Boston Bankruptcy Lawyer Blog

In Atlanta, Michael Shaw, an associate at the law firm of Greenberg Trauig, pleaded guilty to fraud after it was discovered that he stole over a half of a million dollars from his own law firm. Apparently after undertaking the work for the firm, he would then send his own work to the firm stating that an outside vendor did the work. The work included investigator services and real estate title work. The firm paid the (fake) bill to outside vendor, which was a scam - Mr. Shaw had stolen one of the firm's client's social security numbers to set up the fake vendor! When the firm paid the bills, he would forge the name on the check and deposit the monies into his own account. When asked if Mr. Shaw could file bankruptcy to discharge the debt, our opinion is that fraudulently obtained debts are not dischargable in bankruptcy.

Mr. Shaw was disbarred by the Georgia Bar and, in pleading guilty in criminal court, faces up to 30 years in jail for his crimes.

Bankruptcy Courts throughout the United States are vigilantly pursuing fraud by debtors who file Chapter 7 bankruptcy. In a Nevada case, a man from California was indicted by the federal US Attorney there for bankruptcy fraud. Apparently, in 2005, the man filed a Chapter 7 bankruptcy petition but failed to list a bank account he controlled with $100,000 in it.

The theme seems to be that some of these folks seem to believe that they can lie under oath in Chapter 7 bankruptcy and that the Federal Courts, with the powers of the US Trustee's Office, will not find them.

Don't lie. We all learned this by kindergarten. You can't lie under oath either. If this derivation of "don't lie" wasn't learned during the Clinton administration, what was? In a case decided by the Bankruptcy Court on September 15, 2010, the Court found that the debtor lied, under oath, on his Statement of Financial Affairs, which is a critical part of the personal bankruptcy petition and schedules. Apparently the debtor "failed to disclose the identity of several corporations in which he had an interest" on his Petition and Schedules. The Court found that as a trained accountant, and as someone who did disclose those corporations on recent tax returns, the debtor was, simply, lying. The Petition and Schedules are signed under oath, and under oath, the Trustee at the Creditor's Hearing asks each debtor if the Petition is true and accurate.

In the case, In Re: Gorman, the U.S. Bankruptcy Court pointed out that the false oath was "material." Apparently the debtor also held corporate offices, which he failed to disclose. The debtor's defense was, first, that there was no value to the corporations he had an interest in, and second, that he "was distracted" and the Court pointed out that these two defenses "are inconsistent with each other" and that the debtor acted "knowingly and fraudulently." The case was sent back to the U.S. Trustee for a denial of discharge.

The elderly are filing bankruptcy at increasing rates because of credit card debt, according to new research. The study, by Michigan Bankruptcy Law Professor John Pottow, shows that the number of elderly filing for bankruptcy protection increased from 2.1% in 1991 to 7% in 2007. Professor Pottow, who testified before a Congressional Committee in July 2009, made news by showing that our healthcare system was bankrupting Americans, and in particular, putting elderly Americans into bankruptcy.

Pottow's research, undertaken through the Consumer Bankruptcy Project and citing Elizabeth Warren's work shows that, using a broader definition of Email This Post

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On October 15, 2010, the Social Security Administration announced that, for the second year in a row, that cost of living benefits will not be increased. This is based on the Consumer Price Index which was flat for the latest one year period. This is the second year in a row that Massachusetts consumers will not see any rise in there monthly benefits. Those folks that rely on Social Security payments for the bulk of their income, have had two years in a row of zero increase. This applies to all 58.7 million beneficiaries.

Social Security income is the primary source of income for 64% of recipients; one third of all recipients rely on Social Security for 90% of their income.

The flip side of the equation is that the ceiling for workers paying into Social Security will not be allowed to be raised in 2011. That income ceiling is set now at $106,800. All earned income above that amount will not be taxed for Social Security.

Massachusetts Institute of Technology economics professor Peter Diamond was awarded the Nobel Prize in Economics. The Swedish Academy awarded Professor Diamond and two colleagues the award for an unemployment modeling that can be used in other economic arenas. According to the Nobel Prize Committee "the laureates models help us understand how unemployment, vacancies and wages are affected by [state] regulation and economic policies." Also called "markets with search frictions," the research examined the marketplace, including unemployment, where buyers and sellers don't easily find each other. Massachusetts consumers who are concerned about jobs and employment should appreciate the timeliness of the award, considering the 8.8% Massachusetts unemployment rate.

