Tech visionary Steve Jobs died yesterday. One of many items being circulated about him is a commencement address he gave at Stanford in 2005. I have copied it in its entirety below. However, I wanted to focus on one passage which speaks to what we do as bankruptcy lawyers. Here, Jobs talks about being fired from Apple, the company he had founded, at age 30: I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life. During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together. I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle. Steve Jobs was able to take a monumental setback and come back brilliantly. As bankruptcy lawyers, we give both individuals and companies the opportunity to recover from devastating financial losses. Who knows--the next individual debtor who you help to get a fresh start or the next company you reorganize may use that opportunity to develop something revolutionary just as Steve Jobs did. Steve Jobs: "Find What You Love"I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.The first story is about connecting the dots.I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.My second story is about love and loss.I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.My third story is about death.When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.This was the closest I've been to facing death, and I hope it's the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.Stay Hungry. Stay Foolish.Thank you all very much.

Today is the first Tuesday in October which marks the start of the Supreme Court's October Term 2011. So far the Court has granted cert in forty-eight cases, only one of which involves bankruptcy. There are a few interesting petitions pending but no bombshells like last term's Stern v. Marshall.Cert Granted:No. 10-875, Hall v. United States. This case concerns whether post-petition capital gains in a chapter 12 case constitute a claim against the estate. The case arises because chapter 7 and chapter 11 cases give rise to a separate taxable estate while chapter 12 and chapter 13 cases do not. The Ninth Circuit found that because a chapter 12 estate is not a taxable entity, it could not "incur" a tax. Because the estate did not incur the tax, the tax could not be treated under the debtor's plan. The Ninth Circuit position conflicts with opinions from the Eighth Circuit and the Tenth Circuit Bankruptcy Appellate Panel.You can read the docket here.Petitions Pending:No. 11-166, RadLAX Gateway Hotel, LLC v. Amalgamated Bank. This case raises the Philadelphia Newspapers issue of whether a plan can propose a sale of property without allowing the lender to credit bid. The Seventh Circuit ruled that it could not. The Third Circuit has allowed a sale without credit bidding as the "indubitable equivalent" of the creditor's claim.You can read the docket here.No. 10-1285, Countrywide Mortgages v. Rodriquez. This case has to do with the troublesome issue of how to calculate escrow payments on a mortgage claim in chapter 13. The Third Circuit held that, notwithstanding RESPA, the lender could not factor pre-petition escrow shortgages into the debtor's post-petition payment. The Fifth Circuit has ruled consistently with the Third Circuit.You can read the docket here.Cert Denied:No. 10-1443, AmeriCredit Financial Services v. Penrod. This case involved whether a creditor who financed negative equity still had a purchase money security interest under the hanging paragraph of Section 1325(a). The Ninth Circuit said that it did not, while the other eight circuits to consider the issue ruled in favor of the purchase money status. The Supreme Court denied cert today. This means that the circuit split is not resolved.

