In fact, most bankruptcy debtors do not lose any of their property. Particularly in Texas, the bankruptcy exemptions are very generous. In most cases, the debtor’s entire homestead, a vehicle for every adult, all retirement accounts, and up to $30,000 of personal property (such as furniture, clothing, jewelry, and other household goods) are completely protected.  In the case of a married couple, the exemption rises to $60,000.

The purpose of the bankruptcy laws is to protect a debtor’s assets and allow them to get a fresh start. Stripping a debtor of all of their property would do nothing to advance that goal. The last thing a bankruptcy trustee wants is a truckload of used furniture and used vehicles to liquidate and distribute to creditors.

It is true that if a person has a large amount of cash available, either in bank accounts or hidden under the mattress, it may have to be turned over to the trustee to distribute to creditors. However, an experienced bankruptcy attorney can advise a potential debtor with regard to appropriate pre-bankruptcy planning in order to avoid having such assets seized. For example, if the debtor is behind with house payments or car payments, it is completely appropriate to bring those payments up to date. Also, the debtor may have needs such as visiting the dentist, buying new glasses, making household repairs, or otherwise using the money to stabilize their family’s financial well-being before filing a bankruptcy case.

However, care should be taken not to spend such assets inappropriately. For instance, if a debtor repays loans to family members or business associates shortly before a case is filed, the trustee can retrieve that money and distribute it equally to all creditors. Therefore, it is important for any person who is considering bankruptcy to consult with an experienced bankruptcy attorney before repaying any debts or otherwise spending down their assets.

Some of the most common scenarios where this occurs are debts arising from breach of a fiduciary duty, damages from injuries caused by drunk driving, or debts arising from a divorce settlement.

If you are unsure whether or not your client’s claim will be discharged in a bankruptcy case, you should refer your client to a lawyer who is experienced in the representation of creditors in bankruptcy, so the proper treatment of your client’s claim can be determined.

Debtors are required to list all of their property in their bankruptcy schedules, and a claim against another party is considered an asset. Unless the proceeds of the claim are exempt under the Bankruptcy Code, the trustee in the bankruptcy case may be entitled to step into the shoes of the debtor and receive any money that is collected. That money will then be distributed to the debtor’s creditors.

You should be careful to tell all your clients that they should inform you if they are currently or later become involved in a bankruptcy case, and also to inform their bankruptcy lawyer of any possible claims or lawsuits they have. You may be required to apply to the bankruptcy judge for approval of your employment to continue with a lawsuit in which you represent the plaintiff if your client becomes a debtor in a bankruptcy case.  The best course of action is to contact your client’s bankruptcy attorney as soon as you become aware that the client plans to file a bankruptcy case, so you can work together to protect your client’s rights.

Even if you or your client has not received official notice of the bankruptcy case filing, actual knowledge is enough to support damages for violation of the automatic stay.

Some types of cases are not stayed by the bankruptcy filing, such as child support enforcement actions, paternity suits, and some other types of actions. But state court judges often want a “comfort order” from the bankruptcy court that specifically states the litigation will be allowed to continue, and under what conditions. If in doubt, it is best to consult with a bankruptcy attorney or reach an agreement with the debtor’s bankruptcy attorney before continuing to prosecute any action against a bankruptcy debtor.

You would think that as a bankruptcy lawyer, I would never fall victim to a scam. Unfortunately, I saw one of the commercials while I was waiting impatiently for a webpage to load on my laptop, which has become increasingly slow over the past few months. In a weak moment, I went to the website and downloaded the program, after paying $30.00 for the privilege.

At first, I was pleasantly surprised. My computer did indeed speed up noticeably, and I was very happy with the result. However, when I turned on my computer the next morning, I was greeted by a succession of Viagra ads, porno websites, and warnings that I needed to go back to the website and download the company’s anti-virus program. For another $30.00, of course.

Fortunately, I wasn’t that gullible, and I tried to go to the websites for Microsoft, Norton, and McAfee to download a reputable anti-virus program. The FinallyFast program blocked all my efforts to go to those websites, and I had to give up and go buy a program to load manually.

When I told the salesman at the computer store what was going on, he told me that the program might not allow me to load the Norton software I had purchased. He was right. My first attempts to load the program failed. Fortunately, Norton had a fix for that on the CD, and I was finally able to load the program.

