Coping with debt and financial troubles may be stressful and tough, and no one likes to be harassed by creditors. But unfprtunately, debt collectors are well-known for using aggressive and abusive tactics to collect payments. Regular calls, pressure, force, or making a bad brand name– nothing is left in the list! Continue reading
What Are The Merits of Filing Bankruptcy Under Chapter 7
First and foremost, before knowing about filing of Chapter 7 Bankruptcy, let’s look into what a “bankruptcy”actually really is. . Continue reading
How to Search for A Bankruptcy Lawyer Online
In Boston and in Massachusetts, finding the best, qualified bankruptcy lawyers and attorneys that know their job and how to do it well can be challenging. However, it is not impossible and with the right steps, this task can (and should!) be accomplished rather “sooner than later”. At the end of the day, it is all just a matter of being patient and putting in a more-than-trivial amount of effort.
Why and when should I consider filing a bankruptcy case?
The reasons why people file for bankruptcy protection in the United States is as varied and complicated as the bankruptcy process itself. In the final analysis however, it really comes down to an individual’s or couples’ “relationship” to their debts as a whole, the individual’s or couples’ ability to weather unforeseen changes in their financial circumstances, and the individual’s or couple’s tolerance of personal and financial “stress”. Therefore, the decision of whether and when to file a bankruptcy petition is both one that is based on a rational self-examination of a person’s financial circumstances as well as an assessment of their own emotional state and ability to handle their financial affairs without outside assistance.
In bankruptcy parlance, we refer to people that “file” for bankruptcy protection as Debtors and the entities to whom they owe money or referred to as creditors. No two debtor’s financial and emotional makeup is ever identical. However, there are certain basic, objective indicators that a bankruptcy case may be needed to resolve a debtor’s financial distress. These indicators include, but are not limited to, the following:
- The debtor is making only minimum payments to creditors each month, leaving the debtor with an insufficient amount of money to pay for his regular monthly living expenses;
- The debtor is falling behind or missing payments to one or more creditors each month;
- One or more of the debtor’s financial accounts has been referred to a debt collection agency or to a debt collection lawyer to commence suit;
- The debtor is being sued in courts of law on credit card and personal loans;
- The debtor has received letters and other notifications indicating that one or more of his or her creditors is threatening repossession or foreclosure of essential assets needed for the debtor maintain a minimum standard of living;
- The debtor is having difficulty focusing either at home or at work due to the distractions caused by his or her financial commitments; and
- The debtor is losing sleep fixating on thoughts of how to deal with his or her debts on a going forward basis.
Using these kinds of objective, evidence-based criteria for a self-assessment may yield results that better guide a person’s decision-making process, rather than listening to Internet- or radio-based promotions promising financial relief as a result of allegedly “secret programs that credit card companies don’t want you to know about”. If it sounds too good to be true, that it likely is. To put it bluntly, there is simply norealand meaningful substitute for legal remedies provided under the Bankruptcy Code, regardless what credit card companies and their hucksters would have people believe.
Do I need to use a bankruptcy lawyer to file for bankruptcy?
In a word, “no”. No one is legally required to retain a competent bankruptcy attorney in order to seek protection under the Bankruptcy Code. Then again, no one is legally required to seek out the assistance of a surgeon in removing a cancerous tumor or an appendix about to burst. If a person wants to file a bankruptcy petition or do their own appendectomy on themselves, they are perfectly free to do so. In both cases, the process will be dangerous, likely extremely painful, and a successful outcome is much more likely to be in doubt. Oh, I forgot to mention that since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) in 2005, the likely better medical analogy would be that of performing one’s own Prefrontal Lobotomy (rather than an appendectomy) due to the fact that the process was made a full order of magnitude more complex and involves a number of additional steps that the bankruptcy process did not include prior to the BAPCPA’s enactment. So, yes, by all means, people are legally permitted to prepare and prosecute their own bankruptcy cases without the representation of a competent lawyer; it’s just that they would likely will not enjoy the result of such an endeavor.
You ask: ”Why is the bankruptcy process been made so complicated?” The reason is that the Bankruptcy Code and the rules of procedure were enacted by Congress so they strike a balance between the demands of creditors, on the one hand, for accountability on the part of their borrowers, attempting to “weed out” those persons that may be intentionally trying to “abuse the bankruptcy process” and, on the other hand, the need to provide meaningful relief to borrowers experiencing genuine financial distress so that they may once again become active and productive members of the economic life of the country. This is a very difficult balance strike and the Bankruptcy Code has been the subject of many changes, amendments, revisions, and deletions, all designed to maintain this “dynamic balance” between debtors and creditors.
What then should I look for online in order to evaluate which the lawyer to retain to represent me in bankruptcy? Shouldn’t the legal fee be the primary consideration?
Certainly, the cost of retaining a particular attorney is always a consideration in deciding which attorney to retain and not an unimportant one. But most competent lawyers won’t advertise how much they would charge to do a bankruptcy case because there is no way for the lawyer to quote a fee blindly without first spending some time evaluating the client’s financial circumstances in determining if bankruptcy is a good option and, if so, what the chapter of bankruptcy ought to be filed (Yes, there is more than one kind of bankruptcy in the same way as there is more than one flavor of ice cream!). Those that advertise “cut rate“ prices online may not even be licensed attorneys at all but merely “bankruptcy petition-preparers” who are mere “scribes” for their customers that not even allowed to provide any legal advice all. So, then, how then to evaluate the vast number of lawyers that one can find on the Internet? Whether you use a general “search engine” such as Google.com, Yahoo.com or the like, or more lawyer-specific databases such as Avvo.com, Lawyers.com, Martindale.com or Findlaw.com, the “evaluation process” for you should remain the same. What follows are more specific criteria to conduct that kind of evaluation.
