From the US Trustee Program press office:

The U.S. Trustee Program (USTP or Program) announced today that it has entered into a settlement agreement with Capital One Bank (USA) N.A. (Capital One) that, if approved by the United States Bankruptcy Court for the District of Massachusetts, will resolve USTP allegations that Capital One sought to collect debts that had been discharged in prior bankruptcy cases.

Under the settlement, an independent auditor will examine approximately 650,000 Capital One customer accounts to ensure that any monies improperly received by Capital One have been or are immediately returned to debtors or their bankruptcy estates. The auditor will also approve reimbursement to debtors and trustees for actual out-of-pocket costs and expenses, including attorneys’ fees incurred to contest erroneous claims. Capital One filed approximately 5,600 proofs of claim seeking payment of debts that had been discharged in prior bankruptcy cases.

Though the agreement is binding on Capital One and offices of the United States Trustee across the country, it does not bind or prejudice the rights and claims of third parties.

For more information, go here.

Posted by Bill McLeod at 4:04 PM | Permalink | Comments (0) | TrackBacks (0)

As the Senate begins to vote on the bailout, and as Washington and even some local leadership continues its campaign of fear mongering support, here's some food for thought, courtesy of the good folks over at Calculated Risk:

As of Sept 30th, the national debt was $10,024,724,896,912.49.

What's another $700,000,000,000?

Posted by Bill McLeod at 7:57 PM | Permalink | Comments (0) | TrackBacks (0)

In bankruptcy, good faith is a lot like good art. It is difficult to describe, but you know it when you see it. The same can be said with bad faith. A recent chapter 13 case out of the 9th Circuit illustrates that point.

The debtor filed a chapter 13 case in August 2004. Since chapter 13 is a voluntary proceeding, a debtor has the option of voluntarily dismissing their case at any time. Also, in chapter 13, the debtor is typically in control of assets of the estate. In this debtor’s case, one of the assets was claim that was being arbitrated against an LLC.

The debtor’s plan was met with objections from the trustee as well as creditors. The debtor assured the court that he would use funds obtained in the arbitration to fund the plan. In July 2005, the debtor was awarded approximately $185,000 in the arbitration. That month, the court ordered him to pay that sum to the chapter 13 trustee.

In August, the debtor’s attorney sought permission to withdraw from the case citing a breakdown in the attorney client relationship. At the hearing, the court learned that the debtor had not complied with the prior order from the court by turning the money over to the trustee. The court gave the debtor one hour to deliver the money, or the court was going to convert the case to chapter 7. The debtor did not deliver the money, and on that same day, the debtor filed a “Notice of Dismissal.”

Continue reading "Good Faith and Bad Art" »

Posted by Bill McLeod at 1:09 PM | Permalink | Comments (0) | TrackBacks (0)

Are you hoping that your mortgage company will "work with you" and modify your loan? Good luck.

On August 12, there was a Free Foreclosure Prevention Workshop at Gillette Stadium. I have heard a number of different perspectives from people who attended. The one thing I am consistently hearing: mortgages are not getting modified, at least in not any meaningful way to enable people to keep their home.

I then read this interesting news release from Massachusetts Attorney General Martha Coakley outlining her recent testimony to the US House Financial Services Committee confirming what I am already hearing:

The Attorney General’s written testimony outlines the office’s findings with regard to the implementation of loan modifications in Massachusetts. Specifically, the testimony notes that:

-Loan modifications are not being achieved in significant numbers. When compared to the number of foreclosures in process, far too few borrowers are able to restructure their loans to generate a sustainable loan; and

-When so-called loan modifications do occur, they often do not result in a sustainable loan. Lenders and servicers routinely offer and complete so-called loan modifications that increase monthly payments and increase overall debt. They do not meaningfully avoid foreclosure. At best, they temporarily delay the inevitable delinquency and eventual foreclosure.

You can read the entire release, and get access to Attorney General's testimony here.

