Electronic Documents

Electronic documents are awesome.  They’re friendlier to the environment.  They’re cheaper than the cost of paper and ink / toner.  They’re easier to store and take up less space.
Over the past several years, I’ve embraced several methods to reduce physical paperwork in my office and switch over to electronic documents whenever possible – and I will continue to do so.
However, there are two types of documents that I frequently receive from clients that need to stop:

  1. Documents requiring your signature.  If I send you a document that needs to be signed, I need to have the original “wet” signature returned to me.  That means either mailing it back or dropping it off in person.  Unless you’re digitally signing a document using e-sign equipment in my office, all ink-signed documents should be returned to my office in actual paper and ink form.  Note – most documents do not require your signature.  I can take pay-stubs, tax returns, vehicle titles, real estate documents – all of this stuff electronically.  But any special forms, affidavits – anything that needs to be filed directly with the bankruptcy court and requiring your signature – those items I need to get the originals back on.
  2. Photographs of Documents.  Admittedly, this one isn’t so much a rule as it is an annoyance.  The image quality of most cell phone pictures of documents I receive is not very good, and the image is distorted if the document is folded at all.  Converting image files to PDFs that retain enough image quality to be readable by the Trustee is sometimes not possible.  And even when it is, it’s enough of a hassle as to not be worth it.  If you don’t have a scanner – that’s fine.  Bring the document in to my office and let me scan it.  There’s no charge for it, and I’ll have a clean, high quality image to send to the Trustee.

Keeping Records

In recent days, I’ve had a few clients who have had to shell out a considerable amount of money to pay for copies of documents that they needed for their bankruptcy case.  These are documents that they had already received in the past for free, but instead of holding on to those documents, they chose to throw them in the garbage instead.  Replacing those documents came at quite a bit of cost – and it was all perfectly avoidable.

As a general rule, it is a good idea to keep copies of important documents – some permanently, and others for at least six years.  Even if you don’t intend to file for bankruptcy, this is a good habit to get into, because it’s not just bankruptcy attorneys who request these types of documents.

Here are some common documents you should always keep copies of in a safe location.

  • Vital documents, including birth certificates, marriage certificates, divorce decrees, bankruptcy discharge orders, death certificates, and social security cards – keep these forever.
  • Ownership records, including deeds, titles, and confirmations of ownership – keep these for as long as you own the property they reference.
  • Tax Returns (IRS 1040 and the corresponding state forms, plus any schedules and worksheets) – keep these for at least six years.
  • Insurance Policy Papers – keep these for as long as the policy is active.
  • Paystubs, Bank Statements, Receipts, and other Financial Documents – keep these for at least six years.