Find a reputable firm
So, how does one evaluate a lawyer’s “reputation”? The first step is to search for a firm that has overall positive reviews as well as satisfaction with their services from their clients. Read over the reviews themselves and ask yourself the following questions:
- Do the reviews appear to be “organic” in nature or do they appear to be just “boilerplate” copy?
- Do the reviews reflect the lawyer as being personable and compassionate?
- What kind of the bankruptcy case does the reviewer describe and how did the reviewed lawyer handle their case?
- Is the person giving the review described their financial circumstances in a way that is similar to yours?
- How far back in time to the reviews go?
- How many reviews are being provided? Is it just 5 or 10 or more than 40 or 50 ?
- Has the reviewer described a legal issue that is similar to the one that you may be facing? For example, has the lawyer saved homes from foreclosure? Removed creditor’s liens from a client’s home? Successfully defended or prosecuted a client’s legal rights in an adversary proceeding or contested matter before the Bankruptcy Court?A good choice in this scenario for anyone regardless of their situation would be the Law Offices of Richard N. Gottlieb, who have more than 2 decades worth of experience under their belts. They have advised their clients in a successful manner while helping them turn over a new leaf.
Make sure the firm is versatile
What this essentially means is making sure that the firm’s area of expertise is not limited to just one specific type of client in the bankruptcy process. Why is this important? In order to be able to represent anyone effectively in the bankruptcy process they need to understand the process not just from one party’s point of view, but, rather, from multiple points of view. For this reason, it’s important to determine whether a particular bankruptcy attorney has represented bankruptcy trustees in the past so that the lawyer will understand what motivates and what information is needed by trustees in bankruptcy. Similarly, it’s important that a lawyer understand the motivations of secured creditors (such as, mortgage lenders and car loan providers) and this can only be done if that lawyers actually represented such parties in the bankruptcy process.The Law Offices of Richard N. Gottlieb is an exceptional example of being an all-rounder, as they work with numerous different kinds of individuals, creditors, and trustees. Along with this, they also handle cases that involve issues dealing with bankruptcy, litigation, and other legal matters in both state and federal courts.
Ensure that the attorneys/lawyers are credible
In times of desperation, it is rather easy to blindly take and follow the advice of someone who appears to be knowledgeable on the outside but, in reality, is not. This is why it is important to do some research beforehand just to be on the safe side. In other words, taking a look at the ratings and reviews of the individual attorneys/lawyers could end up making all the difference in getting the help one needs by proving beneficial.
Peer endorsements can also be useful
Oftentimes, clients turn to others like themselves for honest, helpful ratings and reviews before deciding once and for all if they want to get on board as well. However, what many may tend to forget about is what individuals with similar professions have to say about their fellow peers (i.e., lawyers endorsing other lawyers, etc.). Not only does this offer another perspective, but it also provides an additional layer of credibility. This way, the client gains a better idea of the type of person they will be working with and what exactly they are potentially getting themselves into.
Check for any blogs
Blogs are especially crucial due to the fact that they could give valuable insight that one was not previously aware of. Since many of them contain information about a wide range of topics, there is a good chance that clients will find whatever they are looking for. In this case, that being Boston bankruptcy attorneys. If this does end up being the case, it will help the client get one step closer to locating the best Massachusetts bankruptcy lawyer near them.
Awards & nominations are optional
Something arguably not talked about enough are the awards and nominations that a firm receives because of their services. While these should not be a major component in one’s decision to join forces with that firm, it could definitely be a factor, nonetheless. This is due to the fact that the awards and nominations do hold some degree of weight, but only to the extent that it boosts the already existing legitimacy of that firm. It lets the client know that the firm and its services are legit and at the very least, they are doing something right when it comes to their lawyers and attorneys.
So why choose the Law Offices of Richard N. Gottlieb?
After going over all of the steps to finding the perfect Boston bankruptcy attorney or the best Massachusetts bankruptcy lawyeronline, one may still be legitimately skeptical about working with the Law Offices of Richard N. Gottlieb. This is completely understandable for a number of reasons. However, these lingering concerns can be laid with as little as a five-minute telephone call and the manner in which it is received . Ask yourself:
- Who answered the telephone when you called? Was it the lawyer himself or paralegal or legal secretary?
- When you spoke with the attorney, did he sound cold and indifferent or compassionate regarding your circumstances?
- What kinds of questions that a lawyer ask? Were they general or analytical in nature? Did the lawyer appear to treat your concerns as important or as just another name on a case file?
- Did the lawyer quote you a fee without asking about the specific circumstances of your finances or invite you to come into his office for free consultation before being able to quote you quote you a fee?
- Did the lawyer sound authentic and personable over the telephone? Did the lawyer seen interested in you as a person rather than just another source of income? Did it sound like the lawyer enjoyed the practice of bankruptcy law or that this was merely his “9-to-5 job”?
There are many more questions that could be asked and should be a before deciding upon retaining a bankruptcy lawyer. But in the final analysis , the question that you need to ask yourself is (a) whether a particular lawyer has both the objective legal expertise to help solve your financial problems and (b) whether that lawyers personality serves as a “good fit” with your own.
With this in mind, the Boston Law firm of the Law Offices of Richard N. Gottlieb specializing in bankruptcy and related-litigation stands out from the rest because of their unrivaled services and complete customer satisfaction.
