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Monthly Archives: June 2012

What Is The 341 Meeting of Creditors

Posted by Ryan Blay on June 27th, 2012 in Bankruptcy, Bankruptcy Information, Chapter 13, Chapter 7, Illinois, Wisconsin

 

So you filed for bankruptcy and now learn that you are required to attend a “Creditor’s Meeting,” also known as 341 Meeting.  That sounds pretty intimidating.  The last thing that you want right now is to go to court or meet with your creditors.  Don’t worry; this meeting is not nearly as scary as it sounds, once we clear up some misconceptions.

So what is a Creditor’s Meeting?

This meeting generally occurs a month or two after you file for bankruptcy, and you are required to attend.  For a Chapter 7 bankruptcy a 341 is basically a time for the Trustee to make sure that the information in your bankruptcy petition is correct and that you have listed all of your non-exempt assets.  For a Chapter 13 bankruptcy the Trustee also wants to make sure that your repayment plan is feasible.  Technically, this is also a time reserved for creditors to ask questions about your finances and your bankruptcy petition.  Not to worry, though, creditors almost never come.

What is the meeting actually like?

The actual meeting is much less frightening and much less glamorous that you probably imagine.  First, this meeting does not take place in a courtroom, but rather in a relatively bland room inside a government building.  As you walk in you will see the trustee at a table in the front of the room, probably in the middle of another debtor’s 341 Meeting.  You and your attorney will sit in that room and wait to be called; this will give you a chance to hear what the meeting will be like before you are called up.

When the Trustee calls your name, you and your attorney go up to the table.  You will be put under oath and the Trustee will verify your identity.  After this, the Trustee will proceed to ask a number of yes/no questions and may ask you to clarify a point or two on your petition.  All in all, the meeting will last about 15 minutes and, if your petition is in order, it will be relatively painless.  Follow up work may be necessary, but in all likelihood you will not have to meet with your trustee again.

That is the 341 Meeting.  It is not meant to intimidate or test you, in fact, it is mostly a formality on the way to a fresh financial start.  Just remember to arrive a few minutes early, bring your driver’s license and social security card (or W2 form), and not to worry.

This post was the first by Lakelaw summer intern Tatiana Barry.


How Long Does Bankruptcy Take from Start to Finish?

Posted by Ryan Blay on June 22nd, 2012 in Bankruptcy, Bankruptcy Information, Bankruptcy procedures

Every bankruptcy can take a different amount of time, but for each chapter of bankruptcy, we can usually give a very good guess for how long our clients will be in the process.

In a Chapter 7 Bankruptcy, from the time we file the petition and schedules with the court, the usual time to reach the Creditor’s Meeting (or 341 meeting) is about 30-45 days.  From then, assuming our clients have no assets to be sold and divided among the creditors, they will take their second counseling session (debtor education or financial management), we will file the certificate, and there will be a discharge of the debts in 60-90 days from the creditor’s meeting.  Even if there are assets, the case can proceed to a discharge in the same time period, but the case will stay open while the asset (a car, cash in a bank account, a house) will be sold and the creditors get paid.

The other chapters require a payment plan.  So beyond the creditor’s meetings, the goal is to create a plan to pay creditors back over three to five years.  The bankruptcy doesn’t have to last this long if the creditors can be paid back faster, but this is the general timeframe we have.  The plans cannot last for longer than five years.


Attorneys Can Be Punished Too

Posted by Ryan Blay on June 21st, 2012 in Bankruptcy, Wisconsin

Debtors who make serious omissions or lies on their bankruptcy schedules can face angry judges, trustees, and attorneys.  But attorneys who continue to make serious mistakes can also get punished by the judges.  This happens in bankruptcy when lawyers, charged with helping guide debtors through a difficult process, make so many mistakes that they harm more people than they help.

Recently, one Milwaukee attorney was punished, and the punishment made the pages of the Milwaukee Journal-Sentinel.  Talk about bad advertising!  Attorney Emory Booker was actually fined twice – once for overcharging clients, and another for making multiple mistakes.

