In addition, many bankruptcy attorneys will probably charge two separate fees: one to cover the several hours worth of work that will be involved with the means test, and another to cover the remainder of the bankruptcy filing including preparation of the petition and representation in court. After all, it will often be difficult to recommend filing Chapter 7 until the attorney devotes a substantial amount of time to reviewing all aspects of the case and then performing the means test.

Manuals and Books on the New Law are Imperative. Getting a new copy of the Bankruptcy Code is mandatory. In addition, the leading legal publishers such as Thomson-West and LexisNexis have published versions that contain an analysis. LRP Publications has an excellent manual about understanding the new laws. LRP also publishes a regular newsletter, Consumer Bankruptcy News, which often contains practice oriented articles. Additionally, National Consumer Law Center will be soon coming out with a new edition of my favorite handbook, which I refer to as the bible, entitled Consumer Bankruptcy Law and Practice.

Obtaining or Updating Your Software. With the advent of the new laws, combined with the local court requirement that attorneys file petitions electronically, it is inconceivable that a practitioner can prepare a bankruptcy petition without using a computer together with specialized and current software. If you plan to practice consumer bankruptcy, then you must make this investment. All of the leading petition preparation software publishers have rushed to prepare updated versions of their software. The software will be especially important in assisting you with the numerous calculations required by the means test. The software will also include all necessary databases regarding the IRS standardized expense tables and the state median income.

Are You Ready for All of This? If all of the above does not sound intimidating enough, one of the judges at the recent Bar Association seminar commented that he could not imagine how the court system and United States Trustee’s Office would be able to function after October 17, considering all of the major changes and obligations that they will have to address as well. To make matters more tenuous, many commentators have suggested that Congress should delay the effective date of the new law as it would be unfairly harsh to those who have been adversely affected by the recent hurricanes in the Gulf states. Finally, if you decide to continue your bankruptcy practice, be prepared to spend a substantial amount of time reviewing the new laws, attending seminars and workshops, and re-adjusting your perspective as to how bankruptcy works. It will be an evolutionary process.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the November 2005 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

New Laws Just Became Effective. On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), this country’s most sweeping bankruptcy legislation in decades, became effective. The Act, which is 512 pages in length, contains so many changes that it affects nearly every aspect of the bankruptcy case, even including the way the practitioner can interact with his clients.

Flood of Last-Minute Bankruptcy Filers Brings Clerk’s Office to a Halt. There were so many filings the week before the new laws went into effect that the Bankruptcy Court clerk’s office in Central Islip was unable to handle the flow. The clerk’s office initially anticipated shutting down its electronic case filing system for twelve hours to process the new filings and to implement the new software to handle the new petitions. However, the most recent announcement from the clerk’s office was that it would be unable to accommodate any new filings (except for emergency cases hand-delivered to the clerk’s office) until October 31. A front-page article in the New York Times on Friday, October 14, 2005, showed a photograph of a line of people a block long waiting in the rain for five hours to file last minute petitions at the Bankruptcy Court in Manhattan. Similar stories echoed throughout the country. Fear of the drastic changes in the new law was enough of a motivating factor to compel tens of thousands of consumers to file for relief at the last minute.

The New Laws are Greatly Disliked. It appears that apart from the financial services industry who lobbied for the changes in the law, virtually everyone else, from debtor’s attorneys to professors to trustees to judges, are very unhappy with the new law for various reasons. For one, BAPCAP is extremely complex and imposes a new means test as a filing prerequisite. This will have the effect of making bankruptcy less accessible for many debtors and much more expensive.

Many general practitioners who previously handled routine cases will certainly be intimidated by the complexities of the new law as well as new provisions which place great liability on the attorney. Judges and professors have complained that many provisions of the new law have been drafted atrociously. Whereas prior legislation was drafted with the assistance of some of the finest minds in the bankruptcy world, the new legislation was mostly drafted by lobbyists with relatively little knowledge of real life bankruptcy practice.

What Has Changed with the New Law. Discussing each and every provision of the new law could easily fill a thousand of these columns. The means test is a major component. Its ostensible purpose is to determine, after a series of calculations, whether a debtor who seeks to file for Chapter 7, would be abusing the bankruptcy laws because the debtor could afford to pay something back to their creditors. In addition to this totally new procedure, there are new provisions for determining property of the estate and calculating exemptions. There are new procedures for valuing assets. There are new laws concerning the automatic stay, which will not be so automatic in some instances. Treatment of secured claims has changed and debtors will likely have to reaffirm secured debts, a procedure that had been mostly done away with in this jurisdiction during the past decade. Matrimonial obligations are now treated totally differently in a way to designed to protect the innocent spouse. There are new exceptions to discharge. There are also greater limitations upon re-filing after a previous petition has been filed. And don’t forget, debtors must receive credit counseling as a condition to filing for bankruptcy relief, and budget counseling as a condition to receiving a discharge, and you will certainly need to assist them with this.

The Law Mandates Certain Changes to Your Practice. Debtor’s attorneys are now required to make certain disclosures about the nature of legal services offered and the consequences of filing for bankruptcy. BAPCPA also restricts the way bankruptcy attorneys may advertise their services and imposes the requirement that all bankruptcy attorneys classify themselves as “debt relief agencies.”

