Homeowner Dues When Home is Foreclosed

A recent article describes a big problem homeowners with homeowners association dues following bankruptcy.  The big problem is found when such homeowners surrender their homes, but still remain owners of the property because the bank will not take the property back.  A partial excerpt of the text is found below:

A federal bankruptcy judge in Nashville has ordered the sale of a flood victim's home after the lender refused to foreclose, in what legal observers say is a first-of-its-kind ruling.


Sheryl Pigg lost nearly everything in the 2010 flood, according to The Tennessean. She ultimately found a new home, declared bankruptcy and discharged her debts.


But a 2005 change to federal bankruptcy code made Pigg liable for continuing homeowners association fees at her abandoned home, because she was still the legal owner. Pigg sued mortgage holder Bank of America to get the lender to foreclose, accept a deed in lieu of foreclosure or allow a sale of the Nashville condominium.


In his ruling, Judge George Paine II ordered Pigg's bankruptcy reopened so that a trustee can sell the home, with the proceeds going first to the homeowner's association and then the bank. He reasoned that Bank of America has consented to the sale of the flood-damaged condominium through its inaction.


"With the real estate collapse, lenders, who otherwise have the right to do so, are choosing not to foreclose on their collateral leaving homeowners in limbo," Paine wrote. "Congress' broadening of (the bankruptcy code) to protect HOAs deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code."


In court filings, Bank of America argued that it was not obligated to foreclose on an abandoned property.


"Bank of America is reviewing Judge Paine's decision," the bank said in an emailed statement to The Tennessean. "At this time, we have not decided whether to appeal."

For questions on homeowners association dues in bankruptcy, call the San Jose Bankruptcy Attorney  Henshaw Law Office at (408) 533-1075.

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Improving Economy?

Bankruptcy courts may be one of the better economic indicators of both the local and national economy.  A recent article dated July 4, 2011, of an interview with a bankruptcy judge in Florida gives some insight on why this is so.  Judge Glenn of the Middle District of Florida said, "Filings slowed dramatically after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, but have since risen annually."

Judge Glenn also described one reason why individuals file for bankruptcy protection.  He said:

When you talk to the lawyers at the Bar meetings, you hear how the foreclosures in the state courts have slowed a little because of all the foreclosure problems. There is speculation that when the foreclosures pick back up in the state courts, that the bankruptcy filings will pick up.

That’s because 30 percent of our filings in Jacksonville are the kind of filings to save homes, Chapter 7 is liquidation, Chapter 13 is to save a home, Chapter 11 is business reorganization. About 25 to 30 percent of our filings, districtwide and in Jacksonville, are Chapter 13s, so when foreclosures pick up, this will probably pick up.

Judge Glenn also predicted that bankruptcies should flatten out, but could increase as the population in his District increases.  He also said that, "From all I can tell, [the economy] is getting better. I base that on the fact that the job markets, although they’re increasing slowly, are increasing.  From what I see, for the last 12 months, our filings are only up 1 percent as opposed to how much they increased before that. For the first five months of this year, they are down. I think the economy is getting better. Slowly."

Let's compare the Middle District with the Northern District of California.  From March 2010 to March 2011, 38,405 cases were filed in the Northern District.  This compares to 35,401 during the previous year.  This is over an 8% increase from 2010 to 2011.  Similarly, in the San Jose Division, the total number of bankruptcies filed increase over 5% (13,117 in 2011 compared to 12,476 to 2010).


The hope is that we will all recover in the near future.  


For more questions on consumer or small business bankruptcy protection, call the Henshaw Law Office at (408) 533-1075.  


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Bankruptcy in Baseball

Today's baseball news seems to be surrounding the Los Angeles Dodgers and their owner's filing of Chapter 11 bankruptcy.  The goal of the Dodgers is not to fold and end as a franchise, but to buy time from what they consider to be a hostile overreaching from Major League Baseball.  The Dodgers are valued at approximately $800 million, with assets estimated at $1 billion, and debts at approximately $500 million.  For those that follow baseball, and are interested in the plight of the Dodgers, their largest creditor as far as baseball personnel is Manny Ramirez.  Mr. Ramirez no longer plays for the Dodgers, but is still owed $21 million.  Aren't the Giants fans glad that he did not choose the Bay Area....???

It sounds like it will be an interesting summer in Dodgerland.  I still am hurt from the Kirk Gibson home run in 1988, so I am not too sad about their case.