Instantly, the virus was detected and eliminated. I was so relieved, and immediately did what I should have done to begin with — researched the website from which I had downloaded the program. I found hundreds of consumer complaints, and added my experience to every website I could find that addressed the problem.

And, of course, I should already have had a good anti-virus program installed on my computer. The program I had expired a few months ago, and I had planned to buy a new computer, so I didn’t resubscribe. Then I forgot about it, until I needed it. Never again. I hope my experience will keep a few people from the same expense and frustration.

1.    the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself and his dependents if forced to repay the loans;

2.    additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

3.    the debtor has made good faith efforts to repay the loans.

I have succeeded in having student loans discharged in two of my bankruptcy cases. In one, the debtor was a 72-year-old man who was in the beginning stages of Alzheimer’s disease. In the other, the debtor was a 57-year-old grandmother who was raising three of her grandchildren, while also caring for her terminally ill mother.  In both cases, the debtors had made payments on their student loans in the past, had very limited income, and their circumstances were unlikely to improve in the foreseeable future.

I have been contacted in the past by people in their 20s or 30s who were interested in discharging their student loans in bankruptcy, but I have never pursued those cases. The courts will not grant a discharge of a student loan if the person has many productive years ahead of them in which to repay the loan.

The Department of Education will sometimes forgive a student loan if a person has attended a school that provided a worthless degree, the school has gone out of business, or some other situation exists that indicates fraud by the school. If you feel that your situation falls into this category, contact the U.S. Department of Education to pursue a possible forgiveness of your loan or to get a forbearance or other help in repaying your loan.

In a bid to avoid an overload of foreclosed houses in its inventory, Fannie Mae has introduced a new program that would give homeowners facing foreclosure the option of leasing their houses for one year. The program could keep thousands of families in their homes, but critics worry that the Government-backed lender, which has received billions of dollars in bail-out funds, could end up losing even more money.

The “Deed For Lease” program would allow homeowners to transfer title to their homes back to Fannie Mae, in exchange for a one-year lease, with possible extensions after that lease term ends. The goal is to allow homeowners to remain in their homes, and for Fannie Mae to avoid the expensive and lengthy process of foreclosing on the homes.

The program helps “eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower’s credit record. “It shows that you put your best effort to work out a solution,” said Gabe Del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. “The preferred option is allowing people to retain ownership,” he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don’t qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

This program will be particularly attractive to homeowners who owe more on their house than it is worth. By paying the market rate of rent in their area, they may actually be paying less per month in rent than they were paying on their inflated mortgage.

During the first nine months of 2009, Fannie Mae foreclosed on over 90,000 homes, and accepted 2,000 “deeds in lieu of foreclosure,” where the homeowners deeded the homes back to Fannie Mae and then walked away.

While Fannie Mae executives say the company’s motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. “That’s folly,” says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

“Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded,” he said. “It’s going to cost a fortune.”

The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter as the taxpayers’ bill from the housing market bust keeps getting bigger. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.8 billion, including $883 million in dividends paid to the Treasury Department.

Pessimists like Schiff say the recent stability in the housing market is just temporary, and argue that there is a huge backlog of foreclosed homes that haven’t gone on the market. Refusing to sell those homes, they say, only prolongs the problem.

But other experts say that Fannie Mae’s new policy could make sense, even if prices don’t rebound quickly. The company will get rental income while avoiding costly foreclosure expenses. It will also help to safeguard the homes, which are less likely to be vandalized when occupied.

“There are a whole lot of costs you avoid,” said Thomas Lawler, a former Fannie Mae economist. “You don’t necessarily have to believe that home prices a year from now will be higher than today.”

Fannie Mae’s sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be completed and only allows month-to-month leases. Freddie Mac declined to detail how many borrowers have participated.

The two companies purchase loans from banks and sell them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, about half of all U.S. mortgages. They have been badly hurt by the housing bust and have required $96 billion in federal aid since being seized by government regulators 14 months ago.

To find out whether your home loan is owned by Fannie Mae or Freddie Mac, try these Web sites:

Fannie Mae http://loanlookup.fanniemae.com/loanlookup/

Freddie Mac: http://www.freddiemac.com/mymortgage

If you have questions about foreclosure or any related legal matters, please contact our bankruptcy and consumer law firm. There is no charge for that first phone call.

You have three options regarding your vehicles in a Chapter 13 bankruptcy:

1. Surrender the vehicle. If you cannot afford to pay for a vehicle, you can surrender it in your Chapter 13 Plan, and will be under no obligation to make any further payments or have any liability for the balance that remains after the surrendered vehicle is sold by the creditor.
2. Pay the current value of the vehicle. If you purchased your vehicle more than 910 days prior to filing the bankruptcy case, you can propose to pay the current market value of the vehicle in your Chapter 13 plan, regardless of the amount actually owed on the vehicle. Depending upon where you file your bankruptcy case, you may also be able to reduce the interest rate considerably. For example, in the Northern District of Texas, you will only be required to pay interest of about 4.25% on the vehicle balance.
3. Pay the balance at a lower interest rate. If you purchased your vehicle less than 910 days before the case was filed, you will have to pay the full balance owed on the vehicle. However, your interest rate may be reduced to a rate as low as 4.25%, depending upon where your case is filed.

It is very important for you to consult with a lawyer in the district where your case will be filed to obtain advice about how vehicles are handled in a Chapter 13 case in your district.

You have three options concerning your vehicle when you file a Chapter 7 case:

1. Reaffirmation. If you reaffirm the debt on your vehicle, it means that you agree to continue making payments and that if you stop doing so, the creditor can repossess the vehicle. If you reaffirm a loan on a vehicle and it is repossessed after your bankruptcy discharge, you will be held responsible for any balance remaining after the car is sold at auction. You should not reaffirm the debt unless you are sure you will be able to make future payments. I also advise my clients not to sign reaffirmation agreements unless the creditor offers them better terms under the reaffirmation agreement (which is essentially a new contract on the vehicle), such as lowering the interest rate and/or reducing the balance owed. In the vast majority of cases, creditors will not repossess a vehicle even if you fail to sign a reaffirmation agreement, so long as you continue to make your required monthly payments.
2. Redemption. You may also consider redeeming your vehicle, if you have the resources to do so. Under a redemption, you pay the creditor the present value of the vehicle all at once, and are not responsible for the unsecured portion of the debt, which is the amount over the value of the vehicle. For example, if your vehicle is worth $5,000 and you owe $10,000 on it, you can pay the creditor $5,000 and the remaining balance is discharged in your bankruptcy.
3. Surrender. If you simply cannot afford your vehicle, the best option may be to surrender it. If you surrender the vehicle, the creditor must accept the vehicle as full satisfaction of the debt, and may not pursue you to collect any balance remaining on the debt after the vehicle is auctioned.

Often, it makes more sense to purchase an inexpensive vehicle for cash and surrender your vehicle if you can no longer afford it. You can then trade in that vehicle after your bankruptcy is completed, and purchase a vehicle on credit. While you will probably have to pay a high interest rate on a vehicle after your bankruptcy is over, it may be more affordable than the vehicle you have surrendered. Additionally, making on-time payments on a vehicle, whether a new one or one reaffirmed in your bankruptcy, will improve your credit score relatively quickly.

For advice about how to handle your vehicle in a bankruptcy case, you should consult with a reputable bankruptcy attorney who can explain your options and help you decide the best course for you.

In June, HAMP officials began conducting rigorous reviews of mortgage servicers, and have now started a “second look” program, under which servicers’ decisions to approve or deny HAMP modifications will be scrutinized. Compliance officers are also analyzing HAMP-modified loans to track error rates with servicers.

Government officials have tried to stimulate the rate of modifications several times. The Treasury Department has set a goal of 4 million mortgage modifications by 2012, but estimates indicate that only about half that number will actually be modified.

Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said, “The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” He may insert a cramdown provision into legislation that would overhaul the financial system, which would allow bankruptcy judges to lower the balances on mortgages to the market value of the property and set new interest rates. That bill will become a top priority in early 2010.

Complaints concerning predatory lending and mortgage practices were sixth, with complaints about telemarketers, automobile repair, automobile warranties, and telecom slamming rounding out the top 10.

“With the recession and increased foreclosure rates, consumers need to be on high alert. Too many people are being swindled out of their hard-earned money by scam artists,” said Hawaii Attorney General Mark Bennett, who co-chairs the NAAG Consumer Protection Committee with Montana Attorney General Steve Bullock.

Utility companies that use pre-paid meters effectively avoid state utility commission regulations. Such consumer protections as notice before disconnection and discretion to allow utility service to continue for elderly or sick residents disappear. Lower-income households are typically the users of pre-paid meters, and severe pressure may be put onto families to find cash to feed the meter. The situation can cause such families to become victims of predatory small lenders and even loan sharks.

