About Me
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.

Bankruptcy Practice

The New Wildcard Bankruptcy Exemption in New York

Posted on Wednesday (March 2, 2011) at 3:00 pm to Bankruptcy Exemptions
Bankruptcy Practice
Suffolk Lawyer

New York Bankruptcy ExemptionsZweinstein  
Written by Craig D. Robins, Esq.
How to Use the New Open-Ended Federal Exemption
Last month I wrote about some bombshell news for New York bankruptcy debtors: outgoing-Governor Paterson unexpectedly signed legislation greatly increasing the New York state law exemptions, which are the statutes debtors can use to protect assets while seeking bankruptcy relief.  The new law became effective on January 22, 2011. 
See the January 2011 Suffolk Lawyer article — Bankruptcy Exemptions for New York Suddenly Increased for 2011
Not only does the new law increase existing exemption amounts for various assets, but it also permits debtors to use the federal exemptions – something that New York debtors (and their attorneys) never had to consider in the past.
It is therefore exciting that we will now be able to protect our consumer bankruptcy clients with a set of exemption statutes that open the door to all sorts of new possibilities.  The most intriguing federal exemption is the wildcard exemption.  It’s as if we’re playing poker and we’ve been dealt a new “wild” card that will enable us to win.
The wildcard exemption should permit most Long Island debtors to keep all of their assets in a typical Chapter 7 case.  Previously, assets such as cars, bank accounts, personal injury causes of action, and tax refunds were at times difficult to fully protect for some clients.
First, a little about choosing the exemption scheme.  A debtor can choose either the federal exemptions or the state exemptions, whichever is more favorable, but a debtor cannot use a combination of the two.  If a married couple files a joint case, both spouses must use the same exemption scheme.
Next, here’s a very general outline of some of the most common federal exemptions that each debtor can claim:
 Homestead Exemption    $21,625
 Motor Vehicle                   $3,450
 Tools of Trade                  $2,175
 Jewelry                             $1,450
 Cash                                  $1,150
 Personal Injury                 $21,625
 Household Goods             $11,525
If you’ve read any older material referring to these federal exemptions, you’ll notice that all of the above amounts are different.  They changed in April 2010, and they will change again in a few years.  We New Yorkers are not used to that, as the federal exemptions have barely changed in two decades.           
The Federal Wildcard Exemption
The federal exemptions are set forth in Bankruptcy Code Section 522(d) which states, in relevant part:
The following property may be exempted […]
 (1) The debtor’s aggregate interest, not to exceed $21,625 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.  [….]
 (5) The debtor’s aggregate interest in any property, not to exceed in value $1,150 plus up to $10,825 of any unused amount of the exemption provided under paragraph (1) of this subsection.
Sub-section 522(5) is the wildcard exemption. This sub-section works together with section 522(1) to enable a debtor who does not use the federal homestead exemption to exempt $10,825 in “any property”.
Stacking and Flexibility with the WIldcard Exemption
Thus, one great thing about the wildcard exemption is its flexibility which enables a debtor to split the wildcard exemption amount over multiple items and stack it on top of other exemptions as needed to protect any exposed equity.
This, coupled with the other asset-specific exemptions found elsewhere in section 522, usually allows a debtor to exempt all of his or her property in a Chapter 7 bankruptcy.
Learning About the New, New York Bankruptcy Exemption Law
So how does one learn more about the new federal exemptions?  Here’s my plan of action.  Since I am not used to them, I will need to commit them to memory and determine how to employ them in a strategic manner.
Therefore, I plan to read and re-read section 522 a dozen times until they sink in.  This section is lengthy and will require some dedicated concentration.
I will review various bankruptcy treatises like my favorite, Consumer Bankruptcy Law and Practice, published by National Consumer Law Center.  I will also begin reading recent cases from other parts of the country that interpret various aspects of the federal exemptions – cases that I conveniently ignored for years because they did not mean anything to me; but now they are ever so important.
I also like Consumer Bankruptcy News, published by LRP Publications – a nice bi-weekly review of new bankruptcy cases combined with news and some articles about bankruptcy practice.
I will be looking forward to the next CLE about the subject.  Suffolk Academy of Law Dean and Chapter 7 Trustee Richard L. Stern will be moderating a Lunch ‘n Learn Seminar about the new federal exemptions at the Suffolk County Bar Association on Wednesday, March 9, 2011.
Finally, I will be eagerly anticipating the first few decisions from our very own bankruptcy judges in the Eastern District of New York, as debtors’ counsel and trustees really try to see how these new laws work.
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 FEBRUARY 2011 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream.                  (516) 496-0800  (516) 496-0800    (516) 496-0800  (516) 496-0800      (516) 496-0800  (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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A Creditor Just Violated My Clients’ Rights by Posting Their Social Security Numbers

Posted on Tuesday (February 8, 2011) at 4:00 pm to Bankruptcy Practice
Bankruptcy Procedure
Bankruptcy Tips Consumers Should Know
Creditors Engaging in Abusive Bankruptcy Practices

