Auto lenders getting aggressive with repossessions, even after bankruptcy

By doug | Published: June 8, 2018

Massachusetts bankruptcy attorneys should be aware of a recent uptick (during the spring and summer of 2018) in aggressive actions by auto lenders seeking to repossess debtor’s vehicles despite a bankruptcy filing.

Several of the common lenders are upping the ante, but Toyota Financial seems to be taking the most aggressive positions of all.

One of their tricks seems to be active monitoring of Statements of Intention. This often overlooked pleading in Chapter 7 cases requires a debtor to state whether they intend to redeem the vehicle, surrender it, or enter in to a reaffirmation agreement with the lender.

The statement of intention form (Form 108) also has a line marked “Other” will a fill in the blank space. If debtor’s counsel uses this form and the lender is Toyota, watch out! (some Massachusetts bankruptcy lawyers like to use this line to avoid reaffs, arguing that state law prevents repossession anyway, so long as the debtor’s account is paid up — a big IF).

In that case, Toyota may take the position that the automatic stay concerning the vehicle expires 30 days after the case filing (or after the Statement of Intent filing, if later), and seek to do a quickie repo with no notice to the debtor or his counsel.

This is based on a twisted reading of bankruptcy code sections 362 (h) (2), and 521 (a).

Debtor counsel’s first line of defense to this aggression is former bankruptcy judge Henry Boroff’s opinion in In re Mollison, 463 B.R. 169 (Bankr.D.Mass. 2012). Mollison holds that where a debtor fails to file a statement of intention, or files one with the “Other” box checked, the automatic stay does not expire after 30 days, but rather 30 days after the first date set for the section 341 Meeting of Creditors.

While Mollison is a great case and should be cited with gusto if there actually is a surprise repossession, there are still some problems, not the least being that Judge Boroff is retired, and you can be 100% sure your case will not be heard by him. Bankruptcy judge Christopher Panos has stated in court that he may or may not follow Mollison.

A second line of defense is obviously to just give in and always file Form 108 indicating a reaff will be filed for every vehicle. But even here potential traps lurk. A close reading of section 521 indicates it is the debtor who has to perform the stated intention — meaning that debtor’s counsel may have to draft the reaff, and serve it on the creditor, a reversal of the normal order of things.

All of which adds up to just a few more things to worry about when representing Chapter 7 debtors in Massachusetts…..

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Private pension income needs to be reported twice on bankruptcy schedules

By doug | Published: May 2, 2018

If you are thinking about filing for bankruptcy and you receive a private pension payment each month, instead of or in addition to social security checks, be aware that the pension is treated differently on the bankruptcy forms and in the calculations that determine the course of your case.

Simply put, the pension must be reported as income on both the “means test” forms, and on Schedule I, where each debtor’s monthly income is itemized.

Social security checks are NOT listed on the means test forms, but they ARE included in monthly income on schedule I.

There are different means test form for Chapter 7 and Chapter 13.

For Chapter 7 (simple) cases, it’s Form 122A, “Statement of current monthly income / means test.” This form is used to compare your gross income and family size with the state average, to see if you qualify for Chapter 7. Pension payments should be listed on this form, but social security payments should not. (If you’re paying attention, yes, this means that if your only income is social security, you automatically qualify for Chapter 7).

For Chapter 13 cases, something similar to a means test is found on Form 122C, “Current Monthly Income / Disposible Income.” This form is used to determine the length of your Chapter 13 case (between 36 and 60 months), and in some cases to determine what your monthly payment to the bankruptcy trustee will be. Again, private pension payments must be listed, but social security payments are omitted.

In addition, every debtor must itemize their monthly income on Schedule I, a form used in all bankruptcy cases (Chapters 7, 11, 12 & 13, etc.). Here, debtors must list pension income as well as social security income as well as anything else (wages, dividends, the kitchen sink). The grand total is compared to your monthly expenses, listed on Schedule J.

As just a rough example, imagine a debtor with who gets a $1,000.00 pension check each month, and also gets $1,000.00 from social security. If their monthly expenses on schedule J total $1,900, they could afford a $100 / month Chapter 13 plan payment.

The issue about pensions came up not so long ago in the Sjogren case, where newly minted Springfield, Mass. bankruptcy judge Elizabeth D. Katz ruled that pension income has to go on the means test form, because Congress did not create a specific exemption for it when drafting the Bankruptcy Code.

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Median income levels for the bankruptcy means test rise again

By admin | Published: October 20, 2017

New data released by the Census Bureau as of April 1, 2018 will result in it being a bit easier to qualify for Chapter 7 bankruptcy in either New Hampshire or Massachusetts.

Median income levels are used by the bankruptcy court to determine whether a debtor qualifies for a Chapter 7 case, and also to determine if a Chapter 13 debtor must file a three year plan or a five year plan.

