Monday, July 30, 2012


Kenneth Feinberg:  "Who Gets What: Fair Compensation after Tragedy and Financial Upheaval."SOME SAY unfair compensation creating more Tragedy and increasing the Financial Upheaval

By Terry R. Bankert a Flint Michigan Bankruptcy and Divorce Attorney. 810-235-1970

Kenneth R. Feinberg  sings Irish ballads as the Gulf of Mexico Charter Fishing Industry mourns the loss of its livelihood and the life of one Captain that committed suicide.

About the Author
Kenneth R. Feinberg ... has been front and center in some of the most complex legal disputes of the past three decades: Agent Orange, asbestos, the closing of the Shoreham Nuclear Plant, and 9/11. He is adjunct Professor of Law at Georgetown University, the University of Pennsylvania, Columbia University, and the University of Virginia.[3]

Many people complained about the lack of communication or claims paid under the administration of Kenneth Feinberg, the appointee who disbursed $6.1 billion in oil spill claims to 221,000 claimants. Patrick Juneau was installed in March to implement a new court-supervised process for distributing what BP estimates will be $7.8 billion for claims covered by a recent class-action settlement.[7]

Feinberg the British Petroleum BP money man and overseer of the bureaucratic misery caused by his administration of victim claims against BP British Petroleum whose negligence diminished the fishing industry in the gulf of mexico and destroyed economic and real lives of thousands  dependent on this economy.

For those still dealing with the claims process, "It has consumed every moment of my last two years and I don't have a lot to show for it." Tracy Redding read Kenneth Feinberg's book with a critical eye. "The one statement that literally made me have to walk away from the book for a couple of hours when he referred to the emergency advance payments that we received as unprecedented gift' and 'found money'." [8]

As he explains in his new book Who Gets What, his task is to maximize prompt, fair payouts and minimize dilatory litigation.[1]

Feinberg wasn't part of the VOO program, that was bp and the subcontractors. Feinberg came in on the back end of that.

"There's never been a private claims facility like this. We received over 1 million claims from 50 states and 35 foreign countries we paid out $6.5 billion before the first trial was even scheduled to begin," said Feinberg.[2]

The judge brought payments to the halt the day the settlement was reached "in principle" and feinberg was dismissed. The buck was passed to the court claims, and even though the infrastructure was the same key players; no economic claims are moving. Why? In many cases claimants have provided documentation from 2007- 2011 month and months and month ago?

Feinberg has done all his government and university work pro bono, but he figures that BP paid his law firm around $18 million. “It depends on the circumstances,”he says. “Another terrorist attack? Of course I’d do it for free. Another shooting at a university? Of course I’d do it for free. Oil company, wrongdoer, willing to foot the bill—of course I won’t do it for free.” [1]

Feinberg had mentors that mapped every move of his elite career. What is his history. He is nothing more than an apologist for Big Corporations the ultimate corporatist.  Feinberg was the administrator  of the chaos remedy, his real job to keep the public at bay and the press muffled.  His personal history is one of protecting government, the politicians he socializes with from that mix of intellectual and money elites   are high positioned people  we  defer too but whose true agenda is preservation of their wealth and power and their dependence  on corporation political support.

Feinberg assignments have always ended with payouts equal to what insurance would cover.His mission is to make us feel good and minimize the corporate damages.

He is  a Corporatist as defined by Naomi Klien in Shock Doctrine.

Did you know the smallest players whose lives  were so totally devastated the Charter Fishing Captains and those that book their clients have yet to be paid.

Folks like Tracy Redding who hasn't received a claims check since November of 2010. "I want him to look me in the eye and I highly recommend he don't lie to me again but I really would like to have a conversation with him. Come on be straight with me. What was really behind a lot of this?" [8]

Feinberg has long stated that he put himself behind the proverbial eight-ball in the Gulf by overpromising how quickly he could get emergency payments to spill victims. In the book, he is even more self-critical on that point:
"In meeting after meeting during the first weeks of the GCCF, I made the ridiculous public pledge that 'the GCCF will pay eligible individual claimants within forty-eight hours and eligible businesses within one week.' Talk about a self-inflicted wound!" Feinberg writes. "Underestimating the volume and complexity of the claims, I promised what I could not possibly deliver. As a result, the GCCF was immediately placed on the defensive."[4\]

He said the volume of claims kept him from holding individual meetings with claimants, something he considered critical to upholding a sense of justice. It was clear that Feinberg wanted to do that because throughout the GCCF, he promised claimants who confronted him in person or sent him letters and emails that he would review their claims "personally." That sometimes got him in trouble, making it appear that he was providing certain claimants with negotiated settlements rather than adhering to a formulaic method for paying similar claims equitably. [4]

Feinberg fumbled another ball as the administer of BP claims. Millions suffer yet he stands to make millions from telling the story . Where is the justice. He should profit no more from his book than a serial killer telling his tale.