Social Security numbers in bankruptcy cases are sacredWritten by Craig D. Robins, Esq.
This morning I reviewed a proof of claim filed in one of our Chapter 13 bankruptcy cases.  It was filed by American General Financial Services, LLC for a $7,000 debt that was incurred two years ago for an in-ground swimming pool.  The local merchant was Island Recreational.  They filed the claim as “secured.”
Here’s the problem:  The proof of claim contained an attachment that consisted of the one-page quicky credit application my clients filled out at the time they purchased the pool and applied for financing.  
Attaching this document was not the problem; the creditor’s failure to remove or redact my clients’ Social Security numbers was.
Social Security Numbers Are Sacred and Confidential in Bankruptcy Proceedings
With identify theft becoming a significant concern this past decade, the bankruptcy courts adopted a new privacy rule that was made part of the official Bankruptcy Rules. 
Bankruptcy Rule 9037 requires any party filing a document to ensure that any references to Social Security numbers and other sensitive data are deleted or redacted.
I previously wrote about this:  Maintaining Privacy in Bankruptcy Court Filings .

Getting the Creditor to Immediately Rectify the Situation
I immediately e-mailed the creditor’s “Bankruptcy Specialist” who had prepared the proof of claim and advised her that not only did she violate the law, but she was exposing my client to the possibility of identity theft. 
Technically the creditor was in contempt of court for violating Rule 9037.
I also considered bringing a motion seeking sanctions against the creditor.  However, doing some quick research, I learned that some courts have refused to award sanctions in such instances, stating that Rule 9037 does not provide a private cause of action to do so. 
Rebecca Rose, a law student on the St. John’s Law Review, recently wrote a summary of of the Matthys case which held that Disclosure of Social Security Number Does Not Give Debtors a Private Right of Action
Meanwhile, other courts have stated that sanctions are necessary to deter this type of conduct and have indeed awarded them.  I found a great article in the ABI Journal about this — Rule 9037: Consequences of Failure to Redact “Personal Data Identifiers”  However, the link is only available to ABI members. 
However, since the Second Circuit did not have any case law on the subject, I decided it would probably not be worthwhile to test the waters on this. 
In any event, I tend to be a pragmatist, and I was mostly concerned about achieving a quick resolution and an appropriate disposition of the problem for my clients.
The Offensive Proof of Claim was Removed and Amended
The creditor’s Bankruptcy Specialist, within minutes of receiving my e-mail, contacted me and agreed to resolve the problem — and she did so in a very pleasant and apologetic manner.
Within an hour, she had gotten the Bankruptcy Court Clerk to permanently remove the offensive document from the court’s records.  
This was fortunate because some bankruptcy courts in other jurisdictions handle such matters differently — they will only block the offensive material temporarily while requiring counsel to bring a motion for a protective order, a significant amount of work.
She then filed an amended proof of claim, now treating the debt as unsecured, rather than secured.  This will save us a little time later when we need to reconcile the filed claims in preparation for proceeding towards confirmation of the Chapter 13 plan.
Sure, I could have been meaner and more aggressive.  I could have fought for some sanctions or attorney’s fees.  However, I resolved the problem rather quickly, and the creditor made my life a little easier by amending the proof of claim.  I think I did OK for my client. 
Had the creditor’s Bankruptcy Specialist been nasty or unresponsive or not conciliatory, I would have handled the matter most differently.
Of course there was a possibility that someone paid the government an ECF fee to view the proof of claim, but I think the possibility that a person with illicit intent did so within a relatively-short period is exceptionally unlikely.
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Bankruptcy Judge Suggests Direction of Means Test Decisions in EDNY Cases

Posted on Tuesday (November 16, 2010) at 3:30 pm to Bankruptcy Means Test
Bankruptcy Practice
Chapter 13 Bankruptcy

Central Islip Bankruptcy Judges Alan S. Trust, Robert E. Grossman and Dorothy T. Eisenberg at Bankruptcy Roundtable 2010

Central Islip Bankruptcy Judges Alan S. Trust, Robert E. Grossman and Dorothy T. Eisenberg at Bankruptcy Roundtable 2010

Written by Craig D. Robins, Esq.

