Bankruptcy – Page 2

What does Chapter 13 Bankruptcy Cost? – South Alabama Bankruptcy Lawyer Judson E. Crump

September 15, 2014 by Attorney Judson E Crump 1 Comment

The Cost of Chapter 13 Bankruptcy, Part 1.

In 2013, there were 3,223 Chapter 13 bankruptcy cases filed in the Southern District of Alabama. Of those, I would estimate that in only 3,220 of those cases did the debtors have any idea how their Chapter 13 payment was calculated. Why? Well, the majority of those cases were filed by a handful of high volume bankruptcy mills, and when you hire a volume filer, you’re lucky to get 30 minutes of face-time with your own lawyer to discuss the basics of your situation. So getting an actual explanation of how your payment is calculated is out of the question.

Even in the cases where the debtors were represented by good lawyers, very few clients understand exactly what happens. From the client’s perspective, here is what you see. You go in to talk to your lawyer. You answer their questions. If they’re a good lawyer, they answer a few of your questions, too. After reviewing your paperwork, the lawyer scribbles some things on a notepad, punches some digits on a calculator, while you sit there wondering what the hell he’s doing.

Then his head pops up and he says “OK, your monthly payment will be $425/month for five years. That includes the 2012 taxes, the ’07 Silverado, and all of your credit cards.”

And inside you think “WTF?”

But because you don’t want to look like an idiot in front of your apparently serious and sophisticated lawyer, you just say “And that’s all I have to pay?”

“Well, and your monthly mortgage payment and ongoing utilities. But basically, yeah. That $425 covers all of your debt.”

And since you had previously been hemorrhaging $1300/month on credit card bills alone, you wonder how the hell that’s possible. But you don’t ask because your lawyer is clearly getting antsy about you still sitting there in his chair without committing to signing up so he can move you along to a paralegal and collect your $3,000 in 6 months. So you say “OK well that sounds good.” And that’s it.

Many clients don’t care. They came in with a pile of bills and stress they couldn’t afford and they leave with a payment they can afford. That’s all they need to know. But for those of you who still have the burning questions – here is your answer.

>>Next Page: How Your Lawyer Calculates your Monthly Payment>>

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How the Bankruptcy Courts Reward Bad Lawyering, Part 2 – Alabama Bankruptcy Attorney Judson E. Crump

September 2, 2014 by Attorney Judson E Crump 1 Comment

How do you know a good bankruptcy lawyer from a bad one?

This is a tougher question. It is hard to advise in this regard without overgeneralizing. There are some large firms that do a good job, and a lot of small firms and solos that are complete hacks. As a general rule, you can’t rely on advertising at all – the most visible bankruptcy lawyer in your community is just the one with the most advertising budget. In fact, a big advertiser is often a firm where you’ll be one client of hundreds dealing with lots of non-attorney staff.

For the most part, you’ll have to use your head and put some time and effort into it. After all, it’s your case!

Consult with at least two different lawyers.

Every decent bankruptcy lawyer offers a free consultation. Take advantage of this. Make appointments with two different lawyers. Go to each appointment and tell your story. Listen to how they address your concerns. It isn’t so much that one of the two lawyers you see is likely to be the best lawyer in town as much as the fact that seeing only one lawyer severely limits your understanding of the bankruptcy process. If you only see a crappy lawyer, then you won’t realize he was a crappy lawyer until it is far, far too late.

Ask about non-bankruptcy options.

A lawyer who doesn’t know anything but bankruptcy can’t advise you to do anything but bankruptcy. And the first and foremost thought in your mind if you’re thinking about bankruptcy should be this: Is it my best option? Filing bankruptcy is a big step, and though it’s only slightly more reversible than a hysterectomy.

You want to be damn sure that if you do file bankruptcy, it was the last, best option for your situation. So if you’re there because you are trying to save your home, ask the lawyer for advice about your loan modification or short sale efforts. If he can’t give you basic info on the HAMP Program or the new Dodd-Frank Dual Tracking regulations, then he doesn’t deserve your $3,000.

