If there is one bankruptcy case that sums up the frustrations of homeowners dealing with mortgage firms and banks, it must the the one recently decided by Bankruptcy Judge Hoffman in Massachusetts.

This case (In re Perra, from May 22, 2013) seemingly has it all: a homeowner who bought in the early 2000′s and financed with a main-line bank (Fleet, now Bank of America), falling behind in payments during the recession, then trying to get a modification (with all the usual paperwork screw-ups, even though they were working through an attorney).

Then the loan appears to have been mysteriously sold, and the servicing moved to a new firm (Green Tree). Gotta restart the modification process from scratch. Oh, and buy the way, someone started the foreclosure process (aka the dreaded “dual tracking,” where modification and foreclosure compete in a race to see which gets done first).

Frantic phone calls ensued, in which Green Tree apparently assured the homeowners over the phone that the foreclosure sale would be postponed, but Bank of America went ahead and held the sale anyway.

Several months later, the homeowners filed a bankruptcy case trying to get the house back, as well as a lawsuit accusing both Bank of America and Green Tree of many bad things.

While this opinion is must reading for any Massachusetts lawyer wondering what’s actually going on on the ground in this area at the present stage of the mortgage mess, it also highlights a basic truism: debtors are many times better off heading to bankruptcy court sooner rather than later, and certainly before the house is actually lost to foreclosure.

A recent opinion from United States bankruptcy judge Henry Boroff in Massachusetts helps to clarify a much debated question of bankruptcy law: when is the debtor’s “meeting of creditors” really over?

Each person filing a bankruptcy case is required to attend a “Meeting of creditors,” also known as a “341 meeting” after the code section mandating it.

These hearings are usually routine, and usually involve the debtor fielding questions under oath from a bankruptcy trustee, rather than from creditors.

But in the Vierstra case, there was a dispute between the trustee and the debtor about a claimed homestead exemption — the debtor had moved out of the home she exempted when she separated from her husband, who still lived there. At the meeting, the trustee orally continued the hearing until some unspecified date in the future.

Later, the trustee filed a written objection to the homestead exemption, but the debtor was able to successfully argue that the objection was filed late, because the meeting of creditors was really over.

What came to this debtor’s rescue was an obscure provision that was inserted in to Bankruptcy Rule 2003 (e) in 2011, which says:

“The meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice. The presiding official shall promptly file a statement specifying the date and time to which the meeting is adjourned.”

Because the trustee didn’t take the precaution of filing a statement with the court specifying an exact continuation date, the debtor in this case was granted her homestead exemption for a house she didn’t live in.

The rule is a good one, as it basically brings the curtain down on the practices of some trustees, who habitually “continue” hearings with no firm date in mind.

With April 15, 2013 in the rear view mirror, a new window of opportunity has opened up for people who owe back taxes for the year 2009.

That’s because the required three year period from the 2009 due date (April 15, 2010) has now expired. Starting now, 2009 income taxes (both Massachusetts and federal) are now fully dischargable in a bankruptcy case.

As always, there can be a catch. The most basic one is that taxpayers actually had to have filed their return, and what’s more filed it on time, before the original 4-15-2009 due date.

Debtors who asked for an extension to file in 2009 still have to wait, and should NOT file a bankruptcy case right now! The rules require a full three years to pass before the later of the due date or actual filing of a tax return, before the debts can be discharged in bankruptcy.

Massachusetts bankruptcy attorneys trying to help clients mired in the mortgage mess of the last few years are increasingly turning their attention to the notion of good service.

By this I don’t mean fawning over clients or judges, but simply sending (“serving” in legal lingo) important court papers to the right recipients.

As a prime example of how frustrating this formerly simple task can be, take a look at what happened in the Weiss v. GB Mortgage case, decided by bankruptcy judge Melvin Hoffman on April 4, 2013.

There, the bankruptcy trustee was actually trying to sue the mortgage holders on the debtor’s house. But the lawsuit papers kept coming back — the “authorized agent” was out of business, or was no longer authorized to accept legal papers, the companies themselves had been through a welter of name changes, closures, and combinations and so on.

It was only when the trustee succeeded in getting default judgments issued that the company left holding the bag — GMAC Mortgage — complained. The end result was that one of the default judgments was removed, but the other one stuck.

