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February of 2016 Diane was named Outstanding Pro Bono Attorney of the Month by the Volunteer Lawyers Program. The Volunteer Lawyers Program is a joint project of Community Legal Services Inc. and the Maricopa County Bar Association. This program consists of lawyers who volunteer their time to provide legal assistance to low-income Maricopa County residents.
Questions from Peggi Cornelius, VLP Programs Coordinator:
1) What motivates you to do community service?
Those around me – both I my fellow volunteers and those who we are lucky enough to help. I am motivated by the energy of people like Pat Gerrich and Kevin Ruegg and cannot help but be affected by their enthusiastic commitment to our community. I am motivated to give more when I see the relief in the eyes of someone who knows their pay check will no longer be garnished or their sleep interrupted by obnoxious collection calls. It really is true that the more you give the more you receive.
2) How did you learn of the VLP and participate for the first time?
I really do not remember. Most likely it would have been a referral from Kevin S. Ruegg, Arizona Foundation for Legal Services & Education. From that time she and Pat Gerrich (Community Legal Services) never let me out of their sight.
3) Describe pro bono work you’ve undertaken with VLP; Bar associations, courts, law schools, and/or other community service work?
Throughout my entire legal career I have volunteered at many of the State Bar programs, Bankruptcy Court programs, VLP call-outs, Disabled Vet groups (my husband is a disabled vet), law school programs or other projects that are designed to really help people, not just be a press opportunity. In 2005 we established the Self-Help Center at the Bankruptcy Court. Today the Center has a fabulous permanent staff (Tami Johnson and Cynthia McElroy), the commitment by all the bankruptcy judges and, at the core of its success, 70+ volunteer attorneys. The result has been to help thousands of individuals who could not afford an attorney or were abandoned by their own attorney. In 2014 I established a Bankruptcy Clinic at the Arizona Summit Law School. The Center offers free legal advice dealing with bankruptcy and debt related issues. The students are wonderful and learn how to manage a great deal of paperwork, plus the reward of helping someone in need.
4) Among pro bono clients you’ve advised or represented, what people, circumstances, outcomes, etc., stand out in your mind?
A young mother of three children (all under the age of 10 and all disabled) was abandoned by her husband, the only bread winner. She was left with all the bills, no income and no ability to find work because of her responsibility to care for her children. She was referred to me by a friend. We talked about options, including bankruptcy. In reviewing her assets she disclosed a savings account with almost $500. The exemption allowance was $150 so I explained how she would lose the extra money if a creditor swept her account or she filed for bankruptcy. My heart stopped as she broke into tears. She explained that it had taken her almost 3 years to save the money and she overwhelmed by the prospect of losing it. Suddenly her eyes lit up and she asked “can I use the money to buy a new bed”? I realized that she had listed only one bed (remember this is a family of four). She explained that she had not slept in a bed since her husband left almost three years earlier. The children took turns sleeping on the floor or in the bed. After I stopped crying I asked my husband to borrow the neighbor’s truck and help her buy a bed.
That event stands out in my heart and soul as an example of why all volunteers do what they do.
5) What has been most gratifying?
Helping people start their lives over after financial disaster. Many people are overwhelmed by changes in life: divorce, death, illness or unemployment. They lose the ability to stand back and visualize their future because they are buried in the minutia of their day-to-day existence. My goal is to give them the tools they need to make good decisions for their future. Hopefully, they share these same tools with their children and others.
I also love mentoring young lawyers, or those new to the bankruptcy practice. If I can show them the value of volunteering then my reach grows through them (something like a large tree spreading its branches to offer shade to those who need it).
6) What has been most challenging? What keeps you coming back?
The most challenging – dealing with attorneys who fight just because “it is fun” or they are under the misconception that a “good” lawyer is supposed to make everything difficult. These argumentative attorneys cost the entire system in time, money and energy. Their take pride in harming others rather than settling the matter.
