Written by Craig D. Robins, Esq.
If you have a Fannie Mae mortgage, are delinquent with your mortgage payments, and are headed towards losing your house in foreclosure, you may be able to get a temporary break. A new program entitled, “Deed for Lease” permits homeowners to transfer the deed to their house to Fannie Mae and sign a one-year lease. The program was just announced two days ago.
Why would Fannie Mae do this? The foreclosure process is usually lengthy and time-consuming. This program will permit families to stay in their homes (albeit for a limited period of time) and avoid the uncertainty of foreclosure.
However, the program is not for everyone. There is a detailed application process and you must be approved. Also, the program only applies only to Fannie Mae mortgages.
Is the “Deed for Lease” program better than filing bankruptcy or engaging in foreclosure defense? Only an experience bankruptcy attorney can really help answer that question. There pros and cons with all options. The “Deed for Lease” program means losing your home — for good. On the other hand, a Chapter 13 bankruptcy enables the homeowner to cure the mortgage arrears over time and keep the home.
The program also guarantees a minimum one-year rental period, which also calls for a monthly rental payment. However, defending a foreclosure proceeding (assuming that there is a reasonable foreclosure defense) can often provide the homeowner with an even longer period to stay in the home, during which time the homeowner does not make any rent, mortgage or real estate tax payment. In the program, you would have to pay “market rate” for rent, which could be fairly pricey. For a typical Long Island home, that could easily be $2,000 per month or more.
Finally, even if the program sounds good for you, there is no guarantee that you will be accepted into it, and the approval process can take some time — and all the while the mortgagee can continue a foreclosure proceeding.
Of course, if the bank takes back a deed in exchange for a lease, the homeowner is off the hook for any mortgage deficiency. However, keep in mind that a Chapter 7 bankruptcy filing in New York would discharge such a deficiency.
If you’ve already filed for bankruptcy, you are not eligible for the program.
How do I know if I have a Fannie Mae mortgage? Fannie Mae has a website that enables you to look up your property to see: [loanlookup.fanniemae.com]
What are the details of the “Deed for Lease” program?
Related posts:
- Is a Short Sale a Reasonable Alternative to Foreclosure on Long Island? Written by Craig D. Robins, Esq. Many Long Island...
- New York Homeowners in Foreclosure May Get More Time Written by Craig D. Robins, Esq. This past September,...
- Long Island Foreclosure Case Dismissed! Written by Craig D. Robins, Esq. Mortgage Company messes...
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Written by Craig D. Robins, Esq.
If a trustee in a Chapter 7 case comes across a significant asset that is not exempt, the trustee will first solicit an offer from the debtor. If the debtor is interested in keeping the asset, then the debtor will negotiate to purchase the debtor’s interest.
What happens if the debtor is not interested or can’t afford to purchase the asset? Then the trustee will try to sell it.
In order to do so, the Chapter 7 trustee must give notice to all creditors and interested parties listed in the petition.
The trustee can then determine how the asset will be sold. It can be through a broker or an auctioneer. The trustee can also publish a notice indicating that the sale will be in his office, or that the item will be sold to the highest bid received by a certain date.
In order for the trustee to accept a bid, even if the only party making the offer is the debtor, the trustee must seek bankruptcy court approval. In some instances, the trustee will structure the sale so that it is subject to a higher or better offer.
Once the trustee sells the asset, then he has good amount of paperwork to do.
You may be interested in a related post I wrote: 
Written by Craig D. Robins, Esq.
Last week I wrote a post in which I said that 
Written by Craig D. Robins, Esq.
The simple answer is that all income of any kind must be disclosed in a bankruptcy filing. Some clients think that because they “work off the books” they don’t have to disclose that income. That’s certainly not the case. All income must be disclosed — no matter how it is received.
In addition to salary and earnings from employment, all other types of income must be disclosed as well. These include:
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BAPCPA Man Pokes Fun at the Poorly-Written Bankruptcy Amendments!
Written by Craig D. Robins, Esq.
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I am pleased to post antoher cartoon strip of 
Written by Craig D. Robins, Esq.
Everyone who files for personal bankruptcy must produce identification. You are not required to produce identification at the time of filing, but at the meeting of creditors which occurs one month later. However, any experienced bankruptcy attorney will want to see that ID from the outset.
