Bankruptcy Law: MCLE Basicsplus!® Recorded 10/11/2018

Unedited transcript of

Bankruptcy Law: MCLE BasicsPlus!® Recorded 10/11/2018

>>:It's now my distinct pleasure to introduce the chair of today's program. Don Lassman is a sole practitioner in Needham, Mass., concentrating in the areas of bankruptcy, insolvency and business reorganization since 1983. Mr. Lassman is a member of the bar of the Commonwealth of Pennsylvania and Massachusetts, the Boston Bar Association, the National Association of Bankruptcy Trustees and the American Bankruptcy Institute, and has been a member of the Panel of Chapter 7 trustees for the U.S. Bankruptcy Court for the District of Massachusetts since 1995. He's earned the preeminent peer review rating by Martindale Hubbell. Mr. Lassman participates in many continuing legal education programs as chairperson and panelist and has written extensively on legal issues relating to insolvency and bankruptcy, including most recently, as a contributing author for "Bankruptcy Practice In Massachusetts." Don, I'll leave it to you.

>>:Great, OK, thank you. Thank you.

>>:Thank you so much.

>>:So good morning. We have a really, really strong panel of attorneys here. You have preeminent lawyers in what they do. There are other preeminent lawyers, too. They tried to get on the panel; they couldn't. So you really have the top shelf people here. And I want to go over the agenda for the two days so you understand how it's set up and why we set it up the way we did because it's very purposeful in what we did. So this morning, we're going to review things that you need to know if you're starting a bankruptcy practice or going to get involved in the practice of bankruptcy law. And then, we'll move into some definitional - some terms that you're going to hear frequently today and you have to know what they mean to be able to keep up with what everybody is saying. Then, we'll

© MCLE, Inc. All rights reserved have a roundtable discussion about setting up a business bankruptcy practice. If you're going to be setting up on your own or you're part of one, thinking about the terms and conditions upon which you would hire - someone would hire you and you might fire a client. Also, what a law office needs in terms of equipment and software - and then, we'll talk a little bit about how you get clients - so how to develop them. Then there'll be a short break, and then, we'll talk about preparing a bankruptcy case from the perspective of a Chapter 7 bankruptcy case and a Chapter 13 bankruptcy case. You don't need to know what those are right now, but you absolutely positively will at the end of tomorrow. And we'll look at it from the viewpoint of the person filing bankruptcy - so the person that owes all the money. We'll look at Chapter 7. We'll look at Chapter 13. Chapter 11, we don't talk about specifically. Chapter 11 is a reorganization provision and more complicated. There are MCLE programs on that. So this is really - if you're looking at a bankruptcy pyramid, this is the foundation course. And then there are courses throughout the year that'll pick out little subtopics. So there'll be a Chapter 11 course. There may be a means test course. There may be a reaffirmation course. And then you can kind of add those blocks to get to the top. Then, everyone is excused. Then we do a look at the means test for a little bit, and then your lunch on your own. When you come back, we have a ethical discussion that's new this year. We have someone from the Board of Bar Overseers. So if you don't come back after lunch, I'll know why that is. And hopefully, no one in this room is being hunted down. And I'm very excited about that. Pam Harbison was a bankruptcy attorney for many years. They really had little or no bankruptcy expertise at the Board of Bar Overseers, and so they hired Pam. I don't know if that's an indication that they need more help because there're more bankruptcy attorneys popping up over there or they just wanted to kind of plug that gap. So she's going to talk about that. That is a not-to-miss. Then we're going to do a client interview. So over lunch, you do have an assignment. Please read the hypothetical, which is on the materials that you received today. And it's on Page 1, 2, 3 and 4. So it's long. And we're going to review that from 2:15 to 2:45 in the format that you would get it. So we are going to have a role-playing attorney and a role-playing debtor. And the job - and role-playing associates - and the job of the attorney is to gather all this information from the debtor so that the attorney at the end of the day will be able to make a recommendation. So

© MCLE, Inc. All rights reserved this would be if you had a client come into your office - how do you question them? What information do you need? And then, having that information, from 2:45 to 3:00, we're going to ask you what issues you think came up during the meeting that should be reviewed in terms of legal issues that we're concerned about. And then, we will go through a counseling session. So we'll put all the issues that we spot up on the white board. And then, we'll answer as many them as we can get through. And to the extent we don't get through them all today, we'll go through a few of them tomorrow. Typically, we get 30 - there's at least probably 40 or 50 issues lurking in this fact pattern. Day 2 - tomorrow, we'll start again at 9: 30. We go through all the bankruptcy forms. So how do you - what forms do you have to prepare and how do you do it? And that's a lengthy session but very important because it'll introduce you to every single bankruptcy form in kind of what the tips and traps are that are built in there. There is consistencies, inconsistencies that you have to watch out for. You might fill out something on one form, and it ties into something on another form. But do they tie together? And if they don't tie together, why not? And if you don't know it before your bankruptcy case is filed, then you'll have some explaining to do when the case gets before a bankruptcy trustee. Then, we'll look at the case from the creditors perspective. So today, debtor's perspective; tomorrow, creditor's perspective - so that's the person that's owed the money - so the credit card companies, the hospital bills that are unpaid, those banks that aren't paid - things like that. So we'll look at what rights do creditors have. Then lunch is on your own. And then, in the afternoon, we're going to have an ethics - a discussion of ethics from the creditor's perspective. So if you represent a creditor, what are your ethical obligations? And we're fortunate to have someone from the Office of the United States Trustee here. And he prepared a pretty detailed flowchart of the steps kind of you have to think about if you're going to represent creditors. Then we have two very good discussions - one on bankruptcy litigation. So bankruptcy involves court practice. You may have to go to court. If you do, what do you do? What do you file? When? How? Where do you look? So all of those answers - all of those questions and many more will be answered on the session we have on bankruptcy litigation. Then we have tax issues in bankruptcy. In consumer cases, tax issues can predominate. Many bank - many people that are filing bankruptcy have trouble with their finances. They're not well-organized, and they don't file

© MCLE, Inc. All rights reserved tax returns. So as a consumer lawyer, you may ask for tax returns, and you get the answer, oh, I last filed tax return in 2014. OK, now what? So how do you file bankruptcy? What are your obligations with respect to taxes? And how do you treat taxes in a bankruptcy case? Are they discharged? Can they be wiped out? Are they not? How do you know? What do you do? And so we have someone from the Massachusetts Department of Revenue. That's all he does. And he's going to talk to you about taxes. Bankrupts use electronic filing, so we're going to talk a little bit about that. I'm going to talk a little about it in a minute. And we're going to have - we have someone - we have the clerk from the United States Bankruptcy Court. So you're going to see; there are a lot of top-shelf professionals that are going to be here, parading through. We have a big, big cast tomorrow. And so Molly Sharon, who is the clerk of the United States Bankruptcy Court is going to stop by. And she's going to run through electronic case filing and what the clerk's office does, what your interaction with them may be, how to contact them, why you would contact them. Why would you ever call them? And we also have someone from the Office of the United States Trustee - an attorney - a staff attorney who will come and talk to you about the role of the United States Trustee in a bankruptcy case. Then, in the afternoon, we're going to look at things that creditor's lawyers end up doing in a bankruptcy case. So today, we're talking about debtor's lawyers - what they have to do. Tomorrow, we're going to look at a creditor's lawyer and how creditor's lawyer may try to throw a wrench into your - at that time at least - nice, smooth bankruptcy case. Everything's going great, and then a creditor's lawyer has something to say about that, justifiably so, no doubt. And so we'll show you a creditors meeting. If you are in a bankruptcy case, you absolutely positively have to go to a creditors meeting. And we're going to conduct one right here so you'll know how a creditors meeting runs, who goes, what they say, when they say it, what they can say, what they can't say, how you can protect your client, how you can enforce your rights as a creditor, things to do and not to do. And then after that, we'll have a mock presentation of a motion in a bankruptcy case. So much of bankruptcy practice is accomplished by motion - not all of it. And bankruptcy litigation - you'll get a little taste of that during the bankruptcy litigation session. But then in the afternoon, you actually see a motion presented. So you get a little sense of how it works and what to do when you need to file a motion. So that's how it rounds out.

© MCLE, Inc. All rights reserved I want to start this - let me say, I guess, two other things. And that is that those that are on the webcast should feel free to throw questions in. After lunch, the people that are here will try to pare you off in groups of two. That's usually what a pair means. So you'll be in a group of two, and you'll go through a hypothetical together with your partner and just kind of prepare a list of issues that you see. And then we'll go around the room - each pair or trio if we don't have even numbers. And we'll get, you know, your issues that you spotted. And then, for those participating on the webcast, we would ask you to look through the hypothetical, as well, and then just transmit all your issues to me via email so that we can make sure all the issues for those here and those watching online are presented. So let me start with some basics, OK? Has anyone here been in bankruptcy court? OK. One, one. OK, so a little bit - or two. All right, now they're coming out of the woodwork. OK, so that's not a bad thing. And I'm not going to ask you more questions than anybody else. But so the bankruptcy court. And oh, let me say one more thing - Anne White to my left. So Anne, why don't you talk a little bit about yourself so they know who you are because they heard, like, this long thing about me. And they're wondering, like, who are you? So now you should say something.

>>:Oh, hi. I'm Anne White. I'm an attorney at Demeo LLP, which is a mid to small-sized litigation firm in Boston. We have a specialty in bankruptcy, including other litigation aspects. And I have been on the Panel of Chapter 7 trustees for 12, 13 years I guess. And so has Don Lassman. So there is a group of about 30 folks that have been appointed over the years to stand as on a panel of trustees. And we'll learn what that means. But once a month, I listen to cases. I conduct a 341 meeting, so you'll figure out what that is. But anyway, I do bankruptcy all the time, representing creditors, debtors and corporations. And I also once a month sit as a trustee.

>>:Great. So Anne has a varied practice and we're going to hear from her as well. And Ann is going to participate now, so I'll say some things and you can correct everything I say as I go forward. We're going to have two more people here this morning - Richard Askenase will be here. He was a chapter 13 trustee, and he has a very strong chapter 13 practice. And also Christina Turgeon, who's an attorney from Springfield. And she'll be here probably around about 10:15 - Richard and Christina. And Christina has a

© MCLE, Inc. All rights reserved very strong debtor practice and does some creditor work in Western Massachusetts, so we'll get her perspective on things out there. So first, the court - so three bankruptcy courts and three locations, right? So one at 5 Post Office Square and one at 595 Main Street in Worcester. And then one that's in Springfield. I don't know the street address offhand but it is - maybe it is State Street. So not the greatest location, kind of a little sketchy, but may be getting better now that the casino's there. I'm not sure if that's better or worse, but it's a beautiful building when you get inside. And it takes about an hour and a half to two hours to get there. So if you have a case in Springfield, give yourself plenty of time. In Boston, I think you need to give yourself plenty of time as well because you have to get through two sets - maybe one, but sometimes two sets of security clearance. And in Worcester, just one set of security clearance. Make sure you always have your bar card. With your bar card, you can then take your cell phone in. You can take a laptop in. If you don't have your bar card, you're not going to get any of that in. And you may need it, particularly your laptop. If you're trying a case, you need your information. So just be mindful of some extra time you might need and the documents you need to bring with you to get inside. They'll require a bar card and then a driver's license every time. There are clerks' offices in Boston, Worcester and Springfield. So if you're filing documents or you need to check on a case or do something like that, there are clerks' offices. Most filing in bankruptcy is accomplished electronically - I'll cycle to that in a minute. But there are clerks' offices. Clerks are very helpful. All their phone numbers are on the bankruptcy court website, and you should be kind to the clerks because you may need them from time to time. The bankruptcy court website is very helpful in a number of respects. So the bankruptcy court website is MAB, which is Massachusetts bankruptcy - I'm not sure what is - MAB. uscourts.gov. And so on the Massachusetts bankruptcy court website - I go there - I'm probably once a week for two reasons, and you can go for many reasons. One reason I go is all of the bankruptcy judges' opinions are there. So under judges, you can go to drop down menu, opinions and you should read that - you should be there at least once a month so you can read the judges' new opinions because you've got to know what's going on. Sometimes opinions are very hard to understand. You know, your head may twist in circles or your head may explode sometimes. But that's where you find the decisions, and for all the judges. Now, in

© MCLE, Inc. All rights reserved Massachusetts, three bankruptcy judges presently - Judge Joan Feeney, who retires in May and so there will be a new judge coming. They don't know who it is, but the first circuit just appointed a panel of lawyers to consider applications for that position. There is Judge Bailey and Judge Hoffman. So - Frank Bailey and Mel Hoffman. And so they're all in Boston on the 12th floor of 5 Post Office Square. And in Worcester, there are two more judges that we have - Christopher Panos and Elizabeth Katz. Elizabeth Katz sits in Worcester more often in Springfield. That's where her office is in Springfield. Judge Panos' office - in Worcester 595 Main Street, I think second or third floor. I always forget. The clerks will tell you when you walk in through the security. They'll tell you where to go. So if you have a case in Worcester, you're going to see Judge Panos or you might see Judge Katz. So Christopher Panos - relatively new to the bench - three years maybe. Elizabeth Katz - very new to the bench, couple years maybe - not maybe, not even that. So we really have a very - I would say and I'm sure you would say because we're being recorded - the judges are great. And they're - they know their stuff, right? So that's the thing about bankruptcy, right? The bankruptcy judges are specialized judges. So no matter what you're bringing to them, they've probably seen it a hundred times. So they know it. They read the papers. So you really got to be sharp. You've got to know - you've got to know some other things I'm going to talk about a minute. But the judges are really good and like I said, that's all they do. So this isn't state court where the judge may get a receivership one day, a criminal matter, a civil matter - they're, like, all over the place. In bankruptcy, you know, this is all they see day after day after day. So they know it well. You get a good decision. And they get it right more often than not. So you just have to be well prepared for what you're going to present. So that's - the website also has information about electronic filing. Bankruptcy court is all electronic. You should never have to go to a clerk's office to file anything. You may have to go to the clerk's office to get a certified copy of something. You can do that by mail. But I typically do it in person. But otherwise, it's all electronic. So you need to register with the bankruptcy court to be able to file papers. If you're not registered, you're not going to have much of a practice because you can't log into the bankruptcy court to file papers without a log in and a password. So you've got to get them. Easy to get - there's some training you have to do and the clerk's office will tell you how that's accomplished. And then you'll get your

© MCLE, Inc. All rights reserved log in and your password. And then you'll be - and your password is your electronic signature. So when you use it, you're responsible for it. So if you give your password to me and I file a paper saying, Judge Feeny should be sent to Worcester, you're going to be responsible for that pleading. And you're going to have to explain to Judge Feeney why you would file such a thing. So be very careful about who gets your password and how they use it. But that's your signature. There's also a PACER system - you're going to hear us talk about that - PACER, which is an - if it's the government, it's an acronym. And I can't tell you what it is - public access and some other things. But that is a way to check in on documents filed in any case. So if you want to know - Ann White filed a bankruptcy case for me and you want to know what's going on in that case because you represent a creditor that I owe money to, you can find out the case number and 24/7 you can file documents, 24/7 you can retrieve documents. The bankruptcy court is far advanced compared to state court in electronic filing. So it's great. And the electronic filing system is frequently referred to as CM, which is case management, slash ECF, which is electronic case filing. So that log in and password for PACER, which is checking documents, is different than your log in and password for filing documents. So PACER - one log in, one password - EMECF, which is the filing system, another password, another log in. So you have two - one on each side. They're not the same. And different courts have different passwords if you're going to file documents. Your PACER log in should work through - your PACER log in will work throughout the country. OK, so you just go to the PACER website and you check what court you want because maybe a client will call and say, John Doe filed bankruptcy on me out in Florida and I'm renting him property. What do I do? Well, you can hop on PACER to check Florida, but you will not be able to file - you will not be able to file documents in Florida. You'll have to get local counsel and then be admitted pro hoc to come in because you're - you won't have the signature. You won't have the sign in signature. The office of the United States trustee is the other thing you want to think about. So we've talked about the court, which is the top, the clerk's office and the office of United States trustee. They all have offices in Boston and offices in Worcester. And their offices are, in Boston, in the same place the court is. They're just on the 10th floor, the clerk is on the 11th floor, and then the court is on the 12th floor in Boston. The trustee's office in Worcester is not where the court is. What's the address there?

© MCLE, Inc. All rights reserved Something four - I think it's, like, seven. I forget what the address is. It's the same place that 341 meetings are held in Worcester. It's a very tall, black, glass building. It's the only tall, glass, black building in Worcester. The address escapes me - oh yeah, 495 Main Street. There it is. So 495 Main Street in Worcester, and that's where you can meet with the trustee. The last thing location-wise I want to talk about - so we've talked about the court, we talked about the clerk, we talked about the U.S. trustee, right? - and there'll be someone here from the United States trustee. Let me say, the job of the United States trustee is to oversee all bankruptcy cases. So the United States trustee is not appointed to a case. They are lurking in the background. Hopefully you never hear from the United States trustee because that means your case is fine from their perspective. But sometimes you'll file a case and the U.S. trustee will call you up. Oh, I see you got a case for Don Lassman and he has a house in the cape and there is no valuation there. What's going on? Or we checked Don Lassman's records online. And we see his house on the cape and you didn't list it on the schedules. Why is that? So the U.S. Trustee will get involved if your case kind of comes through their little sifter and there's some problems. It's unlikely that you'll hear from the U.S. trustee in your case. It's very unlikely if you're doing everything right. But you can, and so you should be prepared for it. The last locational thing I want to talk about is the creditor meetings. Every bankruptcy case that's filed will have a creditor meeting scheduled and the purpose of the creditor meeting is for the debtor and the debtor's lawyer to come to a room and be subject to questioning by a bankruptcy trustee. In chapter 7 and chapter 13, trustees are appointed. In chapter 11, they're not. In chapter 7 and 13, a trustee will be appointed and the trustee's job is to question the debtor. And creditors can come to the meeting and ask questions also. And we're going to do a mock creditor meeting. This creditor meeting is also called a section 341 meeting referring to the bankruptcy code section that says there must be a creditor meeting. And creditor meetings - where are those held? Well, it depends on where your debtor lives, OK? So you want to be careful if your case is on some of these kind of edge jurisdictions that might be in Worcester or might be in Boston. Bankruptcy rules indicate what towns in certain counties are Worcester considered - Middlesex County is the one that kind of is split up. So you may think that you're filing a case and you're going - your creditor meeting will be in Boston because they're, like, near Boston.

© MCLE, Inc. All rights reserved But then you have to go to Worcester. You just want to be careful checking your location. There's a local rule that says which towns and which counties are Boston, Springfield, Worcester. So it's clearly stated. Just remember to check it. The Boston 341 meetings - again, held in the bankruptcy court building on the third floor, room 325 B. And so you go to the meeting and you go fine. It's a room that's kind of, like, this size. And there's a lot of people. It's like a doctor's office. You're waiting around to go in and see the trustee. The trustee meeting is public. There can be a bunch of people in there because there's a lot of meetings scheduled every day and people are, like, stacked up. So when you go to your first meeting, there's like 20 people waiting around. They're not on your case. They're for their own case. You don't want your client freaking out that all the creditors have come to ask questions. In most cases, no one appears. If you're going to do a creditor meeting, the other Boston location - I'll call it Boston location, but the other location for for cases that are assigned to the Boston area is New Bedford. And I don't have the address right now. It's a brand new location. It's on the court website. I have the pleasure of being able to go to New Bedford now and so that will start November 1st. So you just need to know that because it's a lot further from where the meetings used to be. They used to be in Brockton. They're not. They're in New Bedford starting the 1 of November. And that's a federal building also. And then there are also meetings in Worcester in the same location as the trustees' office - 495 Main Street - right on the first floor of that building. That's where your meeting will be if you have a creditor meeting for a Worcester case. And in Springfield - I haven't been to a 341 meeting in Springfield. The location, I think, is also on State Street. I kind of forget exactly where it is, but those locations are available if you look at the website for the office of the United States Trustee. And let me add that website to get to it - the office of the United States Trustee is part of the U. S. Attorney's Office - the Department of Justice. So to find the U.S. Trustees website, you can link that way or you can go through the Department of Justice. So those were kind of your general location things.

>>:Let me make one comment - Richard Askenase, sorry I was late. One comment about the 341 meetings - if you're going your first one, get there early and listen. Listen to what the trustees ask other debtors because it will help you see what this particular trustee is focusing on, see if there's

© MCLE, Inc. All rights reserved any issues in your case that may relate to the questions that they're asking other people, so you can do that. I also recommend that you recommend to your clients that they get to the 341 meeting early. First of all, everybody should be early to everything, says the attorney who has a half hour late. But leaving that aside. I'm supposed to be at the start of the program. But you want your clients to see hear and see the trustee ask other debtors because when your clients come to 341 meeting, they are extremely nervous. They should be. It's an important process. And their nervousness can ease, in my opinion, if they see other people going through it and get a feel for how the questions are and the tone of it, which is usually not adversarial, relatively calm and so forth like that. So get there early, have your clients get there early, explain to them what's going on, have them listen to a couple of trustee meetings unless you're the first one up, obviously, so they can have a little level of comfort. And if - you can say to them, if you hear them ask other people before you a question that may raise an issue in your case, tug me, let me know. We'll go outside and we'll chat about it. It gives a comfort level to your clients, and frankly to you too the first couple of times you do it.

>>:Yeah, I think Richard's point is really good, and that is that you might even go to - you might call the office of the U.S. Trustee and say oh when are you next having meetings in Boston? And just go in advance of even having a client because - and see what kinds of questions the trustee asks. So you go for 10 or 15 minutes or half an hour - watch. Same thing for court.

>>:Absolutely for court.

>>:You can go to bankruptcy court here. Now, the judges do things - they run their courts a little bit differently. But at least you can see some hearings. So that's a nice thing to do. The last thing - another thing I want to talk about is some of the terms. So in your packet, starting on page five, there's a list of terminology that you're going to hear a lot about today. So I just want to talk - I just want to highlight a few of these items before we move into the next part of the program, which is developing a practice, marketing, how to retain clients and so forth. The first thing I want to talk about is the bankruptcy code. So what is the law? Where are we going

© MCLE, Inc. All rights reserved with that? And this is on page five. So the laws that you're going to be most concerned with are the following. One is the bankruptcy code, which is Title XI of the United States code, right? The bankruptcy rules - federal rules of bankruptcy practice. So those are your federal rules. Then you have local rules, so the bankruptcy court in Boston has a very thick, long book of local rules in bankruptcy.

>>:Can we have a show and tell?

>>:Yeah, go ahead.

>>:I use Colliers. And this is the pocket - or the - yeah, the portable version. But it's a three volume set. Don, don't you use something else?

>>:I use that.

>>:You use Colliers. OK, so this I bring to court pretty much every time because I have - you know, as much as I'd like to say I've memorized all the provisions, you need them. And then this is the the local rules, just for Massachusetts. And they - the number system on the local rules matches the federal rules, with more and more specificity. So if you're doing a application to - well, I would be doing an application to employ an auctioneer. It's discussed in the federal rules, but then it's more specifically outlined in the local rules.

>>:So you can find these. These are all on the court's website. You can link to electronic bankruptcy code and electronic rules. And some people will bring this in on a laptop so they'll have it. Some people bring it in book form. Whatever is easier for you.

>>:As a practitioner, you need to buy the Colliers. But the bankruptcy court is gushing to give you this. They want to hand you the local rules because they want you to abide by the local rules. So they will hand you as many copies of this that you want.

>>:And the judges expect you to know all the local rules.

© MCLE, Inc. All rights reserved >>:So you have the rules at the federal level which apply to all bankruptcy cases and you have the local rules for your court. And then in addition to that, there are some provisions and they would be in what Anne showed you, that Collier's book. There are some provisions of Title XXVIII which is jurisdictional provisions that you need to be familiar with, venue provisions. You know, what bankruptcy court do you file in? Is there jurisdiction in Massachusetts for your case? Gotta look at the venue rules and the jurisdiction rules. And then there are some criminal issues in bankruptcy cases. Very rare to run into those, that's just a rare thing, but you might. And there are some provisions of Title XVIII of the United States code, which is where all crimes are defined, that also apply to bankruptcy cases. So that's kind of an overview of kind of where your law is, that's the bankruptcy code. You'll hear us talk about estate or bankruptcy estate, E-S- T-A-T-E. So that is a thing that is created when a bankruptcy case is filed and it's comprised of everything that the bankrupt person owns. So that's the bankruptcy estate. It's this kind of bundle of sticks that the debtor owns when they file bankruptcy, that's the estate. Chapter 7, sometimes also referred to as liquidation or straight bankruptcy. I think the key thing to remember about Chapter 7 cases, no repayment plan it's not a reorganization. And a Chapter 13 and a Chapter 11 is about making payments over time. And when we get Christine and Richard we'll tell you the reasons why you would file one or the other. I just want to do a very top level Chapter 7, Chapter 13. Chapter 13 reorganization for individuals. Chapter 11 can be individual reorganization also, but more often used for businesses. And again 13 and 11 you're paying money back over time. Seven, you're not paying anything. You're not voluntarily paying anything in a Chapter 7 case. You'll hear us talk about claims or debts. So that's the obligation that's owed. You'll hear us talk about discharge. Discharge is kind of the holy grail of the bankruptcy case, the discharge is the - wiping out the obligations. Now some debts are dischargeable some aren't. Again, this is high level, we'll talk about that. There are certain exceptions to what is dischargeable and isn't and we'll talk about that later. But as a general proposition if you're found - if you represent a debtor, you want to get your - all of the debts wiped out, with certain exceptions. And if you're the creditor maybe you want to see if the court will say the debt is not dischargeable, it's excepted from discharge. And so we'll chat a little bit about that. An example of a non-discharge that might be a tax or a fraud

© MCLE, Inc. All rights reserved claim or something like that. So we'll get into that a little bit further. You'll hear about exemptions. So exemptions are really, I think, maybe the holy grail for lawyers because they have to. That is how they protect things for their client. A debtor when they file bankruptcy they are not expected to give up everything, leave their clothing behind, their cars, their...

>>:These days.

>>:Right. They just - they don't leave everything behind. They need what's called a fresh start, right? So that's what bankruptcy is all about, getting a fresh start. And how do you get that? Through the discharge of debt and also through exemption. So by scheduling your exemptions in certain ways. And there are exemption schemes that you can choose, different exemption schemes and we'll talk about that tomorrow. You protect your client's property from the creditors and you're allowed to do that. Certain things you're allowed to protect, so when the client comes out of the bankruptcy on the other side they have some foundation for getting a fresh start and getting on with their lives. Trustee. So there are Chapter 7 trustees, there are United States trustees, there are Chapter 13 Trustees. There's all these trustees floating around. And the Chapter 7 trustee is the person appointed when you file a bankruptcy case to oversee your case. Their job is to question the lawyer and or the debtor about the bankruptcy case, why it was filed, if everything is OK. Every Chapter 7 case will have a trustee and when you file the case there's a little event you can select that says Judge and trustee. And then you find out who your judge is and who your trustee is. When you file a case you have no idea, it's random, completely random who you're assigned to. You don't even know what day you'll have to go to a trustee or creditor meeting. All that stuff is assigned when your case is filed. You press a button, you wait like 15 seconds and then you get a little bounce back that says OK, your trustee is Anne White, you're meeting with creditors in Worcester on such and such a date and such and such a time. And then you let your client know these things because your client must go to the creditor meeting with you and you're there to help them through that process. Now there's Chapter 13 Trustees, same thing. You file a Chapter 13 case, Chapter 13 trustee will be appointed to oversee your case. And when you file your case you will be notified who your trustee is, where your meeting is, what date and what

© MCLE, Inc. All rights reserved time it is and its location. The office of the United States Trustee. I don't know if they're capital T and we're like small t. I'm not sure how that works. The chapter - they are the complete trustee...

>>:I treat them as a capital T let's put it that way.

>>:Is that right? So they oversee all bankruptcy cases, they ensure the integrity of the system and they have - they are staffed with lawyers and paralegals and they check all the case. Every case is filed. They have metrics in a kind of a software system that kind of rolls through all the schedules. Because all of the schedules are now form read - they're readable. And so if you kind of slide out of their sieve, as I said, and there's something going on your in case you might hear from the Office of the United States Trustee. You always want to respond promptly and fully to the best of your ability. So those are kind of the key terms you'll hear. There may be other terms that we kind of throw around and if there's something we say that you don't understand just raise your hand say, what are you talking about? And we'll be happy to clarify. The next item I want to talk about with our faculty here is terms of engagement, how to get clients, how to fire clients, why? How to build a practice and if you're building a practice, what you need in your practice to be successful. So Richard, Anne and I will participate as soon as Anne says one more thing.

>>:Exactly, one more thing.

>>:One more, now one.

>>:One more thing. Just in the general overview. When I'm meeting with a client I describe the bankruptcy estate and what we're going to report on our bankruptcy. If you're going to be filed as a debtor, is you're going to report everything, you're going report every kind of asset, every kind of income any kind of expectancy. That bankruptcy estate is just about - is everything you can ever think of. And then the lawyers job is to then exempt a lot of the assets because the first question a person says to me well, you know, they're going to take my house and they're going to take my car. And that's where the role of the attorney is to exempt those assets. So it just in a - the big basics is yeah, every asset comes into the hopper,

© MCLE, Inc. All rights reserved every asset comes into the bucket, that's the bankruptcy estate. And then the attorney's job is to exempt various assets. And then the other kind of graphic thing. I try to be blunt with that client. I say, now you're - essentially you could have as many as three adversaries. And your adversaries one, could be the trustee that you meet with who's going to ask pointed questions and if you don't disclose something and they find out about it that's going to be a problem. So your one adversary is your Chapter 7 trustee who's going to question you, examine you. Another adversary could be some creditor that you've angered that's also going to raise an issue or find an asset or complain about some kind of alleged misrepresentation that you made. And a third adversary, it could be the United States Trustee's office which are appointed and hired by the federal government to supervise the whole system. And they might say, you know, you make too much income, you don't pass the means test. You should be in a Chapter 13 not a Chapter 7, and you should be reorganizing not filing a seven. So I make it kind of graphic. Here's who we're going to be up against potentially.

>>:Yeah. Let me - for visual learners. I'm just going to draw something, OK? I'm going to try to draw something. Ok so my drawing passing is like getting worse every year. OK.

>>:Is this the bus?

>>:Yeah, this is a bus.

>>:This is the bus. We've been doing this for a few years.

>>:This is a bus. This is a really good way to think about this, OK? So let me get out of the way. That is a bus. I used to have a bus but I'm not sure where it went. It's funny, that's a bus, OK. And when you file bankruptcy the bus is now starting, you've now got that bus rolling. The bus is driven by the Chapter 7 trustee, OK? And you're - you as the bus comes by to the bankruptcy stop and you get on the bus with your client, OK? And when you get on the bus with your client, there's your client. In his hand he has a big suitcase, OK? And in that suitcase is all his property, that's everything he owns. So you get on the bus, you talk to the trustee, that's you 341

© MCLE, Inc. All rights reserved meeting, OK? The bus is filled with creditors, OK? So they can be at that 341 meeting and ask you questions and as Anne said one of your creditors, one person that could be in there is the U.S. Trustee. But it's filled with all your creditors. So your job is to get on the bus, take a ride, OK? And then get off the bus. And when you get off the bus you want to make sure everything is still in the suitcase, OK? And how do you keep it in the suitcase? Like Anne said, you get your exemptions planned out. So in that suitcases is a house and a car and some clothes and using your exemptions you're going to keep the house, and the car and the clothes so that when your meeting is done and the trustee lets you off the bus - you get on the bus by paying your filing fee or maybe not if the person can't afford a filing fee. You get on the bus and you get - your stop is coming up, you get off, you have all your goods in the suitcase and you're done. So that's kind of - for visual people I think that's a good way to kind of envision what you want to do. We're going to fill all of that, there's a lot going on there, right? But that will give you a good - give you a good sense of like how it works. All Right. So the next thing I want to go onto is how to attract and retain clients, OK? So as I said we have Anne who's Chapter 7 trustee, I'm a Chapter 7 trustee. Anne and I both have largely consumer practices. And Richard was a Chapter 13 trustee, is not presently, and has a large Chapter 13 practices and large debtor practice as well. So the first thing I want to talk about with everybody, and I have some questions for you. But I'll ask the question, I'll answer it first so I don't put anybody on the spot and then you can jump in. So I think one thing that's important in developing a practice is kind of networking. So how do you establish a network of people so that people know you and who you are. How do they find you? And remember there's only five bankruptcy judges, so you're going to be before the same people all the time. Not like state court where there's people rotating in and out, different people appointed. So those judges, you get one chance to make a good impression. If you're not making a good impression the judges do remember. I think they're very good at kind of screening things out. But nevertheless, if you come in and the last time you really had no idea of what was going on they're going to say oh, here we go again. So you need to develop a good relationship, but then having developed a good relationship, how do you network? So there's - I would recommend these things and my panelists will then jump in with other things. So I think Bar organizations are really important. So

© MCLE, Inc. All rights reserved the Boston Bar Association has a very strong bankruptcy section and they have a lot of networking opportunities, they have a lot of educational programs and they have a lot of opportunities to mingle with other people in the practice and meet the judges. So the Boston Bar Association bankruptcy section, important. The Massachusetts Bar Association also has a business section that encompasses bankruptcy as well, but not quite as active in the bankruptcy area. But the Mass. Bar - I'm a member of both myself. I'm a member of the Mass. Bar Association because they're professional liability insurance rates are lower than the bar assoc - than the Boston Bar Association. Even when you add in the Mass. Bar Associations annual fee. So but that's a good way to get professional liability insurance also, through your bar associations because they negotiate typically a better rate. So bar association is a good way to get started. Also there are professional associations. So if you're a bankruptcy lawyer you might join the American Bankruptcy Institute, ABI.org. And they offer conferences, there's a Northeast bankruptcy conference every summer, it's in July. I expect to see all of you there this year. And it's going to be in Newport, Rhode Island. And you can come down for the day or two days, you can stay overnight, whatever you want to do. But they have educational programs throughout the day and there's a consumer track and there's a business track. And it's a really good opportunity to mix and mingle, all the - most of the judges go. So you're like sitting, you're just sitting, you can be surrounded by judges. Little creepy sometimes, you can be sitting there and there's judges everywhere. You're just hanging out and you're talking to them about things and it's just nice to kind of establish a relationship. They also offer opportunities to publish because they have a monthly magazine that they put out. So you have opportunities to publish because they're always looking for authors to do things. They have committees that publish monthly and they're looking for materials to publish. So that's - I think a really good organization to be - to stay on top of what's going on in the practice and provide you with networking opportunities. There's also National Association of Consumer Bankruptcy Attorneys which is, focuses predominately on consumer issues. They have yearly and maybe even semi-yearly retreats, conferences where they focus just on consumer issues. The consumer - the Commercial Law League, CLL is more creditor oriented. But if you're going to be representing creditors they have frequent events that you can attend and build your practice there. And there's also

© MCLE, Inc. All rights reserved something, the national - National Bankruptcy Judges - NCBJ, National Conference of Bankruptcy Judges, NCBJ.org. The - all of the bankruptcy judges annually have a meeting where they have very high caliber legal presentations on kind of important issues and then that is really a national. So ABI, the Northeast Conference is really your area. If you have a more national practice or want to develop one then you want to go to these national conferences. And NCBJ and ABI both have national opportunities. So I think those are some good ways to - those are some good organizations to build some networking. Do you have some networking ideas in...

>>:Yeah, let me give you a couple of thoughts on this. I think the best way - the two major ways you're going to get business is from prior clients and other attorneys. Broadly speaking that's where it comes from. Prior clients pretty straightforward. You do a good job keeping, you know, keep in touch with them. If you move your office, send the letter to former clients that you moved and so forth like that with a new phone number, etc. And if you did a good job for them they will refer people to you. The best way also is through other attorneys. But I'm going to emphasize, non-bankruptcy attorneys because a lot of people have problems. For example, one of the biggest areas that can intersect is divorce law and bankruptcy law. So I would encourage you to get in touch with attorneys that concentrate on divorce law. Go to some of their seminars or some of their programs and give out your card. I actually have on my business card, on my top right it says bankruptcy and debtor problems. So that, if the attorney won't remember who I am, I don't expect that. But if he takes the card and throws it in the drawer and the card says bankruptcy on it, which I point out. If a client of his has a bankruptcy issue, wait a second. Pulls out the drawer, a card is there and so forth like that. And I think that's the way you should consider. Another one also is litigation. People get sued and one of the ways you can get rid of litigation I mean, it's obviously complicated, but one of the ways you can get rid of litigation is through a bankruptcy filing because it stops the litigation and you may be able to resolve the issue through a bankruptcy matter. In other words, you may be able to file a Chapter 7 case and get a discharge of the debt and therefore it's all done. So, you know, contacting attorneys that are not in the bankruptcy field by going to some seminar programs, and software like that, and interacting

>>:Let me just add two really quick things. Richard said something I should've really said in the definition. Automatic stay - when a bankruptcy case is filed, all collection activity, all litigation stopped. There are certain exceptions. But as a general proposition, that's a big benefit of filing bankruptcy. So your client's house about to get foreclosed on, their cars about to get repossessed. They have to go to court because they just got sued by the credit card company. They filed bankruptcy that's all stopped. You want to make sure you notify the court that the action against your client is proceeding. And you want to make sure you notify the lawyer who's bringing the action against your client. But at least be on top of that. And then one more item that I'll say to you that is - so how do you get your very first client, right? So if you don't have clients that are referred to you, haven't been caught, like, how do you start? One good way the volunteer lawyers project in Boston offers the opportunity to pair you up with a mentor, give you a case. You a - you're - it's a pro bono case. But you work the case in to finish. They have the software to help you. And we'll talk about software. It's good. Maybe, Ann, you can throw that in software when you make your next comments. But that's a good way to get experience on a consumer bankruptcy as volunteer lawyers project here in Boston. Ann, you can go ahead.

>>:Back to the automatic stay, that's another thing I'm explaining at the first meeting with my potential new client, my - the new debtor. It's a stay - it's an injunction. And it happens automatically the minute you push the button and file the bankruptcy. But it's not permanent forever and ever. If you haven't paid your mortgage, the credit - the bank or the credit union or whoever holds that mortgage is going to ask for relief from that automatic stay. So you'll learn about that tomorrow. But it's a very good benefit day one the minute you filed the bankruptcy but it's sort of to be continued. This - it's still going to be discussions and probably litigation about it later. Back to the topic of terms of engagement, I think - Don, you mentioned all the organizations I thought that the Boston - for me personally, the Boston Bar Association was a real catapult for my career. I applaud them very much. You volunteer for something. And my experience in my life has been you volunteer and - it sounds bad. I get twice as much out. I put half in. And I,

© MCLE, Inc. All rights reserved you know, twice, three times as much out in terms of meeting people, in terms of learning. Preparing for this little - on great presentation today, I learned stuff last night yesterday the last couple of days preparing for this. It's you never - you're never - I think you only benefit from volunteering. And these organizations are great. Looking at the audience today, I have to mention one more organization, which is the - it's called IWIRC. It's I-W-I- R-C. And everyone in this room absolutely should run out today and join. It's the international - it's a big name here - but International Women's Insolvency Restructuring Conference. We have women from Canada, I think some from Germany and some from Australia. But mostly it's the United States and Canada. But it's a superb organization because it's women in insolvency and restructuring, women in bankruptcy. And they have meetings regularly in Massachusetts - in Boston in Massachusetts. And they have meetings internationally and nationally as well. It's an excellent, excellent organization because it cuts the group even smaller to be who's interested in bankruptcy and who happens to be a woman.

>>:For those who you who are watching on TV, there are five people in the audience. And it's all women. And that's exactly why she made that comment.

>>:It was fair to me to make that plug.

>>:So you want to set up an office, what do you need, right? So you need a computer. And you need a scanner and a printer. And you need some software. The software vendors are pretty limited now. Best Case - B-E-S- T-C-A-S-E - offer software. I believe West may have a product as well. West Bank may have a product. Typically, you want to obtain the forms for Chapter 7 and Chapter 13. Certainly, you may also want Chapter 11. The - and you have to renew every year because they do provide updates to the software. And the renewal - the fee is around $1,000 a year. So it's not a small expense but it is the best way to get everything done. And the forms that you're going to be completing are well-organized, well set out. They cover one another. So if you're entering information in one spot and you populate that field and that field is important on another schedule, it will cross populate automatically or pop up a question. So I think software's important. Yup.

© MCLE, Inc. All rights reserved >>:I use Best Case, which is probably the most common one these days. And I will say that if I have a technical issue, if I'm struggling on how to fill something out or, you know, something like that, you call Best Case - their tech support. I've never had an issue. They've always been able to walk me through every problem. Really within ten minutes after making the phone call, the problem is solved. And it's great. So their backup is excellent. And you need it because I'm not super tech savvy. And it works.

>>:Yeah, I'm a - you know, my practice - I'm a solo practitioner and my office is actually in my home. So I have a home office. I'm as thin as you can be in terms of overhead. And what else do I have? I have - I do have an IT person that can help me with software and hardware issues if they arise. They don't frequently do. But if they do, I have someone to help me with that. And you need a good phone system and a good conference feature. I have voice over Internet so - which is inexpensive, much more inexpensive than a landline through a traditional carrier. And you need very good calendaring, because bankruptcy is all - is, in large part, about dates and times, and in bankruptcy, the time periods are shorter than you might be used to in state court, so you need to be on top of that. You can always - there are good calendar systems available when you want to have something just so you can keep on track of dates and times. Any other software or hardware ideas?

>>:Quick nightmare story on that one, OK. About a month ago, my software - my calendar software program that I use - and I've been using for years and years and years - I opened it up in the morning and it was completely blank. Everything was gone. And I called the tech guy that I use and he logged into my computer, and he spent about an hour and a half on it and he said, it's gone. I can't recover it. It's done. And it had all my contacts for a lot of years of practice. OK. How do I recover that? Well, I only could recover some of it and, of course, not only - sorry - not only is it contacts, but it's my calendar. So the bankruptcy court has a calendaring system in the bankruptcy court. Once you become a bankruptcy attorney, you get a pass code to file papers with the bankruptcy court. Everything that - every date that you have in the bankruptcy system on any of your cases - response date, a hearing date and so forth - especially notice in a

© MCLE, Inc. All rights reserved special section on the bankruptcy court website. So I called up the bankruptcy court because I couldn't remember how to find it - it's just technical - and I called up and I got the IT guy at bankruptcy court and I said, I lost my software. How do I find my dates? Because I knew the system had it. Says, this is what you do. You go to this spot, you click a couple here and everything will come up. Just run from now to the next six months and that'll give you what you need and so forth like that. And I was able to do it and I was able to recover the whole thing, as far as that is concerned, fairly quickly. So just be aware that the bankruptcy court actually had - and most people don't know it because they don't run into the problem, thank God - but all of your dates and hearings and so forth and response deadlines are available in the court if there's an issue and in order to find it, it's - easiest way to contact - the IT person will tell you where to get it.

>>:All right, and so I have two questions now from the panel. I'll start with Anne and then we'll move this way. But Anne, this is a softball question, OK? So you're going to...

>>:We're just getting warmed up.

>>:So how do you decide how much to charge a case, and how do you charge a case? So might you do an hourly, a flat fee, so - and one other question. That is, how many hours a week are you - would you say you're working, total? Maybe not necessarily billable, but total, and then what's billed? So, two things - how do you charge, how do you decide what to charge and how much do you work?

>>:OK for a Chapter 7 - for an individual, I charge a flat fee and I get the payment in advance of the bankruptcy. And that's - the short answer is that's because in theory, they could discharge my debt the day - the minute after I file the bankruptcy. That's being funny but it's essentially true. So I do collect the money in advance of the filing of the bankruptcy. Sometimes it takes a client more than a month to collect the money they need to pay me to file the bankruptcy. My experience is that I - I'm in Boston. I'm handling complex Chapter 7 cases and I might charge 2,000, I might charge 3,000. That might seem high compared to other folks, but I spend,

© MCLE, Inc. All rights reserved usually - on my hourly rate, I usually spend almost twice the amount of time on the case that I get paid for. It's not - I don't do a large volume. I do specialized complicated cases where there's a question about some kind of exemption, where there's a question about some kind of asset. Sometimes the person will meet with me three or four times over the course of a year or two before we even file the Chapter 7, so these are - it's not that things are so mysterious. It's just that there was a transfer. They sent - they gave something to their daughter that made perfect sense at the time. But you have to - you may have to wait to file a bankruptcy because there's a question about a potential fraudulent transfer. There are a variety of reasons why cases - Chapter 7s that seem straightforward can be complex. They seem to fall into that category of complex cases so I don't - I have to charge accordingly.

>>:Oh, how much time? Oh, one other thing also.

>>:Yeah.

>>:So you said 7. So if you could maybe just chat about, as a 7 trustee, what you've seen as a range of fees, what do you think you might do for 13 and how much of work do you think, like, you know, what time do you commit?

>>:OK, so a Chapter 13 is - if I said I lose money on 7s, I really lose money on Chapter 13s. They go on the smallest - the shortest amount of time for a 13 is three years and I've never done one that I didn't have at least three amended plans before I got through. That's not my fault. That's the nature of the system and the fact that claims are not - are filed after you file the plan, and mortgage payments somehow end up in arrears that you didn't think were going to end up in arrears and the circumstances change. Maybe in a 7, I might be able to get through the case in 15 hours, something like that, maybe. In a Chapter 13, it's oceans of time and it's just - that's the nature of the case. I'm - in a 13 - the one I'm working on right now - I take one a year - I'm trying to solve a $250,000 Massachusetts tax debt, meaning solve, meaning reduce that because it's wrong for a variety of reasons; reduce a federal tax debt that's 50,000; reduce the mortgage arrears by doing a loan modification on the first mortgage; a loan

© MCLE, Inc. All rights reserved modification on the second mortgage; and delete three claims that are fraudulent claims because they were from high interest loans. So it's a mini Chapter 11. It's a complicated case.

>>:And do you charge hourly or flat rate?

>>:What I do in a 13 is I charge a flat fee at the beginning - maybe 6,000 bucks - and then I look to get some interim payment during the course of the 13. And an unusual aspect is if the case then is totally finished and closed and over with, the client knows I'm still going to have my hand out at the end. We've finished this whole case, but I still need to get paid.

>>:And what's the range of fees you see in 7 as a Chapter 7 trustee?

>>:Now, having said I charge, you know, 2 to $3,000 - in Worcester, I see $750 a case. I see $1,000 a case. I see 1,500 a case. So I'm the outlier on that.

>>:OK. All right. Christina.

>>:Same question?

>>:Yep, or same two - yeah, yeah. Please.

>>:Same questions. Yeah, so I'm on the lower end of that scale. I practice in Springfield and so, we don't really get the Boston fees despite the fact that the service is the same, I'd like to think. So my range of fees is really between 1,500 and 2,000 for what I call a simple, straightforward Chapter 7 even though there really is no such thing. I don't give a fee over the phone. I always like to have that initial consultation and I don't charge for that, but that is very important for me because I am able to kind of get a gauge for how much work I'm going to have to put into this case. How needy is my client going to be? How much handholding do I have to do? Do I have to request documents several times? Now, I'll know that, you know, just when they walk in with their duffel bag full of receipts and bank statements, versus someone who's got a neat and orderly file, you know, tabbed - you know, tab documents. I also do Chapter 13s - and again, my

© MCLE, Inc. All rights reserved range is much lower than Anne's is - and I charge anywhere between 2,000 to 3,500. I often don't do an interim billing just because it's time consuming and you don't get paid to prepare your fee application, so you actually have to petition the court for additional fees. And I find it to be very time consuming, so I really try to gauge, again, at the - you know, my initial consultation how much time I think is going to go into that case. And again, similarly to Anne, we don't get paid nearly what we're worth for a Chapter 13. Second question was how many hours?

>>:Yeah. How many do you think, like, a Chapter 7 case typically takes, or a Chapter 13? Just a sense of...

>>:I never really keep track of that, but again, I think it's upwards of 10 hours.

>>:On a 7.

>>:On a 7, yes. And I - you know, I try to get all those documents ahead of time. You'll see in your packet that you have some of my documents which is a questionnaire. We'll talk later about, you know, online versions of those questionnaires and inputting directly. But despite, you know, my efforts at getting everything that I need upfront, you know, within the first, you know, first couple of weeks after our initial meeting, there's still a lot of handholding going on, you know, requesting updated documents and the like. So there's a lot of back and forth, at least in terms of telephone calls and emails, that I put into my cases.

>>:OK. Richard.

>>:I mostly do Chapter 13 cases. I was Chapter 13 trustee for a few years, and so that's really been my - probably 80, 90 percent of my bankruptcy work is Chapter 13. So that's sort of where it is. Massachusetts bankruptcy - there is what's called a no-look fee, which is if you - you can charge $3,500 legal fee for a Chapter 13 case and then an additional thousand over the course of the case, so 4,500 altogether. You don't have to file the fee application. It's just - you know, just report it and you're all set like that. So I try to get as close to the 3,500 upfront as I can before I file the

© MCLE, Inc. All rights reserved bankruptcy case. That's pretty tough to do. I don't usually get that close. I probably get - most of the time, I get 2,500 to 3,000 and then I'll add another thousand or so in the plan - a Chapter 13 is a payment plan, which we'll get to shortly - and then include it in the plan as the balance of my fee and that's fairly standard. I have to say for the most part, I do not - I am not interested in tilting at windmills, so I personally prefer to work on relatively straightforward Chapter 13 cases. I don't get - I don't file cases that I know there's going to be adversarial proceedings or I'm challenging the validity of a mortgage or something else like that. I pass them on to Anne or somebody else because I don't like to do that work. So I work on volume and relatively vanilla cases. Now, I will say - and we'll get to this when we do the Chapter 13 cases - a lot of Chapter 13 cases over the last four or five years have been cases in which they're stopping a foreclosure and the client is trying to do a loan modification. So that's a little bit - I don't the loan modifications. I send them to an expert that does loan modification because that's another one that I find that you submit documents and you submit, and you submit, submit, submit, submit, submit - it takes dozens and dozens of hours and you never really actually get paid for it, so I leave the other experts to do that.

>>:But see, Richard raises a good point. So there's your networking. Richard does bankruptcy, he knows Anne, he gets a case that he can't handle or he gets a case with a conflict, he calls Anne. So if you're within the bankruptcy community and you know the people that are good at what they do, you get calls from other lawyers saying, you know something? This has an adversary proceeding, don't want to handle it, or an adversary proceeding, which is fine, but I'm happy to handle the case. Anne, can you take the adversary proceeding because you have more resources at your disposal? All right. So we're going to take a break until 11 o'clock and then when you come back, we'll look at how to prepare - or the things to think about in preparing a bankruptcy case in Chapter 7 and Chapter 13. And Eve, you have a question. Everybody should fill out their name tags, too, because then I can call on you by name.

>>:You can see it?

>>:Yes, I can see it.

>>:Oh, OK. So Anne, do you charge for initial consult?

>>:No.

>>:OK. Christine?

>>:And I don't either.

>>:So sometimes I do and sometimes I don't. I'll tell you the reason why sometimes I do. I think sometimes it's important for the client to know there's value in what they're getting, so if they don't want to pay for the initial consultation even, then, you know, it's tough. But I will say that if you charge for the initial consultation, that may be click, because there are many, many people that don't. So I'm really - I will say this. If it's a person that I'm consulting with - it's not purely consumer. They own a business. You know, they're not like a little Uber driver or something - it's a little more complicated - then I'll tend to charge, but a low rate. I'll charge a rate - $200, maybe $250 - and I'll say to them if they hire me, I will apply that toward the fee I would charge for the bankruptcy case. But you have to be - it's tough. The bankruptcy market is very cost-competitive.

>>:I'll make two related comments to that. Number one, I agree. I do not charge an initial fee but if it's a business scenario - if it's really a business scenario, something a little more complicated than an Uber driver - I'll probably charge 100 or 200 bucks for the consultation because you're getting into more complicated stuff. And they're running a business. They should pay for professional advice. And other than that, I generally don't charge.

>>:Question?

>>:Yeah. Get your reaction to this - I usually advise Chapter 13 clients that as long as it is not 100 percent planned then it's essentially free from their point of view because I'm paid by their unsecured creditors. And I think

>>:I would say I do not have that perspective. I do not see it that way at all.

>>:I disagree as well.

>>:I don't see it that way.

>>:The theory...

>>:My fee and what the dividend is paid to unsecured creditors are totally unrelated, period.

>>:But that's not true.

>>:Well, I think that they are.

>>:If you're being paid through the plaintiff...

>>:Being paid a piece of it through the plaintiff.

>>:Reduces credit card holders from 92 percent...

>>:When we get to the Chapter 13, which we will do after the break and we go through the plan - generally there's a certain amount you may have to pay unsecured creditors in a Chapter 13 case. You may have to pay unsecured creditors $10,000. You may have to pay them - you may be able to pay them zero. It has no relationship to what your legal fee is.

>>:All right, so we'll talk - we'll get into this further when he does his Chapter 13. Christina, did you want to add something?

>>:I mean, the cost of the plan overall is going to increase if there's a legal fee in there. So, I mean...

>>:At whose expense?

>>:And that's at the expense of the unsecured creditors unless it's 100 percent claimed. That's the perspective I...

>>:I don't agree with that because you may have to pay a certain amount based on liquidation analysis, which we'll get to in a minute, and that's a fixed number.

>>:There are scenarios - all right. So we'll come back because we're going to get into 13. So if everybody could come back at five past 11, because I'm going to give you the full 15 minutes. Right. We're going to start now with the debtor's perspective - Chapter 7, Chapter 13. I think what I'd like to do is start with Chapter 7 first, if that's OK.

>>:Sure.

>>:So Christina, if you want to say anything about your practice and introduce yourself, be my guest and then roll.

>>:Thank you. Hi, everybody. My name's Christina Turgeon. As I said before, I practice out in the Springfield area - western Mass, if any of you are familiar with that area. I've been practicing bankruptcy law a little over 10 years now - mainly Chapter 7s, but I do also dabble in Chapter 13s because not many people like to touch those. I only have about 15 minutes for my piece of Chapter 7 debtor's prospective, so if you have any questions, you know, raise your hand and I'm hopeful...

>>:Actually, Christina, you have 30 minutes.

>>:Oh, I thought...

>>:Yeah. Yeah, because I have 11:00 to - I have from 11:00 to 12:00. So you each have 30 minutes. So we expanded to give you more time.

>>:Perfect. So then if you want to be engaging that's fine, too. If you have

© MCLE, Inc. All rights reserved a question as I'm going along, feel free to jump in. So the way I kind of operate is I - as I said before, I have an initial consultation so I can get a feel for what type of clients that I'll be working with over the next several months. Chapter 7 is fairly straightforward in terms of the timeline that you're going to be with them. You know, if you get paid you can get that, you know, case file relatively soon. You're probably in and out of that case in about six months, which is quite different from the Chapter 13. You'll hear that takes several years. I always start off within an interview, basically. So, you know, I want the client to get to know me and ask me questions and I want to, obviously, get to know the client. So I start off with, you know, my questions to my client. You know, basically, you know, what kind of brought you here? What makes you think that you need to file? And it can be anything from, you know, just the nagging phone calls that they get from the creditors - some of them can be quite nasty - to having a court action filed against you for collection of a debt. Sometimes those can be, you know, numerous. You know, if you get several creditors, that can mean, you know, several dates. If they're working, they've got to take the time off from work so they're not getting judgments filed against them. It could be a divorce. It could be any number of reasons - medical health issues, loss of a job. So there's a lot of reasons that the, you know, potential debtor will come to me. And I want to know why they think that they need to file. Is it just overwhelming? Is there a foreclosure that's coming? You know, do we need to have the conversation as to whether or not it's worth saving the house? You know, we can get you to Chapter 7 and kind of relieve that entire burden from you rather than putting you in a 13. So those are the kind of things that I like to know right up front - right off the bat. Then my conversation moves into, you know, what kind of assets do they have? Do they qualify for a Chapter 7? You could be disqualified for Chapter 7 if there are certain assets that you have that you want to keep. There are exemptions, which are basically protections that the law provides. So you can keep certain assets or a certain percentage of assets. You can keep a certain amount a dollar amount in a vehicle. You can keep a certain dollar amount of clothing. You know, so there's a whole list of exemptions. And I want to know what kind of assets my clients have before getting started so I can see if there is an issue that we're going to run into with protecting those particular assets. So I like to have that conversation upfront. That way, if they, you know, if there are assets that

© MCLE, Inc. All rights reserved we need to worry about, we can kind of figure out whether or not we need to do a little bit of pre-bankruptcy planning. Along the lines with what types of assets do they have, they might not be forthcoming. So you need to be aware that you need to ask the questions. And by that, I mean, you know, for example, bank accounts. If you say, OK, well, you know, do you have a bank account? And they say, oh yes. I only have one. But that one bank account could actually be a checking account and a savings account, but it's held at one particular bank. So they might not see the difference between those two accounts. Similarly, they might have a bank account that has their daughter's or son's name on it. And they might not think that that's their account because they don't use it and it's solely the child that's using it. But for purposes of bankruptcy, it's an asset of yours that you need to at least disclose. It doesn't necessarily mean that the trustee is going to seek to take that money, but you need to properly list it and list that your name is on it, but that it's, you know, for use of the child. So there's questions that you need to kind of ask your client to determine what assets are actually available or in existence, rather. The next thing I like to go over are the list of debts.

>>:So they may say to you, oh, I have, you know, an American Express card. I have a, you know, a Chase Visa card. They'll list all of their credit card debts because that's, I mean, let's face it - that's the reason that they're coming into your office most likely is because they've got all this credit card debt. What they might not want to be forthcoming with is that they borrowed, you know, $5,000 from their parents. And they don't see that as a debt, but it's somebody that you owe money to. And we need to explain to them that they need to list that. And then there's going to be more exploring that you're going to have to do with respect to that $5,000 that they borrowed from their parents because you want to know whether or not they've paid that back or any piece of that back because that would also need to be listed as a preferential payment. Depending on the value of what was paid back and the timeframe as to when that was paid back, a trustee could certainly seek to recover that for the purposes of benefiting the creditors and the bankruptcy estate. So, you know, you need to kind of flesh out what kind of debts they have, even if they don't classify those as debts. I've had clients come to me and say, oh well, you know, I've got this Macy's card and, you know, I still use it, but I pay it every month, and I pay

© MCLE, Inc. All rights reserved on time every month. But I've got a, you know, a $500 balance on it. Well, you might want to keep that card, but you still need to list that card. And it's really up to the creditor as to whether or not they're going to let you continue that line of credit. Yes.

>>:In your opinion, if you advise the client to pay it to zero before you file, so it's open credit but not a debt, do you still have to list it?

>>:Christina, do you - can you repeat the question?

>>:Yeah, so the question was, if the client comes to me and says that they have a balance that they want to pay down, do I advise them to pay that down...

>>:To zero.

>>:...To zero so that it does not need to be listed as a creditor on the bankruptcy petition? And the answer to that is no, especially depending on how much they have paid down because it is a preferential payment. And just because that credit card has been brought down to zero-balance doesn't necessarily mean that the client's going to be able to use it. I never...

>>:My experience has been that the credit card companies cancel once you file, no matter what the chapter is.

>>:Yes.

>>:Even a zero balance.

>>:Do the banks do what Macy's won't - the charge cards will not do?

>>:Well, it's certainly up to the individual creditor, the lender. But I never advise my client to, Number One, incur debt in the anticipation of filing bankruptcy or to pay off debt that could be discharged. I think I'm doing them a disservice if I tell them to pay money towards a card when they're in dire straits, most likely. And they are throwing that money in there,

>>:The one thing I would say, though, is if they realistically need a car, I would say to them, get your car because it's going to be much more difficult to do it after you file. Get your car, including presumably, a car loan and so forth, like that because you may have a much tougher time for the year or so after you file a bankruptcy case, or even longer. And then you could be struggling.

>>:I would agree with that, but I think that there's a line there with respect to secured credit versus unsecured credit.

>>:Preferential payment - what is that?

>>:A preferential payment is when you prefer - I mean, in simplest terms, it's when you prefer to pay one creditor over another creditor. So I think I brought that up when I was talking about paying back mom and dad. So you're preferring to pay back mom and dad that $5,000 versus paying back your Visa card that might have that similar balance or any balance on it. So if you prefer to pay one creditor over another creditor the trustee can reach out to that creditor and actually take that money back and then distribute it evenly among all the creditors.

>>:If you have a $600 safe harbor.

>>:Generally speaking, yes. But it's really up to the trustee and I think - and I'm not a trustee but in my experience what I've seen happen is they kind of do the analysis as to how much debt is out there and what was that payment. I mean, if it was a thousand-dollar payment and, you know, your overall debt is $50,000, is it really worth the trustees time and energy to go and recover that thousand-dollar payment, get a small fee on that and then distribute, you know, maybe $800 to those $30,000 credit-debt holders.

>>:Also there's a time limit on preferences and we will be talking about that. So the payment has to be made within a certain period of time of the bankruptcy filing to even be a preference. 90 days for creditors, generally

>>:Insiders.

>>:I think everybody - as you can see, in the law there's always a it depends kind of situation.

>>:Exactly.

>>:And I think that Chris's - Christine's advice is perfect. I happen to give slightly different advice. If they've got five or seven credit cards and one that really has a very minimal balance and it would not be extraordinary to pay that down and that card is with a bank that is totally unaffiliated with all the other cards. So in other words Chase has got a lock on credit cards. Capital One, Bank of America, there are, you know, half a dozen entities that hold most of the credit cards in the United States. But if you happen to have a Barclay Card and none of the other cards are with Barclay Bank and it's got a $500 balance that's owed. Yes, there's a risk. Yes, you pay for - you're throwing 500 bucks at that card. And I tell my client it's your - sometimes I give the advice to my client. It's your business decision, are you - do you think it's worth paying that $500 to that credit card so that you can then perhaps use that credit card in the future? There's no promise that you can use that credit card in the future because any lender can just yank the card because you - because of their discernment that you're no longer a good credit risk. But sometimes, as opposed to Christine, sometimes I say you might like to have the opportunity to have a credit card if there's one with really a very low current balance. You might want to consider resuscitating and using that card to resuscitate your credit going forward. That's - it's a judgment call.

>>:One thing that I will say, I'll reverse myself just a bit. I do have clients that have come to me in the past and asked if they can pay their dentist a small balance. And that's because they want to continue to obviously get services from the dentist. So if it's a medical provider then I would say, you know, yes if that's something that you, you know, want to continue receiving that service.

>>:Right. You know, your primary care, you know, if there's ongoing service obviously, you know, that shouldn't be an issue. So also in terms of - I'm going to back up for just a minute in terms of assets. I also want to know about their real estate. That's very big because they will say, yes I have a house and they will not talk to you about their timeshare. They will not talk to you about being listed on the deed to their parents beach house, you know, or something like that. So you really want to ask them, you know, what types of vacations are they going on. You know what - in order to try to flesh out what type of real estate they have because that's a pretty important question. I also like to know about auto loans. You know sometimes these individuals will come in, they'll have several cars but some of them might just be in one spouse's name. And that's going to help me determine, you know, part of my analysis is whether or not we need to file for one individual or the, you know, the joint family units, the husband and wife. Are you jumping in?

>>:Yes. What do you do about getting credit reports for your clients...

>>:I...

>>:...In order to find out where the debts are, are they joint debts, whatever?

>>:Well, that's two pieces. I always require a credit report, but do I always get it? No. I tell my clients that they can get it for free through annualcreditreport.com. That will save them, you know, a fee, they can get that for free. If I have to get it for them then I...

>>:Write this down, annualcreditreport.com. That's a service you want to use every time.

>>:Yes. And I don't need one from all three credit reporting agencies, one is sufficient. They all pretty much report the same. I review it. I have my client review it because sometimes - a lot of times medical bills are not - oftentimes medical bills don't make it to the credit report. So I go through

© MCLE, Inc. All rights reserved that with my client and I have them, you know, review that. If there's something that they say oh, well I paid that off. I list it anyway. If it's on their credit report, the credit card company or the creditor does not have it listed as I paid it off. So I'd rather list it, that way they can't come back out of the woodwork and say we never got notice of the bankruptcy and try to collect on it down the road.

>>:And if it's a married couple, even if you may only be filing one, I ask each of them to get a credit report separate. Just to see whether there's any joint debts which they might not have realized they have as a joint credit card.

>>:Because all joint debtors - all joint - people who are - so you have one card and two people are listed on that card. The joint debtor does need to be notified of the bankruptcy filing. So a spouse would have to be listed as a joint debtor. And that's really to protect the spouse so that they can continue to pay on that particular debt, so that their credit is not compromised as a result of the other spouse's filing. Of course, student loans are something that we discuss. Personal loans are something that we discuss. To family or friends, again, those are insider payments if payments have been made, you know, have been made against those particular loans. Medical bills. I also like to talk about cash advances at that first meeting because if there was a cash advance on the credit card that's treated a little bit differently. So I would like to know about that. If there's any property transfers within the past two years. Actually, I ask about the past four years and whether or not that property transfer was in the ordinary course of their business, of their life or whether that was facilitated by a divorce or if, you know, if I feel that that was because of the anticipated bankruptcy filing I like to know that too. A lot of times people will try to hurry and get that property out of their name so that they can file so that they don't lose it, not realizing that that could open up a whole can of worms. So I like to address that right out of the gate as well. I like to know if they've made any charity, you know, charitable contributions and what kind of contributions those were, when they were. If they do that regularly on their tax returns, if they're listed. You know those are things that I want to know about. And again, this is all to kind of determine, I guess in a nut shell, whether or not my client is telling me the truth. I'd like

© MCLE, Inc. All rights reserved to know everything in advance and then we can try to deal with it, rather than finding out at the 341 meeting. When you find something out of the 341 meeting because the trustee has asked the question and you don't know the answer, it's - you're not in a good position. And so you need to just let your client know that in advance, trustees have ways of finding things out. So you want to know what they're going to know. You want to be able to answer that question appropriately.

>>:Disclose, disclose, disclose.

>>:Yes. I also at that first meeting talk about the Means Test and their presumption of abuse. Whether or not they are going...

>>:Tell them what the Means Test is.

>>:So the Means Test is really - in the beginning I said I need to determine whether or not my client qualifies to file Chapter 7. Sometimes they are forced into a Chapter 13 and I'm not going to steal Anne's thunder because she is the queen of the means test. But essentially I'll give you just a quick overview. Essentially, it's really just a test to determine whether or not you have the means to pay back a piece of that debt that you owe. And there is a formulaic calculation that is made and there's a lot of bankruptcy software out there, and my bankruptcy software that I use will just pop up and tell me whether or not there was a presumption of abuse. And so if there is, you can overcome that presumption but I like to have that conversation in advance with my clients. So I'm not going to go too much into that. Richard, I'm going to let Anne go into that. I also talk about the credit counseling. So there's required courses that your clients will need to take. One is to get into bankruptcy and they actually have to give you a certificate that will be filed with the court. If that certificate is not filed with the court then your case can be discharged, excuse me, dismissed without a discharge. And then after the filing there is a second course that needs to be taken and again, that certificate needs to be filed in order for you to get that discharge. So it's a pre bankruptcy and a post-bankruptcy court talking about you're - basically, how did you get into this position? You know, what kind of brought you here? What do your expenses look like? Things like that. And then the second exam kind of talks about how to

>>:Christina, when do you hand them the questionnaire?

>>:So I hand them the questionnaire at that initial meeting. And let me back up for one second and I'll get to that, but at the initial meeting. Before the initial meeting I will send out a letter which is for an initial consultation. And I just want to point out that in that initial consultation letter I stress that there is no attorney-client privilege. I don't want to give them any expectation that I represent them yet until they've actually signed my representation letter. So I tell them what to bring to the meeting, you know, I like to have them bring their paystubs, I like to have them bring their bank statements. Not that I'm going to go through all that but just so that they know what's involved and I want to see, again, how much effort they're putting into this and how much handholding I'm going to have to do. So again, at that meeting I go over all of the things that we just discussed. I give them a copy of my questionnaire which is in your packet. And at the beginning of my questionnaire I have a really thorough checklist. It might not apply to every client, but I tell them cross it off if it doesn't apply to you so that I don't think that you have overlooked it. But that checklist has everything that I feel that I'm going to need in order to actually assess that potential clients case.

>>:Included in your hand out today is Anne's summaries and questionnaires and so forth, so be aware you've got it.

>>:You have that checklist right up front. And then I think it's a 9 or 10- page questionnaire and that has, I actually should be streamlining that now that there is the online program that the bankruptcy software uses. You can actually have your clients, if they're savvy enough, actually enter that information right online. I'm still kind of old fashioned. I like to have a hard copy, I like to look at it. That way I can say OK, well this is what they provided me with if there's any question down the road. I have my client sign that and that becomes part of my file. I also think that that qualifies as work product so I don't have to provide that to the trustee. But it serves as a useful tool for me so that if they ever come back and say, you know, oh I

© MCLE, Inc. All rights reserved told you that I had that retirement plan that was never listed on the bankruptcy. And I can say OK well let me pull out the questionnaire that you filed with me and that you signed with me. And it's - it's blank. And that questionnaire kind of mirrors the bankruptcy program software that I use so that I can just kind of streamline it and input it myself. I like to input it myself so that I can see what it is. It's a useful tool for me to prepare for the 341 meetings. I've talked about the 341 meeting or mentioned it a couple times. What that is, is it's really the section of the code that a trustee is allowed to - is required to have a meeting and examination of creditors. I'm sorry, examination of the debtor by the creditor. So creditors actually are able to come to the 341 meeting and examine the debtor. It rarely happens, in my experience. I think the only times that I've seen that happen is really with the Department of Revenue or if you list an individual who might not know any better. So an individual will - all of your creditors will get notice of the 341 meeting and if you have an individual, a family friend, they'll get notice of that and it just says, you know, you have the right to appear here and then they will show up and they will not know what to do and they won't really have any questions to ask.

>>:If you're stiffing a contractor they'll probably show up.

>>:Yes. Yes. And that meeting typically takes about 15 minutes or so. I think the longest part is waiting for the client's case to be called because there are several meetings that are conducted or scheduled to be conducted at the same time. At that initial meeting I give that questionnaire, I also give certain bankruptcy notices. So under the bankruptcy code we are required to give certain notices to our clients within - is it five days after our initial meeting? So I just give it right off the bat. And then I also have them sign what's called a receipt of notices. And I explain to them at the meeting that, you know, sometimes we'll have time to go over those, sometimes we don't. But I tell them this is just - it's a CYA letter quite frankly. It's just saying that you've received the documents that I'm required to give you. And I just put that in my file. What else?

>>:Talk a little bit about discharge?

>>:So in a Chapter 7 a discharge is, I think, quite haha, quite easier to get

>>:Much faster.

>>:It's much faster and much easier. Most chapter sevens are fairly straightforward and the discharge is really what you want at the end of the day. That is what discharges your client from having to pay back their debt at the end of the day. It's, you know, a one page piece of paper but it's a very powerful piece of paper. It means that the creditors cannot collect against that debt at all. There are certain exemptions that cannot be exceptions to the discharge, which is notably student loans, financial obligations in the Probate and Family Court. So if you have an - a order that child support or alimony is due to your client - I'm sorry - that your client owes to somebody else, that's not dischargeable. Any questions on chapter 7s?

>>:Can I...

>>:Jump in, yeah.

>>:I think that Christina's checklist here on page 19 of your materials is really great because as much as we want to trust our clients, we ask them all sorts of questions, we ask them to sign lots of documents. But we really want to kind of have an independent source to say that what they're saying is correct. So when we get the tax returns, two years worth of tax returns, which are listed here, that really does help with the notion of what's your income. Did you sell an asset in the last couple of years? Again, the person might not be trying to not tell you something, they might have forgotten. It's the documentation to back up what they're saying to you. I found it's been really, really critical to my practice and it has helped in many, many instances avoid what could be a surprise at the 341 meeting or could be the loss of an asset because there was a transfer that you didn't know about or a trust that you didn't know about. So of the things that are listed on that page 19 the homeowner's insurance binder, Christina knows why she put that on the list. It's on the list because they might have forgot to tell you that well, they have this special jewelry that's a special binder in the insurance policy that says yeah, I've got this $15,000

© MCLE, Inc. All rights reserved worth of jewelry and I wanted to be sure if the house is consumed in fire that I get paid back for that jewelry. Well, did they tell you about the jewelry? It's really critical. So every - the normal kind of insurance binder I'm not so interested in. But a rider on the insurance is something that any good bankruptcy attorney is going to be interested in because we want to be sure for insurance purposes you're saying it's worth $15,000. Let's go get an appraisal, let's find out what this jewelry is really worth. That's an example of where the documents really help you out, where the individual wasn't trying to be unclear but the documents help you out.

>>:I'm going to interrupt you for one second, Anne. Going back to jewelry, it's important that you ask your client about jewelry. They might come into your office with nothing on but then they're going to come into that 341 meeting and they are going to have on, you know, the antique, you know, the heirloom watch that's been in the family, you know, that it was their great grandmothers. They're going to have all the jewelry, they're wedding bands.

>>:That's where you stop them, you take them out in the hall, say take the jewelry, put it in the pocketbook.

>>:Well, there may be an ethical problem with that. There may be an ethical problem.

>>:I always tell them we're going to list something. You know if you've got costume jewelry that's still jewelry. List a small nominal value on the petition.

>>:I agree.

>>:And some trustees out in the western part of the state will always say, you don't have any clothing? Because there's actually - there's a question on the petition that says, you know, what's the value of your clothing. And they always have a hard time valuing it. And I just kind of said what's the tag-sale value? What's the tag-sale value of your closing because you - we're going to list something.

© MCLE, Inc. All rights reserved >>:And for jewelry, it's not infrequent with some clients. They say, well, you know, this cost a lot of money. And I say, well, then you're going to go to the jewelry building, the complex here in Washington Street, or you're going to go someplace else, and you're going to get a valuation. And it's not going to be the insurance value; it's going to be, what would that jeweler pay you, today in cash, to buy back that ring? It's used, it's not in the perfect setting. Whatever the issue is, you want a valuation. You want to back up, with a piece of paper, what you're putting on the forms. And that's pretty much true of pretty much everything you put on the form. You want to have a piece of paper to back it up.

>>:Fur coats as well. I used to go in a trustee meeting, 13 case, and she says, oh, yes, I have three fur coats. And she lived in Florida for a long time. And we - just caught us by surprise. I said, all right, just bring them in, get me a letter from the - you know, a local furrier. And so - I was able to exempt it, but, you know - just caught us by surprise.

>>:Another one that's kind of a snare could be a prior divorce. You've got a prior divorce, and in all divorce proceedings, you have to fill out multiple - over the course of time - financial statements in the divorce. Now, you don't want that statement to be diametrically opposed to what you just filed in your bankruptcy. And in fact, you know, I've got a case right now where that is the case. I'm not the debtor. I'm a creditor in that case - representing a creditor. But that's an example where, yeah, you want the divorce decree, but if it's a recent divorce, you want the finance statement that was filed on that - in that divorce.

>>:But you also want that because there could be an outstanding asset that you haven't received yet, that the - that your spouse is still supposed to give to you. Maybe the houses is - hasn't been transferred over yet, or the value of - you know, of your client's piece of that, so you want to look at that piece of it, too, the division of assets.

>>:Yeah a couple of things - I think in bankruptcy, generally, the kind of watchword is disclosure. So even if you think something has no value - you know, the car that's on blocks in the garage that hasn't driven, is undriveable in any circumstances - list everything. And you - the debtor is

© MCLE, Inc. All rights reserved allowed to put a valuation on it. If you have reasons to believe that valuation is suspect, then have a professional review it, and have that professional give you a written document that you give the trustee. But it's all about disclosure. As Anne said, you have to see the documents. So if the debtor owns a house, you have to see the deed. And you probably want to get a title run down or do one yourself because sometimes debtors don't understand the properties in trust. I always go online and check the title because sometimes there's intermediate transfers. You just don't know about them. And if there is equity that - you know, there's a reasonable amount of equity in the property, debtor wants a check, I'll higher a title company to just give me a rundown from the day they own the property. The charge for that is around $80 or $90 if you're trying to protect a quarter of a million dollars in equity. And that's the way to get it done - so somebody actually goes to the registry of deeds and checks the records. Because am I the perfect searcher online? I'm probably pretty good, but I always like to get a backup. And somebody's house, you cannot mess with that. They lose their house - and I think they're going to keep - most people can keep their house in bankruptcy. They lose it, you're in a lot of trouble.

>>:There's also been a wrinkle in the last couple of years - triggered largely by this gentleman over here to my right - where you should look at the mortgages that are on the property to see if they were properly executed because he's been able to set aside mortgages if the mortgage was improperly done. Therefore, there's no mortgage on the property now the property is owned without any mortgage on it, and he, as Chapter 7 trustee, wants to sell the property. And you may not be able to exempt that through a homestead, so you need to take a look at that, at least a little bit.

>>:You need to - yeah, you need to see the documents. You cannot take your clients word for the house they own, the car they own. You need to see original - you need original documentation. Just like if you were preparing a tax return - you're a CPA - you need original documents for things before you file.

>>:Speaking of homestead, I always make sure that my client has their homestead. And if it's already been recorded, I review that to make sure that it's appropriate and, you know, documented - excuse me - executed

© MCLE, Inc. All rights reserved appropriately because that would be malpractice if you filed - excuse me if you filed a bankruptcy without getting that homestead recorded first, even if it's minutes before.

>>:Anne, anything more on that?

>>:Just two more things - a frequent question you definitely want to ask your Chapter 7 potential debtor is, are they the beneficiary of any kind of trust? And you'll find that they might hesitate. Well, my parents - da, da, da - and they don't know. They have to go have that uncomfortable conversation with their parents and find out, are they the beneficiary of some kind of trust? We need to look at the trust. We need to see what the issues are there. That's really important. And on the - back to documents, again - I think I might tend to get more bank statements rather than less. Three months is great. Sometimes I only need three months. Sometimes I want more. And recently, for example, I found that the debtor - trying to tell me the truth, all the time telling me the truth, but he had an equity line on his house. And he would take some out of the equity line and he'd pay some back on the equity line, and he'd take some out of the equity line, and he paid some back. And I had to look at a year's worth of bank statements to figure out, at the end of the day, had he essentially paid himself too much? And is that is that a preference or an inappropriate transfer or are we with consistent debt throughout the whole time?

>>:What if you were advising (unintelligible) who were healthy at the moment - we're maybe not so healthy at the moment - about getting into the terms of their parents will and making changes that are appropriate to deal with the six-month reach-back.

>>:Can you repeat the question?

>>:OK, the question is, how are we advising high-income debtors, maybe, and high-income parents of debtors when they've got a will and - to the question of what may or may not happen with respect to their parents health. We haven't mentioned this yet, but they're - in a Chapter 7, 90 percent of what we're doing is looking at assets and debts on the date we file the bankruptcy. It's a snapshot. What do you own that day? What do

© MCLE, Inc. All rights reserved you owe that day? Then as a trustee, I ask the debtor to raise their right hand and - have they listed all that they own and all that they owe? The one exception to that is there is a 180-day - well, there's some exceptions, but the key exception is there's 180-day look-forward period when it comes to inheritance. And that can't be underestimated. It's something you have to - I, in many, many cases, look at my clients straight in the eye and say this is a gamble you're making, that your parents are going to live - one of two are going to live 180 days.

>>:(Unintelligible) state people about whether there's a dispenser of trust or whether there's revocable trust. And if they're comfortable, I tell them, in my opinion, it's to your advantage. I mean, the parent's lawyer will be changed, and the dispenser of trust will be created - and they got to discuss that. Now, I've even - few times I've been real ignored on that. There are a couple of times there really were disastrous results because they didn't take my advice.

>>:Well, a peer's raising a question about whether now the parents of the presumed soon-to-be debtor should or could change their will or change their trust in anticipation of the debtor filing a bankruptcy. That's a question. And one analysis would be that's - there's no impropriety because my mom, my dad have an independent right to decide that I'm a bad egg, and they're not going to give me anything in their will, and they can change their will at any point. That's one argument. There is another argument that this is part of a scheme and might be considered a part of an improper bad faith scheme to keep legitimate assets away from the hands of the debtor. This is - that's a complicated issue, but I have seen it run afoul, as well, where they didn't know the person was going to die or they weren't thinking clearly about it or they didn't follow their attorneys advice. And as trustee, both Don and I have our hand out. Our hand is out. And I have had to check the public records to find out if the father is still alive or not. In a very recent case, they didn't tell me, and he had died. And I came, and I have my hand out because it's a 180-day look-forward period. And just trying to out your - be an ostrich and put your head in the sand is not going to work.

>>:All right, so what I want to do now is switch to Chapter 13. So Richard is going to talk - oh, go ahead.

>>:You have to list it on the petition.

>>:Yeah, you have to list it.

>>:I list every dog or cat as 10 bucks.

>>:And some may be valuable. You may have horses.

>>:I had a horse farm...

>>:Yeah, sure.

>>:...And we had to list that.

>>:Or a purebred dogs. I mean, what do they pay for the dog? Usually, that's what we in the valuation. And you can't exempt it. There is a wildcard exemption you can use on any property, but there is a place for animals, and you should list pets. Whatever they own should absolutely be there.

>>:You should all take a look, if you haven't already, at the petition and the schedules that go with them and read the question, not just on the program - print out a copy because the questions are really listed through there, and you should see exactly what needs to be on there.

>>:And we will - we're going to go right through the schedules tomorrow morning, so you'll get a very thorough in-depth dive. So...

>>:Chapter 13 - chapter 13, in my opinion, is the anti-Chapter 7. It's not only just it's the opposite, it's where you run to if you think you're going to have a problem in a Chapter 7 case. I, admittedly, am a Chapter 7 former trustee. This is my home territory - Chapter 13 trustee. It was a home territory. And when in doubt, you file a 13. And then figure it out thereafter. You have a little breathing space and so forth like that. Chapter 13 is a payment plan. That's what it is. You're going to make payments every

© MCLE, Inc. All rights reserved month to the Chapter 13 trustee during the course of the plan. And usually, the plans are three to five years, most often five years, no longer than that. And the question is, who are you paying, why, and how do you calculate all that stuff and so forth like that. And in Chapter 7 case, if you have assets that are not protected by an exemption, the trustee is going to sell the asset - OK? - could be a car, you know, whatever - house. The trustee will sell the asset. You won't - you know, you may have an asset that's worth $50,000, and you can exempt $20,000. A trust trustee will sell it, give you the 20,000, and keep the 30, and pay the creditors, but you want to keep that asset. So in the Chapter 13 case, you can essentially take that asset that would otherwise be sold in a Chapter 7 case and you can keep it, but you can pay the creditors what they would otherwise get if a Chapter 7 trustee sold it. So it's the opposite of a Chapter 7 case. And it's one of the things, if you can do it - is you can protect assets. Anyway, the purpose of Chapter 13 - it's a payment plan. And there are several reasons why you would go into a Chapter 13 case rather than a Chapter 7 case. OK, the most common reason that people file a Chapter 13 case is that they are facing a mortgage foreclosure. And Chapter 13 is the better process for a long-term halt on that foreclosure sale. And finally, if any bankruptcy case will stop the foreclosure process because of what's called the automatic stay - which Don mentioned at the beginning of the program - it holds all collection activity, including foreclosure, and it'll give you a breathing space. But a long-term breathing space is a Chapter 13 case, not a Chapter 7 case. In Chapter 7 case - mortgage creditor can come in, and will come in, generally, fairly quickly, and get permission and resume the foreclosure sale. And that's where you are. If the property - the debtor doesn't want to keep the property, it's not an issue. But if they want to keep the property, they have to file it as 13 and not a seven. Second reason that people file a Chapter 13 case is often because they have tax debt. Generally speaking, I'm talking about income tax debt - all right? - IRS, DOR, et cetera, et cetera, et cetera. In a Chapter 13 case, you can take that debt and you can pay it out over five years. And that often happens when you get the phone call, when all of a sudden the IRS or the DOR has levied on their bank account or their paycheck, and now they're panicking because they're struggling. And you file 13, and they'll release the levy. And the idea is you're going to pay that money back over the course of their Chapter 13 plan, along with what other creditor that you may have to

© MCLE, Inc. All rights reserved pay. So those are the two most common reasons that you see. The third reason that you see is what is what I said before. It's liquidation analysis. If the Chapter 7 trustee would sell an asset that your client wants to keep, you can pay the amount that the trustee would get from that asset - as I said before, $50,000 asset, $20,000 exemption - so the trustee would be able to get $30,000. You can pay that $30,000 to the unsecured creditors as part of your Chapter 13 plan over 60 months, and the property won't get sold. So that's the third reason. And the fourth reason - and this is a relatively new reason - is what's called the means test. I'm not going to get into detail because Anne's got that wrapped up shortly. But the means test is a calculation based on your income for the, you know, six months prior to filing the bankruptcy case. And you put it into various formulas. Those formulas essentially tell you, in a Chapter 7 case, whether you're filing is considered a problem. What's the term?

>>:Presumption of...

>>:Yeah, presumption of presumed abuse. Is it abuse? And when when that statute - when the bankruptcy code was revised in 2005, the thinking had been that that whole analysis - OK? - was - the whole means test analysis was related to Chapter 7 case - because it was. But the courts in their esteemed wisdom tied it into Chapter 13 as well. So you do this means test calculation, initially, for the idea as to whether you can file a Chapter 7 case. And it's not an abuse, and you're all set. But you still have to do the means test analysis in a Chapter 13 case, and it will tell you how much you have to pay your unsecured creditors, broadly speaking. And if your means test analysis says that you have to pay - I'll make it simple - $60,000 to the unsecured creditors and you file a 60-month plan, then you've got to file a plan that's going to pay the unsecured creditors $1,000 a month on unsecured things. Forget everything else. If your clients can't afford to do that, they will not be able to sustain their Chapter 13 case, so it is a part of the analysis that you have to do. I talked about - I used to talk about the three pillars of Chapter 13, now the four pillars of Chapter 13. In order to get a plan confirmed - OK? - you have to pay your cured creditors, which is usually the mortgage - sometimes the car note, but usually the mortgage - in full. You have to pay your priority claims in full. That's usually taxes, OK? You have to pay the liquidation analysis. The unsecured

© MCLE, Inc. All rights reserved creditor is what they would get if it was a Chapter 7 case. And then the fourth pillar - more recent - is if there's a means test issue, you have to put - you have to pay the unsecured creditors what the means test would provide that you pay. That's, you know - and if you meet all four of those criteria, you're going to be able to get a Chapter 13 plan to confirm it. Now, with the means test issues - OK? - that's a complicated analysis. And when I sit down with a client initially and I go over why are we filing, what's going on here and so forth like that - OK? - and most people contact me because there's a mortgage foreclosure. And that's why they need to file a Chapter 13 because - or, as I said, a tax levy is scooping up their bank accounts, so we want to throw them in a Chapter 13. I can't do - I won't do the means test analysis right away. It's too complicated - OK? - can't do it. I won't do it on - you know, I don't do those conversations on the phone anyway. I have the clients come in when they call me on the phone because they've gotten a solicitation letter or the referral or whatever it is. I have very minimal conversation on the phone with the potential client - that's, who are you, what's going on? OK, let's set an appointment. I have my discussion in the office, and I hand out the disclosures that were required, and then I go over what's going on and so forth like that. But I do not do a means test analysis when they're sitting there. It's too complicated. And if there is a potential real issue, I might separately charge 100 to $200 to do the means test analysis in advance to see where it all goes, even though it's going to be a 13, because you're still going to have to pay the unsecured creditors what the means test would provide - so it's a factor that's there. It doesn't often come up because, usually, with mortgage arrears and other issues, it takes up most of the oxygen in terms of what you would have to pay for the unsecured creditors. So it's usually not a factor. I've run into it on very few occasions, but sometimes it does. I know Don and I have talked about some matters, where he said people who just haven't been able to file a bankruptcy case - they couldn't do a 7 because it's presumed, you know, abused. And they go to do a Chapter 13 case and the analysis would say that - the means test would say you have to pay the unsecured creditors more than they could even come close to affording and you couldn't do anything. I mean, it's unfortunate that the bankruptcy system doesn't allow them to file, but it sort of happens that way on rare occasions.

>>:Let me just jump in for one thing. The other thing is that one spouse

© MCLE, Inc. All rights reserved may need the relief, the other spouse doesn't, but when you file bankruptcy for just one spouse, the family incomes included. And so you may have one spouse as a doctor, the other one that's in startups, the one that does start ups is not doing so well, needs to file bankruptcy. The doctor doesn't need to file bankruptcy.

>>:Money making a lot of money.

>>:Making a lot of money. So when you do the means test, yeah, they have the money to pay, but the doctor says, wait a minute, I'm not putting in my income to pay your debt. So you get a little family squabble going on there. So you got to be careful about that, as well.

>>:It is an issue that comes up here.

>>:Yeah, it's tough.

>>:(Unintelligible) That the non-filing spouse is not bound by any of the means test allowances for, you know, this jurisdiction or whatever. If the non-filing spouse wants to spend all her - because she's a doctor - excess money at Foxwoods, that's unobjectionable. That can be backed out of the family - the household income presumably...

>>:So Anne - hold that question, Anne will deal with that when we go to the means test. Go ahead.

>>:OK. So the Chapter 13 - so they come to see you - generally speaking on a Chapter 13, they're coming to you either because of foreclosure or a tax levy. That's the most common way that you see it. You want to file a Chapter 13 case. If there is a rush, and you'd be surprised how many times I've gotten a phone call a couple of days before the foreclosure sale. It's very alarming, but it happens. OK?

>>:Almost all of my Chapter 13s...

>>:You're going to have to file your bankruptcy case right away. A couple of things - a, make sure they get the credit counseling done right away

© MCLE, Inc. All rights reserved because it becomes a problem if they don't. So get them on the credit counseling and get that done, get that certificate and so forth, like that. I recently had a case dismissed because they couldn't - it was an emergency. I was contacted Thursday night. I met the client on Friday afternoon. The foreclosure sale was 9:00 Monday morning that just - I couldn't wait. I filed the bankruptcy case Friday afternoon. I couldn't take the chance otherwise, and they didn't get the credit counseling done until like Tuesday or Wednesday. Bankruptcy Court dismissed the case.

>>:Can you fill out the thing where it says, you know, on the first page where you have reasons why you didn't do credit counseling - and they rejected it.

>>:Yes, but the rule says, you're supposed to have - sought the credit counseling within five days in advance, and they didn't seek the credit. It was five days in advance and decided I wasn't going to have the client lie about it so I told them to tell the truth, case got dismissed, had a refiled Chapter 13 case, new filing fee and file a motion - we went in front of the judge, allowed it, it wasn't an issue but it could be a problem. So get the credit counseling done right away, right away, right away. Yeah as soon as they contact you - get it done.

>>:It's inexpensive - 10 to 20 bucks. Sometimes they waive it. It's not a huge expense or time.

>>:So - and then I have them come in, and I have them - I always repair what's called a skeletal petition in Chapter 13, which is just name, address, social security number, list of the creditors, and I file a skeletal petition. And then I file all the rest of the papers about 30 days later. One - little breathing space to go over it and so forth like that. Again, the starting point here was, very often they come to you just before the foreclosure sale, so you don't have time to do the kind of analysis that you usually have to do during the Chapter 7 case - or you can't do - you need to do it, but you can't. So you have you're rushing, you filed Chapter 13 case. If it turns out, as you do your full analysis, that there is a serious problem here, and there really isn't the ability to go forward to Chapter 13 case, you can file a voluntary dismissal of the bankruptcy case, and you're out of the issue.

© MCLE, Inc. All rights reserved Now you don't like to do that, but sometimes you don't have a choice. So, you know, and the same thing comes up - same thing comes up with a homestead. You may not have the opportunity to file the homestead because it's such a rush. You've got to do the best you can with it. They've created their problem by coming at you so quickly before - so short time before the foreclosure sale. Anyway, you file - I file a bankruptcy case, I file a skeletal petition, file a motion to extend time - again usually about 30 days to file all the schedules and plan. I give the clients the questionnaire, you know, and so forth like that. I use the questionnaire that comes with best case - it's about 40 pages. But (laughter) I send it to them by email and have them fill it out. You need paystubs. I need 180 days of paystubs, and I need the last one or two years tax returns. Very often, they haven't filed the returns. It's amazing how often that is. You do the best you can. It is a requirement that the returns be filed. If they're required to be filed. If they don't have enough income to file a return, you can file an affidavit with the IRS and the DOR that says, I didn't have enough income to file it. And if you're not clear as to whether they did, you can call the IRS and the DOR, they'll call them up on their system, and they'll say - they'll have some information about income, and if they're showing virtually nothing, then you're probably OK. But it's sometimes they say, wait a second, we show a lot of income for, you know, 2016 and 2015, then you better tell your client, you know, you've got to get the tax returns done. You have time. It's not, you know - you have a number of months to get it done. But it is a priority that it gets done? If taxes are in fact owed, they will become part of the Chapter 13 plan. So a Chapter 13 plan is a payment plan. And the question is, what is the goal of the Chapter 13 plan? In a Chapter 7 case, OK, Christine mentioned to go get a discharge. That's not necessarily the case in Chapter 13. You may not supposed to say that, but that is the actual reality because you're trying to accomplish a goal. So let's just say, the property is in foreclosure, which is often the situation. OK? How are they going to fix the foreclosure problem? Well, there are two - there are three major ways that come up. One, is you have a plan. A payment plan through the Chapter 13 trustee, which is what the Chapter 13 plan is, which is going to cure the arrears. There are $50,000 in arrears, and they're going to pay the $50,000 to the Chapter 13 trustee over the course of their plan. And in addition, they will they will restart their regular mortgage payments directly to the bank as they were doing before

© MCLE, Inc. All rights reserved although, they'll probably have to mail it to a different address. And at the end of the case, they should be current. They've made the post-petition mortgage payments and the preposition will be cured by the plan, they're current on the mortgage. They're all set. That's the traditional Chapter 13 plan that we saw for years and years and years. More recently, I would say a good 1-3 of my chapter 13 cases, possibly even more, are cases that are filed, the goal of which is to get a mortgage loan modification. And the plan says, I'm taking a mortgage loan modification on my plan. And I'm using, you know, an agency to do that with me. And that process takes somewhere between 4 and 6 months.

>>:And are you making payments?

>>:So the question - so I happen to personally think, and I was trustee so I really have a stake in this game, I happen to think that's not a proper Chapter 13 plan, by the way. But nonetheless, you're filing it anyway because you don't have a choice. And the Chapter 13 trustees, generally speaking, will not contest that. They'll allow that to go forth. They'll file an objection to the plan. More importantly, the mortgage creditor will file an objection to the plan. Hey, you're not paying my mortgage. You're not paying my arrears. And if they're, in fact, going through with their loan modification process, the hearings for the objection to the plan - you continue them in court for about, you know, four or five months or so, until the loan modification process reaches an end one way or the other - approved or not approved. And the chapter trustee will generally go along with that. Now most of the time, you have some other creditors. So you're paying something. You may have, you know, $10,000 in a credit card, and you say, all right, well, we're going to pay them 100 percent, $10,000 - because you have to have a payment that comes in the Chapter 13 trustee.

>>:You stop paying your monthly payment with the assumption that the modification is granted?

>>:You start paying them plan payment. Your plan - your chapter 13 plan calls for a payment. A plan that has a zero payment, in my opinion, cannot be confirmed and will not be approved - can't go anywhere. So you have to

>>:Is $150 a month still the rule of thumb for the minimum?

>>:I think so.

>>:Yes, a minimal plan, but that's a - no, I think in Worcester, it's less than that actually. But that's not a major issue. And now the question that comes up, if they have no unsecured creditors at all, and some of them don't, I put my legal fee - I put a portion of my legal fee in the plan. And Boston is no problem. If the only credit that's being paid in the chapter 13 plan is legal fee. That's all right, they'll allow that to go while the loan modification process plays itself out. In Worcester, it's a little more reluctant to do that. I don't have a definitive answer on that question, but you may not have a choice. You have to put something in there if there's no payment plan, there's no ability to get a plan confirmed. It just doesn't go anywhere. So you - and then you - I don't to get loan modifications, as I said, I have the clients use an agency that does experience in doing it. Once the loan modification is approved, usually I file a motion in bankruptcy court to approve the loan modification. It just gets an extra stamp on it - that isn't a bad idea. It's not required, but I don't think it's a bad idea. And then quite frankly, depending on what the rest of the creditor situation is in the case, I may dismiss the case. In other times and other times, you can finally Chapter 13 plan, you're buying some time this equity in the property. They want to sell it, and you can file a plan that says, I'm going to put the property on the market and sell it, especially if there's equity. And what you want to do in that case is get a mortgage broker - sorry, real estate broker appointed. You file paperwork to approve the appointment of a real estate broker as quickly as you can because that lets everybody know, including the mortgage creditor and the trustee, that the debtor is really serious about selling the property. And they know that a mortgage broker is going to try to sell it relatively quickly because they don't get paid otherwise. So it sort of puts the case on hold for a couple of months - see if you actually get a buyer and sort of go from there. If there are, you know, taxes are uncertain, your clients get the tax returns done, file the tax - have your client file the tax return, and I always get a signed

© MCLE, Inc. All rights reserved copy. And I send them to the bankruptcy department of the IRS and DOR to help speed them along in their review and to file the proof of claim and so forth like that. So then you - at some point, if you made - your goal is to get you Chapter 13 plan approved by the trustee. Creditors don't object. The only creditor that really steps in at all is the mortgage creditor. Mortgage creditor is going object for one or two reasons. If your plan is going to cure the arrears, they want to make sure that the arrears is the amount that you put in your plan is equal to the amount in their proof of claim. And you'll adjust it once they file their proof of claim - not a problem - generally not an issue about it, OK? In a loan modification plan, as I said, they'll file an objection and you'll continue it out for about 5 or 6 months until the loan modification reaches an end result. If it's a sale plan, same thing. Let's make sure there's insurance on the property, which you have to do anyway. And then, you know, get a broker going on it. And hopefully, get it sold in a reasonable period of time. If you're doing a sale plan, if your clients can make some mortgage payments, have them make some mortgage payments. It gives them more time before the bank gets antsy about whether a buyer is happening or not. Sometimes they can't afford it at all. You do the best you can with that. Anyway, the goal is to get your plan confirmed. The plan is confirmed by the trustee filing a confirmation order with the court. Massachusetts may be the only state that does not have a court hearing regarding the confirmation of the plan. I know in Rhode Island they do. You have to actually go in front of the judge and tell them what you're doing. But - and they do that in New Hampshire. I did that suff many, many years ago when I did a little work in those states. Massachusetts doesn't have it. If the trustee's satisfied with it, the trustee will file an - will file a confirmation order, plan will get approved. Then, at that point, you're sort of just monitoring the case. You're not doing much. If mortgage payments aren't being made, the bank will file a motion to - for a lien - to resume foreclosure because they're not getting paid. You know, trustee will file a motion to dismiss if they're not getting paid. You know - and you file the case to the end. At the end of the case - you have a little work to do at the end of the case. You have to file a special affidavit, which mostly has to do with those - any domestic relations orders that are - that are - money that's owed - has your client been paying the child support? - you know, that kind of a thing. Other than that, it's fairly straightforward. You file the affidavit then get the second credit counseling done - the

© MCLE, Inc. All rights reserved debtor education. And then you file the motion to enter a discharge with the affidavit. And - you know, and you get your discharge, and you're pretty much - pretty well all set. Chapter 13 is a great program because it really allows people to hold onto their property, cure the arrears - and that's what it was designed for - and pay tax. And that's - you know, and when in doubt, if - I have a very hard rule. And I'm going to - I want you to hear this rule. Never rush to file a Chapter 7. That will get you in trouble.

>>:Why?

>>:Because you can't dismiss a Chapter 7. And if you have assets that the trustee can get their hands on, the trustee is going to fight any voluntary dismissal, take those assets, and sell it. And that's why you never rush into Chapter 7. If there's an emergency situation, file it as a 13, give yourself 20 - 30 days to figure out really what's going on. And if there's a real problem, you can voluntarily dismiss it. Otherwise, you file a 13 planning, you incorporate whatever your analysis has come in. But never rush to file a 7.

>>:Can you talk a little bit about that thing we get from the trustee at the end of the plan where he says, essentially, I think all the arrearage is secured, and the bank has 30 days to (unintelligible) about that, and what (unintelligible) there's always somewhat of a...

>>:There's a new process that's been in place for several years now. At the end of the Chapter 13 case, whether it's a mortgage arrears case or not, the Chapter 13 trustee files a paperwork that says all the mortgage payments have been made, any arrears that were proposed in the plan had been paid, and the mortgage creditor is all set. And serves everybody, most especially serves the mortgage creditor. And I recently had one where the mortgage creditor file a response that says wait a second, no, there are post-petition mortgage payments that were not made during the Chapter 13 plan - five-year plan. It is not uncommon for a client for a debtor to miss a payment or two or for, perhaps, the bank to misapply it. These things can happen. And they filed a response that said hey, wait a second, they're about six months behind post-petition, they owe us, you know, $20,000. So my attitude on that one is I sort of see where that goes. I immediately write to the counsel - most of whom I know - and I say give

© MCLE, Inc. All rights reserved me a - give me a payment history on the account, which can be very difficult to read. And I frankly take that payment history, and I turn it over to the client. And then said you figure out if there's any payments that are missing. It's not my job. And it does come up - payment never got cashed, never got paid, they missed a month. I mean - you know, over the course of a five-year plan - 60 months - payments can get missed. So there's - so what happens on that situation is - and they - the client will call me back and say yeah, you know, they're - we're probably right. We owe, you know, three or four payments. I said OK, what's your ability to pay that back? What is your timeframe to pay that back? And they say OK, I can make double payments for the next three months or four months and cure it. I call banks. I contact banks' counsel, then say let's do a stipulation. They'll pay it out, and I - we file it that way. And it's generally not a problem. I do say to them it's much easier and better if you can come up with the money quickly and get rid of it. And sometimes they can. They can borrow from a family member for a period of time, get the money in the creditor - I just had one just last week. Creditor withdrew the - filed an amended statement that says we're all set. And the discharge will enter right away.

>>:Any reason why, if the bank says no, you could not, at that point, file a new Chapter 13? Now, you couldn't get a new discharge. But why could you not file....

>>:You could - well, first of...

>>:Repeat the question.

>>:The question is if the bank does not go along with the payment plan to cure the five or six months of arrears that occurred during the course of the plan, could you file a new Chapter 13 case? The answer is yes. Yeah, you sort of have to wait for the old case to get dismissed. You can't - you know, can't have two cases open at the same time, but you could file a new Chapter 13 case and cure whatever arrears they had over a period of time - excuse me. And what I would do - what I would do would be, if the attorney was being resistant or the attorney's client was being resistant to allowing some time, I say OK, well, if that's what you want to be, I'll file a new 13 case, and we'll take that money, and we'll spread it out over 36

>>:All right. So what I'd like to do now is turn it over to Anne. And Anne is going to talk to about 12:30 on issues relating to means test in her materials - or in the handout that you received.

>>:In the handout, on the materials - they start on page 33.

>>:Let me interrupt for just one second to say that, in the - in the booklet on page 9-28, is a copy of a chapter 13 plan. Don't pay attention to it. That's the old plan. I got wrapped up with some personal matters and wasn't able to get the new plan in. There's a new form Chapter 13 plan. I'll work with Don to see if we can get it to everybody that signed up for the course. It's not in the material. This plan is not - is not effective. Sorry.

>>:OK. So talking about the means test, we've got the handout starting on page 33. And in your book there's an entire chapter - a chapter 7 - that talks about the means test. It is - it is complicated, but I think that highlighting the major issues can really help you out. First off, what is the means test? It's something that applies in Chapter 7, it applies and Chapter 13, it also applies in individual Chapter 11s where it's an individual not a corporation that's filing a Chapter 11. It's a creature of the amendments to the bankruptcy code that occurred in 2005. It's a statutory formula. It's a shortcut to determine abuse by a debtor. And the concept back in 2005 was that wealthy debtors were filing bankruptcy to get a discharge, and they want to force the wealthy debtor to convert and use a Chapter 13 reorganization. They wanted that individual to pay something over the course of time. And they wanted to be sure that the debtors who can pay creditors do pay creditors. So the issues in a - in a means test concern income and allowed expenses. The first question, however, is - does the means test apply to your specific debtor? And it would not apply to your specific debtor if the debts of that individual are primarily not consumer debts. And by that I mean the individual ran a corner store, and borrowed for the corner store, and had all sorts of debts related to the corner store. They didn't own a house, they just ran this business. Unfortunately, the business closed, so the debts of that individual are not

© MCLE, Inc. All rights reserved just 50 percent but over 50 percent debts connection with the corner store that they tried to run. And therefore, those are business debts, not consumer debts. And therefore, that individual does not have to file a means test or file those special forms, does not have to satisfy the means test.

>>:(Inaudible).

>>:In a 13, you have to file a means test, but I think the non-consumer aspect applies across the board. That's under section 707(b)(1) of the bankruptcy code. All the issues regarding means test are in 707. Peter, I'll look up that exact issue after this session, but I'm not - I believe that the means test has to be filed in a 7 or a 13. But if it's non-consumer debt, I don't believe it applies in a 13. But that's - I will confirm that later. I don't have an answer off the top of my head on that one. The second kinds of individuals who do not have to satisfy a means test are disabled veterans and individuals that are in active duty with the National Guard or with our armed services. Don just represents many veterans, and he's familiar with, of course, that exception to the means test. The other aspect of the means test that make - that may give relief to folks is that the amount of your income, if it's below a certain threshold, may - by definition, satisfies the means test. And this is an income threshold. And I do apologize. In my materials, the number is wrong. It changes every year. The number now - if you're a family of one and you make $62,659 - you make under $62,660, you are below the median income or the threshold income in Massachusetts, and you don't - you - basically, you get a free card. You don't have to do any other aspects of the means test. You're below the threshold. For a family of two, it happens to be up to 80,180 - is that the current standard. That's - this is an example why we really like our best- case forms because they update every couple of months. And it's hard to keep track of the numbers as they change every year. But the threshold or the median family income is something that's determined state by state, and it's determined according to our United States Census data. But Massachusetts - we are a wealthy state, and so our thresholds are very high.

>>:The...

>>:I don't know (laughter).

>>:Oh, I thought you had the number. It's quite a bit high, like a hundred and...

>>:It's over 100,000.

>>:Hundred and eleven, that's - 110 I think is what I saw.

>>:That's a big number.

>>:So the next question becomes - let's be sure we're calculating income correctly because you've got the income side and you've got the expense side. The definition of income is the income for the last six months prior to the month you file the bankruptcy. So it's a historical definition. We will discuss throughout the next day and tomorrow income in a variety of contexts. When it comes to the means test, the definition of income is historical - last six months before the month we file the bankruptcy. So we file in October, you want to see what was the income in April through September. It's why folks on the panel have said the means test is complicated is because you, then, have to sit down - I do - and develop an Excel spreadsheet, and take every paystub, and take every source of income from any place - they worked part time here, they got a bonus there. I write down every entry of every income they got from any source on a spreadsheet, and it ends up with 30 or 40 entries. And that's - and I add it up, and I divide by 6, and that's their income.

>>:Now I don't do it that way. I put it right in my bankruptcy program - my software.

>>:OK. I'm - that would work too. And I'm nervous. I like to see it all in an Excel spreadsheet with each paystub. So for example, you know, you have a paystub, but it's not paid until three days later or five days later. It's very - it's a formula. It's very formulaic. So if they didn't actually get that paystub -

© MCLE, Inc. All rights reserved they didn't get paid until the 15 of - the 17 of the month, even though the check is dated the 15, I want to know what they actually received. It's very - it's very precise. And so, for example, I've advised clients to file right away because they had a month where they couldn't work, or I've advised them to wait for another month because, when I add the numbers up, we work - it works today or it will work tomorrow, but it didn't work yesterday. It's a formula. And there's - it's like a tax return. There is no impropriety in timing the filing of your bankruptcy so that the income may be a little bit less than it would have otherwise or a little bit more. They're just about to get a new job, you might say - with more money, you might say well, let's file sooner rather than later.

>>:And two other things that come up sometimes is commission checks, and bonuses, and when those get paid - and that can affect your six-month look-back if necessary - of course, in Chapter 13, where you've got a foreclosure, you don't have that luxury of that kind of time.

>>:So there's a recent case - the Maxton case. And that - this just came down in May of this year. And it's a Judge Hoffman case. The question there was does your income include meals, allowances, travel allowances, those sorts of things that show up on your pay stub? And the answer from this judge was yes, it does. And I actually think that's a correct answer. But when you're thinking about the means test, you don't want to add in - this is an expression I don't think I'm saying it correctly - but you want to add in heavy and takeoff light, or add in light and takeoff heavy. If, in fact, an individual has meals allowances and travel allowances, that presumably means he's traveling - he or she is traveling and incurring meals. Those should be, then, expense items someplace on the means test as well. So if you're looking at income and you find some additional, you know, bonuses or expense items, there probably should be a corresponding expense deduction as well.

>>:Yeah. So on that case - the Maxton case - that was peculiar facts. Those meals and travel allowances were on the - well, maybe - they were peculiar. They were on the paystub. They were, like, part of compensation. That's how - that case is a little different than many cases where - not all, but many - where the person will get a separate travel allowance check or

© MCLE, Inc. All rights reserved a separate - and the U.S. Trustees' position on that - because I called them on that because I had that after I read the Paxton case. They said no, if you're getting reimbursed, as Anne said, for something you expended, then that's not income to you, you paid the money and you're just getting reimbursed. But in that Paxton case, you'll see it - in Maxton it was on the pay stub. So then what do you do with it? Had to get reported, and it was a little more problem. So you got to read that case carefully and see if it applies to your situation - because I had a client that was getting vast sums for reimbursement because he was a lineman on a utility, and there was all this utility work that had to get done, but he was just paying Holiday Inn and just getting reimbursed back. So is that income that then blows him up for the means test? No, that didn't appear on my means test at all. They were just getting reimbursed right back. Abd the U.S. Trustees' position was that would be fine.

>>:This - if I can, this site is 2018 Westlaw 2246573. And it - just the basic moral of the story is any income you get from any source, you've got to consider that in the income block. That includes regular payments that you get from relatives. That includes payments from friends that are on a regular, periodic basis. So again, the notion being don't try to put something on light and then take it off heavy in terms of expenses. If you've got someone helping, living in the same house with you, paying for some expenses, that's income in. But then there's going to be a corresponding expenses.

>>:Right, in the situation I have where they're getting these heavy checks, I did not include it in the income box, but I did have a little footnote - debtor receives $500 a week for allowance for Holiday Inn, pays $500 a week to Holiday Inn every month, therefore, not included in the means test at all. So I've disclosed it, but that's the way I proceed.

>>:So other examples - you include child support, you include the non- debtor spouse, and that's the question that has been asked already about the non-debtor spouse. You include that income in the means test...

>>:If they're living together.

© MCLE, Inc. All rights reserved >>:...If they're living together, correct. And you include contributions from other - regular contributions from whoever. You exclude - this is important. You exclude Social Security, and you exclude someone from a separate household. So if the spouse - if you're separated, and the spouse is living someplace else, you don't include that individual's income. To the question of - there's such a thing as a marital adjustment. And that goes to the fact that the non-deptor spouse may have a poor income or may have a high income, but that non-debtor spouse may be the one that pays for the children's private school. Or the non-debtor spouse may be the one that has legitimate - legit - you want them to go out and gamble. I'm not really comfortable with that. And the reason I'm not comfortable with the non- debtor spouse just wasting their income is - no - it - is that there is still a provision of 707 - which is what we're talking about, we're talking about a formula for abuse on the one hand or just the general notion of bad faith. And there is a concept that has been retained throughout the bankruptcy code for a long time which has to do with bad faith filing. And I wouldn't want to see the non-debtor spouse just squandering their income on frivolous stuff. That would be my concern.

>>:(Inaudible) non-debtor boyfriend rather spouse?

>>:But who lives together.

>>:No, I think - I don't think - the question was would it be different if the non-debtor spouse was just a non-debtor boyfriend. We haven't - we're about to get to that question, sort of, and it has to do with, now, how many - it's going to come up in the hypo. How many people do we count in the family because I've just said, for a family of one, it's one number. For a family of four, it's a different number. Well, what's the family? What is that concept? And that goes to boyfriend - spouse - well, there's - of course, there's three definitions. And I do commend you to the materials in the book that you've been given, which is Chapter 7 of the book. And it talks about three different ways to decide what's your family number. What's the family size? And one approach is like - according to the tax returns - you know? - did you put the person down as a dependent on your tax return? That's not particularly followed, but some jurisdictions have followed that. The other approach is "heads on beds," and that's just how many people

© MCLE, Inc. All rights reserved are sleeping in the house. How many people live in the house? But the pre - I believe the correct approach, and one that has been followed in the Gabori case - Gabori case in Rhode Island close to us here is the economic unit. And I want to read from that case for one second if I can find it. The head of - the son of the debtor lived in the house. Apparently, he did not contribute at all. So the quote in the - in the case is, in short, based on all the circumstance, the court considers that the debtors describe - description of his son - Junior's contribution consist mostly of affection and parental pride, and that, although he's probably a joy to have around, he is not part of the economic unit that drives this household. So they weren't going to include that individual as a - as a - as a contributing member to the economic unit of that household. And I think you really do want to look at the dollars and cents and what makes sense in terms of not over - not making your household six people because, occasionally, the boyfriend comes over and stays over, but making it the number that's realistic for who's really contributing to this household unit. I don't want to - I've had trouble discerning house - the numbers in the household, but I've tried to be conservative to consider a less, rather than more. Christine, did you want to say anything?

>>:I agree. Sometimes you need to be creative because you might need that fourth body to keep you where you need to be with respect of the means test. Just be sure that you can substantiate it. You know, I think sometimes it becomes tricky. If you have somebody who is away at school - away at college, you know, you need to determine whether or not you can count that person as a head on the bed if they're only there two months out of the year - three months out of the year.

>>:Oh, I would them in it. I think - I think students at full-time college away are heads on bed. I have no doubt about that.

>>:Well, that's what you see there...

>>:There's a discrepancy.

>>:There's a difference of opinion about this because I do think it goes more to the economic unit.

>>:If you have a self-sufficient son who is in California, you know, eight or nine months out of the year, it's - you really need to be able to substantiate how you qualify that as a - that person as a household member for purposes of the bankruptcy means test I think.

>>:I'm with Christina on this because, just like the income side - now we've talked about that and we've talked about, now - we're talking about the number in the family, how to figure out the family size. On the income side, I want it to be in a form of some kind of spreadsheet where I can see each entry of what's come in. On the expense side, I'd like to see - well, if it was the six months or the three months that this child was at home - the adult child was at home, well, there's expenses for the kid. There's expenses for the kid. If you can justify that with documentation, with actual numbers, that's different than I happen to have a blood sibling or child, and they're nowhere to be found. That's different.

>>:I can ask another question? (Inaudible) nobody disagrees, I think, (unintelligible) how do you deal with...

>>:In - on my...

>>:Can you repeat the...

>>:Yes. The question is in a self-employed, do you just include profit? And this is one where I'm gonna say what - what's been said, which is I follow the - follow the form. And it seems to have a - it has an entry item for the gross receipts, and then I deduct the expenses. It doesn't show up. It's an internal workings in the means test form. But that's how I do that. If they - the gross receipts - last expenses.

>>:(Inaudible).

>>:The question is, should I rely on the accountants profit or loss for the

>>:Disclose that's how you did it. I took the accountant's statement.

>>:No, that's terrific. No, that's terrific. I'm, you know, working with clients right now to get them well versed in QuickBooks. And that's what you want. You want the documents right there to help you. All right, now we've got the income side, we've got a notion of the issues with respect to family size. Now what about expenses? There are three categories of expenses in the Means Test and this is where the rubber really hits the road because it's not just whatever the family happens to pay. It's these defined expenses. And the defined expenses are as follows, one, an IRS federal nationally established expense. And that has to do with food, housekeeping, laundry, personal products, miscellaneous items like that. They'll just say for a family of four you're allowed this much for food period end of story, that's the allowed amount. It's a national fixed amount. Again, that's why the software is very helpful because it knows those numbers and can report those. Then the next fixed amount is the - is a local standard and it will vary from county to county and it has to do with car expense and rental expense. And those items, again, depend on which county you're in. They are established by the IRS, they were originally established when the IRS was doing installment payments or workout payments with folks that owed taxes. And Congress thought well this will be great we'll apply this same standard to the Means Test. The third category are actual expenses of a certain nature. And by that I mean actual taxes that are withheld or actually paid by the debtor. Actual involuntary payroll deductions like, you know, union dues or...

>>:Mandatory Retirement.

>>:...Mandatory requirement deductions. Sometimes the cost of a term life insurance might be a deduction on your paystub but it also might be something that you pay independently. That's allowed. Court ordered payments. And those mostly would be domestic support payments, but they could be other payments that you're ordered by the court to pay that are not discharged. Health insurance, child - some child care, a limited

© MCLE, Inc. All rights reserved amount of child care. And then the final deduction that's very important, that are actual expenses, are the amounts you are contractually obliged to pay on your mortgage and on your car payments. And that's what's considered really to be the huge loophole because ironically, someone that has two homes may pass the Means Test swimmingly, easily because they are contractually obliged to pay, you know, 3,000 bucks on their home and another couple thousand on their second home. And that satisfies the Means Tests so they can ride through it.

>>:But not necessarily ride through in Chapter 13, because if you're making a payment on a vacation property of $1,500 a month, it's true. One of the requirements in Chapter 13 is that the expenses have to be necessary for the reorganization of the debtor and it's hard to justify a vacation property as necessary to the - let me finish, Peter - necessary to the reorganization of the debtor. So if you - and if you took that money and you added it into disposable income the unsecured creditors would get a 50 percent or 80 percent dividend. I do not believe that you can justify that and I think that the creditor, the trustee would object to the plan and the plan would not be confirmed if you were paying - if you were paying mortgage and other expenses on a holiday property.

>>:So then the final area is, say let's say when you do the math you end up with excess income every month, you've got excess. What happens then? It's not unusual that you could justify special circumstances. One that I had, not particularly recently, but one I had was a person that was, frankly, working very hard to lose weight. And she went - had significant expenses for certain training, certain health courses she was taking, certain nutrition features that she was doing and they were expenses every week, every month in the last six months that I added them up on my Excel spreadsheet and they totaled a number that was deductible. I said that's a special - that might be a special circumstance but this person is working night and day to lose that 20 pounds and that's part of what she's actually spent. And that did not go to a court decision but it was allowed by the United States Trustee's office who is the person that will review these, you know, may review your Means Test. A more recent case though, the Gold decision, where an individual actually spent to see - the debtor was looking to see his significant other, his partner who lived in Puerto Rico, I think.

© MCLE, Inc. All rights reserved And there was travel and there was support for the partner in Puerto Rico and there was - I understood it to be a visa issue with respect to getting the significant other to come to the United States. They were all real, they were all actual monthly expenses but the bankruptcy court chose to decide that was not - did not constitute special circumstances. There was a lot more to that case. It was a 13 that had almost been successful and there was maybe only 25 percent left of the payments on the 13 when they converted to a 7. But special circumstances usually mean health or welfare or, you know, something that kind of rings as not frivolous, necessary expense of the debtor.

>>:One other tip. This is in - having not only to do with the Means Test. But on - we'll both be doing the schedules tomorrow and schedule I, which is income and schedule J, of expense. If you - if your client has an extraordinary expense that they incur, often a medically related expense, and so forth like that. You know, you're going to miss that on the schedule J because you're going to need that and may also be required for the Means Test in order to qualify. And make sure you get some documentation of what that is. If it's a medically related situation, have your client ask the doctor to write a letter that says the client has a condition, doesn't need to be specified, that requires this kind of monthly expense for medical services and you give that letter to the trustee and the trustee is going to be satisfied with it. I mean, that's totally appropriate. But it's also fair for the trustee to raise the question and, you know, so just be aware of that. If you have any extraordinary expenses on schedule J, whether they're Means Test related or not, be prepared to back it up with some documentation just so that you satisfy the trustee. And do it in advance of the trustee meeting so you're already there, you can give it to them and, you know, you've solved the problem.

>>:So what Richard is pointing out also is that on the forms there's the Means Test and then there's a separate place where you list income and expense and that's Schedule I and Schedule J, excuse me. And one is a historical reference to income and the other one is today what is your income and today what are your expenses? And those are really separate apples and oranges but you have to kind of satisfy both of them. In general, the Means Test is a formula, you either pass it or you don't. And if

© MCLE, Inc. All rights reserved you don't pass it you can prove, by special circumstances, that you should pass the Means Test and there - because it is a formula there is plenty of room, without impropriety, to time the filing of your bankruptcy to either meet the Means Test or not. You know, you don't want to advise your client to incur new debt, but if their car is broken, they need a new car, that's a contractual obligation that they could incur that would perhaps make them then satisfy the Means Test. It's a formula, you want to work with it.

>>:All right, so what I want to do now is take a break. We have a one hour lunch break. So you should be back here at 1:30. Be sure to review the hypothetical, start thinking about it. I think what we'll do is we'll form two law firms. So the back table's one law firm, the side table is another law firm and when you come back you can kind of get in your law firms and we'll do the mock creditors meeting. Then within your law firms your...

>>:No, no the mock client meeting.

>>:Mock client meeting. Yeah, mock client meeting - then you'll get together, you know, the law firms there, pull out all the issues, we'll get them up on the board, we'll go through them and we'll hopefully solve them all in the allotted time. So we'll see you back at 1:30. Thank you. And with us is Pamela Harbeson who is a attorney at the Board of Bar Overseers for the Commonwealth of Mass.. So Pam, you ready to go?

>>:I am.

>>:Where would you like to go from?

>>:I think from there. I have a PowerPoint.

>>:You do - oh, let me get that for you. Oh, you're so good. And I not only do the PowerPoint I know where it is.

>>:And cookies.

>>:You can't tell anybody.

>>:That's top secret.

>>:Top secret, cookies.

>>:Only way they keep them around here. Hold on one sec. Anne, could you push the button right behind you down so the screen comes down?

>>:This is high tech.

>>:We are - now - and I think there's a light here I'm going to get. Is that OK for you?

>>:That's fine.

>>:Now here's a pointer, you know, forward and backward.

>>:OK.

>>:Hold on one second. Now wait let me go to full screen, didn't want to do that. Let me see if this works. Oh, that's so cool. OK, so - you know forward and backwards.

>>:I think I know forward and backwards, OK.

>>:So I'm going to go in the audience because, otherwise, I'm going to get a headache.