A Practical Guide to the Massachusetts Homestead Act and How to Use it.
In 2012, the State of Massachusetts changed and clarified the rights of its homeowners to protect their financial interests in their homes from the reach of common unsecured creditors. What follows is a basic guide for understanding your legal rights in your home if you living in Massachusetts.
What is a “Homestead Exemption” anyway?
A “Homestead Exemption” is best thought of a statutory “set aside” for the benefit of a homeowner. In some states, like Texas, the “size” of the homestead exemption is measured in acres or square feet. In Massachusetts, the homestead exemption is measured in dollars of “equity”. “Equity” in this case is the dollar amount remaining after all mortgages and municipal charges (like real estate taxes and water and sewer liens) are deducted from the fair market value of the real estate. For example, If a home’s fair market value is $300,000 with a mortgage balance of $150,000 and outstanding municipal charges of $25,000, the homeowner’s “equity” in the home would amount to $125,000 (i.e. $300,000 less $150,000 less $25,000 equals $125,000). In that event the homeowner would have $125,000 of equity that he would seek to protect from the reach of his creditors should he or she become delinquent on his or her otherwise unsecured debts, like credit card companies and banks and finance companies that make unsecured personal loans.
Although no one likes to think about it, when you become delinquent on a personal loan or credit card debt, creditors will ordinarily seek to secure repayment by obtaining an attachment or other judicial lien against a person’s home as part of their attempt to collect on the debt in a court of law. Only a court can grant a judicial lien or attachment prior to the entry of a judgment. However, once an Execution of Judgment is issued by a Court, the creditor can have a deputy sheriff record a levy (that also creates a judicial lien) against a debtor’s home.
The Massachusetts homestead exemption under Mass. General Laws Chapter 188, Section 1, et al. allows a Massachusetts homeowner to defend their equity in their home either in a Massachusetts State Court or (more effectively) in a U.S. Bankruptcy Court
What Kinds of Homestead Exemptions are there in Massachusetts?
There are really three (3) types of homestead exemptions available to homeowners in Massachusetts and they are as follows:
1. The “Automatic Homestead”. Under Mass. Gen. Laws Ch. 188, Section 4, there is an “automatic” exemption of $125,000. There is no need to file anything to lay claim to this exemption.
2. The “Declared Homestead Exemption”. Under Mass. Gen. Laws Ch. 188, Section 3, a homeowner (or group of homeowners) may claim up to $500,000 of equity in their home as exempt. However, to claim this exemption the homeowner must file a “Declaration of Homestead” with the County Register of Deeds in the county where the home is located. The declaration must be signed before a Notary Public and the present cost filing of the declaration is $35.
3. The “Elderly or Disabled Person’s Homestead”. Like the “Declared Homestead”, under Mass. Gen. Laws Chapter 188, Section 2, a homeowner (or group of homeowners) may *each* claim up to $500,000 of equity in their home as exempt. This type of homestead exemption also requires the filing of a “Declaration of Homestead” with the County Register of Deeds in the county where the home is located, plus proof of disability or a certification that the homeowner(s) are at least 62 years old. The most important benefit of the Elderly of Disabled Persons’ Homestead Exemption is the ability to “stack” the exemption so that an elderly (over 62) married couple that owns their home jointly may claim an aggregate homestead of *two (2) times* the basic $500,000 homestead amount, PLUS another $250,000 in equity, for a total aggregate exemption of $1,250,000.
For whose benefit may a homestead exemption be claimed?
The homestead exemption may be “declared” by one homeowner, but its protection is intended for the benefit of AND covers the legal interests of the Declarant homeowner’s family members living with him or her at the time of the filing of the Declaration of Homestead with the Registry of Deeds. The homeowner “declaring” the homestead must actually reside at the home as their principal place of residence or intend to reside at the the home as their principal place of residence in order for the Declaration of Homestead to be effective.
Geographically, what comprises my “home” for homestead purposes?
Even if your “home” is situated on more than one lot of land (say, in a subdivision), the entire undivided (or unsubdivided) property will be covered by the exemption, even if some adjacent lots consist of vacant land, SO LONG AS the lots are actually “used” as part of the homestead property even for such things as recreation, storage, gardening, etc. So long as there is proof of “use” as part of your home, it will be covered by the Massachusetts homestead exemption.
Are their any exceptions to the kind of debts that can “pierce through” a homestead exemption?
Yes. Under Mass.General Laws Chapter 188, ? 3(b), certain types of debts can “pierce” a homestead exemption claim. These include:
(1) debts for federal, state and local taxes;
(2) debts for a judicial lien on the home recorded BEFORE to the creation of the estate of homestead;
(3) debts secured by a mortgage on the home;
(4) debts for non-payment of an order by a court for the support of a spouse, former spouse or minor children;
(5) where buildings owned by the homeowner is situated on land NOT owned by the homeowner; and
(6) upon an execution of judgment issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity.
These “exception” to the Massachusetts homestead exemption apply only in the case where the homeowner has NOT sought protection under Chapter 7, 11 or 13 of the Bankruptcy Code. The protections provide by the Bankruptcy Code “amplify” and expand the protections already provided under Massachusetts State law.
How does a Bankruptcy filing add additional protections to a Mass. Homestead Exemption claim?
