What happens if I get behind on mortgage payments while I am in a Chapter 13?You made the decision to file a bankruptcy and decided to keep you home. You file a Chapter 13 and are making your mortgage payments and your Chapter 13 plan payments as scheduled. Something comes up and you get several months behind on the post-petition mortgage payments. Now what? Several things will happen…First is that the attorney for the mortgage company will likely contact your attorney let you know that payments are delinquent. If this happens, the attorney should contact you advising you that payments needs to be brought current. However, this step of a “warning” from the mortgage company is not required and does not always happen.The next step (often times the first step), is that the mortgage company’s attorney will file a Motion for Relief with the court in your bankruptcy case. Essentially this is the mortgage company bringing notice to the court that you are delinquent on post-petition payments on your mortgage. They are also asking the court to grant the mortgage company relief from the automatic stay. In short, the mortgage company wants permission to be able to continue with a foreclosure process even though you are in a bankruptcy due to being delinquent.The motion for relief will set out a hearing date. 7 days prior to that hearing date a response must be filed by you or your attorney (if you are represented) stating your intentions, whether you intend to become current on the mortgage, etc. If not response is filed, the motion for relief will automatically be granted to the mortgage company 7 days before the hearing.Options1. Become Current: Respond to the motion and become current on post-petition mortgage payments before the hearing2. Stipulation Agreement: Depending on how far behind you are on your mortgage, you can ask the mortgage company to allow you to enter into a stipulation agreement. This stipulation agreement usually requires some sort of down payment and spread the delinquent post-petition mortgage payments out over 6 months. This may sound like a great option, however, be aware that you now have 1) ongoing mortgage payments, 2) chapter 13 plan payments, and 3) a stipulation payment.3. Surrender the home: If at this point you realize you cannot maintain payments on the mortgage, you can allow the Motion for Relief to be granted and surrender the home through the bankruptcy. The decision to file bankruptcy and the decisions related to any motion for relief in a bankruptcy are important and should not be made based on this article. You should seek legal advice before making a decision. 

Do I have to appear in front of a Judge for my bankruptcy? No. The Judge does oversee the bankruptcy process; however you are not required to appear in front of him. Depending on your specific case, your attorney may need to appear in front of the Judge for certain motions or objections that may arise, but you do not need to attend.So do I have to go to court at all for my bankruptcy?Yes. One time during your bankruptcy you are required to appear in front of a trustee who has been assigned to your case. This appearance is often referred to as the “meeting of creditors”.What happens at the meeting of creditors?  The meeting of creditors is required under 11 USC §341 of the United States Code. This meeting is required in order to receive your discharge under both Chapter 7 and Chapter 13 bankruptcies.At the meeting the trustee will ask you questions under oath. There are some required questions and other questions will be asked depending on what you have listed on your petition, schedules, statements, and related documents. Generally, the questions are aimed towards verifying information you have listed (i.e. Are all of your creditors listed? Is your income still the same at it was on the date the petition was filed?).If you were honest and reviewed for accuracy your documents before they were filled with the court, then you will have nothing to worry about at this meeting.Are my creditors going to show up and tell me that I have to pay them back?Yes and no. Can creditors show up at your meeting of creditors? Yes, but they usually do not. Even if some of your creditors do show up, they cannot come and tell you to pay them back. Their appearance is permitted to allow them to ask you questions about your income, assets, etc. Again however, appearance by creditors is rare.Who is the trustee and what does he do?The trustee is appointed by the United States trustee, an officer of the Department of Justice, who oversees the bankruptcy. The trustees’ role is to determine whether there are assets that can be liquidated for the creditors’ benefit. They are essential appointed to make sure your bankruptcy complies with the bankruptcy code and that you have disclosed all income and property and that those items do not exceed that which is allowed in the bankruptcy in order to receive a discharge.In Closing…. The meeting is nothing to be worried about. If you have been thorough and completed your forms honestly and accurately, then this will be a breeze. Show up on time with your ID and SS card and the rest is easy! 

What is a wage order and what are the benefits?A wage order in a Chapter 13 is where a portion of your Chapter 13 plan payment is automatically deducted from your paycheck by your employer. Your employer then sends the money directly to the trustee.If you are paid bi-weekly then the monthly payment will be prorated. For example, if your Chapter 13 plan payment is $300 then $138.46 would be taken out of each paycheck.Benefits to wage order:                                       Presumed current if less than 10 days lateNo paying entire payment out of one paycheckPayments guaranteed to be made (so long as your employer is following the order)You are not tempted to spend the money elsewhereAllows for an overall successful completion of a Chapter 13 planIn Illinois, wage orders are required where the Debtor is employed. In Missouri, while it is not required, it is strongly recommended as is ensures payments will be made to the trustee on a regular basis.What are your payment options if you do not have a wage order?Payments can be made in the form of a cashier’s check or money order and mailed to the trustee. You can also set up for an official bank check to be sent on a monthly basis directly to the trustee. They will NOT however accept a personal check from you.To avoid incurring the fees of a money order on a monthly basis for your entire Chapter 13, talk to your attorney about setting up a wage order for you. 