>>:OK. All Right. So as Don said, I'm Pamela Harbeson. I am an assistant Bar Council. I am going to talk a little bit about what the structure of the Board of Bar Overseers is because I don't think people are very familiar with that. I think it just will help you a little bit, get sort of a little bit of background on the structure of how things work. Prior to my going to the BBO I was a - I was in private practice and I was a bankruptcy practitioner. I represented trustees, I represented Don. I went up against a couple of

© MCLE, Inc. All rights reserved these ladies over here. And I did that for about 20 years before I went over to the BBO. And so now - so the BBO, they're sort of like the overarching board and they're the ones that are the policy makers. They make all final decisions regarding discipline. They are an arm of the SJC appointed according to the SJC rules and then under that there is the office of the Bar Council and that's where I am. And I'm basically acting as a prosecutor and I bring petitions for discipline against lawyers who do bad things and violate the professional rules of conduct. So let me ask you a question. How many people here have taken the MPRE within the past five years, anybody? One. OK, so you know what I'm talking about a little bit, probably it's a little fresher in your mind, about what the rules of professional conduct are. But basically, the Massachusetts rules that govern ethics for all lawyers. If you practice in the Commonwealth and you are licensed in the Commonwealth these rules apply to you, no matter what your practice area is. But what I did for this presentation is, I went back and I looked statistically at what bankruptcy cases have come up in the past, say 10 to 15 years and which rules are really the ones that kind of come to the forefront within bankruptcy practice. And it's not really all that surprising that the rules that come to the fore in a bankruptcy practice are the same rules that come to the fore in other areas of practice, in litigation and in probate, for example. Also because bankruptcy lawyers sometimes have access to large amounts of funds, we're going to talk about that, that's where people really get into trouble. I know everybody knows that you can be disbarred but there's other levels of discipline like public reprimand, admonition, which is what they used to call private reprimand. So that's where nobody really knows that it's you that's being slapped on the wrist and said don't do it again. Public reprimand, suspension and then disbarment. So with that we're going to talk about some of the basic rules. So the first is - there's really four, I could only fit three on this slide so we're going to go to the next slide too. But the - there's three that cover competence and diligence. And again, this is sort of your basic, like out of the box, you got to provide competent representation, right? You cannot completely just fake it till you make it. You have to actually have some skill, preparation and thoroughness when you're representing a client. You should always try to seek through lawful objectives of your client, that's rule 1.2. Through reasonably available means and then you should also act with reasonable diligence. And I am going to talk about some sample

© MCLE, Inc. All rights reserved cases but I have to say, really our bread and butter case over at the BBO involves these three rules. Because lawyers sometimes like freeze, they get panicky when they don't know an answer or if something goes wrong with a case and they stick their head in the sand and go la, la, la, la, la, la, la. And that doesn't actually make the problem go away. What it will usually do is get the client so infuriated that they report the attorney to us. So don't do that. And then rule 1.4 is about communication. And again, this goes back to what I was just saying. You should always let your client know what's going on with the case, the client's the one who decides, right? They're the ultimate decision maker about their case. If they are going to settle something they are the ones that have to decide whether to take the settlement or not. It's not up to the lawyer to make that decision. Of course you can advise them as what you think the best course of action is, but they are the ones that have to decide. And you have to explain the matter to the extent reasonably necessary to permit the client to make an informed decision regarding that case. So those are sort of the first four rules and here's some sample cases that involve those rules. The first is in the matter of Watson. And so the - all of the cases are reported in the Massachusetts Attorney Discipline Reporter, that's what the MADR, Mass. Attorney Discipline Reporter is. You can also find all of the cases on our website which is www.massbbo.org or if you are a member of social law they also have all of the reported decisions relating to Board of Bar Overseer cases. So in the matter of Watson, the attorney was retained to file bankruptcy petitions in three different matters. In each of the matters the attorney essentially abandoned the clients and never pursued the matters, never actually filed the cases. The attorney never returned the unearned portion of the fees that were paid. We're going to talk more about fees in a second too. Failed to communicate with the clients, failed to turn over the client files when the client said OK, I've had enough. Let me have my file back so I can find an attorney who is going to actually help me. And then failed to respond to Bar Council's inquiries and the sanction in that case was an 18-month suspension. And you'll see the rules violated in 1.1, 1.2, 1.3, 1,4 those are the four ones that we just went over. 1.16 is regarding termination of representation, turning files over, returning unearned fee. 8.1, 8.4, 8.4 is misconduct like fraud and those kinds of things. In the matter of Howard, very similar, retained in four separate matters, was paid a flat fee in each of those matters. But in this case that

© MCLE, Inc. All rights reserved attorney actually prepared and filed skeleton petitions. The court entered orders to update on three of the cases and the Chapter 13 trustee filed a motion to dismiss for failure to file certain documents in the fourth case. And the attorney didn't respond in any of those cases, didn't respond to the order to show cause or the orders to update or the motion to dismiss. And then, attorney failed to let his clients know that each of the four cases had been dismissed. And then, the attorney was nonresponsive to the client's calls. And failed to refund any of their fees when they made demand. And in that case, the attorney resigned as a disciplinary sanction. That's basically equivalent to a disbarment. It just doesn't look as bad when you look up the attorney on the website, but it has the same import or effect in that, you cannot reapply to become a member of the bar again for eight years after you resign. And in the matter of Hockman - that's a 2015 case. Again, same scenario - attorney retained in two matters. The court dismissed the couple's Chapter 13 case four times because the attorney kept failing to file a feasible plan. Now I know - you probably this morning talked a little bit about software and getting a software program. In this case the attorney said, oh, it's Best Case's fault. It's because Best Case is coming up with this unfeasable plan. But he kept filing it anyway, instead of fixing it. And then after the final dismissal, the attorney failed to advise the clients that they could refile. And then, in second matter, attorney falsely told the client that a complaint for modification in a child support case, not a bankruptcy case, had been filed when in fact, he hadn't actually filed it. So he was lying to his client. And then, again, those same four rules - 1.1, 1.2, 1.3 and 1.4. So let's talk a little bit about fees. So fees - rule 1.5 is the first rule that governs fees. In 1.5, it says you cannot charge or collect and excess - a clearly excessive or an illegal fee. And the second part of rule 1.5 says, you have to have a fee agreement. Even if it's a flat fee, you have to have a fee agreement. You can't say this more than enough. You must have a fee - a written fee agreement that the client gets, OK? They don't necessarily have to sign it, though that is best practice. But they have to have in writing the basis for your fee, even if it's a flat fee or a retainer, hourly agreement fee or a contingency fee, right? Any of those arrangements or a hybrid of any of those, you have to have a fee agreement. People get in trouble because they don't have fee agreements. And then, the clients are mad, and they don't pay. And then you did all this work, and you don't get paid. And then they - the client complains to us,

© MCLE, Inc. All rights reserved and we say, you didn't have a fee agreements, and now we're going to sanction you. We're not going to disbar you for that, but you will get sanctioned. Probably an admonition the first time around, and then a public reprimand if you do it again. So closely related to having a fee agreement, you have to know what to do with the client funds once you get money from the client. So that's going to depend on whether or not it's a flat fee or an hourly retainer, OK? We very - like retainer - the word retainer has a very weird history, right? Because, I mean, in the olden days, it was sort of like, you know, you were the consigliere for "The Godfather" - right? - which means you were on retainer, which means you were not going to represent anybody else. That does not happen in today's practice or very rarely at least, you know - not outside of the Mafia. So the retainer in that sense, means that you're going to take money that you're going to draw on later. But until you earn that fee, that money is client funds and that means it has to go into an IOLTA account. If it's a flat fee, that means it is not client funds. And you can put it into your operating account. But you still have to earn it. This is what people don't necessarily understand. I've had plenty of other attorneys who say, yeah, it was a $5,000 flat fee, and I got the fee, and I put it in my account, and I spent it. Yeah, but you didn't do anything on the case. So you didn't actually earn that fee. Oh, it was non- refundable. In the land of the BBO, there is no such thing as a non- refundable fee. Because if you do nothing and you take a $5,000 fee for doing nothing, in our mind, that's clearly excessive fee in violation of rule 1.5. So you have to earn it. So therefore, even if it's a flat fee case, you should keep track of your time. That's my tip for that. Keep a running notebook, a Word document, an Excel spreadsheet, something that shows what you've done on a case. So that when the client decides that they are mad, and they want their money back, you can say I earned this fee. And it was a flat fee, and you don't get it back, and here's why. OK. So that's 1.15. Oh, the other thing I want to say about 1.5 trust accounts, so IOLTA account, trust accounts, sort of the similar - very similar things. An IOLTA account is a trust funds account. So if - how many people here have access to client funds? Keep their own or is anybody working for a firm that has like a bookkeeping department? You guys, OK. If you are ever in - I won't spend any more time on this then. So if you are ever in a position where you're dealing with client funds, our office does present training once a month at the BBA that you can go for free and get some IOLTA

© MCLE, Inc. All rights reserved account training. Because there are special rules, what you do kind of records you have to keep, kind of reconciliations you have to do. And therefore, it's a little complicated so, you know, it's like an hour class, but it's very helpful. OK. Termination of representation - that's rule 1.16. Upon termination of representation and lawyers will take steps to the extent reasonably, practicable to protect the client's interest, such as giving reasonable notice to the client. Also in this rule 1.16, if the court requires you to withdraw from a case, you must do that. I know that at least when I was practicing once you were in that case, you were in a case in the bankruptcy court, and you couldn't really get out, unless there was going to be success or counsel taking your place. So you should be aware of local rules. You have to comply with the local rules, as well. If the court requires that you file a motion to withdraw, you need to do that. If you have not earned all of your fee, you should return whatever unearned portion there is. And you should always send an invoice with that refund or lack there of. If you're returning the client's file, and they're not entitled to a refund, give them that time that you've been keeping track of and along with the letter saying, you're not getting your money back. And then though they might not like that, but at least you'll have some - a good argument and some backup documentation as to why you get to keep the fee. Confidentiality - this is always - between confidentiality and conflicts of interest - those with sort of - I would call that like the varsity level stuff of the of the BBO rules. A little more complicated. Don, I'm going to talk about the thing we talked about this week. So in confidentiality, you have to keep client information confidential. And then conflict of interest is you cannot represent a client if the representation involves a concurrent conflict of interest. And then there's other rules that also apply to former clients and prospective clients. So what Don and I talked about this week was about a prospective client. So he got a call from an out of state where saying, I have a client, who is going to try and file an involuntary bankruptcy against somebody in Massachusetts. Is is something that you could handle? And Don said, why sure, of course I could. I mean, I'm a premier trustee here. So just tell me who the creditors are that are going to be filing this involuntary. And tell me who the debtor is going to be so I can run a conflict check. And lo and behold, he represents the debtor in other related matters. That is a conflict of interest. You cannot represent the creditors who would then be filing involuntary against your client. Sorry. So you don't get to take that case.

© MCLE, Inc. All rights reserved But even further, you can't then tell your client, ooh, by the way, these creditors are getting ready to come after you because that's confidential information that you gained when they were interviewing you or when the lawyer was interviewing you. And later on down the road, if the debtor then comes to Don, I really need you to represent me as this involuntary. Don is going to have another problem in that conflict because he's got this confidential information that may not be confidential anymore. But the rules in weird BBO land might still be confidential so he needs to get the lawyer call them first to clear the client. So it can be very complicated. So this is the duty to former clients, which I think we're going to talk about a little bit later. And then, this is - 8.4 is sort of the catch all - let's call it the catch all rule of misconduct. But basically what we see for 8.4 is conduct involving dishonesty, fraud and deceit. Engaging in conduct that is prejudicial to the administration of justice, you can get a charge of that, if you're lying to the court. There's another rule that also tells you you can't do that. So that would be two rules that would probably be charged if you lie to the court - or engage in any other conduct that adversely reflects on his or her practice of fitness to practice law. And the other thing that I want to just mention briefly about the rules of conduct, some lawyers are under the misapprehension that these rules only apply when you're actually representing somebody else. And that is actually not true. So for example, we unfortunately had attorney recently who was convicted of having child pornography. That has absolutely nothing to do with his practice of law. But yet, it adversely reflects on his fitness to practice law. And he was disbarred. So it's a moral turpitude kind of crime. So I also had a case recently where an attorney said, I wasn't representing that person that was not my client. That person was really just the beneficiary of a trustee of a trust, and I was the trustee. I wasn't representing them. I was the trustee. It was outside my practice of law. And therefore, you can't charge me with stealing all the money from the trust. That person was wrong. And I did, in fact, charge him. And we will hopefully have an order disbarring him shortly.

>>:What was his argument?

>>:His argument was that he was outside of the practice of law and, therefore - and the trust funds in the trust...

>>:He wasn't acting as a lawyer and that the client funds were not client funds in the - in the world of the VB - under the rule. They were actually trust funds, but that's a failing argument because trust funds are client funds. In any event, they weren't his funds to take. (LAUGHTER)

>>:And so that is what finally, you know, carried the day. OK. Here is a - so this is a case of misappropriation basically. So this attorney representing a client in a Chapter 13 case - the client owned a multi-unit rental property. And in the Chapter 13, the attorney advise clients to basically sell - we're going to file a plan, we're going to sell the property, we're going to take the funds that you get from the sale after you pay off your liens. We're going to take that money, and we're going to fund your plan. That will be - it'll be a liquidating plan. And that would have worked out OK, except that when they got the proceeds from the sale of the property, he took it. He missed - he intentionally misused those funds by making withdrawals from his trust account in large, round increments. This is another thing that I've learned as being trustee counsel. If you're ever going to steal money, don't pick a round number. Like - that's just like the biggest red flag if you're going to take $5,000 - no. Anyway - so he took 500,000 in $2,000 increments until - basically, he took about $55,000 of the money and used it for his own personal use. He failed to, then, return that money, and he was, ultimately, disbarred for doing that. So this is the lawyer shall not knowingly make a false statement of fact or law to a tribunal rule. So don't do that. The cases that I found that really involve this rule, for the most part, have to do with attorneys who are filing their own bankruptcy cases, and then they are lying on their schedules. So again, they're not necessarily practicing law because it's really their own bankruptcy schedules that they're filing, but they are lying on their schedules, and they're signing something under the pains of penalties of perjury. And that's a false statement under oath to a court. And that is a no-no. And the presumptive sanction is a two-year suspension for that. So that's a pretty serious thing to do. 3.4(c) - this is a lawyer shall not knowingly disobey an obligation under the rules, which also means don't disobey an order of the court. So if the court orders you as the attorney - not necessarily your client, but you as the attorney - to

© MCLE, Inc. All rights reserved appear on X day, and then you fail to appear, that's a violation of this rule. OK. So this guy - attorney - I don't even know how to say his name. Let's call him Fraylou. He almost - I don't know. He, like, got a home run in terms of almost every rule he violated in this... (LAUGHTER)

>>:...One case. So - no, he did suffer from depression. Depression can be a mitigating circumstance. So if you are experiencing severe anxiety, or depression, or a medical problem, or personal hardship, you know, your life is falling apart for whatever reason, then that can be a mitigating factor when - if somebody files a complaint against you. But you have to, like, try to do something to help yourself, right? Get some help. And in this case, you also - if you cannot handle the case that you were brought, and you failed to disclose that you have an impairment that is going to interfere with your ability to represent that person, that is a violation. So you have to tell the - basically tell the client that you are - you have to withdraw for personal reasons or whatever. So in this case there was a chapter - I think it was a Chapter 13 case. The case defaulted. The attorney offered to return the retainer that he'd been paid and then failed to do so. He - the attorney, then, opened up his clients to severe sanctions and liability because there was a defaulted case and they had a default judgment against them - this was in a civil matter. And he failed to compensate them for that. He, then, filed his own bankruptcy case and failed to list them as creditors even though he owed them there unrefund - their earned retainer. He falsely declared that his schedules were true and accurate. He, then, transferred his interest in his residence to his wife for a dollar. That was not a good move.

>>:This is what the hypo is based on. (LAUGHTER)

>>:When the clients, then, obtained a judgment and execution against him, he still didn't amend his schedules to include them but went ahead and arranged a settlement with them which he didn't disclose to the bankruptcy court. And then he defaulted on the settlement. And then somebody found out about the unauthorized transfer of the residence. The court didn't like that, and they converted his case to a Chapter 7. The clients, then, sought to have their debt declared non-dischargeable. And then the attorney and the clients settled that matter. And he required, as part of that settlement,

© MCLE, Inc. All rights reserved that they withdraw their bar complaint, which is also a violation. So he was suspended for 18 months. And you can see, 1.1, 1.3, one 1.4, 1.8, 1.16, 3.3, 3.4, 8.4(c, d, and h), and rule 401 section 10 which is that you cannot condition a settlement on the withdrawal of a disciplinary complaint. So this guy - yeah, he was - I think he was trying to hit, like, the home run of disciplinary violations. Again, this is another case in which the attorney filed his own Chapter 13 bankruptcy case. And in this case, while the case was pending, he was, you know, making his planned payments. He wanted to buy a new car. And you have to ask court permission to incur debt. So instead - and the car dealership wanted to see something from the court that said that he had authorization in order to incur this new debt. And so what he did was he took the U.S. Trustees Office letterhead and he photocopied it onto a piece of paper correspondence and wrote a letter, supposedly, from his Chapter 13 trustee stating that he was authorized to incur the debt. The bank didn't think that was kosher. And they called U.S. Trustees Office who, then, filed what they needed to file with the bankruptcy court. The case was dismissed, he was barred from refiling his case for more than one year, and there was a complaint referred to us from the court, and he was suspended for three months, which I think was kind of light, actually. But - (laughter). All right. So the last thing I'm going to leave you with is some resources. I highly - again, I highly recommend that you take a look at our website - massbbo.org. All of the rules are on there, all of the cases, every decision is on there. We have many helpful articles. You can search by topic, fees, for example, if you have a question about fees. We also have an ethics hotline Monday, Wednesday, Friday from 2:00 to 4:00 where you will get somebody like me who will - you can say oh, I have this interesting scenario that's come up. Like out-of-court attorney has called me about involuntary, and it's against my client, what do I do? Call that number between 2:00 and 4:00, somebody will talk to you about your ethical issue, and we'll try to give you some guidance.

>>:Will they write a opinion if requested?

>>:No. Nonbinding, helpful, not - we won't even tell you what we necessarily think you should do, but we will say so, I think you need to look at rule 1.16, 1.18, and 1.6 comment 3 and sort of walk you through it. It's more of a guidance, but, no, we will not give an opinion, and we are not

>>:But, Pam, I've used the hotline. It's very - it's very helpful. I found it very helpful.

>>:Thank you, I'm glad. I'm glad. And then, again, if you ever are going to be dealing with trust account monies, retainer agreements, retainer funds, or, you know, if you're doing any real estate conveyancing and you're going to get client funds in that way, I would highly recommend the trust account training at the BBO monthly. Also on our website there is a tab - a calendar for training and events, and you can see when we're really giving speeches and things like that. Don.

>>:So if someone - if you do a flat fee, and you take your flat fee, and you do some work but not all because the client disappears - you basically have to fire your client - and you kept track of your hours, then you might say OK, I got a retainer of $500, I did $100 of hourly work, I'm a returning the client's files because (inaudible) they're gone or they're not responding - OK, here's $400 back. So even though you didn't - even though you werent retained - let's say you have an agreement that says you have a flat fee. So even though your agreement didn't say hourly, if you're returning the money, you'd think you - do you have...

>>:If you haven't earned the flat fee...

>>:Yes, right, you have not.

>>:...Then you should return the unearned portion.

>>:But do you (inaudible) unearned portion based on the hourly rate...

>>:Right. I mean, it's a little bit loosey-goosey in that...

>>:You have a basis though.

>>:You do have a basis. You have a good argument if that's your usual,

© MCLE, Inc. All rights reserved hourly rate. Some of the things that we've seen that have not been good are when somebody takes a $50,000 retainer and then returns 42 - I mean, keeps $42,000, returns 8 because - well, I usually charge 250 an hour, but in your case, because it was so complex, I'm charging you $600 an hour - that's not going to fly.

>>:What happens if you don't have - you just said that your client was MIA. What if you don't know where to return that file or money to, what do you do with it?

>>:Well, that - then I would say you hang on to it until the client contacts you.

>>:And then, for a flat fee, being overcautious, you could put it in your IOLTA account, wait till you've incurred all the services, and then take the flat fee.

>>:Yeah.

>>:There's nothing wrong with being overcautious. What do those letters stand for again?

>>:What, IOLTA?

>>:Yeah.

>>:Interest On Lawyer Trust Accounts.

>>:Oh, all right. Ding-ding.

>>:We have a winner.

>>:(Unintelligible).

>>:International Women's Insolvency & Restructuring Conference. (CROSSTALK)

>>:Well, there is a class - and I think there's one here at MCLE the end of November - called How to Make Money and Stay Out of Trouble, which has some - which actually, the bar council - Connie, Becky, and me - she chairs that, so - no? No, we don't have the funds.

>>:I know I have one, but it's several years old. No, the rules are in the - you know, the big fat Massachusetts state court rule book, if you want, or there on the website.

>>:Now, this is more like a tips and traps for the unwary.

>>:I don't think - not that I know of. So - and that brings up one other interesting point. So you know how you guys have to file registration, you have to register with the BBO, and you file - you have fees that you pay every year, that's what funds my job, the board, the general counsel's office, the client security board. Oh - so that's something I didn't mention. So for these people who are - unscrupulous lawyers steal their money, if there is - generally, there is some sort of sanction against the attorney, then that client can go to the client security board and make a claim and get reimbursed from - and that comes out of your license fees.

>>:(Unintelligible).

>>:Nope, not that I know of because I was just telling Anne that I think I looked at the 2015 ones the last time they put out - maybe as earlier, last time they put out a report. And they reimbursed something like $2 1/2 million, but it was like three attorneys that built that kind of money. It wasn't just like, you know, 40 attorneys that have $150 claims against them, and then there's three attorneys that have $2,250,000 of claims against them. So as far as I know, there is no cap. But that's a separate half of the agency that I don't really know that much about. They have their own website, client security. OK, any other questions? Then I...

>>:Thank you, Pam. (APPLAUSE)

>>:All right, so when they go bad, they go bad big.

>>:That seems to be the experience.

>>:When you break up into law firms after we do this initial presentation, we've got cookies to fuel your thought process.

>>:Yeah, while you're out having lunch, we were baking.

>>:Brainfood, right.

>>:Just saying. And we are - this is a multi - we have many talents up here. We're multitasking - so we were hard at work in the kitchen baking cookies. All right, so here's what we're going to do now. We are going to do a client interview. So you all have a four-page, completely sandbagged fact pattern with more issues than - right? - you can shake a stick at - so there are a lot of issues in here. So what's going to happen now is Pam, Anne and me are Rick's associates. We can participate as commissioned. Rick is going to interview...

>>:Ms. Loni.

>>:Loni. You're going to be Loni or - yeah - you're going to be...

>>:Ms. Loni. It's easier.

>>:Yeah, OK. So she's going to be one of the debtors. And we're going to go through this fact pattern. He's going to try to extract as much information as he can get. As he's extracting it, you should be, you know, jotting down notes and things. Then when that's done, we'll break you up into these two law firms. One can sit on that side, one can sit on this side, so we'll have a real battle back and forth. And then, you know, we'll ask you, back and forth, to just give us an issue that you think is important.

© MCLE, Inc. All rights reserved We'll write that issue up here - OK? - and then you'll have your break, and we'll come back and solve all these issues - venue issues, conflict issues, and all kinds of stuff. Who knows what Loni may come up with on that topic. He's very creative. It's a very creative work. So, Rick, take it away.

>>:All right, I'm going to go through the questions, essentially, in the order of the hypotheticals in this so we don't get lost.

>>:But I might not.

>>:But she may not, and that is her prerogative. (LAUGHTER)

>>:Ms. Loni, it's a pleasure to have you back in the office.

>>:Thank you so much. I - you know, I'm just so nervous. I got all these financial problems and I - can I file today?

>>:No, you will not file.

>>:I need to get filed.

>>:No, no, no, we're not filing today. First of all, I don't have enough information to get started.

>>:That's why I have all this.

>>:That's good. That's all right. That's what the conference is about.

>>:I got a couple bills here...

>>:So that's where we are. OK. Tell me about - you're married - tell me your marital status and your family situation.

>>:Yeah, I'm married to my husband. Well, we've been having a little bit of trouble lately, but I think part of it - those troubles will be resolved if I can just get filed. I hope this can be a quick process. But anyway, we live in Malden. His parents live with us about six months out of the year. That's a

>>:I don't blame you for that. That's certainly an issue.

>>:But, you know - so they're kind of - they try to help out a little bit, you know, with some of the expenses, but it's still such a pain. You know. after 25 years of marriage, you'd think we'd be able to have our own place without our - without my in-laws there and her parents there.

>>:Have you been - have you two been living together all this time, or did somebody...

>>:Well, for the most part, but, like I said, we've been having some, you know, financial issues, some marital trouble. So, you know, he's gone down to Florida for a couple of months. He's probably been there - I don't know - on and off.

>>:Where was he living in Florida?

>>:Disney.

>>:Good for him. (LAUGHTER)

>>:Was he dating Minnie?

>>:You know, I do have my suspicions. (LAUGHTER)

>>:Her name may have been Minnie, but it might not have been Mouse. (LAUGHTER)

>>:Tell me what you have in - who's in the household? Do you have children? Tell me what this is about.

>>:Well, you know, he tells me he's going to come back. Right now, she is - he is actually back. He's living in Massachusetts, but with his brother. You know, so he has come home to me yet. I don't know, we might file down the road, you know, for divorce. We're trying to figure out if we can get our

>>:We'll talk about that. I'm a bankruptcy attorney, but the firm has - the firm has divorce lawyers too.

>>:I want one-stop shop. And if I can get my bankruptcy filed with you, you know, despite the fact that, you know, it's going to be a joint-filing, I want you to represent me in the divorce.

>>:First of all, I don't know if it's going to be joint-filing. We'll be talking about that.

>>:Well, we want to file together. I talked with her, and she's - he's on board.

>>:My expertise is in bankruptcy. My expertise is not in divorce. You would not be well represented if I was representing - filed a divorce case for you. So I would instead refer it to somebody, probably someone in my law firm, to represent you on a divorce matter if that's where you wanted to go. But I personally would not do it because you want to be in my expertise which is in bankruptcy.

>>:OK. Oh, I forgot to...

>>:We talked to...

>>:We've got some kids too.

>>:Yes, I wanted - that was where I was going.

>>:I know I don't look like it, but I've got two older kids - they're grown. They live with us. Unfortunately, neither one of them are working at the time.

>>:And how old are they roughly?

>>:About that. They're both adults.

>>:To you, they're more like 12.

>>:They're not working right now, so, you know, we're, you know, supporting them 100 percent right now. One of them - one of them says that they're supposed to be getting a decent job. Who knows when that's ever going to happen? They've been saying that forever.

>>:So the kids are living with you right now.

>>:Yes.

>>:OK. And Loni-Lucy's floating around someplace else at the moment, back and forth.

>>:You know, between his Minnie Mouse dates, and living with his brother, and, you know, coming home every now and then, I can't tell you where he is from one minute to the next.

>>:OK. Anyway, your sons are living with you.

>>:Yes.

>>:And they're not working at the present time.

>>:No.

>>:And haven't for a while.

>>:Right.

>>:You take care of them.

>>:It's a big burden.

>>:Well, they're my kids.

>>:All right, just check. Anybody have any job prospects? Any of these kids have any job prospects?

>>:Yeah, one of them says he expects a - you know, a decent job. Who knows what that means? Yet, he's still saying Mom, can I have a hundred bucks to go out?

>>:Oh, yeah. Well, that's part of what it is. So - none - are either of them married or have kids?

>>:No.

>>:All right, well - so you're not a grandparent yet. (CROSSTALK)

>>:...Gotta give them 100 bucks to go out on a Friday night. Who knows what he's doing with that? (LAUGHTER)

>>:Do your kids have student loans?

>>:Yeah. I might have signed on it. I'm not quite sure.

>>:Each of them probably has some student loans.

>>:They both do. I might have signed on for one... (CROSSTALK)

>>:I assume, given the fact that they are not working, that they're probably not making payments on the student loans.

>>:Oh, goodness no.

>>:And you're not making payments on the student loans.

>>:We're talking about during the present time.

>>:Yeah, my husband might have made payments here and there.

>>:OK. But you haven't been...

>>:I haven't personally made any in the recent past.

>>:Let's talk a little bit about your home - all right? - your home in Malden. Lovely city. I worked in Malden for 10 years, so dear to my heart, right in downtown.

>>:We've been in this house for 20 years.

>>:Yeah.

>>:You like it?

>>:We paid peanuts for it - $165,000.

>>:Maybe you know each other from Malden.

>>:We could.

>>:What part.

>>:Oh, I was on Dartmouth Street, that's right in the center of town.

>>:I was on Main Street.

>>:There you go, that's right around the corner. (Unintelligible).

>>:I knew you looked familiar. (LAUGHTER)

>>:So like I said, you know, $165,000 - peanuts, you know, 20 years ago. But we refinanced a couple times. You know, we used that money - we had - bought some furniture. We had to buy a TV, you know...

>>:OK. Do you know if this - I assume there's a mortgage on it. Is there more than one?

>>:There is a mortgage. And like I said, we refinanced, so there's a home equity. I don't remember signing off on the refinance though, but I know we have one. I...

>>:In other words, there might have been a re - or more recent refinance.

>>:I think - I wish I knew. I think so.

>>:But you think - you didn't sign it, he did.

>>:I know I didn't sign it, but I'm pretty sure we have one. So if we have one, it would have been because he signed my name without me knowing.

>>:Do you think - do you think he refinanced and took some money that you didn't see?

>>:There could be.

>>:It could be. OK.

>>:I mean, especially with his, you know, trips down to Florida.

>>:Do you have joint bank accounts?

>>:Yes. You know, we have quite a few bank accounts, actually.

>>:Yup. And then we have a Christmas fund. You know, we...

>>:How are the family bills paid? Well, let me - let me stop. You're living separately, and you have been living separately for a while. How are the family bills paid, particularly I'm talking about the mortgage, you know, the - just give me an answer, whatever works for you - You know, the mortgage, the household bills, that kind of stuff.

>>:We both kind of pay them here and there. You know, if there's a bill that comes in and I see it, you know, I'll try to get it paid. But I'm the one who, you know, is at the house more often, so it's typically me.

>>:And the boys tap you for money because you're there.

>>:They do, yeah.

>>:For their dates, right?

>>:Dad's not - dad's not sending up - you know, sending up any money for their accounts.

>>:Do you - so you think there's two - you think there may be more than one mortgage on it?

>>:I'm pretty sure.

>>:OK. And you may not have signed for one or two of them.

>>:I know I didn't, But I'm pretty sure - he asked me for some information, so I think that there was a financial statement that I might have taken it - you know, that - we - I might have helped furnish him with information to, you know, facilitate that.

>>:Give him some paystubs, that type of thing.

>>:OK. All right. So - but you don't recall getting any money from these refinances. You didn't get a check.

>>:I didn't get any money. I didn't get any money out of that. No, but I know that the money that he took out, like, he used for some of his travel expenses.

>>:Are you working?

>>:I am.

>>:What do you - what do you do for work? You work in a Dinky.

>>:Store - work in a donut shop.

>>:He works at Dinky's, and he cleans houses.

>>:OK.

>>:And I am a security guard for the federal government.

>>:There you go (laughter).

>>:You should've have done that ride this year. (LAUGHTER)

>>:So you think that your husband is doing some housecleaning.

>>:Yeah.

>>:OK. Most house cleaners paid by cash.

>>:Yeah, and that's exactly why he does it, so he doesn't have to report it. He doesn't - you know... (CROSSTALK)

>>:I liked him at one time so I don't want to, you know, consider my

© MCLE, Inc. All rights reserved husband as a housekeeper. But, you know - yeah, he does that on the side. He works - you know, he's a manager part-time at Dinky Donuts, so that's kind of - you know, I'm proud of that.

>>:Have you filed your tax returns, and how do you file your tax returns? I mean, it's...

>>:Yeah, I think all of our tax returns have been filed, except for one year. We weren't really kind of on speaking terms. So I think that was 2013. So, you know, he was supposed to take care of it. I was supposed to care of it. Who knows? I think that one's not filed.

>>:When you have filed, you have filed together. You have filed a joint return.

>>:Oh, yeah. Yeah.

>>:No issue about that as far as you know. OK.

>>:But I know he never reported that cleaning business income. I know that.

>>:You certainly weren't pushing him on that because that was always helpful cash to have around, I'm sure. So...

>>:And he says he's willing to file. Like we have talked about that. He's willing to file.

>>:Why do you think you need to file?

>>:I told you, I got all of this pressure on me.

>>:You have creditors.

>>:I'm running the household right now. I got bills to pay. I don't have the money to pay.

>>:Mostly credit card bills.

>>:How much - 10,000, 50,000, 100,000?

>>:About 95,000.

>>:All right, that's a serious amount.

>>:That's why I want to get it filed today.

>>:Starting to get letters and court notices and so forth like that? OK. Any orders yet that you're aware of to make some payments?

>>:No, but I hear that they're going to be coming.

>>:All right. And you've seen some of the court papers?

>>:My friends tell me that they get these types of things in the mail. I don't have time to take off from work. I work for the federal government.

>>:Right. Right. (LAUGHTER)

>>:Do you or your husband have any retirement, a 401k or anything?

>>:Yeah. Yeah, he's got - I've got a 401k, about $80,000 in it. I borrowed against it. You know, I've got to pay for the kids, I guess. I can't just let my kids out on the street. I know they're adults, but I've borrowed about 18,000 against my retirement so that I could, you know, help keep them supported. Am I going to lose my job if I file?

>>:You're working for the federal government.

>>:Yeah.

>>:Well, the bankruptcy code says that anybody that files a bankruptcy

>>:You don't know the answer. Just take the issues back (unintelligible)

>>:The answers - the answers - there are rules say they can't fire you because of it, but we also live in the real world. Some things can happen, so we'll see about that.

>>:I know that he's worried about losing his job at Dinky Donuts, too.

>>:Dinky Donuts isn't going to fire anybody. Donut makers don't get fired because they filed bankruptcy. He's not going to really have to worry about that. He's got to go in and make the donuts. We know that one so...

>>:I sort of know from my paralegal, who gave me a note here, that your husband had some surgery? Maybe some medical bills or?

>>:Yeah. Had to take off some time from work, too. So only made about 35,000 last year.

>>:Have you known to hear him say that he may have some medical bills about 60 to $70,000?

>>:Yeah, about $60,000.

>>:Not covered by insurance, I assume. All right.

>>:And his income was down because of the time off.

>>:I assume that that isn't being paid at the present time, as far as you know.

>>:We did pay back - we had to borrow some money from our family, a couple of my friends lent me some money and I paid them back just so I didn't have to to, you know, have them on my back, either. But we needed - we needed to get by.

>>:Well, of course not, I mean, they live with us right now. What am I going to do? I can't her have her ticked off at me.

>>:Can't do that - you've got to feed her the good oatmeal and the good food. So it's - my paralegal left me a note that said that Lonnie may be doing some gambling?

>>:I mean, I got to say, we both - we figured if we could just hit it big, you know, we could just dig ourselves out of this debt. We could, you know, crawl out of the hole so we did, we went to...

>>:How much?

>>:Well, I mean, you win some you lose some. You know, we were up and then we were down. We probably lost about 15,000. We were hoping to win 15,000, but it didn't really go our way.

>>:Do you still owe it, or have you paid them back? And how did you pay them?

>>:No, we still owe. We still owe.

>>:How did...

>>:We didn't - I mean, we didn't gamble with our credit cards if that's what you're asking.

>>:Well - I mean, did you pull cash advances in order to get them?

>>:We did. Well, I think might have taken one cash advance but we really just kind of depleted our savings - our Christmas bonds.

>>:All right.

>>:I mean, it's Christmas year-round with me giving $100, you know, every

>>:So, what's in the - as far as you know, what's in your bank account and what's in Loni's bank account to the extent that you know?

>>:Well, we've got several, so, you know, we have a savings account at TARP bank, and we have two credit cards there also.

>>:Some money in the savings account?

>>:Yeah. We have about, like, 500 bucks in our savings account. I mean, that's not much that's going to be gone, you know, in 2 weeks.

>>:And there - you have some credit cards from that bank as well?

>>:Yeah.

>>:That's interesting that you note that. We'll talk about that.

>>:Yeah. And then we both have direct deposit. That goes right into our checking account at that bank

>>:Same bank?

>>:Same bank.

>>:OK. All right.

>>:And then...

>>:So you each have a separate account and you get paid - your paycheck goes into your account at TARP bank, his paycheck is deposited into his. Just wanted to just get a picture. That's OK.

>>:And, you know, so we pay our bills out of that - those accounts, too.

>>:And do you have a credit union account?

>>:That's separate from the TARP bank accounts?

>>:Yes.

>>:OK. All right.

>>:And then we've got - so 1,500 in of those accounts and then 3,000 is left over - the Christmas Fund is the one that we drained for the casino run, so we had about 3,000 left in there. But, I mean, I can keep that right? I've got to - I do have to get some Christmas gifts. That's why we - I mean, that shouldn't even be counted because that's why we opened that account.

>>:Is it your money?

>>:Well, yeah...

>>:Then it counts.

>>:...But it's - that's for...

>>:If it's your money, it counts.

>>:OK. But we want to keep that money for Christmas gifts.

>>:What are you driving?

>>:I'm driving a new...

>>:Yeah. I saw you pull in in a beautiful car.

>>:Yeah. I have a very new car, and I only pay 300 bucks a month for it.

>>:I didn't even think about it. It was just - I saw the shiny, new wheels. I said I had to have it, and I got it.

>>:And are you current on the payments?

>>:I'm current on the payments.

>>:Because, you know, if you're not, they'll take it.

>>:But I'm current on it. It actually comes right out of my account every month. I don't even have to, like, make a payment.

>>:Which account, if you remember.

>>:One of the savings - I think it's at the I Am Broke Credit Union.

>>:At the credit union account. So they have a - the loan was with them, but you deposit money in them or your paycheck goes in there, and they pay themselves directly.

>>:Yeah, they can take it right out.

>>:You say you have a credit card there, too?

>>:I do have a credit card there, too. Yeah.

>>:Good to know.

>>:Is there any balance on that?

>>:On the credit card.

>>:Yeah.

>>:The amounts - I'm not worried about the amounts right now because we'll get that stuff a little bit later. OK. What about Lonnie, what's he driving these days?

>>:He's got a beat up old truck, 130,000 miles, paid off, but - I don't know - he's probably going to need a new one soon.

>>:As a practical matter, he probably is and you're not opposed to him getting himself a newer car because he's going to be...

>>:Well, if he didn't beat it up, it'd be driving fine.

>>:Well, nonetheless.

>>:Now he wants to divorce. He wants to meet a deal with all the finances the and he wants a new truck. What do I get out of this?

>>:You get sons. You get sons with you.

>>:You got the lawyer.

>>:I get the lawyer. You're going to send him the bill, though, right?

>>:We'll discuss that as part of all of this as well. Do you have any special...

>>:Plus he's got that old Thunderbird in the garage.

>>:Oh. I love a T-bird. Is it a drivable?

>>:He says no, but - I don't know - it doesn't always seem to be in the same spot whenever I go in there, so...

>>:Love a T-bird. I had a T-bird. Dear to my heart.

>>:Do me a favor, just bring me a picture. I'd love to see pictures of all T- birds, just one of my little - separate passions here. I have - my paralegal made a note that said that you have a collection of Hummels, Hummel figurines.

>>:I do. I love them.

>>:Is that right? You've collected them over the years.

>>:And my Aunt's given me some of them. I don't have to do anything with those, right?

>>:Well, I mean...

>>:I mean, my Aunt gave them to me.

>>:...I am not familiar with Hummels personally, but the fact that I've heard of them tells me that there is some value to them.

>>:Oh, they've just been in the family for a while.

>>:But you have a lot of them, and some of them have some value.

>>:I don't think they have much value.

>>:Well, Hummels are very collectible items. It's like having old comic books or something else like that.

>>:They are in a little cabinet. I look at them, you know, before I go to bed each night, and count them out make sure all 59 of them are there. (LAUGHTER)

>>:One of the things that we look at when we talk about - when you file a bankruptcy case, you have to list what you own - your assets. And items that have special value need to be listed in the bankruptcy schedules. And

>>:Forget I even mentioned them.

>>:That's not how it works.

>>:Nobody's going to come in my house and see them sitting in the corner cabinet. Forget I even mentioned it.

>>:That's not necessarily true.

>>:What's your next question? Forget I even mentioned that.

>>:You may need to get some...

>>:Am I going to get this filed today?

>>:You're not getting this filed today. I told you when we started this conversation that you're not getting this filed today. Even if you paid me by cash or a bank check, you're not getting this filed today.

>>:We need to focus on the financial aspect of this, that - my Hummels have nothing to do with this.

>>:Well, we'll take a look at that. I understand that you finally got yourself going with an IRA and started to put money into the future for you. Very good.

>>:Yeah. And just about a hundred bucks, though. I mean, I just started it.

>>:But, your plan is to try to contribute to this regularly out of your weekly or your bi-weekly paycheck, and so forth.

>>:Well, yeah. I mean, if I get divorced, I can't rely on him. So I've got to plan for the future.

>>:Yeah. Remember, I told you about that refinance?

>>:Yeah, yeah.

>>:So, I think I said that we bought that couch set and the new plasma TV. It's one of the big, like, movie screens-size TVs. It's amazing. I think I've got to go get two chairs to go it, though, like the movie-style reclining chairs. Can I get that before I file or should I wait till after?

>>:You've got to get the stereo system to go with it because the only way that way it looks good is if it sounds good.

>>:Should I get that this week? I can put it right on the credit card.

>>:You can't put anything... (LAUGHTER)

>>:I have some room on one of them. I have to figure out which one, but...

>>:Because you are - we are talking about filing in a bankruptcy case, you can't run up any debt.

>>:What do you mean? That's how I'm living right now, as credit card to credit card.

>>:Well, one of the realities of filing - one of the realities that you're here to talk about is that you're spending too much money. You, meaning you and Lonnie. You're spending too much money. That's why you're having these problems. You have $95,000 in credit card debt because you're spending too much. One of the things - broadly speaking, I mean I'm not a family counselor - but one of the things, broadly speaking, you need to be thinking about...

>>:But shouldn't I buy all this stuff now that I need before I file?

>>:It's my time to speak at the moment. Let me speak - one of things you

© MCLE, Inc. All rights reserved need to be thinking about and aware of, is that you are spending. You're probably spending too much money, which is why you have so much debt, so you need to be thinking about how you can cut back your spending...

>>:But that's already after the bankruptcy.

>>:Whatever - Yes, but you need to be thinking about that now. You need to be thinking about that now. You can't be - you cannot be thinking about buying...

>>:Because then I have to pay for it out of my own pocket if I wait till after the filing.

>>:For one thing, everything you pay for is out of your pocket, or should be. That's why - that's what paying for things is.

>>:But now I'm going to get the discharge, you know, with this bankruptcy thing..

>>:I'll make it very simple. You're not allowed to run up a credit - charge on your credit cards - short - let me finish this - or shortly before you the bankruptcy in case. You're not allowed to do that.

>>:My friend went on a shopping spree right before she filed.

>>:Good for her. But, one thing - I'll tell you one thing I know about her, I wasn't her lawyer, and that wouldn't have happened. So it's a problem. (LAUGHTER)

>>:OK. Do I understand that his parents are living with you?

>>:Yes. Yes, my parents are elderly and not - my mom's not doing well. And so, you know, his in-laws - I mean, my in-laws, his parents, are living with us right now. Pain in the you-know-what.

>>:It's never easy.

© MCLE, Inc. All rights reserved >>:But, you know, I'm really worried about my mom - and she left me in the will. I don't know how long I'm going to have her. I don't care about the money in the will. I just - you know, I can't even bear to think about it.

>>:All right. Does she have any special bank accounts, does she have a trust fund? Does she have anything that you are aware of?

>>:She had mentioned a trust. But, like I said, she's not doing well, she doesn't want to talk about it, she doesn't want to talk about anything after she passes. She had mentioned a trust at one point. I don't even care about the money. We don't even have to talk about the trust.

>>:Alright. I have a final note here that there may be some may there may be some income tax issues. I know you mentioned earlier that the last time that you filed a tax return in 2013, but maybe not since then.

>>:Yeah he may - my husband may have some some tax issues. I'm not really quite sure. I thought that we had filed everything except for that 2013 year, where we weren't really talking and, you know, didn't get along at that point. But, he had mentioned that he might have missed a year or two. I really don't remember.

>>:Did you receive - have you received any letters from the Internal Revenue Service?

>>:He got some letter saying that he had under reported one year. I don't know what it's all about.

>>:So, he may have gotten a letter that he may owe some tax money.

>>:Yeah, he might.

>>:OK. But up until 2013, you and he filed taxes together.

>>:Yes.

>>:But you haven't filed taxes. You haven't filed taxes together since then,

>>:Yeah, we filed since then - since 2013, together, but there was - he's telling me that there is - might have been one or two years that he might not have filed.

>>:OK.

>>:And I know that there's, like, two grand in penalties and interest that is owed.

>>:Let's talk a little bit about the house and the mortgage.

>>:Hold on, if we file those - I want to make sure that any refund that we get for those years that may not have been filed, that we still get that refund. I mean, that's money that we've earned.

>>:We don't know if you have a refund because we - until all the taxes...

>>:If there is, I want to make sure that you can get it back.

>>:Just say let's just see where - the account is going to have to go through all the tax returns. Your accountant's going to take up the tax return, prepare the missing ones, and see if there's anything that's owed, or if there's a refund. If there's if there's a refund, it's possible you might be able to get it back. It's not impossible, but we don't have enough information to know that yet. We're going to have to - you're going to have to engage your accountant to make sure that all the tax returns have been filed. I think there's a missing one or two, based on my notes, and if there are, the returns you need to be filed whether you do it separately or jointly. I'm not going to get into that discussion right now. But it wouldn't matter what bankruptcy case you file, all tax returns need to be filed. So, we need to make sure. It doesn't have to be filed instantly, but it needs to be done in the next couple of months when all tax returns get filed.

>>:Oh, you know what, he told me to ask you - he takes that darn Thunderbird out every now and then. Got a couple of tickets. Are those

>>:My - I have a personal reaction to that. OK, you're talking like driving tickets, or parking...

>>:I don't want your personal reaction because you're a Thunderbird guy. I'm talking about the penalties and interests in these tickets.

>>:You don't know. You don't know.

>>:I make it very simple. Pay your tickets because, otherwise, they'll suspend your license. And you don't want to suspend your license, but we'll think about that. But my understanding is that you may have gotten a letter from the mortgage company?

>>:Oh, yeah, something like they're going to foreclose. What does that even mean? They're going to foreclose.

>>:Well, you have not been paying the mortgage for a while, Lonnie's been in charge of it. And do you understand that he, maybe, hasn't made some payments?

>>:I don't know. I call up and say hey, can you make the payment this month? And he'll say yes - you know, yes or no, and...

>>:But you think you saw a letter that indicated that there - that money was out of mortgage.

>>:Something about a foreclosure, I don't really know what that means.

>>:Do you have a copy of that letter?

>>:Oh, it's somewhere in a pile...

>>:Do you know who the mortgage company is?

>>:ABC bank, I think?

© MCLE, Inc. All rights reserved >>:All right, well, I'll need to know that - one of the things that I'd like to check on as soon as possible. Once mortgages are behind I want to try to get in touch with either the mortgage company or the attorney for the mortgage company to know where things are because foreclosure can move fast. Foreclosure is when mortgage isn't paid they can foreclose and you need - it's something I really need to focus on.

>>:Oh, it's probably not moving that fast. I got that letter probably 2 1/2, three months ago.

>>:OK, well, that's... (LAUGHTER)

>>:If they haven't done anything by now, they're not going to do anything.

>>:All right. Let me turn to my associate, Don, see if he has any questions that he could further ask?

>>:No, no. I think you've covered just about everything that was in there. Ladies, do you have anything that you want to add or some other points that we might...

>>:Has anybody been working overtime?

>>:Yeah, there's been a little bit of overtime.

>>:OK.

>>:Yeah.

>>:OK.

>>:And I think - you know, working for the government, I'm expecting a bonus this year.

>>:Oh, a bonus.

>>:From the government, really?

>>:Yeah, I'm one of their star employees.

>>:And well you should be. Anne, anything else for Mrs. Lonnie?

>>:I think we covered it all.

>>:OK.

>>:Should I pay off that credit card that I've been using though? I wanna keep using it.

>>:We're not going to pay anything right now until we do a further assessment. One of the things we're going to do is, I like to have you and Lonnie, if you can, try to get a list of all who your creditors are through certain websites that can help us. So we see what's out there and what's owed just so I have a picture as to who is owed money and so forth like that. You have an accountant, I'll ask your accountant to get in touch with me and give me an update of where things are with tax filings so we know where that is. If a tax filing is missing I want to get some timeframe as to how long it's going to take to prepare that tax return. It needs to be done. Although it doesn't need to be done today, but I'd like to have a handle on that. The most important thing that I want to know and I want to try to explore this pretty quickly. I'll have one of my paralegals work on this because I want to find out who the mortgage company is, if there's - what the status of the mortgage payments are. Because if there's - if their mortgage payments are missed and foreclosure has started I want to know that yesterday. And I want to know that as soon as possible because I don't what to - I want to protect you. And the best way to protect you is to get that information as soon as possible. If you don't have it we'll try to get it from Lonnie. If not we'll try to get it from whatever other source that we can, I think that's really...

>>:And now should I take out my home equity - should I take some money

>>:Well, I won't file a bankruptcy case for you unless I get paid, but you're going to have to work that out.

>>:But I need this filed immediately.

>>:It's not happening today.

>>:But soon.

>>:It's not happening tomorrow.

>>:But soon.

>>:Well, let me start with this. The first priority, I think, that I need to feel comfortable with is what's the status of your mortgage. You told me mortgage payments are missed and that always gets me very nervous because foreclosure can go fast. So that's the first thing I want to know and that's what we need to find out. The rest of the stuff we can take a little bit of time, we want to get some credit reports and so forth like that and start to put all this together. I've - one thing I would ask you to do is, I'm going to ask you to give - bring to my paralegal or send in a copy of your pay stubs for the last six months.

>>:I don't have all of them.

>>:That's all right. Go to your employer and just...

>>:Oh, I - No, I can't tell - then they're going to want - they're going to - they might fire me if they find out what I need these pay stubs for.

>>:Will you let me finish my sentence? Thank you. Very good. I would like to - indicate to your employer or the - that your accountant needs your pay stubs for the last six or nine months to finalize the paperwork that he's handling and you'll get that. So that is helpful, I will need that. And also any

>>:I don't even open them.

>>:That's OK. I don't care if you don't open them. Just stick them in a big envelope and send it to me. Whatever's there now and whatever you get over the next 30 days. I want to get anything that comes in the mail from creditors. Send it to me and we'll go over it and we'll take a look at it, OK.

>>:What do I do about all the phone calls?

>>:Don't answer the phone. That's what voicemail is for. That's exactly what you do and if you answer the phone and they say it's ABC creditor hang up the phone.

>>:My mortgage company?

>>:All of them.

>>:OK.

>>:If necessary, you can give them my name and phone number...

>>:Oh, perfect. Thank you.

>>:...And we can do that. I don't want you having any conversations with them, you can just have them call me. Most of the time I don't give them any information anyway. But sometimes they can be a - mortgage company I want to talk to. That's fine. Definitely want to talk to the mortgage company, but everybody else we just don't want them until we find out what's going on. But we will get a report which will show everybody that you owe money to. Hopefully we can get one from Lonnie as well which will give us a little clearer picture as to what's going on.

>>:I don't have to go to court tomorrow, do I?

>>:I do.

>>:Well, let me know who that is, get me the paperwork on that.

>>:They're suing me.

>>:That's alright. Give me the paperwork, give my secretary or my paralegal the paperwork for that hearing, OK. And we will contact the attorney and we'll see if we can get that hearing rescheduled for a couple of weeks while we sort out what's going on. That's generally not a problem. We can usually take care of that on the short term.

>>:What - were they asking for some kind of lien on your house - does that sound familiar? - or something like that?

>>:They were looking to garnish my paycheck.

>>:That's tomorrow?

>>:Yeah, that's tomorrow.

>>:OK.

>>:And I need every penny...

>>:Do you have that? Give that paperwork either to me or to my paralegal. I want you to find that because I can't otherwise find it. I'll get in touch with the attorney and I might be able to get the hearing rescheduled for a couple of weeks while we sort it out. I mean, I have a pretty good relationship.

>>:I mean, if my wages get garnished there's no way I can pay you. Do you do pro bono?

>>:He will be.

>>:I can usually get them to reschedule a hearing for about a month while we sort out what's going on. So just make sure I have that and we'll take care of it, OK. Now the last thing I just want to say to you is take a deep breath, calm down. You're in good hands and we're going to resolve most of your problems.

>>:I hope so...

>>:OK.

>>:...Because my husband - he's my biggest problem, so I'm taking your word for it.

>>:Well, I'll talk about financial problems, I'm not solving husband problems.

>>:All right, so.

>>:Mr. Lassman, can we get an applause for these? (APPLAUSE)

>>:We have a good team now. So what you witnessed is not at all out of the ordinary. Actually, it can be multiplied because you have husband and wife here at the same time. Husband reveals something to the wife during the meeting or one of the two usually says I didn't know anything about this during the time it was accumulating. So it can be can be very tricky and you need a box of tissues near your desk.

>>:Yes, yes. There are definitely - there definitely can be tears at initial meetings with clients.

>>:Yeah, many - that's not unusual at all.

>>:It is definitely not uncommon for one spouse to take out a second mortgage or refinance without the other spouse knowing.

>>:Yeah.

>>:It's frighteningly common.

>>:So all that - all that comes out at the first meeting, and then you're there. It's like what do you do?

>>:I will say just one more thing before break. My experience, overall, has been - I've been doing this for a while - my experience has been even if one person handles almost all the other finances and the other spouse is really not involved in it. When things are not going well and there are serious financial problems the other spouse knows that something's going on. They're aware that there are financial issues, they may not know the extent of it.

>>:Yeah, the depth of it is when it really gets bad. All right.

>>:There's something I would do also for the (unintelligible). I'd be concerned that this meeting, to make sure the client understands how attorney client privileges work and some other things, in case they end up in a divorce situation.

>>:Well - so these are the issues. So now you go - because that's a segue right into what we're doing, which is perfect. So what we'd like to do now is, from this moment, 2:45, until 3:15 there is networking and refreshment break in there. So you're law firms, you're adults so you can decide when you want to refresh and break and when you want to talk.

>>:Sit over here on this side, these three will be that law firm.

>>:Yeah, that's right. So we have two - we'll have two law firms. And then your job is to talk amongst yourselves and write down a list of the issues

>>:That we do.

>>:We have our own legal issues. OK. (LAUGHTER)

>>:Let's be clear. We are being taped, so I wanna just clarify. We're all on legal. We have identified a lot of legal issues in this hypo. So at 3:15 we will talk to you about getting the legal issues from you. We'll list all those legal issues up here until 3:30 and then 3:30 to 4:30 we will go through each one and see if we can resolve it. And while you're in your law firms we'll walk around and talk to you if you need some stuff.

>>:So one group should sit over here, and then the other - you three just go from there.

>>:So if that's all right with you guys.

>>:Thank you.

>>:These are things like, if you heard absolutely nothing else today, theoretically if this is all you hear it will be valuable for you. I know that's probably hard to believe. I'm not sure I believe it myself, but I think it's right. So with respect to Pam these are her takeaways. Return client phone calls. Keep your client apprised of status even if it's bad news. The second is do not blindly rely on software, be thorough, accurate and honest when you draft pleadings. And the last takeaway is use the BBO resources online including the ethical hotline Monday, Wednesday and Friday from two to five. So those are the three things that I think really well summarize her presentation. Anne gave - provided me with these takeaways. The Means Test is a mechanism to establish a presumption of bankruptcy abuse. It's really a formula mechanism - formulaic mechanism. Most debtors are below median for their family size and pass the Means Test without any issue. Higher income debtors also typically pass the Means Test due to significant contractual obligations like mortgages and car loans. And courts look to totality of circumstances in determining abuse. By

© MCLE, Inc. All rights reserved the way all this is available online so in a few days you'll get a little link you can watch this again. So if I'm speaking too fast and you're saying why doesn't he slow down? You'll be able to see this again and again and again and again online, yeah. And if we watch it a lot then it boosts our numbers. (LAUGHTER)

>>:That's a little secret. That's the takeaway from me to you. OK. So Christina gave me the following. Cover yourself in writing. Engagement letter, non-engagement letter, receipt of bankruptcy notices. So make sure you have some paper trail as to what you've agreed to do and on what terms and conditions, or what you've agreed not to do. Prepare your client for the creditor meeting, what to wear, what not to wear, questions to anticipate, things like that. And ask the right questions, for instance clients don't always know what an asset is. Clients don't know who owns their house sometimes, they think the bank owns their house. Many clients think that so you have to be very careful in the language you use because you use it every day so you assume everybody knows what it means, but they really do not. So those are the takeaways from today's session so far.

>>:I have a couple of takeaways but since it's in my handwriting he's never going to be able to read it. So I'll go through it. The first takeaway is, what is the purpose for filing a Chapter 13 case in the first place? We talk about discharge.

>>:These have to be short - by the way, takeaway means a short bullet point.

>>:Just shut up and let me do what I'm doing. Getting discharged in a Chapter 13 case is not always essential. You want to stop foreclosure, you want to make some tax payments, maybe you want to buy some time to sell the property and realize the equity. So just be aware that there may be a goal other than the discharge when filing a Chapter 13 bankruptcy case. I think this next point that I have is for anything that you handle bankruptcy or otherwise always try to look at the bigger picture for your client. They may come into you with a financial problem. As you start to go through it you'll begin to see other much larger issues that they're not focusing in on, but you're aware of and you need to try to help them put that in

© MCLE, Inc. All rights reserved perspective. I think that's really important. I also want to think about what is their life going to be after the bankruptcy case is over? Whether it's Chapter 7 or Chapter 13 that's particularly relevant regarding student loans because they're generally non-dischargeable in a bankruptcy case. OK. And also be aware, I think it's really important, of the impact of any bank - foreclosure, any bankruptcy filing on other family members, OK. Parents are filing, do the kids - do the teenage kids know that there's a foreclosure that's pending. You know, how does it affect - sometimes the husband comes into you, the wife doesn't know what's going on or may know a little bit and they come in and all of a sudden they get a bigger picture. So be aware of the family context. Or try to - you know, be sensitive to the family context that may be lurking in there when a family comes in to see you about a bankruptcy matter.

>>:All right, so what I want to do now is go through issues that you've spotted, OK? So...

>>:Yeah, and we've got to get out of the way here. I'm going to get out of the way.

>>:Oh no, you're OK. You're both OK, actually.

>>:Yep.

>>:You are actually OK up there.

>>:He's leaving us.

>>:No, I'm not going anywhere.

>>:Are you writing them down?

>>:No, no, you are.

>>:Oh, OK. You had a marker so...

>>:No, I'm happy to do it, I'll do half with you.

>>:I'll do one and you do one. All right, so which team do you want? You want that one?

>>:Yep.

>>:I'm betting on these guys. OK. All right, so...

>>:Don't let me down you guys.

>>:So give her an issue and then you'll give me an issue until you've run out of gas and then we'll do our own issues. So go ahead which one do you have?

>>:The possible foreclosure.

>>:All right, go with that. All right, what do we have over here? Issues and...

>>:Family/Household size.

>>:What is it?

>>:Family size.

>>:Oh, family size, OK.

>>:Domicile.

>>:All right. All right, yep.

>>:The inability to discharge student loans.

>>:OK.

>>:And the student loans - I think there was also - there was something else there. Student loans...

>>:Did they - did the parents co-sign?

>>:Yeah.

>>:That still counts as one, Don.

>>:No, not on my side. (LAUGHTER)

>>:Well, we were keeping student loans as one thing.

>>:Exactly.

>>:Issue anyway.

>>:No, I'm giving you two because I'm doing the numbering. All right, your turn.

>>:Divorce.

>>:Divorce. I see why you guys picked up these. (LAUGHTER)

>>:All right, come on there's a lot more.

>>:There's collecting our portion, but you don't want your client to rack up a bunch of credit card debt before filing, or you'll get a letter from the trustee's office saying that you're (inaudible).

>>:So the divorce is multifaceted...

>>:(Laughter).

>>:...OK? It just is. So we treat that as (unintelligible).

>>:(Laughter).

>>:Somebody held it out, and I grabbed it. (LAUGHTER)

>>:So wait - what are the divorce things we wanted to talk about?

>>:Is there any need for the husband to file? (CROSSTALK)

>>:So who files - who files, OK. What's another divorce issue?

>>:Conflict of interests.

>>:That's a big one.

>>:Also (unintelligible).

>>:Whether the wife lives with him or doesn't live with him.

>>:OK - so family size. OK, we'll get that - it's family size. (CROSSTALK)

>>:All right. OK, over here. (CROSSTALK)

>>:Divorce.

>>:But, you know, this is being recorded, so... (CROSSTALK)

>>:...Referring to the captain of the ship here.

>>:Really? (Unintelligible). Thank you. OK.

>>:The validity of this refinance where Lonny didn't sign it.

>>:OK, refinance. All right. (Inaudible).

>>:The kids' future employment.

>>:OK.

>>:Sell your home. (LAUGHTER) (CROSSTALK)

>>:Reporting the potential 10K from the sick relative.

>>:Which is it again? Say it again.

>>:It was the - they had a sick relative, and then the hospital - the sick relative potentially has 10K going to the client.

>>:Oh, inheritance.

>>:Yeah.

>>:OK, yeah.

>>:The (unintelligible).

>>:Yeah.

>>:Some of the assets like the (unintelligible) as far as... (CROSSTALK)

>>:Over here.

>>:I know they just went.

>>:Oh, OK. Then you go. (CROSSTALK)

>>:I thought - but (unintelligible).

>>:Overtime.

>>:OK. Come on, Nicole. (Unintelligible). (CROSSTALK)

>>:List the parking tickets so...

>>:The travel to Florida (unintelligible).

>>:OK. I'm already on the second problem.

>>:Do they have a homestead?

>>:OK.

>>:Have a 401K, and borrowing from it?

>>:OK. OK. 401k borrowed.

>>:The payment to family and friends - the (unintelligible).

>>:Repaying them?

>>:Yep. (CROSSTALK)

>>:The gambling.

>>:When was the last time they paid on the credit card - like, how much?

>>:The cash advances.

>>:(Unintelligible).

>>:(Unintelligible) Is worn out. OK.

>>:OK.

>>:Prioritizing exemptions and assets - what you want to protect.

>>:All right. She was very upset about something (unintelligible). OK.

>>:There's a line of (unintelligible) way to protect equity in a house without filing bankruptcy. We weren't sure that that was a homestead or whether it was, like, some kind of fraudulent transfer.

>>:Or he could be trying to fraudulently transfer to his wife.

>>:Fraudulent conveyance, we'll give you that one. (LAUGHTER)

>>:I feel like double dipping, though, (unintelligible) (laughter).

>>:Come on. Come on, there's more.

>>:The will. The six and the prospective (inaudible).

>>:I think we have that one unless you meant something different.

>>:There was a sick relative, and then there's the parents' will. They're two separate issues.

>>:OK. (CROSSTALK)

>>:The parents' will. All right. We're (unintelligible), but yep.

>>:So Lonny's hardship for last year - he had a reduced income.

>>:OK.

>>:More (unintelligible), first of all. Clearly, your client needs a lot of hand-

>>:Good. OK.

>>:(Unintelligible) Has your fair share of ethical issues with your client, who apparently wants to file yesterday (laughter).

>>:OK. OK - so timing in bankruptcy. What have you got over there? Law firm (unintelligible).

>>:Nope. It just (unintelligible).

>>:We have such a long, long, list, I mean...

>>:That's all right. Take your time.

>>:As long as it's coming from both sides.

>>:We weren't sure about involuntary bankruptcy. Is that one of the (inaudible)?

>>:(Unintelligible), OK.

>>:We'll talk about it a little bit.

>>:There was an issue with the banks - those two - the credit card was tied to the same bank.

>>:Oh, very good. That's a good one. And you probably (unintelligible). (CROSSTALK)

>>:The attorney-client privilege issue with wanting the same lawyer representing them in divorce as in your potentially joint filing on your...

>>:(Unintelligible). Jump on in.

>>:(Unintelligible) Gambling debt (unintelligible) bad faith.

>>:We have gambling.

>>:You said bad faith. Yeah.

>>:We're thinking these folks looked good for a Chapter 13, too, because of the tax issue and the foreclosure. Did we say that already?

>>:So, yeah, we have a - we have a chapter selection.

>>:I don't think we have chapter selection, though.

>>:We have chapter selection on your side?

>>:No, we didn't talk about it. (CROSSTALK)

>>:That's just, like, a freebie. That should be (unintelligible).

>>:This was (unintelligible) - OK.

>>:I'd suggest that they're getting a family court order (unintelligible).

>>:Other lawyers - that's a good one. Get another lawyer.

>>:(Unintelligible) have that one.

>>:Oh, they already have that one.

>>:(Unintelligible) Representing both of them, but to deal with what's going to happen in the divorce, because they're going to have to decide about (unintelligible). They're going to have to decide who's going to pay for it. (Unintelligible) divorce.

>>:No, I'm going to take it.

>>:The garnish was not in the fact pattern.

>>:Oh, from what she said. (LAUGHTER)

>>:That means she's got some...

>>:Crazy Lonny-slash-Lucy.

>>:So if we're going to do that, then it's, like, what judgments are there already against that?

>>:Oh, we don't have taxes yet.

>>:No, we haven't.

>>:I'm going to say tax filing (unintelligible).

>>:Because you can't garnish (inaudible).

>>:Christina, have you got the (unintelligible) - the tickets?

>>:I think I did. (CROSSTALK)

>>:Out of order.

>>:To be very thorough, have your office do a title run of your clients, maybe to see what else they're on. Maybe if they filed for bankruptcy...

>>:(Unintelligible) What about the old T-bird? (CROSSTALK)

>>:Yeah, but we've got a good one here. Filed bankruptcy before - question mark. That's - Donny, you get that one. (CROSSTALK)

>>:We can't stop her.

>>:Well, you know, we've (unintelligible) very general thing that...

>>:We covered so many things today.

>>:But now we're out.

>>:Our loss. We should have... (CROSSTALK)

>>:Oh, that's a good one.

>>:(Unintelligible) Ask for contributions (laughter).

>>:I don't know. I think...

>>:You said refund proceeds.

>>:You said...

>>:Oh, I forgot about that.

>>:Yeah, I'm going to put the equity loan.

>>:I put tax refund - put tax refund on that.

>>:Yes. Because he just loves (unintelligible) whether or not he was going to get me my refund back. (LAUGHTER)

>>:Well, he wasn't too sure about it.

