2 years 3 months ago

Global Client Solutions got $61.50 from C H and pays up $1500. C H, like many of my bankruptcy clients, tried to “settle” her debts before talking to a bankruptcy lawyer. She paid $1,133.48 to Global Client Solutions as part of a debt settlement plan, before she realized NONE of the money was going to […]
The post Global Client Solutions Pays Us $1500. by Robert Weed appeared first on Robert Weed.

2 years 6 months ago

In most chapter 13 bankruptcy cases, upon confirmation, a monthly payment is set in place and it will not vary. However, there is always an exception to this rule. In some circumstances, the debtor can bring a motion to modify the plan such as a case where there is a significant decrease in income. Well+ Read More
The post When Your Chapter 13 Plan Payment Is Not Written In Stone? appeared first on David M. Siegel.

2 years 6 months ago

Not every married couple files a joint chapter 13 bankruptcy case. However, the income and expenses of the non-filing party is critical in determining how much the filer has to pay per month to a Chapter 13 trustee and for how long. This relatively new concept stems back to the bankruptcy reform of October 17,+ Read More
The post The Importance Of The Non-Filing Spouse In Chapter 13 Bankruptcy appeared first on David M. Siegel.

2 years 6 months ago

When a chapter 13 case is up for confirmation, the court, the trustee and the debtor must comply with section 1129 of 11 U.S.C.  This section deals with confirmation of a plan and it lists all the different factors that must be complied with for the court to sign an order confirming the plan. Most+ Read More
The post Confirmation Of A Chapter 13 Plan: The Liquidation Test appeared first on David M. Siegel.

2 years 6 months ago

Here at Shenwick & Associates, we play for both sides–both debtors and creditors.  One issue that both debtors and creditors are intensely concerned about is the “automatic stay” imposed by § 362 of the Bankruptcy Code.  The automatic stay is an injunction that tolls legal actions by creditors (with a few limited exceptions) against debtors.  The automatic stay takes effect when a bankruptcy petition is filed.

In many cases, debtors contact us prior to a court hearing or a foreclosure sale to invoke the protection of the automatic stay to stop these proceedings.  In the case of a debtor who’s a party to a collection action, once the bankruptcy petition is filed, the collection is stayed and barring a successful objection to the discharge of the debt, the debt will be discharged in bankruptcy (the exceptions to discharge are complex, vary from chapter to chapter and are beyond the scope of this article).  Although the automatic stay stops enforcement mechanisms in actions (such as debt collection and foreclosure sales) and the commencement or continuation of legal proceedings, it does not bar the ministerial act of entry of judgment against a debtor.

From the creditor’s perspective, the automatic stay serves to bar the creditor from exercising their rights and remedies under applicable non–bankruptcy law.  Fortunately, there are some strategies that creditors can use to obtain relief from the automatic stay.  If a debtor has a pending bankruptcy case and files a new case, a new filing will be presumptively considered to be in bad faith; the automatic stay in the new case will only last for 30 days, unless a request to continue the automatic stay is made by a party in interest and the debtor can demonstrate that the new case was filed in good faith.  And if a debtor has had two pending cases in the past year, the third filing will not trigger the automatic stay without an order from the bankruptcy court.

However, the primary method for creditors to circumvent the automatic stay is by filing a motion for relief from the automatic stay pursuant to § 362(d) of the Bankruptcy Code, which provides that:

On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—for cause, including the lack of adequate protection of an interest in property of such party in interest; with respect to a stay of an act against property under subsection (a) of this section, if—the debtor does not have an equity in such property; and such property is not necessary to an effective reorganization; 

“Adequate protection” is discussed in § 361 of the Bankruptcy Code, and is required to protect secured creditors from a decrease in the value of their collateral between a bankruptcy filing and confirmation of a plan.  Section 361 lists several examples of adequate protection, including single or periodic cash payments.

