Archive for the 'Bankruptcy Filings' Category

Bankruptcy Filings Up in 2010 When Compared to 2009

Published
by
David Yunghans
on June 23, 2010
in Bankruptcy Filings
. 0 Comments

Bankruptcy filings for the year through May 2010 are up over 9% nationwide as compared to filings through the same time last year.  From January 2010 to May 2010 there were 136,142 consumer bankruptcy filings nationwide as compared to 124,838 at the same time last year.  The increase is likely attributed to the high unemployment rate and tight credit restrictions of banks.  Although filings have increased when compared to last year’s numbers, there was an overall decline nationwide in filings from April 2010 to May 2010.  Filings in April were approximately 145,000 as compared to 137,000 in May 2010.  The two states with the highest filings are Nevada and Georgia.  Some states have experienced a decrease in filings when compared to last year.  States such as Tennessee, South Carolina, Alabama, and West Virginia have all seen the number of filings drop.  However, states such as Arizona and California have seen an increase in filings this year by 43% and 36% respectively.  Filings for the year are projected to reach the records set in 2005 when over 2 million households filed for bankruptcy.

If you have any questions, please contact David Yunghans directly at 513.723.2211 or via email at dyunghans@weltman.com.

Bankruptcy & The Economy: A Valuable Session

Published
by
Beth Schenz
on May 6, 2010
in Bankruptcy Court, Bankruptcy Filings, Chapter 11, Chapter 13 and Chapter 7
. 0 Comments

Cleveland, Ohio – May 6, 2010

The William J. O’Neill Regional Bankruptcy Institute, a part of the Cleveland Metropolitan Bar Association, is conducting a bankruptcy seminar offering an entertaining and comprehensive approach to the latest and best in the bankruptcy and insolvency arenas at the Marriott at Key Tower on May 12 and 13.  The two-day seminar, “What Hath the Great Recession Wrought: The Bend, The Bar and Congress Respond,” will feature regionally and nationally recognized speakers, including principal attorneys and judges from some of the nation’s highest-profile bankruptcy cases.

Beth Ann Schenz, an attorney in the Bankruptcy Department at Weltman, Weinberg & Reis Co., L.P.A. (WWR) played an integral part in putting together these dynamic presentations.  Over the last year, Ms. Schenz was Co-Chair of the 2010 Institute.  This undertaking involved coordinating over 58 speakers including 12 federal judges to speak on issues which touch the very heart of our economy.  For more information or if you would like to attend the discussion, visit www.clemetrobar.org/ONeill_Bankruptcy_Institute.aspx. 

The following is a capsule of some of the hot topics that will be discussed: 

Revitalizing a City
With lackluster economic growth, high jobless rates and dynamic talent loss in most of Midwest Cities, this lunch will focus on how a region turns around these staggering statistics.  The luncheon discussion will focus on the positive efforts that area organizations have gained over the course of the last year and what efforts they have planned to help propel this region into a strong, vibrant economic force.

Who Is Behind the Bankruptcy Statistics
The country continues to see statistics of the overwhelming amounts of people filing bankruptcy.  With bankruptcy numbers continuing to rise, the questions that are never asked are: what is behind the numbers, who are behind the numbers and what circumstances are behind the numbers.  This speaker will address those questions by taking the academia approach mainstream.  By understanding the numbers, community and economic leaders can address the situation and make policy that will help our economic future.  

Why Are They Too Big to Fail – We Have Chapter 11
Lead counsel from the Chrysler and Lehman Brothers bankruptcies will discuss the effect on bankruptcy sales of the Second Circuit’s ruling in Chrysler, and of Judge Peck’s recent decision allowing a lawsuit to proceed against Barclay’s, the bankruptcy purchaser of Lehman’s.   These disputes have reshaped the business landscape in important ways. This will be a great discussion considering the ongoing news stories involving companies and banks that are too big to fail.  Also, the discussion will continue on what is in the future of Chapter 11 bankruptcies.

Victims of Madoff & Other Ponzi Schemes
Irving Picard will lead a panel of the primary participants in the Madoff case.  They will review the hotly-litigated issues governing distributions to victims of the Ponzi scheme fraud. 

What is the Federal Legislature Doing
John Rao of the National Consumer Law Center and William A. Brandt, Jr. DSI are no strangers to Washington D.C.  Come hear what they have to say.

Loan Modification Ordered in Bankruptcy
Economic Issues before the Bench is a panel consisting of Judge Drain, Judge Isgur and Judge Morgenstern-Clarren.  Of note is Judge Drain’s piece on court-ordered loan modification procedures, which forces the creditor to enter into talks on loss mitigation.

If you have any questions regarding this bankruptcy seminar or would like a copy of the seminar materials, please contact Beth Schenz. Beth is an associate in the Bankruptcy department of WWR located in the Brooklyn Heights office. She can be reached directly at 216.739.5645 or via email at bschenz@weltman.com.

Treasury Department Issues Guidelines for Use of HAMP in Bankruptcy

Published
by
Monette Cope
on March 30, 2010
in Bankruptcy Filings, Homeowners Affordable Modification Program and Real Estate
. 0 Comments

A recent post advised lenders and servicers of a strategy proposed by a prominent Chapter 13 Trustee to file bankruptcy and apply for a HAMP modification at the same time. To recap, theoretically, the servicer will lower the mortgage payments and a modification would be in executed within 60 days of filing the bankruptcy, and the plan would be ready for confirmation.  However, this not only overlooks likely delays in the process, but also the three month trial period during which the debtor must make full and timely modified payments before the modification is permanent.  During the process, the servicer can be bound by automatic stay for months while awaiting completion of the modification, and so confirmation.

Now the U.S. Treasury is promoting the idea through its just-issued Supplemental Directive 10-02.  It includes guidelines for HAMP modifications in bankruptcy, which will become effective June 1, 2010.  These guidelines may in some cases help ease the expected delays in Chapter 13 confirmations.

The Treasury acknowledges that the HAMP process may cause delays in Chapter 13 cases, and further permits (but does not require) servicers to extend the trial payment period from three to five months to accommodate any legal proceedings needed to approve the modification or to receive trial payments from the Chapter 13 trustee.  This would obviously create more delay, but gives the servicer control over such an extension.

Even better, servicers can waive the three month trial period when:

  1. Post-petition payments on the loan are current prior to entering into a HAMP agreement; and
  2. The payments are equal to or more than the payment as modified; and
  3. The Bankruptcy Court approves the modification, if necessary; and
  4. The investor agrees to the waiver.

If a debtor qualifies, the Treasury Directive’s waiver provision could prevent months of delay before confirmation, and could allow a plan to be confirmed within 60 days of filing in some cases.

Coordinating HAMP with a Chapter 7 bankruptcy is much less complicated.  The only new requirement applies in the event a debtor obtained a discharge, and a reaffirmation agreement was not filed.  If a debtor later enters into a modification agreement, the servicer must include specific language that it will not hold the debtor personally liable for any debt arising out of the agreement.

In both Chapter 13 and Chapter 7, the servicer may choose (but is not required) to accept bankruptcy schedules and tax returns provided in the case as evidence of income in lieu of the Affidavit of Hardship and Form 4506T-EZ. The only restriction is that the schedules must be less than 90 days old.

These guidelines, where appropriate, are avenues that can reduce delay where a Chapter 13 case is combined with a HAMP application.  However, servicers still need to take quick and aggressive action in this circumstance because all too often, it may lead to unjustified delay.

If you have any questions, please contact Ms. Monette W. Cope, Esq. Monette is a junior partner in the bankruptcy department of Weltman, Weinberg & Reis Co., L.P.A. located in the Chicago office. She can be reached directly at 312-253-9614 or via email at mcope@weltman.com.

New HAMP Guidelines Announced Affecting Foreclosures

Published
by
Jack Day
on March 29, 2010
in Bankruptcy Filings, Homeowners Affordable Modification Program and Real Estate
. 0 Comments

On March 24, 2010, the Treasury Department announced new guidelines for handling pending or threatened foreclosure actions for lenders participating in the Home Affordable Modification Program (HAMP) effective June 1, 2010. Lenders participating in HAMP include Fannie Mae (FNMA) and Freddie Mac (FHLMC) loans, lenders accepting TARP funds, and other lenders who voluntarily agree to participate.

Under the new guidelines, a participating servicer or lender may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until at least one of the following circumstances exists:

  1. The borrower is evaluated for HAMP and is determined to be ineligible for the program; or
  2. The borrower is offered a trial period plan, but fails to make a trial period payment by the last day of the month in which such payment is due; or
  3. The servicer has established right party contact, has sent at least two written requests asking the borrower to supply required information in accordance with HAMP guidelines and has otherwise satisfied the Reasonable Effort solicitation standard, and the borrower failed to respond by the dates indicated in those requests; or
  4. The servicer has satisfied the Reasonable Effort solicitation standard without establishing right party contact; or
  5. The borrower or co-borrower states he or she is not interested in pursuing a HAMP modification and such statement is reflected by the servicer in their servicing system

Existing foreclosure sales must be immediately halted when a borrower submits a request for HAMP consideration, so long as the request is received at least 7 full days prior to the sale date. The only exception is where the sale cannot be stopped because the local official fails or refuses to halt some or all of the activities. For example, in some jurisdictions, a sale may not be stopped without the approval of the judge assigned to that case. The local judge may not be available or may otherwise not approve stopping the sale.