The Office of the United States Trustee adopted a policy in 2002 in which individuals are required to identify themselves with picture identification (typically a driver’s license) and proof of correct Social Security number (typically a Social Security card).
However, other forms of proof are acceptable as well. According to
Written by Craig D. Robins, Esq.
The Chief Judge of New York, Jonathon Lippman, announced today that he will be providing all New York State judges with an allowance of $10,000 in addition to their regular salary. This is a welcome addition considering that this is the 11th straight year that New York judges have not gotten a pay raise. However, this does not apply to Bankruptcy judges.
Bankruptcy judges, who are federal employees, have not gotten significant pay raises for quite some time as well. The current salary for a bankruptcy judge is $160,080, and this amount is set by Congress. The salary is actually based on 92% of the salary of a United States District Court judge, which is currently $174,000.
Incidentally, New York State Court judges in the Supreme Court currently have a salary of $136,700, and County District Court judges earn slightly less than that.
Many of the Long Island bankruptcy attorneys appearing before Judges Robert E. Grossman, Alan S. Trust, and Dorothy T. Eisenberg in the Central Islip Bankruptcy Court therefore earn more than the judge.
Although a judge’s salary, when compared to the typical salary of a Long Island resident, may seem pretty good, it is relatively less than what the judge can earn in private practice. This is the main reason why former Chief Bankruptcy Judge Melanie S. Cyganowski retired from the bench two years ago. (See the my interview of her: 
Written by Craig D. Robins, Esq.
Last week I wrote about 
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BAPCPA Man Illustrates the Powers of Bankruptcy Against Evil Mortgage Companies!
Written by Craig D. Robins, Esq.
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I am pleased to post the seventh cartoon strip of 
Written by Craig D. Robins, Esq.
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Filing bankruptcy can release you from a burdonsome cell phone contract and let you discharge the early termination penalty
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These days, almost everyone has a cell phone. Should a typical consumer debtor filing bankruptcy on Long Island list their cell phone provider as a creditor for bankruptcy purposes?
Consumers Who Have Old Accounts with Deficiencies. If you have an old bill on a closed account with a balance due, then there is no question. This is a debt that you must include. The entire obligation will be eliminated by the bankruptcy filing.
Consumers Who Have Active Accounts with Balances Due. Consumers filing for personal bankruptcy are required to list all outstanding debts in the bankruptcy petition. Thus, if you owe your cell phone provider a balance, even if you plan to keep the account, you must list them. Doing so will enable you to discharge the balance owed. Some cell phone companies may ask you to post a security deposit after the bankruptcy filing, but I observe that most providers are not asking for this.
What Happens to the Service Contract in Bankruptcy? Chances are you are still in a service contract which requires that you pay a penalty if you cancel it before the end of the contractual period, which is typically two years. Most consumers can benefit by canceling their cell phone contracts. This would enable the consumer to not only eliminate their balance but remove their obligation to pay any early cancellation penalty.
Here’s why: Filing a Chapter 7 bankruptcy has the effect of terminating any “executory contract” which is one in which the parties are still performing it. Cell phone contracts are executory contracts during the typical two-year contract period. By including the cell phone provider as a creditor in the bankruptcy petition, the contract is automatically terminated, and any early cancellation penalty becomes a dischargeable debt just like the credit card debts.
Consumers Who Have Accounts that Are Totally Up-to-Date. Consumers should list the cell phone provider as a potential creditor in the bankruptcy petition, even if no balance is owed. Although the bankruptcy law has the effect of automatically terminating the cell phone contract, virtually all cell phone companies will continue service if the account is current, and will not pay any attention to the bankruptcy filing.
The advantage to you, the consumer, by including the cell phone company in the petition, even if you are current, is that you can later terminate the contract before the end of the typical two-year period, and not be responsible for the early termination penalty.
Special Note About Cell Phones for Later: Since I’m talking about cell phones, please note that when you do eventually file for bankruptcy relief and later go to court for the meeting of creditors, you must leave your cell phone in the car. The Central Islip Bankruptcy Court has a policy of not permitting any cell phones into the building. If you arrive at court by public transportation, the U.S. Marshall will permit you to check your phone with them in the lobby.
Written by Craig D. Robins, Esq.
Written by Craig D. Robins, Esq.
Can You Discharge Taxes in Bankruptcy?
Some taxes can be discharged in a personal bankruptcy filing. The most common type of tax that consumers owe is back income taxes. In certain circumstances, they can be discharged. Most other types of taxes cannot be eliminated in bankruptcy.
What Taxes Are Dischargeable In Chapter 7 Bankruptcy?
Written by Craig D. Robins, Esq.
At various times this year, Congressional committees have pondered the idea of making it easier for consumers who are overwhelmed with medical debt to file for bankruptcy.
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I previously discussed this in: 
By Craig D. Robins, Esq.
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BAPCPA Man Shows that Bankruptcy Can Be Humorous!
Written by Craig D. Robins, Esq.
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I am pleased to post the sixth cartoon strip of 
Written by Craig D. Robins, Esq.
New Bankruptcy Means Test Criteria Goes Into Effect November 1, 2009
Passing the bankruptcy means test is dependant upon the amount of median income in the state where you live. For New York residents, it will be slightly easier for some families to qualify for Chapter 7 bankruptcy next month. For those seeking to file for Chapter 13 bankruptcy, some families will be able to pay less each month.
The figures used for the each state’s median income are based on United States Census data, and adopted by the Office of the United States Trustee.
The last time the median income figures were updated was March 15, 2009, and I wrote a blog article about that. See 
Written by Craig D. Robins, Esq.
Every now and then I come across a situation that I just find incredible. I just met with a potential client who was being subpoenaed by the attorneys for a Long Island Chapter 7 bankruptcy trustee.
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The trustee is now going on a fishing expedition for assets involving a corporate Long Island Chapter 7 business bankruptcy filing. The trustee retained counsel to assist in this endeavor.
Apparently, the potential client and another fellow were each fifty-percent shareholders of a corporation that filed for Chapter 7 bankruptcy relief over a year and a half ago. The amazing thing was that the potential client who I met with had just found out about the bankruptcy. Consequently, we now have all sorts of sticky issues such as whether the corporate bankruptcy was filed in good faith or not.
Corporate Bankruptcy Filings Must Be Authorized
Here’s why: any time a corporation seeks bankruptcy protection, it must have authority to file the bankruptcy petition. That typically means that the corporation’s board of directors must meet, agree to permit the corporation to file for bankruptcy, and then acknowledge this authorization by preparing a corporation resolution authorizing the bankruptcy filing.
In this case, there was no corporate resolution! Local E.D.N.Y. Bankruptcy Rule 1074-1(a) states that any bankruptcy petition filed by a corporation shall be accompanied by a duly attested copy of the corporate resolution authorizing the filing. Such a document was never filed – nor could it have since it would have required the consent of both shareholders. The shareholder I met with never consented to the bankruptcy filing, let alone knew about it.
So, here is a corporate bankruptcy filing that is fatally deficient. If a corporate bankruptcy is not duly authorized, it can be dismissed.
Authority to File Corporate Bankruptcy Requires Consent by a Majority of the Board of Directors
In order for a corporation to have the appropriate authority to file bankruptcy, there must an agreement by the majority of the directors, which is necessary to constitute a quorum to transact business.
Shareholders, themselves, lack the authority necessary to file bankruptcy because they do not have the power of management. Thus, one shareholder cannot decide, on his own, that he wants to put the corporation into bankruptcy, even if that shareholder is the president, unless he has over 50% of the voting shares of stock.
What is also perplexing is that the shareholder who filed the bankruptcy failed to include his partner as an interested party, which would have enabled the partner to then receive notice of the filing.
What happens now? If this is brought to the attention of the court, the judge would have no choice but to find that the court does not have jurisdiction over the case and would be constrained to dismiss it. It also appears that the subpoena that my potential client received cannot be enforced.
In any event, this matter leaves some serious questions upon the attorney who filed the case, considering that he may have filed a frivolous case. The attorney, who holds himself out as a business lawyer, should know better.
Written by Craig D. Robins, Esq.
The next storm to hit the housing market will be caused by the wave of defaults on pay-option adjustable rate mortgages according to an article in the Wall Street Journal yesterday.