 Although § 362(d)(1) specifically references adequate protection, that’s only one example of “cause,” which can also include the filing of a Chapter 13 plan in bad faith or the Debtor’s failure to make post–petition payments on the secured claim.
With respect to § 362(d)(2), the Supreme Court has held that once a party moving for relief from the automatic stay establishes that a debtor has no equity in a property, it’s the burden of the debtor to establish that the collateral at issue is necessary to an effective reorganization.  Section 362(g) places the burden of proof regarding the Debtor’s equity in property on the party moving for relief from the automatic stay, but the burden of proof on all other issues is on the party opposing relief.

Whether you’re a debtor or a creditor, please contact Shenwick & Associates to discuss how the automatic stay in bankruptcy will affect your rights.

2 years 7 months ago

In the Summer of 2014, we wrote about a Chapter 7 bankruptcy case in the U.S. Bankruptcy Court for the Western District of Michigan (the “Bankruptcy Court”) involving an intra-family squabble. Our analysis focused on the Bankruptcy Court’s decision related to cross motions for summary judgment filed by the parties, and whether the doctrine of “collateral estoppel ”was applicable to the claims being asserted by the parties in an adversary proceeding pending in the bankruptcy.
While bankruptcy offers a fresh start to debtors, it’s not always a fast fresh start, as evidenced by the fact that the Bankruptcy Court recently published another opinion in the same adversary proceeding relating to a similar claim and again analyzing the applicability of collateral estoppel. Read More ›
Tags: Chapter 7, Western District of Michigan

2 years 7 months ago

When Chapter 13 Makes Sense There are certain circumstances where chapter 13 makes perfect sense even though there may not be a lot of debt being repaid. A perfect example of this would be if a person’s driver’s license is suspended due to failure to pay parking tickets to the City of Chicago. Let’s say+ Read More
The post Chapter 13 Filing With Limited Debts appeared first on David M. Siegel.

2 years 7 months ago

Chance For Dismissal This is a question that comes up on nearly every chapter 13 bankruptcy case that is filed. It is almost impossible to make it through the chapter 13 filing process without some sort of difficulty. The difficulty might stem from the trustee, a creditor, the regulations, or the debtor himself. There are+ Read More
The post Is My Chapter 13 Bankruptcy Case On The Verge Of Dismissal? appeared first on David M. Siegel.

2 years 7 months ago

Working with clients who fall into debt traps has made me cautious about using credit cards. That’s an understatement. I’m paranoid when it comes to debt. I pay off all personal and business credit card debts in full and never carry a balance.  In fact, I pay the accounts weekly so I don’t carry a balance on my credit report.  (That actually helps boost a credit score.)
So, I was surprised when the folks at the Debt Reduction Center sent me this advertisement letter.
Debt Reduction Center Letter
How this company estimated that I might owe $25,000 of creditor balances is beyond me, but I’m sure it has something to do with what I could owe if I decided to maximize my lines of credit. However, as I said before, I don’t carry a balance and I never pay late, so it was surprising to get the letter.
I can only assume that everyone in America with a credit card is getting these letters, whether or not they are experiencing debt problems.
But even if I was $25,000 in credit card debt, is it really true that I could settle my way out of the problem for only $375 per month over 36 months?  Gosh, that seems hard to believe.  To pay off $25,000 of credit card debt with an average interest rate of 19% would require a $916 payment over 37 months.  I can see where many folks would find this offer attractive.
Will this settlement plan actually work?  Can you settle $25,000 of debt for $375 per month over 36 months?  In my professional opinion, not a chance!

