Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

On September 20, 2011 I was a speaker for Law Review CLE on the topic of Foreclosure Defense in Orange, California and again on November 10, 2011 in Riverside. My perspective is always from the bankruptcy side where we will file under Chapter 13 of the Bankruptcy Code to initially stop the foreclosure sale. The benefit to this strategy is, the moment the bankruptcy case is filed, the Debtor's mortgage becomes current and the Debtor will make up the mortgage arrears through trustee payments in their Chapter 13 Plan.

Many practitioners in attendance practice in state court's, and it was depressing to hear their state court hurdles of having to file bonds with the court that are prohibitive to the homeowners and the level of difficulty in moving their cases to the discovery phase. Ironically, our bankruptcy judges continue to tell bankruptcy counsel that the foreclosure defense issues like, "who owns the note" argument needs to be addressed in state court.  It's as if the two benches are pointing fingers and neither wants to take the time to learn about the mortgage securitization issues because their calendars are packed.

Never fear that I shared my Max Gardner Bootcamp wisdom, some of my most recent moving papers, and cutting edge legal arguments we are making that we hope will persuade the bench that mortgage creditors are committing fraud upon our courts, every time. There is hope through the bankruptcy process and it's important to hire competent counsel to assist you when facing these complex issues.

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     A literal reading of 11 U.S.C. Section §362(c)(3) terminates the stay 30 days after the filing of the petition only with respect to the debtor, not property of the estate. However, coming into bankruptcy court in the Central District, recent rulings have discussed whether the Stay terminates entirely or only with respect to the Debtor in subsequent bankruptcy case filings.

      In re Reswick Jr., 2011 Bankr. LEXIS 873, (B.A.P. 9th Cir. February 4, 2011) held that the Automatic Stay terminated as to the debtor and property of the debtor’s bankruptcy estate 30 days after the debtor’s second bankruptcy filing. The court agreed with the persuasive reasoning set forth in In re Daniel, 404 B.R. 318 (Bankr. N.D. Ill. 2009), and held that the automatic stay terminated in its entirety on the 30th day after the petition date." (Emphasis added.) This is a minority decision.

The Reswick court analyzed the majority viewpoint [*364],

“The majority interpretation finds the phrase "with respect to the debtor" to be both critical and unambi-guous, and concludes that on the 30th day after the peti-tion date, the automatic stay terminates only with respect to the debtor and the debtor's property, but not as to property of the estate. See, e.g., Holcomb v. Hardeman (In re Holcomb), 380 B.R. 813 (10th Cir. BAP 2008); [**7] Jumpp v. Chase Home Finance, LLC (In re Jumpp), 356 B.R. 789 (1st Cir. BAP 2006); In re Pope, 351 B.R. 14 (Bankr. D.R.I. 2006); In re Murray, 350 B.R. 408 (Bankr. S.D. Ohio 2006); In re Brandon, 349 B.R. 130 (Bankr. M.D.N.C. 2006); Bankers Trust Co. of Cal. v. Gillcrese (In re Gillcrese), 346 B.R. 373 (Bankr. W.D. Pa. 2006); In re Williams, 346 B.R. 361 (Bankr. E.D. Pa. 2006); In re Harris, 342 B.R. 274 (Bankr. N.D. Ohio 2006); In re Jones, 339 B.R. 360 (Bankr. E.D.N.C. 2006); In re Moon, 339 B.R. 668 (Bankr. N.D. Ohio 2006); In re Johnson, 335 B.R. 805 (Bankr. W.D. Tenn. 2006). Although these decisions state that the court need not read beyond the phrase "with respect to the debtor" to discern its meaning, see, e.g., Jones, 399 B.R. at 363 ("Section 362(c)(3)(A) provides that the stay terminates 'with respect to the debtor.' How could that be any clear-er?"), these decisions arguably do read beyond the phrase because they find that the stay terminates with respect to the debtor and to any property of the debtor that is not property of the estate. Id. at 362; see also Holcomb, 380 B.R. at 816 ("[W]e conclude that the language of § 362(c)(3)(A) terminates the stay only as to the debtor [**8] and the debtor's property."); Jumpp, 356 B.R. at 797 ("Section 362(c)(3)(A) provides for a partial termination of the stay.").”

On May 9, 2011, the Central District Riverside Division Court in In re Rinard, 2011 Bankr. LEXIS 1731, Judge Clarkson held,

“Under 11 U.S.C. § 105(a), a bankruptcy court "may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." Section 105(a) gives the bankruptcy courts the power to stay actions that are not subject to the 11 U.S.C. § 362(a) automatic stay (footnote omitted) but "threaten the integrity of a bankrupt's estate." Canter v. Canter (In re Canter), 299 F.3d 1150, 1155 (9th Cir. 2002) (citation and quotation marks omitted); Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d 1424, 1427 (9th Cir. 1987)." Solidus Networks, Inc. v. Excel Innovations, Inc. (In re Excel Innovations, Inc.), 502 F.3d 1086, 1093 (9th Cir. 2007). The Ninth Circuit, in Solidus Network further found that the usual preliminary injunction standard applies to stays of proceedings against non-debtors under § 105(a). Solidus at 1094.”

