Don’t Panic!

Just a word or two of warning. I am seeing lots of people who are in a panic. They are in the process of losing their homes or jobs or both. The daily news offers little or no comfort. All the “bailout” talk doesn’t include any concrete help for individuals that I can see. This state of mind increases the probability of being in a serious accident or incident. Or such is my personal observation.

I mentioned this in passing while meeting with clients recently. The next time they came in they greeted me as “Nostradamus” – comparing me to the Sixteenth Century prophet or wizard. The type of thing I was talking about had happened to one of them. Sorry about being vague as to exactly what happened, but I need to not break confidentiality. I expressed the hope that it had not been the power of suggestion – the result of an idea that had been planted by me. They were sure it was not.

I bring this up here because I really want to say that I believe we all need to keep the events of the past year or two in perspective. The Romans had a saying – THIS TOO SHALL PASS. It’s a universal truth, and I’m convinced that it certainly applies to our present economic climate. Panic and anxiety always just makes any problem worse. The harder and more difficult times are, the more important it is to take care or yourself. One of my favorite slogans – prominent in a lot of the self-help literature – is abbreviated as “HALT” – don’t let yourself get too Hungry, Angry, Lonely or Tired. A good concept to keep in mind when going through a bankruptcy or any other crisis.

On several of my web pages I talk about how easy it is go get ahold of me. I wrote most of that a couple of years ago. It has become untrue over the past few months, for which I apologize. Between the clients and the creditors of clients, my voice mail box often fills up. My goal has always been to return my calls within 24 hours. I have of late been unable to be that prompt. If you need me and don’t get me right away, keep trying please. I am around and I do want to talk with you; it’s just that things are really busy right now. I would say that it’s more busy than it was in 2005 right before the new bankruptcy law went into effect.

Correction: I’ll be back in the office on Thursday September 18th!

How embarrassing!

It has come to my attention that the message on my answering machine at my office says that I will be out of town until “Thursday September 19th.” Obviously that is wrong, because Thursday is the 18th and the 19th is Friday.

It should say that I will be back on “Thursday September 18th.” I’m at Grand Marais for a few days, and I would change that message from here if I could – but it’s not that kind of machine. I can’t change the message without being there.

So just please be advised that I intend to be in the office again starting on Thursday the 18th of September. I suppose I’ll try to call everyone who is on my schedule that day to make sure they are not confused by the message. The names and phone numbers should be here with me on my Palm Pilot.

The fact that I made that error tends to support the proposition that I really needed a couple of days off.

It was a chilly and misty day today at Grand Marais. Not good for outdoor activities. I spent several hours with my wife sipping premium coffee at the Java Moose, and reading an edition of Carl Sandburg’s biography of Abraham Lincoln. I’ve been working on that book off and on for years. It’s slow going, very intense and detail filled. I’m still only about half way through.

This evening the sky began to clear and we were able to watch the full moon rise over the harbor, while having dinner at the Angry Trout. It was very beautiful. Tomorrow is supposed to be warmer and sunny. For tonight we are snug and comfortable in our little pop-up camper.

September 10th and 11th

I’m working late here in the office this September 11th evening. It was a funky day, seven years after the big attack on our country. I was wall to wall all day with appointments, and the phone rang constantly. I finally gave up on the phone. I just could not keep up. I don’t think that’s ever happened before. Strangely, only about one caller in ten actually leaves a message. I have managed to call most of them back, but I really wonder about the others. If it was important enough to call in the first place, then why no message?

I have to share this with you all. While September 11th is a sad anniversary, so is September 10th. On that day in 1897 a taxi driver in London, England, became the first person in the world ever to be arrested for drunk driving — after slamming his vehicle into a building.

If I at all can I would like to get to the north shore for a peek at some fall colors. I might run away and try it this weekend. I’m up to date with most of my work. I can’t keep up with the calls in any event, and staying home would not fix that. These are the most desperate times I have seen in my lifetime; but I’ll be able to help more people if I take care of myself. I keep telling my kids: when the plane loses pressure and the oxygen masks come down, put the mask on yourself first. Then put the mask on your children or others who are in your care. The person who is first to pass out is no longer able to help others.

Consumer Bankruptcy Up 48% in July

A few weeks ago I bookmarked an article posted on Twin Cities Daily Planet which indicated that bankrupty filings in Minnesota are up almost 30% for May and June of 2008 as compared to May and June of 2007. I thought it has seemed to be pretty busy around here, but I still thought the percentage was surprisingly high. Had someone told me in January of 2006, right after the “reform” legislation had gone into effect that this was going to happen, I don’t think I would have believed it. The standard wisdom at that time was that bankruptcy lawyers might be about out of business. In fact, many lawyers quit practicing bankruptcy law at that time. The new law was called BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act). In my opinion, the only abuse that was going on was that perpetrated by the credit industry, and the only protection provided was for them and not consumers.

Earlier this week I received a copy of Consumer Bankruptcy News, one of those old fashioned publications that is still printed on paper. In the lower right corner of page 7 was an item stating that nation-wide bankruptcy filings were up 48% in July 2008 as compared to July 2007. There were 94,124 consumer filings in July and 82,770 in June this year. That would be as if everybody in Bloomington, Minnesota and in Duluth Minnesota combined had filed for bankruptcy in June or July. If that keeps up, I would assume that for August it would be as if everybody in Rochester, Minnesota had filed for bankruptcy.

