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10

Nov 2020

We Stop Navy Federal Trying to Pull a Fast One

Posted by / in Chapter 13 Bankruptcy, Weekly Posts /

We Stop Navy Federal Trying to Pull a Fast One

This is a story of Navy Federal trying to take unfair advantage of a disabled vet; and how we were able to stop them.

Harry is the disabled vet. He wasn’t able to quite make ends meet when he filed Chapter 7 Bankruptcy in 2015, even though he was working. His biggest creditor then was Navy Federal.  He had a credit card, a personal loan, and a car loan with Navy.  He gave up the car—it was a 2007 with 131,000 miles.

Three years later, his health got worse. He lost his job and with it part of his income. Then, this year he go behind on his mortgage, talked to me, and we put him in a Chapter 13 payment plan, so he could catch the house up.

Up pops Navy Federal, demanding to be paid.  Demanding to be paid on the car he gave up in his 2015 bankruptcy, and the personal loan he cleared; and the credit card he cleared.

Navy Federal demands to be paid on debts that were cleared in bankruptcy five years before.

That set off the Chapter 13 Bankruptcy Trustee.  Not at Navy Federal; the trustee went off at Harry.  “You were supposed to list everybody you owed money to and you left Navy Federal out. Why’d you do that?”  The trustee asks the judge to toss out Harry’s payment plan, saying Harry had lied to the court.

My first job as a lawyer was to calm the trustee down. Harry could lose his house if his payment plan got tossed out.

Now, Navy had to know about the bankruptcy. Because if they’d been asking for payment during these five years, we’d have set them straight. They never did. they didn’t say anything until the slip their paper—called a proof of claim—into the bankruptcy court.

Maybe it’s an honest mistake.

They Probably Broke No Rule

Supreme Court

In Midland v Johnson, the Supreme Court said a “proof of claim” doesn’t have to be valid, it just has to be a claim.

The odd thing is there’s probably no rule broken here.  Even if they did it on purpose. In a case called Midland Funding v Johnson, the Supreme Court looked at the word “claim.” When creditors want to be paid in a bankruptcy, they file a paper called a Proof of Claim.

According to the Supreme Court, there’s nothing that says the “claim” has to be enforceable, it just has to be a claim. The burden is on Harry—and me, his lawyer—to catch them when they try to pull a fast one.  This time, we did.

 

 

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26

Mar 2020

Can’t Make Your Chapter 13 payments?

Posted by / in Blog, Chapter 13 Bankruptcy, Weekly Posts /

The Big Bailout Helps If You have to Skip Chapter 13 Payments

The big bailout law, just passed, includes some slack for people in Chapter 13. If you can’t make your Chapter 13 payments, we can ask the bankruptcy judge to add up to 24 months to your payment plan. Before that law was passed, if you got permission to skip some payments, you had to catch up in the months that are left.

How Will This Work Out?

I don’t know yet how this will work out. I’m thinking it over and talking with other, smart bankruptcy lawyers, while we try to see the best way to use this law.

If you can’t make your Chapter 13 payments, we can ask the bankruptcy judge to add them on to the end.

 

Here’s a little more info Covid-19 and the 7 Year Plan «. Asking for more time only applies to people who already have an approved plan.  If you are not yet approved–or haven’t filed yet–you can’t ask for the extra two years to pay.

 

 

 

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28

Jan 2016

Chapter 13 in Virginia–A New Nightmare

Posted by / in Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

Chapter 13 in Virginia–A New Nightmare

The Bankruptcy Judge in Norfolk just made chapter 13 in Virginia even more dangerous.  And last night one bankruptcy judge in Alexandria hinted that he agrees.

 

Chapter 13 bankrutpcy in Virginia--Tidewater at this court house

The Bankruptcy Judge in Norfolk is in this Federal Courthouse

The issue came up the the case of In re Marlene Evans.  Ms Evans made her bankruptcy payments to the Chapter 13 Trustee for five years.  According to her plan, she had paid about $4500 toward $23,000 in debts, and the rest of it was supposed to be discharged–gone.

