Wisconsin Bankruptcy Blog

A Lawyer, a Doctor, and a Priest Walk Into a Bar...

2012-01-24T07:57:00.000-06:00

... or to be more succinct: two people walk into a bar.

The title "doctor" is not restricted to the medical field. As most people are aware, people with advanced academic degrees (Ph.D's) are referred to as doctors. Attorneys, too, are technically doctors, as upon graduation, we receive juris doctor degrees.

So why don't most attorneys use the title? Read the answer here: http://www.abajournal.com/magazine/article/lawyers_are_doctors_too/.

Reader Question

2012-01-17T21:29:00.001-06:00

Someone posted a question in the comments section of an old post I wrote in 2009. It's an excellent question (and I welcome readers to post questions), and since it's buried, I decided to re-post it here.

QUESTION:

I had a Chapter 7 discharged in 2009 (in Wisconsin). I recently became aware that my first and second mortgages were on my credit report as "part of the bankruptcy", though I have always paid on time, before and after the bankruptcy. I was unaware that I needed to sign formal agreements to do so and my attorney did not advise me in this area. I certainly was never presented with the forms, and in fact, the mortgagor says they did not receive any paperwork. It is now too late to do so and, as a result, I am not getting credit for my payments through the credit bureau. When I asked Bank of America why they did not originate a request to reaffirm (which I assume they would rush to do) I was told it would now be easier for them to foreclose on me, should I ever stop making payments. Should I be concerned? What, if anything can i do at this point? Thanks!

ANSWER:

Bankruptcy is good against the world (see http://wisconsinbankruptcy.blogspot.com/2011/12/bankruptcy-mythbusting-9.html). All of your debts, whether they are listed or unlisted, presumptively dischargeable or non-dischargeable - they are all affected by a bankruptcy filing. In the case of secured loans, bankruptcy eliminates debts, but it does not eliminate liens. Therefore, in having a secured debt discharged in bankruptcy, a secured creditor can still realize their security interests via repossession or foreclosure. This is why - in extremely rare cases - certain vindictive creditors will repossess or foreclose in the absence of a reaffirmation agreement.

Secured debts like mortgages and car loans are actually dischargeable. The reaffirmation agreement is a tool that excepts those debts from discharge and prevents the lender from repossessing or foreclosing unless there is some future default in plan payments. Without the reaffirmation agreement, the debt is technically discharged. With the reaffirmation agreement, the debt survives, and the creditor can collect deficiencies against the debtor in the event of foreclosure or repossession. (Which is why it makes no sense for Bank of America to say it is easier to foreclose – the reaffirmation agreement actually gives them more protection.)

The vast majority of secured creditors will not foreclose or repossess, even if the debtor does not sign a reaffirmation agreement, so long as the debtor continues to make monthly payments. This is called a "ride through", and it's a pretty good deal for the debtor, because if they do default in the future, their bankruptcy still protects them from collections.

The downside to the ride through is that the lenders are not required to report payments to the credit bureaus (though some do as a courtesy). And that's the issue you're faced with now. Once the case is discharged or closed, the court here in the Eastern District of Wisconsin (other districts may have different policies) will not allow you to reopen the case to file a reaffirmation agreement.

I would venture to say that your only two options are to contact Bank of America to see if there is someone you can talk to about having your payments reported or to file a dispute with the credit bureaus (see http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.pdf).

The only other option I can think of is for you to refinance. Get a new company to assume the debt, pay off Bank of America, and then - having a valid new debt with the second creditor - your payments would be reported correctly. Unfortunately, this would be a tough feat to accomplish in this economic environment.

Most of the bankruptcy attorneys I know (myself included) will not initiate drafting of reaffirmation agreements, because the lender is generally in the best position to have the details of the original loan agreement necessary to complete the forms. Also (and I'm just speaking for myself), there is no practical way of tracking whether certain creditors have submitted reaffirmation agreements for our clients (especially since it is not always in our clients' best interest to file a reaffirmation agreement). However, because of the very issue you're facing, I've made a point of informing my clients about reaffirmation agreements, their consequences (both in signing and not signing one) and what they need to do if the lender does not initiate a reaffirmation agreement. Most secured creditors will submit reaffirmation documents without being prompted.

Unfortunately, I don't have a good answer for your situation, but I hope - at least - you find the information useful. Although the lack of credit reporting is unfortunate, I wouldn't be too concerned about foreclosure. Just keep making your mortgage payments. And in the event you do default on your mortgage in the future and the home does foreclose, you can at least rest easy knowing that they can't come after you for more money.

2011 Foreclosure Stats

2012-01-15T10:31:00.002-06:00

	Jan-11	Feb-11	Mar-11	Apr-11	May-11	Jun-11	Jul-11	Aug-11	Sep-11	Oct-11	Nov-11	Dec-11	Total
Brown	85	70	99	72	65	67	62	78	102	61	87	87	935
Calumet	13	7	11	10	7	11	10	10	12	9	10	13	123
Door	11	8	8	10	10	10	11	14	5	4	11	5	107
Florence	1	4	4	1	1	1	1	0	3	1	0	2	19
Fond du Lac	40	24	33	27	37	31	20	37	34	26	30	23	362
Forest	2	5	2	3	3	5	4	1	5	2	2	8	42
Green Lake	8	7	11	6	6	4	6	6	7	9	12	8	90
Kewaunee	9	5	7	3	4	13	6	6	15	8	5	7	88
Langlade	10	5	9	12	10	6	4	11	12	7	4	3	93
Manitowoc	40	24	25	17	22	21	13	20	22	23	26	23	276
Marinette	24	20	17	10	16	10	13	18	18	19	13	18	196
Marquette	7	4	9	6	5	9	8	13	8	10	7	10	96
Meonominee	0	1	2	0	0	0	0	0	0	0	1	0	4
Oconto	28	13	17	16	13	16	16	17	20	22	19	17	214
Outagamie	43	38	58	50	47	33	46	44	50	38	38	40	525
Shawano	24	18	19	11	13	19	11	12	14	10	18	4	173
Sheboygan	43	38	46	27	42	40	42	44	39	35	45	37	478
Waupaca	22	21	19	13	20	24	12	26	22	18	20	12	229
Waushara	13	10	16	12	10	14	10	16	13	8	14	7	143
Winnebago	59	50	63	53	43	37	34	48	38	59	57	46	587
Total	482	372	475	359	374	371	329	421	439	369	419	370	4780

December 2011 Foreclosure Stats

2012-01-15T10:30:00.000-06:00

Brown	87
Calumet	13
Door	5
Florence	2
Fond du Lac	23
Forest	8
Green Lake	8
Kewaunee	7
Langlade	3
Manitowoc	23
Marinette	18
Marquette	10
Menominee	0
Oconto	17
Outagamie	40
Shawano	4
Sheboygan	37
Waupaca	12
Waushara	7
Winnebago	46
	370

The Ostrich Effect

2011-12-30T19:44:00.000-06:00

I was chatting with a colleague of mine about clients who claim to never be served with legal notices, and we ended up on a discussion of the ostrich effect. When claims of lack of service are fully investigated, what we discover 9 times out of 10 is that, in fact, notices were served to our clients, they just ignored the notice or didn't understand the notice. At any rate, this is generally referred to as the ostrich effect - the belief that problems will go away on their own if you just ignore it and pretend like everything is hunky dory. We see this all the time with people who just suddenly become aware of a pending wage garnishment, foreclosure sale, or utility shut-off.

As I've blogged about in the past, the first quarter of the year is generally a very busy time for bankruptcy attorneys. A confluence of events leads to a number of people suddenly realizing that they need to file for bankruptcy:

Christmas credit card bills
property and income taxes
annual dues and memberships
winter heating costs
increased lay-offs and unemployment rates during the winter season

And all of this culminates into the April 15 deadline for people to have their utilities shut off due to the end of Wisconsin's winter moratorium. Literally thousands of debtors who haven't been paying their utility bills, all scrambling at once to file bankruptcy as an 11th hour attempt to keep the lights on.

So it is in that spirit that I bring up the ostrich effect in the hopes that this whimsical illustration will remind folks to not wait until the last possible minute. Consult with an attorney. Our initial consultations are free, and it never hurts to arm yourself with as much information as early on as possible.

Bankruptcy Mythbusting #10

2011-12-25T08:28:00.000-06:00

Myth: I will never have another credit card again! I don't want or need to rebuild my credit.

Fact: Your credit does more for you than allow you to incur debt. Although rebuilding credit for that purpose is enough of a reason if you ever hope to buy a home or new car. But let's pretend for a moment that you are willing to live in an apartment for the rest of your life and buy beaters with cash, just to avoid going into debt again. Your credit score is used by more than just lenders, such as prospective employers, insurance underwriters, and prospective landlords.

In a nutshell, you need to be concerned with your credit score (and more importantly, rebuilding your credit score), because it will impact many areas of your life.

Credit cards might not be the best way to rebuild credit, but it is faulty logic to believe that credit cards are - in and of themselves - bad. They are not. Credit cards can be very useful tools, if used properly.

The problem is that too many people use credit cards and loans as a means of supplementing their income. For example, Bob earns $2k per month, spends $3k/mo, and supplements his income by taking out $1k loans each month. Bob is living beyond his means. The proper way for Bob to handle his finances is to either scale back his expenses, find ways to increase his income, or a combination of both.

Credit cards are best used as a means of a temporary advance. Bob spends $2k/mo, and Bob earns $2k/mo, but Bob doesn't have $2k right this second. He needs to make a purchase, and will have the money to cover the purchase on a later date. He puts the purchase on a credit card, and promptly squares his bill when the statement comes in.

Of course, budgeting (leaning how to scale back expenses as necessary) and determining what expenses are necessities and what expenses are optional is a whole other topic. As an experienced bankruptcy attorney, I can help make suggestions for improvements to your budget so that you only have to go through bankruptcy once, and can avoid having to do it again in the future. If you'd like to schedule a free consultation to determine what we can do for you, give my office a call at (920) 490-6160.

Bankruptcy Mythbusting #9

2011-12-24T07:48:00.001-06:00

Myth: Debts I list on my bankruptcy schedules will be discharged. OR Debts I do not list on my bankruptcy schedules will not be discharged. OR I can pick and choose which debts to include.

Fact: A lot of confusion arises because most people think that “listing” a debt is synonymous with “filing against” or “discharging” a debt, which is inaccurate. Unfortunately, too many people do not disclose all of their debts as they should, and this causes big problems down the road. Listing a debt on your bankruptcy schedules is NOT synonymous with having the debt discharged. Whether a debt is discharged depends on the nature of the debt, not whether it was listed and disclosed.

A non-dischargeable debt (such as a student loan or tax debt) is what it is. You could file bankruptcy over and over again, and list your student loans on your bankruptcy petition each and every time. Unless you can demonstrate the nearly impossible standard of undue hardship, those student loans are not going away.

And a dischargeable debt (such as a credit card or medical bill) is what it is. So many clients want to keep a particular store credit card, a credit card for making fuel purchases, or they don’t want to file against their favorite doctor. But the bankruptcy is universal, and all unsecured debts are discharged, whether they were listed on schedules or not.

Stated another way, the Chapter 7 discharge is "good against the world," including unscheduled creditors. The discharge is said to be good against the world in the sense that it applies to all unscheduled debts except those that are expressly made nondischargeable by § 523. In re Guseck, 310 B.R. 400, 402 (Bankr. E.D. Wis. 2004)

Nor does listing your home mortgage and auto loan mean that you are going to lose your house or car. Most people get to pick and choose which secured debts they will reaffirm or surrender. Listing secured creditors on your bankruptcy schedules is not itself an affirmation of intent.

So if a debt will be discharged whether or not it is listed on schedules, or if a debt is non-dischargeable whether or not it is listed on schedules, then why is it is so important to list creditors on schedules?

No matter who the creditor is – a non-dischargeable student loan, a dischargeable credit card, or a home mortgage you intend to reaffirm – they are all legally affected by your bankruptcy filing. Your bankruptcy case automatically endows you and all of your creditors with certain rights and responsibilities.

Disclosing all debts is a matter of proper notice and due process rights. Each of your creditors is entitled to be made aware of your bankruptcy so that they can conform their behavior accordingly. If their debt is dischargeable, they may be entitled to object to discharge if they can prove fraud. Though student loans won’t be discharged, your lender is still required to not make collection attempts while the bankruptcy is pending. And though you intend to reaffirm your home mortgage, the debt is technically dischargeable, so your lender needs to execute a reaffirmation agreement.

And if your case is an "Asset Chapter 7" (non-exempt property available to the trustee to be sold for the benefit of unsecured creditors) or a Chapter 13 (which includes monthly plan payments to be redistributed among creditors), then all of your creditors have a right to know about the bankruptcy so they can file claims.

Sure, there are other reasons to list all creditors. (1) So you get the full force and benefit of your automatic stay and discharge injunction protections. (2) Because your debt to income ratio, who your creditors are, and how much your creditors are owed (regardless of class) may very well have a material impact on your case and how it is administered. (3) Because keeping unsecured debts "out of bankruptcy" usually means you're still making payments to them, which would suggest that you have been making preferential payments.

But at the end of the day, it is primarily a due process issue. Each and every one of your creditors, regardless of your intent to pay and regardless of dischargeability, will be affected by your bankruptcy case and have a right to know that you filed for bankruptcy.

Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #8

2011-12-23T07:14:00.003-06:00

Myth: I make too much money to qualify for bankruptcy.

Fact: Although it is possible to earn too much money to qualify for Chapter 7 Bankruptcy, there is no income limit on Chapter 13 Bankruptcy. Even millionaires and billionaires can file for bankruptcy. It's not about the money you make. It's all about your debt to income ratio. A person making $40k per year in income and no debt could be doing better than someone making $400k per year if the latter person has a bucket load of debt.

Several weeks ago, I saw an advertisement for some reality show - I believe it was Braxton Family Values, where one girl commented on another girl's house and pool "Is this what it means to be bankrupt?" I thought the ad was amusing.