If you should feel a need to come see me to talk bankruptcy, there’s sure no reason to feel alone.

Short Sales Revisited

For several months I have had a video posted at YouTube entitled “The Trouble with Short Sales.” Of all the videos I have posted, this is the one I get the most flack about – mostly from Realtors who are in the short sale business. My experience of this past week emphasizes how right I am about short sales in Minnesota usually being a really bad deal. If anything, my video understates the case.

A client of mine came to me for help with making a short sale work. I advised that it was likely to be a serious problem, but she wanted to try it anyway. For better mental health and possibly better credit among other reasons, she wanted this house out of her life. A buyer was found, and after a few months the mortgage company indicated – in a rather vague letter of intent – that they were ready to complete the short sale. Getting a real person on the phone from the mortgage company was nearly impossible; and when it was possible to get a real person, it was never anybody who could answer a question or make a decision.

I finally was able to speak with the closer who was going to handle the paperwork for the transaction. She indicated that most of the lenders she dealt with were very clear that they intended to reserve the right to come after the seller for the remaining balance owing on the mortgage, even though the house was being sold. The paperwork for the transaction involving my client did not explicitly say that the lender would be suing my client later, but it didn’t say the lender would not be either. The only release that my client could expect to get would be one that released the house only. There would be no release of personal liability.

This was a situation involving only one mortgage. In those situations in the State of Minnesota, the most common method of foreclosure is “foreclosure by advertisement.” When advertisement is the method, the lender gets the house, but that’s all the lender gets. The home owner is off the hook. That means that my client was presented with the following choice:

  1. Either do a short sale and expect to get sued for the remaining unpaid balance of the mortgage; or
  2. Wait for the lender to foreclose and lose the house without getting sued for anything.

The second choice is obviously better than the first. In both choices the house is lost, but with the second choice at least they don’t come after you for more money afterwards. It would have made a lot of sense for the mortgage lender to provide a personal release of liability so that my client could have completed the short sale. Now it will take the mortgage company another year of so and considerable expense to conduct the foreclosure. The house will probably go down in value during that time too. But in letters and calls to the mortgage company, I never seemed to be able to get any body’s attention with this information.

This aspect of Minnesota foreclosure law is unusual. There are only seven other states as far as I know that have similar laws. The mortgage company does business in all 50 states, and follows a one size fits all policy line for everything. Their policy might make sense in most states, but not in Minnesota. They hurt themselves by being that way, but nobody seems to care.

For a short time this week I was excited because I thought I was seeing some signs that I might be able to make the short sale idea work. What it was going to take, of course, was a release of personal liability. By Thursday afternoon, however, it was quite clear that was not going to happen. It was time to back out of the deal, cancel the purchase agreement, and wait for a “foreclosure by advertisement.”

Underdahl II – End of the Source Code Issue?

I’ve mentioned here once or twice in the past, that there has been a small tempest brewing over the source code of the Intoxilyzer 5000 breath test machine. That’s the one that’s been in use all over Minnesota since the early 1990s. I’ve heard it said that the computer processor that is the guts of the gizmo has about as much computing power as one of those old pong games from the 1980s, although I doubt that’s true. It is true, however, that until recently a small minority of judges have been questioning the validity of the test results because the manufacturer of the machine has keep the source code of the software that dives the device a trade secret. No defense lawyer can get an expert opinion on the validity of the source code, because nobody can get the source code, not even the State of Minnesota.

My understanding is that earlier this year the Attorney General’s office in St. Paul filed a suit against the manufacturer demanding that they cough up the code. So far as I know, that is still pending.

Meanwhile our Court of Appeals seems to have either back tracked or flip-flopped on the issue of the Intoxilyzer’s source code, depending on how narrowly one reads the opinion. In 2007 in a civil implied consent case known as “Underdahl I,” they said that the question of the machine’s reliability is subject to challenge and that the Commissioner of Public Safety would not be granted an order which would prevent the district court from enforcing an order requiring that the Commissioner produce the source code. In May of 2008, however, after the State has continued to be unable to produce the code even after suing the manufacturer, the Court of Appeals in a criminal DWI case decision known as “Underdahl II” has said that the defendants failed to make an adequate showing that the source code is relevant to a plausible challenge to the reliability of the Intoxilyzer.

In short in Underdahl I they seemed to open the door to a source code challenge and in Underdahl II they seemed to close it. I must say that after sitting here for a while looking over these two decisions, my head is spinning a bit. I’m not sure if the dust has really settled on this issue or not, and whether there may be further appeals. I still am noticing that some police departments seem to be using a lot more blood and urine testing in an apparent move to side step any possible problem with this.

Shredding Day

I just got back to the office from my “storage facility,” where it took a truck from Shred-N-Go about 15 minutes to chew up 1,204 pounds of old files. Most of that was from the 1990s, although I did throw in a few things from as recent as 2002. OK, maybe even a few things from 2003 that I was sure were not worth saving. About a fourth of it was my own old financial and billing records.