The Means Test: One of the Most Difficult New Provisions. The essence of the new law is the means test, a six-page, fifty-five-line item, computational form that makes the most complicated tax return form look like a walk in the park. This form alone will intimidate the most seasoned practitioner and will likely have the effect, intended or not, of preventing many people from filing for bankruptcy for various reasons. Learning how to utilize this mandatory form, and how to properly input correct information and figures, poses a great challenge. The trap here is that if the attorney slips up and incorrectly prepares this form, he can be sued by the creditors and sanctioned by the court.

Be Prepared to Do Due Diligence With Each Case or Be Sanctioned. The number one concern that most consumer bankruptcy attorneys probably have about the new law is that it imposes a tremendous responsibility and potential liability on the attorney. The attorney must now conduct a reasonable investigation to verify the accuracy of the information provided by the client. In addition, the attorney must determine that the petition and all other information provided to the court and the trustee is well-grounded in fact. Finally, the attorney must certify that a Chapter 7 petition is not an abusive filing. The penalties for violating any of the new liability provisions can be strict and can include fee disgorgement plus actual damages including attorney’s fees and costs and possible civil penalties. These new responsibilities, combined with attorney liability, will likely cause many lawyers to leave the consumer bankruptcy practice, and will result in an increase in fees charged by those who stay.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York.  This article appeared October 2005 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

There are many issues facing the plaintiff negligence attorney whose personal injury client files for bankruptcy. Here are some bankruptcy fundamentals that you should be aware of.

Bankruptcy Involves Different Statutes and Rules. Most personal injury attorneys practice relatively little in Federal Court, let alone Bankruptcy Court. Thus, when their P.I. client files for bankruptcy, a different world opens up with intimidating statutes and rules much different than those usually encountered in the typical Supreme Court action. Bankruptcy practice is governed by the United States Bankruptcy Code and the Bankruptcy Rules. The Bankruptcy Courts in New York employ the Federal Rules of Civil Procedure as opposed to the C.P.L.R. In addition, there are “local rules” for the two Bankruptcy Courts that comprise the Eastern District of New York, located in Central Islip and Brooklyn.

Personal Injury Suits and Causes of Action are Assets. A serious injury that gives a debtor the right to sue for personal injury is an asset of the bankruptcy estate. The debtor can exempt the first $7,500 in net proceeds, but anything over and above that belongs to the bankruptcy estate.

All Causes of Action Must be Scheduled. It is very important to make sure that the debtor scheduled the P.I. suit or cause of action in the bankruptcy petition. The debtor’s failure to schedule a potential cause of action may actually work as a meritorious defense to the entire P.I. case, which can result in having the P.I. case dismissed. Current New York case law states that if a P.I. plaintiff filed a chapter 7 petition but failed to list a potential cause of action for personal injuries, then the plaintiff lacks standing to bring the P.I. action.

What to Do If Your P.I. Client Failed to List the Cause of Action. If your P.I. client failed to list the cause of action, then you should immediately contact the attorney who prepared the bankruptcy petition to discuss why this happened, and to determine whether any amendments were ever filed, or whether the matter was addressed at the first meeting of creditors. Unfortunately, some attorneys who prepare bankruptcy petitions are not thorough enough to cross-examine their clients as to such intangible assets as causes of action. Nevertheless, a debtor has the duty to amend his or her petition upon learning of any defects in the petition.

What to Do If You’ve Already Initiated Your P.I. Case and Your Client Files for Bankruptcy or Wants to File for Bankruptcy. Hopefully, your client discussed his or her intentions to file bankruptcy with you prior to actually doing so. In any event, you should contact your client’s bankruptcy attorney to make sure that all information about the suit has been, or will be, properly scheduled in the petition. Again, the main concern focuses around the value of the P.I. case and whether the trustee will deem the case to be valuable enough to administer. You should expect to provide the trustee with copies of the pleadings and the bill of particulars. If the case may have significant value, the trustee will get in touch with you

Always Ask Your New P.I. Client if They Filed for Bankruptcy. Many P.I. clients neglect to tell their attorney that they filed for bankruptcy after their accident. If you learn that your client filed for bankruptcy, then you should look at a copy of the bankruptcy petition to make sure the client listed the cause of action as an asset. Also make sure the debtor claimed the exemption for personal injury. If the client already filed for bankruptcy and did list the potential suit, then you will need to determine what action the trustee took.

The Trustee May Abandon the P.I. Case or Cause of Action. Most trustees will consider the right to sue for a relatively small injury as being of “inconsequential value to the bankruptcy estate” and may have already decided to abandon the trustee’s interest in the cause of action. Generally, if a P.I. case will not result in any significant non-exempt recovery (usually a gross award or settlement of less than $15,000 before attorney’s fees and disbursements), then the trustee will not care about administering it.

If the case appears to be of inconsequential value, then consider contacting the trustee and requesting him to provide you with a letter indicating that he intends to abandon the trustee’s interest in the matter.