Planning Ahead – Documents Needed for Bankruptcy

Tip #1 – Don’t wait until the last minute to consult with an attorney regarding bankruptcy.  At the very least, reach out to one to explore your options as soon as you realize you’re in trouble (when you first begin to miss payments on bills).  You don’t necessarily have to file bankruptcy right away, nor do you even have to hire an attorney right away.  But at least talk to one, and do it early.  That way, you know your options, you know what will be expected of you, and you won’t be trying to cram work and fees that could ordinarily be spread out over several months into several hours.  Sometimes, just consulting with an attorney can help you to avoid your situation from becoming worse.
Tip #2 – Don’t force your attorney into filing a skeletal petition.  Some attorneys – myself included – won’t even do it for you as a matter of policy.  What is a skeletal petition?  It’s an emergency filing with minimal disclosure requirements designed to get you immediate bankruptcy protection, with the expectation that you will complete the remaining disclosures at a later date.  A skeletal petition necessarily means that your attorney has not yet had the opportunity to gather and review all of the relevant information for your case, which means he cannot properly advise you.  Even though most cases can be dismissed if you discover there is a problem later, this is not always the case.  And the bankruptcy filing alone will do damage to your credit, which will not be ameliorated by a discharge if your case is dismissed.  It is always best to give you and your attorney plenty of time to prepare and analyze a case properly, so that obvious issues can be identified ahead of time.  This means, again, not waiting until the last minute to consult with an attorney.  It means talking to an attorney at the first sign of trouble.
Tip #3 – Expect that you’re going to need to obtain several documents and other pieces of information for your attorney.  It is unlikely that you will have everything sitting at your fingertips.  Most debtors must submit several requests to various government agencies and creditors to gather all of the required documentation.  Some documents are relatively easy to obtain and only take a few minutes.
Other requests take several days, even several weeks to process.  Discuss the document requirements when you first consult with an attorney.  Identify any documents or pieces of information that you will need to obtain and start working on gathering those documents IMMEDIATELY.  You do not want to find yourself in the position where you need to file within the next day or so, but must wait several weeks to receive documents because you only submitted a request for them yesterday.
Based on my experience. the following is a list of common document requests usually take several weeks to process:
  • Federal or state tax transcripts.  You’ll need these if you do not keep copies of your tax returns and cannot obtain a copy from your tax preparer.  Both the Internal Revenue Service and the Wisconsin Department of Revenue process transcript requests in about 3 weeks, on average, but some requests take much longer, particularly if there is an issue with the request.
  • Vehicle titles / confirmation of ownership.  If you have neither your original vehicle title nor the original confirmation of ownership, you have a few options.  Do NOT request a replacement from the DMV.  The fastest way is to get a document referred to as “confirmation of security interest” from your creditor.  If they don’t have that, then you need to submit a special form to the DMV called a certified vehicle record.  Again, the turnaround time for these is usually 3 weeks.
  • Reinstatement quotes.  If you’re filing Chapter 13 to save your home from foreclosure, a reinstatement quote is a crucial number to have.  In many cases, it is the single largest debt that has to be paid back, and therefore has the potential to have a large impact on your plan payment.  Ideally, you do not want to file Chapter 13 without a reasonable degree of confidence in what your plan payment will be.  Because of late fees, penalties, and attorney fees, the reinstatement quote can be very difficult to estimate, and the margin of error on such an estimate may be high.  Furthermore, you are likely to be bounced back and forth between the mortgage company and their attorney.  Unfortunately, reinstatement quotes are only good for a limited time.  So it is highly advisable that you request a quote very early in the process to determine how long it takes your mortgage company to process such a request, then use that information to time your final request prior to filing your bankruptcy case.

Revised Lien Stripping Procedures, Post-Ryan

Last July, the 7th Circuit Court of Appeals rendered its decision in Ryan v. United States (725 F.3d 623 (7th Cir. Ill. 2013)).  In it, Judge Rovner reasoned that 11 U.S.C. § 506(a) and § 506(d) did not have to be read together.  The former allows claims to be split into a secured and unsecured portion (where the debt exceeds the value of the collateral), and the latter allows for the avoidance of a lien for disallowed secured claims.
Previously, § 506(a) and (d) were read together, and essentially, it allowed for the stripping of an unsecured junior mortgage via § 506(d).  Judge Rovner wrote that just because a debt is unsecured under § 506(a) doesn’t mean it is a disallowed secured claim for purposes of § 506(d).  And since then, § 506(d) has no longer been a viable vehicle for lien stripping.
What is lien stripping?  Well, in the context I’ll be discussing today, it’s where the value of one’s home is less than the balance of one or more senior mortgages, such that there is no equity for a secondary (or later) mortgage to attach to.
In English:  Say you have a home worth $100,000.  Your first mortgage balance is $120,000.  Your house is already underwater, but to make things worse, you have a second mortgage for $20,000.  In this situation, the second mortgage is strippable.  This would not be the case is there was any equity (e.g. the house is worth $100,000, but the mortgage balance is $99,999 or less) for the junior mortgage to attach to.  The key here is NOT that the house is underwater, but that the house is underwater even before considering a junior mortgage.
In the wake of Ryan, the general consensus is that unsecured junior mortgages can still be stripped by way of § 1322(b)(2).  Additionally, the local bar in the Eastern District of Wisconsin has met a few times since then to discuss other problems cropping up in lien strip cases and to bring some uniformity to the process.
Accordingly, homeowners who wish to seek a lien strip should be aware of the following…

