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Bankruptcy

Bankruptcy (11)

An important benefit of a bankruptcy filing is the ability to nullify certain liens. For this column, the focus will be on liens attaching to homestead real estate. Liens attached to non-homestead real estate may be susceptible to removal or modification in a chapter 13 bankruptcy.

The most common situation is a typical judicial lien for a monetary judgment acquired by a creditor and filed in the county within which the bankruptcy debtor owns his or her home. For judicial liens, the applicable statute is 11 USC §522(f)(1)(A). The fundamental basis to be able to remove a judicial lien is demonstrating that the debtor's equity in their homestead is less than the permissible bankruptcy homestead exemption. The debtor's equity is determined simply by calculating the sum of the market value of the homestead, less the current balance on any mortgages and outstanding property taxes. If the amount of the equity is less than the applicable exemption, then any judicial lien is almost universally susceptible to being removed ("stripped off") by motion in the bankruptcy proceeding. The applicable homestead exemption in New York ranges from a low of approximately $80,000 in certain counties, to over $130,000 in Saratoga County per debtor. The amounts are periodically adjusted. In most instances the debtor's equity is within the exemption level, and removal of the liens will be successful. Note that judicial liens fall within the type of lien that can be removed, but nonjudicial liens, such as IRS liens and those filed by DSS, are not susceptible to be removed. Also, judicial liens for child support and maintenance cannot be removed (11 USC §522(f)(1)(A) excludes debts under §523(a)(5) that are Domestic Support Obligations). While I have read one bankruptcy court decision outside New York that removed a nonjudicial lien, to my knowledge the practice is not currently being allowed in the Northern District of New York.

Beware of false claims of debt collectors.

In this day and age, debt collectors continue to use illegal and immoral tactics to try to collect debts. They will claim that you will be arrested, they will claim that legal action will be taken against you if you don't immediately return their phone call, and they will make other false claims. They may even pose as court officers or other officials, as a threat to collect a debt. The state and federal government tries to shut down improper debt collectors, and they have done so, but it seems that every time one is shut down another one pops up. Very recently the state and federal government targeted two firms in Western New York, Vantage Point Services and Four-Star Resolution, accusing them of improper practices. When you add the improper practices to the fact that certain debts are "bought" improperly by some debt collectors, including debts that are no longer valid for various reasons, you should be extremely cautious and skeptical upon receiving any contact from a debt collector. Debt collectors have no power over you or your money. In New York State, for anybody to try to take money from you through a garnishment or other means, they have to start by filing a lawsuit and properly serving you with a summons.

If you are receiving multiple calls from debt collectors, it may be helpful to talk to an attorney about your rights and your options. And whatever you do, do not give out personal information to any stranger over the phone, and certainly not over the Internet.

Monday, 11 November 2013 15:30

Inherited IRA's

Written by

RODRIGUEZ & ASSOCIATES BANKRUPTCY BLOG

INHERITED IRA’S

November 7, 2013

 The U.S. Supreme Court is to resolve the issue of inherited IRA’s.  Two different Circuit Courts, the Fifth Circuit and the Seventh Circuit, have ruled different ways as to whether inherited IRA’s are exempt under the bankruptcy code.  The Seventh Circuit ruled that inherited IRA’s were not exempt, while the Fifth Circuit ruled they are exempt for non-spouse beneficiaries.

 The Supreme Court decision will have a far-reaching impact on inherited IRA’s.

Source: Consumer Bankruptcy News October 28, 2013, Volume 24, Issue 2.

Monday, 11 November 2013 15:27

Exemptions

Written by

RODRIGUEZ & ASSOCIATES BANKRUPTCY BLOG

EXEMPTIONS

November 7, 2013

 The Eighth Circuit has ruled that some equity needs to be shown in property in order to claim an exemption.  This issue most commonly arises when a motion is made to strip a judgment lien off a home using the Homestead exemption.  Some judges have ruled that equity needs to be shown to take the exemption.  In other words, if the mortgage is higher than the value of the home listed on the petition, there may be no ability to strip under 11 U.S.C. 522(f).  This is apparently the law within the Eighth Circuit.  In the Albany District, this rule does not take effect.  See: Goben v. Corydon State Bank Eighth Circuit, 9/23/13.

Source: Consumer Bankruptcy News October 28, 2013, Volume 24, Issue 2.