Effective April 1, 2018, the median income levels in Massachusetts and New Hampshire are as follows:

MASSACHUSETTS:

One person household: $62,660.00
Two person household: $80,180.00
Three person household: $98,758.00
Four person household: $123,864.00
Five person household: $132,264.00
Six person household: $140,664.00

NEW HAMPSHIRE:

One person household: $64,531.00
Two person household: $75,856.00
Three person household: $92,263.00
Four person household: $115,926.00
Five person household: $124,326.00
Six person household: $132,726.00

Big family? Add $8,400.00 for each additional person.

If you are curious about how these figures vary state-by-state, you can check out this link:

https://www.bestcase.com/MeansTestChanges/MTtablesHTMLFinal/xIncome_DT18A_17A_Comp.Htm

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New rules on credit reports may leave them looking skimpier — and less accurate

By doug | Published: July 6, 2017

Starting July 1, 2017, important rules for credit reporting agencies have changed, and the changes may have a big impact on both the curious consumer who just wants to check his score, and the debtor seriously thinking about filing for bankruptcy.

Going forward, civil judgments and tax liens data will no longer be reported by the three major credit-reporting bureaus that do not include three of the following data points: name, address, social security number or date of birth.

That means that an estimated 11 million Americans will see some lien and judgment information vanish from their credit reports.

Good news or bad news? If you are a debtor, it might make you feel better. It might even make the FICO score go up a bit.

But not including the liens or court judgments doesn’t make them go away. That’s potentially a problem if you file for bankruptcy, because debts that aren’t listed aren’t discharged, and your bankruptcy lawyer might not know to list them if they are not on your report.

The is a solution, however. Bankruptcy lawyers have access to specially created credit reports that will still have the debts “missing” from the free reports. The catch is, these complete credit reports aren’t free. I use CIN Legal Infonet for mine, where the price starts at $33.00.

by Doug Beaton

Painting: Atropos, by Matthew Cheyne.

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Midland Funding survives bankruptcy scare in Supreme Court

By admin | Published: May 24, 2017

Midland Funding, the giant California-based debt buyer, narrowly escaped judgment in the United States Supreme Court in May 2017, when the nation’s highest justices ruled 5-3 that they couldn’t be sued by a bankrupt debtor for filing a stale claim — i.e. a claim involving a debt where the statute of limitations had expired — in her bankruptcy case.

Only a handful of bankruptcy cases go all the way to the Supreme Court in a given year, and this one stands out because it also involves the seldom-litigated Fair Debt Collection Practices Act (FDCPA).

Aleida Johnson had filed for Chapter 13 bankruptcy in Alabama when Midland filed a claim in her case for a whopping $1,979.71 credit card debt. Trouble was, the debt was over ten years old and well past the statute of limitations. Johnson’s lawyer objected to the claim and it was denied by the bankruptcy judge. Then he turned around and sued Midland for damages under the FDCPA.

Not so fast, says the majority of the Supreme Court justices. Just because the debt was old didn’t mean that Midland’s claim rose to the level of being either false, deceptive, misleading, unconscionable, or unfair, any one of which are needed to win a case under the FDCPA. The majority opinion was written by Justice Stephen Breyer of Massachusetts.

The three dissenting justices (Sotomayor, Ginsberg, and Kagan), pointed out that it wasn’t realistic for Chapter 13 trustees to police all the unsecured claims in their cases for statute of limitations problems.

You can read the full opinion in Midland Funding LLC v. Johnson by clicking here.

by Doug Beaton

Posted in Bankruptcy News, Chapter 13 | Comments closed

Chapter 13 debt limits increase

By doug | Published: March 30, 2016

The upper debt limits for going in to Chapter 13 bankruptcy increased as of April 1, 2016.

Chapter 13 debtors must have less than $1,184,200 in secured loans in order to qualify for relief.

They also must have less than $394,725 in unsecured loans to qualify.

BucketsThe debt limits are adjusted automatically every three years, based on consumer price inflation information. The new limits represent a modest increase over the calculations made in 2013.

Student loan debt is almost always unsecured debt, so the increase could be a boon to graduate student debtors with over $300,000 in student loans, or to parents helping many children through college. For those stuck with massive monthly student loan payments, Chapter 13 is sometimes a viable option where negotiation fails and attachments are threatened.

Posted in Chapter 13, Student loans | Tagged | Comments closed

Automatic Massachusetts homesteads limited to $125K

By doug | Published: February 26, 2015

Since 2012, homeowners in Massachusetts have had two options for obtaining homestead protection for their residence.

andover house

First, they can do it “the old way” — by filing a legal declaration of homestead at the county registry of deeds. Translation: a small bit of hassle, a small fee to pay, maybe have lawyer get involved, or do you feel like taking it on yourself?

But then there is the “new” automatic homestead protection. Translation: do nothing except live in the house, no filing no fees.