The problem is part of the sub-prime mortgage meltdown. Between two and four years ago, an incredible number of homeowners took out pay-option adjustable rate mortgages (ARM), especially here on Long Island. A very large number of our clients who own homes have such mortgages.
Now, with these mortgages starting to reset to much higher rates and exorbitant monthly payments, many homeowners will be unable to afford them any longer. There can actually be a flood of defaults. Many Long Island communities have a great majority of homeowners who refinanced their homes with ARMs.
The rate of delinquencies and foreclosures on ARMs is extremely high, in large part because so many of these homes are underwater and have no equity.
A bankruptcy filing can often provide relief from an onerous adjustable rate mortgage
The Long Island bankruptcy attorneys in our firm meet with homeowners on a regular basis who are facing this dilemma. Fortunately for them, they have various bankruptcy options.
With some, we recommend Chapter 7 bankruptcy which enables them to stay in the home for a period of time without having to make any payments. Then, they can move out and not have to worry about any deficiency obligation on the mortgage, as that is discharged in the bankruptcy proceeding.
With other clients who may have several mortgages, we may recommend Chapter 13 bankruptcy as there is a mechanism in that type of bankruptcy to eliminate the second mortgage if he house has lost a great deal of value.
For those Long Island homeowners in financial difficulty, it makes sense to quickly meet with an experienced Long Island bankruptcy attorney.
Written by Craig D. Robins, Esq.
The precipitous drop in real estate values during the past two years is forcing many wealthy homeowners to consider bankruptcy as an option and Long Island is no exception.
Here’s why: many well-to-do individuals invested heavily in one parcel of real estate — their home — during the go-go real estate boom, thinking that it was a fantastic investment. After all, who could complain about an investment that increased 10% to 20% in value for a number of years?
Recently, homes have been bad investments. The more expensive the home; the worse the investment.
However, as we all know, real estate values have plummeted. To make matters worse, many of these high-income homeowners leveraged their real estate purchase. They bought a million dollar home and financed it with a million dollar mortgage. Unlike an investment in stock, which, in a worse-case scenario, can become worthless, a leveraged investment in real estate can actually result in an extreme amount of additional liability.
Thus, if the value of the home is under water and worth less much less than the amount due on the mortgage, the homeowner can now be liable to the mortgage company for hundreds of thousands of dollars more than what the home is worth. In addition, the homeowner must also pay for property taxes, insurance and maintenance.
Individual Chapter 11 bankruptcy filings with million dollar homes have greatly increased
With many highly-paid executives being laid off, there are a lot of million dollar homeowners who can’t afford to make their mortgage payments. According to data from the National Bankruptcy Research Center, personal Chapter 11 filings, which is the type of bankruptcy wealthy individuals would file, have jumped 73 percent over last year.
In general, if secured debt is more than $1,010,650, then a homeowner is not eligible for Chapter 13 bankruptcy, and instead, must file for Chapter 11 bankruptcy, which is also the type ob bankruptcy that businesses ordinarily file. Individual consumers who have earned substantial income in the six-month period before seeking bankruptcy relief are often precluded from filing for Chapter 7 bankruptcy because of the means test.
The falling demand for million dollar homes is one cause of increased individual chapter 11 filings
It is also interesting to note that nationwide listings of homes for ,worth $1 million or more, increased 27.3 percent in July from last October, according to 
Written by Craig D. Robins, Esq.
Tomorrow I am one of three panelists who will be speaking at the Nassau County Bar Association at a public education seminar.
The program is entitled: “Is Bankruptcy the Solution? What it Can and Cannot Achieve”
At the seminar, we will be providing a “plain English” overview of how bankruptcy can help consumers on Long Island.
My fellow panelists include Long Island Chapter 7 bankruptcy trustee Andrew M. Thaler, Esq. and bankruptcy lawyer Heath S. Berger, Esq.
The program is from 7:00 to 9:00 p.m. at the Nassau County Bar Association, 15th and West Streets, Mineola. The program is free, but advance registration is requested. Please call the Bar Association at 516-747-4070. For directions go to the 
Written by Jason Leibowitz, Esq.*
Written by Craig D. Robins, Esq.
Husbands and wives can file a joint bankruptcy petition. When both spouses need bankruptcy relief, it is quite easy to file a joint petition, and it is half the work of filing two separate petitions. See my post: 
Written by Craig D. Robins, Esq.
