Category Archives: Blog

Debtor Must Tell Creditor That Bankruptcy Case Was Filed, Not Just Attorney Hired

By Laura J. Margulies, Esq.

Once I am hired as an attorney for a debtor, I advise my client to let any creditors who call know that he or she has retained my firm as his or her counsel and that any questions regarding them must be made to my office. Once the bankruptcy case is filed, I advise my clients to let any creditor who calls them know that they filed bankruptcy and give the creditor their case number. Once the creditor knows about the filing and is given a case number, it generally does not contact the debtor again.

In the recent case of Ferrer v. Lou Sobh Automotive of Jax, Inc. (In re Ferrer), 2017 WL 401188 (Bankr. M.D. Fla. 1/30/17), a car lender contacted the debtor after he filed for bankruptcy and asked him to stop by to sign a new contract for the purchase of his vehicle. The car was purchased just two days prior to his filing. The debtor advised the lender that he had hired a bankruptcy attorney, and directed the lender to call his attorney. The debtor did not list the lender on his Schedules and the lender did not get notice of the bankruptcy filing. Ultimately, the debtor did enter into a new loan agreement with the lender. The debtor believed that the lender’s contact with him violated the automatic stay and brought an action against it. The court however, found that the lender did not wilfully violate the automatic stay, as just telling a creditor that you hired a bankruptcy attorney is not the same as letting the creditor know that you actually filed a bankruptcy case. Furthermore, the court stated that even if it found that the lender had violated the automatic stay, the debtor presented no evidence that the violation caused him any actual damage.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com .

Debtors Cannot Contest the Foreclosure of a “Surrendered” Home

By Laura Margulies, Esq.

In the recent case of Failla v. Citibank, NA (In re Failla), 2016 WL 5750666 (11th Cir. 2016), the 11th Circuit held that debtors who indicated their intention to “surrender” their real property in their Chapter 7 case, could not later contest the foreclosure of the property. In Failla, the debtors were facing a foreclosure sale of their home, and filed a Chapter 7 case prior to the sale. The sale was halted and they continued to contest the sale in state court, while indicating on their Statement of Intent their intention to surrender the property.

Rather then file the usual motion for relief from stay to continue the foreclosure sale, the lender filed a motion to compel the debtors to surrender their property. The bankruptcy court granted the lender’s motion, which was affirmed on appeal. The debtors had argued that the word surrender applied only to the Chapter 7 trustee and not the lender. The court rejected this argument and found that the term surrender means to both the trustee and the lender.

This 11th Circuit ruling was rejected in the subsequent case of In re Ryan, 2016 WL 6102312 (Bankr. D. Hawaii 2016). In Ryan, the court held that a lender did not have the right to compel surrender of a property, even if the debtor had indicated “surrender” in his or her statement of intent. It further held, that a debtor could still raise objections to a foreclosure sale in state court notwithstanding the debtor’s statement of intent indicating his intent to surrender the property.

Until this issue is resolved, it may be best not to indicate “surrender” in the Statement of Intent if the debtor plans to challenge a foreclosure sale. If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.

Debtors May Avoid Lien In Chapter 13 Case That They Did Not Avoid in Prior Case

By Craig Stewart, Esq. and Laura Margulies, Esq.

If a debtor did not avoid a judicial lien on a piece of real estate he owed when he filed a Chapter 7 case, he may avoid it a subsequent Chapter 13 case, In Re Fielder, 2016 WL 6879252 (Bankr. D. Or. 11/16/16) In Fielder, at the time the debtors filed a Chapter 7 case they had a judicial lien on their real estate, but they did not move to avoid it and they later received a discharge in that case. Seven years later the same debtors filed a Chapter 13 case and sought to avoid the same lien in the Chapter 13 case. The judgment lien holder objected.

The Chapter 13 debtors proposed a chapter 13 plan which provided that they would be seeking to avoid the lien on the property because it impaired their exemptions. The lien holder argued that the debtors were barred from avoiding the lien because they had failed to avoid the lien while in the Chapter 7 case. In the alternative, the judicial lien holder argued it was entitled to an unsecured claim to the extent the lien was avoided.

The Court held that the Bankruptcy Code does not prohibit the use of §522(f)(1) in a subsequent bankruptcy filing. The Code is replete with examples where action or inaction in prior bankruptcy cases is given consequence. Indeed, Chapter 5 of Title 11 is expressly made applicable to Chapter 13 cases without limitation, accordingly, the court would allow the debtors to avoid the judicial lien on their property as the value of the prior liens on the property exceeded the value of the property. The court also ruled that because of the discharge of the debt in their Chapter 7 case, the lender was not entitled to an unsecured claim in the debtors’ Chapter 13 case. lien.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.

