Rochester Bankruptcy and Debt Relief

One question that I am often asked is whether the unsecured second or third mortgage on the property owned by the debtor can be stripped in Chapter 7 Bankruptcy.  In Chapter 13 Bankruptcy, the unsecured second mortgage can be stripped by bringing a Ponds motion.

Unfortunately, in Chapter 7 Bankruptcy, the unsecured second or third mortgage cannot be stripped.  In a recent decision which also applies to the bankruptcy cases in Rochester, New York,  In re Grano, the Buffalo Bankruptcy Judge Bucki held that in Chapter 7 Bankruptcy cases, the debtors cannot avoid wholly unsecured second or third mortgages.

Joseph and Ann Grano owned a residence in the Town of Amherst, New York.  After filing a Chapter 7 Bankruptcy petition, they commenced the adversary proceeding against Wells Fargo Bank, N.A., to avoid a second mortgage.  In their complaint, they alleged that their real estate has a current fair market value of $445,000 and that it is encumbered by two mortgages: a first lien with an outstanding principal balance of $511,000, and the second mortgage of Wells Fargo with a balance of $95,837.60.

Granos asserted that they can avoid the second mortgage pursuant to the authority of 11 U.S.C. § 506(a) and (d).  In lieu of an answer, Wells Fargo moved to dismiss the complaint for failure to state a cause of action.  In relevant part, section 506(a)(1) of the Bankruptcy Code states that “[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property . . . and is an unsecured claim to the extent that the value of such creditor’s interest . . . is less than the amount of such allowed claim.” Asserting that the first mortgage secures a debt greater than the value of the property, the debtors argue that in its status as a second mortgagee, Wells Fargo retains only an unsecured claim.  Subject to exceptions not here present, 11 U.S.C. § 506(d) states that “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” In reliance upon this later subdivision, the debtors commenced their  adversary proceeding to avoid the second mortgage of Wells Fargo.

In Dewsnup, the Supreme Court accepted the position of the secured creditor, that “the words ‘allowed secured claim’ in §506(d) need not be read as an indivisible term of art defined by reference to § 506(a).”  Instead, the language of section 506(d) “should be read term-by-term to refer to any claim that is, first, allowed, and, second, secured.  Because there is no question that the claim at issue here has been ‘allowed’ pursuant to §502 of the Code and is secured by a lien with recourse to the underlying collateral, it does not come within the scope of §506(d), which voids only liens  corresponding to claims that have not been allowed and secured.” 502 U.S.at 415.  Effectively, therefore, the Supreme Court refused to recognize section 506(d) as a grant of authority to a debtor in Chapter 7 to “strip-down” or cancel the lien of an undersecured mortgage.

In contrast to Chapter 7, debtors in Chapter 13 may assert rights under special statutory provisions for the treatment of secured claims.  Specifically, 11 U.S.C. § 1322(b)(2) provides that a Chapter 13 plan may “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.” InNobelman v. American Savings Bank, 508 U.S. 324 (1993), the Supreme Court held that the language of section 1322(b)(2) precluded the bifurcation of an undersecured homestead mortgage into secured and unsecured claims. Consequently, to the extent that a homestead has value to collateralize any portion of a mortgage, a chapter 13 plan must treat that lien as fully secured.  However, in In re Pond, 252 F.3d 122 (2001), the Second Circuit distinguished those circumstances where the homestead lacks equity to collateralize any portion of an inferior lien. In this special circumstance, because the lien is wholly unsecured, the debtors “are not ‘holders of . . . a claim secured only by a security interest in . . . the debtor’s principal residence,’ 11 U.S.C. § 1322(b)(2), and their rights in the lien are not protected under the antimodification exception of Section 1322(b)(2).” 252 F.3d at 127.

In the present instance, Mr. and Mrs. Grano contended that this court should adopt for Chapter 7 the same exception that the Second Circuit has recognized for cases in Chapter 13, to the effect of permitting the avoidance of secondary liens that are totally undercollateralized. Unfortunately, this argument overlooks the unique statutory predicate of Chapter 13.  In allowing a debtor in Chapter 13 to avoid a fully unsecured homestead mortgage, the decision in In re Pond utilized the authority of 11 U.S.C. § 1322(b)(2). No parallel provision applies in Chapter 7.  The court concluded that notwithstanding the absence of equity beyond superior liens, the debtors may not avoid the second mortgage of Wells Fargo Bank, N.A.