My prediction is that from here on in, finding the right company to sue in bankruptcy court is going to be more and more of a shell game nightmare — but with the sizable stakes involved in many mortgages, one that will have played skillfully and with determination.

A very modest increase in the amount of equity in a car that a debtor can keep after filing a bankruptcy case went into effect in April, 2013.

Previously, a single debtor claiming federal exemptions was allowed $3,450 in equity in a vehicle.

With the cost-of-living increase that took effect on April 1st, that was bumped up to a whopping $3,675.

So after bankruptcy, you can keep a car that looks like the one up above right?

Well, yes you could, but that’s not the end of the story.

Debtors with a better car can look to the “wild card” exemptions to save their ride. This provides almost $13,000 in coverage, which should be good for most bankrupt motorists.

Married debtors with both names appearing on the title can combine the car exemptions and get a break of $7,350.

Debtors who use the vehicle for work can add a “tools-of-trade” exemption. Would that work for just a commuter vehicle? Maybe.

And as a last resort, debtors could switch to the state exemptions, which are more generous as far as cars and trucks go. For example, Massachusetts has a $7,500 exemption for a car for state residents who file for bankruptcy, and double that — $15,000 if the bankrupt driver is a senior citizen.

The bottom line: if you have to file for bankruptcy, don’t worry about keeping your car or truck.

A bit of good news just came in for anyone out there considering filing a bankruptcy case:

As of April 1, 2013, the total amount of property that a debtor can “keep” after filing Chapter 7 bankruptcy increased to $12,725.00, an extra $750 over prior law.

The increase is part of an every-three years tweaking of the bankruptcy code to account for inflation.

A couple of important points about this figure: it represents the amount available under the federal “wild card” exemption, applicable to any property a debtor owns that is not covered by any other exemption. Even more good news: The federal wild card is allowed to be taken by debtors who live in either Massachusetts or New Hampshire, as well as a few other states.

The full amount may not be available, however, to debtors who have a lot of home equity built up, so it’s best to check with a bankruptcy attorney before making rash assumptions.

Like I said, the wild card can protect any type of property. In actual practice, wild card exemptions are most often applied to bank accounts and cash that otherwise would be lost upon filing. So is it possible to go bankrupt and keep over $12K in the bank? For a lot of people, you bet it is!

Dionne Warwick has filed for bankruptcy. The 72 year old pop diva’s case was filed pretty far from San Jose — in the bankruptcy court in northern New Jersey.

Big numbers always make big headlines in the financial pages, and Warwick’s has a whopper — $10 million dollars due for back taxes. Of this, $7 million is owed to a single creditor — the Internal Revenue Service, for the 1991-1999 tax years.

Although the numbers might be a lot higher, Warwick’s case has a lot in common with middle income folks who file for bankruptcy in Massachusetts and New Hampshire.

First, back taxes is a common, and a proper reason to file a bankruptcy case. When the taxes are old, as they are here, they will usually be discharged without a fuss in bankruptcy court.

Second, the case highlights the aggressive tactics used by the IRS to squeeze taxpayers. As described by Dionne Warwick’s publicist:

‘‘In light of the magnitude of her tax liabilities, (Dionne) Warwick has repeatedly attempted to offer re-payment plans and proposals to the IRS and the California Franchise Tax Board for taxes owed,’’ Kevin Sasaki said in an email Tuesday. ‘‘These plans were not accepted, resulting in escalating interest and penalties. Although the actual amount of back taxes owed has been paid, the resulting penalties and interest has continually accrued.’’

As far as differences go, Warwick’s income is far greater than the average bankruptcy file — an estimated $20,950 per month, mostly from song royalties. At that level, expect her to end up in a Chapter 13 case, where she will have to partially repay creditors with monthly payments to her bankruptcy trustee.

Massachusetts bankruptcy attorneys got an important clarification recently from U.S. Bankruptcy Court judge Melvin Hoffman on how much spacing there must be between bankruptcy cases for a debtor who wants a Chapter 13 discharge, but who has previously received a Chapter 7 discharge.

