New Attorney With The Firm
I am very proud and excited to announce that I have hired a new associate. His name is Fredrick Nix and he had been practicing bankruptcy law in Hagerstown, Maryland before joining this firm. He is a 1997 graduate of Catholic University School of Law and is a member of the Maryland Bar Association Consumer Bankruptcy Section.
Wednesday, November 7, 2012
Sunday, July 29, 2012
Turnover of Post-Petition Garnishment Starts When Case Is Filed.
Once a debtor files for bankruptcy, all wages garnishments must cease. In the recent case of In re Williams, a case from the Bankruptcy Court in Kansas reported on May 15, 2012, the creditor had an obligation to refund post-petition wages even though it did not originally get notice of the bankruptcy filing.
In this case the debtor filed bankruptcy on June 23, 2011, but did not list the creditor who had been garnishing his wages before he filed. On October 5, 2011, he finally notified the creditor of his bankruptcy filing and the next day the wage garnishment stopped. The creditor refused to return the wages garnished for the period between June 23, 2011 and October 5, 2011, claiming that it only needed to stop the garnishment once it leaned of the bankruptcy case. The debtor then filed a turnover motion with the bankruptcy court seeking the return of his wages for this period of time.
The Bankruptcy Court granted the debtor’s motion. The Court said that “absence of notice to the creditor that the bankruptcy has been filed is not a defense to the obligation to obligation to turnover. Notice to creditors is not an element of the imposition of the stay. The stay arises automatically upon the filing of the petition for relief, not upon notice to creditors of the filing. A creditor who has initiated collection efforts without knowledge of a bankruptcy petition has an affirmative duty to restore the status quo without the debtor having to seek relief from the Bankruptcy Court. Lack of proper notice protects a creditor from the imposition of a penalty, but not from the turnover obligation."
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
In this case the debtor filed bankruptcy on June 23, 2011, but did not list the creditor who had been garnishing his wages before he filed. On October 5, 2011, he finally notified the creditor of his bankruptcy filing and the next day the wage garnishment stopped. The creditor refused to return the wages garnished for the period between June 23, 2011 and October 5, 2011, claiming that it only needed to stop the garnishment once it leaned of the bankruptcy case. The debtor then filed a turnover motion with the bankruptcy court seeking the return of his wages for this period of time.
The Bankruptcy Court granted the debtor’s motion. The Court said that “absence of notice to the creditor that the bankruptcy has been filed is not a defense to the obligation to obligation to turnover. Notice to creditors is not an element of the imposition of the stay. The stay arises automatically upon the filing of the petition for relief, not upon notice to creditors of the filing. A creditor who has initiated collection efforts without knowledge of a bankruptcy petition has an affirmative duty to restore the status quo without the debtor having to seek relief from the Bankruptcy Court. Lack of proper notice protects a creditor from the imposition of a penalty, but not from the turnover obligation."
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Monday, July 16, 2012
District Court of Maryland Dismisses Thousands of Debt Collection Cases
A recent news article caught my attention and I thought I would share it with those following this blog.
ANNAPOLIS, Md. – July 11, 2012) On July 10, Chief Judge Ben C. Clyburn of the District Court of Maryland dismissed 3,564 debt collection cases against Maryland residents. Judge Clyburn’s order comes after a settlement agreement with the debt collection agencies LVNV and Resurgent Capital Services.
As part of the agreement reached with the Maryland State Collection Agency Licensing Board, LVNV and Resurgent will pay $1 million to the state and agreed to the dismissal of cases pending in Maryland District Court. Also, $3.8 million in credit will be applied to the accounts of 6,246 consumers whose cases have been adjudicated or settled. The settlement came after claims that LVNV and Resurgent violated state and federal laws about licensure and submitting false or misleading claims or affidavits in court.
LVNV is part of a new industry – “debt buying,” – that has clogged the dockets of small claims courts in Maryland and throughout the country, particularly during the current recession. Debt buyers specialize in buying debts that have been abandoned by the original creditors, usually credit card companies, for a tiny fraction of the amount owed. Debts may be sold to other debt buyers several times, and the documentation to prove the debt is owed sometimes is little more than the person’s name, last known address and Social Security number.
“In this current recessionary economy, the District Court has been seeing an increasing number of debt collection cases,” Judge Clyburn said. “We have been responding to many issues related to debt-buying and we now have new rules in place that help make the process more transparent, give the judge more information, and level the playing field for consumers.”
The 3,564 cases dismissed yesterday were dismissed before judgment and “without prejudice,” which means a case is eligible to be re-filed in the future.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
ANNAPOLIS, Md. – July 11, 2012) On July 10, Chief Judge Ben C. Clyburn of the District Court of Maryland dismissed 3,564 debt collection cases against Maryland residents. Judge Clyburn’s order comes after a settlement agreement with the debt collection agencies LVNV and Resurgent Capital Services.
As part of the agreement reached with the Maryland State Collection Agency Licensing Board, LVNV and Resurgent will pay $1 million to the state and agreed to the dismissal of cases pending in Maryland District Court. Also, $3.8 million in credit will be applied to the accounts of 6,246 consumers whose cases have been adjudicated or settled. The settlement came after claims that LVNV and Resurgent violated state and federal laws about licensure and submitting false or misleading claims or affidavits in court.
LVNV is part of a new industry – “debt buying,” – that has clogged the dockets of small claims courts in Maryland and throughout the country, particularly during the current recession. Debt buyers specialize in buying debts that have been abandoned by the original creditors, usually credit card companies, for a tiny fraction of the amount owed. Debts may be sold to other debt buyers several times, and the documentation to prove the debt is owed sometimes is little more than the person’s name, last known address and Social Security number.
“In this current recessionary economy, the District Court has been seeing an increasing number of debt collection cases,” Judge Clyburn said. “We have been responding to many issues related to debt-buying and we now have new rules in place that help make the process more transparent, give the judge more information, and level the playing field for consumers.”
The 3,564 cases dismissed yesterday were dismissed before judgment and “without prejudice,” which means a case is eligible to be re-filed in the future.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, June 13, 2012
Interesting Case on Bad Faith and a Meth Lab
An interesting case was recently reported in the Consumer Bankruptcy News. In First Tennessee Bank, N.A. v. Hansen, 2012 WL 1156409 (Bankr. E.D. Tenn. 4/6/12), the bank alleged that the debtors’ case was filed in bad faith because they knew about a meth lab in their basement and should not be allowed to get the damages caused by the lab to be discharged. The debtors had rented out their basement to their grandson’s father. The father had a drug problem, which he claimed was over. The debtors required that he take drug tests and after 10 months of the tests coming back negative, they allowed him to rent their basement. In 2010 the debtors’ business declined and they thought about selling their house, but after obtaining an appraisal in August of 2010 they realized there was no equity in the house and proposed a plan that called for the surrender of the house back to the lender. They then moved out of the house, but allowed their grandson and his father to remain in the house.
