Boston Bankruptcy Lawyer Blog

Personal bankruptcies were down in 2011, for the first time in several years, according to preliminary reports. The estimate is that 1.35 million personal bankruptcies were filed in the United States, which was down approximately 12.5% from 2010. As the Boston bankruptcy lawyer reported on January 5, 2011 in our bostonbankrutpcylawyerblog.com bankruptcies were up in 2010 by 9%, with over 1.55 million being filed in 2010. In 2005, the year the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect, there were over 2 million personal bankruptcies filed.

In Massachusetts, the specifics look like this: 19,777 total bankruptcies were filed in 2011. Of those, 75% were Massachusetts Chapter 7 personal bankruptcies and 25% were Chapter 13 bankruptcies. With a population of over 6.5 million, that is a rate of 300 bankruptcies per capita. We ranked 33rd of the 50 states and District of Columbia in rate per capita. The Massachusetts rate decrease in bankruptcy filings was 0.52%, significantly lower than the rate of decrease in the rest of the country.

The only state with an increase in bankruptcies in 2011 was Utah, where the rate was up a nominal 1%. The states with the largest decreases in bankruptcy rates were Nevada, where the decrease was 19% and Florida, where the decrease was 16%. Still, there are a lot of states with high bankruptcy rates, including California, Colorado, Tennessee, Alabama and Georgia.

In an interesting article published by Boy Lawless in Credit Slips in December 2010, it was predicted that there would be 1.457 million bankruptcy filings, based on a statistical analysis. We're not going to give a scholarly review of Mr. Lawless' analysis, but it seems to be fairly accurate, and, more significantly, Mr. Lawless says that the trend is what we should watch. His notion of the trend in bankruptcies decreasing was spot on. Lawless, a professor at the University of Illinois College of Law, has said that "consumer credit" is the "most significant indicator" of what drives bankruptcy rates.

Thus, we looked at consumer debt in the US. Credit card debt, which decreased between 2008 an 2010, increased in 2011. According to the Federal Reserve report on consumer debt, credit card debt increased 9% in 2011. Another measure of consumer debt, student loan debt, was up in 2011, with the total being $845 billion when measured in the middle of last year. This should be watched carefully because, unlike credit card debt, student loans are very difficult to discharge in bankruptcy.

Professor Lawless is proposing that federal bankruptcy petitions include a question about the race of the filer. This is because of recent evidence that black bankruptcy petitioners have been found to file Chapter 13 bankruptcies disproportionate to white filers.

In our sister country to the north, Canada, bankruptcy statistics can be instructive. Their swings tend to be less dramatic than ours. According to the Office of the Superintendent of Bankruptcy in Canada, the rate of bankruptcy in Canada fell by approximately 8.1% last year. Further, in Canada, there more folks filing "consumer proposals," a Chapter 13 style bankruptcy, in which a percentage of the debt is paid back.

An important new study, entitled "Race, Attorney Influence, and Bankruptcy Chapter Choice," undertaken by University of Illinois Law Profession Bob Lawless, along with colleagues Jean Braucher, of University of Arizona and Dov Cohen, also a professor at Illinois (in psychology and law), outlines some serious potential problems in the bankruptcy process, in the United States.

The study, by the Consumer Bankruptcy Project, indicates that black bankruptcy petition filers use chapter 13 at a higher rate than chapter 7. In fact, blacks are about two times a likely as whites to file Chapter 13, with the black Chapter 13 rate at 54.7% and the white rate at 28.6%. Asians were found to file Chapter 13 at 24.4%, and Hispanics at 21.7%. Our bostonbankruptcylawyerblog.com has a mission of keeping clients informed of news such as this study.

Let's review the difference between the two types of bankruptcy. Chapter 7 bankruptcies are generally cheaper to file, allow folks to kept most of their assets and discharge most of their debt. Homes are protected under the Massachusetts Homestead exemption, pensions are protected, but other assets are limited. In fact, under Chapter 7, most debts are discharged within 90 days, and petitioners get a "fresh start." Chapter 13 bankruptcies, however, require that petitioners repay their debts, based on income, over a period of time up to 5 years. Thus, Chapter 13 offers less relief and costs more. Further, Chapter 13 cases fail at a significantly higher rate: the plans are difficult to comply with month after month, year after year. Circumstances change. If so, why are a disproportionate number of black filers using Chapter 13?

The professors undertook two studies. They first looked at actual statistics from the federal bankruptcy filings each year. After considerable analysis, they determined that "African Americans are much more likely to file chapter 13, as compared to debtors of other races," according to their abstract.

Second, and quite troubling, the professors sent out surveys to bankruptcy attorneys, similar to, but not including, this Boston bankruptcy lawyer. The survey included questions about a hypothetical African American couple, Reggie and Latisha, of the African Methodist Church and a white couple Todd and Allison, of the United Methodist Church. Unfortunately, the surveyed attorneys recommended the "fresh start" Chapter 7 bankruptcy disproportionally to the apparent white couple, and the more financially burdensome and more expensive Chapter 13 bankruptcy to the apparent black couple. The professors make a significant point. Are lawyers, judges, trustees, indeed the whole system, biased? If so, how do we fix it? It's a complex system, often tossed about by politicians, including the ones who were sucked into passing the Bankruptcy Act of 2005.

