Blogs
Second Mortgage “Stripping”
One of the advantages of filing bankruptcy under Chapter 13 is that an entirely unsecured second mortgage, or other junior mortgage, can be “stripped” from your homestead or other real estate. This mortgage is then treated by the Chapter 13 plan as an unsecured claim, the same as a credit card or other unsecured debt. Consequently, it only has to paid in part rather than being paid in full as for most mortgages.
“Stripping” unsecured second mortgages cannot be done in Chapter 7 cases. Also, it can only be done when your home’s market value is less than the entire balance owed on the first mortgage, rendering the second mortgage entirely unsecured by any value of the home. This means that in deciding whether to seek to strip off a second mortgage, an appraisal of your home will be necessary.
Second mortgage lien stripping is allowed by bankruptcy code sections 506 and 1322(b). It requires committing to a three to five year Chapter 13 repayment plan, where the now-unsecured second mortgage is paid based upon your ability to repay it, the same as most of your other debts.
If you are trying to restructure your debt to make sure you can afford to keep the necessities of life, it makes sense for you to obtain a free consulation at our offices to discuss your options.
Steven Taylor [email protected]
Law Office of Steven Taylor, PC
Serving Central and Northern Indiana
1-800-966-8447
Filed under: Chapter 13 Bankruptcy Tagged: Chapter 13 Bankruptcy 
The answer to whether or not unemployment benefits are dischargeable in bankruptcy hinges on the following: 1) whether the state receives adequate notice of the bankruptcy filing; 2) whether the state upon proper notice brings a timely complaint (adversarial proceeding) in the bankruptcy court, and 3) whether the state wins its complaint and proves that the debtor obtained the unemployment overpayment by fraud or theft as opposed to having made a reasonable mistake.
A debt that is discharged in bankruptcy is a debt that is no longer enforceable. The general rule is that a debt is dischargeable at the conclusion of a Chapter 7 or a Chapter 13 bankruptcy case absent some specific statutory provision to the contrary. The exceptions to discharge are primarily enumerated in sections 523, 727, 1228 and 1328 of the United States Bankruptcy Code.
Some of the provisions of the Bankruptcy Code are “self-executing” excluding a debt from discharge automatically even if the creditor does not challenge the dischargeability of the underlying debt. Specifically these sections include, 11U.S.C. §523(a)(1), (3), (5), (7), (8), (9), (10), (11), (12), (13), (14), (16), (17), (18), or (19). However, other provisions of the bankruptcy code require that the creditor file a separate complaint known as an adversarial proceeding within a strict time frame otherwise the underlying debt is discharged. The provisions of the Bankruptcy Code that might bar the discharge of an overpayment of state unemployment benefits are not self-executing. These three provisions fall under 11 U.S.C. § 523(a)(2), (4), (6), and (15). Of these provisions only 523(a)(2) and (a)(4) would seem applicable. These two provisions are known as the “fraud” provisions. Accordingly in order for the state to prevail in excluding unemployment overpayments from discharge, they must prevail in a timely filed fraud complaint brought in the U.S. Bankruptcy Court.
In general, a complaint to determine the dischargeability of debt under § 523(a)(2), or (4), must be filed not later than sixty days after the first date set for the creditors meeting. Parties must have at least thirty days’ notice of this deadline. Fed. R. Bankr. P. 4007(c). However the state would need to be given proper notice so that they would have the opportunity to file a complaint and challenge the dischargeability of the overpayment pursuant to 11 U.S.C. §523(a)(3). This is why it is extremely important that all creditors be properly listed on the debtor’s bankruptcy schedules.
Again, there are two provisions of Bankruptcy Code Section 523 that if successfully brought by the state seeking to recover an unemployment overpayment claim would bar the discharge of the debt under the Bankruptcy Code. The first such provision is found under 523(a)(2).
Section 523(a)(2) excepts from discharge debts incurred in obtaining money, property, or services by false pretense or fraud. Accordingly, the debtor who knowingly made a false statement on his unemployment application or continuing unemployment forms would be excepted from discharge under this provision provided the state timely brought and proved their complaint. A debtor who could prove that they reasonably believed that they were entitled to the overpayment money would prevail and be entitled to discharge the debt.