  1. Lien stripping a junior mortgage is only possible in Chapter 13 Bankruptcy.
  2. You must be eligible for a Chapter 13 discharge.  The “Chapter 20” option (which is a Chapter 7 to wipe out debt followed immediately by a Chapter 13 to strip the lien and affirmed by Judge Pepper in In re Fair, 450 B.R. 853 (E.D. Wis. 2011)) has since been rejected at the district court level in Lindskog v. M&I Bank, 480 B.R. 916 (E.D. Wis. 2012).
  3. If successful, a certified copy of the court order must be recorded with the Register of Deeds in the county where your property is located.  Many also believe that, once obtained, a certified copy of the discharge order should also be recorded.

Homeowners should prepare to obtain the following for their bankruptcy attorney…
  1. A title abstract for the property.
  2. Copies of all recorded mortgages, assignments of mortgages, and subordination agreements attached to your property – obtained from the Register of Deeds’ office.
  3. Evidence supporting valuation of the property.  I strongly recommend all three of the following: (1) copy of your most recent property tax bill, (2) a comparative market analysis not more than 6 months old, and (3) a real estate appraisal not more than 6 months old.  If your property was in foreclosure, check the court papers (complaint and judgment) for any assertions of value.
  4. Proof of the current balance on the senior mortgage(s) – either a recent billing statement or the proof of claim filed with the bankruptcy court.