Comment by Bankruptcy Judge Grossman at Annual Update Seminar Hints at How the Central Islip Bankruptcy Court Will Address Future Decisions Involving Means Test Issues
All three Bankruptcy Court judges from the Central Islip Courthouse in the Eastern District of New York attended the Annual Bankruptcy Roundtable panel discussion last night, which was held at the Nassau County Bar Association.
Over one hundred bankruptcy practitioners from Nassau and Suffolk Counties attended the event.
Of course, the presentation included the annual wrap-up of notable Supreme Court bankruptcy decisions and noteworthy local decisions, as well as some nice presentations by some of our local bankruptcy attorneys about substantive law issues.
What I found most significant, however, was not the typical presentation material, but instead, the substance of a two-minute comment that Judge Robert E. Grossman contributed during a review of the Lanning Supreme Court case.
The Comment from Judge Grossman. . .
Judge Grossman, clearly expressing his frustration and dissatisfaction over the poorly-formulated wording in the BAPCPA means test statute, remarked vehemently, “we can’t figure out what this miserably written statute means!” 
He then suggested that we seem to be entering a new judicial period in which Bankruptcy Court judges will have more discretion in reviewing means test issues, especially those concerning a debtor’s expenses.
He remarked that we will likely see “less absolutes,” as he predicted that the appellate courts will focus their holdings by utilizing a “plain language” approach.
I found this comment most important as it clearly shows that Judge Grossman, and likely his fellow colleagues on the bench in Central Islip, will be focusing their analysis of means test issues by using a common sense approach as opposed to a strict constructionist approach that can produce a technically-correct, but absurd and unintended result.
Judge’s Comment Underscores Position Judge Will Take with Analyzing Means Test Issues
I have previously written how BAPCPA was designed to essentially remove judicial discretion from interpreting means test results, and I even commented on the “plain meaning” approach that Judge Grossman took in some of his decisions (see my post, Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts).
Judge Grossman also referred to his year-old Rabener decision, which I also commented on in my post, Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts .  In that decision the Judge made clear that he does not believe that the Court should blindly use a rigid application to reduce judicial discretion when reviewing means test issues.  He stated that a sound conclusion consistent with reason is paramount.
Now, with comments such as those from Judge Grossman yesterday, it is becoming more and more clear that our Bankruptcy Court will be emphasizing a logical, forward-looking, common sense, plain language approach to analyzing and resolving means test issues.
As an active consumer bankruptcy practitioner who needs to know where his clients stand with the means test, and when to butt heads with a Chapter 13 trustee who takes a nonsensical, yet strict constructionist view of the means test law, today’s comment cements what we are already know — that the Court will most certainly be guided by a common sense approach.
What’s even more important is that in utilizing a common sense approach, the bankrutpcy judges will likely use increased amounts of discretion to reach a reasonable and sound result.   So when the Chapter 13 trustee insists that you amend a plan because BAPCPA says so even though it produces a ridiculous result, consider getting an opinion from the judge instead — if the result is reasonable, you now know how the judge will likely rule.
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Official Bankruptcy Court Website for Eastern District of New York Has Been Updated

Posted on Wednesday (November 10, 2010) at 7:30 pm to Bankruptcy Practice
Central Islip Bankruptcy Court & Judges
Info on Bankruptcy and the Court

Bankruptcy Court -- Eastern District of New YorkWritten by Craig D. Robins, Esq.
The website for the Bankruptcy Court for the E.D.N.Y. has been updated again.  This website covers the bankruptcy courts in Central Islip and Brooklyn.
According to a release from the Court, the goal of redesign was to provide Court information to visitors in a more accessible format.  Maybe I was more used to it, but I liked the general look and feel of the old website.
Once I become more acustomed to the new site, however, it should be more efficient to use.  The new Bankruptcy Court website now has separate sections for the various types of individuals who will be visiting the site.  There is an attorney section, a pro se section, a trustee section and a creditor section.
The Court has indicated a desire to further customize the attorney section to make it more user friendly for bankruptcy counsel.
To Access Bankruptcy Court Website for Central Islip and Brooklyn, Click This Link:
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Suggestions to Improve the Bankruptcy Court

Posted on Monday (November 8, 2010) at 1:00 am to Bankruptcy Practice
Central Islip Bankruptcy Court & Judges

Improving Bankruptcy Court EfficiencyWritten by Craig D. Robins, Esq.
Some Recommendations for the “Strategic Planning Program” of the Bankruptcy Court for the Eastern District of New York
I write this while attending the National Association of Consumer Bankruptcy Attorneys Annual Workshop in Puerto Rico.  I flew down here with my associate, Jason Leibowitz, and my good friend, Kerie Stone, who is the Chairperson of the Bankruptcy Committee of the Suffolk County Bar Association.
In between attending workshop sessions, Kerie and I chatted about her participation in a Strategic Planning Program which is designed to improve the efficiency of our bankruptcy courts in Central Islip and Brooklyn.
She said that upon her return to New York, she will be attending meetings with a committee of our bankruptcy judges, an efficiency expert being flown in from Washington, some of the court clerks, and some of the trustees — all in an effort to make our court run better.
Since I am an active and proactive Long Island bankruptcy attorney, Kerie asked me to come up with my own suggestions that she can relay to the Committee.  I quickly came up with two.  Here they are:
The Judges Should Unify Courtroom Practices and Procedures
We currently have seven different bankruptcy judges.  Unfortunately, that means we have seven different sets of chambers rules, seven different sets of calendar procedures, and seven different sets of protocols.
For example, for the same type of court application, some judges permit counsel to submit notices of presentment whereas other judges require motions accompanied by court appearances.  Also, different judges have different requirements (or permit their trustees to have different requirements) for the provisions they want contained in a Chapter 13 plan.  It simply does not make sense that we do not have a uniform Chapter 13 plan for our district.
It would therefore be great if the judges could work together to unify their chamber rules and procedures.
Judges Should Improve Communications with the Bankruptcy Bar as to Expectations from Counsel
Attorneys would be able to practice much more efficiently if they knew what the judges expect from them.   In addition, court practice would be much smoother if a larger percentage of attorneys handled matters in the manner the court would prefer.
As such, perhaps the judges can hold annual presentations to the bankruptcy bar during which time they can review how they would like counsel to handle or address various matters.
Many of our judges periodically provide presentations at continuing legal education seminars where attorneys can attend for a fee.  However, my experience has been that most judges concentrate their discussions on substantive law issues, as opposed to procedural aspects that would make court practice more efficient.
What we need are periodic presentations at no cost where the sole purpose would be for the judges to discuss the court’s policies and procedures with the bankruptcy bar in an effort to make bankruptcy court practice more efficient.  The judges could also consider other methods to educate the bar as to their expectations for bankruptcy practice. 
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Meeting of Creditors: Duty to Provide Bank Statements

