StayViolation.Com

Attorneys General Say Debt Collectors Inspire The Most Complaints

Now of course that is not surprising.  Especially in states like Texas where garnishment is difficult or impossible, I would assume that debt collectors are the motivation for most people filing bankruptcy.  Not for the fact that debt is owed and unpaid, but because of the harsh and repeated tactics the debtors are trying to avoid.

According to HuffPo's reporting, according to the National Association of Attorneys General (NAAG), more complaints were filed last year against debt collectors than any other industry.  This was unchanged from the same survey conducted in 2007.  Further, "Debt collectors generate more complaints than any other industry," according to the Federal Trade Commission's Web site.  In a February report on the industry, the FTC cited "major problems" and "recognized that certain debt collection litigation and arbitration practices appear to raise substantial consumer protection issues."

It should be no secret that most debt collectors serve no real purpose other than that of harassment.  Sometimes it is subtle but, as indicated in this article, much of the time it is not.  More importantly, from a bankruptcy standpoint, debt collectors do not know how, or do not care, to shut down the machine of collect activity just because a bankruptcy is filed.  You see this all of the time.  The bankruptcy is filed, the case and the existence of the stay is noticed out, but the inappropriate actions continue.  Often these inappropriate actions continue even when placed on notice to stop violating the stay by the bankruptcy attorneys.

Why is this so?

Most likely for the same reason that debt collectors represent the largest number of complaints to the various AGs and the FTC.  They do not make money if they are not stepping over the line.

Another way to look at it is that these are generally large organizations with people working in undesirable jobs.  It takes a lot of effort and manpower to get the collection machine moving.  And, as collectors will argue, all they hear are hard luck stories or reasons why they should not be calling.  So, they are trained to ignore these issues and continue on.  This often gets them in trouble both inside and outside of the bankruptcy context.

The 5th Circuit Helps Answer The Question Of Who Owns An Automatic Stay Violation Claim

It is, in reality, an issue that is not much discussed by courts, but occasionally it is something that is challenged.  That is who exactly owns a claim for an automatic stay violation.  It is relevant for a number of different reasons.  First, it is an issue of standing.  Who may bring a claim and under what circumstances?  Second, to whom is the violator of the automatic stay liable, and is it possible that the violator of the stay might have multiple liabilities for the same act?  Third, if a claim has already been brought by another and settled, is there an issue of res judicata or collateral estopple? Fourth, is court approval required of a settlement if the cause of action is not brought by the trustee?  And fifth, who is entitled to the recovery of funds if there is a settlement?

In the past the answer with most courts has unofficially been that under 11 U.S.C. § 362(k)(1) (or previously under the pre-BAPCPA rule of 11 U.S.C. § 362(h)) that each individual injured by a willful violation of the stay could maintain a separate cause of action against the one violating the stay.  Also, that the cause of action did not belong to the estate in that it constituted a private cause of action or a private remedy which belong to, and could be settled by, the individual presumably injured.  However, there have been some mixed exception to this rule in our Texas courts, especially in the area of Chapter 13 bankruptcies.

Although brought in the context of a Chapter 11 bankruptcy, the 5th Circuit Court of Appeals has, in a case of first impression, gone a long way in formalizing these more unofficial views expressed from the bench by the majority of our bankruptcy courts.

In St. Paul Fire & Marine Ins. Co. vs. Labuzan, the Court had to analyze these issues in order to reach the conclusion it was required to decide.  In doing so, the 5th Circuit established the analysis that automatic stay violations brought under § 362(k)(1) constitute "private remedies" (meaning they can be multiple remedies for multiple parties suing over the same set of facts and circumstances) that do not belong to the bankruptcy estate (meaning the claims are not property of the bankruptcy estate) and thus the recovery or remedy belongs to the person(s) bringing those actions and not the trustee in bankruptcy.

Labuzan concerned itself with the question of whether non-corporate creditors could maintain there own cause of action against a violator of the stay in a Chapter 11 bankruptcy even when the Trustee had settled its own stay violation action with the violator for the exact same set of facts and circumstances?  The conclusion of the Court was yes because the proposed cause of action brought by, in this case, a man and wife creditor did not belong to the Trustee in that the cause of action under § 362(k)(1) was not property of the bankruptcy estate.

