Monday, December 9, 2013

Running on Empty: “What If I Can’t Make My Chapter 13 Payments?”

Chapter 13 bankruptcy is about payments. After all, it’s a “payment plan bankruptcy.”  But what if you just can’t make the payments?

A moratori…what?
A motion for moratorium of payments is a motion you can file to suspend your plan payments for a period of time.
Practice from bankruptcy district to bankruptcy district is very different.  Here in the Southern District of California, it can be challenge to get a moratorium, but not impossible. We are often able to obtain orders suspending payments for up to three months – although it is wise to use only one or two months if you need it, because you never know when you’ll need another order.  There is usually more flexibility if the plan is otherwise scheduled to complete in less than five years since a bankruptcy may not extend beyond its fifth anniversary.

Tell your lawyer if you’ll have problems making your plan payments
Going on maternity leave? Getting laid off for a few weeks? Having surgery? These are all income interrupters. If you’ll be experiencing an income interrupter, let us know well ahead of time so that we can timely prepare and file your motion with the (hopefully) legitimate reasons you have to suspend your payments.
Your creditors and the bankruptcy trustee have the right to object to the motion, but usually (let’s say almost always) the only person you need to “sell” your cause to is the trustee.

But my trustee’s a real jerk!
My official position is that there are no Chapter 13 trustees who are real jerks. None. Unofficially, let’s say you really do have a jerk for a trustee. Keep in mind that even if the trustee objects, you have the right to be heard by the judge. And the likelihood of your bankruptcy judge and your bankruptcy trustee being a jerk is pretty slim, statistically speaking.  If you really do have some legitimate reason to suspend your payments–through no fault of your own–the judge will grant your motion.

Don’t keep your attorney in the dark
With any problems in any type of bankruptcy, let us know immediately so that we can take necessary steps to keep your case on track. 

Chapter 13 cases are designed to help everyone – even you!  So, keep us informed of changes in your circumstances and lives so that we can continue to protect your interests.  

Friday, November 22, 2013

How to file bankruptcy – What are Executory Contracts and Unexpired Leases in bankruptcy?

List your executory contracts and unexpired leases on your bankruptcy petition and declare your intention either to accept or to reject those contracts. Contracts that are not timely assumed are rejected and the parties are released from further performance under those contracts.

An executory contract is an agreement that has not been completed. A contract is an agreement between two or more parties to perform certain specified actions. Once the parties complete all contractual obligations the contract becomes fully executed and the parties to that contract have no further obligation to act under that contract. An example of an executory contract is an agreement to sell property in which the buyer and seller agree to perform certain actions including inspecting the property, making certain repairs, obtaining financing, transferring title, delivering possession and making payment. Until all contractual requirements are met, the contract remains open to be executed.

An unexpired lease is a form of contract for the use of certain specified real or personal property that has a specified length of time remaining on the length of the contract. An example of an unexpired lease is a rental agreement for the use of a car or a house where the owner agrees to provide the property to the lessee for a set number of months or years and the lessee agrees to make payments for using that property. For bankruptcy purposes, a timeshare falls into this category.

Bankruptcy code section 11 U.S.C. 365 requires that assumption of an executory contract or unexpired lease in a chapter 7 liquidation case within 60 days of filing the case; and in all other chapters of bankruptcy before confirmation of a plan. The court may extend the time to assume such agreements for cause. In the case of non-residential real estate agreements, the time to act is extended to 120 days or longer by court order.

If you have any questions regarding your open contracts or leases, call us today for a free consultation.

Speckman Law Firm
Attorney David L. Speckman

Friday, November 15, 2013

Should You Use A Debt Settlement Company? Be Aware! Be Very Aware!

I was recently in court and saw two different consumer debtors attempting to navigate a collections action, in pro per.  They had been sued by a credit card company after they had sought help from a debt settlement company.  The debtors had been sued even after having been assured by the debt settlement company that it would assist the debtors somewhat with the creditors.  Of course, the only thing the debt settlement company provided by way of assistance was some worthless “cut and paste” pleadings that made no sense and actually violate the prohibition on practicing law without a license.  Needless to say, the debtors found themselves in court having to explain things before the judge by themselves.

These companies are typically a scam.  Indeed, across the county, these outfits have been investigated and sued by various governmental agencies and prosecutors, including for engaging in the unauthorized practice of law.  Other entities have had similar experience with one debt settlement firm in particular.  But, the fact that people still sign up for these “services” raises the question why do people believe the junk they are selling?

I think the real reason is twofold.  First, people generally want to pay their debts and they reason that payment of some of the debt is better than none at all.  The second reason is fear of bankruptcy.  People are afraid of losing property and of the damage to their credit.  While these are legitimate concerns, it does not explain why folks do not seek out a competent professional to advise on financial issues yet they fall hook, line and sinker for some fast-talking snake oil salesman over the telephone.

If you are facing financial issues, seek out a competent bankruptcy attorney in your area.  Just because you seek advice, it does not commit you to filing bankruptcy.  But, because we are experienced in all aspects of the debt collection process and alternatives including bankruptcy, we can offer you meaningful solutions to your financial problems.

Call Speckman Law Firm and Set Up your FREE Consultation

Wednesday, November 13, 2013

Are You Too Far Behind on Your Mortgage for Chapter 13? Chapter 11 May Help!

 Mortgage lenders have been delaying foreclosures for people all over the country. Ask any bankruptcy attorney–they've seen cases where people haven’t made a mortgage payment for two, three, or even four years, and the mortgage company hasn't even started the foreclosure process. Loan modifications can stretch on, court proceedings are scheduled and canceled, an unsuccessful Chapter 13, can all delay things. As a result, the mortgage arrearages–the amount you’re behind on your mortgage–can add up to a lot of money.

When you go to most consumer bankruptcy attorneys to file for a Chapter 13 repayment plan, you’re told that the plan payments will be too high for you to afford, since the full amount of the arrearage must be paid over a maximum of five years. If the arrears are $60,000, for example, this would require at least a $1,000 per month payment on top of resuming the regular monthly payment. Most people just can’t afford it.
This may result in many people thinking that they have no alternative other than losing their home. But there may be another alternative: an individual Chapter 11.
Most people don’t even know that individuals can file for Chapter 11; they think that it’s just for businesses. This is not true. In a Chapter 11 case, there is no five-year limit on the repayment term for mortgage arrearages. In some Chapter 11 cases, it is possible to obtain repayment terms of up to 30 years, without interest. In the example above, instead of a $1,000 per month payment, my client is looking at a monthly payment of $166.67. This is far more doable for most people.
Of course, Chapter 11 is not for everyone.  These cases tend to be far more complex and expensive than a Chapter 13, and there are not many consumer bankruptcy attorneys who know how to steer you through an individual Chapter 11.  However, we do.  Indeed, we have successfully managed several individual Chapter 11 cases.  Give us a call today to discuss your situation and learn whether a Chapter 11 bankruptcy may be the correct answer. 

Friday, November 1, 2013

Fourth Circuit Holds Inheritances Are Estate Property In Chapter 13 Cases

Recently, the Fourth Circuit Court of Appeals issued an opinion in Carroll v Logan.  This will have an impact for future chapter 13 cases in this circuit.

In Carroll, the debtors filed a chapter 13 case in 2009.  The Carrolls’ plan provided for a payment to unsecured creditors of approximately 3.8%, that is, each unsecured creditor who filed a claim would receive approximately 4% of what they claimed was owed.

A little over three years after the debtors’ filed bankruptcy, Mr. Carroll notified the court that he would receive $100,000.00 from an inheritance.  Upon such notice, the chapter 13 trustee moved to modify their plan to provide for the $100,000.00 to be paid through the plan toward unsecured creditors.  The debtors’ objected to the trustee’s motion.

At issue were two provisions of the Bankruptcy Code:  Section 541 and Section 1306.  Section 541 defines what property interests come into the bankruptcy estate upon filing for bankruptcy protection.  In particular, Section 541(a)(5) states that any property that the debtor acquires or is entitled to within 180 days after filing bankruptcy by bequest, devise or inheritance becomes property of the bankruptcy estate.  A reason for this provision is so that if a debtor knows that a family member is going to pass on soon and the debtor has lots of debts, the debtor won’t file bankruptcy immediately before the family member passes to discharge his debts and then have the full inheritance.  If a debtor inherits property within 180 days after filing, the trustee can get those assets to pay creditors.

In the Carrolls’ case, they had filed for bankruptcy in 2009 and did not become entitled to inherit anything until well after the 180 days since filing had passed.  As such, the debtors’ argued, they should not have to submit their inheritance to the chapter 13 trustee.

The trustee countered and the Fourth Circuit agreed that Section 1306 allows the trustee to reach the inheritance.  Section 1306 states that property of the bankruptcy estate includes, in addition to the property specified in Section 541 (see above), all property that the debtor acquires after commencement of the case but before the case is closed, dismissed, or converted to a case under a different chapter.  As such, under Section 1306, even though the debtor did not acquire the property within 180 days after his bankruptcy filing as set forth under Section 541, Section 1306 states that the after acquired property does come into the bankruptcy estate until the case is closed, dismissed or converted.  Therefore, the debtors would be required to pay the $100,000.00 inheritance into the plan (less their exemptions, if any).

This can create another factor to carefully consider before choosing a chapter 7 case or a chapter 13 case.  If you do not stand to inherit much from family members, it may not be much of a factor.  If you do stand to inherit something, a chapter 13 case can go on for up to five years and any inheritance acquired could go to paying your creditors.  At the same time, if you do not qualify for a chapter 7 case because you “flunk” the means test or if you must file a chapter 13 to cure mortgage arrears or other reasons, there may not be any other bankruptcy options.