Another option is to wait until the case is closed, as any property which is listed on the debtor’s schedules that is not otherwise administered before the case is closed, is deemed abandoned to the debtor. Thus, as long as the Court closes the bankruptcy, you will not need to get involved in Bankruptcy Court and you can continue with the case as you would have.

If more than a few months have passed since the debtor attended the First Meeting of Creditors, consider having the bankruptcy attorney check the court’s docket to see if the Bankruptcy Court closed the case or if the trustee formally abandoned the asset. The fact that the debtor received a discharge does not necessarily mean that the trustee abandoned the asset or that the court closed the case. Also, closing the first meeting of creditors is not the same thing as closing the bankruptcy case. If the case is still open, contact your client’s bankruptcy attorney to see if the trustee expressed any interest in administering the P.I. cause of action.

The Trustee May Want to Administer the P.I. Claim as an Asset of the Estate. If the case may be worth more than $15,000, it is likely that the trustee will not abandon the cause of action and will want to administer the bankruptcy as an asset case.

Representing a Debtor with a P.I. Suit That Is Being Administered by a Trustee Requires Court Approval. The Bankruptcy Code requires that all attorneys who render services to a debtor must be approved by the court. A trustee may employ as special counsel under a contingency fee arrangement, any attorney who has represented the debtor in pre-petition litigation, when it is in the best interests of the bankruptcy estate and the attorney has no interest adverse to that of the debtor or the estate. Theoretically, the trustee can hire any attorney of the trustee’s choosing to represent the debtor in the P.I. suit, and can even take the case away from the existing P.I. attorney. In practice, however, this rarely occurs. The trustee will almost always permit the existing P.I. attorney to continue with the P.I. case because a relationship already exists between the debtor and counsel, and because the P.I. attorney may be in the best position to represent the debtor with a negligence matter. Nevertheless, it would behoove you to co-operate fully with the trustee.

Handling a Debtor’s P.I. Case Requires a Retention Application. It will be necessary for you to file an application with the court to be retained as special counsel to the trustee for the purposes of prosecuting the P.I. claim. Annexed to the application should be a copy of the written retainer agreement between you and your client. The legal fee must be reasonable and it is subject to court review at the conclusion of the case.

The application will also include an affidavit of disinterest in which you must state that you have no claim that is adverse to the interests of the debtor’s estate. This means that you cannot be a creditor for legal fees not related to the pending P.I. case.

The trustee will usually prepare these documents (as well as any other necessary documents in the course of the bankruptcy) and submit them to the court after you sign them.

Appearances in Bankruptcy Court by P.I. attorneys are rarely necessary. The application to approve your fee after the case is settled is usually brought by the trustee and should not require your appearance.

Who Is Your Client Now? Once the trustee seeks your formal retention on behalf of the bankruptcy estate, you client is technically the trustee, rather than the plaintiff. Sometimes this can lead to some unusual ethical issues.

Will the P.I. Case Be Transferred to the Bankruptcy Court? A personal injury case is considered a non-core proceeding which means that it involves issues not directly involving the bankruptcy code. You can therefore anticipate that the P.I. case will be litigated in Supreme Court.

Will it Be Necessary to Amend the Existing Caption? Some trustees may require you to amend the caption to reflect the fact that the trustee has become the party plaintiff. Most trustees will not require this.

Effect of the Automatic Stay on P.I. Litigation. The automatic bankruptcy stay imposed by Code sec. 362 does not operate to stay any actions brought by the debtor. The stay only acts to stay actions brought against the debtor including cross-claims, counter-claims and third-party claims.

Settlement. Some trustees will require you to review all settlement negotiations with the trustee Other trustees will be content on hearing from you when you’ve reached a tentative settlement. All settlements will require the trustee to bring a motion to obtain Bankruptcy Court approval. The insurance carrier will thereafter want releases from the trustee as well as the plaintiff. It is important to maintain communications with the trustee as to all major settlement negotiations. The settlement is generally made payable to the trustee.

Your Legal Fee. Once the matter is settled, you will be required to submit an application for a “final fee allowance” in order to be paid. This is something that the trustee should assist you with.

Concluding Advice. The biggest variable in handling a valuable personal injury case of a debtor in bankruptcy is the attitude and disposition of the trustee. Contact the trustee at your earliest opportunity to get an idea of the trustee’s disposition and preferences.

Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in th April 2005 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com

Written by Craig D. Robins, Esq.

You Don’t Always Get What You Wish For. This past April, President Bush signed the most sweeping bankruptcy amendment act in decades, granting the credit card and banking industry’s wish for a tougher Bankruptcy Code. For the six months following, the press spouted stories of gloom and doom for consumers seeking to file after October 17, 2005, when the new laws would go into effect. Newspapers painted a grim picture that debt-laden consumers would no longer be able to utilize bankruptcy as a way to alleviate their financial woes. As a result, many consumers developed the impression that bankruptcy was going away for good or that they would no longer qualify.

It initially appeared that the new laws were so harsh and slanted in favor of banks and lenders that bankruptcy for the masses would be a thing of the past. However, now that several months have passed, and some of the dust has settled, it looks like the credit card companies may not necessarily have gotten what they wished for.

