Archive for the ‘Bankruptcy Blog’ Category

Consumers Filing Bankruptcy Face Bigger Challenges

Monday, September 30th, 2013

By: Marshall G. Reissman

A recent article in the New York Times recently about consumers facing bankruptcy with much more debt than previous debtors. If you are facing this same type of situation, please call us and schedule a free consultation. We want to help you in this time of uncertainty and doubt

 

 

 

Can I Strip off a Second Mortgage in Chapter 7? Now you Can!

Friday, May 18th, 2012

By: Marshall G. Reissman, Attorney at the Reissman Law Group, P.A.

The 11th Circuit Court of Appeals recently held that debtors in Chapter 7 bankruptcy have the ability to strip off their second mortgage on their homestead property if the first mortgage is greater than the value of the home. The ability to wipe out a second mortgage in bankruptcy was previously only available to debtors in Chapter 13 bankruptcy.

Prior to this decision, many practitioners, myself included, would have counseled individuals who wanted to remain in their home, but wanted to strip off a second mortgage to file Chapter 13 bankruptcy. A United States Supreme Court decision in Dewsnup v. Timm, held that a Chapter 7 debtor could not “cram down” a partially secured debt. Cramming down a debt deals with valuing secured property to its actual value as opposed to what is owed on the collateral. This is another big reason folks file Chapter 13 bankruptcy. Many courts interpreted this decision into Chapter 7 debtors not being able to strip off wholly unsecured junior lien.

The 11th Circuit applied its “prior panel precedent rule,” which states that a later court may depart from an earlier court’s decision ONLY if an intervening Supreme Court decision is “clearly on point.” Because the decision in Dewsnup only dealt with cramming down partially secured liens and not stripping off wholly unsecured junior liens, then the 11th Circuit holding in Folendore v. United States Small Bus. Admin remains controlling precedent in the 11th Circuit.

Basically, if a junior lien is allowed under the Bankruptcy Code and is also totally unsecured under the Code, it is also voidable in Chapter 7 bankruptcy under the Code. Please call us today to see if you qualify for relief under Chapter 7 bankruptcy and if you can strip off a second mortgage.

McNeal v. GMAC Mortgage, LLC (In re McNeal) (11th Cir. 2012)

Dewsnup v. Timm, 502 U.S. 410 (1992).

Folendore v. United States Small Bus. Admin., 862 F.2d 1537 (11th Cir. 1989).

11 U.S.C. Sec. 502

11 U.S.C. Sec. 506(a)

11 U.S.C. Sec. 506(d)

The Test No One Discusses in Bankruptcy

Friday, May 4th, 2012

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.

The test that everyone wants to talk about when they come in for a consultation is the Means Test. Folks generally want to know if they qualify to file Chapter 7 by passing the Means Test. This test is pretty simple. If you are below the state median income you qualify. Everyone breathes a big sigh of relief that they won’t be forced into a repayment plan under Chapter 13. The problem with this is the Means Test is where the analysis begins, not where it ends. The actual income and expenses of the Debtor must be taken into account in order to pass the not much discussed “Totality of  Circumstances Test.”

Even if a Debtor is below the median income on the Means Test, if the Debtor has disposable income on the bankruptcy schedules, the Debtor may not qualify to receive a discharge under Chapter 7. This is called the Totality of Circumstances Test. If a Debtor has disposable income to pay back unsecured creditors, the Trustee can file a notice stating that receiving a discharge under Chapter 7 would be an abuse. Not many folks talk about the Totality of Circumstances Test, and the only test you can find on the internet is the Means Test. Inevitably, folks do some research on the internet, find out they are under their state’s median income, and automatically think they can receive a discharge under Chapter 7. Therein lies the mistake. Passing the Means Test just gets you to the starting line, a better analysis needs to be performed to see if you can finish the race.

I recently had the opportunity to review Warren Sapp’s bankruptcy petition when I was interviewed by a Tampa Bay Times reporter. Link to the story can be found here.  I previously wrote an article about the reason why I, and other bankruptcy attorneys, think that Mr. Sapp filed for bankruptcy. The garnishment. Another question folks had was how could a person with so much income file Chapter 7. Looking over the schedules, it did not appear Mr. Sapp had substantial income in the six months prior to filing the Chapter 7 Bankruptcy petition. What I believe will be problematic for Mr. Sapp is the amount of disposable income he shows on his schedules. While Mr. Sapp does not fail the Means Test, Mr. Sapp lists more than $4,500.00 in net monthly income on his schedules, which could  be viewed as an abuse is he receives a discharge under Chapter 7. I guess we will have to wait and see.

In the meantime, if you want to find out if you not only qualify to file Chapter 7 Bankruptcy, but will be able to receive a discharge under Chapter 7, call us for a free consultation. We have more than 30 years combined experience representing individuals in bankruptcy.

Professional Athletes Filing Bankruptcy

Thursday, April 12th, 2012

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.

Professional athletes filing bankruptcy have been in the news over the years including Mike Tyson, Sheryl Swoopes, and Lawrence Taylor. It may shock some people that professional athletes, who made millions during their careers, face the same kind of financial troubles that middle class Americans find themselves in. One of the latest professional athletes to file bankruptcy is Warren Sapp, formerly of the Tampa Bay Buccaneers.

Unfortunately, professional athletes are not immune from the problems regular people face, they just have a few more zeros at the end of their bills. Whether it is over-spending, bad investments, or a victim of the recent real estate bubble, professional athletes are subject to the same types of financial problems. Another possible reason for filing bankruptcy is to stop pending litigation or to stop a garnishment. Read a post about bankruptcy and garnishment here.