>>:You have to evaluate the furniture and the TV and assess what that is now.

>>:Ah, evaluation.

>>:Evaluation. OK.

>>:Like, you know, because we wrote down the Thunderbird and the Hummels, but not the furniture and the TV.

>>:The life insurance - do you have (unintelligible) life insurance?

>>:I don't think we actually talked about it. You know, it's in the fact pattern, but...

>>:What was in the fact pattern? What did it say?

>>:Well, it says they both have life insurance. They're not sure what term life insurance is. (CROSSTALK)

>>:I think it's a tie. (LAUGHTER)

>>:All right. So this is pretty good. We have 48, so that's good. That's good. So what we're going to do now is go through these, and what we're going to do is I'm going to throw them out to the panel. As we know, if there's something you in particular - if there's a panelist who particularly wants to take one, raise your hand. But otherwise, I'll just start at the end with Rick and then work towards this way. So Rick - or actually I'm gonna over to you, Anne, with this one because it's kind of a means test issue. So what did you think about the family size of - this family's all over the place.

>>:I think if you did heads on beds it'd be the kids living there with their parents, but because the kids are just sound like a money drain and not contributing anything, I don't think they're, necessarily, part of the economic unit. But then you look at the other aspect, are they claimed as dependents on the parents tax return? And I think, because they're adults, they're probably not claimed as dependents. So it's going to be - it depends kind of question where you drill in some more in some more facts. But, from what I'm hearing, I might be inclined not to include the kids as part of the family unit because they're just kind of a zero.

>>:One second. One second. Let me just finish. What about the grandparents who are all living there?

>>:Well now, that depends. Do the grandparents, when they live there, contribute to the household, economic household? And I sure as heck would hope that they do. And therefore - and if the period that you're filing includes five months or six months when they've been living there, then I would say yeah, you do include them.

>>:And would you include Lonnie and Lucy, even though Lucy's not living there now?

>>:That's really - that's almost the toughest one of all because it sounds like the two spouses have been separated for quite a while.

>>:OK. There's a lot - there's issues on a lot of levels.

>>:And on that - that's a large issue because if they really are separated, there's this checkbox on the means test that says married but living separately. And you don't have to have a divorce or you don't have to have even a separation agreement. But if you - everybody can sign affidavits that says, no, I've been away from this household for nine months or a year and nine months. That's compelling.

>>:I don't see why you wouldn't include the kids on the petition. They live there, right? The fact that they're not bringing in any money is not an issue, in that they're a financial drain. That's part of the reason why they're having financial problems in the first place. I would certainly include the kids in there. I would include the grandparents, but I would include their income as part of what it is because, frankly, it's probably not all that much. The likelihood is, well, what we have here with the income issues that we're shown here, OK? I can't imagine they wouldn't be below median income anyway, so I don't think it really matters all that much. Their income is very low so - they're going to be below median income.

© MCLE, Inc. All rights reserved >>:I think the - that's important. An important point. Because I think the analysis really comes in when it's a close call. That's when you really need to kind of have documentation. You know, when it's a no-brainer it's a no- brainer. But when you really need to analyze it when it's a close call.

>>:So, Anne, you said you do not include - I'll come back to that - So you said you do not include Social Security.

>>:Correct.

>>:Is that only of the debtors or of anyone in the family? So, if the grandparents sole source of income is Social Security, would it be included or excluded?

>>:Good question. I like that one.

>>:I know it's a hard one - I don't - here's what I would - here's my advice on that. If the parents regularly give 500 bucks to their adult - to Lonnie and Lucy. If the parents regularly give 500 bucks a month, hey, here's to defray our food costs and everything else. That's what I put on the schedule.

>>:So it's not Social Security income to the debtors.

>>:Correct. Correct. And the means test form has two columns, one for the debtor, and one for the spouse of the debtor. Not for - the other part of the form is regular, periodic payments from a third party and that's what the...

>>:So, Social Security's in the hands of the grandparents, but it's not excluded because it's not Social Security when the grandparents give it to the...

>>:Correct.

>>:OK. Everybody clear on that? Alright, Yeah.

© MCLE, Inc. All rights reserved >>:So if - in terms of deciding if it's going to be like just Lonnie declaring bankruptcy or Lonnie and Lucy, does that change the valuation of who's in the household? Because all of sudden - because we're talking about whether or not to include Lucy. That seems like it's all a conversation based on just Lonnie is declaring bankruptcy. Would, all of a sudden if she's a part of it would you include...

>>:Well, what's weird about the Means Test is that it includes that non- debtor spouse in a Means Test. But there's a set - you're asking now, I think, a separate question which is - who's going to file here? And to make a decision about that question - who files? - and I can get help from my colleagues. I look to who holds the debts. You know, how much of the debts are joint? How much of the debts are individual? If I want to - sort of just stop a foreclosure maybe and I have some other plans, just filing one could really slow down that process. But it's a - that is a difficult decision and I sit with both clients, husbands and wives, all the time and decide, well, who's going to file here? Which one and/or both?

>>:Let's address that issue, if I may, Don. Let's address who is going to file, OK? We haven't yet gone into which chapter, but, given the fact that there appears to be a foreclosure process that is ongoing and may be relatively imminent but certainly substantial mortgage arrears, I start with the premise that you should be looking into Chapter 13 because you don't want a mortgage creditor to come in, get relief from stay which you can't stop, and then all of a sudden they're moving forward with their foreclosure. So - I know it's some of my own perspective that I do a lot of thirteen work, but my default would be to just file it as a thirteen. We stopped the foreclosure scenario. And, you know, that takes care of that one. Then when you're looking at that then you're figuring out - how are you going to fund that chapter? Then, when you're doing that, then the question is do you file one spouse or both spouses? And that's a complicated question. For the mortgage, assuming it's a joint mortgage which it is here, I prefer - and if that's the critical reason that's involved here, I prefer to file one spouse in the bankruptcy case. Because if that plan fails and about 60 percent of all Chapter 13 cases fail which is to say they're not able to make the payments either to the mortgage company or the trustee are usually both for. If a Chapter 13 plan fails, the the other

© MCLE, Inc. All rights reserved spouse can file a separate Chapter 13 case afterwards and the bank rarely contests it. It's not an issue. Tooth bites at the apple is generally OK. So, if the foreclosure is the dominant issue, then I usually like to try to file one if it's a joint debt. Secondly, we have taxes. The taxes are joint returns. So, generally speaking, you file one. All the taxes come into the case. You file your plan that's going to cover all the taxes. And you should be OK, in terms of covering the tax problem through your Chapter 13 plan, so...

>>:(Unintelligible).

>>:That may be the case. That there is - that they calculate interest over the course of the Chapter 13 plan differently, debtor and non-debtor. OK. My experience has been - first of all there's a question as to whether interest accrues on tax debt in the Chapter 13 case anyway.

>>:For the non-debtor?

>>:For the debtor itself. Let me just take it one at a time. There's a question as to whether interest accrues on the tax debt while you're in Chapter 13 case. I think it's unsettled. I think it's somewhat unclear. I know the IRS is pretty strong in saying you owe us the taxes. You know, it's the interest that otherwise would have come through in a Chapter 13 case. And the other spouse may not - what tends to happen is, in the scenario where you voice one of them theoretically they're accruing interest on the on the other one. At the end of the bankruptcy case, especially if the IRS is in fact adding taxes adding interest to the claim which they like to do and I think that they can, there's a tax debt that's owed after the Chapter 13 case is over. Thirteen case is probably filed because of foreclosure. There is tax debt and there are other creditors, you pay them an appropriate dividend, as low as possible. There may be a tax debt when the case is over but it's going to be substantially less than what they owed in the beginning of the bankruptcy case. So, after the bankruptcy case is over, I would say to the clients get in touch with the IRS and the DOR through your accountant and see if you can make a payment arrangement with them. Because the balance that's going to be owed is not going to be all that high. You can probably pay it out over three or four years and fix the problem that way. If worst comes to worst, you can file another 13 and just pay the tax debt.

© MCLE, Inc. All rights reserved That's rarely going to be necessary. You probably - the balance is going to be so much lower. You could probably make a payment plan to take care of it through directly through the IRS or the DOR.

>>:Now, Richard and I are dear friends, but I disagree. I - from the fact pattern, it said that if we just didn't have to pay our credit cards, we could pay our mortgage. So if I take - I'm going to extrapolate from that one sentence in the fact pattern that the relief of a Chapter 7 may be exactly and really really all that this debtor needs - debtor and are debtors need - because if they stop paying on their credit cards they'll have enough to pay the mortgage. Maybe they're a couple months behind - presumably they're three months behind - but that's something maybe they can catch up or do a loan modification. A Chapter 7 slows the process down. You have the right in a Chapter 7, you always have the right to convert to a Chapter 13. So, I, respectfully, think that the the quicker discharge of a Chapter 7 may be the exact kind of relief that they're looking for. It also should be mentioned that when it - if you haven't filed a tax return, you're not going to get a discharge of that debt. But there are provisions that permit a discharge of essentially old income tax debt and that's something you basically say, you know, death and taxes you don't get a discharge of taxes. But you can, if it's income tax and if you file the return timely. But, you know, it's something from 2012. It has to be a tax that was assessed more than three years before you filed the bankruptcy. And that's something that you can come ask me about but you got to get a transcript, you gotta to be really sure that it's really, really old tax debt. But a 7 will let you discharge that. So, there's a lot of benefits to a 7. Nothing wrong with 13. You can always convert to a 13 but Richard and I - I forget that every time in this session we're going to come up in saying I think - he thinks it's a 13, I think it's a 7 case.

>>:We've been doing this for years, and we still have the same argument.

>>:We have the same argument. I think that when it comes to the married couple, we really have to hone in on can they see eye-to-eye to file a bankruptcy? They have to sign these forms under pains and penalties of perjury and agree that they're true and accurate. And if we're not - if they're not even on speaking terms, that's a bigger reason than anything else just

>>:So on the student loan issues - Christina you want to try that? We have two issues on student loans - discharge and, then, this co-signing issue, so...

>>:So - I mean, generally speaking, student loans are non-dischargeable. There are certain hardships that will allow you to discharge theirs. It's hot litigation right now, and there's a lot of - there's a lot of movement towards trying to get student loan dischargeability, you know...

>>:More liberalized.

>>:...more liberalized, you know, an easier path to get there. But, as of right now, it's still pretty difficult to get a discharge off of a student loan debt. With respect to the co-signing, what did I say? I think that I had co- signed on one or two of the student loans for my children. And, you know, I think that - I don't think that that has a bright line either. While I co-signed, I think that some courts will hold that it's - there's no benefit to me as the debtor to have that obligation. That's really my child's obligation and what do I gain from that? So, whether or not that, if it's a Chapter 13 plan and I proposed a payment to my child's student loan. That might be kicked by the trustee, and the trustee might give me some some pushback on that.

>>:My experience with that is as follows. If you list a student creditor, which you probably would do, student loans credits can file proof of claim in a Chapter 13 case. They will file. And if, in fact, you want to pay it through the Chapter 13 plan, go right ahead and do it. And the trustee's not going to object that you're paying the student loan creditor, but, you know. So, I don't think - and you can separate them out. And...

>>:If a proof of claim is filed, but if there's no proof of claim...

>>:If there's no proof - if there's no proof of claim filed then I wouldn't then I would not pay. That is - yeah, if there's no proof of claim filed, then you, otherwise, provide that we're not paying it, and leave it to the sons, and

>>:But if you wanted to the file a claim on behalf...

>>:You file a claim on behalf, you might. You might want to.

>>:But yeah, exactly. You can file a claim on behalf of that creditor.

>>:Explain that for me.

>>:I'm losing - I forget what it's called...

>>:There's a new process where you can file a proof of claim on behalf of a creditor if they don't file it.

>>:A surrogate claim can be filed by the debtor and/or by the trustee for any creditor that has not filed a claim.

>>:So let's do - any questions about that? No? OK.

>>:If the loan was issued by a bank, (unintelligible)?

>>:So, OK, so that gets to... (CROSSTALK)

>>:Right. Right.

>>:That would not be a student loan, as defined by the bankruptcy code, that we're talking about. It's not a non-dischargeable debt. It would be a dischargeable debt. A loan taken out for college purposes, which is not an official student loan, it's just an extra debt and it would be treated like any other.

>>:I think there is a case - I thought there was a case that talks about what the proceeds were used for. I don't know. I'm not sure about that. So, even if it was, I think if you took money on a - if you use a credit card and use it to finance your college education, maybe that's not a problem? I'm not sure.

>>:But that's not a student loan. That's a cash advance.

>>:That's right, but Don's point is, if it's a credit card and you're just maxing out your credit card, you can use it for whatever you using it for. If you go to a bank and get a loan, 9 out of 10 they're going to figure out it's a student loan and you're going to be saddled with that as a non- dischargeable debt. Because it's - if you go get a discretionary loan they don't know what it's for, that's something different, but lots of times they...

>>:They'll find out the purpose and they'll change it to the student loan category. So there is - there may be a little wiggle room. Student loans. The language is really confusing and the definitional section of what the student loan is takes you to all of these other sections of the United States code. So it's really, really...

>>:It's going to be ongoing for quite some time, I think.

>>:Yeah. OK. So the - so what's the problem with this refinance? Who signed and who didn't?

>>:The question that came up is that there was a refinance and one the spouses didn't sign the situation.

>>:Didn't remember.

>>:And, more importantly, the other spouse signed for that spouse.

>>:Right, OK. As far as the bank is concerned, they consider it to be an innocent scenario. I think that there, you know, they still have a valid lien on the property.

>>:Well, of course the bank's going to say that. You're going to go forward on foreclosure and you're going to have to cure it by some payment plan,

>>:And the argument against it would be (unintelligible)

>>:Yeah, so, I mean, there'd have to be like equitable reformation or something of the mortgage. You have an issue - not sure You just need to know about it.

>>:And it could be a possible criminal action for fraud. And if there is a criminal action, a discharge can be withheld.

>>:Between spouses you can't...

>>:Testify against the other one. So there's a whole host of issues within that one.

>>:Everybody's e-signing now, so how do you - to prove that you didn't sign it would be next to impossible.

>>:I don't know that you can e-sign - can you e-sign mortgages and...

>>:Everything is e-signed.

>>:Wait, but doesn't - how does someone fill out the notary on the mortgage, that you appeared personally before them? How does that work?

>>:I don't about this - I know all the stuff leading up to it is e-signing now. Even on like deeds and stuff it's like there's everything's so - my husband's a realtor - everything is e-signing nowadays.

>>:But there is a notary on the documents?

>>:On a mortgage, though?

>>:And on a deed. (CROSSTALK)

>>:You haven't signed - everything leading up to that is e-signing...

>>:No, you're right. Leading up to it.

>>:But I don't think the mortgage itself can be e-signed.

>>:Maybe not.

>>:Yeah. Yeah. I'm not sure.

>>:Yeah.

>>:OK. So, and then you have all the conflict issues that Christina said.

>>:Well, what if you use the - theoretically - the refi proceedings to pay student loans - or to pay for the school, then does that make it...

>>:Yeah, that's what we're wondering. I'm not sure of that. I'm not sure that one will be a problem.

>>:I think that that - I think it's...

>>:Well, that's a...

>>:The proceeds are something - you've now taken the proceeds from them - from your home.

>>:Wait. Here's the issue with that. That might - well, there's cases on this as to whether or not if you are paying your - you do not have an - a parent does not have an obligation to pay for their kids' college education. So if they take the money out of their house and use it to pay the college education, it may be a fraudulent conveyance. In other words, they've given money to a school but they've got nothing in return. Their kids did but they didn't, so Judge Hoffman would say, no, that's OK. You do have an obligation. He sees that as being reasonably equivalent value, but other

© MCLE, Inc. All rights reserved courts don't. So I'm not - so that's - that would be analyzed as you're taking your property and giving it to your kids like a gift which is a fraudulent conveyance and if you've done it within four years of the bankruptcy case, it can be returned. These concepts, by the way - fraudulent conveyance, preferences - will be discussed tomorrow in the creditors' section because creditors are the ones that usually bring these, so we're kind of skipping ahead a little bit. So when the credit alert comes in tomorrow and starts talking about these things - no, just say oh, wow, never heard of that before.

>>:Now, we - and that Hoffman decision where he says it's OK for the parent to pay for the kids' education, that's on appeal and it has - as far as I know - hasn't been ruled yet.

>>:In Massachusetts there's an obligation to pay for a minor child.

>>:Up to age - but what's a minor?

>>:It's - well, that's - the research...

>>:Twenty-six.

>>:Is it 26?

>>:Well, in probate court there's a rule that says you can pay up to 26.

>>:Yeah, but I don't think that's the definition of a minor.

>>:No, no, no. No, and a minor is defined - there's, like, three different rules out there. There's 18, there's 21 for usual support and then there's up to 26 if it's college.

>>:It's 23 if it's college, actually, and it depends on whether you have to maintain a residence for them when they're not in school or if they're...

>>:That's right. You're right, you're right, you're right.

© MCLE, Inc. All rights reserved >>:...While they're in school or if they have, like, any extenuating circumstances including, like, disabilities and things like that, or if they're working - all of those things kind of...

>>:This thing usually gets litigated in probate court, right? And those decisions, then, will just carry over to bankruptcy court to the extent it's a state-wide issue.

>>:It's a - Chapter 7 trustees are clawing - trying to claw back the parents' payments of tuition, and so - then you have all the issues. How old is the kid? Where does the student live when he's not - he or she is not in school?

>>:They're also doing like a third, a third, and a third a lot of times now. So one parent has to pay one-third and the child has to pay another third in loans, and then the other parent has to pay a third.

>>:But that doesn't necessarily hold true in the bankruptcy court. And I have a student loan case right now that's pending and we filed almost - it was probably over a year ago - and the trustee is holding the case open, pending the appeal, because if they can claw it back they will.

>>:What's the appeal? What issue was on this, again?

>>:Is the student loan debt and whether or not a parent can pay for a child and if there is value that the parent - that the debtor parent - is receiving as a result of paying for the student loan for the child.

>>:This is in the Chapter 13 case?

>>:This is Chapter 7.

>>:That's what I thought. OK.

>>:To repay it to the...

>>:Correct. Yes.

>>:Correct

>>:Exactly.

>>:That's a straight up...

>>:And you won't have that problem in a 13. (LAUGHTER)

>>:Well, no. You may, you may. Right? That affects the solvency analysis.

>>:The trustee's not going to go after it. So that's not going to happen.

>>:That's the key.

>>:Of course he's not going to go after it.

>>:All right. So let's talk about - we did foreclosure. Domicile - what was the domicile issue?

>>:I think that might've - that was my side. I think that was whether or not one spouse was living down in Florida for a period of time versus, you know, coming back and living in Massachusetts but living with somebody - living with a brother...

>>:Right, so where have you been living for the greater part of the preceding 180 days? And so you have to be at least 91 days in Massachusetts for venue purposes.

>>:But also affected that validity of the homestead claim made.

>>:Yes, so that - right. But there's different time periods on that. So the clear the domicile thing, there's no - but people will say, you know - so I think you do have to ask. Actually, there's a question on the state of financial affairs. List all previous addresses for the prior three years. That

© MCLE, Inc. All rights reserved will key you into, do I have a domicile issue here? And I mean, you can wait to get to 91 days. It's only three months and one day, and in Massachusetts it'll be legitimate. But then, as Peter's observed, if you've only been living here for a short period of time, then you may not be able to use the Massachusetts exemptions - for instance, when you move from Florida to Massachusetts and you have to look at the rules on what exemptions you can choose if you're taking the state exemptions, not the federal exemptions. We're going to talk about federal versus state exemptions tomorrow. So there's some timing issues but just looking at domicile - it's 180 days. If you've been in Massachusetts for 91, you're good but then you have to think about exemptions, and we'll talk about that tomorrow.

>>:And also think about whether or not he was actually domiciled in Florida. I mean, did he change his license? Where was he getting his mail? I mean, you can probably make the case either way, as long as you can substantiate it.

>>:Yeah. OK. So kid - maybe you could take this one, Anne - kid's employment future - like what do you do? How do you have to deal with that? Like in the future they may get a job...

>>:He was expected to get a really good job.

>>:From a Chapter 7 perspective - again, I've got my Excel spreadsheet of what came into the economic unit in the last six months before October. From a Chapter 13, it's a different can of worms. And there, you would care if the adult child gets a great job because, all of a sudden, your family unit has a large income.

>>:Yeah, so you're going to have to modify your plan.

>>:Or, as a Chapter 13, my client might need that income in order to fund the plan, and so that's our proposed income that we're expecting within the next month or so.

>>:And the other thing is is there's big money going to be coming in from

© MCLE, Inc. All rights reserved kid's unemployment. You may want to file sooner than later because you don't want that to flow into your means test. So there's a lot - there's just some timing issues. What about unreported income? So this was the cash that Lonny or Lucy was getting from the cleaning job. How do you deal with that issue?

>>:One of the complications with that is that the IRS and the DOR have a tendency to look at bankruptcy filings. So if you put unreported income on schedule I, which is what you are supposed to do because you're putting in your income, it could get picked up by the IRS and the DOR saying, hey, wait a second. You have - if you did this in the last two, three years - schedule I and J are present income and expenses. OK. But if you're showing cash income that you didn't otherwise show, they may ask you what you did in the previous years and so forth like that. I tell the clients, you're supposed to report all your income on your taxes on schedule I. That's what you're supposed to do and live with the consequences. For the most part, especially in this particular instance, the money is relatively small. It's not a big deal. Tax consequences will be relatively insignificant, so I really wouldn't worry about it all that much. But...

>>:Yeah, you can't just forget, right. You can't forget about it and - so yes. You can always amend - you can go back and amend three years of tax returns. You can always do - I mean, that's what you tell the clients. Say, listen. I got to put it down the right way here and you should amend your tax returns. OK, you've covered yourself. So if they don't want to do it, it's up to them.

>>:We sign off on the petitions, as well - that we have done our research and that we've investigated to the best that we can investigate. So if we have information that the client doesn't want to list, then you need to think about whether or not you want to represent that client.

>>:Well, that's a really good point. That's right because there's a provision on - why don't you talk about that?

>>:So at the end of the petition it says, you know, the client certainly signed the pains and penalties of perjury and we as attorneys also signed,

>>:There's a reason why I think the word is reasonable investigation.

>>:Reasonable investigation.

>>:Yeah, so there is a - I don't know if any lawyers - I don't know if you've seen any case law where anyone has - I haven't looked for it so it might be there where anybody's been sued under that provision, but you do - you can't - in other words, if a lawyer - if the client just dumps all the information on you, you can't just take that, put it in your petition, say, OK, I'm done. That's not reasonable. That's nothing. That's basically typing. You could give that to a typist and do that. So you have to bring more to the case than that.

>>:That's why it's important to ask those questions.

>>:Right.

>>:Over and over again, ask them.

>>:In different ways, too - different ways because they just don't know.

>>:Anne, I'm going to pick on you again just because it's overtime. That's kind of a means test and like, what do you do with that overtime?

>>:OK. So it's - overtime basically shows up on the paystub. I took - I make them give me each copy of each paystub and I - and it's painful because I actually put down the FICA on one column and the FUTA and the unemployment and everything else because at the end of the day, I want to have my gross income averaged over that six-month period and then I want to pull out, as a payroll deduction, exactly what they paid in taxes over that six-month period. The cases say that sometimes a paystub over- withholds, so I want to be careful about that, too, that they're not getting, you know, a $20,000 each year on April 16 because they've over-withheld. So I have to be concerned about that. But overtime is income and it's

© MCLE, Inc. All rights reserved historic for the means test, but in terms of my schedule I and J, what's my present income? You know, overtime is, lots of times, optional. So I'm not sure I would always put every drop of overtime in my schedule I if the individual didn't think they were going to do overtime next week.

>>:So what if they said, I had overtime for the last six months but I'm never, ever going to get it again? Can you exclude it from the means test?

>>:Well, I hear that more on bonuses. I mean, they said, I got a bonus but I'm not going to get a bonus next six months because the company's in real hard times. Then that's not on schedule I, for sure. That's not on my present income.

>>:Could you exclude it from your means test saying they received it but it's not indicative of what they'll receive in the future, therefore I have not included - you say it.

>>:I think I've done that on one means test where I said this was a one- time only, will never get again bonus. And I did not - and it just disclosed. I did not include this in the means test.

>>:Special circumstances?

>>:That's really what it is. That's really how it qualifies, yeah. Yes, those are special circumstances.

>>:I also find that it's important for pre-bankruptcy planning. So if there was a close call again with that means test, I might say we're going to wait, you know, two or three months to get them out of that...

>>:Bonus appearance.

>>:Exactly.

>>:OK. What about that last credit card payment and amount? So does that - why does that - why do you think - why does that matter?

>>:If it's a preferential payment depending on how much...

>>:Yeah, it's kind of like we can do payments to insiders and last credit card payments. Is all that kind of preference?

>>:Yeah, so we had said that there was - we were borrowing from family and friends and paid back right away, as quickly as possible. That's an insider payment. And I believe in your materials, there's actually a list of definitions that might've been gone over before I got here. So an insider is really somebody who's, you know, close family member, close friend, and you've chosen to pay them back - you've preferred to pay them back - rather than pay back your credit cards.

>>:You've seen it with a close friend, or is it a family member?

>>:It could be a close friend.

>>:It could be like a control party.

>>:You see that treated as a one year...

>>:Boyfriend, girlfriend.

>>:Boyfriend, girlfriend - yeah...

>>:Oh, for sure. Yeah.

>>:...Because you have to list who you've made a payment to within the past year.

>>:Yeah, when you look at the definition it says, like, the thing - but the definitions say insider includes, so it's not including - insiders are only, so that's why - so it says exactly what you said. It says family members. It doesn't say boyfriend or girlfriend because of that language - includes - and you've got to drill down a little further and see what that is. So, Rick,

>>:All right. The question was whether Lonnie needs to get a truck because his truck is in bad shape.

>>:And we already know he would advise to get a new truck.

>>:I would. I mean, the fact of the matter is if you get a new truck and you have a car payment, which you're likely to do - let's assume that for these purposes - then that's going to be expense item, which is going to help you on your means test calculation, so I think that would help you if you're borderline there. Also, you need - people are going to need a truck in order to get to work and so forth like that. I would say you want to do it, if you can, in advance because if you file a bankruptcy case - file a chapter 7 because you probably cannot get a car loan until the bankruptcy case is over and you get your discharge. That's six months or so and you may run into a problem with that. You're in a Chapter 13 case and you're going to take out a car loan, you're supposed to get bankruptcy court permission to get the car loan. Actually, if you read the code it says, the trustee agrees on a car loan. But the trustees never agree. They say, file it in court. And it's not an issue. You file a motion in court to incur debt in order to do a car loan but you're better off, if you can, to do it in advance because it just saves a lot of headaches.

>>:Is there any prohibition on a lawyer telling a client to incur debt before bankruptcy? I know you can't tell them not to - what is - what am I thinking of?

>>:No, you can't tell from to incur new debt.

>>:It says that in the bankruptcy code. OK. You can't tell them to incur new debt. So here, you wouldn't be telling them to incur new debt. You would just say, buy a car.

>>:Buy a car. Right. Correct. Yeah.

>>:And I only - I mean, if my client just - if they, you know, have a car right

>>:Living.

>>:...Living, for their livelihood. So I advise, you know, you're going to pay cash for it. You know, you're not going to incur debt where you have a, you know, a loan against it. And presumably, whatever car they have is going to be, you know, sold or, you know, given towards it. So I've advised that.

>>:It's easier to do it before you file than afterwards. That's the point.

>>:So the parents will - the issue there is, can - so you can - Anne touched on this. So Monnie has a sick somebody or other and they're going to inherit from them and they know this. And so, you can - you absolutely, positively can talk to the parent and be disinherited. There's enough - that's not a fraudulent conveyance. That's not - that's just - that is black letter. You can certainly do that. You're just being disinherited. If you're inheriting under a trust and it's irrevocable then, you know, you are where you are. But certainly, the parents - the parents will do with their property whatever they want. So you go to them and say, hey, mom and dad. Now, the problem is when you tell them that you're going to file bankruptcy and want them out, does that kill them right then? So that they have a chance - you just have to be careful about that.

>>:We are not that morbid.

>>:But if that - assuming they'll just, like, drop at the spot, then you'll have the time to get through it.

>>:So your parents can change their will at any time. You can't transfer any of your assets at any time - or your client, rather, can't transfer their assets at any time. So that's really important to let them know because some of them say, well, I got to get this out of my name and...

>>:I don't think you could file a disinheritance after the bankruptcy case was filed. The parents would have to...

>>:The parents could do it, but you couldn't file that says, I'm rejecting my inheritance.

>>:No, if they're dead, you can't reject - but yeah, you can be - yep. Question?

>>:Well, we've talked about the look board for Chapter 7. Does that also apply to Chapter 13?

>>:Yes.

>>:The disinheritance? The disinheritance?

>>:No, the inheritance. (CROSSTALK)

>>:Yeah. If you inherit any - during the...

>>:Five years. Yeah, usually five years. Correct.

>>:And refunds?

>>:I don't know if I - it's never come up whether it comes up after the 180 days, after the plan is over. It's just never come up so I don't know the answer to that one, but certainly, during the course of the plan...

>>:There was a recent - I just remember reading something about that - that it doesn't - there's no limitation for 180 days in a Chapter 13.

>>:OK.

>>:Oh, OK. So what's the issue about representing who - so Lucy said, I want you. This is one-stop shopping. Rick, you got to represent me in the bankruptcy case and the divorce case. So what issue might be lurking there, my smart panelists?

© MCLE, Inc. All rights reserved >>:Whether or not there's a conflict - I mean, that's the immediate issue. I wanted him to represent me in the - you know, he's representing me and my husband in the bankruptcy filing, and so...

>>:If it's a joint filing.

>>:If it's a joint filing, and through the course of that, he is learning information that might be helpful, you know, for me and for the husband. So I think there's a direct conflict there with - in terms of representing me for this, as well as for a subsequent divorce filing.

>>:For him and - so would you say his whole firm is disqualified?

>>:Yes.

>>:OK.

>>:Yes because the firm has access to the information that the attorney has.

>>:OK. All right. What about - of the - oh, travel to Florida - I kind of forget what that was - oh.

>>:The expenses?

>>:Oh, OK. Yes. Was that what it was?

>>:Yeah, where there was like a special circumstance.

>>:Oh, OK - where the...

>>:There was debt that was incurred, also, in the travel to Florida. Now, there was a specific credit card I wanted to keep open or he wanted to keep open to allow us to travel back and forth to try to work out our issues.

>>:So what do you think about that? Would you be able to do that? Would

>>:You're not going to be able to maintain credit cards in bankruptcy regardless. I mean, it just - it'd just get wiped out whatever chapter it is, it doesn't matter.

>>:I don't think your travel to Florida would be a special circumstance...

>>:No, I don't think so.

>>:...Be able to claim as on a - in a 13 horse. I imagine that'd be tough. What about the gambling debt that they incurred? Do you think - do you see any issue in connection with gambling? So this is gambling debt, I think, on a credit card right? Through cash advances.

>>:No, this was use of a refinance. Oh, I'm sorry, the Christmas fund.

>>:Oh, Christmas fund - OK, so yeah. Just - so there was a problem with using Christmas fund to pay - to gamble.

>>:On gambling, I have two comments. First, on the Christmas fund - there's something about people - it's fine. They plan ahead, and they designate a bank account for some particular thing. And this trustee one time - I had a debtor say to me, well, I do have that other bank account, but that's for my health - you know, from my medical, any medical. You know, no, it's a bank account. It's got cash in it. It's not any different than any other bank account. So I always ask the question - you know, are these all your bank - you've listed two bank accounts. Do you have any other bank accounts? And that one time I asked, the guy said, oh, yeah. I've got the one that's for my medical bills. Well, that money came to his creditors because there wasn't any contract. It wasn't held in trust. It was just a bank account holding money. So when people say, I've got a Christmas fund, it's just a bank account. I don't care if you call it a Christmas fund. It's still just a bank account.

>>:Is that differentiated, Anne, from a health savings account?

© MCLE, Inc. All rights reserved >>:Yes. There - the new, you know, federal laws permit a flex account and all these things that are all contractually bound together and let you set aside certain money. And that - those are protected. On gambling, I think the issues have to do with bad - what - is the debtor committing bad faith? Is there fraud here? And is the debtor entitled to a discharge? And I have represented multiple gamblers, and I kind of need to know that they're not going to - I kind of need to have them come to me once they've kind of finished their spree. And the reasoning is, I don't want to see, you know, another cash advance two days before the bankruptcy. And I want to see that I can - that we can sign and truthfully state that we're going to - he's going or she's going to Gamblers Anonymous. This is not trying to be moralistic. It's just if the person has a serious gambling problem, that's the explanation for why they have 150K in debt, and it can't be that they - a fraud is when you knowingly take out a credit card knowing you're never going to pay it back. That's fraud, and you're insolvent at the time. So if I can say they didn't, they had a gambling problem, this is an illness, and they're getting help, and it's been six months, and they haven't gambled the last six months, then I file for an individual that's got $150,000 of debt, and it's mostly gambling debt. But it's - I believe - I have gotten discharges, and I believe that's the appropriate way to handle that.

>>:The other thing with the gambling debt is you have to find, like, where did it all go? So how do you show where the money went? So the records - there should be records from a gambling house...

>>:Well, that's impossible.

>>:...But, you know, there's some certain - you know, trustees can inquire - as part of your bankruptcy, you have to be able to show a basis for denying someone these discharges. They cannot show, like, where the money went, what happened. I've been involved in cases with gamblers who, A, don't want to talk about it and, B, don't want to show any records on it. And you can lose your discharge for that. So you have to make sure that when somebody files bankruptcy, they have to know this is an open book. You have to be prepared to talk about it, disclose it. Yep, I went to Foxwoods, I went to Twin Rivers and I went to something else. And you'd show your bank records, or you show whatever records there are from the

© MCLE, Inc. All rights reserved gambling place so you can show you have all these huge credit card debts. Where'd all the money go? You've got to be able explain that. You have to be prepared to do what you can. You just have to be prepared - you kind of have to know...

>>:(Unintelligible) Are gambling debts collectible? Where I am, they are not.

>>:Oh, no, I have no idea. I'm not - I don't know.

>>:Because that - I always use it as an answer because of...

>>:Oh, no. If you owe...

>>:A credit card - be using your credit card.

>>:Yeah, the credit card was at the casino. The machine was in the casino.

>>:It was.

>>:It was obviously (unintelligible) this debt is uncollectible and you (unintelligible).

>>:No, they're - as far as I understand, you know, Foxboro can collect a debt from you. They're providing a service.

>>:(Unintelligible) In Massachusetts.

>>:That's my understanding. Sure.

>>:(Unintelligible).

>>:Non collectible. All right, what about - there was something else I wanted to do here - oh, so the - oh, bankruptcy before. OK. So that's easy to check, right? There's PACER. So PACER, you can put in the debtor's social security number and find out if they filed for it. What's very

>>:Yes.

>>:Everything self-populates. And then you find out - that is really a bad scene.

>>:Yes.

>>:OK. So you want to know that beforehand, so you just run it through PACER. Now, the thing is, how do you - you run it through PACER, just from PACER in Massachusetts. So did they file in Rhode Island, Connecticut, New Hampshire? So you do have to ask. But definitely run the PACER in Massachusetts so you can get some sense of that.

>>:Well, if you get the credit reports, it should show.

>>:Yeah, it will. It will, that's right, get your credit reports.

>>:Well, another thing we talked - we didn't talk about, but let me just throw this out here - sorry, for me - especially in Chapter 13, but I think it's true both times, the client owns real estate, client's intending to do - to own real estate, get a title rundown. Make sure you know what's there. For example, if there's an attachment or an execution lien on the property, and if they're coming to see you for a bankruptcy case, there's a good chance there is, you can get - you can remove that lien from the property if you file the proper paperwork in the bankruptcy court, and you won't file it if you don't know about it, and that's because you haven't done the title rundown, so.

>>:And when they go to sell the house later on and you haven't filed the proper paperwork as Richard just said, they're coming back to you, and their real estate attorney is coming back to you to find out what the heck happened and why you didn't file that motion.

>>:Alright, so we have these assets that are kind of a little sketchy, grey, nobody wants to talk about them - so there's a Thunderbird car that's like,

© MCLE, Inc. All rights reserved somewhere, and there's this - the 59-piece Hummel collection that I won't forget. So, what - Pam, what do you think about like - and she's just very clear, I didn't - there's - I don't have any Hummels.

>>:You've got to list them. I mean, what might not...

>>:Or if your client says no, they won't sign the petition.

>>:Then you don't sign the petition.

>>:Walk away.

>>:I mean, like I said, your name is going on that, so you need to put down all the information that you have. And, I think it was said once or twice, don't rely on just the verbal that your client is giving you, get documentation. So, if they say they've got 59 Hummels, a quick Google research is going to tell you whether or not there is any value to that. It's not the end all be all, but it's a good starting point. And if you find that there's value in whatever that particular asset is, you know, get your clients, get an appraisal.

>>:Having been a comic book collector at one time and no longer, I was familiar with the comic book market. I had a client, came to me, actually an attorney to find a Chapter 7 case, and he had a pretty substantial comic book collection. I said, OK here's what I need you to do, I said, go to the comic book store that you buy most of your stuff to. You have a relationship with them which he does, yeah, yeah, something like that. I said, have the guy from - one of the guys from the comic book store come out, eyeball your collection, kind of see what's - they don't review every one of 15,000 comic books, whatever. Take a look at the collection, give me a letter on letterhead station that says, I've looked at the collection. This collection is worth approximately X amount of money, and then you produce that to the trustee and the - that's going to take care of the issue. And that's true - and that's true of any asset that you have that's really unusual like that, it's also true. I may have mentioned this before, if you have any expense on Schedule J that's unusual, that's not ordinary, get back-up documentation for it. It just cuts off the trustee before they even

>>:On the bank set-offs, the issue lurking there - at least one issue is...

>>:Tell your clients to move their cash from that account immediately.

>>:If you have a bank account at any financial institution and you also have a debt with that account of any sort, a credit card, a car loan, or whatever it is, take your money out of the account. Close the account, and move it someplace else. It's perfectly legal, and there is no problem. But, the bank can grab the money out of the account. They don't need bankruptcy court permission to do so. It is allowed, and it will happen fast.

>>:They don't need to notify the client, or the debtor. They don't need to notify them before they do it.

>>:It's a question you always have to ask.

>>:What about using credit prior to filing? So, Lucy made it very clear that she needs to get some things. She's got her credit card now, she's got help outfit the stereo. I think we got to update the TV. I have a plasma TV. I don't think those exist anymore.

>>:That said, it was really big, though.

>>:I know, but I got to work on that. So, we're - that's about 10 years old. Yeah, it's like blood, I don't know.

>>:It's a 5K TV, now.

>>:I guess that's what it's going to be. We need smart panelists. So, where was I? What were we talking about?

>>:Using the credit cards too much.

>>:Using credit. So, you can't use credit before your filing. You can't incur debt in the anticipation of filing, and you certainly can't counsel your client

© MCLE, Inc. All rights reserved to incur any debt in the anticipation of filing. So just, don't do it. Tell them not to use those credit cards, cut them up, give them to you, you know, shred them. Don't use them.

>>:One thing I will do, I mean, sometimes you have to have credit. Like, you can't not have it for whatever reason. So what I'll tell my client is, if from the day you meet me to the day you file, if you have to use a credit card, for $700, you're going to pay that before we file. So, at least if you use and pay, I'm OK.

>>:Yeah, I agree.

>>:I don't like it, but, you know, sometimes you say geez, you know, I have to go to a convention. I've got to use my - I mean, if they don't have a credit card, they can't get there, because you have to make the reservation. Can't send cash in the mail. So, you know, but they got to pay it.

>>:But usually you can use a bank debit card will solve the problem most of the time.

>>:I always advise against it, because they got into this position for a reason. So, they might have high hopes to pay that $700 credit card after the convention, but they might not be in a financial position to do it. So, I never advise them to incur any credit.

>>:Don, I don't know if I'm allowed, but I want to go back to the Hummels and the T-Bird. I had a client that finally disclosed after I asked five different ways at three different meetings, do you have any other assets, do you have any other things, do you have anything, you know, what are the walls in your living room? What have you got on - in the dining room? And, she admitted that she had original drawings from the Snoopy artist, Schulz, and they were signed. And she said, but I don't want to list them, and I don't want to lose them. And I said, thank you very much. See you later. You can't file a bankruptcy for someone if they don't disclose their assets. The answer would have been, take them off the wall and go have them appraised, and then we'll handle it from there, but she was - didn't

>>:Now, that's really the valuation issue, right?

>>:Yeah, it's valuation.

>>:So you're saying, say some of these things - some things you rely on your client, but some things you want - how about real estate? Will you rely on your client for real estate value? What do you do?

>>:No, I need a valuation for that.

>>:What kind?

>>:At least, a broker's opinion. At minimum, a broker's opinion.

>>:OK, so how about...

>>:You won't use Zillow?

>>:How about like Zillow, like an online valuation? How about - or a tax assess value? What about those?

>>:No.

>>:I'm willing to use Zillow if the - if the equity amount is relatively small. And so, it's going to be way within a homestead amount without any question, I'll use Zillow. If you're filing motions to to do something regarding removing liens - and you're using the - if you're filing motions in bankruptcy court, or remove liens from property, and it gets the valuation, the judges won't let you - use Zillow. You're going to have to get a bank broker's price opinion, but for more informal purposes with the trustee, the trustee will take the Zillow. They will not take an assessed value, they will take Zillow.

>>:Some.

© MCLE, Inc. All rights reserved >>:But if - if the value - if the equity cushion is fairly high, I mean, if you're looking at a Zillow where your equity amount is showing you $400,000, don't rely on Zillow. Get a good - get a formal appraisal, because you don't want to take a chance that you're going to fall outside...

>>:If your house is upside-down, there's no equity in it anyway.

>>:I agree with Richard on that point, but I also will - I will ask my client what they feel that, you know, that value is, because sometimes it needs a lot of work that you're not going to get from Zillow. So, I'll ask them what kind of condition the house is in.

>>:So, what do people - cash advances, any special rules, requirements on cash advances? Are they treated very much differently?

>>:Yes, 90 days.

>>:Ninety days prior to the filing.

>>:So, if they're within 90 days prior to the filing, presumption non- dischargeable or some such thing? OK, so you got to watch cash advances and let it - well, it's not a preference, because you're taking it.

>>:Well, same idea, though.

>>:Yeah, so you just got to be careful. It's non - it's not the same idea. They're non-dischargeable. So, it's just - it's different. It's just - just be aware of cash advances. It doesn't come up often in my cases, probably not in your cases either. That's not a real big problem. And, medical debt, does anybody - there was a lot of medical debt here. There was a lot. Does anybody see a problem with medical debt?

>>:I think I just - I pointed out earlier, a lot of times, medical debt does not make it onto their credit report.

>>:It almost never makes it.

© MCLE, Inc. All rights reserved >>:So you want them - unless it's in collection. So, you want to make sure you ask your clients about any type of, you know, doctor's bills, medical bills, dental bills.

>>:Well, here's an interesting question then. If you have someone - client that comes to see you, it's going to be likely a Chapter 7 case, OK? But they're significant medical issues where they're going to be incurring significant medical debt for an extended period of time, OK. Which may not all be covered by insurance, but they've got these conditions there. You might want to think about holding off the bankruptcy case for a while if you can for an extended time until the mental condition has stabilized, and not incur any more medical bills.

>>:Could be a time - I guess it could be a timing- timing of filing. The homestead, I'm not sure - I don't recall, I don't think we specifically spoke about that. That's, right? So, a homestead is something you can use to protect a house, a recorded homestead, and we're going to talk more about that tomorrow when we go over the bankruptcy schedules. So, I don't think it necessarily played into this - I don't think there was a question of whether - you have to find out whether a homestead if it was recorded or not, right, so that's important, and we'll kind of, we'll get into that a little bit tomorrow. What about parking tickets? Can you knock those things out? Anne, why don't you go on with that.

>>:Section 523 is limits on - or certain exemptions to the discharge of certain debts, and any debt to the extent such debt is for a fine penalty forfeiture payable to a - or for the benefit of a governmental unit. So, the notion is, it's the city of Boston that gave me all these dreadful parking tickets, and so, it's quite - I would assume, that it's not going to be dischargeable. I've read some indications that maybe in a Chapter 13, you could treat it as an unsecured debt in a Chapter 13. That's, I don't know the answer to that, but that's a possibility, but it's certainly not - I believe that it's not dischargeable.

>>:But, I'll go back. You're not going to be able to re-register the car if you haven't paid the - if you haven't paid it. And if, even if you incurred it in Boston, but you live in Medford, it goes up to the state, and you won't be

>>:What do people think - well, why is hand-holding, forwarding mail, forwarding calls, why is that important? Why do people - well, one reason I asked you this for is, what's the fee in the case going to be? So, if you have a very needy client which Lonnie clearly is, and also somewhat contrary, then you might - now Lonnie, here's the interesting point, right. Who pays the fee? How's the fee going to get paid? That seemed to be a little bit of a - there was a little bit of a - little bit of a problem there, but I think this client is going to be high - a higher maintenance maybe, more time, more effort to get to the filing. Might you charge a little more, or might you think about it anyway? Yup?

>>:Would you usually recommend doing the divorce first and then the bankruptcy, or the bankruptcy first and then the divorce?

>>:Oh, great question. All right, so which...

>>:In a case like this where you have, like, the tax debt and the foreclosure, you need to file something quickly, but if it's enforced later, you're going to have to redo a plan if you're a Chapter 13 or is that still while the chapter is pending?

>>:Well, I think if the spouses are amicable, then it makes every bit of sense to file ahead of time especially if there's a lot of - before the divorce, especially there's a lot of joint debt. It makes the divorce that much smoother, because there really isn't that much of a division of assets and liabilities, or, at least liabilities anyway. But, you don't always get those amicable clients.

>>:Right. In this case - in this case with a foreclosure like coming down, you don't have that right. In a lot of cases, like Richard said, you don't have a choice. Foreclosure is tomorrow, you're not thinking, you just got to go, or not, and explain to them what the, you know, pluses and minuses are. I mean, I - go ahead.

© MCLE, Inc. All rights reserved >>:You also get the benefit of having one filing fee if you file jointly. Which, if you file separately, then they have to get a separate attorney, because you can't represent both, so.

>>:I was thinking the fact pattern part of the phone call thing was that they were getting calls from, like, credit - debt consolidation companies, which is very different that getting calls from creditors because debt consolidation companies are definitely trying to...

>>:And they are as sleazy as they come.

>>:Yeah no, they're the worst. So, my recommendation, whatever you do, is not to take their calls.

>>:Oh, right, yeah that's true. Yeah, from those companies those - yeah, many people get into those plans, but I've not seen many that are successful.

>>:Some of them are shams.

>>:Back to the divorce versus bankruptcy. That is a sub-specialty that I'm very interested in, and it's the two, the probate laws, the divorce laws versus the bankruptcy laws. In probate court, you're worrying about the family unit and the children, and in bankruptcy, you're worried about debtors and creditors. So, they're just diametrically different worlds. And, the short - the take away on that is you could file maybe the bankruptcy first and divorce second, or you could file the divorce first and the bankruptcy second - second. But, please don't file them both at the same time. And I say this at every seminar, all the time and yet, still it happens. And the reason is, now you've got a very anxious and eager trustee in the bankruptcy looking for assets, and you may have a rather angry spouse that's going to start talking to the trustee about these assets. So, you may end up really with the double loss on the part of one of your clients.

>>:And also, the divorce is stayed pending bankruptcy, action without court approval.

© MCLE, Inc. All rights reserved >>:Yes, yes. It's really, if you really want to mess things up, you file them both at once, so please don't file them both once. But, now that doesn't mean it doesn't happen and it happens frequently - or not infrequently. And it's because there's a foreclosure, or, it's because the parties really cannot stand it anymore, and they have to file a divorce. And that's, that happens.

>>:So we have a few items we'll probably take them tomorrow, because I kind of want to wrap up now. So, are there any questions on what we've talked about or any burning issues that you'd would like to raise at 4:27? (LAUGHTER)

>>:All the hands go up.

>>:Right.

>>:Do you have something?

>>:So, just out of curiosity. Nothing to do with this, because it has happened a couple of times, right, before the 341 meeting. Slightly morbid, but what do you do if your client passes away before the 341 meeting happens?

>>:There's a whole new local rule about death of debtors. It's a whole specialized area right now. Let's just say it's too complicated to get into right now.

>>:There is a local it does spell it out, and...

>>:And this was just adopted within the last year. It's very hot hot on the press.

>>:Yeah. So, yeah, I haven't gone through it yet myself. I mean, obviously, they can't appear unless you have a seance. They're not coming. You know, so, right. And they've literally been discharged, okay and they have the ultimate discharge - right? - not paying. (LAUGHTER)

>>:I'm not going there.

© MCLE, Inc. All rights reserved >>:I thought this through a little bit. So, yeah, because there's nobody coming 341 meeting, unless there's a representative appointed. You have to file documents with the court notifying them of the death, and then telling what efforts you've made to find someone that can stand in their stead.

>>:Yeah, I - this just came up for me within the last three weeks. I had an ongoing Chapter 13 case, and I get a phone call from the daughter of the father passed away, ongoing 13. I said OK. I immediately sent an email to the trustees, just letting them know what's going on. Said well you've got to file something. Said while they're filing their probate work, I'll wait for the appointment, it's done. This happens to be a funny situation, because the mortgage is really a one-creditor - the bankruptcy case is one-creditor case. It's a reverse mortgage case. So, the property is going to - banks are going to be able to foreclose in six months after the - after the death. So I said to him listen you know, forget about the bankruptcy case, this isn't going to solve your problem. You got to look at the bigger picture, which is, what are you doing with the real estate? And they're in the process, right now, evaluating whether they're going to take out a mortgage and refinance it themselves, or are they going to sell it. And, you know, we need to make that decision and so forth, like that.

>>:So I'm saying, the good news is, there's now a local rule that wasn't there for a long time.

>>:But Nicole's being modest, because what she's had to do, when I'm the trustee, is send the debtor's attorney - check one box, you've got to tell the world that there's been a death here. Number two, you've got to fill this form out and submit this to the court. And, number three, then you've got to ask the court to permit the administration of this case. And, we had, I had to have a hearing recently where the debtor had done one step, two step, but hadn't done the third step which is, you have to then tell the court please, court, let me administer this case. So it's, they've made it kind of complicated. I think the local rule is kind of complicated, but it's three, at least three steps, you can call Nicole, she'll tell you how to do that.

>>:My client had passed away after the 341 meeting, so it was a bit easier

>>:After - I won't tell you which trustee that was.

>>:What, Marcella, what's your question?

>>:Oh, I was just wondering what the effect is of discovering that they did previously file it.

>>:Depending on the timing, you might have to wait. You may be prevented from filing.

>>:So, if they got a discharging a previous case, it depends on what chapters are being filed, but one thing that affects is whether they can get another discharge, cause you can only get a discharge so often.

>>:Eight years.

>>:So for Chapter 7, Chapter 13 every four years so, can they get a discharge in the new case, that's one thing that's important. And, the other thing is whether the automatic stay applies, because, if you file successive bankruptcy cases, you may lose - the automatic stay may not be automatic. You may have to ask the court to impose the automatic stay. So, those are the two key things - the automatic stay, and the impact on the automatic stay, and the impact on the discharge. And 727, section 727, has the rules on the discharge. And section 362 has the rules on the automatic stay. And we're going to talk about those tomorrow on the creditor side.

>>:All right good, we'll see everybody tomorrow. Thanks our panel for coming, because they will be here tomorrow. You're going to to get a whole new crew. You're stuck with me, but they're all new. ---

>>:Don Lassman, who is our chairman, is going to be just a couple minutes late, so I get the pleasure of introducing you to our first speaker. Tiffanie Ellis-Niles is the founding partner of Lyles and Ellis, a general practice law firm on the south shore of Massachusetts. Tiffanie focuses her

© MCLE, Inc. All rights reserved practice on bankruptcy, domestic relations, and landlord-tenant disputes. Tiffanie also has extensive experience representing clients in family law, real estate transactions, estate planning, small claims, and contract matters. In 1999, Tiffanie received her Bachelor of Science degree from the University of Massachusetts Boston and her J.D. from Suffolk Law School in 2004. She was admitted to the practice in Massachusetts in '05. In 2010, Tiffanie was admitted to practice in the Massachusetts bankruptcy courts. Tiffanie is the immediate past president of the Massachusetts Black Women Attorneys and continues to sit on the board. Additionally, Tiffanie serves on the board of the Lawyers Committee for Civil Rights and the Brockton NAACP branch. In 2014 and 2015, Tiffanie was recognized as a Massachusetts rising star by Lawyers Weekly Super Lawyers. Tiffanie.

>>:Thank you, Bruce for that introduction. Good morning, everyone. Well, what we're going to go through now are the forms that you need to actually start the bankruptcy case. Once you've, you know, met with your client and you've, you know, got your questionnaire all filled out, you're going to actually, you know, go through the process of completing the forms. Like you'll probably hear throughout this program, if you haven't already, most people who do this work - they use some type of software to complete this form, which makes your life a lot easier. When I first started, though - I actually did do my first one by hand, and that was awful. So I would advise you to invest in some software to make things a little more practical. So the first form that we're going to look at is going to be the voluntary petition, which is the official form 101 that you'll see up on the screen. Just a few - before we get into all of the forms, just want to give you guys just some notes. I mean, it's probably obvious, but when you're completing these forms, you want to make sure that you're providing complete, accurate and current information. You want to give full disclosures of all the assets and liabilities and other financial information when appropriate. You should check a box no rather than just leaving it blank. And you want to make sure you provide the correct and adequate property description. You want to convey the information on the petitions as clearly as possible, and when it's appropriate, you want to supplement any answers giving with notes indicated by an abstract or on the - on an attachment. And when you attach any documents to these petition's, just make sure that you write the docket number on the form if you know it, definitely the debtor's name. You

>>:Tiffanie, you had mentioned that this was a form 101, and I think I've accidentally got form 106ab up here.

>>:No, that's the right from. Yep, that's the right form. Sorry.

>>:Sorry.

>>:Yep? Go ahead.

>>:(Inaudible).

>>:I don't know if the forms made it to the handout, but they're - but the forms are on the Mass. Bankruptcy website. So if you go there just to Mass. Bankruptcy website and click on official bankruptcy forms, all the forms that you need to start the bankruptcy petition you'll be able to pull up. So for the voluntary petition, it has seven parts. In part one, you're going to be required to give the debtor's full name and any other names that the debtor has used in the past eight years such as if they were married and now they're divorced, you know, give their maiden names. You want to make sure the name provided in part one is the same name that's listed on the debtor's government ID because they're going to use that to show at the creditors' meeting. On this form, you're only going to give - you can scroll up just a little bit...

>>:Sure.

>>:...If you can. Yep. You can go up to the next page.

>>:Next page?

>>:You're going to give just the last three - this is not the right form, so let's...

>>:This one? All right.

>>:You've got everything else underneath.

>>:OK.

>>:So it's - the website is up right now, so for the next programs, anything else, just minimize the tab and it should keep going.

>>:Perfect.

>>:All right. Thank you.

>>:Sorry about that.

>>:That's OK.

>>:Sorry, Tiffanie.

>>:That's all right. Thank you, Bruce. So for section 3 on the petition, you're only going to give the last four digits of the debtor's Social Security number because these forms - all the petitions that you file are going to - they're going to be made available for the public, so obviously, you want to keep that information safeguarded. There's going to be another form that you're going to fill out throughout these forms where you're going to give the debtor's full Social Security number and then you're going to file that form separate from the petition. In line 6, the debtor is going to indicate the filing venue by checking the appropriate box, stating that they've lived in the district within the last 180-day filing period. In part 2, section 7, on the third page, you're going to tell the court about the type of bankruptcy case that your debtor intends to file. Just check the appropriate box there. On line 8, you're going to tell the court how you intend to pay the required filing fee, whether it's going to be attached to the petition or if you're going to be paying in installments or if you're going to be pay - asking for a waiver. If you're going to - if your debtor's going to pay in installments, there is

© MCLE, Inc. All rights reserved another form that I'll just reference. It is listed on the website, but it's from 103(a) and you're asking that the application - yep, that's fine. Thank you. If you are requesting that the fee be waived, you're going to file form 103 (b), which, again, you can also find on the website. Both of those forms - when you're making that request even for installments or for a waiver, you're going to file it with the petition and it has to be approved by the court before, you know, you're allowed to do that. On line 9, your asked whether you have filed bankruptcy previously within the last eight years. And if the response to that's going to be yes, you're going to provide the dates that you did that filing. Line 10 - asks whether there are any pending cases filed by a spouse who is not filing with you or by a business partner or an affiliate, and you would provide that information there if you have it. On line 11, it asks about whether or not you rent your residence and if there is a pending eviction against you. You should check the box yes and complete form 101(a), the initial statement about eviction judgments against the debtor, and file it with the petition. Again, that form 101(a) is also available on the same website that we talked about earlier. In part three, line 12, the debtor's asked to report any businesses owned as a sole proprietor. And if yes, to describe what type of business that was or is.

>>:So 103(a) is if you want to pay in installments or asking for a fee waiver?

>>:Fee waiver, yes. And just attach them both with the petition when you submit them.

>>:A little note about that part three - if they're a sole proprietor, make sure that you list all their business debts. So if they run a business and they have business debt - and many people, if they're individuals and they own corporations or they run corporations - typically, I would put the corporate debt in there as well, even if they're not - even - so if they're incorporated, the corporation's not filing bankruptcy, they are filing personally. But if they have a lot of business debt, typically, the individual bankruptcies because there's been some problem with the corporation. Corporation may no longer be operating or may be operating but is going to close. So you just always want to be safe because a creditor can always pierce the corporate veil and say that they're responsible for the corporate debt. So whenever I

© MCLE, Inc. All rights reserved file an individual that's involved with a corporation that is also going to be going out of business, I would include the corporate debt here. And that's why you're doing this sole proprietor - that'll key you in to - oh, there may be some business debt here that we have to list as well.

>>:Yes. Thank you, Don. In line 13, the debtor's asked whether they are filing under Chapter 11. I know we're just talking about 7 and 13, but that is asked on this petition. Part four asks the debtor to report any hazardous property or any property that needs immediate attention. Like, if they had livestock - you know, they had the animals, they ask about that there. Part five asks the debtor to explain their efforts to receive credit counseling because the law requires that, before a debtor files a bankruptcy petition, that they do attend - they do take a creditor's course and they have a certificate. If - when they do that, you'll be able to submit that certificate along with the initial filing as well. If, for some reason, they don't - they took the course and they just, for some reason, don't have the certificate, they will have 14 days to submit that to the court. If there's other circumstances where you're, like, filing in an emergency and they just, for some reason, couldn't take the costs as of yet, you have to ask for an extension and you'll have 30 days for them to get that certificate in. And you'll see, on the petition, there's a list of other reasons maybe why they haven't been able to take the course. There's some medical reasons listed there that may be applicable to your debtor - why they're not able to obtain the required counseling. If none of the above that you see listed on the form apply, you're going to have to file a motion. If they believe that they're an individual who's not required to take the credit counseling, you have to file a motion and get approval for that not to be filed. Go ahead.

>>:(Inaudible).

>>:I - in my practice, I just, for some reason - since I do bankruptcy, I just get them in the mail. They send them to me. I don't know if they're on the website.

>>:They're on the website for the United States Trustee. So you can find the list of - they're approved credit counseling agencies and they're on the website for the Office of the United States Trustee. And there will be

© MCLE, Inc. All rights reserved someone here from United States Trustee's Office this afternoon, so that's a good question for them, too. So just - maybe just bring that up again and mention it to them.

>>:Thank you. I think we're at part 6.

>>:Yep.

>>:And the - part 6 asks about the debtor's - if the debtor's debts are primary consumer debts or if they're business debts, and you'll check the appropriate box to indicate which one applies to your particular debtor.

>>:Remember, the reason that's important is, if your debts are primarily - so what does primarily mean? Primarily, in my opinion - there's case law that goes both ways on this. Primarily means just more than 50 percent. So some jurisdictions look at the number. Some jurisdictions look at the number of creditors. Some jurisdictions look at the amount of creditors. And some jurisdictions, then, looking at the amounts, say, well, it has to be more than 25 percent - 50 - I mean, it has to be more than 50 percent. Some say more than 75 percent. So the cases are around on that. The reason that's important is if your debts are primarily business, then you don't have to do the means test. And that comes up a lot with sole proprietors or people who run businesses themselves. So that's a nice way to get out from doing the means test, right? And by the way - so let's say your client is a sole proprietor and they have credit card debt all in connection with their business. They have a mortgage. Most people don't qualify because their mortgage is their biggest debt - usually swamps everything else, so they're going to be a consumer. But some people took the mortgage out and used the money in their business. So it's not necessarily the - what the debt is, but it's the use of the funds. So you have to peel one more layer back and say, oh, you have a mortgage, what'd you use the money for? Oh, I put that into my business. Well, now that mortgage, in my opinion - I think the trustee would say this - is primarily business debt, and now you're out of the means test. So you can't - you have to ask - if there's a business involved, you have to really do some digging to find out what all those debts were for. And credit card debt, you might think, oh, that's consumer. But then they say, oh, no, I used that all

>>:Yes. Line 17 asks whether you're filing - well, whether the Chapter 7 - if the debtor estimates that, after, they will be - after the exempt property and administrative expenses, if there'll be any funds available to distribute to the unsecured creditors. So you would just check the appropriate response there.

>>:Yeah. And these just fill in automatically when you're filling you're - you know, those populate, right?

>>:Yeah.

>>:These next ones - yeah.

>>:Line 18 asks how the creditors - does there - how much do they estimate they debt - that they owe. Line 19 asks how - to estimate their assets are worth. Line 20 asks about the liabilities that they're estimated. In part 7 - which, you know, you finally get to the end of the form. Here, just go - the debtor's going to sign after examining all the information they provided to make sure that it's true, correct and accurate. And if they're represented by an attorney, the attorney is going to sign the form as well. The court requires that the signature page on this petition has a live signature, so not just the electronic signature. So both the debtor needs to sign that page and submit it with the petition as well as the attorney. So I think that's...

>>:Yeah. And with the signature - so you have to file the live signature, which is an original signature, right? I have my client sign that in a black magic marker, actually. Because when you scan it in, a lot of times it doesn't pick up the signature. So you get - you file it, but it's, like, so faint, and so then you get an order from the court - you have to correct it. Now your clients are gone. They have to come back. They have to sign it. Then you have to file it. It's like dah dah dah dah. So really, just get, like, a heavy black marker. Have your client sign with that. Then there's no question. Because that - has that happened to you?

>>:Oh, my God, they - like, push hard. And they're, like, what are you talking about? I just give them a black marker and it's, like, done.

>>:So then I'm going to go on to...

>>:What form would you like?

>>:...I'm going to go on to schedule A and B.

>>:You got it.

>>:Property.

>>:Super. Yeah.

>>:So we have that up.

>>:How's that look, good?

>>:That looks good.

>>:OK.