Assuming no other homes were on the market, it would take 1.35 years to sell the properties, based on the current pace of existing-home sales. A change in the mix of foreclosures and traditional sales over different parts of the year raised prices in the period, as the distressed share shrank. Accounting for efforts to have more loans reworked to avert foreclosure will not make much of a difference in the shadow inventory, with optimistic assumptions leading to a reduction in the amount by 1 million.

For example, debt collectors often give false or misleading information about their company and who they represent. By entering the phone number from your caller I.D. onto the website, you may be able to find out more about the collector, where it is located, and other information from people who have had similar experiences and perhaps have done further research into the identity of the callers. Or you may be able to confirm whether or not a caller is involved in a phone scam or other illegal activity. Reporting these calls to your state attorney general or other consumer groups could help uncover such scams and save you and other members of the public from losing money or prevent damage to your credit rating.

If you are experiencing harassing phone calls from debt collectors or have questions concerning other consumer issues, please give us a call. Our consumer law department is ready to answer your questions and offer help to resolve your consumer problems.

Ralph Tornes, who lives in Florida, is pursuing a lawsuit against Bank of America for charging him nearly $500 in overdraft fees in 2008 after it rearranged his purchases from largest to smallest. In May 2008, for instance, Mr. Tornes had $195 in his account when he made two debit purchases for $8 and $13; the bank also processed a bill payment of $256. He claims that Bank of America took his purchases out of chronological order and ran the biggest one through first. So instead of paying $35 for one overdraft fee, he was stuck with three, for a total of $105.

As a result of increasing consumer protests about these practices, regulators are considering the implementation of rules to disallow overdraft fees unless consumers have given permission to allow charges to be run through when there is insufficient money in the account to cover them. In addition, banks would be required to run the charges through in increasing order, allowing smaller charges to be paid without overdrawing the account and resulting in fewer overdraft charges.

Michael Moebs, an economist who advises banks and credit unions, said such legislation would effectively kill overdraft services, causing an estimated 1,000 banks and 2,000 credit unions to fold within two years. That is because 45% of the nation’s banks and credit unions collect more from overdraft services than they make in profits, he said.

“Will they be able to replace it with another fee?” Mr. Moebs said. “Not immediately and not soon enough.” They will certainly try. For instance, some banks have said they might slap a monthly fee of between $10 to $20 on every free checking account. At the moment, people who pay overdraft fees help subsidize the free accounts of those who do not.

In all, $27 billion in fee income flows from covering overdrafts from debit card purchases, ATM transactions, checks and automatic payments for bills like utilities; an additional $11.5 billion arrives from bounced checks and other instances in which banks refuse to pay overdrafts, Mr. Moebs said.

Advocacy groups say banks are making a fortune because consumers are unaware of the exorbitant costs of overdraft services. And banks, they argue, have an incentive to keep it that way.

Rory Foster, a former branch manager in Illinois, said that Wells Fargo based its compensation for managers in part on overall branch profitability. Fee income, including that from overdrafts, is part of the calculation. A spokeswoman for Wells Fargo, Richele J. Messick, said the bank did not tie branch manager pay directly to fee collection.

Much of the information in this blog comes from an article in the New York Times, where you can get further information on this topic.

Loan Resolution Corp. chief operating officer Travis Olsen said one of the top 10 servicers has hired his firm to manage the short sale process. “We will take their borrowers who have been denied a home retention plan and hand-hold them during the rest of the process,” he said. The COO also noted that his Scottsdale, Ariz.-based pre-foreclosure asset-management company has received requests for bids from several top-five servicers.

Treasury is expected to provide incentives for servicers to conduct short sales and share some of the costs of paying off second lien holders. “The final details of the [short sale] program are being finalized, and will be announced as soon as completed,” HUD assistant secretary David Stevens told a congressional panel on Wednesday (Sept. 9).

In a short sale, the lender agrees to accept a loss on the sale of the property and forgive the remaining balance on the mortgage. If a short sale doesn’t work, the next stop is foreclosure. It usually takes LRC a couple of days or weeks to complete a short sale after the buyer makes an offer, while the timeline for servicers can be 60-120 days. “We can sometimes approve short sales the same day the offer is received,” Mr. Olsen said.