Digesting and analyzing the complex, 500-page-long Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was something that most attorneys had put off until after October 17, 2005. After all, there was a mad rush towards the end, of consumers seeking to take advantage of the existing liberal bankruptcy laws, which kept bankruptcy practitioners quite busy. There was also a dearth of legal education seminars to assist attorneys with learning the intricacies of the new laws. Now that I have taken a number of workshops and courses about the new laws, prepared petitions under the new laws (I was the very first attorney to file a Chapter 7 case in this district under the new act), spoken with trustees and colleagues, reviewed commentary by the academics, and conducted my own analysis of the law, I can make some comments on actual practice under the new laws. Although the 2005 Act is still very early in its infancy, and we have barely seen any case law interpreting it, I am now in a position to glean some winners and losers.

Secured Lenders: Big winners. Automobile loan lenders are perhaps the biggest winners of the 2005 Act as debtors are now obligated to re-affirm debt secured by personal property in order to keep their cars. In addition, secured lenders now have greater rights in receiving payment through Chapter 13 plans than they did previously.

Credit Card Companies: Not the winners they thought they would be. The banking industry that poured tens of millions of dollars into lobbying efforts to get a tougher set of bankruptcy laws probably will not fare as well as they had hoped. For one, the vast majority of consumers will still remain eligible for Chapter 7. Secondly, proponents of the new laws inserted the requirement that debtors fulfill credit counseling requirements ostensibly in the hope of steering a significant number of consumers away from bankruptcy, and into credit counseling payment plans instead. However, it appears that consumers desiring to file for bankruptcy are going straight to bankruptcy attorneys just as they had done before, and the bankruptcy attorneys are then setting up the credit counseling for them. Thus, credit counseling does not seem to be really acting as a deterrent, and instead, it is just a nuisance.

Consumers: Not the losers that everyone thought they would be. It appears that about 85% of those consumers who could have filed for Chapter 7 relief under the old laws will still be eligible to file for Chapter 7 under the 2005 Act. Perhaps the most dreaded component of the 2005 Act was the means test, a six-page, fifty-five-line item, computational form designed to weed out from Chapter 7 eligibility those consumers who theoretically could afford to pay back a portion of their debts. However, now that the means test has been actually put to use and thoroughly analyzed, it appears that it was poorly constructed and does not totally do the job its proponents expected it to. For many Long Islanders, the means test will not be a problem because it generously favors homeowners with mortgages and consumers who have car loans or leases. However, consumers who have respectable incomes, but who rent, could end up being ineligible for Chapter 7 compared to similar individuals who pay mortgages and car loans.

It also appears that there may be many loopholes within the means test that will enable a savvy consumer to utilize pre-bankruptcy planning to become eligible for Chapter 7 if they are not already eligible. Although most consumers will still be able to file for Chapter 7, they may be considered losers to the extent that they will have to pay higher legal fees, increased court filing fees, and credit and budget counseling fees. In addition, they will have to deal with more paperwork and headaches to demonstrate eligibility, as attorneys must verify this information and trustees may want to review it as well. It also appears that the new laws may enable some Chapter 13 debtors to pay less than what they would have paid under the old laws.

Bankruptcy Attorneys: Losers to an extent. Although the 2005 Act will require the attorney to do much more work, and to increase legal fees for all bankruptcy matters as a result, the additional legal fees will not compensate them for this. However, bankruptcy attorneys who concentrate in the field may get more cases because bankruptcy has become too difficult and specialized for the general practitioner. Attorneys will have more headaches in having to comply with new due diligence requirements to verify the accuracy of information that clients provide. Attorneys will also have more anxiety as the penalties for violating any of the new liability provisions can be strict and can include fee disgorgement plus actual damages including attorney’s fees and costs and possible civil penalties.

General Practitioners. Big losers. The complexity of the 2005 Act, together with the new responsibilities that it imposes on counsel, combined with potential attorney liability, has certainly caused most general practitioners to leave the consumer bankruptcy practice. The new bankruptcy laws have just become too difficult for those attorneys who do not regularly handle bankruptcy matters.

Trustees: Losers. Trustees now have more paperwork, yet receive the same fees, and may end up with fewer cases. They are also saddled with additional obligations such as having to notify domestic support creditors and agencies whenever a debtor owes a domestic support obligation. In addition, there are greater confidentiality requirements for any cases involving medical or patient records. However, before feeling bad for the Chapter 7 trustees, they will certainly be kept rather for busy for months to come because of the business that will be generated by the record number of consumers who flooded the bankruptcy court with filings just before October 17, 2005, seeking to take advantage of filing under the old laws. Perhaps the trustees will find these cases more lucrative because there appear to be more asset cases in that bunch as the result of many cases filed by debtors without attorneys, who did not understand the concept of exemptions.