The study will be published in the Journal of Empirical Legal Studies sometime in 2012, so we don't have all of their statistics yet. But they inform that the statistics are the same across the country, and includes the south, where Chapter 13 rates are higher in general.

Now, there are going to be academics, politicians and community leaders who object to many aspects of the study. Hopefully, they will prove these distinguished academics wrong. But, in the mean time, it may be instructive to look at some of the facts after we get the full paper. Some details we do have, however: blacks file Chapter 13 at a higher rate than homeowners (54.6% verses 47.1%). Given that most folks have all of their wealth in a home, and homes are protected by homesteads, this is a troubling statistic they have uncovered.

We are often asked how to file bankruptcy in Massachusetts when our clients do not have a social security number. This question comes at the intersection of bankruptcy and immigration law. All bankruptcy petitions have a page in which you are expected to report your social security number. However, the bankruptcy code does not require that page of the standard petition to be completed. Nevertheless, many folks who do not have a social security number are concerned about filing for Massachusetts bankruptcy.

Thus, for those folks who have a social security number, of course, a Boston bankruptcy lawyer would put that on the social security number reporting page. That page of the Petition and Schedules undergoes protections by the Bankruptcy Court. However, it is generally used by the Trustee at the 341 Meeting of Creditors to compare with the petitioner's social security card. We always instruct our clients to bring their license, or state identification, along with their social security card, for identification at the hearings.

For folks who do not have a social security number but who have a United States Individual Tax Identification Number ITIN, we advise that they use this number. If you don't have at ITIN, you can secure one by going to the IRS website. Many of our clients work in the United States, pay taxes using their tax identification number, but do not have a social security number. This is how they can file for bankruptcy in Massachusetts.

As indicated above, we check all state identifications and social security cards or tax identification cards before we complete the Petition and Schedules. You can never ever use someone else's social security number or tax identification number. This will result as a fraud on the Court, which is, of course, a federal crime. This would affect your status if you did not have legal status in the US.

For immigration advice, we refer to Massachusetts immigration lawyer Joshua Goldstein. According to Attorney Goldstein, there is no known reporting from the United States Bankruptcy Court to the Immigration Court. Nor has he seen any correlation between bankruptcies and reporting to immigration.

Just for your information, social security numbers are not random! There is a method to the assigning of numbers. Since 1936, the Social Security Administration has been issuing social security numbers. It has become a requirement to have one. However, it is difficult to figure out the formula. For example, if you were born in Massachusetts, the first three numbers should be between 010 and 034. Of course, there are some changes - before 1973 the numbers were based on where the applicant applied, since then, the central office issues the number by zip code. The second set of numbers is relative to time of application chronologically. Thus, someone with 01 in that second series applied for their social security number before someone with 99 in that series. The third set of numbers is merely the sequential number within each group. There are no 0000s and no 666s, however!

After practicing bankruptcy in Boston for over 25 years, we often get asked questions about Chapter 13 bankruptcy. We focus mostly on Boston Chapter 7 bankruptcy cases. One important advantage of the Massachusetts Chapter 13 bankruptcy is that it offers you the chance to bring down the amount that you owe to your creditors. When you lower the secured debts that you owe it is called a cram down. The typical feature of a secured debt is that if you are not able to repay the debts, you have to return that item to the person or entity that holds the security interest. For instance, if you are not able to repay the mortgage loans that you have taken to purchase a house, furniture or a car, you have to return that asset to your lender. It is to be noted that cram down option is not applicable to a house. When you take out loans to purchase a car or furniture, you are required to make a number of monthly payments in order to pay the principal and interest. Sometimes, it may take years to repay the loans. However, the value of the asset which you are financing continues to depreciate. In fact, the value of the underlying asset often depreciates faster than the loan is being repaid.

Suppose you purchased a car two years ago. The current price of that car may be around $10,000, but the amount that you still owe on the loan may be around $12,000. This phenomenon is known as "upside down." Withina few years after you make a real purchase, the value of that item depreciates to such a level that its current value falls short of the remaining balance that you owe on the loan that took to purchase that item. Chapter 13 bankruptcy has the provision to cram down these types of debts. Under the provision of Chapter 13 bankruptcy, you will be required to pay the amount which is equal to the value of the property and the interest on the remaining balance.

Cram down in bankruptcy is a court mandated way to lower down a part of your original contractual debt obligations. Here the court replaces the original contractual value of the property with its current market value. A cram down is an excellent financial tool which is used to curb your secured debts, especially with respect to Chapter 13 bankruptcy plan.

In order to get the benefits of a cram down, some time must have elapsed since the filing of the bankruptcy. This time period is not fixed for all asset classes, but varies with the nature of the asset class. In order to cram down a car, you must own the car for a minimum of 910 days since you filed for bankruptcy. All Chapter 13 cases go through the Massachusetts bankruptcy court, where the US Trustee appoints an interim trustee to supervise the case during this time. After 910 days, you can replace the original outstanding balance of the car loan with the currently value of the car. Various items that can be crammed down include jewelry, furniture and appliances. In order to get the benefit of cram down, you must own these items for a minimum of 1 year after filing for bankruptcy.

Blog guest author Sam is a Community Member of Oak View Law Group Community and has made contributions through various articles written on subjects related to bankruptcy and consumer law.

