How to Start a New Bankruptcy Practice

How to Start a New Bankruptcy Practice - Page 5

DOWNLOAD AS PDF One Solution to Consider The videos from the American Bankruptcy Institute will NOT show you how to gather information from your clients, prepare the petition or run your practice. That education has never been taught to attorneys and either they learn the skill through trial and error or from an experienced paralegal. Victoria Ring is working hard to bring professional training and support to Chapter 7 and Chapter 13 debtor bankruptcy attorneys. This field has been overlooked in the same way that immigration, divorce and other types of consumer law have been overlooked. As an attorney, you are encouraged to suggest professional training be endorsed by your local bankruptcy court in an effort to end this ongoing problem. Bankruptcy Petition Case Review #1 The following two articles were written by Victoria Ring to assist debtor bankruptcy attorneys. The following two case reviews were chosen for this eBook to help you understand some of the intricate parts of working in this field of law. The problem: There is not enough left over for the debtors to make a Chapter 13 Plan payment. I talked with an attorney today who said: For a Chapter 13 Plan, I thought all I needed to do was take the amount left over between Schedules I and J and this was the Plan payment. Unfortunately, in 90% of the cases, it is not that simple. For example: Today I had a married couple who owed three mortgages on their home. Here are the particulars: $420,000 - Current market value of home $320,000 - First mortgage $ 20,000 - Second mortgage $200,000 - Third mortgage $ 20,725 - Exemption allowance Adding up $320 + $20 + $200 we have a total of $540. The home is valued at $420, leaving the debtors with $120 in equity. Minus out the exemption allowance and the debtors are UNDERWATER by approximately $100. This means that the attorney could propose a cram down on the THIRD mortgage and save the debtors $100,000. This is a good thing, right? Wrong. Even with the cram down, the debtors only have $2,300 left over every month to make a Chapter 13 Plan payment. After plugging in the figures into the Chapter 13 Plan, it would take a MINIMUM of $3,000 in a monthly payment just to cover the mortgage obligation, and still then, the unsecure creditors would only be paid 9 percent (which could be a problem.) A Bad Solution: Some attorneys, when faced with a problem like this will reduce the expenses on Schedule J just to get the case filed. But these are the types of things that will drive a Trustee insane. Also, these are the types of things that can embarrass an attorney in court in front of their clients because they have not done their job properly. They took the easy way out and left the Trustee to figure it out. A Good Solution: The best approach to solving this dilemma is for the attorney to meet with the debtors and explain the situation. The attorney should start by giving the debtors a copy of Schedule J and ask them to look over the figures and let them know if everything looks okay. After the debtors approve the figures (or change them) the attorney can explain the problem to the debtors in terms they will be better able to understand. The attorney may say something like: Since the figures are correct on Schedule J, you can see that you have $2,300 left over per month. However, since your house payment is almost $2,000 that leaves you with only $300 to pay on your cars and the $250,000 in credit card debt. As you can see, there is not enough money to do that. Can you look over Schedule I and J and let me know if you can find an extra $700 so that I can make the Chapter 13 Plan work? This puts control in the debtor’s hands and allows them to feel they are taking an active role. If debtors understand issues, they will be more cooperative in staying in the Chapter 13 Plan. However, if the debtors are unable to come up with a solution, at least they will be able to understand the problem and the attorney can explain different options. What is the Best Solution for This Problem? If the debtors are unable to afford their home or do not anticipate increasing their income, the best solution would be to surrender the home. This would give the debtors a fresh start and since there are only two of them, they could downsize and still leave a comfortable lifestyle. However, people are attached to their THINGS, like homes and cars. In fact, they are so emotionally attached that they cannot stand for a day to pass unless they have that particular home or particular car in their possession. I personally do not understand it. Everything in life comes and goes. Everyone has a time when they have money and a time when they do not. During the times when I have less money, I spend less and adjust my spending habits. When I have money again, I celebrate and spend more. Unfortunately, many people today are not willing to make sacrifices, but I hope this article at least puts the problem into a more understandable perspective. Bankruptcy Petition Case Review #2 The problem: Is there really too much equity in the motor vehicle? An attorney emailed me a Chapter 13 petition for a bankruptcy petition review. He had balanced out Schedule I and J and had a remaining excess of $2,822.55. However, when the attorney proposed a Chapter 13 Plan payment of $2,822.55; the Chapter 13 Plan calculator said the payment needed to be higher to cover the debts. An amount of $3,750.16 was suggested by the software program. In many circumstances, when a law firm is faced with a similar scenario, they will immediately start trying to reduce expenses on Schedule J. This line of reasoning is NOT protecting the debtor. Before you reduce expenses and take money out of the debtors pocket (which should be a strategy that is used as a last resort), go over Schedule A and B with a fine tooth comb. You may be able to find an error you made or the attorney may be able to reduce the interest rates, calculate a different monthly payment, do a cram down, strip a mortgage lien or any other number of options to protect the debtor. However, the petition I reviewed for my attorney today was caused by a very simple error that is impossible to see on the surface. I wanted to pass this important information on to you as soon as it happened so you can recognize the problem and deal with it on a future case to avoid this same problem. Allow me to explain the process I went through to solve this issue so you will have a better understanding of what I am talking about: | Next Page | Previous Page |

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