Make Sure She Knows All Chapters of the Bankruptcy Code

I’m not saying that your lawyer should have experience in Single Asset Real Estate Cases or Corporate Subsidiary Chapter Elevens, but if your lawyer only does Chapter 7 cases, you can’t hire them. Yes, Chapter 7 cases are a bit easier than Chapter 13s, but they’re also more dangerous if you screw them up. Chapter 7 cases cannot be un-done at the Debtor’s option.

And what if you do have a business that may need a Chapter 11? Your lawyer should be able to tell you about it, even if they’re not comfortable actually running a Chapter 11 (because they’re long and expensive and kind of a pain in the ass, IMO).

They Hear Your Story

You don’t need any legal experience or sophistication to get this principle. A lawyer is first and foremost an advisor. That’s why we get referred to as “Counsel.” And the number one characteristic of any good counselor is that they listen.

If a lawyer doesn’t take the time to hear your concerns and priorities before you hire them, they really won’t give a damn after they’ve already been paid.

A Jack-of-All-Trades is a master of Nothing

Yea, there may be some genuine geniuses out there who really can take on a divorce trial Monday, a criminal arraignment Tuesday, and handle your bankruptcy on Wednesday, but I haven’t met one yet. The fact is that the human brain can only contain a finite number of expertises.

I don’t do divorce cases. I don’t do civil rights cases, or criminal cases, or probate work, or Social Security, or personal injury, or worker’s comp, or employment law or insurance law.

I represent people who are in financial trouble. I represent them in many matters – from auto financing fraud to mortgage overcharges to bankruptcy to credit repair – but I don’t stray outside of my comfort zone. These things all share a lot of common legal principles and practical considerations. A personal injury case is utterly different. It’s a tort. I’ve never done a tort case in my life (except fraud, which is technically a tort, even though it is often a part of my statutory cases).

If I put my mind to it and worked really hard at it, could I do a decent job of trying a criminal case? Probably, but no amount of study and preparation would make me as good as a devoted criminal defense attorney. That’s just how life works. If your “bankruptcy lawyer” does personal injury, divorce, and estate planning, she’s not a bankruptcy lawyer. Maybe you’re OK with that. Again, none of these rules are hard and fast, and every lawyer is unique in his own way, but all things being equal, you want an expert in your corner.

And you deserve one.

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How the Bankruptcy Courts Promote Bad Lawyering – Alabama Bankruptcy Lawyer Judson E. Crump

August 28, 2014 by Attorney Judson E Crump 1 Comment

Bankruptcy Lawyers Get Paid More for Being Bad Lawyers

I’m bound to catch some flack from my colleagues in the bankruptcy bar for this article, but if anyone out there has a valid rebuttal to my points, I’ll be the first one to welcome it. Let’s face it: in the current Chapter 13 regime, the quality of work a lawyer does has absolutely no relationship to how much he gets paid. In fact, there’s a better chance that the quality of representation has an inverse relationship to the amount of fees a bankruptcy firm generates. Why? A little thing called the No Look Fee. Only bankruptcy lawyers know what the No Look Fee is, so an introduction to the Chapter 13 fee system is in order.

How Chapter 13 Fees are Awarded

Section 330 of the Bankruptcy Code requires the Bankruptcy Court to approve any fees sought by the debtor’s counsel. Theoretically, this means that the debtor’s lawyer files a written fee application with the court, stating what sort of work was done and by whom. The Court theoretically reviews such applications, and approves the ones that are proper and either denies or reduces fee applications that are not justified.

In reality, though, there are simply too many Chapter 13 cases for the court to put a genuine review into every single fee application. So they issue a standing order that establishes a standard fee for the basic services that tend to go along with every Chapter 13 case. In the Southern District of Alabama, the No Look Fee is currently $3,000.

Now, this makes perfect sense in a world where every bankruptcy is necessary and every bankruptcy lawyer works to ensure that each debtor gets the most benefit from each case and that every debtor completes each case.

But that world is not here.

Why that Doesn’t Work

See, the no-look fees turn lawyering – a necessarily customized service that demands a detailed look into each client’s particular needs – into a fungible commodity. The bankruptcy paperwork and process is nearly the same for every case, so if you can attract enough clients, you can just meet them once for a 30 minute interview, pass them off to a paralegal for all the paperwork, and then run them through the system to generate your $3,000 and move onto the next client.

