I have my own suggestion to add to the many helpful hints Jay has offered in several of his blog articles. When asked, I always advise younger attorneys to seek a relationship with a bankruptcy paralegal who works, or has worked, in an active bankruptcy practice. An experienced bankruptcy paralegal can help a new attorney with many practical aspects of petition preparation and dealing on a day-to-day basis with the bankruptcy court and bankruptcy trustees. Bankruptcy paralegal cannot help you during their regular work day, but they can (with their employer’s permission) assist new attorneys after work or on weekends.

I think an attorney will find it much easier to communicate with and receive practical bankruptcy guidance from a paralegal than from another bankruptcy attorney. Of course, it will cost you much less to pay for a paralegal’s help. Many bankruptcy paralegals and legal secretaries face economic challenges similar to your own clients, and they would appreciate some additional income.

I have encouraged my own paralegal, who has 10 years experience, to assist other attorneys on her own time. I want to help attorneys getting into the bankruptcy field. I find it much easier to offer my paralegal’s time than to commit my own time to assist other lawyers.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.

Why would a debtor want to make payments outside the plan. Possibly, to minimize the costs of Chapter 13 bankruptcy. The bankruptcy trustee charges a fee to administer a Chapter 13 payment plan. The fee ranging from 6% to 10% is assessed against all plan payments collected and administered. Debtor payments outside the plan directly to creditors are not subject to the trustee fee.

Our bankruptcy court will permit payments to secured creditors outside the plan if the debtor has arranged for automatic payments to the creditor from the debtor’s employer or his bank account. The automatic payments system must have been in place before the debtor filed his Chapter 13 petition.

Identity theft was by far the largest complaint category, concerning 21 percent of all complaints filed. The top fifteen list looks like this:

• Identity theft (21 percent)
• Third party and creditor debt collection (nine percent)
• Internet services (six percent)
• Shop-at-home and catalog sales (six percent)
• Foreign money offers and counterfeit check scams (five percent)
• Internet auctions (four percent)
• Credit cards (three percent)
• Prizes, sweepstakes and lotteries (three percent)
• Advance-fee loans and credit protection/repair (three percent)
• Banks and Lenders (two percent)
• Credit bureaus, information furnishers and report users (two percent)
• Television and electronic media (two percent)
• Health care (two percent)
• Business opportunities, employment agencies and work-at-home plans (two percent)
• Computer equipment and software (two percent)

The FTC reports that identity theft complaints also constituted the largest single group of consumer worries last year, but have dropped as an overall percentage of the whole. In addition to the release of 2009’s data, the FTC has posted an animated video detailing how and when to file a complaint (available here).

A Potential Data Breach You Should Know About

In another recent news release, the FTC noted that it has warned almost 100 companies that information they store on peer-to-peer websites (used for everything from playing video games to sharing text, audio and video files to conducting online phone calls) may be vulnerable to data breaches.

Specifically, if peer-to-peer (P2P) software is improperly configured, any sensitive data may be accessible to anyone on the network. This presents a huge security risk, and could lead to identity theft or other costly and frustrating scams.

What this could mean for you is that, if you have given your personal information to one of the companies in question, your information could be at risk.

While no companies have necessarily broken the FTC’s regulations regarding storage of sensitive information, some may be at risk for significant future data breaches.

Additional Resources

FTC 2009 Full Report on Consumer Complaints.

I think some clients try dealing directly with their trustee because they believe they will get a faster response, and some may think they will be charged legal fees if they asked their attorney to call the trustee (rarely true). In some cases the debtor wants to verify, or have explained, an answer they have already received from their bankruptcy attorney.

One of our bankruptcy trustees discussed this issue at a meeting with a group of bankruptcy attorneys. The trustee told the attorney group that when a represented bankruptcy debtor calls his office he assumes that there may be a problem in the bankruptcy case. His assistant will always review the bankruptcy file for unresolved issues or overlooked facts. More often than not, his review will result in problems for the debtor.

The Trustee told the attorneys that, "no good thing can happen from a (debtor) calling a trustee." He advised us to explain to our bankruptcy clients that the trustee is not the debtor’s friend.

"Presidential Reunion" brings together presidential impersonators from the past 35 years of "Saturday Night Live," including Will Ferrel as George W. Bush, Dana Carvey as George Bush, Sr., Chevy Chase as Gerald Ford and Fred Armisen as President Barack Obama. The video also features Jim Carrey as Ronald Reagan.

In the video (see it below), President Obama is struggling with opposition to the Consumer Financial Protection Act by congress and lobbyists. He is then visited by the six previous presidents (including the late Reagan and Ford). Bush, Jr., and Clinton (played by Darrel Hammond) explain how they eased restrictions on banks, helping to create the financial mess in which the nation finds itself. Later, Jimmy Carter (played by Dan Aykroyd) explains in clear terms the benefits of the proposed CFPA.