Posted on Friday (November 5, 2010) at 11:00 am to Bankruptcy Practice
Bankruptcy Tips Consumers Should Know
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy

Bank Statements in Bankruptcy Cases at the Meeting of CreditorsWritten by Craig D. Robins
Debtors in Chapter 7 and Chapter 13 Bankruptcy cases are required to provide certain documents to the trustee prior to the Meeting of Creditors. 
Bankruptcy attorneys generally make sure that all of the required documents are collected in advance and furnished to the trustee in a timely fashion.
These items include, as specified in Bankruptcy Rule 4002, sixty days of pay stubs and the most recent tax return.  In addition, debtors who own real estate that they intend on keeping must provide the trustee with some kind of valuation or appraisal.
Do Trustees Require Bank Statements?
Bankruptcy Rule 4002 requires the debtor to bring to the Meeting of Creditors all bank and other financial account statements showing the balances in the accounts on the date the bankruptcy petition was filed.
However, not every trustee requires debtors to strictly adhere to this rule.  For those cases in the Central Islip Bankruptcy Court, which is in the Eastern District of New York, there is only one Chapter 7 trustee who requires debtors to bring this information to the Meeting of Creditors — Kenneth I. Kirschenbaum.   
Mr. Kirschenbaum is actually one of only two Chapter 7 trustees in our district who requires debtors to provide a laundry list of documents prior to going to court.  He is the only one who requires debtors to bring bank statements and he sometimes threatens to refuse to examine those debtors who do not.
Even if your trustee is someone else, it is nevertheless a wise idea to bring copies of these statements, especially if there are large amounts in the account, or if you are claiming your homestead exemption, or if you are entitled to a tax refund.  In many cases involving these situations, the trustee will ask you to provide the account statements.  Turning them over at the meeting of creditors will save you some time and bother.
Incidentally, in many Chapter 13 cases, the trustee will require the debtor to provide copies of the past 12 months of bank account statements.
What Happens If You Don’t Have the Account Statements?
Bankruptcy Rule 4002 provides a solution for those debtors who do not have these documents in their possession.  Simply providing a verified statement to that effect will suffice.
So as long as you do not have the documents in your possession, and you state so in writing, you do not have to provide them at the Meeting of Creditors.  Be mindful that the trustee may likely require you to obtain and provide copies later on.
For More Information About the Meeting of Creditors
I wrote a very comprehensive post about almost everything you should know about the Meeting of Creditors.  Click here to see Going to Your Bankruptcy Court Hearing — The Meeting of Creditors.  
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Professional Civility Has Been Ordered in the Bankruptcy Court for the Eastern District of New York

Posted on Tuesday (November 2, 2010) at 11:30 pm to Bankruptcy Practice
Info on Bankruptcy and the Court
Lawyer to Lawyer