This decision forces the debtors and their bankruptcy lawyer to engage in a cost benefit analysis in a situation where there is a wholly unsecured second or mortgage.  Assuming the debtors can file either Chapter 7 or Chapter 13 Bankruptcy, the benefit of filing Chapter 7 Bankruptcy and discharging all unsecured debt, should be compared to the benefit of a Chapter 13 Bankruptcy plan payments over 5 years, and a likely discharge of the unsecured second or third mortgage.  Assuming the debtors wish to retain their residence, the comparison of two figures should point them in the right direction.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

I frequently meet with debtors who tell me that they are thinking about filing for bankruptcy, but have concerns since they may need a new car in the near future.  I am usually asked if a new car or used car should be purchased prior to filing for bankruptcy protection.  As a bankruptcy lawyer, the current status of the law prevents me from counseling debtors from acquiring more debt prior to filing for bankruptcy.  However, if I were in the debtor’s position, I would consider the following.

First, if you planning to file Chapter 7 bankruptcy, and you will need a different car, you should buy the car since it is easier to buy a car prior to filing for bankruptcy, assuming that your credit allows it.  If the car is financed, the loan will have to be reaffirmed, and assuming that the amount of equity does not exceed you New York exemption for a vehicle, you will be able to keep your vehicle.  At the same time, a financed vehicle on your credit report will help you rebuild credit after filing for bankruptcy.

If you are filing for Chapter 13 bankruptcy, and decide to buy the car before filing, you will be able to keep the car and payments on the loan will be a part of your repayment plan.  If anything, since in Chapter 13 bankruptcy the bankruptcy court allows only a certain amount of interest to be paid on secured loans, it is possible that your monthly payments may be reduced.  The situation becomes more complicated if the debtor suddenly needs a car after filing Chapter 13 bankruptcy.  In order to obtain new debt, the debtor would need the bankruptcy’s court’s permission to take on a car loan.  This is likely to require a motion to amend the plan that was previously approved by the bankruptcy court.  If the court approves the purchase, that may change the monthly payments made by the debtor.  A potential benefit to the debtor is that if the payments are made on time, this is likely to improve debtor’s credit.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

If you are contemplating filing Chapter 7 or Chapter 13 bankruptcy, you should stop using your credit cards.  Once you’ve decided to file for bankruptcy, any credit card use after that point will be highly scrutinized by both the credit card issuer and the bankruptcy trustee, and is likely to be viewed with a great deal of suspicion.  The reasons for this are obvious.  If the debtor decides that he is seeking to eliminate his credit card debt through Chapter 7 bankruptcy, or pay a lesser amount though a Chapter 13 filing, then incurring additional credit card debt can be considered fraudulent.  Specifically, the credit card issuer will make an argument that the additional debt was incurred without intention to repay, then the discharge can be objected to. Also, the issuer will also look at all of the transactions to verify that the money was not spent on such things as vacation trips, or that other unnecessary spending didn’t take place.  If a credit card issuer learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt.

Also, if the bankruptcy trustee, or United States Trustee, learn that the debtor intentionally ran up his credit cards before filing, then either trustee can seek to have the debtor’s discharge denied or move to have the case dismissed.  There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud, which is a criminal offense.

While consumer Chapter 7 bankruptcy allows the debtor to eliminate all credit card debts and get a fresh new financial start, the debtor should not jeopardize his ability to seek bankruptcy protection by engaging in self-serving or foolish behavior.  There is simply no reason to create problems for the upcoming bankruptcy filing.  Therefore, don’t use your credit cards once you’ve decided to file bankruptcy.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a New York bankruptcy lawyer.

When a potential client calls my office to ask bankruptcy-related questions, I usually suggest that he or she come in for a free initial consultation.  I also ask that when we meet, you bring  your bills, tax returns, pay stubs and any other documents that may be related to your situation.  The reason I ask for such documents is to assess your overall financial picture and to come up with possible solutions to existing problems.

At the consultation, I ask questions to find out what assets are owned by the potential client and also what their debts are.  Depending on the responses I receive, I ask follow-up questions about the issues that may determine the course of action:

1. Recent significant use of credit cards/balance transfers/cash advances;
2. Transfers of property to third parties without payment or adequate consideration;
3. Values of assets which may exceed applicable New York exemptions in a Chapter 7 bankruptcy and may force a Chapter 13 bankruptcy filing instead;
4. The level of household income to make sure that the client can meet the means test and file a Chapter 7 bankruptcy;
5. Whether the debtor recently repaid a debt to a relative or friend which may be a preference;
6. Whether the debtor has a personal injury lawsuit pending, or the right to bring such lawsuit;
7. Whether the debtor had any prior bankruptcy filings;
8. Whether the debtor owes any non-dischargeable debts, such as student loans, maintenance and child support, and some income taxes;
9. Debts incurred as a result of fraudulent conduct or drunk-driving.