>>:So this form - the official form 106a and b - it has eight parts. In part one, the debtor's asked to describe their resident property, to include the buildings, land or other real estate interests that they have. You should be sure to describe the property, again, as accurately as possible. Describe the type of ownership interest that the debtor has, whether it's a fee simple, life estate, tenancy by the entirety. You want to provide the value of the property, which can be obtained through an assessor's office, it could be the debtor's good faith estimate. You could find it on Zillow, you can have an appraisal, or you can get a broker's price opinion. Part two asks the debtor to describe the vehicles that they own. And again, you want to just

© MCLE, Inc. All rights reserved give the best description possible. The form kind of walks you through, asking you the appropriate questions such as the make, model of that vehicle. So you just want to provide as much information as possible. And again, if there's not enough space, you can add attachments. Just make sure you provide the identifying information for the debtor on any additional attachment that you make outside of these forms.

>>:Where do you get your value from?

>>:For the cars - the Kelley Blue Book value - you can look online to do those.

>>:And this is interesting. This - there's one other thing. So this is a little confusing, but it says, do you own or lease? So if you lease a vehicle, you don't own it, but you still have to list it as if you own it on this - yeah, on this page. So it goes two places. There's an executory contract sheet we're going to talk about. it's going to go twice. But you do have to list the leased vehicle here. So you say, like, who cares what the value is? Because I'm not going to get the value when it's over. It's going back to the lease company but you do have to go through this. It's a little - it's counterintuitive, but, yeah.

>>:And - no. That's why those questionnaires when you start out doing those are so important. When I first started and I was working with an attorney, he - and I was an associate, he had us literally sit there with the client and go through the questionnaire. And those questionnaires are long. They're like, you know, more than 20-30 pages, so...

>>:Yep. Yeah.

>>:...But now I've got - now that I'm doing this - and when you see things that your client misses because you have them do it and give it back to you. And if you don't go through it all, you have to call them back to get the information. So it's important to try to go over the questionnaire with them just so you have all of that information about the leased cars and...

>>:That's actually a good point. So - I'm curious - so how do you do your

>>:Yep. I give them a questionnaire and I usually have them fill it out because sometimes it takes them months to, you know, get everything together. And then they come back in. And then we go over it together to make sure we have everything.

>>:You know, so I kind of do the same thing. I'll sit down - I'll have the client and I'll go over the questionnaire with them. Because sometimes the questionnaire - like, they don't get it. It's hard to understand the questionnaire - what things mean. So I'll go over the questionnaire with them, in person, then they leave and I do what you do. They come back. I don't just say send me the information, I sit down with them because a lot of times they - information they put together - it's hard to figure out where it all goes.

>>:Yeah. And they especially leave out that part about the inventory. A lot of clients will leave that part out or they don't put the values down.

>>:Oh, I don't know how to do this yet.

>>:Just forget it. So we are on part 3, where the debtor is asked to describe their personal property and household items and give a general description of each and provide an estimate value. And I always tell my clients just to think yard sale value. So whatever, like, you have in your home - silverware, TVs, you know, furniture - just what do you think you'll get at a yard sale. You know, give a good faith estimate that way. So, again, that's that part where, if you just have your client send it in, they're going to leave that stuff out or they're going to put down a few things when you know, you know, everyone has a bed, hopefully, a dining room table, stereo. So you just want them to list all that stuff and give the best value that they can.

>>:Yeah. Technically, the code has a valuation provision. I think it's in 506 - section 506 that says value is, if you had to replace this item in its current condition at retail - now, you know, that's technically what they say. Most - but I just say what you do. I say, give me the best estimate as to what you

© MCLE, Inc. All rights reserved think your stuff is worth, and they put that down. If clients get a little freaky about that, I say, if you've - are concerned, then go online to eBay or something. Enter, you know, furniture sets or something like that, and get something comparable, right? Run that page out and then you can give it to the trustee. But most trustees don't care about household goods. They're not going to sell their household goods. So that's not a big deal. But make sure, like you said, something's there. You can't come in and say you have no clothes...

>>:Yeah.

>>:...OK? It just looks kind of silly. And there's a lot of stuff here to list, right? There's a lot of things to go through. So - yeah.

>>:And even you - like I said, when you use the software, that helps you out, too. And - you know, if you go through that with your clients.

>>:You can't - right? It's all about disclosure. You can't be harmed by not - you can only be harmed by not disclosing. So even if they have something - oh, I'm not listing it because it's not worth anything. Wrong. If they own it, list it.

>>:Yep. When in doubt, just list it.

>>:Right. It's not about what it's worth, it's about listing it. The - you can put your estimate. The trustee, then, can make their own determination. And they usually agree with you.

>>:In part four, the debtor's going to be asked to describe their financial assets. So, you know, cash on hand, account balances on the date of filing. That's why it's important to get your debtor's bank statements when they're providing their documents to you so you can see, you know, what's going on with those accounts. And you want to make sure that they're all listed in the petition - savings account, checking account. Don't - it doesn't matter how many different banks they have, you want to make sure that they're all provided.

© MCLE, Inc. All rights reserved >>:Yeah. And I'll have my client go to the bank the morning they're going to sign the petition, print out a little receipt, and then that shows their balance. Because there could be float - there could be all kinds of things on. So it's usually not a problem because they usually have plenty of exemption - Tiffanie's going to talk about that in a little bit, but still. I'll just have them bring me their little piece of paper from Northland Bank or whatever it is that says savings account, checking account, so then I can provide - some trustees want to see that - the actual balance on the date of filing. That's - and that's another thing. If you're delayed - like you said, it could take three months. You don't want to use a balance from three months ago. You want to use the balance now.

>>:Exactly because I've had clients who - they don't - they want to file, but they take - you know, they take time, so they'll - when they finally do come back into you, it - sometimes they'll bring the stuff they had in April and it's, you know, now July. So you have to go back and get all of the current information.

>>:Yeah. You've got to be very careful about that.

>>:This schedule A/B is for chapter 7...

>>:Yep. Chapter 7, 13, 11 and 12.

>>:Yeah. Every bankruptcy petition has this. Yeah. Yeah.

>>:For a business, it's different. So these schedules for - these are for individual. That's all we're doing. The business schedule is different because they don't have household furniture. So the business schedule is inventories and receivables. So it is different, and there are a different set of forms for businesses. But they're in large - the idea - the concepts are still the same. We're not reviewing those because we're not - that's kind of a more advanced - I mean, MCLE offers a more advanced class on business filings, but this is strictly - so this is an individual A - schedule A/B - for an individual case.

>>:You'd use this for a sole proprietorship?

© MCLE, Inc. All rights reserved >>:Absolutely. I have - yeah. Right. So it's only if a corporation is filing. So if an Inc., LLC - something of that kind - if a corporate entity - it would have a separate - typically, it would have a separate tax ID number. That - I would - then you have to use the corporate bankruptcy forms.

>>:On line 21, 23 and 24 - they are all asking about the retirement accounts and pensions accounts. So you want to definitely make sure you provide that information there as accurate as possible. Again, on my questionnaire, I, you know, give samples and I ask the client to bring all of that stuff so you can physically see it and, you know, make sure you're capturing the correct, up to date information that way.

>>:Something on retirement accounts - you've got to make sure you know what kind of account it is. So some people have, like, retirement accounts that they got through a domestic support order. If they did, you know, check that. Make sure everything's been done. The other thing is if the IRA is inherited - so it's not their IRA, OK? So you die. I'm your son. I inherit your IRA. OK? Inherited IRAs may or may not be exempt. Typically, retirement accounts are exempt, right? No worries. But if they're inherited, they may not be, so you need to know that in advance and think about it. Just make sure you know what kind of account. And you'll know because it'll typically say. And you need to see - that's why you got to see the statement. So the client comes in - I have a $500,000 IRA. OK, fine, you write that down, but you got to see the paperwork. You go, what is this?

>>:Like the hypothetical - like Larry and Lonnie - he does a lot of thinking in here - I think this, I think that. So you're going to actually see the documents so you know what's really going on before you complete these schedules. Line 31 - it asks about insurance policies, so you want to make sure you have that information. If the debtor has an insurance policy, you want to make sure, again, it's accurate and up to date and you include it on the petition.

>>:Do you get a letter from an insurance company?

>>:I haven't, no.

>>:Oh, you mean for your client to provide you - yes. Oh, yes. I do.

>>:OK. OK. Yeah.

>>:Line 33 asks about potential lawsuits because a note, I believe it's on the petition as well, but if it's not, if you don't disclose any lawsuits that you currently have pending - that's why they ask about it here - you can be - you could possibly be precluded from bringing that action after the bankruptcy case is filed. So again, you just want to be as honest as possible and list everything that is currently going on with your debtor at the time they file.

>>:You would do that as a plaintiff?

>>:Yes.

>>:Yeah, right. So you're seeking to - or a counterclaim, right? You might be - you might be able to find it that way. The - one other thing I just want to mention - these trusts. So we talked about that, right? So trusts are a big thing and people mess them up all the time, so at least there's the question so when you go over it with your client, they'll know oh, you did ask me about trust. Now, whether they understand or can they get the information, different kettle of fish, but you got to be very careful with trusts. They are really tough.

>>:Part five.

>>:OK. Yeah.

>>:So part five is the debtor's asked to describe any business-related property that the debtor may have an interest in and, as an example, that if the debtor dissolved the business and they left equipment there, furniture for the landlord, you know, to kind of offset the rent that they may have

© MCLE, Inc. All rights reserved owed them. You just want to, you know, know about that time frame, just to make sure that it doesn't trigger like any fraudulent transfers. So you want to make sure you have that information and ask your debtor about that.

>>:And most consumer debtors don't really have anything in part five. You know, they might, you know, if they're a sole proprietor, they may have business chairs, desks, a little office or something like that or some inventory or something like that. So that's where it picks that all up. Part six is just farm equipment. Most debtors don't have any farm equipment and then, you know, this is the catch-all - anything else you can think of that you didn't list. I can't imagine there being everything else after all that exhaustive stuff. Have you ever had anything in there?

>>:No, I don't think so.

>>:Right. Yeah, I can't think of anything else. OK.

>>:It usually fits in somewhere else.

>>:Now to your fun schedule.

>>:Schedule C. So schedule C, official form 106C, the property that you claim as exempt. So all the property you just listed in Schedule A and B, now you're going to have to try to find exemptions so you can have - so the debtor can possibly keep as much property as they can.

>>:Right. So this is everything in the suitcase, right? They get on the bus, all the property's in the suitcase. Trustees driving the bus - you want to get off the bus with everything in your suitcase. All the creditors are in the bus trying to grab it. You use the exemptions to protect it.

>>:Exactly. I like that. I think I'm going to steal that from you next year.

>>:That vision was really good.

>>:Yes.

>>:So this schedule has two parts. The items listed on schedule C, again, should be checked with the items that you list on schedule A and B. And you want to make sure that you didn't omit anything. You want to provide the current market values listed for the items. Make sure they're identical to what you listed on the previous schedule. And again, these exemptions are not automatic, so for the property to be considered exempt, you must list the property on schedule C and if you do not list the property, then that trustee who's driving the bus may sell it to pay all of the creditors.

>>:Yeah, we didn't talk about exemptions at all. So do you want to talk about, like, how to choose them and all that because we didn't cover that yesterday.

>>:Oh, you didn't?

>>:So this is wide open for you.

>>:OK. So yes. So Schedule C you must first decide what exemptions that you're going to utilize, whether it's going to be either state or federal exemptions and if you're married, and the debtor is going to file jointly with their spouse, then they have to choose the same exemption. So it's either going to be federal or state - they can't each have a different one.

>>:Which ones do you usually use?

>>:It depends. If there's like a homestead, I typically, obviously I want to use the state, but it just depends on the particular client. Which one? I think I'm heavy on either side.

>>:You know, the federal exemptions are in the bankruptcy code, right? There's a bankruptcy code of exemptions...

>>:Yes.

>>:...But the homestead's like how much?

>>:Five? And how much is it under the bankruptcy - like 20,000 or something for the homestead? Yeah, it's very small.

>>:Very small.

>>:Yeah. So if you have a house, then you're taking the state exemptions, usually. If you don't have a house, then the federal can be better like on all this stuff. Can be anyway. So you have to you have to decide which one you want. Most of the state exemptions are in Chapter 235. The IRAs, I think 234 - I forget exactly where that one is, but yeah there's 234 and 235 of mass general laws where the state exemptions aren't in the federal. They're in 522(d) - Section 522(d).. This is like the most important thing that a lawyer does, right? This is where you make your money.

>>:This is where you protect your client's assets.

>>:Right because they think, like, you know, you saw Lucy yesterday. I want to keep my refund. I want to keep my Hummel - this is what we had the - we did this. So she wants to keep her Hummels, she wants to keep her figurines, right? The 59 figurines, she wants to keep her refund, she, you know, she wants to keep everything, but and tax refunds - but can she?

>>:Well, this is where you would figure that out for her and you tell her. Maybe she loses something, but that's the, you know, sometimes you have to file bankruptcy, you can't keep everything.

>>:No, you can't keep everything. Some things you have to, you know, give up so you have to pick the right exemptions and, I mean, again, you go to the code. I mean, I use my software, usually, to just figure out which exemptions my client's taking. But pretty much everything that I list on A and B, there's an exemption for, and you want to make sure that you, you know, claim the - you want to make sure that you put the current values, that they're listed, the full market value of the debtor's interest in the

© MCLE, Inc. All rights reserved property without deducting the liens or the available exemptions, to be consistent with the value that was on A and B. And in that last column on the form is where you identify the law that allows you to claim the property as exempt. Yep, right there. So we do spend a lot of time with the clients, making sure one, that we have the correct values so when you're looking for the exemptions, you're claiming the right exemptions so you make sure that that property can be covered and that it is safe.

>>:You can amend schedules also. You freely can do that, but if the trustee has found objection to an exempt - like if the trustee might file an objection to the exemption, then I think you're still in the amendment zone, but if the court enters an order denying an exemption, I'm not sure you can, then, amend...

>>:Try to fix it, yeah.

>>:...All right? - because you kind of got res judicata on that issue so it may be tougher. So I'm not positive on that, I haven't really explored that so, but - so if you find, say oh, I messed up, I should have claimed the state and the federal and it hasn't been a creditor meeting or anything, file an amendment. You know, you can always amend. Or you forgot to list the asset, you can amend the schedules. As long there's no detriment to anybody, but if parties have relied on it to their detriment, then it can be a little tougher to get an amendment. I know, as a trustee, if I object to somebody's exemption, objection is sustained, and then they try to amend a claim, a different form, I say you can't do that, it's too late. The court has ruled. You're stuck with these exemptions. You should have amended before the court ruled, so.

>>:Yeah, so it's just important...

>>:I don't know if you ever had that happen to you.

>>:I haven't that happen, no.

>>:You always get them right the first time.

>>:I don't always do that.

>>:That's pretty tricky. So yeah, I mean, it just depends on what you're listing. Again, you go through, I said that, you go through all of their assets and you pick the proper exemption, depending on the value, so they can keep their property.

>>:What's the - you can choose this 100 percent of fair market value. Do you ever do that? I mean, what do you - like, when you say, it's says amount of exemptions you claim, do you list an amount - there's this opportunity, 100 percent of fair market value up to any applicable statutory limit, like what do you do with that?

>>:Well, sometimes I click that if I'm not certain exactly, like, what the amount is. But again, I ask the client, you know, what their interest is in the particular item because if they don't have - if they're not certain about it, then I click the 100 percent.

>>:OK. Yeah, that's a little tricky for - I mean, I do what you do. I put in an amount and that is in there because some - I'm trying to think of a circumstance where this might apply. You might have a lawsuit and you don't know the value of it, right? So that's a claim that you have. Like what is it? So do you estimate or do you just say 100 percent of the fair market value up to the statutory limit? You look at the exemptions of this. Tort lawsuits, for personal injury, they can be exempt up to $23,000. So rather than putting the exact number - and you might not want to put an exact number there, right? Because if you're suing somebody and they look at your bankruptcy petition, they say oh, you listed your lawsuit as worth $23,000. Now, you got to do settlement value. So you may want to put unknown in your bankruptcy petition and then just say 100 percent of fair market so you're not stuck because I guess, you know, you have sign - your client signed this under penalties of pains and perjury, so there's, like, that's what they think the case is worth. So that's, you know, you've got to think about where these schedules can end up down the road. And you want to make sure there's no inconsistencies that might get them later on.

>>:At the bottom of the page, it said add attachments. Is there anything you would - what would you...

>>:Where do you see that?

>>:At the very bottom of the window, yeah. Yeah, that add attachment, I don't know what that is. Does that mean anything? Then it's save as...

>>:Oh, that's if you have - you don't have enough space here. If you need - if you have more property - I mean, more exemptions than property so list and you add that attachment, and then you want to make sure...

>>:Yeah.

>>:...You put the information - identify an addendum...

>>:You just need more room.

>>:Yeah. So it's be Page 2 of 3, or 4, or 5. Depends on how many things you're adding there.

>>:Yeah. Yeah. And the software you can do where this is the - we're looking at these schedules on the bankruptcy court. If you had the bankruptcy software, best case or whichever one you're using, you just scan in documents, you can add them. So you won't see this. When you - the bankruptcy software looks nothing like this, right? The bankruptcy software just has a bunch of fields that you enter, and then that information populates the schedule so then you print them and they look like this, but the software doesn't look like this at all.

>>:Limit line. Unless you want to be like me and you're beginning when you do your first one, just do it by hand.

>>:There you go. Yeah, you can do that. You absolutely can do that. On

>>:It was a nightmare.

>>:It must have been. Like, particularly scanning the minutes of filing them must have been fun.

>>:But it wasn't a problem, so I did not have any objections.

>>:Yeah? OK. That is weird.

>>:I don't think I have anything else there. I was going to go on to schedule D. Was there anything else?

>>:Anybody have any questions about the exemptions? Yes. We just got a look at them. And you're just matching your exemption to your - in most consumer cases, everything's protected, right?

>>:Everything's protected.

>>:Yes, it's unusual to have something unprotected. Typically, if it's unprotected it's because your client didn't tell you about it. And then it comes up later. It's like, ugh.

>>:Or if it's, like, out of the amount that's allowed for the exemption then you have a - depending on wants on your choosing, you have the wildcard that can cover that.

>>:Oh, can you explain what the wildcard is?

>>:Yeah. So if something doesn't fit, we have this wild card that can make that prop. So, for example, if you have - I can't think of an example - but if something's only exempted say up to, you know, 2,000 or 2,500, and that's the maximum. But it's - your value that your debtor has is more than that, then you can use that wild card to cover that extra.

>>:An automobile.

>>:Yeah. There you go.

>>:(Unintelligible) full value...

>>:Then you use the wildcard.

>>:...You need to use the wildcard to protect...

>>:To protect that - get the full value of that vehicle.

>>:You know, we say a wild card. Under the state, I think it's around $5,000. Basically, wild card means it's something you can find any property. Most exemptions are property specific and have an amount. Not all are amount-specific, some of it's property-specific. So they're unlimited. Then there's this wild-card exemption. Five thousand dollars - put it on anything. So if you have a car, that's worth 20,000, and the exemption's only 15, you have five open. You can use your wild card protected. You have a question? No. Oh, OK. All right - schedule B.

>>:Schedule B - OK. I'm ready. So creditors who have secured, claims that are secured about the property - if it's Form 106-D, this one has two parts. Here, you want to be sure that you list all of the creditors who have a claim secured by your property. You want - you don't to leave any of the secured creditors out. List anyone who has a judgment lien on your property. If there's any garnishments, statutory liens, mortgages, deeds of trusts and other security interests against the property - those creditors are going to be listed here. It is important that you have the correct name and address of each creditor that you with. Because if you don't have that correct information and a creditor fails to get notice of the filing, then that could affect your discharge. They just want to make sure you have that correct information when you file. You want to list debts that appear. I tell my clients to get their credit report. I mean, usually, they can - everyone can get one free a year. So I have them get their credit report to obtain that information. The amount of the claim listed in column A should be the full

© MCLE, Inc. All rights reserved amount of the claim, even though it may exceed the value of the collateral. The value of the collateral listed in Column B should be the full-fair market value of the property and should correspond to the property that was listed on Schedule A and B. And any unsecured portions are going to be listed in column C and...

>>:So that's it, right? So if the property is underwater - so if the property's worth 500 and there's a million-dollar mortgage or unsecured portion - half a million dollars. And these automatically populate in the software when you're filling these. And a lot of stuff - like, you've already gone through Schedule A.

>>:Yep.

>>:All this stuff just slides into Schedule D - yeah.

>>:Claims made - so we'll talk about the classification of the claims. They could be contingent, you know, meaning that the debtor is not obligated to pay unless a particular event occurs after they filed the bankruptcy. An example of that would be if you co-signed a loan for someone that debt your debtor may not have to pay that loan unless that other person does not pay it. So that will be contingent. An unliquidated characteristic would mean that, you know, you're on - the amount hasn't been determined as of yet. So if you're involved in, like, a car accident and the victim is going to sue, you may not know the amount yet because that hasn't been awarded. And obviously, a disputed claim means that the debtor disagrees with the amount that the creditor is claiming they owe. They may say they paid the bill in full, and the creditor is still trying to collect from them. So you would check off that that particular claim is disputed.

>>:Yeah. Pay careful attention that, particularly if your client disputes the debt because, let's say, they owe someone money, but they are - it's unclear. So you want to make sure that if it's disputed, you checked that. Because the creditor may say, oh, my debt's not dischargeable. And you listed me here. And you didn't say it was disputed, so you acknowledge I owe the debt. And - but you may say. wait a minute, you know? You're in some dispute with them. You're a partner or something like that. So you've

© MCLE, Inc. All rights reserved got to pay attention to everything. Everything matters. And the court will say, wait a minute, you know? You know, you prepared this schedule. Did you read it? Yeah. Did you sign it? Yeah. Did you check off disputed? No. Now, you can amend. But you're sure going to have some explaining to do. So pay attention to those. Those things really matter. These little things can really add up.

>>:She had a question.

>>:Oh, I'm sorry. Go ahead.

>>:So what is the situation when someone, you know, is (unintelligible)? It's gone to judgment in a year - two years, whatever, at this point. And now your client's saying it's disputed, but (unintelligible) court's judgment is done. Like, I mean, what's the line for checking (unintelligible) completely done? But someone's saying, now, oh no. I don't think that (unintelligible).

>>:I mean, I guess it, too, will depend. I mean, why didn't they go to court, you know? Could they just not get the time off work? They, you know, felt like they didn't owe the debt or they, you know, didn't have the means to litigate it. It could still be something they dispute even if it's going to judgment. It's in the collections, and it's charged off.

>>:Now, remember. You can avoid liens under - so you might list a judicial lien here on a house. But bankruptcy under bankruptcy, you can strip away judicial liens on houses. You can't touch mortgages. But you can do - did you talk about - I don't know if we get into that - maybe not? So yeah. You are allowed to - I think when - Macken, do you talk about that? can you talk about 522 - avoidance? OK. Yeah. See. That's what you get for coming early. (Unintelligible) stuff. So anyway, Mac was going to do the creditor perspective. So that's why I was asking her about that because - but usually, this is a debtor remedy. So if you file bankruptcy and there are judicial liens - like, Amex has a lien on the property judicially - credit cards frequently do that. In bankruptcy, you can remove that lien from the house to the extent it impairs your exemption. So if you claim an exemption, there's equity in the house. You claim an exemption in that. And some courts even say you don't need any equity in the house, you are allowed to

© MCLE, Inc. All rights reserved remove liens. So I tell my clients, don't worry. If you get - if you're sued and they put a lien on your house, don't worry. I can remove it. But it costs more money. And I don't do that for nothing. It's a part of my flat fee. They have to pay to get that done. But it's a big benefit of a Chapter 7 case. You're not talking Chapter 13. But in Chapter 7, that's a big benefit. You can knock those judicial means. You can pull them off the property to the (unintelligible). I guess you - I don't know if you can do in Chapter 13. I haven't really thought about that. But certainly, in Chapter 7, it's a nice thing to remember. And now you pick up here because you can see - see judgment lien? Then you'll know. You have all these choices...

>>:Choices to check off.

>>:...To Check off - yeah.

>>:And so a single claim - they get they can have more than one of those characteristics, you know?

>>:Oh, yeah, which ones?

>>:The - so they can be disputed.

>>:Yeah. It can be all three.

>>:Yeah. Unliquidated - you don't know.

>>:Yeah. Typically, if I'm filing a case and they - for a sole proprietor, let's say, and I'm going to lose the business debt, I'll check off all three of those because I'm not going to acknowledge my debtor is responsible because I'm basically giving away the piercing the corporate veil argument. So I'll list the debts. So my client files. And they're in the stationery business. They don't mind the ABC stationery. I'll include ABC stationery. I'll click off contingent, unliquidated and disputed. You can click off more than one.

>>:And another note I just have here that you want to only list the debt here once. So if you believe some of the debt is secured and the other part is unsecured, you only want to list it either here or on the next schedule

>>:Yeah.

>>:...E/F. 106 - yeah. Yeah. That's correct. So we have four parts here. And on this schedule, you're going to use to identify all the unsecured claims that the debtor has, Part 1 asks to list priority unsecured claims creditor - for the creditor - that the debtor has. Credit - and these, of course, are creditors that don't have a lien because if they had a lien, that would list it on the previous schedule. So the most common priority unsecured claim would be some type - certain tax debts, past-due alimony or child support. Part two asks to list all the non-priority unsecured claims. And those are generally paid after priority unsecured claims are paid. And the most common obviously are credit cards and medical bills.

>>:Do you list the taxing? I see some lawyers will list the taxing authority in every single case they file just in case? Do you do that?

>>:I don't list it in single one, no.

>>:So unless they - unless you know they owe money...

>>:Yep.

>>:Yeah. I do the same. I don't. But some do. Some of will list Mass Department of Revenue, Internal Revenue Service. By the way, the local rules have address for the Mass Department of Revenue And The Internal Revenue Service for notice purposes. So if you look at the local rule - I think the rule is something. I don't know. It's in the back. There is address for notice purposes. Notice is very important in bankruptcy. Particularly - if you're going to avoid a lien for instance. Avoiding a lien requires notice to the entity, not the - you can send it to the...

>>:The collection agent.

>>:...The collection agent, too, but that is not sufficient notice. And notice

© MCLE, Inc. All rights reserved to the entity means the agent - it means the president. So if the money is owed to Amex, you have to find the corporate address for Amex. And you have to notify them by certified mail. You can send it by regular, too. You have to do it by certified mail. So you have to look online at the secretary of state's office probably or maybe just generally. And you have to serve the president not the - not general counsel, not the treasurer, not the secretary. It has to be, you know, John Doe President, American Express. I would also serve the registered agent in the Commonwealth. Sometimes they are the same. But they may not be. But some of these can be really hard to find because these creditors are, you know, banks - who knows? So someone can - their service can be like the hardest thing. So you want to remove the debt, but you have to be very careful. And the service rules are in 7001 or maybe 7004. Is that where it is? 7004, yeah. The service rules were just really tightened up in the last year. So you have to be very careful - if there's a corporate entity, and you're taking their lien away, or doing something with their lien - this applies to Chapter 13, too, if you're modifying liens. They have to get served appropriately, and sending the letter to their post office box is not going to cut it in the court. And particularly with plans, if you're modifying a secured claim in a plan - you know, like we talked about yesterday, Richard said there's arrearages, you're going to stretch it out over some period of time, you've got to make sure the service is appropriate, or that plan will get kicked back, and the court will say, improper service, try again.

>>:And then I've had - whatever reason you may have an address correct, but at some point through the case, you get the mail back. That's a problem. You have to go out and find - not go out, literally - but you have to find the correct address in order to serve that person, or it's going to be a problem with, you know, being able to get your discharge.

>>:And you have to file the notice with the court of the new address.

>>:Yep, of the new address, so they can add it to the creditor's list. So we talked about Part Two with the non-priority unsecured claims, and then Part Three asks to list basically everyone else, everyone else that needs to be notified. So how we talked about the precedent - In this part, you'll list if there's a collection agency. So you know, at some point, you owed, you

>>:Collection agency, lawyers. Anybody - you know, sometimes the debt will pass through three different collection agencies. List them all, right? This is your chance because, every time you amend the schedule to add a creditor, there's a fee. So you know, I've seen people, this Part Three could be like four pages long, 30 people on there. This is the chance to clear the decks and get everybody notice.

>>:You want to make sure - and that's what - the question I ask for my client, I have them just literally bring me the notices. Like, if anyone sent you anything, requesting anybody, just bring it to me because, you know, sometimes they're unsure, you know, when you get overwhelmed. So just bring me every letter that you have, and then we sort through them and figure out who needs to get notice. And I think Part Four just asks for just...

>>:There's a summary that automatically populates. So all the information you enter will then, you know, the tax debts will be - the taxes will be listed. This is just - This part of Schedule E-F is really for the court, for their statistics, so it automatically populates. You won't need to fill this in yourself. It'll automatically populate from the information you've entered on Part One, Two and Three. Want to go to Schedule G?

>>:Schedule G. It's on 106-G.

>>:This will be executory contracts and unexpired leases. We talked a little bit about this in the beginning when we talked about the vehicle where a person is leasing it, and they don't own it. So you want to be able to list that information here. You're going to - the debtor's going to list ongoing leases for certain contracts. The debtor must list all agreements that may be executory contracts or unexpired leases, even if it's listed on Schedule A and B. Some examples of that - I have residential leases, rental agreements for a place that the debtor lives or vacations, even if it's on a verbal month-to-month agreement. Any service providers - and examples would be like cell phone providers or personal electronic devices. Other

© MCLE, Inc. All rights reserved examples - I have internet services, vehicle leases, timeshares, any rent-to- own equipment leases and employment contracts. You just want to make sure that they're listed on this schedule.

>>:You want to go to H? There it is.

>>:106-H.

>>:OK.

>>:All right, so for the co-debtor - a debtor - it's going to be anyone other than a spouse in a joint case. The debtor who - if there is none, you click none. I mean, there's plenty of times on this form where I've just clicked none. But just for - you know, every case is different. You want to list anyone who's responsible for any debts listed on the other schedules. So if you've listed something that your debtor's paying, but someone else could be responsible or they are responsible, you want to make sure that you list them here. For example, like someone who co-signed on a car loan, they will be listed here.

>>:So they're going to get notice of your bankruptcy. My clients always freak out. Oh, are they now bankrupt, too, right?

>>:Yeah.

>>:You know, because they're not effected.

>>:I don't want to add them. (CROSSTALK)

>>:So they're not - their credit's not - as long as they keep paying. I mean, the other thing is now you've stuck it to the co-debtor because you don't have to pay, so now the co-debtor is responsible, so that can create some friction sometimes. So you know, there is an impact of bankruptcy on other people, and this form will lead you to have that discussion. I think you're right, though, on most cases. Student loans end up here a lot, too. Something to file bankruptcy, that's a frequent one. And it's like sorry, you still have to pay - the other person's going to have to pay the whole student

>>:Yeah.

>>:I just want to mention one thing. You see this little box up here - check if amended filing? Yeah.

>>:We have those on, like, almost every form. So if you file something - and we talked about amendments - you want to make sure when you file a new form, you check the amended box, so that the court knows you're filing an amendment. That is very important. And there are some other forms that we're going to talk about in a little bit that you also have to file every time you file a certain amended schedule.

>>:Go to I? I'm sorry. I'm sorry. G, H - Yeah, I.

>>:Yeah, I.

>>:Any questions about anything so far? So we're doing a perfect job? Oh, we have one question.

>>:To make it clearer, wouldn't you - could you also write amend at the top?

>>:Oh, right at the top?

>>:Yeah.

>>:Sure.

>>:I haven't practiced in about five years, I remember that...

>>:That was the old school. Yeah, yeah. Now you check that box, that's how it's done. And the documents that Tiffanie's going to talk about. But yeah. It's that box.

>>:Yeah, because he's right, I think a few years ago you just wrote

>>:Right. That's right. Yeah, yeah.

>>:So Schedule I - Form 106-I has two parts. Here the debtor's going to provide all the information about their employment and their monthly income, as of the date of the filing. If married and the spouse is living with the debtor, you're going to include the information for the non-filing spouse. If they're married but separated, the non-filing spouse information does not need to be included.

>>:So remember, this is a situation you talked about where one's filing, the other spouse earns a lot of money. The other spouse really isn't subject to bankruptcy, other than their income is sucked in here. So that's where the one spouse may not be happy about the bankruptcy filing of the other person because their income is going to be taken into consideration. I think we have a question. Do you have a question?

>>:Yeah, sorry, just to go back to G - do you file that even if there's no creditors?

>>:G or H? Yep. If there's no co-debtors on H - is that right? That's OK. No, you do. You check the no box, and you do file it.

>>:Every single schedule has to be filed, right? And there may be nothing on it.

>>:Correct. And there could be nothing on the Schedule I. There could be no income for your debtor, but you still have to file it.

>>:You have to indicate none. Yeah.

>>:So that was my first point, that if there's nothing to report, you just write zero, and it's easy, you're done with this form. But most times, there's something to report. So in Part One, you're filling out the employment information for both the debtor and, if appropriate, for a non-filing spouse. If either person has more than one employer, you're going to, again, attach

© MCLE, Inc. All rights reserved a separate page with information about the additional employment. In Part Two, you're going to give details about the monthly income that the debtor expects to receive. Give information in a monthly payment form, even if they receive their payment some other way - if they're paid, you know, daily, quarterly, biweekly, you still want to, you know, do the calculations to make it come out in a monthly format.

>>:Usually this information comes right from the paystub. So you're putting the paystub in, and it'll say, how many pay periods - 26, if they're getting paid biweekly, and then this will automatically populate. There's a lot of - this is a hard schedule. Or it takes time, right?

>>:It takes time. But I mean, the questions are there to guide you. So I mean - again, like Don said, you just take the paystub, and you're able to fill out that information because it's right there on their paystub. You add it there. Again, if it doesn't apply to them, you just put a zero.

>>:I believe you have a question?

>>:If you guys are converting to monthly amounts, do you use 4.3 or do you just use - like, for weekly to monthly? Family court, you have to use 4.3, that's why I ask.

>>:So like 4.3, is that monthly or...

>>:Well, they do that because every month...

>>:Weekly to monthly, 4.3, because technically there's very little extra.

>>:Than some months.

>>:Yeah, I think really the software has you enter the number of pay periods. So if you're weekly, then that would be 26 pay periods, right? So that's how it does it. So the software - yeah, there's not that - I mean, yeah...

>>:The software helps you out. So but if you're not using the software, then

>>:But otherwise, the software will do it. Yeah, right. It requires - because it says, how many periods. Yeah.

>>:Every time we talk about that, it just brings me back to that first case, I find. I'm looking up the exemptions and doing the math. Now you just plug it in, and it's good to go. Yeah. So do we have any questions on I? Because, again - and you just - yup - just on property income.

>>:They may have interest and dividends, family support.

>>:Whether any other family member is helping to pay any of these bills, you want to make sure you list that here on this schedule. So it's basically any money that the debtor is receiving. So it's not just income, and sometimes you'll have clients who would just think that, but if they are - because I had a Chapter 7 before where the daughter was paying a portion of the rent. So I mean, that's not technically the mother's income, but we list that here because it's money that she's receiving to help her make those payments. So you want to make sure you list any contributions from other family members here, as well.

>>:This is important too.

>>:Yes, if you expect to have an increase or decrease within the year after you file this form, you want to check no or yes, and explain it. I had a client recently who, for the month of July and August, there was an increase, only she was in the medical field, and they were low on staff, so they were giving them additional money for that, but then come September, October, it's going to go back to her regular schedule. So you know, she had those two pay stubs that looked like she was earning more, but that wasn't going to be the case after she filed. So you do want to explain that there. That's very important.

>>:Questions on I? All right, let's go to J, another tough one.

>>:That's actually a very good point. Because some clients will come in and like, wow, you have excess income, $800. This is awesome. They said, no I don't. I said, well.

>>:Where's it going?

>>:That's a good check.

>>:Where is everything going?

>>:That's exactly right.

>>:So this schedule has two parts and the debtor is going to estimate their monthly expenses as of the date of filing. Part one is asking them to describe their household, if their married and filing individually. You include the - again - the non-filing spouses expenses here because you've included their income on I. So you want to also make sure you're included in their expenses so everything adds up. If you're just including their income and you don't include expenses, then - it's going to look like your debtor who's filing has more income available than they do.

>>:Remember, this part one says do you have dependents. Now that's not dependents in the tax, it's not a technical term. So if your clients have people living with them but they don't claim them as a dependent on the tax return, they can still be a dependent. Right, that's the discussion we had yesterday about how do you determine household size. Remember, Lucy and Lonny have of all these people living with them, they got their grown up kids and grandparents and all that. They can be dependents, they can be part - because it says, describe your household, they're in your household. So I would list them, I would list all those kids. And even though they're not dependent on your tax return. Yeah - because the more dependent you have, right, the higher your income is and the better off you are in the means test. So I'm not saying that you should make up people

>>:Because they have to live there. A client I have, they have like five dependent, like five grown children, but only one of the children actually live in the household. But they are still paying for those, they help them with their child support and help them with their mortgage, so they are paying for them but they don't live with them, so they are not in the household. There's going to be a part for that.

>>:Yeah, you roll.

>>:Yeah.

>>:OK.

>>:So a part with this form - because there's another form, I didn't pull it up. But if there - if you're filing jointly and the debtor one and debtor two keep separate households, debtor two must complete another form, which is going to be the 106-J2, where they're going to talk about their separate household expenses.

>>:Right. So you have two spouses, but they have - they live in their own homes.

>>:But they're filing jointly.

>>:Yeah.

>>:So there's a different form for that.

>>:Right, because all their incomes are listed so you've got to get all their expenses, but they're not living together so there's two rents. You don't put them all in one form, two forms - two forms, two schedule J's.

>>:That's the reason for that and that the form is there, I don't think I pulled it up, but it is available also on the website.

>>:Yeah. So this is the form that they would fill out.

>>:Looks exactly the same, they're just called schedule J2. But everything else is exactly the same as J.

>>:So if we scroll down some more to J, again, you know, these forms are great because they ask you the questions and you're able just to put everything there. You know, I try to include all of that on my questionnaire, try to keep it updated to make sure I'm capturing, everything. But typically, everything that the debtor is paying on a monthly basis, you want to make sure they list it here. So again, when we talk about that client that I have who's paying, you know, her - whatever contribution she's making to someone outside of the home, you want to put it right here. And I know that line looks small on the software, you know, it does allow you enough room to fit that explanation there and put the amount that you're paying.

>>:And, you know, these can be tricky for clients to figure out. So, you know, I typically say, look at your checkbook, look at your credit cards...

>>:Bank statements.

>>:...yeah, bank statements, and prepare a sheet, and try to figure out - you know, because bankrupt clients typically aren't really good on budgeting...

>>:Yeah.

>>:...OK? So that's why they're in this situation. So it's hard, like how did they - they've never actually had to do this. A lot of clients really appreciate doing it for first time, but it can be hard. But this is a very important schedule to figure out and get right. And as you said, it should be - all my clients I tell I tell them if they're bankrupt, use this number here, their net, right. So their income list, their expenses is probably going to be negative or pretty close to zero. If it's positive, then they're going to be in a chapter 13 because then they can pay, make monthly payments.

© MCLE, Inc. All rights reserved >>:Exactly. I've had clients when you do all this, because like you said, they provide you with information and you have them come in to read it over and it's like, well how do I have $700 left? Where is that money? I don't see it every month. Now we have to go back to go over their expenses again, look at the sheet, look at the bank statements and see where they're really spending their money just to make sure that we're capturing everything.

>>:Right, and sometimes you find out some things that become problems. They say oh, I have a gambling problem.

>>:Oh, yeah, they don't mention that.

>>:Or they're smoking, or drinking or, some - you know, it, like, comes out that way. I mean, if you drill down, you like get to this stuff. And you get to it first so the trustee isn't the one and then you can kind of figure out how to deal with that, right? So yeah.

>>:I think my question there literally asks, you know, if you play the lottery and I had a client and she would tell me no. And as I'm sitting in her home, I see a stack of ones and three in the window and I'm like OK, you don't play the lottery. Because I don't know, they just don't think it's relevant but it is because you're filing bankruptcy because you don't have any money, where's your money going? So let's really think about it and unpack it.

>>:Right, and people want to hide it. And it's silly to hide, there's nothing - that's not - you know - that's where it went, OK. But if you don't say anything, you're not going to get your discharge because you're lying under oath. But if you do say something, at least you have shot.

>>:Yep. So...

>>:Do a statement of financial affairs or do we have something else?

>>:Did you want to do the summary, I mean, of the 106.

>>:Because this is going to be that - one of those forms, 106...

>>:Is it the same one as 106? Oh, summary this? Oh, yeah, that populates, right? That's self-populating. OK, good.

>>:This is one of those forms that we talked - so this form is going to summarize basically everything that you did on the schedules that we have been talking about all morning. It's going to summarize the, you know, the assets and the liabilities and some information for the court. And this is one of those forms that if you amend any schedule from A to J, you also have to file this form because it's going to change the numbers, obviously. So you want to file it, you want to check the amendment box at the top of the form and make sure you file that with every amended A through J schedule.

>>:There's a local rule on how to amend. So if you read the local rule, it tells you what schedules you've got a file. It's very particular, you just want make sure you do it the right way. You're going to get pinged with notices from the clerk's office, file this, file that, corrective action needed. So yeah and your client gets that in the mail and they call you up and say, what are you doing wrong? Anything they get in the mail, they do not like it.

>>:I know, they think you don't it too, I'm like, I get everything you get.

>>:That's right. Yeah, they're calling you, I have news for you. It's like yeah, I knew that three days ago.

>>:And the same with a declaration. After you do the schedules, there's a declaration...

>>:Oh, declaration of electronic filing?

>>:No, up some more. The 106.

>>:Right here?

© MCLE, Inc. All rights reserved >>:That's another form that you're going to file. Every time you amend anything from A to J, you're going to file another one of these saying that they read the new schedule, everything is complete and accurate and then they'll file that with it. So now, yes, we can talk about financial affairs.

>>:This is a really good form to go through carefully, it raises a lot of questions and will identify issues for you. And see what this says, so same financial affairs individuals, there's one for corporations.

>>:So the financial affairs is a very long form. But you have to pay attention to it because it asks - in certain parts it's going to be asking you for information from, you know, different time periods in your life. So they're basically asking you to provide a summary of your financial history over a certain period of time. And, I mean, it asks you about your taxes for the last three years, if you've lived in a community estate property in Section 3, you would check if it applies. Again, don't leave the box, if it's no, it's just no. A lot of the times, in my financial affairs, most of the stuff doesn't apply. But there are some things in here like the taxes, whether their bank account information, whether if they've closed any accounts before filing, that stuff applies.

>>:And this one is important because this will help you on the exemption. Remember we talked yesterday about exemptions a little bit. So depending on how long they've lived where they're filing, the exemptions in the state may or may not be available. So if they haven't lived in Massachusetts for a long enough period, the exemptions if they choose state exemptions, may have to be exemptions in the state where they live before. And this can get particularly tricky if they live in Massachusetts but on real estate, somewhere else. So then you get some really - most consumer cases, not usual. But that, you know, in this case - when you ask them this question, that'll - oh, you live - or sometimes you get a driver's license, an out of state driver's license, right. So anything you see that's like a little odd, you've got to ask questions about it. So oh, you used to live in Florida. Yeah. You own a house out there? Oh yeah, I had to leave that house. What happen? It was getting foreclosed on. OK fine, but at least you know now and you can disclose it. So that question is really important. Like I

>>:Sure.

>>:Yeah, might as well. I think it's a good idea. We have time, too. So...

>>:We do. So, let me just look at - so explaining the sources of your income. So here, you got to be writing, you know, because sometimes you'll have debtors who have different jobs, you know, within some different periods of time. So you want to put the wages that they earned here. Again, this is going to be the gross. I usually am able to get this from their tax returns, that's another reason why I asked them - I asked my clients for their last three years of tax returns, so you have that information available to you and you can put that in this section. And it's usually going to be yes. Did you receive any income during the year or the previous two calendar years - taxable. So again, you put that there, you identified the source, you put both the debtor one and debtor two.

>>:And usually, one of these is at five. Yeah. So this one is if you're working, this is like your Social Security. So one is income from employment and one is income other than from employment. So...

>>:Alimony, child support, Social Security.

>>:Yeah. Yeah, stuff like that. You can see where clients get confused by this. (Unintelligible) payments.

>>:Oh, yeah, the list of payments - that gets tricky. Because, I mean, sometimes, you know, at least my clients when they come to you, they're at their last end, but they've been trying to keep it together, trying to pay a little bit here, pay a little bit there. So you want them to list anyone that they've paid in a certain period of time before the filing of the bankruptcy.

>>:So Macken, this you're going to get into, this is all the preference stuff. So is like where the creditors lawyers go, whoosh, right there. See who got a preference.

>>:Yeah. There's going to be some preference stuff in there.

>>:I mean, you talk about the preference, too. I have had clients - again, you ask them all these questions and they still withhold information from you because, I mean, I have clients who - you know, they give me all their credit card information but they want to keep the home depot card because they have a home and they want to make repairs on it. But then the - Home Depot cancels them and they call me and they say, hey, I didn't give you that, how did that happen? It's because you can't just keep one over the other. Everyone gets notice when you file the bankruptcy. So - and that's seven.

>>:Inside, right?

>>:Yeah. So did you make any payments to - a payment on a debt you owe anyone who is an insider? I haven't had that.

>>:Is this like - we talked about this yesterday. If you pay your family - like, oh, I owe my mom 5,000. I'm going to pay her before I file bankruptcy so I don't have to list her. Then you list it here and a trustee is probably going to claw that money back from your mom, so your mom will get mad twice, once when you tell her you're filing bankruptcy and the second time when she's got to give the money back to somebody other than you. So you end up having to pay her twice because I guarantee you she's going to want her money. So you gave it to her. It's now back. All she had to do was keep the money in your bank account, exempt it, and pay her after the case. She has to wait a little bit. I know moms can be impatient, but if she can wait until after that bankruptcy case is over, then the $5,000 could stay in your bank account. So, yeah, that's really a - that's a very important thing to check because relatives - if your client's relatives start getting sued and you didn't tell your client about it, they're not going to be happy. Yeah. They're going to be talking to Pam Harbeson. OK? That's what's going to happen.

>>:That's section eight. Did we talk about if you transferred any property?

>>:Oh, right. Where was that?

>>:Right here. Within the year before filing bankruptcy, did you make any transfers of any property? That's very important. Because if you, you know, gave - put a house in your sister's name just before filing bankruptcy or a year before, you'd want to definitely disclose that. And again, you ask your clients, they, you know, say no or maybe they forgot and it could come up. So you just want to make sure you provide the accurate information here so you can save yourself, you know, problems down the road. And legal actions - yes. Repossessions - foreclosures. I've - I usually have a lot here because that's usually why clients are coming - because they're being sued. They had to go to court, they want to get the automatic stay so they don't have to go to court. So you want to make sure - again, like I said, I ask them for all the information they've received from the court and the collection agencies or attorneys, and you want to make sure you provide that information there.

>>:Do you file anything in the courts?

>>:I usually don't. In a case I had this year, I had to send something because although we filed this bankruptcy, the court still, like, found the person in default or something, so...

>>:Yeah, because a lot of lawyers will file, like, a suggestion of bankruptcy. So I think it's a good idea. It can't hurt...

>>:It can't, yeah.

>>:...Right? And when the state court gets it, you know, most state courts - many state court judges aren't particularly familiar with bankruptcy. Or if they see something that has bankruptcy written on it anywhere, everything stops. And so it is a good way to stop, like, the default from entering and so forth. Yeah. Now, if there's many defendants, you want to indicate - you know, if seven people are being sued and your client's the only one filing, you just indicate, you know, bankruptcy filed as to John Doe, then the case

© MCLE, Inc. All rights reserved will be stayed as to your client. The case can still go forward as to everybody else. But sometimes the judge will just stop the whole thing. So if you're a creditor, you can get these suggestions of stay, then you - sometimes you have to go in to the court to explain to the judge, wait, don't stay the whole case, it's just this one guy, not everybody else. So - yeah. This one's part five here. Oh, gifts.

>>:Yeah. If you received any gifts or, you know, gave any gifts, you want to make sure you describe, you know, the person who you gave the gift to, give all of their information. Again, this - financial affairs is trying to summarize your whole, you know, financial situation prior to filing. And again, you know, some people are going to be angry with you, but you have to provide the information here and just be as detailed as possible. This financial affairs - I include this in my questionnaire so, you know, they're able to check it off or list that information there as well. But again, that's why you have them come back in because sometimes they completely ignore this form and they bring it back in blank and you know at least - they've done at least five things in the form. You know, nothing's all nos.

>>:And these gifts - right? - so again, giving away property - trustee says oh, I get to get it back. Now the amount - so trustee's not going to go after $600 if you made a gift to a charity. Most trustees probably wouldn't go out for $1,000 because it just costs too much money to get all that done. But, you know, you look. Now, if somebody regularly gives $1,000 to their church - right? I mean, our clients have any money. So is - are there going to be a lot of gifts? As a practical matter, probably not. This certain loss section - this - part 6 - that's where you get into these losses. You know, gambling - that's really what comes up in that one. So that could be an explanation. So you can see how the statement of financial affairs can tie into things.

>>:I actually think they should fill this out first, you know, before they fill out anything else.

>>:Yeah, because it ties up - you want to talk about this one? Part seven, you know, the transfers within two years they can get back or something

>>:Oh, yeah.

>>:Yeah.

>>:So again, doing the look back, in part seven, you're going to talk about any payments or transfers that you made. So this can be to attorneys. This can be for people - credit counseling agencies - anything that you transferred within that time. Because again, like I said, you have clients coming to you who have been thinking about maybe this - or how to solve their financial situation, whether it be bankruptcy or something else. They want to - you want to make sure you provide the information if they did transfer or make any payments prior - like, in one - it's a timeframe, so within the year prior. You want to make sure that they provide that information here and give as detailed as possible a description of what was transferred and the exact amount of money.

>>:Yeah. This - 18 is one where trustees - this kind of - the question many trustees focus on. This is, have you made any transfers within two years of the bankruptcy filing out of the ordinary course? So this would be what Tiffanie said - you give away your house to your sister or something like that. That's where this is going to show up. Now, the look - this asked for two years and the lookback period is four. So just because two years is clear doesn't mean four years is clear, so you need to ask...

>>:As many - I always ask if there's been any transfers. Don't even give the year. Because then you can decide. If they say, yeah, I transferred, you know, my house. Well, when was that? Oh, that was 10 years ago. So then you know.

>>:That's a way to do it. Yeah. But that's a key question. And in most cases, it's non - you know, most consumers - they don't have anything. But that's a big question for - and then there's a self-settled trust thing. I mean, most consumer debtors don't have anything. But if they put their property in trust - I'm dealing with a case right now where I'm representing debtors who did put property in trust. It was nine years and eight months before the

© MCLE, Inc. All rights reserved bankruptcy was filed. So it wasn't my case I didn't file it, somebody else did. Now I'm trying to help them out. But nevertheless, there could be a trust lurking. So make sure you get on top of that. And then here's where you're listening all your bank accounts closed, opened - safe deposit box - safe deposit boxes and storage boxes, right?

>>:Yeah.

>>:Got to be on top of that. There can be stuff in there. How about part nine - is - that - oh.

>>:Identify a property...

>>:Oh.

>>:...Identify property you hold or control for someone else.

>>:Yeah. Have you ever had that?

>>:Yeah, because I have, like, clients - if they have - what are they called? Like, when they have the trust - the accounts for their children - you know? - the CDs. They have - you know, they're in their names, but they're for their minor children, so you want to make sure that they list that there.

>>:Do you put them on schedule B also?

>>:Yeah.

>>:OK, you do? OK. OK. So you put it in both places. So you say - so - OK. Yeah, I'm never sure what to do with that because it's technically not - like, whose is it?

>>:Yeah. It's technically for the child.

>>:Right. Yeah. And then environmental - this rarely applies - environmental information. Usually, your clients are not in possession of environmentally hazardous stuff. And - I mean, you know, if they have, like,

© MCLE, Inc. All rights reserved common cleaning liquids and stuff, that's not what we're talking about here. We're talking, like, Superfund kind of things here. So people will say, oh, yeah, some detergent. And it's like, no, no, that's not it. I mean, that is it, probably. If you - like, if you went out and poured that on your lawn, that would probably be a problem, but that's not what they want to know in there. Oh, and then here's your business. So there's a four-year lookback for any business interest you have. So that's very important. And a lot of people just - as a trustee, I see people overlook that all the time. They'll be listing debts for - that are playing the business, really, and it's, like, what about this one?

>>:That applied to Lucy. Didn't she have her little cleaning business?

>>:Right? Yep. So - and, you know, it's just, like, get it done because usually what I'll say is, OK, you're going to have to amend the schedules and I'm going to continue your meeting, and then you're going to have to come back So it's like - so yeah, that's one that a lot of people just skip over for whatever reason. And it's important to know. Oh, and that there's that financial statement - Lucy gave a financial statement. So this would give you information - have you given a financial statement to anybody in the last few years, right? Because then you can see - big in divorce cases, right? Because your filing financial status with the divorce court - you can look at that compared to this. They don't line up. Uh-Oh...

>>:Then you have a problem.

>>:...Somebody has a problem. That's right. Now, do you have to file this signature - this one you don't have to file, right?

>>:Nope, just the signature on the petition.

>>:Yeah. OK. So - yep?

>>:How far back are they going to look for financial statements?

>>:I mean, I haven't had any and I've used this for divorce clients. I'm not sure how far, but...

© MCLE, Inc. All rights reserved >>:This says two years, but I guess, you know, if I were a trustee and I saw debts that went back - I guess I would go at least as far back as the debts you've listed on the schedule. So if your debts go back seven years, I might want to see - I might - it's unusual, people - you know, financial statements - like you said, in divorce case and sometimes businesses, right? So people don't - in business, sometimes the bank will require a financial statement as part of the lending documents. But it's - I've rarely had that - I've rarely seen the financial statement thing come up. So I think it's the transfer - it's really this - is the transfers that can be problematic, and that's kind of the biggest thing. But a lot of times, on consumer cases, you're right - most of this is just non - doesn't - you know, doesn't apply. But it takes time and you've got to check. And you can't leave it blank. You have to check.

>>:Yeah. And a lot of my client's try to leave it blank and I have to call them in and you have to go through - and we had to sit down together and go through it because the email didn't work to say complete it, so they have to come in.

>>:Right. Yeah. You've just got to - you've got to make sure you have it. When I have - I witness the signature. So I won't let anybody sign their schedules and mail them in. Is yours the same - do you do the same thing?

>>:Yeah. No. Yep, I witness the signature. But once you - because, like I said, I do it kind of opposite of you. Like, I have them complete the questionnaire and then come in and we go through it. So they'll come in with it blank. So it's, like, now we have to sit here and fill it out all together again.

>>:Right.

>>:Or sometimes they'll take it with them and then bring it back, and they still do it incorrectly. So it's better just to sit with them so they can fill out the financial (unintelligible) part because. A lot of my clients think that that doesn't apply to them for some reason.

© MCLE, Inc. All rights reserved >>:OK. Yeah. But I will not accept, like, signed schedules from the client mailing. I want them to sign in front of me. Actually, I have them initial every page. Do you do that? Yeah. I have them initial every page not because - I was in a case where somebody said, oh, that isn't my signature. I was a lawyer. He said, I didn't sign it. So I was like, really? And I don't videotape. Maybe that's what I need to start doing/. But now they initial every page. So, you know, then it's really hard for them to say, oh, I didn't sign those other 60 pages either. You know, I was like, come on. But yes. I have them initial every single page. And sometimes I'm making changes on them because, you know, you're sitting down with somebody. But so I make a change. We initially the change. And then we initial - because documents they cite - that they have, they don't get filed, right? It's all electronic. So there's a PDF documents to get the file. So the papers they sign aren't the ones that really get filed. They used to be. They're not now. But at least I have a record of it. So...

>>:Yeah. It's a good way to double check when they - when they ask that question. What do mean what does it do? Did you look at everything?

>>:Yeah, yeah. So I just do it because I had that one bad experience. You know, most debtors are honest. But if they're in trouble, you're the first one to get thrown under the bus. OK? So yeah. Any questions about any of that. Everybody feels relatively confident that they can prepare bankruptcy schedules for a consumer?

>>:From scratch, no software - that's the test.

>>:That's the real test. OK. So we have a 15-minute break till 11:15. And then when you come back, we're going to have a presentation about bankruptcy. Now, we're going to switch the focus. We've been looking on the debtor side. We're going to talk about the consumer side of the case. So 11:15, we'll be set. Great. All right, so let's get started. If we get things started a little early, then we have plenty of time - if we finish a little early, we can have a little more time to break. So what we're going to do now is look at bankruptcy from the creditor perspective. So this would be from the perspective of the variety of different creditors that may be owed money.

© MCLE, Inc. All rights reserved You may have credit cards, landlords banks, mortgage companies, car lenders, hospitals. You know, they're impacted by a bankruptcy filing. A Bankruptcy filing - they get a notice of. And then what do they do now? Because they don't want to run afoul of any bankruptcy laws. And then - so they don't want to do anything wrong. But what rights do they also have? So Machan is going to talk about that. Now this part of the program goes into about 12:20 or so or 12:30 actually. And then Christine, to her right, will talk about foreclosures, evictions, some state court problems that commonly lead to bankruptcy. But then you need to know, like, how all the timing on that works, what does it all mean because your client will come in with these issues. And you want to be able to say, oh, I understand that. Here's what it means. Here's your rights. Here's maybe some defects or some defenses. Maybe you don't have to file bankruptcy. You can fight it the state court. So Christine will talk about that. So Macken, I'll turn it over to you. Go ahead.

>>:Hi, everyone. I'm Macken Toussaint. I work Riemer and Braunstein, which is my government center. My practice include mostly Chapter 11 and creditor work. And then I also do some financing at Riemer and Braunstein. So we're going to switch our rule as we're going to be council representing a creditor in a bankruptcy case. Thank you. Before I begin, I should note that in addition to the materials that are included I think in the package that I got this morning, there's also another paper that Lynn, the person who's been doing this in prior years, wrote about creditors' perspectives. So it's everything you want in there. So a creditor is a debtor. The creditor of the debtor is anyone holding that claim. So now the first question is, who is the claim holder? And you should take a look at Section 101 of the bankruptcy code which has all the definition - the defined terms. And a claim is one other terms that are defined. And it's pretty much all right to payment, whether or not the right is reduced to judgment, whether it's liquidated or liquidated, whether it's a contingent claim, whether it's mature, whether it's immature, whether it's disputed, whether it's a secured claim or it's an unsecured claim. So this definition pretty much captures all debt and liabilities of the debtor including also a guarantee. So if someone gave you a guarantee, you didn't call them the guarantee but potentially it's a claim if you want to be involved in the bankruptcy case. So now we're going to talk about the different categories of claims. And we're kind of,

© MCLE, Inc. All rights reserved like, divided into the four main categories of claim. The first one is a secured claim. So it's pretty much when the debtors obligation is secured by property or an asset. A typical one, of course, is a mortgage or a car loan, for example. And if you are - if you are represent a secured creditor, that creditor has some special right for lack of a better word because you have a lien on something compared to an unsecured creditor. You'll see the concept of an over-secured creditor. And that has to do with - when the collateral that you have a security interest in is actually the value of that collateral is more than your claim amount, so you're considered an over secured creditor. And that's important because under the bankruptcy code, you may be entitled to attorney's fees, you know, no cost and fees and charges because you're over-secured. Then the opposite of that would be pretty much like if you were under-secured creditor where the collateral where you have a security interest in is actually devalued less than your claim amount. And in that case, the deficiency claim would be important because you may be in a situation where the secured portion is treated a little bit separately then the unsecured portion of your claim. And then you also have creditors who are wholly unsecured, which pretty much - it's a situation where you have a third mortgage on a property that would be a typical example where the value of the real estate is not even enough to cover the second mortgage. So there's nothing else there for you for your claim. So you will be wholly unsecured. And in connection to such a claim, you'll hear the word lien stripping, which I think we talked about a little bit this - it was mentioned this morning. The idea is really your claim is technically an unsecured claim because there's no value in the collateral for you at that point.

>>:Macken, let me ask you a question?

>>:Yes.

>>:You have a presentation, so do you want a clicker, and you can roll through this - through the slides.

>>:Oh, we didn't even put it up there (laughter).

>>:Yeah. I don't know. You were going. I was like, wait a minute. I think

>>:Can I do it from here? Can I do it from here?

>>:That's - actually, let's try it.

>>:Let's click to page four.

>>:This is backwards.

>>:I'll probably mess it up, but let's see. Let's see.

>>:If you point it over here, I think...

>>:To where? I'm probably too far.

>>:There you go.

>>:I'm up to page four - perfect - all right.

>>:Sorry about that.

>>:No, no problem. Thank you. They do have it on paper. But it's so small.

>>:It's hard to read.

>>:Yeah. It's very hard to read...

>>:Yeah. These slides - what page?

>>:...But that's much better. I'm going on page four right now.

>>:What page in the materials? Hold on a second. Is she on page - oh, the materials today are page two?

>>:Yeah. We did give them some materials.

>>:All right so that's much better.

>>:This is much better.

>>:So one thing to keep in mind for lien stripping, though, is there are a section under the bankruptcy code where if you're dealing with the debtor's principal residence, generally, the general rule is you cannot strip off the lien if it's a principal residence. But also but I - My understanding is there's also some uncertainty, though, if you're dealing with a wholly unsecured claim. So some courts have different ruling with respect to that particular issue. The other thing I should mention - that in a Chapter 13 case, you can - instead of filing a brand new separate procedure to strip that lien on the property, you could do that right under Chapter 13 plan. And I believe we have a brand new form Chapter 13 plan right now in Massachusetts. And there's a provision in there, a section in there that allows you to do that. So what else? I also have a note about Section 522(f) which was also mentioned this morning that has to do with avoiding a lien, which is if it's a judicial lien or a non-purchase money security interest and household or personal good, you can avoid those liens to the extent they're impaired the debtor's exemption and no real property. I have to point to this.

>>:Is it working?

>>:I might have to move. I'm back on five. OK.

>>:You want to go backwards?

>>:No, I'm on the right page right now. It's kind of slow. There's kind of like a delay.

>>:Yeah, there's a delay or something like that. If it doesn't work then what I can do is, you can - I'll stand over here and you can say next slide.

>>:OK. So we've done secured claim. So now the other kind of claim is the priority claims. So priority claim is pretty much. It's a priority because the

© MCLE, Inc. All rights reserved bankruptcy code states say so. So you go to Section 507, and you'll see the list of all the priority claims. And typical one is a domestic support obligation. We know that claim is a part - will be paid first because it's under 507(a)(1). Another popular one is the administrative post-petition expense. Pretty much if the claim happens post-petition, after the filing, and we're going to talk about constitute administrative - the one in the slides - it's also going to be - have - it's going to have a private claim as well. Another one in the 507(a)(4) have to do with wages and salary. If, for example, your debtor has a business and they do have employees, it's up to 12,850 as of right now because those amounts change from time to time. That would be a priority claim as well. I have another one with respect to under A(8) having to do with governmental units. If the government have tax claims, that's also considered a priority claim. So...

