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Here at Shenwick & Associates, we're devoted to helping our clients discharge as many of their debts as possible in bankruptcy. We also aggressively attempt to help our clients retain as much of their property as possible after their bankruptcy case is concluded.

However, with regard to property that's secured by a debt, whether a debtor can retain that property will often depend on whether he or she is willing to sign a reaffirmation agreement. We covered reaffirmation agreements in a recent e-mail, but have recently done some more investigation into the topic, which we wanted to share with you.

As a hypothetical, let's say we have a married couple, filing jointly, who own a house with a mortgage and are current on their mortgage payments. There is no equity in the house. They want to keep their house after their bankruptcy case is concluded and continue to pay their mortgage during the pendency of the bankruptcy case. Does this couple need to file a reaffirmation agreement with the secured creditor? Our answer, for cases filed in the Second Circuit (New York, Connecticut and Vermont) is no.

Prior to the enactment of BAPCPA in 2005, courts in several circuits (including the 2nd Circuit in Capital Communications Federal Credit Union v. Boodrow (In re Boodrow) and BankBoston, N.A. v. Sokolowski (In re Sokolowski) had held that debtors had the option (the "ride through option") to retain both real property and personal property collateral and maintain current performance on the loan. Furthermore, secured creditors could not foreclose based solely on the debtor's filing of a bankruptcy petition and failure to reaffirm.

When BAPCPA was enacted, 11 U.S.C. §§ 521(a)(6) (which governs the debtor's duties with respect to secured personal property) and 362(h) (which governs termination of the automatic stay with respect to secured personal property) specifically eliminated the ride through option for personal property. However, decisions in several circuits (including a decision from Connecticut, In re Caraballo) have held that Boodrow and Sokolowski remain binding authority that the ride through option is still in effect with respect to real property. Accordingly, in New York a mortgage on a house does not need to be reaffirmed, but a loan on secured personal property needs to be reaffirmed.

As with all of our opinions expressed in these e-mails, this is not legal advice–every bankruptcy case is different and we cannot render legal advice without being retained. To discuss your unique situation with respect to your personal and real property, reaffirmation of secured debts and whether bankruptcy is right for you, please contact Jim Shenwick.

CBS News.com reports “Overdraft fees are raking in billions of dollars for the banking industry. But who’s paying them? Predominantly a tiny subset of consumers: young, working in lower-wage jobs and heavy users of debit cards.
Surveying 304 individuals who reported paying more than $100 in overdraft fees during the past year, the Pew Charitable Trust found that the bulk — 67 percent — of those paying hefty overdraft charges are working but earning less than $50,000 annually. Roughly one-third earn $25,000 or less. Their preferred method of payment is a debit card, and more than a third of them are under age 36.
Nearly a quarter of those surveyed said they paid more than a week’s wages in overdraft fees in the past year, with one in four reporting that the charges added to $300 annually or more. Nearly one in five of these individuals said overdrafts cost them $500 or more last year.” Read more…

The post 5 Ways to Cut Costly Overdraft Fees appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

“Charge off” is accounting jargon for the formal determination that the creditor is no longer treating its claim against you as an asset.   It permits the creditor to take a “wholly worthless bad debt” deduction on its taxes under Sec. 1244 of the IRC.    It does not mean the creditor has released its claim and it cannot pursue you.  Any payments received after the debt is charged off are treated differently for tax purposes.   And that its claim against the reorganized debtor is not on its balance sheet above the line.
What it does mean is that the creditors still retains the right to collect the full amount of debt and have a variety of options available to them. Depending upon the situation, the creditor may have internal collections staff pursue collection or sell it to an external collector, or the creditor may elect to sue on the entire debt.
Statute of limitations: most debtors do not understand that the creditor has a limited amount of time to collect on the debt.  That time limit is call the “statute of limitations” and differs in each state.  Here is a link to an article on Credit.com listing the statutes by state: Statutes of Limitation on Debt Collection.  WARNING: this list may not be accurate so it is very important you talk with an experienced attorney to determine your rights.

The post Do I Have to Pay a Debt that Was “Charged Off”? appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

A few weeks ago I wrote an article to warn plaintiff attorneys to be careful to ensure that their clients who have previously filed bankruptcy to ensure that all claims they have against third parties are reported on the bankruptcy schedules.  (Plaintiff’s Attorneys Beware: Your Client’s Bankruptcy Case is About to Sock You Right Between the Eyes)  Well,  . . .  it just happened to a lady in Minnesota. (See Cover v J.C. Penny Corporation, Civ No 15-515, District of Minnesota).
The significant aspect of this case is that the debtor, April Cover, failed to report a discrimination claim on her bankruptcy schedules but she did verbally tell the bankruptcy trustee about the claim.
Not good enough says the Minnesota court.  Actual verbal notice of a claim is not enough.  Audio recordings of the court meeting between the trustee and the debtor disclose that the discrimination claim was reported to the trustee.  There is no question that the debtor disclosed her claim, but without formally amending the bankruptcy schedules a debtor is legally barred from pursuing recovery in subsequent litigation.

The only locations where Cover disclosed her EEOC claim—the audio file of the creditors’ meeting and communications between the trustee and her counsel— are unavailable to creditors. Hence, despite her later, oral disclosure, Cover failed to adequately amend her Petition, and she also failed to keep the trustee apprised of the status of her EEOC charge, or the existence of this action. In the Court’s view, Cover’s positions are clearly inconsistent.”

Given the court’s opinion, actual written notice to the trustee is also probably insufficient to protect a debtor from judicial estoppel in subsequent litigation.  It is not enough to send the trustee a letter to report claims not originally report or new claims occurring during the bankruptcy.  The Minnesota court declares that only formal amendments to the bankruptcy schedules are sufficient to protect a debtor’s claim.
This issue becomes confusing because the trustee, when informed of the claim, probably determined that the claim was exempt from creditor or trustee claims under Minnesota law.  However, even when a trustee is informed of the claim against a third party and elects not to claim it because of exemption laws, the claim must be formally reported on amended schedules to be preserved.
Plaintiff attorneys need to ask the following questions:

• Has their client filed bankruptcy in the past?
• Did the injury occur before, during or after the bankruptcy case?
• If a claim occurred before or during the bankruptcy were the bankruptcy schedules amended?
• Did the Chapter 7 trustee release his or her claim against the injury claim?
• Was the PACER computer system checked to see if the client has filed bankruptcy?
• Have you obtained a full copy of the bankruptcy schedules?
• Is it too late to amend the bankruptcy schedules to report a missing claim?
• Was the notice of the claim sufficiently detailed to put the trustee and creditors on notice?

I encourage Nebraska attorneys to contact this office if they have concerns about their client’s bankruptcy case.