The rules of procedure in Massachusetts bankruptcy court are clear; just as the rules of civil procedure are in state and federal courts: When you file a "complaint" to initiate a civil lawsuit in court, the rules require a "short and plain statement" regarding 1. Jurisdiction, 2. What is the "claim" and 3.What kind of relief is sought.
In our Massachusetts bankruptcy blog we have discussed bankruptcy sanctions. This article is about sanctions on an attorney.

In a proceeding in Bankruptcy Court, a Massachusetts bankruptcy attorney filed a complaint in a Boston Chapter 7 case called an adversary proceeding. That is, following a filing for bankruptcy protection to discharge the debts of his client, the attorney, on behalf of his client filed a lawsuit within, or on top of, the bankruptcy proceeding, for relief beyond and in addition to the discharge of consumer debts. In the case In Re: Koufos, Peter (USBC) https://ecf.mab.uscourts.gov/cgi-bin/show_case_doc.wawb.v3.4?159,393231,,64057834, (Chapter 7 Case No. 10-23579-JNF; Adv. P. No. 11-1185) (Oct. 21, 2011). The Complaint is an attempt to stop a foreclosure action by US Bank. However, instead of short and plain paragraphs which are clearly established by the rules, the attorney's complaint resorted to "innuendo, invective, hearsay...with rhetorical questions [in a] hyperbolic attack" on the mortgage lending industry.

Unfortunately, in an attempt to point out the abuses of the mortgage lenders, the bankruptcy attorney got carried away with "ad hominem attacks and irrelevant and prejudicial" remarks in the complaint. Complaints should not be testimony and should never be replete with rhetorical questions such as: where did the debtor's money go after the bank took the payments? In this case, the complaint has 161 paragraphs of information, which, I believe the Court found too much like a motion for summary judgment, in essence, arguing the case, and too little like the short and plain statement outlining the case.

Count one, which is a request for relief stating that the bank does not have standing to foreclose, has 40 more paragraphs of testimony like information along with argument. The second count is another "standing" type of count requesting declaratory judgment against the bank, and, while only 10 paragraphs, has opinions on what the law is and quotes from cases. Again, it seems like a summary judgment legal argument rather than a Complaint under the rules. Count three is a RICO count, which, again, quotes case law, incorporates federal statues and argues the case. Count four is a Massachusetts 93A, however, fails to state that a 93A Demand letter was sent, which is a requirement by the law. It does argue why it was not necessary. Count five argues a civil conspiracy, citing federal and Massachusetts case law. Count six is a brief Unjust Enrichment count. Count seven is, or should be, paired with the 93A count, regarding violation of Massachusetts Chapter 140. Count seven seeks to rescind the mortgage. Count eight, ironically plead as one count but really is two counts, requesting intentional inflection of emotional distress and negligent infliction of emotional distress. As a Massachusetts personal injury lawyer, I would suggest pleading this as two counts because they require proving different elements.

In any event, the 310 paragraph, 45 page Complaint with exhibits totaling 673 pages, was too much for the Court to ignore. The defendant bank followed the rule by notifying the attorney ahead of time, giving him the opportunity to withdraw or amend the Complaint. The Massachusetts bankruptcy court and Judge Feeney perhaps went easy on the attorney, considering the possibilities. The Court cited Federal Rules of Bankruptcy Procedure 9011, essentially saying that the attorney failed to make an "adequate inquiry" on statements before filing the claim. The Complaint is "anything but 'a short and plain statement of a claim showing that the pleader is entitled to relief.'" The Court ordered Rule 11 sanctions of $1,000.00 to be paid, not to the Court, but to a non-profit legal organization that benefits consumers. The Court didn't give us a vote, but we would advocate that the sanction be paid to the National Lawyers Guild, where I am on the Board of the Lawyer Referral Service.

Everyone in Massachusetts is a fan of Friendly's Ice Cream. Founded in the 1930s, it has been a family establishment throughout the Bay State for generations. Now, however, the company is mired in federal bankruptcy court and the new owner stands accused of fraud regarding the treatment of their pension obligations. Here's what's going on.

The current owner of the Friendly Ice Cream Corporation is a company based in Florida called Sun Capital Partners. They are a private equity firm. They filed a Chapter 11 bankruptcy www.neilburnslaw.com in October, 2011. This closed the remaining 60 stores and put over 1,200 workers into unemployment. Friendly's lists $76.4 million in assets and $181.4 million in liabilities. $105 million of this is underfunded pension obligations.
In a bankruptcy court filing, the federal Pension Benefit Guarantee Corporation, filed an objection to the proceedings, claiming that Sun Capital Partners committed fraud in their transactions with respect to Friendly pensions. If not stopped, the FPGC says 6,000 former employees will lose pension rights. Here's what they allege: before putting Friendly into Chapter 11 reorganization, the PBGC says Sun put the assets of Friendly's into one corporate entity. Next, they filed bankruptcy, attempting to get rid of the obligations on the pensions. Then, another Sun entity made a bid for Friendly's assets. If they win the bid, they will have bought their own company without the $100 million in pension obligations they owed before the bankruptcy!

The federal Pension Benefit Guarantee Corporation is looking at the fact that the transfers occurred just prior to filing for bankruptcy. Experts claim it does not pass the bankruptcy "smell" test, especially because different entities of Sun were involved.

We are not corporate bankruptcy specialists, however, we did represent one party in one aspect of another ice cream related Boston bankruptcy matter: Brigham's.

The message here is to both plan for bankruptcy and to deal honestly with creditors before bankruptcy. The Chapter 7 personal bankruptcy rules are clear. For example, payments to creditors within a certain period of time prior to filing bankruptcy in Massachusetts are scrutinized. If you pay off a loan to your brother in law the week before you file for protection against other creditors, it will likely be cited as fraudulent. We work hard to teach all of our Boston bankruptcy clients to work within the rules.

Another common example is with respect to real estate. Too many folks do not understand joint ownership. When your parents put you on the deed to their home on the Cape, you now own the house. You can file a Petition to Partition and force the sale. You may be appalled at the notion of selling your parents home out from under them, but the fact that you have the right to do so gives the bankruptcy trustee the right to also. Thus, if your family did have this situation, you would have to plan for it before filing. We can help you do that. The good news, with respect to real estate, is that the Homestead Act can protect the equity in the home you live in, up to $500,000.

Finally, by way of further example, back to pensions and ice cream - most pensions are protected under the bankruptcy statute. Before we file, however, we check to be sure your pension is protected, and secure the proper documents to prove this to the bankruptcy trustee.

As a Massachusetts bankruptcy lawyer, clients, or potential clients, who are facing the prospect of foreclosure, often consult us. They want to know their rights and what options they have. Usually they want to keep their home. And they can often do so by keeping their mortgage current and discharging their credit card debt. If you can make the mortgage payments but not the credit card payments, you may be able to protect your home and qualify for a chapter 7 bankruptcy. Our Massachusetts bankruptcy and consumer blog is here to give some guidance.

Some want to walk away from their home; they are too far behind in making mortgage payments, the payment amount or interest rate is too high, or the house is just too much. Often the mortgage company forecloses and does not go after folks for the difference between the foreclosure sale price and the balance on the mortgage, if any. However, the difference between the foreclosure sale price and the remaining amount on the loan can be taxable as a "gift" by the federal Internal Revenue Service. This is not true, however, if you discharge that amount in a Massachusetts bankruptcy. If you have no other debts, it may be worth the cost, however, if you have significant unsecured debts, such as credit card debt, a Chapter 7 bankruptcy in Massachusetts may make sense in giving you a fresh start.

There are other options such as "deed in lieu of foreclosure" and short sale. Often these make sense, however, generally not if someone is filing bankruptcy in Massachusetts.

Massachusetts foreclosure law has been challenged a great deal lately. In Bank of New York v. Bailey, 460 Mass 327 (2011) the Supreme Judicial Court said that foreclosing lenders and their attorneys must have proper documentation to prove title before proceeding with a foreclosure. There were a series of cases decided by the Supreme Judicial Court and the Land Court that requires lenders, especially those lenders who where not the original lenders, to prove that they had proper mortgage documentation to get clear title. See US Bank Association v. Ibnez, 458 Mass. 637 (2011)

Massachusetts credit scores are often a concern of our clients. Our general advice is that if someone is being foreclosed, they should try to pay all other bills, especially credit card bills. A foreclosure drops a credit score about 100 to 140 points, but, by paying the other bills, you can rebuild your credit score. While a foreclosure will likely stay on your credit report for seven years, if you stay current with other debt obligations, your score will not take as big a hit. Of course, if you have a foreclosure on your credit report, you are not likely to get the best interest rate. You may, however qualify for a loan if you can show that a hardship caused the foreclosure; you are even more likely to qualify if you can make a significant down payment toward the new home.

Fannie Mae, the federal lender which buys mortgages on the secondary market, prevents any government financed loans for at least seven years. However, this is only if the default was when you could have paid. Documentation that shows the family emergency, loss of job, or similar circumstances surrounding the default and foreclosure, would help.

Massachusetts bankruptcy filings fell in October 2011, which was the fourth straight month that we saw a decline in bankruptcies throughout the country. It is not clear if this was because folks have better control of their credit or because the next big wave, with respect to foreclosures, has yet to hit. It is also possible that lenders are not lending as much so folks are not credit restricted. The American Bankruptcy Institute reports a 19.6% decrease in personal bankruptcy filings in October 2011, from the October 2010 filings. Further, total consumer debt fell in the past two years. We have reported the decrease in Massachusetts bankruptcies in numerous blog posts. The news continues to be good!

And October had 2% fewer personal bankruptcies than September this year. For the year, the Administrative Office of the U.S. Bankruptcy Courts reports that the number of business and personal bankruptcies are down approximately 8% over the past year. By the end of the third quarter, September 30, 2011, the number of personal bankruptcies was 1,417,326.

Bankruptcy filings for 2011 are as follows: 353,082 total in the first quarter, with 252,338, or 71% as Chapter 7 no asset personal bankruptcies; 367,487 total in the second quarter with 265,759 or 72.32% as Chapter 7 cases. These statistics are from the American Bankrutpcy Institute. It is interesting to note that the percentage of Chapter 7 filings, as compared to all non business filings, has fluctuated from a low of 60.86% in 2007 to what appears to be the new normal, of numbers in the nigh sixties and low seventies since that time.

On the other hand, home foreclosures have slowed to the point where it will take perhaps more than eight years to clear out the 2.1 million homeowners considered delinquent on their mortgages. While this may be slowing the filings now, it could have the effect of increasing bankruptcy filings soon, and in the future.

Personal bankruptcy has even factored into the current presidential race; noted attorney Gloria Allred recently represented Sahron Bilek who accused Republican a presidential candidate of sexual harassment. Ms. Bilek's personal bankruptcy filing was pointed out by the candidate as having a "long and troubled history, from the courts to personal finances." Regardless of the politics, and the unfortunate incident, with personal bankruptcies more prevalent they are affecting folks in ways other than credit scores. This is one way we do not normally anticipate that a bankruptcy will affect our clients.

Earlier this year in our blog, http://www.bostonbankruptcylawyerblog.com, we reported that 13% of all Americans have considered filing for personal bankruptcy. Nevertheless, our antidotal evidence is that personal bankruptcies in Massachusetts are down significantly. It seems that the wave hit hardest last year and this year folks are still hanging in there, negotiating their mortgages, perhaps not paying but not being foreclosed on either. We see more and more folks not paying their mortgages, but having some legal hook to keep them in their homes - a foreclosure gone bad by the bank, a lender that is not moving quickly, or the courts stopping a foreclosure for some reason.

The costs and attorney fees for filing for bankruptcy in Massachusetts has increased, of necessity, since the Bankruptcy Abuse and Protection Act of 2005. We try to be the Boston low cost bankruptcy lawyer because our clients demand top quality effective legal representation at a fair and reduced cost.

The cost for attorney fees can be found by simply calling us; we can generally undertake an intake and you can talk to a lawyer for a low bankruptcy fee quote during your phone call. Reduced fee Massachusetts bankruptcy lawyers are also a function of your income and assets, along with the difficulty of your case.

What are the new requirements in the BAPA? Why are attorney fees higher than they used to be? We will attempt to outline some of the requirements under the new law here.

First and foremost, bankruptcy attorneys must now verify all of the information our clients provide. Income? We need to review your tax returns and updated pay advices. Credit card debts? We need to review copies of the bills and your credit report. Secured debts? We need copies of your mortgages and car loans. Assets? We need to review the documents regarding your home, car, and your 401k plan.

Another significant new requirement for the bankruptcy attorney is to complete the Means Test. This can require substantial legal work, especially on some bankruptcy petitions. The Means Test requires that personal bankruptcy filers have family incomes below the "mean" of the people in their state. The mean numbers, for different sized families, changes every year or so, as a function of the state income numbers. The means test in Massachusetts numbers changed, in fact decreased, representing Massachusetts median income. However, if your family income is above the mean, your attorney needs to apply state maximum costs for various categories.

The new law also increases the number of years a consumer may file for Chapter 7 bankruptcy protection from six years to eight years. The reason for this is, of course, to protect creditors and prevent consumers from filing too often. Of course, this does not increase the fees.

Bankruptcy credit counseling is another part of the new BAPA law. This credit counseling class must be completed before a personal bankruptcy Petition can be filed with the Bankruptcy Court. The class, which takes one to two hours over the internet, enables you to evaluate your personal financial situation, review alternatives to filing a personal bankruptcy, and establishing a personal budget plan. The cost is $30 to $50 depending on the company. The companies that are certified by the Bankruptcy Court will forward the certificate to your attorney's fax or email immediately upon completing the class.

Bankruptcy financial management counseling is the change in the BAPA law that effects our clients last. The class must be taken within 45 days of the creditor's hearing. This requirement requires the debtor to take a class over the internet, or telephone, to learn the three fundamentals of financial management: the benefits of establishing short term and long term financial goals; teaching how to create a family budget; and, how to balance a checkbook and reconcile monthly bank statements. The goal is to teach financial management to avoid future bankruptcies.

Finally, there is an increased filing fee of $299. Most folks have to pay the fee. However, if your income and assets meet the requirements to waive the bankruptcy fee, we prepare and file the motion to waive the fee at no charge.

Personal bankruptcy costs more as a result of the new laws. We try to help all of our clients by keeping our Massachusetts personal bankruptcy fees as low as possible. We work with our bankruptcy clients, in every case, to keep the fees down as low as possible. Call us.

Boston bankruptcy lawyers are often contacted to file Massachusetts bankruptcy to stop a foreclosure. Sometimes they need to file bankruptcy so that they can discharge their consumer debt, giving them the funds available to avoid foreclosure. Sometimes, our clients buy property at foreclosure sales. Today's blog entry on http://www.bostonbankruptcylawyerblog.com/ is concerning buying foreclosed property.

In a recent case handed down by the Massachusetts Supreme Judicial Court, Massachusetts foreclosure procedures were at issue. Actually, it was the validity of the title that the buyers of foreclosed property received that was the issue. As a result, the buyer did not have legal "standing" to file the lawsuit. Without standing, your case will be dismissed. Before we discuss the case, we will try to explain standing. If you are injured as a result of a Massachusetts car accident, you have "standing" to file a lawsuit against the person who caused the collision. If you observed the accident and feel that the driver was driving too fast, you do not have "standing" because you were not injured; you don't have a cause of action against anyone. You are simply a witness. If you buy a house and the title is at issue, you would normally have "standing" to file a lawsuit against the seller. After all, you paid money, you are living on the property, wherefore you should be allowed to file a lawsuit in the local courts to determine the quality of your title.

In this case, Francis J. Bevilacqua v. Pablo Rodriguez, Mr. Bevilacquo bought, or thought he bought property in Haverhill. The property had been foreclosed on by the bank, against Rodriguez, because of an unpaid mortgage. Rodriguez departed. Bevilacqua bought the property at a foreclosure sale. There was a problem with the title so Bevilacqua filed a claim in Massachusetts Land Court to validate, or clear, his title. The Land Court determined that Bevilacqua did not have legal standing to file the lawsuit, so it dismissed the case with prejudice. He appealed. The SJC took the case from the Appeals Court to decide the issue. The Court called the case "highly unusual" because the defendant, Rodriguez, never appeared. In other words, Bevilacqua filed a lawsuit, the defendant failed to answer for file any appearance opposing the lawsuit, yet he still lost. Twice! But because the bank never followed the proper procedures, it never had the ability to foreclose. Wherefore, Bevilacqua never had record title, so he could not even allege "standing" to file the lawsuit.

In a blog article in our sister state of Maine, bankruptcy Attorney Richard Olson says this about the case: buyer beware. Be sure you have record title. Attorney Olson says do your homework before buying property at a foreclosure sale; hire an experienced title attorney to be sure you can get good title. Litigating a case in the Land Court and before the Supreme Judicial Court just may add costs that are unacceptable to get title. This is especially true when the banks have clearly mishandled the title documents and the foreclosure does not necessarily provide for clear title.

The good news is that the Social Security Administration has announced that next year, for the first time since 2009, there will be a cost of living adjustment in Social Security benefits in the amount of 3.6%. As a Massachusetts bankruptcy lawyer, I often get asked: can the Massachusetts Bankruptcy Trustee take my Social Security Check? Does Social Security get factored into the Means Test in Massachusetts?

First, let's review why there is a 3.6% increase coming. 55 million people will get the Cost of Living Adjustment (COLA) in their Social Security check starting January 2012. Approximately 8 million Supplemental Security Income (SSI) beneficiaries will get the same increase in benefits. Since 1972, this there have been COLA adjustments, based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from last year's third quarter to this year's third quarter. It is the US Bureau of Labor Statistics, in the Department of Labor, that determines the CPI-W. For the last two years, as many of our Massachusetts consumer clients know, there was no increase in CPI-W, and therefore, no increase in the cost of living adjustment in their monthly Social Security checks.

It is also important to note that in 2012 there will be an increase in the wages that can be taxed for Social Security: from a maximum of $106,800 to $110,100. This is based on the average wages increase. Everyone is taxed 15.3%, for Social Security and Medicare, up to the maximum. If you are employed, your employer pays half, or 7.65%, and, of course, that is factored into salaries. If you self-employed, you pay the full 15.3%. Except, of course with the government and taxes there is an exception, and in 2011 the exception is good: this was reduced by 2% for 2011!

The SSA estimates that the average monthly social security benefit starting January, 2012 will be as follows: $1,229 for all workers; $1,994, for a retired couple; $2,543 for a widowed mother of two; $1,184 for a senior who is widowed; $1,892 for a disabled worker or spouse with children; $1,111 for a disabled worker.

But, again, how would this affect someone asking for a fresh start in Massachusetts filing for bankruptcy? The easy answer is that no, Social Security income is not calculated as a part of the Means Test. The Means Test, a part of the 2005 changes in the US Bankruptcy Laws, requires that all people filing for Chapter 7 personal bankruptcy complete a "test", which is a form attached to the bankruptcy Petition. The test evaluates the income of filers, and if you are over the maximum incomes for your category, you may have to file under a different Bankruptcy Chapter such as Chapter 13. Thus, if you have a certain amount of part time income, plus Social Security income, you will be able to exclude the Social Security income from the test.

The Means Test really has two parts. First, if your income for the six months prior to filing is below the Massachusetts' median family income, for a "family" your size, you can simply "pass" the test. Thus, if you have income plus Social Security income, the Social Security income is excluded, which helps our many of our Massachusetts bankruptcy clients. The second part of the test only need be taken if your income exceeds the Massachusetts median family income. Many of our Boston bankruptcy clients pass this test simply by showing the details of their expenses, some actual expenses and some standardized Massachusetts expenses, therefore proving that they are in need of Chapter 7 bankruptcy protection in Massachusetts. The Trustee and the Court will look at those expenses to see if there are "special circumstances" such as medical or unemployment situations.

Not likely. However, in a ruling last month by the U.S. Circuit Court of Appeals for the Eighth Circuit, a decision came down that may affect how homestead law evolves. The ruling expanded the notion of what is exempt under the homestead law to include personal property. How will Massachusetts bankruptcy law be impacted? What are Boston bankruptcy lawyers advising about the Massachusetts Homestead Act? This is what we explore in our blog http://www.bostonbankruptcylawyerblog.com/ today.

Let's look at the North Dakota case first. The U.S. Bankruptcy Code allows each state to have its own homestead limit. In North Dakota, when a debtor files for bankruptcy protection, he or she may protect up to $100,000 of equity in their home, thereby "homesteading" that property. In the case handed down by the Appeals Court, the debtor, Lawrence Danduran, sold a home in New Rockford, North Dakota, in 2009, for $225,000. Included in the sale was personal property, physically in the home, including a pool table, a hot tub and audio visual equipment. Such items are often sold with a home. In New Rockford, which is in southwestern North Dakota, it is likely that this is just as common as in Massachusetts home sales - those moving, for whatever reason, don't need all of the personal property which fits nicely into the home. Mr. Danduran paid off his mortgage with the sale proceeds and put the rest of the money into a bank account. It is that sum, $87,500 that became the issue in this case.