The other applicable exception would come under Bankruptcy Code Section 523(a)(4). This provision bars a discharge where the plaintiff proves fraud or defalcation while the defendant was acting in a fiduciary capacity, or committed embezzlement, or larceny. These provisions would be applicable if the state were able to prove that you received an unemployment benefit by means of what is commonly known as theft. Again, the state would have to timely file their complaint and prove that that is what happened.
In conclusion, at least in California in my experience rarely does the state when properly notified challenge the overpayment by timely bringing an adversarial complaint. Accordingly, it is critically important that the overpayment claim be listed on the debtor’s bankruptcy schedules and that notice to the state be properly addressed. For California overpayments you would want to notice Employment Development Department, State of California, Bankruptcy Unit – MIC 92E, P.O. Box 826880, Sacramento, CA 94280. In the event that the state brings a timely complaint, the debtor/ defendant in consultation with his bankruptcy attorney must decide if reasonable defenses exist to the state’s claim and the costs and benefits of defending the claim. Unless the facts tilt in favor of debtor / defendant it may be advisable to work out a settlement with a repayment plan. For more information contact San Diego bankruptcy attorney Raymond Schimmel at (619) 275-1250 or at http://www.endbillcollections.com.
The answer to whether or not unemployment benefits are dischargeable in bankruptcy hinges on the following: 1) whether the state receives adequate notice of the bankruptcy filing; 2) whether the state upon proper notice brings a timely complaint (adversarial proceeding) in the bankruptcy court, and 3) whether the state wins its complaint and proves that the debtor obtained the unemployment overpayment by fraud or theft as opposed to having made a reasonable mistake.
A debt that is discharged in bankruptcy is a debt that is no longer enforceable. The general rule is that a debt is dischargeable at the conclusion of a Chapter 7 or a Chapter 13 bankruptcy case absent some specific statutory provision to the contrary. The exceptions to discharge are primarily enumerated in sections 523, 727, 1228 and 1328 of the United States Bankruptcy Code.
Some of the provisions of the Bankruptcy Code are “self-executing” excluding a debt from discharge automatically even if the creditor does not challenge the dischargeability of the underlying debt. Specifically these sections include, 11U.S.C. §523(a)(1), (3), (5), (7), (8), (9), (10), (11), (12), (13), (14), (16), (17), (18), or (19). However, other provisions of the bankruptcy code require that the creditor file a separate complaint known as an adversarial proceeding within a strict time frame otherwise the underlying debt is discharged. The provisions of the Bankruptcy Code that might bar the discharge of an overpayment of state unemployment benefits are not self-executing. These three provisions fall under 11 U.S.C. § 523(a)(2), (4), (6), and (15). Of these provisions only 523(a)(2) and (a)(4) would seem applicable. These two provisions are known as the “fraud” provisions. Accordingly in order for the state to prevail in excluding unemployment overpayments from discharge, they must prevail in a timely filed fraud complaint brought in the U.S. Bankruptcy Court.
In general, a complaint to determine the dischargeability of debt under § 523(a)(2), or (4), must be filed not later than sixty days after the first date set for the creditors meeting. Parties must have at least thirty days’ notice of this deadline. Fed. R. Bankr. P. 4007(c). However the state would need to be given proper notice so that they would have the opportunity to file a complaint and challenge the dischargeability of the overpayment pursuant to 11 U.S.C. §523(a)(3). This is why it is extremely important that all creditors be properly listed on the debtor’s bankruptcy schedules.
Again, there are two provisions of Bankruptcy Code Section 523 that if successfully brought by the state seeking to recover an unemployment overpayment claim would bar the discharge of the debt under the Bankruptcy Code. The first such provision is found under 523(a)(2).
Section 523(a)(2) excepts from discharge debts incurred in obtaining money, property, or services by false pretense or fraud. Accordingly, the debtor who knowingly made a false statement on his unemployment application or continuing unemployment forms would be excepted from discharge under this provision provided the state timely brought and proved their complaint. A debtor who could prove that they reasonably believed that they were entitled to the overpayment money would prevail and be entitled to discharge the debt.
