Monthly Archives: October 2013

Who Are These Companies Filing Proofs of Claims in My Bankruptcy Case?

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In certain bankruptcy cases the companies or people you owe money to are asked to file a proof of claim or should file a proof of claim in the hope of being paid a portion or all of the debt owed to them. If you filed a Chapter 7 case and all of your assets cannot be protected by bankruptcy exemptions then you have an asset Chapter 7 case. The Chapter 7 trustee assigned to the case will send out a notice of possible dividends, which means there is a possibility of creditors receiving money from the bankruptcy estate in the bankruptcy case. If you file a Chapter 13 case then your creditors should always file a proof of claim to be paid pursuant to the Chapter 13 plan filed. In Chapter 13 cases a creditor may not receive anything, but still should file a proof of claim just in case.

Bankruptcy Code Section 101(9)(A) defines a “creditor” as any “entity that has a claim against the debtor at the time of or before the order for relief.” A “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, secured, or unsecured.” 11 U.S.C. § 101(4)(A). A “claim” also can be a “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment.” 11 U.S.C. § 101(4)(B). See In re Beugen, 99 B.R. 961, 963 (9th Cir. B.A.P. 1989)

Who Are These Companies Filing Proofs of Claims in My Bankruptcy Case

Who Are These Companies Filing Proofs of Claims in My Bankruptcy Case

I Do Not Recognize Any of the Creditor Names

Once creditors start filing their proofs of claims you may not recognize any of the names of the creditors because the original debt was sold or transferred to a third party. This is normal and quite common. Each proof of claim is supposed to provide who the original creditor was and have the assignment or transfer documents attached to the proof of claim so that you can determine if you actually owe the money or not. If the claim does not provide proper documentation as to how it was calculated your bankruptcy attorney should object to the claim.

Debts Cannot be Purchased for Improper Purposes Though

See In re Beugen, 99 B.R. 961 (9th Cir. B.A.P. 1989), aff’d, 930 F.2d 27 (9th Cir. 1991) regarding a creditor purchasing claims for an improper purpose. In this case the creditor, Young, was more or less buying claims so that he could harass the debtors, the Beugens. Young apparently had no intention of just collecting on the underlying debts of the purchased claims. In this case Young originally filed an adversary complaint against the Beugens arguing fraud resulting from the sale of a salon from the Beugens to Young. The complaint was dismissed and then Young filed a motion to dismiss the Beugens’ corporate Chapter 11 and their personal Chapter 11 cases. The court agreed with Young and dismissed the corporate Chapter 11 but the court did not dismiss the personal Chapter 11 case. Eventually the court did convert the Beugens’ personal Chapter 11 case to a case under Chapter 7 of the Bankruptcy Code. Here is where Young went wrong though. The first claim Young purchased was a claim totaling $753.38 from a small claims judgment. A balance of only $374.47 remained on this claim at the time Young purchased it from the original creditor. Young acquired another claim totaling $5,000. Both of these claims were solicited and assigned after the Beugens filed their Chapter 11 case. Young proceeded to file another adversary complaint objecting to the Beugens under the claims he had purchased. The Beugens bankruptcy lawyer argued that since Young was not the original holder of these two claims that Young did not have the right to object to the Beugens discharge under 727 of the Bankruptcy Code. The court in Beugen provides in part that “the right to object to a debtors discharge is not a marketable commodity which may be purchased by one party from another in order to inflict punishment and discomfort upon a debtor.”

Purchasing a claim is perfectly normal and acceptable if the underlying motivation is to seek payment of the claim. If a claim is purchased for other purposes such as objecting to the discharge of the debtor a party should think twice before proceeding. Mr. Young was ordered to pay the attorney fees and double costs of the Beugens pursuant to Federal Rule of Appellate Procedure 38. A very expensive mistake.

Federal Government Shutdown and the Effect on California Bankruptcy Courts

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Amazingly the Federal Government shutdown is entering its 15th day. In the Bankruptcy Court for the Northern District of California the Chief Judge, the Honorable Alan Jaroslovsky, issued an order on October 11, 2013, regarding the continued operations of the Court. A link to the General Order 28 is at the end of this article. So far we have experienced some slowdowns in certain areas, but it appears in the Bankruptcy Court for the Northern District of California will continue for the most part uninterrupted.

The same cannot be said for the Bankruptcy Court for the Eastern District of California. According to Aaron Koenig, a bankruptcy lawyer in the Sacramento area, the Eastern District of California will no longer conduct 341 meeting of creditors or court hearings on or around October 21, 2013. That does not mean you will not be able to file for bankruptcy protection. The newly filed bankruptcy cases and bankruptcy cases still being administered will be halted in their tracks. This could have far reaching negative consequences for both debtors and creditors. Hopefully the Federal Government will appropriate some money for the Federals Courts this week.

Unfortunately we had a client forget to bring their social security card to their meeting of creditors last week. After your bankruptcy attorney files your bankruptcy petition you must attend a meeting of the creditors and provide a valid government identification card and proof of your social security number. When you receive the official notice of the date and time of the meeting of the creditors and other various deadlines it also says to bring proof of your social security number. Depending upon the Chapter 7 Trustee assigned to your case you may be able to use a W-2 or a government issued letter with your social security number listed. Most of the time a tax return will not be allowed.

The Chapter 7 Trustee assigned to our bankruptcy case was kind enough to question our client and then continue the meeting of the creditors to verify their social security number. Normally our client could go to the United States Trustee’s office in the same building anytime between the first meeting of the creditors and the continued meeting of the creditors and show the United States Trustee proof of their social security number. Due to the Federal Government shutdown the United States Trustee’s Office is closed. Granted the problem was created by our client, but now we may have to appear with our client at the continued meeting of the creditors.

Hopefully the Federal Government shutdown will come to an end soon and everything will go back to normal.

http://www.canb.uscourts.gov/files/GENERAL%20ORDER%2028.pdf

What Happens to My Car if it is Leased When Filing for Bankruptcy?

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One of the most important parts of having a job is being able to get to the job each and every day. That means you need reliable transportation. There are a number of misconceptions when filing for bankruptcy protection. A common question is will I lose my car? If you cannot afford to make the monthly car loan or lease payment, then probably yes. You have to continue to make the car loan payment or lease payment to keep a car with a loan or a lease. If you can make the car loan payment or lease payment each month, then rarely will you lose a vehicle when seeking bankruptcy protection.

Leased Vehicles and Chapter 7 Bankruptcy

When you seek the counsel of a bankruptcy lawyer and file for bankruptcy protection with a lease vehicle you have a couple of options. You may either assume the lease or reject the lease. Assuming the lease means that you intend to fulfill the terms of the lease you agreed to prior to the bankruptcy filing. Section 365(d)(1) of the Bankruptcy Code provides: “In a case under chapter 7 of this title, if the trustee does not assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor within 60 days after the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such contract or lease is deemed rejected.” This means that you and/or the trustee assigned to your case, depending upon the circumstances, must decide whether to assume or reject a car lease within 60 days of the bankruptcy case being filed. This time limit can be extended though. If the car lease is not assumed within the 60 days the lease is automatically rejected and it is time to turn over the vehicle to the dealership that leased it to you.

Lease Vehicles and Chapter 13 Bankruptcy

When filing a Chapter 13 bankruptcy to reorganize your debts you may also keep a lease vehicle or choose to get rid of it. Some Chapter 13 bankruptcy cases are filed to pay back missed lease payments in the Chapter 13 plan and then continue to make the regular lease payment after the case is filed. Make sure you let your bankruptcy attorney know if you are current on the lease payments or behind when you discuss your circumstances during the initial consultation. Most Chapter 13 plans have a designated section for leases. There will be a box for the name of the other party to the lease, a description of the leased item, the regular monthly payment, the amount of the payments missed before the case was filed and lastly the monthly amount to be paid in the Chapter 13 plan to catch up the missed lease payments. If a lease is not listed in this section of the Chapter 13 plan, the plan usually provides the lease is rejected. Upon approval of the Chapter 13 plan by the court the effected lease holder may take all steps necessary to enforce their rights pursuant to applicable law. Basically you should turn the leased vehicle over to the dealership so they can sell it or auction it off.

If Your Mortgage Loan is Sold or Transferred You Still Have to Pay and the New Note Holder has the Right to Foreclose

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We can all agree that the mortgage meltdown was horrible and there is a lot of blame to throw around. In the aftermath of every disaster whether financial or natural there are unsavory people out there to try and make a buck. Just ask all the people who paid contractors to help them rebuild after hurricane Katrina who were ripped off. The mortgage meltdown was no different. Of course the mortgage meltdown was a boon for bankruptcy lawyers, but everything we do is by federal court order with layers upon layers of oversight.

The first wave of crooks were the loan modification companies and some attorneys. Many were taking large upfront retainers and providing little to nothing for the thousands of dollars they accepted. The California legislature finally tried to put a stop to the fleecing of desperate homeowners in 2009 when California Senate Bill 94 was passed and took effect October 11, 2009. I can tell you from firsthand experience it took another two years or more for homeowners to be aware of the new law and for mortgage modification companies to stop taking upfront fees. Then once the California State Bar started disbarring attorneys who continued to accept upfront fees the crooks stopped. Then loan modification companies/attorneys started to create new categories of services like pre-litigation education fees to try and skirt this new law. I believe that unethical practice has stopped as well.

Back to your mortgage and what happens when it is sold or transferred to another entity. It is very common for a note or deed of trust to be transferred or sold to another party before you make the final payment. This does not mean you no longer legally owe the money pursuant to the original note. This was another scam some attorneys used to bilk thousands and thousands of dollars from unsuspecting homeowners who could no longer make their mortgage payments.

Many lawsuits were filed in state court to attempt to stop foreclosures under the Securitization Theory. Almost all notes or deeds of trust recorded have provisions that they can be transferred or sold without notice to the borrower. The original note, deed of trust or loan contract is distinct and separate from any securities transaction. In In re Nordeen, decided by the Bankruptcy Appellate Panel for the Ninth Circuit, Case No. NV-12-1441-DKiCo, the panel does an excellent job explaining the difference between entering into the mortgage or deed of trust versus the transfer or assignment of the security interest as a securities transaction. As the Bankruptcy Appellate Panel correctly points out, if all of the payments are made pursuant to the mortgage or deed of trust the borrower may never ever know who ends up owning the note. Again, all the lawsuits regarding the Securitization Theory popped up once the mortgage meltdown began. It is just unfortunate that some attorneys and bankruptcy attorneys chose to use this theory in failed attempts to stop foreclosures and take thousands of dollars from desperate homeowners. So if you believe there is an issue regarding the assignment or transfer of your mortgage to another party be careful. This issue has now been litigated thoroughly and you had better have grounds that the original mortgage, deed of trust or loan is defective on its face.