StayViolation.Com

ARE YOU INTERESTED IN POSSIBLY JOINING ME IN A THIRD WAVE SUMMIT OR SABBATICAL TO JAPAN NEXT SUMMER? PLEASE LET ME KNOW!

Did you know the Biblical Sabbath is the origin for the present-day practice of “the weekend”, meaning Saturday and Sunday in which most do not have work scheduled, or where, like me, your work schedule is more relaxed.  It comes from the Hebrew Shabbat meaning literally a “ceasing” in work.  It is meant to be a hiatus.  Also from this comes the concept of sabbatical, which is an extended version, which traditionally lasted a year.  But, in recent time sabbatical has come to mean any extended absence in one’s career in order to achieve something.

Many times what we want to achieve away from work is just a better understanding of things.  We just want to get away and experience new and much different surroundings.  To open up our minds to new possibilities.  To avoid the mental restrictions and constraints under which we live from day to day.

There is just something about being away for a while, and I do not mean simply near a computer or cell phone in a different location.  I mean out of pocket and mysteriously away from the action long enough to consider other things and other factors that might positively impact our lives.  To get away to someplace you might not otherwise go on your own.

So, although I have not made any plans, I would like your input on what I am thinking.

I am thinking about ditching it all for a week next summer, leaving the country for a more foreign culture, in an effort to see how the rest of the world lives and works — literally.

I am thinking about a Third Wave conference, or really more of an un-conference of sorts (a sabbatical if you will) wherein we legal professionals (lawyers, assistants, law students, techies, consultants, bloggers and the like) can commune and discuss with each other the concepts, the benefits and the nuts and bolts of the Third Wave Practice of Law, including the home-based practice, the virtual law firm, the niche practice of law, cheap tech, marketing and growing a non-traditional law practice, and collaboration, just to name areas.  While, at the same time, getting our minds clear and our horizons adjusted and calibrated properly, by experiencing a different culture, a different environment, seeing the sights, and studying really comparative law or legal practices.  How does the law differ in different places of the World?

CLE would be great, and with some planning there is no reason why this could not be added or achieved so as to kill two birds with one stone.  This might also add some tax incentive to the trip.

Get away from the kids, the pets, and the pressures of the home and office for a week.  Leave the cell phone and the email behind.  Travel and experience and share and learn in a group of like minded law professionals.

I am thinking that maybe we can plan a trip together to Japan thinking that what will change our perspective culturally will assist us in changing our perspective about the practice of law in our country, and allow us to more fully understand what is truly possible.

It also goes to better understanding and appreciation of the concept of work-life balance or blending.

Japan, it would seem, would offer us that difference, enjoyment and entertainment we all want.  And, with its mass transit, it could very well offer us something reasonably affordable.

My daughter, Mary, knows the county well, has worked there, has a degree in Japanese and is fluent.  Many in Japan speak English as well.  She could be our guide, and in that she will have finished her third year of law school by that time, she fits in our criteria and has our interest at heart.

I would hope that along with seeing the traditional sights, that we could arrange to visit a Japanese law school, a law firm and government offices to get a perspective how how things differ and not.

I understand that it is a lot to consider, but I would like to be able to gauge the interest out there for such a trip next summer.  There is no reason to go to the effort over the next year if there is not enough serious interest.

So, here is what I would ask of you.  If you would be interest in attending such a retreat and learning experience next summer (alone or with your significant other), please email me and let me know.  I want to start by compiling a list of possible participants that want to understand more about the Third Wave practice of law and other cultures.  I am looking for both newbies and those who would have the capability and would care to share your expertise with everyone about related matters, such as law firm tech, blogging, marketing, networking, collaborating, niching a practice, working from home, unbundled legal services or the like.  Obviously, there is no obligation at this point and no money to put down for the trip, but I would like to have a list of people who would be greatly interest.

Email me at -

chuck@chucknewton.net

And, give me your contact information and any ideas that you might have for such a trip.

Other bloggers and social media types, please help me spread the word to other legal professionals.  Your assistance would be greatly appreciated.

If we get enough interest, we will start planning and organizing something more formal for your review.

Many times what we want to achieve away from work is just a better understanding of things.  We just want to get away and experience new and much different surroundings.  To open up our minds to new possibilities.  To avoid the mental restrictions and constraints under which we live from day to day.

There is just something about being away for a while, and I do not mean simply near a computer or cell phone in a different location.  I mean out of pocket and mysteriously away from the action long enough to consider other things and other factors that might positively impact our lives.  To get away to someplace you might not otherwise go on your own.

So, although I have not made any plans, I would like your input on what I am thinking.

I am thinking about ditching it all for a week next summer, leaving the country for a more foreign culture, in an effort to see how the rest of the world lives and works — literally.

I am thinking about a Third Wave conference, or really more of an un-conference of sorts (a sabbatical if you will) wherein we legal professionals (lawyers, assistants, law students, techies, consultants, bloggers and the like) can commune and discuss with each other the concepts, the benefits and the nuts and bolts of the Third Wave Practice of Law, including the home-based practice, the virtual law firm, the niche practice of law, cheap tech, marketing and growing a non-traditional law practice, and collaboration, just to name areas.  While, at the same time, getting our minds clear and our horizons adjusted and calibrated properly, by experiencing a different culture, a different environment, seeing the sights, and studying really comparative law or legal practices.  How does the law differ in different places of the World?

CLE would be great, and with some planning there is no reason why this could not be added or achieved so as to kill two birds with one stone.  This might also add some tax incentive to the trip.

Get away from the kids, the pets, and the pressures of the home and office for a week.  Leave the cell phone and the email behind.  Travel and experience and share and learn in a group of like minded law professionals.

I am thinking that maybe we can plan a trip together to Japan thinking that what will change our perspective culturally will assist us in changing our perspective about the practice of law in our country, and allow us to more fully understand what is truly possible.

It also goes to better understanding and appreciation of the concept of work-life balance or blending.

Japan, it would seem, would offer us that difference, enjoyment and entertainment we all want.  And, with its mass transit, it could very well offer us something reasonably affordable.

My daughter, Mary, knows the county well, has worked there, has a degree in Japanese and is fluent.  Many in Japan speak English as well.  She could be our guide, and in that she will have finished her third year of law school by that time, she fits in our criteria and has our interest at heart.

I would hope that along with seeing the traditional sights, that we could arrange to visit a Japanese law school, a law firm and government offices to get a perspective how how things differ and not.

I understand that it is a lot to consider, but I would like to be able to gauge the interest out there for such a trip next summer.  There is no reason to go to the effort over the next year if there is not enough serious interest.

So, here is what I would ask of you.  If you would be interest in attending such a retreat and learning experience next summer (alone or with your significant other), please email me and let me know.  I want to start by compiling a list of possible participants that want to understand more about the Third Wave practice of law and other cultures.  I am looking for both newbies and those who would have the capability and would care to share your expertise with everyone about related matters, such as law firm tech, blogging, marketing, networking, collaborating, niching a practice, working from home, unbundled legal services or the like.  Obviously, there is no obligation at this point and no money to put down for the trip, but I would like to have a list of people who would be greatly interest.

Email me at -

chuck@chucknewton.net

And, give me your contact information and any ideas that you might have for such a trip.

Other bloggers and social media types, please help me spread the word to other legal professionals.  Your assistance would be greatly appreciated.

If we get enough interest, we will start planning and organizing something more formal for your review.

New York Shuts Down Collection Agency Run By Felons

As reported by the AP and The Houston Chronicle, the State of New York shut down a Buffalo, New York company run by felons.  The company operated under a number of names, including Final Claims Asset Locators, and it was run by a former drug dealer named Tobias Boylan that goes by the moniker, "Bags of Money".  The company was terrifying people into paying money by stating that the police were being sent over to their house then to throw them in jail.  In one recorded phone call the collector was heard saying, “Make sure you have somewhere for your kids to go. Lock up your house. Get some clean clothes, because you’re not coming home anytime soon."

This is obviously an interesting public interest story, but whether run by felons or more reputable sorts, the truth of the matter is that collection agencies are constantly engaging in this type of strange innuendo that is intended to deceive the person with whom they are dealing.  There should also be a concern about the propriety of companies that provide the business to these collectors.

5 Myths Of Bankruptcy

New York News did filed this report debunking 5 Myths of Bankruptcy.  Let us listen in -

Comedian Tim Clue Jokes About Debt, Credit Cards and Bill Collectors

I stole this off Dan Nunley's Oklahoma Bankruptcy Lawyer Blog.  Enjoy.

It Is Time We Curb Bank Overdraft Fee Abuse

It has reached the point of embarrassment, that is for everybody but the banks.  I am talking, of course, about the sky high and rapidly increasing overdraft fees charged.

Now, three Democratic lawmakers have asked the Federal Reserve to curb charges that banks levy on customers when they make a purchase with a debit card and overdraw an account. The fees can mount up quickly and cost consumers more than their actual purchases.  Known as "overdraft protection," and consumers often don't even know that they have the unasked-for convenience until the charges appear on their accounts.

House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.), along with Rep. Carolyn Maloney (D-N.Y.) and Rep. Luis Gutierrez (D-Ill.), sent a letter to Federal Reserve Chairman Ben Bernanke asking the Fed to strengthen planned regulation of overdrafts.

"Overdraft abuses related to debit card purchases and ATM withdrawals are particularly egregious for at least two reasons," the lawmakers wrote. "First, overdraft fees triggered by these transactions, which could easily be denied at the terminal, often take consumers completely by surprise. Second, an overdraft fee charged on a typical debit card purchase is vastly disproportionate to the amount of the overdraft itself."  The lawmakers want the Federal Reserve to require institutions to obtain the written consent of their customers before enrolling them in overdraft protection.

Overdraft charges represent one of the biggest slices of the short-term unsecured credit market.  It is bigger than credit card over-the-limit penalties, and much bigger than payday loans, bringing in $34.7 billion in revenue for banks and credit unions in 2008, compared with $7.3 billion for payday lenders.

Payday loans are often vilified for their high costs, and they're illegal in 15 states. The annualized percentage rate (APR) of interest on a typical payday loan is 400 percent or more, according to the Consumer Federation of America. But that's nothing compared with the overdrafts the lawmakers are targeting.  The Federal Deposit Insurance Corporation released a survey in January 2008 that broke down the average cost of overdraft fees to consumers and found that a typical $27 overdraft repaid in two weeks incurred an APR of 3,520 percent.

Just how bad is it when the banks and credit unions are charging more in terms of interest than are payday lenders?

New Credit Card Law Will Also Restrict FreeCreditReport.Com - Style Ads

We have all seen the TV spots of companies, and especially FreeCreditReport.Com, advertising FREE credit reports.  I have always wondered how they can afford to saturate the TV airwaves for a free service.

Well, the new credit card reform bill signed into law by President Obama will not just try to put a stop to several unfair practices of the credit card industry -- it also targets misleading advertisements for phony "free" credit reports.

The law calls for the Federal Trade Commission to issue new rules that will force free credit report advertisers to inform consumers that the only place for a free credit report is AnnualCreditReport.Com.  And, TV and radio ads will also be required to include the statement: "This is not the free credit report provided for by Federal law."

Under the Bush administration, the FTC repeatedly fined the folks behind FreeCreditReport.Com for deceptive advertising, since you only get the "free" report after enrolling in a $15-a-month credit monitoring program. But the fines amounted to mere wrist-slaps.

Online Payday Loan Companies Are Loan Sharks That Trap People In Debt And Then Disappear

Not enough, maybe, but at least Congress has started to do something about the deceptive credit card industry.  Now it is time for it to tackle an ever growing menace known as the payday loan industry and especially the online payday loan industry.

If you are interested, Huffpo has a post on the subject, we review here, and the site is looking for your horror stories as well.  You can email those payday horror stories to Huffpo at this email address -

submissions+debt@huffingtonpost.com

What Huffpo reported was that the online payday lending industry group, Online Lenders Alliance, wrapped up a 3-day conference near the White House, where they pandered to senators and congressmen from both parties.  Or, maybe, the pandering was the other way around.

