A proof of claim is filed by a creditor after a Chapter 13 bankruptcy case is filed.  Its essentially the way for a creditor to raise their hand and say, you owe me money, please pay me my share.

Most of the time, the creditor has a legitimate proof of claim and your plan must be adjusted accordingly (more on that in another post), but occasionally a creditor will file a proof of claim that defies logic.

I have a current case where several bogus proofs of claim have been filed.

The most egregious claim filed was by a debt buyer (more on that in another post).  This company probably purchased a portfolio of debt accounts for a penny on the dollar, and if this claim was any indication of the quality of the accounts, probably less.

This creditor filed a proof of claim for $8800 on a debt that was charged off in 1996.  Just to give you some context, in 1996, President Clinton hadn’t started his second term yet, The Spice Girls had the number one single on the radio (which was released primarily on cassette tapes I might add), gasoline cost 73 cents a gallon and the New York Yankees were world series champions (some things just don’t change).

This creditor did not provide any supporting documents either.  It is likely that this creditor saw that my client was filing a 100% plan and they were just throwing it up against the wall and seeing if it stuck.

Unfortunately for the creditor, the wall they hit was me.  The first thing I do in this situation is contact the creditor who has filed the bogus or deficient (a nice way of saying bogus) claim and ask them for supporting documents.  If they don’t have it, I request that they withdraw the claim.

This particular creditor only had a voice mail box, so I left a message that they would provide supporting documents or I would file an objection to their claim.

Well I didn’t hear back and I filed an objection to their claim.  Surprise, surprise, the creditor withdrew their claim rather than fight in court.

That is what you want.  Anyone can fill out bankruptcy documents, but you want a lawyer who isn’t going to roll over and just let a creditor steal from you, which is what this creditor wanted to do.

I saved my client $8800, or almost $150 per month in her Chapter 13 plan.  That is $150 that can go to pay for clothes for her daughter, gas for her car, or even a night out.  Most importantly its $150 that she isn’t paying to a thief every month.

You don’t just want to hire a paper pusher, you want to hire a fighter.  You want to higher a lawyer that gets his kicks from pushing back at debt collectors when they push you.  You don’t just want someone in your corner, you want someone who is going to get in the ring and flatten the creditor that is trying to do you wrong.

If you are in danger of losing your home and don’t want to go it alone, call me at 484-661-2891 to set up a free, no obligation consultation.

In most cases, the first hearing on confirmation is continued, so it isn’t anything to worry about if you keep in touch with your attorney.

If you filed pro se (by yourself) and are having second thoughts (and you should) about going it alone, feel free to contact me at 484-661-2891 or email me at jim@padebt911.com and we can discuss your case for no charge.

Perhaps the proper question is who. In both Chapter 7 and Chapter 13 bankruptcy, the bankruptcy trustee represents your creditors in the bankruptcy court. It is a trustee’s job to look out for the interests of the creditors.

That doesn’t mean the bankruptcy trustee is your enemy, the bankruptcy trustee is your friend, kind of like the friend who tells you that you had too much to drink and you shouldn’t drive home.

With the number of cases currently in front of the bankruptcy court, it would take years before a bankruptcy case would be processed if it were the sole responsibility of a bankruptcy judge, and that is where the trustee comes into play.  The trustee is there at your 341 meeting.  The trustee reviews all proofs of claim in your bankruptcy case for errors.  The trustee reviews of bankruptcy documents for errors as well, and generally speaking if your bankruptcy attorney follows the trustees request, your bankruptcy case should sail through.

The trustees also truth detector.  When you order 341 meeting the trustee puts you under oath makes you swear that you’ll tell the truth, and they’re very good at detecting when you’re telling a lie.

Bottom line is this, tell the trustee the truth and do what the trustee asks, and you’ll much better chance of getting your case confirmed.

My response: “good answer!”

Until the bankruptcy case is actually closed, there is still a chance to rescue your case from dismissal.  There is a motion that I’ve had to use called the “Motion to reconsider dismissal.”

You don’t want to be here.  If your case has been dismissed, it is probably because you did not follow an explicit instruction by the bankruptcy court, such as failure to submit documents or make payments.

Most dismissals happen in Chapter 13 cases, and most of these dismissals are the result of not paying your Chapter 13 trustee payment.

If your case is dismissed, the automatic stay that protects you from debt collectors is lost immediately, however there are certain circumstances where the judge will withdraw his dismissal order.

So you’re probably wondering: “How do I get the judge to withdraw the dismissal order?”  You’re probably not going to like the answer. You or your attorney (hopefully by now you have an attorney, you really need one) will have to go in front of the judge who ordered the case dismissed and convince him or her that your situation has changed and you are unlikely to run into the problem that caused your case to be dismissed in the first place.  If there ever was a Hail Mary pass a bankruptcy law, the motion to reconsider dismissal is it.