After I ask all of these questions, I am able to recommend the course of conduct for the debtor.  I typically will explain if the bankruptcy a good option; what are its costs; and how a typical bankruptcy gets prepared, filed and proceeds in bankruptcy court.  If a bankruptcy is likely to solve debtor’s problems, I will discuss which type of bankruptcy is available and what are the advantages and disadvantages of Chapter 7 and Chapter 13 bankruptcy?

In the event you decide to proceed with a bankruptcy filing, I will ask you to sign a retainer agreement. You will leave my office with a bankruptcy questionnaire which will ask you to provide information on your income, expenses, assets and liabilities.  I will also provide you with a checklist of the documents I am going to need to prepare your petition and file your bankruptcy, including paystubs and tax returns.  In addition, I will provide you with a list of organizations providing consumer credit counseling course, so you can meet pre-filing requirements.

I will also tell you how to deal with continuing phone calls from your creditors.  There are times when I am not able to answer every questions, and may ask for additional documents to figure out the debtor’s circumstances.  I believe that the free consultation benefits both me and the potential client.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

A question that I commonly hear from debtors in Chapter 7 and Chapter 13 bankruptcies in Rochester or surrounding  counties, is whether when they file for bankruptcy, someone will come to their house or apartment, and search or remove their assets.  My typical response is to reassure them by telling them that in my experience, any such visits are extremely rare, and would only serve to verify the accuracy of their bankruptcy petition and other disclosure provided during their bankruptcy case.  At the same time, as a bankruptcy lawyer, any such statements makes me concerned, since whether or not someone will actually come to search your house or apartment if you file for Chapter 7 or Chapter 13 bankruptcy, the petition, schedules and statement of financial affairs must to be completed truthfully and accurately. Any attempt by the debtor to conceal assets, or any dishonest statements in the bankruptcy petition or other information provided during the bankruptcy, if caught, are likely to result in a referral to the U.S. Attorney Office for criminal prosecution.  There are currently individuals serving time in federal penitentiary who have been convicted of bankruptcy crimes, including those whose bankruptcy crimes cases were prosecuted in Rochester.  In addition, the financial consequences of the dismissal of the bankruptcy case, and denial of discharge, can be significant, even if there is no criminal prosecution.

With respect to obtaining access to the debtor’s house or apartment, the bankruptcy trustee has the ability to obtain an order authorizing him or her to search the debtor’s house or apartment, with the assistance of the United States Marshall, and to break doors, locks and safes during the course of an investigation. Usually such order will be obtained on an ex parte basis — meaning without prior notice to the debtor to prevent him or her from hiding the assets.

As I have written before, when you file Chapter 7 bankruptcy, you receive the benefit of bankruptcy exemptions.  For most debtors, the exemptions allow them to keep most, if not all, of the property they own.  While each case is fact specific, and depends of the property owned and its value, a bankruptcy lawyer will be able to engage in pre-bankruptcy exemption planning to maximize available exemptions, and to minimize the assets that would have to be turned over to the trustee if their value exceeds permissible exemptions.

Therefore, the bankruptcy petition, and all of the schedules and other documents provided to the bankruptcy court,  should be prepared truthfully and completely, while understanding that the trustee in your bankruptcy case has the ability to get a court order authorizing him to verify the accuracy of your petition.  If the debtor provided truthful and accurate disclosure, he or she has nothing to fear.  As a bankruptcy attorney, I work closely with all of my clients to make sure that they understand their obligations as debtors, but also to make sure they get to keep as much property as they are legally allowed.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

In Chapter 13 bankruptcies, it is not uncommon to see situations where the debtor, who owns a home, has both a first and a second mortgage, or even a third mortgage on that home.  In today’s real estate market, it is not uncommon for those mortgages to exceed the value of the home by a significant amount.  Since the secured debt must be paid in full in Chapter 13 bankruptcy, does it make sense for the debtor to greatly overpay the value of that home? The bankruptcy law offers us a solution for those situations.  Debtor’s bankrutcy lawyer can bring a “Pond” motion.  The motion is named after a decision, In re Pond, 252 F.3d 122 (2nd Cir. 2001).