Great food for thought on the Non Billable Hour on understanding clients. The headline was “Are your clients really stupid?”. Wait, wait.  Hear him out. The answer isn’t what you’re tempted to respond. Matt Homann, who describes himself as a recovering lawyer, adapted to lawyering a piece from the Bay Area tech world, suggesting that differences of opinions among co workers are more often due to different  thinking process, biases and emotions than native intelligence. Homann added these questions to ask as you think about communication problems with clients. Are they afraid of the conclusion? Maybe it threatens their work, their reputation, or their self-esteem. Are environmental stresses degrading their judgment? Time pressure or having your career on the line can make it hard to do your best work. Are they intimidated by you?  Are they swamped by emotions of insecurity that make it hard to think. You may be unwittingly shutting them down, which begins a vicious cycle. Tone it down. Analyzing bankruptcy clients Our bankruptcy prospects are so often afraid of the conclusion that bankruptcy is a good choice for them. Or rather, they are afraid of the conclusions they draw about bankruptcy as failure.  Or fear of the unknown that is life after bankruptcy. We certainly see clients too stressed to think rationally.  They’ve lived in a stew of creditor pressures and self-flagellation for too long.  Part of our job is reducing that stress enough that other concerns and other outcomes can be considered. If we are intimidating our clients, that’s a barrier to communication that we can fix, without help from the client.  Our ability to listen to the client ought to be as well developed as our ability to expound on the law. I have heard now from a number of clients who’ve come to me after engaging another local lawyer.  Each reported that he controlled the conversation and cut off questions.  There was no reaching out to the humans across the desk, who had concerns, doubts, and fears.  The most recent refugees from his office marvelled that I listened to them before talking myself. We as bankruptcy lawyers are stupid if we don’t practice empathy.  The stakes for our clients of impaired communication are too great. Image courtesy of fisher.osu.edu.

  Advantages of Bankruptcy As part of our work with clients considering bankruptcy, we want to make sure you understand all of your options. When you are faced with stress and overwhelming debt, bankruptcy can be one option that can quickly end creditor harassment. When you file for bankruptcy, your creditors must stop calling or [...]

  Advantages of Bankruptcy As part of our work with clients considering bankruptcy, we want to make sure you understand all of your options. When you are faced with stress and overwhelming debt, bankruptcy can be one option that can quickly end creditor harassment. When you file for bankruptcy, your creditors must stop calling or […]The post Advantages and Disadvantages of Bankruptcy appeared first on Tucson Bankruptcy Attorneys Trezza & Associates.

The marital settlement agreement that resolves a divorce often divides the debts between the couple.   If it goes beyond creating two piles of debt, his and hers, you have  a bankruptcy issue. Hold harmless provisions The typical indemnification provision requires each spouse to hold the other harmless from the debts assigned to that spouse.  The indemnity is itself a contingent debt.   And debts (other than support) to a spouse or former spouse incurred in the course of a dissolution of marriage are not dischargeable in Chapter 7.  §523(a)(15). Note, it doesn’t require the debtor to pay the debt;  it just requires that the debtor make his former spouse whole if she is sued by the creditor and has to pay it. So, while the debtor can discharge his liability to the third party creditors on the debts assigned to him in the divorce, his obligation to protect his former spouse from the creditor survives a Chapter 7 discharge. Indemnification in bankruptcy This provision recently bit client of mine with a decades-old marital settlement agreement. The joint credit cards assigned to him had long been paid off and remained unused.  But when he hit a rough patch and used the cards to carry him over a business crisis, lo and behold, he had obligated the former spouse whose name, unfortunately, remained on the account. His discharge in Chapter 7 wiped out his liability to the credit card company, but not his obligation to hold his ex wife harmless for any claims on the joint account. Marital history may drive choice of bankruptcy chapter Chapter 13 treats indemnification obligations differently. The discharge outlined in §1328 does wipe out non support debts to a former spouse. Whether the debt is a payment to equalize the division of property or an undertaking to hold the other harmless from marital obligations, it is dischargeable in Chapter 13. The bankruptcy interview Your intake process needs to identify non support debts to former spouses.  Dollars to doughnuts, the potential bankruptcy filer will not know what the settlement agreement or divorce judgment says on the issue of marital debts. If there is exposure to a former spouse, you’ll need a candid discussion of the risks in proceeding in Chapter 7. Just one more complexity in the life of a bankruptcy lawyer.