Coming Changes for Bankruptcy

Some big changes are coming down the pipe for bankruptcy.  Typically – we will see very minor changes in forms once a year in December.  This year (2013) we saw a dramatic change in Schedules I & J (income and expenses).
Schedule I introduces some interesting changes.  There are now lines dedicated to making a distinction between mandatory retirement contributions, voluntary ones, and repayments on retirement loans.  Expenses relating to business and rental income have been moved from Schedule J to Schedule I – so your net profits are what end up displayed on forms.  There is also now a separate line for what we refer to as “household contributions”.  This is “income” arising from other people (such as roommates, unmarried partners, children with jobs, friends, or other relatives that contribute to household expenses from their funds.
Information concerning dependents has been moved to Schedule J – you’re also required to indicate whether your claimed dependents actually live with you or not, and whether you are paying the expenses of non-dependents.
On Schedule J, groups of expenses have been grouped together a little better.  Telecomm utilities have been lumped together.  Food has been lumped together with “housekeeping supplies” which I found a little odd.  Personal care products (soaps, shampoos, shaving kits, dental products, etc.) and services (e.g. haircuts) have been given their own slot.  Perhaps I find that new arrangement odd because we used to have a separate line under miscellaneous expenses for ‘personal grooming and household supplies’.  Transportation is now specifically defined to include public transit and maintenance.  Entertainment is now defined to include subscriptions and club memberships.  Again, under the old forms, we had some of these items broken up on separate lines.
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Schedules I & J are basically early releases.  Most if not all of the remaining bankruptcy forms will be revamped come December 2014.  These changes have been touted as “form modernization”.  Essentially, most of these forms are getting considerably longer than they were previously.  As it is, the average set of bankruptcy forms that we file is about a 60-80 page packet (depending on the number of individual creditors).  From what I’ve been hearing, these new forms could easily inflate the packet to about 100-120 pages.  Time will tell.
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By December 2015, we are expecting to see a new National Model Chapter 13 Plan, and use of said plan is expected to be mandatory.  I think it’s pretty clear this is a move that favors creditors – many of which have national operations, but receive a wide array of plans from 94 districts, and not all districts have a mandatory model plan.
A national model plan will make it easier for creditors to find information that they are looking for, and for more uniform understanding of plan provisions.  What will undoubtedly concern bankruptcy practitioners (and should concern debtors) is that a model mandatory plan could end up curbing certain district customs.  I don’t want to speculate on what those are going to be.  Suffice it to say, I’ve reviewed an early draft of the model Chapter 13 plan, and I made quite a few notations of possible conflicts with the way we do things here in the Eastern District of Wisconsin (certain customs and practices which we have statutory freedom to do).  As the draft goes through revisions from attorney feedback, we’ll get a firmer idea of what the plan will look like, and whichever concerns I still have at that time, I’ll bring up so as to give people an opportunity to file before the plan takes effect in December 2015.
* * *
Not all of the changes will be bad.  There is a rumored change to the Federal Rules of Bankruptcy Procedure that I am particularly excited about.  Currently, the deadline to file a proof of claim is 90 days after the first meeting of creditors (which is itself usually 4-6 weeks after the bankruptcy case is filed).  The government gets 180 days from the date the case is filed.  And the rule does not apply at all to secured creditors.
The rumored change will establish a bar date to file claims that is 60 days from the date the case is filed and it will apply to secured creditors.  I have not heard yet as to whether the government bar date will change.  I assume that they will continue to have more time than general creditors, but I suspect their deadline may be shortened a little as well.
This news sucks for creditors but is great for debtors.  Under the existing framework, there really was no way to know if a plan was feasible by the time of the hearing, when the trustee recommends for or against confirmation.  In certain cases where the trustee was not confident of feasibility, or when the amount of claims might greatly control the required plan payment, or where there was doubt as to the amount of claims, the trustee would sometimes withhold a recommendation and adjourn out beyond the bar date.  This didn’t happen often, but it happened enough to be irritating.  Technically, the feasibility of all plans is unknowable until the bar date passes, but nobody wants to wait 3 months for a plan to become comfirmable.
Under this new structure, the bar date will be about 2-4 weeks after the hearing date, which means – worst case scenario – a single one month adjournment should be enough to check feasibility.
If the trustee recommends for confirmation before the bar date passes (as happens now, and I suspect may continue to happen), then debtors can take comfort in the fact that they will know much sooner whether their plan payments need to be adjusted to account for any unanticipated or underestimated claims.  In short – they won’t have been paying for 5 – 6 months before they know whether their plan needs to be adjusted.
If you ask me – that’s win-win, and I’m excited for that particular change.  I wish they had implemented it this year.

Advanced Lien Stripping Information

One of the great tools that Chapter 13 Bankruptcy provides for homeowners is the possibility of stripping off a wholly unsecured mortgage.  What does that mean?  Well, claims are generally only “secured” to the extent that there is equity in collateral for the claim to attach.  So, let’s pretend John Doe owns a house worth $120,000, has two mortgages with balances of $150,000 and $50,000.  The balance on the first mortgage is greater than the value of the house.  Therefore, the property has zero equity for the second mortgage to attach to.
If it were any other type of debt, the first mortgage would only be secured up to the value ($120k secured, $30k unsecured.  But the bankruptcy code’s anti-modification provision at 11 U.S.C. § 1322(b)(2), however, ensures that the first mortgage company will be treated as completely secured.
If there is so much as one dollar of equity in the property, there is something for the second mortgage to attach to, and the anti-modification provision would apply to the second mortgage, too.  But in cases where the property is “underwater” before we even look at the second mortgage, then the second mortgage is completely unsecured and could be stripped under 11 U.S.C. § 506(d).
That was, at least, until the 7th Circuit issued its decision last July: Ryan v. United States (In re Ryan), 2013 U.S. App. LEXIS 13710 (7th Cir. Ill. 2013).  Without getting into the technicalities, the court in Ryan opined that § 506(d) could be read separately from § 506(a).  § 506(a) says that a claim is only secured to the extent there is equity available to attach to.  § 506(d) permits the avoidance of a lien that is not an allowed secured claim.  The court said that the former didn’t necessary create a “disallowed claim” – which effectively abolished § 506(d) as a mechanism for stripping off unsecured mortgages.
This has left practitioners with the question of whether liens could still be stripped, and if so, how.  As of September 20, 2013, only three decisions were published that referenced the Ryan case – all in Illinois.  One of them mentions the possibility of another mechanism for lien stripping, but is silent as to that mechanism.
I have had one lien stripping case since Ryan, and that one settled out of court.  The approach I used was to stick with § 506(a), which allows my client to assert that the junior mortgage company does not have a valid secured claim.  Then, I switch from § 506(d) to § 1322(b)(2) which allows modification of two types of claims: secured claims except ones secured solely by your principal residence, and unsecured claims.  If the judge rules that the claim is unsecured, then invoking 1322(b)(2) to modify their claim should be no problem.
So we’re not avoiding the lien, we are modifying the claim.  The plan should contain language that asserts that the junior mortgage lender would retain their lien in the property and have an unsecured claim in the bankruptcy, but upon successful completion of the plan and discharge, the lien would be satisfied.
Since this approach has already yielded one settlement, I am confident this is the correct approach.  However, until there is a published judicial opinion on the matter, we proceed in this area of law cautiously.
So, you wanna try to strip your unsecured junior mortgage?  Here’s some things you need to know…