>>:Let me mention one thing here. Macken has a slide about involuntary case. And we didn't talk about that. But bankruptcy cases can be filed against a client. So we've only been talking about voluntary bankruptcies which is where you file the bankruptcy petition on behalf of the debtor. But you may - you talk about involuntary as part of your...

>>:No, I think just mention it because it's one other claim. But I think it's Section 303.

>>:Yeah.

>>:Yeah. So you want to talk - just tell because that's a good creditor remedy process.

>>:So you do have - you do - under that section of the bankruptcy code, I think you need about three creditors in certain amount for the claim to total to - for all the claims to total to, then if you do have that, you can actually put someone or business in bankruptcy. So that's why it's an involuntary bankruptcy petition.

>>:And that debtor can contest it. So they're not in bankruptcy when the petition is filed and order for relief doesn't enter. It's just - there's a complaint...

>>:...And then you have a trial.

>>:Yeah, and then they have to respond. And there's a whole process that goes through that to determine if the bankruptcy's going to stay open or not.

>>:Right.

>>:How do you find the other co-debtor?

>>:Generally, they know - I think, I find that it's not - well, yeah, because how do you know - if you are in a certain type of business, though, right, you know who's doing business with that, you know, with that debtor. I think that one way - people, they just talk to each other. They just know each other.

>>:Yes, I think that's right. That's right. Like contractor - usually everybody knows who's working with the contractor. But it can be contested. I'm involved in a case now where the involuntary is filed against an individual and a corporation. The judge allowed, after a trial, as to the corporation, said no as to the individual. There's things you have to prove. I think not paying your debts as they come due, or something like that. How many do you have, that's part of it - an amount. But, you know, a bankruptcy case could be filed against your client. It's unusual because it's costly. And if you're wrong, the penalties are substantial. So if you put somebody in a bankruptcy, and the judge says, you shouldn't have done that, then there can be punitive damages. So it's not often used.

>>:And you have to have a real claim.

>>:Right? Oh, OK. So explain that. Yeah, that's right.

>>:You can't do it out of spite. You have to have a claim. I believe it cannot be a contingent claim either. It has to be... (CROSSTALK)

>>:Will VOR join in on that?

>>:Usually they haven't - the ones that I've seen has always been private parties doing that. I don't think the government is...

>>:Yeah, I'll tell you. They used to do it because they are unsecured, so they're priority, right? But they're still unsecured, unless they have a tax lien, right? But yeah, you could do that. But it's just - it's rarely used because the creditor has to go out of pocket. So they're owed money already, then they have to pay the lawyer thousands of dollars more, and if there's a trial, many thousands of dollars more. And so sometimes they're just like...

>>:So pretty much, if you're going to do that, you need to kind of like make a financial calculation what are the chances of you getting paid your claim at the end of the day? And also, you got to make sure the debtor has assets. You can't - nobody would waste their time doing that, putting a debtor in bankruptcy where they don't really have much assets to pay your claim at the end of the day.

>>:Everybody understand that? An involuntary - it's important to know. And it is at 303...

>>:303, I think. So now we move to administrative claims. So when you hear administrative, automatically think post-petition. So it's a claim that is incurred after the filing. And it has been - that's because it has to do with an actual necessary cost to preserve the estate. So that's why a typical administrative expense claim is the attorney's. So the debtor's attorney representing the case is providing services after the petition date. Those are usually an administrative expense. So that's under 503(b), and you'll see that is but - nine different type of administrative expense claim. Another one, of course, is the wage and salaries, if the debtor is a business. I have compensation of certain officers in the case, including

>>:What's an administrative claim in a Chapter 7? Like, what would be a common administrative claim that they might see in a consumer case?

>>:I would think it's - because the debtor's attorney get paid upfront. So it's really not...

>>:Probably just like Chapter 7 trustee fees or something like that.

>>:But I would think if it's a big Chapter 7, I think you'd - like, under (b)(3), for example, some creditors could provide certain - not services, for some benefit to the estate, so that may come up. And it's Chapter 7 because Chapter 7 is usually the trustees in charge of the case, not the debtor. The Chapter 7 trustee would be in charge in the trial, so - you know, kind of like go through the assets, go through the billings, and make the payments. And it goes fairly quickly. So it's less of a dispute under Chapter 7, but you definitely see that come up a lot in Chapter 11.

>>:And maybe Chapter 13.

>>:Thirteen, as well.

>>:Chapter 13. You have a question?

>>:I'm guessing 13, especially if you had to hire (unintelligible)...

>>:True, yes. And then also, another one in 13 - if you're renting, and you haven't paid your rent post-petition, that would mean that's your expense because you need a place to stay. So now, the other one that I mentioned, the last one, it's 503(b)(9), which - going to be going to the next slide. So the idea with 503(b)(9) has to do if you represent a creditor that provides merchandise or that sells good to the debtor, and if they do that within a certain amount of time, and they didn't have time to pull those merchandise or goods back from the debtor before the filing - because the debtor never really tell you they're going to file for bankruptcy - or there's some items for

© MCLE, Inc. All rights reserved sale, and then they file for bankruptcy. So you'd be like, crap. I wish I knew that I didn't - so usually then the bankruptcy could give those creditors a little bit of special preference, where they have the option of getting the goods back if they do that timely, within a certain amount of time, under 546 or 503(b)(9) give them an administrative expense claim, kind of like to encourage people to do business with the debtor, type of thing.

>>:So remember now, right? So you're now sitting with Macken. You're on the creditor's side here. So you may be saying, as a debtor's lawyer, like why are we talking about this? Because I'm not going to worry about this. But now you're - so this is for what if a shipper calls you or something - you know, somebody that was shipping goods to Toys 'R' Us, your client, and they say, oh, I just shipped them three truckloads of goods for - what do I do? You can now, if you're going to represent a creditor, you have to know about these reclamation rights.

>>:That's right.

>>:So this is really from the - you've got to take off your debtor hat, put on your creditor-attorney hat. You're now the creditor's lawyer. Make sure you get oriented right.

>>:That's right. So the local bankruptcy rules in Massachusetts recently - well, last year - they do have a particular section that tells you, you have a deadline for you to file that claim, if that's what you have. So it's not only that you know what to do, but you really need to do it timely. Actually it's - the law code is 2002-1. And you have to do that within 60 days after the date is set for the 241 meeting. So if you don't do it timely, you may not have a 503(b)(3) claim. You still have a claim. But it's not going to be one with admission of status. And then you have the general unsecured claim, which is all the other ones, right? Because, technically, the general unsecured claim is one where you don't have collateral. You don't have a secured claim. You're not a priority claim. And you don't have a 503(b) claim. So - and those typical claims would be like what I just mentioned earlier if you're the landlord, right? The debtor didn't pay the rent for the past three, four months. So that lien note have an unsecured claim. The utility bills would have an unsecured claim. Also another the typical one is

© MCLE, Inc. All rights reserved credit card bills - would be in a general unsecured. As an attorney, you may be representing a client and then that client files for bankruptcy. Your attorney's fees were not paid. So you would have in a general unsecured claim as well.

>>:You're at the end of the line.

>>:That's right. That's right. I have that in bold that the general unsecured claim - they're generally not entitled to distribution meaning payment in the bankruptcy until after all the priority people are paid. The other thing I should mention that if there's it's not unlikely that you will get no distribution in the case, especially if you have a debtor that has secured creditors to pay first. And then also, when you take out the exempt assets, there's not enough left for the unsecured creditors.

>>:So sometimes - Macken, do you sometimes tell your clients do nothing because you're going to get nothing?

>>:Yeah. Sometimes, I mean, if you look at the debtor schedule, you notice there's really nothing there if it - where the client would actually - I would encourage them to do something is when the claim is not listed or it's listed and not properly. And there's a chance the trustee may fine some assets. So you're better off not blowing off. You need to fall within the deadline for filing of claims. It may appears there's not - I've seen cases cases where it appears it's really not a lot of assets. But there's a settlement with a creditor. You know, at some point, some asset does does come in. Plus, it really doesn't take that long to file a proof of claim anyways. So you kind of, like, it really depends on the client and what and how much is owed. Sometimes you have creditors where they are already forgot about that money anyways. And if there's nothing in the bankruptcy for you to get paid, so you - it's a calculated chance I guess.

>>:Yeah. I have a case where the Zoots, you know, the cleaning place - they went out of business. So I had a client who's landlord - called me up. Oh, what do I do? And you said, this is probably, you know, terrible. I have my premises. There's all this cleaning equipment in there. I can't re-rent it. So we made an arrangement to get everything out as quickly as we could,

© MCLE, Inc. All rights reserved so the debtor sold everything. But then we filed a claim for administrative rent because after the bankruptcy was filed, they were still in there. All their stuff was there.

>>:Right.

>>:And my client's like oh bankrupt - I'm never got to see anything. This is a typical thing. I'll file a claim - never going to get anything. But he got a big - a very large check for all that administrative rent. So, you know, in many cases, these cases. So you would do what Macken says and say oh, everything in my store was sold, there's probably some money.

>>:Yep.

>>:And then you can file and administrative rent claim. So they didn't get all of the preposition rent - never going to get it. They were, like, three months behind, like 60,000 or something.

>>:So you have to assess what kind of claim do you have while you're up there or do or where you are?

>>:I think the prepetition rent is unsecured, never going to see a penny other than their security deposit. But their post-petition rent - they got the whole thing. So they got three months rent. That's like foul money because they figured it's terrible. So you really have to watch it carefully. You can get some money for your client.

>>:Yeah. All right, so now with - the next section is property of the estates. As to why all this matters - now, if you - if a debtor owes you money, you file a lawsuit, for example - prepetition - you can't just hear about the bankruptcy and then, oh, I'm already - I went first and already filed a lawsuit. I'm just going to proceed and sue the debtor. No. You can't opt out of the bankruptcy. You're a creditor - you get notice of the bankruptcy. Everybody got to go through the bankruptcy process and just join the line. And now, one of the big reason is the concept of property of the estate. You guys probably learned about that yesterday. So the idea is, once the bankruptcy is filed, a bankruptcy estate is created.

>>:And that estate is to benefit everybody. So the - if it's a Chapter 7, the trustee would, you know, get the assets, figure out who - what the liabilities are. And the idea is to liquidate everything and fund distribution to creditors. So, essentially, all the debtor's property would become subject to the administration of the bankruptcy court or the Chapter 7 trustee if it's a Chapter 7 case except for what you guys learn about today - if it's an exempt property. If it's - the property was exempt, then it doesn't become part of the bankruptcy estate. And then I have here that, if the debtor, for example, has an interest in a corporation or an LLC or it has an interest in a contract that is lucrative, all that becomes part of the bankruptcy estate asset. I have in here that the estate property does not include post-petition earning in a Chapter 7 case. So if you file - if your client filed for Chapter - if it's a Chapter 7 case - because now the trustee's in charge of the assets as of the petition date and liabilities, so the debtor then will continue to work, but that income will not become part of the bankruptcy estate. However, if it's a Chapter 13 case, it's the opposite, right? Because in Chapter 13, the idea is the debtor's going to be filing a plan to pay the creditors, and be post-petition income will be what the plan will be based on. Same thing if the - if it's an individual debtor who filed for Chapter 11.

>>:Two things on - that Macken said - I hope you don't mind me jumping in.

>>:Absolutely. Go ahead.

>>:So two things. One, if you own an LLC, you lose control. So like if - so...

>>:If you're an LLC, now you're in bankruptcy, then the trustee would be the one that has - that's running the show here.

>>:Yeah. So you have to tell your client about that, which can be a little prickly. Most trustees are not going to want to deal with it, but they might. The other something is - typically, I'll ask an accountant to value the LLC

© MCLE, Inc. All rights reserved because you have to put a valuation on it and, you know, most LLCs run by individuals are not worth anything, but it is good to have an accountant because, you know, what if the LLC owns valuable intellectual property or something? Well, now the trustee can sell it.

>>:Or real estate.

>>:Yeah, or real estate. Right. So you've got to be very careful about what - in most cases, the LLC is not valuable. That - you're filing bankruptcy for that reason. But still, you have to be careful. The control issue can be really tough.

>>:Yep. Now, another reason why it all matters, in addition to the property of the estate concept, is the automatic stay. So it's exactly like it sounds. It's automatic. So if you had a prior lawsuit that you filed against the debtor, you can't keep going. If you even have a foreclosure scheduled already, you have to stop and get relief from the automatic stay, which we're going to talk about later. You can't keep calling the debtor for that that payment that's due. You can't even enforce the judgment. Everything is stayed. So I have in here in bold that the creditor's attorney - you need to be aware of the automatic stay and really advise your client to adjust their internal collection procedures. So if the way of doing things is to keep pounding the debtor, they're going to have to stop that because there's a bankruptcy now. Now, under that, I have that there may be damages. So there is a - it's a thing. If you've breached - if you violate the automatic stay, the debtor can go to court and get relief. And then also whatever action that you take may be void anyways, so it's very important for the creditors to know that things have changed once the bankruptcy is filed. Also, I have a note here that's - even if you didn't receive formal notice from the court yet, the automatic stay's there. It still applies to everybody.

>>:If you have a foreclosure sale scheduled and they are - and they file the bankruptcy before the foreclosure - I forget what the ruling is - can you do one continuance without violating the automatic stay?

>>:There is one - at least there's a case in - a case or two in Massachusetts where you can, yes. Well, you have to reschedule. You

© MCLE, Inc. All rights reserved don't proceed with the foreclosure. You reschedule it one time, and then you can proceed and file relief from the automatic stay if you want to proceed with the foreclosure. I think it's a - it's, I think, based on the language of the case where the judge found that, well, it's not a technical violation of the automatic stay to continue the foreclosure for another day.

>>:Right. So you're not selling it.

>>:You're not selling it (laughter).

>>:Right, that would be bad. OK.

>>:So - yes. So then the slide - the next slide talks about the option of seeking relief from the automatic stay to proceed. So, for example, if it's a litigation against the debtor, but really if you're going to go after the insurance, for example, and it's really not going to affect the administration of the estate, you can file for relief from the automatic stay and say - you know, and explain your case to the judge where you can proceed in state court. And then, once you get the judgment and then your claim will be paid in the bankruptcy. Another example is if the debtor's not paying the mortgage post-petition, you may have cause to get relief from the automatic stay. Now, I have in here that certain proceeding are exempted from the automatic stay to begin with. So it's not - I mean, I did say, at the beginning, it's - everything is stayed, but it's really not everything. So if you go to Section 362(b), there are specific actions that are not - that do not get affected by the automatic stay. I counted, there's about, like, 28 of them. One is a criminal proceeding. That's not automatically stayed. Another popular one is child support action for alimony and child support. That's not automatically stayed. Another one is the governmental unit - if they have - if they want to exercise the police power, that's not automatically stayed. I have in here, also, in 362(b)(10), if it's a non- residential lease but the lease was already expired prior to the filing, it's not necessarily automatically stayed under the Bankruptcy Code.

>>:Usually, you know, if you have - if you're - if you, like, aren't sure, there's no harm in going for relief from stay. The worst the judge could say is, oh, you're protected by...

© MCLE, Inc. All rights reserved >>:Protected by the automatic stay. I mean, I've seen situations where you - if - I would file a motion for relief from stay, we just put language and say we're really doing it just as extra precaution just in case it applies if it's unclear.

>>:Yeah, because, if it does apply, it's terrible.

>>:Then you - yeah, that's right.

>>:So you may as well find out, right? It doesn't cause a lot of money, and it really is - yeah, you can always be safe.

>>:Yeah. So now Section 362(h) is not necessarily an exception to the automatic stay, but it does provide that - I think you guys must - I wasn't here yesterday - must have learned that yesterday. So there's a section of the bankruptcy code that the debtor has to file a statement of his or her intention. If they want to keep the property, if it's subject to a security interest - so 362(h) provides that, if they debtor doesn't do that timely, there may be a chance that the automatic stay does not apply to that particular property.

>>:Yeah. Let me say one thing about this quickly. There's a concept called reaffirmation. Sometimes a secured creditor, typically a mortgage company or a car-own company, may ask your client to reaffirm a debt. Reaffirm means your personal liability will remain on the obligation. So typically, through bankruptcy, personal obligations are wiped out, but the mortgage obligation remains in place. So you can still lose your house if you don't pay because the lien remains there, but you don't have the personal liabilities. And reaffirmation, basically, is like no bankruptcy ever happened, you've got to pay me like you always did. And if you don't pay me, I can sue you and get the money from you. If you don't sign a reaffirmation agreement, then they could only go after the property. And if there's a deficiency, they can't get the difference from you. Typically, I do not recommend reaffirmation agreements under any circumstances.

>>:What about a car, though? Where the debtor usually need that car to

>>:Right. So - that's a great question.

>>:That's where you usually see it.

>>:Yeah. You'll see it, but you do not - in Massachusetts, you cannot repossess a motor vehicle for a non-monetary default. So filing bankruptcy, while a - an event of default under almost all motor vehicle agreements, you cannot repossess on that basis. And same with real - in real estate as well. You need a monetary default. So it's rare that you would have a reaffirmation agreement. There are reasons to do it because, if you don't reaffirm, sometimes the creditor will not put the payments you make after the bankruptcy on your credit report. So it can slow down your rehabilitation. Sometimes they'll stop sending you bills, so it's like, where do you send your payment? Now, that's less a problem now with electronic payment, but I mean there's some things so - reaffirmation is really important to understand. The ABI - American Bankruptcy Institute - has a little bookstore and there's a book on reaffirmation, and you should get it and you should - and read it. It's really a good - you have to understand reaffirmation if you're going represent consumer debtors.

>>:I mean, creditor. Well, two - that as well.

>>:Both, consumer debtors and creditors. You've got to - yeah. Because creditors want - creditors are going to be sending out reaffirmation agreements to you.

>>:So technically, if you represent the creditor, you want them to sign it. If you represent the debtor, you don't want them to sign it.

>>:That's right. Right. There's two sides to every class that we're aware of. That's exactly right. But you need to know that concept. And it's - that's kind of a separate course, really, but it's something to be aware of. And there's a good book on it, so you can read that.

>>:So the next thing is - so you do have some debtors, though, where -

© MCLE, Inc. All rights reserved they call them serial filers, where they would file for bankruptcy this year, didn't really get a discharge because they just want to stay a foreclosure and get the case dismissed. And then, next year, they file again. So the bankruptcy court does have some protection with respect to these debtors. It's under 362(c) - the - (c)(3), for example, has language that, if the debtor is in Chapter 7, 11 or 13 and there was one pending prior to that - so the bankruptcy - the automatic stay may not apply to the second case after 30 days unless someone asks to extend the automatic day. So I guess if you're a creditor, you may object to it. It depends on the situation and the facts of the case.

>>:And this is the issue we talked about yesterday. Richard said, oh, file a bankruptcy, but then he may have it dismissed because he needed to do it. But if you dismiss it, there's consequences.

>>:That's right.

>>:You don't get that automatic stay necessarily. There are some things going on.

>>:And then C(4) talks about if the debtor had two or more prior bankruptcy case dismissed in the past 12 months then it's even harder to get the stay. So now another reason that it all matters is the district, which I'm sure you guys talked about yesterday. But I'm going to go real quick. So as you guys know, the really big point of filing for bankruptcy is to get the discharge at the end of the day. So in Chapter 7, it's - I have it hear that it typically enters in about six months. That's the amount of time it takes from the trustee to go to over the assets - or less - four to six months. In Chapter 13 plan, the debtor will get the discharge after they're done making the payments under the Chapter 13 plan. And if it's a Chapter 11, it's usually associated with when the plan is confirmed. So...

>>:And your personal liability is been discharged. You have, like, in personam liability, in rem liability, so it's kind of like those circumstances. Like, when I hear those words, I just kind of pass out.

>>:The debtor just want a discharge (laughter).

>>:They have to keep paying.

>>:Some creditors don't know that. Oh, I filed bankruptcy. I don't have pay my mortgage any more. No. Well, you don't if you don't keep your house.

>>:That's right. Another point that - with respect to discharge - even if you didn't get any distribution in the case as a creditor, that doesn't mean your claim is not discharged. So keep that in mind.

>>:Once it's discharged, you can never...

>>:You cannot go after the debtor going forward after the claim is discharged. It's gone. So I have to - yes - so under 523, there is a concept of discharge and dischargeability where not really all debts or claims are automatically accepted. I'm sorry. Certain debts are automatically accepted from - a debt is discharged under 523. So if you get - if you take a look at section 523, for example, if I think under subsection 3 - if the creditor, if the debtor didn't list your claim at all, it's nowhere on the schedule and your client did not get notice, for example, you have an argument that my claim is not discharged. Another one is domestic support. Those claim under subsection - clause 5, it's not automatically discharged. Another popular one is student loan, that's not automatically discharge. And I think that there's a beginning language for that section, makes reference to undue hardship. That's why sometimes you see there are separate proceeding where the debtors' filing a separate proceeding to make sure the student loan is discharged to show that there's undue hardship to the debtor. But those are. I mean, it's just very hard to get. But it is still possible though. And you do also have the concept of dischargeability. Section 523(c) carve out certain claim that relates to false pretense like if the debtor incurred the debt using false statement - false pretense. As the creditor, you could file a separate proceeding to say my - this particular claim is not dischargeable.

>>:This only comes up when contractors file bankruptcy and homeowners,

© MCLE, Inc. All rights reserved you know, paid and they file a discharge complaint saying, wait a minute. My debt should not be discharged. I gave you money. You never - you defrauded me. You didn't use the money for the right thing. You told me you were going to use it for this. You use it for something else. So those cases can lead to the discharge.

>>:Or the debtor just right out - just give you false information.

>>:Right. Right. So that's where you see that and the creditor has to file a complaint in bankruptcy court, it's not automatic, those fraud ones. You have to do something. So you know student loans - that's automatic. But the - or the tax is automatic. For private credits, typically, you have to file a complaint. And you can have a jury trial - a non-jury trial in bankruptcy court, witnesses the whole nine yards, that you would have in state court to determine dischargeability. So - yeah.

>>:OK. So now you represent a creditor. And where do you - you have to do some sort of due diligence. You need to get some information. That's the only way you're going to represent your client properly because first we want to know what the claim is what is it based on, and what are the steps you need to take. And then also, what are going to be the deadlines? So one easy source would be from your own client, the creditor. So if it's - if your claim is a secured claim, you want to see the secured documents, right? If it's a mortgage, you want to see the promissary note. You want to see the actual mortgage. If it's a contract - if your claim is based on a contract, you want to see that, too. You want to see if your client is entitled to interest, you want to see what your client's entitled, too. Is there a security deposit that your client is holding, if you represent a landlord? Another source of due diligence would be the case itself, you could on the docket. So most of you probably already have a PACER account. You just - you have the case number. You log on. And you usually just go straight take - a look at schedules. What are the assets and liabilities? Who's ahead of you? The statement of financial affairs which you guys talked about today - you definitely want to look at that to see what the debtor's disclosing as to what's happening in their financial affairs. And sometimes if it's a Chapter 13, the plan may already be filed with the petition. So you want to first take a look at the plan to see how the debtor proposing to pay

© MCLE, Inc. All rights reserved you. Or if you even - in the Chapter 13 plan to - on to be getting payment. And also, the schedule will tell you how the debtor is planning on treating you. Do they put you in Schedule D as a secured creditor properly? If you are an unsecured claim, you would be on schedule F and so on. If you're a priority claim, you will be in schedule E. Oh, another way to get more information is to get a hold of the notice of the bankruptcy case. If you - if your client didn't have a copy of it - didn't give it to you, it's usually docketed anyway. So while you're on the docket - while you are already looking at the docket, pull that out. And we're going to talk about that a little more because it has a bunch of deadlines in it. Now, the last - I think, starting with page 30 - I know it's a little bit hard to read what you guys have, but I do have form documents attached as well. And starting with page 34 and 36 is a copy of the form notice of the bankruptcy case. I'm pretty sure you guys already talked about that yesterday, but just in case. And if you guys want a better copy of this, email me. I can just - the copy that you guys have is really hard to read, especially the form. So if you email me, I'll send you this whole thing that's a little bit easier to read.

>>:Macken, was your email on the first page?

>>:It's on the first page, yes.

>>:Yeah. So just email her, she'll send it to you.

>>:So another source of due diligence - a 341 meeting. The 341 meeting is the meeting of all the - you know, all the creditors. If it's a Chapter 7, the Chapter 7 trustee is going to be heading it. If it's a 13, Chapter 13 trustee. If it's an 11, the U.S. Trustee's going to be doing it. It's - that's where the debtor will testify, under oath, as to his or her liabilities, their assets. So you may learn a thing or two if you're there, and you may even ask questions about your claim in some situations. So it's not over - it's not - you don't have to attend the 341 meeting, but, depending on your claim, you may make the decision that you want to be there and hear what the debtor has to say. Another source of information is creditor's committee. Now, that's usually in Chapter 11. If it's a Chapter 11 case, the U.S. Trustee has the option to form a committee of unsecured creditors. So that's - it doesn't always happen, but sometimes it does happen depending

© MCLE, Inc. All rights reserved on how big the case is and how many creditors there are. So you - if there is a creditors committee, you may be able to contact them and get certain information and, to the extent it's not confidential, they have no reason not to give it to you. Also, entering an appearance. That's actually going to be the first thing that you do when you represent a creditor. You file a notice of appearance. It's really telling the trustee, the debtor - I'm representing the creditor, and if anything is filed in the case, I need to be served. So they would put you in what we call a service list, which is now a little bit less important because - I mean, the service list - we don't hear that as often as before because now we have ECF. So everybody is filing electronically. So as soon as you file your notice of appearance, you are automatically in the ECF list anyway. So whenever something is filed in the case, you automatically get an email. Now, you do know you have a claim - what your claim has - you know, what your claim is all about. So now you need to assert your claim. Now, you do that by filing - what we have is a proof of claim. So the bankruptcy rule that addresses proof of claim is 3001. It actually lays out as to how to file a proof of claim, what needs to be included in a proof of claim, how - who needs to sign the proof of claim - so 3001(a) through - pretty much - (d) - give you all that information. And, of course, if, for example, you have - it's a mortgage - your claim is a secured claim, you need to attach your backup documents to show the claim because, at the end of the day, the trustee is going to have to review the claims, and sometimes they may need to object to your claim.

>>:And the rules are very specific.

>>:Very specific. Rule 3001.

>>:Yeah.

>>:Now, I - also - one of the document that is attached is a form - starting with page 38 is the form proof of claim that needs to be filed. Now, keep in mind, some - there are times where the official forms - which I think you guys were looking at earlier today on the website - sometimes they do change. So you should always make sure that you're not using a prior form. So, for example, that proof of claim that I have attached in my document, it's - it was last amended 2016. It doesn't really - they don't get

© MCLE, Inc. All rights reserved amended very often, but you need to make sure you're using the last form. So once you file the proof of claim, you just wait and see if there's going to be an objection. If there's no objection, it's - your filing your proof of claims - it's prima facie evidence that you have a valid claim if there's no objection to your claim. I didn't switch. 503(b)(9) claim that we talked about earlier - we don't have an official proof of claim form for it, but I believe some creditors have used the regular proof of claim, you just have to tweak the language a little bit when you're describing your claim to make sure it makes sense. And by the way, sometimes you may even want to attach - do attachments. Sometimes I do - when I'm filing proof of claim for a landlord, for example, I always have an exhibit that describes the claims even more. So you may be able to use that form for a 503(b) claim or you could just file a separate pleading - a motion for 503(b) payment if you need to.

>>:That's right. Yeah, proofs of claims are for claims that arose - that exist as of the petition date. So, yeah, for a landlord it's kind of funky - right? - because you have the prepetition claim, you know rent's going to accrue in the future under the terms of your rent - under the terms of your lease, but I think your proof of claim can only claim monies owed as of the petition...

>>:Petition date.

>>:...Petition date. So if you have post-petition rent, you probably have to file a - you have to do some - you may have to do something different. I'm not sure.

>>:Well, post-petition rent - I always file it - a motion for admonition of expense. But the 503(b)(9) claim is a little tricky because, really, you rendered those goods to the debtor pre-petition. Technically, it's a pre- petition claim, but it's just like there's another special form for that claim. Then - I could see how some people would use that for a 503(b)(9) claim.

>>:Yep.

>>:Let me see. Now, the next slide talks about if your proof of claim - if your claim is with respect to a secured creditor. So there used to be a time

© MCLE, Inc. All rights reserved where, if you were a secured creditor in a 13 case, they used to not file a proof of claim necessarily, but then the debtor, in the Chapter 13 plan, would propose how they're going to pay them. So I - the local has been amended in Massachusetts where the creditor - the secured creditor must have a proof of claim on file if you want to receive distribution under the plan. We also have - bankruptcy rule 3002, as of December, 2017, was amended and says, in addition to other creditors, secured creditors must also have your credit - proof of claim on file for that claim to be considered allowed. So for filing the proof of claim - so in Chapter 7 and 13, if that's the cases you have to deal with, a proof of claim is required. Now, there's a bankruptcy rule 3003 that - which - if it's a Chapter 11 case, you may not necessarily have to file a proof of claim. You remember how you guys were talking about earlier this morning where you have - the debtor has the option of putting disputed, contingent and unliquidated. If your claim is listed properly in a Chapter 11 case, meaning it's the right amount, the right address, the right name, and then it's not - those three boxes - none of them are checked, you may not - you don't have to file a proof of claim because your claim is proper. So - and it's - and you have to make sure it's Chapter 11, though. I mean, there are situations where, even though your claim is listed, you still file a proof of claim. For example, they don't have the right address for you and you want to make sure the trustee or the debtor has the right document. So you file you proof of claim and you attach all your documents.

>>:Who signs the proof of claim? Or who do you have...

>>:I always have the debtor file - I mean - I'm sorry, the creditor file the proof of claim. There - it used to be an issue where - whether the attorney for the creditor can sign it. I mean, because it's an issue, I would - just to be on the safe side, I'll have the creditor sign it.

>>:All right. So if you're short on time, get it in there and sign it, and then you can always amend it with...

>>:That's right. That's right. That's actually my next note. It's like, if you timely file your proof of claim, you can always amend it later. But the idea is to make sure you get it in there timely. So let's see - so proof of a more

© MCLE, Inc. All rights reserved unsecured claim. Now, there are also some additional requirements if you represent a secured creditor and it's a consumer bankruptcy case, meaning that you're dealing with an individual debtor. Now, under 3001(c) (2), you have to file a particular itemized statement of interests, fees and expenses. You also have to file a statement of the amount necessary to cure the default, again, under bankruptcy rule 3001. Now, if you represent a creditor - and we're talking about a mortgage that has to do with the principal residence of the debtor - there's an additional attachment that you have to - it's called the mortgage proof of claim attachment, and this document - I have a form of it in - starting with page 41 in the attachments section. So you have to file that as well. And also, you may - there are circumstances where you may have to file a separate escrow statement depending on where things are with respect to the mortgage and payments that are due.

>>:This predominantly applies in Chapter 13. I have bank clients. I do this in Chapter 13. It's complicated, OK? It is really complicated. It's not clear that any legal work you do in connection with this is compensable. So it's not clear you can add it to the bill - that - the legal fees and expenses. There's timing - it has to be filed every six months. And you also have to file a notice of any rate change. I mean, there is a lot of stuff in that.

>>:That's next slide.

>>:There is so much stuff in that rule, jampacked.

>>:Yes. Yes.

>>:And it's really - you've got to go very slowly and you have to let your client know that, if you work on it and they pay you, it's not - even if you include that on your fee notice, it's not clear that that is a compensable thing.

>>:And to encourage creditor's attorneys to do this - follow the rule, 3001(c) (2)(D) have provisions where the court can award relief to the debtor or what have you if those requirements are not met. Some more about requirement for mortgages, which is what they we're just talking about

© MCLE, Inc. All rights reserved earlier. It's 3002.1 - notice relating to claim secured by the debtor's principal residence. One of them is the notice of payment change. If there's a payment change, you have to file that within 21 days in the bankruptcy case. And same thing for - it's a separate notice to itemize all the fees and expenses that you're going to be charging to the debtor's account, post- petition. There's a separate notice for that and that has to be filed within 180 days after those fees were incurred. And both the notice of payment and the notice of fees and expenses, I also have the forms attached starting with page 43 and 45 as well.

>>:The curious thing is how they get paid. So you file a notice of fees. What do they get paid? I talked to a chapter 13 trustee about this, she doesn't know. So you're saying that I've had more fees post-petition, they're not in the plan.

>>:Isn't it the idea that you're giving everybody notice that you're going to be adding them to the loan. But now, because I've read somewhere it used to be an issue where those fees are incurring post-petition, the debtor has no idea and then the cases dismissed. And then now you're going to foreclose and boom, now the amount is much higher now. So I think there's the incentive is full disclosure so the debtor know, you know, post- petition, I've had one - I mean, I rarely have chapter 13 cases, where I'm representing the creditor and it's costing money. So those are additional attorney's fees, that's going to be added to the mortgage amount if this case is dismissed and the creditor is going to have to foreclose. So the bank - I think - to some extent is trying to protect the debtor for disclosure purposes now, even though really nothing much is happening in the plan but the debtor now knows at the end of the day, those amounts will have to be paid.

>>:That's right. So when they cure the end of the plan, their principal amount may be increased by the sums.

>>:I've never seen anybody object to them but I'm pretty sure some that can if they want to.

>>:Oh, absolutely. Yeah, definitely.

© MCLE, Inc. All rights reserved >>:So now we're almost done. So we're going to talk about other remedies for the creditors. One of them is the relief from the (unintelligible), we touch upon that fairly quickly earlier. So if your debtors - if the debtors not paying your mortgage amount, you know, you could file for relief from stay. And then there's also if we're dealing with a chapter 13 case, there's a special worksheet, again, that you have to file if you do it relief from stay. And a form of that worksheet is attached on page 47. And then I should also note that the local rules, 4001-1 has the separate technical and general requirements for filing for relief from state. So you really need to make sure those requirements are met when you're filing your motion. Another remedy for a creditor is objecting to confirmation of the plan. So the plaintiffs filed, for example, and the debt is not proposing to pay all the arrearages or they're not going to be paying you the way they're supposed to. And also, if its a chapter 13 case, there are specific requirements that have to be met for the debtors plan to be confirmed of the 1325. So I would take a look at that 1325 and make sure that those requirements are met. If they not, I'll file an objection. I'm assuming your claim is not treating properly, if your claim is being treated properly, then you don't need to rock the boat. So another, if it's a chapter 11, same thing, you can object to the plan. And the requirements for confirmation are under 1129. So take a look at that if they're not met or file an objection. Now also dischargeability of the debt, we touched upon that a little bit. If your claim was obtained by fraud, false statement was given to your client and you look at 523(c) in one of those of the type of claim that you have, I would challenge you. I mean, it's a separate proceeding but it may be worth your while. Reaffirmation of the debt, which we touched upon a little bit earlier. So it's not - where am I - yep - it's not automatic but you need to file the - there has to be an agreement that's filed with the court and the court actually have to approve it. And I know that the local rule also has the form cover sheet, the form agreement. So you should take a look at that and I've attached just the cover sheet and the agreement and the attachment on page 53 and 55.

>>:And there are strict time limits on when that can be done. So both from a debtor's standpoint - I've never seen a creditor say you didn't do the reaffirmation and time, therefore I relief from stay. Because most cases,

>>:That's right.

>>:So reaffirmation is rare, but you need to...

>>:It used to be very popular, though, a couple years ago. I don't know what happened. Like you're right, right now it's the creditors are more like, well, you pay me post-petition then...

>>:Because the law is what it is. They can't do anything, they can't foreclose, they need a monetary default to be able to foreclosure. So I think that's primary. And plus, I think consumer lawyers are smarter. You know, they just know what's going on so it's like, why would I do this? I mean, there are reasons but I think that people are kind of catching up a little bit. So yeah, the reaffirmation stuff is just kind of slowed down.

>>:Yeah. And the standard will be even harder, by the way, if the debtors not represented by an attorney, where the attorney can not advise them not to sign it and they ended up signing it and now there's a hearing. So, you know, keep that in mind as well. So just because you've convinced them to sign it because they don't have an attorney, doesn't mean it's going to be approved by the court. So some more remedies, so let's say you represent a creditor that has a lease with the debtor or contract. So Section 365 of the bankruptcy code gives the debtors specific amount of time to decide if they're going to assume or reject your lease. And if they don't, you could file a motion to compel them to do that. So 364 - under 364 (d)(1), for example, the chapter talks about residential will property - which the timeline is about 60 days. (D)(4) talks about residential real property. (D)(3) is non-residential...

>>:I think you want to keep it near you. Yeah, yeah, I think you got to...

>>:I'm sorry guys. All right, here you go. And then (d)(4) talks about non- residential. So one - so there are sections under the Bankruptcy Code that

© MCLE, Inc. All rights reserved says if and when the debtor needs to timely perform post-petition - because, remember; once the debtor filed for bankruptcy or puts partition claim, especially in Chapter 11, you will have to meet your post-production obligations. And then also - same as Chapter 13. And so there are timelines, so they have specific time as, you know, when they need to assume or reject. You can give them a hard there, too. Another option for remedies is to - well, that's really not an option for remedies. But if you file your proof of claim and the trustee or the debtor objects your claim, you've really got to make sure that you respond to that objection. So once there's a claim objection on file and you file no response, you're risking, you know, the court allowing the objection, and now your proof of claim was filed for nothing. Another one is preference lawsuit. So if your client - you represent a creditor, remember; if that client creditor received money within a 90-day period or for debtor filing for bankruptcy and now the trustee decides to sue you for preference action, you have to respond to that person's action, you just don't do anything. And...

>>:Preferences are hard, too, to your client explain because they ship the goods, the debtor got them, and now they have to give the money back. So they have got the goods and they get the money. So it's very hard concept to - it just - like, you know, that's what the law is, but it's hard to...

>>:Yeah, they usually - a creditor would not - it's pretty much bad news to a creditor.

>>:Yes, it is very bad news. And they can't figure it out. They say, wait a minute; they got my goods, and I have to give the money back? That's crazy.

>>:Yes, it's very bad news for a creditor. So I have a slide that talks a little bit for reclamation claim as to a remedy. So remember, as we talked about at the beginning, you have a specific deadline for you to exercise your reclamation claims - so you cannot miss that. And then also, if you decide to not get the goods back, you're going to file an admission expense claim under the local rule. There's a deadline for that as well. Now, another one to talk about is 263(a). That has to do - whenever the debtor's selling, its collateral - mostly Chapter 11 - they do that under 263. And F talks about

© MCLE, Inc. All rights reserved all the requirements that needs to be met if there's a secured creditor. One of them is consent. Chances are it's going to be - it's not going to be an issue if you consent to begin with. But if you don't, you need to take a look at Section 263. Yeah, the idea is you have leverage if they - if the debtor is selling its assets and your collateral is included. So now we're going to talk about the various deadline and bar dates. The case commencement - which we talked about that a little bit. It's all - the form of it is attached and at the end of the material. So if that particular notice - give you all sorts of different deadlines. So the first thing you do, you just circle them, calendar them, whatever you want to do. So it gives you the objection deadline for dischargeability of the debt - of debt if you want to bring an action for that. Objection to discharge - it gives you a deadline for that as well. Now, if you want to object to the debtors exemptions that - you guys talked about that earlier today - there's also a deadline for that. So if you - 30 days after the 341 meeting comes and goes, and you didn't file objection to the exemption, and you wanted to do that, then it's going to be too late. Now, you will hear the expression of bar date and bankruptcy. That pretty much is the deadline to file a proof of claim. So once you know you're going to be filing proof of claim, you definitely do not want to blow that deadline at all. It's probably one of the most important deadlines if you represent a creditor.

>>:It's like, when a claim gets - yeah - when a case gets filed, like, get the claim filed, right? When you're thinking about it because if you put it off...

>>:You don't want to forget to file a proof of claim. So if it's Chapter 7 or Chapter 13, right now the deadline is 70 days after the bankruptcy filing. And keep in mind, this deadline was changed recently, last year, because it used to be 90 days after the first date of the 341 meeting. I guess now you get a little bit less time, right?

>>:You have less time because they wanted to get the case confirmed. Everybody's filing their claims after the plan was filed, then you had to change your plan. It was kind of an endless loop. So this way, all the claims come in, and you can get your plan confirmed...

>>:So it's easier on the debtor, harder on the creditor. So in a Chapter 11

© MCLE, Inc. All rights reserved case, though, the deadline - it's not specific in the Bankruptcy Code because usually the debtor's attorney would just file a motion to set the bar date. And when we do that, we usually serve up a notice of the bar date, so you'll know when to file your proof of claim. Now, another deadline is the objection to the plan. So there's a deadline as well. So usually, in Chapter 13 cases - I've seen debtor's attorney now filing the plan with the petition, so you need to literally schedule the time for you to file the deadline if that's what you're going to do. So that's my last - that was my last slide.

>>:Go ahead. Go ahead.

>>:I know. So pretty much just to recap, in summary, you determine your claim, you figure out if your client is a creditor to begin with and what kind of claim they have. Once you figure that out, you're going to do a little bit of due diligence to collect information, as we've talked about. And after you so diligence and you definitely file your proof of claim, unless you're in a Chapter 11 and your claim is not disputed or contingent - and there will be situations where you may have to take other actions in the case after you file the proof of claim, including if you have to bring a separate proceeding, if you have to file a motion for relief from stay. And then I have here that the most - one of the most important things for me - you always check the rules and the code. Bankruptcy is tricky, to some extent, but the code has a rule associated with it. So sometimes you have situations where - OK, I know I have the right to do that, how do I do it? Check the rules - the Bankruptcy Rules. So in addition to the Bankruptcy Rules, you also have the local rules, which I have two copies of. One is the black line to see what changes were made from last year. And one's the new - it's, like, you - I always check the local rules because there are requirements - like, for example, there's one - if you're filing for motion for relief from stay, for example, you have to call the attorney on the other side to let them know you're doing that. It's a technical default, but what if the other attorneys object and decide to bring that up in court? So always check the local rule and always check the Bankruptcy Rules.

>>:Good.

>>:All right. So does anybody have any questions about - I mean, you can ask questions at any time if something occurs to you - the rest of the time because Macken will be here for the rest of the day, I think, right? So if you have questions that come up - otherwise, we're going to move on. Christine is now going to talk a little bit about kind of state law things - kind of precursors to bankruptcy - things you need to be able to know - think about to help your client that may be considering a bankruptcy filing. Oh, Christine, can you tell them what you do? Like, your background - just a little bit of your background, please. And here, let them give you a - do you want to take Macken's little thing there just so they can get you on the tape. Thanks so much.

>>:There we go. Sorry, everybody. Hi, my name's Christine Murphy. Primarily, I've been doing litigation since about 2006. Prior to that, I did Social Security administrative law, traveling throughout the country representing disabled individuals. And out of law school, I was a prosecutor for 2 1/2 years. So that's generally my background. Since 2006, I've worked in various law firms, essentially, doing - law firms that have done collection work. I, essentially, have been a litigator in those firms. So I'll give you sort of an overview. I'm not a foreclosure expert per se, but I've certainly litigated many of those cases as well as condominium cases. Just to give you an overview of Massachusetts foreclosure law, Massachusetts is a non-judicial state. What that means is an action doesn't have to be filed in the court - complaints - that sort of thing. However, there is a caveat to that. There is a statute to protect folks that are in the military, and that does require that you file a complaint in the Land Court in Boston. Now, you can still proceed with a foreclosure even if you didn't take the step to file that action, but you have a cloud on your title and you'd probably never get title insurance post-foreclosure. So that's the one court piece of the foreclosure process. It's called the Service Members Civil Relief Act, and it protects those persons who serve on active duty for the nation's defense from adverse consequences to their legal rights that may result because of such service. The SCRA protects service members from having their homes foreclosed upon while they're on active duty. In order to make sure that a mortgagee, usually a bank or a mortgage company, does not

© MCLE, Inc. All rights reserved foreclose on an active duty service member, the mortgagee will file the case in the Superior Court or the Land Court for a determination as to whether anybody with an ownership interest in the property is entitled to benefits under the SCRA, and these cases are known informally as service members cases. You're protected from court proceedings as above against foreclosure as long as the obligation - the debt is secured by real or personal property, the debt was incurred before the active duty, the property was owned by you or your dependents before active duty, the property is still owned by you or your dependents, and your ability to pay is materially affected by such service. Now, that being said, once the borrower actually defaults, as in has not made a payment, under Massachusetts law, you're required to send a 90-day right to cure letter, essentially, and it's got to have certain information within it. You're - the mortgagee is required to provide at least 90 days for you to have the right to cure the debt, and they can take no real action until that 90-day period is over. If the borrower does not cure the default within the 90 days, then the lenders typically send acceleration letters. What that means is - it's a letter that, essentially, says your entire outstanding balance is due. That 90-day cure period - that's just simply going to be for whatever your monthly payments are and however months you're in arrears. Once an acceleration letter is sent, now they're, essentially, accelerating the note and the entire full amount of that loan becomes due. That's typically when the lender's or mortgagee's law firms or lawyers are going to file that soldiers - SCRA complaint with the Land Court. And after that's filed, there's a whole process. You're, essentially, waiting for a judgment from the Land Court, and that judgment's going to tell you, the lender or the lender's counsel, where it is you need to publish the notice of sale. And that process can - I know Don wanted me to address the timeline on this process. So first of all, once you've defaulted, there's a 90-day cure period. So nothing can happen in that first 90 days. In the event that you don't cure the default, you're typically going to receive an acceleration letter. The mortgage and note are accelerated, essentially. When the Land Court action is filed, it can take - I've seen it take - it depends what year you're in. It could take one to, say, six months. I think, on average, you're talking 30 - excuse me, three months to six months to wait for that judgment. Yes? I'm sorry.

>>:The acceleration letter is not required, though. That's optional.

© MCLE, Inc. All rights reserved >>:That's right. It's not required. I also practiced in Rhode Island and there's quite a bit of litigation on that very issue, which says - it's - if you read paragraph - it's typically paragraph 22 in the mortgage. There are attorneys who've taken the position on behalf of the borrower clients down in Rhode Island that an acceleration letter pursuant to the terms of the mortgage is required. I've argued, successfully, in Rhode Island that it is not. That's not what the letter says. It is - excuse me, the terms of the mortgage. Typically, the paragraph that I'm addressing - paragraph 22 - will say that the lender - they are required to send a default notice, obviously, and that's clear in this - in the language. It says they may accelerate - the lender may accelerate the loan if the default isn't cured. So I, like I said, successfully argued that to a judge, and there was one clever attorney who said, oh, no, that requires the second letter. So I think - best practice - just send the letter - the acceleration letter should be sent. But again, you're right, it is not required.

>>:So the 90-day default period - is that after the acceleration letter or is that...

>>:No, that's the first letter that you'd send out. So, in other words, you're behind in your mortgage, you're going to get a 90-day letter. The 90-day is the period you have to cure. The lending entity can't proceed with foreclosure in that 90 days. Once the 90-day period is over, if you haven't cured the arrears, that's when they can send the acceleration letter and they say, there was, you know, $2,700 due. Now there's $270,000 due. That's what an acceleration letter is because you didn't cure. Now, once you file, like I said, in the Land Court, you've got to wait a certain period of time. And throughout this entire process I should certainly note that you should always be checking PACER to make sure that the owners - borrowers haven't filed for bankruptcy. Once you get your judgment from Land Court, that's when you - they're going to tell you where to publish your notice of sale - usually, where the property sits. And depending on a large circulation type of newspaper. You have to publish that three weeks, consecutively, in a row, before you can proceed with foreclosure. You are required to provide 21 days' notice to the borrowers with respect to the sale. The sale - notice of sale should contain the property description, the

© MCLE, Inc. All rights reserved date, the time, the place of the sale, which is always pretty much at the property, and the terms of the sale if any are applicable. Once you proceed to foreclosure, there are certain affidavits that have to be filed. There's been significant litigation over the past, I'd say, 10 years with respect to requirements on the lenders part. One of that - one of those requirements is that the lender or somebody on behalf of the lender has to attest to the fact that they complied with all the terms of the mortgage, they complied with sending out the default letter, they complied with giving an opportunity for loss mitigation options, also an affidavit stating that they are, in fact, the holder of the mortgage. That was a hugely litigated issue many years ago in the Ibanez case, which, I believe, is in the materials. And, essentially, what that was is a group of borrowers challenged the validity of a foreclosure sale by saying, you had no standing to proceed with foreclosure because the old practice by a lot of lending entities was they would have signed the mortgages. So it would go from one entity to another. And instead of actually executing an assignment showing that transfer of ownership of the mortgage, they would wait until after the foreclosure sale and put it on record at that point. And so what this judge said, I think rightly so, you didn't even have - there's no evidence that you were even the holder of the mortgage throughout this entire process, and now you've put an assignment on record after the fact. So you had no standing. Guess what? Your foreclosure was invalid. So I think that those pipes have been cleaned out. That caused a tremendous amount of redos, if you will. The foreclosures had to be redone. That being said, the practice tip out of that is you make sure that you have assignments, in recordable form, prior, really, to proceeding even with your 90-day default letter. The case itself, I believe, states that, as long as you have a assignment in recordable form prior to the three publications, you're fine. But best practice - you want to make sure all your ducks are in a row so that there's no challenge to the standing.

>>:(Inaudible).

>>:Yeah.

>>:Oh, can you repeat the question.

© MCLE, Inc. All rights reserved >>:Oh, I'm sorry. You said it - are publications through the newspaper? Yes. And I've actually gone to court for motions to publish or serve a defendant by publishing in a newspaper - if you just can't make good service - you don't have a proper address for them. And I've had at least two judges say to me, do people still read newspapers (laughter)?

>>:What do you say then?

>>:I say, well, Your Honor, I'm just following the law. I mean, what am I supposed to do? Will that change at some point, you know, where you have to ask to serve someone electronically? I'm not really sure.

>>:You're right. I mean, there are electronic newspapers, but I don't know how you would serve through...

>>:Right? Yeah. So it is an interesting question. But yes, you'll see that. If you open a newspaper - maybe you don't open a newspaper - you'll see the list of the auctions. Oh, I'll hurry up here. The other...

>>:You're fine. You're fine.

>>:...OK.

>>:Take your time. Take your time.

>>:So that's essentially the foreclosure process. So you're talking about - you've got your 90-day period to cure. You're then filing your SCRA complaint with the Land Court. You're waiting anywhere from three to six months for a judgment, typically, there. And once you do get your judgment, you're publishing in the...

>>:Do they know what SCRA is?

>>:...I did already, yep. I just am shortening it now.

>>:Those acronyms were killing you.

© MCLE, Inc. All rights reserved >>:Right. They're tough. And once you get the judgment from the Land Court, that's when you're going to publish for three consecutive weeks. Then you can have your auction. You also have to notify - I should have mentioned - any lien holders of record - juniors and such that - you're not required, actually, to notify anyone that's got a senior lien. It's just - goes from your entity down. So that's essentially the process. Once the foreclosure's occurred, either the bank purchases the property if no successful - if there's nobody there to bid on it or if they - the debt is too high and people don't think it's worth it. So that happens in the last few years, too. There was a significant amount of foreclosures that the bank was purchasing the properties, and it's caused a lot of problems because they were underwater. What the borrowers owed to the banks - the value far - you know, didn't exceed that. So it was not worth it to folks - for folks to buy the properties. If it is bought back by the bank, they have to go through an eviction process unless the former owners leave voluntarily. And I know Don wanted me address eviction a little bit...

>>:Cash for keys, those kinds of options.

>>:...Cash for keys - that's the route I think most of the lenders have gone is try to avoid having to actually file an eviction action because that's a whole other process that takes time. So what they typically will do is, say - they'll leave a notice on your door and say, if you'd like to enter into a cash for keys, we'll give you $1,000 if you'll agree to vacate in 30 days - that type of thing. The next step would be, if it's former owners occupying the property - not tenants, but actual former owners - the borrowers and their immediate family, you're basically sending what they call a notice to quit. And that's - that gives them 72 hours to vacate the property. If they vacate, that's fine. You're all set. If they do not, then you're going to have to file a summary process action in the court, usually district court, and there's a whole process with that. They can file an answer. I know that they never used to be able to challenge the foreclosure in the eviction process, and then I think a case came down where they did allow it, but I'm not entirely sure on that now.

>>:So the - how long does the - how long - if a homeowner said, gee, you know, how long could I stay in here maybe - I'm not going to be

>>:Oh, if they weren't cooperative and didn't vacate?

>>:Yeah.

>>:They actually can, and the reason for that - I mean, it - this process moves relatively slowly. I mean, it can always be expedited if there's - things are not contested and the banks have their ducks in a row. But yes, once the auction occurs - the foreclosure, whoever is the purchaser - if it's a third party, they've got 30 days, typically, to remit the full payment because usually you're only remitting either a 5 or $10,000 certified check at the sale, if you're purchasing the property. And then you sign a memorandum of sale and it gives you, typically, 30 days to remit the remaining amount that you agreed to buy the property for. So right there - I've seen those where there's extensions, there's the title issue. That could buy you months and months. I mean, sometimes, years. It depends on the issue. So that's going to hold up the process.

>>:And how long would you say from - you know, your client gets that first soldiers and sailors - like, if they're saying, well, you know, when might that sale be? Is it, like, three months, four months? How long is it usually, about?

>>:I indicated, I think, anywhere from three to six months because you're waiting until you have that Land Court judgment before you schedule a sale. And then once you do get the judgment from the Land Court, you've got the three weeks of publication. That being said, I also address - and I don't want to take too much of your time. It's just, basically, I also have done condominium law. And with the condominiums, there - I don't know if any of you are familiar with condominiums, but you have to pay common fees each month. Those are really the equivalent of municipal taxes. So if you're familiar - if you don't pay your town taxes - your city taxes, they'll put a lien on your property. And they can actually foreclose on you pursuant to that lien. And that will wipe out all liens of record, including the first mortgage, which is super frightening if you represent a lender. Common

© MCLE, Inc. All rights reserved fees at a condominium act the same way. So this is all found in Chapter 183(a) of the Mass. General Laws, and it addresses the delinquent fees. There's a whole process involved but, ultimately, the condominium association can file an action and can ask the court to establish a lien on the property and allow you to go to sale. And then they don't even have nearly the requirements that the banks do with respect to mortgages. They just have to publish three weeks in a row and they go to sale. And that catches lenders by surprise sometimes if they are asleep at the wheel and don't open their mail because they are required to receive notice of that.

>>:I'm pretty sure those condo fees have special status in bankruptcy, right? They're non - they're protect - go ahead.

>>:That's right. They're non-dischargeable. They're against the property. There are cases on that. I think Judge Feeney had one particular case back in 2008. And essentially, you know, you can't file bankruptcy and say, hey, I'm exempt from paying my condo fees. This statute trumps it - 183(a) says, this is a statutory lien on your property, so it really runs with the property.

>>:Where this really gets a little prickly is when your client owns - there's a whole host of prickly issues with respect to real estate that your client owns that they want to leave. So they're like, I'm not paying anymore, I'm going to just let it go. But the problem is condo fees are continuing to accrue. They're post-petition, not pre-petition. They're not discharged, so technically your client is on the hook for those. Now, I don't know, really, what happens at a foreclosure sale. Probably, they get paid and nobody ever goes after the borrower. But still, you have issues of insurance - continuing to insure the property. You know, what if the water and sewers - you know, all these continuing charges on property. So your client says, oh, it's underwater, I'm going to walk away. Typically, it's OK. But, you know, if you have that property where you've left it - OK, fine - but you left the water on. All the pipes explode and you're on the top floor and everybody down below gets damage. Guess what? Your client's going to hear from somebody and they're going to say, hey, that's post-petition - you know? - what are you supposed to do about that?

>>:So there are things with real estate you have to think about, it's not just, oh, walk away, bankruptcy, I'm done.

>>:Right.

>>:And you get - you should at least keep the property insured - at least you should have casualty insurance on the property until it's foreclosed because if somebody slips and falls on the property, your client's still the record owner - by filing bankruptcy, title's still in your name. It'll stay there until they foreclose. And foreclosure can take years.

>>:Absolutely.

>>:And so if somebody slips and falls, they're coming after the property owner, and that's you. And your client's like, wait a minute, you didn't tell me about this. So you've got to be careful.

>>:If you've got an escrow mortgage alone - basically, the bank is taking out each month what they estimate your taxes will be and you're - typically, you're going to have your own hazard insurance policy, which you pay out of pocket, and you've got to show proof to the lender that you, in fact, do. What they do - typically, lenders - they're - most of them escrow taxes. So if you stop making your mortgage payments, your taxes aren't being paid. So then the bank has to pay the taxes. They're usually pretty good about being on top of that. They'll also put what's called forced placed insurance on your property, so...

>>:What is that?

>>:Basically, forced placed insurance is exactly as it sounds. You've stopped paying your premiums on your homeowner's insurance and now the bank because, God forbid something happened - because they've got a huge investment in that property, too - fire, you know, destruction - whatever the case may be - they'll put the insurance on the property and pay for it. And it's typically much more expensive - I think three times more

>>:But it only covers the property. If somebody slips and falls...

>>:That's right.

>>:...That's on you. That's your insurance policy. They're just getting casualties, they're not getting liability.

>>:Right. Right.

>>:So it's something a lot of people couldn't get - you can get hit on that. You've got to be careful.

>>:Right. So as far as - you know, in the bankruptcy context, at any stage of these processes, whether it's a condominium or a lender going forward with collection or foreclosure, you've always got to be cognizant of a borrower or owner filing for bankruptcy. So you're diligently checking PACER to see whether or not they have. You hope to receive notice if they do - you don't always. And in the event that they do, all collection activity has to stop and you need to move for relief from stay and go through that whole procedure before you can proceed. And that's basically the long and short of it.

>>:All right. So any questions about that? All right. So I want to thank my creditor panel because we really needed all the time - probably even needed a little more time, so I might have to adjust again next year because that took another 12 minutes. But that just means you have a shorter lunch because we're staying on time because I've got a huge panel this afternoon and they're all very important people - much more important than us. They come from a court and the trustee's office. We've got all the bigwigs coming in. So you need to be back at 1:30. We'll start right at 1:30. Hopefully, that's OK with everybody. So we'll see you then. Let's get this started. Did you have a PowerPoint?

>>:No PowerPoint.

© MCLE, Inc. All rights reserved >>:No? OK. So we're going to switch order. So what we're going to do right now is we're going to go to tax issues in bankruptcy. Does he have a card somewhere? Does he have one of these? Down here. So, Chris, I'm going to move you. I'm sorry. Wait a minute. Let me see if I have your - John, do you have a - let's see where your card is. Oh, right here. John, would you mind sitting right here?

>>:Sure.

>>:Good. Let me get your name card, which I have.

>>:Oh, let me get that out of your way.

>>:All right. So we have a tax presentation from John O'Donnell, who is with the Legal Bureau of the Massachusetts Department of Revenue. Tax claims are kind of a very special claim - priority creditor - and so we give it special attention. So it gets its own section. We don't have a section for secured, unsecured, we have a section for priority because taxes can be a little tricky. And you have materials, and I think they're in this handout. I don't know if you know what - do you know what page they're on in the materials?

>>:I don't, but they're pretty extensive.

>>:Yeah, they're very extensive - the tax presentation. I think they're in day two.

>>:Eighty-one.

>>:Page 81? Awesome. All right. So, John, go ahead.

>>:And I'm not going to follow along with the materials just because trying to get through all that in a half an hour is pretty much impossible. But, first, I have to - so I have to start with a couple of disclaimers. The first is that - is obligatory. My employer requires that I give this, but, basically, my talk today is really only going to express my views and opinions on the subject matter at hand and can't be construed as an official statement of policy or

© MCLE, Inc. All rights reserved practice of the DOR of the Commonwealth. The second disclaimer is my own, and that's, you know, what I said just now is that the breadth and depth of this material doesn't really lend itself to a half an hour presentation, so what I'm going to try to do is sort of lay out all of the key concepts and the key provisions. Sometimes that can turn into - like, it had the drinking from a firehose effect, so I'll be throwing a lot of things out there. If, at any point, I stop making sense or it feels like I'm speaking in a different language, by all means, raise your hand or send a question online and I'll be happy to back up and sort of fill in the details. And I'm also happy to talk to anyone afterwards if you have any additional questions. But my goal is to get through this and at least leave a couple of minutes for questions if people have them. Tax issues have a fundamental effect on the viability of a reorganization plan, and they can undermine the debtor's goal of a fresh start. That's why all of this is important. And really, tax issues can color how you counsel your client from the beginning of a bankruptcy case. So the talk of this - so the point of this talk is really twofold. The first is it's to provide a primer on the sometimes-messy ways that tax issues and bankruptcy issues can intersect. The second, really, is to provide the broad strokes of what you need to know in order to successfully navigate your client through a bankruptcy with tax issues. And to do this, I'm going to focus on three key concepts - the automatic stay, claims and claim treatment, and the discharge, which I'm sure you've already all covered in day one and earlier today. From my perspective, what I'm going to talk about is important for a couple of different reasons. First is you want to know, if you're filing a bankruptcy on behalf of someone, what relief is going to be immediately available to that person from the outset of the case. In other words, what does the automatic stay halt in a tax context and what it doesn't, an example being bank levies. So the taxing authorities, by and large, liberally use tax levies of bank accounts in order to collect taxes. Automatic stay would halt a levy. But on the flip side, if you have a client under audit or is about to be assessed with a tax, the automatic stay doesn't do anything to halt that audit process. Second reason that I think this is all important is because you want to ensure that your client is filing under the proper chapter. As I've noted, tax claims can undermine a reorganization. If your client files a Chapter 13 bankruptcy and, unbeknownst to you, has a giant tax - priority tax claim floating around out there, it may make the plan unfeasible and may to -

© MCLE, Inc. All rights reserved cause them to either dismiss the case or convert to a Chapter 7. So it's important to know what a priority tax claim is and how it needs to be treated under the code. And probably most importantly to - the most important point to all this is to know what long-term relief is available - to know what the dischargeability provisions say about taxes. This is especially important in an income tax context. I'm going to go through a number of rules that cause - can cause income taxes to be rendered non- dischargeable and they're basically time - they're time-sensitive. So there's one rule called the three-year rule that I'm going to talk a little bit about, and basically what that means is, if your client's income taxes are older than three years, then they can be dischargeable under the Tax Code - or the Bankruptcy Code, rather. If your client files a bankruptcy at - when the taxes are two years and 11 months old, when they could have waited a month and discharged a greater amount of their taxes, then that could be fodder for maybe a malpractice suit or at least some complications for you. So it's important that you know what the dischargeability rules are in order to avoid some trouble down the line. So with that, what I think I'll do is jump right into the automatic stay and its effects on the tax process. As mentioned, the automatic stay prohibits creditors, including taxing authorities, from taking certain actions to collect a pre-petition debt. Prohibited acts in a tax context include bank levies, garnishments, license suspensions, business seizures, but there are some key exceptions that you should know. There's two provisions that I want to throw at you - Section 362(b)(9) of the Bankruptcy Code allows a taxing authority to conduct an audit, issue a notice of deficiency, a demand for tax returns, as well as an assessment and demand for payment. That's the biggest exception in a tax context. In order to do any of those things, the taxing authority does not need to seek relief from stay and can just carry on as they normally would. The other exception to note is 362(b)(26), which allows a taxing authority to offset a pre-petition refund against a pre- petition tax liability - and the automatic stay part of my presentation is pretty brief just because those really are the key things to note. But there is one other thing I'll mention that sort of comes up fairly often, and that's Section 1301 of Chapter 13 has a special provision that provides for a codebtor stay in certain circumstances. That provision does not apply to taxes. A lot of times we'll see a - so I'll give you an example. Say a husband and wife owe joint tax liability, only the husband files for

© MCLE, Inc. All rights reserved bankruptcy, for whatever reason, the wife does not file for bankruptcy, certain consumer debts, a codebtor stay would apply, meaning that the creditor couldn't go after the non-filing spouse. Taxes are not consumer debts. So for that reason, in this context that I'm laying out, the taxing authority could still fully collect against the non-debtor wife.