I am feeling some emotions about seeing that stuff go. At the time that I generated those files, they were top priority in my life. I practically sweat blood over some of them. They represented skill, art, valuable lessons; important help provided to many people, whose lives were improved as a result. I believe I practically walked on water in a few of those cases, and perhaps performed a few near miracles. Or so it seemed at the time. And of course in a few of the cases, notwithstanding my best efforts, everything seemed to turn to crap.

I feel a certain sadness about it I suppose. Also relief.

The paper files are not nearly as important as they used to be. The fact is that I still have electronic copies of most of the paper I shredded on a disk or portable hard drive. All bankruptcy documents are available on line going back at least ten years. A summary of what’s in the state court files is available on line too.

Last time I did this was five years ago. That would mean that on average I generate about 240.8 pounds of paperwork per year. I wonder what the cost of the printer ink for all this is. No wonder my office supply cost is so high. In the next life will I meet the angry ghosts of all the trees I am responsible for killing?

Bankruptcy Petition Filed in Bad Faith

Can’t help myself. I have to share this.

I’m on an email list where I get all sorts of updates concerning bankruptcy law. My email this morning brought me news of a North Carolina bankruptcy court decision where the case was dismissed as having been brought in bad faith. What was the bad faith?

It seems that the petitioner, a woman who had just finished a divorce process, was filing the petition in bankruptcy primarily to make her attorney fees for the divorce go away. Through the divorce process she had obtained exempt assets in excess of $250,000 in value; and the lawyer’s bill was about $42,000; but the lawyer had already expressed a willingness to settle for $20,000.

The court appears to have reasoned that as this person went ahead with her contentious divorce, the lawyer had a reasonable expectation to be paid from the “equitable distribution recovery” of assets in the divorce case, and the filing of bankruptcy right after the divorce was in bad faith.

This is an example of what I hear referred to as the “smell test.” There is probably no specific provision in the bankruptcy code that says you can’t list your attorney fee bill in a bankruptcy right after the divorce. But under these particular circumstances, the bankruptcy court judge clearly did not like the way it smelled.

I have had several clients who have listed attorney fees in their bankruptcy petitions. However, that was not the only debt they had and that was not the reason why they filed. In addition, there had been a respectable period of time that had passed since the divorce was final; and it would have been something my client felt bad about and only listed because my advice was that all debts had to be listed.

Typically I find that my clients are very reluctant to list a debt that was for a personal service, where they have a relationship with the provider of the service. They really hate to list their doctor, dentist or plumber. If they need a bankruptcy, however, there’s no choice. All debts must be listed.

Another Drunk Driving Crack Down

Today’s Star Tribune reports – as is often the case right before a major holiday – that starting today and continuing through the month of July there will be extra law enforcement on the roads and streets of this State specifically looking for drunk drivers. I recommend that you take a look at the full story. There’s information there about a new “safe and sober” web site that the state has put up as well.

Creeping Debt and Chapter 13 Bankruptcy Debt Limits

Not long ago it seemed that $20,000 of credit card debt was a lot. I would file a bankruptcy for a person who had that without giving it a second thought. Now, however, as things go in my world, that’s not a lot of debt for most people. Unless the debtor is sick, disabled or hopelessly low income, I would be reluctant to file for someone with such a small debt.

What’s happening is that I rarely see anyone who’s not more than $50,000 in debt, and over $100,000 of consumer credit card debt is common. Once the total of the debt tops $100,000 I tend to ignore how much higher it goes, as my software keeps a running tally of the total. The fact is that for me, and I’m afraid for the whole country, the amount of credit card debt that seems normal is creeping steadily upward.

So the other day when I was reading my mail on a bankruptcy lawyer listserve, I had a bit of a start. One of the emails reminded me that for a Chapter 13 bankruptcy, there is a limit as to how much debt one is allowed to have. I quickly pulled out the most recent Chapter 13 I had filed and checked the balances of the debts, to make sure we had not exceeded the legal limit. Up until that moment it never occurred to me that one day someone will probably walk into my office with consumer debts in excess of the Chapter 13 limits. All of a sudden, those limits don’t seem as high to me as they used to. A lawyer who files a case where the limits are exceeded is subject to sanctions. If I did that it could cost me thousands of dollars. I must start paying more attention to those limits.

In order to qualify for a Chapter 13 bankruptcy, the person’s secured debt must not exceed $1,010,650 and the unsecured debt must not exceed $336,900. The way things are going right now, I would not be surprised to meet someone within the next week whose debts are over those limits. From my perspective the current economic downturn has been frightening and unbelievable.

I don’t mean to imply that I have never met a person with debts that high. Back in the early 1980s, during a serious recession we had in those years, I did a Chapter 7 bankruptcy for a real estate developer who had gone out of business and who had millions of dollars in debt. There’s no limit to the amount of debt you can run through a Chapter 7. I have also done Chapter 7 work for small business owners who’s debts would have exeeded the Chapter 13 limits.

But now people I see with consumer debt are actually starting to push those Chapter 13 limits, and that is something I have never seen before.