When debts are primarily business debts, a debtor is excused from the means test
Last night I conferred with a client who did not pass the bankruptcy means test. Ordinarily, passing the means test is a prerequisite for being eligible for Chapter 7 bankruptcy filing. However, failing the means test was not a problem for this client. Most of his debts were the result of personal guaranties on a failed business.
The debtor had operated several automobile dealerships on Long Island. Unfortunately, due to the problems with the economy, the dealerships recently went out of business, leaving the debtor on the hook for almost two million dollars in corporate debt that he personally guaranteed.
When we plugged all of his data into the means test, he did not pass. However, the Bankruptcy Code states that if debts are primarily non-consumer debts, the debtor is exempt from the means test, and the means test does not have to be filled out.
We will therefore be able to file his Chapter 7 bankruptcy petition even though he fails the means test.
What does consumer debt include? Consumer debt includes debt incurred for personal, family, or household purposes. That would encompass typical credit card debt, utility bills, medical bills, car loans and mortgages. However, obligations resulting from business are not considered consumer debt.
How much debt must be non-consumer debt in order to be exempt? The bankruptcy statute uses the word, “primarily.” That means at least 50%.
Keep in mind that you must include the full balance on a mortgage as part of consumer debt. Since most business owners own mortgaged homes with mortgages totaling several hundred thousand dollars, the amount of business debt must be quite substantial in order to invoke the exemption.
Also note that if a credit card was used to pay business expenses, then the credit card debt is not a consumer debt.
Click here to see a copy of the
Written by Craig D. Robins, Esq.
Christmas bonuses are now less than 90 days away. This notion is important because receiving a Christmas bonus or year-end bonus for some people can adversely skew the bankruptcy means test and make them ineligible for Chapter 7 bankruptcy.
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The Bankruptcy Means Test
The bankruptcy means test is a very comprehensive, very complex series of calculations that the federal government designed to ascertain whether someone qualifies for Chapter 7 filing. It was designedas part of the new bankruptcy laws to prevent those consumers who have high incomes from being able to eliminate their debts in Chapter 7 cases. See my post, 
Written by Craig D. Robins, Esq.
“The Mortgage Machine Backfires.” That was the title of a fantastic and incredibly interesting article in yesterday’s New York Times.
Times business columnist Gretchen Morgenson wrote about a recent Kansas Supreme Court case which lambasted a “dubious practice” that mortgagees have relied on for several years now. The principles discussed in that case have the stunning potential of operating as an absolute defense in mortgage foreclosure proceedings throughout the country and especially on Long Island.
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“MERS” — The Mortgage Electronic Registration System
We are all used the standard recording process whereby deeds and mortgages are recorded with the county clerk. However, during the recent mortgage lending spree, mortgage loans changed hands constantly, often ending up in packaged and securitized mortgage pools. The Times characterized the constant changing of mortgage ownership as a “dizzying series of transactions.”
Each time a mortgage is recorded there is a hefty recording fee. To save money, the mortgage industry, including Freddie Mac and Fannie Mae, set up MERS to record mortgage assignments electronically.
MERS estimates that it saved its members about $1 billion during the previous decade. There are about 60 million mortgage loans that are registered in the name of MERS!
The MERS flaw: It does not own mortgages but merely records them in the MERS name
Not only does MERS register mortgages, it also began registering the various mortgage assignments and transfers. However, when it registered anything with a county clerk, it registered the mortgage in the name of MERS. And herein lies the significant flaw that may now become an incredible problem for all MERS mortgages. Even though MERS listed itself as the owner of the mortgage in the public records of county clerks across the country, it did not actually own any of the mortgages.
If MERS is only an Electronic Registry, How can it bring foreclosure actions?
One of the basic tenets of mortgage foreclosure law is that the mortgagee must have standing to bring the foreclosure action, which means it must own the mortgage being foreclosed upon. I successfully persuaded the Nassau County Supreme Court a few months ago to dismiss a foreclosure for this very reason. See my post: 
Government considers placing restrictions on loan modification companies
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BAPCPA Man Shows that Bankruptcy Can Be Humorous!
Written by Craig D. Robins, Esq.
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I am pleased to post the fifth cartoon strip of