Not so fast, said the Chapter 13 Trustee, Clint Stackhouse.  The Trustee said, you paid me, but you are behind with your mortgage payments. And sure enough, Ms Evans admitted she was about ten months behind on the mortgage.

That means, argued the Chapter 13 Trustee, you didn’t keep all your promises–you paid me, but not the mortgage.  And you promised to do both.

The Judge, Stephen St John, agreed.  Even though she had paid what she promised toward the $23,000–mostly credit cards, personal loans and payday loans–they are allowed to start chasing her again, when the bankruptcy was over. Why, because she fell behind with the mortgage payments.

This doesn’t seem fair.

It doesn’t seem fair.  Ms Evans paid what the credit cards were promised–why does she have to pay them again?  Since she admits she’s behind on the mortgage–well, everybody has always agreed that the mortgage company can come after her for that.  And if she can’t work it out, she’ll lose her house.  But why do the credit cards get to hide behind the mortgage company?

And it happens a lot in Chapter 13

People often finish Chapter 13 a few months behind on their mortgage.  That’s because Chapter 13 budgets are very tight.  In Northern Virginia, where the cost of living is real high, they are very, very tight.  So after four years of the Chapter 13 trustee draining every available cent from your budget, towards the end, you may need a $2500 car repair.  And skipping the last couple mortgage payments seems like the only way to do that. Figuring when the Chapter 13 payment is done, then there’s money to catch up the mortgage.

That strategy is now officially a disaster, at least in Tidewater, and maybe in all of Virginia.

The Judges in Alexandria

Last night was the annual dinner of the Bankruptcy Judges and the bankruptcy lawyers.  The Judges got to talk for an hour, and Judge Robert Mayer brought this up.  He didn’t say he agreed (Judges are supposed to tell you what they think–except when you are in court in front of them.) But he did say that “most courts around the country” that have decide this, have all decided the same way.  

UPDATE: Ms Evans Loses Her Appeal

A US District Court Judge in Norfolk, today on January 13, 2017, agreed with the bankruptcy judge. (You can read it here. Evans v Stackhouse.)  It’s now the law in Virginia. If you finish your Chapter 13, and pay the credit cards all your promised, but fell behind on your mortgage, your bankrutpcy is tossed out. The credit cards are allowed to start chasing you all over again.

What’s the lesson? Avoid Chapter 13

Here are some disadvantages of Chapter 13, compared to Chapter 7.  

1.  If your income increases after you start paying, the Chapter 13 trustee will want more.

2.  If you inherit money while you are in Chapter 13,  that money goes to the Chapter 13 trustee.

3. In many cases, the bankruptcy trustee takes your refund.

4. It’s worse on your credit than Chapter 7.

5. Less than half of Chapter 13 filings succeed.

6.  And now, you can complete your payments and still not get a discharge, if you slip behind on your mortgage payments.  

 

hank hildebrand chapter 13 trustee

Tennessee Chapter 13 trustee Hank Hildebrand says Chapter is a “complex, expensive, unproductive system.”

If there’s any way, you want to avoid Chapter 13.   

Hank Hildebrand, Chapter 13 Trustee in the Middle District of Tennessee, and one of the nation’s most frequent speakers on Chapter 13 issues describes Chapter 13 as a “complex, expensive and unproductive system.”  

One more darn thing.

Just had a ruling from the 11th Circuit.  Suppose during the Chapter 13, you are injured in a car accident.   If you go ahead and sue for your injury, without first telling the bankruptcy court, you forfeit your right to sue for that injury.  

Chapter 13 is Anti-family

Client, two years into Chapter 13, asked me today if getting married will affect his Chapter 13 plan.  Well, it might. If the spouse is working, too, the trustee can claim that the increased family income is a substantial, unforeseen change, and ask that the payments be increase.

The members of Congress of the Judiciary Committee, who care about family values, could support a change in the law that blocks the trustee from arguing that.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES