Over 40 states have already signed on to the sellout deal the corrupt politicians negotiated, so they could run for office beating their chests bragging about their tremendous accomplishment, with their mortgage company liege lords, who should have already started their prison terms, to get them off the hook for the greatest financial crimes in our history.

Just in case you wonder where I stand.

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The Monday, February 6 deadline passed with some states still on the fence, including the big one, California.

There are holdouts to the sellout:  New York Attorney General Eric Schneiderman chief among those opposing the foreclosure settlement.

Though his resolve could be weakening:

“Schneiderman said Jan. 27 that the liability releases in the draft settlement had become narrow enough so that a full investigation by a new mortgage crisis unit that he will help lead could move forward.” (from the Hufifngton Post article linked to above)

Schneiderman was appointed to the Residential Mortgage-Backed Securities Working Group by the White House, which continued the pattern of our prior President in appointing the mortgage crooks (one of them pictured below)

Image by: Dreamstime

to government office, instead of prosecuting them.

Some of us think the commission is toothless, an election year ploy to make it look like something will happen; a commission with more mortgage industry representatives than consumer advocates.

I and others have written about the real solution to the foreclosure crisis, judicial mortgage cramdown in Chapter 13 cases, allowing the courts to cram-down the amount of the mortgage to the value of the home, and to change the interest rate and length of the loan.

But the bad guys seem to have purchased both political parties, so that died was killed by the Senate.

That is how to deal with the mess on the ground.  It is equally essential to punish the wrongdoers, or we just set ourselves up again for another disaster down the road.

Bankruptcy!  I don’t want to file bankruptcy!

Hey, if you do want to file, there is something wrong with you.

But you want to keep your house?  Avoid foreclosure?

Which option hurts more:  losing your home, or, filing bankruptcy?

We humans make decisions based on our emotions:  we shy away (or run, if you are like me) from what hurts, and seek what gives us pleasure.

In spite of what I have had state court judges tell me, that there no longer is any stigma to filing bankruptcy, that is not how my clients feel.

It feels like a complete failure; breaking promises, dishonorable.

Some people cannot face the perceived shame of filing bankruptcy and kill themselves.

I am not emotionally invested in my client’s decisions on these matters, other than my strong desire that they benefit from my assistance.

Either way, you need to do the cold calculations, a real budget, how much do you have to work with, how much will it cost to do what you want to do.

There is always a  money trade off with these choices, for instance, if you meet with me and tell me keeping your house is priority number one, if I said would you pay $1 million dollars for your house, I bet you would say no.

In the old days, back when homes were worth more than we owed on them, (gosh, seems like a long time ago, doesn’t it?) most Chapter 13 bankruptcy cases were filed to stop a foreclosure and give you time to catch up on the missed payments, up to five years.

These days, most Chapter 13 bankruptcy cases are still filed to stop home foreclosure, but, in a quite different way:  lien stripping.

This option is only available if your home is worth less than what is owed on the first mortgage, and you have two, or more, mortgages.  Many of my clients are able to file a Chapter 13 payment plan, and make a plan payment that is equal to, or even less than, their second mortgage payment.

Which is scarier, foreclosure, or Chapter 13 bankruptcy?

Consult an expert bankruptcy attorney before you decide.

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It is just a fact that the over one trillion (uh,  yeah, not billion, not hundreds of billions, trillion) dollars of student debt now outstanding in our fair land will not be repaid.

Because the graduates will not generate sufficient income to pay it back.

The jobs they were told were out there for them are not there.  Of course, that big increase in degree programs colleague Chip Parker wrote about is one of the symptoms.

Another one is unjustified tuition increases by colleges, who already have enough money, but know their customers can get more student loan money to buy their product.  Which they do, mostly because they do not understand what paying it back means to their lives.

I take issue Mr. Parker’s statement that student loans, like mortgages are a necessary evil.

We will save that debate for another time.

The problem on the table is what to do about the debt that is already out there.  It is not currently dischargeable under bankruptcy law, unless the debtor can prove it would be an undue hardship to have to repay it.  Very little student loan debt is resolved by this method.

What if this debt cannot be discharged in bankruptcy?

We will have thousands of students shackled into debt.

(image credit: dreamstime)

So, who should take the hit?  What about the banks that lent the money?  Oh, sorry, I forgot.  This is America.  The banks NEVER take a hit.  Most of this debt was guaranteed by, or to, the government anyway.

The universities?

Should they be required to pay all or some of the debt their graduates cannot pay?

Nearly seventy universities in the U.S. have endowments of over a billion dollars.  They are the ones who are supposed to be making the students job worthy.  Big paying job worthy.

Boy, I love this idea.  As you can tell from Chip’s post, being that faculty number and salary have not increased during the last decades of tuition inflation, funded by easily obtained student loans, where did the money go?

“If the professors are not getting this booty, it must mean the administrators are. “

Still, very difficult to work out the details on this one.  Probably would require a whole new bureaucracy.

So what are we left with?

The students?

Calls to return bankruptcy laws to the days when student loans were dischargeable are increasing, even law professor Glen Reynolds, considered a conservative (actually, libertarian) blogger (Instapundit) has joined the chorus.  Glen has long written about the unsustainability of the student loan bubble.

Something will change.  We just have to work out what it will be.

At least the graduate in the picture has a job.  Being that is involves wearing a chicken suit, it might not produce enough scratch to pay off his share of the more than $1 trillion dollars in student loan debt now owed in our country.

The issue is on this site because now, more than ever, it is difficult to get student loans discharged in bankruptcy.

My colleague Chip Parker wrote here about student loan dischargeability in Chapter 7 bankruptcy.

There is a student loan bubble, comparable to the housing bubble, the bursting of which splattered us all. The short version, as the government subsidized the cost of college, more and more, unsurprisingly, more and more folks went to college on the easily borrowed dime of the taxpayer.

To check out the status of the student loan crisis in your state, check the projectonstudentdebt.org site.  Click here:  student loan crisis.

Being that they were not spending their own money, the colleges had no problem increasing tuition by way more than the rate of inflation.  It appears most of the increase went to:  more and higher paid administrators.

Australia has a different student loan policy:  each student has “x” amount of dollars for undergrad education.  You use it up, it is gone.  You can get more for grad school.  This way, the colleges do not just raise the rates knowing the government will just up the loans it grants.

Make no mistake:  whether or not the bankruptcy laws are changed to make student loans dischargeable, the trillion dollars out there will NOT be repaid.

As it is, we have sold college grads a bill of goods.  “To get a good job, you need a good education.”  Putting to one side the question of what is a good education, a generation has gone into hock big time, only to come out to jobs wearing chicken suits.  If they are lucky.

They cannot buy houses because they have to repay the loans, so they go back to live with mom and dad.

The President’s student loan program, as per usual, is laughable, saving the average grad less than $10 per month.

This will change, but how?

(image credit dreamstime)

1.  Debt collectors are NOT under oath when they are talking to you.  There are restrictions on what they can say, but exagerration, saying what might happen if you do not pay, are allowed.

2.  They are not trying to help you!  They are not trying to work things out, come up with a plan you can live with.  They just want your money.

3.  You are wasting your breath telling them your life story.  They do not care what your situation is, as I say to my clients, they do not care if you are a quadraplegic living alone.  THEY JUST WANT YOUR MONEY.

4.  Why do they just want your money?  Because that is how they get paid; they get a percentage of what you pay.

5.  You already feel bad for not paying the bill, (if you owe it) and they will play on that, how only bad people do not pay their bills, and you are not a bad person, are you?

6.  They may be collecting for someone who bought the debt at a discount.  They may have bought your $10,000 credit card balance for $500.  So, frequently, they have lots more room to negotiate than you think.

7.  If they play nice with you, the evil boss is staring over their shoulder, and when he figures out what a deal you are not taking, he will get really mad.

8.  This debt they are collecting may be past the statute of limitations for your state.  That means, it may be too late for the actual creditor to sue you in court.  It may still be on your credit report, but, you are safe from a judgment, garnishment or execution on a judgment.

9.  You can find a lawyer to talk to for free on the phone about whatever they are telling you.  Do not believe anything they say about bankruptcy, or any other law.

10. You cannot go to jail for not paying a bill.  It is not child support, or some other court ordered payment.

(image credit:  dreamstime)

Colleague Dana Wilkinson calls it “foreclosure limbo.”

You made the difficult decision, accepted reality, you cannot pay your debts, and, even filing bankruptcy, cannot keep your condo.  Or, like one of my clients, the condo you bought for your son’s family, which they could no longer pay.

Whether in a Chapter 13 bankruptcy, or Chapter 7 bankruptcy, you state in your papers you want to give up the condo, let it go back to the lender.

Your chapter 13 plan is confirmed, and provides that you are surrendering the condo, in satisfaction of the mortgage claim.

And the lender, does:  nothing.

They do not object to the plan, they do not contact your lawyer.

Or, in your Chapter 7 bankruptcy, your statement of intentions says:  surrender the condo, let it go back to the lender.

Well, in Michigan, and I think, most states, transfer of real estate requires acceptance.  You can sign a deed quit claiming your interest to the mortgage company, but, if they do not accept it, the property is still yours.

And there’s the rub.  You are stuck with ownership responsibilities, including, those accruing condo dues or asssocitaion fees or whatever they are called in your neck of the woods.

