Occupy Movement Focuses on Foreclosures

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The Occupy movement has recently focused their attention from Wall Street to the thousands of homes in foreclosure across the United States.  Occupy protesters around the country are “re-occupying” vacant foreclosed homes, or homes that are at risk of being foreclosed by the banks.

The protesters are voicing their frustration with the banks they claim are responsible for the current foreclosure crisis.  The protestors point out the lack of regulations for loan modifications, the variable interest rates, and other profit tools and predatory lending practices some banks have been known to employ.

The Occupy Foreclosures movement has had some direct success at preventing banks takeover of homes.  Reportedly, the protester’s tactics in conjunction with the homeowners’ efforts have prevented the eviction of homeowners, prevented the auction of some homes, and delayed many foreclosures.  In some cases, banks have agreed to open or re-open loan modification discussions with homeowners on the verge of foreclosure.

It is too early to determine the impact this new phase of the Occupy movement will have on the foreclosure crisis.  In the meantime, some small victories have energized the movement and their visibility and strength keeps growing. 

 “—Craig I. Kelley, West Palm Beach Bankruptcy Attorney of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. You can get more information about bankruptcy from an experienced bankruptcy attorney in West Palm Beach by contacting Craig I. Kelley at 561-491-1200 or by emailing info@kelleylawoffice.com.”

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Banks Halting Foreclosures During the Holiday Season

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Several big lenders, including Wells Fargo Bank, J.P. Morgan Chase Bank, Bank of America and others are suspending their foreclosures and evictions during the holiday season.  Although the legal and administrative foreclosure proceeding will continue to move forward, these banks are implementing policies to avoid the scheduling of hearings on foreclosures or the execution of evictions and lockouts during the holidays.

Freddie Mac and Fannie Mae have also announced they will suspend evictions involving residential properties.

Although a small, symbolic gesture to struggling homeowners, the temporary moratorium will benefit many families by preventing their displacement during the holiday season.  Banks are expected to continue business as usual after January 2, 2012.

—Craig I. Kelley, West Palm Beach Bankruptcy Attorney of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. You can get more information about bankruptcy from an experienced bankruptcy attorney in West Palm Beach by contacting Craig I. Kelley at 561-491-1200 or by emailing info@kelleylawoffice.com.”

Third-Party Investors Buying Your Property in Bankruptcy

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A new trend has emerged in the Bankruptcy process in Florida.  Third party investors are increasingly approaching Chapter 7 trustees and offering to buy the bankruptcy estate’s interest in the debtors’ real property for a small amount of money.  The investor who buys the property, typically for a few thousand dollars, acquires title to the property, rents it out, and delays the foreclosure process while making profit from the rentals.

In a Chapter 7 bankruptcy procedure, a trustee takes over the assets of the debtor’s estate, liquidates them, subject to any applicable exemptions, and then distributes the proceeds to the creditors.  Generally, trustees would abandon a property of the estate that is secured by a mortgage lien in excess of the value.  The recent trend to sell the estate’s interest in the property essentially curtails any hope the debtors may have to pursue a loan modification and to reach any arrangement with the lender to prevent foreclosure of their property. 

Some creditor’s attorneys are concerned this practice will cause delays in the foreclosure process, and increase litigations costs.  Creditor attorneys are also alarmed that in some instances these third-party investors are corporate entities affiliated with foreclosure defense firms.

Obviously, this new trend will not affect debtors who claim the homestead exemption on their property, which will allow them to keep the property after the bankruptcy.

Craig I. Kelley, West Palm Beach Bankruptcy Attorney of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. You can get more information about bankruptcy from an experienced bankruptcy attorney in West Palm Beach by contacting Craig I. Kelley at 561-491-1200 or by emailing info@kelleylawoffice.com.   For more information log on to www.kelleylawoffice.com.

Major Changes in New Proof of Claim Form

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On December 1, 2011, a new proof of claim (“POC”) requirement proposed by the Bankruptcy Rules Advisory Committee, and established by the U.S. Supreme Court takes effect.  This new form is different from the previous POC form in several aspects.  Some of the more salient changes are the following:

  • Section 3b has been added to establish a uniform claim identifier to facilitate distribution and posting of payments by Chapter 13 trustees.
  • Section 4 now requires that secured-claim holders disclose the annual interest rate in effect at the time a bankruptcy case is filed. Check boxes have been added to this section to further indicate whether the interest rate is fixed or variable.
  • Section 7 was revised to clarify that creditors must attach documentation supporting their claim or evidencing perfection of a security interest. The form also includes language that reminds the creditor of the need to redact any documents attached to the POC. 
  • Section 8, the date and signature box on the POC form, was revised to include a certification that the information submitted on the form meets the requirements of Bankruptcy Rule 9011(b), which requires that the claim be “true and correct to the best of the signer’s knowledge, information and reasonable belief.”  The POC signer will now have to declare, under penalty of perjury, that the information provided in the POC is correct to the best of the signer’s knowledge.  The effect of this new section is that now all POCs will require a person to review the information for accuracy and sign off on that assertion of accuracy.