From 1989 to 2007, Judges Larry Kelly and Frank Monroe occupied the bankruptcy bench in Austin, providing a period of judicial continuity rivaled only by their colleagues in San Antonio (Judges Leif Clark and Ronald King served at the same time from 1988 to 2012).   On April 1, 2013, the Austin bar welcomed its third new judge in six years as Judge Craig Gargotta moved to San Antonio and Judge Tony Davis assumed the bench.   Here is an introduction to the newest jurist to oversee Austin insolvency proceedings.    (Note:  This is an expanded version of an article that I previously published).BackgroundJudge Tony Davis spent his time as a student and a young practitioner in three very different locales.    He received a B.A. in economics and mathematics from the University of Minnesota at Morris in 1980, was awarded a J.D. from the University of Virginia School of Law in 1983 and then was admitted to the Oklahoma bar.   He spent his early years as an associate with Conner & Winters in Tulsa before making his move to Baker Botts, LLP.    Immediately prior to taking the bench, Judge Davis was a partner in the Houston office of Baker Botts.    One of the most challenging cases that he worked on was the Asarco case, which involved nearly $6.5 billion (with a B) in environmental claims.    According to the Judge on that case:Debtors' counsel, lead  by Tony Davis with Baker Botts, initiated and ultimately set in place a procedure for pre-trial, discovery, mediation and trial schedule for the estimation of the environmental claims that would have resulted in Court orders or settlements in months instead of years even if all such claims had to be estimated to a final judgment. This incredible process required Debtors' counsel to prepare for multiple-tracked sites teams of environmental and bankruptcy lawyers toward mediation, trial or settlement of each site, yet coordinated such that overlapping legal issues, overlapping facts and experts, could be efficiently implemented.In re ASARCO, LLC, 2011 Bankr. LEXIS 2880 at *26-27 (Bankr. S. D. Tex. 2011).Some of his other noteworthy cases include representing Ralph S. Janvey, the court appointed receiver in the Stanford International Bank, Ltd. case and representing the Russian Federation in the short-lived bankruptcy of Yukos Oil Company.  (The Yukos case involved a Russian company which moved its offices to the home of its CFO in Houston and paid a retainer to Fulbright & Jaworski to qualify for bankruptcy in the United States.   The case was dismissed after about three months).    Thus, he has experience chasing fraudsters and oligarchs and cleaning up the financial fallout from environmental claims.    What Others Say About Judge DavisBill Stutts, who worked with Judge Davis at Baker Botts, described his former colleague as “measured and thoughtful,” stating:He started practice in bankruptcy in Oklahoma during the oil-patch bankruptcies of the 1980's.   He is known to be measured and thoughtful, and rarely (if ever) rash.  Responsibility and an expectation that others will be responsible can be hallmarks of his approach to the practice.  He is pretty well organized (I don't want to over-sell his work habits too soon), having even found some time during practice to write published law review articles.  I believe that he really and honestly views his upcoming service on the bench to be just that-- service. Mr. Stutts also characterized Judge Davis as a voracious learner and said that by the time he handles his first chapter 13 hearing, he will have studied until he knows as much as or more than anyone else in the room.Judge Brenda Rhoades was hired as an associate at Baker Botts by Judge Davis.   She described him as a most patient and kind supervising attorney.  She said that he asked very intelligent but tough questions and taught her about how to work with junior attorneys and how to teach them.   At his investiture ceremony, Judge Davis was described as having a “teutonic work ethic.”    Apparently this term comes from the German phrase “hochste Leistung bringen” which loosely translated means “to bring about the highest output or performance” or “to work very intensively.”   The concept arises in the teachings of Martin Luther  and was referred to by the German sociologist Max Weber as the Protestant work ethic.   According to a recent article in Slate, the teutonic work ethic is actually a myth since Greeks work many more hours than Germans.    No doubt the term was applied to Judge Davis to refer to his prodigious work output as opposed to the current slothfulness of the German worker.Judge Davis’s new colleague Chris Mott described him as someone who read the encyclopedia and the dictionary for fun, who was equally interested in tennis and golf and Churchill and chess and who forced his family to listen to Shakespeare on CD on family trips.Judge Davis In His Own WordsAt his investiture, Judge Davis described his feelings at being selected for the position of U.S. Bankruptcy Judge as pride, humility and a sense of responsibility.    He said that his goal would be to demonstrate a good judicial demeanor, to be prepared and to rule promptly.    He urged practitioners to be prepared to “teach me.”     He affirmed that “truth and justice are best revealed in the crucible of the adversary system.”    He touted the value of an independent judiciary as opposed to a society subject to “the whim of an ayatollah.”        Practitioners in Judge Davis’s courtroom should be punctual.    He has stated that as a practitioner, he was deathly afraid to be late for a hearing and made it a point never to do so.    However, on one occasion when he appeared on the bench after the time set for a hearing, he apologized to the bar and stated that he should have allowed himself more than fifteen minutes for lunch.Judge Davis stated that he has learned from each of the Texas judges that he has appeared before and considered them all role models, but that “if I had to name one, I would name my chief, Judge King, for his exemplary demeanor and the sound judgment that is reflected in his decisions.     He said that his biggest challenge would be “quickly developing proficiency in consumer bankruptcy law and practice.”     When asked how he would Keep Austin Weird, he said that, “Occasionally I will wear a pink or salmon-colored tie to court.”In a 2009 interview, Judge Davis stated that the Bankruptcy Code had already seen “excessive reform.”   He said:If anything, bankruptcy law has seen excessive reform. The Bankruptcy Code, as originally enacted in 1978, has been and continues to be such a remarkably flexible and efficient way to conduct a financial restructuring under court supervision that it is the envy of the commercial world.  Since it was enacted, however, a number of special interest groups have succeeded in carving out special interest legislation to address or protect unique issues that apply to specific industries. These numerous amendments have somewhat increased the complexity of the Bankruptcy Code but, fortunately, have not materially impaired the Bankruptcy Code’s overall effectiveness.Law 360, Q &  A with Baker Botts’ Tony Davis,which can be found here.            When asked what advice he would give a young lawyer, he said: Seek and take on responsibility — responsibility for understanding the facts and issues involved in the case, responsibility for advising clients, and responsibility for preparing for and conducting in-court hearings and out-of-court negotiations. Accepting and discharging responsibility is the surest way to develop the professional growth you need to be an accomplished and successful lawyer.This is good advice for lawyers of any age.