A skilled bankruptcy professional such as those on this website can help you navigate the world of bankruptcy.  If you are facing financial issues, contact one of us today.

Wednesday, October 30, 2013

What is a Chapter 12 bankruptcy and do I qualify?

          Chapter 12 of the Bankruptcy Code is designed to protect family farmers and fisherman.  Southern California has plenty of both.  Still, this is a very uncommon form of bankruptcy.

          An individual or married couple who farm can file Chapter 12, but so can a farm corporation, LLC or partnership. There are some requirements to file a successful Chapter 12. You must have regular annual income, your debts cannot exceed $4,031,575 (adjusted yearly), and over 50% of your debts must have been related to the farming operation. In addition, if you are an individual or couple, over 50% of your gross income must come from farming operations.

          Farm Bankruptcy was first added to the Bankruptcy Code in 1986. In the 1980’s, there were many bank failures, and credit all but dried up for farmers. The result was a farm crisis. Chapter 12 Farm Bankruptcy was supposed to be a temporary emergency response, but was periodically extended. In 2005 when Congress passed a major overhaul of the Bankruptcy Code, making it harder and more expensive for consumers to file for bankruptcy, they actually strengthened Chapter 12 and made it permanent.

          The most powerful tool found in a Chapter 12 is the ability to re-do, or modify any secured debt. This includes mortgages and loans on livestock, crops and equipment. All aspects of the loans can be modified into what is effectively a new loan. The interest rate can be lowered. The principal balance can be decreased down to the value of the collateral. The term of the loan can be increased. Any arrears will disappear into the new modified loan.

          This ability to modify ANY secured loan in Chapter 12 is one of the major advantages of Chapter 12 over Chapter 13. Others include: There is no required “means test” in a Chapter 12; you do not have to get a Court Order extending the automatic stay beyond 30 days if you were in a previous Chapter 12; The eligibility limits are greater than in a Chapter 13.

          Family farmers in America are a dying breed. The continued access farmers have to Chapter 12 bankruptcy has allowed many farms to get through tough economic times and continue their family farm business and way of life.

          If you feel you may qualify for this powerful and effective bankruptcy, call us for a free consultation.  The call just might “save the farm”.

Friday, September 6, 2013

Bankruptcy is not a “Dirty Word”

I spend a lot of time talking to clients (and prospective clients) about the social stigma of filing bankruptcy.  That is probably the primary reason that people who need the protection bankruptcy offers wait too long to file, or don’t file at all.  Many people struggle with overwhelming debt for far too long, exhausting their resources (and often the resources of family members as well) because of their perception of bankruptcy.

So I was struck by something the Seventh Circuit Court of Appeals said in a recent decision involving NBA great Scottie Pippen.  Pippen had sued several media outlets for defamation because they reported, erroneously, that he had filed bankruptcy.  The three-judge panel found that such a report was not defamation per se.   Defamation per se essentially means someone says  something so bad about you that you don’t have to show that it damaged you–we assume that damage occurred.  (Think of it like the playground taunt that is so bad you don’t get in trouble if you sock the person who said it.)  In the Pippen case, the court said.

A similar taint does not attach to the reputation of people who go bankrupt. Many innocent reasons lead to financial distress. Readers of the defendants’ statements who mistakenly believe that Pippen is insolvent readily could conclude that his advisers bear the blame.

Some people need bankruptcy because of bad financial advice, others because of an illness and resulting bills, or because of the loss of a job, or a divorce, or a combination of those things.  Some people need bankruptcy simply because their income has dropped, or just hasn't kept pace with the cost of living.  Given that there are so many factors that are out of your control, why should the perception that bankruptcy is a dirty word keep you from seeking the protection that you need?

I think of bankruptcy like surgery.  I don’t know anyone who wants to have surgery.  (From that statement you will conclude, correctly, that I don’t know any celebrity plastic surgery addicts.  Thankfully.)  But if you are sick, or in pain, and surgery will correct a problem, or give you a better quality of life, or save your life, how many of us would refuse?  Bankruptcy is financial surgery.  You eliminate the bad stuff, and start over fresh without a financial tumor weighing you down. Without the stress of bill collector calls.  Without trying to decide which bill to pay when your paycheck just won’t stretch anymore. Without worry over foreclosure or repossession.

No, bankruptcy is not a dirty word.

Friday, August 30, 2013

Should I File a Chapter 7 or a Chapter 13 Bankruptcy

While some of my clients know what bankruptcy chapter they should file under, most look to me to advise them whether to file for Chapter 7 or Chapter 13 (or Chapter 11 or Chapter 12, the topics of a later blog). What do I look at in deciding which chapter to recommend?

My “default” setting is Chapter 7. This is the least expensive, fastest and simplest chapter of the Bankruptcy Code. Unless there is a significant reason to file under a different chapter, I will normally recommend that the client file for Chapter 7.

What happens in a Chapter 7? The answer depends on the type of debt. Generally, there are three kinds of debt: priority, secured and general unsecured. Priority debt consists of recent tax debt and domestic support obligations such as alimony and child support. Priority debt is not dischargeable in a Chapter 7. Unless it’s paid in full during the case, you still owe it after you get a discharge. Most secured debt, that is, debt where you pledge something as collateral, such as mortgages and car loans, are changed from “recourse debt” to “non-recourse debt.” What does this legalese mean? It means that if the lender could sue you for a deficiency or shortfall after a foreclosure or repossession if the sale of the collateral doesn’t bring in enough to pay the debt in full, the bankruptcy discharge stops them from going after you. All they can go after is the collateral, and if it doesn’t bring in enough to pay the debt in full, tough. You’re off the hook. This means that you can walk away from the house or car if you want to. If you don’t want to, just keep the payment current and you’ll be fine. Upon the entry of a discharge, most general unsecured debt–credit cards, medical debt, personal loans, old taxes, tax penalties, foreclosure and repossession deficiencies, unpaid rent, unpaid HOA and condo fees, unpaid utility bills, etc. (but not student loans)–are wiped out. You don’t need to pay these debts at all.

A typical Chapter 7 lasts about 4 months from filing to discharge.

Why would you want to file a Chapter 13? Several main reasons:
1. You aren’t eligible for a Chapter 7. You fail the means test, or have too much disposable income to qualify for a Chapter 7. Or you might have filed a Chapter 7 case in which you received a discharge within the last eight years. None of these are problems in a Chapter 13
2. You are behind on your mortgage and need time to catch up. A Chapter 13 gives you up to five years to spread these payments out to bring the mortgage current, without interest.
3. You owe more on the first mortgage on your home than it’s worth, and have a second or third mortgage. A Chapter 13 lets you “strip off,” or wipe out, wholly unsecured second and third mortgages.
4. You’re behind on your tax or domestic support payments and need time to catch up. A Chapter 13 gives you up to five years to spread these payments out to bring them current.
5. You owe a domestic support property distribution and want to discharge it. A Chapter 13 “super discharge” allows you to do this.
In these circumstances, I would normally advise my clients to consider a Chapter 13.
This decision is not always easy or straightforward. It requires a detailed analysis of your assets, debt, income and expenses, and an in-depth knowledge of the Bankruptcy Code. An experienced bankruptcy attorney is the best person to advise you.

Tuesday, July 16, 2013

Forcing the Mortgage Holder to Take Back a Home through Chapter 13

Using bankruptcy to surrender a home that has become unaffordable is nearly as common as using bankruptcy to stop a foreclosure so that a home can be retained. The question whether to keep a home when filing bankruptcy is usually answered by comparing the amount of the home’s monthly mortgage payments with the income the debtor is able to devote to housing payments. If the payments are no longer affordable, the debtor might choose to surrender the home as part of either a chapter 7 or chapter 13 bankruptcy filing.

However, in practice this is sometimes more difficult than it would seem at first glance. Mortgage companies are often slow to foreclose on homes that are surrendered to the lender in bankruptcy, leaving the home vacant, and still technically under the ownership of the bankruptcy debtor, for months or even years after the bankruptcy was filed.

The slow-to-foreclose mortgage company can create a host of problems for the surrendering-the-home bankruptcy debtor, who could be held liable for post-bankruptcy homeowners association fees, property assessments, other ownership related financial obligations (but not the monthly mortgage payments, the personal obligation for which the debtor was discharged in the bankruptcy), or property owner liability for injuries occurring at the vacant home.

However, a recent ruling from a Hawaii bankruptcy court approved an ingenious solution to the problem of the non-foreclosing lender. This chapter 13 decision, In re Rosa, No. 13-00630 (Bky. Hawaii July 8, 2013), approved over the objections of the chapter 13 trustee a chapter 13 plan which contained a provision designed to solve this problem by conveying the home back to the first mortgage holder.
In the Rosa case, the debtor’s chapter 13 plan stated that title to the real estate “shall vest in City National Bank/OCWEN Loan Service upon confirmation, and the Confirmation Order shall constitute a deed of conveyance of the property when recorded at the Bureau of Conveyances.” The chapter 13 trustee objected, arguing that a “surrender” under the bankruptcy law did not transfer ownership of the surrendered property until the lender actually foreclosed.

The court disagreed with the trustee and pointed out that here, the debtor had gone beyond merely “surrendering” the property in the chapter 13 plan. Rather, the chapter 13 plan plainly stated that confirmation of the plan by the court would transfer ownership to the lender, and that the order confirming the plan would be recorded like any other deed of conveyance. The lender had been served with this plan and it had not objected to the plan in court. The plan was therefore confirmed over the objections of the chapter 13 trustee.

The result of this strategy for this debtor was a prompt solution to the potential foot-dragging behavior by the lender in foreclosing, which otherwise might have led to years of wrangling by the debtor over unpaid future property assessments.

If you feel “stuck” with a house you no longer desire to keep, call us today to discuss your options and whether a Chapter 13 makes sense for you.

Wednesday, July 10, 2013

Over Median? - Get Creative to Fit into Chapter 7

Chapter 7 offers many advantages over Chapter 13:
  • faster process – 3 months vs. 5 years
  • lower cost
  • more complete relief from debts
When I meet with a prospective client, I start my evaluation by by asking “can this person fit into a Chapter 7?”
By contrast, the Bankruptcy Code is designed to push debtors into Chapter 13, where they repay some or all of their debt. This issue – how much, if anything, should a debtor pay back to creditors – underlies most of the conflict (and litigation) that can arise in a bankruptcy case.
As an advocate who works on behalf of debtors, my goal is to help my clients obtain a fresh start – that is, complete their bankruptcy cases as quickly as possible and with as little residual debt as possible.
One hurdle that appears in just about every bankruptcy case is the means test. Designed to bar Chapter 7 relief from debtors who have the means to pay back their debts in Chapter 13 or Chapter 11, the means test uses a clunky, mechanical series of calculations to predict future earnings capacity based on past performance. How ironic that federal securities laws require sellers of investments like stocks and mutual funds to specifically disclaim that past performance is no guarantee of future results.
In any case, an astute bankruptcy lawyer should view the means test as a flexible structure and not a monolith. There are numerous angles to argue that the means test should not apply in a particular case or that the results in a particular case should be ignored. A nice example of good lawyering in this regard was published by my BLN colleague Jay Fleischman in his law firm blog, where he points out that a student loan incurred for a business purpose may make a Chapter 7 case non-consumer in nature and this eliminate the means test requirement entirely.
In cases where the means test does apply, it is important to look for every possible may be possible to end up with the result that you are eligible to file Chapter 7 if you wish. If you are an above-median debtor the first draft of your means test may yield the result that you cannot file Chapter 7 but you and your attorney must dig deeper.  Contact us today to discuss several tactics that may help you qualify for Chapter 7, even when the means test suggests that you may not be eligible.

Thursday, June 6, 2013

Experience Debt Relief Through Bankruptcy (not against it)

 Answer this question: Should you file bankruptcy?
Yes, if you owe more now than you did last month. This test is easy and the answer is simple to understand. It is your best way to tell whether your finances are headed in the right direction or whether you are digging deeper into debt. If you ignore this one piece of expert advice you will undoubtedly follow the false promise of what appear to be quick easy painless debt collection schemes, schemes that are stacked against you.

Do not ignore these warning signs.

As one struggles with bills one typically faces a series of common phases – ill-advised attempts to fix the problem. You pay as much as you can on your bills, and when that is not enough you move into phase one. First, one uses savings, until none is left, leaving nothing for emergencies. You are taught early in life to save for a rainy day. Your savings account is your safety net. It is there to protect you and keep you out of financial trouble. Using up your emergency fund is your first warning sign that financial danger lies ahead.
Next, one borrows money, usually in one or more of the following four ways.
            1.        By credit cards, until the account limits max out and the bank declines to issue further credit;
            2.        By long term debt consolidation, based on one’s ability to get a loan;
            3.        By short term high interest payday type loans;
            4.        By begging money from family and friends.
When you find yourself in a hole, stop digging. Borrowing money to get of debt is the same as digging the hole deeper. If you cannot pay your bills today, you will not be able to pay more debt tomorrow. When no one will loan you more money, you have used up all your credit, and you have spent all the money you do not have. When you have no more credit to spend, stop digging. This is the second warning sign that you need real help.
Finally you realize your ways do not work and you start to ask for advice. The one word you keep hearing is bankruptcy. That is a word you have been conditioned to avoid, because banks tell you it is bad. The same people that stopped loaning you money do not want you to file bankruptcy. Why, because they tell you they will not give you loans in the future. But they already stopped giving you loans and you cannot pay the debt you already have. It is time to get a fresh start, a do-over. It is time to take back control of your life. In reality, contacting a bankruptcy lawyer is the first step to achieving debt relief, but for many people it is often the last resort. The third warning sign is thinking you can solve this problem yourself.

See an expert.

You tried it your way. Now is the time to listen to the expert. A bankruptcy lawyer brings years of experience and thousands of cases to your problems. A lawyer will listen to your problems and present you with options to get out of debt. The lawyer can offer debt consolidation or debt settlement and can explain whether those options are suitable to your situation.

Follow advice.

Bankruptcy lawyers are trained to find solutions. An experienced bankruptcy attorney can predict whether your case:
-Probably will succeed;
-Might have a chance at success; or
-Is a loser.
It is time to follow advice. Keep an open mind and let the lawyer work for you. Accept the advice, take the recommendations. Do not insist on another scheme that “is a loser”. You ignored all the warning signs leading to falling in debt. Now is the time to let the experienced bankruptcy lawyer help you out of debt.