A Pond motion is a motion made in a chapter 13 Bankruptcy case where the debtor owns and lives (as his or her primary residence) in a residence which has a second mortgage and the value of the house is less than the amount owed on the first mortgage, as of the date the debtor files his or her Chapter 13 bankruptcy petition.  If the motion is successful, the second mortgage will be treated as unsecured debt, removing its secured status. As a result, the amount owed to the second mortgage company gets treated like any other unsecured debt, and paid, in most Chapter 13 bankruptcies, pro rata. If the debtor is paying 50% of his unsecured debt through the Chapter 13 plan, it means that the amount paid on the second mortgage will be 50% of the amount owed.  Once the debtor obtains his or her discharge the remainder of the second mortgage debt is no longer owed.

Here in Rochester, Judge Ninfo has written a number of decisions addressing Pond motions.  One critical issue associated with Pond motions is valuation of the real estate.  In In re Dzenziel, the central issue presented to the court was whether the valuation of the property would make the second mortgage unsecured.

The debtors brought their Pond motion, alleging that their residence had a value of $99,047, and the balance due on the first mortgage was $99,813.97 as of their most recent mortgage statement.  Since the balance due on the first mortgage exceeded the value of the residence, the debtors asserted that the second mortgage was totally unsecured on the date they filed their Chapter 13 petition.  Because the second mortgagor disputed the debtor’s valuation of the property, the court conducted a trial on the Pond motion.

Testimony at trial indicated that the debtors originally purchased the property for $101,000 when the property had been appraised at $111,000. The debtors reported that when they obtained the second mortgage in 1999, the property had been appraised at $180,000.  The competing real estate appraisers testified respectively that the value of the property was either between $97,808 and $100,285 (adjusted to $99,047), or  $120,000.

Analyzing the Pond decision, Judge Ninfo wrote, “If there is no equity in a debtor’s residence after accounting for other encumbrances that have priority over a mortgage lien, so that the mortgage lien is not even partially secured, the lien can be avoided and the mortgage debt treated as unsecured.”  The court further stated that the burden falls upon the debtor to demonstrate that there is not even $1 of value over prior valid liens to support the mortgage lien that is to be avoided.  The court also held that the debtor’s burden of proof is higher when “it appears that there was equity available for the mortgage … at the time it was executed; the alleged value deficiency may have been created in part because of a debtor’s failure to make payments on superior mortgages… and [if] the alleged value deficiency is not substantial….”
Reviewing the evidence presented, the court determined that the property has a value of at least $100,000, which does exceed the balance due on the first mortgage, and based upon relevant testimony, the property probably has a value between $120,000 to $145,000.  Judge Ninfo concluded that  the debtors have not met their burden to demonstrate that there is no value over prior liens that would enable the court to avoid the second mortgage and denied the motion.

The above demonstrates that valuation of property is critical in those situations where the debtor has an opportunity to convert second mortgage to unsecured debt.  The bankruptcy lawyer would do well to use a reputable real estate appraiser and be prepared to conduct a hearing to substantiate the property’s value.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

If you are in debt, does it always make sense to file either Chapter 7 or Chapter 13 bankruptcy?  If your only source of  income is Social Security or Social Security Disability, you can file for bankruptcy, but it may not be necessary.  Because of the exemptions under both federal and New York State law, if your sole source of income is either Social Security Retirement or Social Security Disability, you are generally considered to be judgment proof and your income is exempt from garnishment or other collections actions by the creditors.  While your creditors still have the right to sue you and obtain judgments, they are not likely to be able to enforce them against your income or any bank accounts that contain solely the money from either Social Security Disability or Social Security Retirement.  At the same time, the debtor may still have other assets, either personal or real property, that a creditor may reach once it obtains a  judgment.

Even if you are judgment proof, you may still need to file a Chapter 7 or Chapter 13 bankruptcy.  If you have secured debt, such as a mortgage or car payment, and you are behind on your payments, Chapter 13 may give you the ability to bring these secured debts current, while still discharging most or all of your revolving credit debt, personal loans or medical debt.  Another benefit of filing for bankruptcy is that either Chapter 7 or Chapter 13 bankruptcy will stop harassment by the creditors.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

What happens if you’re in a Chapter 7 bankruptcy, and fall behind in your payments on secured loan, such as your home mortgage or car loan?  Under those circumstances, it is possible to covert to Chapter 13 bankruptcy where you can make payments though the plan and to stop a foreclosure or car repossession. While it is not as simple as it is to convert from a Chapter 13 bankruptcy to a Chapter 7 bankruptcy, it can be done by filing a motion with the court and placing your creditors on notice.

