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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.