Cited: Holder of Note & Mortgage Had Standing to Seek Relief

Consumer Bankruptcy News Dec 22, 2011 vol. 22, issue 4

The holder of a note and mortgage has standing to bring a motion to lift stay.  Capital One Bank received an assignment from Mortgage Electronic registration system (MERS) was able to overcome an objection to the lift stay motion by a chapter 7 trustee.  The court in essence determined that whether Capital One Bank would ultimately prevail in a state court foreclosure, is an issue for state court determination.  However in 11 usc 362(d) the MERS possession of the note and mortgage in the assignment is enough to establish standing for Capital One to pursue a lift stay motion.

Friday, 01 November 2013 15:07

Medical Bills and Bankruptcy

Written by

RODRIGUEZ & ASSOCIATES BLOG

MEDICAL BILLS AND BANKRUPTCY

July 2, 2013

 Medical bills are a huge contributing factor in bankruptcy filings.  CNBC.com reports that 1.7 million American households will likely file bankruptcy this year because of rising bills.  The CNBC article published Tuesday, June 25, 2013, reports rising medical bills, more than credit cards, mortgages, and other forms of debt cause people to file bankruptcy.  Additionally, having health insurance is not always a financial safeguard.  High deductibles of up to $5,000.00 to $10,000.00 could force some people to file bankruptcy, along with people without health insurance needing medical treatment.  It is also speculated that some consumers may skip prescription medications in an effort to save money.  However, foregoing prescription medication can trigger long-term and expensive medical problems down the road.

Wednesday, 19 June 2013 12:21

Homestead Exemption

Written by

Rodriguez & Doern PLLC Bankruptcy Blog

June 18, 2013

 In the case of In Re: Bellafiore, Eastern District of New York, Second Circuit, in May 2013, Bankruptcy Court ruled the debtor could use his homestead exemption on the cash proceeds on the sale of his home prior to the bankruptcy filing.  This means the fact that the debtor intended to vacate and sell real property does not change the fact that the real property was his permanent residence and his homestead, and he can exempt the proceeds in the bankruptcy.

 On May 13, 2013, the U.S. Supreme Court in Bullock v. BankChampaign established a standard for defalcation in § 523(a)(4).  The Court stated, “We hold that defalcation includes a culpable state of mind requirement akin to that which accompanies application of the other terms in the same statutory phrase.  We describe that state of mind as one involving knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior.”

 This standard now basically requires an intent element in order to prove defalcation in the non-dischargeability of debt in an Adversary Proceeding in Bankruptcy Court.

Friday, 05 April 2013 12:45

Bankruptcy filings decline

Written by

RODRIGUEZ & ASSOCIATES BLOG

BANKRUPTCY FILINGS DOWN

April 4, 2013

 Bankruptcy filings continue to decline, according to the March 12, 2013 issue of Consumer Bankruptcy News.  Filings in January 2013 declined by 10-percent compared to January 2012.  American Bankruptcy Institute Executive Director Samuel J. Gerdano is quoted as saying that restrained consumer spending and lower interest rates have contributed to the decline.

Friday, 05 April 2013 12:37

New York Foreclosures Stalled

Written by

RODRIGUEZ & ASSOCIATES BLOG

SLOW PACE OF FORECLOSURES

April 4, 2013

 According to an article posted on CNBC.com dated March 7, 2013, foreclosures in New York State are being stalled by years due to huge foreclosure backlogs.  In New York, the backlog could last as long as 607 months, which translates to approximately 50 years. New York and other states have judicial foreclosures, which require intervention by a judge.  Additionally, New York, New Jersey, Massachusetts and other states have introduced policies to further forestall foreclosures in an effort to encourage workouts with lenders.  States that have non-judicial foreclosures have a much quicker turnaround on foreclosed properties. 

An Acting State Supreme Court Justice in Suffolk County cut down Bank of America’s mortgage balance due to the conduct of the bank and apparently its attorneys.  Bank of America was cited for repeated and persistent failure to comply with lawful orders of the Court, including those which directed the production of the servicing agreement.  The litigation occurred over a 34- month period of time.  The Justice ruled the bank acted, “wholly devoid of even so much as a scintilla of good faith in negotiating in good faith.”  The bank was ordered to produce its pooling and servicing agreement and it took the bank nearly six months to produce the agreement.  The bank’s attorneys indicated this agreement prohibited it from writing the loan down or negotiating.  Once the agreement was produced, the bank’s attorney conceded that there was no absolute bar for principal reductions.  The bank was ordered to pay the borrower $200,000.00 as a sanction, which would then write down the $493,000.00 mortgage.

This information is included in Volume 247, number 76 of the New York Law Journal dated April 20, 2012.

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