Chapter 13 Plan Can Require Creditor To Send Monthly Statements

By: Craig W. Stewart, Esq.

Debtors who file bankruptcy oftentimes complain about the fact that after they file their mortgage companies or car finance lenders stop sending monthly billing statements for fear of violating the automatic stay provisions of the Bankruptcy Code.

Now, under a recent case out of Massachusetts, In Re Penny L and Jason A Sperry, 2016 WL 7167869 (Bankr. D. Mass. 12/8/16), these lenders must send the statements. In this case. the Chapter 13 debtors proposed a cure and maintain plan with specific language stating that the creditor (here a mortgage company) shall send the debtors monthly mortgage payments consistent with its prepetition practice. Of course, HSBC, the lender, replied that it could not comply internally and logistics limited it from complying.

The Court held that the Bankruptcy Code does not prohibit and arguably permits sending post-petition statements under section 1322(b)(11). In Maryland there is a Local Rule that allows secured creditors to send monthly statements to debtors. Accordingly, there is no excuse for these lenders for not sending monthly statements to their Chapter 13 clients.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com

Debtor Did Not Loose Tenants by the Entirety Exemption After Spouse Died

By Laura Margulies, Esq.

In the recent Maryland bankruptcy case of In re Buckley, 2016 WL 7480233 (Bankr. D. Md 12.29.16), the court denied the trustee’s objection to the debtor’s tenants by the entireties exemption which the trustee had filed after the death of the debtor’s husband. In the Buckley case, the debtor and her non-filing husband owned their house free and clear of liens. The debtor filed a Chapter 7 case in June 2016 and had exempted the full equity in the house using the tenants by the entireties exemption. Shortly after she filed, in July of 2016, her husband passed away. The trustee filed an objection to the exemption arguing that the husband’s death extinguished the tenants by the entireties exemption. The court disagreed with the trustee and held that the rights of individual creditors against property held by the debtor by the entireties are fixed as of the petition date and the Bankruptcy Code does not provide for those rights to expand or contract upon the post-petition death of the non-filing spouse. Accordingly, the debtor was entitled to the entireties exemption.

This result does not apply to a situation where the parties divorce post-petition. If a debtor owns property with his or her spouse and claims tenants by the entireties exemption to protect his or her equity in the house, but then gets a limited or final divorce within 6 months of the filing of the case, the tenants by the entireties exemption no longer applies, see Bankruptcy Code Section 541(a)(5)(B). Should this happen, the court would sustain an objection by the trustee to the use of the entireties exemption.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com .

Debtors Do Not Need to Pay Interest to Unsecured Creditors

By Laura Margulies, Esq.

In the recent case of In re Egger, 2016 wL 6892747 (Bankr. W.D. Wash. 11/22/16), the court held that the debtors’ Chapter 13 Plan did not need to provide for interest to be paid to their unsecured creditors to satisfy Section 1325(b)(1)(A). In the Egger case, the trustee objected to the debtors’ plan because it was for less than 60 months and while it paid the unsecured creditors 100% of their claims, it did not provide for interest on those claims. The Chapter 13 trustee maintained that since the debtors’ budget showed they can afford to pay interest on the claims, they should be required to do so under Section 1325(b)(1)(A). The court overruled the trustee’s objection and found that Section 1325(b)(1)(A) does not require payment of interest on unsecured claims. Accordingly, the debtors’ plan was able to proceed to confirmation.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.

Trustee Can Use IRS’s 10 Year Collection Statue to Avoid a Fraudulent Transfer

By Laura J. Margulies

Usually, a trustee seeks to avoid fraudulent conveyances that occur within the state’s statute of limitations, which in Maryland is three years. However, in the recent case of In re Kipnis, 555 B.R. 877 (Bankr. S.D. Fla. 2016), the bankruptcy court allowed a trustee to pursue a fraudulent conveyance action using the IRS’s 10-year collection statue of 26 U.S.C. §6502. In this case, the trustee sought to avoid transfers the debtor made in 2005 after the IRS determined that the debtor owed it in excess of $1 million dollars. The debtor, who filed for bankruptcy in January of 2014, moved to dismiss the complaint on the basis that the alleged fraudulent transfer occurred more than four years prepetition, which is beyond Florida’s statute of limitations. The court ruled that the trustee was not limited by the state’s statute of limitations. Section 544(b) of the Bankruptcy Code allows a trustee to avoid any transfer of an interest of the debtor in property that is voidable under applicable law under section 502 of the Code. Section 6901 of the Internal Revenue Code allows the IRS to pursue avoidance actions against transferees of the taxpayer’s property. Although the IRS must prove the elements of a fraudulent transfer under state law, the statute of limitations to file the action is governed by federal law. Under §6502, the IRS has ten years to collect a tax debt. Because §544(b) allows a trustee to step into the shoes of the IRS, he can avoid the transfer for the benefit of the tax debt, which is an allowable unsecured claim in the debtor’s bankruptcy case.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.

Consequences for Mortgage Lenders Failure to Comply With Bankruptcy Rules

By Laura Margulies, Esq.

Federal Bankruptcy Rule 3002.1 sets forth several obligations that pertain to secured creditors, including mortgage lenders. First, it requires them to notify the debtor and the debtor’s attorney if the monthly mortgage payment is going to increase. The notice must be sent to the debtor and the debtor’s attorney at least 21 days before the payment is due to change. Second, if the lender has incurred any expenses after it filed its claim, but before the case is completed, it must notify the debtor and the debtor’s attorney of the expense at least 180 days after it incurred the expense. Third, within 21 days after the Trustee files it notice of Final Cure Payment, it must file a response indicating whether it agrees with the Notice.

I have filed objections to notices of increase in mortgage payments where the notice was given less than the 21 days prior to the expected increase and the court ruled that the notice was not valid since it did not comply with the law. In the recent case of In re Salazar, 2016 WL 6068819 (Bankr. S.D. Tex. 10.14.16), the court disallowed the lender’s claim for attorney’s fees and expenses because it failed to notify the debtor of the expenses within the 180 days that the expenses were incurred. Regarding the third item, if the Trustee’s Final Cure Notice indicates that the debtor is current on his mortgage payments and the lender does not timely respond, I maintain that it is precluded from later claiming the debtor was behind on his post-petition payments.

If you are considering filing for bankruptcy, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.

Laura Margulies & Associates, LLC Receives 2016 Best of Hagerstown Award

Press Release

FOR IMMEDIATE RELEASE

Laura Margulies & Associates, LLC Receives 2016 Best of Hagerstown Award

Hagerstown Award Program Honors the Achievement

HAGERSTOWN October 21, 2016 — Laura Margulies & Associates, LLC has been selected for the 2016 Best of Hagerstown Award in the Bankruptcy Attorney category by the Hagerstown Award Program.

Each year, the Hagerstown Award Program identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Hagerstown area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2016 Hagerstown Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Hagerstown Award Program and data provided by third parties.

About Hagerstown Award Program

The Hagerstown Award Program is an annual awards program honoring the achievements and accomplishments of local businesses throughout the Hagerstown area. Recognition is given to those companies that have shown the ability to use their best practices and implemented programs to generate competitive advantages and long-term value.

The Hagerstown Award Program was established to recognize the best of local businesses in our community. Our organization works exclusively with local business owners, trade groups, professional associations and other business advertising and marketing groups. Our mission is to recognize the small business community’s contributions to the U.S. economy.

SOURCE: Hagerstown Award Program

CONTACT:
Hagerstown Award Program
Email: PublicRelations@localawardscenter.org
URL: http://www.localawardscenter.org

Debtor’s Attorney’s Fee May Be Paid Ahead of DSO Claim

By: Craig W. Stewart, Esq.

When attorneys file Chapter 13 cases, they some times put part of their fee in the Chapter 13 Plan. This will cause some delay in paying the fee because the Chapter 13 Trustee will not start paying creditors, including the debtor’s attorney, until the plan is approved, which typically takes about 6 months. In Chapter 13 cases, Congress confirmed that attorney’s fees for counsel are required to be paid ahead of, or at least concurrently with, other creditor claims. In the recent case of In Re Stephen D. Chamberlain, 2016 WL 4169198 (Bankr. D. Colo. 8/14/16), the Court stated that “Section 1322(a)(2) does not require that claims entitled to priority be paid in the order of their priority. Instead, all Section 507 claims (whether for DSO claims, attorney’s fees, taxes, or otherwise) must be paid in full in cash over time under the plan. If a debtor cannot pay all Section 507 priority claims in full during the term of the plan, the plan cannot be confirmed. Congress confirmed that attorney’s fees for counsel are required to be paid ahead of, or at least concurrently with, other creditor claims.

In a recent case in the Bankruptcy Court in Greenbelt, Maryland, our law office filed a Chapter 13 plan and listed our fees to be paid “concurrent” with the DSO priority claim. Counsel for the DSO creditor objected profusely to this Plan but had no case law to support his position. The judge hearing the Objection to the Plan has taken account of this case out of Colorado. As in the Colorado case, the creditor attorney also objected that the debtor’s plan was not proposed in good faith. While the court in our case has not ruled on the issue, we are hopeful that her ruling will be in line with the Chamberlain case.

If you are experiencing financial difficulties and are considering bankruptcy pleaase contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of bankruptcy cases in Maryland and Washington, D.C., many involving unique or novel issues. Please call us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.