Did you know  Feinberg let a fleet of out of state boats come into the clean up and paid them yet the charter captains will be paid only if the offset against their claims of ⅓ is accepted.

Feinberg lied directly to my primary source  out of Bon Secour booking charter out of Gulf Shores Alabama  and surrounding areas. He told her there were no glitches in the online system which is even worse now that the courts have taken over.   Feinberg made the local claims adjusters impotent and the distribution of  economic claims to come to a halt.

Feinberg called the emergency payments received in Aug-Nov 2010 a gift. The amount of paperwork to qualify was mountainous and he called it a gift?

In March, Feinberg’s run at the helm of GCCF ended when a New Orleans federal judge appointed a new administrator. Congressman Jo Bonner sent out a tweet that read: “End of an Error.”[2]

He and his Washington law firm, Feinberg Rozen, was paid $1.25 million a month to dole out BP's money, leading to complaints that Feinberg was protecting BP's assets. On the other hand, he took just 18 months to pay 225,000 victims more than $6.2 billion, a record of speed and distribution that put to shame similar-scale compensation efforts, such as the post-Katrina Road Home program for homeowners.[4]

"That criticism is absolutely to be expected I accept it in good faith."
But he does not accept the assessment of his reign as being a failure. "By all accounts, I think that the distribution and just 18 months of $16.5 billion to 220,000 people is evidence of success," Feinberg said.[2]

Public officials at the state level have not been so reserved, harshly criticizing Feinberg and warning Gulf Coast residents about the claims process.
"I would not give him (Feinberg) very high marks, and I've said that personally to him in meetings, face-to-face," Alabama Attorney General Luther Strange said in a Wednesday telephone interview.[5]

Strange added that the Obama administration "could do a much better job in holding his feet to the fire."[5]
A Feinberg spokeswoman declined to comment.
Feinberg has been increasingly under fire along the Gulf Coast, with local leaders accusing him and his staff of misleading the public, unfairly denying claims and managing the process with too little transparency.[5]

The livelihood of Charter Captains, men and women with everything at stake, has been destroyed by the BP oil spill and the incompetence of the  Feinberg claims center.

The Charter Fishermen were told that if they helped in the clean up which they did it would not lower their claims which it has. This ⅓ pay back applies only to charter fishermen and  not shrimpers, not oystermen, not the guys that fish for the same fish but sell them, just the Charter Fishermen. Where is the justice in this? TO PRESIDENT OBAMA WHERE IS THE JUSTICE.


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Tuesday, July 24, 2012

Bankruptcy and home foreclosurer, by Flint Bankruptcy Attorney Terry Bankert 810-235-1970.

TOWN HALL MEETING JULY 24 6-7:30 PM House of Prayer 1851 West Carpenter Rd. Flint.

Local elected officials are attempting to help their constituents .Foreclosure TOWNHALL MEETING  July 24th with Brenda Clack moderator.  Co Host Deborah Cherry. This material prepared  by Terry Bankert one of several presenters. For additional questions contact Flint Bankruptcy Attorney Terry Bankert 235-1970 or


A single foreclosure comes at a high price to all of us! According to the Joint Economic Committee of the U.S. Congress, the average foreclosure costs:

  • Local government $19,227- shrinking tax base, erosion of basic services for everyone, costs of demolition, code enforcement, blight remediation, and other services related to a foreclosure;
  • Neighbors $1,508 – decrease in home value, harder to sell, refinance or move; and
  • Homeowners $7,200 – equity, moving expenses, legal fees, etc.[10]
Four major impacts caused by the foreclosure crisis:
  • Increased number of foreclosures;
  • Increased number of vacant properties;
  • Decrease in property values; and
  • Erosion of the local tax base that funds basic services to all.


