Sonoma County Lawyer Blog

The National Association of Consumer Bankruptcy Attorneys (NACBA) prepared a report regarding the dischargeability of student loans in the bankruptcy court. I have summarized the report below, but click here to review the entire report .

According to the NACBA, Americans now owe more on student loans than on credit cards. The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans and exceeded $1 trillion for the first time last year. The reason: Students and workers seeking retraining are borrowing extraordinary amounts of money through federal and private loan programs to help cover the rising cost of college and training. In many cases, parents responsible for the student loans are in or near retirement years and facing repayment demands.

How big is the danger to the U.S. economy? "Evidence is mounting that student loans could be the next trouble spot for lenders," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs.

With rising debt comes increased risk, both to borrowers and to the economy in general. Even in the best of economic times when jobs are plentiful, young people with considerable debt burdens end up delaying life-cycle events such as buying a car, purchasing a home, getting married and having children. Piling up student loans in middle age is even more troublesome. Aside from the simple truth that there is less time to earn back the money, it also means facing retirement years still deeply in debt. And, parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline.

Continue reading "The Student Loan Debt Bomb: America's Next Mortgage Economic Crisis" »

The debtor and West Vernon Energy Corporation had been engaged in lengthy litigation. Prior to the debtor's bankruptcy filing, a jury awarded West Vernon a verdict of $178,207. The debtor's bankruptcy included a debt owed to "West Vernon Petroleum" at an address different than West Vernon's address.

Although it appeared that West Vernon's never received notice of the bankruptcy filing from the Clerk of the Bankruptcy Court, the company received actual notice of the filing from the debtor's attorney. This notice was received two months prior to the claims bar date. Despite this opportunity to file a claim before the deadline, West Vernon filed its claim several weeks after the deadline.

West Vernon then asked the court to have its claim deemed timely filed. The court denied the request, and disallowed the claim, stating that since Section 502(b)(9) was added to the Code, bankruptcy courts have almost uniformly ruled that proofs of claim that are untimely filed in a Chapter 13 case may not be deemed timely filed.
As such, the bankruptcy court denied an improperly scheduled creditor's request that its tardily filed claim be deemed timely filed.

If you are a creditor in a pending bankruptcy case there are very quick critical deadlines that must be followed to preserve your rights. The Law Offices of James V. Sansone is located in Santa Rosa, California and serves clients, debtors and creditors, with their bankruptcy needs throughout the North Bay area of California, including Sonoma County, Mendocino County, Lake County, Santa Rosa, Napa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport and Kelseyville.

Credit card delinquencies have reached a six-year low, according to the latest Credit Card Index from Fitch Ratings according to Consumer Bankruptcy News. The report also shows credit card charge-offs ticking up for the first time in the past several months.

Credit card accounts more than 60 days past due dropped to 2.15 percent in August, marking the 19th straight month of decline from a record high of 4.5%. Accounts on which consumers have missed one payment declined from 3.34% to 3.02%.

Credit card defaults increased from 6.33% to 6.41%. The Fitch Ratings Report said the increase was driven by two of the larger trusts--Citibank and Bank of America--posting higher losses. The report added that charge-off rates of 6% are considered normal.
Consumers repaid 21.14% of their credit card debt in August. That figure was less than the 21.76% paid in July, but was well above the index average of 16.3%.

Some may point to this as an indication that the economy is improving. I'm not convinced. Is it possible that credit card delinquencies have decreased because credit is harder to get? Can it be that credit is no longer considered an American citizen's right but a qualified privilege?

If you are suffering from an unhealthy amount of credit card debt the Law Offices of James V. Sansone can help. We are located in Santa Rosa, California and serve clients with their bankruptcy needs throughout the North Bay area of California, including Sonoma County, Mendocino County, Lake County, Santa Rosa, Napa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport and Kelseyville.

I recently wrote a blog post entitled "No Lien Stripping in Chapter 20 Cases In The Ninth Circuit - Santa Rosa Bankruptcy". In that post, I overstated the meaning of that case when I represented the issue is now settled in the 9th circuit. As the case I was discussing, In re: Ricardo and Jenny Victorio, was a bankruptcy district court case, it is not binding on other California Bankruptcy Courts, it is only persuasive.

In fact, another bankruptcy court in the 9th circuit has come up with a different opinion. In the case of Jose Manuel Garcia and Maria Garcia, Judge Stephen Johnson held that a debtor may lien strip in a Chapter 20 bankruptcy.