The kicker is that the declared homestead exemption is able to protect up to $500,000 in equity in the property.

The automatic homestead exemption is limited to $125,000.

The really big kicker, though, is that for married folks, or others living under the same roof, the automatic do-nothing exemption is “one size fits all,” that is a husband and wife can NOT each claim $125K for a joint $250K benefit. $125K is all the benefit anyone gets for one house.

That makes filing the old fashioned declaration of homestead a big winner long-term. You might not have much equity in a property now, but taking the small step of filing a declaration might help out big time down the line.

Posted in Exemptions, Real estate | Comments closed

The repo man is now inside your dashboard

By doug | Published: September 25, 2014

The latest wrinkle in auto finance has a nasty edge to it, as lenders are pouncing on new technology that allows them to remotely shut off a borrower’s vehicle if they are only a few days late on a payment.
car-repo
Writing for the New York Times and Boston Globe, Michael Corkery and Jessica Silver-Greenberg describe the advent of “Wall Street’s Big Brother,” a gizmo formally known as a starter interrupt device, which prevents a vehicle from running if a banker shuts it off for slow payment: “This new technology is bringing auto loans … into the lives of people with credit scores battered by the financial downturn.”

Meet the mother who had her car shut off on the day she had to bring her daughter to the emergency room, and the meet the banker who boasts of shutting down borrower’s vehicles while he shops at Walmart.

Sooner or later, though, another player is bound to show up in this game. That would be the local bankruptcy lawyer, who has access to the laws that will remedy he situation, and get the motor running again. And, as time goes on (or even now, if the loan was taken out more than two and a half years ago), the bankruptcy weapon of choice may be the Chapter 13 cramdown, which not only can get the debtor back on the road, but possibly with a lower payment to boot.

Game on.

Posted in Secured loans | Comments closed

Debt collectors know when to pounce on you — how one does it

By doug | Published: September 16, 2014

One of the nation’s largest debt collectors,Portfolio Recovery Associates, has been in the news lately, and this article exposes a hard truth about the collections system: Debt collectors know when your finances improve. Because debt collectors pay the credit bureaus to tell them.
pra collector

I’m a bankruptcy attorney, and I know people want to put off filing bankruptcy for as long as possible.

Some people come to see me when they have a good job again, after unemployment. They start to settle some of their smaller debts, and when they do, everybody jumps them.

Debt collectors call from everywhere. The sheriff comes around with a pile of summons. Old judgments suddenly are trying to attach your wages.

“I’m trying to do the ‘right thing,’” people tell me, “But I can’t pay everybody at once! How do they know?”

Portfolio Recovery are a high tech debt collectors. When they see your credit score start to improve, they know it’s time to jump on you.

Portfolio’s Recovery Associates is one of the top debt collectors in the country. They are good at what they do as debt collectors because of their technology.

Portfolio’s president has bragged in the newspaper about how they use computers to identify people who just now have some money.
Most people they leave alone: “Let’s face it,” says Steve Fredrickson, the company’s co-founder and CEO, “if you’re a consumer that’s in dire financial straits and you can’t pay us anything, I don’t want to talk to you, and you don’t want to talk to me.”
But when your credit report starts to improve, they pounce. When an unemployed mom gets a job or signs up for a cellphone contract, for example, her score goes up. PRA pays to access data from credit reporting agencies, among other sources of information.

“When something does change, you want to be the first one to get them on the phone,” [PRA Vice President Neal] Stern says. “They probably owe five or six other people.”

The lesson here is that unless you have cash to settle with everybody, trying to settle one creditor at a time, does NOT buy you peace. (Bankruptcy does that.) Trying to settle your bad debts, sadly, just leads to more headaches.

Posted in Practical tips | Comments closed

Getting a mortgage after bankruptcy just got a little easier

By doug | Published: August 26, 2014

Here’s a little bit of good news for people who have filed for bankruptcy, but are wishing they could buy a property again.
waiting
As of July 29, 2014, Fannie Mae has relaxed its rules for qualifying for a mortgage with a bankruptcy on your record.

While bankruptcy can be listed on your credit record for up to ten years, Fannie Mae will approve applications for would-be owners two years after filing.

However, for a long time, Fannie Mae has had a separate rule that homeowners with a foreclosure on their credit had to wait three years to apply for a new mortgage. That created some problems because even when people file bankruptcy to get out of an upside down house, the mortgage lenders and servicers would often drag their feet on foreclosing.

But now, Fannie Mae has announced it has eliminated the three year rule on foreclossures. So all anyone has to wait is two years after bankruptcy and they can try for a FNMA backed mortgage again.

That’s only fair. It’s not your fault if the mortgage company never gets around to foreclosing. And it’s good for the economy. More new houses can get built and sold sooner. Great news all around.

Posted in Bankruptcy News, Foreclosure, Secured loans | Leave a comment
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