"Mr. President, you have to establish the Consumer Financial Protection Agency. People are tired of being ripped off by credit card companies and banks," he says.

The video was made in conjunction with the Main Street Brigade, an organization committed to bringing awareness to, and dispelling myths about the CFPA.

The act was first suggested to Congress by Harvard professor Elizabeth Warren, author of several studies about consumer credit and bankruptcy.

An interesting post from FiveCentNickel.com offers a look at Visa’s rules that merchants must follow if they accept Visa cards. Here’s a summary.

• What to take: Vendors can choose whether to accept credit and business cards, debit cards and gift cards, or both.
• No price limits: If a merchant accepts Visa cards, it is required to accept the cards for any transaction, regardless of its dollar amount. However, many merchants ignore this policy and set a minimum purchase amount to encourage spending. If you’re irritated by a specific vendor’s policy, consider speaking to a manager.
• Near equality: Items bought with Visa cards cannot be subjected to any special charge, but vendors can offer customers discounts for paying with cash (you may notice this especially at gas stations).
• Convenience fees: Online and over-the-phone transactions may be subject to extra charges, so long as they’re disclosed and not applied to any in-person transactions.
• No cash tax: Sellers cannot collect taxes from Visa transactions in cash.
• Tip not included: When you pay with a Visa card and intend to add a tip, vendors can only authorize your account for the amount of the service minus tip.
• No cash returns: If you buy something with a Visa card, sellers cannot give you cash should you return it.
• Time crunch: Merchants have to report Visa sales receipts within five days of purchase.
• Privacy limits: Receipts for Visa transactions should only show the final four digits of your card number and should not show your card’s expiration date. Further, sellers have to keep all account number information private.
• Policy disclosure: Vendors must explain (or make available) return and exchange policies before a customer makes a purchase.
• Signature required: Unsigned cards are considered invalid. If a cashier encounters one, she is supposed to make the customer sign the card and compare the signature to one on an ID card. Writing “ask for ID card” in lieu of a signature is considered an invalid substitute.
• ID optional: Merchants may ask for a photo ID, but cannot require buyers to have one in order to complete a transaction.

It’s always a good idea to make sure you know the rules of your debit or credit card, so if you don’t have a Visa, check out your cardholder’s website!

Additional Resources

Just the Facts about Credit Cards (PDF)

A Consumer’s Guide to Credit Cards (PDF)

The Florida Supreme Court is requiring mediation in state court foreclosure cases. This state court rule is helpful, but the bankruptcy court rule could be better for homeowners. Before getting to mediate with a bank agent with full authority the homeowner has to be in a foreclosure case. The homeowner first has to stop paying the mortgage for at least three months, wait for the bank to file a lawsuit, hire a civil attorney to answer the lawsuit, proceed for several months in civil litigation, and then at some point, arrange for a court ordered mediation. The result of the mediation is a contractual agreement to modify the mortgage, and the modification usually calls for a few months of trial payments before it is binding.

Chapter 13 mediation should be faster and more definitive. A debtor probably can get an order requiring mediation with their mortgage lender very soon after filing a Chapter 13 bankruptcy petition. The borrower/debtor will not have to miss several mortgage payments and fall farther behind on their mortgage. There will probably be uniform court orders. The bankruptcy rule probably will permit a court order adopting any mediated mortgage modification which order can be recorded in the public real estate records.

And now, as layoffs and salary reductions become more and more common around the country, many once-comfortable graduates are finding themselves unable to meet the terms of their loans. Here are some ways you can handle your student debt.

Know Your Numbers

If you need to rework the terms of your student loans, consider contacting your lender. But before you do so, take these preparatory steps:

• Outline your budget: Crunch the numbers and figure out what you can realistically afford to pay each month.
• Read the fine print: Make sure you understand the terms of your loans as they now stand so that you’ll be ready to ask for specific modifications when you speak with your lender.

Once you’ve determined what kinds of payments you can make, familiarize yourself with your options for repayment. Depending on your circumstances, these may include the following:

• Modify your repayment plan: Some lenders offer graduated repayment schedules, meaning you pay more per month as you go along (which can be useful if you expect to make more money in the future). If your loans are through the Federal Government, visit the Federal Direct Loan web site to see your choices.
• Consider a deferment: Many lenders offer you a chance to defer payments for a variety of reasons (such as going back to school, working in certain fields, being unemployed, etc.). Check with your lender to see how to apply, but keep in mind that interest will likely still accrue during the deferral period.
• Apply for forbearance: You may also be able to make reduced payments or suspend payments altogether for reasons of financial hardship but, as with deferments, interest will likely still build up.
• Look at consolidation: Consolidation offers often prove helpful because they allow you to make a single payment each month and can even help lower interest rates. But be sure you understand the complete terms—some come with prepayment penalties.