>>:This goes back to what Richard was saying yesterday. So Richard said one debtor spouse files a bankruptcy, puts the mortgage in it, the codebtor stay would apply. The mortgage is being cured by the debtor in the Chapter 13. Because of the codebtor stay, they can't go after the person that's not in bankruptcy for the same arrearage. It's covered by that Chapter 13.

>>:Yep, yep. So those are, really, the key concepts involved with taxes in the automatic stay. There's obviously a lot more to it. And I definitely recommend that you read through some of the materials that I provided because they do treat it a little bit more intensively. But I want to move on to claims and claim treatment. And that usually takes up the bulk of what I have to say because it's really what I spend - at least in the bankruptcy part of what I do at the DOR, I spend most of my time dealing with claims and the claims process and the administration of the case. So I'll start with the definition of a claim, which is found in Section 1055 of the Code - defines a claim pretty broadly. It's any right to payment arising from - arising before a bankruptcy case is filed. So it's about as broad as you can get. Tax claims can be either liquidated or unliquidated. Liquidated is where the amount is fixed. And, usually, they're result of a return that's been filed by the debtor without payment or the completion of a tax audit. Unliquidated claims take the form of estimated proof of claims that are filed by the taxing authority. And usually, those are the result of the debtor's failure to file a tax return for a certain period or the result of an ongoing audit that hasn't yet been completed. So we - the DOR, IRS, they'll file estimated claims for certain periods, basically, as place holders so that when an assessment of a tax actually does happen, taxing authority will amend the claim and actually list the exact amount that's owed. The types of taxes is listed under proof of claim. There's really four categories of taxes. Actually, before I get into the categories, let me tell you the types of taxes. So far and away, the most common are personal income taxes.

© MCLE, Inc. All rights reserved Those have special rules for priority, special rules for dischargeability. Maybe the second most common, at least in an individual bankruptcy - and I'm focusing mainly on individual bankruptcies here. I'm not going to really get into many Chapter 11 issues because it's kind of, I think, outside the scope of what we're doing here - so focus on Chapter 7s and 13s - second most common type of tax - it'll show up in proof claim and in Chapter 7 or Chapter 13 case - are going to be called, what we call, responsible person taxes. And usually, those taxes arise in a business context if a debtor operated a business or was an officer of a business - that business failed to pay certain taxes, then there is a mechanism, both under the Internal Revenue Code, the Massachusetts Tax Code, that can essentially pierce the corporate veil and allow the taxing authority to pursue that individual. And that's why you'll get responsible person tax debts on a taxing authority's proof of claim. So moving onto the types of taxes that can be listed on a proof of claim - excuse me - the classifications to support - tax claim classifications, priority secured, general unsecured and administrative. I'm going to focus on priority secured and general unsecured because those are the ones that arise most in a individual consumer bankruptcy. Section 507(a)(8) of the Bankruptcy Code governs priority treatment. And the - so again, I'm going to focus on income taxes because they're, far and away, the most common types of taxes you'll encounter in a consumer bankruptcy case. It's Section 507(a)(8)(a) that deals with personal income taxes. And that provision lays out three different rules that govern priority of income taxes. There's the three-year rule, the 240-day rule, and what's called the non-assessed but assessable rule. And I'm going to go through these rules really quickly. But just be mindful that this is probably one of the most important things to take away from this talk because these rules, you should know and should be able to analyze what claims are going to be priority and what aren't - as part of your client intake, really. So the three-year rule essentially says that if a tax return is due within three years of the period running up to the bankruptcy filing, then the taxes - the income taxes for that period are priority and also non-dischargeable. The 240-day rule is a bit - and these rules are all sort of mutually exclusive. If one of them applies, then the tax debt is priority debt. The 240-day rule says that if a tax - regardless of when the return was due, if it was assessed within the 240 days leading up to the bankruptcy filing, then those taxes are priority debts. And that's regardless

© MCLE, Inc. All rights reserved of when the tax return was due. The third rule, not assessed but assessable, means that if a tax was not assessed on the day the bankruptcy was filed but is still assessable, pursuant to applicable non- bankruptcy law after the case is filed, then it's still - regardless of when it's assessed after the case is filed and regardless of when the return was actually due, it's considered priority tax debt. And this is meant to sort of capture those taxes that the taxing authority may not yet be aware of because the taxpayer has not yet filed the return, or the audit process has not yet been completed. So those are the three main rules. And I think there's an appendix to the materials, that have flow charts and things like that, that lay out how those rules work. When I was a private attorney, filing 7s and 13s for people, that was - a main part of my client intake was to really investigate as to what taxes were owed - so you can perform that analysis from the get-go and know, you know, OK, well, you know, these tax claims are going to have to be paid in the plan. They need the income in order to fund a plan that fully pays them in five years. The other types of taxes that are entitled to priority under Section 507 are a property tax payable within one year of a bankruptcy filing, trust fund taxes. And trust fund taxes - that's 507(a)(8)(c) of the bankruptcy code. And basically, a trust fund tax is any tax that the debtor was required to collect from somebody else and remit to the taxing authority. So this would be sales taxes, withholding taxes, meals taxes. Anything that fits that description is a trust fund tax. And regardless of how old it is, regardless of when it was assessed, regardless of when the return is due, it's considered priority debt that's also non-dischargeable. Other priority tax debts - employment tax where a tax return was due within three years of the bankruptcy filing. Certain tax penalties - now, most tax penalties are not entitled to priority treatment under the code. There is a very specific exception to that, and that's tax penalties that are compensation for an actual pecuniary loss by the government. Most tax penalties are punitive in nature. They're not intended to compensate the government for an actual loss. I've never encountered tax penalties that were meant to recover a loss, but I guess, theoretically, they are floating out there. Most tax penalties are not going to be considered priority tax stuff. And I'll talk about what the import of that is. And then - hopefully, when I get to the dischargeability section of my presentation. The last thing I'll note about priority debts is that - is how you deal with interest. So interest is - basically follows the tax. So interest on

© MCLE, Inc. All rights reserved the tax is part of the tax. If you have a priority tax debt, then the pre- petition interest on that priority tax debt is going to be considered priority debt as well. The penalties are a different story, but the interest on the tax itself is part of the tax. Priority tax claims are given eighth priority of distribution in a Chapter 7 liquidation. And unless otherwise agreed by the taxing authority, priority tax debts have to be paid in full for a Chapter 13 plan. The relevant provision there is Section 1322(a)(2) of the bankruptcy code. And like I said, for this reason it's especially important that you have real picture of what the tax liabilities of your client are before filing a case so that you can adequately counsel them to what chapter they really belong in. Even if a tax claim isn't entitled to priority status, it can still be a secured tax claim. And a secure tax claim is a tax claim that is secured by a statutory tax lien, the relevant non-bankruptcy provisions dealing with statutory tax liens. So under Massachusetts law, it's General Laws 62(c), Section 50. And under the Internal Revenue Code, it's 28 USC, Sections 6321 through 6323. Those are the tax lien provisions, and they govern how liens arise and how they're perfected as against third parties. Tax liens arise by operation of law upon the assessment of a tax and a failure of the debtor to pay it. They're a blanket lien, which means that they attach to both real and personal property. And they have to be perfected in order to be enforceable both against third parties and against the bankruptcy estate. The way that they're perfected is by the filing of a notice of tax lien. And again, this is governed in the relevant non-bankruptcy provisions that I just gave you. Basically, to perfect a tax lien against real property, the taxing authority has to file the notice of tax lien and the Registry of Deeds where the real property is located.

>>:When you say the taxing authority, you're talking about the state taxing authority.

>>:Both the state and federal taxing authorities...

>>:OK.

>>:...Under the relevant laws, have to file the notice of tax lien in the Registry of Deeds. With respect to personal property, it varies as to whether it's state or a federal tax lien. State tax liens or perfected as

© MCLE, Inc. All rights reserved against personal property by the state taxing authority filing the notice of tax lien, at least in the Commonwealth, with the secretary of state's office. And there actually now is an online database that the secretary of state's office has that you can actually just go in, type in the last name of the debtor to check if there's state tax liens. With respect to federal tax liens, those are perfected as against personal property by the filing of a tax lien in the U.S. District Court where the property is located. The last time I checked, there was no online database to search for tax liens filed with the U.S. District Court in Massachusetts. I could be wrong about that.

>>:I think you have to go to the district court in the Moakley Courthouse and check the registry there.

>>:OK. So they have a terminal in the courthouse?

>>:Yeah, that's right.

>>:So you have to go to the courthouse, and it probably should be part of your diligence in conducting an investigation of your client's financial affairs and checking up on tax liens. Because again, that colors how the entire case can go from the get go. Priority of distribution for state and federal tax liens generally follows the first in time rule when it comes to competing creditors. So if, say, a mortgagor has a superior lien interest in a piece of property and the taxing authority files their tax lien after the fact, then that mortgagor wins. When it comes to state versus federal tax liens, the rules are a little bit different. There's a Supreme Court case, United States versus Vermont, which should be in the materials that I handed out. And basically, what that case says is when state and federal tax liens compete, it's not the recordation date of the notice of tax lien that counts, it's the assessment date. So when we - when the DOR and the IRS get in a fight over a secured interest, it's resolved by looking to when the subject taxes were assessed, and the first to assess wins. That's the rule when it's competing tax liens. A couple other notes about tax liens. So they can't be avoided under Section 522(f) of the code because they're not judicial liens. They can be subordinated in a Chapter 7 case under section 724(b). That's a pretty complicated issue, so I'm not going to get into it. But basically, the gist of it is that a tax lien can be set aside for - to the benefit of priority

© MCLE, Inc. All rights reserved creditors under 507(a)(1) to (a)(7) of the code. So you can set aside the tax lien, allow certain priority creditors to get paid off the top before the tax lien is paid and then the tax lien has to get satisfied. In a plan of reorganization, a fully secured tax claim is entitled to full payment under Chapter 13. I believe that provision is Section 1325(a)(5). If the claim is partially unsecured, then - did you talk about cramdowns?

>>:We have not.

>>:OK. So there's a there's something called a cramdown where in Chapter 13, you can cram down a secured claim to the actual value of the collateral. So say you have a $50,000 piece of property, there's a $100,000 lien on that property, Chapter 13 has a provision that allows you to cram down that $100,000 secured claim to a $50,000 secured claim and a $50,000 unsecured claim, if that makes sense. In a tax context, this is also possible. So if there's a huge tax lien, then the tax lien can be crammed down to the value of the collateral. A complicating factor is the priority rule. So say there's a huge secured tax claim on a piece of property, you cram down the tax claim to secured and unsecured portions, it could be that that under secured portion is still entitled to priority treatment and would still have to be paid in full through a Chapter 13 plan. So it can be a distinction without a difference, but again, it's like you have to do sort of mental gymnastics to parse all this out. You have to figure out, OK, well, OK, is this secured or under secured? OK, it's under secured. Is it priority or general unsecured? So there is sort of some hoops you have to jump through. But there are situations where you might have old the income taxes that are otherwise dischargeable non-priority debts that are secured by a lien that can be crammed down. And that could be something that inures to the debtor's benefit, if you can successfully cram down that tax lien to the actual value of the collateral.

>>:One thing I want to throw there - Macken, you might know about this. I just don't remember exactly. I'm not sure you can cram down a mortgage on residential real estate in a Chapter 13, even if - I forget whether there may be something about that. Residential mortgages have some special treatment and 13, maybe not an 11. I'm trying - Chris, you're shaking your head, so...

>>:You can't file - did you ever rule you that you can't file for bankruptcy to renegotiate your own mortgage, right? So you can't alter...

>>:So you can't cram down the - so the cramdown he's talking about applies to secured claims, but not if that secured claim is a residential or...

>>:Primary residence.

>>:...primary residence claim.

>>:And I think if I'm - I could be wrong. It's been a while since I've looked at this issue. But you can still - if it's a second mortgage that's wholly unsecured, you can still strip off a second mortgage.

>>:Yes, that, you can do.

>>:OK.

>>:Right. And I think maybe in Chapter 11, residential mortgages also have that - they also have that status where even if they're under secured, they cannot be crammed down even in 11? Yeah. OK, yeah. So if it's a principal mortgage, this cramdown idea is not going to work but it can work for other things - other types of liens on real estate.

>>:Don, how am I doing on time?

>>:I've got you until five after.

>>:Five after? OK, so I've got to move pretty quickly, but there's just a couple of things I want to say about claims. So priority treatment, I talked a lot about that. So general - so whatever isn't a priority claim or a general - or rather a secured claim is usually going to be a general unsecured claim. And that will be old income taxes, tax penalties. Just because something is general unsecured doesn't necessarily mean it's going to be

© MCLE, Inc. All rights reserved dischargeable. I think there's a common misconception, especially among new practitioners, that, oh, it's general unsecured. It's going to get discharged at the end of the case, and that's not the case because the discharge ability provisions under 523 And the priority provisions that are 507 are completely separate. They intertwine, but there are instances where there are general unsecured tax claims that are rendered non- dischargeable for various reasons. Again, I'll get to that at the end. The other thing I wanted to mention very briefly, because it's sort of beyond the scope of of all this, but administrative tax claims. Those come up usually in the context of a business bankruptcy, usually in a Chapter 11 where there is a going concern and that bankruptcy estate is accruing taxes. Post petition taxes can arise in a Chapter 13 case. Usually, it doesn't come up as an administrative claim. It comes up as a motion to dismiss. So if the debtor is paying his Chapter 13 plan and he is accruing income taxes and not paying them, that'll usually cause the IRS or the DOR to file a motion to dismiss the case rather than try to seek to collect those taxes from the bankruptcy estate. Really quick on the claims filing process. So basically, the idea is the taxing authority gets notice of every single bankruptcy filed, at least in the Commonwealth. There are tax examiners assigned to each specific case. Those tax examiners' job is essentially to take the case information, look up the debtor's tax liabilities, look up any potential business tax liabilities they may have and file proof of claim. What I would encourage you to do is if you believe that there are going to be tax issues in the bankruptcy case, it's best to get out in front of them so that you know what you're getting into or what your clients getting into, really. And the best way to do that is to call the respective bankruptcy units of the taxing authorities. I did include contact information for those bankruptcy units in the materials. I think it's one of the appendixes. So just bear that in mind. It's great to - you know, a lot of times, certain pleadings can be completely avoided by picking up the phone and I'd encourage you to do that if there are any tax questions when it comes to proofs of claim that are filed. The last thing I'll mention in the claims context is disputing tax claims. Now Section 505 of the bankruptcy code confers bankruptcy court jurisdiction on tax claims and it allows the bankruptcy court to determine the amount or legality of any tax. This provision provides an alternate forum for the determination of the legality of a tax. However, it's limited in that if, say, a tax is already being contested at the state level - and for state taxes here

© MCLE, Inc. All rights reserved in the Commonwealth, the appellate tax board has original jurisdiction over the substantive taxation issues. If a final determination in a non-bankruptcy forum has already happened, then 505 doesn't give the debtor a second bite at the apple to have another court weigh in. So what happens when a final determination is made by the non-bankruptcy form is the bankruptcy court loses jurisdiction to hear that tax issue under Section 505. So now, I'll spend the last five minutes or so just talking a bit about dischargeability, which is a pretty hot button issue these days. Dischargeability is generally laid out in section 523 of the bankruptcy code. Priority tax claims are generally non-dischargeable under Section 523(a)(1)(a). As noted, not all general unsecured claims are automatically dischargeable, as there are some notable exceptions and those exceptions are claims for which no return was filed, claims for which the return was filed late within two years of the bankruptcy petition and claims for which the debtor made a fraudulent return or willfully attempted to evade or defeat a tax. And those provisions are 523(a)(1)(b) and (a)(1)(c). There's been a couple of recent decisions here in Massachusetts regarding the dischargeability of taxes and penalty - tax penalties. A few years ago, the first circuit in re Fahey, which is, again, in the materials, found that - essentially, the take away from Fahey is that if an income tax return was filed even one day late beyond the statutory deadline, then those income taxes are non- dischargeable. Now the issue in Fahey was whether a return filed after the statutory due date for the taxes constituted a return for purposes of the bankruptcy code. And bear with me because this is kind of arcane. But DOR's - so 523(a)(1)(b) says that, as I've mentioned, claims for which no return was filed or accepted from discharge. So what is a return? There's an unnumbered paragraph in Section 523(a) that says that a return, for purposes of this section, means a return that meets the requirements of applicable non-bankruptcy law. Under the Massachusetts tax code, one of the requirements for a return is that it be filed by April 15 of the following tax year. Again, this is income taxes. The DOR's argument in the Fahey case and all the cases related to Fahey was that if a tax return is filed even one day late after that statutory due date, then the timeliness requirement of the Massachusetts statute is not met. And therefore, under this language in 523, it doesn't count as a return. So in other words, a late filed return is not a return under 523. Ultimately, the First Circuit sided with the DOR and there have been other circuits that have ruled in favor of state

>>:With the Massachusetts Department of Revenue.

>>:Right. And the IRS - it's not clear to me exactly what their position is here in the Commonwealth. But originally, they took a different position. But it seems like they may be heading towards that same conclusion as - since the First Circuit has weighed in, if there is a time limit requirement and it's not met, then the taxes are not discharged. Are you - do you know anything about that or...

>>:The IRS, I think - I'm not sure where the IRS is on that, whether they would take the same line as the Mass. Department of Revenue. They may say a late return and still constitute every time.

>>:Yeah, and that was their tact, at least during the Fahey litigation.

>>:Yeah.

>>:So contrast that with penalties. So just because the income taxes are non-dischargeable, it doesn't necessarily mean - Excuse me. - that the associated penalties with those income taxes are dischargeable. And that is the case in re McCarthy, which was ruled on by Judge Boroff a couple of years ago before he retired. And basically how that works is so 523(a)(1) governs the dischargeability of taxes. 523(a)(7), however, governs the dischargeability of tax penalties. Now 523(a)(7) is kind of a nightmare. It contains a triple negative, so you have to really read it and parse it. But essentially, what Judge Boroff ruled was that if the triggering event for a tax penalty is older than three years prior to the bankruptcy filing, then the penalties associated with that triggering event are dischargeable. Now that's a lot to take in. I encourage you to read the summary that I put at the end of my materials. But basically, if the penalties are older than three years will relate to some event, say, the failure to file a tax return, which occurred more than three years before the bankruptcy filing, those penalties are dischargeable even if the taxes themselves are non- dischargeable. Is that clear for the most part? OK. So that's tax penalties.

© MCLE, Inc. All rights reserved What I would - the last thing I would note regarding dischargeability is that 523 is the general provision that governs dischargeability in a bankruptcy case, but each specific chapter of the bankruptcy code has its own dischargeability provision that, to some extent, incorporates 523. Chapter 7 has Section 727, which basically incorporates 523 in full. So Chapter 13 has Section 1328, which incorporates parts of 523, but not all of it. So depending on the chapter that a person files, certain tax claims may be dischargeable or may not be. And there used to be something called a super discharge in Chapter 13. That has largely been eliminated from the amendments to the bankruptcy code in 2005. But there are instances where there are tax claims that are dischargeable in a Chapter 13 case that may not be dischargeable in a Chapter 7 case. And again, that will be in the materials. Have a look at that. I think with that, I'm about out of time. Is there time for questions?

>>:If there are any questions out there, this is - I'm - we're be happy to entertain any. I'll let you know where Chris is. He can be...

>>:John.

>>:John. I don't know where Chris is.

>>:Chris was here before.

>>:Yeah, he was here before. And there is contact information for all of the tax examiners in John's material toward the end.

>>:Right, and I'll be around after if anyone has anything, too.

>>:OK. Well, John, thank you very much. You can relinquish your seat. And Eric, if you want to come forward...

>>:Sure.

>>:And I think we have a - let me see what he have for you. Yep. Got you down here, bring it over here. Chris, do you want to sit there or do you want to sit up here too?

>>:All right, you're good here?

>>:I'm good right there.

>>:All right, so let me get your PowerPoint up. We're going to do - so what we're talking about now is ethical issues for creditors. And you can follow along in the materials. These are at - where is it? I just had them here, hold on a second. I'll find them shortly. They are in your - oh, wait. Here it is, here it is. So they start on page 55.

>>:So, Eric, why don't you just let everybody know who you are? And then Christine and Macken are here to participate as well as creditor's representatives. So I'll turn it over to you, and you have until about 2:35.

>>:Excellent. Thank you very much.

>>:You're welcome, and there's a clicker. You just point there and you can move right through your slides.

>>:Wonderful. Thank you, Don. I'm Eric Bradford. I'm the senior trial attorney with the U.S. Trustee's Office in Boston. And I've been there for, well, 25 years. Time flies when you're having fun. And I'm assigned to a single judge, but that doesn't mean I don't switch hit in and out. I essentially appear exclusively before Judge Bailey, but you'll see me sometimes in different cases - 11s, 13s, 7s and so forth. And we're going to have the role of the U.S. Trustee and his perspective on things in the next session. But just in general, the U.S. trustee is charged with responsibility for essentially keeping the system operating transparently and accountably. We supervise trustees. And one of the other things that we keep an eye out for, at least in respect of the code, is ethical issues as they touch upon bankruptcy cases. And the set of slides that I have here - and I certainly welcome everybody's input on this because the U.S. Trustee has no monopoly on ethics or anything else. But what we've done is we put together a set of slides. And as Don said, they're in your

© MCLE, Inc. All rights reserved materials to that highlight the stallion issues that come up. And I think that probably the first thing that - Sorry, I keep moving. There we go. The fundamental ethics framework that we have, there are essentially in bankruptcy. And I'm addressing my comments really to a consumer type practice, which I assume most of you are. There are three sources, of course. The first, you're very familiar with, the Massachusetts rules of professional conduct. I've taken a look at them and made sure that I'm current, at least through this past December. There's the bankruptcy code and then, of course, the bankruptcy rules. And the fundamental reason that you're there, like with any kind of practice at all, any specialty, is to help the client. But in this context, it's important to make sure that the bankruptcy system itself operates transparently and accountably and that lawyers who represent especially debtors, individual debtors, receive reasonable compensation for their services. The first rule, I think, is the big one, competence. And I'm just quoting from the rules of professional conduct there, the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. Well, it's not easy to get unless you've actually been doing it and there's nothing that prevents an attorney from, excerpted here in that comment, accepting a rep representation where through reasonable preparation, he or she can bring himself up to speed. There are so many variables in a debtor practice. If you've been around as long as I have, you know that eventually, there's no difference between law people and their money and their businesses. It all blends together. And Mr. O'Donnell's presentation on tax matters was, I think, especially illuminating because everything touches tax too. So working in this area, I think requires a little bit of preparation not only on just the substantive law, but there are so many different things that go into it. It could be finance and accounting. And most people are checkbook debtors like - or checkbook taxpayers like you and me. But if they run a business, they're behind on tax returns, they can't seem to match expenses to revenue, problems happen. So the competence aspect of it is something that's very important. You get that through experience. And I would never hesitate to request guidance from anyone. And while I can't give legal advice or no one in the U.S. Trustees Office certainly can, we at least know our way around a little bit about process. So if you ever see us - and we'll talk more about that in the next panel. When you're likely to hear from the U.S. Trustee, usually has something to do with the means test, then we're certainly open to

© MCLE, Inc. All rights reserved discussing any of those issues. Diligence, I mean, this is obvious. And as lawyers, we all know this. You have to act with reasonable diligence and prominence in representing the client. Same for any type of set practice. It could be a real estate practice. But if it touches bankruptcy, certainly, getting off the mark, getting things filed with the court is very important. Communication Rule 14, you have to keep the client - we all, lawyers, have to keep the client reasonably informed of what's going on, and the client is ultimately the decider. So you have to work to make sure that the client has enough information to make that decision. Fees - the rules of professional conduct have - I think are pretty straightforward, but very general way of addressing fees. A lawyer shall not charge an excessive fee. And there's a laundry list of things that one includes to determine whether a fee is reasonable, and they sound an awful lot like the factors considered by bankruptcy cases and bankruptcy courts. When it's a debtor's attorney seeking compensation from the estate, and this is actually in section 327 of the bankruptcy code too. So here's an example of almost a word for word overlap between that code and the rules of professional responsibility. The results obtain experience, reputation and ability of the lawyer in performing the services. And this is when you're getting compensated for the bankruptcy estate, because every dollar that comes out of an estate is that much less that's available to pay creditor's claims. Fee sharing. The Massachusetts rules of professional conduct are very permissive on this. Fee sharing is permissive - it is permitted, and subsection E says you can have a division of a fee including a referral fee between lawyers who are not in the same firm. But here, the client has to be advised and it says only if the client's notified at the time the client enters into the fee agreement and consents to it and the total fee is reasonable. Not a problem under Massachusetts law. So if there's a slip and fall case, you referred to someone - I send a case to a Mack and I'm in a firm, she's in a different firm at Riemer, I can get a referral fee if I'm a private firm lawyer. No problem in something like that. Bankruptcy, as we'll it in the further we get into the deck, fee sharing is not permitted, at least on the debtor side and anything you usually do has to be fully disclosed. Still staying with the Massachusetts rules of professional conduct. Conflict of interest, you can't have one. In other words, you can't represent, simultaneously, clients having an adverse interest to one another unless you reasonably believe that there won't be one party adversely affected by

© MCLE, Inc. All rights reserved this dual representation and each client consents after consultation. You have to give them the information to make that informed decision. In bankruptcy, you'll see that when a professional, a lawyer is seeking to be employed by the estate - it's 327(a) - you can't have this kind of situation. And in 327(a) and in rule 2014, one must be entirely disinterested. You can't have a claim against the client, you can't be a creditor in the case and you can't have an adverse interest. And that means a material interest economically that clashes, and we'll see that in a couple slides. So here we go. Here's the bankruptcy code and the rules. We've already kind of been over 327(a). That professional - it could be the estate professional. 1103 has the same requirements for an attorney who wants to represent an unsecured creditor's committee in a Chapter 11 case. They can't have a claim against the estate and they have to have no adverse interest. And rule 2014 - and I think most people get that. You can't have an adverse interest. Does it make sense and everything has to be above board. Where people sometimes get into a little bit of trouble is the failure to disclose. 2014, I think was amended - it has to be within the last 15 years. And it requires you to disclose to a fare-thee-well any connections that you have with the client, with creditors, with professionals in the case. And you see trustees like Don, for example, oftentimes, if they're in an 11 or seven that's been converted to an 11, making very elaborate efforts to disclose any known interests and so forth. He may have worked as counsel for another Chapter 7 trustee who has a claim in the case. If it's, for example, a wholly owned business by a debtor, that's filed. Those kinds of connections are very, very important. And the reason it's important to disclose them is that compensation from the estate for the professional could be at risk.

>>:I'm going to - just, Eric...

>>:Go ahead.

>>:Just another example. If you, for example, you work with the debtor in the bankruptcy case, but it just happened the major creditor in the bankruptcy case two years to render service for them and you have a relationship with them. So you're going to have to - it's important as well. Because try to imagine that creditor in the case filed a proof of claim. And

© MCLE, Inc. All rights reserved because of your relationship, now you're kind of like torn. Do you object the claim or not? So you don't want that kind of thing to be out there. So they got - I've seen situation where you represent the debtor and we know there's going to be a major creditor case, and you do get the consent from both if you proceed and still file bankruptcy for the debtor, then you have a special conflict attorney that would be doing the objecting to that claim. So you prepare in advance if you know who the parties are going to be in the bankruptcy case.

>>:And if you represent or a member of a firm like you are with a whole group of very large creditors, I'm sure that that type of issue comes up...

>>:Comes up all the time. So what you do - if you're going to be getting a debtor case, you have to send a conflict notice to the whole firm just in case one of - there's an attorney in the firm represented to some extent or like some point whenever one of the major creditors in the case - sometimes you can't even take the case if you can't get that conflict waiver.

>>:Very good. There's actually a definition of what a disinterested person is. So you have to burrow yourself into that code, especially up at the definitional section, 101. Under sub 14, it's a person that is not a creditor, equity security holder or an insider and does not have an interest to materially adverse to the estate. One of the other things that I hinted here that's in this ellipsis is serving perhaps as an officer of a corporation. A debtor can't have - or its professional, I should say, can't have maybe a member of the firm serve as an officer or a director. There had been objections on that basis in the past in corporate cases. And this is Rome versus Braunstein. It says Mr. Braunstein, for whom Macken worked for so long - this went up to the First Circuit I think it was 1994. Yes. And the First Circuit taking his firm's position. He was the trustee in that case and got debtor's attorney disqualified and disgorged. The conflict of interest prevented the attorney from getting paid in that case. And adverse interest is the possession or assertion of a mutually exclusive claim to the same economic interest or a predisposition that renders such a bias in favor of one of the entities. And we like to think of that, in my office, as a situation where someone's going to pull his punches. I'm not going to go after, possibly, the recipient of a fraudulent transfer or a preference because,

© MCLE, Inc. All rights reserved well, they're my client. I'm not going to go after them. So in that case, the attorney, Mr. Rome, was disqualified, disgorged either - failures to disclose as well. So it's important under 328(c) of the code, if at anytime, someone is found not to be disinterested or does have an adverse interest, they lose everything. So it's important to do that due diligence upfront and this it, 327 (e). Failure to be disinterested does have consequences. Another statue that comes into play sometimes more often than you'd think in a consumer case, Chapter 7, you get paid upfront. You don't want to take the case unless you're paid. If you have a bill that's outstanding for preposition work, maybe you can't qualify as debtor's counsel, maybe there's a conflict, whatever. But 329 measures, really, the worth of someone's proposed fee or the fee that they've gotten, perhaps in advance. And if they have - it's really 329(b). If their fee exceeds the reasonable value than their services, they can have that fee reduced. Here, you have to make a statement of the compensation that you were paid before the case was filed, or I should say within one year of filing. This - again, full disclosure. If you've taken fees in advance, you've been paid for work in advance, you have to disclose it as counsel. Whoops. And B, if the reasonable value of the compensation exceeds the value of those services, then you can have the court cancel the agreement, order a refund. Fee sharing, I highlighted this very briefly when we started. Section 504 in the code prohibits fee sharing unless the attorneys are part of the same firm. So if Mr. Braunstein - Alan Braunstein earns a fee in a case, he can share it with Macken or with anyone in the firm because he's employed as counsel to the trustee or something like that. So no problem if you're in the same firm, it's just the different firms - the referral fee. You might ask, well, why is that? Why can't I refer to a friend who's a bankruptcy lawyer like you something and get a fee on it if I'm in private practice? And the answer is, really, there should be no hiding of compensation. There should be one attorney for a debtor, one professional that's going to guide the debtor and the case. And by getting rid of this, by making it more transparent and accountable, the system works better. There's nothing to hide. And there have been a lot of cases I've read about recently that have come out of New York not involved in bankruptcy. But I think there were some legislators, and I think one of them got sent to prison. Nothing under the New York ethics laws that prohibited the legislature from referring the client. He didn't disclose, and that's how he got into trouble. He had silent income and so forth. And of course, that's

© MCLE, Inc. All rights reserved a corrupting influence. This rule is designed not exactly the same momentous intention as that, but you want to keep the system as transparent as possible. One attorney. No sharing of fees. However, there are exceptions to this. If you represent a creditor who files an involuntary petition, there are - under 303, there are certain - you know, there's 10 or more creditors, less than 10, so forth, you can share fees that way. No prohibition on that. In the area of abuse - presumed abuse. The means test. There is a provision - I haven't seen it enforced and I don't think the U. S. Trustee in this region has ever filed a request in this respect. But it does authorize the court to order a debtor's attorney to reimburse the trustee - someone. It could be the Chapter 7 trustee for that matter. It could be Don. - reasonable costs in prosecuting a motion under 707(b) if it finds that the debtor's attorney violated the rule 11. In other words, a pleading was prepared, the means test was prepared without care - without reasonable care, without an investigation of the facts. So willy nilly, for example, assigning numbers in form 122(a)(1). Oh, he can't be above the median. I don't need to look at the pay advices. Turns out there's no factual basis for that at all. We see it and people are very good about amending, and that's important. And we're as straightforward as we can be in sending out emails. We'll get into that in the next session. But just know that's out there. If you're putting together a means test, putting together schedules and statements of financial affairs, it's so important to go over every line and not rely on software that may automatically populate fields and so forth. Check it. And I have some slides in the next deck that will show you what I mean by that. There's also authorization to assess an appropriate civil penalty for a violation of 9011. Ow. Who needs that? Again, my office hasn't brought them. Maybe we thought a couple of occasions, God, this is really bad. But people have been very good about amending schedules, about amending 122(a)(1) and (2). And...

>>:Just - sorry.

>>:Go ahead.

>>:I haven't seen that either, but I would imagine the rule 9011 in the bankruptcy when you sign something, it doesn't apply just the debtor's attorney. Also, if you represent the creditor, you can just make a ridiculous

>>:And, again, this is all pertaining to the means test. And as Don said earlier, 2005, when the BAPCPA was passed, that Congress was really serious about this. Your signature on the petition certifies that you perform a reasonable investigation into the circumstances and that what you're saying is well grounded and warranted. And that means even if your eyes cross, having to go over those pay advices and making sure that you've got everything to the best of your ability put together on the numbers. A few more bankruptcy rules. 2016 requires the disclosure of the compensation. That's sub B and 9011. It's the same as federal rule 11 about the good faith effort to understand before you sign something that it's the best that it can be and that it's warranted by fact. And then I put together a couple of ethics examples here, and I haven't had a chance to discuss it with - either review to. But I just - I throw them out. Nothing like putting something on someone with no warning at all. And this is Don too, because Don is more close to this than I think practically all of us because of his rounds every three weeks or so when he gets new cases. But I just throw these out. Can an attorney simultaneously represent divorcing spouses? Is that kind of a conflict in itself? I just throw that out.

>>:Yeah, so we talked a little bit about this yesterday, actually. And our view was that it depends on the - I guess it depends on how the spouses are going at one another. So if it's amicable, then it might be OK. But if in the course of the bankruptcy, they're going to have to reveal things, then it might not be so. Probably the safest thing to do is if they're divorcing spouses, just have them each have their own lawyer. That way you're...

>>:But, Don, that's so expensive. Why - you know, can't we just paper this over?

>>:Right. And maybe you can, if they have no issues about anything. It really kind of depends. Everything that's in the bankruptcy case is public knowledge, it's in the public realm. So anything you fill out on the bankruptcy schedule is not is going to be disclosed. The problem is what they might tell you during the representation. So if they're both in the room

© MCLE, Inc. All rights reserved all the time and you're limiting to material you need for the bankruptcy case, then it might be OK. But if one says, oh, my husband isn't here yet but there's a few things I want to talk to you about before he gets here, then it may become problematic and that's when you might have to say, no. So the easier thing to do to avoid that altogether is to have them separate. But like Eric said, they may not be here before and they, no, we'll just do it. And there are many cases filed by divorcing spouses. It happens all the time. People come to the meeting, they have different addresses. Why do they have different addresses? Because they're separated. So it happens all the time. Just have to be careful. So I think you can do it, but you got to be careful.

>>:Was that then filed as a joint case?

>>:Yep, filed it as a joint case because they don't want to file separate. It's too expensive. They don't want to have two lawyers, two cases. So separate case when the case is filed. But on the petition, they have different addresses.

>>:OK.

>>:Yeah.

>>:Here's another one. If the attorney fails to disclose his fee agreement that he has with the debtor under the code and the rules - that should be 329(b), not 326(b) - and then sues the client and state court posts petition for breach, is that an ethical problem? Do you ever see that?

>>:So I've never seen a lawsuit. I think most bankruptcy - I'm not aware of a lawsuit where a bankruptcy lawyer sued his client later on. I think that if there was a fee agreement and it wasn't filed, you violated a rule. But I don't think you violated an ethical rule, you just violated a bankruptcy rule. So - and if the client signed it, I'm not sure there would be a problem. I would think it would be enforceable. And you might amend your bankruptcy petition to include the agreement or reopen the case to include the fee agreement so it's there, that will probably be a better thing. But, you know, I don't think - I'm not sure whether there's some judicial estoppel issue or

>>:I guess also, depending on who's representing the debtor, I could see how they could try to play it against you. But just argue, well, you never filed it in the bankruptcy case and trying to say you did something wrong.

>>:Yeah, it's like the client saying - it'd be kind of weird, right?

>>:Yes.

>>:Yeah.

>>:Unfortunate no matter what.

>>:Yeah. It's better if you do it, better if you disclose.

>>:The next one, what problems are there if the attorney meets his client for the first time at the 341 meeting and...

>>:Oh, so like an appearance lawyer?

>>:Yeah.

>>:Just saying.

>>:That's right.

>>:Or we put together the schedule, statement of financial affairs, the means test, all that stuff, filed the case and I we discussed everything by telephone. Everything seems to be OK. And I meet my client for the first time at the 341 meeting. Is that a problem?

>>:Absolutely. Aren't you supposed to have this individual in your office signing the petition before you file it?

>>:Oh, I sent it Federal Express. And he signed it and he sent it back. And

>>:Yeah. So - yeah, sometimes - well, it's hard to know, right? Because it's hard to uncover. Because - but I do see a lawyer come in and say John Doe, are you here. OK. They don't even know who John Doe is. John Doe meets you, oh, hi, you know? Because they met them for - but usually, it's a partner of another person. So it's a two person firm, one person can't make it. So that's where I've seen it. I haven't seen it totally unknown. But I thought - I don't know. I thought that was, I guess, my request was there might be some rule about this. I'm not sure of an ethical rule. I don't - I know the judges don't like it. I think the judge may even have a decision on this about it. So I think it could be problematic - depending, right?

>>:I think you're risking getting disgorged. I really do. Make the effort. Go the extra quarter mile. See the client, meet the client.

>>:Yeah.

>>:This is from Mike. Once again, five years ago, when I was practicing, I had an out of state entity hired me to represent people in bankruptcies. I think I even took one from Mr. Lassman at one point. They hired me - I did not meet most of my clients until the day of the 341 hearing. You know, I was basically, you know, there just for the hearing. And it did - it presented some issues because, if you don't know your - you have to go on what they're presenting you on paper. You don't get to look at it in person.

>>:Hold on, are you on the 2016(b) or not? Who's listed as the attorney representing the debtor with the bankruptcy petition was filed, you or somebody else?

>>:It was the out of state firm.

>>:Interesting. Yeah.

>>:Interesting...

>>:...Because I was going suggest - that we see a lot of internet based people like Upstart and so forth. And they were offering to get attorneys locally involved. But all of the back office work, all the preparation and so forth was done offsite and the attorney had no input on it until he showed up and then he's given schedules that could be remarkably inaccurate or something like that. That's a problem because you're touching, then, on diligence, competence. Hearing, speaking, talking to the client and understanding what's going on, being able to follow up with the question - oh, my - crucial, I would think. So I would just say never undertake a representation like that because it's just too fraught.

>>:I wouldn't do it now. I did it in the past, unfortunately.

>>:I think we're over time.

>>:Yeah. So what I'd like to do is we're going to move on now. So thank you, Eric. Any questions or thoughts or comments or - OK. I don't see too many people fidgeting in their seats, so I guess no one out there has had any trouble with these ethical issues. So we're going to take a look at now is the role in perspective of the office of a U.S. Trustee and program will go until about - Let me see what I - have this laid out. Bare with me for one second. Rule in perspective of the U.S. Trustee to about 2:50.

>>:Excellent.

>>:So let me bring up your PowerPoint.

>>:Thank you, Don. You're very nice to do that. And please feel free to move around or whatever. I know you folks have been in your seats for quite a while.

>>:All right. So you have the clicker.

>>:I certainly do. Thank you.

>>:Thank you very much. Basically, the U.S. Trustee Program, as I said, has - its whole purpose - you know, the mission we've excerpted here - to protect and preserve the integrity of the system and to prevent fraud and abuse, maintain transparency and accountability in the system. It's been around since 1978. It went nationwide in 1987 - so it just had its 30th birthday last year. And essentially, it's a litigating component of the Department of Justice. It expanded to 21 regions in 87. And currently, there are 21 U.S. Trustees, so there are 21 regional head offices around the country with 95 field offices. Every state but Alabama and North Carolina has a U.S. Trustee. They still - in those two states - had the bankruptcy administrator, which is an interesting but anachronistic kind of situation. They're supervised by the judge in every district. And one wonders the degree of independence you would have. I guess the idea of putting it in an executive branch agency was to ensure that the judges wouldn't necessarily overreach. And so far, so good. But how the system can exist but - everywhere except those two states, I don't know. There was once a challenge to that, I think, but what happened to it, I don't know. Our basic job - we supervise the administration of Chapter 7, 11 and 13 cases. We appoint panels of trustees. For example, Don is on a panel here in Boston. They file reports with the U.S. Trustee. We make sure that they're reporting assets that they've collected, where their money is. We monitor what money goes out of an estate when creditors are paid and closed. And the system was started in an effort, really, to stop a problem first identified in the Depression. There were so many businesses and then so many people who filed for bankruptcy in the 1930s. And under the 19 - Well, the 1898 Act, the old act, that money would go into a hole and no one would ever see it again. And that was a problem. And the Chandler Act of '34 was a partial attempt to address that. But I think that the U.S. Trustee Program - if you want to think of it as kind of last gasp at the Golden Age of financial regulation. In the late-70s, the problem had been addressed many times with reform commissions. But finally, when the new code was passed, the program started as a pilot, an experiment, and then it went nationwide, as I said. And I think, frankly, it does a good job of making sure that at least things are reported and there - all the administrative functions that the judge used to do, like appoint a trustee,

© MCLE, Inc. All rights reserved had been taken over by the U.S. Trustee - so there is some independence. We appoint and supervise, as I said, the trustees on that panel. We take legal actions. We have just as much discretion as any other executive agency, under DOJ, to prevent fraud and abuse. We can investigate. We can ask questions. We ensure that things are administered as promptly as possible. The Bankruptcy Code speaks about getting creditors paid as quickly as possible. We appoint Chapter 11 - in Chapter 11 cases, creditors committees. We review disclosure statements, applications to employ, object, where necessary, to confirmations of plans and disclosure statements. We do a - well, as you'll see in the next couple of slides, we do a 100 percent review of all Chapter 7 schedules, statement of financial affairs and means test forms. Every single case that's filed everywhere in the country, there's someone at the U.S. Trustees Office reviewing it, making sure that things are reported correctly. And these documents are all submitted under penalty of perjury. This is what's called civil enforcement. We examine these documents and make sure that there is - accurate. And where we have questions, we'll be asking some questions - you know, kind of sort of the contents of the schedules. It used to be that they really were divided along the lines of what you would expect to see. And instead of financial statements, the balance sheet and income statement, sources and uses of cash - but maybe not an equity statement of owners equity. They've kind of amended the forms to make them questions so that someone who's not a lawyer can fill them out. They're a little more complicated than they used to be. So in the sake of making things simple, they're more complicated. And it requires more diligence than ever for an attorney to look at them. The exemptions are on - you've probably already been over all this - on Schedule C, income and expenses - on IMJ, the statement of financial affairs. It's kind of like the notes to what you would expect to see in a set of generally-accepted accounting principle's financial statements. There are notes to a balance sheet that tell you how the company accounts for things, what methods it uses, how it calculates depreciation, how it accounts for accounts receivable, how it charges them off. All that information and more is isolated in the statement of financial affairs. But what I look for, generally, are things that - involving transactions of assets - closed bank accounts, transfers of property within two years. All of this is in there. Pay advices - those are separately given to the Chapter 7 trustee in a consumer case, and to the Chapter 13 trustee,

© MCLE, Inc. All rights reserved for purposes in the means test. We also look at tax returns. Now, there are two kinds of civil enforcement that we generally do in Chapter 7 cases. One is the means test. Subsection 2, 707(b)(2) - and basically, that matches up someone's income, as a household, if they are above the median, for the same family size in their state, like the state of Massachusetts. And the median is the exact middle, not the average. Not the mean, the median. Then they have to go and complete Form 122(a)(2). And that matches that income against standard expenses derived from the IRS, both their financial collections standards and so forth. And if there's net funds at the very bottom, you can boil it down to this. At line 39(c), if there's more than $214.17, then it's presumptively abusive. But a debtor can rebut that presumption by coming forward with evidence of special circumstances - I have a health condition that requires me to spend more on things, or I have a sick child, or I'm supporting my mother who's very ill, or we live in a part of the country where things are very expensive, and these expenses don't in any way show reality - something like that. And then we do objections to discharge and investigations. That's essentially omissions from schedules, lying, cheating. If you're not straightforward on your schedules, that there's a fault of concealed assets and so forth, that's a problem. In Boston, we're divided into three teams by the judges. Judge Hoffman - you'll see Heather Sprague. Judge Bailey - you'll see me. And Judge Beeny - you'll see Paula Bachtell. We are all very collegial. We enjoy a great relationship with each other. And you might hear from us from time to time. Especially in consumer cases - were very visible in 11s. But in consumer cases, you'll see us quite a bit when we're asking for information about the means test or something that we picked up in the context of reviewing a case under 727(a), discharge issue. And we all report to John Fitzgerald. He's the assistant U.S. Trustee. He would be here today, but he's traveling for work. You'd like him more, I think. William Herrington is the U.S. Trustee. And there, I'm on Bailey Hoffman. And Amber Nevers is our auditor. So if someone with a name Amber show up on your dial thing, that's her. And she's very nice to deal with. She's our auditor. She does numbers and things like that. Bass CPA - you probably - all familiar with this. The idea behind it, whether well-intentioned or not, was that before 2005, there was a huge bankruptcy discharge. And the way the code was originally set up in '78, debt was the problem. If you got rid of the debt, if you cleaned up the right side of someone's balance sheet,

© MCLE, Inc. All rights reserved that was it. He'd be fine. But credit card companies and others believe that people were getting away with too much, that the amount of scheduled debt that was discharged was monumental. And the figures bear that out. If you look, every year in this country, hundreds of thousands of people will be filing for bankruptcy, and the amount of debt discharged was disturbing to creditors. So these amendments were put in. And essentially, it's means testing. I don't want to say this, but I kind of get this feeling that that's going to happen to Social Security for the rest of us, for me, if I live long enough to get to retirement. If you earn above a certain amount, your benefits will go down. If you don't, your benefits will stay at what you've earned. Here, the idea is if someone can afford to pay, they should. That was the idea. So you're juxtaposing that median income against, what are standard expenses? And the - it was a perceived abuse problem. This goes forward. Here you go. So when we might contact you is when we want to get substantiation for the calculation of current monthly income. That's the income over the past six months. And divide it by six, you come up with CMI. You might want to confirm special circumstances. And our policy on the means test is there on the screen if you want to go into our website. Just google the U.S. Trustee. You might request documents about tax returns, bank account statements and so forth. And if there a material statement that's been highlighted in a debtor audit, cases are randomly chosen, and they're given a desk audit. And if there's a problem - this guy has a snowmobile that he didn't report - it shows up. And the debtor is required to explain that discrepancy. We might also contact you to discuss the value of your services if there is a problem. We usually contact everybody by email, but certainly feel free to contact us by phone. There are - I've given you kind of a set of slides. And I won't go through them now. You can look through your materials because I think they're printed in the book - because I'm at the end of my time. But you see that...

>>:These are Page 136, 7, 8, 9 right in there.

>>:I've given you some kind of breakouts of how the means test works. This is what's called B3 abuse - not presumed abuse. But as we go in to 707(b)(2), there's some slides here with the form and what goes into calculating current monthly income. And then we have the expenses. There's an exclusion under 707(b)(7).

© MCLE, Inc. All rights reserved >>:This was longer than what Anne White covered. So Anne White does a covered means test. Who's enforcing that means test material? Office of U. S. Trustee. So Anne went over income expenses, how to prepare the means test. Who's looking at it to make sure it's right? The Office of the U. S. Trustee. And you'll got a letter from them, and they will say, send me this and this and this and this. If you don't have any of that, that's the problem because you should, all right? So that's getting the underlying documents that makes these forms complete.

>>:You hear some - you know, where we pull all these forms - or all these figures - it's all on the U.S. Trustee website. Don't trust - sometimes - I'm sorry - we don't necessarily trust the best case. Sometimes there's a glitch in that software. If you just need to double-check your figures, look on the U.S. Trustees website. And it has - all this information is there for you. And I'm certainly available - any of us is at anytime. We're supposed to be the experts on this stuff - so best of luck to all of you. If we can help in any way, please call.

>>:All right, Eric, thank you so much. You're good. Thank you. (APPLAUSE)

>>:So I'm going to slide along. Eric has to excuse himself. He's teaching a class, so if you have questions for him - some of you are taking his class or have taken his class. I don't know.

>>:I don't see any former students here.

>>:No former students, OK. All right, but...

>>:(Unintelligible).

>>:He's got them. And they're very, very helpful. And they're very generous with their time. All right, so the next topic we're going to get into is bankruptcy litigation. And this is about - we have this section because you may litigate in your bankruptcy case. And Chris will explain kind of like what that means and how that could happen. If you filed a bankruptcy

© MCLE, Inc. All rights reserved case, why are we talking about litigation? What's that about? So, Chris, if you can't say where you're from and kind of what your background is - and then I have you slotted in your time until 3:15, so I can give you 3:20. I'll give you a full 30 minutes.

>>:OK, thank you. My name is Christopher Condon. I'm a business restructuring attorney, principally at a firm called Murphy & King in Boston. In my career, I've done both sort of creditor side and debtor side work, and I've been doing it for little more than 15 years now, so I have some decent experience. I always like to say that, you know, litigators think that, you know, nothing ruins good litigation like a bankruptcy case. Which is true, but there is bankruptcy - there is litigation inside of bankruptcy cases as well. The outline that's in the materials is a good reference for you. It has a lot of information in there, sort of quick reference to case sites and things. But I'm going to go through the the ideas, the concepts, that are in the outline sort of more generally. In a bankruptcy case, about 95 percent of what you do is motion practice. You need to file a motion to do anything that's out of the ordinary course, which turns out, there's a lot of things. So you have to file a lot of motions in a bankruptcy case if you want to accomplish anything from the debtor side. And creditors have to file motions if they want to get relief from the automatic stay to pursue their pre- petition litigation or foreclose on a house or whatever it is they want to do. So when you file a motion and it is opposed, it is what we call a contested matter in bankruptcy. And there's a rule, which is - I know there a lot of numbers thrown around in bankruptcy law. Rule 9014 governors contested matters. And basically, it implements certain elements of the Rules of Civil Procedure into a bankruptcy case, principally discovery, summary judgment and issues about dismissal. So a motion is filed, there is, under local rule, 14 days to respond unless the court sets a different deadline. Once the opposition is filed, the matter is generally deemed to be a contested matter. It will also be scheduled for a hearing relatively quickly because one of the things about bankruptcy is that it proceeds a lot faster than, say, a generic civil litigation case. So usually when a motion filed, there may be a deadline established to oppose the motion, and a hearing will be scheduled, you know, somewhere between 21 and 40-something days from the time that the motions filed. The hearing will probably be non- evidentiary. So oftentimes, there are initial hearings that are just held on

© MCLE, Inc. All rights reserved that motion opposition - go to a hearing. Technically, however, you can, because of Rule 9014, try to seek discovery from people in advance if you think that you need something like that. I would advise you generally because, in dealing in bankruptcy cases, we're usually talking about - usually, not always - but usually talking about documents that really aren't in dispute, facts that aren't necessarily in dispute, we're usually talking a lot about numbers, things like this. File a motion, file an affidavit, attach documents to the motion that you file, present all of these things that you have in that way in the first instance. So you can go - after an opposition is filed, you can try to seek discovery. The other side - as a practice point - may oppose this because some judges have held that a issue is not a contested matter until they say that it is a contested matter. So you might try to seek discovery in advance of the hearing on some sort of expedited basis. The other side may refuse to cooperate with you. And the judge may agree with them and say, you don't have to until I say you have to. That's just - but you - technically, the rule says it's a contested matter. You can implement these rules of discovery - and you do it that way. So, you know, that generally is going to be most of your practice - in bankruptcy court is motion practice. The initial hearing, there may be an evidentiary hearing scheduled after that, where additional time afforded for you to provide - you know, to take discovery and to put on evidence at the trial. Usually, in bankruptcy court, initial examinations are presented by affidavit. You would submit an affidavit, and then the affiant would be available for cross- examination. That's typically the way it goes. Again, it just tends to expedite the matter so does it go on for multiple days. The second type of - yup?

>>:(Inaudible).

>>:Yeah, you can use it for impeachment, certainly. So - and that happens a lot. Some portion of bankruptcy litigation is what John was talking about earlier - discharge, dischargeability. That's what happens. People write one thing down on their schedules, they say something else in the creditors meeting, and then they say something else and write something else. And some later point, becomes an issue of credibility and what - whether they're speaking truthfully. You know, I say there is some salacious bankruptcy litigation that goes on. There were - somebody who was on

© MCLE, Inc. All rights reserved one of those real housewife shows was thrown in jail recently for doing just that thing - right? - for bankruptcy fraud. So, you know, sometimes you get these high-level cases, one of which we'll talk about later - a little later. The second kind of generic type of bankruptcy litigation is what's called an adversary proceeding. And adversary proceedings are governed by the Rule 7000s - the bankruptcy rules. There is, in 7001, a list of things which must be in the form of an adversary proceeding. So typically, you know, there is an extensive list there. But I would say that, you know, when you're trying to seek injunctive relief when you're trying to determine the extent of a lien, the validity of a lien, you have to file an adversary proceeding. There are certain things you have to file an adversary proceeding for. So if you're thinking about what it is, look at Rule 7001. My advice is if it's not listed in 7001, file a motion because it's going to be accomplished faster. You're - whatever you're seeking is going to be accomplished faster in the motion practice than it is in an adversary proceeding, so try to file a motion if you can. You may be told that you're wrong and you've got to go back and file a complaint. But, you know - that might happen. The general rules of - in an adversary - in a regular civil litigation case typically apply in an adversary. 7000s implement a lot of the rules that are in the Rules of Civil Procedure. So as a for instance, when you file a complaint in adversary proceeding, you'll follow the same general rules that you have to follow in a regular civil litigation case in federal court - the way you plead, all these kind of things. One benefit in bankruptcy is that you can serve by mail. It makes it, again, a lot faster. You don't have to go through the process of serving in person. So that's very useful, especially if you're on the bankruptcy estate side and you want to sue a bunch of people for preferences or something like that. You can just mail out all the complaints. My advice is send it by regular mail because that's the presumption. Under Rule four, it's delivered. Also, send it by certified mail. It's a lot easier if you go to seek default judgment later. You at least have some sort of return receipt. But a lot of issues get involved in jurisdiction in bankruptcy. And it's needless to say it's very complicated. You could write a lot of briefs of many hundreds of pages about bankruptcy court jurisdiction, something that's continually debated in the circuit courts and the supreme court. But one of the things you have to do when you file a complaint to institute an adversary proceeding is you have to plead whether or not the claims that you are bringing are either core or non-core. And these are terms of art. If

© MCLE, Inc. All rights reserved you want to sound like you know what you're talking about, you want to talk about core and non-core. Inevitably, even now, you know, sometimes people are ordered to file briefs about whether or not the issues are core or non-core. You know, it can sidetrack a lot of litigation. What is the bankruptcy courts jurisdiction? The reason why is that bankruptcy courts, in case anybody didn't know, are not Article III courts. They are - they were created by Congress, not by the Constitution. And so another term of art is what happens is cases filed under the Bankruptcy Code are so-called referred from the district court, which holds original jurisdiction to the bankruptcy courts, which hold concurrent jurisdiction. That is - the word is called a referral. Usually, there is a rule in the District Court local rules in any jurisdiction, like this one, that says all cases under chapter - and under Title XI are automatically referred to the bankruptcy court. Now, typically, again, if you're in a state representative, you're the debtor, you're a trustee in a bankruptcy case, you want to try your case in bankruptcy court. It's faster. Generally speaking, bankruptcy courts have better understanding, an expertise in bankruptcy law. So typically, the estate representatives want to try their case in bankruptcy court. If you're not the estate representative, you don't want to have your case tried in bankruptcy court, mostly because you would rather that a drag on longer so that, you know, you can you have more leverage in the case. Maybe you don't want a court that has expertise in bankruptcy law deciding your case. Maybe you like, you know, the district court deciding it because you think that it's more favorable forum for you. Typically, creditors tend to think that. Typically, estate representatives tend to think the opposite. So this issue about core and non-core jurisdiction is constantly debated. It's very complicated. There are some case cites in there, but we're going to talk a little bit about what each of these things are. Core matters are typically described as rights which arise under the Bankruptcy Code and/or something that arises specifically in the context of a bankruptcy case. So there is a list of core - a non-exclusive list of core matters in 28 USC 157. Bankruptcy court jurisdictions typically is defined by two principal statutes, 1334 and 157. So 157 lists what is a - again, it's including but not limited to certain core things. One core thing is preferences. You may run into this a lot in just general practice, any kind of litigation practice. Your client gets sued for a preference, typically gets sued in bankruptcy court. It's a bankruptcy- specific thing. There are some things that are akin to preferences, but it is

© MCLE, Inc. All rights reserved a federal law creation. It exists in bankruptcy specifically. It's a core matter. You generally can't fight the jurisdiction of the bankruptcy court in a core matter because the bankruptcy court is specifically authorized by statute to enter final orders on all core matters. Something is non-core, and that's basically any common law right, anything that is not a specific bankruptcy court creation. The bankruptcy court does not have jurisdiction to enter final orders. What that means is, usually, a case may be tried before the bankruptcy court. The bankruptcy court can make findings of fact and conclusions of law, but those findings of fact and conclusions of law on non-core matters have to be certified by the district court. So they go to the district court. District court can review the entire case de novo. Doesn't have to take the recommendations of the bankruptcy court. So needless to say, while bankruptcy court adversary proceedings are typically run faster than a regular federal court civil litigation case, these kinds of issues make it more complicated and drag it out, drag out the process, because you essentially have two courts that have the same jurisdiction. And so it can get a little bit messy. But if you want to use the terms - it's core and non- core. Core matters are simply things that either arise specifically under the Bankruptcy Code or are kind of bankruptcy creations. Everything else is called non-core. Those matters are still referred - again, referred - to the bankruptcy court under what's called the bankruptcy court's related to jurisdiction. But there are vehicles for people to remove them from the bankruptcy court, essentially. We're going to talk about those in a minute.

>>:I want to make sure that everyone's clear. When we're talking core and non-core, it's count-specific, right? So say you have an adversary complain for, I don't know, chargeability, and then you also have a count, like a common law count for negligence or something like that. Obviously, this chargeability matter is going to be considered core. But then you have a complaint - you have an additional count that's a common law claim that is not core, so you have this sort of this junction where the court can rule - enter a final order of one but has to refer the other counts in the district court.