Under Section 522(c) of the U.S. Bankruptcy Code, “Unless the case is dismissed, property exempted under this section is not liable DURING OR AFTER THE CASE for any debt of the debtor that arose . . . before the commencement of the case, except–”
1. debts for State or Federal taxes or a debt for child support, alimony or the like;
2.debts secured by a lien that is not “avoidable” (i.e. capable of being extinguished) under the Bankruptcy Code;
3. debts secured by a tax lien;
4. debts owed by a debtor that is an “affiliated” (i.e. president, officer or director) with an “insured depositary institution” (i.e. a Bank, Savings and Loan, or an insured Credit Union) on account of fraud or willful and malicious injury and that is owed to the federal Receiver of the defunct bank;
5. a debt for fraud in the obtaining or providing of any scholarship, grant, loan, tuition, discount, award, or other financial assistance for purposes of financing an education at an institution of higher education.
Because most of the “exceptions” to allowed exemptions under Section 522(c) are MUCH more narrow than the exceptions found in the state exemption statute, only the exceptions found under Section 522(c) will apply to a homeowner that files for bankruptcy protection. Therefore, many of the exceptions found in Mass. Gen. Laws Ch. 188, Section 3(b) (see above) DO NOT APPLY with respect to past creditors included in the bankruptcy case to the extent that they conflict with the narrower exceptions under the Bankruptcy Code under a legal doctrine called “federal supremacy” or federal pre-emption”.
Can I “lose” homestead protection?
A homestead can only be terminated by deeding it to someone else, abandoning the home (except that family members that remain still have homestead protections), establishing a new homestead somewhere else. (Remember: You can only have ONE Principal residence so there can only be one homestead exemption to which it applies!)
What if I sell my house? Are the proceeds of sale protected?
If you sell your house, the net proceeds of sale, so long as they are less than the applicable homestead amount, remain exempt for at least one (1) year after the sale. But some court have held that time restrictions such as this one MAY not apply if the homeowner seeks bankruptcy protection as well because of the protections under Section 522(c) of the Bankruptcy Code.
Additional resources provided by the author
When Should You Consider Filing a Bankruptcy Petition (or Why People File for Bankruptcy)?
Besides practicing bankruptcy law for more than 35 years, I have taught this area of law at 2 different law schools (including my own “alma mater”) for 13 years. Each time I teach the course, the very first question I ask the class is “why do people file for bankruptcy?” Here we go!
1. The Financial Dimension
Many of my law students give the answer that, “well, people file for bankruptcy when the amount of their debts exceed the value of their assets”. While this answer is rational, it is actually a very simplistic notion. In our current “consumer economy”, where consumer debt both secured (for example, home mortgages and car loans) and unsecured debts (credit cards, personal loans, student loans, overdraft and unsecured lines of credit, et al.) is available to virtually every one and where banks and credit card issuers literally compete for business on the basis of such, funds and blandishments as (a) where people went to college, (b) free airline tickets, and (c) “cash back” incentives, consumer debt has become in the United States as common as clouds in the sky. It is not uncommon that financially stable people can maintain substantial credit balances equal to more than 30% (or MUCH more) of their annual income, without placing them at immediate financial risk of default.
So it is not simply a matter of one’s “debt to asset ratio” that determines whether a person ought to file a bankruptcy case. The more immediate question rather is the ability of the borrower to be able to successfully “service” or “manage” their total debt load at any given point in time based upon the availability of liquid assets (for example, cash in the bank, savings, securities, and the like). In the world of accounting, this might be referred to as a business’ “current ratio”; that is, the ratio of “current assets” (cash current accounts receivables and liquid securities [stocks and bonds]) to “current liabilities” (the amount of any expenses do on debts that ***must*** be paid immediately). The lower this “current ratio” is in any given point in time, the greater the likelihood that external “financial pressure” will force a person to consider filing a bankruptcy case.
2. Events of External Financial Distress
By “events of external financial distress”, I’m referring to events, either foreseen (and previously ignored) or wholly unforeseen, that because the borrower to suffer a sense of such great concern that they no longer “feel” financially secure. The longer this “external financial distress” exists or increases, the greater the likelihood that bankruptcy becomes a substantial option. What form can these “events of external financial distress” take? They include, but are not limited to:
(a) “collections activities” such as default notices, demands for payment from collection agencies and collection attorneys , the initiation of one or more lawsuits in the local courts;
(b) loss of “overtime” pay or the loss of employment;
(c) the death or long-term illness of a family member that previously provided substantial financial support for the household;
(d) the Notice of Tax Assessment by the IRS or state taxing authority; and
(e) the break-up, separation or divorce of the family unit which previously provided financial support of the borrower.
3. The Psychological Dimension of Debt
Even if one is facing one or more of the “events of external financial distress” and has a low or faces a decreasing financial “current ratio”, this does not necessarily mean that a person would be prepared to file a bankruptcy petition to eliminate their debts and get a “fresh start”. In my experience, what drives most borrowers to seriously consider the bankruptcy filing as more to do with their own sense of “psychological resilience” to financial distress that almost anything else.
We live in a country that treats as a “moral virtue” the ability to manage their financial affairs regardless of external circumstances and stigmatizes those people that, for one reason or another, seek to take positive action to finally eliminate their financial distress. In the United States, it is altogether too common to view “credit scores”, “creditworthiness” or the aggregate of the their credit cards’ “credit limits” as a standard by which to evaluate a person’s “self-worth”. We lionize those that many times by circumstance or by birth, have given them great wealth while diminishing those persons not so blessed.
The reality is that, for most of us, the extent of a person’s “emotional support system” and “emotional endurance” or the lack thereof, is a substantial determining factor towards the likelihood of a bankruptcy filing in the face of financial distress. It is essentially a dynamic tension between the ever-present anxiety generated by financial distress against the speculative perception of one’s self-worth based of how others might view them.