This system awards lawyers that file the most bankruptcies with the least amount of actual lawyer work, not the most well-considered and well executed bankruptcies. A debtor who gets $1,000 worth of lawyering still pays $3,000. And so does a debtor who gets $10,000 worth of lawyering. A debtor whose attorney answers every phone call pays the same fee as a debtor who only deals with the paralegals and secretaries.

And it gets even worse. Bankruptcy lawyer fees have no relation to the benefit received by the debtor. If a debtor files a Chapter 13 case with an initial monthly payment of $500, and that payment is increased to $650 because of several questionable debt collector claims, the attorney should fight those claims to save their client money. But there’s no penalty if the lawyer doesn’t, and no bonus if the lawyer does.

And if the debtor cannot afford the increased payment, and their case gets dismissed, the debtor’s lawyer doesn’t lose a dime. So if the debtor pays his lawyer $3,000 for a bankruptcy that failed because of the lawyer’s laziness or inattention, the bad lawyer suffers no penalty. The good lawyer who prevents this from happening similarly gets no benefit other than the satisfaction of knowing he’s a decent person.

In fact, the reverse is true. See, if your Chapter 13 case is dismissed, you can often file a second bankruptcy shortly thereafter to try again and make it work. So when a debtor’s Chapter 13 case is dismissed, guess who calls the debtor in for a meeting to discuss filing a second case? That’s right, the bad lawyer whose laziness got the case dismissed in the first place. So they file a second bankruptcy, and the first thing that gets paid in that case is the second attorney’s fee, regardless of whether or not that second case actually helps the debtor or gets dismissed like the first one.

The result: the good lawyer who worked to make sure his client’s bankruptcy succeed gets paid $3,000. The bad lawyer who let his client’s bankruptcy case get dismissed gets paid $6,000.

But, surely there aren’t lawyers out there who would intentionally work their clients for multiple fees, right?

WRONG. I have work experience both inside and outside bankruptcy mills, and I know how their clients are dealt with.

So what do you do about it?

The system needs to be reformed, and it must start with the courts. Chapter 13 attorneys should have some skin in the game from the minute their client walks into the door until they’ve gotten their discharge papers. If the no-look fee is $3,000, then only $1,000 should be paid at confirmation, and the rest should be spread out over the remaining years of the plan. At least $500 should depend on the client receiving a discharge. No look fees should not exist only for filing, but for hearings and matters that benefit the client and are truly necessary. For instance, a motion for relief caused by a client’s failure to make mortgage payments should be grounds for an additional fee of, say, $200. An objection to claim that reduces a client’s monthly payment by $100 should be grounds for an additional fee as well. And so on.

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Can you stop a foreclosure in Alabama without filing bankruptcy? – Alabama Consumer Credit Attorney Judson E Crump

July 21, 2014 by Attorney Judson E Crump 5 Comments

Rarely.

I realize that there are a number of “law firms” from other states that claim to be able to stop or delay foreclosures without filing bankruptcy. They are all scams.

If you never listen to another word from a foreclosure lawyer, listen to this one: there are three ways to stop a foreclosure without convincing the bank to do it on their own -Paying Up, Bankruptcy, and a Temporary Restraining Order.

TROs are pretty tough to get. You have to basically come up with evidence that the foreclosure is clearly wrongful, that the homeowner will be severely and irreparably harmed, and that. Which is not always the case. Now, a foreclosure can be illegal even if the borrower is behind on payments, but asking a court for a TRO requires some pretty heavy lawyering and I don’t know any lawyers who will do it without being paid up front. See, even if you have a good case against the foreclosing bank, letting the foreclosure happen doesn’t destroy the case. Sometimes, it is actually better to do that, because the bank will then try to eject you from the property in a state court lawsuit and you can bring up their illegal conduct as a counterclaim.

Paying up is pretty simple: you can either pay off the entire loan (which you can do after the foreclosure anyway through your 1 year right of redemption), or you can exercise your right to cure, in which case you pay back the amount of money you are behind and the mortgage gets reinstated. The right to cure in Alabama is absolute and can be exercised at any point up to 5 days before the foreclosure sale. Furthermore, they have to provide you with notice of the amount required to cure the default so you know what it will take to fix it. If you send them that amount, they have to call off the foreclosure.