As related to consumers, we run across many individuals that simply need time to figure out some issues with their debts.  This may be based on a foreclosure, bank levy, car repossession, or a lawsuit.  Bankruptcy's automatic stay can help those in such a need.

For more information on the automatic stay, or other bankruptcy related questions, please call the Henshaw Law Office today at (408) 533-1075.

Decline in Bankruptcies

According to the Wall Street Journal, bankruptcies are on the decline.  They state:

"The number of consumer bankruptcies filed declined by nearly 14.8% to 114,803 in May from a month earlier, the American Bankruptcy Institute and the National Bankruptcy Research Center said Thursday. Compared to the same month a year ago, filings fell almost 15.7%."

The Northern District of California has reported that bankruptcy filings here in the San Jose area continue to rise, at least as of March 2011. 

The Wall Street Journal's report proclaims that "the worst is behind us."  Let's hope they are correct in their proclomation.

For bankruptcy questions, contact the Henshaw Law Office at (408) 533-1075.

Chapter 13 Valuation of Vehicles

If you are considering Chapter 13 bankruptcy to strip down a vehicle loan, one issue that debtors have to consider is the value that the courts will allow.  In Chapter 13 cases, the value of collateral is defined as “the replacement value of such property … without deduction for costs of sale or marketing."  In the case of vehicles, this is the retail value of the vehicle.  To determine this amount, debtors and their attorney can utilize a couple options, including Kelley Blue Book and the National Appraisal Guides.

The difference between values can be quite substantial.  For example, the retail value of a 2005 Toyota Camry with 50,000 miles is approximately $14,500, while the same vehicle has a private party value of $12,600 (as of 6/2/2011).  Over a course of a three (3) year plan, this amount is equal to approximately $60 a month.  The price a person could really obtain for the vehicle may be significantly less.  However, the Bankruptcy Code regulates that a debtor does not get to simply estimate the value.  These values are regulated. 

Should you have any questions on Chapter 13 vehicle values or other bankruptcy questions, contact the Henshaw Law Office today at (408) 533-1075. 

Student Loans – Can they be Eliminated Through Bankruptcy?

Not to be too simplistic, bankruptcy is to help those people that have spent more than they earn.  With the rapidly changing economic scenario in this country, student loans have become more prevalent.  The question then becomes if, when, and how these loans can be discharged.

For most people, the answer to the first question is that these loans generally cannot be discharged.  Student loans are not dischargeable under the Bankruptcy Code if (i) made, (ii) insured, or (iii) guaranteed by a governmental unit or (iv) made under any program funded in whole or part by a governmental unit or a nonprofit institution.  The rationale behind this provision of the Bankruptcy Code is that lawmakers determined that individuals should not be allowed to take advantage of the benefits of the costs of education without paying for them.  In that same theory, some bankruptcy courts have allowed discharges of student loans where the debtor in bankruptcy is the cosigner, not the student loan borrower.

The one way out of student loans is when continuing the debt would constitute an “undue hardship” on the borrower.  The court is the one that determines what an undue hardship means and whether the situation qualifies under the Code and case law. 

The procedure to attempt to obtain a discharge of student loan debts, after an individual files a bankruptcy petition, begins with the filing of an “adversary action.”  This means that the borrower files a lawsuit, with a corresponding complaint, against the lender. 

To show undue hardship courts have accepted a number of tests.  One such is a mechanical test wherein the bankruptcy court evaluates a number of factors, including the number of the debtor’s dependents, and their ages and needs, health of the debtor and his or her dependents, access to transportation, level of education attained by the debtor, day-to-day living expenses, marketability of the debtor's job skills, current income, and other sources of wealth.

Another test courts have looked at is whether the borrower has made good faith attempts to pay of the educational loan as well as obtain and retain employment.  One last test bankruptcy courts use is to look at the “totality of the circumstances” to determine what is most equitable under the given situation.

As stated above, in the great majority of cases, student loans will not be discharged.  However, because each case is different, and the courts do allow for discharge in limited circumstances, call the Henshaw Law Office today to see whether your case may be one of those where an undue hardship may be found.

Moving Office

Due to the growth of the Henshaw Law Office, we are relocated to a new office on April 15, 2011.  Our new address will be 1101 South Winchester Boulevard, Suite F-166, San Jose, California 95128.  The new location will be more convenient for a majority of our clients.  We look forward to the benefits of the new office and our increased space.  We hope to see you in the office soon.