In addition to changes to the actual POC form, the POC changes include the creation of three new attachments required from certain mortgage creditors:

  • Mortgage Attachment Form – Attachment A.  This new form is now required to be completed and attached to the proof of claim secured by the debtor’s principal residence. 
  • Notice of Mortgage Payment Change – Supplement 1.  This new form requires the holder of a secured claim on the debtor’s principal place residence to notify any changes in the amount of the mortgage payments, at least 21 days before the change, and to indicate the basis for the change, and the date when the change will take effect.  
  • Notice of Post-petition Mortgage Fees, Expenses, and Charges – Supplement 2.  This new form requires the holder of a security interest in the debtor’s principal residence to file a notice of all post-petition fees, expenses, and charges within 180 days after they are incurred. 

The new POC form is designed to prevent the filing of unsubstantiated claims.  All these new forms require that the signer declare under penalty of perjury that the information provided is true and correct.  The new changes are an obvious attempt to increase the oversight on creditors, especially mortgage lenders, in the wake of the several complaints on their handling of defaulted mortgages.

Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach State College and lectures nationally on the topics of Bankruptcy and Foreclosure. His law firm is located in West Palm Beach and he can be reached at 561-491-1200 or at info@kelleylawoffice.com. For more information log on to www.kelleylawoffice.com.

Rebuilding Your Credit After Bankruptcy

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One of the main concerns when considering filing for bankruptcy is the effect that bankruptcy may have on their credit status, and for how long.  Some people incorrectly assume that their credit will remain adversely affected seven or even ten years.  This is simply not true.  Most people can significantly improve their credit within two years after their bankruptcy, if they follow some simple steps. 

Here are a few tips to help you improve your credit following your bankruptcy discharge:

  • Maintain existing credit.  It is extremely important to maintain existing credit in good status.  Make all car payments or mortgage payments on time.  Pay any new credit payments well before the due date.

 

  • Pay all your bills on time. Delinquent items on your credit report after a bankruptcy filing will severely hurt your credit score.

 

  • Try to apply or obtain credit.  After bankruptcy, you may have an aversion to credit purchases and credit cards. The reality is that you will most likely eventually need credit for certain purchases, like a car, a house, etc., or for even renting an apartment.  If you do not use your credit after your bankruptcy, then the last entry on your credit report will be your bankruptcy. To improve your credit report, you need to have and use your credit wisely.

 

  • Do not, however, be so eager to rebuild your credit that you incur in some bad debt.  Avoid high fee, low credit limit credit cards.  Low credit limits will make it more difficult for you to keep an adequate balance and available credit ratio. Shop for the right credit card. Also, you should keep in mind that declined credit applications can negatively affect your credit score.  And do not get multiple credit cards.  One or two will suffice.

 

  • Understand and monitor your credit report, and clean it up.  You are entitled to one free credit report per year.  Make sure that your discharged debt is not listed as open or delinquent on your credit report.  Objections to your credit report are easy to process with the credit bureaus.

 

  • Beware of credit repair scams.  You may not only lose the money you pay these scammers, but in some instances you may be subject to fines or to imprisonment.

A bankruptcy discharge combined with some strategic credit building will improve your credit dramatically. Speak with your bankruptcy attorney for more information about the effect bankruptcy can have on your credit and about what you can do to improve your credit after your bankruptcy.

Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach State College and lectures nationally on the topics of Bankruptcy and Foreclosure. His law firm is located in West Palm Beach and he can be reached at 561-491-1200 or at info@kelleylawoffice.com. For more information log on to www.kelleylawoffice.com.

 

New Foreclosure Affidavit Controversy in Florida

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Lenders or mortgage holders are required to submit an affidavit in support of their motion for summary judgment, generally called an “Affidavit of Amount Due” or “Affidavit of Indebtedness”.  This affidavit lays out certain relevant information about the debtor’s mortgage debt.