In my case, the mortgage payments were a year behind when we filed the Chapter 13 bankruptcy, the son’s family had left, no one would buy it, no one would rent it, so it sat empty.

The plan provided for surrender to the mortgage company in full satisfaction of its claim.  They did not object, the plan was confirmed, the case went on for a year.  Then the association filed a motion for my clients to pay all the dues accrued since the case was filed.

So, we filed a motion that the court make the lender take back title to the real estate, or, sign off and give it to us, so we could give it to the association.

A lawyer finally showed up for the mortgage company, and the Judge asked, what does your client want to do with this place?

His answer:  We don’t know yet.

So, the Judge would not grant our motion, and did not grant the condo association motion, but we all agreed the condo association could rent out the place and apply rent to the back, and accruing, dues.

And that was last August.  The mortgage company still has done nothing.

But, it was good that we filed our motion, as a Federal District Judge in Detroit just held that the homeowner can be stuck with the dues if he has made no effort, other than the Chapter 13 plan, to get the condo out of his name.

]]> http://www.bankruptcylawnetwork.com/filing-bankruptcy-do-i-have-to-keep-my-condo/feed/ 0 http://www.bankruptcylawnetwork.com/los-angeles-dodgers-filed-chapter-11-bankruptcy-in-delaware/ http://www.bankruptcylawnetwork.com/los-angeles-dodgers-filed-chapter-11-bankruptcy-in-delaware/#comments Wed, 10 Aug 2011 16:38:56 +0000 Kurt O'Keefe, Attorney at Law http://www.bankruptcylawnetwork.com/?p=23087

(Dodger shirt available through And my own hometown Detroit company, General Motors, filed Chapter 11 in – New  York City.

Well, is is something of a cottage industry in Delaware, whose courts have extra judges and personnel, and, incidentally, way more bankruptcy lawyers per capita than anywhere in the world.

Because, the Delaware courts have enacted rules that make it easier, more favorable, for companies to file Chapter 11 there.

New York is already blessed with many expensive bankruptcy lawyers, and their bankruptcy courts have also made rules to ease Chapter 11 filings for corporations.

But, hey, where does it say bankruptcy is supposed to be convenient for the companies filing, and their lawyers?

Writing in the Journal of the American Bankruptcy Institute,  Congressman, John Conyers, joining hands across the aisle with Republican Lamar Smith of Texas, discuss their sponsored legislation to would limit the ability of corporations to forum shop.  Why should the Dodgers be able to file clear across the country, away from most of their creditors, not to mention all of their (dwindling supply of) fans?

And GM, with employees and suppliers and retirees all over Michigan, be able to scamper off to New York?

Under current law, because a GM affiliate, a dealership it owned in Harlem, filed in New York first, so when GM filed minutes later, it was a related case assigned to the same Judge.

I guess the Dodgers are on of the zillions of corporations incorporated in Delaware.

The new law would require corporations to file either where it has its principal place of business, or where its principal assets are located.

GM has plants all over, so it might still have had some options, but the Dodgers would have had a tough time filing Chapter 11 outside of Los Angeles.

I think it a good idea for companies to file close to home.

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We have bailed out the mortgage companies that brought us the foreclosure crisis, now the states and a federal government agencies are on the verge of a sellout buyout by the bad guys for fraudulent foreclosures.

The Office of Comptroller of the Currency, or OCC, and the attorney generals for all 50 states are participating in the talks, with five of the main crooks:  J. P. Morgan Chase, Wells Fargo, Ally Financial (formerly GMAC), Citigroup and Bank of (everything in) America.

The sum of $20 billion has been thrown around for a while as the total cost of the settlement.

The latest rumor is that the federal part of the settlement would involve credit for reduction of mortgage principal in loan modifications, something we at BLN have been screaming for some years now.

What did these wonderful companies do that would inspire them to fork over these huge amounts of money?

Where do I begin?

A HISTORY OF RIPPING OFF EVERYONE

The best summary of the whole story is “Reckle$$ Endangerment” by Gretchen Morgensten, but lets look at some of the mortgage company fraud highlights:

In the worst acquisition by an American corporation, bar none, Bank of (everything in) America bought Countrywide just before the real estate bubble burst.

Countrywide was the worst purveyor of predatory loans and bogus mortgages.

A Forbes story quotes Susan Kastner in the Financial Times:  “…The Walnut Place investors said that as many as two-thirds of the loans in two Countrywide trusts failed to meet underwriting guidelines, according to their own investigation. Extrapolating that failure rate to the 530 trusts covered by the bank’s settlement, the Walnut Place investors concluded that BofA could be liable to repurchase loans with unpaid principal balances of as much as $242bn.”