Recently, I had the opportunity to look over Warren Sapp’s bankruptcy petition and schedules at the request of a local reporter. The question the reporter had was the question most people had, why did Warren Sapp file Chapter 7 bankruptcy? At first look, it may be hard to understand. Many of the larger debts owed by Warren Sapp would appear to be non-dischargeable including taxes owed to the IRS and domestic support obligations to a former spouse and minor children. So why now? When I looked over the Statement of Financial Affairs “why now” become apparent to me.

One of Warren Sapp’s creditors, PNC Bank, who Mr. Sapp listed a debt totaling over $800,000.00, held a judgment against Warren Sapp and the creditor executed a Writ of Garnishment. Warren Sapp stated that PNC bank garnished more than $130,000.00, in December, 2011. One way to stop a garnishment is to file bankruptcy. Our clients face garnishment of their wages and bank accounts on a regular basis, and if appropriate, we will file bankruptcy on their behalf to stop the garnishment and discharge the underlying debt. Again, Warren Sapp just  had a few more zeros at the end of his garnishment than most of our clients, but it still has the same effect.

Please check back for information regarding Warren Sapp’s bankruptcy. I will be following his case and providing my thoughts on what happens.

Garnishment and Bankruptcy

Tuesday, April 10th, 2012

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.

Folks usually seek out the services of a bankruptcy attorney only when their situation becomes dire. One of those situations occurs when a credior sues someone. A lawsuit can be detrimental enough, but the real pain happens if the creditor is able to get a judgment against the person. Once the creditor obtains the judgment, the creditor can take whatever legal action is available to enforce the judgment. One action is the ability of the creditor to garnish a person’s wages, bank accounts, and other revenue streams. A garnishment can turn things from bad to worse.

Fortunately, one way to stop a garnishment is to file bankruptcy. When a person files bankruptcy, an auotmatic stay of protection is put into effect. The automatic stay prevents a creditor from taking certain actions including enforcing a pre-petition garnishment action.  Not only will the garnsihment stop, but as long the person remains in bankruptcy and receives a discharge, the underlying debt will likely be dischargeable as well.

If a creditor has filed a lawsuit against you, seek out the advice of an experienced bankruptcy attorney to find out if filing bankruptcy is right for you. Call us today, and we will provide a free consultation and determine what course of action is right for you.

The Automatic Stay of Protection and Discharge Injunction

Friday, March 30th, 2012

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.

One of the advantages debtors receive when they file for bankruptcy is creditors can no longer seek to collect money from them. At the time a bankruptcy case is filed, an automatic stay of protection is put into place under Sec. 362 of the Bankruptcy Code, which prevents creditors from contacting debtors trying to collect on outstanding debt. When a creditor fails to abide by the Automatic Stay, the bankruptcy court has the ability to levy sanctions against the creditors for failing to abide by the Stay. Oftentimes a creditors will normally stop contacting debtors after receiving a phone call from the debtor’s attorney advising the creditor of the bankruptcy case information. When the creditor continues to violate the Stay, the debtor’s attorney can file a motion with the court and seek sanctions, including punitive damages and attorney fees.

This same principle applies after a debtor receives a discharge. Once a debtor receives a discharge, creditors are forever barred from attempting to collect a debt that was included in the bankruptcy. The same rules apply if a creditor violates the discharge injunction as if they violate the Automatic Stay. Usually, once put on notice, creditors will cease collection activity. It may take several attempts and some sternly worded letters, but creditors usually stop harassing debtors.

Then there are the exceptional cases.

Recently, Bank of America allegedly called a debtor over 30 times to collect a debt that was included in the debtor’s bankruptcy. Thirty phone calls is probably excessive in anyone’s book. Apparently a bankruptcy judge in the Middle District of Florida Ft. Myers Division also thought 30 phone calls was excessive. He sanctioned Bank of America for violating the discharge injunction and made the bank pay $12,500.00 for the debtor’s attorney fees and additional sums for the debtor’s emotional distress according to the Huffington Post.

The Automatic Stay and Discharge Injunction are no joke. If creditors fail to abide by the Bankruptcy Code, they may find themselves on the other side of the collection process.

Here is the link to the article on the Huffington Post.

What does the Ransom decision mean

Friday, March 30th, 2012

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.

In January, 2011, the United States Supreme Court ruled that if a debtor is not making loan payments or lease payments then a debtor is not allowed to deduct the car-ownership deduction on the Statement of Current Monthly Income and Means Test Calculation, commonly referred to as the Means Test.

The debtor in Ransom filed for relief under Chapter 13 in 2006. The debtor listed over $80,000.00 in unsecured debt, including debt owed to FIA Card Services, who filed on objection to the debtor’s plan. The debtor sought the car-ownership deduction of $471.00 on the Means Test, which, when totaling all deductions on the Means Test, resulted in disposable income to the unsecured creditors in the amount of $210.55 per month, or $12,633.00 over the life of the debtor’s plan. FIA argued that the debtor should not be able to take the car-ownership deduction because the debtor was not making loan or lease payments. The difference between the debtor’s proposal and the amount available to the unsecured creditors would more than double if FIA’s argument succeeded. The bankruptcy court agreed with FIA and denied confirmation of the debtor’s plan.

The debtor appealed the decision to the Ninth Circuit Bankruptcy Appellate Panel, which affirmed the lower court’s decision. The debtor appealed the Appellate Panel’s decision to the United States Court of Appeals for the Ninth Circuit, which also affirmed. The debtor ultimately appealed the decision of the circuit court to the United States Supreme Court, which upheld the previous decisions of both courts the debtor appealed.

This decision changed the landscape of bankruptcy law and greatly diminished the deductions debtors can take on the Means Test if they do not make loan or lease payments on a vehicle.