Regardless, the purpose of the OLA is to weed out the bad apples of the industry by requiring its members, none of which are listed on its website, to comply with good business practices.  But, you know, good business practices do not always represent moral or even consumer friendly practices.  You can be a loan shark and still account for your profits appropriately.  Also, not many payday lenders promote themselves as being part of the OLA.

What is obvious, however, is that online payday loans are becoming more of the norm. Online payday loan lenders loaned (?) approximately $7.1 billion in volume for 2008 according to one estimate.

Consumer advocates sent a letter to members of Congress urging them to ignore the conference and implement a cap on interest rates.  There point was that online payday loans are layering a whole other set of risks on top of a product that is set to fail by its basic structure.

As quoted in the article, Dale Pittman, a consumer protection lawyer who represents victims of debt collection harassment and abuse in Petersburg, Va., has some experience tracking online lenders. He said, "It's hard as hell to find these people ... You can't communicate with them and tell them what they're doing is illegal." Thirty-five states have enacted interest caps that effectively ban payday lending, but Virginia isn't one of them and so online payday loan lenders are avoiding these caps.  Pittman tried to track down several online lenders on behalf of a client who was drowning in debt after taking out multiple payday loans over the course of a year. None of the lenders had a license, as far as Pittman could tell, so all the loans were illegal.  He also could not find but one of the lenders.

The same problem is occurring in a bankruptcy setting.  Whether or not it is an automatic stay or discharge injunction violation to submit an actual check for payment on an account which was issued before the filing of the bankruptcy, most of these lenders no longer accept actual negotiable instruments.  Not only do these payday sharks ding  bank accounts all of the time, but if they recover money that money will likely have to be returned if any turnover adversary is filed.  But, try to find the company.  The bank statements are not much help.  Usually the trail is so difficult to uncover and the potential recovery is small enough that most bankruptcy attorneys do not believe it is worth their time, especially if they cannot recover attorneys fees if no stay violation is found.  The debtor in bankruptcy, however, is made to suffer.

The Mortgage Fraud Industry

No, the U.S. Senate did not believe that consumers and ordinary people deserved any mortgage relief, but it gave hundreds of billions of dollars to the mortgage industry.  Mortgage modification was denied to the bankrupt consumer to protect an industry where fraud was so pervasive that it deserves not to be called the mortgage industry but the mortgage fraud industry.  Watch and share this video.

U.S. Senate Votes Down Bankruptcy Mortgage Bill

It really is a sad day for those facing foreclosure in this country.  Strangely, it is probably not good news for the mortgage industry either that must now foreclose millions of homes and sell them at bargain basement prices.  Worse of all, it is bad news for the housing market in that everyone will probably see their home prices reduced further.

The Senate has defeated legislation that would have let hundreds of thousands of debt-ridden homeowners seek mortgage relief in bankruptcy court.

President Barack Obama had said the bill was important to saving the economy and promised to push for its passage. But facing stiff opposition from banks, Obama did little to lean on lawmakers who worried it might spike interest rates.

The bill would have allowed bankruptcy judges to rewrite a person’s mortgage terms, if a bank refused to offer better terms based on income and home value. Only 45 senators voted in favor of the bill, with 51 senators opposed.

Posting Sign About The Debtor Can Constitute A Stay Violation (Judgment Achieved On One Of Our Cases)

United States Bankruptcy Judge Bill Parker of the Eastern District of Texas issued JUDGMENT against a creditor in one of our adversary proceedings finding that posting a sign concerning the pre-petition debt owed by the Debtor constituted a willful violation of the stay.  Worse for the creditor was the fact that the Court found that the creditor should pay actual and punitive damages of $21,820.00.

In James Bradley Collier v. Paul Hill the Court found that Hill's Mobile Home Parts & Service sold various mobile home parts and materials to Brad Collier prior to Mr. Collier filing a Chapter 13 bankruptcy, and Mr. Collier owed Paul Hill a pre-petition debt of $984.23.

Initial errors by Mr. Collier and the Bankruptcy Court failed to provide actual notice to Paul Hill and his company, Hill's Mobile home Parts & Service.  However, after confirmation by Paul Hill that Brad Collier had filed Chapter 13 bankruptcy, Paul Hill engaged in two improper acts in violation of the automatic stay.  First, he retained Josh B. Maness to represent him in regard to collection of the pre-petition claim.  Mr. Maness sent a letter to Brad Collier's bankruptcy attorney, Jean H. Taylor, confirming the bankruptcy, yet demanding the full balance of the pre-petition debt.  Misstatements were made in the letter that Mr. Maness attributed to an unfamiliarity as to how to use the Bankruptcy Court's PACER/ECF system.  Regardless, the Court found the letter constituted a willful violation of the automatic stay issued in Mr. Collier's Chapter 13 bankruptcy because no good faith defenses are allowed as to stay violation.  The Court concluded this "ill-informed conclusion based upon an insufficient investigation" was "not a technical violation based upon an innocent mistake" as "[t]his is precisely the type of behavior that the automatic stay is intended to preclude".

Based on the letter alone, litigation was not initiated.  Jean Taylor contacted Josh Maness and informed him that his assumptions as stated in the letter were incorrect.

Second, and more concerning, Paul Hill and his company posted a large sign near a major intersection of US Highway 80 and FM 2199 in Scottsville, Texas, not far from where Brad Collier, his family, his friends, and his employer lived and worked, which read - "BRAD COLLIER OWES ME $984.23 WILL YOU PLEASE COME PAY ME!"  (Emphasis in original).  It is unclear if Mr. Maness encouraged the sign to be posted by Paul Hill, but he did continue to represent Mr. Hill in his refusal to remove the sign.  It remained posted in public view  for a period of 21 days, and Paul Hill only agreed to remove the sign at the hearing scheduled by the Bankruptcy Court on Brad Collier's requested expedited hearing for an injunction.

Following the precedent of the 5th Circuit Court of Appeals in Campbell v. Countrywide and In re Chesnut, the Bankruptcy Court found the sign constituted a willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k).

Paul Hill vigorously contended that the posting of the Scottsville sign did not constitute a violation of the automatic stay, "[n]otwithstanding the actual languageusd in the sign" because it was not posted to collect a debt but rather "to inform the public that Collier wouldn't pay his debts and not to give him any credit".  Mr. Hill testified that he had already "written off the debt" and that the threat of a judgment and the sign were intended to create embarrassment for Mr. Hill.

The Court found that "[w]hile embarrassing the Debtor in their shared community was certainly a motive of the Defendant, the Court finds that such a motive had an objective - to coerce the Debtor into paying his debt".

Mr. Hill contended throughout the litigation that the directive on the sign -- "WILL YOU PLEAS COME PAY ME!" - did not constitute an effort to collect a debt because there was no question mark at the end of the sentence.  However, the Court found that the use of an exclamation mark in lieu of a question mark demonstrated that the opposite was true.  "The exclamation mark transforms the sentence into a directive, which demands that the Debtor pay the debt."  The Court further found that the Bankruptcy Code was clear. "Any effort, action, or demand by a creditor to collect a pre-petition debt violates the automatic stay".

Regardless of the stay violation, Paul Hill contended that he could not be sanctioned for his action of posting the sign because of his entitlement to exercise his free speech right under the First Amendment to the United States Constitution, citing Turner Advertising Co. v. National Serv. Corp. (In re National Serv. Corp.), 742 F.2d 859 (5th Cir. 1984).  Since the Scottsville sign constituted free speech, Hill through his counsel contended, it could not be curtailed by 11 U.S.C. §§ 362(a) and (k).

As to this argument the Court found:

"While there are certainly components of speech involved in virtually every expression offered about the filing of a bankruptcy case, the automatic stay and the restrictions contained therein focus not upon speech but rather upon the restraint of actions -- actions that threaten the core objectives of the Bankruptcy Code and the judicial system designed to achieve those objectives.  It proscribes conduct — conduct that threatens the “breathing spell” and the “fresh start” to which an honest debtor under this system is entitled as it fulfills the duty of full disclosure of its assets and liabilities — as well as conduct that threatens the efficient marshaling of those assets in order to insure a fair and equitable distribution to creditors. The scope of the automatic stay may at times incidentally impact free speech, but those isolated intrusions are justified in order to accomplish the significant governmental interest in providing uniform bankruptcy laws and an effective means by which to implement them".

Paul Hill's decision to continue with the sign and stating it was intended to embarrass Mr. Collier might have proved fatal.  The Court awarded actual and punitive damages of $21,820.00 as against Mr. Hill.

Super Priority For Car Creditor - Harsh Words For Debtor Attorneys Trying To Get Paid In A Chapter 13 Bankruptcy

Recently Brian Lacoff a St. John's Law Student writing on Bankruptcy Case Blog analyzed the decision in In re Dispirito, 371 B.R. 695, 695 (Bankr. D.N.J. 2007), which states it is the debtor's attorney that bares the risk of any loss in regard to fees in a Chapter 13 bankrutpcy.

The New Jersey Bankruptcy Court following and expanding on Judge Mavin Isgur's opinion in In re DeSardi, 340 B.R. 790 (Bankr. S.D. Tex. 2006), ruled that an undersecured creditor, in this case Ford Motor Credit Co., was entitled not only to adequate protection payments, but “super-priority” status of the inadequate adequate protection provided during the case meant that the Chapter 13 plan had to pay those amounts before paying any of the debtor’s attorneys fee pursuant to 11 U.S.C. § 507(b).

In Dispirito the Bankruptcy Court held that by seeking to confirm a plan that provides for payments owing on a vehicle, the debtor “implicitly acknowledges that such expenses are both reasonable and necessary for the maintenance and support of the debtor."  As such, the adequate protection payments have super-priority over other administrative expenses, such as attorney fees, under § 507(b).  The Bankrutpcy Court reasoned that “if attorney’s fees are paid ahead of the adequate protection payments, then adequate protection fails; the funds . . . would be paid to someone besides the protected lender."

The court concluded, “[i]f the risk of non-payment of the debtor’s attorney fees . . . is too great to justify taking the case . . . [it] should say something about the case."

There is nothing much like a Bankrutpcy Court in a difficult decision taking a personal slap at the debtors' bar.

In any event, it appears that the DeSardi decision is slowly becoming the majority decision on the subject of attorneys' fees being paid upfront ahead of adequate protection payments of undersecured creditors.

Your Senators Need To Support Senate Bill 61 - Helping Families Save Their Homes In Bankruptcy Act Of 2009. These Videos Show Why.

I think what these videos show are banks and lenders seemingly not working with people in any constructive way to save their homes.  It is haphazard at best.  It also show people not so much plagued by terribly bad decisions but by reasonable risks except for the economy leading them to unemployment of underemployment.  These are people overcome by and large by the intolerance of large financial institutions that tell Congress one thing and do another.  Namely, that they are working with people to modify mortgages and they are not except as it as it suits their needs to keep inventories of foreclosed homes lower or some such reason.  These people express their fears and sorrows in a real sense, but what this pain represents is a complete lack of adequate due process.  What is needed, and needed now, is an independent arbiter that is not there just to enforce laws written for the benefit of the mega lenders.  That would be the bankruptcy courts.  We need to rewrite our laws now to allow bankruptcy judges to modify mortgages to limit these kinds of personal tragedies from happening.

The statistics are daunting.  Currently, over 6,600 American families a day are going through what you see on these videos, and they are losing their homes to foreclosure.  In the next five years over 8 million families will lose their homes to foreclosure.  Bankruptcy reform to allow the adjustment of mortgages costs the taxpayers nothing, unlike the huge trillion dollar bailouts to these financial institutions.

You need to go online, get the phone number and email address of your United States Senators, contact them and tell them to support Senate Bil 61 - Helping Families Save Their Homes in Bankruptcy Act of 2009.  You need to do it now.

If you need a portal to do this easily, you can call you senator through a toll free number provided by NACBA at 877-354-4958, or you may email them by clicking on this NACBA SITE.