What keeps me coming back – working with other attorneys who have the same commitment to professionalism and making the world a better place for us all. I know this sounds sappy, but it is really how I feel.
7) What would you say to a colleague who expressed interest, but was reticent to join VLP?
A law degree is a privilege, not a right. With that license comes the responsibility for every attorney to help make their community better.
Personal history:
1) Where were you born? Raised? If different than Arizona, how did you come to reside here?
Born in Tucson moved to Phoenix while in grade school
2) Describe your family of origin – people, environment, etc.
My family includes hard working farmers, ranchers and small town people. When I was young my parents operated a mechanical engineering firm in our front room. Mom was the bookkeeper and Dad the mechanical engineer. They moved their business out of the house after the employees outnumbered the five family members. Dinners were spent discussing business issues so, as children, we were immersed into the business world. My parents encouraged early entrepreneur experiences: making and selling Barbie doll clothes or acrylic grapes, plus the traditional lemonade stand and babysitting.
3) Where & what field of studies – undergrad? Grad?
Undergrad – two majors: physio-psychology and criminal justice.
4) Did you have other jobs/profession before becoming a lawyer?
At 19 I took on the most important job – being a mother. To earn extra income I started a seamstress business out of my home. At 21 my career in or around the law started with a receptionist job at the Maricopa County Public Defender’s Office. Prior to law school I spent fifteen years with firms of various sizes working as a receptionist, bookkeeper, paralegal; even with a short stint as the janitor in order to earn extra money for law school.
5) When/how did you know you wanted to be a lawyer? What or who influenced you to go to law school?
I always wondered how things worked: vehicles, record players, the human body and the law. I don’t like the heat, so working on vehicles was out. Record players still confound me. The human body was an option, but I wanted more control over my time. Last on the list was the law. This goal was set in stone when, just before graduation from ASU, I attended a presentation in the Great Hall of the ASU School of Law.  There were a few speakers who failed to gain my interest, but then a very imposing man was introduced with a long list of what he had done during his legal career.  Upon taking the podium the speaker asked if we were impressed with his resume’. Overwhelmed by the list of jobs and responsibilities we all muttered “yes”. He laughed and said “the real truth – I get bored easily and need to try something different every few years. The law allows me that opportunity.” My eyes widen with the knowledge that I could make a life in the law while navigating my own course. I really wish I remembered this wonderful man’s name because he really was that “ah ha” moment.
6) Describe your family and/or personal life now.
My immediate family is in Phoenix, including my parents. Between my husband and I we have four girls, four grandchildren and one great grandchild. In 1991 I moved my busy creditor bankruptcy practice to my home, where it still operates today. The family was too large and needed adult supervision. In 2000 my husband joined me and took over the front office responsibilities, including the bookkeeping. As the children left our home morphed from a three bedroom and garage into a one bedroom and 3 offices. Our children were involved in the office and learned the value of good business skills. What 8 year old do you know who has a resume’?
7) Who do you think would be most proud of the work you are doing through VLP?
My grandmother – Flora Frye. Grandmother was not a traditional woman. She worked a man’s job – farming. She was in the military in the 1940s. After retiring from farming she moved to Yuma and established the first Displaced Homemaker program. She haunted the offices of politicians and was a well-known face at the legislature. When I was just entering law school she invited me to attend the opening ceremonies at the State Legislature. The House Chair welcomed her, then turned to me and said “when Flora Frye asks for something you just give it to her because she will keep coming back until you do”. Until that day I was completely unaware how involved she was in politics or the community volunteer world. A few years later she received the Channel 12 award “12 Who Care” (I have her award on my desk). A year after that she was honored by the Governor for her contributions to vulnerable women and children. She graduated from NAU with her doctorate in education when she was 89.