United States Trustee: Loser. As the ultimate enforcer of policing abusive bankruptcy filings and also having the responsibility to review just about every case in general and appear in all Chapter 11 cases, this office was chronically overworked and understaffed to begin with. Now they have even more work in reviewing the means test filed with each and every case, as well as reviewing cases for substantial abuse under Code section 707(b). In addition, the 2005 Act imposes many new debtor filing requirements such as filing the credit counseling certificates, income tax returns, proof of pre-petition wages, the means test form, etc. The United States Trustee will probably be the entity that ultimately brings applications to dismiss those cases in which debtors have neglected to timely file the appropriate documents, or they may direct the clerk’s office to automatically dismiss a case.

Legal Publishers: Winners. Between Electronic Case Filing and the new laws, you simply cannot do a bankruptcy case any more unless you have the most up-to-date (and expensive) computer software. Gone are the days of grabbing a Blumberg form for a few bucks. The legal publishers have been doing a brisk business selling their updated software.

Innocent Spouses: Partial Winners. The 2005 Act contains a host of provisions designed to protect innocent spouses that the code refers to as “support creditors,” basically divorcees and single mothers who are owed child support, alimony or maintenance (the Code now refers to these debts as “domestic support obligations”). However, in some instances, increased protection is illusory as secured creditors such as automobile lenders have greater priority over unsecured priority creditors such as innocent spouses.

Judges: Losers. What judge wants the headache of new laws that are not popular to begin with, are poorly written, have numerous ambiguities and inconsistencies, and do not necessarily help those consumers who the judges have been trying to help for the past several decades. Judges and professors have complained that many provisions of the new law have been drafted atrociously. Whereas prior legislation was drafted with the assistance of some of the finest minds in the bankruptcy world, the new legislation was mostly drafted by lobbyists with relatively little knowledge of real life bankruptcy practice. I have not heard of a single judge in this country who has had any praise for the new laws.

Dedication to Judge Duberstein. I dedicate this column to the memory of Chief Bankruptcy Judge Conrad B. Duberstein, who died in November at the age of 90. He was extremely well liked for his personable nature and ability to entertain, especially in the courtroom. We have all heard his numerous jokes and anecdotes throughout every proceeding. He made practicing before him an enjoyable experience. He had the rare ability to touch each of us in a special way. We will all miss him.

About the author:  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the March 2005 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

Just as most bankruptcy attorneys find matrimonial issues confusing, most matrimonial attorneys find bankruptcy issues confusing. Nevertheless, in order for the matrimonial attorney to be able to effectively represent his or her client, certain bankruptcy fundamentals should be recognized, especially considering that divorce is one of the major factors which drives consumers into bankruptcy. Although bankruptcy-matrimonial matters can easily fill a treatise, I will concisely point out the top ten issues that you should be aware of.

1. The Basic Premise Still Exists: Maintenance and Support Are Not Dischargeable. The Bankruptcy Code excepts from discharge, maintenance or support payments owed to a spouse, former spouse or child of the debtor, in connection with a separation agreement, divorce decree, court order, administrative determination, or property settlement. Section 523(a)(5).

2. The Other Basic Premise, that Equitable Distribution is Not Dischargeable, Has Changed. Prior to October 1994, when the Bankruptcy Code received a major overhaul, it was easy for attorneys to advise clients: Maintenance and support were dischargeable; equitable distribution was not. However, the 1994 Bankruptcy Amendment Act changed that with the introduction of a new provision, section 523(a)(15), which makes equitable distribution “potentially” non-dischargeable.

This new section enables an aggrieved spouse to make equitable distribution non-dischargeable if the aggrieved spouse can prove a two-prong test: a) the debtor has the ability to pay the debt; and b) the detrimental consequences to the aggrieved spouse outweigh the benefits to the debtor spouse in discharging the debt.

If you ask attorneys who primarily represent wives, they would say that this section was added to protect innocent spouses, who, during the marriage, relied on their husbands for their economic well being. However, if you ask counsel who often represent husbands, they would argue that the new law was passed to ensure that bankruptcy lawyers are fully employed and that bitter wives be given one last whack at their husbands, in the court of last resort.

3. Objecting to the Dischargeability of Equitable Distribution Requires Quick Action. The bankruptcy court has exclusive jurisdiction of dischargeability determinations under the section 523(a)(15) two-prong test. The aggrieved spouse must file an adversary proceeding complaint with the bankruptcy court within 60 days of the date of the meeting of creditors, objecting to the dischargeability of the equitable distribution. This date is known as the “bar date.”

4. The Bankruptcy Court Shares Concurrent Jurisdiction. Although the bankruptcy court has exclusive jurisdiction of the two-prong test of section 523(a)(15), it shares concurrent jurisdiction with the state court on section 523(a)(5) issues concerning whether a debt is non-dischargeable because it is support or maintenance.

5. Bankruptcy Judges Hate Matrimonial Law Issues, and Supreme Court Judges Hate Bankruptcy Law Issues. Two courts are often needed. State court judges tend to have limited familiarity with bankruptcy law issues and do not seem to be eager to get involved with interpreting bankruptcy law. On the other hand, whether a bankruptcy judge has exclusive or concurrent jurisdiction over matrimonial debt issues, the bankruptcy judge will often kick the sticky divorce issues back to the matrimonial court for a determination there, which the bankruptcy court will then adopt.

6. Bankruptcy Judges and State Court Judges Have Different Objectives. You should also be aware that bankruptcy judges theoretically may favor the debtor since the policy of bankruptcy is to offer a debtor the opportunity for a fresh new financial start. Meanwhile, matrimonial judges may be more likely to favor the aggrieved spouse as the state has a public policy of protecting innocent spouses.

7. The Burden of Proof is on the Aggrieved Spouse. A general rule of law about objecting to discharge is that the aggrieved spouse creditor carries the burden of proof that the debt is non-dischargeable.

8. Settlement Agreements and Divorce Decrees Are Not Always Binding. Settlement agreements and divorce decrees usually designate debts as either support and maintenance, or equitable distribution. However, such designations are not binding and the bankruptcy court can look beyond such language to determine the true nature of the debt. There is a large body of case law that explores those factors that the court should consider.

The main factors that the court will look at to determine whether the debt is in the nature of a support payment or equitable distribution are: a) whether the payments terminate upon death or remarriage of the spouse receiving them; b) whether payments are contingent on future earning abilities; c) whether payments are to be periodic over a long period of time; and d) whether the payments are designated as being for the purposes of medical care, mortgage, or other needs of the spouse receiving them.

9. Attorneys’ Fees Are Usually Non-dischargeable. Income-providing husbands are often ordered to pay the attorneys’ fees of their spouses. However, when a husband files for bankruptcy, such attorney’s fees are usually found to be in the nature of support, and thus, non-dischargeable (unless a successful adversary proceeding is brought regarding the two-prong test under section 523(a)(15)).

10. Know When To Consult With Bankruptcy Counsel. There are many bankruptcy traps for the unwary matrimonial attorney. Consider conferring with a bankruptcy attorney experienced in bankruptcy-matrimonial issues.

Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the February 2005 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

Motions to lift the stay must comply with the various rules.     The most common type of motion in consumer bankruptcy practice is a motion to lift the stay. Such motions are typically brought by a secured creditor, such as a mortgagee or auto lender, because the debtor has fallen behind with his or her payment obligations.

Almost all creditors’ attorneys now bring “lift-stay” motions by filing and serving a “notice of presentment of a proposed order lifting the stay,” as this type of application alleviates the need to make a court appearance unless opposition is filed. However, the judges in this district have strict chamber’s rules pertaining to how such applications can be brought, which are in addition to Bankruptcy Code and local rule requirements. The various court rules seek to protect a debtor by requiring that various due process requirements be satisfactorily addressed.

Lift-stay motions often contain fatal mistakes.    Most lift-stay motions are prepared by secretaries and paralegals. A large percentage of these applications are not sufficiently reviewed by supervising attorneys and do not meet all of the court’s requirements. Consequently, it is often possible to spot a fatal procedural flaw, which, if brought to the attention of the court, could end up buying your client more time in their home. A former law clerk estimated that as many as one-fourth of all lift-stay motions are initially defective.

Reviewing a lift-stay motion for errors can help your client.    Even in situations where there is a low likelihood of the debtor ultimately saving the subject premises, you may be able to extend the debtor’s time in the house by bringing these fatal flaws to the attention of the court. No matter how solid a creditor’s position is, the creditor still has an absolute obligation to make sure that its motion papers are properly prepared and conform to the Bankruptcy Code as well as local rules and chamber’s rules. I have focused the following discussion primarily on lift-stay motions brought by mortgagees (as opposed to other secured creditors like car loan lenders), as efforts undertaken by a foreclosing mortgagee will probably affect your client the most. However, the same principals apply to all lift-stay motions.

Were the motion papers properly served?     Make sure that service of the motion was proper. The moving party must file with the court an affidavit of service or certificate of mailing indicating that all proper parties were served. This includes the debtor, debtor’s counsel, and the bankruptcy trustee, all of whom are indispensable parties who must be joined. In addition, notices of presentment must have a time period of at least 20 days from the date of service to the date of presentment.

Did the motion include the necessary supporting documents?   A motion to lift the stay must include a copy of the mortgage note and mortgage, and these documents must show the date of recording. In addition, the debtor must be a party to the note or mortgage. All exhibits must be legible. This is important as exhibits are often generated from microfiche where the legibility may be poor.

Did the moving party establish standing?   Mortgages are frequently assigned. If the moving creditor is not the same entity as the creditor set forth in the mortgage and note, then there must be a recital in the motion papers explaining that either the mortgage was assigned or that the movant is a servicing agent. If the mortgage was assigned, a copy of the recorded instrument of assignment must be attached to the motion papers. If the movant is the servicing agent, then the motion papers must contain a copy of the servicing agreement or power of attorney authorizing the servicing agent to take legal action to enforce the mortgage.

Is there a supporting affidavit from the loan representative?   It is elementary law that all motions must be supported by an affidavit from someone who has actual knowledge of the relevant facts. Accordingly, there must be a notarized and executed affidavit from a loan representative. This affidavit must set forth the post-petition payment defaults and the total amount of the mortgage indebtedness. In addition, the affidavit must either indicate that the stay should be lifted for cause, in which event the specific cause should be set-forth, or the stay should be lifted because the mortgage indebtedness exceeds the value of the property. Finally, the affidavit must correctly identify the address of the subject property.