And finally, there is Chapter 13 bankruptcy, which is what most people who want to stop a foreclosure end up doing. There are two reasons for this: 1) there are a million bankruptcy lawyers who flood the TV, radio, and yellow pages with advertisements announcing their ability to “STOP FORECLOSURE, REPOSSESSION, WAGE GARNISHMENTS” and 2) Chapter 13 is a simple, guaranteed remedy. If you can catch up the mortgage arrears over 5 years and keep making the regular payments, then you keep your home. It’s that simple. This is a great remedy – unless you’ve been dealt with illegally, in which case you may have rights against your lender that give you a better result than filing bankruptcy.

Can my doctor refuse to see me because I didn’t pay a bill that was discharged in bankruptcy? – Alabama Consumer Credit Attorney Judson E Crump

July 15, 2014 by Attorney Judson E Crump 7 Comments

Yes, unless it is an emergency. Nobody can force you to do business with someone you don’t want to do business with, unless you’re trying to discriminate against a protected class. Debtors are not a protected class. So yes, doctors can refuse to see you for routine or pre-planned services if you have not paid them. Likewise, dentists and veterinarians can hold your puppies and gums hostage to their demands for money.

The big exception to this rule is for medical emergencies. If you’re shot and rushed to an ER at a hospital that you owe money to, they have to treat you. This is why so many poor people go to the ER. They don’t have health insurance or money to pay a normal doctor, so when they get sick, they just wait until it gets bad enough and becomes an emergency and then they go to the ER.

There is another, smaller exception: they cannot withhold your medical records for nonpayment of bills. They can charge you a small fee for printing copies of your records, but that’s all they can charge you. So here’s an example:

Susannah is a cancer survivor, but her insurance hit a lifetime maximum in 2011, and she had to file bankruptcy in 2012 because her medical bills were over $200,000. She still owes Greedy Oncology, PC $2,000, and she needs to see another oncologist for a follow up appointment. She found someone who will see her, but she needs the records from Greedy Oncology. The regular fee for her records is $15. When Susannah asks for her records, they can charge her $15 to provide the records, but they cannot charge her $2015, or anything beyond $15.

Does Filing Bankruptcy Cut off your Power and water? – Alabama Consumer Credit Attorney Judson E Crump

June 30, 2014 by Attorney Judson E Crump Leave a Comment

No. The filing of a bankruptcy does not allow utilities to cut off their services. Nor does it allow you to keep using those utilities without paying for them. In most situations, the filing of a bankruptcy has no effect on your utility bills. You keep using the services, you keep paying the bills, and everyone is happy.

However, there are a few situations where a bankruptcy does impact your utilities. The first is where you have old bills for services you don’t use anymore. Most commonly, this involves cell phone bills that you still owe after switching to another carrier. These are unsecured debts that are typically discharged in bankruptcy.

If you are behind on power and water bills, you can discharge them in the bankruptcy, but if you ever want to use the services of that particular utility again, you’ll have to pay them back what you owe. In Alabama, for instance, most places are subject to the monopoly of Alabama Power Co., and unless you’re moving to a different state or a local power co-op, then you’re stuck paying Alabama Power off. The same goes for water bills, but they’re usually easier to escape because they’re more local.

What about situations where you owe Alabama Power for both electric service and a washer/dryer you financed through Alabama Power and they bill you for each month with your power bill? The bill for the washer/dryer is a separate debt, and should be treated as such. This means that you can either surrender the washer/dryer and discharge the debt, or you can keep the washer/dryer and keep paying the debt.

Here’s a common example: Debtor owes Comcast $400 for past cable bills, $800 to Verizon for a phone that has been disconnected since 2011, and $600 to Alabama Power for past due bills.

The Verizon bill will be discharged, because the debtor no longer uses that service and has no reason to keep paying it.

Comcast must be paid to keep getting cable, but Debtor can switch to satellite or public TV and save that $400.