According to the National Low Income Housing Coalition, 40% of those facing eviction from foreclosures are renters. An additional seven million low-income households are at risk of foreclosure. Despite all this, JPMorgan CEO Jamie Dimon, whose bank has been accused of fraudulently foreclosing on thousands of veterans, haughtily defended his bank's practice of risky Wall Street speculative trading that sent a whopping $2 billion down the drain.[7  article 05/05/12]


There are literally five vacant buildings for every homeless person in America. And the latest US Census data shows that half of America is either poor or low-income.[7]


Thank you to Commissioners Brenda Clack, Omar Sims and Genesee County Treasurer Deborah Cherry for organizing this townhall meeting.  On MLIVE 5/2/12 Homeowners who are behind paying property taxes can find out ways to prevent tax foreclosure was the topic at the first Town Hall. The meeting was in response to many question  citizens had regarding trying to help themselves or neighbors save their homes from tax foreclosure. Co Hosts were Omar Sims Genesee County Commissioner and Deborah Cherry. Genesee County Treasurer.

We expect our elected officials to look at policy changed to help people.Some hurt and angry constituents say their  elected officials have a complete lack of attention  to helping  low-income families. That is not true but the issue is complicated and the solutions elusive. Many argue  elected officials, whose job is supposedly to uphold the rights of their constituents when they're being victimized by predatory banking, lending, and deceptively fraudulent mortgages need to act aggressively .  President Obama should  declare housing to be a human right, make more low-income housing a national priority, and give every American adult who owns a mortgage a $100,000 principal reduction to keep mortgages more in line with the actual value of their home.[ see generally 7]

On July 18 2012 mlive. County Treasurer Cherry and Commissioner Clack are asking for a meeting with local banks saying they want to find every possible way to keep families in homes and stop mortgage foreclosures.

She says it is better to have an occupied house than a vacant one for everybody.

Why not  allow people to remain in their homes and maintain the neighborhood.

They want to ask questions to the banks.


Poverty has gone up just as dramatically as the wealth amassed by the 1% and the .01%  super rich ... the amount of available low-income housing for needy families has gone down just as dramatically as the value of millions of homes owned by those victimized by the reckless greed of Wall Street executives.[see generally 7]


Michigan’s foreclosure crisis is not over yet and it’s hurting us all! For the past five years, Michigan has ranked in the:

  • Top 10 states for numbers of foreclosures
  • Top 5 states for decline in property values (estimated at a more than 25% average loss in property value)
  • Top 5 states for mortgage fraud and foreclosure rescue scams.
  • Top 5 states for percent of homes “underwater” – owing more on their mortgage than their home is currently worth (estimated to be more than 35%)


Michigan Mortgage Foreclosure Law

There are two ways lenders in Michigan can foreclose:
1) Judicial Foreclosure where the lender must take the borrower to court, and
2) Foreclosure by Advertisement where the lender may foreclose by scheduling a Sheriff’s sale and advertising that sale in a local paper.
Michigan is considered a Foreclosure by Advertisement state because nearly all Michigan foreclosures are by advertisement. However, both types of foreclosure are permitted.

Foreclosure Timeline and Process

The Michigan State Housing Development Authority offers an in-depth explanation of the foreclosure timeline and process in the state of Michigan.

90-Day Pre-foreclosure Negotiation Period

Effective July 5, 2009, Michigan temporarily amended its foreclosure law with what is commonly referred to as the “90-Day Law”. The purpose of the amendment is to bring at-risk homeowners and lenders together to avoid foreclosure by providing a 90-day pre-foreclosure period in order to find alternative solutions. The law applies to both foreclosure by advertisement and/or anyone at risk of losing their primary residence. The law was originally due to sunset in July 2011, however it was temporarily extended to January 5, 2012 and subsequently to January 2013.
The most recent extension of the law lays out a 30/ 60/ 90-day framework within the 90-Day pre-foreclosure negotiation period that requires:
  • Within 30 days of the date of the pre-foreclosure notification letter from the lender: The homeowner must contact the lender either directly or indirectly through a HUD or MSHDA-certified foreclosure counselor to schedule a pre-foreclosure meeting;
  • Within 60 days after the date of the mailed pre-foreclosure notice: The homeowner must submit to the lender a completed documents package, if requested; and
  • Within 90 days from the date of the pre-foreclosure notification letter: The lender must reach a decision.
The law also:
  • Establishes consequences if the property is vandalized during the redemption period;
  • Makes it a misdemeanor for someone who is not a licensed attorney or approved housing counselor to represent a borrower in the negotiation process;
  • And, unless the borrower demonstrates that the property is used for agricultural purposes, reduces the redemption period on properties greater than three acres to six months (down from 12 months) if the amount due at the time of the foreclosure notice is greater than 66-2/3% of the original mortgage balance.

