Mass. bankruptcy court says too bad if you didn’t receive notice of a foreclosure

By doug | Published: April 26, 2012

Massachusetts law requires that a lender send two notices to a homeowner before a foreclosure auction can be held — one by certified or registered mail, and the other by regular first class mail. Advertisements must also be placed in a local newspaper.

But what if the homeowner never receives these notices? Can the foreclosure be stopped or reversed on this ground?

No such luck, according to a recent opinion in the bankruptcy court by Judge Boroff. It is the sending of the foreclosure letters that counts, and whether or not they are received (never mind read or understood) is not the issue.

This came up in the case of Bailey v. Wells Fargo, no. 09-44760 in the bankruptcy court in Worcester, Mass. The homeowners wanted to void the foreclosure based in part on the fact that they said their letter carrier left the two notices in a little used front door, where they were not discovered until the loss of the home was a fait accompli.

Judge Boroff ruled, however, that the mailbox rule in Massachusetts is clear: the requirement that the notice be mailed to the owner of the foreclosed property is satisfied by mailing the documents, and the non-receipt of them by the owner is irrelevant.

The bottom line is that if you are behind on the mortgage and you want to try to keep the property, you need to be vigilant in monitoring your “snail mail” so that you are not surprised by an upcoming auction date.

 

By Doug Beaton

Posted in Foreclosure | Comments closed

What do bankruptcy lawyers talk about when they get together?

By doug | Published: April 25, 2012

Ever wonder what a bunch of bankruptcy lawyers would hash over when they get together for a confab?

Well, one of the largest meetings of bankruptcy lawyers starts on April 26th in San Antonio, Texas when the National Association of Consumer Bankruptcy Attorneys convenes its annual meeting.

Some of the topics up for discussion are “Understanding Tax Claims in Bankruptcy,” (important, but a snooze-fest, I know), “Moving forward with reverse mortgages,” (addressing the growing number of senior citizens going bankrupt), and “Getting inside your debtor’s mind.” (once inside, is there any way out)?

Not surprisingly, many of the topics to be discussed involve home mortgages in one way or another, including “Objecting to evidence in mortgage cases,” and “Who owns the note, and why does it matter?”

Keeping up the Texas theme, there is even a session on “Lassoing debt buyers,” those pesky collection firms that specialize in trying to beat consumers out of decades-old bills.

On the final day of the conference there is a session called “Get educated on student loans,” (which might be the hot topic in bankruptcy law for the coming year), and even one called “Trustees gone wild.” If that one ever shows up on YouTube, I’ll try to post it here!

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

What if you file for bankruptcy, and discover assets you didn’t even knew you had?

By doug | Published: April 24, 2012

Have you ever spent the weekend cleaning out the garage? If so, you probably end up amazed at the amount of stuff you have accumulated over the years.

There’s a good chance that you have more assets than you realize that aren’t cluttering up the garage, too.

And if you are going to file for bankruptcy, you need to start thinking about them.

How about money in your Paypal and EBay accounts? Assets that need to be declared!

Same thing with book royalties, patents and trade secrets — what lawyers love to call “intellectual property.”

Web sites and domain names could be considered assets in our technologically dominated age.

Season tickets to sporting events and subscriptions to the arts definitely need to be declared — you wouldn’t want to lose them, would you?

Health savings accounts are assets. Run a restaurant? The liquor license might be a big one.

The security deposit for a rental apartment or storage unit is your money, not the landlord’s; and so these too are assets of what lawyers love to call your “bankruptcy estate.”

Vacation clubs and timeshares? Put ’em on the list too!

And this list is not meant to be all-inclusive (I don’t think any list could be), but it is meant to give you a flavor for some “hidden” assets that many people have, which need to be accounted for when filing a bankruptcy case.

As always, remember the “golden rule” of bankruptcy court: “list it, or lose it!”

 

By Doug Beaton

Posted in Practical tips | Comments closed

Another NFL quarterback needs to file for bankruptcy — this time it’s Warren Sapp

By doug | Published: April 23, 2012

Financial writer Michelle Singletary reported over the weekend that former NFL star Warren Sapp has filed a Chapter 7 bankruptcy case.

Sapp was best known for quarterbacking the Houston Oilers in the days before the franchise moved to Tennessee.

His financial troubles — which consumed the estimated $60M in paychecks he cashed as an elite athlete — appear have a familiar cause: investment in Florida real estate. Sapp was smart though, and still has considerable holdings in his retirement accounts — which (just like yours) can’t be touched by creditors in bankruptcy court proceedings.

Only two years ago I blogged about another NFL QB going through bankruptcy — Mark Brunell of the Jaguars, who also got snagged by real estate losses.

As Singletary points out in her article, footballers hitting rough patches in the business world is nothing new — even one of the all-time greats, Johhny Unitas, filed for bankruptcy after some business deals went sour in the 1980’s.