If this sounds squishy and irrational to you, that’s okay. Because it is. In short, there are rational reasons to file for bankruptcy protection that people will refuse to even consider because of great emotional resilience in the face of events of external financial distress. Concomitantly, there are irrational reasons that a person may choose to file a bankruptcy petition based upon their misperception of their financial status because of their lack of “emotional resilience” in the face of events of external financial distress.
4. How then SHOULD One Go About Deciding Whether to Consider a Bankruptcy Filing?
In my experience this is really a “factor-based” analysis that includes both financial and psychological aspects. These factors include, in no particular order, the following:
(a) the level of debt presently being carried versus the available net income (that is, after expenses) to service that debt;
(b) both the number of and the severity of the events of external financial distress the borrower is facing and the likelihood that those events will persist for the foreseeable future;
(c) whether the events of external financial distress are “acute” in nature (for example, the immediate threat of a garnishment of wages or foreclosure or repossession of an important asset) or “chronic” (for example, using credit cards to pay daily expenses of living);
(d) the nature of the “debt structure” of the borrower (that is, the composition by type of the debts carried) and the likelihood of being able to eliminate those debts without having to resort to the “legal tools” available under the Bankruptcy Code (simply stated, there are some things that you can do under the bankruptcy code that you could ***never*** be able, as a practical matter, to accomplish in any state court);
(e) the extent to which the borrower’s assets would be protected from the reach of creditors, both outside the bankruptcy process as compared to within the bankruptcy process;
(f) the extent of the borrower’s personal sense of financial distress and whether it is causing or is likely to cause future physical or mental illness (for example, anxiety, depression, insomnia, upset stomach or gastritis, etc.); and
(g) the extent of the borrower’s emotional and financial “support structure” to assist the borrower in confronting and combating the source or sources of his or her financial distress.
5. The Need For Specialized Legal Knowledge
If you are suffering from a stomach ailment, you would not go to an eye doctor. Similarly, if you knew that you were suffering from a specific type of eye illness, you would likely seek out the help of that very same eye doctor, as opposed to a general practitioner. The very same logic applies with respect to business and consumer bankruptcy law. A lawyer that knows how to do a divorce or defend a criminal action or prosecute a personal injury case, does not make him well-qualified necessarily to be a bankruptcy attorney. Bankruptcy law, perhaps like few other areas of legal practice, is a defined legal specialty that requires literally years of practice to do effectively and well. The reason for this is that most lawyers are taught to deal with mostly “bilateral” legal processes in matters such as contract law, civil litigation, real estate practice and the like. Bankruptcy law by comparison is a “multilateral” process involving multiple stakeholders, each of which with their own particular (and sometimes peculiar) points of view. Moreover, bankruptcy law can oftentimes be an area that combines different aspects of legal practice requiring disparate skills involved in civil litigation, administrative proceedings, and even ono-on-one negotiation, all being used together within one, single unified process. bankruptcy cases necessarily involve aspects of state law, federal law, and administrative law, all of which must be executed according to rules that have short and rigid timelines. In short, bankruptcy is no place for a layperson or a general practitioner to “dabble” in. He would know or try and do your own bankruptcy filing than you would try to do your own prefrontal lobotomy: the outcomes necessarily will be bad!
It is therefore important when evaluating whether bankruptcy is a good alternative to speak with a knowledgeable and competent bankruptcy attorney in your particular jurisdiction. How then to evaluate the competence and expertise of a bankruptcy lawyer:
(a) how many years of specialized bankruptcy practice has the lawyer had;
(b) how many cases as the bankruptcy attorney handled in the last 5 years;
(c) what notable cases as the bankruptcy attorney been involved in an what were the outcomes;
(d) what reviews has the bankruptcy lawyer received and how apparently “organic” are those reviews;
(e) has the bankruptcy lawyer represented clients with the same kinds of problems that you are currently facing;
(f) what is the bankruptcy attorney’s personality like, how “approachable” is he or she, and is the bankruptcy lawyer willing to take the time to explain the bankruptcy process to you?
These are just some of the qualities that you should use in evaluating the advice being given by a specialized business or consumer bankruptcy lawyer. Naturally, other factors will necessarily come into play.
6. Final Thoughts
As with much in life, timing is everything. The biggest problem that I have faced in my many years as a bankruptcy lawyer is that people wait to long before coming to me with their problems. In many cases, having come to see me sooner, I would have been able to have avoided much of the distress that they were forced to endure and prevent some of the negative legal consequences that came to pass only because they waited so long.
It is better to swallow one’s pride, and seek out legal advice before a “crisis” becomes a genuine catastrophe. However this requires perhaps the hardest thing that one can ask of oneself, namely, the capacity to see things as they actually and really are rather than as we would like them to be. This is very very hard for most people because it is all but impossible to be “objective” about oneself and the reality of one’s actual circumstances. This is the real reason (and it is a very good one) why people retain lawyers in the first place: lawyers are trained to engage in “critical” thinking and to view a client circumstances in the most objective way possible, and then based upon that objective reality provide clear and cogent advice as to how the client ought to proceed.
But in order to be able to do this, the client must first engage in an exercise of self-awareness and confront himself or herself and be honest with himself or herself about their legal and financial circumstances. Until that event comes to pass, the borrower will not pick up the phone and reach for the assistance that he or she likely needs.
Additional resources provided by the author
First Circuit Holds that Native American Indian Tribe, and its Online “Payday Lender” Arm Cannot Ignore the Automatic Stay of the Federal Bankruptcy Code.