Has the mortgagee properly demonstrated the value of the property?    When the mortgagee asserts that the ground for lifting the stay is that the mortgage indebtedness exceeds the value of the property, then the mortgagee must include a valuation report such as an appraisal or broker’s price opinion letter as an exhibit to the motion. The valuation report must be current, which generally means that it must have been made within the preceding 90 days, or within 90 days of the petition date. Anything older than that can be considered obsolete. The valuation report must be signed and must also contain language in the form of an affidavit that the person who prepared the report attests that he or she is disinterested and is not a broker or selling agent under a listing agreement and does not anticipate acting as the broker or listing agent for any party in interest. The person who signs the valuation report must include a statement of his or her professional qualifications. The report must contain a suitable description of comparable values of properties that have been recently sold. If the moving party is taking the position that the mortgagee lacks adequate protection, then the moving papers cannot contain any inconsistent statements which indicate that the mortgagee is fully secured. In lieu of providing a valuation report, the mortgagee can rely on the debtor’s admission of the value of the property as indicated in the debtor’s bankruptcy schedules. In such an event, the creditor must include a legible copy of the debtor’s schedule “A” or “D” as an exhibit.

Is the motion seeking proper relief?   Generally, a motion to lift the stay, when brought by notice of presentment, may not seek any type of equitable relief other than an unadorned vacating or modifying of the stay to permit the mortgagee to enforce its state law remedies. Accordingly, a proposed order cannot seek payment of costs and attorney’s fees as this creates an inconsistency between section 362 (a)(d)(2) and section 506 (b).

What happens if you demonstrate a fatal error?   The mortgagee must usually start the entire motion process all over again. This means that the mortgagee must take the necessary time to correct and amend its motion. The mortgagee must then re-serve all necessary parties, and begin the twenty-day time period all over again. This can get your client an extra four to six weeks or more in their home. Keep in mind that this article focused on utilizing procedural errors as a defense. There are numerous substantive issues that you can raise as well.

Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the November 2004 issue of the Nassau 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 Medford, Commack, Woodbury, Patchogue, Mastic, Coram 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, Esq.

For seven straight years, Congress has come exceedingly close to enacting sweeping bankruptcy legislation that would make it much more difficult for consumers to discharge their debts. These bankruptcy amendment bills have either passed the House or the Senate, or both. For various reasons they have died before being signed into law. Yet, as analogized in a recent Christian Science Monitor article, the proposed bankruptcy legislation is like a mythical vampire: it constantly dies, yet comes back to life to haunt us the following year, often for underlying political reasons.

Most bankruptcy attorneys hope that Congress will put a stake through the heart of the proposed legislation. Yet the bankruptcy bill will probably return to haunt us again next year. The reason is simple. Banks, credit card companies and financial institutions have huge incentives to supply big money to Congressional lobbyists and have given generously to the re-election campaigns of members of Congress, especially those Republicans who support the bills. Opponents of bankruptcy reform argue that it is designed to boost profits for consumer lenders by making it tougher for troubled families to get any relief in bankruptcy. Last year credit card companies racked up about $30 billion in profits.

Nevertheless, it is unlikely that we will see any new bankruptcy legislation this year – an election year. President George W. Bush, who previously announced that he would immediately sign any bankruptcy amendment bill that was placed in front of him (one can infer that he would not even bother to read it), will certainly not want to incur the wrath of a large number of middle Americans who have lost their jobs and are considering bankruptcy relief.

The President is not the only one who does not want to become unpopular at election time with the enactment of a bankruptcy amendment bill. The mostly Republican members of Congress who support the bill and who are seeking election do not want to lose potential votes either. Yet, in all likelihood, we will see more proposed bankruptcy reform legislation emerge from the dead again next year, especially if President Bush is re-elected.

President Bush, while campaigning, delivers his constant message on the economy: “We are turning the corner and we are not going back. In another four years, the economy will be better.” Despite this rosy rhetoric, millions of families currently need bankruptcy protection, especially the middle class.

Here are some statistics. Bankruptcy filings are way up and at an all-time high. Personal bankruptcies peaked in 2003 with a record 1.6 million cases filed – a rate of 185 an hour. That annual total is nearly double the 812,898 filings in 1993.

Last year, Elizabeth Warren, a Harvard University bankruptcy law professor co-authored “The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke,” and last month, the Wall Street Journal featured a page-one article: “New Group Swells Bankruptcy Court: The Middle-Aged.” The Journal story focused on “an emerging class of middle-age, white-collar Americans who make the grim odyssey from comfortable circumstances to going broke.” Among the villains of this disturbing piece are the unstable job market and staggering amounts of personal debt.

That article quoted a passage from Professor Warren’s book: “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.”

It is clear that the middle class, the middle-aged, and middle America, require the ability to obtain bankruptcy relief. Let’s hope that the Vampire’s days are over.

About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the October 2004 issue of the Nassau 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 Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

Written by Craig D. Robins, Esq.