You really can stop much of this suffering.  You need to do it now.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Visit msnbc.com for Breaking News, World News, and News about the Economy

U. S. House Passes Mortgage Modification Bill

The House has passed bankruptcy reform legislation that dealt the banking industry its first major defeat since 1994. The bill, passed 234-191, largely along party lines, encourages lenders to renegotiate mortgages with troubled homeowners. If they can't, the bill allows bankruptcy judges to modify the mortgages, a reform that bankers have argued undermines the sanctity of a contract and rewards bad behavior.

But their arguments fell on deaf ears in a chamber that has appropriated hundreds of billions of dollars in bailout funds for major banks.

"There are some people who said during the debate, 'Well, this bill rewards irresponsibility or bad choices.' Well, my goodness," said Rep. Artur Davis (D-Ala.). "Many people in my district feel that those [bank bailouts] rewarded irresponsibility and bad decisions, but they were done in the name of a broader interest. So on this issue, frankly, the banks were out of touch with the American people."

The argument that the bill would create chaos didn't influence lawmakers in this already chaotic environment. "The idea that this is all about destabilizing the real estate market -- that's just a bad joke," said Rep. Bill Delahunt (D-Mass.). "And looking forward, well, you know what, we can't look too forward because we're in this tsunami."

Financial Services Committee chairman Barney Frank (D-Mass.) said that the banks' winning streak was unsurprising, given that the GOP took Congress in 1995. But even with Democrats in power since January 2007, banks haven't lost any major battles.

"The Committee on Financial Services put out a bill to regulate credit cards in 2008. They didn't like that," Frank said, but noted the bill ultimately died. "Nothing passed both houses that they didn't like."

Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) chuckled at the thought of the banks being on the losing end of a vote for once. "I'm not close enough to them to count their wins and losses, but they're pretty powerful," he said.

Rep. Mike Simpson (R-Idaho) said he wasn't sure about their win/loss record, either. "Hell, I don't know," he said. "I don't keep track of whether the banking industry wins or loses votes. We're trying to send a message to the banking industry? I don't know, I thought we were trying to pass legislation that would work and unfortunately this is not a good piece."

The New Frontier In Debt Collection - Harassing The Dead's Next Of Kin To Pay What They Do Not Owe

If I have said it once, I have said it a thousand times.  There is no reason, no reason what so ever, for people to deal with, trust, or even communicate with a debt collector.  This is especially true for relative and loved ones that are grieving.  There is really no reason whatsoever for debt collectors to even exist.  This does not mean that people should ignore the calls of the actual creditors, but in this day and age of selling bad debt, this does not much exist.

So, what is the problem this time?

The New York Times, reports on one collection company called DCM Services that seeks to collect past due and defaulted debt from THE DEAD.

We use to joke in the old days that death often represented the ultimate discharge of one's debts.  This was especially true if the deceased did not have any real assets.  No longer.  Now you have a collection service that will try to harass your next of kin, such as your children and your widow, and probably at a time when they least need such treatment.

Intervening in a probate matter in which there are assets, other than the home, is one thing, but this is only a small part of what this company, and other collectors, do.

The problem is that the people contacted by DCM and other collectors often have no legal obligation to pay the debt, but they are pressured or convinced in some way to do it.

According to the NYT article, new hires at DCM, for example, train for three weeks in what the company calls “empathic active listening,” which mixes the comforting air of a funeral director with the nonjudgmental tones of a friend to convince people who have no liability to pay the debt.  The goal is to play improperly on sympathies and emotions of the person, whether there is an estate of the deceased to pay the debt or not.

I loved this response from the article as to the fact these people do not owe the debt. Scott Weltman of Weltman, Weinberg & Reis, a Cleveland law firm that performs deceased collections, says that if family members ask, “we definitely tell them” they have no legal obligation to pay. “But is it disclosed upfront — ‘Mr. Smith, you definitely don’t owe the money’? It’s not that blunt.”

DCM started as a law firm, which means, I suppose, that it now just a collection agency.  What is frightening is that it now employs 180 people, many directly involved in collecting debts from people who do not owe them.

How bad is this practice on collectors.  DCM admits in the article that not everyone has the temperament to place such calls and they lose 50% of those it hires to do so in the first 90 days.  Of course, you might say as easily that those that quit have a conscience.

And do not think the manipulation stops with the calls.  DCM started a Web site called MyWayForward.com to provide the bereaved with information and tools.  Obviously to gain the sympathies and trust of families struggling already with the death to pay debts they do not owe.

The collectors for the company are trained in the five stages of grief, which might sound like a good thing, except it is obviously used not to necessarily be of assistance to those grieving, but to solicit the payment of the bills of the dead from those likely not responsible.

I think all bankruptcy attorneys need to be on the lookout for people that have been taken advantage of in this regard.

PACER, Tear Down This Wall !!

PACER/ECF was a godsend for Third Wavers, connected attorneys, future lawyers, telecommuters, home office lawyers and, really, all lawyers when it was first established.  It sure beat the hell out of making tons of copies of a documents and either couriering or FEDEXing them to the Courthouse, and then turning around and mailing out copies to everyone and his dog who had any interest in the case.  The system now send me copies of everything filed in a case - twice.  State court systems, especially in Texas, are pathetically and terminally behind the times and the tech.  So, let us hear it for PACER/ECF!  It is probably the best government sponsored program ever.

That said, things do evolve, and it is time to move away from the closed access futures of the system.  My good friend Rick Georges over at Future Lawyer referred me to this article on Wire.Com, about Senator Joe Lieberman wanting to know why PACER has not eliminated its pay for access to view public documents.

According to the article, Chairman of the Senate's Government Affairs committee, Sen. Lieberman (I-Connecticut), bypassed the administrators of the system and sent a letter straight to the Judicial Conference of the United States, which stating in part:

"Seven years after the passage of the E-Government Act, it appears that little has been done to make these records freely available — with PACER charging a higher rate than 2002. Furthermore, the funds generated by these fees are still well higher than the cost of dissemination ..."

It is an ongoing attempt by some to open-source the nation's operating systems.  In this I agree.

Uploading is paid in the way of filing fees in most instances.  But, if you were an ordinary citizen you could walk into a Courthouse and see all these records for free.  (Unless the Court sealed them for good reason).  Sure you would have to pay for the cost of copying any document, as the government should not bare that costs.  So, you should be able to access these public documents freely now.

I am not supporter of Sen. Lieberman, but I do like this idea.

PACER/ECF was a godsend for Third Wavers, connected attorneys, future lawyers, telecommuters, home office lawyers and, really, all lawyers when it was first established.  It sure beat the hell out of making tons of copies of a documents and either couriering or FEDEXing them to the Courthouse, and then turning around and mailing out copies to everyone and his dog who had any interest in the case.  The system now send me copies of everything filed in a case - twice.  State court systems, especially in Texas, are pathetically and terminally behind the times and the tech.  So, let us hear it for PACER/ECF!  It is probably the best government sponsored program ever.

That said, things do evolve, and it is time to move away from the closed access futures of the system.  My good friend Rick Georges over at Future Lawyer referred me to this article on Wire.Com, about Senator Joe Lieberman wanting to know why PACER has not eliminated its pay for access to view public documents.

According to the article, Chairman of the Senate's Government Affairs committee, Sen. Lieberman (I-Connecticut), bypassed the administrators of the system and sent a letter straight to the Judicial Conference of the United States, which stating in part:

"Seven years after the passage of the E-Government Act, it appears that little has been done to make these records freely available — with PACER charging a higher rate than 2002. Furthermore, the funds generated by these fees are still well higher than the cost of dissemination ..."

It is an ongoing attempt by some to open-source the nation's operating systems.  In this I agree.

Uploading is paid in the way of filing fees in most instances.  But, if you were an ordinary citizen you could walk into a Courthouse and see all these records for free.  (Unless the Court sealed them for good reason).  Sure you would have to pay for the cost of copying any document, as the government should not bare that costs.  So, you should be able to access these public documents freely now.

I am not supporter of Sen. Lieberman, but I do like this idea.

Fighting The Foreclosure Machine

Written before the collapse of our credit markets, I was reminded of the New York Times article Foreclosure Machines Thrives on Woes by Billy Price and his blog Dallas Bankruptcy Lawyer.  It was an amazing article when written, and it likely speaks volumes now that foreclosures have only increased.

The essence of the article is really that bankruptcy attorneys seem to be the only real line of defense against some bad foreclosure practices, but the conduct does not stop even once a debtor enters bankruptcy.

One point of the article is that the methods employed by mortgage servicing companies has corrupted the system in a way that benefits nobody but the large law firms that pursue these matters in large numbers based on unit costs.

As stated in the article, "Nobody wins when a home enters foreclosure - neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold ... The reality is very different.  Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits."

These law firms are commonly called "foreclosure mills".  Most bankruptcy firms that have had to work with these mills will tell you that they are generally strident, ill informed, and have generally contributed to a worsening of the real estate market.  They certainly make a debtors honest efforts to reorganize and save their home in bankruptcy exceedingly difficult many times.  Yet, there is little change now as to how mortgage servicing companies have employed their services since the crash of the real estate market in this country.

The problem from a bankruptcy standpoint?

These foreclosure mills are paid by the number of motions, objections and documents filed in a bankruptcy. The result is that these mills are encouraged to file as many claims as possible.  As stated in the article, “Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments.”

What seems to empower mortgage servicing companies and foreclosure mills is the notion that it can add any fee its wishes, without bankruptcy court authority or effective disclosure to the debtor's mortgage account.  In a recent study, Katherine M. Porter, an associate professor of law at the University of Iowa, found that of 1,733 mortgage accounts in bankruptcy across the country she reviewed almost half contained questionable fees, which were automatically added tot he debtor's account.

The problem with any machine is that once it gets going it is just hard to turn off, especially when the machine is fueled not by its analysis of the situation, or how exactly it has effectively assisted its client, but by the shear number of motions and objections its files.  The only real line of defense has been the debtors' bankruptcy attorneys, and even they get overwhelmed by the magnitude of this problem.

Previously I posted about series of problem in the State of Texas concerning the law firm of Barrett Burke Wilson Castle Daffin & Frappier (then commonly known as BBWCDF).  The law firm went through a period of embarrassing revelations in the bankruptcy courts in Houston, Texas resulting in a number of high dollar sanctions and sever tongue lashings by the judges.  (You can read these decisions by clicking HERE, and HERE, and HERE and HERE).  The law firm has since undergone a reorganization and is now known as Barrett Daffin Frappier Turner & Engel, L.L.P (or BDFTE).

The problem ultimately is that BBWCDF or BDFTE might be one of the largest of this type of firm or foreclosure mill, but they are not the only one by any means.

The only recourse a debtor has is to be vigilant in reviewing the statements or records obtained from mortgage servicing companies, calling questionable fees and conduct to the attention of a bankruptcy attorney, and comparing with the bankruptcy attorney this information to that filed in the underlying bankruptcy case.  Bankruptcy rights are not self-enforcing.  If the courts do not know the activity is taking place, the courts cannot correct it.  Bankruptcy attorneys only know to enforce what they can reasonably discover from the bankruptcy documents filed.  It is ultimately the comparison of these bankruptcy documents, and what is really happening on the ground that uncovers much of the bad conduct.  Mortgage servicing companies and these bankruptcy mills survive because nobody but the debtor has all of the information to review and compare, and the consumer is not versed in doing so.

So, be vigilant.

Bill Collectors Are Terrible People In Terrible Jobs

I have thought about it off and on, and I always wonder why were should just not outlaw bill collectors.  I am not talking about companies that feel they need to collect their own debt, but independent debt collection companies.  After all, what really useful function do they serve?  There entire existence, say what you will, is based solely on harassing, lying, bullying and deceiving people.  They really have no other arrows in their quivers, except for these.  They exist for no other reason.  And, most often, they are rewarded for succeeding at exactly this type of conduct in that they live off of a percentage of what they collect.  They eat what they kill.