Dr. Diamond's "A Model of Price Adjustment" published in 1971 showed that, contrary to Econ 101 theory, competition can lead to monopoly pricing. This occurs when identical sellers that fix their prices lead to consumers failing to search for a better price. Professor Diamond's work proved that increasing unemployment insurance enables workers to pass up more marginal jobs. "In contrast to the classical models established in these markets, buyers and sellers do not always contact each other instantly and the demands and objectives of each are not always satisfied, as happens with companies seeking employees and those seeking a job. Since the search takes time and resources, it generates friction in the market, so there may be unemployed, although there are vacant jobs. "

Continue reading "Nobel Prize to Massachusetts Unemployment Expert" »

Finally, the Massachusetts Office of Consumer Affairs and Business Regulation announced that they would review lenders' foreclosures procedures. We don't know if they have been reading our blog articles about GMAC Mortgage and the improper documentation foreclosure crisis, but they are finally acting to protect consumers.

This is a welcome development because foreclosures are up dramatically in Massachusetts. The latest numbers show that there were 1,207 foreclosures in August, an "83.2 percent increase from the 659 reported during the same month in 2009." The Massachusetts Division of Banks, the Attorney General and the Office of Consumer Affairs apparently have woken up and are beginning to work, along the with the feds and other states, to determine what can be done do make the foreclosure process fair.

Continue reading "Massachusetts Foreclosures To Be Reviewed" »

Massachusetts bankruptcies are up 35% for the first half of 2010. On the other hand, Massachusetts has one of the lowest bankruptcy filing rates historically. Statistics compiled by the National Bankruptcy Research Center show that about one every 110 households have filed for bankruptcy protection in 2010. While the highest rates are in the Southwest and Southeast, particularly south Florida; rates are particularly strong in Nevada, Georgia, California and Utah. The states with higher bankruptcy rates than the national average include Alaska, DC, South Carolina, North Dakota, South Dakota and Texas.

New Hampshire bankruptcies are up 51.9% for the first half of 2010, with 4,635 Chapter 7 Petitions filed in the first half of the year. Massachusetts Chapter 7 bankruptcies filed during that period were 18,009. Another statistic worth noting is that there were 15,835 bankruptcies pending at the end of the half year in 2009, and 18,322 on July 1, 2010, and increase of 15.7 percent.

Discharging student loans under federal bankruptcy laws is very difficult. Even if you have a good case under the law, getting a discharge for federal student loans would involve significant time and effort to convince the Trustee, the Court, and the educational funding company. A recent decision handed down by the US Appeals Court demonstrated just that.

In the case of Denise Megan Brondson a 64 year old recent law school graduate attempted to discharge her student loans because she could not get a job and was living on social security income of $946 per month. Thus, she attempted to discharge her $82,000 in student loans acquired while attending Southern New England School of Law. Attorney Brondson's case first went before the Federal Bankruptcy Court where the Court held that she was unlikely to be able to work and that repayment would be "unduly burdensome."

Continue reading "Massachusetts Bankruptcy Court Allows Student Loan Discharge" »

Notwithstanding the upturn in the economy, the number of foreclosures in Massachusetts is up this year. In 2009, the number was 9,269, while this year the number is close to 10,000, through August. With the mortgage companies throughout the US stopping or slowing foreclosure cases because of improper documentation the rate of increase may slow. We will see.

The concern of course is what is on the horizon: in the 100 largest metropolitan areas in the US, the amount of mortgages that are overdue by more than 90 days, called seriously delinquent mortgages, rose by almost one third in the past year. This is up from about 10% the year earlier. While Boston is not in the top 25 metropolitan areas of foreclosure rates (Florida has 17 of the 25), all of eastern Massachusetts is in the 7-11% range, with parts of Western Massachusetts in the 11-15% range.

Continue reading "Massachusetts Foreclosures Up" »

Our Massachusetts bankruptcy blog recently reported that GMAC Mortgage had stopped all foreclosure proceedings because of improper documentation. Yesterday, JP Morgan Chase announced they too would halt over 50,000 foreclosure actions as a result of in adequate documentation. Just like in the GMAC case, JP Morgan Chase acknowledged that their employees have been signing affidavits that were not truthful: in a deposition last May, a JP Morgan executive testified that her staff had signed 18,000 legal documents each month without much verification as to accuracy. The resolution of the problem may take weeks, but is not likely to reduce the number of foreclosures filed.

Massachusetts Congressman Barney Frank, Chairman of the House Financial Services Committee, urged Fannie Mae, the federal agency that buys mortgages on the secondary market, to half their work with "foreclosure mill" law firms that do not verify documentation before filing lawsuits to foreclose on homeowners.

Continue reading "Will Massachusetts Attorney General Act on Mortgage Foreclosure Crisis" »