The trustee, appointed by the state bankruptcy court to oversee personal bankruptcies, objected to the $87,500, saying that $7,700 was "personal property" proceeds, from the sale of the pool table etc., and that issue to be decided was heard by the U.S. Bankruptcy Court for the District of North Dakota. That decision was appealed to the U.S. Bankruptcy Appellate Panel (BAP) for the 8th Circuit reversed the judge's decision. The BAP found that Mr. Danduran had shown "sufficient indicia" of combining his non-exempt property into his homestead property by putting all of the proceeds into the same bank account. The Court of Appeals, however, found that there were no specific findings of how the funds were mixed - was the payment to pay off the mortgage from the sale of the real property, the personal property, or a combination. Because the Court never addressed this issue, the monies were not clearly identified, and therefore, exempt.

How would this work in Massachusetts? There are two ways to use the Massachusetts homestead law. First, Massachusetts bankruptcy attorneys may advise to use the federal exemptions, United States Code, Section 522(d)(1). That law, which exempts $20,000, was the subject of our blog article regarding the simple approach to Massachusetts homestead law. If you have more than $20,000 of equity in your home, you may be advised to use the state law. The new Massachusetts homestead law, if utilized properly, exempts up to $500,000 in equity from creditors in bankruptcy. Can you include personal property in Massachusetts? Not yet. But what if you had a pool table and a hot tub in your home? If they were built in, they may very well be exempt. I might not advise Massachusetts bankruptcy clients to test the North Dakota law: it could be an expensive and unsuccessful proposition. However, the change in the law is often gradual, and the sale of a valid homesteaded home, along with some personal possessions that are combined with the sale, and the money is not segregated, could be where those waters are tested.

We have provided numerous updates about the Consumer Financial Protection Bureau since its establishment as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act, usually referred to simply as Dodd-Frank, after the congressmen who were responsible for the law, has been a hot topic as of late. There have been many questions, perhaps generated by the Bank of America's decision to add $5 per month fees to all who use the ATM cash machines. From the perspective of a Massachusetts bankruptcy lawyer and a Massachusetts consumer lawyer, we see the Dodd-Frank Act as a positive step in bringing these consumer banking questions to light.

The Agency claims that its mission is to help "consumer financial markets" by "making rules more effective" and by working to "fairly enforce" the rules. The goal is to empower consumers with respect to their economic lives.

Over a year ago, President Obama named Elizabeth Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury for the CFPB. We write about Professor Warren, who is a Massachusetts bankruptcy professor at Harvard Law School, in our blog, http://www.bostobankrutpcylawyerblog.com on occasion. Professor Warren was largely responsible for getting the new consumer agency on the books, and off the ground. Unfortunately, even before President Obama could nominate Professor Warren, she withdrew. Perhaps she withdrew because of the current climate in Washington. Presently, Ms. Warren is running for United States Senate, for the seat formerly occupied by Ted Kennedy and currently occupied by Scott Brown. We try to avoid politics, however, so our focus goes back to the CFPB.

Professor Warren noted that the statutory objectives of the Agency were to get consumers timely and easy to understand information about the financial decisions they would make, including mortgages, credit cards, and loans. The Agency was to be a watchdog over unfair and deceptive practices by financial institutions, large and small. Further, the Agency was to help REDUCE regulations.

For example, the Agency working toward reducing the mortgage disclosure documentation to one, easy to read "know before you owe" document. Considering that the mortgage crisis caused or largely contributed to the financial crisis, this could prove a helpful step for future homebuyers.

Another example is their work on the Credit Card Accountability Responsibility Act, the CARD law, of 2009. The CARD law provides consumers with all of the costs of obtaining and using credit cards, in a more up-front and consumer friendly fashion. Thus, everyone knows upfront about how the Bank of America $5 charges will affect them. You may not like the new fees, but you know about them...and you can make decisions before they go into effect.

As a Massachusetts bankruptcy lawyer, for over 25 years, I'm often asked about credit scores. The CFPB is required by law to study the fairness of credit reporting.

The current administrator of the CFPB is Raj Date, however, the president has nominated Richard Cordray, the current head of the Bureau's Enforcement Division, to be the first director. He is the former Attorney General of Ohio. While it is not clear of Mr. Date or Mr. Cordray will work to stop the $5 fee, the CFPB has been a flashpoint to focus the question. They certainly can review the effects of the fee on consumers. It's a large Agency, but not likely to take on every battle that hits the news.

The Bureau has the following divisions: Chief Operating Officer, which cover consumer response and operations; Consumer Education and Engagement, which covers financial education and consumer education, including education for elders, students, and US service members; Research, Markets and Regulations, which oversees research and regulations, including mortgages, installment loans, and credit markets; Supervision and Enforcement, which covers fair lending and equal opportunity, including overseeing large banks and non banks; and a legal, or General Counsel, office.

After 25 years of representing individuals in Massachusetts bankruptcy, clients often ask how filing for Chapter 7 bankruptcy in Massachusetts will affect their credit rating. What happens after the Boston Bankruptcy Court issues a Massachusetts bankruptcy discharge? How long will the words Massachusetts bankruptcy stay on your credit report? How long will a Massachusetts foreclosure stay on your credit report? Call Boston bankruptcy attorney Neil Burns for answers to your personal questions, or read on.