Attorneys have an important duty to make sure that they act in good faith to help their clients.  If they put their clients in worse spots than they began with, or take too much money given what they offer (legal analyses but not paperwork preparation or actual legal representation), then judges will criticize them publicly and make them return their fees. It’s a reminder that honest debtors, diligent trustees, and careful attorneys all make the system work properly.

Also, it’s a reminder that you’ll get what you pay for.  Mr. Booker was charging much less than attorneys typically do, because he wasn’t actually representing them ethically.  He was meeting with them and guiding them into bankruptcy — but not through bankruptcy.  Sometimes it’s worth paying a little more to get an honest attorney.


Tax Foreclosures and Chapter 13 Bankruptcy

Posted by Ryan Blay on June 13th, 2012 in Bankruptcy, Chapter 13, Foreclosure - Saving Your Home, Real Estate, Wisconsin

Suppose you own your home or a rental property and don’t pay the real estate taxes on time.  If they build up and you don’t pay for 2 years or more, you may be facing a “tax foreclosure”.

Tax foreclosure is different than a standard foreclosure in Illinois or Wisconsin, because a regular foreclosure goes through the court system.  The lender has to sue the homeowner and any other lienholders, get a judgment, allow for a redemption period, sell the property at auction, and decide whether to collect on any remaining balance.

In tax foreclosure, the property goes through an administrative process and gets turned over to the taxing party (say, the City of Milwaukee) after a notice period.  There is no auction, but rather a transfer for the amount of unpaid taxes.

Recently, courts in New York and Wisconsin have ruled that these transfers can be considered “fraudulent conveyances” in Chapter 13 Bankruptcy.  What does that mean?

What is means is that this is no different than a homeowner deeding his $100,000 house to his Aunt Sally for $3,000.  It is a transfer within 2 years of filing bankruptcy for less than fair value.  There is no exception for a transfer to a City or taxing party in the code.

The debtors in a few Chapter 13 cases (grouped together by the court for ruling on the law)  each sued the City of Milwaukee in their Chapter 13 bankruptcies.  They sought to get the house back and try to redeem the homes by paying the back taxes through their Chapter 13 Plans.  The City was furious, because they had followed the process set forth in the Wisconsin Statutes.  They believed that the debtors were looking to essentially make the law toothless.

The Court took this in to consideration but ruled that in the rare case of a bankruptcy filing in the 2 years after a tax foreclosure, the actions were in fact fraudulent conveyances.  The law didn’t say the City of Milwaukee must sell the homes at auction, but they surely couldn’t say with a straight face that a $100,000 home’s fair value was $8,000 due to that amount being owed in taxes.  They didn’t hold a public auction as lenders in foreclosure do.  That part of the process made the transfer fraudulent, because they couldn’t establish fair value.

If you have had a home lost to tax foreclosure in the last year or so and think you might be able to afford a Chapter 13 payment plan, contact us at Lakelaw.  We might be able to use this decision to your advantage and recover a lost property.


The Truth About Best Buy

Posted by Ryan Blay on June 12th, 2012 in Bankruptcy, Chapter 7, Illinois, Life After Bankruptcy, Wisconsin

 

Best Buy is a fun place to shop.  It has lots of gadgets, gifts, and games for men and women, boys and girls.  It’s very tempting to overspend or try to finance purchases we can’t afford.

In bankruptcy, the goal is to shed the debt that bothers us.  In order to get a fresh start in Chapter 7, that means making tough choices about what debts to hold on to and keep paying.  The majority of our clients need a car to get to and from work, working appliances and adequate furniture.  The bigger issues come with electronics and gadgets.

Best Buy wants to sell you things.  They do a good job of it.  One way they do this is by offering financing on their Best Buy cards, typically through HSBC.  HSBC is a huge banking company, and Best Buy is the local brand that makes folks happy by selling TVs, iPads, and gaming systems.