Six-Month Post-Foreclosure Redemption Period

For 50 years, Michigan Foreclosure Law has included a six-month redemption period (12 months for agricultural property that is larger than three acres) for homeowners whose homes have sold at the Sheriff’s Sale. This period is meant to provide a reasonable amount of time for homeowners to redeem the home, refinance it, sell it on a short sale or find a new place to live. If a homeowner abandons the property before the six months is up, the lender can shorten the redemption period to 30 days.

Protecting Tenants in Foreclosure Act

Tenants living in foreclosed properties are directly affected by the impact of foreclosure. The Protecting Tenants in Foreclosure Act is a federal law that makes clear what happens when the foreclosed landlord’s redemption period is over and the bank or mortgage company takes over as owner of the house or apartment building.
The law provides for tenants with an existing lease as follows:
  • both parties (bank and tenant) must honor and continue with the terms of the current lease
  • all tenants are guaranteed at least 90 days notice before the can be evicted, unless the bank or mortgage company intend to use the property
  • tenants must pay the bank their monthly rent and the bank must provide all maintenance and repairs to the house or apartment.


Q:What to Do If You're Late on Payments

  • Stay in Your Home and Gather Your Financial Documents
  • Stay in your home to make sure you qualify for assistance. Before contacting your lender or a housing counseling agency, gather your financial documents.
  • Contact Your Lender
  • homeowners who are having trouble making their monthly mortgage payment should try to work with their lender to assess their ability to repay debt, and consider other options. Lookup your lender's contact information through the Hope Now Alliance website.
  • Lenders don't have to accept all proposals and are not obligated to do so. So don’t wait till the last minute to contact your lender.
  • If the lender refuses to take partial payments, you should put this money aside to help negotiate with the lender later.
  • Take Advantage of Free Counseling and Assistance

  • Review Programs Available to Assist You

  • A number of federal and local assistance programs are available to help keep you in your home. Review foreclosure assistance programs.
  • Protect Yourself and Your Home
  • Don't sign anything you don't understand and remember to use registered or certified mail in all your correspondence on legal matters.
  • Protect yourself from fraud by learning about foreclosure scams.

Assistance, Refinancing, and Modification Programs

Refinancing, mortgage modification, and foreclosure assistance programs are available to Washington residents to help them stay in their home.

Possible Alternatives to Foreclosure

  • Special Forbearance
  • Your lender may be able to temporarily reduce or suspend your payments for a fixed period of time. At the end of that time, you must make a lump sum payment or enter into a long term repayment plan to pay back the reduced or suspended amount. Forbearance may be a good option when the cause of your default is specific and temporary and it is reasonable to assume you will be able to resume making payments at the end of the forbearance period.
  • Repayment Plan
  • Your lender may be able to arrange a simple repayment plan whereby you make your mortgage payment plus an amount of the total in default. The plan could be a few months long, or may extend to a year. At the end of the time period, you would have paid off the past due amount and your payments go back to the original payment amount. A repayment plan may be a good option when the situation that caused your default is resolved.
  • Mortgage Modification
  • You may be able to refinance the debt and extend the term of your mortgage loan. This will help you catch up by possibly reducing the monthly payments to a more affordable level. You may qualify if you've recovered from a financial problem but your net income is less than it was before the default.
  • Partial Claim
  • Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current, if you qualify.
  • Pre-Foreclosure Sale
  • This will allow you to sell your property and pay off your mortgage loan to avoid foreclosure and damage to your credit rating. If you're unable to afford the house long-term, you may sell the house yourself before the foreclosure sale and save some of your equity.
  • Deed-in-lieu of Foreclosure
  • As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but may help your chances of getting another mortgage loan in the future.

Information For Renters

If you rent your home, and your home was sold at a foreclosure sale after May 20, 2009, a new federal law, The Protecting Tenants at Foreclosure Act of 2009, requires the new owner to notify you at least 90 days before evicting you. You must still comply with the obligations of your lease or rental agreement during this time period.


Potential Solutions

A. Negotiation of a Loan Modification Is Probably the Best Chance in This Situation
  1. While Chapter 13 allows an arrearage to be cured over 60 months, if a foreclosure is not imminent or if your constituent has received a Notice Pursuant to MCL 600.3205 (3205 Notice) regarding forthcoming foreclosure and the time to respond has not passed, the results of a loan modification may be more beneficial than a Chapter 13 to your constituent.

