With foreclosure numbers in Tennessee cities on the rise, it should come as no surprise that desperate homeowners are being targeted by scammers. Usually the scammers pitch promises to stop a pending foreclosure using a "secret provision in the law" or an alleged special relationship with mortgage lenders.
In almost every case, the scammer asks for several hundred or several thousand dollars, then he prepares a two page Chapter 13 "emergency petition" in the homeowner’s name and files the petition in the local bankruptcy court. The scammer does not put his own name on the petition – instead he signs the homeowner’s name as if the homeowner filed the case.
Often the emergency filing will stop the foreclosure, although only temporarily. Under the bankruptcy law, a Chapter 13 plan and schedules must be filed within 15 days of the "emergency" filing. Since the homeowner did not intend to file bankruptcy in the first place, many of these cases are dismissed by the clerk’s office when no plan and schedules are filed.
Further, many of the emergency petitions are filed without proper documentation – no credit counseling certificate and no pay advices.
At best, the bewildered homeowner will realize what is going on and will retain counsel to either proceed with the Chapter 13 or to file a dismissal in court. More often than not, however, the homeowner will be afraid to take any action out of concern that the homeowner himself did something wrong. The wrongfully filed case will wind its way through the bankruptcy system until it is eventually dismissed and the homeowner will be left facing foreclosure again, but with less of a bankruptcy option because of the previous filing.
Recently a federal judge in Kansas denied bond to a foreclosure scammer named Issac Yass, who owned a company called Stopco that allegedly perpetrateda slightly different type of bankruptcy fraud in several States, including Tennessee. Investigators say that Yass operated by filing Chapter 13 petitions on behalf of fictitious persons who claimed to have a fractional interest in the properties in foreclosure. He then charged homeowners a monthly fee. Yass’ case is unique in that the alleged fraud was perpetrated on a grand scale – investigators contend that since 2006, Yass stopped foreclosures on over $50 million worth of properties.
At Clark and Washington, we have seen many cases of many kinds of foreclosure scams. Sometimes we can help pick up the pieces, and sometimes there is little or nothing we can do. If you are facing a foreclosure in Tennessee, we strongly recommend that you seek competant legal advice from a lawyer who is a member of the Tennessee bar. If a non-attorney foreclosure prevention company solicits your business, run the other way.
Filed under Bankruptcy in the news, Emergency petitions, Foreclosure by 
Our office recently received the following question from a reader of our blog:
I am now in a full-time Air Force Reserve, with 27 years total military service time. I will be discharged if the Air Force finds out about my financial problems. My wife and I are carrying over $200,000 in credit card debt . Our cash flow is negative $7,000 per month and our only remaining asset is around $60,000 stocks. What can we do?
Our firm’s answer: First, I think that you need to find an experienced and knowledgeable bankruptcy lawyer. I recently filed a Chapter 13 case for a military reserve officer who was in a similar mess. We structured the Chapter 13 as a direct pay, meaning that we did not set up a payroll deduction with the Air Force. That case is proceeding along nicely and I expect it to be confirmed next month.
While there is no guarantee that your commanding officer will not find out, Chapter 13 trustees do not regulalry contact employers. In my case, the military has not been made aware of my client’s filing. An experienced lawyer in the district where you would file can give you more specific advice.
You also need to find out if Chapter 13 is an option at all. It may not be, but you need to find out for certain to either eliminate the option or keep it available.
You also should ask whether there is any way to protect your stock. Every state has "exemption laws" that protect certain assets. You don’t say where you live so I can’t comment about what you might be able to protect, but it would be a shame to use up an asset that is fully or partially protected prior to filing a bankruptcy.
If you do nothing, at some point you are going to get sued and all bets are off. While bankruptcy is always a last resort, it can give you the power to eliminate or reduce debts and to cancel contracts.
Make sure to find a lawyer with specific experience in Chapter 13, because I think that is the type of bankruptcy you would most likely want to consider.
Best of luck to you.
Filed under Chapter 13, Common pre-bankruptcy mistakes, Pre-bankruptcy planning by
One of the most controversial topics arising from the BAPCPA changes ot the bankruptcy law has to do with the so-called "hanging paragraph" of Section 1325(a). Stated simply, Section 1325(a) does not clearly address what happens in a Chapter 13 if a debtor surrenders a vehicle back to a secured creditor if the vehicle is worth less than the outstanding claim.