Singletary also points out that several years ago, Sports Illustrated published a revealing article on how and why a high percentage of pro athletes end up financially ruined. The magazine calculated that by the time they have been retired for two years, 78 percent of former NFL players have gone bankrupt or are dealing with financial issues. Within five years of retirement, an estimated 60 percent of former NBA players are broke.

But bankruptcy isn’t a death sentence, and its not the end of the line for anyone. Certainly not for Sapp, whose filing indicates he has a salary — a monthly salary, no less of $116,000! Sapp is a commentator on the NFL Network premium pay cable station.

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Enormous growing problem with student loans next bubble to explode — or will it boomerang back to bankruptcy court?

By doug | Published: April 13, 2012

Over the Easter weekend, a lot was written about the massive growing problem of student loan defaults — which some commentators think might soon approach the problems associated with the recent real estate crash.

In an Associated Press article, William Brewer, president of the National Association of Consumer Bankruptcy Attorneys, “This could very well be the next debt bomb for the U.S. economy.”

“As bankruptcy lawyers, we’re the first to see the cracks in the foundation,” Brewer said. “We were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing huge defaults on student loans and people driven into financial difficulties because of them.”

And if you think it’s just students saddled with these loans, think again. Increasingly, parents and even grandparents have been twisted into co-signing the loans, meaning student loan debt, of all things, is becoming another problem of the elderly!
People over sixty collectively owe over $36 Billion dollars for their offspring’s education.

Currently, student loans are difficult to discharge in bankruptcy court, requiring the debtor to bring (and win) a lawsuit in addition to the regular case.

But if the bubble bursts, that may be changing. Lat year, legislation was introduced in Congress to ease up these requirements. In the current election year dynamic, it probably doesn’t have much chance — unless the problem really does grow as big as the housing crisis.

 

By Doug Beaton

Posted in Student loans | Comments closed

Should you go into bankruptcy to cram down your car loan?

By doug | Published: April 2, 2012

Think about this scenario for a minute: Things haven’t been going well lately, and debts are pressing on you. Bankruptcy may be an option, not your first choice to be sure, but its out there, and the bills collectors have been closing in fast.

You have an older car you bought a few years ago at a not-so great dealer (like some of the ones who hang out in Plaistow, right over the Massachusetts line, here the lemon laws are a bit looser), who did get you financed but at a high rate.

The car isn’t great, but you definitely need it to get to your job so you can earn your daily bread. It might be coming up on some pricey repairs that you would rather not think about just now.

If this kind of situation rings true to you, maybe its time to explore the cram-down rules of Chapter 13 bankruptcy, which could offer major relief.

In essence, the bankruptcy code allows you (once you file a case, that is), to re-write the loan down to the current fair market value of the car or truck. You can then pay off this new lower balance over a period of three to five years by making monthly payments to your bankruptcy trustee. You might even be able to get a lower interest rate on these payments while you do this.

But, like any other legal strategy, there are traps and tricks you have to know before you take the plunge.

First, the cramdown rule applies only under Chapter 13 of the bankruptcy code. So this case is not going to be the simplest or quickest one through the system.

Second, the rule only applies to cars that have been purchased by you more than 910 days before you file your case (that’s two and a half years). So if your purchase is more recent than that, you won’t be able to do a cramdown — at least without waiting for the 910 days to pass.

But if you can get by those two obstacles, and have a steady income now, the cramdown strategy can get you out of an obscene car loan agreement — and can help you get rid of other debts, like credit cards or medical bills as well.

And you might even qualify to pay your bankruptcy lawyer’s fees in installments as well.

Again you want to ask yourself three questions before taking this plunge:

(1) Do I have a reasonably steady income?

(2) Did I buy my car more than 2 1/2 years ago?

(3) Is my car worth less than the balance of the loan?

If so, and you have other debt problems as well, the Chapter 13 cram down rules could be a real benefit to you in a tough time.

 

By Doug Beaton

Posted in Chapter 13, Practical tips, Secured loans | Comments closed

Should you file for bankruptcy while you are unemployed?

By doug | Published: March 22, 2012

If you have lost your job and are collecting unemployment, is this a good time to file a bankruptcy case to eliminate the debts?

A long time ago when I was starting as a lawyer, it was unusual to see unemployed folks filing cases. It costs some money to file, of course, and that money is hard to come by without a job. People generally filed for bankruptcy when they got a new job, but realized they could never get out from under the credit card bills that had piled up while jobless.

The situation is quite different now — and he culprit is the bankruptcy reform laws passed in 2005. This law instituted a “means test” for filing Chapter 7 bankruptcy, which had the perverse effect of making the temporary poverty of unemployment an attractive time to “qualify” for bankruptcy relief.

Simply put, if you lost a good paying job, it won’t be long (three months tops) before you qualify for a Chapter 7 bankruptcy. But now, if you wait until you find a good paying job again, the US trustee could object to your discharge on the grounds that your expected future income would allow you to pay creditors a monthly tribute.