Civility in the Bankruptcy CourtWritten by Craig D. Robins, Esq.
Last week, on October 28, 2010, Bankruptcy Judge Carla E. Craig, who is the Chief Judge of the Bankruptcy Court for the Eastern District of New York, issued an administrative order adopting guidelines for standards of civility for the legal profession.
These guidelines were originally developed by the New York State Bar Association and incorporated into the New York State Rules of the Code of Professional Responsibility.
In adopting these guidelines, the Bankruptcy Court seeks to set a standard of practice in the Court that will promote the professional, civil, efficient and effective practice of bankruptcy cases.
The rules are essentially a list of common sense manners and protocols that all lawyers should be following in any event.  It is unfortunate that some lawyers fail to act in a civil and professional manner, but having a set of standards will certainly make clear what is expected of the bar.  The guidelines are aimed at maintaining the status of the legal profession as honorable and respected.
For the past 20 years I have been actively involved as a board member of the Theodore Roosevelt Chapter of the American Inns of Court, which is an organization of attorneys, judges and law students dedicated to the enhancement of civility, ethics and legal excellence in the practice of law.  The recently-adopted guidelines are nothing new to our organization.
Click here to see the administrative order providing for the Adoption of New York State Standards of Civility
What Does Civility in the Bankruptcy Court Mean?
In a nutshell, here are some of the basic principals espoused by the guidelines.
1.    Attorneys should be courteous and civil.  “Lawyers can disagree without being disagreeable.” 
2.   Lawyers should cooperate with opposing counsel in an effort to avoid litigation and to resolve litigation that has already commenced.  As a pragmatic attorney, that echos my sentiments in all litigated matters.  I feel that most litigation emanates from matters in which the parties cannot work together to reach a reasonable disposition.
3.    A lawyer should respect the schedule and commitments of opposing counsel, consistent with protection of the client’s interests.
4.    A lawyer should promptly return telephone calls and answer correspondence reasonably requiring a response. 
5.    The timing and manner of service of papers should not be designed to cause disadvantage to the party receiving the papers.
6.    A lawyer should not use any aspect of the litigation process, including discovery and motion practice, as a means of harassment or for the purpose of unnecessarily prolonging litigation or increasing litigation expenses.
7    In depositions and other proceedings, and in negotiations, lawyers should conduct themselves with dignity and refrain from engaging in acts of rudeness and disrespect.
8.    A lawyer should adhere to all express promises and agreements with other counsel, whether oral or in writing, and to agreements implied by the circumstances or by local customs.
9.    Lawyers should not mislead other persons involved in the litigation process.
10.    Lawyers should be mindful of the need to protect the standing of the legal profession in the eyes of the public. Accordingly, lawyers should bring the New York State Standards of Civility to the attention of other lawyers when appropriate.
11.    A Judge should be patient, courteous and civil to lawyers, parties and witnesses.
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Complying With the Payment Advice Rule in Consumer Bankruptcy Cases

Posted on Thursday (September 30, 2010) at 8:00 pm to Bankruptcy Practice
Issues Involving New Bankruptcy Laws
Recent Bankruptcy Court Decisions
Suffolk Lawyer

Pay Stubs in Bankruptcy CasesBy Craig D. Robins, Esq.
Recent Appellate Decision Says Filing All Pay Stubs May Not Be Necessary

We all know that under the new bankruptcy laws, debtors are required to file copies of all pay stubs for income received during the 60-day period prior to filing.
To put teeth into this requirement, the law further provides that failure to do so will result in the automatic dismissal of the bankruptcy case – a scary thought.  What happens if a debtor files just one pay stub, but otherwise documents the payments they received?
The Second Circuit Court of Appeals just decided a case last month, on August 9, 2010.  It held that debtors do not need to file all of their pre-petition payment advices if they otherwise document all payment received from employers during the 60-day pre-petition period. 
This case addressed for the first time in our circuit what obligations the Bankruptcy Code imposes upon a debtor with respect to the filing of payments advices. The bottom line is that debtors merely need to provide the necessary information on payments as opposed to the actual pay stubs themselves.
The Pay Stub Requirement in Chapter 7 and Chapter 13 Bankruptcy Filings
When Congress revised the bankruptcy laws in 2005, it imposed a new requirement under Bankruptcy Code section 521(a)(1)(B)(iv) that debtors provide written verification of their current income by filing “copies of all payment advices or other evidence of payment received within 60 days before the date of the filing of the petition, by the debtor from any employer of the debtor.”  Payment advices are typically pay stubs.
