Boston Bankruptcy Lawyer Blog

The law for filing a Boston bankruptcy is clear in many respects. One important aspect is to complete the Boston bankruptcy petition and schedules accurately and honestly. Another important part of any Massachusetts bankruptcy case is to testify honestly at any and all hearings. For example, at all bankruptcy creditor hearings, also known as 341 hearings, debtors are sworn in and the Interim Trustee asks questions. Sometimes your lawyer will make a representation to the Trustee. Your obligation is to answer all questions honestly and to correct any mistakes your attorney makes. In a case that came down from the First Circuit Court of Appeals last month a debtor lost his bankruptcy discharge as to all his debts after adopting his lawyer's misrepresentation at the 341 creditor hearing. The case Thunberg, Bruce E. (Lawyers Weekly No. 01-095-11) revolved around the issue of payments (from the wife to the husband) and how they were characterized; i.e. alimony verses settlement. Without going into divorce law here, or the facts of the case, there is a significant difference between support (income) and property settlement (an asset). The debtor's bankruptcy lawyer misrepresented the way the divorce agreement was worded and how the payments were being made. This amounted to a fraud on the court.

We have written many times on the issue of fraud and misrepresentation. It may work for some folks some times, but it generally will not work. And it's not worth it. There any many legal ways to get around a legal problem. Talking with your bankruptcy lawyer, making and executing a plan, is the best way to work out what may seem like an insurmountable legal issue.

Will the foreclosure crisis continue in the United States? Will there continue to be record foreclosures in Massachusetts? Will record Massachusetts bankruptcies continue? Massachusetts foreclosures are down 67% from last year, yet there are thousands of Massachusetts properties in or near foreclosures. According to real estate researchers, 23% of households nationally are "underwater" in their mortgages; research reporting company Zillow claims that the number is closer to 27%. Furthermore, if you count the true costs of selling, such as realtor fees, moving and closing costs, an even larger number of folks have "effective negative equity" in their homes. There are two million homes in foreclosure or for which the homeowners are behind in their mortgages.

What is the historical context of this? According to research undertaken by Yale economist Robert Shiller, there were two land bubbles in the 1800's, and only one in the twentieth century: a farmland oriented bubble in the late 1970's. Wherefore, the housing bubble that began this century was an historical anomaly, albeit a drastic economic event, affecting the whole economy, and, arguably, much of the world. Dr. Shiller's research concluded there would be a housing bubble in 2005, referring to it as an "extended asset class and not a full blown bubble, at least not yet." The chart below shows why!

Continue reading "Foreclosures and Massachusetts Bankruptcies" »

Back in early January 2011, we wrote about increasing your credit score after personal bankruptcy in Massachusetts. Secured credit cards are credit cards that look and work like credit cards, however, are not based on the issuer's reliance on your credit, but based on "security" that is money, you have placed in an account with the issuer. It works like this: you deposit $500 into an account and you have "credit" up to $500 on your secured credit card. The beauty of it is that the issuer sends a monthly report to the credit rating agencies saying that you are up to date in your payments. It has proved to be an excellent way of enhancing your credit score after getting a fresh start following bankruptcy.

In a recent survey by New York Times columnist Tara Siegel Bernard, the following banks were determined to be helpful in issuing secured credit cards: HSBS, Capital One, Bank of American (one year following bankruptcy), Wells Fargo (with the one year provision and only to current customers). We don't have the resources of the Times to check on this, or to find other lenders, however, we have heard that credit unions are good places to check as well.

To follow up with our comparative international bankruptcy tour, the Russian Economic Development Ministry has recently drafted an amendment to the bankruptcy laws allowing Russians to file for personal bankruptcy protection - so long as their debt exceeds 50,000 rubles (approximately $1,785) and they are unable to repay it within six months. The current law, which went into effect in 2009, has many similarities to United States, and Massachusetts' personal bankruptcy law: the court will examine transactions that occurred within the past three (3) years to determine if they were "suspicious transactions" or preferential transactions." The proposed law calls for a restructuring plan which may be similar to our Chapter 13 personal bankruptcy.

Our article earlier this month on Canadian personal bankruptcy highlighted the statistics there regarding numbers of Canadians filing for personal bankruptcy protection. Unfortunately, we can find no such statistics for Russia. While Canadian comparisons may be more interesting because we are neighbors and have similar economies, with the flattening of the world, it would be interesting to know how our former cold war adversaries are doing, on a comparative basis.

Filing for a personal bankruptcy in Massachusetts enables you to discharge your unsecured debt and keep all of your assets, up to the statutory maximum. A bankruptcy lawyer will explain to you what you can discharge and what you can keep. For example, in a recent article about keeping your tax refunds in bankruptcy we noted that proper planning enables our clients to keep those refunds. In addition, keeping your home in bankruptcy is even easier with a new Massachusetts homestead law. Further, consumers can keep most assets and rebuild FICO scores following bankruptcy in Massachusetts

Continue reading "Assets You Keep in Massachusetts Bankruptcies" »

Filing a Chapter 7 personal bankruptcy (generally) allows you to either keep your home or walk away from a home that is "underwater" in mortgage debt. On the other hand, if you don't have a home, how soon after filing for bankruptcy protection will it take to be able to buy a home? Home ownership is 73% over the general population, 68% with those that filed bankruptcy over 15 years ago, and 50% for folks that have recently, according to a study by Ohio State Professor Jay Zagorsky regarding life after bankruptcy.