In October of 2010, the debtor husband went back to the house and went to the basement storage area to get packing tape and discovered two bottles and a tube and confronted the father. The father admitted he was making speed and apologized for violating the debtors’ trust and destroyed all the lab equipment. However, it turned out that after destroying all the lab equipment he then bought new equipment and resumed his illegal activities. The police were called to the house by child protective services to make sure the grandson had enough food in the house. When opening the cabinets the police discovered jars containing a white liquid and found the meth lab. The father was arrested and the house was condemned. The bank subsequently paid more than $45,000 to repair the damage done to the house and also spent more than $35,000 in legal fees. The bank asked the court to dismiss the case as having been filed in bad faith. The bank alleged that the debtors knew of the meth lab and were using the Chapter 13 filing to get rid of a worthless house and the debt associated with it. However, the court found that the debtors were not aware of the meth lab and only decided to surrender the house after an appraisal came back which indicated they had no equity in the house. Accordingly, the court denied the bank’s motion.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
In October of 2010, the debtor husband went back to the house and went to the basement storage area to get packing tape and discovered two bottles and a tube and confronted the father. The father admitted he was making speed and apologized for violating the debtors’ trust and destroyed all the lab equipment. However, it turned out that after destroying all the lab equipment he then bought new equipment and resumed his illegal activities. The police were called to the house by child protective services to make sure the grandson had enough food in the house. When opening the cabinets the police discovered jars containing a white liquid and found the meth lab. The father was arrested and the house was condemned. The bank subsequently paid more than $45,000 to repair the damage done to the house and also spent more than $35,000 in legal fees. The bank asked the court to dismiss the case as having been filed in bad faith. The bank alleged that the debtors knew of the meth lab and were using the Chapter 13 filing to get rid of a worthless house and the debt associated with it. However, the court found that the debtors were not aware of the meth lab and only decided to surrender the house after an appraisal came back which indicated they had no equity in the house. Accordingly, the court denied the bank’s motion.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Tuesday, May 15, 2012
New Rules for Mortgage Lenders In Chapter 13 Bankruptcy Cases
This past December 2011, Congress enacted a new Federal Bankruptcy Rule, Rule 3002.1. This new rule governs how mortgage payments are to be treated. Specifically, when a debtor’s Chapter 13 plan provides to cure pre-petition arrears owed to the debtor’s mortgage company and the Trustee has paid those arrears in full, the Trustee must file a report with the court and send a copy of the report to the mortgage lender which indicates that the pre-petition arrears have been paid in full and that the debtor is current on his mortgage payments. If the mortgage company’s records indicate that the pre-petition arrears have not been paid in full or that the debtor is not current, it has 21 days from the date of the Trustee’s notice to file a response. If no response is filed by the mortgage lender, then the debtor will be considered current on his or her mortgage payments. This means that the mortgage lender is later precluded from claiming any payments are due from the debtor as of the date of the Trustee’s notice. This new law was enacted to prevent mortgage companies from claiming additional monies due from debtors after their Chapter 13 cases are discharged and closed.
If the lender files a timely opposition to the Trustee’s notice, the debtor has 31 days after the opposition is filed to file a response challenging the lender’s opposition. The court will then schedule a hearing and make a determination on the issue. If the lender does not file a timely opposition, it is precluded from presenting evidence at a subsequent hearing on the issue of the debtor’s payments.
The new rule also requires lenders to notify the court and the debtor if during the chapter 13 case it changes the amount of the debtor’s mortgage payment due to escrow changes or the loan was an adjustable rate loan or for any other reason. This notice must be filed with the court at least 21 days before the new payment amount is due. I had once case recently where the mortgage lender filed a notice in May 2012 of a payment change that took effect March 1, 2012. This was clearly not timely, and therefore, my client would not be responsible for the increase in payment during the months of March and April.
Finally, the new rule also requires that the mortgage lender file a notice with the court, with copies sent to the debtor and the debtor’s attorney, of any fee, cost or expense incurred by it during the Chapter 13 case which it considers the debtor’s liability. This notice must be filed within 180 of the date the lender incurred this fee, cost or expense. For example, if the lender wants to charge the debtor’s account for preparing and filing a proof of claim, it must notify the court of that expense within 180 days of the filing of the claim, or it will not be able to charge the debtor’s account for that expense.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
If the lender files a timely opposition to the Trustee’s notice, the debtor has 31 days after the opposition is filed to file a response challenging the lender’s opposition. The court will then schedule a hearing and make a determination on the issue. If the lender does not file a timely opposition, it is precluded from presenting evidence at a subsequent hearing on the issue of the debtor’s payments.
The new rule also requires lenders to notify the court and the debtor if during the chapter 13 case it changes the amount of the debtor’s mortgage payment due to escrow changes or the loan was an adjustable rate loan or for any other reason. This notice must be filed with the court at least 21 days before the new payment amount is due. I had once case recently where the mortgage lender filed a notice in May 2012 of a payment change that took effect March 1, 2012. This was clearly not timely, and therefore, my client would not be responsible for the increase in payment during the months of March and April.
Finally, the new rule also requires that the mortgage lender file a notice with the court, with copies sent to the debtor and the debtor’s attorney, of any fee, cost or expense incurred by it during the Chapter 13 case which it considers the debtor’s liability. This notice must be filed within 180 of the date the lender incurred this fee, cost or expense. For example, if the lender wants to charge the debtor’s account for preparing and filing a proof of claim, it must notify the court of that expense within 180 days of the filing of the claim, or it will not be able to charge the debtor’s account for that expense.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Friday, May 11, 2012
Reaffirmation of Vehicle Loans in Chapter 7 Cases
On July 15, 2011 the highest Court in Maryland clarified the issue of whether a lender who has granted a loan for the purchase of a vehicle under a vehicle retail installment contract may repossess a vehicle solely because the borrower filed bankruptcy. In most cases, the answer is “yes.”
In the matter of Ford Motor Credit Company, LLC v. Roberson, 420 Md. 649 (Md. 2011), the debtor, Patricia Roberson, filed a previous Chapter 7 bankruptcy case. While that case was pending she did not execute a reaffirmation agreement to reinstate her car loan with Ford. After she received her discharge, Ford repossessed her car. Ms. Roberson was current on her car payments at the time of repossession, and the vehicle was properly titled and insured. Ford argued that it had the right to repossess the vehicle under the “Ipso Facto” clause of her finance agreement. The Ipso Facto clause stated that the filing of bankruptcy, in and of itself, was a breach of the finance agreement. Ford argued that the purpose of the Ipso Facto clause is to prevent “insecurity” that is caused by the filing of Chapter 7 bankruptcy. This “insecurity” exists because a bankruptcy discharge removes Ford’s ability to sue a borrower if he or she defaults on the car loan after bankruptcy. The way to cure this “insecurity” would have been for Ms. Roberson to have executed a reaffirmation agreement during pendency the Chapter 7 case because it would reinstate Ms. Roberson’s personal liability for the loan (subject to Court approval). Ms. Roberson argued that since she was current on her payments and was otherwise in compliance with the loan agreement, there was no basis for Ford to deem the loan to be in default.