  1. Remember a Chapter 13 requires your constituent to be able to afford the current mortgage payments, plus an amount necessary to cure the pre-petition arrearage over time, plus, plus, plus. A loan modification generally restores a constituent to current status on the loan, can re-amortize it over a maximum of 40 years and can reduce the interest rate to as low as 2% for first mortgages and 1% for second mortgages. Thus, a potential modification will generally free up more cash for the constituent who can now use the funds they have available to clear up other debt, still possibly filing Chapter 13 or Chapter 7 but not putting the house into the Chapter 13 plan payments.

  1. Also, if you have a constituent that has a second mortgage and qualifies under the Home Affordable Modification Program (HAMP) for a first mortgage modification, then your constituent’s second mortgage will automatically be eligible under the Second Lien Modification Program (2MP), assuming your constituent’s loan servicer is a program participant. 2MP coordinates with the first mortgage modification program to lower payments on second liens and offer an affordable solution for homeowners.

B. Negotiation of a Forbearance Agreement


Sometimes loan modification is not needed. Your constituent has a favorable interest rate, a decent payment and could afford the mortgage payment and even more, they have just fallen behind due to an unforeseen event. Rather than forcing the issue and putting them into a Chapter 13, a short term repayment and forbearance plan can be negotiated with the lender.

Often without formal and massive amounts of paperwork, a repayment plan can be created which will usually be between 3 to 6 months long. This allows your constituent to bring their home payments current without filing Chapter 13.

C. Sometimes Your constituent Wants to Give Up Their House (Values Have Fallen, Jobs Have Been Lost)

This is becoming a common situation in the State of Michigan. Bankruptcy Chapter 7 is often thought of as the solution. The problem that seems to come up is that the constituent wants a Chapter 7 but does not qualify or better yet, they filed in September, 2005, can only file every 8 years , because they thought the opportunity to file was going to be gone forever.

D. What Can THEY  Do?

  1. Negotiation of a deed-in-lieu of foreclosure is an available option. This is the process whereby the borrower surrenders the property to the lender often in exchange for forgiveness of the outstanding debt. Valuation of the property is an essential part of the negotiation. This must be coupled with an attempt to negotiate forgiveness of any deficiency balance. The Homeowner must be aware that the forgiveness of the debt may be a taxable event.

  1. A deed-in-lieu is often not possible if a second mortgage exists on a property. Some I have found that a possible solution to this is to negotiate a buy out of the debt with the second mortgage company. Often the lender has no equity to which this loan attaches. If the first forecloses, they will often never recover a dime. Thus in order to grant a release the lien and forgive the remaining debt on a second mortgage, the holder of a second will take pennies on the dollar.

  1. Additionally, if your constituent has tried for and is denied a loan modification and keeping the home is no longer a realistic option, the Home Affordable Foreclosure Alternatives Program (HAFA) may prove useful. HAFA assists homeowners who can no longer afford to stay in their home but wish to avoid a foreclosure and transition into more affordable housing through a short sale or a deed-in-lieu of foreclosure.


  1. III. An Additional Alternative to Bankruptcy in Dealing with the Housing Industry Is to Negotiate a Short Sale with Regard to the Real Estate

  1. A short sale is a purchase of the property in question for less than is owed on the property. This is usually able to be accomplished if the property has been marketed for at least 120 days and the lender determines that the property is not worth what is owed. A ready, willing and able buyer must be found and the purchase offer and acceptance must be contingent upon the lender’s acceptance. If there is a second mortgage, the lender holding the second mortgage will often require funds to be given them from the proceeds.

The borrower will never be entitled to any of the proceeds, but the end result may be that all debts are satisfied and any deficiency on the second mortgage will be forgiven. Be aware, most short sales must be an arms-length transaction, so the purchaser generally is not allowed to be a relative of the borrower. Also, be aware that one lender’s definition of a relation may be different from another.

  1. Caveat THEY  must be particularly aware that a short sale does not always result in forgiveness of all debt. THEY  must balance the benefits of the short sale with the constituent’s ability to live with property for at least 6 months after a foreclosure sale. THEY must also watch out for the timing of the forgiveness of the debt as the tax ramification of same may be devastating.

IV. Opportunity Exists Today in the Housing Market

  1. With the new Michigan foreclosure statute, MCL 600.3101 et al ,a homeowner who intends to walk away from the house can usually reside in a property for over 12 months for free.

Free from the date they stop paying on the mortgage.