This situation involves section 1328 (f) of the bankruptcy code, which bars a second Chapter 13 discharge if a debtor has filed a previous case under Chapter 13 within four years, or a previous case under Chapter 7 within two years.

In the Johnson case, decided on March 11, 2013, the debtors had filed a Chapter 13 case in 2008, converted in to Chapter 7 in 2009, and got their Chapter 7 discharge in April, 2010. Then they filed a follow-up Chapter 13 case in August of 2012, and petitioned the court for another discharge.

Judge Hoffman made two important rulings in this case. First, he determined that the time periods involved should be calculated by measuring from the filing date of the first case to the filing date of the second, ignoring both the dates of conversion and the date the first discharge was issued.

Second, he ruled that the original Chapter of the filing, not the chapter of conversion controlled which time period to apply.

In this situation, that was bad news for the debtors, who had filed their second case just a few days short of four years from the first one. Because the first case was filed under Chapter 13, the judge applied the four year rule, and denied any discharge in the second case.

People behind on their Massachusetts state income taxes have an aggressive foe out there — the Massachusetts Department of Revenue.

Mass. DOR has been taking some pretty far-out positions in court on bankruptcy cases filed by Massachusetts residents looking to discharge back taxes. Just recently, they argued in Judge Hoffman’s courtroom that all tax returns that were filed late could never be discharged in bankruptcy.

Thankfully for debtors state-wide, the judge didn’t agree, and it is still possible for late returns to sometimes result in a discharge.

The dispute, decided in the twin cases of Brown and Gonzalez, on March 11, 2013, both involved unrelated debtors who both filed bunches of Mass. returns late, and then more than three years later each filed for bankruptcy.

This situation is governed by section 523 of the bankruptcy code, which has a “two year rule,” allowing for a discharge of the tax only if the late tax returns were filed more than two years before the bankruptcy.

Mass. DOR, on the other hand, wanted their own rule enforced — saying virtually any tax debt for a late return couldn’t be discharged in bankruptcy.

Judge Hoffman ruled that such an extreme approach could not have been what the drafters of section 523 had in mind when the section was amended back in 2005, and granted the debtors their discharges.

There are three important takeaway points in these cases:

First, the two year rule survives, at least where the late tax return is filed before the tax authority (IRS or DOR) gets around to formally assessing the tax on their own.

Second, bankruptcy practitioners need to be aware that Mass DOR will sometimes pursue unreasonable long-shot positions that require additional litigation in bankruptcy court.

And third, bankruptcy lawyers should not be reluctant to take them on. Just because a bureaucrat takes a legal position doesn’t mean it is correct. This is especially true in the often upside-down world of bankruptcy court.

When bankruptcy debtors file Chapter 13 cases, they have to pay a fee, or commission to the Chapter 13 trustee that administers their case. This is how the trustee gets paid. The commission is typically ten percent of the payments made through the plan. So if a debtor’s plan calls for a monthly payment of $500, the plan usually will give the trustee $50 of that, and so on?

But is it possible to propose a lower payment?

A married couple in Massachusetts tried it recently — and lost. They proposed to pay the trustee 9% instead. The difference in payments was a whopping $10 per month. Over the five years of the plan, it came to $600 total. For that amount, the case went to court when the trustee protested.

The debtor’s argument was that trustees don’t actually get paid 10%. Instead, they are allowed a fee that changes from year to year, and is set by the federal government based on financial conditions. The maximum fee they can get is 10%, so that is what goes on the pre-printed forms that attorneys use. Recently, the actual fee trustees are allowed has been 8.75%. Any difference is used to pay a little more out to the creditors.

But in the Tagliavia case, bankruptcy court judge Melvin Hoffman decided that debtors in his court need to use the forms as they are and propose a trustee fee of ten percent. He said that the system would be unworkable otherwise, because plans would have to be constantly amended and the rate floats up and down.

The judge thought that would make a mockery out of the budgets that Chapter 13 debtors file with the courts: if they could be constantly manipulated to fit the trustee’s fee, it would give the impression that debtors weren’t being honest about their expenses in the first place.

So, at least in Judge Hoffman’s court, Massachusetts bankruptcy debtors need to plan on paying a ten percent fee to the trustee if they file a case under Chapter 13.