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April 2011 Archives

Consumer Bankruptcy Filings Decline Nationwide: NBKRC

As previously reported here, bankruptcy filings have been falling in the Western District of New York. A new analysis by the National Bankruptcy Research Center (NBKRC) shows that consumer bankruptcy filings are also down nationwide. The analysis, prepared by Professor Ronald Mann of the Columbia Law School, showed that bankruptcy filing in the United States for the first three months in 2011 are down 6% compared to the first quarter of 2010. The report was released by the NBKRC April 4, 2011.

Albany Debtor denied Discharge Failure to Maintain Business Records: O'Hara

The Hon. Robert E. Littlefield, Jr., Chief Judge of the United States Bankruptcy Court for the Norther District of New York has denied Joseph J. O'Hara a bankruptcy discharge. In re O'Hara, NDNY Bk #08-12108; AP #09-90055; decision April 18, 2011.

LPS Sanction by Louisiana Bankruptcy Court for Misrepresenting Chapter 13 Post-petition Mortgage Payments: in re Wilson

When confirming a Chapter 13 plan in the bankruptcy court in Rochester, Judge John C. Ninfo II emphasizes to every debtor the need to maintain accurate records of mortgage payments made after the case is filed ('post-petition.) Standing Trustee George M. Reiber also emphasizes this record-keeping requirement, and provides all Chapter 13 debtors with the 'yellow folder', a file pre-printed on the cover with spaces to note down every post-petition payment. A recent decision from the Bankruptcy Court for the Eastern District of Louisiana underscores the importance of that record-keeping. Judge Elizabeth W. Magner has sanction a mortgage servicing company for misrepresenting the debtor's post-petition payments and 'robo-signing' of court affidavits:
In re Wilson, ED La. Ch. 13 bk #07-11862, decision April 7, 2011. The decision is available at no charge on the Pacer docket of the case. See also New York Times: "Homework Regulators Aren't Doing"' Article April 16, 2011; author: Gretchen Morgenson.  Se also Reuters April 13, 2011, article by Scot Paltrow.

Fraudulent Transfer Into Retirement Account Exempt in NY? The Morra decisions

Is a 401(k) retirement plan exempt in bankruptcy under New York law? Does it make a difference if the funds were transferred into the retirement account when the debtor was insolvent (a constructive fraudulent conveyance)? What about funds transferred into the account within 90 days of filing bankruptcy? These were the issues presented in a long, torturous Eastern District of New York bankruptcy case, In re Morra, resulting in four court decisions from 2006 to 2009. To be precise, the 90 day transfer issue was not present in Morra, but the analysis reached would apply to that issue as well. These decisions came out a while ago, but I have not seen any other on-line analysis of their significance.

Q&A: High Student loans and Bankruptcy

Ms. R from the Buffalo area wrote to me and asked what advise I could give her concerning her $100,000 + student loan debt.  Payments are increasing by 1/3 and she can hardly afford the current payment.  If you have a better answer than me, please post a comment.  My response:

Analysis: NY Proposed property Tax Lien transfer Bill: A6348 and S.2976

On March 23, I reported that there was pending in the New York State legislature a proposal that would allow local municipalities to sell their property tax liens to private parties, with the consent of the property owner.  The lender who pays the pax in exchange for the lien would be in a senior position on the btitle (senior to the first mortgage) and would enter into an agreement with the property owner to pay back the loan, at interest of up to 18%.  If the property owner defaults, the property tax lender could foreclose on the property.

Syracuse Symphony to File Chapter 7

The Syracuse Symphony Orchestra (SSO) voted early this week to shut down and file a chapter 7 bankruptcy, according to the Syracuse Post-Standard (article April 5, author Melinda Johnson.) The company terminated its season - its 50th anniversary season - early, with twenty concerts remaining. The Rochester Philharmonic Orchestra announced that it will honor SSO tickets at selected concerts this Spring.

Government Shutdown Not Likely to Affect Bankruptcy Court for Two Weeks; UST Office Less Clear

With a likely federal government shutdown just hours away, it is still unclear of the potential impact on bankruptcy cases, the court clerk's office, the Office of the US Trustee, and the bankruptcy court. However, it would appear that the court itself will continue to operate as normal for at least two weeks.  The status of the UST is less clear.