If you’re just beginning school and considering loan options, remember that they may not seem like a big burden at this stage, but can add up quickly and should be considered carefully.

Additional Resources

Federal Student Loans: Learn the Basics and Manage Your Debt (PDF)

Sen. Jim Bunning, a Republican from Kentucky and former Major League Baseball pitcher, has objected to extending jobless benefits, which are attached to a larger spending bill that was past unanimously by the House last week.

The New York Times reports that 4,300 of Bunning's own constituents will exhaust their unemployment benefits in the next week, and that number will surely continue to rise over the coming weeks and months.

In New York, about 54,300 jobless workers are set to see their benefits run out next week, the most of any state, according to the Labor Department. Florida and Georgia follow, with approximately 49,600 and 41,000 workers losing benefits after March 13, respectively.

Bunning, who is not seeking reelection this year, has received praise from fellow Senate Republicans for taking his controversial stance.

The $10 billion bill up before the Senate would use stimulus money to extend unemployment insurance for jobless workers, and resume work for 2,000 Department of Transportation workers on highway construction projects.

About The Bankruptcy Blog

The Bankruptcy blog provides news and information on the economy, financial trends and bankruptcy information.

At the bar meeting the trustees suggested that the Chapter 7 trustees may be taking a closer look at personal property lists and values. They indicated that most trustees may be sending an appraiser to the debtors homes to take an inventory whenever the debtor’s home is valued more than $500,000. It is hard to believe, they said, that a home worth more than a half million dollars in today’s real estate market contains less than $2,000 (joint filing) of furniture and electronic equipment. The trustees stated that bankruptcy debtors whose homes and personal property lists will likely be scrutinized consider hiring their own appraiser to value their property before they file their petition and submit their own personal property appraisal to the trustee.

It costs only two or three hundred dollars for an appraisal of household property. In the past, when my clients’ income or house size implied expensive furnishings I have suggested the client retain one of the appraisal firms used by the Chapter 7 trustees so that the trustee would not challenge the appraiser’s credentials.

Whenever a debtor suspects that his personal property schedules will be questioned by the bankruptcy trustee it is a very good ideal to get a preemptive appraisal. When you hire the appraisal you schedule the date and time of the appraisal. You’ll know well in advance when this appraiser will be going through your home to inspect your belongings. Your own appraisal is not binding, and you don’t have to use the results on your petitions is you disagree in good faith with the appraiser’s report.

The trustee speakers offered debtors another practical suggestion when the debtors know they have non-exempt personal property including furniture or automobiles. Typically, trustees and bankruptcy debtors negotiate the amount and terms of the debtor’s "buy-back" of non-exempt cars and personal property at or after the trustee meeting. These trustees suggested that debtors decide what they would like to offer the trustee in payment and then bring a cashiers check for the amount of their offer to the trustee meeting. In other words, make your offer an literally put the cash on the table. The trustees said they are usually willing to accept significantly lower valuations and buy-back offers when the offer is accompanied by certified funds.

Center for Responsibility Lending Responds

The Center for Responsible Lending released a humorous (though cynical) animated video that highlights some of the areas not addressed by the new act—and illustrates ways in which credit card issuers have adapted their policies to maintain profit levels. These include:

• Interest rate hikes: To compensate for lost revenue, some card issuers have already raised users’ interest rates. Even users in good standing may be “forcibly eligible” for this, as the video claims.
• Over-limit fees: If you accidentally exceed your credit limit, your cardholder likely charges a fee. And, with new restrictions in place on other charges they can assess, you might see this fee jump.
• Inactivity fees: On the other hand, if you use your card too infrequently, you might see a fee for that, as well, because that means you’re less profitable for the company.
• Increased minimum payments: Another technique some card issuers are using is to up the minimum amount you can pay each month. This could be profitable for those who won’t be able to afford the increased payments and can be charged an under-payment fee.

The Regulation-Creativity Relationship

As the video illustrates with a graph, more consumer protection may seem like a good thing, but in practice, it often means that card issuers just get more “creative” with fees they charge reasons they charge them.

If you’re thinking now is a good time to get out of credit cards altogether, you’re not alone, but, before you cancel your cards, consider this:

• Your credit score: Part of your credit score is based on age of accounts (older ones are better); another part is based on diversity of credit (so eliminating one type entirely would hurt you).
• Your reentry: If, at some future time, you decide you want a credit card again, you’ll likely have to contend with uber-high interest rates (above 70 percent) because you won’t have any recent credit card history.