I had a client who fell behind on their chapter 13 plan payment and I was not able to convince a Chapter 13 trustee that they should continue the case to another hearing.  The case was dismissed, and because of that I filed a motion to reconsider dismissal after speaking with my client and determining that they could in fact come up with the funds to catch up to chapter 13 plan payment by the date of the hearing.

I went before the judge with a certified check for the entire amount my client was past due on the Chapter 13 plan payment.  Furthermore, I explained to the judge with detailed spreadsheets why my client would not fall behind again and respectfully requested that the judge reconsider his dismissal and reinstate my client’s case.

The judge was convinced in the case was reinstated.

Two weeks later, I was in front of a different judge, used the same tactic, and didn’t get the same result.  My client’s case was dismissed, that was a final decision, and now my client was going to lose her house because they fell behind on their Chapter 13 plan payment.

The moral of story is this, do not depend on the motion to reconsider dismissal order to save your home, however, if your case has already been dismissed and your lawyer is telling you you’re done, ask him or her about a motion to reconsider dismissal, and if your lawyer can’t or does not want to do that, call me at 484-661-2891 or e-mail me jim@padebt911.com and we can discuss whether or not this Hail Mary pass is worth throwing.

note: I will have to consult with the attorney who filed your bankruptcy case prior to accepting your matter.

Getting a mortgage modification after a Chapter 13 case is filed is tricky enough, if the Chapter 13 plan authority been confirmed, it requires permission from the court to modify the mortgage and amend the Chapter 13 plan.  Getting this permission is not easy.

This company is based out of Texas, and I’m not going to give them any advertising whatsoever, but you’ll know them when you deal with them.  Their salespeople are very good at being salespeople and they pretend to be a law firm, but if you dig through their website they will say that they’re not a law firm and not providing legal advice.  That’s a good thing, although I wish they be more up front about it, because if they try to practice law in Pennsylvania without a license, they be violating the law.  In my estimation, they are least violating legal ethics and while they say they are not providing legal advice, I’m sure that the State Bar of Texas would take a dim view of this behavior.

If you are in a current chapter 13 plan and you want a mortgage modification, you need to speak to your attorney before signing any papers.  As an attorney, I can only do so much to get sure money refunded from the slimy companies like this company in Texas and for one of my client it cost them $1899.

This client is angry with me.  I refused to authorize his company to process the mortgage modification.  The company claims you don’t need to be an attorney to process a mortgage modification, and they may very well be correct, but they are presenting themselves as a law firm and they are unlicensed, which could mean that my authorization of their services could mean they were working under my license.  I don’t know a single lawyer who would agree to that.

I don’t think I’m going to get the clients money back.  My best guess is that this firm is to disappear at the first sign of a complaint and reappear as another entity with a similar website and a similar slimy strategy.

Many clients seem to think that a mortgage modification is easy to get after a Chapter 13 bankruptcy is filed, nothing is further from the truth.  In the movie Back to the Future, Marty McFly said the Doc Brown: “you just don’t walk into a store to buy plutonium!”  You just don’t call the bank and get a mortgage modification either!  It’s a complicated process, a process being made more complicated because banks don’t really want to give modifications but are being pressured by the government.  Mortgage modification is a process that an experienced attorney should handle especially within a chapter 13 case.

So before you consider sending a large amount of money to an out-of-state company who promises you the world, think about this: “Can I get the Chapter 13 trustee to prove this modification and an amended plan by myself?”  The reason you should ask that question is because if you go behind your attorneys back and do this, they are likely to find a way out of the case, and then you’ll be left with no representation.

For my angry client, they got a happy ending to their case.  All they need to do is catch up their chapter 13 plan and they will have a confirmed Chapter 13 bankruptcy case.  They don’t have to lose their home.

When you’re ready to stop playing games with the out-of-state mortgage modification companies, call me at 484-661-2891 or e-mail me at jim@padebt911.com to schedule your free, no obligation consultation.

It seems like it should be an easy question, however because of the exemeptions in Chapter 13 bankruptcy, it is important to have an accurate valuation of your home and be able to justify it.  This is also where preparation can prevent disaster.

I have a client who refused to prepare for the 341 meeting of creditors.  Because they refused this 15-20 minute preparation phone call with me, my client may well lose his home because he gave the wrong answer to the property valuation question.  It stinks, because the property valuation question is a subjective question, and therefore there is no correct answer.

The trustee asked “If you put your house on the market today, what could you sell it for?”