Have you made all your payments under your Chapter 13 plan?  You can still lose your discharge—unless you file your §1328 Certification. Why is that?  You cannot get a chapter 13 discharge if you were one of the people who caused the housing crisis back in 2007 and 2008.  Or if you’ve been convicted of [...]The post Chapter 13: Don’t get disqualified at the finish line appeared first on Robert Weed.

The Supreme Court has set the stage to flesh out the practical impact of Stern v. Marshall.   On June 24, 2013, the Court granted the petition for cert filed by the defendant in a fraudulent conveyance suit brought by a trustee in Executive Benefits Insurance Agency v. Arkison, No. 12-1200.    The case is significant because it squarely raises the issue of whether a party can waive its right to insist on a trial before an Article III tribunal and the related question of whether consent is permissible.  What HappenedAccording to the Ninth Circuit, Nicholas Paleveda and his wife “operated a welter of companies,” including Bellingham Insurance Agency, Inc.    Although Palveda did not own Bellingham, he served as its CEO and sole director until shortly before its ceased doing business.   The day after Bellingham ceased doing business, Palveda used its funds to incorporate Executive Benefits Insurance Agency, Inc.    Bellingham also irrevocably assigned its right to receive commissions from its largest client to one of its longtime employees, who subsequently paid them to EBIA.     When Bellingham filed for chapter 7 relief, the trustee sued EBIA for eighteen causes of action, including recovery of fraudulent transfers and voidable preferences and to establish EBIA as a “mere successor” of Bellingham.    EBIA filed a jury demand and request to withdraw the reference.    However, it asked the Bankruptcy Court to abate these pleadings while it considered motions for summary judgment.    The Bankruptcy Court granted summary judgment in favor of the Trustee and entered a money judgment for $373,291.28.    EBIA abandoned its request to withdraw the reference and instead appealed to the District Court.   The District Court affirmed the grant of summary judgment.    On appeal to the Ninth Circuit, EBIA asserted for the first time that Stern v. Marshall precluded the Bankruptcy Court from entering a final judgment.    The Ninth Circuit solicited amici briefs and received thirteen submissions, including one from the Solicitor General.The Ninth Circuit RulingThe Ninth Circuit rendered its decision on December 4, 2012.   Matter of Bellingham Insurance Agency, Inc., 702 F.3d 553 (9th Cir. 2012).    The Ninth Circuit affirmed the lower court judgments in a manner that placed the waiver/consent issue at center stage.   The Court concluded that bankruptcy courts generally lack the power to enter final judgments in fraudulent conveyance suits.   The Court stated:Taken together, Granfinanciera and Stern settle the question of whether bankruptcy courts have the general authority to enter final judgments on fraudulent conveyance claims against noncreditors to the bankruptcy estate.   They do not.Bellinghamat 565.    This was not a surprising conclusion.In the alternative, the Court concluded that bankruptcy courts had the authority to submit proposed findings of fact and conclusions of law to the U.S. District Courts in core matters in which they lacked authority to enter a final judgment.   This ruling addressed a statutory gap in 28 U.S.C. Sec. 157 which allowed courts to “hear and determine” core proceedings and to submit proposed findings of fact and conclusions to the District Court in non-core proceedings.   However, the statutory language did not expressly allow the Bankruptcy Court to submit proposed findings and conclusions to the District Court in core proceedings in which it was not authorized to enter a final judgment.   The Court stated:Our conclusion is consistent with the Stern Court’s tacit approval of bankruptcy courts’ continuing to hear and make recommendations about statutory core proceedings in which entry of final judgment by a non-Article III judge would be unconstitutional.Bellingham, at 566.The next section of the opinion is the most difficult part.    