The Court of Appeals of Maryland decided the matter in favor of Ford. In doing so, the Court looked to three statutes that govern lending and borrowing in the State of Maryland. These statutes are commonly referred to as “CLEC”, “OPEC”, and “RISA”. There was no dispute that the finance agreement at issue was governed by CLEC. The Court also looked at an older case called Biggus v. Ford Motor Credit Co., 328 Md. 188, 613 A.2d 986 (Md. 1991). In Biggus the Court of Appeals acknowledged that CLEC was a newer statute that RISA. The Court determined that there were certain situations that were not covered by CLEC, and wherever there were gaps in the CLEC rules, the rules under RISA would fill in the blanks. After the Biggus case was decided, the Maryland Legislature grew concerned that this “gap filling” would cause a flood of new lawsuits in order to determine when RISA rules would apply to contracts that were otherwise governed by CLEC. The Legislature thought this uncertainty would cause lenders to believe that they needed set money aside to cover legal fees and costs associated with this unknown litigation. As a result, it was feared that many lending costs would spike and lenders would simply stop writing auto loans in Maryland. Therefore, new provisions, including the one containing the Ipso Facto clause at issue were enacted.
The Court then compared language in CLEC (and OPEC) with the language in RISA, regarding what a lender is prohibited to do in the face of “uncertainty.” The Court noted that RISA prohibits both acceleration of all payments due under the loan and repossession of the vehicle, while CLEC only prohibits acceleration of the payments due under the loan. The Court determined that the Legislature must have intentionally excluded repossession from the prohibitions under CLEC and, as a result, it was permitted.
Boiled down to its essence, the Roberson decision stands for a proposition that most car loans must be reaffirmed in Chapter 7 cases in order to nullify the lender’s right to repossess the vehicle at any time, regardless of whether payments have been made and the owner is otherwise in compliance with the loan terms. This does not mean all reaffirmation agreements should be signed. Consultation with a bankruptcy lawyer is key in determining whether it is in your best interest to sign a reaffirmation agreement.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
In the matter of Ford Motor Credit Company, LLC v. Roberson, 420 Md. 649 (Md. 2011), the debtor, Patricia Roberson, filed a previous Chapter 7 bankruptcy case. While that case was pending she did not execute a reaffirmation agreement to reinstate her car loan with Ford. After she received her discharge, Ford repossessed her car. Ms. Roberson was current on her car payments at the time of repossession, and the vehicle was properly titled and insured. Ford argued that it had the right to repossess the vehicle under the “Ipso Facto” clause of her finance agreement. The Ipso Facto clause stated that the filing of bankruptcy, in and of itself, was a breach of the finance agreement. Ford argued that the purpose of the Ipso Facto clause is to prevent “insecurity” that is caused by the filing of Chapter 7 bankruptcy. This “insecurity” exists because a bankruptcy discharge removes Ford’s ability to sue a borrower if he or she defaults on the car loan after bankruptcy. The way to cure this “insecurity” would have been for Ms. Roberson to have executed a reaffirmation agreement during pendency the Chapter 7 case because it would reinstate Ms. Roberson’s personal liability for the loan (subject to Court approval). Ms. Roberson argued that since she was current on her payments and was otherwise in compliance with the loan agreement, there was no basis for Ford to deem the loan to be in default.
The Court of Appeals of Maryland decided the matter in favor of Ford. In doing so, the Court looked to three statutes that govern lending and borrowing in the State of Maryland. These statutes are commonly referred to as “CLEC”, “OPEC”, and “RISA”. There was no dispute that the finance agreement at issue was governed by CLEC. The Court also looked at an older case called Biggus v. Ford Motor Credit Co., 328 Md. 188, 613 A.2d 986 (Md. 1991). In Biggus the Court of Appeals acknowledged that CLEC was a newer statute that RISA. The Court determined that there were certain situations that were not covered by CLEC, and wherever there were gaps in the CLEC rules, the rules under RISA would fill in the blanks. After the Biggus case was decided, the Maryland Legislature grew concerned that this “gap filling” would cause a flood of new lawsuits in order to determine when RISA rules would apply to contracts that were otherwise governed by CLEC. The Legislature thought this uncertainty would cause lenders to believe that they needed set money aside to cover legal fees and costs associated with this unknown litigation. As a result, it was feared that many lending costs would spike and lenders would simply stop writing auto loans in Maryland. Therefore, new provisions, including the one containing the Ipso Facto clause at issue were enacted.
The Court then compared language in CLEC (and OPEC) with the language in RISA, regarding what a lender is prohibited to do in the face of “uncertainty.” The Court noted that RISA prohibits both acceleration of all payments due under the loan and repossession of the vehicle, while CLEC only prohibits acceleration of the payments due under the loan. The Court determined that the Legislature must have intentionally excluded repossession from the prohibitions under CLEC and, as a result, it was permitted.
Boiled down to its essence, the Roberson decision stands for a proposition that most car loans must be reaffirmed in Chapter 7 cases in order to nullify the lender’s right to repossess the vehicle at any time, regardless of whether payments have been made and the owner is otherwise in compliance with the loan terms. This does not mean all reaffirmation agreements should be signed. Consultation with a bankruptcy lawyer is key in determining whether it is in your best interest to sign a reaffirmation agreement.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
Tuesday, April 17, 2012
Be Careful of What Funds Are in The Bank on The Day the Debtor Files Bankruptcy
In Maryland, the Chapter 7 Trustees are now asking to see exactly what funds were in the debtor’s bank account on the day he or she filed the Chapter 7 case. If the amount in the account is more than is listed on the debtor’s schedules and therefore not fully exempt, the trustee may ask the debtor to turn over the non-disclosed and non-exempt portion of the funds in the account. When indicating the amount in the bank account, a debtor may have deducted the amount in checks that he or she wrote prior to filing from the balance in the account. However, if those checks did not clear pre-petition, the money was still in the account on the date of filing and unless disclosed and exempted, may have to be turned over to the trustee. A debtor may be surprised to find out that they cannot deduct checks outstanding on the date of filing from the balance on the account, especially since by the time they meet with the trustee, the checks would have cleared and the funds are no longer in the account.
Section 541 of the Bankruptcy Code broadly defines property of the estate to include all legal or equitable interests of the debtor in property as of the date of the filing of the case. This will usually include all money in a debtor’s bank account. The Supreme Court has ruled in the case of Barnhill v. Johnson, 503 U.S. 393 (1992) the funds in a debtor’s bank account remain the debtor’s until the checks actually clear the bank, even though the debtor may have written checks that were outstanding as of the date the case was filed.