I took a Zillow valuation of the property and valued it at $123,000.  I used another online valuation of the property, and it was valued at $127,000.  I even pulled comparable sales of property and they were in the $100,000 to $120,000 range.

So how did my client answer the trustee when asked what the home could sell for?  $170,000!

I’m sorry, even if a row house in Easton is built like the Taj Mahal, it isn’t selling for $170,000 in this market.

This could have been prevented if the client had bothered to respond to my phone calls or my letters.  After filing this client was unable to be reached.  He refused to take my calls.  When I finally got him on the phone, he refused to prepare for the 341 meeting.

His answer to me was “Well I’ll tell the truth.”  Telling the truth is good, knowing the truth is better, and the reality is that every homeowner would like to believe that their house is worth more than it actually is.

Because my client gabe the trustee this answer, the trustee is now working with $170,000 as the value of the house, and since he only owes $90,000 on it, he has $60,000 in equity (less the exemptions) that he needs to pay to the trustee.  That translates to about a $1300 per month chapter 13 payment when his payment should not really be more than $400 per month.

I believe that this chapter 13 plan will fail, and if it does he will be the first 2009 client I have had not be able to work with a Chapter 13 plan, and that is because we are now forced to work outside the parameters that  I filed it in.  The Chapter 13 plan was based on the property value of $120,000, which was a valuation I took before filing.  I used the full real estate exemption and the wild card exemption and rather than $60,000 in equity that needed to be paid to the trustee, the plan called for $4,000 in equity.

The bottom line is this, my client had every opportunity to prepare for the 341 meeting and simply chose not to.  When your attorney calls and wants to prepare you for a hearing, the love of all that is good please take their call and spend the 30 or 45 minutes necessary to prepare for it, if not it might cost you your home.

To fix this, my client is probably going to have to pursue mortgage modification, which in his case may not be so bad, but once you start down the Chapter 13 Bankruptcy road, it is in your best interest to finish.  The wrong answer at the 341 meeting may indeed cost my client his home, and the only person responsible for that is him.

If you’re having debt troubles or behind on your mortgage and you don’t want to cooperate with your attorney, please don’t call me, there are plenty of other people who want and need my help and are going to cooperate with what we need to do.  However if you’re part of the 99% of people who will listen to their bankruptcy attorney, and you’re ready to find your way out of the debt maze, call me at 484-661-2891 or e-mail me at jim@padebt911.com for your free, no obligation consultation.

It was doomed to happen.  In 2005, houses routinely fetched $250,000 to $300,000 yet the median salary in the Lehigh Valley was around $36,000.  Given the miserable performance of this economy, it’s unlikely that the average salary has gone up much since then.

The housing boom here was out of control, no doubt about it.  A lot of people were relocating from New York City and its suburbs to the Lehigh Valley for its lower taxes and lower cost of living, but because these folks who were used to paying $600,000 or more for a house didn’t think twice about paying $300,000 for a house that just 10 years ago might have gone for $130,000.

To make a long story short, the New York contingent artificially inflated the sale price of homes.  The New Yorkers are not totally to blame for this however, interest rates were kept artificially low by the Bush administration and borrowing money was never cheaper.  Another factor that went into this was the rampant fraud and the fact that you could have zero proof of income, no down payment, and qualify for one of these variable rate mortgages.  If Bernie Madoff had come up with this, they would’ve given him the chair.

So that brings us to today.  The same houses that were selling for $300,000 are now down in the $180,000 range, and I think they’re probably still too high.

A client came to my office on Friday.  He is a single man with a three bedroom 2 1/2 bathroom house in Allentown.  He hadn’t made a mortgage payment in a year, but now he was back to work in able to make his payments again, kind of.

My clients mortgage payment was $1105 per month.  He had a second mortgage of $242 per month.  His weekly take-home pay was somewhere in the neighborhood of $500.  If you’ve done the math you can probably see where this is going.

To make a Chapter 13 plan work for my client, he would have needed to pay a minimum of $300 per month and probably more to the Chapter 13 trustee.  With take home pay of $2166, my client would have expended close to $1900 per month just to stay in his home.

Clearly Chapter 13 bankruptcy wasn’t going to work for this man, however he had a 401(k) with about $100,00o in it.  He asked me if he should take a withdrawal from it to pay the past the past due on his house to stay in his home.  Looking at a situation, I had to tell him no.

Here’s why, he was going to dip into his retirement, something the Chapter 13 trustee cannot touch and very few creditors can go after, to save a house that he owed $30,000 more on than it was worth, and moreover, a home that he really did not need.

