Jacksonville Bankruptcy Lawyer Blog

Published on: March 15, 2012

Florida Chapter 7 Trustee’s Aggressive Collection Practices

“If you cannot reason with a man, reason with his wallet.”

11 USC 326(a) determines a Chapter 7 and 11 Trustee’s compensation to be twenty-five percent of the first $5,000, ten percent from $5,000 to $50,000, five percent between $50,000 and a $1,000,000 and three percent of any monies disbursed or turned over in a bankruptcy case. For this reason, trustees are zealous in collecting all property of the debtor’s estate as is their role as representatives of the estate.

When a case is filed, a debtor must list all of the property they claim is exempt. The trustee then has thirty days to object to the debtor’s claim of exemptions, otherwise the trustee’s right is waived and the exemptions stand. If the trustee files the objection to the claim of exemptions, the objection must be justified by some kind of measurable facts. Typically, the trustee states that they disagree with the value assigned to the debtor’s property. For instance, if the debtor lists his car’s value at $1,000, which he’s allowed to keep but the trustee feels it’s worth an amount closer to $2,000. This would be a valid ground for the trustee’s objection. The debtor would then have to either amend their list of exempt property or attend a hearing in front of the judge and argue the evidence with the trustee.

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Published on: March 14, 2012

Florida Debtors With Student Loans Have Some Options

By David M. Goldman

As both an attorney and a holder of a postgraduate degree I am often approached by people, clients and associates alike regarding an American’s ability to discharge student loan debt in bankruptcy. I have recently read, “The Student Loan Scam” and found it to be an enlightening, albeit depressing, read. The book outlines the history of the non-dischargability of student loan debts in bankruptcy from the early stages when it was discharged like any other debt to when it required a five year Chapter 13, then a seven year case and then finally being practically impossible to discharge in any scheme at all. Apparently, student loans have only held their practically non-dischargable status since the passage of the 1998 Higher Education Act.

In Canada, recent changes to their laws have permitted discharge of student loans which originated seven (7) years prior. Recently, I spoke to an attorney out of Calgary, Canada who informed me that while Canadian loans can be discharged within the seven year period and that any of my clients who might want to file in Canada would still be liable on their U.S. loans.

Student loan borrowers are not without alternatives. “The Student Loan Scam” gave gruesome examples of those who migrated form the U.S., went underground or even committed suicide as a result of their non-dischargable debt. About three years ago the “Income Based Repayment” program went into effect. This program allows those with state backed loans to pay only a percentage of their income toward their debt. This is on a graduated scale and allows a person making less than $15,000 to have no payment. After twenty-five (25) years of these payments, the remaining debt is discharged. Just last year, this twenty-five (25) year period was reduced to fifteen (15) years. In short, the ability to discharge student loans in the United States went from dischargable in bankruptcy, to dischargable in five years, then seven, then not at all, then twenty-five years and now fifteen. What length of time is appropriate? Who knows.

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Published on: March 13, 2012

Florida Ponzi Scheme Bankruptcy Forcing Payback of “Investor” Returns

By David M. Goldman

St. Johns County, Florida residents never suspected that one of their own, Lydia Cladek, was the head of a $100 million dollar Ponzi scheme, one of the largest to hit the south eastern United States. Cladek is in her sixties and is a little over five feet tall and yet this little old woman has brought many of her investors to their knees. In late January she was convicted of fourteen counts of different kinds of fraud.

Investigators found she was holding $4 million in car notes despite owing $90 million in outstanding loans. She had been living a lavish lifestyle with several houses in the Florida area.

A Ponzi Scheme is one where a person takes money from investors and pretends that those investments are increasing in value. The money never increases in value, but the Ponzi Schemer is able to pay out more than the investors paid in by taking on new investors. The new investors pay the dividends on the old investor’s money. As long as the Schemer pays a higher than average rate, they can convince more people to invest. This effect snowballs until there is simply too much money going out vs. coming in and the scheme collapses.

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Published on: March 9, 2012

Jacksonville, Florida Court Sustains Objection To Deficiency Claim

By David M. Goldman

Jacksonville, Florida Chapter 13 bankruptcy cases rarely see claims for deficiencies on real properties. A deficiency occurs when a repossessed home is sold, but the sale price isn’t high enough to meet the value of the mortgage. The different between the sale price and the amount owed is the deficiency. In Florida, the borrower owes the deficiency amount to the lender. When the borrower files for Chapter 13 bankruptcy protection, the lender almost invariably writes the debt off as a tax loss, never filing a proof of claim against the debtor.

A proof of claim is just that -evidence that money is owed by the debtor to the creditor. Creditors who wish to make a claim must do so within the proper time constraints and the claim must be valid. If the claim is not valid, the debtor or debtor’s counsel can object to the claim and have it disallowed.