The bankruptcy court will require a good reason for granting your motion, and if one is provided, the court will convert the case.  There are rules about converting for “bad faith” or if you have already converted the case before, but generally, requests for conversions are granted. Once the motion is granted, your bankruptcy lawyer can file a Chapter 13 plan which will allow you to cure any arrears and to give you time to repay house or car payments, and stop the foreclosure or repossession.

Similarly to converting from Chapter 13 to Chapter 7 bankruptcy, your petition will need to be updated.  Also, some of the debts might be treated differently in Chapter 13.  You will need to prepare a plan, and there will be a new trustee appointed and a new 341 hearing held. Eventually, your plan will need to be confirmed by the court.   Overall, the process isn’t too difficult and you are likely to be able to save your home or car.  For many debtors, the benefits of converting their case are worth it.  A bankruptcy attorney will be able to guide you through the process.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

One of the common issues that may arise in a bankruptcy, is that the debtor may have one or more accounts at a bank to which the debtor owes money.  In those situations, the bank may assert its right of setoff.

The right of setoff in New York is available to a lending institution pursuant to Section 9-g of the Banking Law. Under that section, banking institutions have a long established right of setoff where a borrower is indebted to the institution and also has money on deposit with the institution. This right of setoff is preserved in bankruptcy by Section 553(a), which provides that,

“Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case[.]”

At  a first glance, the setoff appears to require a motion to lift the automatic stay since Section 362(a)(7) specifically covers “the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor[.]”.  Thus, under the statute, in order to exercise that right, the bank must make a motion to lift automatic stay.  However, here in Rochester, in In re Catalano, Judge Ninfo has ruled that under some circumstances, the bankruptcy court will not require the motion to lift stay and set the following policy.

If a banking institution has a clear right of setoff under New York law and the debtor has funds on deposit with it in the amount of $750.00 or less, and also owes the institution a debt in excess of the funds on deposit, the institution may setoff the amount on deposit without obtaining formal relief from the automatic stay, provided that it gives the written notice described herein, and the trustee or debtor does not demand a hearing because there is a genuine dispute as to the asserted right of setoff.

As stated in the decision, the banking institution shall give written notice to the trustee, debtor and debtor’s attorney, if there is one, that: (1) asserts its right of setoff; (2) is accompanied by copies of the debtor’s schedules or other documentation that demonstrates the right of setoff; (3) sets forth a “contact person” at the institution, along with that individual’s address, direct telephone number and a fax number; and (4) advises that unless the trustee or debtor has a genuine dispute as to the validity of the asserted right of setoff, it will be effected ten (10) days after the date of the mailing of the notice. In the event that the trustee or debtor notifies the contact person of a genuine dispute as to the asserted right of setoff, the banking institution shall be required to bring a formal motion to terminate the automatic stay under Section 362(d).

This policy makes it extremely important that the debtor fully discloses his/her financial situation to the bankruptcy lawyer and also allow the bankruptcy attorney to engage in prefiling planning to protect the debtor’s assets from the potential right of setoff.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

Because most mortgages contain real estate tax escrow provisions, there are not as many Chapter 13 debtors who have unpaid real estate taxes due when they file their Chapter 13 plans as there are debtors who have mortgage arrearages.  However, Chapter 13 debtors frequently do have significant unpaid real estate taxes due on their residences, and in many cases,  the need to pay these unpaid real estate taxes over time in order to save their homes is one of the primary purposes of the Chapter 13 filing.

If you are filing Chapter 13 bankruptcy, and you have real property tax arrears, a typical plan will provide for a payment of such arrears in full over the life of the plan.  Local municipalities, to whom such taxes are owed, will be treated as secured creditors under the plan and will receive full payment of taxes owed.  In addition, any such municipality will be entitled to interest on the money owed.

Here in Rochester, local municipalities usually receive 18% interest rate on the real property tax arrears.  Once the bankruptcy is filed, any such arrears will be subject to the New York State judgment interest rate of 9%.  Judge Ninfo has previously addressed this issue in In re Clark, holding that the statutory rate is an appropriate post-confirmation interest rate under Section 1325(a)(5)(B)(ii) to be paid.

In view of the above, a bankruptcy lawyer must make sure that the proposed plan allows for full repayment of property tax arrears, together with appropriate interest, and that the debtor is able to afford payments under the plan.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.