The video exaggerates a little (by mentioning, for example, a “legibility fee” for left-handed users), but by doing so draws attention to the more serious matter of how significantly your credit card could change.

Be sure to read all correspondence from your card issuer, even mailings that seem like junk: some of them might contain important details about the new rates and fees you may have to pay. These statements will also come in handy if mounting fees and interest force you into bankruptcy.

Additional Resources

Credit CARD Act

· Do take the bankruptcy court seriously, and avoid making any financial decisions that may make your creditors suspect you of filing in bad faith.

· Do seek bankruptcy court counsel before you file any papers, and learn your rights and options under the United States bankruptcy code.

· Do maintain timely payments on any collateralized loans that you wish to keep the collateral for. In other words, if you have a mortgage or car payment and you intend to keep the house or car, you must remain current on the payment. (Please alert us if you are not current on a collateralized loan at the time we are preparing your case for filing.)

· Do file your tax returns. Even if you know that you owe the IRS a lot of money, it is still important to file your taxes in a timely fashion. Not filing will only exacerbate the problem.

· Do reduce the amount of future income tax refunds. Refunds are routinely taken in Chapter 7 cases, and may affect plan payments in Chapter 13. If you expect to get an income tax refund , reduce your withholding so that you do not get a refund . If much of the refund id from the Earned Income Tax Credit, apply to get that available at www.irs.gov/pub.irs-fill/fw5.pdf or through your employer. For more information, see the IRS web page. Caution: Do not reduce the withholding for tax so much that you will have a big tax bill to pay.

· Do be honest and forthcoming on your bankruptcy petition. Even if it is embarrassing, it is important that your attorney knows. Any creditors not listed on your petition may not be discharged.

· Do keep our office up to date with your contact information. Mailing address, phone and email.

· Do consider increasing your 401K contribution if you have excess income and you are filing a Chapter 13.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.

· Don’t pay your relatives or friends in favor of your other creditors, and don’t try to transfer property out of your name and into theirs. If you do, the bankruptcy trustee may sue them on behalf of your creditors to get the money back.

· Don’t transfer any property to a relative within one year of filing your case. The Trustee may even go back five (5) years from filing the case if the transfer was for a fraudulent purpose such as avoiding paying your creditors.

· Don’t take a loan against your real estate in an effort to reduce the equity. You can often file a bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay a credit card debt, you may be putting your house at risk.

· Don’t pay ahead or pay off balances early on secured loans (loans for which there is collateral).

· Don’t pay ahead or pay off balances early on unsecured loans (personal loans, medical bills, credit cards or store cards, etc.).

· Don’t attempt to sell your property for less than what it’s worth. This will not reduce the amount you eventually have to repay – and you or whoever you sold it to may end up stuck with the difference.

· Don’t run up your credit card debt prior to filing a bankruptcy. The court may view this as an attempt to exploit the bankruptcy system, and the judge may treat it accordingly.

· Don’t buy any luxury items prior to filing for bankruptcy. Any luxury items purchased within 70 days of filing for bankruptcy are viewed as non-dischargeable debt.

· Don’t take any major cash advances off of credit cards prior to filing for bankruptcy. The court may suspect that you are acting in bad faith and may refuse to discharge the debt.

· Don’t borrow, withdraw from or cash out your 401K, IRA, or ERISA qualified savings and retirement plans to pay bills. If you do, you may be liable for penalties and taxes that are not protected by the bankruptcy filing. If you don’t use these funds, you are very likely to have them to draw on after bankruptcy.

· Don’t file if you are about to receive a tax refund or inheritance. Discuss the timing with your attorney.

· Don’t transfer money in to your kid’s bank accounts. They have you as a co-signer and are subject to the same review as your bank accounts.

· Don’t get married just before filing if your spouse has high income.

· Don’t misrepresent facts to your attorney we are working to help you.

· Don’t wait until after filing to purchase a vehicle, if you know you will need a more dependable car please take care of that before filing your case. Each case is different if you need to do this please contact the attorney first.

· Don’t assume that the bankruptcy will get rid of all your debts. Some tax liabilities are non-dischargeable (basically, all tax liability accrued in the three tax years prior to filing are non-dischargeable in most circumstances). Student loans are now non-dischargeable except in cases of extreme hardship.

· Don’t tell your attorney that certain items of personal property do not belong to you if they really do belong to you.

· Don’t expect your Attorney to help you defraud the Bankruptcy Court and your creditors, it won’t happen.

· Don’t lie you will be signing the bankruptcy papers under penalty of perjury.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.

Some experts suggest the rules are unlikely to pass because they would mean more work, and potentially less income, for many mortgage lenders and loan servicers. This issue, according to some, highlights the core problems with that industry.

