The Florida Bankruptcy Law Blog

The Bankruptcy Trustee Is Not The Debtor's Friend

Once in a while our office gets a call from the Chapter 13 Trustee or one of the Chapter 7 trustees telling us that one of our clients called or wrote their office about an issue in or question about their case. We then contact the client and explain to them that when they are represented by an attorney in a bankruptcy case their attorney should handle all communications with their bankruptcy trustee. Why would a bankruptcy debtor bypass their attorney and speak directly to a trustee?

I think some clients try dealing directly with their trustee because they believe they will get a faster response, and some may think they will be charged legal fees if they asked their attorney to call the trustee (rarely true). In some cases the debtor wants to verify, or have explained, an answer they have already received from their bankruptcy attorney.

One of our bankruptcy trustees discussed this issue at a meeting with a group of bankruptcy attorneys. The trustee told the attorney group that when a represented bankruptcy debtor calls his office he assumes that there may be a problem in the bankruptcy case. His assistant will always review the bankruptcy file for unresolved issues or overlooked facts. More often than not, his review will result in problems for the debtor.

The Trustee told the attorneys that, "no good thing can happen from a (debtor) calling a trustee." He advised us to explain to our bankruptcy clients that the trustee is not the debtor’s friend.

Orlando Bankruptcy Courts To Take Tougher Stand On Automobile Valuation

I have heard from several sources that  Orlando Division bankruptcy courts are getting tough on car valuation in Chapter 7 bankruptcy. I have written previous blog posts about bankruptcy clients who successfully used valuation sheets from CarMax as evidence of their non-exempt car’s valuation prior to filing. Bankruptcy debtors found that the CarMax appraisals were lower than NADA or Blue Book valuations during the economic crises and gas crises when car valuations dropped precipitously. During the past year most Chapter 7 trustees accepted CarMax appraisals because on the theory that CarMax appraisals constituted purchase offers and were true indicators of what an arms-length buyer is willing to pay in the current market. Also, trustees found they could not get NADA values when they auctioned a debtor’s vehicle and that the CarMax valuations were a reasonable statement of market value. The policy is changing and become stricter.

U.S. Trustee Demonstrates More Flexible Means Test Analysis For Recently Unemployed Chapter 7 Debtors

A debtor’s income for purposes of the bankruptcy means test is based on his last six months actual gross income. The six month income is doubled to arrive at an annual income number. In today’s economy many people are considering bankruptcy because of recent job loss. Sudden unemployment can produce an inequitable bankruptcy means test result. When a is suddenly unemployed the means test strictly applied will be based on previous employment without consideration for future unemployment without significant income. A person who had been making a good income will likely fail the means even though he is unemployed and unable to pay his bills. Up to now, many recently unemployed debtors had to file a Chapter 13 bankruptcy based on prior employment and then convert to a Chapter 7 when it became evident they had no income to fund a Chapter 13 plan. This round-about Chapter 7 is inefficient and more expensive for the debtor.

Recently, our office discovered that our local U.S. Trustee office is now considering a different and more direct approach to bankruptcies of recently unemployed debtors. We have been told that we can file a Chapter 7 case for a recently unemployed debtor even though the means test based on previous income states that the debtor is ineligible for Chapter 7. If the petition explains that the debtor is without work or significant income with no immediate employment prospects the Trustee’s office will not reject the Chapter 7 filing. This represents a more compassionate and common sense approach to enforcing the means test which is designed to prevent abusive Chapter 7 filings.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Chapter 7 Trustee Goes After 2009 Prospective Tax Refunds

Bankruptcy trustees may be more aggressively seeking your income tax refunds. Tax refunds are non-exempt money in most bankruptcy cases. If you file bankruptcy during the first four or five months of the calendar year, and you are due or expecting a tax refund for the prior tax year, the trustee will take your tax refund. The asset at issue is the refund that was due the debtor at the end of the prior year, based on the prior year’s income and withholding, to be reported on the income tax return. I have received emails from two attorneys reporting that a Chapter 7 trustee at a creditor meeting has required that the debtor pay the trustee the year-to-date portion of the debtor’s expected tax refund for 2009, even though the tax return is not due until next year and the amount of refund is not set until the end of the tax year.

Financing Car Purchase During Chapter 7 Bankruptcy

Many Chapter 7 bankruptcy clients would like to surrender a car and escape an upside-down car loan, but they are afraid they will not be able to buy a replacement car. Many people have destroyed their credit by the time they consider bankruptcy and believe no one will loan them money to buy a car after there a bankruptcy filing appears on their credit report. I recently attended an attorneys luncheon in Orlando, Florida where one of the attorneys said many of her bankruptcy clients obtained car financing after surrendering an upside-down car in a Chapter 7 bankruptcy.

Mortgage Modification Program Enacted By Federal Government

I receive several emails and calls daily from people with problem home mortgages. This week several people have asked me whether they qualify for help under the government’s new mortgage assistance program. I read an article in the Wall Street Journal that described the two mortgage assistance programs implemented this past week. The Journal article included a chart that helped explain the program benefits and qualifications. I have reproduced the Wall Street Journal chart to assist Blog readers.  WHO WOULD QUALIFY

Attorney Helps Re-establish Credit After Bankruptcy

An Orlando attorney contacted me recently to discuss his law practice that focuses on resolving credit report issues and debt collection matters. I was happy to receive his call because many of my bankruptcy clients ask me for assistance dealing with collection agencies and repairing their credit score after they file bankruptcy. The attorney’s name is Walter Benenati, and he deals primarily in Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA) litigation.

Florida Bar Homeowner Assistance Article

A recent blog post described a voluntary program initiated by the Florida Bar to help homeowners negotiate with mortgage lenders. An article about this program appears in the current issue of the Florida Bar News. Link: Fighting against foreclosure. The Bar News is a trade publication distributed every other week to attorney members of the Florida Bar.

U.S.Trustee Seminar Helps Clarify Means Test Exemptions

The U.S. Trustee’s office in Orlando held a seminar to discuss their application of the Means Test. Among many interesting topics were the characterization of debts as either consumer debts or business debts. The distinction is important to determine if a prospective Chapter 7 debtor is exempt from the means test. If a debtor’s debts are primarily non-consumer debts the debtor is eligible to file Chapter 7 regardless of whether he passes the means test.

Could Prior Debtors File 7 Today?

I saw an interesting comment about the effect of the new bankruptcy law on Link: TPMCafe || The Bankruptcy Wars Continue. Apparently a study done by the Denver bankruptcy clerks office found that 80% of chapter 7 debtors who rushed to file just before the new bankruptcy law took effect would qualify for Chapter 7 under the new law. The primary difference between the old and new bankruptcy law for most debtors, the author says, is the amount of legal fees. He stated that his bankruptcy partner doubled his bankruptcy fee under the new law because of the amount of extra legal work required by the new bankruptcy law. Many consumers will be financially unable to file bankruptcy. The author doubts that credit card companies will actually see increased debt collections because more of their customers cannot take advantage of bankruptcy protection. If people can't afford a bankruptcy attorney they also likely cannot afford to repay credit card debt.