Boston Bankruptcy Lawyer Blog

Massachusetts Lawyer Denied Bankruptcy Discharge

Mon, 30 Aug 2010 10:15:26 -0500

Personal bankruptcy law gives the debtor a "fresh start." The bankruptcy petition will be denied, however, when the Trustee finds assets or a fraud in the Petition. In another case handed down this month by Federal Bankruptcy Judge Feeny, a lawyer attempting to discharge his debts had his bankruptcy case denied because he "concealed property of the [bankruptcy] estate, failed to maintain accurate, complete and reliable books and records, or made false oaths or accounts in connection with his case" such as bank accounts, investment accounts.

In this case, the lawyer debtor made false statements in his Petition, on his Petition Schedules, in oral testimony at the 341 Creditor's hearing, and that those false statements were "material and intended to mislead the Trustee and creditors." The attorney debtor also failed to disclose assets such as contingency fee cases, where a future settlement or judgment was clearly an asset. The debtor's defense was lack of intent, however, the Court found the opposite due to the "nature and extent of the inaccuracies."

Social Security, Lies and Videotape - a Massachusetts Consumer Lawyer's Perspective

Tue, 24 Aug 2010 10:21:54 -0500

This note is not intended as a primer on Social Security, but a brief essay, by a Boston bankruptcy attorney who regularly receives a host of questions from clients on where its going, where it came from, and what is does now. From its inception during the Great Depression in 1935, the Social Security Act was expected to "To provide for the general welfare by establishing a system of federal old-age benefits and by enabling the several states to make more adequate provision..." Essentially, the federal Act was intended to provide economic security for all; a matter too critical to be left to the several states and their various laws.

With the economy devastated by the Great Depression and no longer relying on local farming, there was need for a federal action. President Roosevelt established a Commission which modeled the Act on German leader Bismarck, who, in 1889 designed the contributory pension system. Most of Western Europe adopted some form of what we know as Social Security before 1935. The Act covered assistance to the states to provide for three basic needs: the aged, the blind and dependent children. The law has been amended and augmented numerous times since then. In 1965 Medicare was added, to provide for medical care for the aged and in 1972 the cost of living adjustments were added.

Experienced Massachusetts Personal Bankruptcy Attorney Reprimanded

Tue, 17 Aug 2010 13:22:21 -0500

The Federal Bankruptcy Court in Boston handed down a decision sharply criticizing an attorney with 28 years of experience for putting his two clients, an elderly widow and her disabled daughter, through duplicative bankruptcy proceedings and attempting to collect excessive fees for both. Judge Boroff stated that it had "particular dismay with respect to the type of conduct" of the attorney. Based on the Court's decision, clients seeking personal bankruptcy attorneys in Boston need to be ever vigilant about the reasonableness of the recommendations by those attorneys.

The Court examined the Bankruptcy Petitions and determined that notwithstanding the Chapter 13 filings, the petitioners had simple, straight forward, Chapter 7 cases. Nevertheless, the attorney, in order to secure a fee, filed Chapter 13 petitions for the clients. The attorney's proposed Chapter 13 Plans called for the debtors to pay $7,918 ($3,959.00 each), or 94% of all distributions to the attorney himself! There was nominal monies going to the creditors and the Chapter 13 Trustee found that it did "not appear to be in the Debtor' best interest to be in a Chapter 13" proceeding.

Massachusetts Credit Score News for Consumers

Wed, 11 Aug 2010 12:00:01 -0500

Many of our personal bankruptcy clients, now free of their debts, are looking for homes in this market. A problem for home buyers these days is that the FICO score has come to matter more and more following the credit crisis. Fannie Mae and Freddie Mac wont purchase a mortgage from the front line lenders if your credit score is below 620. This is notwithstanding the fact that many bankers will freely admit that the FICO score is not the best predictor of responsibility in consumer lending - home equity and debt to income ratio are far more significant. So is job stability and marketable assets.

We recommend that you work with lenders. Work on reestablishing your credit scores and research places where the magic cutoff number does not apply. The website Lending Art provides mortgage lenders credit score requirements.

Protecting Retirement Accounts in Massachusetts Personal Bankruptcy

Tue, 03 Aug 2010 16:40:17 -0500

Massachusetts consumers who file for personal bankruptcy protection are fortunate when it comes to protecting retirement accounts. This is because whether they use the bankruptcy state exemptions (generally used when protecting a home with equity) or the federal exemptions (more generous for other assets), retirement assets can be protected if the Bankruptcy Petition and Schedules are properly prepared and filed.

Most retirement accounts that are employer sponsored, such as 401(k) accounts are protected under the Employee Retirement Income Security Act (ERISA). In fact, other than domestic (divorce) or tax (IRS) actions, those assets are generally fully protected from creditors.

Individual Retirement Accounts (IRAs) are not protected under ERISA, however, they are protected in both the state and federal exemptions with certain restrictions.
These are general rules, and consumers should not transfer assets into our out of what they perceive to be a protected vehicle without first talking with an attorney.

Boston Attorney Fails to Attend Personal Bankruptcy Creditor's Meeting Penalized

Fri, 30 Jul 2010 11:13:37 -0500

When personal bankruptcy attorneys are retained, their responsibility includes informing the client of the law, drafting the Petition and Schedules, filing the documents with the Court, and attending the Creditor's Meeting, or §341 Meeting. In a recent case handed down by the United States Bankruptcy Court, a Boston attorney failed to appear at the Creditor's Meeting for five different clients.

In fact, he sent his legal assistant, who was not an attorney. "The debtors [clients] were right to be indignant," the Court stated. "The 341 Meeting is most often a debtor's first exposure to the public face of the bankruptcy process and to the adversarial forces potentially arrayed against her...[the attorney] abandoned his clients at the moment they needed him most." In addition, this attorney was aiding his assistant in what is called "unauthorized practice of the law" which is against both federal and state rules.

The case, In Re: Otero, Heather M. et al, was decided by Judge Hoffman on June 18, 2010.

Massachusetts Personal Bankruptcy Filings Up for First Half of 2010

Tue, 27 Jul 2010 09:39:49 -0500

The numbers for the first half of the year are in and our Massachusetts personal bankruptcy clients will understand: chapter 7 personal bankruptcies are up 17.6% over that period. Chapter 13 reorganizations are up 62%! While these numbers are grim, the good news is that bankruptcies tend to be a lagging economic indicator; they rise after a great fall in income and following the worst part of recessions.

"A total of 11,847 filers statewide sought protection under Chapter 7, Chapter 13, and Chapter 11 of the U.S. bankruptcy code in the first two quarters, up from 9,461 a year earlier," according to the Warren Group. "The number of filings was also 13.7 percent higher than the previous two quarters, when there were 10,419 filings."

Increasing Your Credit Score after Personal Bankruptcy in Boston, Massachusetts

Sun, 25 Jul 2010 10:01:21 -0500

A client called us the other day and reported that now that he was 18 months post bankruptcy, his FICO credit score was 640, he was getting better and better rates on his credit cards, and that he was "overjoyed" at how "easy this was" once he was given the relief that the "fresh start" the law promises. Apparently he has been following the simple rules that improve credit scores.

We have written about this on prior occasions and we are pleased that the information is helping clients. The following is adapted from our website about reestablishing credit after bankruptcy.

1. Live within your means. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.

2. Pay your reaffirmed, pre-bankruptcy debts on time; 35% of your score is based on payment history.

3. Pay your utility bills and rent on time; these folks report to credit agencies. 30% of your score is based on amount and type of outstanding debt.

4. Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money. Use a debit card and then apply for a credit card from that bank. 15% of your credit score is based on length of credit history.

5. Apply for store and gas credit cards where you would normally pay cash. Use but pay timely. Don't do this too many times as 10% of your credit score is based on the numer of new accounts.

Notes from a Boston Bankruptcy Attorney Before Suzie Goes off to College

Fri, 23 Jul 2010 09:47:28 -0500

Clients often ask their consumer attorney how to teach their college bound kids about credit and finance. At the intersection of when their income is low and needs are high, these enthusiastic young folks need clear instruction on how to manage their financial life. A wonderful approach to dealing with offspring and their finances is in Michael Stopler's book, Wealth: An Owner's Manual. The simple approach is to open a bank account which Suzie, or both of you, has access to, have her put her earnings in and you put a monthly, or quarterly, allowance in. The account can have a checking and debit card and Suzie is responsible for managing the account. Another approach is to give Suzie a credit card that you are responsible for.

Unfortunately, we see a lot of these credit card bills, one, two or 10 years later. Suzie had some problems and now the parents are in bankruptcy, partially because of these debts. If the credit card was in the parent's name, the parent is responsible. On the other hand, this does allow Suzie to build up some credit, and for the parents to monitor the expenses and to teach responsibility from time to time.

Massachusetts Consumers Await Obama's Appointee to Financial Consumer Protection Agency

Thu, 22 Jul 2010 09:57:54 -0500

Now that Congress has passed the 2010 Consumer Financial Protection Act, our consumer clients ask how it will affect them, who will lead the agency, and when. Daily media reports indicate that while Harvard's Elizabeth Warren, the consumer champion, is still in the running, no decision has been by the Obama administration. While we agree that Warren's relentless push for consumers entitles her to full consideration, our desire is that the ultimate results of "reform" are consumer focused, and not, as in the prior 2005 Act, bank focused.

A quick review may be in order. In 1994, the National Bankruptcy Review Commission was established. The author of its report in 1997 was Elizabeth Warren. Ms. Warren's findings clearly indicated that mortgage lenders, and others, needed tighter regulation. Unfortunately, Congress rejected the proposals of the Commission and passed the 2005 Bankruptcy Abuse Prevention and consumer Protection Act. This law was written by and for the lenders and banks. Sure, it has reduced a few consumer bankruptcies. However, mostly it has increased costs to consumers: costs and interest rates to consumers went up, lending became looser, the financial crisis occurred, bankruptcies and foreclosures skyrocketed.

We are watching and waiting to see what the administration will do, what the new agency will do, and, most significantly, what the results will be.

New Federal Consumer Agency -Massachusetts Scholar to Lead?

Wed, 21 Jul 2010 17:49:16 -0500

Elizabeth Warren, Harvard Law School Professor and the champion of the Consumer Financial Protection Bureau law, passed by Congress and signed into law by President Obama, may be on the short list to lead the new agency. Warren was the Chairperson of the Federal Oversight Committee making recommendations to Congress Regardless of the president's final choice; Warren has been a champion for consumers like our clients who are filing bankruptcy in record numbers. The new law will have multiple consequences for consumers. We intend to write several articles to review the law.

Massachusetts Consumer Protection Statute, 93A, Attorney Fees and Interest

Mon, 19 Jul 2010 17:45:38 -0500

In a ruling by the Federal District Court in Massachusetts, Judge Young held that when a consumer wins a Consumer Protection claim (93A case) and the Court orders that the defendant pay the consumer his or her attorney fees, interest on the attorney fees begins to accrue when the original judgment enters. In Massachusetts Courts court, the interest rate is one percent per month from the time suit is filed http://www.ncsconline.org/WC/Publications/KIS_PreCivPJIPub.pdf , however the federal court rate is 5.22% from the judgment date. This one reason why our clients appreciate having their consumer protection cases heard in state courts.

In this case, the plaintiffs were awarded a victory on the case and had to await some time before attorney fees were calculates. Apparently, the issue became when to start accruing the interest on the attorney fee portion of the judgment: from the time of the initial victory, or from the later time when Judge Young actually made his attorney fee finding. The Court decided that while the First Circuit has not made a determination, other Federal Circuit Courts have, and they go back to the date of the initial judgment.

Credit Scores and their Meaning to Massachusetts Consumers

Fri, 16 Jul 2010 09:31:37 -0500

Our personal bankruptcy clients have many questions regarding their _blank">credit scores. We have written numerous times on this topic. Today we want to remind clients that while having a top credit score is nice, having an average credit score means paying more interest on loans. On the other hand, having a score below 650 begins to mean trouble. According to a FICO report released this week, 35% of all consumers have credit scores below 650 which makes them unworthy for prime loans for credit cards or other loans. 25.5% scored below 600.

The reasons for this mainly include a run up in credit card debt and, of course, defaults. There are many simple ways to attack this problem, mostly focusing on: reducing debt!

While we help clients with personal bankruptcies, we also help clients with budgeting, prioritizing, and often with negotiating one or more of their debts.

Financial Literacy and Subprime Mortgages in Massachusetts

Tue, 13 Jul 2010 09:47:29 -0500

In a recent study economists found a "large and statistically significant negative correlation" between financial literacy and subprime mortgage defaults. In our opinion, the ramifications run deeper than putting a new agency under the Federal Reserve Bank, the so called Financial Reform Act. Our clients, more and more, are asked to manage their retirement accounts (401k, 403b, IRA, etc.), and to make non-retirement savings decisions. Indeed, the economists stated: "Of even greater concern however, is that differences in financial literacy are correlated with consumption and savings decisions."

The study is replete with statistics and interesting findings. For example, the folks at the bottom 25% of calculation skills, 20% had been foreclosed on; whereas, only there were only 5% of foreclosures in the folks who scored in the top 25%. The work was published by the Federal Reserve Bank of Atlanta (with research from the Boston Federal Reserve Bank).

Final phase of CARD Act begins August 2010

Fri, 09 Jul 2010 10:45:12 -0500

In February 2010, the second phase of the Credit Card Accountability Responsibility and Disclosure (CARD) Act significantly changed the terms consumers were held to by credit card companies. The CARD Act generally made credit card terms more friendly to consumers, since all credit card companies are now held to the same standards.

There is more good news for consumers, especially those consumers who are in the process of rebuilding credit after bankruptcy. The third phase of the CARD Act will come into action in August 2010 and incorporate the following updates:

1. If the borrower makes a payment 60 days late and suffers an increased interest rate, six months of on-time payments will cause the interest rate to return to the original rate.
2. Gift cards will not expire before five years and will not be subject to inactivity fees.

Although this is good news, consumers should still be cautious. Credit card companies may create new rules or change the existing terms of your credit card agreement to counteract these mandatory changes. Read any changes carefully, and don't forget to keep an eye on your overall credit by requesting your free annual credit report.