The Proposed Mortgage Rule Changes

Here’s a look at what alterations have allegedly been suggested and what they reveal about the way HAMP and the mortgage lending system in general is currently working, and how it could better work to help people avoid bankruptcy and stay in their homes:

1. Introduction of a 30-day “borrower response period.” This period would begin after a borrower was denied a mortgage modification; during the 30 days, mortgage lenders would be prohibited from foreclosing on properties. The aim is to provide a window in which borrowers can determine whether their denial resulted from mistakes in their application.

Those in the know suggest that this proposed change is necessary because a number of borrowers are being denied modifications because of mistakes in their application – not because they don’t actually qualify.

2. Prohibition of foreclosures for borrowers who have not been proven ineligible for modifications. In other words, banks would be required to offer borrowers an alternative to foreclosure (namely, modification) and would not be permitted to foreclose on a home if a borrower proved eligible for that modification.

According to sources, this type of language already exists in some form in HAMP – in fact, that’s part of the whole purpose of the program. The inclusion of this as a proposed modification suggests that mortgage lenders are not taking adequate steps to avoid foreclosing on properties.

3. Suspension of all foreclosure action once a borrower has been approved for a 90-day trial modification. HAMP requires a trial period. In this 90-day window, approved borrowers make payments under a modified mortgage plan. If they adhere to the terms, they should qualify for a permanent modification.

The fact that a new rule expressly prohibiting foreclosure action during the trial period has been proposed suggests that lenders are disregarding modification agreements and proceeding to foreclose regardless of a borrower’s status.

4. Written verification (from a trustee or lawyer) that a borrower does not qualify for HAMP before foreclosure can proceed. In other words, this rule would require banks to have proof that they can go ahead and foreclose.

This suggests that mortgage lenders have not been following this rule on their own, and have perhaps been foreclosing on properties even when a borrower qualified for a modification.

Bottom Line For Anyone Needing Mortgage Relief

If you are at risk of losing your home to foreclosure, you may want to contact a bankruptcy attorney. These proposed rules suggest the cards may be stacked against you.

Bankruptcies filed after bank garnishment is common because the garnishment of the debtor’s accounts often precipitates bankruptcy. There have been some bankruptcy cases which have placed upon the creditor an obligation to take affirmative steps to release any garnishments on accounts, or levies on automobiles(not repossessions), upon the debtor’s filing a bankruptcy petition. The cases state that if the creditor fails to take such affirmative action against its own garnishment the bankruptcy court can and will impose sanctions against the creditor.

Bankruptcy debtors can hold accountable creditors that fail to immediately dissolve pending garnishments and levies after the debtor files bankruptcy. If you file bankruptcy when a bank has already garnished your bank account your lawyer can send an email and letter to the bank attorney who served the garnishment in which your lawyer can notify the attorney of the garnishment and demand that the attorney and his client dissolve the garnishment within a short time such as two or three days. If the bank’s attorney ignores the demand the your attorney can file a motion for monetary sanctions and attorneys fees to be levied upon the creditor.

And, with car issues in the news pretty often these days, they’re certainly on our minds. Here’s a little crash course on what you can expect to happen to your car if you file for bankruptcy.

Chapter 7 & Chapter 13 Bankruptcy

Whether you file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you can expect an automatic stay to take effect. This stay prevents debt collection, wage garnishment, lawsuits related to your finances, foreclosure and repossession.

The automatic stay remains effective until the court discharges your case.

Cars in Chapter 7 Bankruptcy

Chapter 7 bankruptcy offers filers a complete discharge of many unsecured debts. Your car loan, though, is a secured debt (it’s attached to property—your car). If you file a Chapter 7 case, you’ll have three options for your car loan:

• Redeem: This option involves one lump sum payment to your creditor for the car’s current fair market value. If you can afford to do this, it may make life easier in the future, since you’ll have eliminated car payments. But because most people file for bankruptcy at a time when cash is not handy, it may not be a viable option for many filers.
• Reaffirm: This option allows you to essentially continue making payments on your lease or loan as you did before you filed for bankruptcy. In reaffirming your debt, you agree a second time to continue making payments according to a schedule agreed upon by both you and your creditor.
• Surrender: If neither continuing payments nor redeeming the car will work for you financially (for example, if you owe more on the car than it’s currently worth), you can also choose to surrender your vehicle to your creditor and have the remainder of your debt discharged.

Cars in Chapter 13 Bankruptcy

If you file under Chapter 13 bankruptcy, your car’s future will depend on when you bought it.

• Newer cars: If you bought your car within 910 days of your bankruptcy filing, you’re required to pay the full value of the car loan, though your interest rate may be reduced.
• Older cars: If you purchased your car more than 910 days before filing for bankruptcy, you’re only required to repay the car’s current fair market value.