About one-third of option ARMS are already in default, and it is expected that 600,000 option ARMS will reset within the next four years. According to Barclays Capital, 81% of the option ARMs originated in 2007 are expected to default, with many ending in foreclosure. Barclays projects that banks will lose $112 billion on option ARMs written from 2005 to 2007.

All of the debtor’s creditors also receive notice of the meeting, and may attend and question the debtor. In reality, that seldom happens. Bankruptcy cases are filed electronically with the bankruptcy court, and creditors can view all the documents filed in the case online. There normally is no reason for a creditor to spend the time and money to attend the meeting in person.

The trustee assigned to the debtor’s case presides at the meeting, swears in the debtor, and tape records the meeting. The debtor, his or her attorney, and the trustee sit at a conference table in a meeting room, and if a creditor attends, the creditor will also sit at the table during the meeting. Other debtors, attorneys, and creditors are also in the room and can hear what is being said. However, the other parties are usually far more concerned about their own cases and pay little attention to what is being said in other cases.

After the debtor is sworn in and the trustee determines that the debtor has presented the proper identification — usually a driver’s license and Social Security card — the debtor’s attorney asks the debtor a series of questions. Those questions are related to the information that was given in the schedules and statement of financial affairs filed in the case, and usually just confirm for the record that the information given was true and correct. If any explanations or corrections to the information need to be made, those issues are discussed during the meeting.

If the trustee wants additional information or documents, those items are requested and a deadline is normally given for production of that information or those documents. If any creditors are in attendance, they are allowed to ask questions relevant to their claims in the case. However, most trustees limit the time allowed for creditors to question debtors at the meeting, and do not allow the questions to become abusive or irrelevant. If creditors wish to ask further questions, they are allowed to file a motion with the court requesting a “2004 exam,” which is similar to a deposition. However, it is extremely rare for such an exam to be requested.

It is very important that a debtor review all of the paperwork filed in his or her case before the time of the trustee meeting, to be sure that no mistakes were made, that no information is incomplete, or that no additions or changes need to be made. Once the debtor is sitting before the trustee, all of the paperwork should be complete and accurate, to avoid any appearance of fraud or dishonesty. Be sure your lawyer is completely aware of anything relevant to your case that could possibly cause a problem at the meeting. Your lawyer can make any necessary amendments to the documents before the meeting so that your case will proceed smoothly and you will receive your discharge in a timely manner.

One auto analyst called the program a success, after his research showed that it was responsible for saving 39,000 jobs that otherwise would have been eliminated. “It’s really more substantial than we had thought in terms of stimulus,” said David Cole, chairman of the Center for Automotive Research. “This is companies putting people back to work.”

General Motors announced last week that it will reinstate 1,350 workers and add overtime for about 10,000 at three plants, as the automaker replenishes inventory sold during the government program. Honda also said it will increase U.S. production.

Asian automakers were the big winners in the program. Eight of the top 10 new cars purchased through the program came from Honda, Hyundai, Nissan and Toyota, which claimed the top spot with its Corolla. The Corolla and Honda Civic are manufactured in the United States. The only top 10 vehicles produced by U.S. automakers were the Ford Escape and Ford Focus.

By contrast, all of the top 10 clunkers turned in were made by a Detroit company, with the four-wheel-drive Ford Explorer SUV, Ford F-150 pickup and the four-wheel-drive Jeep Grand Cherokee taking the top three spots. Even though no General Motors vehicle cracked the top 10 of best-sellers, GM’s sales volume was strong, finishing second behind Toyota with 17.6% of all new vehicles sold.

The new cars average about 9 miles per gallon better than the clunkers they replaced, the Transportation Department said. “Moribund showrooms were brought back to life and consumers bought fuel-efficient cars that will save them money and improve the environment,” Transportation Secretary Ray LaHood said in a statement Wednesday.

Under the program, car buyers were eligible for a federal government credit worth up to $4,500 toward the purchase of a new qualifying vehicle.

It is unclear whether the program will be responsible for an overall increase in auto sales in the coming years, or if it merely pulled forward sales that consumers already planned to make in the future, resulting in no net gain for auto sales over the long run. The program, which had been a part of the original stimulus bill earlier this year but was deleted before final passage, was so popular that it required an additional $2 billion in funding after it was underway.

Potential buyers could take advantage of the program until 8 p.m. Monday, but the government was forced to twice extend the deadline for dealers to submit paperwork. Some dealers complained about the program, saying they were not being reimbursed by the government quickly enough, while some set up their own privately-run deals.