My suggestion is for the debtor to go online on the date the case is being filed and let the attorney know exactly how much is in the account on that date. Hopefully, it is not more than the debtor will be entitled to exempt. If it is, then the debtor may want to wait to file until all the checks that have been sent out clear the account, or withdraw the funds in the account and use the cash to pay bills that would be considered necessary expenses for the debtor or his or her dependents.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Section 541 of the Bankruptcy Code broadly defines property of the estate to include all legal or equitable interests of the debtor in property as of the date of the filing of the case. This will usually include all money in a debtor’s bank account. The Supreme Court has ruled in the case of Barnhill v. Johnson, 503 U.S. 393 (1992) the funds in a debtor’s bank account remain the debtor’s until the checks actually clear the bank, even though the debtor may have written checks that were outstanding as of the date the case was filed.
My suggestion is for the debtor to go online on the date the case is being filed and let the attorney know exactly how much is in the account on that date. Hopefully, it is not more than the debtor will be entitled to exempt. If it is, then the debtor may want to wait to file until all the checks that have been sent out clear the account, or withdraw the funds in the account and use the cash to pay bills that would be considered necessary expenses for the debtor or his or her dependents.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, January 4, 2012
Beware of Escrow Double Dipping By Mortgage Lenders
The United States Trustee’s Office in New York has uncovered a scam that has cost Chapter 13 debtors approximately $179 million in excessive fees from their mortgage lenders. It involves “double dipping” of escrow payments. Double dipping is when the mortgage lender charges the Chapter 13 debtor twice for the same escrow arrears.
Counsel for debtors or debtors themselves should carefully review of the claims filed by mortgage lenders or services in Chapter 13 cases to see if they are being charged twice for the same escrow arrears. Mortgage lenders must file an itemization of the arrears in their claim. The itemization will indicate the number of months in arrears, any accumulated late charges, attorneys’ fees incurred by the lender, escrow shortage, etc. The only time an escrow shortage should appear is if the mortgage arrears only includes principal and interest. If the mortgage arrears includes a portion for escrow there should be no itemization for escrow shortage. For example, if your mortgage consists of $1,500 in principal and interest and the escrow for property taxes and insurance is $500, if the lender claims that the debtor was four months behind in his payments pre-petition and uses the figure of $2,000 per month for a total of $8,000, then there should not be a separate itemization for escrow shortage of $2,000 as the escrow shortage was already calculated in the monthly itemization. Unfortunately, mortgage lenders and servicers have not been that careful in preparing the claims and are collecting double the amount actually owed by the debtor for escrow shortage.
There are even cases where the lenders are actually collecting triple the escrow arrears. This happens when the lender or servicer adjusts the debtor’s regular mortgage payments to cover the pre-petition escrow arrears as part of the debtor’s post-petition payments. In this case, the debtor and the Chapter 13 Trustee are both paying the lender for the escrow arrears.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Counsel for debtors or debtors themselves should carefully review of the claims filed by mortgage lenders or services in Chapter 13 cases to see if they are being charged twice for the same escrow arrears. Mortgage lenders must file an itemization of the arrears in their claim. The itemization will indicate the number of months in arrears, any accumulated late charges, attorneys’ fees incurred by the lender, escrow shortage, etc. The only time an escrow shortage should appear is if the mortgage arrears only includes principal and interest. If the mortgage arrears includes a portion for escrow there should be no itemization for escrow shortage. For example, if your mortgage consists of $1,500 in principal and interest and the escrow for property taxes and insurance is $500, if the lender claims that the debtor was four months behind in his payments pre-petition and uses the figure of $2,000 per month for a total of $8,000, then there should not be a separate itemization for escrow shortage of $2,000 as the escrow shortage was already calculated in the monthly itemization. Unfortunately, mortgage lenders and servicers have not been that careful in preparing the claims and are collecting double the amount actually owed by the debtor for escrow shortage.
There are even cases where the lenders are actually collecting triple the escrow arrears. This happens when the lender or servicer adjusts the debtor’s regular mortgage payments to cover the pre-petition escrow arrears as part of the debtor’s post-petition payments. In this case, the debtor and the Chapter 13 Trustee are both paying the lender for the escrow arrears.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Tuesday, November 1, 2011
Severance Payments Received By A Debtor After Chapter 7 Is Filed Were Considered Part of Bankruptcy Estate
In the case of In re Jokiel, 447 B.R. 868 (Bankr. N.D. Ill. 2011), the debtor was employed when he filed his Chapter 7 case. A few months later he was notified that his employment would be terminated and that he would be receiving a severance payment from his former employer. The chapter 7 trustee filed a motion for the debtor to turn over the severance payments to the trustee, as the trustee considered the payment as part of his bankruptcy estate. The debtor responded that since he did not become entitled to the severance payment until after his case was filed, it was not part of the bankruptcy estate.
The bankruptcy court held that §541 of the Bankruptcy Code, which is the section that describes what constitutes property of the estate, should be interpreted very broadly. The court found that the severance payments were part of the debtor’s employment contract and was given to him as an incentive to sign the original employment contract. Accordingly, the court found that the severance was not for post-petition services performed by the debtor and was therefore part of his bankruptcy estate.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The bankruptcy court held that §541 of the Bankruptcy Code, which is the section that describes what constitutes property of the estate, should be interpreted very broadly. The court found that the severance payments were part of the debtor’s employment contract and was given to him as an incentive to sign the original employment contract. Accordingly, the court found that the severance was not for post-petition services performed by the debtor and was therefore part of his bankruptcy estate.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Tuesday, September 20, 2011
New Laws in Maryland Tighten Requirements for Creditors to Obtain Judgments Against People
The Maryland Court of Appeals just amended certain rules to protect consumers from paying on debts to creditors who are not really entitled to any payments. The new law will require creditors to demonstrate that they own the debt, that the statute of limitations to collect the debt has not expired and that they are licensed to operate business in Maryland.
The changes to Rules 3-306, 3-308 and 3-509 of the Maryland Rules take effect January 1, 2012. If the creditor wants to obtain a judgment against a debtor and does not want to have to appear in court, it can file a request for judgment with an Affidavit.. Under the new laws, the person making the affidavit must have personal knowledge of the facts contained in the affidavit and must be competent to testify about the facts. In addition, the affidavit must be accompanied by detailed evidence of liability, specifically indicating the amount claimed, any interest with an interest worksheet, and proof that the attorney’s fees sought are reasonable, along with authenticated copies of the documents on which the claim is based.
If the complaint is being brought by a collection agency, then the agency must provide the following: (1) proof of existence of the debt; (2) proof of the terms and conditions of the debt; (3) proof of ownership; (4) identification of the nature of the debt; (5) proof of entitlement to damages under the contract in the case of a future services contract; (6) pertinent account charge off information (statue of limitations); (7) pertinent non-charge off account information; and (8) identifications of all Maryland collection agency licenses currently held by the creditor.