Schedules I and J of the bankruptcy petition are the budget for the debtors in bankruptcy.  Sometimes, the budget does show a small positive amount every month.  Subtracting fixed expenses (food, utilities, rent/mortgage, car payment, insurance, etc.) from net income, we get a final number.  If that number is “-$400″, that means that our clients are still running a $400 budget deficit per month – even with their credit cards, medical bills, and unsecured loans excluded.  So when our clients then ask if they can keep the 3D TV and Wiis they financed, it comes time for tough decisions.

With secured goods like electronics, we have 3 options to present to our clients:  They can surrender the goods and let Best Buy pick them up at their own expense.  We can have them offer a lump sum amount in a redemption for the fair value of the item.  Or they can reaffirm the debts through long term payments that now survive the bankruptcy.

As an attorney, I am really reluctant to recommend this last option, because typically it means another $2000 or so in debt that remains after bankruptcy.  If there is no car payment, mortgage payment, or other long term debt, then maybe it’s workable.  But these items are not as essential to living as, say, a car is to get from work to home and pick up the kids.

We’re not here to make these decisions, but it is part of our job to advise our clients as to how to proceed.  Like any other debt, we must look at the whole picture and make a choice that won’t put our clients in a bad situation in the future.

If you have an item or two financed on a Best Buy card, and bankruptcy is an option in the near future, call or e-mail us to discuss.


Involved in a Divorce? Tell Your Attorney EVERYTHING About Your Home and Finances

Posted by Ryan Blay on June 11th, 2012 in Bankruptcy Information, Real Estate

If there is one breed of attorney that is always criticized, it’s a divorce attorney.  Nearly every lawyer will have heard a complaint about somebody’s family law attorney that didn’t listen, that ignored them or was walked all over.  It’s always the attorney’s fault!

Here at Lakelaw, we prefer to work with attorneys who specialize in family law because it is important that lawyers in that field stay aware of everything going on financially.  Why?  Because divorce is a process that splits a marriage – but also divides assets and debts.  If these assets and debts are being divided, created, or confused, it only makes the poor divorce attorney’s job harder, and will cost their client much more in fees.

Today I received a call from a woman whose husband had compelled her to transfer her share of the marital home to him.  He may or may not have attempted to modify the mortgage without her knowledge.  It is critical for her attorney to know:  (1) How much is owed on the house as a result of any loan modification or refinance; (2) Whether it would be worth seeking to get the deed transfer reversed so she might be able to preserve the home; (3) How much she would have to pay to save the home: and (4) Whether the transfer would have any consequences for an upcoming foreclosure. These could make a big difference in what she receives in support and where she may be living months from now.

Lawyers have enough trouble trying to dissolve a marriage and let two very angry people fight over possessions and payments.  If they are surprised or not informed when a transfer of an asset happens, it’s going to mean their client could be left emptyhanded later.

The moral of the story:  You pay for an attorney, tell them Everything.   If our clients are in the middle of a divorce, we work hard to make sure their other attorneys know exactly what is going on and why.  It’s a collaberative process, and nobody should be kept in the dark.  We promise our clients courtesy, compassion, and care.  Other lawyers deserve the same treatement.


Southeast Wisconsin Foreclosures Increase in May 2012: Lakelaw is Not Surprised

Posted by Ryan Blay on June 5th, 2012 in Foreclosure - Saving Your Home, Mortgage Foreclosure Defense, Mortgage Modifications, Real Estate, Wisconsin

If you live in Kenosha, Racine, or Milwaukee County, you may see more of these signs.  According to the Milwaukee Journal-Sentinel, May foreclosures were up significantly over May 2011 filings.  Although the biggest servicers are under agreements with the states to reform their practices and provide money for principal reduction, it won’t solve the main problems spurring foreclosure issues:  slow turnaround on modification reviews, a lack of jobs to provide for affordable mortgages, and depressed real estate prices from the prior glut of foreclosed homes.

Milwaukee, and its collar counties of Waukesha, Ozaukee, and Washington, continue with the depressing news.  While most areas of the country are seeing slow upticks of housing prices, Metro Milwaukee’s are falling.