Example: Tom has a 2005 Chevrolet worth $10,000. GMAC holds a lien against that vehicle totaling $14,000. Tom files Chapter 13 and provides in his plan that he elects to surrender the Chevrolet back to GMAC. What happens to the $4,000 "deficiency?"
Some federal circuit courts of appeal have held that the surrender of the vehicle wipes out all liability. Other appeals courts have ruled that upon surrender, any deficiency balance would become an unsecured claim payable in the Chapter 13.
The 6th Circuit Court of Appeals (its precedent governs cases filed in Tennessee) has issued a ruling on this matter in favor of creditors. In the case of AmeriCredit Financial Services v. Long, the 6th Circuit Court of Appeals has ruled that deficiency claims arising from a debtor’s surrender of a vehcile in a Chapter 13 survives the surrender and must be paid pursuant to the Chapter 13 plan.
You can read a copy of the AmeriCredit v. Long decision by clicking on the link. The decision is worth reading not only to understand the Court’s logic, but also to get a sense of the frustration that the appeals court has for the poorly worded provision of the law. While the 6th Circuit holding provides that the vehicle surrender does not wipe out the deficiency, the appeals court does not hold back in expressing its displeasure in issuing its decision.
In language highly unusual to circuit court opinions, 6th Circuit Judge Merritt writes "due to a glitch or a gap in a recent revision to the Bankruptcy Code intended to benefit creditors, the law is now silent on what happens to the remaining indebtedness in the surrender-of-the-car situation. The bankruptcy court below held that the congressional mistake in drafting the revision means that the remaining indebtedness is completely wiped out. We believe the gap should be filled and the Congressional mistake corrected. The law previously governing this situation should be restored until Congress can correct its mistake and fill in the gap."
Now, back to our example. For the time begin at least, if Tom surrenders his car in his Chapter 13, GMAC can file an unsecured claim in Tom’s case for $4,000. If Tom’s plan provides for a 100% payout to unsecured creditors, his plan will cost him around $80 more per month. Let’s hope that Congress will see fit to fix this problem and end the situation where a lender gets a vehicle back to resell and hundreds or thousands of dollars in windfall profit earned on the backs of struggling debtors.
Filed under Bankruptcy in the news, Chapter 13 by
Frequently, we meet with potential clients who have significant tax debt in addition to credit card, vehicle loan or mortgage debt. In some cases, the tax problem is the factor that led a person to call our office. In those cases where tax problems are the driving force behind the consultation, we have to consider whether the client is better off filing bankruptcy or pursuing a negotiated settlement with the IRS.
The IRS has a number of programs available to indivduals who have incurred significant tax liabilities. Two of the most common programs are the "installment agreement" program in which the taxpayer pays 100% of his delinquent tax over several years, and the "offer in compromise" program in which the taxpayer settles his account for less than 100 cents on the dollar.
Interestingly, Congress looked to these IRS programs when designing the means test elements of the BAPCPA changes to the bankruptcy laws. The budget expense categories used in means test calculations are derived in part from the approved expense categories that the IRS uses in both installment agreements and in offers in compromise.
Depsite what you may have heard, tax debt can be dealt with in a bankruptcy. Chapter 7 can discharge "stale" tax debt and Chapter 13 can be used to pay recent tax debt (called priority debt), secured tax debt (when a tax lien has been filed) and unsecured (stale) tax debt.
Some commentators argue that bankruptcy may be a better tool for dealing with tax debts than installment agreements or offers in compromise. Certainly the likelihood of obtaining a discharge is better than the odds of getting an offer in compromise accepted. In addition, bankruptcy allows you to deal with all of your debts – not just tax debts while under the protection of the bankruptcy court.
Clark and Washington can advise you how your tax debt would be treated in either a Chapter 7 or Chapter 13 bankruptcy. You can then compare the bankruptcy solution to the offer in compromise and/or installment agreement option and choose the remedy that offers the best benefits to you.
Filed under Bankruptcy and tax debt by