Judge Johnson held that the availability of a Chapter 13 Discharge is not a predicate to lien stripping in Chapter 13. In coming to this conclusion the judge relied, at least in part, on Judge Jellen of the Oakland Division analysis of this question. Judge Jellen analyzed this question of whether a debtor in what has been called a "no discharge" chapter 13, (aka Chapter 20), can confirm a plan which modifies the rights of secured creditors using sections 506(a) and 1325(a) of the Bankruptcy Code. Judge Jellen found that the power to strip off wholly unsecured junior liens on real property is not conditioned on a debtor's right to a discharge under section 1328(f), but on the debtor's compliance with chapter 13 plan and confirmation requirements under sections 1322 and 1325.

So what is the answer to this question? Can you lien strip in a Chapter 20 Bankruptcy filing? Right now, it depends on who you ask. This question is sure to make its way up to the United States Supreme Court in time.

The Law Offices of James V. Sansone is located in Santa Rosa, California and serves clients with their bankruptcy needs throughout the North Bay area of California, including Sonoma County, Mendocino County, Lake County, Santa Rosa, Napa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport and Kelseyville.

Under the current state of bankruptcy law, a debtor can't cram down the mortgage on the principal residence in a Chapter 13 Bankruptcy. However, a Principal Paydown (PPP) bill may soon pass thanks to the National Association of Consumer Bankruptcy Attorneys (NACBA). Thirty-two members of the California delegation in the U.S. House of Representatives sent a "call to action" to President Obama that read in relevant part:

"One promising possibility would be a temporary reduction in the interest rates of certain homeowners who file for Chapter 13 bankruptcy, so that the entirety of their monthly payments would go to paying down their principal balances for five years. Coordination with the bankruptcy process would make these reductions more likely to succeed than other types of loan modifications, while also limiting the program to those who truly need it and avoiding the administrative failures that have plagued many other initiatives. Such a plan could be implemented for mortgages held by Fannie Mae and Freddie Mac, as we believe that such a plan would be entirely consistent with FHFA's obligation to minimize taxpayer losses in the Enterprises. This plan could also be implemented as part of the nationwide settlement currently being negotiated by a group of state attorneys general."

Continue reading "Support Growing Among Policymakers For NACBA's Principal Paydown Plan" »

How do you know if you have violated the automatic stay in bankruptcy? A debtor filed for Chapter 13 relief, and then later received a mortgage loan statement from Chase Home Finance. The debtor and his wife sued Chase alleging violations of the automatic stay, the Pennsylvania Fair Trade Extension Uniformity Act, the Pennsylvania Unfair Trade and Consumer Protection Act, and the Fair Debt Collection Practices Act.

The bankruptcy court granted Chase's motion to dismiss. Because the debtor's wife was not a debtor, she was not protected by the automatic stay. The court said the statement did not state that the account was past due nor demand immediate payment but did include a disclaimer that did not violate the stay as to the debtor.

The court characterized the Statement as being informative rather than an attempt to collect a prepetition debt. The language of the Statement was unambiguous and makes it aware that the Debtor is protected by the automatic stay and the statement is for compliance and informational purposes only which does not constitute an attempt to collect debt.

The court did not accept that the automatic stay prohibits all communication between a creditor and a bankruptcy debtor. The court granted the motion regarding consumer protection violations based on the court's lack of subject matter jurisdiction. The cause of the action was due to the debtor's property rather than the bankruptcy.

The Law Offices of James V. Sansone is located in Santa Rosa, California and serves clients, debtors and creditors, with their bankruptcy needs throughout the North Bay area of California, including Sonoma County, Mendocino County, Lake County, Santa Rosa, Napa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport and Kelseyville.

A wedding ring, college degree and a well-paying job: the American dream or a recipe for bankruptcy? Some of the factors often associated with financial success are increasingly becoming correlated with personal bankruptcy filings, a study released Tuesday by the Institute for Financial Literacy found, according to Bankruptcy Beat. The study found that from 2006 to 2010, bankruptcy filings increased among college graduates and those earning $60,000 a year or more.

What's more, last year, 64% of bankruptcy filers surveyed were married a number that also increased from five years ago.

Why is this you ask? I think the answer is simple. The more we make the more we spend.

Continue reading "Marriage, College, And A Job Won't Ward Off Bankruptcy - Santa Rosa Bankruptcy " »

The issue of whether or not a debtor can strip a lien in a "Chapter 20" bankruptcy is split throughout the United States. However, the issue was just settled in our circuit.