Adversary Proceedings. Even what appears to be the simplest Chapter 7 consumer bankruptcy filing may result in an adversary proceeding which is basically a federal lawsuit brought within a pending bankruptcy proceeding. The Bankruptcy Rules provide that certain contested matters in bankruptcy proceedings must be litigated in this way. Bankruptcy Rule 7001 sets forth ten such matters. They include objections to discharge; determination of the validity, priority, or extent of a lien or interest in property of the estate; actions to recover property of the estate; and proceedings to sell property in which the debtor is only a part owner. Bankruptcy Rule 7001 et. seq., sets forth all of the rules applicable to adversary proceedings.

Proceedings to Determine The Dischargeability of a Debt. These are by far the most common adversary proceedings that the consumer bankruptcy practitioner may encounter. With the proliferation of consumers seeking to discharge credit card debt through bankruptcy, many credit card companies, banks and other lenders are actively reviewing petitions and credit usage histories to determine if the debtor obtained the debt by way of any fraudulent or improper means. Under code section 523, a creditor can contest the dischargeability of a particular debt that was incurred through false pretenses, fraud, use of false financial statements, embezzlement, or larceny.

Contesting the Entire Discharge. Bankruptcy code section 727 allows an interested party to contest the entire discharge for intentional concealment, transfer or destruction of property; unjustified failure to keep books and records; dishonesty in connection with the bankruptcy code; or failure to explain loss of assets. If a trustee requests a debtor to provide documents at the meeting of creditors and the debtor is uncooperative, the trustee will bring an adversary proceeding under this section.

Federal Rules Govern. Virtually all of the Federal Rules of Civil Procedure regarding litigation apply to adversary proceedings. These rules are especially tailored to bankruptcy proceedings by Bankruptcy Rules 9001 et. seq. Leave your C.P.L.R. at home and get a copy of the Federal Rules. Sometimes the general practitioner is at a slight disadvantage because of an unfamiliarity with Federal law.

How Adversary Proceedings Are Commenced. The creditor or trustee will draft a complaint, setting forth the facts and allegations which the plaintiff believes justify the granting of relief against the debtor, and stating the relief requested. All adversary proceedings must be filed electronically through the court’s E.C.F. system. The court will also assign an adversary proceeding case number to the matter, which is different from the original bankruptcy case number. All adversary proceeding documents filed with the court must contain the full adversary proceeding caption, both case number and adversary proceeding case number, the type of chapter, and the name of the judge. The debtor can be referred to as either “debtor” or “defendant.”

Service. Most adversary proceedings are served pursuant to Bankruptcy Rule 7004(b) by first class mail upon both the debtor and his or her attorney, although service can be completed by other means as well. Service must also be made within 10 days of the summons date. Bankruptcy Rule 7004(f).

Be Aware of the Bar Date. In Chapter 7 proceedings, the court sets a statute of limitations for creditors to file objections to discharge. The bar date is 60 days from the date set for the first scheduled meeting of creditors. Bankruptcy Rules 4004 and 4007. Adjournment of the meeting of creditors does not affect the bar date. Failure to timely file a dischargeability adversary proceeding by the bar date will forever bar the creditor from objecting to discharge.

Written by Craig D. Robins, Esq.

The U.S. Trustee Initiative Program. The Office of the United States Trustee has been scouring cases recently, looking for indications that a debtor has the ability to make a reasonable payment to his creditors. The United States Trustee Program launched a nationwide campaign, dubbed the “Civil Enforcement Initiative,” aimed at “advancing and protecting the integrity of the bankruptcy system.” The initiative was developed when, after years of proposed legislation to stop alleged bankruptcy abuse, none of the proposed bankruptcy reforms became law. Thus, the U.S. Trustee’s Office decided to adopt and implement some of the legislative policy themselves.

It appears that the initiative will focus on three key problem areas: ( i) debtors who abuse the bankruptcy system and engage in bankruptcy fraud, by loading up on credit card debt or orchestrating a bust-out; ( ii) debtors who have the ability to repay a reasonable portion of their debts; and (iii) debtors (or their attorneys) who file sloppy schedules, or false and incorrect schedules; and attorneys who provide poor legal representation or charge excessive attorney’s fees.

You can therefore expect to see a heightened amount of activity out of our district U.S. Trustee’s office investigating cases to see if debtors have truly filed in “good faith.” The following are my observations of this practice.

“Substantial Abuse” – Bankruptcy Code Section 707(b). The U.S. Trustee frequently relies on this section and alleges that a debtor is substantially abusing the bankruptcy system when it believes a debtor has not filed in good faith for one of the above reasons.

The Initiative Program Has Become the U.S. Trustee’s Foremost Priority. The Office of the U.S. Trustee is a division of the Department of Justice and has responsibility for overseeing all bankruptcy cases and trustees. Previously, a major portion of that office’s time was devoted to overseeing the administration of Chapter 11 business cases. However, Chapter 11 filings have decreased markedly over the past few years, apparently resulting in the U.S. Trustee’s office shifting their priorities from business cases to consumer cases.