Posted by Bill McLeod at 11:51 AM | Permalink | Comments (0) | TrackBacks (0)

When someone files bankruptcy, an estate is created. The property in the estate is defined in the Code, and it is the property in the estate that is used to pay creditors. But how do you value property of the estate if the nature of the interest held in the real estate changes after the petition date? On Friday, the 7th Circuit Court of Appeals answered that question.

In January 2004, the debtors filed for chapter 13 relief and sought to avoid a judgment lien (valued at about $8,200) on their residence. The lien arose from a deficiency judgment following an automobile repossession. Debtor’s estimated their interest in the residence to be valued at $65,000, subject to a mortgage of about $58,000. Their interest in the residence reflected an encumbrance of a life estate interest held by a relative. Under Indiana law, the homestead exemption at the time was $15,000 ($7,500 per debtor).

Two years later, after the plan was confirmed, the debtor’s filed a motion seeking to avoid the lien on the property. A month prior to the filing of the motion, the mother released her life estate interest by a quit claim deed, thus conveying the property to the debtors a fee simple interest. The value of that interest was determined to be $95,000. However, when the debtors sought to avoid the lien on the property, they used the prior valuation of $65,000.

The creditor argued that the valuation that should be used is the new one of $95,000. After an unsuccessful appeal to the District Court, the Court of Appeals was called upon to answer one question: for the purposes of avoiding a lien under Section 522, when should the debtors’ interest in the real estate be determined?

The Court looked to Section 1306 and what constitutes property of the estate:

Property of the estate includes, in addition to the property specified in section 541…. all property…that the debtor acquires after the commencement of the case but before the case is closed.

Section 541(a)(1) identifies property in the estate as including “all legal or equitable interests of the debtor in property at the commencement of the case.” And Section 541(a)(7) lists property of the estate as including “[a]ny interest in property that the estate acquires after the commencement of the case.” Based on that, the Court held that the value of the real estate should be determined at the fair market value at the time it was recorded in December 2005. The lien could not be avoided.

To get access to the opinion, and to hear the oral arguments of the case, Click Here.

Posted by Bill McLeod at 12:50 PM | Permalink | Comments (0) | TrackBacks (0)

Over the last several months, I’ve blogged about issues people should consider if they think bankruptcy is on the horizon. I called it “Storm Preparation” because I have sensed for some time now that financially, things were going to get worse, and I wanted readers to think about issues ahead of time to avoid problems down the road. Just like a hurricane, it’s best to prepare for any storm. And typically, you don’t start boarding up the windows when it starts raining.

The past few days have confirmed that financial thunder clouds are within ear-shot distance. There’s Lehman Brothers, Merril Lynch and now AIG. Will there be more failures and bailouts? I’m willing to bet yes. Will this storm end any time soon? I honestly do not think so. How will any of this affect your job and your family? I have no idea. It may take some time for the ripples emanating from Wall Street to touch the farthest corners of the land. But with all of that said, we can only prepare so much.

I will not completely stop blogging Storm Preparation, but it will no longer be weekly. When issues pop up that I think readers need to know about, you will read about them here. You can find past Storm Preparation articles in the archives under Category.

But for now, keep reading and batten down the hatches. Storm’s a’comin.

Posted by Bill McLeod at 12:13 PM | Permalink | Comments (0) | TrackBacks (0)

So yesterday I received this letter from WaMu:

Dear William McLoud [sic]:

Our customer (my client) informed us of his/her intent to file (chapter 7) bankruptcy. We realize this decision was not an easy one. We would like to resolve this matter and offer an alternative that may minimize the negative impact that filing for bankruptcy can have on your client’s credit and employment opportunities.

As of today, the balance on the (credit card) account referenced above is [$2,500]. However, you may elect to settle the balance for 60%, or [$1,500], and your client will be under no further obligation. Simply alert us of your acceptance and remit the settlement payment.

If your client is unable to pay this amount in full, or if you have any further questions, please contact our Bankruptcy Department…

Continue reading "WhatsaMatta with WaMu?" »

Posted by Bill McLeod at 4:52 PM | Permalink | Comments (0) | TrackBacks (0)