Bankruptcy Rule 1007(c) requires debtors to fulfill this requirement within 14 days after filing the petition.   However, if the debtor fails to file the payment advices within 45 days of the filing date, then Code section 521(i)(1) provides for automatic dismissal. 
Bankruptcy counsel typically file pay stubs with the bankruptcy court by ECF, and send copies to the trustee, at the same time the petition is filed or shortly thereafter.
The Recent Riffle Case
Stephen Riffle and his wife filed a routine Chapter 13 case in the Western District of New York in 2008.  His attorney only filed the debtor’s last pay stub during the 60-day pre-petition period because that was the only pay stub that the debtor retained.
The pay stub contained the debtor’s earnings and deductions for the pay period and also stated the debtor’s year-to-date earning and payroll deductions in various categories.
In addition to filing this one pay-stub, the debtor also filed a chart entitled “Sales Earnings Report,” which had been issued by the debtor’s employer and showed the debtor’s gross earnings for each pay period from the beginning of the year.  Debtor’s counsel believed that these two documents satisfactorily disposed of the payment advice requirement.
However, an aggressive creditor, Community Bank, disagreed, and after 45 days filed a motion asking the bankruptcy court to confirm that the case was dismissed for non-compliance with the statute.  The Chapter 13 trustee opposed the dismissal, arguing that the two documents that the debtor filed represented full compliance with the statutory requirement.
The bankruptcy court agreed with the debtor and trustee; the District Court affirmed, and so did the Second Circuit.  Community Bank v. Riffle (In re Riffle), no. 08-4440-bk (2d Cir. 08/09/10).
The Relatively-New BAPCPA Statute that Provides for Filing Payment Advices Is Very Poorly Worded
The Court of Appeals noted that it had not previously decided what obligations 521(a)(1)(B)(iv) imposes upon a debtor and further stated that “the statute, to put it mildly, is not a model of syntactical clarity. At least two grammatically valid readings of the statute are possible, each of which would place a different requirement on the debtor.”
The Court determined that the statute was ambiguous and provided an analysis in which it dissected clauses and words, explored different grammatical meanings, discussed how certain words modified other words, and focused on how interpreting one participle could lead to two different grammatical conclusions – both of which would be technically correct.
“Other Evidence” of Payment is Acceptable 
In the end, the Court chose “the payment-focused interpretation” over a “document-focused interpretation” and held that the statute requires a debtor to file either all payment advices received within 60 days pre-petition – or –  other evidence of payment received during this period.
“Although neither reading is perfectly satisfying, we conclude that the payment-focused interpretation is superior,” the Court said.
The Court commented that the documents that the debtor filed “created a very clear picture as to the amount of income the debtor received in the 60 days pre-petition” and thus met his obligation under the statute.
What this Case Means to Long Island Bankruptcy Practitioners
The Second Circuit clearly indicated its desire to follow a more liberal, practical-sense approach in its interpretation of the statute.  Basically, as long as a debtor provides all of the relevant information regarding payment received during the relevant period, as opposed to the actual “pieces of paper” the debtor received (pay stubs), then the debtor has complied with his statutory requirements.
Income Breakdown Not Required
The Court also commented that the Bankruptcy Code does not require a breakdown of gross and net income on a per-pay period basis.  However, a debtor must identify monthly net income.
Practical Tip:  What Do You Do If the Debtor Has Not Received Any Payment Advices During the 60-day Period?
When there are no payment advices, then there is nothing to file.  However, the bankruptcy court clerk’s office does not know that there is no documentation, so it is prudent to prepare an affidavit for the debtor to sign indicating this fact, and file this “Affidavit in Lieu of Payment Advices” the same way you would ordinarily file the pay stubs.
Practical Tip: Have Debtor Request Info from Employer
Debtors often do a poor job of retaining papers, and frequently discard or misplace pay stubs.  If a debtor has discarded or misplaced his pay stubs, then most employers will be able to print a report containing the same information, that should provide all of the necessary details to comply with the statute.
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 SEPTEMBER 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com
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Counseling High-Income Consumer Bankruptcy Debtors