The goal of the law is to simply turn a blind eye to the entire reason these people and companies exist.  The law seeks to insulate the actual creditor from the conduct that the creditor suspects is going to be employed to collect the debt.  Maybe this is more metaphorical, but it is tantamount to hiring someone to go break the debtor's leg only to tell them you do not want to hear about it later.  It reminds me of that scene in the movie Sneakers in which Ben Kingsley says to Robert Redford, "I cannot kill my friend".  Then he turns to his henchman and says to him, "Kill my friend".  Like the good servant that goes to church every Sunday only to live a regretful life the rest of the week, it is all too convenient for creditors, politicians, courts and we the people to simply put this in too sterile of light.

Do not get me wrong.  There is a problem when companies extend credit and they do not get paid.  They obviously need to do what they can to get paid.  There are legal mechanisms, where a neutral party can make these hard decisions.  Nobody is talking about taking from creditors there legal rights or their right to reasonably attempt to recover their capitalist lifeblood.  Nobody is saying that.  The complaint concerns tactics and techniques that are extrajudicial.

We somehow miss the mark.  We meet and pass legislation that tries to delineate when a debt collector absolutely goes too far.  Forget that they still cross this broad line constantly.  We ignore that their purpose is simply not necessary.  We concern ourselves with it might be okay for a private debt collector (not the creditor undertaking legal means) to turn the wheel on the rack 5 times but not 6 times, while ignoring completely that the rack is wrong.

You might think I exaggerate.  I do not.  These people are hurtful.  Their tactics are cutting, pernicious, distressing and malicious.  Why else would any normal person send money to a imperceptible third party, with no apparent connection to the debt, when they do not necessarily have the funds or have greater obligations that cannot be met.  Maybe it is not physical brutality, or the threat of it.  Maybe it is more clairvoyant in nature.  But, sometimes psychological discomfort, or playing off the fears and emotions of those already in fear is worse.  We know this for we worry about enhanced interrogation techniques at Gitmo.

And, it is hard to imagine that most of the people who are forced for low wages to man the call centers that do this type of work are enjoying the experience either.  Sure there are probably some sadistic bastards who like the thrill of the work, but most problems arise because the ordinary people manning the phones at these collection agencies are being pushed beyond their moral compass as well.  Why do you think most large corporations do not want to employ people for this nasty task.  It is kind of like Wal-Mart not wishing to employ illegal aliens to clean it stores at night, so it elects to hire companies that hire illegal aliens to clean its stores at night.  The cartoon below, I think illustrates this.

Therein lies the problem for us.  Since the entire system of independent collection agencies is designed to skirt the law, to be so persistent as to not stop, and to lie and cheat their way into an advantageous position with the debtor, small things like the automatic stay and the discharge injunction simply do not matter that much.  These collectors are trained to shoot back when they are threatened with the prospect of legal rights being violated, so why would they not do the same when told of the stay or the discharge injunction?  In short, they are paid to pay it no never mind.

The only logical solution is not to say that some practices are wrong, but to outlaw the profession altogether.  If a creditors is owed money, let the creditor try to collect it legally.  These thugs they do not need.

Jay Fleischman - Bankruptcy Marketing Expert

Jay Fleishman, along with his bankruptcy and bankruptcy litigation practice, has developed the skills of a skilled bankruptcy marketer.  You can follow him at Bankruptcy Practice News.  Below is his video concerning marketing for lead generation.
Bankruptcy Practice Pro News - January 14, 2009 from Jay Fleischman on Vimeo.

Debtor who received a discharge less than four years from filing a chapter 13 maybe eligilbe for another discharge

 Here, we are ultimately concerned here with automatic stay and discharge injunction issues, and those things which might have an effect on them.

In a case of first impression both for the United States Court of Appeals, 6th Circuit, and really a case of first impression by any court of appeals nationally, the 6th Circuit found that a debtor who received a bankruptcy discharge in less than four years before he filed a Chapter 13 bankruptcy was eligible for a discharge in the Chapter 13 bankruptcy as well.

The opinion was issued in In re Sanders, which was issued on December 29, 2008.  Judge Jeffrey S. Sutton issued the opinion for a unanimous panel.

The case involved a debtor named Jason Sanders who had filed a Chapter 13 bankruptcy petition more than four years after he filed an earlier Chapter 7 case, but less than less than four years after the bankruptcy court issued his Chapter 7 discharge.  This would not necessarily be an extraordinary situation because debtors often find themselves in need of Chapter 13 protection on an emergency basis, such as to stop of foreclosure or repossession regardless of the filing of a prior bankruptcy.

When Congress overhauled the Bankruptcy Code in 2005, it adopted 11 U.S.C. § 1328(f),  which limited a debtor’s ability to obtain multiple discharges by filing one bankruptcy proceeding after another.  Section 1328(f) provides: "(f) Notwithstanding [chapter 13’s provisions authorizing discharges], the court shall not grant a discharge of all debts provided for in the plan . . . if the debtor has received a discharge -- (1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under [chapter 13], or (2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order."  (Emphasis added).

The Court had to decide two questions -- when does the clock begin to running in this regard, and when does it stop?

As to when the clock stops running, the Court decided it ended upon the filing of the new Chapter 13 petition because § 1328(f)(1) makes clear that the time limit ends on the date the chapter 13 petition was filed, and also § 301(a) provides that the “commencement of a voluntary case . . . constitutes an order for relief.

The harder question was when does the clock start, or when does the § 1328(f)'s "four-year forbidden window begin?"  The choices were either the date of the filing of the prior Chapter 7 bankruptcy filing or its discharge date.

Based upon the plain meaning of § 1328(f) and a point of grammar, the 6th Circuit decided that the four year prohibition begins when a debtor files his first petition, and not when the debtor receives his first discharge.  To do otherwise would require the Court to read the word "filed" out of the statute.

(Picture is of 6th Circuit Justice Jeffrey S. Sutton, who issued the opinion).

Maintaining An Auto Disabling Device Is A Stay Violation

There is a trend among used car dealers, and especially those used car dealers that tote the note, to install disabling devices in the automobiles they sell, which disables the vehicle from operating if a new code is not inputted at the time a payment is normally due.

The technology is generally called telematics, and where this term addresses many different solutions involving asset management such as maintaining the tracking of fleet vehicles and the use of anti-theft devices, one of the "solutions" is the ability to disable a mortgaged automobile if timely payments are not made.  There is not a lot written on this aspect of telematics, but U. S. News & World Reports did report on it. There are a few companies that manufacture these devices.  These are, for example, Aircept, PayTeck, and PassTime to name a few.  Strangely enough, although devises to disable mortgage vehicles is a growing and vibrant area of the industry, it would seem that even the providers of the devices and system do not maintain websites that directly tout what they do in this regard.  The disabling services deployed by these companies must seem insidious to these companies as well.  Here is a video that explains the product from a positive standpoint that is not easy to find on the web --  CLICK HERE FOR THE VIDEO.

There are a lot of interesting issues concerning these auto disabling devices and who exactly they are intended to benefit.  For example, the video talks about the system reducing interest rates charged by note lots.  We seriously doubt that this is true and could find no direct evidence on this fact.

Our Third Wave Manifesto Is Published By Texas Bar Journal

Acceptance ... at last.

I am pleased to announce that the January issue of the Texas Bar Journal will contain our manifesto on the Third Wave Practice of Law.  You can read a copy of the article in PDF by CLICKING HERE.

The State Bar of Texas is a mandatory bar association, and it is one of the largest in the United States.  The Texas Bar Journal is distributed by mail to over 97,000 members and subscribers each month.  I know I read it from cover to cover.  It represents an outstanding forum to discuss the changing practice of law.

It is so vitally important for other lawyers, staff and law students to understand that they do have alternatives to the traditional practice of law.  I would encourage you to help me populate the Web with this article.  Please help me spread the word.

The Debtor Does Not Have To Prove Up Injury Seperate And Apart From A Willful Violation Of The Stay

In reading bankruptcy court opinions concerning violations of the automatic stay, and from my practice in prosecuting these violations, it would appear the greatest misunderstanding of 11 U.S.C. § 362(k) (and the pre-BAPCPA provision of § 362(h)), is the distinction between damages and injury.

As I have often said, "damages" do not constitute a element that must be established to establish liability under § 362(k).  Damages are simply a consequence of the bankruptcy court otherwise finding a willful violation of the stay.

Injury, on the other hand does not have to be individually proved up by a Plaintiff in a stay violation for the simple reason that the proving up of a violation (any violation, willful or otherwise) establishes the violation of a core right, which constitutes an injury.  If you prove what you otherwise need to prove under § 362(k), you have established injury.

Yet, well meaning bankruptcy judges, as well as less than well meaning defense counsel, continue to spend much time and effort attempting to (1) confuse actual, out-of-pocket damages with injury, and (2) attempting to refute injury is separately established, contesting whether a defendant is liable under § 362(k).  It is an analysis that is simply unnecessary.

As to the issue of damages v. injury the tendency is to treat these a synonomous terms.  Defendants, and some judges, continue to believe that if actual, out-of-pocket damages cannot be established at the outset of the case prosecuting a violation, then the plaintiff simply cannot prevail.  This would seem, however, to ignore proper legal construction.  Words in a statute are not to be read so as to render them superfluous. Hence, the elementary rule of statutory construction is that, wherever possible, effect must be given to every word of a statute. United States v. Nordic Village, Inc., 503 U.S. 30, 112 S.Ct. 1011, 1015 (1992).  The terms injury and damages are included in the same sentence and cannot be interchangable terms.

Further, the 5th Circuit (as with all circuit courts) does not establish either injury or damages as any one of the elements necessary for a determination of liability in its reading of § 362(k). In re Chesnut, 422 F.3d 298, 302 (5th Cir. 2005), In re Repine, 536 F.3d 512 (5th Cir. 2008), and Campbell v. Countrywide Home Loans, Inc., Case No. 07-20499, Pg. 9 (5th Cir. October 13, 2008). 

The finding of a willful violation of the injunctions of a court, injury is already established. “Injury” is broadly defined as being "a violation of another's legal right, for which the law provides a remedy." Black's Law Dictionary 801 (8th ed. 2004). Since the automatic stay of 11 U.S.C. § 362(a) is a legal right afforded to Mr. and Mrs. Henderson that protects them from continued collection efforts by their Creditors. (H.R. Rep. No. 595, 95th Cong., 1st Sess. 174-75 (1977)) "the mere violation of the automatic stay constitutes an injury to the debtor inasmuch as the creditor's violation restricts the debtor's breathing spell and subjects the debtor to continued collection efforts, possibly including harassment and intimidation." Jackson v. Dan Holiday Furniture, LLC (In re Jackson), 309 B.R. 33, 38 (Bankr. W.D. Mo. 2004). Also see, In re Reed, 102 B.R. 243, 245 (Bankr. E.D. Okl. 1989); Bukowski v. Patel, 266 B.R. 838 (Bankr. E.D. Wis. 2001); and, In re Preston, 333 B.R. 346, 350 (Bankr. M.D. NC 2005). The United States Supreme Court recently confirmed that “injury” constitutes a standing issue, ruling that one of the elements to Article III standing a plaintiff must establish “a ―concrete and particularized‖ invasion of a ―legally protected interest”, as is the case with 11 U.S.C. § 362(a) and other bankruptcy provisions. Sprint Communications Co. v. APCC Services, Inc., 07-552, pg. 4 (U.S. 6-23-2008). The willful violation of 11 U.S.C. § 362(a)(1) and other bankruptcy provisions and rules does constitute the invasion of such a legally protected interest and the undisputed material facts above demonstrate such an invasion.

We Have Redesigned The Third Wave Blog

This represents our practice blog, but we have an interest in the changing practice of law as well.  For a long time we have maintained a blog describing these changes, and our other interest, entitled Chuck Newton Rides The Third Wave.  We have spent some time redesigning that blog and giving it a new look.  Visit our Third Wave blog and let us know what you think by clicking here.