In the fall of 2010, deficiencies in the production, execution, and review of affidavits and other legal documents related to the mortgage foreclosures gave way to the “robo-signing” controversy that has not quite been resolved to this day. 

In this context, the recent case of Glarum v. Lasalle Bank, N.A., 4D10-1372 (Fla. 4th DCA, September 7, 2011) may complicate banks’ efforts to foreclose in Florida.  According to the court’s ruling, it is not enough for the person signing and preparing the affidavit to obtain the information from the lender’s computer system.  The affiant must be able to verify that the computerized entries were correct at the time they were made. In Glarum, The affidavit was found to be inadmissible hearsay as the affiant had no knowledge of how the data was produced and was not competent to authenticate the data.  An important fact in this case is that the person signing the affidavit worked for a loan servicing agency and had admitted in discovery that he did not have personal knowledge of all the facts in the affidavit.

LaSalle Bank, N.A. has already filed a motion for rehearing asking Florida’s Fourth District Court of Appeal to clarify its decision.  LaSalle Bank, N.A. believes that the ruling creates confusion, as some now believe that only the bank employee who personally entered the computerized information into a bank’s computer system may prepare and sign the affidavit of amount due.  Such an interpretation would effectively preclude many foreclosures as the person entering the data may no longer be an employee of the foreclosing bank.

Although the events in Glarum do not quite rise to “robo-signing” proportions, it is one more tool in the foreclosure defense arsenal that is sure raise some waves and further slow foreclosure process in Florida.

 Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach State College and lectures nationally on the topics of Bankruptcy and Foreclosure. His law firm is located in West Palm Beach and he can be reached at 561-491-1200 or at info@kelleylawoffice.com. For more information log on to www.kelleylawoffice.com.

Florida Legislature Explores Non Judicial Foreclosure Option

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Florida is currently one of the 26 states to have strict judicial foreclosure proceedings, which means that the banks or lenders are required to seek foreclosure via formal legal process that involves a lawsuit and an official court order approving the foreclosure.  Florida Governor, Rick Scott and some leaders of the Florida Legislature seek to change the foreclosure process in Florida from a judicial process to a non-judicial process. Other proposals involve diverting uncontested foreclosure into a non-judicial process, and allowing the contested foreclosure to remain in the judicial system.

It currently takes about two years on average for a foreclosure action to be completed from start to finish.  Proponents of the non-judicial system argue that speeding up the foreclosure process will allow banks to increase lending to homeowners and that will help the market recover. Others argue, however, that a non-judicial system would reward lenders at the expense of the homeowners, and would remove necessary oversight in the foreclosure process.  Another concern is the effect that the elimination of the foreclosure fee revenue would have in the Florida court system.

A similar bill to change Florida to a non-judicial foreclosure was previously introduced in the Florida Legislature and failed. 

Craig Kelley

Craig Kelley

—Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. His office is located in West Palm Beach and he can be reached at 561-491-1200 or info@kelleylawoffice.com. Log on to http://www.kelleylawoffice.com for more information.

Bankruptcy and Student Loans

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Once considered “good debt”, in the same category as mortgages, student loans are increasingly becoming a serious problem.

Last year, student loan debt surpassed credit card debt and is expected to soon increase beyond 1 trillion dollars.  This debt increase is more astounding when considering that in the year 2000, student loan debt was less than $200 billion.  The effects of insurmountable student loan debt, compounded by the lack of available jobs or low salaries, have tremendous implications for the current generation of students and graduates. 

In 2009, the Obama administration introduced a program that limits the monthly payment for eligible federal student loan borrowers to fifteen percent of their discretionary income, and forgives the debt after 25 years.  In October of 2011, the Obama administration introduced a new program to further help alleviate the burden of federal loans.  This program would limit the student loan payment of eligible participants to ten percent of their discretionary income and will forgive the debt after 20 years of repayment.  These initiatives would only help the eligible participants and will do nothing to ease the private student loan burden.

A good number of student loan debtors will not receive adequate relief from their student loan debt unless they can discharge at least a portion of it in bankruptcy.

Unlike credit card debts, and undersecured mortgages, student loans are not dischargeable in bankruptcy, pursuant to section 11 U.S.C. § 523(a)(8) of the U.S. Bankruptcy Code.  Before the 2005 amendments to the Bankruptcy laws, only government issued or guaranteed student loans were non-dischargeable.  The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) made all students loans, federal and private, non-dischargeable, unless the debtor can demonstrate undue hardship.  This past summer, the Fairness for Struggling Students Act of 2011 was introduced in the U.S. Senate, and the Private Student Loan Bankruptcy Fairness Act of 2011 was introduced in the U.S. House of Representatives.  Both bills seek to make private student loans dischargeable again.  No major action has been taken on either bill since their introduction early this past summer.