It sounds like a cliché, but here at Shenwick & Associates, every bankruptcy case really is different. Every debtor has their own unique story of how they got into debt, what type and amount of debt they have, their living conditions and many other factors, which we need to apply the law to so we can provide them with the relief they seek. In one recent case, we had a young single man (let's call him "Doug") who lived in Brooklyn and earned a substantial income. He had filed for Chapter 7 bankruptcy a few years ago, but the case was dismissed because he was earning too much to qualify for Chapter 7 bankruptcy. In 2005, Congress radically amended the bankruptcy laws through the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which introduced a new form, Form 22, the "Statement of Current Monthly Income." There are actually three different forms, depending upon whether the debtor is filing for relief under Chapter 7 ( Form B22A) (the "Means Test"), Chapter 11 ( Form B22B) or Chapter 13 ( Form B22C) of the Bankruptcy Code. For Chapter 7 debtors, Form B22A includes a means-test calculation, which is a complex six page calculation of expenses and disposable income that a debtor must complete if he or she is above the median income for their state and family size. If their disposable income is above $11,725 over a 60 month period, the presumption of abuse arises, which means that it would be presumptively abusive to allow them to liquidate their debts under Chapter 7 of the Bankruptcy Code. In this case, they must file for relief under Chapter 11 or Chapter 13 of the Bankruptcy Code. Form B22C includes calculations to determine the length of a Plan (36 or 60 months) and the amount of disposable income the debtor must pay into the Plan each month. Doug came to us to determine what his disposable income would be in a Chapter 13 Plan. Although he had a condo, it was "underwater" (the liens on the condo exceeded the fair market value of the apartment), so he was going to have to surrender the unit to his secured creditors and rent an apartment. However, the rents he was being quoted by brokers far exceeded the IRS mortgage/rent standard for one person living in Brooklyn ($1,297). The question was-could we also deduct the differenhttp://www.blogger.com/img/blank.gifce between the actual rent he was going to have to pay and the mortgage/rent standard? There is very scant case law on this question, and no appellate courts appear to have considered the issue yet, but according to the Bankruptcy Court in the Eastern District of Kentucky, the answer is no, not without special circumstances. In , 382 B.R. 85 (2008), the debtors filed a joint Chapter 7 bankruptcy petition that reported annualized current monthly income of $83,022.36 on their Means Test. The applicable median family income for 2 persons in Kentucky was $41,560. The allowable mortgage/rent standard for 1 or 2 persons living in Boone County, KY was $842/month, but the Shinkles' actual rent was $1,500/month. So, the Shinkles claimed an adjustment of $658 on Line 21 of their Means Test, which allows debtors to claim an additional expense if they contend that the process set out in Line 20 of the Means Test does not accurately compute the amount they are due under IRS Standards. Without this adjustment, their Chapter 7 case would have been presumptively abusive. The legal issue before the Court was if the Shinkles should be entitled to claim their actual rental expenses on the Means Test, in excess of the IRS standards. In its discussion, the Court looked to the plain language of § 7070(b)(2)(B) of the Bankruptcy Code, which provides: "In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative. In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide - documentation for such expense or adjustment to income; and a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable." The United States Trustee contended that the Shinkles had not demonstrated such special circumstances. The Shinkles argued that allowed amounts for rent or mortgage expenses are guidelines and not "set in stone," that a condition of Mrs. Shinkle's employment was that she reside in Boone County, and that any slight reduction in rent they could derive from moving would be offset by the costs of moving and forfeiting their opportunity to own the house they were renting. The Court cited two cases where special circumstances were found–In re Scarafiotti, 365 B.R. 618,631 (Bankr. D.Colo. 2007) (debtors' son needed to be in a specific school to address mental and emotional difficulties, which justified a modest increase in the debtors' housing allowance) and In re Graham, 363 B.R. 844,847 (Bankr. S.D. Ohio 2007 (the debtor husband had to move 800 miles from his wife and her two children from a previous marriage in order to find gainful employment, but the debtor wife could not join her husband because of the constraints of her shared custody agreement. These debtors were allowed to claim a second set of housing expenses for the husband). The Court found no such special circumstances in the Shinkles' case. For more information about the Means Test in Chapter 7, disposable income to fund a Plan in chapter 13 and getting relief through the bankruptcy process, please contact Jim Shenwick.

By JOSEPH PLAMBECK First-time buyers in New York City confront a series of choices: co-op or condo, high-rise or walk-up, a second bathroom or just steps from the subway? But there seems to be consensus on at least one decision — whether to hire a real estate lawyer.In New York, unlike most places in the United States, it is customary for buyers to seek the representation of a lawyer throughout the purchasing process. Although this is not a legal requirement, some longtime real estate agents say they have never witnessed a deal completed without the buyer’s having a lawyer on hand.“I would never, never have a situation where a buyer did not have an attorney,” said Deanna Kory, a senior vice president of the Corcoran Group. “Without question, there is too much to understand. You can’t understand it on the fly.”Buyers in New York City rely upon lawyers because real estate transactions can be extraordinarily complicated. In addition to the usual concerns about contracts, liens and titles, New York’s numerous co-ops have financial statements and meeting minutes that require scrutiny. Buying a condo, and even a single-family home, can be equally knotty. Not to mention that the sellers on the other side of the table usually come armed with their own lawyer.And then, of course, there is the simple fact that real estate in New York is expensive. Making a bad deal can jeopardize huge amounts of money.“You’re signing the largest check you’ve ever signed,” said Gary L. Malin, the president of the brokerage Citi Habitats, “and you want to make sure that you’re not missing something. To not engage an attorney — you’d feel naked in the process.”Lawyers also provide a necessary buffer in what can be an emotional process. Peter Graubard, a real estate lawyer since 1994, said lawyers were able to provide an objective assessment even while advocating for buyers.“I’m really the only involved party whose fee doesn’t depend on the deal closing,” Mr. Graubard said. “I get paid for my lack of a conflict of interest.”Mr. Malin, who worked for a short time as a real estate lawyer before joining Citi Habitats, says it is especially important for first-time buyers to have a lawyer on their side. A real estate agent can help with some aspects of the process, but a lawyer is the one who performs crucial due diligence and helps finish the deal.At the start of the buying process, the lawyer helps negotiate the contract. Michael P. Kozek, a lawyer at Jeffrey S. Ween & Associates, says that most of the drafting is done by the seller’s lawyer, but that there should be a chance to review the terms and try to adjust them.The buyer’s lawyer will also dig into the information available about a property, looking at a co-op’s finances and the minutes of its board meetings. Some buyers with a background in finance believe they can handle this part by themselves. But, Ms. Kory said, they may not know the customary tax breaks and accounting methods used by co-ops, which can lead to serious misunderstandings.Michael W. Goldstein, a lawyer who has handled residential real estate deals for more than 20 years, says an experienced lawyer is also easily able to spot in the board’s minutes any issues that may percolate into problems. Perhaps there is talk about a loud resident who is to be the buyer’s neighbor, or discussion of a balky boiler that may need expensive repairs not accounted for in the building’s capital improvement plan.Because experienced real estate lawyers see a lot of contracts and know the customs, they can also help cut through roadblocks. For that reason, Ms. Kory said, it is usually a mistake to hire a lawyer who does not have extensive familiarity with residential deals.Lawyers and real estate agents both say that the best way to find a lawyer is through word of mouth, in the best case from a friend or a family member. But if that option is not available, real estate agents are often happy to refer someone with whom they have worked.Ms. Kory says she often advises clients to talk to two or three lawyers, and then choose one, before making any offer on a home. That might seem premature, she said, but having good representation lined up can help ensure that you get the home you really want.“Having a lawyer makes you look more capable of following through on the deal,” Ms. Kory said. “Even if you are the only one bidding, you will come across stronger if you have all your ducks in a row.”Buyers should have a few simple questions ready for prospective lawyers. First, ask about residential real estate experience — generally, more is better. Find out about experience with closings for homes similar to yours, or even in the building you are considering. Then find out how much of the work would be done by the lawyer personally, and how much (and which parts) would be handled by a paralegal.And ask if the charge will be a flat fee or based on an hourly rate. In general, residential real estate lawyers in New York charge a fee, often between $1,500 and $2,500. More complicated or expensive deals, like buying a multifamily brownstone, for example, can take the tab closer to $5,000.In most cases, that fee will cover a few hours of face time with the lawyer, his or her presence at the closing and a few conversations over the phone. The lawyer will spend several additional hours examining the paperwork and performing due diligence. The buyer also receives something else: more peace of mind.“The reality is that most people are not well versed in real estate law,” said Mr. Malin of Citi Habitats. “There are a lot of things that could potentially go wrong in the process. And you could very likely regret not spending the money.”Copyright 2011 The New York Times Company. All rights reserved.