A person being sued in Maryland still needs to file a notice of intent to defend and needs to appear in court. If the creditor has not submitted all the evidence required by these new rules, the creditor will not be able to obtain a judgment against the debtor. If the person does not file a notice to defend or does not appear in court, the judge may consider whether the creditor fulfilled its requirements under the new law and may or may not enter judgment in the creditor’s favor.
These laws should help people avoid having to pay for debts that are beyond the statute of limitations to collect, or pay for debts to an agency not licensed to collect the debt in Maryland, or where the creditor has no documents to prove the existence of the debt.
By: Laura J. Margulies and Ruth Clayton
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The changes to Rules 3-306, 3-308 and 3-509 of the Maryland Rules take effect January 1, 2012. If the creditor wants to obtain a judgment against a debtor and does not want to have to appear in court, it can file a request for judgment with an Affidavit.. Under the new laws, the person making the affidavit must have personal knowledge of the facts contained in the affidavit and must be competent to testify about the facts. In addition, the affidavit must be accompanied by detailed evidence of liability, specifically indicating the amount claimed, any interest with an interest worksheet, and proof that the attorney’s fees sought are reasonable, along with authenticated copies of the documents on which the claim is based.
If the complaint is being brought by a collection agency, then the agency must provide the following: (1) proof of existence of the debt; (2) proof of the terms and conditions of the debt; (3) proof of ownership; (4) identification of the nature of the debt; (5) proof of entitlement to damages under the contract in the case of a future services contract; (6) pertinent account charge off information (statue of limitations); (7) pertinent non-charge off account information; and (8) identifications of all Maryland collection agency licenses currently held by the creditor.
A person being sued in Maryland still needs to file a notice of intent to defend and needs to appear in court. If the creditor has not submitted all the evidence required by these new rules, the creditor will not be able to obtain a judgment against the debtor. If the person does not file a notice to defend or does not appear in court, the judge may consider whether the creditor fulfilled its requirements under the new law and may or may not enter judgment in the creditor’s favor.
These laws should help people avoid having to pay for debts that are beyond the statute of limitations to collect, or pay for debts to an agency not licensed to collect the debt in Maryland, or where the creditor has no documents to prove the existence of the debt.
By: Laura J. Margulies and Ruth Clayton
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Thursday, May 12, 2011
Can a Debtor Exempt an Inherited IRA?
A person who has an Individual Retirement Account (IRA) may designate a beneficiary to receive the balance in the account if the person dies before the account is depleted. If the person dies before the funds are depleted, the beneficiary is now the owner of the account. Under Maryland exemption laws, a debtor, filing bankruptcy may exempt all the funds in his or her own IRA. The question arises whether a person, other than a surviving spouse, who inherits an IRA may also exempt all the funds in the inherited IRA.
The surviving spouse has the right to transfer the IRA to his or her own name. This is commonly referred to as a “rollover distribution.” Once this is done, the spouse’s IRA is exempt under Mayland law.
A nonspousal beneficiary does not have this option. Instead, the nonspousal beneficiary must keep the account in the deceased name and must take distribution of all the funds within either 5 years, or if an election is made, over the beneficiary’s life time. Neither type of beneficiary may make an contributions to the IRA, but both may withdraw the funds in the account without penalty even if he or she has not reached retirement age.
Courts split on whether the nonspousal beneficiary may exempt the IRA in a bankruptcy case. In one case, In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010), the court allowed the exemption. While in the case of In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex 2010), the court denied the exemption. However, in Maryland, the law specifically provides that:
“In addition to the exemptions provided..... any money or other assets
payable to a particiapant or beneficiary from, or any interest of any
participant or beneficiary in, a retirement plan qualfied under §401(a),
§403(a), §403(b), §408, .... of the United States Internal Revenue Code
...., shall be exempt from any and all claims of the creditors of the
beneficiary or participant...” (Emphasis supplied)
Accordingly, under Maryland exemption statute, the beneficiaries of an IRA, even a nonspousal beneficiary, should be able to exempt the IRA in their bankruptcy case.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The surviving spouse has the right to transfer the IRA to his or her own name. This is commonly referred to as a “rollover distribution.” Once this is done, the spouse’s IRA is exempt under Mayland law.
A nonspousal beneficiary does not have this option. Instead, the nonspousal beneficiary must keep the account in the deceased name and must take distribution of all the funds within either 5 years, or if an election is made, over the beneficiary’s life time. Neither type of beneficiary may make an contributions to the IRA, but both may withdraw the funds in the account without penalty even if he or she has not reached retirement age.
Courts split on whether the nonspousal beneficiary may exempt the IRA in a bankruptcy case. In one case, In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010), the court allowed the exemption. While in the case of In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex 2010), the court denied the exemption. However, in Maryland, the law specifically provides that:
“In addition to the exemptions provided..... any money or other assets
payable to a particiapant or beneficiary from, or any interest of any
participant or beneficiary in, a retirement plan qualfied under §401(a),
§403(a), §403(b), §408, .... of the United States Internal Revenue Code
...., shall be exempt from any and all claims of the creditors of the
beneficiary or participant...” (Emphasis supplied)
Accordingly, under Maryland exemption statute, the beneficiaries of an IRA, even a nonspousal beneficiary, should be able to exempt the IRA in their bankruptcy case.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Thursday, February 10, 2011
Debtor’s Obligations After Property Is Surrendered
When a debtor files for bankruptcy, he or she may want to surrender certain property that is subject to a lien back to the lender. For example, the debtor may want to surrender a car that is only worth $2,000 but has a lien of $10,000 back to the car lender. Another common example is when the debtor does not want to keep a house worth $100,000 that has mortgage liens that total more than $200,000. In a Chapter 7 case, the debtor indicates his or her intention to surrender in a separate form entitled “Statement of Intent.” In a Chapter 13 case, the debtor indicates his or her intention in the Chapter 13 Plan. The Chapter 13 trustee may also require that the debtor provide him or her with evidence of the surrender of the collateral.