  1. The equation depends on the value of the home and the balances owed on each mortgage.  The latter is rather simple to obtain.  A recent billing statement from the mortgage company will do.  Otherwise, the proof of claim that the mortgage company files in your bankruptcy case can be relied on (though that may not come for several weeks or months after your case is filed, and holding off on filing the adversary could delay confirmation of the plan.
  2. Evidence of the value of the home is much more difficult, since value is subjective.  As my mom was fond of telling me when I grew up – “something is worth only what someone else is willing to pay for”.  I like to get three pieces of evidence – the most recent property tax assessment, a recent appraisal (from an independent third party, no more than 6 months old), and a recent CMA (comparative market analysis).  If all three numbers are less than the balance of the first mortgage, then my client is in good shape.  If the house is in foreclosure and both mortgages are held by the same company, it is likely that the foreclosure complaint alleges a value.  Since the plaintiff in the foreclosure is the defendant in the lien strip, you can use their own number against them.
  3. Nothing prevents the mortgage company from disputing the value with their own appraisals.  If a contest develops, the judge will have to make a determination as to value.
  4. You will need to get copies of each mortgage from the Register of Deeds’ office, plus all assignments of the mortgage.  If the mortgage has been transferred from one lender to another, it is important in the adversary proceeding to serve the summons and complaint to the correct creditor.  Rule 7004 of the Federal Rules of Bankruptcy Procedure applies for serving the summons and complaint.
  5. Just because you get a bill from Bank of America doesn’t mean that they hold your mortgage.  There are several roles involved with a mortgage.  There is the holder of the note – the note is what entitles the holder to payment on the debt.  There is the holder of the mortgage – the mortgage is what entitles the holder to foreclose a property in event of default under the note.  Then there is the mortgage servicer, who merely accepts and processes payments.  The servicer is the entity that most homeowners are familiar with because the servicer is who they interact with.  However, the servicer is not the proper entity to serve the summons and complaint to (though they are the proper recipients of a qualified written request under RESPA to find out certain information, including the note and mortgage holder).  Under the UCC, the note and the mortgage are supposed to be held by the same entity, and most of the time, that is what you will find.  However, in the heydey of MERS (Mortgage Electronic Registration Systems) the mortgage and note were often separated.
  6. Obtaining all of the mortgages also helps to establish rank and priority.  The first mortgage holder is usually the one first recorded.  A first mortgage that is refinanced after a second mortgage has been recorded could lose its priority status if it does not have a valid Subordination Agreement.  Why does this matter?  Take my original example.  If the property is worth $120k, and instead has a first mortgage of $50k and a second mortgage of $150k, then there is $70k equity for the second mortgage to attach to, and it cannot be stripped.
  7. If you are successful in stripping your lien, the judgement must be filed and recorded with the Register of Deeds’ office.  The judgement should also reference the legal description of the property.
  8. Debtors may wish to employ the services of a title company to ensure that the judgment is properly recorded.
  9. There had been a split in judicial opinion about whether a debtor had to be entitled to a discharge in order to strip a lien (the so-called Chapter 20 scenario, in which someone files a Chapter 7, gets a discharge, then files a no-discharge Chapter 13 to strip a lien).  The case law was veering in the direction of saying ‘yes’ you did have to have a discharge.  The Ryan opinion pretty much settles that question as a firm ‘yes’ – at least in the 7th Circuit.
  10. A copy of the discharge should be served upon the mortgage company or their attorney upon successful completion of a Chapter 13 Plan.  It may also be advisable to attach a copy of the discharge with the judgment that will be filed and recorded with the Register of Deeds’ office.