The other applicable exception would come under Bankruptcy Code Section 523(a)(4). This provision bars a discharge where the plaintiff proves fraud or defalcation while the defendant was acting in a fiduciary capacity, or committed embezzlement, or larceny. These provisions would be applicable if the state were able to prove that you received an unemployment benefit by means of what is commonly known as theft. Again, the state would have to timely file their complaint and prove that that is what happened.
In conclusion, at least in California in my experience rarely does the state when properly notified challenge the overpayment by timely bringing an adversarial complaint. Accordingly, it is critically important that the overpayment claim be listed on the debtor’s bankruptcy schedules and that notice to the state be properly addressed. For California overpayments you would want to notice Employment Development Department, State of California, Bankruptcy Unit – MIC 92E, P.O. Box 826880, Sacramento, CA 94280. In the event that the state brings a timely complaint, the debtor/ defendant in consultation with his bankruptcy attorney must decide if reasonable defenses exist to the state’s claim and the costs and benefits of defending the claim. Unless the facts tilt in favor of debtor / defendant it may be advisable to work out a settlement with a repayment plan. For more information contact San Diego bankruptcy attorney Raymond Schimmel at (619) 275-1250 or at http://www.endbillcollections.com.
Various "Robo-Signer" class action suits have been filed across the country. The case of Geoffrey Huber, et al. vs. GMAC, LLC, n/k/a Ally Financial, Case 10-2458-SCB was filed in the Federal District Court of the Middle District of Florida on November 2, 2010. The complaint alleges that the Defendant engaged in a fraudulent scheme to fabricate and falsify affidavits and other documents to support foreclosure complaints and judgments.
The action is being brought as a statewide class action on behalf of all other similarly-situated obligors who have been obligors on notes and mortgages in the State of Florida served by the Defendant within the previous three years. The relief sought is based on an alleged violation of constitutional rights under color of state law 42 U.S.C. 1983, abuse of process, and unfair and deceptive trade practices pursuant to Fla. Stat. 501.201 et seq. Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983
When you file for Chapter 7 bankruptcy, an automatic stay is put in place. This is the legal mechanism that stops foreclosure, repossession and collection efforts including wage garnishments. This can be a great relief for you. You can take a breath and work on reorganizing your priorities and assets.
However, under certain circumstances, creditors can ask the court to allow them to go ahead with collections in spite of the bankruptcy filing. This is called a Motion for Relief from Automatic Stay, and a successful one often negates the whole purpose of filing for Chapter 7 bankruptcy in the first place.
These motions are most often filed by mortgage companies and car loan lenders, but any creditor can file a Motion for Relief if they have a compelling reason to resume collection efforts before your Chapter 7 bankruptcy case is otherwise completed.
The Court may grant creditors relief from the stay if they can produce evidence that you will be putting their collateral at risk or that you are unable to continue satisfactory payments on the collateral. If you defaulted on your mortgage seem unable to cure past due payments or continue making payments, the mortgage company may decide to file a Motion for Relief from the Automatic Stay. Automobile lenders who feel you are putting the vehicle at risk, such as failing to maintain insurance coverage or purposely putting the vehicle at risk of damage, would file for relief in order to repossess the car and protect their collateral.
In a Chapter 7 bankruptcy, the creditor typically wants to be sure that it will get full value for the asset when the repossess it. The major concern is that you’re holding onto a car (for example) and not paying for it – if you crack it up during the Chapter 7 bankruptcy process then the bank is going to get stuck with a worthless car and you’re going to walk away from the debt once the discharge is issued.
The motion for relief, therefore, is the creditor’s way of getting things moving forward quickly rather than having to wait until the Chapter 7 bankruptcy discharge is issued. It’s a means of evening the scales and making things are fair to both parties as possible.
If the Bankruptcy Court grants the motion, then the company is allowed to pursue collection action against you to claim the asset, such as initiating a foreclosure proceeding or repossessing an automobile. However, there are ways of avoiding foreclosure of your home or repossession of your vehicle, even after that process has begun and whether you are in bankruptcy or not. Your attorney should be able to help you.