Still not convinced?

Walk into the lawyer’s office. Proudly announce that you do not want to file bankruptcy. Shout that you have excellent credit. Scream that you want to pay your bills. Then, … Remember the test: Do you owe more money today than you did yesterday? Remember how you drained your savings accounts. Remember how you borrowed every penny that you could borrow.
Remember how everything you tried did not work. Now, let the experienced bankruptcy lawyer bring you to your goal of real debt relief.

Friday, May 17, 2013

“Chapter 20″ Lien Stripping Allowed by Fourth Circuit Appeals Court

The U.S. Court of Appeals, Fourth Circuit, has become the first U.S. Court of Appeals to approve “chapter 20″ lien stripping.  Although virtually all U.S. bankruptcy courts allow the “stripping” (vacating and eliminating) of completely unsecured junior mortgages on homestead real estate, the Fourth Circuit is the first circuit-level appeals court to approve lien stripping in a chapter 13 which follows closely on the heels of a chapter 7 bankruptcy filing.  In re Davis (Branigan v. Davis), No. 12-1184 (4th Cir. May 10, 2013).
“Chapter 20″ is a colloquial term for a chapter 13 bankruptcy filed within four years of a chapter 7 case.
A junior mortgage is the second, third, or any other mortgage which is junior to the first mortgage upon homestead real estate.  Although junior mortgages cannot be stripped or otherwise modified in a chapter 7 bankruptcy (although the Eleventh Circuit has allowed this practice in an unpublished opinion), junior mortgages can indeed be stripped off in a chapter 13 bankruptcy, if the junior mortgage is entirely unsecured.

An example of an entirely secured junior mortgage would be where the home’s value is $200,000 and the first mortgage has a balance of $250,000; if the home is also subject to a second mortgage in the amount of $50,000 the second mortgage is not secured by any actual value of the real estate.  To think of this example in another way, if a foreclosure sale were to occur on this underwater home, the first mortgage would receive only $200,000 (the home’s value) and the second mortgage would get absolutely nothing.  This is what the bankruptcy code means when it categorizes a junior mortgage as entirely unsecured.

“Chapter 20 junior mortgage lien stripping” means stripping an entirely unsecured junior home mortgage in a chapter 13 bankruptcy case which is filed within four years after a chapter 7 filing by the same debtor.  The question whether this is permissible arises because the debtor is not eligible for a discharge of debts in a chapter 13 filed within four years of a chapter 7 discharge.

Many are surprised that someone can file chapter 13 bankruptcy within four years of filing chapter 7 — isn’t there a mandatory eight year waiting period between bankruptcy filings?  The answer is no.  A debtor can file chapter 13 at any time, it’s just that a chapter 13 debtor cannot receive a discharge, in the new chapter 13 case, if the case is filed within four years of a previous chapter 7 case.

Mortgage banks have raised the argument that even if junior mortgage lien stripping is allowed in chapter 13 bankruptcy cases, it should not be allowed in a no-discharge chapter 20 case.  If the debtor cannot receive a discharge of debts, the argument goes, then how can the chapter 13 filing strip off a junior mortgage?
In In re Davis, the appeals court noted that lower courts have been split on the question of chapter 20 lien stripping, although one Bankruptcy Appellate Panel had approved this practice in In re Fisette, 455 B.R. 177 (8th Cir. BAP 2011).

Call Speckman Law Firm at 619-696-5151

Monday, May 13, 2013

Who gets Lower Rates? Wall Street Banks or Student Loans?

Wall Street Banks Get Lower Rates Than Student Loans AND Can Bankrupt Their Loans From The Government



Bankruptcy remains a source of financial relief for most borrowers.  Most debts are discharged in bankruptcy and folks receive a “fresh start”. However, there is one huge exception that is not discharged automatically in any bankruptcy - student loans.
Both government and private loans are not discharged in bankruptcy. Student loans are dischargeable in bankruptcy cases only if the student can prove that the loans cannot be repaid without undue hardship, now or at any time in the future.   Providing undue currently hardship would seem to be easy — after all, bankruptcy means broke, right?   The difficult part is proving that the hardship will continue indefinitely into the future.  Absent a permanent disability, this standard is seldom met. So, the practical consequence is that student loans are largely considered “non-dischargable.”

There may be some relief in the future – at least with private student loans. 

A meaningful push to revamp the current loan is being made by Elizabth Warren, a former Democratic Senator from Massechusetts. 
There, Elizabeth Warren served as the interim potential head of the Consumer Financial Protection Bureau, but her permanent appointment was blocked by partisan politics. Undeterred, Elizabeth Warren ran for Senate shortly thereafter. Warren now serves on the Senate Banking Committee, where she has introduced her first piece of legislation:  “The Bank on Students Loan Fairness Act.” Ms. Warren proposes a radical change:   to give individuals the same interest rate that the big Wall Street banks obtain, an interest rate of about .75% on loans they obtain from the government. The interest rate for Stafford (government backed) student loans is currently set at 3.4% and is set to double to 6.8 percent in July.