>>:Right, and we'll talk a little bit about these vehicles, but this is a good point. If you have a 10-count complaint, you might have seven core counts and three non-core counts. In that case, assuming that the defendant

© MCLE, Inc. All rights reserved doesn't use any of the vehicles we're going to talk about in a couple of minutes, the bankruptcy court would do just what I just said, which is they would make final orders on the core counts of the complaint, and they would make findings and conclusions on the non-core related counts of the complaint, and then those would be sent to the district court, who can review those matters de novo. District court is also the first level of appeal from bankruptcy court, so you could end up with all those things in front of the district court (laughter). So we'll talk about that in a few minutes, too. But anyway, when anybody talks about - so there is broad related to jurisdiction of the bankruptcy courts, so when I talk about non-core matters being related to the conduct of a bankruptcy case, there are all kinds of circumstances and scenarios whereby you can imagine that there are non- bankruptcy claims that are brought in the context of a bankruptcy case. Just by way of example, typically what happens is there are - people file claims, right? Creditors file claims in a bankruptcy case. And as a practice point, you should consider this a little bit because if you represent a creditor of a debtor, you should think carefully. Not necessarily long and hard, because you won't have time because there's a bar date to file claims. But you should think carefully about whether you want to file a claim. The reason why it is, as a for instance, if the debtor has no money and the likelihood of you getting paid is very slim, if you file a claim, you're subjecting yourself to the bankruptcy court's jurisdiction. So when you do that, then you can get sued in the bankruptcy court. And you don't want to do that. You might want to reserve your right to contest the bankruptcy court's jurisdiction on all these loans. So, you know, only file a claim if you have some sort of reasonable expectation of getting paid, you know, something that is meaningful is my general recommendation. But typically, people just file claims. But, you know, when you file claims, you're waiving some of your rights in a bankruptcy case. Then what happens is somebody turns around that objects to your claim and they bring essentially what are counterclaims against you. So all of those counterclaims may relate to your business relationship. It could be anything. It could be 938 claims. They could be, you know, all kinds of stuff, to which the bankruptcy courts not have original jurisdiction over. But they relate to the same business transaction, it's the business relationship, anything like that. So, you know, that's where you're going to get the objection to a claim - is absolutely a core matter. The 938 claim, as a for instance, is not a court matter. So the

© MCLE, Inc. All rights reserved case that talks about this is - as I said, there are salacious cases. The case is called Stern v. Marshall, it's the most famous recent case on this, which was a Supreme Court case involving a person named Anna Nicole Smith whose real name was Vickie Lynn Marshall, who married an 89-year-old guy named Marshall - forget what his first name was exactly. He died. She made a claim to his estate and was a multimillionaire. In the course of this, because there was a dispute with the deceased's, then at that time, elderly son who was, like, 70, he obviously didn't want to give Anna Nicole Smith any money. So there was a dispute, drug on. Nicole Smith eventually ended up in bankruptcy because she didn't have any money. I should say Vickie Lynn Marshall ended up in bankruptcy, and there was a dispute between her and the executor of the - Mr. Marshall's estate. Essentially, there were claims and counterclaims involving defamation and all these kind of personal right claims between the two of them. And the Supreme Court decided that this case would be a good case for them to throw a wrench in what was generally understood to be bankruptcy court jurisdiction. At the time the Stern v. Marshall was decided, it was generally accepted fact that if you file a claim in a bankruptcy case, people can bring counterclaims against you in bankruptcy court related to that claim. These claims are all related to each other but the Supreme Court said no, because this involves the determination of a private right, which is not a core matter, then the bankruptcy court doesn't have jurisdiction. So the bankruptcy couty did not have jurisdiction, decide the counterclaims between these two people. So therefore, after that case was decided, then bankruptcy court started to say, well, what is our jurisdiction? Like I said, it's a complicated issue. The terms core, non-core, those are the things you're going to be arguing about, whether the case was referred and not referred. And so it is constantly debated. I won't say the law is in flux. That's not really what - that's not really true. It's a gray area. It's very gray. So those things are still talked about all the time. I still write briefs about what are core and non-core. I still have fights about these things. You know, there's cases about it now. To make it even more complicated, even when you file a case that may even be considered a core matter or, you know, certainly a related to matter, a defendant in the case might file what's called a withdrawal of the reference. So again, the word refer. It's all cases are referred, all related to cases are referred to the bankruptcy court, you can file a motion to withdraw the automatic reference of the

© MCLE, Inc. All rights reserved case. The basis for doing this is whether or not the case requires the court to determine substantive non-bankruptcy law. So I had a case about this, as a for instance, it involved interpretation of the National Banking Act. And the District Court found the defendant's motion and the case law surrounding the National Banking Act to be very interesting and withdrew my bankruptcy case to the District Court even though it was about an objection to claim. It happens. I settled the case, but nonetheless, you know, I had to go up and argue that you find yourself in kind of an awkward position because your - the case is heard. You withdraw the reference motions heard by the district court judge and you're standing there as the estate representative, trying to say, no, no, no, judge. I like you, but I don't want to have you, you know, hear my case. So that is another vehicle that people use to, again, take the case out of bankruptcy court, have it decided in the District Court. And I'll just make some little mention of this at this point, which is a lot of this relates to jury trial right. Again, your right to a jury trial, you have to preserve that and assert it in accordance with the Federal Rules of Civil Procedure, typically. But a lot of it involves a right to jury trial. And, you know, the reason why is you cannot conduct a jury trial in a bankruptcy court unless everybody consents. So typically, the creditors will not consent because they don't want to have jury trial in bankruptcy court. They have the jury trial and district court. Takes longer, better chance to settle the case. So very few times will they consent. In fact, at my firm, everybody can only remember one time, which was the case that the firm had. So as far as I'm concerned, apparently there was only one case that ever happened. I don't know. I've never heard of another case. It very rarely happens that jury cases are tried in bankruptcy court. Most bankruptcy courtrooms don't have jury boxes. So you typically have to have it somewhere else. I think we have one jury box in Boston. I think the ones in Worcester have jury boxes, but I think we have one jury box in Boston. Anyway, so - and I will just point out on that point just one case which, is called Langenkamp v. Culp, which is an old Supreme Court case. It holds that - again, this is what I'm talking about with whether or not you file proof a claim in a case. Langenkamp holds that if you file a claim - a proof of claim in a bankruptcy case, you waive your right to a jury trial with respect to the matter that is in the proof of claim. So if you're served to be owed $1 million and the debtor says, no, I don't owe you $1 million because, you know, I paid, you know, $999,000, you can't have a jury trial

© MCLE, Inc. All rights reserved on that if you filed the claim. Obviously, you don't file, the claim, you're not collecting your $1 million anyway. So that's the calculus. But that is still typically the law that you waive your right to a jury trial to that specific issue. The proof will claim. Whether or not you waived your right to a jury trial in other matters related to the claim is again. A gray area of the law. There's somewhat of a circuit split on that, both those issues. I just want to touch on it - a couple other things that you can use in bankruptcy court. One thing, which is very useful or some people find it very useful is a special bankruptcy rule called Rule 2004. You may periodically run across this. You may have clients that get subpoenas - Rule 2004 subpoenas. Rule 2004 is essentially a rule that allows you to conduct discovery about matters in the bankruptcy case without filing a complaint against somebody. So creditors can use 2004 to depose the debtor or principles of the debtor, in the case of a company, or relatives of the debtor. And also, the debtor and the trustee can use Rule 2004 to depose anyone. It is a broad grant of power. It is very discretionary, gives the bankruptcy court authority to order examinations of documents and oral examinations of people and entities, with respect to any matter related to the administration of the bankruptcy case. One example I'll use to illustrate what this means, typically, is that if you are principal of a company, I can file Rule 2004 in your company's bankruptcy case to examine you about things that went on in the company. I cannot ask you, in the context of Rule 2004, about how much money you made last year, or what you did with it, or whether you stole money from the company or whatever. I can't ask about your finances, but I can ask about the company's finances. That's sort of an easy example. So the other thing I would say about 2004 is you cannot use 2004 when you have other vehicles of discovery available to you. So if you are involved in litigation - let's say, again, the principal of a company, the company is in bankruptcy. You want to, you know, examine this - you want to take another crack at examining this person, you can't go file Rule 2004 of the principle in the company's bankruptcy case because you already have a litigation against that person, and you are required to use the other proceeding to conduct discovery. You can't just use both. I had a case recently where there was a deadline to file a complaint. We filed Rule 2004 motions. They responded to them, in part. We contested some of the documents that were produced, and so on and so forth. But the deadline was coming, so we had to sue them. So at that point, file a lawsuit. You

© MCLE, Inc. All rights reserved can't go back, and say, hey, I have this open 2004 matter. Typically, the court will not allow you to do that. And you've got to just conduct discovery the way you normally conduct discovery in the other case. So again, you may have clients that get 2004 motions, so just keep these things in mind. It's not - You can't abuse it, but it is a broad grant of power. It's typically called a fishing expedition. You know, that you can use it to try to find out stuff about the bankruptcy estate. As I mentioned before - some time here - appeals, bankruptcy appeals. Bankruptcy court is essentially here. The district court is here. The appeals court is here. You have two rights of automatic appeal out of a bankruptcy court decision. You do that by just filing a notice of appeal, but you have to consider something else, something more complex. Do you want to have your appeal heard by what is called the bankruptcy appellate panel, or do you want to have it heard by the district court? Again, statute authorizes district courts to create what are called bankruptcy appellate panels. They are generally comprised of bankruptcy and other federal court judges, and they - you know, again, I guess the general thought is that bankruptcy appellate panels are more favorable to bankruptcy court decisions. Perhaps, you know, people think that. Not sure there's any authority or evidence of that, but I think people think that. So typically, estate representatives like to have their cases heard by the bankruptcy appellate panel, and non-estate representatives or defendants in lawsuits by debtors like to have their case heard in the district court. In order to have your case heard in the district court, you must file what is called an election at the time that you file - yep - at the time that you file your notice of appeal, you have to file an election to have it heard in the district court. Otherwise, it will be heard by the bankruptcy appellate panel. So that's just something else to consider. Again, that's the time to do it. There is a vehicle for direct appeal. It's in the materials. I'll let you look at it, that direct appeal to the circuit court. Again, when you - after your appeal's heard in the district court, you can appeal as a matter of right to the circuit court. The last thing I'll mention is bankruptcy court settlements. As everybody's been talking about, transparency's an important thing in bankruptcy. That is embodied even in what is called Rule 9019. This is another rule that you might hear thrown around - 9019 You must - the estate must file a motion and seek court authority to what is called compromise a claim. So obviously, this is easy. If you settle a piece of litigation, that's typically a compromise of a claim. There's a standard set

© MCLE, Inc. All rights reserved forth. Business judgment of the estate representative, the trustee or the debtor, about whether or not the settlement should be approved, considering the complexities, collectability, all kinds of issues, which you could probably think of on your own. But there are cases that talk about this - elements that have to be met. The only thing I would say about this is, like I said, seems obvious that you have to file a 9019 you're compromising a piece of litigation. However, a lot of instances where you might not have to file a Rule 9019. If you go out and collect something from somebody, if you collect 100 percent of something from somebody, you sue somebody and collect 100 percent of it, you don't have to file a 9019. It's not a compromise of a claim. You know, there are other things which may not be a compromise of a claim. If you're not giving away estate property, if you're not compromising estate property, it's not a compromise of a claim. But pretty much everything else you have to go to court and get court authority to do it. Obviously, it's a little complex there because, you know, let's say you wanted to - you were collecting, you had a bunch of collections actions against people. You might not want the other defendants in your other collections actions to know that you're giving somebody a deal. So anyway - but it makes it a little bit complicated. But typically, you have to disclose all the elements of your settlement and get a court order authorizing you to settle a case. And I think that's about it.

>>:All right, any questions about - you can see why you needed this component - OK? - because you file a bankruptcy case, but other stuff can happen. There are attorneys that specialize in the appellate work. I know, as a trustee, if I have an appellate case, I'm typically going to Chris or someone at his firm to handle that because it can be specialized. Not everybody does it. Not everybody does it well. They do. But there can be a lot of complications, and time is very important. So Chris, thank you so much. And we'll give him a hand. Can't get a ton of people here, I'm afraid. All right, so we're going to move along. You're going to stick around, though, because you're going to do the mock. Macken, do you have the hypo for the creditors meeting, so you know what's going on? The hypothetical? Yep, that's the one I mean. Yeah, yeah. OK, good. I just want to make sure you had it because it was in the day one. All right, so we are very fortunate to have with us, Molly Sharon, who is the clerk of the United States Bankruptcy Court. So you can come this way, walk this way,

>>:Hopefully my coffee won't spill.

>>:Let me get my stuff out of the way. I've got so much stuff strewn around.

>>:No, don't. Just leave it there, Don.

>>:Really?

>>:It's fine. No worries.

>>:Let me get the lights down.

>>:Hi, everyone. Again, I'm Molly Sharon. That's my nickname. If you ever see Mary, it's not a mistake. I have two names. I was given them both at birth, and I respond to either one. So I am the clerk of the bankruptcy court in Massachusetts, which means I serve the court in Boston, in Worcester and in Springfield. A lot of people think that we're just located in Boston, but we love our other offices, as well. Before - I've only been in this job for about a year and a half, and prior to this time, I was actually clerk of the bankruptcy appellate panel, so I was interested in what Chris had to say about BAPs. If he didn't mention it, there are only five in the country. Only five circuits have BAPs. So the first has been in existence for, I believe, about 25 years. It has a great body of case law. All of the judges in - oops, there we go. All of the judges in the circuit serve on the BAP and think it's terrific, and I would extol its virtues for anybody who wanted to appear there. But I'll just make a plug. They are actually located in Boston. Their offices are over at the Moakley Courthouse. And they certainly travel if the cases are available to them to sit in other courts. So that's the plug for the BAP. And that's where I fit into the federal courts in Massachusetts. So I wanted to pull up first our website, which somebody just said to me recently, they asked why my name wasn't on it anywhere. So I guess maybe I'll fix that. Anyhow, I hope that this is a helpful piece of information for litigants. We've been working on it. We're going to put some more

© MCLE, Inc. All rights reserved things on it. You will find that, across the country, federal courts have used this template because they want to make it easy. If you're researching the local rules in another court, you ought to be able to be familiar with the website and know where to go. It varies somewhat. But in any event, the things that I find are useful about our website is actually one of our - you find here where the judges are. You can find where the judge - under judge's information, you can find the opinions of all of our judges. So these are hyperlinks. This would get you to all of Judge Bailey's opinions. You don't have to go through Westlaw to find them. These would be written opinions. These would not be - some of our judges will issue memorandums of opinions. Those wouldn't be published in this format. These are just official opinions that they have issued. This also doesn't tell you - just a word of warning - it doesn't tell you if the matter was appealed. You'd have to take a look at the docket or go into Westlaw for that. Something else that I think - this is a newer feature of our website that folks have told me they find quite helpful. And that's over here - our court calendar. This gives you the court calendar for today and tomorrow. That's it. You can also actually go through your ECF account, and there is a calendar function there, where you can get calendars for the judges that are a little farther out. So I know that Judge Feeney is not sitting today, but I think Judge Hoffman did. So when you go on here - there we go. Here's his calendar. So it gives you current, as of today. And does it give you today and tomorrow? I think it gives you - maybe he doesn't have anything tomorrow. But this is actually the calendar that you would see hanging outside of his courtroom. So it's really quite up to date. They make the changes right away. And it picks it up. In our court and not in every court, you file things through ECF, and we're going to go through that in a minute. Once it hits the court, we have an internal program that we call BCAP, and that's where we would take matters - that's where the judge's calendar is created, and that's where things are put on last minute, or taken off last minute. And this information is grabbed from BCAP, so it's really quite up to date and helpful. The other thing, when you're...

>>:Can you get a calendar for a lawyer? So if I put my name in there, I could see my cases come up?

>>:You can do that through ECF. Yeah, yeah. That was something that we

© MCLE, Inc. All rights reserved started about a year ago, as well, and I think that that's been pretty helpful. The thing for new practitioners to our court, is you want to go ahead and you want to get PACER account if you don't have a PACER account already. And you would get that through here, just clicking on here. And then you'd want to get an ECF account to allow you to file things with us. Oh, Don, am I going right on to yours? Which is fine.

>>:No, I don't know.

>>:Oh, I'm sorry. I'm thinking it's mine. OK. Let me see if I can work with my login. I'm going to need glasses, though, to be able to see this. One thing that I do want to point out if you're - so this is before you are actually - for some reason - I don't know why it's taking me here, as opposed to - because wait, actually it might be through the PACER. Where is the training? I should know this better. OK. Let's see. If I've got - that's just national case information. That's going to take me someplace else. I don't want - oh, I know. I'm sorry. You can see that I don't do the website all the time. ECF information - there we go. It's going to be under Access and Training. So you need to do this. This is where you begin the ECF online training. You don't have to come in. When we first instituted it, we had a training room for attorneys. You'd have to come in and spend several hours, yuck. Now you can just do it online. The one thing that you want to be super careful about, though, is you're going to - when you sign onto this, you've got an application, and when you finish it, you've got a certificate that you've completed it. You need to print out those two things. You need to sign them and send them into our court, and then we'll get you an ECF account. You just don't want to remember - you don't want to forget to do that. Another thing, when you're filing with ECF, you have to pay the fees that are associated with a petition, a motion. There's a whole list of filing fees that you have. I just want to warn you, there's yet another website that gets involved with that, and that's pay.gov. That's a national program that supports the courts with their electronic - with processing payments for electronic filing. So just so you know, we don't - we are not processing your fees locally. Excuse me, your fees for any filings that you have are going to be through pay.gov. OK, so let me go back and see if I can show you what happens when you try and do something electronically. So I was given - oh, you know what? I have to go to another - you know,

>>:Want to use my login for it?

>>:Well, you know what, Don. Let me - one second. I'm a little compromised with different glasses here. Sorry, I probably should have set this up before I got here. But this will hopefully work, and if not, I'm going to ask you to do it, Don. I just want to give you guys a quick peek into how easy it is. I know - Wow. Amazing. I know that when you - that state courts are still not electronic, am I right? There's not much that - land court is fairly electronic, but not everybody is. All the bankruptcy courts in the country, we were one of the first ones to be electronic. And so it's a really smooth process when you want to do anything. We, though - courts of appeals and district courts have started allowing pro se litigants to electronically file. Bankruptcy courts have shied away from that because if we allowed it, the amount of processing would just be incredible. But we're getting there. At some point pretty soon, we're going to have electronic filing. The other thing I wanted to point out, too, with respect to sign-ons, you have to get an ECF account for every federal court where you file. So as bankruptcy practitioner of Massachusetts, you have a login for our court. You have a login for the district court. You have a login for the BAP. You have a login for the court of appeals. Within a year, I am told - although truthfully, I've been told this for a lot longer than a year - we are going to have a single sign-on, so that you would have one login and password for every federal court. OK, so why is this asking me for this again? OK, let's try this again. There it is. Oh, that's why. Don, do you want to try yours?

>>:You just have to get the redaction block.

>>:(Inaudible).

>>:Oh, OK. Thank you. Excellent. OK. So this is the screen, if you were going to file a petition for somebody, this is what would show up for you. You're going to go over to bankruptcy. You would just go right here - open a bankruptcy case. And you know, again, you can see the list down there -

© MCLE, Inc. All rights reserved if you wanted to file an appeal, if you've got a motion. But you would just start off by opening up a bankruptcy case. You're going to choose what chapter you want to file. Let's do Chapter 13. This is where you would indicate if you had a joint petition. And then you just click next. This allows you to search to see if a debtor has filed something in the past because we are always quite interested in that. Just going to put in a name. And I'm not going to go too far on this. So this is just searching. These would be search results. It's going to tell me if there is a prior case. I actually don't really care about that. So I'm going to say I'm creating a new party. And this is where I would start to fill in this person's information. Let me just see...

>>:And your software - if you have bankruptcy software, it does this automatically. So all this is rolled through - all of this is populated automatically. It takes about three or four minutes. And then - because it links directly to (inaudible). You'll see these screens popping up and they're filling, your software fills in automatically.

>>:Right. And just to let you know - OK, it doesn't like - I was trying to goof around with this. When it asks for county and other information, we have to capture certain information on a federal level, so that's why sometimes - Let me just see if it'll let me go forward, and if not, I'm going to - OK, it's not going to let me keep going forward. But anyhow, you keep filling in information. It's going to ask you liability range, asset range, and you just keep on filling in things that you would fill in for a petition. And as Don said, a lot of this stuff is going to be captured. When it asks for things where you say, why are you capturing county, it's because we have to capture those things. There's information more particularly for consumer debtors that gets amassed on a national level, and that's something that you can see on the U.S. court's dot-gov website - keeps all of those statistics. And by the way, I would highly recommend that website because it has lots of information on there about bankruptcy. It has lots of information about bankruptcy statistics if you're interested. It actually has lots of information about litigation in district court and appeals and all that kind of stuff. But - and here, you can go to it right from our webpage. And there you go. So this is about the federal courts, about judges. It's got all sorts of really useful information. It's got lots of videos. For example, if you had a client

© MCLE, Inc. All rights reserved who was nervous about going to a 341, there's a video of a mock 341 on this website. So I find that pretty helpful. Anyhow, going back to this live database. There we go. OK, so that was just starting to show you that it is actually pretty easy to use this. If you were using a motion, you're going to put a case number in here. Let's see. I have one written down in my - I can't find it, of course. I transposed numbers, and I don't remember which one. Sorry. So it's going to bring up - if I had the right number, it's going to bring up the case, and you are going to use a dropdown that's going to tell you what type of motion it is. You know, is it a motion to amend? Is it a motion for relief from stay? And then what you're going to do is click browse, and pull it up from whatever your word processing is, and you attach the document here, and that gets filed at the bankruptcy court. I just have to warn you, when it gets to the bankruptcy court, we have case administrators that are assigned to each case, and they're going to go through and make sure that you've got the right attachments. So if you've got a motion to approve a stipulation, you have to attach the stipulation. If you haven't done that, you're going to get a phone call from them, and they're going to do a corrective entry once you file the right thing. And that leads me to, if you ever have any questions, if you pause for a minute before you file anything electronically, please reach out to us. In every single office, there are case administrators that are specifically - each judge has three case administrators assigned to the judge. They cannot give you legal advice, obviously, but they can answer any question that you have, and they'd prefer that you call them before you try and wing it, when you're doing any kind of electronic filing. So let me show you how to get in touch with them. Contact court staff. And here's the big trick that everybody misses - the phone numbers are over here, right? People do contact court staff, and they only use these three numbers. But what this gets you to is - the first names. They don't want the last names of the case administrators. But for each judge, this is telling you - the courtroom calendar clerk can tell you if something's on or you're concerned about something or you have some kind of special need when you come into the courtroom, that's the person that you want to call. The case administrator supervisor is the person to call if the case administrator's not calling you back or you're concerned about the information that you've been given. And then each one of the judges has three case administrators. The ECR operator - that's the person in the courtroom who is recording the

© MCLE, Inc. All rights reserved proceeding, and if you just decide that you're filing an appeal, this is the person that you need to get in touch with to order a transcript. So you can see this is for all of the judges, and this is where they sit. I will just warn you that Judge Panos is the judge in the central division and sits in Worcester. But Judge Katz also sits in Worcester. She's on the draw, we call for all the cases. Although Judge Panos is the primary judge in Worcester, Judge Katz certainly sits there on occasion. You will also find that sometimes judges sit in. They can easily cover for another judge in a different division. So Judge Feeney - if Judge Panos is on vacation for a couple of weeks, maybe Judge Feeney is going to sit out in Worcester. And just to let you know, of the five judges, Judge Feeney has actually announced her retirement. We just posted that on our website. And she is going to be retiring, effective in May. Here's that kind of announcement. We have a merit selection panel that's been appointed, and they'll be receiving applications. Depending on how that committee works and what the FBI background check produces, we may or may not have a gap. There may or may not be a judge appointed by next May. If the judge is not appointed by next May, then that means that some of the other judges will be stepping in and sitting in Boston for Judge Feeney. They're pretty flexible like that. They all, all five of them, have slightly different procedures. They're not published procedures, but they're not difficult ones either. If you're very concerned, you can call the courtroom deputy. That person would be able to help you. For the most part, they try and keep things uniform. And speaking of uniformity, I was asked to - and Don you're going to tell me when I'm when I'm up. We - there's obviously the federal rules that you all have been talking about. We have local rules. Both sets of rules change periodically. The federal rules typically don't. Any changes kick in December 1. There are some changes that are going to kick in this December 1, but nothing of any note. Last year, we had quite a number of rules kick in around Chapter 13. This year, the bulk of the rules pertain to the appellate rules, which are found in the 8000 series, and those are mainly designed to make sure that the bankruptcy rules of appellate procedure more closely align with the federal rules of appellate procedure, which by the way, are the default rules if the bankruptcy appellate rules don't answer your questions. I did want to let you know that when we have - we have our local rules. We are actually in the process of doing a change - a modernization, if you will - where we've taken out some of the old rules,

© MCLE, Inc. All rights reserved cleaned up some rules, added some rules where we thought things were lacking, and those aren't going to be - we hope that those are going to be out within six months. There's a couple of rules that we think would be helpful to get out sooner. One of them, I think you might have been talking about them with respect to Chapter 13, and that's official local form 8, and that pertains to the agreement between council and the debtor. That is probably going to change very soon by way of a standing order, and those are the rules that come out when we've got a change that we have that needs to come out before there's a formal change to our local rules because to change our local rules is a whole process. We have a committee, and they have to go through the district court. So if there's an interim rule, they would come out by standing order, and the judges would sign it, say - and it would be attached. One of the so, that was our 1007 change. That goes out on an announcement on our website site, and through CMECF. We make sure everybody knows about it. Another rule that is likely going to come out in a standing order next week is actually an appendix, four. We've cleaned that up so that it has better information for addresses for folks who need to be served, particularly in the Chapter 13 context. So, it's got more information about federal authorities and their addresses, Massachusetts authorities and their addresses. So, that will come out by way of a standing order next week. One thing that you will not find on our website is any statistical information. That, again, you would find on uscourts.gov. We look at those things quite regularly. I can report that the statistics show that there has been an increase in filings over last year. They're still down from what they were in 2016. The bulk of the change is in Chapter 13. That's increased quite a bit. 11s have stayed the same, and 7s have gone down just a little bit. The good news though, is that when I was talking about Judge Feeney, there's always a chance that even though that there is a position available that it might not be filled based on the statistics. There is a national committee that looks at something like that, and they did look at it this time after Judge Feeney announced her retirement, and they thought it was robust enough in Massachusetts that it's worth replacing her, which is terrific news for us. So that means, you know, that part of their analysis involves determining what the statistics look like in the next few years as well. I don't know that the impact of two casinos opening in Massachusetts has on that, but - so, one of the things I also want to point out is to appear in our court as an

© MCLE, Inc. All rights reserved attorney, you have to be admitted to the District of Massachusetts. You have to do that through the district court website. It's a very easy process. That stands true also for the bankruptcy appellate panel. In order to file there, you have to show that you were admitted to the court from which you are taking an appeal. So I'm not speaking for the other four districts in the First Circuit, but in Massachusetts, if you're admitted to the district court and you appeared in the Massachusetts bankruptcy court, you have no problem appearing at the BAP. So, I think that's about all that I have to say about our - I don't think that - oh, let me just show you by the way, we have bankruptcy information here. Some of which is taken from the uscourts.gov, but you can get, you know, copies of the code. You can get information about financial management, about the U.S. Trustee Program. Also if you have a debtor who has questions, they can get information about bankruptcy over here, but I went over this pretty quickly. This has a lot of information. We put this on last year when there was a large change in Chapter 13. One thing that's kind of helpful is, you know, we've got all of our new forms and rules and the exhibits that you have to append, and down at the very bottom is this, the comments of the Committee on the local rules. I think this is a pretty useful document. It was prepared with - by the local rules committee, and it has a lot of information about why we did what we did with respect to our fairly extensive plan. And just to let you know, that rules committee, we have three advisory committees. If you really like bankruptcy and you want to participate more, it's a great idea to try and get on one of those committees. We have, as you can see, our local rule - our committee on local rules, which is kind of large. We have a Diversity Initiative Taskforce, which actually should have the members on there. They are doing a lot of work this year with law schools to try and get folks in the pipeline to engage in bankruptcy practice. We also have a pro bono legal services advisory committee. We do a lot of work with legal service groups across the state to try and help attorneys train in bankruptcy so that they can then volunteer to take on bankruptcy cases. So - and so our debtor information is over here. And one thing to let you know that we do have in our office is we have a pro se clerk who helps pro se debtors when they come in to get information to help them. And I have to tell you that one of the first things he's going to say to them is please try and get an attorney because it's kind of - it's a pretty difficult thing to navigate particularly if you want to try and have a Chapter 13. So, does

>>:I actually had a question for you. So, the topic has come up recently in my office as to students - we have a lot of interns that may want to appear in bankruptcy court, and I know that there's a district court local rule that's incorporated into the bankruptcy local rules, that allows student appearances under certain conditions. Now, the question for you is, if we have questions about that rule, should we direct it to your office or to the individual judge's chamber?

>>:My office to start. And in case I didn't say this before, I'm happy to give you my direct dial which is 617-748-6609. Love those kinds of questions. Happy to help out in any way, or I'm happy to direct you to the person who can actually help you when I don't know what the answer is. So - but our judges, I have to say, are very committed to outreach. They do quite a bit of it. They really like to participate with high school students and law school students, maybe some college students, but that tends to be a little bit of a gap. But, we have those students come in quite a bit, and they're really focused on having people learn about the law and trying to get people in the pipeline to practice bankruptcy law. So, - and I think you'll find if you do contact our court, we're, you know, we emphasize over and over again that we're public servants, and we're here to help out, and we're here to answer questions as much as we can without, you know, getting into legal advice. So, if anybody ever has a question after today, please feel free to give me a call. (APPLAUSE)

>>:Did I stick to my time, Don? Just about. Good to see you guys. Let's hope it's not raining any more.

>>:Thanks so much. All right so, I need all my people up here. So, we'll get this going. Bear with me for one second. Let's get that done. So, what we're going to do now is a mock 341 meeting. So you heard - and I actually found this out the first time, there's a 341 meeting apparently on the uscourts.gov website. So if you're going to represent a debtor, go check it out, and then you can give it to your debtors, and they can look at and it'll put them at ease, because they're always worried. They're very nervous when they go to 341 meetings. Very, very nervous. Yeah, that's

© MCLE, Inc. All rights reserved good. That's awesome. So, let me get the cards out here for everybody. Here's yours. There you go. Excellent. Ready? OK. So, we're going to use the hypo that we used yesterday, Lonnie and Lucy. And, Lonnie and Lucy are together now. They're merged into one person, here. So, we have Lonnie Debtor and - oh, here it is. OK, so I'm going to play the role of the Chapter 7 trustee, so I'll be doing the questioning. The debtor is going to be John O'Donnell, and he can be Lonnie or Lucy. You can switch back and forth however you like.

>>:Oh, I have to be a split personality this time? That's a new wrinkle.

>>:Whatever makes it difficult on your counsel. Your counsel, Chris Condon, he's going to be the debtor's attorney. And then, Macken and Christine can represent any creditor they like, whether they're in this case or are totally made up. So really, the biggest parts really are the debt and the debtor's counsel. Creditors, you know, may have some questions, and that's fine, so there are a number of different creditors in here. We have some credit cards and banks and things like that. So, we're going to get going, and then after this, we're going to do a lift stay motion. So, let's start with this. Alright, so calling the case of Lonnie and Lucy Debtor, case number 18-14753-JNF. Counsel, can you please enter your appearance for the tape recording that I'm making?

>>:Yes, Christopher Condon on behalf of the debtor.

>>:OK, and are there any other parties here on behalf of anyone for any reason?

>>:Macken Toussaint on behalf of Boston Mortgage Company.

>>:OK.

>>:And Christine Murphy, here on behalf of...

>>:Some Creditor.

>>:...Some Creditor.

© MCLE, Inc. All rights reserved >>:OK. That works for me. Don't worry about it with the names. We're not going to be that careful. So, I'd ask the debtor, Lonnie Debtor, please raise your right hand. Do you solemnly swear the testimony you're about to give is true and correct?

>>:Yes.

>>:OK. You can lower your right hand. Can you please tell me your name?

>>:My name is Lonnie Debtor.

>>:OK, and you've given me a driver's license and a social security card, and the address on your social - driver's license matches your petition. Your driver's licenses is valid. It's a Massachusetts driver's license, and that looks like you, so I'm going to return your driver's license to you. And, I'm also looking at your social security card, and the social security card matches the statement of social security number that you filed with the bankruptcy case, so you can have that back as well. I'm now going to show you a copy of the - your counsel may have a copy of the signature page that you filed with your bankruptcy petition. Do you see your signature on that document?

>>:That looks like my signature, yes.

>>:OK. And do you remember reviewing all of your papers before you signed that document?

>>:I can't quite recall, but it looks familiar.

>>:OK.

>>:I signed it. You know, I - this was the first time I'm meeting my lawyer today. (LAUGHTER)

>>:And we did - I spoke with this paralegal by Skype. But - you know, I'm pretty sure that's it.

>>:I have a very strong spam folder, so I (unintelligible).

>>:Do send those emails by the way.

>>:Are there any changes you'd like to make to your petition at this time that you're aware of?

>>:No.

>>:No changes, OK. All right. Have you ever filed a bankruptcy case before?

>>:Maybe about 15 years ago.

>>:OK. And what caused you to file bankruptcy this time? What kind of financial problems were you having that led you to file a bankruptcy now?

>>:Basically my wife spent all my money.

>>:So Lucy spent all your money.

>>:Yeah, that's right.

>>:All right. Lucy, what do you think about that?

>>:I completely disagree.

>>:OK. What do you think caused the financial problems?

>>:Loni likes to go to Las Vegas a lot. And he takes a lot of trips to Florida. And that's where our money went. I don't know what he's talking about.

>>:OK. So you're spending habits are problematic.

>>:OK. I just did say that. Yes, OK. Do you own any real estate?

>>:Yes, we own a house.

>>:Oh, in what town do you live?

>>:In Malden.

>>:All right. And do you own that house together, in a trust?

>>:I think - I actually think the bank owns it. We have a mortgage with Boston Mortgage.

>>:Oh, OK.

>>:And we make payments on it. I think that's how it works, right? The bank owns the mortgage - the house.

>>:No, you own your house subject to the mortgage.

>>:Subject to the mortgage, OK.

>>:And council - is it in both their names or in trust? Do you know what the ownership is?

>>:It's tenancy by the entirety.

>>:OK. OK. And so do you personally live in the house now?

>>:I live there.

>>:And where does Lucy live?

>>:Lucy lives in her brother's house right now. She was in Florida for a

>>:OK.

>>:Had some difficulties. But she's back in Massachusetts. And we're working on it.

>>:Are you in a divorce case now?

>>:No.

>>:No. OK. And how long has Lucy been out of the house?

>>:I would say about six months.

>>:OK. Lucy, do you intend to move back to the house?

>>:No, not at this point. No, absolutely not.

>>:OK. And, Loni, do you intend to stay in that house?

>>:Oh, yeah.

>>:OK. What do you think the house is worth?

>>:We - it was appraised recently. We think it's worth around 200.

>>:Two hundred. And how many mortgages on your house?

>>:There's two mortgages.

>>:You know how much they are?

>>:I think one is 160. And we have a home equity line that we've used to travel to Florida extensively. That's about 15.

>>:Are you current on your mortgages now?

>>:Are you trying to renegotiate?

>>:Well, my lawyer told me that I could get rid of my second mortgage. And he has some special legal formula that he can cause my mortgage to somehow disappear. So we're going to be doing that. We're going to make my mortgage disappear through this case. (LAUGHTER)

>>:Which one? Which mortgage?

>>:Both.

>>:Both mortgages disappear. Council, can you tell me about this?

>>:Yeah. No, I'm not aware of that obviously.

>>:Well, I paid him a lot of money. And that's - you know, basically it is for that reason because he told me that my mortgage would go away.

>>:What I got paid was disclosed.

>>:Properly disclosed.

>>:OK. And so you're not paying either mortgage right now?

>>:No. And I don't intend to.

>>:Do you own any other real estate?

>>:We have a timeshare.

>>:Oh, OK.

>>:OK.

>>:But you can't - I mean, that has nothing to do with this. It's in Mexico, so you can't do anything, right?

>>:Did your lawyer tell you that?

>>:Yeah.

>>:OK. Are you feeling OK, Loni? Do you want to take a break?

>>:I'm fine. Are you OK?

>>:I'm good.

>>:Now he was feeling well before, but he's been going downhill. Are you working?

>>:Yes. I'm working.

>>:What are you doing?

>>:I'm a security guard.

>>:OK. And is - does Lucy - Lucy, are you working?

>>:Yes, I'm also working.

>>:What do you do, Lucy?

>>:I work for Dinky Donuts.

>>:OK.

>>:I also clean houses on the side.

>>:Yes, I got paid about $2,000 last year.

>>:OK. Do you have any retirement?

>>:Yeah, we have a 401k.

>>:Anything else beside that?

>>:I think we have something called an IRA.

>>:All right. Lucy or Loni?

>>:That would be Lucy.

>>:Lucy has an IRA. OK. Have you destroyed all your credit cards?

>>:Yeah.

>>:You're not using them any longer.

>>:No, they all closed anyways once we filed. I tried to use it, but it just - it didn't work...

>>:It didn't work.

>>:...For some reason.

>>:OK. Do you have any tax problems?

>>:Yeah. Well, I wouldn't say it's a problem. We just - we haven't filed a return for, I think, it's 2013.

>>:OK.

>>:And how come you didn't file your return?

>>:We owe a ton of money for that year. So we thought it best to, you know, just not file so maybe they would just forget about us. And, you know, and I figure, you know, we're filing bankruptcy anyway. All the taxes are going away because of the bankruptcy, right? Right?

>>:No. OK. Who lives in your house? How big is your household?

>>:There's - I have two adult kids. They're kind of deadbeats.

>>:Are they working?

>>:They don't work, no. And then I have...

>>:Do they contribute to the household at all?

>>:I mean, not really.

>>:OK. Anybody else there?

>>:My in-laws live with us part time

>>:OK.

>>:And they travel back and forth to Florida.

>>:Do they help you at all with expenses?

>>:They just get a little bit of social security, but it's not really enough for them to contribute.

>>:OK. Do you contribute to their expenses in any way?

>>:OK.

>>:Sometimes.

>>:Sometimes. OK. Anybody else there?

>>:Do pets count?

>>:Yeah, how many pets do you have?

>>:We have a dog. And I have a pet falcon.

>>:OK. (LAUGHTER)

>>:I didn't see the pet falcon on the schedule B. You may need have to amend that.

>>:I might have to amend that. We're not really sure what the value of that is.

>>:Well, it's actually - it's worth more to (unintelligible).

>>:It's expensive to take care of.

>>:Oh, I see. OK. Did you buy the falcon?

>>:Yes, I bought it in cash.

>>:Do you remember what you paid for?

>>:I think I paid about - it's a very rare falcon. I think I paid about $40,000 for it.

>>:What do you think it's worth today if you were to - could you sell a falcon or not?

>>:OK.

>>:Not that I would ever sell it.

>>:Right. Who's - where is it?

>>:The falcon?

>>:Yeah.

>>:It's in my house.

>>:Oh, at your house. OK. OK. So counsel, you may need to do a schedule amendment.

>>:Absolutely.

>>:What does that mean?

>>:That just means to file the schedule over again.

>>:Yeah, you just have to list the falcon. The Falcon wasn't listed on the schedule originally. So you have time to amend. You can certainly do that. And council, I'd ask you to provide me with some authentic certificate or something that someone that knows values for the falcon that I can rely on. So I'm sure the debtor as it - can state an opinion. But I'd like to have something a little more professional so maybe there is someone that is in the business of selling or buying falcons and you can get their opinion that I can use that for a basis for valuation.

>>:So you're going to sell my falcon?

>>:But we'll exempt it. It will be OK.

>>:Oh, the falcon is very much alive.

>>:You might want to stuff him.

>>:You can take his live falcon. But you can leave his dead one.

>>:I don't think the falcon's going to let you get near him anyway. So good luck trying to sell him. (LAUGHTER)

>>:OK. Did your lawyer talk to you about Chapter 7 and Chapter 13?

>>:Like I said, I never met him before. His paralegal gave me kind of a breakdown of some of that stuff via Skype.

>>:OK. That's all. That's it. Not this guy.

>>:No.

>>:OK. Do you understand the effect of bankruptcy can have on your credit?

>>:I believe my credit took a hit.

>>:OK. And you understand what the discharge of debt and bankruptcy means?

>>:It means all my debts go away. All my problems are solved.

>>:Yes, that's exactly right. OK. All right. I don't have any further questions at this time. Counsel, what I'll do is - because there's a schedule amendment, I'm going to continue your creditor meeting to my next meeting date at the same time, same location. If you file the amendment before then and you give me the information about values so that I can

© MCLE, Inc. All rights reserved make a judgment, then you won't need to come back and answer any more questions and then just call me a few days before the meeting. And I'll let you know - if you haven't filed anything by them, then you have to come back down here. But if you get that in on time, you shouldn't have to come back, OK? All right. Are there any creditors present that have some questions?

>>:I do have just a few questions.

>>:OK. So if you could just remind me who you represent, and then we'll go.

>>:I represent Boston Mortgage company.

>>:OK.

>>:(Unintelligible). The creditor I represent owes the mortgage (unintelligible).

>>:Well, we just - we can't afford the payments right now. So that's the reason we're filing bankruptcy just to make your mortgage go away.

>>:(Unintelligible).

>>:That was part of it.

>>:And you're still making the same income that you were making?

>>:Actually I was hurt last year. I was on disability, so my income last year was less than it normally would be.

>>:You also mentioned that you think that the value of the property is about 200. How did you figure that out?

>>:I think the bank appraised it. There's an appraisal. We refinanced last year. And I think that was part of it was the bank appraised the property.

© MCLE, Inc. All rights reserved >>:No, I think we were pretty close to. I think the value came out to 210. The last question that I have - you mentioned that you have no intention to pay the - your motgage back. Have you filed your intention to surrender the property?

>>:No, the intention is to just make the mortgage go away. You'll have to - I'll direct you to my lawyer who can speak more about that. But, I mean, from what he's telling me that the law provides for the mortgage to just go away. And I don't have to pay it. I get a free house.

>>:Counsel, do you remember what you said on the statement of intention by any chance?

>>:We don't intend to surrender the property.

>>:OK. And are you in negotiation to modify the mortgages or anything of that?

>>:I think we may intend to do that. We have to see how it breaks down. It's been a change in circumstances.

>>:OK.

>>:Well, I've been (unintelligible).

>>:Do you have proof that you're actually the holder of the mortgage? Like, was there an assignment that you can show on the registry?

>>:(Unintelligible).

>>:Christine, do you have any questions?

>>:Just briefly. Is there property still in both you and your wife's name or has it been transferred since the last...

>>:It's in both of our names. I think she signed for me on the refinance.

>>:As far as I can remember.

>>:And is there any other liens on the property that you're aware of?

>>:There might be a tax lien.

>>:OK, federal or state or...

>>:The IRS. So federal.

>>:OK, thank you.

>>:Is the property insured? Do you have any insurance on the property?

>>:I think I remember paying something last year.

>>:Counselor, do you have anything about that?

>>:I have a certificate of insurance.

>>:Oh, OK. So it is currently insured, OK. All right, I have no further questions. That concludes the meeting. So that is - you don't typically get a debtor that's so obstreperous, particularly two debtors in one. But that isn't a lot - you know, those are exactly the questions I'm going to ask. The creditor is trying to set herself up for the lift-stay motion now that you're going to see, because she can say, oh, I went to the 341 meeting. And he said, under oath, he wasn't going to pay the mortgage anymore. Oh, that's kind of bad. You know, the lawyer will have to come up with something on that. You know, he was under the influence of some psychotic drug or something. I don't know what it would be (laughter). But in any event, that's - and it takes usually about - some can be longer - but usually about five to seven minutes. You've got to make sure you have that identification. I can't tell you how many cases, they come and they don't have their social security card, they don't have their driver's license. And then you're going home. You're going to have to come back again for another day. So you

© MCLE, Inc. All rights reserved want to make sure. And the other thing I didn't ask, but you do need to do - before every meeting, a debtor has to give the trustee certain documents. I forget what section of the code it is. Maybe 521 or - But you have to give a most recent tax return. So if you haven't filed tax returns for four years because you're on Social Security, your most recent tax return can be 2012. That's OK. It's just the most recent tax return. It doesn't have to be this year's tax return. It's the most recent one filed by the debtor, and if they haven't filed for three years, then you give them the one from four years ago. Then you - and pay stubs for the six-month period preceding the bankruptcy. And then some trustees will ask for more. Many trustees now are electronically linked to set up, to send - so as soon as they get notification of a case, you're going to get a little note - oh, you just filed your case. Send me bank statements, real estate documents, IRA statements. So different trustees are different. You know, see what it is. But you got to get that to them seven days - no less than seven days before the creditor meeting. And if you do it less, the trustee can say, hey, you know, you got this to me too late. Didn't have a chance to review it. Come back again.

>>:I would suggest - just because, especially representing individuals. There are unreliable people, a lot of them, in the world. Do not file somebody's bankruptcy case until they give you all of this stuff, OK? Unless their house is being foreclosed on. Because otherwise you spend all this time trying to get the stuff, and it's counterproductive.

>>:Yeah, and it just drives the cost of the case.

>>:Right.

>>:You probably - I'm sure you guys went over this yesterday, but it's also - so that mock exercise sort of shows the importance of getting the debtor's testimony in writing somehow, not just relying on a phone conversation to fill out the schedules, actually getting a physical questionnaire from them. Because, you know, if they've left something off, you want to show that it was their fault, not yours, just to protect yourself.

>>:Right.

>>:Yeah, actually, as bad as he is - and he makes me look bad every year.

>>:He makes you look worse every year.

>>:I know, I think it's worse. I think he thinks about this. (CROSSTALK)

>>:All year. But it's not that hard.

>>:Almost nothing he said would actually give rise to an objection to his discharge.

>>:No.

>>:You know, I actually had a case with a guy who was a chronic gambler and everything, and in the middle of his discharge trial - this was many years ago - but in the middle of his discharge trial, the judge looked down to me and said, well - his basic testimony was, I spent $250,000 on gambling and drinking and drugs, right? That's his testimony. And the judge looked at me and said, well, are you objecting to his discharge because you don't believe him? And I said, no, I believe him.

>>:So what happened?

>>:He got discharged.

>>:Yeah, right. There's nothing you can do, right? So like...

>>:Yeah, it's not - it's not enough just to blow your money. You still get a discharge...

>>:Yeah, you can still get a discharge.

>>:...As long as you're not committing fraud.

© MCLE, Inc. All rights reserved >>:But it is important to, you know, get your story straight. So your client, you know, try to get everything straight. But you know, the fact that the falcon came up, that's not unusual. People forget things. Just amend right away. Some lawyers will not amend. It's like, you're waiting for the amendment, waiting for the - you keep coming back for 341, and he's filed it.

>>:And I've seen instances where - I've seen instances where attorneys get dressed down in court and have to sometimes disgorge their fees for failing to do things. I mean, it's usually pretty egregious circumstances, but you know, unless you can stand up there in court and say, Judge, I sent this guy 400 emails, and he never - he just wouldn't respond to me...

>>:Now, what is unfortunate, he says, well, you told me. And I mean, that does happen sometimes, right? Not often because usually the clients doesn't totally understand what's going on necessarily. But that will happen sometimes, so that could, you know - yes, I have a falcon, or - I forget what the other item was you said would be protected - your house, oh, the mortgage. So you know, that's probably extreme, but that does happen, where the client will talk to the lawyer and say, you know, what's he talking about? This is not going to be a problem, right? And then the meeting's over, and everybody quietly goes out into the hall, and boom. There's like this explosion out there in the hallway because they're screaming out there.

>>:And it's not just assets and dischargeability issues that can come up. It's also something like a preference or like a fraudulent transfer. I've had instances where I've gotten everything in writing, been at the 341 meeting representing a debtor, and then sometimes you just like - something just comes out of 341 meeting they never told you about. Like, oh, I gave my $10,000 car to my wife two months ago. And that, you know, that doesn't really touch - I mean, maybe it touches on dischargeability, but the trustee can go after that car now. And you know, it can make for an ugly situation if the debtor wasn't anticipating that.

>>:Where this also can come up is where you're representing a client.

© MCLE, Inc. All rights reserved You're sitting there listening to the question - I see this all the time - you're listening to the questions that are being asked, but you're sitting next to your client waiting, and a question is asked, and I see like the lawyer and the client talking. So it's clear to me that I just asked a question in a case before their case that is going to create a problem. Because they'll have like, oh, he just asked about prior lawsuits or something, and all of a sudden, they like bolt out of the room. So - and then they have a discussion. But then they come up to the table, and are there any amendments? I always say, I give them a chance to make the amendment. I say, oh, yeah, we have an amendment - we forgot to add a lawsuit. I mean, it doesn't even matter. The lawsuit is, again, stems by a collection agency, but nevertheless. So that's an opportunity. If you hear something there, your client's listened to all these questions, and if they say, he got me on that one, then just, you know, have a discussion or tell the trustee, you know, put me down on the 10:30 list instead of 10 o'clock, and then get your story straight, so when you come up, you're ready to roll. Because the trustees are not out to get you. They just want to get the, you know, get the information straight, and if you bring it on, then I think it's fine. All right, so anything else on that? OK. And then do look at the us.gov 341 meeting. Sounds pretty good.

>>:Just in terms of like the creditor's rule, is it like when you're (unintelligible) on the record.

>>:I don't think it's beneficial, right?

>>:No.

>>:It's still good for him to be testifying under oath, though.

>>:Well, I think, typically, if you had a good lawyer, your lawyer would say after some point...

>>:A good lawyer for the creditor or the debtor?

>>:The debtor. I think the debtor's lawyer, at some point, would say, you know, that's enough. In a 341 meeting, you're allowed to ask questions,

>>:Personal.

>>:No, and you're not allowed to get into specific debts, really. I mean, you can't - anyway, a creditor can't conduct deposition about their debt during the 341 meeting. It's not the point, so they have to go file a Rule 2004 motion. If they want to do that.

>>:Yeah, yeah.

>>:The question she asked - I mean, you know, there's general stuff I'm going to allow. I don't...

>>:But also, as their attorney, if you think it's not going to go on that long, and you don't really object, you might as well just let them testify because then it is over, you know. Like, you don't...

>>:You don't have to go to Rule 2004.

>>:So it can be free discovery. And some creditors use it as that, but usually, what I've seen is that, especially in like Chapter 7 or Chapter 13 cases, the trustee's going to cut it off eventually because they don't want - they have a ton of people waiting in a room, and they don't want these meetings to last like an hour.

>>:Although, the other thing you can do is, if you're creditor's counsel, call the trustee. Tell the trustee what you're interested in. Let the trustee ask the questions. Debtor's lawyer's not going to cut the trustee off. OK, because trustee can go so, you know - and then the trustee will say, oh, well, bank person - OK, I'll go this far, but I'm not going to go into what happened in the loan signing room or something like that. Because that's really only - the bank only cares about that. If there was fraud when he was signing it, no one else cares about that. Only the bank does. But are you going to pay your mortgage? So if you're the creditor's lawyer, call the trustee up. And say, hey, this guy's coming in, he's bad, and here's the

>>:To what extent do you see immigration officials or fish and wildlife floating around at...

>>:Oh, at the 341 meeting?

>>:Yeah. That the falcon that maybe shouldn't be a pet, or (unintelligible). (LAUGHTER)

>>:Oh, right. Right. So something - yeah. No, I've never had - I mean, they could be there and I wouldn't know.

>>:It's not - I don't think it's common. It's possible. I know that there was a - I was involved in this case where a bankruptcy debtor tried to leave the country from Detroit. And somehow, Customs found out about his bankruptcy petition and sort of saw some red flags there and actually stopped him and ended up finding a bunch of cash in his pants. So it does happen, but that's the only time I've ever heard that.

>>:Who knows what they can search? I mean, it's all public information.

>>:And that's the idea, too, with bankruptcy. It's like you're getting - the debtor's getting a big benefit. Bankruptcy discharge is one of the most powerful economic remedies under the law. The sort of bargain is that you're lifting the veil and sort of showing the world, essentially, what's going on, and that can raise a host of issues. I know, in a tax context, we constantly look at the schedules and statement of financial affairs to see if there are discrepancies between what's filed and what's being reported in a tax return. It's a pretty common.

>>:Yeah, I will say, too. I mean, you might just think about these things a little bit. Sometimes you might represent somebody who actually has some money. I represented a guy who was a pretty big-time real estate broker. When he filed for bankruptcy, he happened to be - just not have any money, not have any listings or whatever. So he didn't really have that

© MCLE, Inc. All rights reserved many assets. He filed a Chapter 7 case. But you know, he didn't want it in the press. He was, you know - and so he had like a $800,000 judgment against him from some sort of syndication agreement or something he had. Anyway - but you know, so like I filed that case like on a Sunday, you know. So it wasn't in the paper. It wasn't in the Banker & Tradesman. It wasn't in, you know...

>>:So do you think filing Sunday made a difference?

>>:I do. I think it got a little less publicity. I mean, you know, I think they do a scan of those things. I think people do look at them. That was a few years ago. They may look at them more now than they used to. It may be easier.

>>:Now everything's online, and it doesn't make a difference.

>>:Yeah, no. But I mean, I filed it, you know, I filed it electronically on like Sunday night.

>>:Slot it in.

>>:All right, so anything else? Great. OK, so now we're going to do is a lift- stay motion. And so the - let me set the parties here. So we have a motion for relief from the automatic stay, so case filed. Are we doing a 7 or a 13?

>>:I have 13.

>>:Chapter 13, OK. So this is a Chapter 13 case, so debtor files, has a mortgage. The mortgage isn't getting paid, and so the creditor is now coming in to see if the stay can be lifted so that the mortgage company can proceed to foreclose. And Chris Condon is counsel for the debtor. Macken is counsel for the bank, and I have to oversee this situation. OK. So I guess I would - so calling a lift stay motion in the case of Lucy and Lonny Debtor, case number 18-14357-JNF. Could the parties please identify themselves?

>>:Macken Toussaint, on behalf of Boston Mortgage Company.

>>:And Christopher Condon on behalf of Lonny and Lucy Debtor.

>>:All right. So since this is the creditor's motion, I'll hear from counsel for the creditor first.

>>:Yes, your honor. We filed this motion two or three weeks - three weeks ago. Just to give you a little bit of background, the debtor - the bank gave a mortgage to the debtors about - back in 1998. The principal balance in the loan right now is - well, the loan was for $165,000. We did - the bank did record its mortgage with the appropriate registry of deed. The monthly payment under the mortgage is about a $1,000 a month. And the last time we received any - the bank received any money from the debtor was back in December 2017. That was six months prior to the filing. And the petition, as you know, was filed back on May 31, 2018. Now, because the debtor didn't pay for about six months, the arrearages, as of the petition, is about $6,000. Right now, the indebtedness under the note is still about $160,000. And the debtor did have a plan confirmed. I should note that the bank did object to confirmation of the plan, but the plan was confirmed over the objection of the bank. And I believe the value of the property is about $210,000. But they're - based on a check that we did with the title examination, we believe there's about - there's another second loan for about 15,000. And I've learned from the 341 meeting that there may be a tax lien pending which I need to learn more about. So during the post- petition period, the debtor had - like I said, the debtor didn't make - actually haven't mentioned that yet. So the plan was confirmed, and from June to September, the debtor had made no post-petition payments. So we have another $4,000 plus attorney's fees and other charges that are now due with respect to this debt. So we are seeking relief from the automatic stay on the section 362(d)(1) and for cause in - because we - the bank here does not have any adequate protection for its security interests. As I mentioned, the debtor didn't pay for six months prior to the filing. The debtor hasn't made any payment for the next four months. And I also understand that the property may not be insured. I have learned from the debtor's counsel that there may be an insurance certificate, but I haven't

© MCLE, Inc. All rights reserved seen a copy of it. And I believe that we do have cause to proceed and foreclose with respect to the property since there's no adequate protection, as I mentioned, and the debtor is not making any payments. And, in fact, at a 341 meeting, the debtor mentioned that he has no intention to continue making payment going forward.

>>:OK. Thank you, counsel. If I could hear from debtor's counsel, please?

>>:Yes, your honor. Again, Christopher Condon on behalf of the debtors. I think, you know, as way of background, your honor, it's important to mention that this property has been owned by the debtors for several decades. There are at least five people living there, including the debtor's adult children and a couple of their in-laws. It is a very unique property, your Honor. It's in Malden, and it apparently has a large falcon structure constructed outside. It's really something to see.

>>:Also unique.

>>:Very unique.

>>:Unique.

>>:Very unique property...

>>:OK, OK.

>>:...That has a lot of potential value. The bank acknowledges, Your Honor, that there is equity just on the face because the bank's own evaluation of the properties is worth $210,000, which is substantially more than the liens that have been identified by the bank. In addition, your Honor, I would assert that obviously, under the case law in this jurisdiction, there is adequate protection for the bank's interest. Not only is there an equity cushion in the property, but there has been no diminution in the value of the property since the filing. In fact, the property is insured. I have a certificate of insurance here that I'll provide to the banks counsel at the conclusion of the hearing. In addition, the debtors are making their regular utility payments. They're maintaining the property. And the - there is - as I

© MCLE, Inc. All rights reserved said, the true measure of adequate protection is whether there's been a diminution since the petition date. There simply has not. There's no evidence of that. So there is no cause to - for relief from the automatic stay at this time. But there may be value for the bankruptcy estate in the property, which would be lost in the event of a foreclosure.

>>:And I hear that the debtor does not intend to make any payments. Can you clarify that?

>>:I think that was a misunderstanding, Your Honor, of a discussion that I had with my client. Legal implications of the mortgage.

>>:OK. So what is your client's intention with respect to that?

>>:Well, as I think it was testified to at the 341 meeting, he has been injured, Your Honor. And he was - he's a security guard. He was out of work. But both - Mr. Debtor is now working, and Mrs. Debtor are now working. And we intend to resume making payments at some point in the future. Your Honor, again, I don't think that's necessary at this point, adequate protection, because the banks adequately protect it.

>>:And what's the status of real estate taxes?

>>:The real estate taxes have been paid as well. I'm sorry. I should have mentioned that earlier.

>>:So if you could provide evidence of payment of the real estate taxes to bank's counsel - if you could provide evidence of the insurance certificate the bank's counsel - then with respect to the arrearage and the post- petition payments, when does the debtor intend to resume the post-petition - is he going to be resuming those payments this month, next month, three months - what's the - what's the plan?

>>:I think the latest they would begin is the beginning of next year, Your Honor.

>>:So what month are we in now?

>>:October. So you would - you would suspend payments until what day?

>>:January 1.

>>:January 1. And then what payment amount would you propose to make at that time?

>>:I think at that point, Your Honor, they could probably pay the thousand dollar regular payment and make a $500 additional payment toward the arrearage.

>>:OK. And are you in agreement with the arrearage stated by the bank of $6,000 pre-petition, $4,000 post-petition?

>>:Subject to final confirm - yes. Those numbers appear accurate.

>>:OK. Alright. And at $500 a month, that $10,000 arrearage - actually the arrearage would be greater because you're saying you're not going to pay October, November, or December. So it will be, now, 13 - let's see - $13,000 arrearage. And you're going to - you're proposing to pay that back at $500 a month?

>>:Yes.

>>:Counsel from the bank?

>>:But the six - the first 6,000 being paid - the chapter 13 planned payments - are you counting both all together?

>>:So counsel, what's the status of the plan payments?

>>:We - again, we intend to - we haven't been able to make this payment, but we intend to essentially make catch-up payments to get the plan back on track.

>>:I think it's only behind this seven - this - whatever, 6,000 - what it would be, $9,000.

>>:So are the only payments under the plan the payments being made on the arrearage to the bank?

>>:Right.

>>:Oh, OK. So that's the only creditor being paid under the plan?

>>:No, I'm sorry. All the other creditors are being paid except the bank.

>>:OK. So I'm asking about the planned payment.

>>:Right, the planned payments are being made.

>>:Oh, so the planned payments are occurring?

>>:Right.

>>:I see, OK. All right. And counsel, do you have any reason to dispute the - did you - have you checked with the Chapter 13 trustee on the stand?

>>:I have not. I don't know you. Yeah, I will.

>>:So you can check on that, OK? So I'm going to assume, for the purpose of this hearing, the counsel's representation of the planned payments are correct, are current. All right. So then we have a $4,000 arrearage, and it's going to go up to seven. And you're proposing to pay $7,000 arrearage - $500 a month. So that'll take 12 - what is it? - 14 months.

>>:Yep.

>>:Fourteen months. And also you will resume making the monthly

>>:That's correct.

>>:OK. And have you spoken to your client about this? It's acceptable to him?

>>:Yes.

>>:And he's told you that he believes this is - I'd probably take - I might take evidence on that fact if the debtor's around. Typically this is a non- evidentiary. So typically that original list - I should have said that. Typically this first hearing is non-evidentiary. So you would not be expected to provide evidence at that hearing, but we might want evidence on some of these points.

>>:Depending on the circumstances, you may just want to bring your client with you.

>>:I think you should have - yes. I think that's for sure because you want your client to see what you - what you're dealing with.

>>:Right.

>>:So it's good for him to see that the judge may have forced this, or didn't force this, or whatever. Counsel for the bank, was the debtor - does the debtor have a history of arrearages pre-petition? Beyond this, you've had their mortgage for quite some time. Can you tell me a little bit about their history before bankruptcy?

>>:My understanding from the bank is that they have - at least twice, we had to refinance, and they stopped making payments, which is why after 20 years, the mortgage is still $160,000.

>>:So there's been a repeat of arrearage cure, arrearage cure?

>>:Yes.

>>:Well, obviously, I wasn't involved in those, but it was the bank's decision to refinance them, so...

>>:OK. And when was that refinancing?

>>:I think last time was about five years ago.

>>:Five years ago. All right. OK, anything further from any of the parties?

>>:Now if - I need to talk to my client about this arrangement here. But of course, the court will order what it will order. If the debtors stop making payment, let's say, in February, is there any way we could have some understanding that I don't have to come back here again and file another motion for relief from stay if the debtor does not proceed and comply with that order that you'd be entering to make the payments?

>>:Wait, say that one more time please.

>>:If the debtor doesn't make the payments as promised today...

>>:Right.

>>:...Is there any way we could have something in the order where I don't have to come back for another motion for relief from stay?

>>:Yes. Oh, I see. OK, OK, right. So my order will be as follows. The relief from stay request by the bank - the motion is continued. The debtor is ordered to make the payments as represented by his counsel. So the post- petition payments to resume on January 1, together with a catch-up payment of $500 a month. And creditor's counsel need not come back. All you need to do is file an affidavit of non-payment. In addition, if the real estate taxes and insurance, for any reason, would fail in the interim, all you would need to do is found affidavit to that effect, and relief from the stay

© MCLE, Inc. All rights reserved will enter immediately. And in addition, with respect to the payment. So if insurance is not paid, if real estate taxes are not paid - so debtor's counsel should supply that information to the bank. If either of those things are not paid timely, there is a default. Then an affidavit to that effect will lead to automatic relief from stay. And if the payments are not made as represented on the 1 of January - $1,500, and $1,500 every month thereafter - then a simple affidavit of non-payment will lead to automatic release from state without further order of court. That's all. Thank you. So that's not - now, you know, it was a debtor to court - that was a hard case. Because a debtor - I don't know if a judge would really say, you don't have to start paying post-petition until January. You know, that's - I mean, and probably what would have happened was they would have settled this before they even got to me, right? So they would - they would just come up with something. But usually I think debtors do want to give them - I think courts do want to give the debtors some time to try to make them. And there's five people in the house, plus there's a falcon flying around. You want to throw all of these people out? Probably not. Plus I don't want the falcon chasing me around. Neither does bank's counsel. So yeah, so I don't think that's a bad result. And guess what? If the bank - I actually - you can't appeal an estate, right? It's interlocutory, I think, right? Yeah, so you can't - the bank is stuck with it. They can't even appeal that decision because it's an intermediate decision that doesn't finally dispose of anything. So the bank is like stuck with this case. You may think I'm insane.

>>:The other thing is, too, it's like in this situation where he has to pay the thousand dollars and then come up with another 500 - there's a good chance he won't be able to make the payment in January.

>>:Well, right. So the bank - the bank's lawyer will basically say, listen. Three months. I don't have to come back again. The judge is going to give me automatic relief. Plus, if the insurance is not in place, and the taxes aren't in place, you'll get relief sooner. Probably a good result because, you know, you don't have to come back for another hearing. All right, any questions about any of that? So there's one thing Ann White sent me. She sent me a note. She wanted everybody know if you represent a debtor - under the local rule 9010. If you're representing a debtor, you're in for

© MCLE, Inc. All rights reserved everything, and you can't get out without permission of the court. And in particular, if a discharge action is commenced against the debtor, you are going to be assigned counsel. Now, that doesn't mean you can't withdraw. You just have to ask for permission. The judge may not allow it. Typically, the way I handle this is I say I'm going to represent you in adversary proceedings on discharge, but you're going to pay me X. So that rule does not mean - which people misinterpreted - that rule does not mean you have to work for free. It just means you're going to be listed as the attorney of record. But if you can't come to an agreement on terms and conditions, then you file an application with the court to withdraw from that adversary proceeding.

>>:You've got to do two things. One, you got to have it in your engagement letter. And two, you've got to disclose it on your attorney - you have to file something called attorney's closure. Whatever, you guys probably talked about that.

>>:We did.

>>:And so it says, matters I've agreed to represent you in, matters I have not agreed to represent you in. So in the matters you've not agreed to represent them in, you write adversary proceedings, discharged actions, whatever.

>>:Well, no, you can't say that. You have to, but you can say I will represent you under these terms and conditions.

>>:Most people have, like, a little paragraph that they put in there.

>>:Yes, exactly. So I just want people to know, basically, when you're debtor's counsel, you're like - you're stuck like glue. And you can get out, but it can be difficult to get out. So be aware of that. So you really have to evaluate the case. Is there going to be a lot of litigation filed? If so, think about what your fees are going to be, or how you're going to get paid in the future, and put it in writing. So then you can come in and say, Judge, we did talk about discharge complaints, and he said he would give me a retainer of X and an hourly rate of Y. And he's refusing to do it. I want to

>>:Get somebody else, other than the debtor, to sign the engagement letter too. That will help.

>>:What do you mean?

>>:Get a non-debtor to agree to make the payments.

>>:Oh, OK. If there's - if there's anybody around. I mean, most...

>>:Get their relatives to agree to make the payments.

>>:Most debtors I have - like, everybody around him has crashed and burned. They've lent him so much money, they're not going to touch him. So there's no co-signer. But, you know, yeah, you could try that. But usually they're done. Great, any questions about that? All right, so we're all done. So if everybody please do send your ideas about changes that we can make. We incorporate them. I've already gotten a good idea. So anything you have. And that's it for things. So you're now consumer bankruptcy lawyers, ready to go. Call VLP. Volunteer for a case. Get a mentor. And move forward. And feel free to call anybody on the panel with any questions you might have.