Unfortunately, even after the lender is notified of the debtor’s intent to surrender the property, the lender in these circumstances is generally not obligated to repossess or foreclose on their collateral. The personal obligation of the debtor for the debt is discharged, but until the title changes or the car is repossessed, the debtor is still the owner of the property. In the case of a car, if the car is not picked up by the lender then as long as there are tags on the car, the debtor must keep the car insured. In the case of a house, the debtor should still maintain hazard insurance until the property is sold or at least until the date of a foreclosure sale. The debtor will also be required to maintain the property, such as cutting the grass, until it is sold. In addition, if the property is subject to condominium or homeowner association fees, after the filing of the bankruptcy case the debtor will need to pay these fees on a monthly basis until the property is sold.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Unfortunately, even after the lender is notified of the debtor’s intent to surrender the property, the lender in these circumstances is generally not obligated to repossess or foreclose on their collateral. The personal obligation of the debtor for the debt is discharged, but until the title changes or the car is repossessed, the debtor is still the owner of the property. In the case of a car, if the car is not picked up by the lender then as long as there are tags on the car, the debtor must keep the car insured. In the case of a house, the debtor should still maintain hazard insurance until the property is sold or at least until the date of a foreclosure sale. The debtor will also be required to maintain the property, such as cutting the grass, until it is sold. In addition, if the property is subject to condominium or homeowner association fees, after the filing of the bankruptcy case the debtor will need to pay these fees on a monthly basis until the property is sold.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, December 15, 2010
Condominium and Homeowners Association Fees in Bankruptcy
Many of my clients who own a condominium, or live in a neighborhood that is subject to a homeowners association, are surprised to learn that after they file bankruptcy they still have an obligation to pay fees to the condominium or homeowners association. Filing bankruptcy will discharge the condominium or homeowners association fees or dues that had accrued before the case was filed, but will not discharge the obligation that becomes due after they file. This is due to an exception in the Bankruptcy Code Section 523(a)(16) which provides that a discharge will not include fees or assessments that become due and payable after the case is filed. The debtor will continue to be liable for these fees after the filing of the bankruptcy case until the debtor no longer has any legal interest in the property.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, November 10, 2010
ISSUES REGARDING FUNDS IN A BANK ACCOUNT PRIOR TO FILING BANKRUPTCY
Under the 1995 Strumpf decision, (Citizen Bank of Maryland v. Strumpft, 516 U.S. 16) the Supreme Court ruled that a bank may freeze any money that is in a debtor’s account at the time it learns of the debtor’s bankruptcy case, if the debtor owes the bank money. This would result in the debtor not having access to those funds. The bank may then file a motion with the bankruptcy court for permission to sefoff the funds in the account with the amount the debtor owes the bank. The Supreme Court held that this freeze did not violate the automatic stay provisions of the Bankruptcy Code, which normally prohibit creditors from taking any actions to collect its debt. As a result of this ruling, I have always advised my clients to remove any funds they have in a bank before filing the case if they owe the bank money.
Wells Fargo Bank took this one step further. It believed it had the right to freeze money in a debtor’s bank account even if the debtor does not owe it money. In re Mwangi, 432 B.R. 812 (9th Cir. B.A.P. 2010); Calvin v. Wells Fargo Bank NA, 329 B.R. 589 (2005). Its national policy provided that if the debtor had more than $5,000 in an account with Wells Fargo, it would put an administrative hold on the account once it found out about the debtor’s bankruptcy. It would then send the debtor a letter notifying him or her about the freeze. Another letter would be sent to the trustee appointed in the case notifying the trustee about the account and asking the trustee what it should do with the frozen funds. Even if the debtor had exempted the funds on his bankruptcy schedules, he would have no access to the funds until the trustee to informed Wells Fargo to release the funds. This could result in a wait of more than 30 days. The Mwangi decision will hopefully put an end to this practice. The 9th Circuit ruled that because the bank was not attempting to protect setoff rights, the “exception” to turnover of funds in a deposit account recognized by the Supreme Court in Strumpf did not apply in this case. The funds in the debtor’s accounts, even those claimed as exempt, were property of the estate and therefore the debtors had standing to pursue sanctions for bank's stay violation. Finally it held that by placing a hold on the account funds, the bank exercised control over property of the estate in violation of the automatic stay.
Now that Wells Fargo has acquired Wachovia, more people would have been subject to this freeze. Until it is clear that Wells Fargo will no longer put their account holders’ funds on hold upon learning of their bankruptcy cases, I would advise potential bankruptcy clients not to leave funds in their Wells Fargo account.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wells Fargo Bank took this one step further. It believed it had the right to freeze money in a debtor’s bank account even if the debtor does not owe it money. In re Mwangi, 432 B.R. 812 (9th Cir. B.A.P. 2010); Calvin v. Wells Fargo Bank NA, 329 B.R. 589 (2005). Its national policy provided that if the debtor had more than $5,000 in an account with Wells Fargo, it would put an administrative hold on the account once it found out about the debtor’s bankruptcy. It would then send the debtor a letter notifying him or her about the freeze. Another letter would be sent to the trustee appointed in the case notifying the trustee about the account and asking the trustee what it should do with the frozen funds. Even if the debtor had exempted the funds on his bankruptcy schedules, he would have no access to the funds until the trustee to informed Wells Fargo to release the funds. This could result in a wait of more than 30 days. The Mwangi decision will hopefully put an end to this practice. The 9th Circuit ruled that because the bank was not attempting to protect setoff rights, the “exception” to turnover of funds in a deposit account recognized by the Supreme Court in Strumpf did not apply in this case. The funds in the debtor’s accounts, even those claimed as exempt, were property of the estate and therefore the debtors had standing to pursue sanctions for bank's stay violation. Finally it held that by placing a hold on the account funds, the bank exercised control over property of the estate in violation of the automatic stay.
Now that Wells Fargo has acquired Wachovia, more people would have been subject to this freeze. Until it is clear that Wells Fargo will no longer put their account holders’ funds on hold upon learning of their bankruptcy cases, I would advise potential bankruptcy clients not to leave funds in their Wells Fargo account.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, September 15, 2010
Special Treatment of Utility Creditors in Bankruptcy
When a debtor files for bankruptcy, one of the outstanding debts may be past due payments owed to utility companies, such as PEPCO or Washington Gas, for electric and gas service. The past due amounts may be discharged, however, in order to continue service, the debtor may be required to pay a new security deposit.
The Bankruptcy Code Section 366 provides that the debtor must provide “adequate assurance of payment” to a utility company within 20 days of the filing of the petition or the utility company may discontinue to provide the service. However, the utility company must still comply with state regulations regarding the turn off of the service.
Generally, what constitutes “adequate assurance of payment” is the payment of an additional security deposit to the utility company by the debtor. The deposit must be reasonable and the Code permits the debtor to challenge the reasonableness of the security deposit, Section 366(b), if he or she believes the amount requested by the utility company is not reasonable. The Bankruptcy Court will then schedule a hearing on the issue and make a determination as to a reasonable amount.
If the debtor was current on his or her utility bills before the case was filed, the court may look at his or her prior pay history to see if they were paid late, or whether the debtor was relying on credit cards to make the payments, to determine if the amount requested by the utility company is reasonable.
Once the debtor pays the security deposit, the utility company must continue or restart the service (if it was terminated prior to filing). If the debtor falls behind on the payments after filing, the utility company does not need to file a motion with the bankruptcy court to terminate the service, it can be automatically terminated (assuming the company complies with the state regulations on termination). This is true for case filed under Chapter 7 and Chapter 13.