We have addressed these questions before, but now that the 2010 and early 2011 wave of bankruptcies has subsided, perhaps the perceived stigma, and the hope for personal recovery, has highlighted credit score oriented questions anew.

According to "experts," bankruptcy stays on your credit report for up to 10 years. It has an adverse affect on your credit score. However, as time goes on, if you work on improving your score, the fact that the bankruptcy discharge is on your report, has a diminishing effect on your score.

According to those same "experts," a foreclosure stays on your credit report for up to seven years. That doesn't mean you can't buy a new home for seven years. If you have no new debt, something for a down payment, and a good "new" credit history, you will likely qualify for some, albeit higher interest, mortgage loans in just a few years after personal bankruptcy.

And what about a car? The American dream, and now, for better or worse, the world's dream. The "experts" seem to say that motor vehicle loans are the quickest. The lenders, banks and car companies, lend to almost anyone, anytime. The same is true for leasing a vehicle. The issues is the rate of interest they would charge and the other terms that will be far better for those who did not have to seek bankruptcy protection and discharge their debts.

How do you increase your credit score, to work on getting the home, car or simply a credit card? Increasing credit score after bankruptcy was the topic of our blog,http://www.bostonbankruptcylawyerblog.com, on April 25, 2011. That article pointed out that using secured credit cards was an excellent way of working toward a higher credit score. On January 7, 2011, we wrote about using credit unions to secure a credit card because they are more likely to issue one to someone following personal bankruptcy in Massachusetts.

It is also helpful to know how FICO calculates your score, so you can effectively work on increasing your score. We have an article on our website that discusses increasing your credit score in Massachusetts but we will outline some of that information here.

One, have a bank account. Many folks want to live simply, or can't manage a bank account, but the lenders want to see that you have one, and that you can manage it. Two, get a debit card from your bank, or credit union, and establish responsibility. Three, get a secured credit card through your bank or credit union, as discussed in above referenced blog article. Four, pay all of your bills on time so there will be no negatives reported in your credit report. Five, avoid bad lenders such as those that charge exorbitant rates and the payday loan folks. Six, get a free copy of your FICO credit report and write the agency to correct mistakes. Back up your writing with documents. Seven, live within your means to avoid problems and bad times that may come.

In a case handed down by the First Circuit Court of Appeals earlier this month, the Court stated that a bankruptcy debtor who was denied a discharge was valid because the debtor "intentionally and fraudulently omitted" and undervalued assets from his Massachusetts bankruptcy petition. The case, called In Re: Sullivan, Brian J., and published by Judge Votolato, was appealed from a decision by Bankruptcy Judge Feeney.

The assets were as follows:

A Rolex watch, which the debtor wore to the 341 Creditors Hearing, was not listed in the Petition or Schedules. The debtor later argued that he was not in any way intentionally or fraudulently misleading the Court, it was simply inadvertence. He also argued that he thought it had not value. The Court did not believe him, and the Appeals Court affirmed Judge Feeney's decision saying that there was no clear evidence of the Judge's finding.

Second, a bank account with $1,800 in it was presented as a bank account with $300 in it. The debtor argued that there was a difference between the date of signing and the date his attorney filed the Petition. This likely happens often; a paycheck gets deposited between those two dates, for example, and is rationally explained. However, the Court found that this debtor was "clearly inconsistent" with his explanations. The Court found him to be lying considering his signed Petition to be a false oath. The Appeals Court generally not likely to overturn such a finding by the judge that sits there, watching the debtor answer questions and listening to the answers.

Third, a motor vehicle that the debtor owned the Court found to be undervalued. The Chevelle necessitated $25,000 in upgrades, but was valued at $9,500 on the Petition. Apparently the debtor's parents paid for the upgrades. The debtor admitted that the vehicle had appreciated in value since signing the Petition. It is not clear to me from reading the Court's decision as to what happened here. But to some extent this sounds very fishy. While many of our Massachusetts bankruptcy clients are helped by their family, with childcare, regular financial gifts, and even vehicles, there are very few (in fact I don't recall any) where $25,000 was paid for upgrading a vehicle. Further, none of our clients' vehicles appreciate in value. The Bankruptcy judge found that the debtor "intentionally undervalued" the vehicle and did not believe the debtor's testimony, and the Appeals Court confirmed.

In a blog article from our bankruptcy blog, http://www.bostonbankruptcylawyerblog.com/,that we published on April 29, 2010, titled Bankruptcy Law Update, we noted that a debtor lost his rights to a discharge after he, along with his bankruptcy lawyer, mislead the Bankruptcy Truste, regarding the characterization of his divorce settlement.

There is a very simple lesson to these cases: tell the truth; tell only the truth. Many times telling the truth to your Massachusetts bankruptcy lawyer will enable him or her to work with you to plan your Petition and Schedules. Sometimes it means using Chapter 13 and not 7. Sometimes it means waiting to file until after a gift date has cleared. Sometimes it means filing sooner because of an expected event such as a marriage, or later after a child is born. Competent Massachusetts bankruptcy lawyers work with you to make a plan. Don't get caught filing a false Petition, get professional assistance.