Green Tree Servicing not easy to deal with

green treeJust came across a fantastic quote concerning Green Tree Servicing from Massachusetts based short sale broker Maryann Little, who commented “Greentree is NOT the easiest servicer to work with. They are SLOW…..” when she was discussing a listing in Lowell.

I would add that my clients have had problems with this firm as well in the context of bankruptcy filings. I’ve found I’ve had to keep a close eye on whether they contact my clients after bankruptcy concerning a debt obligation that has been discharged.

If you are on Facebook and looking for a place to commiserate with others about Green Tree, you might try clicking here.

Massachusetts redraws the bankruptcy court map

framinghamThe United States Bankruptcy Court announced that as of May 1, 2014 residents of seven Boston suburbs will henceforth file their cases at the courthouse in Worcester.

The affected municipalities are ASHLAND, FRAMINGHAM, HOLLISTON, BELLINGHAM, FRANKLIN, and MEDWAY. The most significant is Framingham, a city of 68,000 twenty miles west of Boston, and the same distance east of Worcester.

The decision also affects where debtors will go for the meeting of creditors in their case. This might be a modest benefit to them: a spot in a parking garage in Boston can run $30 – $40 or even higher. Paid parking in Worcester? About $2 – $3……..

by Doug Beaton

Strict rule on bankruptcy credit counseling

calendar-pagesA debtor in New Hampshire had his case thrown out of court for not taking a credit counseling course — even though he had completed the course twice!

The seemingly baffling result is due to the exacting requirement of bankruptcy code section 109 (h), which demands that the counseling be taking within 180 days immediately before the filing of the case — no more and no less.

In the New Hampshire case, the debtor had taken the course for the first time 259 days before he eventually filed. Probably sensing that that wasn’t going to cut it, he took the counseling again five days after he filed.

No dice, said the First Circuit Court of Appeals’ bankruptcy division. This part of the bankruptcy code needs to be followed exactly, or else a case is at risk for dismissal.

When a case filing gets delayed, and the counseling certificate gets too old, a few counseling agencies are willing to reissue the certificate as a favor. Based on a strict reading of the law, this too would not pass muster, although its hard to see how a re-issued certificate would be discovered.

by Doug Beaton

Bankruptcy fees set to rise in June

petitionIt’s not the best news for people thinking of going bankrupt, but starting on June 1, 2014, the fees required to file a case are going up by $29 across the board. Here are the new amounts:

Chapter 7 bankruptcy: $335 (up from $ 306);

Chapter 13 bankruptcy: $310 (up from $281);

Chapter 12 bankruptcy: $275 (up from $246).

The Judicial Conference, a Washington based council of judges that sets the fee rates for the federal courts, just approved the increases. You can find the text of their announcement by clicking here.

by Doug Beaton

Open season for shooting down old tax debts

huntingWith April 15th of 2014 in the rear view mirror, it is now open season on discharging 2010 income tax debts (both state and federal) in bankruptcy court.

Income taxes may not be usually dischargeable in bankruptcy, but the rules change once the debts get old. Debtors who filed a return on time, but who ended up owing money they couldn’t pay anyway, can eliminate the tax debt once three years have passed from the day the return was due.

So 2010 taxes were due on April 15th of 2011, and three years later, we have reached the point where the 2010 tax bills may be cashiered with a simple Chapter 7 bankruptcy case.

by Doug Beaton

Counting time backwards in bankruptcy court

Big_ben_closeupIf you have had wages garnished by a creditor, you certainly might be interested in ways to get some of all of that money back so you can spend it.

Filing a bankruptcy case may do the trick, due to a technical portion of the Bankruptcy Code that deals with “preferences.” That, in turn, is bankruptcy court lingo for creditors who have received more than their share of payments right before a bankruptcy case is filed in court.

From the wage earner’s perspective, this means that you have a fighting chance to get back all of the garnished wages for ninety (that’s 90) days before you filed a bankruptcy case.

But what if the 90th day was one of your paydays?

According to bankruptcy code section 547 (b) (4) (A), you can get back wages attached or garnished “on or within 90 days before the filing of the petition.”

When counting backwards you don’t include the day you filed the case, but start counting at the day before. All weekends and holidays do have to be counted, however, according to bankruptcy rule 9006.

A couple of exceptions: this won’t work for attachments covering child support obligations, and it may or may not work for attachments for income tax arrears, depending on your particular circumstances.

by Doug Beaton

Trying to eliminate divorce lawyer’s fee in bankruptcy

couple arguingDebtors who have outstanding bills for legal fees at the time they file a bankruptcy case should include those bills on their bankruptcy schedules and seek to discharge them.

Almost always this works out fine. Your own bills for legal work already performed are usually considered perfectly dischargable. A typical scenario involves a debtor who has been divorced; his own outstanding legal bills from the divorce can be written off in the bankruptcy. It may not seem nice (at least to us lawyers, who are touchy about the subject of fees), but it usually goes down without a hitch.

But that certainly didn’t happen for one debtor in Massachusetts, who found himself being sued in bankruptcy court by his own divorce lawyer after he tried to discharge the lawyer’s $87,000 bill. The divorce lawyer struck back hard — claiming that her services were obtained through fraud.

The debtor in the Dougherty case (the long opinion can be downloaded by clicking here) hired a divorce attorney in 2005 to seek a modification in his divorce case. Sick of not getting paid, she tried to attach $116,000 in the debtor’s investment accounts through a state court lawsuit, but was foiled when the debtor switched funds out of the account before the garnishment (“trustee process” in Massachusetts lingo) could be completed.