In my experience, the utility company will send my office a letter asking that my client, the debtor in a bankruptcy case, pay it a certain sum for a security deposit. I forward the letter to my client and recommend that the person pay the bill. The amount requested by these companies has always been a reasonable sum, so that I have not had to file a motion with the court asking for a reduction.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The Bankruptcy Code Section 366 provides that the debtor must provide “adequate assurance of payment” to a utility company within 20 days of the filing of the petition or the utility company may discontinue to provide the service. However, the utility company must still comply with state regulations regarding the turn off of the service.
Generally, what constitutes “adequate assurance of payment” is the payment of an additional security deposit to the utility company by the debtor. The deposit must be reasonable and the Code permits the debtor to challenge the reasonableness of the security deposit, Section 366(b), if he or she believes the amount requested by the utility company is not reasonable. The Bankruptcy Court will then schedule a hearing on the issue and make a determination as to a reasonable amount.
If the debtor was current on his or her utility bills before the case was filed, the court may look at his or her prior pay history to see if they were paid late, or whether the debtor was relying on credit cards to make the payments, to determine if the amount requested by the utility company is reasonable.
Once the debtor pays the security deposit, the utility company must continue or restart the service (if it was terminated prior to filing). If the debtor falls behind on the payments after filing, the utility company does not need to file a motion with the bankruptcy court to terminate the service, it can be automatically terminated (assuming the company complies with the state regulations on termination). This is true for case filed under Chapter 7 and Chapter 13.
In my experience, the utility company will send my office a letter asking that my client, the debtor in a bankruptcy case, pay it a certain sum for a security deposit. I forward the letter to my client and recommend that the person pay the bill. The amount requested by these companies has always been a reasonable sum, so that I have not had to file a motion with the court asking for a reduction.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Wednesday, July 7, 2010
New Maryland Exemption
Maryland has enacted a new exemption law. This law adds a homestead exemption of $20,200.00 per household. This new law is part of Maryland Courts and Judicial Proceedings Section 11-504 (f)(1)(I). The exemption applies to the homeowner and can only be claimed once in 8 years. The exemption claimed by one homeowner, cannot be claimed by joint owner of the property for another 8 years. The exemption is tied to the Bankruptcy Code Section 522(D)(1), and therefore the amount of the exemption is subject to change every 3 years. This exemption is in addition to the other $12,000 of exemptions listed in Section 11-504.
This homestead exemption is good news for homeowners in Maryland. It means that if they have $20,200 in equity, they are able to keep their house even if they file a Chapter 7 bankruptcy case. The Chapter 7 trustee will not be able to sell the house for the benefit of their creditors unless there is more than $20,2000 in equity. This law also will apply to judgment creditors of the homeowner, they will not want to foreclose on the property unless the sale price will be sufficient to pay off the current liens and credit the homeowner with $20,2000.
This law was enacted to help homeowners who have lived in the property for a substantial period of time and have built up some equity in the property. It will protect them from losing their homes due to financial circumstances beyond their control, such as unexpected medical bills.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
This homestead exemption is good news for homeowners in Maryland. It means that if they have $20,200 in equity, they are able to keep their house even if they file a Chapter 7 bankruptcy case. The Chapter 7 trustee will not be able to sell the house for the benefit of their creditors unless there is more than $20,2000 in equity. This law also will apply to judgment creditors of the homeowner, they will not want to foreclose on the property unless the sale price will be sufficient to pay off the current liens and credit the homeowner with $20,2000.
This law was enacted to help homeowners who have lived in the property for a substantial period of time and have built up some equity in the property. It will protect them from losing their homes due to financial circumstances beyond their control, such as unexpected medical bills.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Sunday, May 16, 2010
How Much Will My Chapter 13 Payment Be?
One of the most common questions asked, and the most important to many who file Chapter 13 bankruptcy is, "how much will the payment be?". The answer is not as simple as it would seem. Under the Bankruptcy Code, a debtor must devote his or her projected "disposable income" over the three or five year payment plan. In order to make this determination, the Court looks to a calculation based on the debtor's household's income and expenses. First, a debtor lists all of his or her household's income, based on all income sources, including wages, investment income, pension income, rent, etc. Next, the debtor lists all of his or her reasonable expenses, including food, mortgage payments or rent, gas, electricity, insurance, and other expenses. These expenses must be reasonable and verifiable. Many expenses, such as luxury vehicles, private school, and savings contributions must be cut. Once these expenses are subtracted from the income, the remaining money is dedicated to the Chapter 13 Plan. The Court may also look to a complicated "means test" that is filed by the debtor, to determine the amount a debtor must pay.
If a debtor files Chapter 13 to pay arrears on secured debts, the full arrearage must be paid back to the lender, regardless of whether this amount would make the payment higher than what the income and expenses say the debtor can afford. There are also fees and trustee commissions that must be paid in the Chapter 13 Plan. Unsecured creditors should also get some distribution, even if it is minimal.
A good lawyer knows how the income and expenses should be stated to make sure the debtor has a Chapter 13 payment that is feasible. Many times when a person files on their own (also know as "pro se") they do not do a good accounting of expenses, which results in an excessively high plan payment. An experienced attorney knows where to look and what questions to ask to make sure legitimate expenses are not missed.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
If a debtor files Chapter 13 to pay arrears on secured debts, the full arrearage must be paid back to the lender, regardless of whether this amount would make the payment higher than what the income and expenses say the debtor can afford. There are also fees and trustee commissions that must be paid in the Chapter 13 Plan. Unsecured creditors should also get some distribution, even if it is minimal.
A good lawyer knows how the income and expenses should be stated to make sure the debtor has a Chapter 13 payment that is feasible. Many times when a person files on their own (also know as "pro se") they do not do a good accounting of expenses, which results in an excessively high plan payment. An experienced attorney knows where to look and what questions to ask to make sure legitimate expenses are not missed.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
Wednesday, April 21, 2010
New Mediation for Homeowners In Foreclosure
The Governor of Maryland just signed a new law to help homeowners facing foreclosure. The new law takes effect on July 1, 2010 and provides new procedures that mortgage lenders must follow before foreclosing on the property. Before a foreclosure case is filed in the Circuit Court where the property is located, the lender must send the homeowner an application for a loss mitigation/loan modification program. The lender must wait at least 45 days after sending the application to the homeowner before filing a foreclosure case with the court.
The lender will need to let the home owner know the results of the application at least 30 days before the foreclosure sale date. The letter to the homeowner must state the reasons for the denial of the loan modification. Once the homeowner receives this letter from the lender, he or she has 15 days to ask the court for mediation. In order to request mediation, the homeowner will need to complete a mediation request form and pay the court $50.00. Once the court receives the request for mediation, the foreclosure sale is put on hold and the parties will need to attend a mediation conference. The mediation will be conducted by an administrative law judge who will schedule the mediation within 60 days of the receiving the homeowners request.