Jay S. Fleischman is a consumer bankruptcy lawyer who sues creditors and bill collectors for harassment after bankruptcy. When not helping people with bill problems, he works with attorneys to help improve their law firm marketing efforts.
When you file for Chapter 7 bankruptcy, an automatic stay is put in place. This is the legal mechanism that stops foreclosure, repossession and collection efforts including wage garnishments. This can be a great relief for you. You can take a breath and work on reorganizing your priorities and assets.
However, under certain circumstances, creditors can ask the court to allow them to go ahead with collections in spite of the bankruptcy filing. This is called a Motion for Relief from Automatic Stay, and a successful one often negates the whole purpose of filing for Chapter 7 bankruptcy in the first place.
These motions are most often filed by mortgage companies and car loan lenders, but any creditor can file a Motion for Relief if they have a compelling reason to resume collection efforts before your Chapter 7 bankruptcy case is otherwise completed.
The Court may grant creditors relief from the stay if they can produce evidence that you will be putting their collateral at risk or that you are unable to continue satisfactory payments on the collateral. If you defaulted on your mortgage seem unable to cure past due payments or continue making payments, the mortgage company may decide to file a Motion for Relief from the Automatic Stay. Automobile lenders who feel you are putting the vehicle at risk, such as failing to maintain insurance coverage or purposely putting the vehicle at risk of damage, would file for relief in order to repossess the car and protect their collateral.
In a Chapter 7 bankruptcy, the creditor typically wants to be sure that it will get full value for the asset when the repossess it. The major concern is that you’re holding onto a car (for example) and not paying for it – if you crack it up during the Chapter 7 bankruptcy process then the bank is going to get stuck with a worthless car and you’re going to walk away from the debt once the discharge is issued.
The motion for relief, therefore, is the creditor’s way of getting things moving forward quickly rather than having to wait until the Chapter 7 bankruptcy discharge is issued. It’s a means of evening the scales and making things are fair to both parties as possible.
If the Bankruptcy Court grants the motion, then the company is allowed to pursue collection action against you to claim the asset, such as initiating a foreclosure proceeding or repossessing an automobile. However, there are ways of avoiding foreclosure of your home or repossession of your vehicle, even after that process has begun and whether you are in bankruptcy or not. Your attorney should be able to help you.
Jay S. Fleischman is a consumer bankruptcy lawyer who sues creditors and bill collectors for harassment after bankruptcy. When not helping people with bill problems, he works with attorneys to help improve their law firm marketing efforts.
The simplistic answer to the question of whether you have to file bankruptcy jointly when you are married is no. You can choose to bankruptcy individually. However, whether or not this is the best decision depends on a number of factors and often involves detailed legal and factual analysis tailored to the individual situation.
First off, my discussion of this topic is limited strictly to California bankruptcy filings. California is a community property state with unique exemption laws. My analysis would not necessarily be appropriate in states that have different property and exemption laws.
Whether you decide to file bankruptcy with your spouse or not will depend on a number of factors as follows:
1) were the debts incurred jointly;
2) does one of the spouses have separate vs. community property;
3) are there issues because one spouse is ineligible for a bankruptcy discharge;
4) is an objective of the bankruptcy junior lien avoidance on a jointly owned property;
5) is it possible for one spouse to preserve a good credit rating;
6) particularly with regard to Chapter 13 bankruptcy are the spouses amicable with one another;
7) must one spouse maintain a security clearance;
8) Will an exemption waiver create a problem;
9) and what are the attributes and characteristics of each spouses obligations and liabilities
Let me start by saying that when you are married and you file for bankruptcy without your spouse your spouse will still be involved in the process to some extent. If you are living with a non-filing spouse their income is still considered in the means test determination for the filing spouse. For Chapter 7 the non-filing spouse’s income is generally combined with the filing spouse to arrive at current monthly income. If the combined income exceeds the median income for your household size, and you and your spouse don’t have the right mix of necessary expenses, you may not qualify for Chapter 7 bankruptcy. In a Chapter 13 bankruptcy your ability to repay is based on your household budget. So even if only one spouse files for bankruptcy, the other spouse’s income and expenses are considered in determining the repayment obligation of the spouse who has filed for bankruptcy. In addition the filing spouses exemption choices are limited if the non-filing spouse does not file an exemption wavier. For the issues involving spousal waivers and how they may affect a non-filing spouse see my blog post on this issue.