In a matter of first impression, the US Court of Appeals for the First Circuit has held that the provisions of the Bankruptcy Code that abrogate and set aside the doctrine of “sovereign immunity” apply to Native American Tribes and their “payday lender” subsidiaries, so that such creditors can no longer ignore the fact a borrower has filed for federal bankruptcy protection. In the case of In re Coughlin sub nom Coughlin v. Lac Du Flambeau Band of Lake Superior Chippewa Indians, et al., _____ F.4th _____, Case No. 21-1153 (May 6, 2022), in a 2-1 decision, the First Circuit found that the abrogation provisions of Section 106(a) of the Bankruptcy Code, which eliminates the defense of “sovereign immunity” for “governmental units” as defined by Section 101(27) of the Code, encompasses and explicitly applies to Native American Indian Tribes and the “arms of the tribe” that conduct online “payday lending” operations.
In Coughlin, the borrower had taken out and $1,100 “payday loan” from Lendgreen in 2019, a wholly-owned online “payday lending” subsidiary of the Appellee Indian Tribe, charging more than 500% interest per annum on each loan made. Later that year, the debtor filed a Chapter 13 bankruptcy case in Massachusetts. Lendgreen was listed in the debtor’s bankruptcy filing and mailing matrix. By the time of the debtor’s bankruptcy filing his debt to Lendgreen had grown to nearly $1600 with the accrual of interest. Mr. Coughlin submitted a Chapter 13 Plan provided that all creditors would receive a 100% “dividend”, paying all creditors that filed proofs of claim 100% in full. The debtor, by his attorney, Richard N Gottlieb, Esq. of Boston, served a copy of the debtor’s Chapter 13 Plan on Lendgreen. Notwithstanding the fact that the bankruptcy code imposed an “automatic stay” barring all creditors from taking any further debt-collection activity without first obtaining bankruptcy court approval for the same, Lendgreen nonetheless repeatedly “dunned” Mr. Coughlin seeking repayment of its debt through numerous and repetitive debt collection letters, emails and voicemail messages to the debtor. 2 months after he filed his Chapter 13 bankruptcy case, Coughlin attempted to take his own life, based upon his belief that, notwithstanding his bankruptcy filing, his “mental and financial agony would never end” and blamed such agony on Lendgreen’s “ regular and incessant telephone calls, emails and voicemails.”
When Coughlin moved to enforce the Automatic Stay under 11 U.S.C. § 362(k) against Lendgreen and its corporate parents, the Native American Indian Tribe, seeking an order both prohibiting further collection efforts as well as damages attorney’s fees and expenses, the tribe and its affiliates asserted that they enjoyed “tribal sovereign immunity” and moved to dismiss the enforcement action. U.S. Bankruptcy Judge Frank J. Bailey agreed with the Indian Tribe’s claim of “tribal sovereign immunity”, held that the abrogation provisions of Section 106(a) did not apply to the Indian Tribe because it was not a “Governmental Unit” under the Bankruptcy Code’s definition of the same term, and then proceeded to grant the Tribe’s Motion to Dismiss the debtor’s enforcement action. Debtor’s counsel then took the extraordinary step of seeking direct appellate review by the First Circuit Court of Appeals of the bankruptcy court’s decision, thereby bypassing the intermediate appellate courts, the U.S. District Court for the District of Massachusetts and the Bankruptcy Appellate Panel of the First Circuit, under 28 U.S.C. § 158(d)(2). Both the U.S. Bankruptcy Court for the District of Massachusetts and the US Court of Appeals for the First Circuit granted direct appellate review of the bankruptcy court’s original decision below.
In a 2-1 decision written by Judge Sandra Lynch dated May 6, 2022, the majority of the panel held that the bankruptcy court’s decision below (that that the Bankruptcy Code’s “abrogation” provisions did not apply to the Indian Tribe and it’s payday lending operation) was legally erroneous and reversed the decision of the bankruptcy court below and remanded the matter back for proceedings consistent with the First Circuit’s judgment in the matter. The First Circuit found that the Indian Tribe was, indeed , a “government” because they acted as the governing authority of its membership, and that, as a government, it was “domestic” in nature because it existed within the United States. The First Circuit found that the definition of a “governmental unit” as expressed in section 101(27) of the Bankruptcy Code was defined as broadly as humanly possible, namely:
United States; State; Commonwealth; District; Territory; municipality; foreign state;
department, agency, or instrumentality of the United States (but not a United States
Trustee while serving as a trustee in a case under this title), a State, a Common-
wealth, a District, a Territory, a municipality, or a foreign state;
or other foreign or domestic government.
It was this last “catch-all” definition that the First Circuit held explicitly covered Indian Tribes, finding that not only did the text of the definition clearly encompass Indian Tribes, but the conclusion was also supported by the historical context so that when Congress abrogated sovereign immunity in 1994, it did so “against the pre-existing backdrop of § 101(27).” The court adopted the debtor’s reasoning, stating “[a]s Coughlin argues, Congress was aware of the existing definition of “governmental unit“ when it incorporated it into § 106.” The majority of the panel rejected the Indian tribes attempt to argue that, notwithstanding both the broad original definition of “governmental unit” and the historical context underlying the enactment of that definition and the later-enacted § 106, that Congress did not “unequivocally express” its intent to abrogate “tribal sovereign immunity”. The tribe contended that, because neither the bankruptcy code nor the legislative history of the same used the phrase “Indian Tribe“, Congress did not mean to abrogate the tribe’s rights of sovereign immunity unequivocally and expressly. The First Circuit rejected this approach as a requirement to use of “magic words” in order to expressed congressional intent. The court had no difficulty in finding recent Supreme Court precedent that explicitly rejected such an approach in the case of Cooper v. FAA, 566 U.S. 291 (2012) when Congress seeks to affect an abrogation of sovereign immunity in a federal statute. The Tribe was similarly unsuccessful in persuading the First Circuit that they were entitled to “special” treatment because of the fact that they were an Indian tribe.