The debtor filed for chapter 7, which would usually be the end of things, but the divorce lawyer wasn’t hearing it. She filed another lawsuit in the bankruptcy case, claiming that three types of fraud should prevent her fees from being discharged.

Ultimately, she based her case on section 523 (a) (6) of the bankruptcy code, which bans discharge for “willful and malicious injury by the debtor to another entity or to the property of another entity.”

That turned out to be too narrow of an argument, and the debtor prevailed, discharging the entire debt. But it couldn’t have been a pleasant experience — first a divorce, then a bankruptcy, and then a long (five years in this case) battle with your own divorce lawyer in the bankruptcy court. Ouch!

by Doug Beaton

Debtors get the benefit of rising real estate values..or do they?

triple deckerWhen you own a home, file a bankruptcy case, and then watch real estate prices rise, who gets the benefit of the new-found value in the property?

Traditionally, the rule has been the debtor benefits and gets to keep all the new equity that might accumulate after the date of filing, with the trustee and creditors unable to touch it.

However, that doesn’t mean an aggressive trustee would never try to change the rules. That’s what happened in Massachusetts in the Garajau case (click here for the text of the opinion), where the Chapter 13 trustee attempted to modify the debtor’s plan in order to attach post-petition equity.

Naturally, there was a twist in the case: before the bankruptcy, the debtor’s neighbor had erected a fence across her driveway, preventing her from parking in her own yard. This spawned a lawsuit which was still pending when the bankruptcy case was filed.

Although the driveway lawsuit was eventually settled in the debtor’s favor, the Chapter 13 trustee used it a lever to try to get at the increasing equity in the property.

First, the trustee tried to get an order to force the debtor to modify her plan to pay out an additional $76,000 to creditors based on the home’s increased value.

No dice, said Boston bankruptcy judge Frank J. Bailey: there is nothing in section 1329 of the bankruptcy code that allows a trustee to force a debtor to modify a properly confirmed plan.

However, the code does allow other parties, including a trustee, to propose a modified plan after confirmation, so that was the trustee’s second gambit. Fortunately for this debtor, the judge ruled that the trustee’s proposal would create an unfeasible plan, since there was no explanation of how the $76K increase would be funded (the existence of a $500K homestead exemption in Massachusetts was no doubt also in the judge’s mind).

The lessons of the Garajau case appear to be two-fold: first, that confirmed plans will be respected by bankruptcy courts and should still give debtors at least a moderate amount of peace-of-mind.

The second lesson is that in a time of fewer bankruptcy filings, aggressive (and sometimes, perhaps over-aggressive) actions by trustees will be encountered far more frequently.

by Doug Beaton

When Dad dies broke: too many elderly are suffering with debt

elderly-poverty_1213788cAn excellent article by Rob Azevedo just appeared in the Boston Globe’s North section where the author describes how his father struggled with debt into his senior years.

Azevedo really hits the nail on the head: “But today, millions of seniors are drowning in debt, trying to heat their homes, pay for medications, eat some food, and keep themselves out of a retirement home, where they’ll absolutely go broke.”

“It didn’t matter how much money my father tried to sock away. It wasn’t enough to live out his years in peace.

My father was no street urchin, thumbing for nickels on a cold, dark winter’s night, and neither is Hank.

As one finance friend of mine told me: ‘‘You have no idea how broke so many people your father’s age are. And you would never know it.’’

And that’s no way to live, grieve, or die.”

It doesn’t have to be this way. If you know a senior citizen who is struggling, a trusted professional (and not a hack selling something with an 800 number) may be able to get rid of the debt. You will be doing them a great favor by pointing them in the right direction.

by Doug Beaton

Are casino liens really hardball?

casino floorTwo front page articles in the Boston Globe in three days has put in the news this fact: Foxwoods and Mohegan Sun, the two massive Connecticut casinos which are now seeking the first gaming licenses ever issued in Massachusetts, have sometimes gotten liens on gambler’s Massachusetts homes for unpaid advances.

First, the Sunday Globe “exposed” the practice with a front page story outlining how the casinos extended credit to there customers, and when it was not repaid, sought and obtained liens on the gamblers’ homes in Massachusetts.

In particular, the article follows a man from Revere who got in deep at both casinos, and ended up with over $80K of liens on his house. Revere just happens to be the proposed site for a new Mohegan Sun casino at the Suffolk Downs race track.

The article also outlines what happened to this debtor: he filed for bankruptcy in 2007, stripped off the liens with a motion, and died three years later. The property therefore passed to his heirs, and the casinos for once didn’t collect.

Two days after the first article comes the news that Massachusetts Attorney General Martha Coakley (also at this writing a candidate for governor) has “urged Massachusetts regulators on Monday to prohibit casinos from placing liens on the homes of patrons with unpaid gambling debts, calling the practice “deeply concerning” in a letter to the state gambling commission.”

Although the Globe claims, citing gaming experts, that it is unusual nationwide for casinos to place liens on their customer’s homes, in general this tactic is quite common through all of Massachusetts collection law.

Liens on homes by private organizations like casinos are never issued without court approval after a lawsuit. Although wage garnishment is possible in Massachusetts, until very recently it not been a favored collection tactic, and the casino’s customers are often retired persons anyways.

So in some way it makes sense that casinos as creditors would use the standard local collection tactic to collect debts.

What is important to realize is:

first, that the liens can often be removed in a bankruptcy case, so debtors need not suffer the loss of home equity, and

second, rather than sensationalize the casinos tactics, the real question to be asked is why are people of modest means being extended dangerous credit like high rollers in the first place?

by Doug Beaton