Additional Resources

Understanding Vehicle Financing (PDF)

Understanding Vehicle Repossession (PDF)

For those who use credit cards responsibly, the new laws will provide more time to pay bills and less likelihood for fees, penalties and interest rate changes. For those struggling with credit cards or facing bankruptcy, the laws may prevent fees from adding up and provide a little breathing room.

Here's a look at some of the key provisions that are now in effect:

• Expanded Statements: Your monthly card statement will have a few new features, including broken down fees and penalties and a chart showing how long it will take to pay off the charges making only the minimum payment (and how much it will cost). Your statement will also arrive at least 21 days before the due date, a full week earlier.
• 45 Day Notices: Your credit card issuer must give advance warning of any changes to your account, particularly interest rate changes. This will give you more time to consider the changes, negotiate with the credit card company, or, if necessary, pay off the balance and close the account.
• No Rate Increases for 1 Year: The new law prohibits "arbitrary" rate increases for the first year you hold an account. Lawmakers hope this will curb "universal defaults", in which one card issuer raises interest rates due to late payment on a card issued by a different bank. Some actions could still trigger a rate increase, such as being more than 60 days delinquent.
• Over-Limit Opt-in: You will only be charged over-limit fees if you agree to it. While this may seem like a blessing, it also means more transactions may be declined.

While these changes went into effect, many cardholders have seen changes to their account over the past year, since the law was introduced. Credit card companies have been preparing for the law to go into effect, and in many cases have not been acting in consumers' best interest.

Many credit card companies have been raising interest rates and introducing new annual fess (which are permitted in the new law) in order to prepare for the revenue losses that could come under the Credit CARD Act.

For more information, visit the Federal Reserve's credit card site.

These debt limits frequently close people out of Chapter 13 even if they are willing to pay what they can afford to creditors. Blame it on the housing bubble. The great housing inflation not only raised prices, but it also increased mortgage amounts. Liberal issuance of second mortgages took peoples total mortgages even higher. Many people now filing bankruptcy became insolvent because of the depreciation of investment real estate- more mortgages. All homestead mortgages and all investment property mortgages count as secured debts to the extent they remain secured by property value. Upside down mortgages are secured debts to extent of current property value and are unsecured debts to the extent of the deficiency. The sum of this mortgage debt is throwing many people out of Chapter 13.

If you don’t qualify for Chapter 7 or Chapter 13 you have two alternatives. One is Chapter 11 bankruptcy, but Chapter 11 is a very complicated procedure and involves legal fees- mostly over $20,000, which few individual debtors can afford. Chapter 11 procedures are appropriate for large corporate bankruptcy. The only other alternative for people who cannot file 7 or 13 is to face creditor lawsuits without any bankruptcy protection.

The Chapter 13 debt limits increase effective April 1, 2010. The increase is only 3%. The debt ceilings will not significantly rise. The April, 2010, increase will not solve the problem.

If a debt is contingent or unliquidated that debt does not count toward Chapter 13 debt limits. A debt is contingent if the debtor will owe them only if something happens in the future. A purchaser’s debt to a seller may be contingent upon the seller delivering the product at a future date. An unliquidated debt is owed now, but the debtor does not know the amount and cannot determine the amount. If a debtor has been sued, and the court found the debtor liable but the damage award is undecided then the debtor is facing an unliquidated claim.

If you think your debts exceed Chapter 13 limits check with an attorney to see if the attorney believes that some of your debts may be either legally contingent or unliquidated.

Unfortunately, according to msnbc.com, a new scam cropping up has been using the BBB’s logo to swindle people out of money. Here’s what you need to know to protect yourself and your money.

• It starts with an email or phone call. Like many similar scams, the one using the BBB’s logo reportedly involves a scammer contacting you and indicating that you’ve won a lottery or contest.
• It pays attention to detail. Some victims have noted that scammers used names of real BBB employees and even included in their emails links to bios on real BBB websites.
• A check will arrive. When it does, the scammers will ask that you deposit it and wire them a certain amount of money to cover taxes or fees or some other imaginary cost associated with the imaginary contest.

If you deposit the check, it may clear, but that doesn’t mean the scam is legitimate. If you wire away money, consider it gone forever—this is a classic maneuver some scammers make.

Protect Yourself: Know the Facts

While this scam can be devastating for those who lose money, it’s entirely avoidable. The following are classic warning signs that what you’re being offered is a scam:

• Unknown contest: If you’ve been told you’ve won something you don’t remember entering, ignore it. Hang up the phone, delete the email and walk away. Consider filing a complaint with the FTC.
• Money wires: Any time you have to pay to collect your winnings, know that something is up. Federal law prohibits charging to join sweepstakes and any legitimate organization would take out taxes and fees before sending you a check – how do they know you’d send the money back?
• High emotions: Many scammers rely on drumming up excitement or fear in their victims because when we’re in elevated emotional states, even the savviest among us can make poor financial decisions.