After you get a discharge in bankruptcy you can buy a house, but as a practical matter, you need to both save up for a down payment as well as be qualified for a mortgage. Saving following bankruptcy is often easier than you might think, as there is no credit card debt dragging you down. Getting a favorable mortgage rate can be difficult, especially within the first two years. However, after that your FICO score is no longer adversely affected by the bankruptcy. See our previous blog article for tips on how to improve your FICO score.

Continue reading "Home Ownership After Personal Bankruptcy in Massachusetts" »

We have written on several occasions about financial consumer advocate and Harvard Law Professor Elizabeth Warren. In several Massachusetts consumer blog articles, we encouraged her appointment as director of the newly established Federal Consumer Financial Protection Bureau. After all, she designed the agency to protect consumers in financial issues, after the Great Recession and financial crisis/banking crisis/mortgage crisis, which began in 2008. She has been appointed as a "special advisor" on a "temporary" basis, to set up the CFPB, but not as director, on a longer-term basis. She has hired staff, set up a fraud alert hotline, and hosted conferences on credit cards and mortgages. She still has no official position, however, and the CFPB has yet to commence operations.

Nevertheless, we thought we'd revisit the CFPB, and Professor Warren, to see what progress, if any, has been undertaken. The agency becomes official on July 21, 2011, and has been running as a quasi-agency in the mean time. On the one hand, there is so much lobbying by the banking industry against such a strong consumer advocate that it may not allow the president to appoint Ms. Warren. There may not be sufficient votes to have the Senate confirm her.

On the other hand, however, Professor Warren is getting the CFPB set up and running, and she is advocating for consumers from a high perch. She has the support of smaller banks, however, when she proposed a $20 million fine on large mortgage banks for wrongful foreclosures, she hit a raw nerve with the big banks. Senators who are supported by the big banks and financial institutions oppose her. Those senators and the lobbyists for the big banks have begun to advocate for a "committee" to replace the "director" of the agency, which, in essence, would assure that nothing at all gets done.

While US and Massachusetts personal bankruptcies were up in 2010, Canadian personal bankruptcies were down. The reduction was 16,704 people, or 11%. The reasons are likely to be because the Canadian economy is doing better and, because the Canadian government changed the bankruptcy rules, similar to the changes the US Congress made in 2005, making it more difficult to file for personal bankruptcy. We don't understand it all down south here, but it has something do to with "surplus income" which is defined as income above a specific amount for a single person, and other amounts for families.

Canadian commentators point out, however, that there is significant Canadian credit card debt and 2009 was a record personal bankruptcy year in Canada. And, perhaps more significantly, Canadian debt has doubled since 2000. On the other hand, interest rates remain low and the mortgage crisis did not hit Canada as hard as many parts of the United States.

Massachusetts will join some 42 other states and allow us to dictate, in a will, a trust for the care of your pets. On April 7, Massachusetts's law will include An Act Relative to Trusts for the Care of Animals. The law finally allows you to leave money and care instructions for your pets in your will. You can set up a trust similar to one you would to provide a college fund for a child or a special needs trust for an incapacitated adult. Boston attorney Neil Burns will draft wills for clients to include an Animal Trust.

The new law contains some restrictions. First, the trust can only be set up for an existing pet, or pets. Second, the trust terminates upon the death of the named pets, regardless of its offspring. Third, the trust is subject to the Probate Court's distraction to lower the amount. Finally, a secondary beneficiary may sue the trustee if she feels that he is not adequately providing for the pet. Any money left over after the pets die would be distributed per the will.

In a wonderful bar exam-like twist in the new law, the trusts are exempt from the rule against perpetuities. See Massachusetts General Laws, Chapter 3C, Section 1 (g)

According to a report earlier this month by the American Bankruptcy Institute, consumer bankruptcies are up so far this year. For example, there were 92,669 bankruptcies filed in January, however, there were 102,686 filed in February. Last year there were 5,847 Massachusetts bankruptcies filed in the first quarter. According to the ABI, the cause for the continued high rate is "high unemployment and a still-poor housing sector." The Wall Street Journal noted that this is an 11% increase from the previous month. On the other hand, Massachusetts bankruptcy attorney Neil Burns notes personal bankruptcies are down from a year ago.

The above numbers include Chapter 7 no asset bankruptcies, Chapter 11, and Chapter 13 consumer reorganization bankruptcies. Last year there were over 1.6 million bankruptcies; we are below that rate so far this year. The total Chapter 7 bankruptcies for 2010 was 1.1 million. The ABI notes that the number of bankruptcies has increased each year since the new law was put into effect, 2005.