Bankruptcy is a very nuanced field of law. I don't mean to give anyone the impression that if they file for bankruptcy, that they too could wind up in a Beverly Hills mansion with an olympic size swimming pool. But the notion that "bankruptcy is for poor people" is incredibly short-sighted and ignorant.

They say a rising tide raises all ships. But if a tide falls low enough, it can sink all ships, too. During a good economy, most bankruptcy debtors tend to be low income individuals. But in a rough economy, like we are experiencing now, the socioeconomic make-up of the average debtor has become far more affluent. In short, people we used to consider wealthy and beyond bankrupt, they too are faced with mounting debt that their income falls short of being able to pay.

An experienced bankruptcy attorney can look over the facts of your case and predict fairly accurately what you can expect in both a Chapter 7 and Chapter 13 environment before you make any commitments. Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #7

2011-12-22T07:14:00.003-06:00

Myth: I don't have enough debt to file bankruptcy.

Fact: There is no legal requirement or minimum amount of debt necessary to file for bankruptcy. There may be more pragmatic concerns, such as whether you have enough debt to make filing bankruptcy worthwhile. I generally try to discourage people from filing for bankruptcy with less than $6k in unsecured debt because the cost to benefit ratio becomes small, though I've had clients insist on filing bankruptcy over less than $4k in debt. Usually, there is some other factor motivating bankruptcy, not just the amount of debt. Most people have somewhere between $20k to $80 in unsecured debt.

You can have too much debt. Chapter 13 has limitations on how much debt you can have. If your debt exceeds those amounts, and do not qualify for a Chapter 7 Bankruptcy, you could be stuck with the much dreaded Chapter 11 bankruptcy (which is usually for corporations, but individuals sometimes file Chapter 11, too). Fortunately, very few people have so much debt that they are faced with this scenario.

The good news is that an experienced bankruptcy attorney can look over the facts of your case and determine whether Chapter 7 or Chapter 13 is best for you before you make any commitments. Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #6

2011-12-21T07:14:00.003-06:00

Myth: I will lose my tax refund.

Fact: In Chapter 7, a tax refund is what we call a "contingent asset" which means that it is an asset that you are currently entitled to, but will not receive until some future date. Once a tax refund is received, it is converted to a cash asset. So you will want to list and exempt the next tax refund you expect to receive after the date your case is filed. In other words, if you file April 1, 2012, have received your 2011 tax refund 2 weeks earlier, you will want to estimate and list your expected 2012 refund (which you wouldn't get until early 2013). You also must list any tax refunds for prior years that you haven't received yet.

Most debtors can exempt their tax refund. Tax refunds might not be exempt if it is a large refund and the debtor already has a lot of other assets that are exhausting available exemptions.

In Wisconsin, the only exemption available for tax refunds is the federal wildcard exemption. Debtors who elect to use state exemptions for any reason (usually to protect equity in real estate in excess of $40k) cannot exempt their tax refund.

In Chapter 13, tax refunds are perceived as future disposable income. In the Eastern District of Wisconsin, the convention is that some debtors must pay in half of their refund, others may keep their refunds.

Above median debtors are entitled to keep their refunds because their tax deduction is computed on the line 30 of the Means Test based on actual tax liability. It is presumed that the debtor must adjust their tax withholdings to effectively make their tax refund zero in order to afford the plan payment as required under the Means Test.

Below median debtors never make it to line 30 of the Means Test, so their tax deduction is based on their budget schedules, which is based on tax withholdings. Since a person can over-withhold, the trustee gets half of the refund, if any.

Why only half? If the debtor gets to keep half, it provides more incentive for the debtor to maximize their refunds on their tax returns, so both the debtor and unsecured creditors get the biggest slice of the pie as possible.

Above median debtors can be required to submit 1/2 of their tax refunds, too. This happens anytime the tax liability on the Means Test is calculated by some other method than the standard formula, or if the debtor does a post-confirmation amendment of the plan (because post-confirmation amendments no longer rely on the Means Test, but on the budget).

An experienced bankruptcy attorney can look over the facts of your case and predict fairly accurately the fate of your tax refunds in both a Chapter 7 and Chapter 13 environment before you make any commitments. Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #5

2011-12-20T07:14:00.003-06:00

Myth: I received notice of foreclosure. It's too late to save my home. I might as well give up and find somewhere to rent.

Fact: This one varies considerably from state to state. In Wisconsin, receiving a summons and complaint for foreclosure is just the first step in a considerably long process.

There are a few ways to stop foreclosure. One is to pay the reinstatement amount (bring the account current). This is the simplest way, but it involves paying late fees, penalties, interest, and attorney fees associated with the foreclosure. And 9 times out of 10, whatever caused the initial default will also prevent you from affording this option.

Refinance and loan modification are also options. Refinancing is tough - even in optimal housing market conditions - because obtaining a new mortgage with mortgage defaults on your credit report is a challenge. Loan modification requires finding a reputable company to modify through, which is next to impossible (read here).

Or you can cure your arrears at no additional interest through a Chapter 13. Case law has established that in Wisconsin, you can stop foreclosure so long as Chapter 13 is filed before the Confirmation of Sale. However, best practice is to file your Chapter 13 before the Sheriff's Sale.

Procedurally in Wisconsin, a mortgage lender typically files a foreclosure lawsuit after two missed mortgage payments. Depending on the court's docket load, a hearing is usually scheduled between 6-8 weeks later. At that hearing, a judgment of foreclosure is usually entered unless there is a bona fide dispute. From the date the foreclosure judgment is entered, the homeowner has a minimum 6 month redemption period. The redemption period can be lengthened to 12 months if the mortgage lender is seeking a deficiency judgment, or shortened to 3 months if the property is abandoned. (These time frames are generally halved if the property is not the debtor's primary residence.) Sometime after the redemption period ends, there will be a Sheriff's Sale. About 2 weeks after the Sheriff's Sale is the Confirmation of Sale.

So a judgment of foreclosure does not instantly spell doom. You have upwards of 6-8 months to get a case filed and save your house.

However, you should consult with an attorney immediately once you have learned of foreclosure. You don't want to have to rush your attorney to do a sloppy filing. You have 6 months minimum, there's no reason to walk into an attorney's office at the 11th hour.

Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation. I can determine what it would take to stop your home from going into foreclosure, and how much time you have left to act.

Bankruptcy Mythbusting #4

2011-12-19T07:14:00.001-06:00

Myth: I can file for bankruptcy without an attorney.

Fact: This myth is actually true. Whether it is prudent is a whole other can of tuna.

Although the bankruptcy courts require corporate debtors to be represented by an attorney, individuals are permitted to file bankruptcy without an attorney, or pro se, But is this wise?

Most of the bankruptcy schedules are actually pretty straight forward. List everything you own on Schedules A & B. List all of your debts on Schedules D-H. Write up your budget on Schedules I & J. Follow the instructions and answer the questions on your Statement of Financial Affairs.

The tough parts, however, are Schedule C (your exemptions) and Form B22 (the Means Test).

Schedule C requires intimate knowledge about how to qualify to use one set of exemptions over the other, knowing the available exemption statutes and their ever-changing dollar limits (which are not always current in the statutory publications), and the best way to arrange exemptions to maximize their benefit and stretch. All of this, to say nothing of the scores of litigation involving proper use of exemptions, community property laws, and other related topics. Sometimes, navigating Schedule C is tricky, even with an attorney. Doing so without an attorney puts you in increased danger of losing assets to trustee liquidation.

Similarly, the Means Test is a complex form intended to standardize and compute disposable income. Most of the available deductions are buried in IRS tables. Again, there is a large amount of litigation and case law that impacts allowable deductions on the Means Test that can test even the most seasoned bankruptcy attorneys, let alone someone with no legal training.

Bankruptcy is a very nuanced field or law. It's not even wise for licensed attorneys to merely "dabble" in it from time to time. Your best bet is to have an attorney who routinely practices bankruptcy and constantly stays on top of changes in the laws and trends in their interpretation.

Not to mention, you will make your judge and trustee happier if you are represented by counsel. Court dockets are clogged with pro se debtors whose cases are under special review because they failed to file important documents, complete credit counseling, and meet other very important deadlines.

Even in the simplest of bankruptcy cases, there is a lot of knowledge necessary to file the bankruptcy properly. It's a lot to learn for one-time use. Bankruptcy attorneys may make the process seem easy, but those of us who do dozens of cases each month use our years of experience to put procedures and policies in place to make the process as seamless as possible. Our practices are built on years and years of trial and error, and a lot of sweat.

Bankruptcy Mythbusting #3

2011-12-18T07:14:00.000-06:00

Myth: I don't want to file for bankruptcy because it will damage my credit and I have great credit now.

Fact: This myth is composed of about one teaspoon of fact and two cups of fiction. The teaspoon of fact is that yes, your credit will take a hit after you file for bankruptcy.

The first cup of fiction is believing that you have great credit right now. If a person's finances have become so distraught that the person has made an appointment with me to discuss bankruptcy, their credit is usually worse than they think it is. Most people think that their credit rating is based solely on their payment history, and because they are current on all of their bills, they must have excellent credit.

In fact, credit scores are based on several items - only one of which is payment history. The algorithms for determining credit score are a tightly guarded trade secret held by the credit bureaus, so there are only a few people in the world who know with certainty what affects credit and by how much. What we know, however, is that your credit score is impacted by:

payment history
debt to income ratio
types of debts
number of open accounts open
available / unused credit
residential and employment stability
and much more...

No matter what sort of bankruptcy you're filing under, bankruptcy is generally a debt to income ratio problem. Even millionaires can file for bankruptcy. The issue isn't how much money you make, but whether that income is sufficient to pay back your debt as it becomes contractually due.

The second cup of fiction is that your credit is ruined forever. While it is true that the bankruptcy remains on your credit for up to ten years, your credit score can be rehabilitated. Think of bankruptcy as resetting you to when you turned 18 and had no credit. You start over from scratch.

If you're lucky, you will have debts that survive bankruptcy, like a mortgage, car loan, or student loans. These debts already exist, so you don't have to reapply for them. You can continue making payments on these debts and use them to re-establish your credit worthiness. Filing Chapter 13 can also help rebuild credit a little faster than it would in Chapter 7, because you're paying back some of your debt, plus the regular plan payments and payments from the trustee help. If you file under Chapter 7 and don't have any surviving debts, small secured loans (furniture and appliance loans) are a great way to get back on your feet.

When done correctly, most people have substantially better credit scores about 12 months after filing bankruptcy than they did going in.

Also bear in mind that your bankruptcy will - in some respects - make you less of a credit risk. People filing for Chapter 7 Bankruptcy can't get another Chapter 7 discharge for 8 years. New creditors know that one way or another, they're going to get paid for the foreseeable future. Also, with all of your unsecured debt now eliminated, you now have a better debt to income ratio, and presumably, an increased ability to pay back new debt.

An experienced bankruptcy attorney can look over your financial circumstances and give you advice on the best ways to rebuild your credit after bankruptcy before you make any commitments. Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #2

2011-12-17T07:14:00.000-06:00

Myth: I don't want to file for bankruptcy because [fill in the blank] will find out!

Fact: Most people find bankruptcy to be a humiliating experience, and are afraid that anyone and everyone - from friends and family to neighbors and coworkers - will find out their secret.

First of all, I think the stigma is unnecessarily exaggerated. Many people find themselves in bankruptcy through no fault of their own - from disastrous medical events, being laid off in the bad economy, or a vehicle needing expensive repairs. Even those who find themselves in bankruptcy - at least partially on their own accord - shouldn't feel overly guilty. This country has never emphasized financial education in its schools, so very few of us know how to read a contract, or fully appreciate the effect of interest and loan terms on debt. People make mistakes, and those mistakes needn't destroy you for life. The trick is to learn from them so you don't repeat the same mistakes. Bankruptcy gives you that fresh start.

The fact of the matter is that a LOT of people file for bankruptcy. Undoubtedly (and statistically), you are acquainted with several people who have filed for bankruptcy. You might just not be aware that they filed for bankruptcy. In the state of Wisconsin, I would estimate that between 25 and 35,000 people file for bankruptcy each year.

So who will find out? For the most part - those who will find out will be (a) your creditors - the bankruptcy court has to send out notice to all of your creditors, and (b) anyone who pulls your credit report for the next 10 years. It is uncommon for anyone else to find out you filed for bankruptcy.

Yes, bankruptcy is a matter of public record. Wisconsin residents may be familiar with Wisconsin Circuit Court Access (CCAP), which is a free, publicly accessible, searchable database of all state court cases. The good news is that bankruptcy cannot be found on CCAP. Why? Because CCAP is a database of state court cases. Bankruptcy is a federal court case.

The federal courts have an analog to CCAP called PACER, but unlike CCAP, you must have a paid login to access it. For the most part, the only people with access to PACER are legal and financial professionals who need to access these sorts of records.

Newspapers and tabloids often feature news about bankruptcy for celebrities and airlines. However, they do not publish notices of bankruptcy for ordinary individuals. That's because (a) publication by newspaper is not valid form of notice in bankruptcy procedure and (b) there are simply too many bankruptcy cases to fit in an ordinary publication. I am aware that back in the day, bankruptcy cases used to be published in the newspaper, and I cannot categorically deny that there isn't some backward newspaper in some corner of the country that still does this. However, I am unaware of any newspaper in the state of Wisconsin that does this.

Your friends, family, and neighbors are very unlikely to discover your bankruptcy unless you tell them, or unless you owe them money. Remember, there's a very good chance several people you know filed for bankruptcy, but you don't know that they filed.

Employers are slightly more likely to find out you filed for bankruptcy. This is true of anyone who files Chapter 13 bankruptcy and has a payroll deduction order for the plan payments (most trustees are flexible and will allow you to make direct payments if this is a concern, so long as you remain current on your plan payment commitments). Employers would also find out if you are currently having your wages garnished, and your attorney needs to notify your payroll department of the bankruptcy to terminate the garnishment. Most people feel that the wage garnishment dulls the humiliation factor of bankruptcy.

Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation.

Bankruptcy Mythbusting #1

2011-12-16T07:57:00.002-06:00

Myth: If I file for bankruptcy, I will lose my [fill in the blank].

Fact: People are afraid that they will lose something - whether it's their home, their car, or their tax refund. That's simply not true. The purpose of bankruptcy is not to strip you of all your worldly possessions and leave you out on the streets with the shirt on your back. Nor does bankruptcy mean a free-for-all for your creditors to come into your home and seize anything of value.

Nevertheless, in a small percentage of cases, people do lose something in bankruptcy, and that's how these rumors get started. People think that because they know it happened in one case, it therefore happens in all cases. While this is false, it is fair to ask - when does someone risk losing something in bankruptcy?

There are only two ways you can lose property in bankruptcy.

First, is through foreclosure / repossession. Bankruptcy eliminates debt, but it does not eliminate liens. Therefore, secured creditors with liens on stuff you own can still exercise their rights to recover their collateral of their debt is not paid. Therefore, if you are delinquent on your mortgage or car payment and file for bankruptcy, your mortgage lender or auto finance company can still take possession of your house or car.

Of course, the same is true, even if you don't file for bankruptcy. The role bankruptcy plays in the foreclosure and repossession process is twofold. One, bankruptcy could trigger these proceedings if the lender hadn't started them yet. In my experience, lenders don't start foreclosure or repossession proceedings until the customer is - on average - two months delinquent on their bill. So, I caution my clients who are even only one month behind on their secured debt payments to catch-up before filing for bankruptcy. Two, the bankruptcy does temporarily stall foreclosure and repossession by way of the automatic stay. Before the creditor can proceed with taking their collateral, they must either file a motion with the court to be excepted from the stay, or they must wait for the bankruptcy case to be discharged and closed.

The second way to lose property is by having property that exceeds your allowed exemptions. While you are not expected to be left out on the streets wearing a barrel, you're not allowed to sit on the proverbial gold mine while your creditors get the shaft, either. Therefore, each debtor in bankruptcy is entitled to "exemptions" which protect equity in assets from trustee seizure. If your assets fit within your allowed exemptions, you keep everything, your creditors get nothing, and your case is referred to as a "no asset case". If the equity in some of your assets exceeds your allowed exemptions, exposed assets could be seized by the trustee and sold for the benefit of unsecured creditors - referred to as an "asset case".

The exemptions you get to choose from vary, depending on which state you file in. Some states are more generous than others. Wisconsin residents may choose between state exemptions and federal exemptions - both sets of which are fairly generous. Consequently, very few debtors filing in Wisconsin have asset cases, and those that do usually do not have very much non-exempt property. Some other states have more favorable exemptions, and others have less favorable exemptions - leading to lower and higher rates of asset cases, respectively.

Some people have heard a myth that they can protect a certain "x" dollar amount of property because someone quoted to them a particular exemption. What's important to understand is that the federal exemptions, and each state set of exemptions, contain several different types of exemptions for different types of property. For example, when using federal exemptions, you have an exemption to protect real estate, another exemption for vehicles, another for household items, another for retirement accounts... Well, I could go on and on - there are literally several dozen exemptions. Some of these have dollar limits. Others, like the ones for retirement accounts, have no dollar limit. Most can only be used for specific types of property. Others, like the "wildcard" exemption, can be used on any asset that doesn't have its own specific exemption (like cash, bank account balances, tax refunds) and assets that are not completely protected by their own exemption (a vehicle with $4k in equity would need a combination of the motor vehicle exemption and a little wildcard exemption to top it off).

If I haven't yet driven home the idea that whether you lose property is fact-specific and varies on a case-by-case basis, then let me point out that everything I've just said assumes you are filing for Chapter 7 Bankruptcy.

Even if your attorney determines that you might lose an asset due to non-exempt equity, or to foreclosure / repossession, you may be able to avoid losing anything by filing for Chapter 13 Bankruptcy. As I like to say, Chapter 13 Bankruptcy can fix any problem that pops up in Chapter 7 Bankruptcy.

In Chapter 13, you can cure arrears on a secured loan over the life of the plan. So for example, say that you are six months behind on your mortgage payments and facing imminent foreclosure. You can file Chapter 13 before the foreclosure process is complete, and propose to pay the arrears over the life of the plan. The bankruptcy filing stops the foreclosure process, and if you complete the Chapter 13 plan successfully, your mortgage will have been brought current by the time you exit.

Similarly, Chapter 13 can alleviate the problem of non-exempt equity. Let's say you have $5k in exposed equity. In Chapter 7, the trustee can seize the asset, sell it, pay you the amount you were able to exempt, and use the remaining $5k to pay to unsecured creditors. In Chapter 13, you pay the trustee (spread out over the life of a 3-5 year plan) an amount identical to what the trustee would have gotten in Chapter 7. The creditors are made as whole as they would have been in Chapter 7, and in exchange, you keep all of your property.

Of course, Chapter 13 only works if you can afford to do whatever you're trying to accomplish. For example, low income debtors who are 8-12 months behind on their mortgage might not be able to afford the necessary plan payment - even over a 5 year plan - to bring the mortgage current. It's a way to say that bankruptcy is not for everyone, and what happens in your case is extremely fact-specific to your particular circumstances.

The good news is that an experienced bankruptcy attorney can look over the facts of your case and predict fairly accurately what you can expect in both a Chapter 7 and Chapter 13 environment before you make any commitments.

Want to find out what bankruptcy could mean for you? Call (920) 490-6160 now to schedule a free consultation. I can determine whether your assets might be vulnerable to foreclosure, repossession, or seizure by trustee, plus more.

November 2011 Foreclosure Stats

2011-12-15T09:21:00.002-06:00

Brown	87
Calumet	10
Door	11
Florence	0
Fond du Lac	30
Forest	2
Green Lake	12
Kewaunee	5
Langlade	4
Manitowoc	26
Marinette	13
Marquette	7
Menominee	1
Oconto	19
Outagamie	38
Shawano	18
Sheboygan	45
Waupaca	20
Waushara	14
Winnebago	57
	419

Bankruptcy MythBusting Series

2011-12-15T07:12:00.001-06:00

In all of my years practicing bankruptcy law, I have heard a lot of reasons why people avoid filing for bankruptcy. The majority of those reasons are based on false myths. Over the next several days, we're going to explore and debunk some of the most common myths.

How do these myths get started? Many of them come about when people, who are less educated than they pretend to be, pass off what they understand as fact. This was rampant when the news media reported on the effects of the BAPCPA when it was pending legislation in 2005. Many claimed that it would be impossible for anyone to file for bankruptcy once the new law went into effect. Nothing could be further from the truth. In fact, while BAPCPA made filing bankruptcy more complex and something of a nuisance, many have argued that it is now easier to qualify for bankruptcy, due to the arbitrary nature of the one-size-fits-all Means Test.

Most of the other myths stem from anecdotal evidence. My neighbor Bob filed for bankruptcy and he lost his house, therefore everyone who files for bankruptcy loses their house. Again, false. Bankruptcy is intensely fact specific. What happens in one bankruptcy case will not necessarily happen in another bankruptcy case. Differences in household size, what state you live in, how much income you have, what you own, what you owe, what chapter you file under, and a plethora of other fine minutiae all coalesce together to determine the disposition of your particular bankruptcy. Bankruptcy cases are like snowflakes - while many may look similar from a distance, no two are identical. A competent bankruptcy attorney can review your case to determine specifically what impact bankruptcy will have on you.

Have a myth you would like to have verified or debunked? Post a comment and I'll be sure to include it in the series.

Bankruptcy Court Clamping Down on Pro Se Filers

2011-11-14T23:21:00.000-06:00

The Eastern District of Wisconsin has been among the top districts in the country with the highest ratio of pro se debtors (people who file bankruptcy without an attorney), to the point where it has become a problem for the judiciary. Pro se debtors are far less likely to appear at the section 341 Hearing, pay the filing fee, complete their counseling courses, file complete paperwork, complete paperwork properly, furnish documents to the trustee in a timely manner, etc. All of this accumulates and creates a strain on the judges and trustees who are administering these cases.

Last month, the bankruptcy court hosted a conference with debtor's attorneys, creditors and creditor's attorneys, trustees, and judges. The discussion centered on ways to reduce the number of pro se filings and make the pro se cases that are filed flow smoother. The result of that conference is that the judges are imposing new policies and procedures which will be less forgiving of debtors who fail to meet certain deadlines and requirements.

On October 27, 2011, the Eastern District judges, clerk and clerk's office supervisors met to discuss the ideas generated at the October 7 pro se brainstorming session. They decided to take the following actions:

1.) Installment fee applications:

A.) The order granting the application to pay the filing fee in installments will require the debtor to make three payments of $102 each, due 30, 60 and 90 days after the petition date, respectively. If the debtor timely requests more time to pay an installment, only one extension will be granted; the judges no longer will consider multiple requests for extensions. If, before the expiration of the 120-day deadline prescribed by Rule 1006(b)(2), a debtor shows adequate cause, the court can extend the deadline for a full 180 days after the petition date. If the court dismisses a debtor’s case for failure to pay an installment, it will not vacate or reconsider that dismissal unless the debtor pays the full balance remaining on the filing fee along with the motion to reinstate.

B.) If the court dismisses a debtor's case for failure to pay any installment of the filing fee, the dismissal order will warn that debtor that if he files a new case within 180 days of the dismissal of the first case, the court will neither waive the filing fee nor grant a request to pay the fee in installments in the second case. If the debtor, in spite of that warning, files a second case within 180 days of the dismissal of the first case and asks either for a fee waiver or an installment plan, the court will deny those requests and give the debtor fourteen (14) days from the petition date to pay the filing fee in full. If the debtor does not pay the filing fee in full in 14 days, the court will dismiss the second case.

2.) Fee waiver applications:

The judges and supervisors considered the suggestion that the court ask debtors to complete a questionnaire, collecting additional information to help the judges make fee waiver decisions. They concluded that all four of the judges already collect most of the suggested information themselves before making fee waiver decisions, and noted that there was no way to get debtors who filed by mail, or who had petition preparers file for them, to complete the questionnaire. Accordingly, the judges decided to continue making fee waiver decisions on a case-by-case basis, and to continue using the information they collect themselves from the petition, schedules and previous filings. The judges and supervisors also agreed that the judges would continue to rule on the fee waiver applications earlier in the case, rather than waiting until after the meeting of creditors. A debtor whose fee waiver application is denied after the meeting of creditors has lost some 45 to 60 days of the 120 days the rule gives him to pay the filing fee, whereas a denial early in the case gives the debtor more time to collect and pay the fee in installments.

3.) Petition preparers:

Starting January 1, 2012, the court will impose a cap on the "presumptively reasonable" petition preparer fee. This cap will be $75. If a petition preparer believes her services are worth more than $75, she must file an affidavit explaining why, and the court will decide whether to allow a higher fee. If a petition preparer charges or collects more than $75 without court approval, the court will require the preparer to refund the money to the debtor, and the preparer could face other sanctions. The court already has started advertising this policy by posting it on the web site and placing flyers in the pro se packets, at the Help Desks, and at the front counter.

The court will continue its previous efforts, as well–monitoring petition preparers who do not comply with the law, providing support to the Help Desks, etc.

The judges and clerk's office staff are grateful to all of the people who contributed ideas and suggestions, both on the list serve and at the October 7 brainstorming session. We look forward to continuing to work with the bar to address the needs of the bankruptcy community in the days ahead.

Even the simplest "cookie-cutter" bankruptcy cases care complex and difficult for someone without specialized training. While most of the bankruptcy schedules are fairly straightforward, there are two forms that are next to impossible to complete without an attorney who is not only familiar with the statutes and rules governing these forms, but also the extensive case law that has evolved around various issues of these two forms.

A lot of people avoid hiring attorneys either because they believe they can do it cheaper or because they just don't like lawyers. But filing bankruptcy (especially if done incorrectly) can have massive consequences and repercussions. It is unwise to try to navigate the laws, forms, and procedures alone and without the assistance of someone who routinely handles bankruptcy cases.

October 2011 Foreclosure Stats

2011-11-14T12:06:00.002-06:00

Brown	61
Calumet	9
Door	4
Florence	1
Fond du Lac	26
Forest	2
Green Lake	9
Kewaunee	8
Langlade	7
Manitowoc	23
Marinette	19
Marquette	10
Menominee	0
Oconto	22
Outagamie	38
Shawano	10
Sheboygan	35
Waupaca	18
Waushara	8
Winnebago	59
	369

New Median Income Levels

2011-10-24T09:56:00.000-05:00

With the exception of a household of one (single person, no dependents), the median income levels are dropping effective November 1, 2011. This means that households making $XXX are more likely to qualify for Chapter 7 before November 1 than after. The new numbers (for Wisconsin only) are listed below:

Household Size:	1	2	3	4	+1
Before 11/1	$41,150	$56,080	$66,256	$77,438	+$7,500
After 11/1	$41,880	$55,671	$64,724	$76,117	+$7,500

Also, remember that the court's filing fees are increasing by $7 effective November 1, 2011, as well. Chapter 7 fees are increasing from $299 to $306, and Chapter 13 fees are increasing from $274 to $281.

September Foreclosure Stats

2011-10-10T14:47:00.001-05:00

Brown	102
Calumet	12
Door	5
Florence	3
Fond du Lac	34
Forest	5
Green Lake	7
Kewaunee	15
Langlade	12
Manitowoc	22
Marinette	18
Marquette	8
Menominee	0
Oconto	20
Outagamie	50
Shawano	14
Sheboygan	39
Waupaca	22
Waushara	13
Winnebago	38
	439

Filing Fee Increase

2011-09-20T09:38:00.001-05:00

The U.S. Bankruptcy Courts are increasing their filing fees by $7 effective November 1, 2011. Chapter 7s, which currently have a filing fee of $299, will increase to $306. Chapter 13s, which currently have a filing fee of $274, will increase to $281.