As Warren explains, this student loan problem is a quiet but growing problem.  She explains that taxpayers are investing in the big banks and that taxpayers should invest in our students.    America should not be “drowning our students in debt while we give a great deal to the banks.”  She points out that economists have stated that defaulted student debt poises a problem and barrier to the recovery of our economy.    She concluded with a call to action and a reminder that students have only their voices, not lobbyists, to ask Congress for equal treatment.

Why should our government make it so easy for Wall Street to skip out on debt while requiring students, our future, to jump hurdles and hire attorneys to obtain financial relief?

Ms. Warren, a former Harvard law professor, understands the financial pressure faced by most Americans as she came from a working-class background, becoming a waitress at age 13 (after beginning as a babysitter at age 9).  Ms. Warren has authored 9 books, including two best sellers.  Let’s hope her efforts produce some meaning change.

If you are struggling with student loan debt, call us today to schedule a free consultation with attorney David L. Speckman.

1350 Columbia Street, Suite 1350
San Diego, CA 92101

Wednesday, April 3, 2013

Biggest Tax Time Mistake Is Not To File You Return

There are a lot of mistakes one can make at tax time. One of the leading mistakes, in fact it is absolutely the biggest, is to fail to file a tax return on time. That particular mistake can also cost a person plenty, especially if the person is in bankruptcy or needs to file bankruptcy.

The temptation not to file a return is sometimes great.  One may know that s/he owes taxes, but is faced with a situation in which the money to pay the taxes is simply not available.  This common situation may leave one confused as to how to best proceed.  Unfortunately, the option often selected is to not file the return at all.  This is in fact exactly the wrong way to proceed.

You see, the IRS penalizes you TEN TIMES as much for not filing a return as it does for just failing to pay the taxes owing! Ten times. The penalty for failure to file a return is 5% of the amount you owe; if you file the return but can’t pay the tax, the penalty is 1/2 of 1%.

Now, that this little fact impact a bankruptcy? Well, if you are considering a bankruptcy filing  your bankruptcy attorney and bankruptcy trustee will require a copy of your most recently filed tax return.  Delay in filing a tax return can (and usually does) result in delay in obtaining a bankruptcy discharge and may case a dismissal of the bankruptcy altogether.  Moreover, a bankruptcy may actually help address the unpaid taxes.  For instance, a Chapter 13 case will give the taxpayer up to five years to pay off the taxes, usually with no interest or penalties. 

So, file those tax returns – even if you do not not have all of the money to pay the taxes.  If you have any questions and need help, call us to arrange a free consultation.

Considering Filing Bankruptcy? Maybe You’re A Popular Celebrity

In the mid 80′s to early 90′s, a television show, “Lifestyles of the Rich and Famous” was one fo the most popular television shows, with its host, Robin Leach.  The show trumped the everyday American how the rich and famous lived - often on exotic vacations. The “Rich” and Celebrities are often admired, imitated and fawned over in our society. But when you look closely, at those individuals, they are not any different from the average  person on the street.  Just like the average person, celebrities often find it beneficial to file for bankruptcy relief. While the celebrity lifestyle may be quite different then yours or mine, financial distress has the same effect on everyone. And everyone is entitled to a fresh start, no matter how many parapazzi stalk them.  Listed below are a few (but certainly not all) bankruptcies of film and television stars as well as a partial list of other celebrities who have filed for bankruptcy protection..
Film and Television Industry
Real Housewives of New Jersey: Terese and Joe Giudice, Danielle Staub, Chris Manzo (his company)
Real Housewives of Orange County: Alexis and Jim Bellino, Simon Barney, Tammy Knickerbocker, Lynne and Frank Curtin
Real Housewives of Atlanta: Lisa Wu Hartwell
Real Housewives of Beverly Hills: Taylor and Russell Armstrong
Real Housewives of D.C.: Michaele and Tareq Salahi
Stephen Baldwin, one of the Baldwin brothers/acting family, featured in an article by Carmen Dellutri,.
Kim Basinger, who bought a town for $20 million right before she was sued for more than $8 million (breach of contract case)
Lorraine Bracco, who admitted when interviewed that bankruptcy is a humbling experience.
Tia Carrere, who was accused of filing bankruptcy to get out of her contract with ABC.
Gary Coleman, now deceased, but who was once the highest paid child actor in his era.
Francis Ford Coppola, who had many box office successes, also had failures that put his studio at risk.
Walt Disney, who created Mickey Mouse AFTER his bankruptcy and went on to fantastic success as explained by Rachel Foley, our Kansas attorney
Burt Reynolds, whose bad investments caused his financial distress.
Zsa Zsa Gabor, who filed bankruptcy after losing a libel suit filed by Elke Sommer
Mickey Rooney, who also became a victim of elder financial abuse after his bankruptcy
Corey Haim, now deceased, filed for Chapter 11 bankruptcy. Haim was best known for his roles in Lost Boys and Lucas, both 80s films.
Don Johnson, another actor who rose to success in the 80s.
Margot Kidder, actress, whose illness amplified the financial turmoil in her life in the late 80s and early 90s.
Randy Quaid, another 80s star, who filed for bankruptcy in 2010s.
Debbie Reynolds, who liquidated some of her memorabilia during the bankruptcy process.
Famous for being Famous Celebrities
Nadya Shuleman (who ended up dismissing her bankruptcy as explained by our Georgia member, Jonathan Ginsberg)
Heidi Fleiss, aka the Hollywood Madam.
John Wayne Bobbitt, whose angry wife dismembered him, filed for bankruptcy, went on to become a adult film star.
Casey Anthony, who was found not guilty for the murder of her child while most of America believes that the wrong verdict was reached.
Anna Nicole Smith, whose real name was “Vicki Lynn Marshall”, rose to fame as the 1993 Playboy Bunny of the Year. In 1994, she married J. Howard Marshall, a wealthy 89 year old. In 1995, Marshall died.