Be on the lookout for any of these signs or anything else that strikes you as off. Sources indicate that some scammers have gotten very sophisticated and use realistic-looking seals, watermarks and color printing, but remember: legitimate offers will still be good after you review them with a trustworthy source.

Be sure to check out businesses on the BBB web site. Legitimate businesses will also let you know their BBB rating. Total Bankruptcy has a BBB A+ rating, its highest rating.

Background

Because health insurance in the U.S. is most commonly linked to jobs, a high rate of unemployment means higher numbers of people are going without health coverage. And, thanks to lowered income for many households, affording healthcare can be a huge stumbling block.

According to sources, some companies are apparently taking advantage of vulnerable Americans by offering discount health products, which may not be a very good bargain.

Discount Plans vs. Health Insurance

Health insurance, as many people know, works like this: you pay a certain amount of money each month (called a premium) and when you need access to medical care, you only pay a portion of the price (called a deductible) because you’ve insured yourself against doing so.

Discount plans, on the other hand, offer discounts on the normal full price of medical services. They are usually restricted to specific caregivers and specific medical facilities. After receiving consumer complaints about some discount plans, investigators reportedly found that discount plans tended to:

• Overstate benefits: Advertisements for some plans misled consumers with claims about potential savings. For example, a plan might advertise itself as offering savings up to 60 percent, but provide a 60 percent discount on only one service.
• Offer insufficient savings: Those with chronic health problems or who make frequent doctor’s visits may see little or no financial benefits from these plans.
• Provide incorrect information: Some plans apparently guaranteed access to medical professionals who were no longer affiliated with the plan.

Making the Decision

If you don’t have access to or cannot afford health insurance, you may benefit from signing up for a discount plan – the important thing to do is research the plan before committing to it.

These precautionary steps to anyone considering such a plan:

• Read everything. Look at the forms you’d be required to fill out and scrutinize the fine print. Make sure you know exactly what the plan includes – and leaves out.
• Don’t jump the gun. Before opting out of another insurance plan, make sure the new plan you’re looking into will offer the kind of protection you need.
• Make some calls. Ask for the list of physicians that you’d have access to and call to make sure they’re still participating.

Remember: commercials tell you only what they want you to know so do a little digging before choosing any new medical product.

Additional Resources

Medical Bills and Bankruptcy

It is well established that a bankruptcy court has the power to reorder the priority of allowed claims based on equitable grounds. Indeed, under section 510(c) of the Bankruptcy Code, if the principles of equity so dictate and after appropriate notice and a hearing, the bankruptcy court may subordinate all or part of an allowed claim, and transfer any lien securing such subordinated claim to the bankruptcy estate.  The decision in the Palmdale Hills case adds a wrinkle to this process when the creditor is in bankruptcy. According to Palmdale Hills, if the subject creditor happens to be in bankruptcy, relief from the automatic stay applied in such creditor's case upon filing must first be obtained before such creditor's secured claim can be equitably subordinated. 

The debtors in the Palmdale Hills case were integrated companies formed as part of a joint venture to develop residential real estate projects with affiliates of Lehman Brothers, Inc. Lehman and its affiliates, including Lehman ALI, Inc. ("Lehman ALI") and Lehman Commercial Paper Inc. ("Lehman Commercial"), provided the financing for the projects through a series of loan agreements and equity arrangements on the debtors' projects. The debtors contended that the structure of these financing arrangements constituted manipulative lending practices and fraudulent conveyances, and that Lehman's complete control over the use of the funds created their significant debt burdens and eventually forced them to file bankruptcy.

Soon after filing bankruptcy in California, the debtors sought blanket relief from the automatic stay in Lehman Commercial's bankruptcy case pending in New York. The purpose of this relief was to allow the Palmdale Hills debtors to administer their California bankruptcy cases without the need to file repeated motions for relief from the automatic stay in Lehman Commercial's New York bankruptcy cases.  However, the New York bankruptcy court denied the broad relief requested by the debtors without prejudice to the debtors' rights to refile specific requests for stay relief.

Eventually, the debtors proposed a chapter 11 plan based principally on equitably subordinating the claims of Lehman ALI (an entity not in bankruptcy) and Lehman Commercial (who is in bankruptcy, together with Lehman ALI, the "Lehman Lenders"). The debtors also filed an adversary proceeding against Lehman ALI to equitably subordinate its claim, which they later proposed to amend to include a request to equitably subordinate Lehman Commercial's claim and transfer its lien to the estate if the California bankruptcy court determined that such action would not violate the automatic stay applicable in Lehman Commercial's bankruptcy case.