The Importance of Disclosing All Debts

2011-09-15T18:39:00.002-05:00

Recently, I experienced a string of Chapter 13 cases that were in danger of failing within just the first few months. It turned out that the reason in each case was the same: the debtors were paying and trying to play catch-up with their utility services (Wisconsin Public Service) and couldn't afford to make their plan payments.

The thing is, WPS should have been included in their bankruptcy case and not paid separately from the Chapter 13 Plan. In each case, the debtor never informed me that they were delinquent on their utility bills. Why WPS didn't show up on their credit reports is a different mystery, but the point remains that a debtor needs to tell their attorney about any debts they may not have shown up on a routine credit check.

I could get into a detailed discussion about WPS and when and why their debts need to be included in bankruptcy. But I think this story illustrates a much broader issue that I find myself repeatedly having to hash out with clients. And that's the "I don't want to file against so-and-so" problem.

Here's the thing, and I can't stress this point nearly enough. Listing a debt on your bankruptcy schedules is NOT synonymous with having the debt discharged. Whether a debt is discharged depends on the nature of the debt, not whether it was disclosed.

A non-dischargeable debt is what it is. You could file bankruptcy 20 times and list your student loans on your schedules each time, and without a demonstration of hardship, those loans aren't going away.

Similarly, someone who wishes to keep a store credit card open for future purchases does themselves no favors by omitting the creditor from their schedules. The bankruptcy discharge is good against the world. And the credit card debt is discharged, whether they were listed on schedules or not.

Stated another way, the Chapter 7 discharge is "good against the world," including unscheduled creditors. The discharge is said to be good against the world in the sense that it applies to all unscheduled debts except those that are expressly made nondischargeable by § 523.
In re Guseck, 310 B.R. 400, 402 (Bankr. E.D. Wis. 2004)

And listing your home mortgage or car loan does not mean you're going to lose your house or your car. Most people get to pick and choose what secured debts they will reaffirm or surrender. Listing these creditors on schedules is not an affirmation of intent.

So if a debt will be discharged whether or not it is listed on schedules, or if a debt is non-dischargeable whether or not it is listed on schedules, then why is it is so important to list creditors on schedules?

Because no matter who the creditor is - a non-dischargeable student loan, your dischargeable credit card, or your home mortgage that you intend to reaffirm - they are all legally affected by your bankruptcy case. Your bankruptcy case automatically endows you and all of your creditors with certain rights and responsibilities.

So disclosing all debts becomes a matter of proper notice and of due process rights. Each of your creditors is entitled to be made aware of your bankruptcy so that they can act accordingly. If their debt is dischargeable, they may be entitled to object to your discharge for allegations of fraud. Although your student loans may not be discharged, your lender is still required to not make collection attempts while the bankruptcy is pending. And although you intend to reaffirm your home mortgage, the debt is technically dischargeable, so your lender needs to know to execute a reaffirmation agreement.

If your case is an "Asset Chapter 7" (non-exempt property available to the trustee to be sold for the benefit of unsecured creditors) or a Chapter 13 (which includes monthly plan payments to be redistributed among creditors), then all of your creditors have a right to know about the bankruptcy so they can file claims.

Sure, there are other reasons to list all creditors. (1) So you get the full force and benefit of your automatic stay and discharge injunction protections. (2) Because your debt to income ratio, who your creditors are, and how much your creditors are owed (regardless of class) may very well have a material impact on your case and how it is administered. (3) Because keeping unsecured debts "out of bankruptcy" usually means you're still making payments to them, which would constitute all sorts of preference payment issues.

But mostly, it's a due process issue. Each and every one of your creditors, regardless of your intent to pay and regardless of dischargeability, will be affected by your bankruptcy case and have a right to know that you filed for bankruptcy.

Median Income Levels Changing

2011-09-14T21:49:00.000-05:00

The median income levels are due up for a change something in the next month or two (usually mid-October or November 1). Median income levels change twice each year. Being below median means you are presumed to qualify for a Chapter 7 Bankruptcy. Being above median means you are presumed to have to file Chapter 13 Bankruptcy (although there are exceptions to both of these presumptions). While I don't yet know what the new median income levels will be, it has been reported that the income levels are dropping. That means that your income could be below median now, but by the end of the year, you will instead be above median.

The median income levels are a reflection of the average household income in each state for any given household size. So if median income levels drop next month, that generally means that Americans are earning less money than they were 6 months ago. That probably doesn't come as much of a surprise to anyone, but here's what might... When the median income level drops, more Americans are presumed to have to file Chapter 13 (debt repayment) even though Americans are, as a whole, making less money. When the median income level increases, more Americans qualify for Chapter 7 (simple discharge), even though we're making more money as a nation.

Regarding the bankruptcy laws passed in 2005, one of my colleagues is fond of saying, "Morons wrote this law. It doesn't make sense, but it is what it is." And when you think about this correlation between median income levels and what it means for bankruptcy filings, you have to agree with the sentiment.

August 2011 Foreclosure Stats

2011-09-14T21:40:00.000-05:00

Up 28% this month.

Brown	78
Calumet	10
Door	14
Florence	0
Fond du Lac	37
Forest	1
Green Lake	6
Kewaunee	6
Langlade	11
Manitowoc	20
Marinette	18
Marquette	13
Menominee	0
Oconto	17
Outagamie	44
Shawano	12
Sheboygan	44
Waupaca	26
Waushara	16
Winnebago	48
	421

Threats of Criminal Prosecution

2011-09-02T06:36:00.001-05:00

A growing number of my clients have reported incidents to me of a collection agency or cash store threatening criminal prosecution for fraud or passing bad checks, in order to get my clients to pay them the debt owed to them.

First, let's get the bad news out of the way. Yes, it is technically possible for any creditor to press criminal charges against a debtor if they believe they can make a case for fraud. Even once a bankruptcy case is filed, the automatic stay does not prevent formal criminal proceedings from commencing or continuing.

HOWEVER...

As a criminal proceeding, the burden of proof is on the creditor to demonstrate fraud, which requires a showing of intent by the debtor to defraud. That intent is very difficult, often impossible to prove. So while it is possible, and certainly does happen from time to time, it is rare for fraud to be prosecuted based solely on a check bouncing or the act of incurring a debt, unless there is additional evidence that supports the intent element. If you are not sure about the circumstances of your case, I strongly recommend consulting with a criminal defense attorney, preferably one who specializes in these sorts of cases.

ADDITIONALLY...

There is a difference between criminal proceedings and threats to commence criminal proceedings. And this is what I want to focus on and discuss in this article.

While the automatic stay in a bankruptcy case does not prevent a creditor from pressing criminal charges, it does prevent a creditor from making idle threats of criminal prosecution.

Acts of criminal prosecution, which are excepted from the automatic stay under 11 U.S.C. § 362(b)(1) are distinguishable from acts to collect a debt (prohibited under 11 U.S.C. § 362 (a)(6)) using the threat of criminal prosecution. Desert Palace, Inc. v. Baumblit (In re Baumblit), 15 Fed. Appx. 30, 35-36 (2d Cir. N.Y. 2001) and Batt v. Am. Rent-All (In re Batt), 322 B.R. 776, 779 (Bankr. N.D. Ohio 2005).

Therefore, it is possible to prosecute a creditor for a violation of the automatic stay and to receive sanctions for that violation. But what if you don't intend to file for bankruptcy? Or what if you intend to file for bankruptcy, but haven't filed yet? Does that mean you are without protections?

The answer is no. (What follows is based on Wisconsin statutes. If you live in another state, check with an attorney licensed to practice in your state to make sure that your state has a similar statute to what is described here.)

Again, while actual criminal prosecution is permissible (assuming the creditor can make the case), it is unlawful for a creditor to threaten criminal prosecution in order to induce payment on a debt. It is criminal extortion.

Wis. Stat. § 943.30: Whoever, either verbally or by any written or printed communication, maliciously threatens to accuse or accuses another of any crime or offense, or threatens or commits any injury to the person, property, business, profession, calling or trade, or the profits and income of any business, profession, calling or trade of another, with intent thereby to extort money or any pecuniary advantage whatever, or with intent to compel the person so threatened to do any act against the persons will or omit to do any lawful act, is guilty of a Class H felony.

Remember, it is possible for a creditor to press criminal charges if they can prove the element of intent to defraud. However, they can prosecute you whether you pay the debt or not. If a creditor is threatening criminal prosecution, but tells you that they will not prosecute you if you pay the debt, that's a good sign that they do not actually intend to prosecute you, but they are attempting to extort you. If you have received harassing phone calls like this from creditors (especially debt collection agencies or payday loan stores / cash stores), I strongly urge you to contact the district attorney's office for the county you live in. If your district attorney is unwilling to help you, you can also consider contacting the state attorney general's office.

The Joyce Smith Case - Declaratory Judgment re: Chapter 128s & Utility Disconnections

2011-08-26T20:26:00.000-05:00

I have had many clients over the years inquire about alternatives to bankruptcy, specifically Wisconsin's unique "Chapter 128". Chapter 128s are cheaper, faster, simpler, and impose fewer requirements on the debtor, compared to federal bankruptcy. However, they also offer far fewer protections. Namely, all debts must be paid in full within 3 years. There is no chance of discharge. There is no stay against repossession or foreclosure.

So limited are the protections of Chapter 128, that I have found only three scenarios in which I would consider recommending them to my clients:

When the client's debt is so low, that the cost of a federal bankruptcy would outweigh the benefit.
When the client is ineligible for a discharge, even under Chapter 13, due to a prior bankruptcy, and has no secured or priority debts worth curing in bankruptcy.
The client is facing a utility shut-off and cannot afford the time or expense necessary to file bankruptcy.

That is, until now. Milwaukee County Circuit Court Judge, the Hon. William S. Pocan issued a declaratory judgment sought by WE Energies. The case is 11-CV-8212, In the matter of the Voluntary Amortization of Debts of Joyce S. Smith. The judge ruled that Wis. Stat. § 128.21 enumerates several collection actions that are prohibited when a petition is filed, and disconnection of utility services (or failure to reconnect) is not listed among them. Therefore, under the plain-meaning of the statute, Chapter 128 no longer prevents a utility disconnection, nor does it guarantee that disconnected utility services will be reconnected. And remember, this decision is not just for WE Energies. Expect Wisconsin Public Service (WPS), Alliant, and Wisconsin Power & Light (WP&L) to exercise their newly spelled-out rights pursuant to this judgment.

Debtors facing utility disconnect must either bring the account current or seek federal bankruptcy protection.

July Foreclosure Stats

2011-08-02T16:24:00.000-05:00

Brown	62
Calumet	10
Door	11
Florence	1
Fond du Lac	20
Forest	4
Green Lake	6
Kewaunee	6
Langlade	4
Manitowoc	13
Marinette	13
Marquette	8
Meonominee	0
Oconto	16
Outagamie	46
Shawano	11
Sheboygan	42
Waupaca	12
Waushara	10
Winnebago	34
	329

401(k) Contribution Conundrum of BAPCPA

2011-07-21T11:39:00.002-05:00

For the last 6 years, bankruptcy attorneys have been mocking the Bankruptcy Abuse and Consumer Protection Act of 2005 for all of its flaws. Yesterday, I've encountered one more.

11 U.S.C § 541 exempts 401(k)'s as property of the bankruptcy estate. Accordingly, future income devoted to a 401(k) is also exempt, and therefore, is an allowable deduction on the Chapter 13 Means Test, Form B22C (because future income is property of the estate in Chapter 13s to fund the proposed repayment plan).

However, since projected disposable income is not an issue in Chapter 7, voluntary 401(k) contributions are NOT an allowable expense on the Chapter 7 Means Test, Form B22A.

So here's the scenario... Above-median debtor cannot beat the presumption of abuse on the Chapter 7 Means Test because his 401(k) contributions are not an allowed expense. Accordingly, he does not qualify for Chapter 7.

However, if the the debtor converts to Chapter 13, he has a negative disposable monthly income because his 401(k) contribution is an allowed expense, and that expense drops him below the threshold. Meaning his Chapter 13 Plan would require no payments whatsoever.

Doesn't qualify for Chapter 7. Chapter 13 would be pointless.

This was such a bizarre result that I had to confer with my colleagues to make sure I wasn't missing something obvious. Turns out I wasn't.

What a stupid law.

June Foreclosure Stats

2011-07-19T13:09:00.000-05:00

Brown	67
Calumet	11
Door	10
Florence	1
Fond du Lac	31
Forest	5
Green Lake	4
Kewaunee	13
Langlade	6
Manitowoc	21
Marinette	10
Marquette	9
Menominee	0
Oconto	16
Outagamie	33
Shawano	19
Sheboygan	40
Waupaca	24
Waushara	14
Winnebago	37
	371

May Foreclosure Stats

2011-07-19T13:08:00.002-05:00

Brown	65
Calumet	7
Door	10
Florence	1
Fond du Lac	37
Forest	3
Green Lake	6
Kewaunee	4
Langlade	10
Manitowoc	22
Marinette	16
Marquette	5
Meonominee	0
Oconto	13
Outagamie	47
Shawano	13
Sheboygan	42
Waupaca	20
Waushara	10
Winnebago	43
	374

April 2011 Foreclosure Stats

2011-05-15T07:57:00.000-05:00

Brown				72
Calumet				10
Door				10
Florence				1
Fond du Lac				27
Forest				3
Green Lake				6
Kewaunee				3
Langlade				12
Manitowoc				17
Marinette				10
Marquette				6
Meonominee				0
Oconto				16
Outagamie				50
Shawano				11
Sheboygan				27
Waupaca				13
Waushara				12
Winnebago				53
Total				359

Mortgage Modification Mediation Program

2011-05-03T17:14:00.000-05:00

Most of my clients are aware of my cautionary warnings about mortgage modification programs, insofar as many of them being scams.

This month, the United States Bankruptcy Court for the Eastern District of Wisconsin is introducing their Mortgage Modification Mediation Program, which hopes to give debtors an opportunity to negotiate mortgage modifications with lenders in an arena with greater transparency.

A Power Point presentation has been created on my web-site, and can be viewed here.

Other resources for more official information are here and here.

Essentially, this is a voluntary program - the court wields very little compulsory power. At present, only Chapter 13 debtors are eligible. The cost is minimal - a $250 mediator fee shared by the mortgage lender and debtor.

When Lanning Isn't Enough - Calculating Plan Payments

2011-04-17T09:00:00.063-05:00

Last year, I wrote about the U.S. Supreme Court's decision in Hamilton v. Lanning. This case is the one that allows us to reconcile large discrepancies between the Means Test and the budget by citing changes in income and expenses that are not reflected on the Means Test - which are known or virtually certain.

Though this represents a huge win for debtors and debtors' counsel, the standard set for allowing debtors to deviate from the Means Test is still fairly rigid. Over the years, I have had several cases where debtors were convinced that they could not afford plan payments under the Means Test, and there wasn't a known or virtually certain change that justified deviation. Two of these in recent days.

Once a Chapter 13 Plan is confirmed, debtors are no longer beholden to the Means Test. They can amend their plan at any time under 11 U.S.C. sec. 1329, and the standards at that point become less stringent. So long as their is an actual, necessary, substantial, and long-term change in income and expenses, it is relatively easy to amend the plan to reduce monthly payments.

However, barring a Lanning-esque circumstance, to get to confirmation, debtors still need to file plans in accordance with their Means Test result. A lot of times, when there is a huge discrepancy in the Means Test result and the budget, it's because the debtor has unreasonable expectations about maintaining a certain lifestyle. While Chapter 13 certainly isn't intended to turn you into a pauper, there is an expectation that you will tighten your belts and life relatively frugally while in Chapter 13.

The purpose of this blog is to demystify the process an attorney uses to calculate plan payments.

First, the attorney has to determine which debts are required to be paid in full inside a Chapter 13 Plan. This is going to include all secured debts (mortgage arrears, property tax arrears, vehicle loans, and other small secured loans), all priority debts (child support and tax arrears), administrative fees (the trustee's cut and balance of the attorney's fees), and floor amounts (such as floors for non-exempt assets, fraudulent incursion of debt or transfer of assets, and recreational vehicles).

Then the attorney runs the Means Test. The Means Test is only calculating the amount of money required to be paid to unsecured creditors, although payments for secured and priority debts are eligible deductions on the test, along with a host of IRS living expense allowances. The income for the Means Test is based on gross wages from the past six months, which includes unreliable sources of income like commissions and overtime. And while we are looking at your gross wages, your taxes, insurance, and other withholdings are deductions elsewhere on the test.

Because the Means Test only affects unsecured creditors, simply surrendering a home or vehicle doesn't necessarily lower your plan payments, because those payments are otherwise used as deductions. So by giving up a home or vehicle, you're simply paying more to unsecured creditors because the funds are being diverted from one class to another.

The Means Test result (for unsecured debts) plus the debts that have to be paid in full (secured and priority), are added up to determine a total required monthly payment. Then, the attorney has to reconcile that minimum requirement with your budget. If your budget shows that you don't enough money to make plan payments, then the plan is not feasible. If the budget shows too much money (as was the case for you), then you have to pay the higher amount - even though the means test requires a lesser payment - because in Chapter 13, all of your disposable income is to come into the Plan. Most attorneys at this stage do some creative budgeting. For example, if he typically allots $200/mo per person in the household for groceries, he can easily adjust that to $150/mo or $250/mo as needed to get the budget to where it needs to be. There is some leeway with what numbers are allowed in the budget. However, that leeway comes with reasonable limitations. Every trustee I know would go into coniptions if I dared to put in a $500/mo recreation budget. Sometimes, we add as much reasonable padding to the budget as is possible, and we still can't match the minimum threshold in the Means Test, and the debtor has to pay more per month.

Again, if you - as the debtor - are unhappy with the Means Test result, your options are (1) to complain to your Congressman about how much BAPCPA sucks, (2) find a change in circumstances that meets the scrutiny needed under Lanning, or (3) tough it out until your Plan is confirmed by the Bankruptcy Court. With the last option, again, you can amend your plan payments using much less stringent criteria.

March 2011 Foreclosure Stats

2011-04-16T09:30:00.001-05:00

Brown    99
Calumet    11
Door    8
Florence    4
Fond du Lac    33
Forest    2
Green Lake    11
Kewaunee    7
Langlade    9
Manitowoc    25
Marinette    17
Marquette    9
Meonominee    2
Oconto    17
Outagamie    58
Shawano    19
Sheboygan    46
Waupaca    19
Waushara    16
Winnebago    63
Total    475

Becuase It's Tax Day - a Blog About Filing Your Taxes On Time

2011-04-15T09:21:00.000-05:00

Oftentimes, when an individual owes income taxes that they cannot afford to pay, they just decide not to file a tax return. Ordinarily, I don't give tax advice, because tax law is not my field of expertise. Outside of bankruptcy, I don't know if there is any advantage to not filing a return until you can afford to pay the debt. However, an interesting case passed through my office the other day, and I'd like to share with you this brief cautionary tale.

The individual hadn't filed taxes since 2006, because she knew she owed a lot of tax debt, but couldn't afford to pay it. She is now contemplating a Chapter 13 Bankruptcy to repay the tax debt she owes. By law, she will need to file her taxes for - at minimum - 2007, 2008, 2009, and 2010 (and 2006 if she expects to deal with that debt). The thing is, had she filed her taxes on-time, 2006 and 2007 would be treated as non-priority tax debt and potentially paid nothing in her Chapter 13 Plan. Only her 2008, 2009, and 2010 taxes would have to be treated as priority and paid in full. However, 11 USC 507(a)(8) - which defines income taxes as priority debts - will necessarily require that we treat 2006 and 2007 as priority as well, because taxes were late filed and not yet assessed. Depending on how much tax she owes for those two years, that could easily bump up her plan payments hundreds of dollars per month.

February 2011 Foreclosure Stats

2011-03-12T07:54:00.000-06:00

Finally some good news for homeowners! Foreclosures were severely depressed last month, going down almost 23%. Every single county except the three smallest counties (Forest, Florence, and Menominee) had decreases (compare to last month's unusual pattern). Moreover, I noticed most counties had no foreclosures filed in the last week of February. Obviously, February is the shortest month of the calendar, so lower numbers were to be expected. But I don't think being 2-3 days short alone can account for the 23% drop.

Brown	70
Calumet	7
Door	8
Florence	4
Fond du Lac	24
Forest	5
Green Lake	7
Kewaunee	5
Langlade	5
Manitowoc	24
Marinette	20
Marquette	4
Menominee	1
Oconto	13
Outagamie	38
Shawano	18
Sheboygan	38
Waupaca	21
Waushara	10
Winnebago	50
	372

January 2011 Foreclosure Stats

2011-03-12T07:44:00.000-06:00

This should have been posted last month, but we were busy preparing to relocate our office. Interesting trends this month - almost all counties remained the same or increased over December 2010. The three largest counties (Brown, Outagamie, and Winnebago), however, all experienced decreases of about 25% or more. Suggests that urban foreclosures are down, and outlying foreclosures are up.

Brown	85
Calumet	13
Door	11
Florence	1
Fond du Lac	40
Forest	2
Green Lake	8
Kewaunee	9
Langlade	10
Manitowoc	40
Marinette	24
Marquette	7
Menominee	0
Oconto	28
Outagamie	43
Shawano	24
Sheboygan	43
Waupaca	22
Waushara	13
Winnebago	59
	482

More Thorough Lists of Terms of Art

2011-03-09T22:07:00.000-06:00

In bankruptcy, you hear frequently about "income", "assets", and "debts". And if the typical bankruptcy debtor was asked to disclose all of these without any further guidance, 9 times out of 10, that debtor would certainly be lost. Because income means more than just your paycheck. It can mean social security, business income, even loans and sale profits. Property doesn't just mean real estate, but includes vehicles, bank accounts, and stuff you don't even possess yet, but have a legal interest in.

So what I thought I would do today is create lists of income and assets. This is not the first time I've posted such a list. But experience teaches us over time to add things to the list. Still, do not rely on these lists to be entirely exhaustive.

Income

1.       Employment (wages, salaries, commissions, tips, overtime)
2.       Business Income (from a business you own or operate)
3.       Rental Income from Tenants
4.       Child Support, Alimony, or Maintenance
5.       Pension
6.       Social Security, SSDI, or SSI
7.       Unemployment Benefits
8.      Workman's Compensation
9.       Short or Long-Term Disability, VA Disability
10.   Income from Trusts or Annuities
11.    Public Assistance (food stamps, rent or utility assistance, etc.)
12.    Household Contributions (assistance from friends/family to pay bills)
13.    Profits from Sale of Assets
14.    Gambling Winnings
15.    Tribal Per Capita Income
16.    Withdrawals from IRAs, 401(k)s, and Whole Life Insurance
17.    Insurance Payouts
18.   Non-PMSI Loan Income
19.    Student Loans (not dedicated for tuition)

Assets

Real Estate (residence, rental properties, business properties, hunting land, vacant lots, timeshares)

Vehicles (automobiles, motorcycles, ATVs, snowmobiles, boats and watercraft, trailers, campers, RVs, mobile homes, aircraft)

Cash in Wallets, Purses, and Safes

Bank Accounts (checking, savings)

Security Deposits

Sole Proprietorship Business Assets & Ownership Interest in Business Entity (LLC, Corp, etc.)

Stocks and Bonds

Cash Value Life Insurance

Retirement Accounts (pensions, 401(k)s, 403(b)s, IRAs, deferred comp, profit sharing, ESOPs)

Tax Refunds

Accounts Receivable

DSO Arrears

Marital Property Settlements

Potential Lawsuits (personal injury, breach of contract, etc.)

Potential Inheritances / Wills / Trusts / Annuities

Life Estates in Real Property

Sample Household Goods

Sofas, Loveseats, Recliners, Chairs, Ottomans

Coffee Tables, End Tables, Entertainment Centers

Desks & Office Furniture

Cabinets & Shelves

Beds

Pillows, Sheets, Comforters, Towels, & Other Linens

Dressers / Armoires

Dining Table / Chairs

Dinnerware (plates, cups, bowls, silverware, etc.)

Cookware (pots, pans, utensils, etc.)

Stove / Oven / Microwave

Refrigerator / Freezer

Other Kitchen Appliances

Washer / Dryer

Televisions

Computers & Peripherals

Phones & Cell Phones

New Median Income Levels

2011-03-08T10:52:00.000-06:00

Time once more for the UST's semi-annual adjustment of median income levels. These new [Wisconsin] numbers are effective March 15, 2011. Slightly easier to qualify for Chapter 7 this time.

Household of 1 - from $40,486 to $41,150
Household of 2 - from $55,175 to $56,080
Household of 3 - from $65,187 to $66,256
Household of 4 - from $76,188 to $77,438
Additional Family Members + $7,500 each

Power Shut-Offs

2011-02-21T11:51:00.000-06:00

WPS (and WP&L, Alliant, and WE Energies) are legally entitled to shut off your utility services if you are in default on payments as of April 15. Don't wait until the last minute to do something about it. Call us today at (920) 490-6160 today for a free bankruptcy consultation.

Cancellation of Debt 1099s

2011-02-21T11:48:00.000-06:00

It's tax season, which means it's time for our annual flood of questions about tax issues and bankruptcy. One we get quite often is regarding the "Cancellation of Debt 1099's" some people get after bankruptcy, and whether these are reportable income on your taxes.

Not being an expert at tax law, my answer is always going to be consult with a tax attorney. However, I can tell you that the IRS exempts from income any discharge of debt arising from a case brought under Title 11 (see 26 U.S.C. § 108(1)(A)). In other words, if your debt was discharged in bankruptcy, then no, you do not report the income on your federal taxes.

Side note: Title 11 and Chapter 11 are two different things. Title 11 refers to the portion of the U.S. Code dealing with all federal bankruptcy laws. Chapter 11, like Chapters 7 and 13, are types of bankruptcy referring to subsections of Title 11. So no, do you do not have to file a Chapter 11 case for 26 U.S.C. § 108(1)(A) to apply!

The question is not so clear-cut when it comes to Wisconsin state income taxes. For all the cases I've filed and all the years I've been practicing, I've only had a problem with this issue once. But it is worth noting.

26 U.S.C. § 108 was amended by P.L. 110-142. In determining what is computed as income,t he Wisconsin Legislature passed Act 28 in 2009, which created created Wis. Stat. 71.01(6)(u) and (um). These two provisions exclude P.L. 110-142.

Did you follow all that? Neither did I, really. As far as I can trace the legislative history, basically, Wisconsin statutes now exclude the federal exclusion of taxable income, the double-negative thereby creating taxable income out of debts discharged in bankruptcy. But again, it's a very convoluted series of statutes, which is why I refer you to speak to a tax professional.

A Fresh Face

2011-02-03T07:15:00.000-06:00

Michelle and I would like to thank The Roberts Group for incubating our fledgling law firm in their suite for the past 20 months. We've reached the point where it is time for us to spread our wings, and so with that, we are moving. To all of our current clients - do not worry - we are staying in the same building, just a different suite. While we're at it, we are also changing our name to be five syllables shorter. Our phone numbers will be remaining the same. All of these changes become effective March 1, 2011.

We are changing from...

Law Office of Gregory A. Holbus, L.L.C.

926 Willard Dr., Ste. 126

Green Bay, WI 54304

to...

Holbus Law Office, L.L.C.

926 Willard Dr., Ste. 118

Green Bay, WI 54304

December Foreclosure Stats

2011-01-16T11:10:00.000-06:00

December saw a 30% jump over November to the second highest total for any month in 2010. behind September. Brown County jumped up 47% over November. Winnebago junped 53%.

Brown	116
Calumet	9
Door	14
Florence	1
Fond du Lac	29
Forest	2
Green Lake	10
Kewaunee	9
Langlade	12
Manitowoc	27
Marinette	20
Marquette	10
Menominee	0
Oconto	24
Outagamie	65
Shawano	19
Sheboygan	42
Waupaca	29
Waushara	15
Winnebago	75
	528

2010 Bankruptcy Filing Statistics

2011-01-16T09:08:00.000-06:00

The Eastern District of Wisconsin had 20,503 bankruptcy filings in 2010. The Western District of Wisconsin had 9,124 bankruptcy filings in 2010. So the state-wide total for bankruptcy filings in 2010 was 29,627.

U.S. Supreme Court Issues a Decision in "Ransom"

2011-01-11T12:05:00.002-06:00

The U.S. Supreme Court issued its ruling in Ransom v. FIA Card Services, N. A. today. At issue is the circumstances in which an above-median debtor in Chapter 13 can take a $496 vehicle ownership deduction on the Means Test when calculating their projected disposable income for the benefit of unsecured creditors. Specifically, whether this deduction can taken if there is no ownership expense (read: finance or lease payment).

Courts across the country have been split on this issue. In the Eastern District of Wisconsin, we have been following the decision laid out in Ross-Tousey, which held the expense is allowable even when there is no lien on the vehicle. However, the SCOTUS reversed that line of cases today by denying this deduction on the Means Test to anyone who does not have the ownership expense.

What does this mean for you? If you are an above-median debtor filing for Chapter 13, there is some incentive to ensuring you have one vehicle with a lien on it. If you are married filing joint, then two vehicles with liens on them. If you have no financed vehicles, then you are missing a $496/mo deduction, which - over a 5 year plan - has the potential to amount to an extra $29,760 dividend being paid out to unsecured creditors, and the number is double for married couples who have no vehicles with liens. Many debtors who might have been eligible for a discharge in the past might now end up paying 100% of unsecured claims, albeit at 0% interest.

The court does not seem to distinguish a debtor who files a Chapter 13, has a lien on his vehicle, but intends to surrender the vehicle and discharge the lien (or at least, I didn't spot a distinction during my first read). Based on the rationale set forth in Ransom, I would wager that taking the deduction in that scenario would be rejected.

I also did not notice a distinction for above-median debtors who are trying to rebut the presumption of abuse by taking this deduction to qualify for Chapter 7. But with the Ransom decision in their back pockets, you can bet the U.S. Trustee will object to Chapter 7s with that deduction. They might lose on the "snapshot" argument, but would likely win on a "totality of circumstances" argument, so my advice is to not take this deduction under any circumstance unless you have the loan or lease payment.

I also don't recommend people running out to obtain a title loan just prior to filing for bankruptcy, that's liable to incur a bad faith objection as well.

For those of you keeping score, this was an 8-1 decision with Justice Antonin Scalia dissenting. Justice Elena Kagan wrote the decision for the majority, and there were no concurring opinions.

Video Blog # 25 - Chapter 13s

2010-12-18T21:38:00.002-06:00

Video Blog # 24 - Notice Requirements and Addressing the Correct Creditor

2010-12-18T21:35:00.000-06:00

Video Blog # 23 - Stay & Discharge Violations

2010-12-18T21:31:00.001-06:00

Video Blog # 21 - Chapter 128

2010-12-18T21:30:00.006-06:00

Video Blog # 22 - Cram-Downs and Mortgage Cram-Down Legislation

2010-12-18T21:30:00.005-06:00

Video Blog # 20 - Foreclosure Prevention via Bankruptcy

2010-12-18T21:29:00.000-06:00

You're Not Alone

2010-12-17T16:13:00.000-06:00

I get a lot of people who ask me how many bankruptcy cases get filed each year. Generally, numbers are published periodically by the clerk of courts and the UST. But as an informal survey - as of a few minutes ago, the Eastern District of Wisconsin is sitting at over 19.860 for the year. Safe to say we'll break 20,000 this year. I haven't seen the Western District's load yet, but they'll easily tack on another 10, maybe even 15k for the year, so statewide, I'd estimate 30,000 cases filed in 2010, conservatively.

November Foreclosure Stats

2010-12-12T18:40:00.002-06:00

Brown	79
Calumet	8
Door	8
Florence	0
Fond du Lac	33
Forest	4
Green Lake	10
Kewaunee	3
Langlade	7
Manitowoc	23
Marinette	13
Marquette	7
Menominee	0
Oconto	18
Outagamie	48
Shawano	17
Sheboygan	46
Waupaca	22
Waushara	13
Winnebago	49
	408

What is a debt relief agency?

2010-11-15T18:51:00.000-06:00

If you've ever hired a bankruptcy attorney or seen an advertisement for one (or if you are reading this blog!), you've no doubt seen the disclaimer "We are a debt relief agency. We help people file for relief under the bankruptcy code." or something substantially similar to this. A lot of people read this disclaimer and think that it means that the person it applies to is not an actual bankruptcy attorney.

In fact, all bankruptcy attorneys are required to identify themselves as debt relief agencies under the bankruptcy code (upheld in In re Milavetz, Gallop & Milavetz, P.A., v. U.S., No. 08-1119 (March 8, 2010)). That doesn't mean your attorney isn't an attorney. This is just the label that Congress felt bankruptcy attorneys needed to have applied to them.

October Foreclosure Stats

2010-11-15T14:43:00.002-06:00

Brown	98
Calumet	20
Door	15
Florence	3
Fond du Lac	32
Forest	3
Green Lake	8
Kewaunee	3
Langlade	8
Manitowoc	28
Marinette	17
Marquette	6
Menominee	0
Oconto	16
Outagamie	58
Shawano	22
Sheboygan	45
Waupaca	19
Waushara	17
Winnebago	68
	486

How to Calculate a Life Estate

2010-11-11T12:30:00.000-06:00

This probably won't be of much interest to debtors, but I am posting this information so that if I, or any other attorney needs this information, I never have to do this research again, because it is complicated.

For those of you who might be wondering, a life estate basically means that the owner of the life estate becomes a tenant of their own property. Over time, ownership of the property transfers incrementally to the beneficiaries of the life estate in the form of percentage future interest, culminating with full transfer of the property to the beneficiaries upon the owner's death.

How to calculate a beneficiary's future interest in a life estate:

Determine the current age of the life estate owner.
Determine when the life estate was created (look to the date the deed which creates the life estate was first recorded).
Using the date (month/year) determined in Step 2, determine the applicable interest at the time the life estate was created under 26 U.S.C. § 7520. The table of interest rates can be found at http://www.irs.gov/businesses/small/article/0,,id=112482,00.html if the interest was created this year. Presently, the IRS has these tables going back to 1997 - to access previous years' interest rates, go to http://www.irs.gov/businesses/small/article/0,,id=204934,00.html.
Access IRS Publication 1457 and open up Table S, which you can get at http://www.irs.gov/pub/irs-tege/sec_1_table_s_2009.xls. Scroll down until you find the interest rate you determined in Step 3. Then locate the age you determined in Step 1. Slide over to the column for Life Estate, and find your percentage.
Multiply the fair market value of the property by the percentage determined in Step 4. Then, account for any partial interests or any other encumbrances (such as mortgages, judgment liens, or tax liens) to determine the value of the beneficiary's future interest.

Green Bay / Northeast Wisconsin Pro Se Help Desk

2010-11-07T21:00:00.003-06:00

The Bankruptcy Court for the Eastern District of Wisconsin has - for a couple of years now - offered the pro se help desk in Milwaukee for debtors who need assistance in completing schedules, but cannot afford to hire an attorney.

I am pleased to announce that I, along with two of my colleagues, are forming a similar help desk here in northeast Wisconsin. The Pro Se Help Desk will be available on the first Thursday of every month, from 4:00 p.m. to 5:30 p.m. beginning December 2, 2010. The Pro Se Help Desk will be located at St. Wilebrord Church at 209 S. Adams St., Green Bay, Wisconsin 54301.

The purpose of this service is to assist low-income debtors in completing their petition and schedules, and to alleviate some of the burden on the trustees and bankruptcy court in dealing with misfiled paperwork by pro se debtors.

Despite the availability of the help desk, we must remind you that filing for bankruptcy is a complicated process, and you really ought to have assistance from a competent and licensed bankruptcy attorney to complete Schedule C and Form B22A.

Although the volunteers who staff the help desk will be licensed attorneys, in our capacity as volunteers (for liability reasons) we cannot offer legal advice. Nor will we render financial advice, complete forms for the debtors, or predict the outcome or applicability of law to the facts of a debtor's case. What we will do is: define legal jargon and other terms of art that appear on forms and the bankruptcy code, describe basic bankruptcy code provisions, describe the general effects of law, and describe basic bankruptcy procedures.

Also, to ensure the availability of help desk volunteers to debtors who genuinely need our assistance, debtors who clearly can afford to hire an attorney will be turned away, along with any debtor who needs to file under Chapter 13, has a secured debt that they wish to reaffirm, are above-median, are represented by counsel and seeking a second opinion, have non-exempt assets, or are expecting sizable tax refunds.

Notice Requirements and Addressing the Correct Creditor

2010-11-04T07:11:00.003-05:00

Attorney Greg Holbus will be a guest lecturer at the November 9, 2010 Lou Jones Breakfast Club, which is a monthly meeting of the Wisconsin State Bar's BICR (Bankruptcy, Insolvency, and Creditors' Rights) Section to discuss current events and developments in the area of bankruptcy law and other related practices - usually for one free CLE credit.

This month's topic provides a road map for debtors' counsel on how to properly serve or notice creditors of bankruptcy filings, motions, and adversary proceedings. Although this lecture is geared toward other attorneys, we hope to illuminate the variety of horror stories that debtors' counsel often faces when attempting to find the proper creditor and address in a world of massive and complex corporate structures (which creditors seem to like to hide themselves in).

Below are some excerpts from the presentation, but you can view the full outline here (or here, as a pdf).

When trying to provide notice or service of process to creditors, debtors' ability to do so properly becomes difficult in a world where creditors have a couple dozen similarly-named subsidiaries or shell companies in existence, and they have hundreds (if not thousands) of offices scattered throughout the country. Debtors' counsel find themselves trapped in an absurdly comical game of hide-and-seek, trying to pin down elusive creditors that seem to deliberately hide behind complex and opaque corporate structures. The point of this presentation is to TRY to un-muddy the waters somewhat.

Debtor shall use the address appearing on any two or more communications (e.g. billing statement, collection letters, etc.) received in the 90 days prior to filing the bankruptcy case. 90 day period does not apply to creditors who would be in violation of non-bankruptcy law by sending communications, in which case, the address appearing on the two most recent communications shall be used. 11 U.S.C. § 342(c)(2).

Although the creditor has a duty to terminate and reverse damages resulting from a stay violation, it could not be sanctioned for willful violation since it was not noticed pursuant to § 342 (appears that notice was sent to addresses appearing on a credit report). In re Tillett, 2010 Bankr. LEXIS 1342 (Bankr. E.D. Va. Apr. 23, 2010).

[...] a filed proof of claim shall stand as a notice of preferred address from the creditor. Fed. R. Bankr. P. 2002(g)(1).

"While no summons is issued and served upon the "defendant" in a contested matter, service of a pleading initiating a contested matter is made in the same manner as service of a summons and complaint in an adversary proceeding." Dean v. Global Fin. Credit, LLC (In re Dean), 359 B.R. 218, 221 (Bankr. C.D. Ill. 2006).

Summons and Complaint shall be served in a manner authorized by FRCP 4, all subsequent documents and pleadings shall be served in a manner authorized by FRCP 5. In addition to FRCP 4, summons and complaint may be served by first class prepaid postage in the following manner:

Domestic or Foreign Corporation, Partnership, or Unincorporated Association: address to an officer, managing agent, general agent, authorized agent by law, or authorized agent by appointment. If agent is authorized by statute and the statute requires, also address to the defendant. Fed. R. Bankr. P. 7004(b)(3).

nsured Depository Institution (any FDIC-insured bank or savings association): address to an officer of the institution by certified mail, or first class mail to its attorney if the attorney has made an appearance. Confirm FDIC-insured status at http://www3.fdic.gov/idasp/. This requirement can be waived by court order in response to an application, or by the creditor's voluntary waiver. Fed. R. Bankr. P. 7004(h).

Complex corporate structures - different entities with similar names. The following is a basic corporate structure glossary. There are many names given to different organizational structures, depending on ownership, holdings and purpose. It is important to keep in mind that an organization is either a formally organized entity, or it is not. If it is formally organized, there will be a designated agent for service.
Parent. A formally organized entity that holds an ownership interest in another entity (subsidiary). The Parent company may have its own line of business, which may or may not be related to the business of the subsidiary.
Subsidiary. A formally organized entity that is owned, at least in part, by another company (parent). In large corporate structures, a subsidiary might also be a parent company for another company down the line.
Holding Company. A formally organized entity that exists primarily to own other companies. Similar to a parent company, but usually without its own line of business.
Division. Usually (but not always) an informally organized part of another company. The division may have its own books and records, but is usually not formally organized (no filing with the State. If you are dealing with a company that is called a division, there is usually another company name that you will need to find. For example, "ABC, a division of XYZ Corp."
Shell or Dummy Company. A formally organized entity that will usually not have any assets of business of its own. These sorts of companies are used to shield information regarding ownership, holdings, etc. It is important to realize that these entities are actual companies, at least on paper. Corporate existence can be challenged based on inadequate capitalization and other grounds, but that is an expensive fight, and may not be relevant from a debtor's standpoint.

When serving a mortgage company on a contested matter or adversary proceeding, it's helpful to know who's who in the industry to know whose conduct is at question or whose rights are sought to be modified.
Mortgage Originator - the lender whose name appears on the mortgage and note (remember, the mortgage establishes the real estate as security for the loan; the note is a promissory note outlining the terms of loan repayment).
Mortgage Holder - present owner of the mortgage; has the right to foreclose.
Note Holder - present owner of the note; usu. (but not always) the same as the mortgage holder.
Mortgage Servicer - party that accepts payment on behalf of the note holder, also responsible for holding / distributing escrow funds.
Not sure who's who in your particular mortgage? Send a Qualified Written Request under RESPA to the mortgage servicer. 12 U.S.C. § 2605(e).