The foreclosure settlements have not played any significant role in stopping the foreclosure tidal wives, and judging by the recent numbers of filings, there are still thousands of active and pending foreclosures to go before the housing market hits rock bottom and can start again.

We’re not surprised at these figures, but it is disheartening to see so many filings.  Despite the attorneys who have given their pro bono and paid time to try to fight the more suspicious foreclosure filings, it is clear that more leadership, and perhaps money, needs to be passed along to the homeowners, rather than to the banks.


Changes to the MMM Program Coming Soon!

Posted by Ryan Blay on June 5th, 2012 in Chapter 13, Foreclosure - Saving Your Home, Mortgage Foreclosure Defense, Mortgage Modifications, Real Estate, Wisconsin

Not content to rest on its laurels, the Eastern District of Wisconsin’s Mortgage Modification Mediation (MMM) Program has continued to inspire and innovate, becoming one of the leading bankruptcy courts in pushing for mortgage modifications during Chapter 13 Bankruptcies.

In addition to talk about expanding the program to the Western District of Wisconsin Bankruptcy Court, the program is planning a move to use the DMM Portal to upload documents and do the unheard of – actually encourage open lines of communication between servicers and debtor attorneys.  Through the work of Judge Susan Kelley and the attorneys, mediators, volunteers, and court staff who have nurtured the program, the MMM should be the envy of the courts for a long time to come.

If you want to know more about the MMM program and how it can help cut through the bog of modification applications toward an answer, please contact us at Lakelaw.  As attorneys who have been active with the program since its inception, we can maneuver clients through the program, work on the applications and its paperwork, and prepare homeowners to work within its guidelines to achieve positive outcomes.


Don’t Have Two Bankruptcies Open At The Same Time!

Posted by Ryan Blay on June 1st, 2012 in Bankruptcy, Bankruptcy Information, Bankruptcy Legislation, Bankruptcy procedures, Chapter 11, Chapter 13

An e-mail recently circulated from another state.  It asked what might happen in a case that had just opened.  It seems that the filer had just filed a Chapter 7 bankruptcy in the past year.  The debtor was about to be discharged, or released, from bankruptcy, with the case to be closed shortly.  However, just before the debtor received the discharge, they filed a petition for Chapter 13 bankruptcy.

Different states might have ways of handling this situation.  But from the responses received, it is pretty clear that this filer could be facing trouble for two big reasons.  First, when a bankruptcy is filed, schedules D, E, and F, list all of the debts owed by the debtor.  Debts to anyone for any reason.  Because the debtor hadn’t received a discharge when this case was filed, those debts should be identical to those on the Chapter 7 petition.  It’s possible the debtor might only have listed debts that would have survived the Chapter 7 – like mortgage debt, certain taxes, student loans, child support, and so forth.

The second, and more troublesome issue, is that for a time there were two bankruptcy estates open.  If that sounds weird and confusing it is.  A bankruptcy estate is the financial world of a debtor – whether an individual, or a business.  Imagine if your beloved grandfather passed away peacefully.  Everything he owned and all of his debts would be involved in his estate.  Now suppose just as everything was to be divided and resolved with his family, you were told that your grandfather had a second estate that prevented this matter from being closed, and that the property couldn’t be divided until this second case was resolved.  Well, other than the pain and sorrow of a death, this is very similar to two bankruptcy cases being open at once.

There are now questions of “bad faith” – whether the Chapter 13 was filed with the intention of paying back creditors, or simply to stall another process.  This would have been much cleaner had the debtor simply wanted until the Chapter 7 was closed to file.  Then a new estate, free from the Chapter 7, would be created and easier to manage.  Unfortunately, that didn’t happen, and the court will have a very messy case to deal with.
I wouldn’t want to be that debtor or their attorney!

The moral of the story:  The bankruptcy process has to be completed – either dismissed without a discharge, or closed after a discharge, in order to be started again. Consecutive bankruptcies may be ok, but two simultaneous bankruptices is not.


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