When a borrower is in foreclosure and is simultaneously either being evaluated for HAMP or is in a trial period plan, the servicer/lender must provide the borrower with a written notification that explains, in clear language, the concurrent modification and foreclosure processes and which states that even though certain foreclosure activities may continue, the home will not be sold at a foreclosure sale while the borrower is being considered for HAMP or while the borrower is making payments under a trial period plan.

Lenders need to review these new requirements carefully to make sure they are in compliance by June 1, 2010.

If you have any questions, please contact Mr. Jack Day, Esq. Jack is a Partner in the Bankruptcy department of the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 513-723-2206 or via e-mail at jday@weltman.com.

Pandora’s Box Opens: Chapter 13 Plans May Be Final Even If Contrary to the Bankruptcy Code

Published
by
Beth Schenz
on March 24, 2010
in Bankruptcy Filings, Chapter 13 and Federal Rules of Bankruptcy Procedure
. 0 Comments

By Beth Ann Schenz, Esq. and Milan Kubat, Esq.

The Supreme Court admits that its decision from March 23, 2010, “is potential for bad-faith litigation tactics” by debtors. 

The Facts
A Chapter 13 debtor listed his student loan debt in his plan.  In the Chapter 13 plan, the debtor proposed to repay only the principal while the remainder (accrued interest) would be discharged.  The United States Department of Education (the “Government”) did not object to the plan or appeal the order confirming the plan.  During the bankruptcy case, the Government filed a proof of claim and received the principal on the debt.  When the Government proceeded to collect on the debt after the debtor received a discharge in the Chapter 13, the debtor filed a motion to enforce the discharge order and direct the Government to cease all collection efforts.  The Government responded to the debtor’s motion to enforce and filed a motion under Federal Rule 60(b)(4) to set aside the confirmation order as void. 

The Court’s Ruling
Whether the confirmation order is void was the focus of the Supreme Court’s ruling.  For a judgment to be void, there must be some jurisdictional issue (the court does not have the power to hear the matter) or a due process issues (the creditor did not receive sufficient notice to defend the matter).  The Supreme Court states that there was no jurisdictional error or due process violation so the confirmation order providing for a discharge on student loans is binding on the creditor. 

Normally, a Chapter 13 debtor receives a discharge for all his or her debts except in some situations.  One example where a Chapter 13 debtor would not receive a discharge is under 11 U.S.C. §523(a)(8) – the student loan exception.  Some student loans are excepted from discharge and such exception is self-executing.  The caveat is that the Court can find that such non-dischargeable student loans create an undue hardship for the debtor and can be discharged.  According to the Bankruptcy Rules, such action requesting a finding of undue hardship is brought by the debtor in an adversary proceeding upon summons and complaint. 

The Supreme Court found that the undue hardship provision in the Bankruptcy Code is not a limitation on the bankruptcy court’s jurisdiction but only a precondition to obtaining a discharge order.  Also, the Court stated that the Bankruptcy Rules that require a complaint to be brought to determine undue hardship are only procedural rules and not jurisdictional rules.  Therefore the confirmation order was well within the jurisdictional authority of the Bankruptcy Court and can not be determined as void. 

On the positive side, the Court found that, “[g]iven the Code’s clear and self-executing requirement for an undue hardship determination, the Bankruptcy Court’s failure to find undue hardship before confirming the plan was a legal error.”  Unfortunately for the Government, a legal error does not make an order void.

Going further, the Supreme Court stated that the Government’s due process rights were not violated as they had ample time to either object to the Chapter 13 plan or appeal the confirmation order.  A finding of due process by the Supreme Court means that the confirmation order can not be found as void.

Where the Supreme Court said that the lower court’s ruling went too far is when they considered that any plan can be confirmed if it provides for a discharge of a non-dischargeable debt.  “Failure to comply with the self-executing requirement should prevent confirmation of the plan even if the creditor fails to object, or to appear in the proceeding at all.”

What This Means To You
A debtor can put any provision in his or her plan, which may be contrary to the code (i.e. discharging a debt that is otherwise non-dischargeable).  This provision should prevent confirmation.  However, the creditor may be bound under the order if the Chapter 13 plan confirms.  If the creditor fails to object to the plan or appeal the confirmation order in a timely manner, the confirmation order whether contrary to the Bankruptcy Code or not will be binding on the creditor.

As a creditor, you will need to make a business decision whether to object or not. WWR can help guide you through the decision making process.

If you have any questions concerning this matter, please contact Ms. Beth Ann Schenz, Esq. or Mr. Milan Kubat, Esq.  Beth is an associate in the Bankruptcy department located in the Brooklyn Heights office. She can be reached directly at 216-739-5645 or via email at bschenz@weltman.com. Milan is also an associate in the Bankruptcy department located in the Brooklyn Heights office. He can be reached directly at 216-739-5647 or via email at mkubat@weltman.com.