Median Income Levels Drop

2010-10-24T09:27:00.002-05:00

The revised median income levels, which come out about twice a year, have been posted. Effective November 1, 2010, all levels in Wisconsin for households of one to three have decreased by about $2k and households of four or more have decreased by about $4k.

March 15, 2010 (current)
$42,205
$57,201
$67,881
$80,243

November 1, 2010 (revised)
1: $40,486
2: $55,175
3: $65,187
4: $76,188

September Foreclosure Stats - More Bad News for the Economy

2010-10-11T10:14:00.002-05:00

Foreclosure cases in September in the 20 county region of northeast Wisconsin rose 17% over August, which itself was a 26% increase over July - an overall 47% increase in just two months. Doesn't bode well for the economists who believe "we've seen the worst of it", and "we've already begun our slow recovery".

Brown	126
Calumet	14
Door	13
Florence	2
Fond du Lac	46
Forest	5
Green Lake	14
Kewaunee	7
Langlade	10
Manitowoc	27
Marinette	32
Marquette	12
Menominee	1
Oconto	23
Outagamie	86
Shawano	14
Sheboygan	57
Waupaca	31
Waushara	11
Winnebago	73
	604

Ransom v. MBNA

2010-10-07T13:18:00.003-05:00

This week kicked off the U.S. Supreme Court's 2010-2011 term. And what an honor! The very first case up for oral arguments was Ransom v. MBNA, the case I mentioned earlier this summer here and here. We'll be keeping an eye out for when the court renders its decision. We will learn whether the ruling will apply to Chapter 7s, Chapter 13s, or both. We will also learn whether the ruling applies to vehicles without a lien, vehicles with a lien that are being discharged, or both.

Creditors Threatening to Throw You in Jail?

2010-09-23T11:47:00.005-05:00

There seems to be a sudden outbreak in the number of panicked phone calls I've gotten from clients, complaining that their creditors are threatening to have them thrown in jail.

There are civil offenses and criminal offenses. Criminal offenses are characterized as being punishable with jail or prison time. Civil offenses, in comparison, cannot. Failure to pay a debt is not a criminal offense. Rest assured, therefore, that your creditors cannot have you thrown in jail for failure to pay a debt. It's a cheap scare tactic.

On the other hand, fraud is a criminal offense. Difficult for prosecutors to prove in many cases, but if one of your creditors is alleging fraud and there's some merit to it, then you might have something to worry about. Still, you can't just be arrested out of the blue. Criminal charges have to be filed, first. If it gets that far (and it rarely does) then you would do well to avail yourself to a criminal attorney.

Debtors contacting the trustee or court when represented by counsel.

2010-09-16T14:27:00.002-05:00

This issue seems to be coming up more and more often. I think, ever since the hearings for Chapter 13 debtors in Appleton and Oshkosh got moved to Wittman Airport, people have been using the hearing location as a reason to question the legitimacy of the trustee. So we're starting to see more and more people who are distrustful of the trustee and demanding to speak to him directly. And then, of course, you get the garden variety client who sees the court as having more answers for them than their lawyer, and so they want to contact the court or the trustee directly for that reason.

If you are represented by counsel, you should never contact the court or the trustee directly. Your attorney is your liaison to those parties. Any questions you have need to go through your lawyer.

This is not about your lawyer hiding things from the court. Trust me, if you have a complaint about your attorney, or if you think your attorney is not communicating effectively, you have several options, but talking directly to the trustee or court is not the way to do it.

Why? There are two reasons debtors are asked not to contact trustees or judges directly. The first and most obvious reason is: they're not your lawyer! They do not represent you, and they do not represent your interests. They cannot offer you legal advice.

The second reason is related to the first, which is: trustees and judges don't want to hear from you if you have a lawyer. That's what the lawyer is for. Again, if you feel your lawyer is not communicating effectively on your behalf, fire the lawyer and get a new one. The courts get very irritated when they receive phone calls from people who are represented by attorneys. If you're going to be proactive and call a judge directly, then you're basically telling everyone that you don't need your attorney. And most lawyers I know (including myself) will immediately withdraw as counsel if you start communicating directly with the court.

In short, if you're not satisfied with the attorney you've hired, you have several options for recourse, but contacting the courts directly is an inappropriate way to do it and can land you in trouble.

Also, for those of you who are having your 341 hearings at Wittman Airport in Oshkosh - I assure you, it's all legit. The trustee is someone appointed by the Department of Justice. Hearings are being held at the airport because it is largely unused, vacant, and finding available meeting space in other locations is hard to come by. There is no need to distrust the trustee!

August Foreclosure Stats

2010-09-15T16:58:00.001-05:00

For all the talk about the improving economy, you wouldn't know it from these stats. Foreclosures spiked up by 26% over last month!

Brown	92
Calumet	16
Door	8
Florence	2
Fond du Lac	50
Forest	2
Green Lake	10
Kewaunee	10
Langlade	5
Manitowoc	26
Marinette	17
Marquette	8
Menominee	0
Oconto	14
Outagamie	84
Shawano	14
Sheboygan	35
Waupaca	34
Waushara	11
Winnebago	79
	517

Issue Spotting & Relevance

2010-09-04T12:16:00.002-05:00

Continuing on this theme of why we, as lawyers, do what we do... Today, I want to briefly discuss issue-spotting and relevance as it pertains to bankruptcy.

Bankruptcy is a difficult issue for most people. They feel a lot of embarrassment or damaged pride. For many of my clients, their instinct is to tell me their entire life story, including all the reasons that led up to their financial misfortunes, and why they feel they need to file for bankruptcy. And most of the time, I let them, especially during the initial consultation. A wise attorney will let their clients talk and talk at length at the beginning to flush out as many potential issues as possible. When our clients give a narrative, sometimes they tell us important things that might not have been picked up from our standardized interview questions - often because the terms of art we sometimes use in our interviews doesn't trigger certain memories in the client.

Many people think that lawyers learn what the law is when we go to law school. Not really. The real gift we receive in law school is training in issue spotting and knowing what facts are relevant (and which facts are irrelevant). Most people under-appreciate this fact, and that's why a lot of people think that if they crack open a code book, they can represent themselves, and that's not really true.

When a client tells me their life story, about 95% of it winds up discarded as irrelevant. As lawyers, we are trained to know what issues may impact bankruptcy, and which facts about a client's case might trigger those issues, and which ones won't. This can become a point of friction between a client and his lawyer - when they can't figure out why the lawyer isn't making certain arguments on the client's behalf - the client doesn't realize that the argument goes nowhere in a legal context.

In any legal scenario, you need to know what the standards and legal rules are. In bankruptcy, it's generally a checklist of meeting certain qualifications, and the only facts that are relevant to the bankruptcy are facts that prove the debtor meets those qualifications. This is why I famously tell all of my clients, prior to their 341 meeting, to answer the trustee's questions directly and to not tell their life-story. In 99% of cases, the circumstances that led someone to need to file for bankruptcy are irrelevant. In the 1% of cases where the circumstances are relevant, we can usually spot that when we pull the credit report or when you try to have a debt discharged that was incurred fraudulently. At any rate, our interviews are designed to flush those issues out early.

But let's step out of the bankruptcy context for a moment and look at personal injury. To prove negligence, the standard is that the cost of precautions has to be less than the severity of the injury multiplied by the likelihood of the injury. So in a case where a landowner failed to put up a sign reading "Beware of Falling Boulders" to warn passers by of the same, the cost of the sign is relevant, the doctor's report of the severity of injuries sustained by having a boulder fall on your head is relevant, and the frequency at which boulders have been falling is relevant. The fact that the landowner is a "mean guy" who yells at small children - not so much.

But this is why having a lawyer is so invaluable. We might not always know what the law is, but we know how to research. We know what the legal standards are and who has the burden of proof. We know which facts are relevant to proving the legal standard, and which are not. And we usually have a pretty good idea of whether your particular case and facts can meet those legal standards, assuming the judge isn't having a bad day!

Anyhow, just to re-summarize my point. A lot of people think that if they can make the judge sympathize with them and give their sob story, that alone will help them win their case. That's hardly ever true. Justice is predicated on a system of objective reasoning, and while it might not always feel like that is what's happening, most players in the judicial system strive for that goal. We do our best to adhere to legal standards, and many times, what you think is important might be completely irrelevant to proving your case.

Case Law, Precedent, & Strategy

2010-09-03T06:54:00.002-05:00

It's not every day that I go to bat, defending the honor of other attorneys. But in recent weeks, I've received a few complaints from clients who don't understand why other lawyers that they have talked to won't take certain cases, whether it's a personal injury or malpractice claim, or some legal theory in bankruptcy law that they want to push.

While it is true that we, as attorneys, have a responsibility to our clients to represent their interests and be fierce advocates for their positions, it does not mean that we have to test out every theory that one could possibly dream up. There are several reasons why we might pass on litigating certain issues. One of them, frankly, is business reasons. It costs us time and money to litigate issues, and we don't always have the resources at our disposal to invest in a case that we are reasonably certain is a loss right from the get-go.

But there are also less selfish, altruistic reasons why we might be picky about which cases we litigate. I'll give you a great example. Recently, I had a case come across my desk of illegal discrimination when it came to bankruptcy and employment. As far as I was concerned, it was a clear-cut case of discrimination. I collected as many of the relevant facts as I could, then set to work on researching the case law and the standards that I would have to prove to win the case. When I dug around in the case law, I discovered two things. First, that there was very little case law on the subject, and even less that was binding on my district. Second, that the case law that did exist imposed Draconian standards to prove the discrimination and obtain any sort of compensation for it.

Although I felt strongly about the case and hoped I could get a judge to reverse the case law, I had to pass on litigating this particular case because the fact scenario was not ideal. You see, even if a judge personally feels one way about a case, in a common law system like ours, judges will resist deviating from established case law to the extent possible, and will hang their hat on anything. That's why when you're litigating novel or controversial issues, attorneys ideally like to look for "the perfect case" to use as a test pilot. What happens if I use a less-than-perfect case as a test pilot? Not only would my client have a higher chance of losing his case, but remember what I said earlier about there being next to no case law on the subject that would be binding in my district? If I pursued the case, then I would have created binding case law. And in less than perfect conditions, the case law that I would have established would probably not help clients who follow in the future with similar problems.

And while I've brought up the subject if precedence in my district... For those of you who like to do your own legal research, bear in mind that in bankruptcy court, there are only three courts whose decisions bind your judges. If you find case law from a different court, that decision, though persuasive, is not binding. Bear that in mind before you run to your lawyer excited over something you find on the Internet that you think helps your case. I promise you, we know how to look up case law, too, and we know which cases are binding and which ones are persuasive. For the record, cases that bind the judges in the Bankruptcy Court for the Eastern District of Wisconsin come from (1) the District Court for the Eastern District of Wisconsin, (2) the 7th Circuit Court of Appeals, and (3) the U.S. Supreme Court. Also remember that bankruptcy operates in the federal court system, not the state court system. Decisions from Wisconsin state courts do not bind our judges, either.

And now for something different. Down in Milwaukee, there is a Pro Se Help Desk for debtors who cannot afford attorneys, headed up by Chapter 7 trustee Andrew Herbach. The help desk is staffed by attorneys, working pro bono who assist individuals in completing their schedules (however, they cannot offer legal advice in this setting). I am pleased to announce that me and a few of my colleagues are now in discussions to bring a similar program to the Green Bay area. Services would likely be restricted to individuals who are at or near the federal poverty guidelines. Likely, the budget management seminar that I developed (which has been on hiatus for a little while) would be integrated into that program. Although we would be offering the Pro Se Help Desk to help those less fortunate, we do have to remind you that it is still a good idea to hire an attorney if you intend to file for bankruptcy. Although many of the forms are relatively simple to navigate, it is important to have legal representation, at minimum for planning your exemptions (Schedule C) and preparing the Means Test (Form B22A).

July Foreclosure Stats

2010-08-14T15:55:00.001-05:00

Brown	83
Calumet	13
Door	10
Florence	0
Fond du Lac	28
Forest	1
Green Lake	7
Kewaunee	4
Langlade	5
Manitowoc	26
Marinette	20
Marquette	8
Menominee	0
Oconto	27
Outagamie	46
Shawano	16
Sheboygan	28
Waupaca	32
Waushara	8
Winnebago	48
	410

2009-2010 Discounts Offered to our Clients

2010-08-03T20:25:00.003-05:00

Like everyone else in the world, bankruptcy attorneys can't work for free. However, our law firm is sympathetic to the fact that our clients are struggling financially. To that end, we offer discount programs designed to make things just a little bit easier for our customers.

We are pleased to announce that during our first year of operation, from July 1, 2009 to June 30, 2010, we voluntarily wrote-off a total of $8,750.00 in legal fees for our clients. In our second year, we expect our client base to grow and for more people to take advantage of our discount programs. I hope I can announce that our clients saved much, much more come this time, 2011!

Bankruptcy & Family Law Intersects: Gay & Lesbian Debtor-Couples

2010-08-03T07:45:00.005-05:00

As you know, two debtors who are married to each other may file a joint bankruptcy petition. As Wisconsin does not currently recognize gay marriage, two such spouses are unable to file a joint petition. So today, we're going to discuss the practical implications of this, and what you need to know.

Income

Under current Wisconsin law, a gay couple living together is basically the equivalent of being roommates for bankruptcy income purposes. Your partner's income is not counted on the Means Test, nor do they contribute to the household size. This actually ends up being advantageous, because the applicable median income level does not increase dollar for dollar with a typical person's salary. Meaning that a married couple who must report income of both spouses is more likely to be above median than a single person (although having child dependents can quickly take care of that). For example, take two individuals each making $30k per year. Any one individual is approximately $12k below median. But if they are married, their combined income is about $3k above median.

However, that isn't to say that your partner's (or significant other's) income is completely excluded from the equation. If any portion of the partner's income is used to contribute to household expenses, then that potion is reportable on the Means Test, as well as Schedule I, the schedule for budgeting income.

Assets

Wisconsin being a community property state, each married spouse has a whole, undivided interest in each marital asset. What that means is that instead of husband and wife each having a 50% interest in a piece of property, the husband and wife are considered a single legal entity with a 100% interest in that piece of property. Since gay couples cannot be legally married in this state, they cannot have community property. They can have individual property or they can have joint property. Joint property being where two people have a 50% interest in an asset. Individual property is only a problem for a gay couple if they own a quantity of assets similar to those of a married couple, but it's all titled in one person's name. This is the same problem that we frequently encounter with non-filing spouses. I'll grossly over-simplify this example to illustrate my point. Let's say there's a flat amount of property exemptions of $25k. Your average person has $20k in assets. Two average people have $40k in assets. If only one person files (whether we're talking about a single person in a gay couple or one spouse of a married couple) they cannot double their exemptions. So if all the property is titled in one person's name, then there's a chance that the exemption limits will be used up. However, if roughly half of the property owned by the couple is owned by each partner, then it is less likely to be a problem. In the case of jointly-owned property, this is where gay couples actually get an advantage over a married couple with a non-filing spouse. Again, with the married couple, the ownership interest is whole and undivided, so if one spouse opts out of filing, the filing spouse only gets half of the exemptions, but full ownership. If assets are titled jointly between two domestic partners, on the other hand, then it doesn't matter that the one partner filing is only entitled to half the exemptions, because his interest in those assets is only half the value. Of course, be careful not to transfer an individual ownership interest into a joint ownership interest just prior to filing, as this could be considered a fraudulent conveyance.

Debts

Debts are the area where there are usually disadvantages for gay couples. Naturally, if each partner owes individual debts, each person must file a separate bankruptcy to discharge those debt obligations. There are no community debts, just as there are no community assets for LGBT couples, so there can be no benefit from a phantom discharge if only one partner files. Similarly, if two partners apply for a joint credit card, or co-sign on each other's loans, if only one partner files, then the other partner - the joint debtor - is still fully liable for those joint debts. The only way to protect a non-filing partner from collections is the same way we would protect any other joint debtor / co-signer, which is to file a Chapter 13. Chapter 13 imposes a co-debtor stay during the 3-5 year term of the repayment plan. However, at the end, any joint debts not paid in full would once again become the responsibility of the non-filing partner.

June Foreclosure Stats

2010-07-18T14:47:00.002-05:00

Brown	85
Calumet	17
Door	14
Florence	1
Fond du Lac	33
Forest	4
Green Lake	4
Kewaunee	5
Langlade	8
Manitowoc	27
Marinette	14
Marquette	9
Menominee	0
Oconto	16
Outagamie	39
Shawano	20
Sheboygan	32
Waupaca	23
Waushara	12
Winnebago	43
	406

Contract Provisions

2010-07-08T06:01:00.002-05:00

Once in a while, a client of ours will bring in contract paperwork that they have with one of their creditors for me to review. The client is panicking because they discovered a "no bankruptcy" clause in the contract. The provision basically states that the client/debtor agrees not to file bankruptcy on the debt owed to the creditor. It's not always clear whether the creditor, when drafting the contract language, is simply trying to deter the debtor from filing for bankruptcy, or if the creditor actually believes that the "no bankruptcy" clause can transform their debt into a non-dischargeable debt. Of course, certain debts are non-dischargeable by law, and you risk forfeiting collateral if you try to discharge secured debts.

However, rest assured that these "no bankruptcy" clauses are unenforceable. If you file bankruptcy and have one of these contracts, the creditor cannot sue you for breach of contract. Your discharge will not be denied.

This is a fundamental concept of contract law - that no matter what the willingness of the parties may be, you cannot agree to certain provisions that are illegal or against public policy. The government long ago decided to adopt bankruptcy laws to give those who need it a fresh start in their financial life. It would undermine the spirit of the law if creditors were able to have their debts discharged simply by putting this clause in.

Wells Fargo Slammed for Freezing Bankruptcy Debtors' Bank Accounts

2010-07-07T10:04:00.003-05:00

This has been an ongoing problem with Wells Fargo. When one of their banking customers files for bankruptcy, they slap a freeze on the customer's savings accounts - they claim because they have a duty to preserve assets of the estate. Well, actually, they don't. That responsibility falls to the debtor. When someone else does it, they are exercising control over the bankruptcy estate in violation of the automatic stay. The following is an excerpt from "Consumer Bankruptcy Abstracts and Research":

Debtors scored a big win last week when the Ninth Circuit Bankruptcy Appellate Panel held that Wells Fargo’s national policy of placing an administrative freeze on debtors’ accounts when they file a bankruptcy petition violates the automatic stay by exercising control over property of the debtor's bankruptcy estate in violation of Bankruptcy Code section 363(a)(3).

The BAP was quite emphatic is its opinion: "Wells Fargo asserts it did not exercise control over property of the estate. We disagree. Wells Fargo could have paid the account funds to the trustee; it did not. Wells Fargo could have released the account funds claimed exempt to the [debtors] when demand was made; it did not. Wells Fargo could have sought direction from the bankruptcy court, by way of a motion for relief from stay or otherwise, regarding the account funds; it did not. Instead, it chose to hold the funds until a demand was made for payment that it alone deemed appropriate. If that is not exercising control over the funds, we don't know what is."

In re Mwangi, Case No. 09-1408 (9th Cir. B.A.P., June 30, 2010).

Update on the Ross-Tousey, et al issue

2010-07-01T14:08:00.005-05:00

The blog entry below that I wrote just 5 days ago about Ross-Tousey and related cases... I predicted that the U.S. Supreme Court would address the issue in its 2010-2011 term. Turns out I was right, and had I made the prediction 5 days earlier, I could have claimed to be psychic. As it turns out, certiorari was granted in Ransom v. MBNA (09-907) on June 21. This will be the case to watch in the coming months.

Effect of Lanning on Ross-Tousey, Clark, and Dionne

2010-06-26T18:18:00.003-05:00

Prior to Hamilton v. Lanning, another major issue that had courts divided was the question of secured debt payments being deducted on the Means Test (Form B22C) when the secured debt payment did not exist. In the Eastern District of Wisconsin, I want to briefly mention three cases:

Ross-Tousey v. Neary (In re Ross-Tousey), 549 F.3d 1148 (7th Cir. Wis. 2008) - this case was about a Chapter 7 debtor, but we mention it because it rose to the level of the 7th Circuit Court of Appeals. Debtors took an ownership deduction for a vehicle with no lien on it. Bankruptcy Court permitted it, District Court reversed, Circuit Court reversed the District Court.
In re Dionne, 402 B.R. 883 (Bankr. E.D. Wis. 2009) - Chapter 13 debtors were permitted to take an ownership deduction for a vehicle they intended on surrendering.
In re Roger & Roberta Clark, Case No. 07-23390 - Chapter 13 debtors were permitted to take an ownership deduction on a vehicle with no lien on it.

Dionne and Clark are both Chapter 13 cases. Ross-Tousey and Clark deal with vehicles with no lien on it. Dionne deals with a vehicle that has a lien on it, but the debtors intend to surrender.

The holding in Hamilton v. Lanning permits the Court to consider changes to the debtor's income or expenses that are known or reasonably certain. Since the surrender of a vehicle and the loss of a secured debt payment is a change in financial circumstances (and the debtor's intent to do so is known because it is stated on the proposed Chapter 13 Plan), then it stands to reason that Lanning reverses Dionne. Clark is distinguishable in that there is no change in circumstances, the vehicle that the ownership deduction is taken for did not have a secured debt payment due at the time of filing. However, given the nature of the discussion in Lanning about a plain-reading of projected disposable income, I think that if a Clark-like case was brought in front of the U.S. Supreme Court, they would not see a distinction based on the lack of a change in circumstances. So in my legal opinion (which is just that, an opinion, until a Court rules otherwise), Dionne and Clark can be lumped together. If one is held is violation of Lanning, then I think the other one fails, too, and vice versa.

It is important to note, however, that the issue of contractually due payments and vehicle ownership deductions was not discussed in Lanning, this is merely an extrapolation of how the case law in Lanning would/should probably be applied to Dionne and Clark. This is why I included Ross-Tousey in my analysis, because the 7th Circuit is the highest legal authority which is directly addressed these questions. Otherwise, it is completely irrelevant as a Chapter 7 case, because a different standard is applicable.

I would also note that this line of cases analyzes the difference between "applicable deductions" and "actual deductions", which is another way that Dionne and Clark might be distinguished and not overruled by Lanning.

Given that Lanning did not directly address the ownership expense issue, I would not be surprised to see this issue make its way to the U.S. Supreme Court during its 2010-2011 term. In the meantime, there are still doctrines of good faith and abuse to be considered. In my opinion, since the SCOTUS is taking the forward-looking approach, a debtor playing it safe would be wise to only take the vehicle ownership deduction if they have a vehicle with a secured debt payment.

May Foreclosure Stats

2010-06-15T09:00:00.001-05:00

Foreclosure rates held relatively steady in the 20 county* region of northeast Wisconsin. In May 2010, there were over** 431 cases filed, down from 490 last month.

*Brown, Calumet, Door, Florence, Fond du Lac, Forest, Green Lake, Kewaunee, Langlade, Manitowoc, Marinette, Marquette, Menominee, Oconto, Outagamie, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago.
** Cases with foreign, corporate, deceased, or represented debtors were not tallied.

Video Blog # 19 - Mortgage Modification Scams

2010-06-12T10:32:00.000-05:00

Video Blog # 18 - Hamilton v. Lanning Decision

2010-06-12T10:16:00.002-05:00

Mortgage Modification Scams - point of clarification

2010-06-09T12:44:00.004-05:00

Several weeks ago I wrote a blog post about mortgage modification scams, in addition to writing about it in the May edition of The Hanging Paragraph.

I should clarify my concern. I think most people are aware that there are mortgage modification scams out there involving third-party companies, most of which you've never heard of. If you want additional information, I would encourage you to read more about them here, here, and here. If you believe that you are the victim of a mortgage modification scam, or if you believe you have been solicited by a scammer, definitely call your state attorney general's office, and consider contacting the FBI and the Federal Trade Commission as well.

To clarify, my concern is broader than these upstart companies hoping to cash in by taking advantage of distressed homeowners. Most of the attention is focused on these third party companies, and almost no attention seems to be paid toward the banks and big mortgage lenders, which I am beginning to believe are scamming homeowners as well. They are bilking homeowners for huge processing fees, not following through on the modification even though the homeowner has done everything the mortgage company has asked of them, and burning precious time in the foreclosure process.

So this is an open invitation - if you believe that you have been or are being scammed by your original mortgage company for a loan modification - I would like to hear from you. Certainly, I'd still recommend contacting your state's AG, the FBI, and the FTC. But give us a call at (920) 490-6160. I am interested in examining the loan modification paperwork, and any other related documents. I'm not sure yet what I'm looking for, but we certainly would respect your privacy, and encourage you to redact any personal information contained on your paperwork before submitting them for my review. If what I suspect is true, we may take steps toward prosecuting some class action claims against these overlooked mortgage lenders.

Hamilton v. Lanning decision rendered.

2010-06-07T11:03:00.004-05:00

About 2-1/2 months after hearing oral arguments, the Supreme Court of the United States today rendered its decision in the case of Hamilton v. Lanning. It is an 8-1 decision, with Justice Scalia as the lone dissenter.

For those of you who haven't been listening to me yak about Lanning, a quick overview... In Chapter 13, debtors are required to submit a Statement of Current Monthly Income (Form B22C, aka The Means Test) which calculates the debtor's projected disposable income based off of the debtor's past six months of income, less expenses necessary for maintenance or support of the household. The inherent problem with this formula is that it assumes that the debtor's future income will mimic the debtor's past income, which in bankruptcy situations, is rarely true. When the debtor's income goes down after or just prior to filing for bankruptcy, the Means Test is skewed to show that the debtor can afford to pay more than what the debtor can actually afford. When the debtor's income goes up after or just prior to filing, creditors end up cheated out of money that the debtor can afford to put into the Plan.

Courts have evolved and split themselves into two camps: the mechanical approach and the forward looking approach. The mechanical approach assumes that Congress, when enacting BAPCPA, intended to eliminate judicial discretion and replace it with a mathematical formula for calculating the debtor's projected disposable income. The Means Test becomes the alpha and omega of the calculation. The forward looking approach notes the absurd results behind the mechanical approach which cuts both ways - in favor of debtors and creditors, depending on the circumstances - and also notes certain ambiguities and inconsistencies in the definitions, distinctions, and usage of the terms "disposable income" and "projected disposable income".

The Court held today that forward looking approach was the correct approach, noting most strongly "the ordinary meaning of 'projected'." Projected numbers look at historical figures, but also consider other factors. The official holding is:

[...] when a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtors income or expenses that are known or virtually certain at the time of confirmation.

What does this mean? As absurd as the mechanical approach could be, at least the mechanical approach would have produced less litigation. For the next 10 or 20 years, we (attorneys and trustees) will be debating what constitutes "known or virtually certain", and a lot of case law is going to evolve out of that, particularly over the next two years as attorneys test the boundaries of this guideline.

It is also a double-edged sword. Debtors who have an increase in income after or just prior to filing bankruptcy will be forced to deviate from the Means Test in a manner favorable to their creditors and to the debtor's detriment. The Court spoke about this quite a bit in dicta on page 14 (part D) of the opinion.

Finally, although the decision doesn't talk much about the expense side of the equation, the holding does. This means that cases allowing "contractually due" payments on debts that the debtor knows will not be paid once the bankruptcy case is filed (in other words, taking a mortgage expense on a house you're surrendering in bankruptcy) such as is the case in In re: Dionne are probably overturned now (though I wouldn't rule out more litigation on that issue).