The benefit of having one spouse filing without the other may come from the fact that the non-filing spouse can preserve their credit (assuming that it is not already shot) and even make credit purchases for the household solely in their name that might not otherwise be possible. In addition the non-filing spouse may in the future have their own individual need to file for bankruptcy and unavoidable future debts from an illness or loss of a job. If they are not a party to the bankruptcy all of their separate bankruptcy options are kept open.
On the other hand if the debts are incurred jointly the creditors may go after the non-filing spouse for the balances that were discharged by the bankruptcy. With that said, the creditors remedies may be limited to levy against the non-filing spouses separate property with the analysis of that issue being outside the scope of this discussion. Even so, the debt collectors can continue to call to demand money from the non-filing spouse for the joint debt or his or her separate debts. This in itself can be quite disconcerting for a couple looking for a fresh start. I also will leave for a future discussion the situation where the spouses are living apart. This creates a whole variety of unique issues and problems. Even with this situation, under the right conditions and careful consideration a joint bankruptcy might be possible and advisable. I touch on some of these issues in my blog article about spousal waivers.
In the end careful legal analysis tailored to the facts and an individual couple’s needs and objectives is required. You should discuss with qualified counsel your objectives and the respective consequences of filing jointly or not given your family’s specific circumstances.
For more information contact San Diego Attorney Raymond Schimmel
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The simplistic answer to the question of whether you have to file bankruptcy jointly when you are married is no. You can choose to bankruptcy individually. However, whether or not this is the best decision depends on a number of factors and often involves detailed legal and factual analysis tailored to the individual situation.
First off, my discussion of this topic is limited strictly to California bankruptcy filings. California is a community property state with unique exemption laws. My analysis would not necessarily be appropriate in states that have different property and exemption laws.
Whether you decide to file bankruptcy with your spouse or not will depend on a number of factors as follows:
1) were the debts incurred jointly;
2) does one of the spouses have separate vs. community property;
3) are there issues because one spouse is ineligible for a bankruptcy discharge;
4) is an objective of the bankruptcy junior lien avoidance on a jointly owned property;
5) is it possible for one spouse to preserve a good credit rating;
6) particularly with regard to Chapter 13 bankruptcy are the spouses amicable with one another;
7) must one spouse maintain a security clearance;
8) Will an exemption waiver create a problem;
9) and what are the attributes and characteristics of each spouses obligations and liabilities
Let me start by saying that when you are married and you file for bankruptcy without your spouse your spouse will still be involved in the process to some extent. If you are living with a non-filing spouse their income is still considered in the means test determination for the filing spouse. For Chapter 7 the non-filing spouse’s income is generally combined with the filing spouse to arrive at current monthly income. If the combined income exceeds the median income for your household size, and you and your spouse don’t have the right mix of necessary expenses, you may not qualify for Chapter 7 bankruptcy. In a Chapter 13 bankruptcy your ability to repay is based on your household budget. So even if only one spouse files for bankruptcy, the other spouse’s income and expenses are considered in determining the repayment obligation of the spouse who has filed for bankruptcy. In addition the filing spouses exemption choices are limited if the non-filing spouse does not file an exemption wavier. For the issues involving spousal waivers and how they may affect a non-filing spouse see my blog post on this issue.
The benefit of having one spouse filing without the other may come from the fact that the non-filing spouse can preserve their credit (assuming that it is not already shot) and even make credit purchases for the household solely in their name that might not otherwise be possible. In addition the non-filing spouse may in the future have their own individual need to file for bankruptcy and unavoidable future debts from an illness or loss of a job. If they are not a party to the bankruptcy all of their separate bankruptcy options are kept open.