Posted on Tuesday (June 15, 2010) at 9:30 pm to Bankruptcy Means Test
Bankruptcy Practice
Chapter 7 Bankruptcy
Suffolk Lawyer

16954274Written by Craig D. Robins, Esq.
Many High-income Debtors with Significant Income Can File Chapter 7 Bankruptcy and Still Pass the Means Test
During the past few years I’ve noticed a fascinating trend: I’m counseling more and more bankruptcy clients with high income and high debt. 
Representing such debtors requires addressing certain special issues which I will focus on in this article which was originally published in the June 2010 Issue of the Suffolk Lawyer, a Bar Association periodical.
Blame the Recession 
Perhaps the current drawn-out recession is affecting an increasing number of consumers beyond the low and middle-class – long the bastion of typical bankruptcy filers.
In addition, falling real estate values have wiped out the equity in many people’s  homes.  Many middle and upper-class Americans have thus lost their ultimate source of long-term savings.
Chapter 7 Bankruptcy Is Usually the Consumer’s Best Choice 
Assuming that there’s no need to consider Chapter 13 to stop foreclosure, I always strive to file Chapter 7 bankruptcy petitions for all my clients – but doing so requires that they qualify under the means test.  After all, if a Chapter 7 case goes smoothly, the debtor will discharge most or all debts and ideally keep all assets.
For high-income debtors, Chapter 7 eligibility has become rather challenging considering that under the 2005 Bankruptcy Amendment Act (BAPCPA), a consumer debtor will almost certainly face opposition to getting a discharge if he or she does not pass the means test.   There is no salary cap for filing Chapter 7 Bankruptcy.
The U.S. Trustee is especially vigilant in reviewing any case that is deemed abusive, or that may even be close to being abusive.
Accordingly, analyzing the facts of a high-income debtor becomes critical and properly preparing the means test and other bankruptcy schedules becomes crucial.
How Much Income Is “High-income”? 
Lately I’ve been regularly filing Chapter 7 bankruptcy petitions for families with incomes well over $100,000.  I recently filed two Chapter 7 cases where the family income was over $200,000.  I actually wrote a blog post a year ago entitled:  Can You File Chapter 7 Bankruptcy on Long Island With a Family Income of $200,000 a Year?  
Considering the perceived income limitations for seeking Chapter 7 relief under the new bankruptcy laws, such high-income filings seem difficult or impossible; yet in practice, they are not.
Generally, a high-income debtor is one who has income over $100,000 per year or $10,000 per month.  In my bankruptcy practice, high-income debtors are often executives, doctors, assorted professionals, and families of double-income spouses.
General Principle for Filing High-income Cases 
A high-income debtor can file for Chapter 7 relief if the debtor a) passes the means test or conversely does not need to qualify for the means test; and b) passes a totality of circumstances test for filing in good faith – often meaning that all of their expenses are reasonable and necessary.  See:  If I Make Over $100,000 a Year, Can I Eliminate Credit Cards Debts in Bankruptcy?
Many high-income debtors also have relatively high levels of debt.  A former executive previously earning several hundred thousand dollars per year can easily have as much credit card debt. 
In such cases, the debt must have been incurred in good faith and must not be unreasonably high in relation to the debtor’s income at the time the debt was incurred.  Counsel should devote extra time to reviewing the various debts in such cases.
The Business Debt Exception to the Means Test 
Many high-income debtors have very substantial debt obligations from failed business ventures, often due to having signed a personal guarantee.  A debtor is excused from preparing the means test if the debtor’s debts are not primarily “consumer debts”, and there is a box on the means test for this exclusion.
A “consumer debt” is defined as a debt incurred by an individual primarily for a personal, family or household purpose.  On the other hand, some courts have defined “business debt” as debt that is incurred with a “profit motive.”  I hope to devote a future column to a more involved discussion about how courts have defined debt as either business debt or consumer debt.
To see a more thorough discussion of this, please see my post:  This Debtor Didn’t Have to Do the Bankruptcy Means Test .
Variables Making High-income Debtors More Eligible for Filing 
Certain individuals are able to pass the means test much more easily than others.  Those that have large families with multiple dependants, large mortgages, two car loans or leases, mortgage arrears and tax arrears are more likely to qualify under the means test because these items can all be used as means test deductions. 
Since individuals with large famlies can benefit from increased means test deductions, consider issues in Determining Household Size for the Means Test .
Frequently, individuals with high income receive year-end bonuses.  By timing the filing of the petition, the impact of year-end bonuses on the means test can be minimized or even reduced.  See my prior post:  Advance Planning: File Bankruptcy Before You Get a Year-End Bonus .
The Budget Must Be Reasonable 
Even if the debtor passes the means test, that alone is not enough to demonstrate that the case is not abusive, and that it is filed in good faith.  All budget items must be reasonable and necessary, based on the debtor’s actual income going forward.  This requires a more subjective and equitable assessment of the debtor’s circumstances.
For example, the U.S. Trustee is likely to object to an expense of $2,000 per month for food for a family of four, but will not have any problem with an expense of $1,200, even though that is on the high side.
Some expenses will not pass muster.  The U.S. Trustee will likely argue that an expensive summer camp is unreasonable, as sending the kids there is being done at the expense of the creditors.
Issues with Keeping Rental Property
High-income debtors are much more likely to have investment real estate in addition to their homes.  In such cases, there is an issue as to whether keeping the rental property is reasonable.  If the expenses of retaining the property exceed the amount of rental income, then keeping the property will result in a reduced amount of disposable income.
In such a case, the U.S. Trustee will argue that the debtor will have additional income each month to make payments to creditors if the investment property is abandoned.
Maintaining a Luxury Residence 
A high-income debtor is much more likely to have an expensive home.  However, there are some cases across the country in which the U.S. Trustee argued that it is unreasonable for a debtor to keep a luxury home with a very high monthly mortgage at the expense of the creditors.  This issue has not been addressed in our Circuit.
Alternatives If Debtor Isn’t Eligible for Chapter 7 Relief 
If the debtor fails the means test or simply has too much disposable income, then there are still a number of options available.  The debtor can file for Chapter 13 relief if his or her secured debts are less than $1,081,400 and unsecured debts are less than $360,475. 
If the debt levels exceed these amounts, they can file for Chapter 11 relief.  Debt Negotiation is also an option in which the attorney can negotiate settlements with the creditors.  See my blog post:  Options If You Fail the Bankruptcy Means Test .
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 JUNE 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com
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Report from NACBA 2010 Annual Bankruptcy Convention

Posted on Wednesday (May 26, 2010) at 11:45 pm to Bankruptcy Means Test
Bankruptcy Practice
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Current Events
Foreclosure Defense
Issues Involving New Bankruptcy Laws
Lawyer to Lawyer
Suffolk Lawyer


Written by Craig D. Robins, Esq.