This conclusion is worth repeating in that it is vitally important in the resolution of the issues raised in the opening paragraph of this post.  Claims or causes of action, and their remedies or recoveries, brought by an individual, whether that individual is a creditor or debtor, is "NOT PROPERTY OF THE BANKRUPTCY ESTATE".  (Emphasis added).

Before the decision in Labuzan, most bankruptcy judges, I think, had come to accept that money recovered pursuant to a § 362(k)(1) action does not belong to anybody but the debtor or party bringing the action, but there are few notable exceptions to this sentiment in which the bankruptcy judge believed the award constitutes property of the bankruptcy estate, requiring a Rule 9019 motion to be filed and the Court's subjective determination of whether the settlement was reasonable or a benefit to the estate.  This sentiment has caused problems in that it discourages debtors, and other parties, from bringing violators of the automatic stay to account for their willful actions, it substantially increases the costs of the litigation, and it discourages settlements on reasonable terms.  It also raises other issues, such as, if the claim is property of the estate, does the debtor's attorney have to get permission to represent the estate before agreeing to go forward with the litigation, whether any settlement must also benefit the unsecured creditors or the estate apart from just the aggrieved individual, or whether the trustee is a necessary party to the litigation other than for notice?

Although this decision does not fully clear up the argument in regard to a stay violation case brought under a Chapter 13, it comes close enough in my estimation, and the decision confirms what we have been stating all along.  A "private cause of action" is exactly that.  It does not belong to the estate.  The recovery does not belong to the estate.  If the estate also has a private cause of action, then the estate needs to bring its own case and seek its own recovery under 11 U.S.C. § 105.

The 5th Circuit reaches its conclusion first by citing its 1989 decision in Pettitt v. Baker, which states that § 362(k)(1) creates a "private remedy for one injured by a willful violation of the automatic stay". (Emphasis added).  For years now some bankruptcy courts seem to gloss over this ruling and what it means, stating that under 11 U.S.C. § 1306 any cause of action that arises post-petition becomes property of the estate.  These Courts equate the "private cause of action" to mean simply that the Debtor can prosecute the estate's cause of action, as opposed to the trustee.  A detailed reading of the analysis in Labuzan would strongly suggest otherwise, however.

Although § 362(k)(1) is available to non-debtors that are "within the zone of interests", the 5th Circuit seems to agree that § 362(k)(1) does not apply to non-humans or non-persons, or the trustee, but that decision is dicta in that the Court was not necessarily requested to consider these issues.  Since the issue on appeal was whether the Labuzans were asserting a § 362(k)(1) action that belonged to the bankruptcy estate the decision of the Court in this respect is of the most importance.  If a § 362(k)(1) cause of action was property of the estate, according to the 5th Circuits test established in Educators Trust, the action could only be brought by the trustee.  In Labuzan the Trustee had already brought such an action and the violator had settled that case with the trustee.

To the 5th Circuit, however, the reverse view of the Educators Trust test was the exact reason that § 362(k)(1) causes of action, recoveries and remedies do not belong to the bankruptcy estate.  As stated in Educators Trust, "If a cause of action belongs to the estate, then the trustee has exclusive standing to assert the claim".  That law is still good.  Therefore, since § 362(k) grants a "private cause of action" and a "private remedy" to someone other than the trustee, then by its very nature under the Educators Trust test the cause of action cannot be property of the bankruptcy estate under § 541.

The trustee or any creditor might have standing itself to assert a claim, for the same facts and the same event, for a willful violation of the stay under § 362(k) or § 105, but that standing is not exclusive.  This means, or course, that if the trustee brings a cause of action and prevails, that claim and remedy belongs to the estate.  If a creditor brings a separate cause of action and prevails, that claim and remedy belongs to that creditor and not the estate or the debtor.  If the debtor brings a separate cause of action and prevails, that claim and remedy belongs exclusively to the debtor and does not belong to the estate or the creditors.  Neither a debtor's claim or remedy, nor a creditor's claim or remedy belongs to the trustee.  Therefore, the recover or claim is not property of the bankruptcy estate.