On the other hand if the debts are incurred jointly the creditors may go after the non-filing spouse for the balances that were discharged by the bankruptcy. With that said, the creditors remedies may be limited to levy against the non-filing spouses separate property with the analysis of that issue being outside the scope of this discussion. Even so, the debt collectors can continue to call to demand money from the non-filing spouse for the joint debt or his or her separate debts. This in itself can be quite disconcerting for a couple looking for a fresh start. I also will leave for a future discussion the situation where the spouses are living apart. This creates a whole variety of unique issues and problems. Even with this situation, under the right conditions and careful consideration a joint bankruptcy might be possible and advisable. I touch on some of these issues in my blog article about spousal waivers.
In the end careful legal analysis tailored to the facts and an individual couple’s needs and objectives is required. You should discuss with qualified counsel your objectives and the respective consequences of filing jointly or not given your family’s specific circumstances.
For more information contact San Diego Attorney Raymond Schimmel
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Bankruptcy mills are high volume law practices that advertise aggressively and provide poor quality legal services. Typical attributes of a bankruptcy mill are as follows:
a) rely heavily on poorly supervised non-attorney staff; b) lack adequate controls over workflow (correspondence to 3rd parties & clients) and court deadlines; c) cut corners both ethically and substantively; d) minimal attorney involvement; e) routinely fail to file necessary documents, and frequently show up to hearings unprepared, and f) Have usually been admonished by the court on more than one occasion.
Unfortunately, with bankruptcy filings soaring, many unaware consumers have turned to “bankruptcy mills” for help with their financial difficulties. Most “bankruptcy mills” advertise heavily on television and radio while flooding homeowners in foreclosure with direct mail. When a consumer chooses a “bankruptcy mill” they assume that they will be working closely with a lawyer on their case. However, with bankruptcy mills, this is often not the case. The economics are such that with a mill they have a very high ratio of cases to attorneys. I have seen “bankruptcy mills” that literally have hundreds of open cases for each attorney working at the firm.
While the consumer might initially meet with an “attorney intake coordinator” who will sign them up, the intake coordinator rarely spends more than a few minutes with the client. Rather their focus is to get a down payment with a signed retainer agreement. Once the retainer agreement has been signed the client is handed off to a “prep team.” The “prep” team usually consists of poorly supervised staff consisting of paralegals, law clerks and secretaries.
The “prep team” will gather necessary documents (usually with little or no attorney review) and prepare the bankruptcy petition and schedules to be filed in a cookie cutter fashion often omitting important disclosures and details. The client will then be asked to come in and sign the often deficient papers. Frequently the final signing is not supervised by an attorney. This means that last minute questions or issues brought up by the client often go unaddressed.
The case is then filed and assigned to an attorney. Often the attorney assigned to the case has never met the client. Frequently, In a Chapter 7 case the client goes to their 341 meeting of creditors only to find that they and their assigned attorney are playing “blind man’s bluff.” In other words, the “bankruptcy mill” attorney will wander through the crowded hearing room trying to figure out which of the attendees are his or her clients. Similarly, the “bankruptcy mill” clients will be looking for the attorney that they have never met while wondering whether they have been abandoned. When the case is called, often the trustee is asking questions for which the assigned “mill” attorney is completely unfamiliar. Many of these cases are continued for no other reason than the client was poorly prepped for the hearing or that their assigned attorney is unprepared to answer obvious questions that should have been apparent if there had been continuity from the start of the case. In other cases, clients lose their property or wind up charged with nondisclosure and felony bankruptcy fraud because of a break-down of communication with their attorney. For an example of serious problems that arise from inadequate bankruptcy representation see my blog article “I Wish I had a Time Machine.”
As problems frequently arise with “bankruptcy mill” attorneys in Chapter 7, similar problems also arise in Chapter 13. In a Chapter 13 case the problems and objections also often arise because of the lack of continuity in the way the case was prepared. Inherently, without adequate communication between attorney and client the “bankruptcy mill” staff will have made many assumptions (often cookie cutter) rather than annoying a hopelessly over-burdened “mill” boss. These assumptions along with an improper application of the law will often prompt a Chapter 13 trustee’s objection to confirmation of the client’s bankruptcy plan. In some cases these problems can be fixed causing only inexcusable anxiety for the client and in other cases they cause the case to be dismissed with serious consequences for the client.