I am currently in San Francisco where I just attended the annual convention of the National Association of Consumer Bankruptcy Attorneys (NACBA).  I write this report from there on May 1, 2010.
[Note:  this article was previously published in the May 2010 edition of the Suffolk Lawyer].
[I will soon post a number of photos that I took at the NACBA convention}
Many years ago I discovered how exciting it is to travel across the country to interact with fellow bankruptcy practitioners and learn the latest about strategies for protecting consumer bankruptcy debtors, and tips for running a bankruptcy law office.
Over the course of three days, some of the country’s leading bankruptcy attorneys as well as a number of bankruptcy judges, provide valuable insight at daily programs and seminars.
What I find just as important is trading notes and war stories with other bankruptcy attorneys from across the country and learning about new products and services at the accompanying trade show.
Here Are Some Highlights of the Bankruptcy Convention
New Trend in Interpreting the Means Test
In a half-day program which addressed the means test, the speakers concluded that both the United States Trustee and our country’s bankruptcy judges have become more lenient in interpreting the means test in Chapter 7 cases.  There are three reasons for this trend.
Apparently, the current recessionary climate and sentiment against large banking institutions is resulting in the U.S. Trustee bringing fewer Section 707 motions alleging that the debtor filed an abusive case. 
In addition, more and more debtors are providing information to the U.S. Trustee’s office in cases where there are means test issues.  This enables the U.S. Trustee to evaluate the issue of abuse and reach a conclusion that the U.S. Trustee should not object.
Finally, there seems to be a greater number of experienced bankruptcy attorneys who know what red flags to look out for and consequently these experienced attorneys refrain from filing abusive cases.
Wide-Spread Concern Over Bankruptcy Judge Salaries
Judicial salaries are relatively low.  It appears that we are losing a large number of bankruptcy judges because the level of judicial pay is so low.  When there is a vacancy on the bench, this causes the bankruptcy court’s entire case load to slow down, which means unhappiness and dissatisfaction to litigants and all others involved.
This was indeed the case just two three years ago here, in the Eastern District of New York.  Our Chief Bankruptcy Judge for the district, Hon. Melanie L. Cyganowski, left the bench to pursue a much more profitable position as a partner in a leading bankruptcy firm. 
I interviewed Judge Cyganowski at that time and she clearly indicated that her reason for leaving the bench was because of her unreasonably low judicial salary.  See:  Chief Bankruptcy Judge Melanie Cyganowski Stepping Down.
HAMP Bankruptcy Update
There was ample discussion about President Obama’s Home Affordable Modification Program (HAMP) which seems to be rife with problems as an unusually small percentage of homeowners actually get permanent relief.
Here’s why: 
a) there is a major lack of communication on the part of the lender;
b) lenders are continuing to threaten homeowners with foreclosure even as the lender is evaluating the homeowner for a modification, and even if the homeowner has been approved for a trial term; and
c) lenders are arbitrary in granting relief.
On a positive note, however, a new law is going into effect on June 1, 2010 that, among other things, makes it illegal for a lender to discriminate against a bankruptcy debtor because he or she is in the HAMP program. 
The new law will also provide certain protections to Chapter 13 debtors as mortgagees will be precluded from objecting to discharge.
Lower Prices for Credit Counseling
When the 2005 Bankruptcy Amendment Act first went into effect in 2005, there were only four approved credit counseling agencies in our jurisdiction (E.D.N.Y.), and they all charged the same rate – $50 per credit counseling session.
There must have been about 20 credit counseling companies exhibiting at the trade show and many now charge fees as low as $15 per session. 
In addition, they gave out so much shwag that my ten-year-old son, Max, will be delighted to receive from me upon my return a large number of squeeze toys, flashlights, keychains, fancy chocolates, playing cards, puzzles, T-shirts and what-not that I picked up from these exhibitors.
My hard-working office staff will also be the recipient of a good deal of this booty.
Emerging Technologies for Consumer Bankruptcy Practices
One of the most crowded exhibitor booths belonged to a OTB, an company that created BK Express, a comprehensive practice management system which is designed for consumer bankruptcy attorneys.
I actually just set up my office to use this software which is basically a special shell designed to work on top of LexisNexis’s Time Matters system. 
Problems with MERS Mortgages and Foreclosure Defenses
In a very dynamic session, we were told that 50% of all residential mortgages in this country are nominally owned by MERS, which is Mortgage Electronic Registration Systems, a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.
The problem with MERS-recorded mortgages is that MERS really does not own the mortgage, thereby creating an interesting argument that MERS does not have any standing in bankruptcy court. 
I previously wrote about special defenses that a homeowner can assert to defend a foreclosure action involving a MERS mortgage.  See:  A New Powerful Mortgage Foreclosure Defense — Compliments of MERS.
If your client has a MERS mortgage, consider looking at the pooling and service agreement to make sure that there was a true and valid assignment at every link of the chain, including delivery and acceptance of assignment documents.  If there was not, you may have a good objection to a MERS proof of claim or motion to lift the stay.
Few Bankruptcy Attorneys From New York
I was rather surprised the very small turn-out from our state.  Out of about 1,600 bankruptcy attorneys who attended the convention, there must have been fewer than 20 from New York, and only one other member, I believe, from the Suffolk County Bar Association.  That was Allison Shields, who was actually one of the speakers – she spoke on managing a successful bankruptcy practice.
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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.
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