On the one hand, the Ninth Circuit referred to the right to determination by an Article III tribunal as “waivable.”    However, the Court also cited cases about the validity of consent and referred to “implied consent” as well.    As a matter of statutory interpretation, the Court found that section 157(c) requires only “consent simpliciter” as opposed to “express consent” as required by section 157(e).     The Ninth Circuit ultimately concluded that a party could consent to entry of a final judgment and that EBIA had done so.Having discussed the constitutional issues at great length, the Court devoted a relatively short discussion before concluding that the summary judgment should be affirmed.   Issues before the Supreme CourtThe two issues designated in EBIA’s petition for cert were:1.  Whether Article III permits the exercise of the judicial power of the United States by bankruptcy courts on the basis of litigant consent, and, if so, whether “implied consent” based on a litigant’s conduct, where the statutory scheme provides the litigant no notice that its consent is required, is sufficient to satisfy Article III.2.  Whether a bankruptcy judge may submit proposed findings of fact and conclusions of law for de novo review by a district court in a “core” proceeding under 28 U.S.C. 157(b). Waiver and ConsentThe most intriguing aspect of this case is the role that waiver or consent may play in how the bankruptcy courts administer their dockets.  The right to trial by jury is one of the most fundamental rights under the Bill of Rights and yet, it can be waived by failure to make a timely objection.  If the right to an article III tribunal can be waived, then bankruptcy courts may proceed as they did prior to Stern so long as no party makes a timely objection.   Parties may consent to having a matter heard by a U.S. Magistrate or through binding arbitration.   If affirmative consent is required, then the courts will need to implement procedural mechanisms to ensure that consent is granted or denied at an early stage.    This is the approach taken by the proposed amendments to Rules 7008, 7012, 7016, 9027 and 9033.   The proposed amendments can be found here.    Finally, there are some matters which cannot be solved by waiver or consent.    Subject matter jurisdiction cannot be created by consent and can be raised at any time.  As a result, if Stern is like subject matter jurisdiction, then courts must proceed at their own peril.     The question for the Court will be whether Stern’s Article III mandate is more like the waivable jury demand, consent to a magistrate or subject matter jurisdiction.    Authority to Submit Proposed Findings and ConclusionsIf the Court finds that waiver and consent are not available when an Article III tribunal is required, the Court may soften the blow by adopting the Ninth Circuit’s alternate holding that Bankruptcy Courts may submit proposed findings of fact and conclusions of law to the district court.    Allowing submission of proposed findings and conclusions will allow the Bankruptcy Courts to continue hearing cases and entering proposed decisions likely to be rubber stamped by the District Courts.The EBIA case is a good example of how the ability to submit proposed findings and conclusions could protect the Bankruptcy Court.    The outcome of the dispute would not have changed based upon whether the Bankruptcy Court was allowed to enter a final judgment or merely submit proposed findings and conclusions to the District Court.   The Bankruptcy Court granted summary judgment, finding that there were not any material issues of disputed fact.    The District Court reviewed the Bankruptcy Court’s conclusions of law on a de novo basis.    Thus, the standard of review for an appeal of a final summary judgment and a de novoreview of proposed findings and conclusions would be the same.   Final ThoughtsChief Justice Roberts described Stern as a narrow ruling.    While the decision relied on some big concepts, it did not flesh out how the ruling would apply as a practical matter.    The forthcoming ruling in Executive Benefits Insurance Agency v. Arkison may provide some practical guidance as to how the system can work post-Stern, or perhaps it will just make life more complicated.