August 2009

31 Aug How To Punish Big Mortgage Company? Full Disclosure In All Ohio Cases Of Funds Received

Many of the mortgage companies are being scrutinized by bankruptcy court judges for the sloppy procedures displayed by the mortgage companies' proofs of claims filed in Chapter 13 bankruptcy cases.Critics charge that the banks/mortgage companies are covering up fraud with the assistance of our government as explained by my colleague Chip Parker, Florida consumer attorney. So, it is pleasant when a government officialtakes a stand for the consumer. Recently, a Ohio judge found that Countrywide, now Bank of America, deserved to be sanctioned for its shoddy record-keeping practices. The bankruptcy judge just needed to find the right punishment....
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31 Aug What Is “Income” In A Chapter 13?

Recently, one of my clients became upset that a disability claim settlement had to be disclosed to the Chapter 13 trustee.   My warning was that the Chapter 13 trustee may well consider any lump sum of money to be income. INCOME? (he yelled)...the IRS does not consider it to be income, why does the Trustee?   The Trustee is bound by the Chapter 13 Order Confirming Plan.   In Oregon, for example, the mandatory Order form provides (which then becomes an order when the judge signs it) that:

the debtor shall report immediately to the trustee any right of the debtor or debtor's spouse to a distribution of funds (other than regular monthly income) or other property which exceeds a value of $2,500.00. This includes the right to disbursements from any source, including, but not limited to, bonuses and inheritances. Any such funds to which the debtor becomes entitled shall be held by the debtor and not used without the trustee's permission, or, if such permission is not obtained, a court order.

That means any out of the ordinary income has to be reported to the Trustee.   Whether it is taxable or not.   Whether it is work income or not.

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31 Aug Valuation of Assets in Bankruptcy: Does it Really Matter? (Part One)

The new bankruptcy law, BAPCPA ("Bankruptcy Abuse Prevention and Consumer Protection Act") requires that a debtor's assets must be valued at "replacement cost."  In fact, if you meet with your attorney, he will give you a notice required by section 527(c) of the Bankruptcy Code, which probably explains valuation similar to this section from the disclosure form I use:
(1) HOW TO VALUE ASSETS AT REPLACEMENT VALUE: You must determine how much your personal property is worth as it is today. Do not value your property based upon what you can sell it for. Instead, value it at what you would have to pay to replace it. If your property is new or close to new, consider retail value adjusted to whatever extent appropriate for the amount the property has been used. If there is a market for your property as used, you may use that market to determine value. For example, you may consider using thrift store prices or prices at house or garage sales or at a secondary marketplace such as eBay to determine what it would cost you to replace your personal property.  [emphasis added].
The notice has always been a bit puzzling to me.  On one hand it says, "do not value your property based upon what you can sell it for."  And on the other hand it actually mentions "house or garage sales."  Huh? Isn't that what I could sell it for? Prior to BAPCPA going into effect, I routinely told my clients to value their "stuff" at garage sale values.  I now tell them to value it at what I call "Goodwill Store value."  In other words, what would their couch, chairs, dining room table, and so on, sell for at a retail store selling used goods?  I have a theory that it would be strangely similar to what the item would sell for at a garage sale, but, maybe not.  Maybe Goodwill or a consignment shop can get the item sold at a slightly higher price. The bigger issue is: what does it matter?
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