Alabama Power must be paid because Debtor still lives in an area where they’re the only provider of electricity.

To sum up: you have the right to discharge all of it, but you only want to exercise that right if you don’t need their services anymore.

What is Bankruptcy Good For? – Alabama Consumer Credit Attorney Judson E Crump

May 3, 2014 by Attorney Judson E Crump 1 Comment

I spend a lot of time trying to convince people not to file bankruptcy without first looking at all of their options. Sometimes, when you have what seems like a hundred bill collectors calling you every day, it feels like there is just no possible way out of the swamp that is debt, and the only way for you to ever have a somewhat normal life is to throw in the towel and file bankruptcy. THAT IS NOT TRUE. You do have alternative options.

That said, there are times when bankruptcy really is the only realistic choice. Knowing just what is best for you requires you to sit down with a licensed professional and discuss your particular situation in detail. But here are some typical situations where bankruptcy is the best option:

A. You have a TON of small creditors. Like, more than 20 separate entities trying to simultaneously collect from you. There is no rule that says debt settlement or collection lawsuit defense won’t work for you just because you have a lot of different creditors. It’s just that dealing with each of them separately will either take a) a lot of your time or b) a lot of lawyer fees.

Now, depending on the amount of the debt and/or time you have, Debt Settlement still may be the way to go. I charge $100 per account, plus 10% of the money I save you. If you have the income to make payments, but not the time to deal with lots of creditors, it may be worth it to hire a lawyer to settle your accounts for you. For example: You have a $5,000 credit card account with Chase. You hire me for $100. I settle the debt for $2000. You owe me $300. Your total debt was $5,000, but you end up paying $2400. Less than 1/2. Still a good deal if you can afford it. Better than bankruptcy if you care about your credit report.

But, if you have lots of accounts, then settling or litigating them all could take a year or two. Some people just can’t stand to have their financial lives in limbo for that long. And I understand. Bankruptcy, by contrast, forces all of your creditors into the process. You’re in and out of Chapter 7 in about 3 months. Chapter 13 cases take 3-5 years, though, so the time factor is not as important if you cannot file Chapter 7.

B. You are about to lose something you cannot afford to lose. Like your home or your only vehicle. Chapter 13 bankruptcy allows you to keep your car from being repossessed and your home from being foreclosed. Chapter 7 will stop those things for a few weeks, but the Bankruptcy Code lets your creditors have relief from the stay (meaning they can come after your stuff) unless you can bring them current and keep paying for them. If you cannot get a loan modification and a foreclosure is coming up, then Chapter 13 may be your only option.

C. You are underwater on your vehicles. Unfortunately, auto loans are nearly impossible to settle for less than the amount owed without first surrendering the vehicle. So if you want to keep your vehicle and you have a lot of debt, bankruptcy can actually help you lower your payments on the vehicle if it is underwater. How? Well, there are two ways, depending on the sort of bankruptcy you file. In Chapter 7 bankruptcy, you can redeem the vehicle for what it is worth – NOT what is owed on it.

What?

Yeah. So here’s how it works. Say you have an Escalade worth $15,000, but you bought it with a 7 year loan with a huge interest rate, so you still owe $30,000. If you can somehow come up with $15,000 after the bankruptcy is filed, (because if you have that cash laying around before it is filed, you’ll lose that money to the Trustee) you can pay that creditor $15,000 and he has to release the lien. Period. Ain’t that cool? Of course, the hard part is finding the money. There are companies who specialize in bankruptcy lending, and I’ve dealt with them before and gotten some clients some great deals. Your attorney should know about them. If your lawyer doesn’t know about redemption, get a new bankruptcy lawyer.

Chapter 13 (the one where you make payments for 5 years) has a similar provision that allows you to pay off a vehicle for less than the amount owed by paying the creditor the value of the vehicle (at current market interest rates – which is usually better than your contract rate) rather than the balance of the loan. One caveat: this ONLY works if you bought the vehicle more than 2.5 years before you filed the bankruptcy.

Chapter 7 redemption does NOT depend on when you bought the vehicle. If you bought it at least 90 days before filing bankruptcy, you can still redeem the collateral and stiff the creditor for their underwater loan portion.