In conclusion it is important that you hire a firm where you can reasonably expect that you can get to know your attorney. Your attorney should be reasonably available to answer your questions, review your documents and the preparation of your case, and to represent you at all trustee and court hearings. In many cases a consumer in need of personal bankruptcy case will get better representation with a well experienced attorney with a strong reputation and a manageable volume of cases.
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Bankruptcy mills are high volume law practices that advertise aggressively and provide poor quality legal services. Typical attributes of a bankruptcy mill are as follows:
a) rely heavily on poorly supervised non-attorney staff; b) lack adequate controls over workflow (correspondence to 3rd parties & clients) and court deadlines; c) cut corners both ethically and substantively; d) minimal attorney involvement; e) routinely fail to file necessary documents, and frequently show up to hearings unprepared, and f) Have usually been admonished by the court on more than one occasion.
Unfortunately, with bankruptcy filings soaring, many unaware consumers have turned to “bankruptcy mills” for help with their financial difficulties. Most “bankruptcy mills” advertise heavily on television and radio while flooding homeowners in foreclosure with direct mail. When a consumer chooses a “bankruptcy mill” they assume that they will be working closely with a lawyer on their case. However, with bankruptcy mills, this is often not the case. The economics are such that with a mill they have a very high ratio of cases to attorneys. I have seen “bankruptcy mills” that literally have hundreds of open cases for each attorney working at the firm.
While the consumer might initially meet with an “attorney intake coordinator” who will sign them up, the intake coordinator rarely spends more than a few minutes with the client. Rather their focus is to get a down payment with a signed retainer agreement. Once the retainer agreement has been signed the client is handed off to a “prep team.” The “prep” team usually consists of poorly supervised staff consisting of paralegals, law clerks and secretaries.
The “prep team” will gather necessary documents (usually with little or no attorney review) and prepare the bankruptcy petition and schedules to be filed in a cookie cutter fashion often omitting important disclosures and details. The client will then be asked to come in and sign the often deficient papers. Frequently the final signing is not supervised by an attorney. This means that last minute questions or issues brought up by the client often go unaddressed.
The case is then filed and assigned to an attorney. Often the attorney assigned to the case has never met the client. Frequently, In a Chapter 7 case the client goes to their 341 meeting of creditors only to find that they and their assigned attorney are playing “blind man’s bluff.” In other words, the “bankruptcy mill” attorney will wander through the crowded hearing room trying to figure out which of the attendees are his or her clients. Similarly, the “bankruptcy mill” clients will be looking for the attorney that they have never met while wondering whether they have been abandoned. When the case is called, often the trustee is asking questions for which the assigned “mill” attorney is completely unfamiliar. Many of these cases are continued for no other reason than the client was poorly prepped for the hearing or that their assigned attorney is unprepared to answer obvious questions that should have been apparent if there had been continuity from the start of the case. In other cases, clients lose their property or wind up charged with nondisclosure and felony bankruptcy fraud because of a break-down of communication with their attorney. For an example of serious problems that arise from inadequate bankruptcy representation see my blog article “I Wish I had a Time Machine.”
As problems frequently arise with “bankruptcy mill” attorneys in Chapter 7, similar problems also arise in Chapter 13. In a Chapter 13 case the problems and objections also often arise because of the lack of continuity in the way the case was prepared. Inherently, without adequate communication between attorney and client the “bankruptcy mill” staff will have made many assumptions (often cookie cutter) rather than annoying a hopelessly over-burdened “mill” boss. These assumptions along with an improper application of the law will often prompt a Chapter 13 trustee’s objection to confirmation of the client’s bankruptcy plan. In some cases these problems can be fixed causing only inexcusable anxiety for the client and in other cases they cause the case to be dismissed with serious consequences for the client.
In conclusion it is important that you hire a firm where you can reasonably expect that you can get to know your attorney. Your attorney should be reasonably available to answer your questions, review your documents and the preparation of your case, and to represent you at all trustee and court hearings. In many cases a consumer in need of personal bankruptcy case will get better representation with a well experienced attorney with a strong reputation and a manageable volume of cases.
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Learn more about how Bankruptcy works and what you need to know.