Usually, a lender will not begin foreclosure until the borrower is 90 to 120 days behind,

they will then often send out a 30 day breach letter giving the borrower 30 days to bring the loan current (not all mortgages require this breach letter), then a 3205 Notice will be issued by the lender and, if properly responded to,

the lender can then not begin foreclosure for 90 days.

Subsequently, a foreclosure notice must be published for 5 weeks, the sale would occur, and the borrower would have a 6 month right of redemption.

After expiration of the redemption, it usually takes at least 30 days to evict the borrower.

Thus, the average home loan from the time payments to a lender terminates until the borrower has to exit the home is 12 1/2 months. 18 1/2 if the property is over 3 acres. Note, in order to qualify for a “3205” 90 day extension, it must be a primary residence and the borrower could not have previously entered into a qualified loan modification within the previous 12 months.

  1. Borrowers who are disgusted at the loss of all equity in their home can take advantage of their free place to live to effectively save money and get their equity out though living free.

V. Opportunity Exists Today in the Credit Card Market Without Impacting Credit Scores
Avoiding Bankruptcy through two proven methods of self reorganization is also possible, but the key to the success is creating cash flow to deal with the paying down of debt. Many of the programs on television and the books on debt management discuss how to get out of debt when you have money to pay the payments, unfortunately, the methods always seem to gloss over the ability to find money in one’s budget.

The biggest impediment YOU  find that exists among YOUR constituents is that they have no ability to rationally analyze their situation.

Quite often they spend the time dealing with their debt by putting out fires rather than addressing the problems logically.

The putting out of economic fires quite often leads to a  list of top mistakes a constituent can make:

  1. Burying their  head in the sand.
  2. Paying credit cards before mortgage payments.
  3. Borrowing from/cashing out an IRA/401(k) and exempt assets to pay credit cards.
  4. Borrowing from/cashing out an IRA/401(k) and exempt assets to pay mortgage payments.
  5. Hearing only what they want to hear.
  6. Believing what is too good to be true, to be true.
  7. Panicking.
  8. Thinking they can figure out what to do on their own.
  9. Blaming their spouse.
  10. Doing nothing for fear of the wrong choices.

The impact of these mistakes is the inability to create/find the resources necessary to eliminate the debt. Tell your  constituents do an analysis of their spending. The spending analysis does require discipline, but if the constituent is truly interested in getting out of debt, by analyzing their spending as set forth below, they will be able to find the funds necessary to get out of debt.

The solution starts with a complete budget analysis:



Once the debtor files his or her bankruptcy case, all creditor actions against the debtor must cease. This is because, the moment the petition is filed, an automatic stay is imposed (hence the name automatic stay). The stay prevents creditors from taking any action against the debtor or against property of the bankruptcy estate. There are a few exceptions to the automatic stay that occur fairly frequently. First, if the debtor has had two previous cases dismissed in the preceding one year and the debtor files a third case, there is no automatic stay unless the debtor seeks an order to have the automatic stay imposed. 11 USC 362(a)(4).

I. The Initial Interview and Case Evaluation with a Bankruptcy Attorney Is Key to Determining the Proper Chapter


The attorney will review the following;

  • Average income (Schedule I) and 6 months of income (Form 22)
  • Expenses (Schedule J) and means test deductions (Form 22)
  • Property values and secured debt balances: exemptions and non-exempt assets
  • Follow up from initial interview if unclear after first interview to nail down values, whether passes means test, project average income and expenses
  • Advice to constituent on options, weigh pros and cons of each chapter, risks involved in chapter 7, cost involved of chapter 13, possibility of waiting for anticipated changes in income/expense/6 month average, what happens if constituent does nothing:
A. Chapter 13
  • Regular income/stable job/disposable income on I and J/ high income
  • Can’t pass means test in chapter 7 and no ability to rebut presumption
  • Save house from foreclosure
  • Cram down car or save car
  • Strip down 2nd or 3rd mortgages in certain circumstances
  • Non-exempt assets constituent wants to keep and can comply with “best interest of creditors” test by paying equivalent portion of debt back that would have been distributed in a chapter 7
  • Pay back income taxes at no interest
  • Child support income is deducted on means test
  • 401K deductions allowed on means test and not disposable income…when constituents have large 401K deductions and are above median, you can calculate a low disposable income in a chapter 13 but may flunk the means test in a chapter 7 due to differences in form 22A and 22C
  • Better for credit in long run
  • Costs more in terms of attorney fees and paying unsecured debts
  • May increase payments if constituents make more money in future
  • May give up tax refunds
  • Chapter 7 has pitfalls like fraudulent transfers and/or preferences
  • Debt limits…beware if your non-contingent liquidated debts exceed $1,080,000 secured or $360,000 unsecured.
  • Uncertain of value of assets like real estate, value of business owned by debtor, and wish to avoid possibility of liquidation