Proposed National Model Chapter 13 Plan

This is a post that will probably be more of interest to bankruptcy practitioners than bankruptcy debtors.  However, there is potential for some substantial changes that will drastically impact how Chapter 13s are administered, so potential bankruptcy filers shouldn’t completely blow this off.
Currently, each federal district has its own way of handling Chapter 13 Plans.  Most if not all have a “model plan” which is the form template attorneys and debtors are encouraged to use when drafting the Chapter 13 repayment plan.  Many districts have made use of their model plan mandatory.  I was on the Local Rules Committee back in 2009, which ultimately made our model plan in the Eastern District of Wisconsin mandatory in early 2010, if memory serves (and over my sole objection).  In districts without a mandatory plan, attorneys can and do have their own versions.
But even if each district adopted a mandatory model plan, it would still leave 94 different plans, which makes it difficult to create uniform case law.  It also becomes burdensome to creditors who do business nationally (though as debtors’ counsel, I care less about that).
So, for quite some time now, a committee has been established to draft and propose a national model plan for use everywhere in the United States.  There are also proposals floating around to the Federal Rules of Bankruptcy Procedure to accommodate this national model plan.  The proposal for FRBP 9009 would prohibit alteration of the model plan except in the special provisions area of the plan.  That rule seems to suggest that the committee will recommend that the model plan be mandatory (and frankly, if it isn’t mandatory, there isn’t much point in having a model plan).  The downside to a mandatory plan, of course, is that if the plan is not drawn up well, it will – at the very least – create some administrative problems.  Worst case, it has the potential to force changes on the rules and procedures at the local level.  Also, there are rumors that what is allowed in the special provisions section of the model plan will be far more restrictive than what we currently do in the Eastern District of Wisconsin (which is basically – ‘anything goes’, so long as it doesn’t violate established law).
So what do we know?  Well, the rule-making process is a long and arduous one.  If everything remains on schedule, the earliest we expect to see implementation of this proposed national model plan is December 2015.  That’s right – 2.5 years from now.  On the upside, this gives us more time to address concerns that exist concerning the current draft of the model plan.

It is worth noting that there is a form modernization project in the works (also referred to as the form lengthening project).  Although there appears to be no set date yet, I expect the new forms to go into effect December 2013, roughly coinciding with the eight year anniversary of BAPCPA.