In a recent case decided by the 9th circuit (In re Defrantz), the court ruled that the debtor has an absolute right to convert his chapter 13 case to a chapter 7 case. The creditor argued that the court should have considered the creditor's motion to dismiss before converting the case and that the right to convert was not absolute. However, the court stated the plain language of section 1307(a) of the bankruptcy code allowed conversion.(10.3.11, tl)

In short the debtor is responsible for association assessments as long as the debtor is the owner of the property. In a chapter 13, the debtor who wants to keep his property must add the prepetition assessment fees into his plan if they are delinquent. The assessment is normally secured by the property. State law often creates a lien for the association when the assessment becomes due. The post petition fees have to be paid when they become due. Smart debtors (or their attorneys) made the argument that the assessments are based on a contract and are discharged (pre- and post petition assessments) through the bankruptcy. One of their supporting arguments was that the exception of discharge in a chapter 13 (section 1328) does not refer to the section 523(a)16 of the bankruptcy code that excludes assessments from discharge. However, the courts held (most recently In re Foster 435 BR 650) that the assessment is not a contract, it runs with the land and cannot be discharged through the bankruptcy.    

We learned nothing new from a recent court decision (In re Dandrum, Bankr. D.ND. August 19, 2011): The debtor must take seriously his duties to disclose transfers before filing and to list income and assets accurately seriously or risk denial of discharge (and even more severe consequences). Debtor failed to disclose assets and transfers on the schedules and statement of affairs. He also liquidated assets that he would not have been able to exempt in his bankruptcy case, and paid only debts that were beneficial to him because the debt was either on exempt property or because the debt was nondischargeable. Even though the debtor amended his schedules later and provided information about transactions to the trustee, the court found that debtor's multiple inaccuracies regarding income, assets, and transfers rose to the level of "reckless indifference to the truth" which the court considered as equal to the intent to deceive. What do we learn from it? Disclose, disclose, disclose everything that has been done before filing.

The Austin Bankruptcy Court is housed in the Homer Thornberry Judicial Building. When the building was converted from a post office to a courthouse, the designers included an elegant entryway. Alas, this was before Oklahoma City and 9/11. Now the entryway is covered by a gate and a sign directing those with business in the building to the functional entrance, the one with the metal detector. While it is sad that the vision of the architect has been overshadowed, at least we are secure.

After the debtor filed a chapter 7 bankruptcy, his mortgage company file a motion for relief in order to start foreclosure proceedings. The court denied the motion for relief because the mortgage company could not show which rights the company has in the note and the failure of properly document the transfer of both the note and the mortgage raised the questions whether the bank had standing to file the motion for relief. The Mortgage company could not show that they actually received the note or was in possession of it. (In re Lippold, 2011 Bankr. Lexis 3282)

The Southern District of Texas has proposed several local rules for public comment. One of the interesting proposals is a model plan to be used by individual chapter 11 debtors. You can find the announcement with links to related documents here.You can find the link to the proposed model plan here.