B. Chapter 7
  • Low income or no disposable income
  • No payment plan to creditors
  • Cheaper
  • Over and done with
  • Exempt assets…exemptions are usually liberal enough for a fresh start, depending on home equity or business assets or vehicles owned
  • Non-exempt assets are not important
  • Save house with mortgage modification, not with bankruptcy
  • Keep house and car by reaffirmation
  • Keep tax refund if don’t use up exemptions (need to disclose prorated share for ytd refund)
  • Keep wages free and clear of trustee if disclosed and exempt (need to disclose prorated earned but unpaid wages/benefits, etc.)
  • Not tied up in payment plan so can borrow money/refinance/buy a car post filing without court permission
  • Do a home mortgage modification
  • Beware of preference payments to family members, favored creditors, and fraudulent transfers in the last 6 years, e.g. gifts, transfers or discounted sales to family, friends or favored ones.
  • Beware of abuse issues, high income, luxury purchases, life style issues in high consumer debt situations.
  • Good for business cases since abuse motion does not apply when majority of debt by total amount is non-consumer (caution must usually include home mortgage as personal debt when calculating total allocation)

C. Conversion from the Wrong Chapter to the Right Chapter
  • Routine to convert from chapter 13 to 7: income drops or plan as filed cannot be confirmed or completed
  • Harder to escape from a chapter 7 since dismissals are not routine and opposed by trustees and conversion to chapter 13 requires a feasible plan and good faith….when in doubt, chapter 13 has more flexibility, safer from liquidation and is easier to get out of due to dismissal as of right.
  • Buy time…postpone discharge in a or confirmation in a 13 when there are doubts about the right chapter

D.  Chapter 11
  • Large or medium sized company, specialty practice, when cannot qualify for chapter 13 and want to stay in business and reorganize corporate debt structure or high income individual case with lots at stake

E. No Chapter or Just Wait Awhile
  • Recent income high but laid off, downsized, drop in income…wait until constituent can pass means test or bet CMI below median on 6 month analysis
  • Pay all creditors
  • Negotiate
  • Pay tax on forgiveness of debt
  • May be postponing inevitable
  • May jeopardize assets
  • Never suck out retirement assets and rarely borrow against equity when in debt trouble and bankruptcy is a good option
  • Pay on time to keep credit good
  • Settle for cash payment(s) for less than amount owed, get it in writing, signed by both parties
  • Do a home mortgage modification
  • Refinance home mortgage or car (usually bad idea)
  • Rich family willing to help out
  • Large preference: 1 year or 90 day wait…. fraudulent conveyance: 6 year wait



Laura Holbrook has worked with a lawyer and housing counselors, fighting to keep her Gaithersburg, Maryland, home.She says she prays daily that she and her children, ages 4 to 15, will be able to remain — despite the foreclosure notices she has received, the photographers who routinely snap pictures of the house for her lender and the prospective buyers who unabashedly survey the property. “It’s been so stressful,” Holbrook said. “It’s not even embarrassing. . . . You feel like you are floating and don’t know when you are going to pop and go to the ground.”Holbrook went into foreclosure because, like many people, she couldn’t make ends meet. In her case, it started when her child support payments stopped for six years. She said her ex-husband was about $65,000 in arrears.
Holbrook eventually sued but settled on a small fraction of what she was owed. The case was dragging on too long, she said, and she couldn’t afford the additional lawyer’s fees.
To get by, she refinanced her house. Twice.
Her mortgage payment nearly doubled, from $900 to $1,700 monthly.
Then she lost her job in marketing and sales. She was unemployed for two months and missed her mortgage payments. When she found a job, she called GMAC to let the lender know that she was working again and could now pay her mortgage.


Holbrook said the customer service agent told her that it was too late: The foreclosure process had started, and her file had been forwarded to the company’s attorney. She has tried to get a loan modification but said she has been told she is ineligible because she doesn’t make enough money. She and her counselors say she does; they think the lender might have lost a document.
Since then, Holbrook has been calling her elected officials and working with housing counselors to try to find a solution. For now, she’s in limbo, hopeful but unsure whether she and her children will be able to keep their home.
“This isn’t for me; this is for my five children,” Holbrook said. “Our house is our haven. It’s our place to feel peace, and if you don’t have peace, than what do you have?”