A claim may be invalid for a variety of reasons. Recently, a deficiency claim for over $95,000 was filed against one of my clients. Like many people, the debtors had owned a rental property which wasn’t worth enough to cover the second mortgage. Their income was too high to qualify for Chapter 7 due to the means test, so they were forced to file a Chapter 13. The claim was unexpected, but came after the case plan had already been confirmed. In every Chapter 13 case a payment plan must be presented to all of the creditors. If the plan has not been objected to by a certain date, it is “confirmed” a term which is similar to a blessing from the court. In my case, the payment plan proposed to return the rental property back to the creditor in full satisfaction of the debt my client’s owed. I indicated that the creditor had no valid claim against my clients because the creditor did not object to the proposed plan, that because the creditor didn’t object to the confirmation of the plan that proposed to pay them no money, that creditor had lost the right to file a claim.

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Published on: March 7, 2012

Jacksonville, Florida Debt Collectors Must Follow Procedures

By David M. Goldman

These days, debts are bought and sold like stocks. By the time a debt collector files suit against you, they may be the third or fourth agency to hold your debt. Generally, this is a good thing because Debt collectors assume that they will be able to win by default in nearly all of their cases. As a result, these collectors rarely keep proper documentation (or don’t even get it in the first place).

Adopted by nearly every state, the Uniform Commercial Code sets forth requirements that must be met by a secured creditor before they can assess a deficiency against a debtor. There are varieties of other provisions that can be used to protect consumers: the Fair Debt Collection Practices Act, the Federal Truth in Lending Act, etc. One of the most powerful protections a consumer has is the Florida Rules of Civil Procedure. When one knows how to get evidence and how to present pleadings properly, the strength of a case is greatly amplified.

When a collector files a complaint with the court, they must have the debtor served at their last known address. There are a variety of defenses that can be used: Perhaps the collector hasn’t properly shown that they are owed the debt, perhaps the debt amount has been improperly calculated, perhaps the debtor isn’t even the right person -the list goes on and on. What is important to keep in mind is that a lack of action on the part of the defense means that they consent to the facts alleged. This is called a default judgment. Default judgments are difficult, though not always impossible to “re-open” and work out properly. It’s far easier to defend such a case if counsel is sought prior to a judgment being obtained, preferably before the initial twenty days after service of process has occurred. By getting into a case early, a lawyer will almost invariably have a better chance at defeating the complaint and may be able to get attorneys fees or file a counter-claim for damages (suing the person who is suing you).

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Published on: March 6, 2012

Jacksonville Florida Repossessions Aggressive In Poor Economy

By David M. Goldman

Jacksonville, Florida debt collectors may be more aggressively pursuing deficiencies for vehicle repossessions, new and old. People are getting behind on their payments for everything; their home, credit cards and cars. Unfortunately, cars and trucks often get picked up quickly after non-payment and aren’t always sold at their commercially reasonable value.
One the positive side, the Florida legislature has included provisions in their Uniform Commercial Code that allow a debtor to counter-sue their creditor if that creditor seeks to sue for a deficiency and cannot show that their sale of the secured property was done in a commercially reasonable manner. An obvious claim for relief would arise from a scenario where a car dealer repossesses a car, sells it to his brother for half of what it’s worth and then sues the debtor for the deficiency. That would be a fairly clear action for statutory damages.
Unfortunately, many people are unaware this protection exists. They feel that because they were unable to make their payments, that perhaps they deserve to be “steamrolled” by the system. We at Law Office of David M. Goldman disagree. If you’ve had a secured asset repossessed and think it was sold for less than it’s value, you may have a cause of action to sue your creditor. Contact a Jacksonville Repossession Defense Attorney at (904) 685-1200 for a free initial consultation.

Published on: March 5, 2012

Jacksonville Bankruptcy Attorney Can Stop Foreclosures

By David M. Goldman

With about half of Jacksonville, Florida homes under water combined with the decrease in overall income for people across the country, it comes as no surprise that people are getting behind on their mortgage payments. Many of those people, especially those in homes that are seriously underwater, would probably benefit most from a mortgage modification or the surrender of the property altogether. However, there is a segment of the population whose home is still worth near if not more than their mortgage(s). Some of these people think that the only way to catch up on their home mortgage is to convince a bank to grant them a modification -often the kind where there are lots of penalties and fees and where the arrearages are tacked on the end of the loan as a balloon payment. These mortgages are not always available and can take so much time to achieve that the penalties become unmanageable.

In many cases, filing a traditional Chapter 13 bankruptcy will help these people catch up on the arrearage on their home. This is especially helpful if there has been a recent increase in income. In a Chapter 13 we submit a plan for repayment which includes the regular monthly mortgage payment, but also amortizes the arrearage to a sixty month period to make payment more manageable. This way, if the debtor can afford it, they can catch up on their mortgage without the arduous frustration of trying to negotiate with the lender.