One of our judges recently overruled a motion for turnover of property that was foreclosed upon after the Stay expired.  What this means is that you MUST file a Motion to Continue the Automatic Stay beyond the 30 days when your client has filed a subsequent filing within 12-months preceding the filing of their current case.  In our Central District these are fairly simple form motions that are routinely granted. These motions MUST be filed and heard within the first 30 days of the case. Don't risk losing your client's assets.

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Dave Ramsey may have been the first to coin the term, "plasectomy," but the doctors and surgeons that most effectively execute this procedure are bankruptcy lawyers.  Dave touts self plesectomy, such a procedure will only slow the tumor's growth. To be sure, my partner John Greifendorff defines plasectomy as the procedure to remove malignant financial tumors.

Other related terms are:

PLASECTIC: adj, of or pertaining to malignant financial consumption, a person or thing that suffers from Plastectomia; and

PLASECTOMIA -- a condition of financial decay or consumption, symptoms -- credit card debt, unsecured debt,
decreased ability to control spending, stress

Symptoms of Plasectomia include:  financial nausia, stress, bounced checks, depleted savings and retirment accounts, headaches, insomnia, homelessness, wallet discomfort, shame, guilt, thoughts of suicide and even death. This list is not exhaustive.

Don't let the stress and worry of moderate to severe Plasectomia drag on your finances any longer. If you've recently done this procedure on yourself and the symptoms are recurring or worsen, it's time to consult with a bankruptcy attorney in your area.  Remember that the Bible even allows for a discharge or wiping clean of all your debts every 7 years. It's no wonder the Bankruptcy Code mirrors the Bible by allowing you to obtain a Discharge of your debts every 8 years.  That's why we offer FREE Plasectomys for our clients.

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 Back in July, 2010 I reported on the 9th circuit case of Mwangi v. Wells Fargo Bank, N.A., "Wells Fargo Won't Stop Freezing Bank Accounts." Our local group of attorneys here in the Central District of California have it on good word from sources inside Wells Fargo's bankruptcy department that the bank continues to freeze accounts while the litigation case is reviewed by the bankruptcy court in Nevada.  The Mwangi case has been remanded back to the bankruptcy court to determine whether Wells Fargo's continuation of the administrative freeze and retention of the account funds claimed exempt, in the absence of instructions from the trustee, was reasonable in light of the debtor's demand that the subject account funds be released for their use.

This is a case to watch as it affects all debtors filing bankruptcy, clients of Wells Fargo Bank, N.A. and the Automatic Stay under 11 U.S.C. § 362(a).  On January 21, 2011 Christopher P. Burke, Esq. and Scott C. Borison, Esq. attorneys for Eric Mwangi and Pauline Mwicharo [Plaintiffs] filed case no. 11-01022-bam in U.S. Bankruptcy Court for the District Court of Nevada this Adversary Class Action Proceeding.  

The allegation from the complaint alleges that Wells Fargo Bank acted in Willful Violation of 11 U.S.C. §362(a)(3).  If the court determines Wells Fargo's conduct was a willful violation of the stay under §362(a), then the bankruptcy court will need to determine what, if any, damages the debtors are entitled to under §362(k)(1).  We will keep you posted on the progress of this pending case and the outcome.  In the meantime, don't bank where you owe money.

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The folks over at Public Counsel Law Center are always providing valuable information to consumers.  Public Counsel Law Center is the nation's leading Pro Bono Law Firm and they do a great job in bankruptcy practice with their reaffirmation clinics and the new help desks at the clerk intake counter. Here are their

5 tips to avoid loan modification scams:

1.  Don't Pay Up Front Fees;

2. Don't Transfer Title or Sell Your House to a "foreclosure rescuer;"

3. Don't Pay your Mortgage Payments to Anyone Other Than Your Lender or Loan Servicer;"

4. Never Sign Any Documents Under Pressure or Without an Opportunity to Review Them.

5. Don't Ignore Letters From Your Lender or Loan Servicer.  Responding is the Best Bet For Saving Your House.

If someone demands an up-front fee, Public Counsel adivses that you can report them to the Attorney General's Office at 1-800-952-5225; or file a complaint online. Remember that the best way to get a workout is to work directly with your lender. 

Remember that the foreclosure process will continue on your home during your attempts to workout a modification agreement with your lender.  You may also want to consult with a bankruptcy lawyer to create an exit strategy if your modification offer falls through and you still want to keep your home. The filing of a bankruptcy case will legally stop the foreclosure process and will give you the breathing room you need to continue to work with your lender and have an advocate on your side.