Of course, as pointed out by the Court, a § 362(k)(1) action cannot be property of the estate under § 541 for the simple reason that a § 362(k)(1) cause of action could have never existed at the time of the filing of the bankruptcy.  But, the analysis of applicability under § 541 and the Educators Trust test is vitally important in Chapter 13 analysis.  This is because § 1306 includes as property of the bankruptcy estate in a Chapter 13 all property or claims, which arise post-petition, provided that the property or claim would have been property of the estate under § 541 if the claim had arisen pre-petition.  This is a fictional analysis that must be applied, but what § 1306 says is that "all property of the kind specified in [§ 541] that the debtor acquires after the commencement of the case but before the case is closed, dismissed or converted" constitutes property of the estate.  Therefore, if in the 5th Circuits § 541 analysis, an automatic stay violation under § 362(k)(1) does not constitute property of the estate under § 541, then it will not constitute property of the estate under § 1306.

The 5th Circuit went on to state that it is possible for the bankruptcy estate and a creditor to "own separate claims against a third party arising out of the same general series of events and broad course of conduct", and that these separate claims "are mutually exclusive".  And, that there is "nothing illogical or contradictory about saying that [a violator of the automatic stay] might have inflected direct injuries on [the debtor, a creditor and the bankruptcy estate]."

In short, if the debtor or creditor brings a separate cause of action under § 362(k)(1), then that cause of action is not property of the bankruptcy estate.  It does not belong to, nor is it owned by, the trustee or the bankruptcy estate.  It constitutes a "private cause of action" and a "private remedy" for the person or individual which might bring the cause of action.  If the trustee or the bankruptcy estate has been injured  separate and apart from these causes of action, the the trustee, on behalf of the estate, should bring its own separate cause of action against the violator of the stay.

Woman And Her Belongings Removed From Her Home After WAMU Mistakenly Auctioned

Nobody but nobody likes their mortgage servicing company.  The stories of bureaucratic SNAFUs, rude people who will not listen when told they are making a mistake, and complete arrogance that they can darn well do what they want leads often to some horrific mistakes.  This occurs both inside and outside bankruptcy.

NBC Miami reports of such an incident involving a Anna Ramirez when Washington Mutual (which is now part of Chase) auctioned off her $260,000.00 home for $87,000.00 and then, without any warning whatsoever, showed up with Miami-Dade police officers and removed her, her husband, her daughter, her grandchildren and tossed of their belongings from the house on the front yard.  The family was given just three hours to get themselves out of the house, and their belongings off the front lawn.

The problem with the auction and the eviction?

Anna Ramirez was not behind on her house payments, the house was not in foreclosure, the house was not for sale, there was no foreclosure letter, no entry and detainer notice, or nothing else to warn them.

The mortgage company obviously blames the Miami-Dade Clerk's office for the mistake, which was eventually reversed by a Miami-Dade judge who allowed the family to return to their home,  But, it is hard to see how the matter should have been placed with the Miami-Dade authorities by WAMU in the first place.

The Ramirez family had lived in their home for three years and only recently refinanced the home with the bank.

This situation actually occurs all of the time in a Chapter 13 context.  A foreclosure is posted, a bankruptcy is then filed, notice goes out, and whether notice is ignored, not received or some other mishap occurs, the foreclosure process does not stop.

Most of the time the mishap does not escalate to this level as only the foreclosure has to be reversed.  But, the situation is illustrative of fear that is associated when mortgage companies are allowed to run rampant irregardless of the bankruptcy filing.  Maybe the homeowners are not evicted as we have in the case at hand, in the long run, but the fear still exists.  This results in mental anguish.

And, it is also important to note that my firm has handled a number of stay violations in which, by the time the case is referred, the debtors have already been evicted and their belonging removed to the front yard.

Bankruptcy attorneys and debtors need to remember to always be vigilant, proactive and timely as to bankruptcy notice.  Maybe it does not stop the willful conduct, but it at least gives the debtor a cause of action and possibility of recovery for a willful violation of the stay when it does occur.

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.

5 Myths Of Bankruptcy

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

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.

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.

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