What was a bachelor doing a three bedroom two and half bathroom house?  He had never been married, his girlfriend lives in another apartment, so really he has a house way too large for his needs.   Now if he were financially able to keep the home, I wouldn’t care, because generally speaking real estate is one of the best investments out there, especially now, but this man was going to struggle to pay his mortgage even after taking a loan out of his retirement.

The bottom line is this, I could have taken the man’s money and filed a Chapter 13 bankruptcy for him, and it might have even worked. Chapter 13 bankruptcy is not for everybody, neither is mortgage modification, you may feel bad or a responsible for letting your house be foreclosed on, but the banks were just as irresponsible in their lending.  The banks went to the government and got a bailout.  No one asked your opinion when they took your tax dollars to bail these people out, nor did they offer you one (and its not coming either).

Sometimes it’s best to let the banks foreclose on the property, I know it hurts, but rather than spend $1400 per month on a home too large for him, my client is going to find an apartment in the $600-$700 range which will work for his budget and will allow him to regroup financially.

Once a foreclosure is over and my client has resettled, I advised him it was in his best interest to file Chapter 7 bankruptcy.  My client racked up nearly $30,000 in credit card debt trying to save his home. If he made the minimum payments, it would take in 35 years or more to pay his credit cards off.  Furthermore, some of the credit cards had been charged off and sent to collection and some of these agencies have become sue-happy lately.

Again chapter 7 bankruptcy is considered by some to be irresponsible, but the reality is these banks were irresponsible lending money to people who couldn’t possibly pay it back.  We don’t have debtor’s prison in the United States for reason, don’t allow yourself to be put in a debtor’s prison without bars.

Hopefully my client will take the next logical step and follow through filing Chapter 7 bankruptcy as we discussed at the meeting.  If you are unsure about your situation and want to know whether or not it makes sense to even just try to stay in your house, call 484-661-2891 for your free no obligation consultation.  You can also e-mail me at Jim@padebt911.com.  All contacts are kept strictly confidential.

Preparation is the key to a successful 341 meeting of creditors, in fact proper preparation is the key to successful bankruptcy case.  It is important be ready for any question that the bankruptcy trustee throws at you.  Fortunately, these questions are generally the same in all bankruptcy cases and the oddball question can be anticipated if your attorney is familiar with the documents in the case… more on that in another post.

The third question the trustee will ask you for 341 meeting of creditors is: “Are all of your assets identified on the schedules?”  This is a straight forward question, but it is one that is fraught with peril.  Lying to the bankruptcy trustee is very bad, you can do prison time if you are caught in a severe enough lie, and the temptation to lower the dollar amout of your assets is quite strong with this question.

You shouldn’t even be tempted to do this.  If your attorney has prepared for your case (its all about preparation folks–they are going to put that on my headstone!), he or she should have identified the values of important property and determined how to handle it with the trustee.

One case I handled involved a man who had recently been divorce.  She got everything except his baseball card collection.  Me, being the card geek I am, was interested, and I learned that he had a 1952 Topps Mickey Mantle card among other valuable cards that were worth around $60,000.  When we discussed this, he wanted to say they were worth $50 because in the end they were just pieces of cardboard with no intrisnic value.  I couldn’t let him do that.  I’m not going to lie to the trustee nor offend the baseball gods on the same page and he decided not to go forward with the bankruptcy case.

Do not lie!  Often times even non-exempt property (property that the trustee can take and sell to pay creditors) can be resolved in the Chapter 13 plan.

The second part of this question is where attorneys get themselves in trouble.  The trustee will ask: “Have you listed all of your creditors on the schedules?”  For some reason, my clients tend to foul this question up, and when I figure out why I’ll fix it.  The answer to this question is yes, but most of the time they give me and or the trustee a dumbfounded look.  My answer always is “Yes, we pulled a credit report prior to filing this case and all creditors on the credit report and on the bankruptcy documents.  If there is a creditor out there that we don’t know about and is not on the credit report who files a proof of claim, we will deal with it accordingly.”

If your attorney has done his or her preparation prior to filing the case by pulling a credit report, you can confidently answer yes.

This is one of the few questions that I can bail a client out of if they start digging a hole with their tongue, but they shouldn’t have any problems.  It should go:

Trustee:  Are all of your assets identified on the schedules?

Client:  Yes.

Trustee:  Have you listed all of your creditors on the schedules?

Client:  Yes.

Next question.

If you have debt problems and you think you need bankruptcy but are terrified of the 341 meeting of creditors, don’t be.  A well prepared attorney will make sure your meeting goes smoothly.  When you are ready to discuss your financial worries with the most well prepared bankruptcy attorney  you have ever met, please email me at jim@padebt911.com or call me at 484-221-8014 to set up a free, no-obligation consultation and you and I can prepare you for whatever the financial future may hold.