Impact of Possible Federal Government Shutdown on Bankruptcy Courts

With a possible federal government shutdown deadline of Friday at midnight, bankruptcy practitioners are unsure of the possible effect on the operation of the bankruptcy system. The Bankruptcy Judge in Rochester, his staff, and the Court Clerk's office are, of course all federal employees, as is the staff of the United States Trustee's office. 

Mortgage Foreclosure Fraud Report on 60 Minutes April 3

In a report aired April 3, 2011, CBS 60 Minutes reports on the foreclosure mess, and in particular about forged documents used in foreclosure procedures. The full 14 minute video report, presented by Scott Pelley, is posted on the CBS News website. A follow-up video interview with Mr. Pelley is posted on 60 Minutes Overtime.The report illuminates the problem of missing mortgage assignments in the mortgage industry. The story in particular focused on actual forged mortgage assignments, created to fill in the missing links in the chan of title. For example, "Linda Green" was listed on thousands of mortgages as a "Vice President" of twenty different banks. Not only was the actual Linda Green no Vice President (more like a shipping clerk), but many other people signed mortgage documents as "Vice President Linda Green", two of which appeared on camera. One demonstrated how he signed 350 documents an hour, 4,000 a day!Foreclosures that involved documents signed by "Linda Green" included Wells Fargo, HSBC, Bank of America, Citi Bank, Deutsche Bank, and US Bank, all of which told 60 Minutes they farmed out their mortgage processing. The fraud reported in the 60 Minutes story was allegedly committed by an entity called Docx, was owned by LPS (Lender Processing Services) LPS told 60 Minutes that its which says it shut Docx down in 2009. The FBI and several states are investigating, according to the story.60 Minutes interviewed Sheila Bair, the Chairman of the U.S. Federal Deposit Insurance Corporation (FDIC), who recommended the possibility of raising a "cleanup" fund of several billion dollars, from banks, to pay homeowners to accept the ownership claim of mortgage banks, which would be cheaper than attempting to prove mortgage ownership in many cases.Follow-up: Here's a link on Scribd (a social publishing site) by Lynn E. Szymoniak, the attorney cited in the 60 Minutes piece, which found "Linda Green" to be VP of dozens of entities (also found: multiple offices held by "Tywanna Thomas, Korell Harp and Shelly Scheffey".) Ms. Szymoniak also published on Scribd an "open letter" about the issue of how Lender Processing Services, Inc. "solves bank's missing paperwork problems in foreclosures."

Utica Judge Rules Above Median Income Ch 13 Plans Must Run 5 Years: Eaton

Utica Bankruptcy Judge Diane Davis has issued a decision disagreeing with a previous decision by Northern District of New York Chief Judge Robert E. Littlefeld Jr., and that debtors with above-median income Chapter 13 cases must file a plan that runs a full five years, unless creditors are paid in full. In re Eaton Ch 13 #08-62201; Bankr. NDNY; decision March 31, 2011.) In the earlier case, In re Green, 378 BR 30 (Bankr. NDNY 2007), Judge Littlefield concluded that Bankruptcy Code 1325(b)(1)(B), which requires a five year "commitment period" for above-median income debtors in Ch. 13, was not a measurement of time ('temporal') but rather a measurement of the amount that must be paid into the plan (a 'multiplier'). As Judge Littlefield saw it, if a debtor's projected disposable income was $500 per month, the plan was required to pay at least $30,000 to unsecured creditors ($500 time the 60 month commitment period), not that the plan actually had to go a full five years. If a debtor's projected disposable income was negative, as it actually was in the Green
case, then the five year commitment period did not even apply. Judge Davis, after reviewing extensive caselaw and legal studies ("Following its review of nearly two dozen cases, leading authoritative treatises, and several scholarly articles addressing this question, the Court may fairly state that there is little, if anything, to be added by this Court that has not already been said by other jurists and scholars since BAPCPA became law." - Eaton, page 5), concluded that the correct interpretation is that five years represents the actual length of time the plan must run, no matter what the projected or actual disposable income. This conclusion is based on opinions rendered since
Green was decided, including Supreme Court decisions.

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