Credit Card Reform Is Coming

Let us be honest about it.  Credit card company practices are designed to blindside consumers.  Get them in debt.  Get then paying minimum payments or close to it.  Then lower the boom in fees and higher interest rates and quicker payment terms and how the money is applied.  It is in short a game of gotcha with serious ramifications for many American families.

Now, in the defense of credit card companies (if you can call it that), they are not the only ones that seek to blindside their customers.  Banks and how the manage their bank accounts and mortgage companies in how they have handled ARMs and and balloons and escrow accounts just to name a couple, do it as well  But, I think we can all agree that credit card companies are the most egregious.

I just hate it when I get that tiny booklet in the mail, in the 6 point print, on onion skin paper, stating all of the changes that are happening to my account in some non-understandable fashion.  I cannot read it and, besides, I did not have the rules under which I was operating in which to compare these changes.  There is nothing to sign.  You just toss it and hope for the best.  But, I can assure you that what is in there is probably no good for you.

During the fight over bankruptcy reform consumer experts pleaded with Congress to at least add consumer protections in regard to the wanton acts of credit card companies.  It fell on deaf ears because the credit card companies, and other creditors, had already greased the Republican Congress and the president.

Since that time, however, we have experience an economic meltdown in which the complicated Wall Street antilogarithms have come into conflict with a Main Street common sense understanding.  You cannot get blood from a turnip.  Credit card companies can change the rules in the middle of the game.  They can blindside the consumer or trap them in any unpleasant situation desired, but if the consumer cannot pay the surprising higher price they did not expect, they cannot pay it.  Period.  For some unknown reason, through bankruptcy reform and the collapsing economy, lenders, and credit card companies in particular, thought they could simply contract their way to safety from consumer defaults.

This is something that has seemed to have been lost on creditors, Wall Street, the rich and the GOP controlled institutions for much too long.  Just because you contract it to be so, and you legislated it to be so, and you close the doors to the emergency room known as bankruptcy, and you end all reasonable regulator oversight so you can pretend you do not know what is happening, does not mean consumers are going to be able to comply with what you want.

Maybe there is some awakening in this regard.  As reported by Reuters, the credit card industry may face some reckoning for its evil ways.

Where Congress dare not tread, the Federal Reserve will vote on credit card reforms that hopefully bring some degree of relief to customers.

For one, credit card users will see easier-to-read tables in their monthly statements if the changes are enacted.

For another, the new Rules are expected to prohibit credit card companies from increasing rates at will, with some exceptions such as those that apply to people who fail to pay a bill within 30 days; so-called universal default, which permits changing card terms if the borrower defaults on another bill such as utilities or a gym membership, also is expected to be banned; and, double-cycle billing, in which card companies reach back to earlier billing cycles to help calculate interest charged in the current cycle, also is expected to be eliminated.

The changes, in part, are a result of Democrats strengthening their control of the next Congress, which is resulting in credit card companies that resisted many changes in the past to accepted them as inevitable.

Reform is necessary if for no other reason American consumers used an estimated 694.4 billion credit Visa, MasterCard, American Express and Discover cards in 2007 alone.

The new rules total some 1,000 pages. The rules must be approved not only by the Federal Reserve but the Office of Thrift Supervision and the National Credit Union Administration as well.  But, all are expected to act soon on these new rules.

Relief Slows To Homeowners Facing Foreclosure

John McCain: The Fundamental Deregulator

Oh, Burn!!

Burn is an exclamatory response, generally by a third party, after someone has just received an insult.  It is slang for disrespecting someone or to make fun of someone.  It is so humiliating or insulting to the point where you cannot return with a comeback.

I have thought, "Oh, BURN!", or its equivalent, a couple of times over the last decade.

The first was during bankruptcy deform, in which these large financial institutions pushed through Congress and the White House reforms that were not needed, and for which there was no motivation for no better reason than to make bankruptcy harder for consumers to file.  Phil Gramm, who is now John McCain's economic adviser, was a United States Senator during part of the debate over bankruptcy reform, and I recall him getting on national TV, and sending out mailers, referring to those who file bankruptcy as "deadbeats".  This practice was repeated by his successor, John Cornyn, who liked to refer to those who file bankruptcy as "deadbeats".  I always thought, no matter what the arguments or what the position taken, that these two otherwise disrespectful men went out of their way to not only advance their contributor's goal, but to intentionally disparage, belittle, dishonor, derogate, defame and slur those who felt they needed this protection.

Certainly the Republicans were not the only ones to blame for this fiasco.  Many Democrats were complicit.  And, were John Cornyn could almost be forgiven because, I doubt from his demeanor in office, that he is very bright.  However, is not Phil Gramm's excuse.

The second "Oh, Burn" moment came when I read about the $700 Billion bailout of the large financial institutions so as to prevent them from filing bankruptcy.  None, or little, of that money is going to help ordinary folks that might have been affected by the conduct of these banks.

You can say what you want about the pros and cons of the bailout, but the philosophy of it show an hypocrisy that is huge and shows a blatant type of contempt for common people.

What this monetary philosophy entails is the privatization of profits, but the socialization of risk or losses.  When there is money to be made or bilked, the government should get out of the way and never interfere, but the government should be made solely responsible for the risks and losses associated with the escapades of the financial institutions.

This was the same argument people like Gramm, Cornyn, Bush, McCain and many on both sides of the divide in Congress argued in regard to the so-called bankruptcy reform measures in Congress.  They argued that in essence that by allowing middle class people to just file bankruptcy when times got tough for them, without regard for the better times they might have had in the past, that the government was allowing these people to privatize profits and to socialize their loses, and that was wrong in their minds at the time.

Now, after middle class people are forced into 5 year repayment schedules not based on their actual budgets or earnings, we are creating what is now a trillion dollars of relief for Wall Street, while ignoring Main Street, and while denying ordinary people the right to achieve the same result when they find a financial meltdown unavoidable.

The 10 Largest Bankruptcies In History

With Lehman Brothers filing the largest bankruptcy in history, there are a couple interesting points to make.

First, in a democracy, what is a right for the biggest and most powerful corporations among us, should be a right extended to the least consumer among us.  After all, this is also Biblical, is it not?  "Whatever you do for the least of these my brothers, you do it to me".  Matthew 25:40.

Second, it is interesting to view the top 10 biggest brothers (bankruptcies) of all time to give you the size and enormity of that right.  These are:

1.    Lehman Brothers - $639 billion in assets.
2.    Worldcom - 103.4 billion in assets.
3.    Enron - $63.4 billion in assets.
4.    Conseco - $61.4 billion in assets.
5.    Texaco - $35.9 billion in assets.
6.    Financial Corp. of America - $33.9 billion in assets.
7.    Refco - $33 billion in assets.
8.    Global Crossing - $30.2 billion in assets.
9.    Pacific Gas and Electric - $29.8 billion in assets.
10.  United Airlines - $25.2 billion in assets.

Bail Bond Guarantees Are Dischargeable

This practice includes the prosecution of contempt as to those that violate the discharge injunction.  However, when considering whether you can or should proceed with a discharge injunction violation you have to look carefully at the exceptions to discharge as stated in 11 U.S.C. § 523.  If there is an exception is it one that requires an actual adversary by the opposing party while the bankruptcy is pending, or is the debt simply immune from any discharge entered due to the type of debt it represents.  It is always a question.

In this regard, the 10th Circuit Court of Appeals has now stated that 11 U.S.C. § 523(a)(7) does     not render nondischargeable a debt incurred by a debtor who has     guaranteed a bail bondsman to make the bondsman whole in the event a     criminal defendant jumps bail.

In a case of first impression for the Court, it ruled in  Affordable Bail Bonds, Inc. v. Sandoval (In re Sandoval) that a judgment obtained before the filing of a case for the guarantee of payment to a bail bond company on an appearance bond was dischargeable because § 523(a)(7) did not apply.

In this case the Debtor, Sandoval, entered into a "plain talk" contract with the Bondsman, Affordable, as an indemnitor in the even the person being bailed did not appear as required.  The Debtor paid the Bondsman $1,600.00 for the bond and agreed to reimburse the Bondsman for actual expenses in case of forfeiture, including the "full amount of the bail forfeited".

The 10th Circuit stated a few caveats:  "It is important at the outset to understand what this case is not. It is not a case where the debtor was the defendant in the underlying criminal action who had previously jumped bail and is now attempting to get his debt to a governmental unit discharged in bankruptcy. Nor is it a case involving a bail-bondsman debtor or other type of surety debtor who is attempting to discharge a debt owing directly to a governmental unit incurred as a result of the
nonappearance of a defendant. We are not concerned here with the nature, scope, or operation of the bond agreement between the Bondsman and the State of Oklahoma".

In light of these caveats, the Bankruptcy Court had gone into some discussion that the Debtor was not a party to the bonds that were forfeited, and the debt was therefore not a fine or a penalty.  The 10th Circuit cut through this by stating it does not matter because this type of "debt is not payable to and for the benefit of a governmental unit, and thus the statute does not bar discharge".  All that mattered was that the "Bondsman is a nongovernmental corporate entity ... and the fact that [the Bondsman] ultimately paid money to the State of Oklahoma after [the one bonded out] failed to appear does not change [the Bondsman's] status from that of a private corporate entity".  The Bondsman had attempted to bootstrap the government entity prong of The Bondsman attempts to satisfy the government-entity prong of § 523(a)(7) by arguing that [the Bondsman] should be subrogated to the rights of the State of Oklahoma.  The 10th Circuit, as the Bankruptcy Court before it, was unpersuaded, stating:  "the State had no rights on the bail bond or otherwise against the [the Debtor]. Thus, 'stepping into the shoes' of the State as a subrogee avails the Bondsman nothing in regard to the dischargeability of the debt and fails to afford the Bondsman status as a governmental unit.

The Bondsman relied on a public policy argument, which would seem to contravene the Bankruptcy Code.  The 10th Circuit concluded that “'[E]xceptions to discharge are to be narrowly construed, and because of the fresh start objectives of bankruptcy, doubt is to be resolved in the debtor’s favor.”' (Internal cite omitted).

Lead Them Not Into Temptation

The problem for many big corporations, insurance companies, financial institutions and even consumers to a lesser degree is that it is easy for a lawyer to lead them into temptation.  To the lawyer it is the means of getting paid more per case.  To the entity it is the feeling of feeling vindicated, even if the final result does not necessarily turn out that way (kind of like the last act of defiance).

We all know lawyers that do this.  Not only do we know who they are, they know who they are.  They probably live a little better than the rest of us, they are never in their offices because they are always in depositions somewhere, and they probably have the best hourly and collection rates around.  In East Texas we say that they are "Board Certified in Billing".

From my perspective typically representing the Plaintiffs, it comes at me this way.  "My client does not think it did anything wrong".  Or, their client wants to argue that a 1949 decision out of Puerto Rico represents a line of cases that represents good law, even if it goes against every decision in the circuit in which the suit resides.  Or, the one I love the best, is that the attorney is concerned not for his client, but what message this sends if he allows his client to settle this claim.  There is of course the so-called "Wal-Mart Defense" in which not only will there be no settlement, they will try to bury you regardless of the costs, for the principal of the thing.  It has to be the delight of those attorneys who think to highly of themselves to convince their clients that this is a viable option.

The problem for many big corporations, insurance companies, financial institutions and even consumers to a lesser degree is that it is easy for a lawyer to lead them into temptation.  To the lawyer it is the means of getting paid more per case.  To the entity it is the feeling of feeling vindicated, even if the final result does not necessarily turn out that way (kind of like the last act of defiance).

We all know lawyers that do this.  Not only do we know who they are, they know who they are.  They probably live a little better than the rest of us, they are never in their offices because they are always in depositions somewhere, and they probably have the best hourly and collection rates around.  In East Texas we say that they are "Board Certified in Billing".