If the mediation fails, the lender will be able to sell the property at a foreclosure auction. The lenders will have an attorney representing their interests at the mediation conference. My suggestion is that homeowners also hire an attorney to represent them at the mediation conference.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The lender will need to let the home owner know the results of the application at least 30 days before the foreclosure sale date. The letter to the homeowner must state the reasons for the denial of the loan modification. Once the homeowner receives this letter from the lender, he or she has 15 days to ask the court for mediation. In order to request mediation, the homeowner will need to complete a mediation request form and pay the court $50.00. Once the court receives the request for mediation, the foreclosure sale is put on hold and the parties will need to attend a mediation conference. The mediation will be conducted by an administrative law judge who will schedule the mediation within 60 days of the receiving the homeowners request.
If the mediation fails, the lender will be able to sell the property at a foreclosure auction. The lenders will have an attorney representing their interests at the mediation conference. My suggestion is that homeowners also hire an attorney to represent them at the mediation conference.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Tuesday, March 9, 2010
Bank Account Garnishments
Once a creditor has obtained a judgment against a debtor, its job is to collect the money due. One of the methods of collecting the money is to garnish the person’s bank account. Once the bank account is frozen, creditors have little motivation to work out any payment plans with the debtor. Many of my clients come to my office after a creditor has placed a freeze on their bank account. If they see me immediately after the notice of the garnishment, there are certain procedures I can take to possibly release the funds. However, they must come as quickly as possible, because in Maryland, after 30 days the bank will be required to turn over the money in the account to the creditor.
Certain funds in an account are exempt from attachment in Maryland. These include social security income, unemployment income, retirement benefits, payments received as a result of a personal injury, and some other types of income. In addition, Maryland allows an individual to exempt up to $6,000 in cash from a garnishment. This is not an exhaustive list of exemptions. You will need to consult with an attorney to determine whether the funds frozen in your account are exempt from garnishment. Neither the bank nor the creditor has an obligation to inquire whether the funds frozen are really exempt from garnishment. In order to claim any of these exemptions, you will need to file a motion with the court in the case filed against you by the creditor asking for these exemptions.
If the funds have already been turned over to the creditor, you may still be able to recoup some or all of the money by filing a bankruptcy case within 90 days of the garnishment. The money garnished maybe considered a preference by the bankruptcy court and the creditor may be ordered to return the funds to the debtor or the bankruptcy estate.
Unfreezing the account may only be the first step in dealing with a person’s financial situation. I suggest you call the Law Offices of Laura Margulies & Associates, LLC so that we can evaluate the state of your financial affairs.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Certain funds in an account are exempt from attachment in Maryland. These include social security income, unemployment income, retirement benefits, payments received as a result of a personal injury, and some other types of income. In addition, Maryland allows an individual to exempt up to $6,000 in cash from a garnishment. This is not an exhaustive list of exemptions. You will need to consult with an attorney to determine whether the funds frozen in your account are exempt from garnishment. Neither the bank nor the creditor has an obligation to inquire whether the funds frozen are really exempt from garnishment. In order to claim any of these exemptions, you will need to file a motion with the court in the case filed against you by the creditor asking for these exemptions.
If the funds have already been turned over to the creditor, you may still be able to recoup some or all of the money by filing a bankruptcy case within 90 days of the garnishment. The money garnished maybe considered a preference by the bankruptcy court and the creditor may be ordered to return the funds to the debtor or the bankruptcy estate.
Unfreezing the account may only be the first step in dealing with a person’s financial situation. I suggest you call the Law Offices of Laura Margulies & Associates, LLC so that we can evaluate the state of your financial affairs.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Sunday, March 7, 2010
Dischargability of Student Loans
One of the more common questions that is asked by potential clients is whether student loans are dischargable in a bankruptcy. Many people have minimal other debt, but have large student loan balances and are looking to bankruptcy as a potential solution. Unfortunately, student loans are rarely dischargable.
Prior to 1998, student loans could be discharged in a bankruptcy, so long as the student loan debt had been in active pay status for over seven years. However, the law was changed and now a Debtor must show that the student loans are a "hardship". While the term "hardship" may seem like a relatively low standard wherein the Debtor must show that the student loan is an encumbrance to paying other recurring expenses, such as food or a mortgage payment, that is simply not the case. In order to show that an actual hardship is occurring to the extent that student loans would be dischargable, the Debtor must show that the student loan debt is preventing him or her from providing a minimal living standard for the Debtor and his or her dependents. In plain English, the Debtor needs to show that he or she is unable to work or otherwise obtain any income, and that the prospect for obtaining the ability to work or otherwise generate income in the future is non-existent because of a permanent mental or physical disability. Therefore, it is nearly impossible to discharge student loan debt in a bankruptcy. This rule holds true regardless of whether the student loans are public or private.
This does not mean that bankruptcy cannot be a solution to a problem with student loan debt. For example, a Debtor with past due balances can file a Chapter 13 bankruptcy to reorganize his or her debt and provide a mechanism to catch back up. Even if a borrower is not behind on the student loan, a Chapter 13 may lower the monthly payment for the next five (5) years. This may allow the sought after "breathing room".
It should be noted that school tuition debt is dischargable in bankruptcy. Therefore, it is important to know the nature of a school related debt before making a decision as to whether bankruptcy can be a solution to student debt problems.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
Prior to 1998, student loans could be discharged in a bankruptcy, so long as the student loan debt had been in active pay status for over seven years. However, the law was changed and now a Debtor must show that the student loans are a "hardship". While the term "hardship" may seem like a relatively low standard wherein the Debtor must show that the student loan is an encumbrance to paying other recurring expenses, such as food or a mortgage payment, that is simply not the case. In order to show that an actual hardship is occurring to the extent that student loans would be dischargable, the Debtor must show that the student loan debt is preventing him or her from providing a minimal living standard for the Debtor and his or her dependents. In plain English, the Debtor needs to show that he or she is unable to work or otherwise obtain any income, and that the prospect for obtaining the ability to work or otherwise generate income in the future is non-existent because of a permanent mental or physical disability. Therefore, it is nearly impossible to discharge student loan debt in a bankruptcy. This rule holds true regardless of whether the student loans are public or private.
This does not mean that bankruptcy cannot be a solution to a problem with student loan debt. For example, a Debtor with past due balances can file a Chapter 13 bankruptcy to reorganize his or her debt and provide a mechanism to catch back up. Even if a borrower is not behind on the student loan, a Chapter 13 may lower the monthly payment for the next five (5) years. This may allow the sought after "breathing room".
It should be noted that school tuition debt is dischargable in bankruptcy. Therefore, it is important to know the nature of a school related debt before making a decision as to whether bankruptcy can be a solution to student debt problems.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
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