Federal Programs

Making Home Affordable Program

The Making Home Affordable Plan is a program announced by President Obama in February 2009 to help combat foreclosures. It is designed to help homeowners reduce mortgage payments to an affordable level.
If your mortgage loan is owned by Fannie Mae or Freddie Mac, your servicer must participate in the Making Home Affordable Program. If your mortgage loan is not owned by Fannie Mae or Freddie Mac, your servicer’s participation is optional.
There are two main components of the Marking Home Affordable Program:
  1. Home Affordable Refinance (HARP)
  2. Home Affordable Modification (HAMP)
To determine your eligibility for the Making Home Affordable Program, you can contact:
  • A local HUD or MSHDA-certified prevention counselor in your area by clicking here.
  • The official Making Home Affordable website. Here you can:
    • access self-assessment and borrower tools
    • use the “checklists” to start gathering the information you need to speak to your mortgage servicer or housing counselor








National Mortgage Settlement website
Michigan Homeowner Assistance Nonprofit Housing Corporation (MHA) and
Michigan State Housing Development Authority (MSHDA) Step Forward Program EXHIBIT B AT END


A. Put an end to robosigning - signing affidavits filed with the court without
personal knowledge.
Affidavits/sworn statements utilized in foreclosure proceedings must be                                                            
accurate as to the amounts owed and the standing of the bank/servicer to
file for    foreclosure and must be based on the signor’s personal
knowledge of the facts.   The affiant must actually review the
bank/servicer records before signing.
Assertions made in foreclosure or bankruptcy proceedings shall be           
accurate, complete and supported by competent and reliable evidence.  
Affidavits shall be signed in the presence of a notary.
Banks/servicers may not rely on an inaccurate affidavit to obtain a       
foreclosure judgment.
Banks/servicer must have standards for qualifications, training and    
supervision of employees that sign affidavits; and shall ensure that they
have an   adequate number of employees with reasonable time to prepare,
verify and execute affidavits.
Banks/servicers shall not pay incentives to employees or third parties to                                     
encourage speed in the signing of affidavits.

Tax Ramifications of Debt Settlement
As bad as things can be and as complicated as some of the strategies to deal with debt may be—tax consequences are an important issue that you need to be aware of and on which constituents must be properly advised.
In general, if a lender cancels debt in excess of the FMV of the property or if a credit card is settled for less than the debt—you have ordinary income on the excess and it is a taxable event UNLESS you fit within an exception
  1. If you’ve filed for bankruptcy relief—no income. Specifically, debt cancelled pursuant to a bankruptcy is not considered income as the borrower is deemed to be insolvent for IRS purposes.
  2. You do not include a canceled debt in income to the extent you were insolvent immediately prior to the cancellation of the debt.:
    • Liabilities > Assets (all assets, including retirement accounts and pensions)
  3. Qualified Principal Residence Indebtedness (Part of the Economic Stabilization Act—good through 2012)
    • Includes any debt secured by your principal residence if tied to the acquisition, construction or improvement of the principal residence.
    • Excludes the amount of the refinance that is used for other reasons (paying down credit card debt, etc).
    • “Principal residence”—“is the home where you ordinarily live most of the time.” (Can only have one at a time).


The Michigan Homeowner Assistance Nonprofit Housing Corporation (MHA) acting through Michigan State Housing Development Authority (MSHDA) has received federal funds from the U.S. Department of Treasury to help Michigan take a step forward through a comprehensive, statewide strategy that is aimed to help homeowners who are at high risk of default or foreclosure.

Through A Step Forward: MHA designed programs to help homeowners who have had a financial hardship. This website is the fastest way for homeowners to submit an application for assistance.

Representing the Homeowner in Foreclosures, Short Sales and Everything in Between

By Jodi L. Mercer, Michigan State Housing Development Authority, Lansing

Presented 04/01/11
2nd Annual Consumer Bankruptcy Institute
Contributed by Marcy J. Ford and Brian Joel Small
Presented 04/19/10
Consumer Bankruptcy Institute
Contributed by David C. Andersen, Yuliy Osipov, and Mark H. Shapiro
Presented 04/19/10
Consumer Bankruptcy Institute
Contributed by Charles D. Bullock, David M. Findling, and Stuart A. Gold





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