From my perspective typically representing the Plaintiffs, it comes at me this way.  "My client does not think it did anything wrong".  Or, their client wants to argue that a 1949 decision out of Puerto Rico represents a line of cases that represents good law, even if it goes against every decision in the circuit in which the suit resides.  Or, the one I love the best, is that the attorney is concerned not for his client, but what message this sends if he allows his client to settle this claim.  There is of course the so-called "Wal-Mart Defense" in which not only will there be no settlement, they will try to bury you regardless of the costs, for the principal of the thing.  It has to be the delight of those attorneys who think to highly of themselves to convince their clients that this is a viable option.

I Guess Bankrutpcy Attorneys Are Debt Relief Agencies Again -- But How Much Does It Matter?

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 started requiring certain people and entities to disclose to consumers in looking to file bankruptcy that they are a "Debt Relief Agency", and to instruct potential bankruptcy filers not do to do things such as not to incur more debt before filing.  See, 11 U.S.C. §§ 526(a)(4) and 528(a)(4) and (b)(2).  Since this time bankruptcy attorneys across the nation have been contesting the fact that they classified as a "debt relief agency" under the these code provisions, because these provisions do not necessarily include the direct application of "lawyer" or "attorney".  They have also, been disputing that the law can constitutionally restrict them from advising their clients to incure new debt, because in some situaitons involving the mortgage crises, this might be benefical.

The matter is important to consumer bankruptcy attorneys on an emotional, practical, and legal level.  On an emotional level, most attorneys do not believe they competed to get into law school, lived through that grind, and pass an impossible bar exam just to have bare the mark that compares it to other fly by night organizations.

On a practical matter, debt relief agencies have a duty to provide certain disclosures to debtors within a short period after meeting with them.  This does not sound onerous on its face, but most consumer bankruptcy attorneys are kind enough to offer most people free evaluations when the new law places terrible restrictions on them already concerning these services.  It literally takes hours of their time, already discouraging attorneys to practice in the area.  Also, many attorneys are nice enough to talk to consumers over the telephone.  This puts the attorney at risk of not being able to provide these disclosures.

On a legal level, bankruptcy attorneys do not believe that Congress should be allowed to prohibit them from advising their clients in ways that might be financially beneficial to the client, as the new Code provisions do.

Then, of course, there is the whole issue of the question itself.  If an attorney does not know if the provision applies to him or her, how does he or she know to try and comply with it.  So, attorneys have been racing around the country trying to get this issue before bankruptcy courts and district courts to get some degree of clarification.  Needless, to say these decisions have been mixed, at best, leaving some attorneys practicing in a particular court, not having to comply, and those in another court having to comply.

This whole discussion is predicate to a decision of first impression being handed down by one of the United States Courts of Appeal, which states that attorneys are debt relief agencies and must comply with those disclosure provisions, but striking down that part of the law as unconstitutional to prohibits attorneys from advising their client as to incurring debt.  In effect, the 8th Circuit splits the baby.

In Milavetz v. United States of America, the 8th Circuit Court of Appeals found that the new term, "debt relief agency" as defined in 11 U.S.C. § 101(12A), is not ambiguous.  Holding with a majority of the courts that have ruled on this matter, including the Texas case, Hersh v. United States, 347 B.R. 19 (N.D. Tex. 2006), "constitutional avoidance" does not apply in this as to the "debt relief agency".  The Court of Appeals defined constitutional avoidance as "where an otherwise acceptable construction of a statute would raises serious constitutional problems, the Cour will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress".  Thus, if interpreting "debt relief agency" to include attorneys would raise constitutional problems, the Court would look for another interpretation.

Ultimately, the Court found that "debt relief agency" includes attorneys because they were not expressly excluded from this group under 11 U.S.C. § 526(d)(2), and because the limited congressional history specifically discussed this provision in terms of "professional standards for attorneys".  The Court also found that providing this disclaimer is does not violate the constitution guarnatees of free speech.

This being the case, the 8th Circuit had to determine if the prohibition restricting attorneys from discussing with clients the possibility of incurring new debt was overly broad and thus unconstitutional.  The 8th Circuit found it was.

The Court ruled that § 526(a)(4)'s plain language an attorney is prohibited from providing this beneficial advice—even if the advice could help the assisted person avoid filing for bankruptcy altogether. For instance, it may be in the assisted person's best interest to refinance a home mortgage in contemplation of bankruptcy to lower the mortgage payments. This could free up additional funds to pay off other debts and avoid the need for filing bankruptcy all together.  The Court found that Incurring these types of additional secured debt, which would often survive or could be reaffirmed by the debtor, may be in the debtor's best interest without harming the creditors.

The end result is that, at least in the 8th Circuit, and probably around the country, bankruptcy attorneys are going to have to use the "debt relief agency" moniker and provide certain minimal disclosures, but § 526(a)(4) is no more, and the government cannot tell you not to provide beneficial information to your clients.

(Pictured is the Hon. Lavenski R. Smith who wrote the opinion).

OBiden -- How Both Oboma, Biden, and McCain For That Matter, Handed Bankruptcy Reform

Barack Obama voted against BAPCPA, but also voted against capping interest rates on credit cards, so that is a mixed bag.

McCain and Joe Biden, Obama's VP nominee, both voted for BAPCPA.

Joe Biden, however, was one of the leaders pushing BAPCPA and fending off almost all attempts to amend it.  This is certainly different from his image as an average Joe, who comes from and is always concerned for the working and middle class.

Biden even went as far as attempting to remove the language from BAPCPA that would have precluded a bankruptcy discharge for debts arising from portests at abortion clinics.

All of this prompted many to refer to Biden as "Senator MBNA", refering to his close relationship with the company, from his home state, and the large donations he received from and as a result of the company.

IndyMac Files For Bankruptcy Protection

According to The New York Times and others,IndyMac Bancorp, the third-largest banking failure in United States history, said that it had filed for bankruptcy protection, less than three weeks after being seized by federal regulators following a bank run by depositors.

Based in Pasadena, Calif., the holding company for IndyMac Bank filed for Chapter 7 protection on Thursday with the federal bankruptcy court in Los Angeles, indicating it plans to liquidate. IndyMac said it expected the court will appoint a bankruptcy trustee promptly.

IndyMac Bancorp has $50 million to $100 million of assets, $100 million to $500 million of liabilities, and fewer than 50 creditors, according to the bankruptcy filing.

The collapse of IndyMac was the largest U.S. banking failure in two decades. Regulators at the time said IndyMac ended March with about $32 billion of assets, and about $19 billion of deposits, most of which were insured.

IndyMac was the fifth of seven bank failures this year, the F.D.I.C. said.

IndyMac once specialized in "Alt-A" and other below-prime home loans, which often did not require borrowers to fully document income or assets.

It collapsed as borrower defaults began to mount, while tight capital markets forced it to take losses on mortgages it sold and kept on its books.

10th Circuits Adopts Objective-Coercion Principle In Discharge Injunction Violations

The United States Court of Appeals, Tenth Circuit opened the door to the Objective-Coercion Principle in discharge injunction violations.  In doing so, however, it distinguished the facts of the case at hand and ruled against the debtors because neither the Bankruptcy Court findings, nor the Debtor's testimony met the guidelines set out by the 10th Circuit.

In the case In re Paul, Circuit Judge Stephen H. Anderson issued the opinion that states that the Objective-Coercion Principle "operates as an overarching exception" to the rule that actions that do not directly violate the 11 U.S.C. §524 discharge injunction may still be a violation of §524(a)(2) if it can be shown that a "creditor acted in such a way as to 'coerce' or "harass' the debtor improperly so as to theoretically force them to pay a discharged debt.

The 10th Circuit, therefore, adopts the theory first established by the 1st Circuit Court of Appeals in its decision In re Pratt in 2006, except that the 10th Circuit did not find that the facts before it in In re Paul met the standard set.

Federal Regulators Seize IndyMac Bank

The real estate market is obviously not going to wait for Congress to act.  It is making decisions on its own as to what banks and companies will survive the real estate meltdown.

According to CNNMoney, in what in what is likely to be the most expensive bank failure ever, troubled mortgage lender IndyMac Bank was taken over by federal regulators.  The operations of the Pasadena, Calif.-based bank were shut down by the Office of Thrift Supervision and transferred to the Federal Deposit Insurance Corp.

The clean up of this bank is expected to costs the Deposit Insurance Fund between $4 billion and $8 billion, and worse still it is expected that 10,000 IndyMac customers could lose as much as $500 million in uninsured deposits.

IndyMac, with assets of $32.01 billion and deposits of $19.06 billion, is the fifth bank to fail this year. Between 2005 and 2007, only three banks failed.  IndyMac marks the largest bank collapse since 1984, when Continental Illinois.

Most media is reporting extensively on what will happen to depositors in the bank.  The bigger question it seems is what does this do to already pressed mortgage borrowers (debtors).  As these troubled mortgage loans are sold off the collections activities against the borrowers are likely to become more aggressive.  This will undoubtedly have a big impact on bankruptcy filings and bankruptcy based litigation.

J. Brian Allen - Northeast Texas Bankruptcy Lawyer

There is a new blog on the block concerning consumer bankruptcy issues in Northeast Texas.

Many of you already know him, but if not welcome J. Brian Allen and his new blog Northeast Texas Bankruptcy Lawyer.  You can view it by CLICKING HERE.

Brian has a good deal of experience in both this legal and geographic area.  And, his blog already has a good deal of vital and interesting content.

One interesting thing, Brian Allen has included a page that lists politicians, famous people and celebrities that have filed bankruptcy. This is vitally important for those in need of bankruptcy protection to know that they are not alone.

In this day and age of bankruptcy marketing if you do ignore the Internet you do it at your own peril.  A blog not only offers you an opportunity to reach people directly, but it can be the hub of all of your network and relationship marketing activities.

Brian sought the help of Grant and Clay Griffiths over at G2WebMedia to set up his bankruptcy blog. Grant Griffiths is one of the pioneers of blog based marketing.  His Kansas Family Law Blog drew 100,000 plus views it first year out of the gate.  He understands what it takes to make a practice blog an effective marketing tool.

(Brian Allen pictured at his new blog going live)

The Housing Market Could Totally Collapse

According to Fortune nearly half of all of the country's outstanding home loan debt is owned by or guaranteed by either Fannie Mae or Freddie Mac.  $5 trillion dollars worth of mortgages, and these two government-sponsored enterprises are in serious financial shape and could fail.

The problems with the two agencies are already causing a loss of confidence with investors, and it is making housing loans harder to come by.

The two companies are hybrids or sort.  Fannie Mae was created by Congress in 1938 and Freddie Mac was created by Congress in 1970.  The mandate for both is to maintain a market for mortgages by buying loans from banks, repackaging them as bonds, and selling those securities to investors with a guarantee that they will be paid. This makes lending more tempting for banks because Fannie and Freddie take on risks like missed payments, defaults and swings in interest rates.  However, the companies are also publicly traded, with the usual mandate of trying to maximize profits for shareholders.  Their efforts involves risk, and as quasi-government programs there is an implicit guarantee that the feds wouldn't let them fail.  As a result, the market and rating agencies have always treated these two as bulletproof.

Each company has borrowed billions directly from the United States Treasury.  Because of the government involvement they have had  a AAA credit rating and could borrow at low rates, which is a benefit they need in order to loan money.  As a result, they have piled on risks without a capital cushion to cover it.  It has not help that like Enron and other companies Fannie Mae has been found to have overstated its earnings and Freddie Mac has been found to have overstated its profits.  Their stock value has recently fallen by 47%.

The question is if these two giants start to founder, how much will it cost the government to bail them out, and whether they are bailed out or not, how much of the surrounding economy will the two take with them if they fail.

It is interesting to talk about and speculate about these issues, but the truth of the matter is that these events would impact real people.  It will undoubtedly lead to more ordinary people needing to file bankruptcy to save their homes.  If the companies sell off debt or obligations, it will lead to harsher collection activity.  This will undoubtedly lead to automatic stay and discharge injunction violations.  So, it is a very real problem.

You Have Gotta Love The Mortgage Lender Implode-O-Meter

It is sad really.  Millions of Americans are losing their homes.  Most of these loses are simply unjust because borrowers were enticed into programs that have harmed them.  The lenders should have known better.  I would contend that they did know better, they thought they could just pawn the loses off on others.  Well, at least one website is gleefully tallying the number of these outrageous lenders that have run into trouble themselves.