For their part, Florida courts continue their move towards more liberal treatment of student loans.  In re Abaunza, 452 B.R. 866 (Bankr. S.D. Fla. 2011), the U.S. Bankruptcy Court for the Southern District of Florida recently held that an above-median income debtor who commits all of his projected disposable income to pay his unsecured creditors in his Chapter 13 Plan, may use excess discretionary income to pay their student loans.  In this case the Court noted that the debtors were able to pay the student loan debt under a separate classification because the debtor’s actual expenses were less than their expenses as calculated under the means test for the purpose of obtaining the debtor’s projected disposable income.  As a result, the debtors ended up with an excess discretionary income that they decided to use to pay their non-dischargeable student loans.  The court overruled the trustee’s objection holding that the separate classification did not constitute unfair discrimination and expressing that what the debtors do with their discretionary income is the debtors’ prerogative.

Although student loans are currently near impossible to discharge in bankruptcy, there is some hope that the government make carve out some relief for the nation’s young professionals.

Craig Kelley

Craig Kelley

—Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. His office is located in West Palm Beach and he can be reached at 561-491-1200 or at info@kelleylawoffice.com. Log on to http://www.kelleylawoffice.com for more information.

Creditors’ Rights & Collection of Money Due

CollectionsBy Craig I. Kelley, Esq

If an individual or business owes you money and is delinquent on payments owed to you, then you have many options which depend upon the nature of the debt. All of these options involve the filing of some form of a lawsuit or a claim in a bankruptcy. If the debt is unsecured, you may file a lawsuit to collect upon the debt. If the debt is secured by property, then you can forose on your secured interest in the collateral, with the proceeds being applied to the debt. If the debt ultimately proves to be undersecured,  meaning you are owed more than the value of the collateral, then you can seek a judgment for the deficiency balance .

Once you receive a judgment in your favor, you may need to take additional action in order to collect upon the judgment, such as a garnishment, levy and execution by the sheriff, and/or possibly discovery in aid of execution.

If the individual or business that owes you money files for bankruptcy, the remedies available to you are governed by the Bankruptcy Code. As soon as the debtor files for bankruptcy protection, an automatic stay goes into effect, which mandates that you must cease all collection activity outside of the bankruptcy court. The automatic stay protects the debtor and his property during the pendency of the bankruptcy from most forms of collection activity. In bankruptcy, your rights as a creditor are dependent upon a priority scheme contained within the Bankruptcy Code.

If you are a secured creditor and the debtor is delinquent at the time of filing for bankruptcy, you have the right to seek relief from the automatic stay to pursue actions such as repossession and/or foreclosure outside bankruptcy if the debtor does not provide adequate protection payments (usually at least interest payments). If the debtor files for Chapter 7 bankruptcy, your rights as a creditor depend upon whether the case is a “no-asset” Chapter 7 case or an “asset” Chapter 7 case. A Chapter 7 bankruptcy is sometimes called a “liquidation” bankruptcy because thebankruptcy trustee will liquidate (sell) the debtor’s non exempt assets and distribute the proceeds to creditors. In order to receive a pro-rata distribution, you must file a proof of claim by the deadline imposed by the bankruptcy court. In a “no-asset” case, there are no non-exempt assets that can be liquidated for the benefit of creditors.

In a Chapter 11 or 13, the debtor proposes a plan of repayment to creditors. If the debtor’s plan improperly treats your claim, you have various objections available to you that must be raised in writing. In addition, in order to preserve your rights, you must file a proof of claim within the deadline imposed by the court. If the debtor has engaged in any type of fraudulent, criminal, or intentionally malicious activity, then you may have the right to seek to have your claim determined to be non-dischargeable, which means that the obligation would survive the bankruptcy proceeding. In addition, you may seek to have the debtor enter into a
reaffirmation agreement, which is a court approved contract through which a debtor agrees that an obligation will survive the bankruptcy proceeding.

These issues are complex in nature and require review and assessment by experienced collections and/or bankruptcy attorneys who can help you understand the remedies available to you.

Craig Kelley

Craig I. Kelley, ESQ.

—Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. His office is located in West Palm Beach and he can be reached at 561-491-1200 or craig@kelleylawoffice.com. Log on to http://www.kelleylawoffice.com for more information.

Simply the Best: January/February 2009