So in the current climate, filing for bankruptcy while still unemployed is a very viable strategy. You don’t have to worry about passing the means test, and you don’t (yet) have an expectation of future income that could draw an objection to your case. A topsy-turvy world indeed!

Photo: Breadlines in NYC, 1933. Library of Congress.

 

By Doug Beaton

Posted in Means Test, Practical tips | Comments closed

Massachusetts church uses bankruptcy laws to stave off foreclosure

By doug | Published: March 21, 2012

The congregation of Roxbury’s Charles Street African Methodist Episcopal Church has authorized its leaders to file a Chapter 11 bankruptcy petition in order to stop foreclosure proceedings scheduled for later in the week.

One of the leading churches in Boston’s black community, they need to use the bankruptcy law to try to restructure a balloon note mortgage that came due in December 2011.

The 194 year old church has been sparring with its lender OneUnited Bank for several years over the terms of several rebuilding projects. When OneUnited refused to restructure the main loan on the church building, church leaders opted for bankruptcy court.

This story is notable on several fronts: first, it underscores how the recession has hurt religious organizations of all stripes, as contributions and tithes plunged with the economy. Next, it shows how effective bankruptcy can be in stopping an imminent foreclosure. And it also shows how negotiating the terms of a mortgage gone bad can be helped by the bankruptcy process, which gives debtors leverage they don’t usually have outside of bankruptcy court.

 

By Doug Beaton

Posted in Bankruptcy News, Foreclosure | Comments closed

More problems with homes, trusts, Massachusetts homesteads, and bankruptcy

By doug | Published: March 16, 2012

Right after writing about the Stallworth case and the dangers of putting houses into trusts before filing a bankruptcy case — and telling the story of a Massachusetts man who lost a lot of home equity in bankruptcy court that way — there comes another Massachusetts bankruptcy case involving, you guessed it, trusts and the homestead exemption.

In the Pierce case, no. 11-15718 the married debtors put their house in a revocable trust for their children in 2004, and selected themselves to be trustees.

They both filed a homestead declaration on the property in April, 2011 (usually only one person signs), then in June they both filed a Chapter 7 bankruptcy case.

The bankruptcy trustee took the position that the home, because it was in a trust, was no longer real estate subject to homestead protection. He also argued that the homestead documents were ineffective because the debtors just signed their names, and did not indicate on the form that they were signing as trustees of a trust.

This case had a happier ending for the debtors, however. The Massachusetts homestead laws were completely overhauled in 2011, and United States Bankruptcy Judge William Hillman decided that he could find no explicit requirement in the new rules that required people to sign homestead declarations as “trustee.”

These debtors lucked out and won their case, and will get to protect their home equity through the bankruptcy case. However, they no doubt suffered several months of worry waiting for the judge’s decision, and spent a lot on litigation expenses.

The moral of both these cases taken together is that you must be very careful if you have placed any property in trust and are thinking of bankruptcy.

The existence of a trust is not a deal-killer in and of itself, but these matters turn on really complex legalities, and you will need to provide your bankruptcy attorney with all the trust documents BEFORE the case is filed; that way, you will sleep well during the case, knowing your home is protected by the law.

 

By Doug Beaton

Posted in Bankruptcy News, Exemptions, Real estate | Comments closed

Sharp eyed bankruptcy trustee invalidates a recorded mortgage

By doug | Published: March 15, 2012

A recent dispute between a bankruptcy trustee and Citi Mortgage that went to bankruptcy court in Boston shows just how sloppy the mortgage industry got during the heady days of the real estate boom in the mid-2000s.

Bankruptcy trustee Marc DiGiacomo filed a motion to eliminate a mortgage on a debtor’s home because it wasn’t “acknowledged” properly in the first place.

When you take on a huge debt like a mortgage, not surprisingly, the actual mortgage has to be signed somewhere. In Massachusetts, this is called an “acknowledgement,” and the paper is signed by the new homeowners in front of a notary public, with the paper becoming part of the mortgage itself.

Under Massachusetts law, no mortgage is supposed to be recorded at a registry of deeds unless it has a proper acknowledgement.

However, when a South Shore couple filed for bankruptcy and DiGiacomo was assigned as the trustee, he discovered that the acknowledgement on the mortgage for the debtor’s home appeared to be signed by another couple — completely unrelated to the homeowners at all!

Bye-bye mortgage, said United States Bankruptcy Judge William Hillman, in a case heard in his court. The case is listed as DiGiacomo v. Citi Mortgage, no 11-01179.

As a result, both the debtors and their creditors stand to get more money through the bankruptcy case, although this may require the home to be sold to liquidate the equity. As for Citi Mortgage, they are going to get squat, for the bankruptcy court ruled that with the wrong signatures on the acknowledgement, the mortgage should never have been recorded in the first place.

It is a never ending source of amazement what you will find when you look into the actual state of affairs of debtors with mortgages who are filing bankruptcy cases now that the economy has tanked!

 

By Doug Beaton

 

Posted in Real estate, Secured loans | Comments closed
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