Because this is the early draft, and is likely to go through substantial changes after feedback has been submitted, there’s not much point in going through the document line by line.  I do want to highlight a few of the expected changes that I think will be the most dramatic.
FRBP 3002 – would shorten the time-frame for filing proofs of claim.  Currently, it is 90 days after the sec. 341 meeting of creditors, which itself is scheduled between 21 and 50 days after the bankruptcy petition is filed.  So all in all, creditors have upwards of 4-5 months to file a proof of claim.  The government has 180 days (or 6 months) after the petition date to file its claim.  This makes administration of a case difficult, as plans are often confirmable long before the bar date to file claims has passed, and feasibility can’t really be addressed until all claims have come in.  So, the new bar date should really help in administration.  The catch is – the government’s 180 days appears to be unaffected by the proposed rule change.  I don’t mind the government getting more time to file claims that private creditors, but 6 months seems excessive to me.
Certain actions to strip liens that have traditionally been done by separate motion or adversary proceeding.  Those are now being folded into the plan, which does cut down on paperwork.  To address notice requirements, however, Rule 3015 is expected to be amended to integrate enhanced service requirements of the Chapter 13 Plan in those circumstances.
The current draft of the plan is no doubt reflective of the districts that its chief authors hail from.  There are a lot of references to confirmation hearings, which not all districts have (unless a creditor objects to confirmation).  Our judges have stopped having confirmation hearings in cases that are not being contested (after the appropriate time to object has passed).  At the moment, lessons learned in law school escape me, and I forget the relative authority of the federal rules to district court cases.   But if this model plan doesn’t force districts to hold confirmation hearings, the language is going to make administration of the plan tricky.
The current draft also is pretty rigid in how payments are structured.  It doesn’t provide for splitting payments between joint debtors, it doesn’t provide for customization of payroll orders into weekly or bi-weekly pay periods, and it only provides for one step provision.  Of course, these issues can be addressed in the special provisions section, but we could save a LOT of unnecessary special provisions by having a better structured paragraph.
The tax refund committal paragraph is similarly rigid and doesn’t account for variances in local customs on the subject.
Another concern is that the plan allows certain “options” that are not available in all districts or not available in all circumstances.  It is said that the Chapter 13 Plan is being drafted to help pro se debtors.  Quite frankly, Chapter 13 is complicated enough that no debtor should try it without an attorney.  Moreoever, without the legal knowledge, pro se debtors will be filing uncomfirmable plans because they won’t know in which districts or in which circumstances certain plain provisions are available.
Other concerning language – the absence of a provision that discusses which aspects of administration are controlled by the plan and which aspects are controlled by the proof of claim; and language in the signature section allowing debtor’s counsel to sign the plan without the debtors’ signatures; the conduit mortgage provision isn’t terribly detailed enough for districts that do not have conduits as a default.  On the upside, this version provides for vesting of property of the estate upon “closing of the case” instead of upon “discharge”, which helps resolve an ambiguity in attorneys who prefer not to have revestment on confirmation, but are filing cases in which a discharge is not available.
Those who wish to review the proposed rule changes or the proposed model plan can try the following links:

Spotting fraud (and how literacy can help).