Thursday, March 21, 2013

Want to Meet Speckman Law Firm?!

Come to this event that Speckman Law Firm will be a part of and have a booth!



Got your bankruptcy discharge?

Great! You’re on your way to a fresh start.

Now you’ve got work to do.

List the debts that didn’t get discharged.  Family support, recent taxes, student loans, or taxes for years for which you haven’t filed bankruptcy are not dischargeable in bankruptcy. The discharge order does not say which debts survive the process – or ask your attorney.

Verify lien balances The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.

Rearrange banking Online banking and automatic bill pay may have been disabled while you were in bankruptcy.

Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.

Save your bankruptcy papers- You’re nearly certain to encounter efforts by buyers of zombie debts to collect debts that have been discharged in your case. You need to be able to show that the debt was scheduled in your case. Creditors with notice, and those they sell their worthless accounts to without notice, were discharged.

Join a credit union Credit unions are owned by their members. They are in business to make loans to members. Rates are usually better than the banks, and the profits flow to members. About the only kinds of credit I’m enthusiastic about are car loans and home loans. Plan to be eligible to apply for a loan by joining now.

Check insurance coverage If you elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liaibility insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title til someone else goes on title. Don’t let post bankruptcy claims arising from property you’re trying to get rid of spoil your fresh start.

Pull a credit report Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The ugly history can properly remain, but you are entitled to a showing that you now owe nothing.
Take advantage of the opportunity that bankruptcy has provided, and go forth and prosper.


The bankruptcy stay is the first major benefit for the debtor when a bankruptcy is commenced. Immediately after the filing fee is paid and a petition is filed, virtually every type of collection activity is called to a halt. An order is entered by the bankruptcy court under 11 USC Section 362 prohibiting nearly all creditors from taking any type of collection action. After months or even years of calls, letters and perhaps wage garnishment the automatic stay of the bankruptcy court is a welcome relief indeed. But does it stop everyone? Does it stop even the Internal Revenue Service?

While there are few exceptions to the protection a debtor in bankruptcy is given by the automatic stay, collection by the IRS is not among them. That is to say, even the IRS is prohibited from collecting after the petition has been filed. While the IRS can continue to audit tax returns during a bankruptcy proceeding, and may even determine that a tax is due, it cannot start or continue enforced collection. The IRS must stop any wage levy and if it files a tax lien after the bankruptcy petition has been filed, it must withdraw the lien.
What happens if the bankruptcy automatic stay is violated? Well, as a general principal, if a creditor violates the automatic stay by accident, it must return the money or stop the collection action as soon as it learns about the bankruptcy. However, if the stay violation is done willfully (ie., on purpose), then the creditor faces serious penalties as federal law provides strong remedies for the debtor. After a willful stay violation, the debtor can not only recover the money or property that was wrongfully taken, attorney fees and even punitive damages may be available.

The IRS instructs its collectors to stop all collection activities when they learn of a bankruptcy. In spite of these instructions, there are times when an overzealous tax collector violates the automatic stay on purpose. While some statutory remedies are available, the debtor cannot recover punitive damages against the government. Special rules apply and, based on 26 USC §7433 (d)(1) an aggrieved taxpayer in bankruptcy must first go through IRS administrative process to fix the problem. Treasury Regulation 301.7433-2(d)(1) sets out a procedure that must first be followed before any damages can be recovered from the IRS.
Despite the additional requirements of IRS regulations, the bankruptcy stay remains powerful protection from the tax collector. There are few other situations in which the debtor can tell the IRS to stop collections and count on the court to back them up. If you are being harassed by the IRS, call us today for a free consultation.