  • You don’t have 36 months to settle debts.  These programs require that you stop paying the credit card account and start paying into their settlement escrow account. After 6 to 12 months of no payments, banks file collection lawsuits or they sell the accounts to aggressive junk debt buyers.
  • Settlement Fees:  Debt settlement companies typically charge a 15% to 20% settlement fee, so not only do you have to save up for the settlement but you need to save up to pay the settlement fees.
  • Accruing Penalties & Fees:  While you are paying money into the debt settlement escrow account, interest and penalties are racking up on the debt.  So even if you settle the debt for 50 cents on the dollar, you are settling a higher account balance.
  • Tax Consequenses:  When credit card companies settle debts they usually issue a 1099-C tax form to the IRS to report what you did not pay. That can result in additional income taxes you must pay.
  • Garnishments:   When the banks obtain judgments they may garnish up to 25% of your paycheck.  That’s commonly when I meet new customers–when their paychecks get garnished and it becomes painfully obvious that the debt settlement program has failed.

You will never find a debt settlement company that publishes its success rate.   There is no standard for measuring success, no auditing of cases, no public records available to audit, and no public reporting requirement at all.  It is commonly believed that the success rate of debt settlement is below 10%.  Some have said the success rate is as low as 1%.
Jeff Meeks, a former Vice President of Recovery Operations for WaMu Card Services, had this to say about the debt settlement industry:

I have had numerous DSC’s admit they have no intention of settling debt and in fact it is counter productive to their purpose to do so; their main purpose being to enroll consumers, collect fees, and provide such poor customer service and results that most consumers drop from the program and thereby leave the DSC with thousands of dollars in unearned benefit.

The Federal Trade Commission has also written a great article warning consumers about the risks of debt settlement. An important FTC study showed that the success rate of debt settlement is less than 10%.
The Nebraska Deceptive Trade Act states that a person engages in a deceptive trade practice when they make “false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions.”  Neb. Rev. Stat. 87-302.
It is a also deceptive when a business “represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have.”
Debt settlement advertisements make false representations about price reductions.  They represent the ability to achieve results they clearly do not obtain.  The advertisements are misleading.  Representing that $25,000 of credit card debt can be settled for 36 monthly payments of $375 monthly is misleading.  Representing that these programs work when the success rate is less than 10% is misleading.
If you have been mislead by a debt settlement company about the success rate of their program you may have a claim for damages under the Nebraska Deceptive Trade Act, including a claim for attorney fees.

2 years 7 months ago

In re Barrett, ND California 2016, lawyer debtor
The United States Bankruptcy Court for the Northern District of California issued an interesting ruling that discharged over a quarter millions dollars of federal student loan debt for a 56-year-old securities law attorney (In re Barrett, Case No 14-43516).
Kevin Barrett is a single man who has been a licensed attorney since 1987.  He is in good health and has no dependents.  At one point he earned as much as $165,000 per year as a securities lawyer, but that income ended in 2007.  He earned very little for the next 4 years.  In 2011 he was hired for $98,000 per year by another firm until August of 2013 when he was terminated.  Since that time he has struggled to earn more than $10,000 per year in his own practice.
The debtor did not live extravagantly. He paid $750 per month for rent and drove an older car. He had no savings or retirement account.
The debtor had paid nearly $40,000 in student loan payments over the years.
The Department of Education objected to the discharge since Barrett never applied for one of their Income Based Repayment (“IBR”) plans. Under such plans a debtor’s payment is pegged to their actual current income level, and in Barrett’s present condition the payment would have been zero. However, the bankruptcy court rejected this argument.

While the DOE correctly argues that this court must consider [the debtor’s] failure to apply for one of its income-based repayment plans, such inaction is insufficient, standing alone, for this court to find against him.

Given the debtor’s age and present lack of income to make a meaningful payment of any amount and the significant income tax consequence of forgiving such a large debt, the California bankruptcy court considered the income-based  payment plan to be impractical.
When seeking to discharge student loans in bankruptcy it is helpful and appropriate to have a record of applying for the various Income-Based Repayment plans available. Such applications demonstrate the good faith courts generally demand as a prerequisite to entertaining  a hardship discharge. However, when it comes to older debtors who have in good faith attempted to improve their circumstances while paying what they can on school debts over an extended period of time, the failure to apply for an IBR is not always conclusive.
Image courtesy of Flickr and Harvard Law Record.