In re Ricardo and Jenny Victorio, the bankruptcy court sustained the trustee's objection to confirmation of the debtors'' plan, holding that debtors in a Chapter 20 case cannot obtain a permanent avoidance of a wholly unsecured junior lien on their principal residence unless they pay the clam amount in full, or obtain a discharge.

Continue reading "No Lien Stripping in Chapter 20 Cases In The Ninth Circuit - Santa Rosa Bankruptcy " »

A Pennsylvania couple was convicted in federal court of fraudulently trying to give new hope to homeowners facing foreclosure. Edward and Jacqueline McCusker face up to 240 years in prison for their involvement in what US Attorney Zane David Memeger described as a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent mortgage loans.

The McCuskers operated Axxium Mortgage Inc., along with co-defendants John Bariana, Jeffrey Bennett and Stephen Doherty, owners of the law firm Bennett & Dohnerty.

The defendants targeted financially distressed homeowners facing foreclosure, falsely promising to help them save their homes. They said they would find investors, but what they did was arrange for a straw purchaser to obtain a fraudulent mortgage and then transfer title of the homeowner's residence to the straw purchaser.

Continue reading "If It Sounds Too Good To Be True, It Is: Couple Convicted of Foreclosure Rescue Fraud" »

Well, that depends on who you ask. In the case of Julianne Arnoux (Case Number: 09-04778-FLX), the United States Bankruptcy Court for the Eastern District of Washington held that income, within the 6 month look back period had to be earned as well as derived.

In Arnoux, supra, the trustee filed a motion and asked the Court to declare that the income listed on the debtor's Means Test was incorrect and to order her to enter a different amount, which would have made her an above median income debtor. The issue was whether the debtor had to include her final pay period in the income listed. The debtor argued that the final pay period was excluded because she did not actually receive that income during the applicable six month period. The trustee argued that the income was derived or earned during the statutory period and therefore had to be included.

Continue reading "Does Current Monthly Income Include Income Received But Not Derived Within The 6 Month Look Back Period?" »

In Pennsylvania, MERS filed a motion for relief from the automatic stay seeking permission to resume foreclosure proceedings against the debtor's residence, purportedly acting on behalf of its principal, to enforce the mortgage on the debtor's property. The debtor asserted that MERS had not established that it had the legal authority to enforce the mortgage and therefore, it lacked standing, or it was not a "party in interest" or it was not the "real party in interest." The court held that, on the evidence presented, MERS had not established that it was a party in interest entitled to seek relief from the automatic stay in order to prosecute a foreclosure action against the property. MERS had not presented sufficient evidence to permit a finding that it was either: (1) the holder of the mortgage, with the concomitant right to enforce it under state law or (2) an agent authorized by the holder of the mortgage to initiate court proceedings to enforce the mortgage on the holder's behalf.

Stay relief is available to a party in interest. To enforce a creditor's rights under a mortgage, courts have recognized that to have the "legally protected interest" that makes a party a "party in interest," the movant must be the party that has authority to enforce the mortgage under applicable nonbankruptcy law.

Continue reading "MERS Relief From Stay Denied Since It Had Not Established Legal Authority To Enforce Mortgage - Santa Rosa Bankruptcy" »

In the case at bar, the debtor acted as real estate broker for a purchaser in a transaction that filed to close. The purchaser sued the debtor in state court. The jury awarded the purchaser $356,000 in damages, finding, inter alia, the debtor breached her fiduciary duty. Subsequent to the judgment, the debtor filed a voluntary Chapter 7 bankruptcy petition. In response, the judgment creditor filed a complaint in bankruptcy court to enforce its state court judgment as non-dischargeable as a debt for fraud while acting in a fiduciary capacity.

The 9th Circuit Court of Appeals, In re Cantrell, held that a California real estate licensee does not meet the fiduciary capacity requirement of Section 523(a)(4) solely based on her status as a real estate licensee because general fiduciary obligations are not sufficient to fulfill the fiduciary capacity requirement in the absence of a statutory, express, or technical trust. In this case, since the debtor never held any property in trust for the purchaser, the court found that the debtor could not have acted in a "fiduciary capacity" within the meaning of that terms under Section 523(a)(4).

If you are a creditor and you believe a debt your are owed may be non-dischargeable you should consult with an experienced Santa Rosa bankruptcy attorney. Only an experienced bankruptcy lawyer can properly assess your case and inform you of all your options under the United States Bankruptcy Code.

The Law Offices of James V. Sansone is located in Santa Rosa, California and helps creditors protect their rights throughout Sonoma County, Mendocino County, and Lake County, including Santa Rosa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport, and Kelseyville.