The other day, I received an e-mail from a a woman who works for a local bank.  She was concerned because one of my clients had taken to writing threatening e-mails to the bank, stating that the bank held no valid mortgages, that by accepting payment from the client, they were committing fraud, and demanding documents that (quite frankly) don’t exist.
It’s interesting to note that this bank is the creditor that I have sued more times than any other creditor for artificially pumping up appraisal values in order to give out home equity loans to homeowners who are already underwater with their first mortgage.  Why is that interesting?  I’ll get to that in a minute.
The banker asked me to investigate and reach out to my client to figure out what was wrong.  And so I did.  My client responded with two lengthy e-mails and two forms (eight pages in total) attached that I had to parse through.
Apparently, my client had been targeted by a group that I am going to refer to as “PT76”.  There isn’t a whole lot of information (and even less reputable information) available on this group.  But from what I could gather, this is an ultra-nationalist, quasi-anarchist, anti-corporate organization.  That’s the polite version.  A more apt description would be an ultra-radical gang of tinfoil hat wearing thugs.
The forms were nothing more than gibberish. Someone strung together a long mess of legal-sounding words in the apparent hope of sounding smart, tough, and ultimately – legitimate.  It’s not even fair for me to say that they were misstating the law.  More accurately,they weren’t saying much of anything.  Their intent appears to be to incite and rile up victimized American consumers.
Here’s the crazy part.  I *should* be with these people.  Anti big bank?  Hell yeah!  I’ve been working in bankruptcy too long not to have developed a vitriolic hatred for the big banks.  Pro government reform? Absolutely!  I’m tired of listening to Congressmen behave like spoiled brats on a school playground.
That forced me intro a little Cartesian bout with existentialism.  For those of you who haven’t had a class in Philosophy, think: Matrix.  I can only be aware of my own existence.  Everything else could be an illusion.  So, for all I know – I’m living in a fantasy world, and these people whom I have dubbed ‘tinfoil hat people’ are the only ones with their heads screwed on straight.
But I got over it, and here’s why.  My beef with PT76 is NOT that they are stupid or uninformed.  I do not think that a person has to be highly educated in order to express an opinion.  I do not think that a person must be wealthy enough to hire an attorney to be active in politics or government.
My problem with PT76 is that they are too emotional not to be involved, but also too lazy to be involved properly. It’s one thing to be stupid.  It’s quite another thing to be stupid, but try to pretend that you’re smart.  When you string a bunch of nonsensical and incoherent legalese together in order to feign legitimacy, intelligence, and strength, then you are no better than the ‘bank cartels’ you claim to be rising up against.  How can you call the bank’s conduct fraud when you yourself are engaged in fraud?
One of the dead giveaways that PT76 is a group of morons were the forms they supplied to my client.  A fifth grader could have composed better forms.
Cell phones and Twitter have been the biggest enemies of literacy – forcing people to abandon years of formal English training in favor of absurdly long acronyms and abbreviations.  People have a tendency to mock those of us who are sticklers for good grammar and spelling.  Some might call me a literary snob.  You know what?  I am.
You could argue that presentation is’superficial’ and unimportant relative to the content of the words.  But I disagree.  The use of good grammar and style – particularly in this case -had a much bigger impact on the forms presented by PT76 than the words did(which were meaningless drivel).
The forms offered by PT76 were riddled with misspelled words, poor grammar, faulty capitalization, faulty punctuation, poor spacing, poor alignment, and poor formatting.  Anyone who was educated enough to speak intelligently enough about the laws that PT76 was referring to would have had the basic composition skills necessary to churn out a decently formatted document.
Does that mean that all properly formatted documents are legitimate?  Of course not.
Does that mean that a document with a single type-o is not legitimate?  Of course not.
A document that reads like it was prepared by a fifth grader is, however, pretty indicative that its content is equally specious.
Grammar and style are important.  Using words properly goes a long way at effectively communicating your ideas with other people.  But more importantly – people who have to read your poorly-formatted documents will become fatigued when they have to spend half their energy trying to translate your poor grammar into actual English, and they are more likely to disregard what you have to say.

BAPCPA’s Silly Tax Return Gap

Under 11 U.S.C. § 1325(a)(9), a Chapter 13 Plan cannot be confirmed if the provisions of 11 U.S.C. § 1308 have not been met.  1308 requires that a debtor who has filed for bankruptcy under Chapter 13 must have filed his or her tax returns for the past four taxable periods ending before the date their case was filed.
This creates a peculiar situation.
A debtor who files bankruptcy after December 31, 2012 will not be able to have their Chapter 13 Plan confirmed until their 2012 tax returns have been filed with the IRS and their state department of revenue, EVEN THOUGH said tax returns are not due until April 15, 2013.
Debtors who need immediate protection under the bankruptcy stay can still file before their tax returns have been filed, but confirmation gets delayed until those returns have been filed.  However – particularly for above-median debtors – the 2012 tax returns are important.  Speficially, they are often needed to compute actual tax liability on line 30 of the Means Test.
I encourage my clients who need to file under Chapter 13 to try to file before the end of the year.  Except under certain circumstances (e.g. where delaying might yield a more favorable Means Test result), it is to their advantage to do so to prevent the tax return problem from causing unnecessary delays in confirmation.  Those needing to file after December 31 are strongly encouraged to have their tax returns filed promptly and – ideally – before their bankruptcy case is filed.