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Tune in to AM830 this Sunday morning from 10 a.m. to 11 a.m. when my partner John Greifendorff and myself, Christine Wilton guest on Real Estate Radio-Southern California with our host, Ron Siegel!

Ron Siegel is host of "Real Estate Radio - Southern California" on ESPN Radio AM 830 KLAA Sunday's from 10-11AM. Every Sunday, Ron discusses current events, real estate, and various other financial topics.  Mr. Siegel runs the Real Estate and Mortgage Resource Center at Stearns Lending and his radio show explores this topic from every angle.

The Real Estate Radio Network, hosted by Ron Siegel, is designed to help Consumers in Southern California understand the HOW and the WHY in our incredible Real Estate Market. Southern California is a unique place to live and an incredible place to invest. If you don’t own a piece of Southern California yet, make sure you tune in and gain all the knowledge you need to make an educated decision about when to enter the market. If you already own a home, listening to the Show will help you understand when it’s a good time to sell or refinance. Either way, the show is for you and we hope you’ll join us this Sunday at 10am on ESPN Radio AM 830 KLAA!

This Sunday morning from 10 a.m. to 11 a.m. we will answer questions that will effectively assist southern California homeowners deal powerfully and effectively with their lenders through bankruptcy.  Bankruptcy is a powerful tool for homeowners and is often overlooked and considered a last resort, yet the injunction that is the automatic stay is enforceable from the moment a bankruptcy case is filed, and Stops foreclosure dead in its tracks.  No other remedy is as effective or as economical to the homeowner.  Send us your questions and we'll do our best to get them all answered.  Thanks for listening!

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Many a Creditor has driven us bankruptcy lawyers and our clients nuts with their antics, but freezing a client's bank account after their case has been filed takes the cake.  The Ninth Circuit BAP just released In re Mwangi Case No. 09-1408 (9th Cir.B.A.P., June 30, 2010), which held that Wells Fargo's national policy of placing administrative holds on accounts of persons filing a bankruptcy petition violates the automatic stay by exercising control over property of the estate.  The issue in Mwangi was their national procedure of running a computerized comparison of all newly filed Chapter 7 bankruptcy cases against Wells Fargo's list of account holders.  If they found a match of one of their account holders who had also filed bankruptcy, then Wells Fargo would immediately 'freeze' that account, preventing the debtor from having access to their money. 

It's no secret that Wells Fargo has been notorious for freezing the accounts of debtors filing bankruptcy under Chatper 7.  We also have it on good word that Wells Fargo will continue to hold funds while they appeal the Mwangi case. 

Keep in mind that your bank account is property of the estate upon filing your bankruptcy case that presumably includes the cash in your bank accounts.  So, don't go on a spending spree just yet.  Any Exempt funds are not exempt until 60 days after the conclusion of your meeting of creditors.  Technically, all of your assets, including cash on hand must be turned over the trustee to administer your estate, but that is just not practical.  This means that the law is not on your side here and while Wells Fargo can put a freeze on your accounts, they also must act prudently by asking for guidance and direction from the Trustee and/or Court as to what to do with your funds.

This reminds me of the term "vicious compliance."  This term seems to crop up in certain union worker circles when they don't like a particular ruling or law, they will strictly comply with it and demonstrate that it doesn't work and then use it against management by knowing it better.  So, if Wells Fargo wanted to 'viciously' comply with the law, they would stop freezing accounts and simply send all the money to the trustee.  No matter how you slice this ruling, Wells Fargo is still a big bully.

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Are you one of the many Americans caught up in the viscious grip of payday loans?  It seems, these days, that payday loan shops are replacing Starbucks on every corner.  It's the new business to be in with this depressed economy. Here's what happens when you obtain payday loans in your rup-up to filing for bankruptcy.

If you have presented a post-dated check as 'security' for the loan, when you file for bankruptcy, the payday lender will simply cash the check and hang on to the funds.  The lender can do this under 11 U.S.C. Sectioin 362(b)(11), which provides that the automatic stay does not apply to the presentment of a negotiable instrument and the giving of notice and protesting dishonor of such an instrument.

However, the overconfidence on the part of these payday lenders comes with a price.  One decision, In re Thomas, 311 B.R. 75 (W.D. Mo. 2004) provides that a post-petition transfer of funds out of the account by presentment of post-dated payday loan check could be avoided pursuant to 11 U.S.C. Section 549(a).  This means that you could bring an action to recover the funds as an unauthorized post-petition transfer.  Unfortunately, such actions are more costly than the amount transferred; which is why most debtors decline to bring an action under Section 549.

Ask your bankruptcy lawyer about their experience with repeat offenses by payday lenders because the creditor's willful violation of the automatic stay does give rise to actual damages, costs, and attorney fees; even punitive damages in some cases.  Don't think that these payday lenders have the upper hand just because they have your check in their hands.

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