There is no official Chapter 20 bankruptcy filing, but a "Chapter 20" filing is idiomatic phrase that refers to the filing a Chapter 13 bankruptcy after having received a previous Chapter 7 bankruptcy discharge. This type of filing has been significantly limited after the 2005 bankruptcy reform act, but "Chapter 20" can still provide vital relief in precise unique situations.

In the 4th Circuit, In re: Bryan Matthew Davis, Carla Denise Bracey-Davis held that the ability to avid wholly unsecured liens is not dependent on receiving a discharge. In Davis, the debtors declared Chapter 13 bankruptcy 12 months after they received a Chapter 7 discharge, and they asked the court to avoid a junior lien a bank held on their residence because their residence was worth less than the amount of senior liens.

While admitting that its lien was wholly unsecured, the bank opposed the debtors' motion to avoid the lien, claiming that the debtors could not avoid the lien because they were ineligible to receive a discharge of their debts in a Chapter 13 bankruptcy case based on their previous Chapter7 filing. The court rejected making a per se rule which would make lien stripping in a Chapter 20 contingent on receiving a discharge, which the court believed was consistent with Section 506(d), which requires debtors to complete the lien stripping process prior to confirmation. Further, because there was no evidence that the debtors declared Chapter 13 bankruptcy in bad faith or filed their Chapter 13 bankruptcy plan in bad faith, the court confirmed the debtors' plan and held that the lien could be avoided.

Continue reading "Santa Rosa Bankruptcy Debtors May Be Able to Avoid Wholly Unsecured Liens in Chapter 20 Filing" »

Some debtors may be barred from filing a bankruptcy case altogether for some period of time. If a client was the debtor in a bankruptcy dismissed in the previous 180 days, and that dismissal was (1) for willful failure to abide by court orders or to appear in court in proper prosecution of the case or (2) a voluntary dismissal following a request for relief from the automatic stay, then that client is not eligible to be a debtor until 180 days after the dismissal.

In other cases, the automatic stay might not apply by reason of a prior case under the Bankruptcy Code or a court order in a prior case. The automatic stay is not effective upon filing or limited in a case filed by a debtor who has had a prior case or cases dismissed within the year. Also excepted from the stay are certain actions to enforce a security interest in real property in connection with serial filings. If the primary purpose for filing is to obtain the benefits of the automatic stay and one of these exceptions applies, debtors need to take affirmative action to have the stay imposed or consider other alternatives to bankruptcy.

Lastly, some clients may stand to gain little from a chapter 7 bankruptcy because they cannot receive a discharge due to a prior bankruptcy. However, a chapter 13 case may still be available to provide significant relief. Even though a chapter 13 discharge is not available if the debtor received a chapter 7 discharge in a case filed during the preceding four years, there may be occasions in which a debtor will find it advantageous to file a chapter 13 case even if a discharge is not available. For example, a debtor may seek to cure a default through a plan or to obtain protection of the bankruptcy court and the automatic stay while paying debts in an orderly fashion through a plan.

The general rules concerning how much time you must wait before you may file a second bankruptcy are as follows:

Continue reading "I Filed For Chapter 7 Bankruptcy In Santa Rosa Before, When Can I File For Bankruptcy Again?" »

Abandonment constitutes a divesture of all of the estate's interests in the property. Abandoned property reverts back to the debtor, and the debtor's rights to the property are treated as if no bankruptcy petition was filed.

The bankruptcy trustee may "abandon" property if it is not needed by the estate and its retention serves no purpose in effectuating the goals of the Bankruptcy Code. Property may be abandoned if it is burdensome to the estate or of inconsequential value and benefit to the estate. Abandonment can occur only after notice and a hearing, which assures that interested parties have an opportunity to object to a proposed abandonment.

Scheduled property that has not been administered by the bankruptcy trustee is automatically abandoned by the close of the case. However, any unscheduled property, since it was unable to be administered, may remain property of the estate.

Typically, abandonment of property of the estate pursuant to section 554 is initiated by the trustee, although other parties may move to have the trustee abandon property.

The law does not specify the time in which the trustee must act to abandon. The trustee must ascertain the property's fair market value and the amount and validity of the outstanding liens against the property. Under prior case law, however, the trustee had a "reasonable" time to consider retaining or abandoning an encumbered or otherwise not clearly beneficial asset. The term "reasonable" implies that the period of deliberation is adaptable to the circumstances. The trustee may wait until he or she is able to ascertain whether there is any profit to be expected for the estate.

Continue reading "An Interested Party Has A Right to Request Abandonment of Property of the Estate In A Santa Rosa Bankruptcy " »