The Lehman Lenders filed a motion for relief from stay in the debtors' California case arguing that they were owed more than $649 million on their loans to the debtors, and that the properties securing these loans lacked equity and were declining in value. The Lehman Lenders also argued that the debtors' reorganization would fail because it was based on equitably subordinating Lehman Commercial's claim, which Lehman Commercial argued violated the automatic stay applicable in its bankruptcy case.

The California bankruptcy court did not, however, grant the Lehman Lenders' stay relief motion, and instead treated it as an informal proof of claim. The court also ruled that the debtors could pursue equitable subordination, through either an adversary proceeding or a plan, as a defense to Lehman Commercial's stay relief motion without violating the automatic stay imposed in Lehman Commercial's bankruptcy case. Lehman Commercial appealed, challenging the California bankruptcy court's decision regarding the scope and application of Lehman Commercial's automatic stay.

The BAP reversed, holding that the California bankruptcy court erred in finding that the debtors could pursue equitable subordination of the Lehman Commercial's claim and transfer its lien to the estate without first obtaining relief from the automatic stay in Lehman Commercial's New York bankruptcy case. While the BAP agreed that equitable subordination could be asserted as a defense to a motion seeking relief from the automatic stay without the necessity for seeking relief from the automatic stay, the BAP concluded that, under the facts of the case, equitable subordination was not merely a defense to the relief from stay motion. According to the BAP, when the California bankruptcy court permitted the debtors to pursue equitable subordination of Lehman Commercial's claim, it conflated equitable subordination as a defense to a relief from stay motion with equitable subordination as an objection to a claim. Because the adjudication of the debtors' equitable subordination of Lehman Commercial's claim sought affirmative relief and was not merely a defense, it rose to the level of violating Lehman Commercial's stay. 

The BAP also rejected the debtors' contention that, because a complete disallowance of a claim through a claim objection could be achieved without a stay violation, their "lesser defensive remedy" of claim subordination could not possibly violate the automatic stay. The BAP noted that when a claim is disallowed, the creditor effectively never had the right to payment under that claim and the debtor did not recover any property from the creditor; whereas under equitable subordination, the creditor has a right to payment, but that right is modified based on equitable grounds and, if the claim is secured by a lien, that lien is transferred to the estate. According to the BAP, it was this key difference that transformed the debtors' claim of equitable subordination from a proper defense to Lehman Commercial's stay relief motion into an offensive action against Lehman Commercial's estate.

Finally, the BAP also noted that if the debtors were allowed to subordinate Lehman Commercial's claim in the California bankruptcy court without first moving for a stay relief in Lehman Commercial's New York bankruptcy case, Lehman Commercial's creditors would be deprived of notice and the chance to challenge the subordination action even though their rights would be affected.

One judge dissented in the Palmdale Hills case and disagreed with the majority's principal holding (as characterized by the dissent) that a debtor may not, in its own bankruptcy, unilaterally defend against a lender's inequitable claim if that lender is also a bankruptcy debtor. According to the dissent, the majority's distinction between claim disallowance and claim subordination is a distinction without a difference and does not constitute a good reason to require a debtor to seek permission of its creditor's bankruptcy court to avoid an equitable result in its own case. Alternatively, according to the dissent, Lehman Commercial waived its right to raise automatic stay issues once it filed its proof of claim. 

Ultimately, the Palmdale Hills decision represents a warning sign for a debtor in bankruptcy to tread carefully when dealing with claims filed in its own case. In light of the large number of bankruptcy filings in recent months, it may behoove such a debtor intending to equitably subordinate a creditor's claim, to first check the bankruptcy status, if any, of such creditor and avoid violating the creditor's automatic stay if it happens to be in bankruptcy itself.

Authored By:

Robert Sahyan
(415) 774-3146
rsahyan@sheppardmullin.com 

Likewise, it is estimated that we will see another 3.5 to 5.5 million foreclosures. Florida is expected to be one of the hardest hit areas. Why? My answer is that Loan Modifications are not working. Even if a person is able to get a loan modification and stay in their home, it may not be enough to deal with all of their debt problems.

On a daily basis I see people who are maxed out with debt. A loan modification for them would be the equivalent of putting a band aid on a broken arm. These are good people who have lost their jobs or have had their hours cut back, etc, etc. They are good, honest and hardworking people were not able to foresee this economic nightmare. Now, they are having to make very hard choices.

If Congress changed the Bankruptcy Laws to allow people to modify their first mortgages in the Bankruptcy Court, people would have an opportunity to save their homes, cut down their debts, modify their payments schedules and pay their debts in a fair and equitable manner.

Bankruptcy is an option for many people, yet for some reason, the bankruptcy process is still shunned by the many people.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.