The current issues revolve around the corner cutting and rule skipping the mortgage companies have used to accelerate foreclosures.

Paying people to sign hundreds of affidavits a day, each attesting to personal knowledge of the status of a mortgage loan, and each needed for legal proceedings to take back your house.

$20 billion is way short of the actual damages caused by these crooks, and should not be considered for one minute.

Leases are their own animal under the bankruptcy code.

They are neither secured debt, nor unsecured debt.

They get their very own schedule, schedule G.

And the Bankruptcy Code provides that leases can be assumed or rejected.

Rejection, as you might have guessed, means nope, not interested, take your leased property back, don’t want it anymore.

The Chapter 7 discharge removes your personal liability for that lease, end of story.

How do you reject a lease?

Happens automatically if you do not assume it.

Now, maybe you rent where you live, or your car, and you want to keep it.

So, you assume the lease.

Sign an assumption, the creditor signs, you file it, and, the lease is assumed.

But that is NOT reaffirmation.

The bankruptcy code, 11 USC 524, sets out what has to be done to re-impose personal liability on a debtor for a pre-petition debt.

Does assuming a lease make you personally liable for that debt?

Can the lessor, the person or company on the other side of the lease, sue you for money if you default later?

Or do you also have to reaffirm a lease in order to be personally liable?

As with reaffirmations, lease assumptions must be entered into BEFORE the discharge.

This gives you at least 60 days after the 341 hearing, or creditors’ meeting, which is about a month after the case is filed.

Unlike reaffirmation agreements, a lease assumption does NOT have to be approved by the Court.

Some courts punted, allowing lease assumptions without addressing the issue of the debtor’s personal liability.

In In Re:  Creighton, 2007 WL 541622 (Bankr.D.Mass.2007), the issue was squarely before the court, as the court had approved the lease assumption, with the notice that a reaffirmation agreement would be necessary for imposition of personal liability on the debtor.

So the creditor moved for reconsideration of that requirement, partly on the basis that the lease assumption included language imposing personal liability on the debtor.

That court, and most others, concluded that nothing in the 2005 Bankruptcy amendments changed the strict requirements for re-imposing personal liability on a debtor.

This holding was followed in the recent case of In re David W. EADER, 426 B.R. 164, (2010)

So, at least in most bankruptcy courts, assuming a lease does NOT make you personally liable again on that contract.

The Truth About Lease Reaffirmation

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You may run an incorporated, or, unincorporated, small business.

A corporation that wants to keep operating has to file for Chapter 11 to get bankruptcy relief.

Individuals may file also;  you do not have to be a corporation to file for Chapter 11.

You may own and rent a bunch of houses, operate a store, or any other business, in your own name.

All bankruptcy chapters require you to all include all of your debts, including personal and business, anything that is in your name.

All property has to be listed, again, whether you consider it personal or business.

Unless your business is a partnership, or corporation, limited liability corporation, even though you may run the business books separately and regard it as separate from you, it is not.

So include in your personal Chapter 11,  your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.

File a personal budget of your income and living expenses, and you should file a separate budget for the business, with its income and expenses.

The reasons and benefits of Chapter 11 bankruptcy?

Even though you may run the business books separately and regard it as separate from you, unless it is a partnership, or corporation, limited liability corporation.

So your individual Chapter 11 includes your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.

You should file a separate budget for the business, with its income and expenses and one for you, with your income, the net from the business, and whatever other income you have, and your personal expenses.

What is the benefit of filing Chapter 11 bankruptcy?

You cannot file a Chapter 13 if you owe more than a certain amount of money.

There is no court appointed trustee in Chapter 11, you act as your own trustee, so you continue to operate in the ordinary course of business, but anything outside the ordinary course of your business requires court approval.

You have the United States Trustee overseeing your case,

The U. S. Trustee gets monthly financial reports from you, and duplicate original copies of your monthly bank statements, and you pay them a quarterly fee.

The U. S. Trustee does NOT get your plan payments to disburse to creditors.

In Chapter 11, usually 120, frequently 180, days to file a plan; in Chapter 13, you have 15 days to file a plan.

You have to start making payments right away in Chapter 13, not so in Chapter 11.

Chapter 11 gives you a time out from most of your debts, which may be enough for you to save your business.

A Chapter 11 plan can change the interest rate and other terms of the mortgage, if your business is renting other homes, and you can re-write the mortgage balances on those homes, down to the value of the home.

You do not have to lose anything by filing Chapter 11; You can return property that you do not want to keep to secured creditors, but y

If you need more time to complete a plan than the five year Chapter 13 maximum, you can take it.

If, and I say if, there is a level at which your business is profitable, Chapter 11 offers a way to shed debt, and the debt service, that may mean the difference between a viable business and one that goes under.

The Truth About Chapter 11