January 2012

A fellow attorney recently asked me this question because the Trustee kept continuing his Chapter 7 client’s meeting of creditors under 11 U.S.C. § 341(a).  What’s a work here?

By the way, you may wonder if fellow attorneys really are asking me these questions that I answer in the blog.  The answer is, yes.  Most of the questions I have dealt with in previous posts were posed to me directly by fellow attorneys.  However, a few of the questions I’ve blogged about were originally posed on a list serve of which I am a member, and I happened to be the one who answered them.  You are the beneficiaries of those answers.

I.          Abandonment Of Assets

A.        The Bankruptcy Code’s Provision

The Bankruptcy Code has an entire section dealing with abandonment of assets by a bankruptcy trustee.  (This is not the same as dealing with abandonment issues, which require the services of a competent, licensed psychiatrist to resolve.)  That section is 11 U.S.C. § 554.  The portions that are relevant to answering my colleague’s question are §§ 554(b) and (c):
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Bankruptcy filings should surge in 2012 because the foreclosure pace is picking up speed, and because the world and U.S. economies are not headed for improvement in the near future.

I.          Foreclosures In 2012

I haven’t written about foreclosure in a while, but an article in the Thursday Los Angeles Times has given me the impetus to do so.

In the January 12, 2012 Business Section, E. Scott Reckard reported:

California and other states are likely to see an enormous wave of long-delayed foreclosure action in the coming year as banks deal more aggressively with 3.5 million seriously delinquent mortgages.  And experts said that dealing with the foreclosure process, from issuing notices of default to selling repossessed homes, is likely to push housing prices lower this year before the real estate market has a chance to recover.

Wow!  Three and a half million seriously delinquent mortgages.  That’s a lot of toxic real estate.  If you’re one of those 3.5 million people with a seriously delinquent mortgage, isn’t it time you considered bankruptcy?

II.        The World Economy

Is that the only bad financial news?  You know better than that.  Here’s what Sue Chang of the Wall Street Journal’s Market Watch reported on Friday, January 13, 2012:

Standard & Poor’s late Friday stripped France and Austria of their triple-A ratings and also downgraded Spain, Italy, and Portugal.  France and Austria are now both rated AA+ while Spain is at A and Italy is rated BBB+.  Meanwhile, Portugal’s rating was slashed to a junk grade of BB.  The move had been anticipated after the ratings agency placed 15 euro-zone countries on CreditWatch negative in early December.
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A fellow attorney recently asked me this question because she had a client who failed to attend the reaffirmation hearing.  As a result, the judge disapproved the reaffirmation agreement.  She wondered if the creditor could now repossess the car.  The short answer is: Yes.  What’s going on here?

I.          To Reaffirm Or Not To Reaffirm,

A fellow attorney, but not a bankruptcy attorney, recently asked me this question because he had a business client who wanted to use an involuntary bankruptcy filing to collect money from a judgment debtor.  To answer my colleague’s question we need a little background.  Let’s start with the concept of a voluntary bankruptcy.

I.          Voluntary Bankruptcy

Almost all bankruptcies filed today are voluntary bankruptcies.  Regardless of the underlying chapter at the heart of the bankruptcy, a voluntary bankruptcy is filed either under 11 U.S.C. § 301(a), or § 302(a).  § 301(a) provides (with emphasis added):

A voluntary case under a chapter of this title is commenced by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter.

The phrase, “by an entity that may be a debtor under such chapter,” appears because a business can file under § 301(a).  However, if the debtor is not a business, then the entity in question is one individual.  Section 301(a) cannot be used by a married couple.  Why?  The answer is found in § 302(a) (with emphasis added):

A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual’s spouse.

Notice the common thread in these two sections:  it is the debtor who files the bankruptcy petition.  The reason such bankruptcies are called voluntary bankruptcies is that the debtor voluntarily enters into bankruptcy.  Contrast this with the statutory language authorizing involuntary bankruptcies.
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