Filing a bankruptcy stalls any collection attempts so a case filed the morning of a foreclosure sale will cancel the sale or, if the sale occurs, will require the Judge to vacate the sale upon motion by the debtor’s counsel. As long as the debtor intends to catch up on their home mortgage and indicates the ability to do so in their bankruptcy plan, the foreclosure will end there.

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Published on: March 4, 2012

Who Gets To Know You Filed?

By David M. Goldman

Jacksonville Bankruptcy cases are a matter of public record. That means that anyone who wants to know whether someone has filed for bankruptcy can look it up. That being said, unless they’re already setup to do so, it’s not the easiest system to access. They have to use a credit card to sign up for the court docket service and must page $0.8 per page (changes depending on where they are) to view documents and search. If they don’t know the debtor’s social security number, this search can be difficult if not impossible, especially if they’re looking for a common name such as, “John Smith”. If they do find your case filing, they will not be able to view everything as some documents are kept private.

People who will get notice of a case filing are those to whom the debtor owes money, those with whom the debtor owes money, the debtor’s lawyer and the trustee appointed by the court.

Everyone who files for bankruptcy is required by 11 USC §341 to attend a hearing called a “341 Hearing”, it’s easy to see where it gets it’s name. This hearing is public, but is generally attended by only lawyers and other people filing for bankruptcy. There is a chance that a debtor could run into someone they know at a 341 hearing, but unless that person was a lawyer, they’re almost definitely declaring bankruptcy as well.

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Published on: March 2, 2012

Effect A Raise Has On Your Jacksonville Bankruptcy

By David M. Goldman

The effect a raise will have on your Jacksonville Bankruptcy depends on which Chapter you’ve filed and the amount of the raise. “Material” is a term often referred to in the legal world. Prior to law school, I would have thought this had to do with fabric, but no, “Material” in the legal sense means, “Significant”. You may have heard the term, “Material Witness”. The same term can be used to describe a raise. Is the raise a big enough raise to have a “material” effect on the debtor’s income? If the answer is yes, then it may have an effect on your case.

With few exceptions qualifying for a Chapter 7 requires you to demonstrate that your income is less than the average American for your family size. This is called the, “Means Test”. To calculate your income, the last six months of your income is added up and multiplied by two. This gives a quasi-accurate report of what your income will be going forward. If your raise occurs after you’ve filed your Chapter 7 and you qualified on the date of filing, you’re case probably won’t be effected by the raise. That being said, there is a forward looking aspect to the “Means Test” which requires you to declare any anticipated changes in your income. If you know the raise is coming, you need to report it.

In a Chapter 13 case a raise has a very different effect. A Chapter 13 is a reorganization of your debt. Generally, secured creditors get paid in full and unsecured creditors get paid what’s left, your disposable income, if anything of your paycheck after paying living expenses and secured creditors. When you get a raise, the amount of money going to your unsecured creditors can increase because you have more disposable income. So, if you have unsecured creditors in a Chapter 13 who aren’t getting paid in full, you won’t see any money from your raise until your case is over because that increase in pay will go to the unsecured creditors. However, if your unsecured creditors are getting paid all of the money they’re owed, then an increase in income means that you’ll be able to pay everyone off sooner. Once everyone is paid in full, your case can be closed and you can get on with your life.

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Published on: March 1, 2012

Who Lives With You Can Matter in relation to a bankruptcy.

By David M. Goldman

Means Test, Bankruptcy
Jacksonville Bankruptcy Courts take into account who lives with you when you file bankruptcy and, depending on the chapter of bankruptcy you file, they may consider those people in different ways. I don’t mean to imply that the character of the people you live with matters. It makes no difference if you’re living with Tim Tebow or Timothy McVeigh. What matters is whether those living with you are dependent on you for most of their care and if they aren’t, the court wants to know if they make regular contributions to the household.

A regular contribution to the household is any payment of money to or on behalf of the person filing bankruptcy. A good example of this is when someone’s mother pays their phone bill every month. Their mother’s intent is to help them out a bit and have them call more frequently. By paying for that utility, it frees up more money for the debtor and so that debtor has more money to pay bills. A regular contribution from anyone counts, but most contributions come from people who live in the same home, such as boyfriends, girlfriends and roommates.

When figuring out which chapter of bankruptcy best suits your situation (if any), your lawyer should take your basic income information and preform a cursory, “Bankruptcy Means Test“. The Means Test was created by the U.S. Legislature in 2005 and requires that anyone wishing to file a Chapter 7 bankruptcy show that their income is lower than average for their family size than the average American household of the same size in their area. There are exceptions to this test for active military and some business holders, but generally this income test is required.

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