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This post was prepared by yours truly, with contributions from Phil Bradford, a financial web content writer. Phil graduated from New York University School of Law and recently joined Herald University as a reporter. He has also written for websites such as debtfreeguys.com and disabilitycanhappen.org

An now, on with the post…

Those who’ve exhausted their financial options or are unable to meet obligations due to illness, divorce, job-loss, or other life-altering events, may consider filing Bankruptcy to get their life back on track.  Here is a quick-guide to help you navigate the process with the help of a good Bankruptcy Lawyer:

Basic Types of Bankruptcy

The most basic distinction when thinking about Bankruptcy is the one between a liquidation (Chapter 7) and a reorganization (Chapter 13 for most people). Whether you need to file a Chapter 7 or 13 case will depend on several factors, including:

  • Total “household” income
  • The value of your property
  • What you stand to lose
  • What you intend to keep

That said, below you will find a few of the most important points when considering if Bankruptcy is right for you.
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BK Ct. ND IL EDIn re: Richard D. Olson, 16-01356 Chapter 13
Bankruptcy Court, N.D. Illinois, Eastern Div.
Opinion Date: June 22, 2016 Judge Schmetterer

This Memorandum Opinion addresses the feasibility and good faith of a Chapter 13 Plan of Reorganization filed on the even of foreclosure by a homeowner. The Mortgagee bank wanted to shut down the case and the Plan. The Court said “not so fast” and prepared a carefully crafted analysis of each objection filed by the bank.

Facts

Richard Olson filed four Chapter 13 Bankruptcy Petitions and Plans in a five year period- the last one on the eve of the foreclosure of his home. Ventures Trust 2013-I-H-R (“Mortgagee”), assignee of the Debtor’s original mortgage lender Bank of America, objected to confirmation of the latest Plan on the basis that it failed to comply with the confirmation requirements in 11 USC §§1325(a)(1), (a)(3), (a)(6) and (a)(7). Specifically, the Mortgagee alleged that there were inaccuracies in the Debtor’s schedules, that the Debtor had failed to correctly value certain obligations while not disclosing others at all, that the Plan was not “feasible,” and that both the case and the Plan had been filed in “bad faith.” In response, the Debtor amended his Bankruptcy Schedules to address some of the inaccuracies.

It is worth noting that the Plan under review in this case proposed curing mortgage defaults per §1322(a)(5) and reinstating monthly mortgage payments to the Mortgagee; as well as committing all the Debtor’s disposable income for the maximum commitment period of 60 months. General Unsecured Creditors are scheduled to receive not less than 2% of the face value of their claims.

The Court entered a Memorandum Opinion on the balance of the Mortgagee’s Objection before ruling on confirmation of the Plan.
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BK Ct. ND IL EDIn re: William W. Yotis III, Chapter 13 Debtor
ND IL ED 2016, Bankruptcy No. 14-bk-02689

Anthony C. Gasunas, Plaintiff v.
William W. Yotis III, Defendant
ND IL ED 2016, Adversary No. 14-ap-00321

Decision: March 28, 2016 Judge: Schmetterer

This Adversary case filed in a Chapter 13 Bankruptcy relates to promissory note fraud between the debtor and creditor. It was tried before Judge Schmetterer. Plaintiff/Creditor Anthony C. Gasunas (“Gasunas”) filed the Complaint to determine dischargeability of the debt owed to him by Debtor/Defendant William W. Yotis, III (“Yotis”). Specifically, the Complaint alleged that Yotis made knowing and fraudulent misrepresentations to borrow money from Gasunas and that the judgment obtained in State Court was not subject to a dischargeable in accordance with §523(a)(2)(A) and (B), as well as §523(a)(4).

Facts

Shortly after Yotis and Gasunas met, Yotis disclosed that he had lost his license to practice law. But Yotis also did not disclose that he had been criminally indicted for forgery and charged in a civil suit filed by the Illinois AG with consumer fraud and deceptive business practices. Nord did Yotis tell Gasunas about any allegations of fraud and related misconduct prior to or after he obtained a series of loans from Gasunas. From 2009 to 2010 Yotis solicited loans from Gasunas totaling $52,345 and gave him a Promissory Note in return. When Yotis failed to pay him back, Gasunas filed suit in State Court and secured a judgment for $52,345 plus costs (the “Judgment”). During this period Gasunas and Yotis were friends – having been introduced through Yotis’ wife – Cavallo – and for that reason the Judgment was extended. Prior to meeting Yotis, Gasunas learned from Cavallo that Yotis was a disbarred Attorney, but had gotten his life back together as a salesman for a remodeling company. Cavallo also told Gasunas that Yotis had been incarcerated on what she said were false charges. Eventually, Yotis and Gasunas met and became friendly.

Yotis acknowledged signing a Promissory Note but denied making any misrepresentations and argued instead that any reliance by Gasunas on his alleged representations would not have been justifiable – a prerequisite for such a claim of nondischargeability. In fact, Yotis claimed that Gasunas knew the terms and debt recited in the Promissory Note were false when he signed it.

Following a trial the Court concluded that there had been a series of misrepresentations by Yotis in obtaining loans from Gasunas and that reliance on those misrepresentations was justifiable. Accordingly, Judgment was entered in favor of Gasunas on Count I under § 523(a)(2)(A); but on Count II found in favor of Yotis.
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Jepson v. Bank of New York Mellon
Court of Appeals for the 7th Circuit  Docket No. 14-2459

Opinion Date: March 22, 2016

This case is a testament to the subprime crisis and illustrates how complex and devastating mortgage securitization and pooling was to ordinary homeowners; middle-class people faced with sudden and insurmountable mortgage debt. Sadly, this decision also illustrates just how hard it is to stand up to the holders of pooled mortgage loans.

The underlying facts of the case are so common that the Plaintiff could have been anyone; while the tortuous path of the case up to the 7th Circuit – years after the underlying foreclosure and bankruptcy – left this Plaintiff financially devastated.

Factual Background

Patricia Jepson (Jepson) executed a Note and Mortgage issued by “America’s Wholesale Lender” – a d/b/a of notorious subprime mortgagee Countrywide – and Mortgage Electronics Registration Systems (MERS), its nominee. The Note was endorsed by Countrywide d/b/a America’s Wholesale Lender and transferred to CWABS, a residential mortgage trust operating under New York law that pooled loans and sells mortgage-backed securities sold on Wall Street. CWABS is governed by a Pooling and Service Agreement (PSA). Bank of New York Mellon (BNYM) was the Trustee for CWABS. MERS therefore assigned Jepson’s mortgage to BNYM.

When Jepson eventually defaulted on her mortgage – a common scenario in such subprime traps – BNYM filed a Foreclosure complaint in State Court. Jepson inturn filed Chapter 7 Bankruptcy. BNYM predictably moved to lift the Automatic Stay. But instead of lying down and letting the Bank proceed, Jepson filed an Adversary Complaint and Objection seeking a declaration that BNYM had no interest in her mortgage because, inter alia, the note did not proceed through a complete chain of intervening endorsements; was endorsed after the closing date in the PSA; and that America Wholesale Lender was a fictitious entity rendering the Note was void under Illinois law. Continue reading

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This guest-post, a synopsis of “Let’s Talk About Arbitration” by Attorney William Goren from his blog, Understanding the ADA.  The original post discusses issues pertaining to arbitration of claims arising under the Americans with Disabilities Act. The author assumes that readers know the difference between arbitration and mediation. Covered points include these:

  • Can an ADA claim be subject arbitration?
  • Are there situations in which an arbitration agreement is deemed unconscionable?
  • Can an arbitration agreement assert that an award cannot be challenged for any reason?

The post also discusses:

  1. Whether an arbitration agreement covers ADA matters will depend upon how it is phrased, but if phrased broadly enough, an arbitration agreement can cover ADA matters.
  2. An arbitration agreement can be held unconscionable, but proving that an arbitration agreement is unconscionable is not an easy task.
  3. An arbitration agreement that prevents any challenges whatsoever to the award may well be declared against public policy (It was in Georgia, and Georgia very closely follows the Federal Arbitration Act).
  4. The Second Circuit goes with the stay, but the U.S. Court of Appeals are split on this. Ultimately, it will all come down to what “shall,” means.
  5. In a comment the author also notes a recent California Supreme Court case concluding that the Federal Arbitration Act preempts state requirements as to how notification is given that an agreement is subject arbitration (font size for example).

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Dual Tracking is the industry name for the practice of letting a foreclosure case tick on even while the homeowner seeks to modify their mortgage loan. The idea is simple: the Bank will take whichever solution comes through first – a modification or a foreclosure. The problem is that the Bank holds all the cards: the Bank’s Loss Mitigation Department decides how long it takes to review and approve an application to modify your loan, while the Foreclosure process in Court has been greatly simplified and streamlined for the benefit of the Banks. Illinois mortgage foreclosure laws, even Illinois Supreme Court Rules, now permit foreclosing banks to roll over homeowners and get to a judgment.

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Today’s post features a pair of cases in which a foreclosure defense Attorney seems to have gone too far. Foreclosure defense has become a veritable cottage industry over the past decade and it is common for Clients to expect their lawyer to do more than fight. They want to delay “by any means necessary.” But the Courts still regard the law as a genteel profession. This means that what Clients see as run of the mill zealous lawyering comes off to the Judge as unprofessional or worse. This pair of cases highlights that point.

Case #1: In re Wendy A. Nora

Facts

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For Debtors, Chapter 7 Liquidation is the ultimate relief, while Chapter 13 and 11 Reorganization offers an opportunity to reduce their Debtor’s payments in light of their income. In either type of case however, the Creditor is not entitled to anything until it has filed is Proof of Claim.

What Is a Proof of Claim?

The Proof of Claim or “PoC” is the means by which Creditors state:

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Gasunas vs. Yotis, 14-321 (Nov.24) ND IL ED (J. Schmetterer)

The Facts

Yotis, a former Illinois Attorney, borrowed over $50,000 from his Client Gasunas using various tricks and subterfuge: from outright lies to misrepresentations and material omissions of fact designed to manipulate his “friend” and benefactor. Once he had the money, Yotis filed a Chapter 13 Bankruptcy.