It is not clear, at this point in time, whether or not the Tribe will be seeking further appellate review from the First Circuit or seek a further appeal to the United States Supreme Court. However, the First Circuit’s decision makes it absolutely clear that no entity, even an Indian Tribe asserting its “tribal sovereign immunity” from suit, should treat the Bankruptcy Code lightly. The holding of the First Circuit also makes it clear that no one, not even a “governmental unit” with pretensions of somehow being special, entitled or otherwise unconstrained by the same rules that all others must follow, are, in point of fact, not above the rule of law that governs the United States of America, particularly in the area of consumer protections such as those provided under the federal Bankruptcy Code.
Boston Bankruptcy Update: ONE MAN’S “BREACH OF CONTRACT” CAN SOMETIMES BE ANOTHER MAN’S “FRAUD”
In a recent decision by Bankruptcy Judge William C. Hillman in the case of In re Kappeler, the Bankruptcy Court in Boston was presented with a Motion to Dismiss an adversary proceeding seeking to declare a debt that the Debtor thought was a dischargeable breach of contract one for a non-dischargeable fraud. The Debtor, an electrician, had been hired to do some electrical work for the plaintiff, an assisted-living facility in Blackstone, Massachusetts.
The plaintiff claimed that the Debtor had represented that he would perform the electrical work and install a fire alarm system in a competent fashion, that he would complete all work to code standards and that all work had passed inspection. The plaintiff went on to allege that the electrical work was not code compliant and did not meet the requirements for a commercial assisted-living facility, necessitating the plaintiff to pay substantial sums for correction of the work performed by the Debtor. When the Debtor filed a petition for bankruptcy protection under Chapter 7 of the Bankruptcy Code, the plaintiff brought an adversary proceeding to declare the debt owed to it to be non-dischargeable for fraud.
The Debtor responded with a Motion to Dismiss the case based upon the assertion that, among other things, the Plaintiff’s damages were caused from substandard work (i.e. a breach of contract) and not from any misrepresentation as to whether the work was “up to code” or had not been inspected (i.e. positive fraud). The court denied the Motion to Dismiss pointing out that the Debtor had been paid some $35,000 for the electrical work that he did do and therefore the claim for fraud, although needed to still be proven with evidence, the adversary proceeding’s Complaint, in fact, was “plausible” and therefore not subject to being dismissed by the court at that point in the adversary proceeding.
What does this really mean for debtors and creditors? Generally, a simple breach of a contract, by itself, does not give rise to a debt that is non-dischargeable for fraud. However, where specific representations are made about the quality of the work or whether work will be performed in a particular way, such representations may give rise to a potential adversary proceeding for non-dischargeability. By comparison, in the case of Bellas Pavers v. Stewart, the very same Judge granted a directed verdict in favor of the Debtor after the close of a plaintiff creditor’s case where the creditor (a sub-contractor) could not prove that the Debtor (the general contractor) intended not to pay the contractor at the time that the contractor was retained. Judge Hillman was affirmed by the Bankruptcy Appellate Panel for the First Circuit on an appeal defended by my firm. Which only goes to show that when differentiating between a contract claim and fraud claim, the “devil is in the details”.
In Re: Kappeler, Daniel W. (Lawyers Weekly No. 04-012-14) (16 pages) (Hillman, J.) (USBC) Jonathan Horne, of Jager Smith, for the debtor; Patrick O. Flaherty for plaintiff Ducharme Estates, Ltd. (Chapter 7 Case No. 11-18166-WCH; Adversary Proceeding No. 13-1166) (Jan. 30, 2014).
Boston Bankruptcy Update: A Debtor seeking to discharge Student Loans under the “Undue Hardship” Test must Exhaust Income-Based and Income-Contingent Repayment Plan Options First
In general, student loans are considered long-term non-dischargeable debts. This means, even after your Chapter 7 or Chapter 13 Bankruptcy, you still owe and will have to repay your student loans. However, there is an exception, and it is usually used for medical and chronic illnesses, called the “Undue Hardship” test. If a Debtor can show that repayment of student loans would prove to be an “undue hardship” then the Judge can order student loans dischargeable and no longer owing. However, this test is difficult to meet, and first and foremost, a Debtor must exhaust his or her repayment options with the student loan holder (whether it be U.S. Dept. of Education, Sallie Mae, or a private bank or institution). Most notably are the two repayment plan options offered for Federal student loans: (1) Income-Based Repayment; and (2) Income-Contingent Repayment.
Under a recent bankruptcy case where the judge DENIED the debtors request to declare his student loans dischargeable, the Judge determined that the debtor did not meet his burden under the “undue hardship” test because he didn’t try or exhaust these two programs for repayment first.
Where a plaintiff Chapter 7 debtor has filed a complaint for a declaration that his student loan debt to the defendant is dischargeable, the debtor has not met his burden of establishing that it would be an undue hardship for him to repay his student loan.
