Flagstar Bank Penalized for Mortgage Servicing Violations

The Consumer Financial Protection Bureau (CFPB) announced that it has reached a consent agreement with Flagstar Bank to settle accusations that the bank delayed or prevented thousands of homeowners from obtaining mortgage relief and avoid foreclosure. The agreement calls for Flagstar to pay $27.5 million to the roughly 6,500 consumers whose loans were serviced by the bank. The bank will …

Courts Relax Rules for Bankrupting Student Loans

You can’t discharge student loans in bankruptcy. Everyone knows that. Nevertheless, recent federal court decisions indicate that restrictions on discharging student loans during bankruptcy are relaxing. Most public and private student loans are excluded from discharge unless the bankruptcy debtor can show that repaying the loan would “impose an undue hardship on the debtor and the debtor’s dependents.” Because Congress …

Some Student Loans ARE Dischargeable

There are many myths surrounding the topic of discharging student loans in bankruptcy. Some say you can’t do it. Others say you can discharge student loans only if you can prove hardship. Still others say you can discharge private student loans, but not federal student loans. Wrong, wrong, and wrong. All debts are discharged in bankruptcy unless there is an …

Payments held by Chapter 13 Trustee

When a debtor’s Chapter 13 bankruptcy case is terminated early, the first question asked is, “What happens to my money that the trustee is holding?” The answer depends on whether the Chapter 13 plan was confirmed prior to a dismissal, or whether the case is converted to a Chapter 7. Unconfirmed Chapter 13 Case If the debtor’s Chapter 13 Plan …

Bankruptcy Discharge Order

At the conclusion of nearly all consumer bankruptcy cases the court will issue a permanent injunction prohibiting creditors from collecting on pre-bankruptcy debts. This permanent injunction known as the “bankruptcy discharge” replaces the “automatic stay,” a temporary injunction. Specifically, the discharge order prohibits discharged creditors from taking any kind of collection action against the debtor personally. The discharge injunction generally …

File a Proof of Claim in Your Chapter 13 Case

Once the Chapter 13 bankruptcy plan is confirmed, the trustee will pay allowed claims. The first step for a creditor to obtain an allowed claim is to file a proof of claim in the case. But Section 501(c) of the Bankruptcy Code also allows the debtor to file a proof of claim if “a creditor does not timely file a …

Avoid the Bankruptcy Means Test

The great Chinese military general Sun Tzu once wrote, “The best victory is to win without actually fighting.” In bankruptcy, the best way to beat the means test is to avoid it altogether. Taking the Means Test only complicates your bankruptcy case, and may disqualify you from Chapter 7, force you into a five year Chapter 13, or make you …

The Trustee Wants to Know: “What’s in Your Wallet?”

The Ninth Circuit case of Shapiro v. Henson stands as a warning to all bankruptcy debtors: be sure what is actually in your bank account on the day your bankruptcy case is filed. The Chapter 7 trustee requires bank account records and will compare that balance to the amount listed on your bankruptcy schedules. When the amount in your bank …

Can the Bankruptcy Judge Make Me Quit Smoking?

During the bankruptcy process, the debtor is asked to account for all monthly expenses on bankruptcy Schedule J, which includes categories such as food, clothing, mortgage/rent, medical, and transportation. However, Schedule J is neither complete nor exclusive. Everyone spends their money differently, and bankruptcy judges are often called upon to decide whether an expense is reasonably necessary for the maintenance …

Revoking Debtor’s Discharge

A primary goal in nearly every Chapter 7 case is the bankruptcy court’s discharge order which forever and completely eliminates many of the debtor’s financial burdens. The discharge order is a powerful injunction that stops collection and harassment over the discharged debt. But not every Chapter 7 debtor receives a discharge, a bankruptcy discharge is reserved for the honest debtor. …