As reported byThe New York Times newspaper, The Mortgage Lender Implode-O-Meter has become so recognized that at the recent Mortgage Bankers Association conference, a speaker addressed how to stay off the website.  “No one wants to be number 266,” said Jim Reichbach, a vice chairman and leader of Deloitte’s banking and securities team. “This is a death toll that is equivalent to the casualty ticker of the Vietnam War.”

When you see so many honest people that have been duped in a way that has cost them their homes, and you have seen what mortgage lenders have tried to do to the bankruptcy laws, it is hard not to feel excited watching these blood suckers parish due to their own schemes.

NACBA / Debtors Fail To Win Interpretation Battle In 10th Circuit Over Interest On 910 Vehicles

The National Association of Consumer Bankruptcy Attorneys (NACBA) along with a number of Debtors (and their bankruptcy attorneys) took their argument over whether secured claims, which cannot be crammed down under the 910-day period preceding the filing of a bankruptcy, are "allowed secured claims" under 11 U.S.C. § 1325(a)(B)(ii) entitling the creditor to interest pursuant to the Supreme Court's prior opinion in Till v. SCS Credit Corp, 541 U.S. 465, 469 (2004).

In the consolidated cases before the United States Court of Appeals, 10th Circuit the Debtors has argued before the Bankruptcy Court, the BAP and the 10th Circuit that as a result BAPCPA a creditor who has a claim secured by a 910 vehicle is not entitled to interest at all because a 910 car claim is not an "allowed secured claim" within the meaning of 11 U.S.C. § 1325(a)(5).  Alternatively, they argued that the requirement to pay interest is not mandatory with the Bankruptcy Court in this regard.

The Debtors prevailed in the Bankruptcy Court, but they did not prevail before the 10th Circuit.

The 10th Circuit ruled that although 11 U.S.C. § 506(a) bifurcation of a claim into secured and unsecured portions is no longer available if the property was purchased or financed within 910 of the bankruptcy filing, the full amount owed is an "allowed secured claim" for purposes of 11 U.S.C. § 1325(a)(5), and the Bankruptcy Court must provide the creditors involved the present value of the claim, which includes interest.  The 10th Circuit also ruled that interest is required on the entire claim, and not just that portion that would be secured except for the 910 day limitation.

Although the 10th Circuit referred to some prior collateral decisions on its part, this really was a case of first impression for the Court.  It represented a gallant effort on the part of these Debtors, their bankruptcy attorneys and NACBA, but in the end the argument did not work.  Where the case goes from here is unclear.

Former NFL Star Michael Vick Files For Bankruptcy Protection

On July 8, 2008, Michael Vick, the former NFL quarterback who is serving a 23-month prison term for plotting to run an interstate dogfighting ring, filed for Chapter 11 reorganization according to Bloomberg News.  Vick cited debts of $10 million to $50 million in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Newport News, Virginia. He listed assets valued at between $10 million and $50 million.

It is reported that Vick's hope is that by filing bankruptcy that he can, after the conclusion of the bankruptcy case, rebuild his life on a personal and spiritual level, resurrect his image as a public figure, and resolve matters with the NFL such that he can resume his career,'' Vick's lawyers said in the bankruptcy filing.

Vick, 28, the No. 1 pick in the National Football League's 2001 college draft and a three-time Pro Bowl choice with the Atlanta Falcons, was indefinitely suspended by the league when he agreed to enter his August 2007 felony plea. He is due to be released from the U.S. penitentiary in Leavenworth, Kansas, in about a year, according to court papers.

A federal judge in December gave Vick less than half the maximum penalty for his role in buying, training and killing dogs while funding gambling on fights held on his property in Surry County, Virginia. He also received three years probation.

Vick pleaded guilty to conspiracy to travel in interstate commerce in aid of unlawful activities and to sponsor a dog in an animal-fighting venture. He publicly apologized for his actions and said he would stand against animal cruelty.

His creditors include The Atlanta Falcons, which are owed $3.75 million for a pro rated signing bonus according to the filing. Other of the largest unsecured creditors listed include Joel Enterprises Inc., owed $4.5 million for breach of contract, and Royal Bank of Canada, owed $2.5 million for a real-estate loan.

Democratic Presidential Candidate Barack Obama Calls For New Bankruptcy Reform

Democratic presidential candidate, Barack Obama, vows to put back some of those protections that were taken away from consumers when Congress passed, and the President signed into law, BAPCPA in 2005.

According to the Associated Press and Fox News, Obama has proposed changing bankruptcy laws to fast-track the process for military families, help seniors keep their homes, and protect people recovering from natural disasters. In doing so, Obama also accused Republican rival John McCain of repeatedly siding with the banking industry, saying, “When it comes to strengthening the safety net for hardworking families, he’s been part of the problem, not part of the solution.”

Obama stated, “Like the president he hopes to succeed, Sen. McCain does not believe the government has a real role to play in protecting Americans from unscrupulous lending practices. He would continue to allow the banks and credit card companies to tilt the playing field in their favor, at the expense of hardworking Americans.”

McCain spokesman Tucker Bounds responded in a statement: “Eighteen Democrats and John McCain worked together on the bipartisan Senate bankruptcy bill, and Barack Obama’s rigid partisanship and self-promoting political attacks show that he’s a typical politician — which is the problem in Washington, not the solution.”

Obama’s new proposals supplement his broader — and previously announced — bankruptcy reform agenda that includes changes intended to help people in financial distress because of medical bills and allow homeowners going through the bankruptcy process to renegotiates terms of their mortgages.

The Democrat said he also would help service members and military families struggling financially after multiple moves, lengthy deployments and, in some cases, predatory lenders, saying, “If you’re protecting America, America should be protecting you from unfair bankruptcy laws.”

He pledged to expedite the bankruptcy process for them by exempting them from a “harsh means test,” cutting “unnecessary paperwork” and “token counseling,” and enacting a minimum homestead exemption to help them keep a greater share of their home’s value.

Obama also wants to allow a speedier bankruptcy process for all service members regardless of what state they live, a departure from current law that says people can use federal bankruptcy exemption laws if their state of residence allows. Some 35 states bar families from federal exemptions, according to a campaign-issued fact sheet.

As for seniors, Obama said, “I’ll help make sure that if you’re over 62 and facing bankruptcy, you’ll have a better chance of keeping your home.”

He said people in that age bracket would get a minimum federal homestead exemption equal to the median cost of a home in their state, “giving them a better chance to keep their homes and helping them maintain both their independence and their financial security.”

In addition, Obama said he would help families recovering from a natural disaster by streamlining the bankruptcy process for those in certified natural disaster areas by eliminating “unnecessary paperwork” and waiving “unneeded credit counseling requirements.”

He also promised to enact a 120-day moratorium “on adverse credit actions from collectors, such as foreclosure” to free families from concerns about collectors as they are trying to recover. And, his campaign said he would amend the Equal Credit Opportunity Act, which bars discrimination in lending, to include protection for disaster victims, so that lenders do not unfairly restrict credit to such families.

Global Inflation Is Rising, Rising, Rising

Inflation is a bad, bad thing.  It hurts most everyone.  As gas prices, food prices and the prices for essential rise uncontrollably, people and companies simply cannot keep up with the market pressures.  People or consumers have to go further in debt, more debt does not get paid, more people are forced into bankruptcy, and then companies and creditors are squeezed.  They immediately get more aggressive, more strident, more litigious.  Operations are set in motion to collect, collect, collect, and everything just appears to spiral out of control.  Once they get their organizations headed in a particular direction, as we know, creditors and companies cannot seem to turn the system off or train it to make distinctions.  The automatic stay and discharge injunctions will be violated.

According to a report by HuffPo there is currently no where to hide from the bogeyman that is inflation.  Prices in one in four countries, many of them in emerging markets, are accelerating at a double-digit pace, which puts them at least two and a half times the 4 percent annual U.S. headline inflation rate, according to new research from Morgan Stanley.  With this, the U.S. economy has slowed to nearly a standstill in the last year because of the mounting inflation and the collapse in the housing and mortgage markets. Other industrialized countries have seen about a 2 percent average rate of growth while emerging economies have topped 7 percent.  That growth is now being threatened by inflation.  Food prices have jumped 39% from February 2007 to 2008, led by wheat, soybeans, corn and edible oils, according to the International Monetary Fund.

Morgan Stanley economists Joachim Fels and Manoj Pradhan said they were "flabbergasted" by their findings that 50 countries had double-digit inflation rates. On that list were six of the 10 most populous countries in the world, including India, Indonesia, Pakistan, Bangladesh, Nigeria and Russia.  In total, those facing such pricing pressures accounted for 42 percent of the world population.  "In other words, close to three billion consumers are currently experiencing double-digit rates of price increases," they wrote in a note to clients.

And, the problem is that soaring inflation is not easy to tame. Some countries, such as India where inflation is running at around 11 percent, may have no choice but to boost interest rates.  Many emerging-market economies also link their currencies to the dollar, and because of the U.S. Federal Reserve's loose monetary policy stance right now the central bank has aggressively cut interest rates in response to the credit crisis and that has helped feed inflationary pressures.

The longer inflation remains elevated, the more damage it will do to long-term economic growth.

As we have often seen, as goes the World eventually goes the United States.

$100 Million Bankruptcy Attorney - I Doubt It

CNNMoney reviewed what it might cost to build the $6 Million Man, who was played on TV by Lee Majors in 1974 in today's dollars.  It is a strange comparison because there really was not a $6 Million Man in 1974. There was only just an estimate of what it would take to put Lee Major's back together as one if it were possible.  And, let us face the fact that in 1974 we all thought $6 million was a heck of a lot of money.  As frivolous as money has become today (even though we do not have it) $6 million seems like chump change almost.

Nonetheless, in 2008 inflation adjusted dollars, Lee Majors would be the $26 Million Man.  But, the real cost of a modern-day cyborg in 2008 would be quite different, according to Greg Chirikjian, professor of mechanical engineering at The Johns Hopkins Institute and a big fan of the original TV show.  According to Chirikjian, research and development costs to design a bionic man would be $50 million to $100 million today. But with a completed design, production costs would only be several hundred thousand dollars per person.

What I find interesting about this discussion is that in 1986, for example, an attorney was allowed to be paid $2,500.00 in legal fees through the Chapter 13 Plan to represent a family in a Chapter 13 bankruptcy in the Eastern District of Texas.  Today, even with the extraordinary new requirements to which an attorney must plan and respond, that fee is now only $3,000.00.  Considering the inflation adjusted costs only that fee should likely be about $9,000.00 today. It is not.  And, if you consider the additional work, it should be higher still.  Judges say that consumers cannot afford these fees over a 5 year period.  However, they were able to pay the equivalent in 1986, and a larger percentage of bankruptcies survived to completion at that time.

And The Walls Come Tumbling Down

According to HuffPo and other news outlets, the City of Vallejo, California filed for bankruptcy protection in the United States Bankruptcy Court for the Northern District of California in San Francisco in order to deal with its ballooning budget deficit caused by soaring employee costs and declining tax revenue.

Vallejo is a San Francisco Bay area suburb of about 120,000 residents and it is the largest California city to seek bankruptcy protection when it filed for bankruptcy under Chapter 9 of the Bankruptcy Code.

Mayor Osby Davis said,"We've exhausted all avenues at this point, and this is all we had left  ... We can't pay our bills."

The police and firefighter unions plan to file a legal challenge, arguing that the city's finances aren't as dire as officials claim and there are other ways to fix the budget deficit, said Mat Mustard, vice president of the Vallejo Police Officers Association.

Vallejo, a mostly working-class city about 30 miles northeast of San Francisco, faces a $16 million budget deficit in its fiscal year starting July 1.

The foreclosure crisis and economic downturn have caused a sharp decline in revenue from sales tax, property tax and development fees.