“To establish undue hardship under §523(a)(8), the Debtor relies primarily on his series of illnesses and chronic health challenges…. . As a matter of proof, it would be the rare case in which a Debtor’s claim of medical disability as a basis for such a discharge could be met without the testimony of a medical professional. … The Debtor merely recounted his history of illnesses and health challenges and offered medical records corroborating that history and identifying past and present treatments. There was no evidence concerning the likely impact of these conditions on the Debtor’s ability to earn income in the future. In fact, the evidence supports the opposite conclusion. The Debtor’s work history has been marked by job loss and unemployment, but in recent years the Debtor has demonstrated an ability to increase his earnings, all during times when he was suffering from the health challenges and disabilities upon which he relies as a basis for his undue hardship case. The Debtor plainly has issues with anxiety and depression, as well as joint pain. But even with these problems, the Debtor succeeded in increasing his income by the time of the trial, which was two years from the time of the filing of his bankruptcy petition. …
“The Debtor’s other basis for seeking discharge of his student loans is a rather non‐specific argument that he has not been able to find continuous and reliable work. This, he suggests, is attributable to the market for his services, to a series of unfortunate job placements, and ultimately to an extended period of unemployment. This history does not come close to establishing that he will not be able to repay his student loans without undue hardship. … By the time of the trial, the Debtor had succeeded in locating a well‐paying, full‐time job with considerable employee benefits. His family income and benefit package had risen to a level at which the Debtor should be able to survive without exposing himself and his family to undue hardship by virtue of repaying his student loans. Therefore, the Debtor’s second basis for suggesting that his student loan should be discharged is equally unavailing.
“ECMC argues that the Debtor should not prevail for another reason: he has not explained how it is an undue hardship for him to repay the loan in light of the income‐based repayment programs available to him, namely the Ford Program, including the Income Contingent Repayment Plan and the Income‐Based Repayment Plan that are available as part of the Ford Program. … Given the availability of these programs, it appears that nondischarge of the loan debt likely would not impose on the Debtor a payment obligation that is greater than his ability to pay during periods of continuing disability or recurring unemployment.”
In Re: Nargassans, Timothy Charles (Bailey, J.) (USBC) (Chapter 7 Case No. 10-12766-FJB; Adversary Proceeding No. 10-1170) (July 11, 2013).
Boston Bankruptcy Update: A Chapter 13 Debtor must include ALL pre-petition mortgage arrears in Plan
A Boston Bankruptcy Judge recently held that a Chapter 13 Plan must include all pre-petition arrears in their plan, or it cannot be confirmed.
Where a mortgage lender has objected to confirmation of a Chapter 13 plan, the objection must be sustained and the plan cannot be confirmed unless the plan provides for a plan to cure all of the prepetition arrearage.
“This case is before the court on three related matters: the objection of chapter 13 debtor Ella L. Everett’s (the ‘Debtor’) to the proof of claim of Deutsche Bank Trust Company (‘Deutsche Bank’), Deutsche Bank’s objection to confirmation of the Debtor’s third amended chapter 13 plan (the ‘Plan’), and Deutsche Bank’s motion for relief from the automatic stay. The Debtor alleges that when her mortgage and note were transferred to Wells Fargo and subsequently to Deutsch Bank, these entities failed to credit payments to her account, improperly paid for insurance for one year, and improperly added fees and late charges to her mortgage. Therefore, she contends, the amount alleged to be in arrears on the mortgage pre‐petition by Deutsche Bank is incorrect, as is the total amount alleged to be outstanding on the note and mortgage. Deutsche Bank defends the amounts in its proof of claim and objects to confirmation of the Debtor’s Plan for grossly understating the extent of the arrearage it purports to cure. In support of its motion for relief from the automatic stay, Deutsche Bank argues that the Debtor has fallen some eight months further in arrears post‐petition. …
“I find that the Debtor has failed to produce substantial evidence to rebut the prima facie evidence that the Deutsche Bank proof of claim is correct. Therefore, the Debtor’s objection to proof of claim is overruled. Deutsche Bank has an allowed secured claim in the amount of $319,495.05, with prepetition arrears in the amount of $63,545.03. …
“Deutsche Bank argues that the Plan fails to provide for payment of its entire pre‐petition arrearage of $63,495.03, as the plan only proposes to cure pre‐petition arrears in the amount of $14,697.00. …
“I have determined that Deutsche Bank has an allowed secured claim in the amount of $319,495.05, including pre‐petition arrears in the amount of $63,545.03. Pursuant to 11 U.S.C. §1322(b)(5), a plan may ‘provide for the curing of any default.’ A debtor taking advantage of this option must cure the whole default. This plan fails to do so and therefore may not be confirmed. The objection to confirmation is accordingly sustained.”
In Re: Everett, Ella L. (Bailey, J.) (USBC) (Chapter 13 Case No. 10-19457-FJB) (July 15, 2013).
United States Census Results Raise Median Income Level for Chapter 7 Bankruptcy Filers
As of November 1, 2012, the United States Census Borough has released updated and new median income statistics
for each state separated by number of family members. This is important to note because if you are considering a debt relief strategy of filing for bankruptcy, in order to qualify for the highly desirable chapter 7 case, where you receive a discharge of unsecured debt without the need to make a payment plan back to your creditors, your household income must fall below the median income for your state and family size. This is called the Means Test. In Massachusetts to qualify your income must be below the following:
- Single person: $54,475
- Family of two: $66,076
- Family of Three: $80,822
- Family of Four: $101,523
- Family of Five: $109,023
If you have questions about your income level, and what qualifies as income for the purposes of a bankruptcy, please feel free to call our office at (617) 742-4491.