The post Diane L. Drain Named Outstanding Pro Bono Attorney of the Month appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

Credit Report Determines Credit Worthiness In the last week, I have noticed more than one client relying way too heavily on information appearing on a credit report. These clients were under the impression that if something falls off the credit report, that they no longer owe any money to that particular creditor. What these clients+ Read More
The post The Credit Report Does Not Tell All appeared first on David M. Siegel.

Facts: This is the bankruptcy case study for Miss Y., who resides in Lake County, Illinois. We are going to examine whether or not this person qualifies for bankruptcy and whether or not this person should file for bankruptcy relief. Let’s look at the specific fact pattern. The first thing to note is that the+ Read More
The post Bankruptcy Case Study – April, 2016 appeared first on David M. Siegel.

In two recent cases the 8th Circuit Court of Appeals has sustained summary judgments against debtors who failed to report claims against third parties that arose after the bankruptcy case was filed.
In the case of Jones v. Bob Evans Farms Inc., the debtor failed to disclose an employment discrimination claim that occurred 3 years after the bankruptcy case was filed.  The bankruptcy case was filed in 2009 and in 2012 the debtor quit his job and filed a discrimination case with the Missouri Equal Opportunity Commission.  The employer filed a motion for Summary Judgment claiming that the debtor was judicially estopped from pursuing his claim because he failed to report the claim in his bankruptcy schedules.
The 8th Circuit court agreed with the employer and declared that a debtor who intentionally hides a post-petition claim by failing to amend the bankruptcy schedules lacks standing to assert such claims in future legal proceedings and is thereby judicially estopped from litigating such claims.
A month later the 8th Circuit issued another opinion on this same topic in the case of Van Horn v. Martin where a debtor filed Chapter 13 bankruptcy in 2007 but failed to amend schedules to report an employment discrimination claim that occurred in 2011.  After the debtor completed the chapter 13 case the employer was awarded a Summary Judgment because the debtor failed to report the new claim, and the 8th Circuit court sustained the summary judgment.

Judicial estoppel is an equitable doctrine which “prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001).

The 8th Circuit applied a three-prong test to determine when judicial estoppel applies.

1. A party’s later position must be clearly inconsistent with its prior position.  By not amending bankruptcy schedules to report a new claim the 8th Circuit declares that no such claim must exist, and that is a position deemed to be clearly inconsistent with the later litigation.
2. Whether the party succeeded in persuading the first court to accept its position. Receiving a discharge in a chapter 13 case where new new claims are not disclosed is considered to cause the first court to accept the position that no claim truly exists.
3. Whether the party seeking to assert an inconsistent position would derive an unfair advantage if not estopped.  Failure to disclose new claims arising during a chapter 13 gives the debtor an unfair advantage in that creditors may have benefited from increased payments derived from settlement of those claims.

The concept of Judicial Estoppel is widely understood by attorneys to require the disclosure of claims that exist prior to the filing of bankruptcy in both chapter 7 and chapter 13 proceedings, but many were surprised that the doctrine was extended to new claims arising after the bankruptcy was filed.
Attorneys for the debtors pointed out that the “bankruptcy estate” is not compromised of post-petition claims.  They claimed that there is no legal duty under the Bankruptcy Code to disclose post-petition claims.  However, the 8th Circuit responded that judicial estoppel may apply “regardless of whether he had independent legal duty to amend schedules.”
As a practical matter, these rulings will have a profound impact on debtors and their attorneys. First, many debtors are simply not aware of the requirement to report new claims to their bankruptcy attorneys.  Debtors are inundated with information at the beginning of a case and it is unreasonable to expect them to remember such fine legal details during a five year case. Also, once a chapter 13 payment plan is approved the case really just fades into the background of their life.  Payments are made the the court monthly, often through a payroll deduction, but there really is no ongoing contact with the court or their attorneys in many cases.
The 8th Circuit takes a drastic and dark view of debtors who fail to amend schedules to report new claims, but this omission is more common and innocent than the court understands.  I frequently learn of new claims that arise from clients who have no idea that such claims should be reported. Usually we learn of these claims when a debtor defaults on plan payments and responds that they were off work due to a car accident or job injury.
Very commonly I discover debtors who are in the middle of new lawsuits for worker compensation claims or auto accidents, and their personal injury attorney has no clue of the need to report the claim to the bankruptcy court. Contrary to the 8th Circuit’s concern over dishonest debtors who hide claims with the intent of misleading the bankruptcy court of their ability to pay debts, most debtors and their injury attorneys are completely clueless of the need to amend bankruptcy schedules to report new claims.  These rulings will cause a lot of unexpected grief when debtors realize they have lost their right to recover just compensation for injuries.
Bankruptcy attorneys will need to communicate with Chapter 13 debtors on an ongoing basis to ensure that new claims are reported.  I can envision scores of malpractice lawsuits being filed against attorneys who fail to report new claims. This is going to be a mess.
Image courtesy of Flickr and The U.S. National Archives