Other cities around the country could find themselves in the same position as Vallejo because they're also struggling with skyrocketing employee expenses and falling revenues, experts say.

"If the economy doesn't turn, you're going to see other cities in the same spot," said Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility. "You're seeing a lot of cities and counties where reserves are being drawn down to pay for benefits."

You May Now Challenge Ad Valorem Tax Assessments ... The Right Is Just Not As Endless As Some Thought

The problem with BAPCPA sometimes is that it finally clears up some rights of the debtor in dispute, only to limit or take away those rights now understood.

This was illustrated well in Steve Sather's Texas Bankrutpcy Lawyer's Blog.

It was none too clear under the old Bankruptcy Code whether a debtor could get a bankruptcy court to redetermine the appraised values used to compute ad valorem taxes so long as the values had not been previously contested.  Under the old Code debtor's attorneys did this if for not other reason than to try to get some negotiation over tax claims that taxing authorities otherwise want to believe are not negotiable.

In Texas, property tax values must be protested in by a date certain or they become final. Tax rates are then set based on the final valuations. The way some read the old 11 U.S.C. § 505, the debtor was allowed to come in after the appraisal rolls had been finalized and taxes set and complain that the valuations were not correct.  Some argued that a debtor could go back indefinitely as long as the valuations had not previously been contested.  You can read this a leverage.

But, as pointed out by Steve Sather, redetermination of tax values was a controversial. Some courts abstained from redetermining property tax values, In re New Haven Projects Ltd. Liability Co., 225 F.3d 383 (2nd Cir. 2000), while others allowed it, In re Hospitality Ventures/La Vista, 314 B.R. 843 (Bankr. N.D. Ga. 2004); In re Fairchild Aircraft Corp., 124 B.R. 488 (Bankr. W.D. Tex. 1991). The cases declining to exercise jurisdiction relied on language in the legislative history to the code stating that abstention was appropriate "where uniformity of assessment is of significant importance." S. Rep. No. 989, 95th Cong., 2d Sess. 11 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5853.

BAPCPA clears up this right with the addition of 11 U.S.C. § 505(a)(2)(C), which states that the court may not redetermine "the amount or legality of any amount arising in connection with an ad valorem tax on real or personal property of the estate, if the applicable period for contesting or redetermining that amount under any law (other than bankruptcy law) has expired."

Congress by limiting the practice, obviously understood that the practice pre-BAPCPA of redetermining those property taxes constituted a legitimate reading of the law at that time.  Now, unfortunately, you cannot retroactively challenge valuations going back prior to the filing of the bankruptcy, but you can still contest valuations which could have been challenged on the petition date and 11 U.S.C. § 108(a) would appear to give the debtor two years in which to file the motion.  The trustee may commence the action within the longer of the original period or two year.

This amendment also seems to quiet the controversy over redetermination is proper. By limiting redetermination to situations where the protest period has not expired on the petition date, Congress appears to have implicitly endorsed it in that one case.

In my way of thinking, this provision is still useful for the reason that house prices are stagnant or falling in most places.  Yet, taxing authorities are continuing to raise values for tax collection reasons.  When I have attended property tax challenges in the past, I can tell you that the process seems so very arbitrary.  To say that it is based on any exact science would be wrong.  It would also seem to be able to apply leverage in the sense this process will take the taxing authority out of the state court and administrative process they now enjoy, and place then in an environment in which they are not familiar.

(Stephen Sather pictured).

The Drew Carey Bankruptcy Party

This clip from the 3rd season The Drew Carey Show about his bankruptcy party.

Damned If You Do, Damned If You Do Not

You have really got to feel for Tenny Zahn, whether you agree or not with the outcome of her confirmed plan.

Essentially, Ms. Zahn found herself in the strange situation where she was aggrieved by her own proposed plan.  This is so because she was left with the Hopson's choice of proposing a Chapter 13 plan that she herself did not want, or risk having her Chapter 13 case dismissed.  So she chose to file the plan required of her and then file an objection to her own plan.  Neither the Bankruptcy Court of the BAP seemed to appreciate such ingenuity, but the Court of Appeals did.

In Tenny Shikaro Zahn vs. Richard Fink the Eighth Circuit Court of Appeals found that Tenny Zahn was an aggrieved party allowing the appeal of the confirmation of her proposed Chapter 13 plan to go forward.

Initially the Bankruptcy Court denied confirmation of Ms. Zahn's Chapter 13 plan because she had failed to include distributions from her non-filing husband's individual retirement account (IRA).  She then appealed that denial of confirmation to the Bankruptcy Appellate Panel (BAP).  The BAP dismissed her appeal as being interlocutory.  Having little choice, Ms. Zahn then proposed a new plan that included the IRA distributions, but filed an objection to her own plan.  The Bankruptcy Court approved this plan over Ms. Zahn's objection.  So, then she appealed the confirmation of that plan in that the decision was not now interlocutory.  The BAP dismissed this appeal as well stating Ms. Zahn lacked standing to appeal the order granting confirmation of her own amended plan because she was not an aggrieved party.  The BAP stated, "a party cannot prosecute an appeal from a judgment in its favor", reasoning that "[w]hen the court confirmed her plan, [Zahn] got all of the relief for which she asked".

The Eighth Circuit stated simply "there is a flaw in the BAP's reasoning".

The Circuit court stated that Ms. Zahn "was forced, over her express objection, to propose an amended plan" and "amended her plan with provisions she believed were erroneous and not required by the Bankruptcy Code, in order to avoid dismissal".  As a result Ms. Zahn can appeal a judgment that was not in her favor and which was prejudicial toward her.  Given these facts, Ms. Zahn was an aggrieved party.  "Not to allow a debtor to appeal confirmation of her own plan would require a debtor to comply with a plan that contains provisions the debtor does not believe are required by the Bankruptcy Code, while losing her right to appeal those provisions".

To me this is much like coercing a confession out of some criminal defendant, and then telling him he cannot appeal his conviction because of the confession.

Wizard Of OZ

Someone recently compared what we attorneys do as being something similar to the Wizard of Oz, in  that what is behind our organizations might be a little smaller than and less intimidating than as we try to make it appear.

Maybe so, but behind everything what we are trying to do is pin a conscience on corporations, banks, finance companies and creditors that pretend to tear their clothes and gnash their teeth over having to pay a little recompense to a financially vulnerable person to whom they have treated badly.  At the same time, most of the multi billion dollar corporations do not think twice of paying their badly performing management hundred million dollar compensation packages or in spending, like Citibank, hundreds of millions to change their logo from one side of their name to another side of their name on all of their signs and print material.

I had a major national bank recently tell me in an email that it would not be "bullied" by my debtor who was in bankruptcy.  Really?  Bullied by a debtor who was just minding his own business and wanted to be left alone from the constant harassment he was receiving despite the fact the lender knew it had been enjoined from this behavior and the fact that the bankruptcy attorney had warned the bank that it was violating the automatic stay.  And, what did the lender find as being bullied.  The Debtor asking them to stop, pay him $500.00 for his time in this matter, and to pay his attorneys' fees of a few thousand dollars that he had not wanted to spend but for the fact that the lender would not stop its activities when politely asked to obey the Court's order.

The last refuge is bankruptcy court, and in this the debtor is suppose to be safe for unilateral action without the knowledge and concern of the bankruptcy court.  And, when big business and big lenders do not obey the law we are increasingly fighting a war of hyperbole.

Not only bankruptcy, but predatory lending, junk fees, the inability to solve any problem or concern of a customer without litigation shows how the essential problem of big lenders and big business and big law firms that they have ceased to serve their customers.  We all feel it.  We are not now trusted customers as we feel more like targets.

Government offers few protections with the exception of the bankruptcy courts.  As a result, the Bankruptcy Code has become the de facto Code of Conduct that should be imposed on all corporations and all lenders.  Should it be so?  Maybe not, but that is what our government has left us, and they have left it to the debtors to enforce this Code of Conduct themselves.

Everybody needs a conscience.  Only it either does not come naturally to big business and those in finance or it is lost in the hierarchy.  It is necessary to ensure that individual actions do not violate a group's moral norms. Conscience consists in the internalization or acceptance of a group's moral norms as correct and overriding one's self-interest when they conflict.  These big lenders and big business do not do override, and these corporations desperately need a conscience to monitor and control their behavior.

William Langewiesche wrote in The Atlantic in November 2001: "The greatest pyramids ... are made not of stone but of people: they are the vast bureaucracies that constitute society's core, and they function not necessarily to get the "job" done but to reward the personal loyalty of those at the bottom to those at the top."  I tend to think he is right.

Adam Smith’s first major work was the Theory of Moral Sentiments. He understood, as an ethicist, that the mechanism of the “invisible hand” would be most efficient if self-interest was restrained by conscience. With remarkable prescience Smith warned that corporations would slip the restraints of human conscience.  These big companies and lenders have taken on a life of their own.  These are entities without a conscience with the potential to wreak havoc on the societies that have created them.

So, what is our job?  It is, I think, to try as best we can in individual cases to demand the respect of these big institutions and try to pin to them a little conscience -- a little concern -- as to what they do.

Election Reform

Yes, as almost all bankruptcy attorneys now know, election reform is crucial.

Confirmation Might Not Always Superceed A Stipulation Entered

In Taumoepeau v. Manufactures & Traders Trust Company, et. al. the 10th Circuit Court of appeals had to decide if a drop dead order or stipulation entered before confirmation concerning strictly post-petition house payments (which did not in fact concern the abt pre-ptition payments) on a residential mortgage was superseded in a way as to make the drop dead order or stipulation non-enforcible after confirmation.

The 10th Circuit, like the Bankruptcy Court and the BAP before it, found that both the drop dead stipulation and the confirmed plan could be read harmoniously and the automatic stay was not in effect to stop the lender's actions in selling the house at foreclosure even though the stipulation was not referred to or included in the confirmed plan.

Most of the decision issued by the 10th Circuit deals with a complicated issue of whether the Court had the jurisdiction to hear the appeal given its late filing.  If found it did, but that in no way impacted on its decision concerning the drop dead stipulation entered in this case.

The relevant facts are that in February 2003 (before BAPCPA) the Debtors filed Chapter 13 bankruptcy and a plan addressing their pre-petition mortgage arrearage.  Their amended plan in July 2003 continued this treatment s to the pre-petition arrearage only.  After filing, but before confirmation, however, the Debtors fell approximately $10,000.00 behind in mortgage payments post-petition.  It has to be assumed that they were required to make these payments on their home directly.  To resolve this post-petition arrearage only, the Debtors and the Creditor entered into a stipulation, which allowed for the automatic stay to lift and the lender to foreclose on the Debtors' home if the Debtors failed in making future payments and other considerations.   Four days after entering into this stipulation the Bankruptcy Court confirmed the Debtors' plan, which provided for the pre-petition arrearage, but made no reference to the stipulation or the post-petition payments.  The Debtors eventually defaulted on the stipulation, the stay was lifted, and the lender proceeded with foreclosure, and in fact did foreclose.  The Debtors then brought an action to stop their eviction from the house claiming that the confirmation superseded the stipulation.

The Bankruptcy Court disagreed with the Debtors.  It was appealed to the BAP and it disagreed with the Debtors as well.  The 10th Circuit found that indeed the post-petition payments missed were nowhere addressed in the order of confirmation.  However, the Court found that the stipulation in no way dealt with the issue of the lenders pre-petition claim for missed payments, and as such the documents were somehow mutually exclusive.  To state it as the Court did, "Like the bankruptcy court in interpreting its own orders, and like the BAP in affirming that interpretation, we conclude that the stipulation and amended plan can be read harmoniously, each addressing a separate debt owed."

In short, the final decision of the 10th Circuit fell on the interpretation of the orders of the Bankruptcy Court.  It is important to note that there exist decisions that disagree with the conclusion reached by the 10 Circuit, and it is concerning that the 10th Circuit would reach this decision without citing to one case or Bankruptcy Code provision, or text, that supports its findings.  It is rare to find such a decision devoid of all such references, and I am not sure what credence that can be given to this decision for this very reason.