Jonathan Ginsberg’s piece about the murky language of notices from the bankruptcy court struck a cord. In an attempt to provide notice, they sow confusion.  But my pet peeve is the client who calls up and says, literally, “I got this letter from {insert name of court or creditor, or trustee}.  What does it mean?”

I wonder if they think I’m the offspring of Carnak the Magnificent, who provided answers BEFORE reading the questions.  I’m trying to train my staff to tell them to fax me the letter in question, so I can see what they are talking about before trying to interpret it.  In my imagination, it would be much more fun just to provide random answers….

A family of three in San Mateo County needs $63,871 a year to meet its basic living needs at a minimal level, according to research by the  Center for Women’s Welfare.

CWW developed the Self Sufficiency Standard to measure the income necessary to meet minimal living standards more precisely that the federal poverty standard whose methodology is five decades old.

What struck me as a bankruptcy lawyer is the sense among bankruptcy trustees and creditors that someone making nearly $64,000 a year would be solidly middle class and reasonably comfortable.  Not so, according to this research.

Part of the problem may be as well that the family with that level of income may also think that it should entitle them to live better than just meeting their needs at a minimal level.  Hence, overspending.

Or, one of my observations over time is that access to credit has helped families mask the fact that they can’t really afford to live a comfortable, middle class life in the San Francisco Bay Area.

As families and well established businesses pour through my office, I remain thankful that our bankruptcy laws and societal mores provide an economic fresh start for those who have no reasonable hope of repairing their finances

The process of filing bankruptcy is no more traumatic than the participant makes it;  the lead up to admitting you need bankruptcy relief is painful, but the steps to getting a bankruptcy discharge are painless.

We all benefit from freeing energy and money for the future of families;  we can be risk takers as business folks knowing that failure doesn’t have to blight the balance of our lives.

I am also grateful for a field of endeavor where I find continuing challenges:  new laws, nuances of state vs. federal law, and the never ending challenge of helping people in distress.  When so many other lawyers have abandoned the practice, I’m thankful that I find it satisfying and engaging after  32 years at the bar.

Reading the paper about corruption and judicial impotence in other countries, I treasure the fact that our legal system is, by and large, independent, honest, and potent.  We must not forget as a society that judges must be independent interpreters of the law, not the political view of the day.

Count your blessings and share them with others.  We are all in this life together.

As befits a Moran, I got my Irish up at a 341 meeting when the UST’s representative announced that “we don’t allow retirement deductions on Schedule I”.  Huh?  Did she intend to utter fighting words?

First point, as far as I could see, she wasn’t wearing a black robe, so the issue of “allowance” was neither hers nor the UST’s.  Judges decide disputed questions and the UST is no more than a party in interest in a bankruptcy proceeding.

Second point, I’ve always thought that the schedules should reflect the facts.  My client has contributions to her 403(b) retirement plan deducted from her paycheck.  I duly show that on Schedule I, so that as far as possible, Schedule I reflects the current income and deduction situation.  Where does this person come from when she says we don’t “allow” scheduling of deductions?

Third point, if you want to argue that for purposes of the 707(b) analysis, retirement savings may not be an allowable deduction, make that argument, preferably not at the 341 meeting.  Think and speak precisely.

Then, there is the point that, in this case, the Income less Expenses calculation is $3400 underwater.  Is this exercise on the UST’s part a good use of scarce government resources?  Do they think there are $3400 worth of mistakes all of which cut in their favor?  Or is this just a matter of doing something so we justify our budget?  [Personally, I'm waiting to see the UST's professed interest in creditor abuse manifest itself.]

My suspicion is that the attitude of the UST’s office as being almighty slipped into this unfortunate’s choice of words.

Falling home prices have lead to a surge of strategic defaulters, in real estate columnist Kenneth Harney’s words:  people who abruptly choose to stop making mortgage payments.  These folks have made an economic decision that continuing to pay on a house that is significantly underwater does not make economic sense.

Harney is clearly bothered by this choice by people who appear to be able to make the payments, but elect instead to default and lose the property.  In this and an earlier column, he raises the question of the morality of  elective mortgage default.

I’ve been chewing on that idea:  is there a moral issue when a borrower voluntarily defaults?  The law attaches  consequences to certain promises, such as the promise to repay money borrowed.  If the borrower is capable of repaying but does not, is that a moral failing?  Or is it nothing more than the weighing of the consequences of shunning a legal duty vs. the cost of performing the promise?

I tried thinking about this from the lender’s side of the transaction:  are there any moral obligations that the lender assumes when they make the loan?  Could the lender exercise a legal right (to foreclose, say) and yet violate a moral precept?  (All of this presupposes that corporations have morals, or moral duties, of course.)  Would a lender have a moral obligation to modify a loan in the absence of a legal obligation?

Or, is all that is involved in the mortgage loan transaction the undertaking to expose yourself to certain unpleasant consequences if you default?

It bears more thought.  I routinely ask bankruptcy clients whether it makes sense to continue to pay on mortgages where the loan balance is significantly greater than the property’s value.  I want them to consider the option of walking away in the course of the bankruptcy.

Quick:  how is a small Tennessee town like a California family facing foreclosure?  The New York Times suggests it’s because they were both sold risky financial products to meet their borrowing needs.  The unemployment-wracked town of 11,000 was not told about the interest rate risk in the bond derivatives that financial advisors promoted and sold the town.  The interest payments on the town’s bond debt have quadrupled.

That’s essentially the same story I hear from clients with adjustable rate, pick a payment loans on their homes.  The financial professionals advising them talked only about the immediate consequences of the loan, and downplayed the risks.  Over and over, clients tell me that when they questioned the broker about how they were going to make the full principal and interest payment, they were assured the broker would get them a better loan before any damage was done.

Why is it that politicians opposing mortgage modification in bankruptcy want to demonize the unsophisticated borrower without regard to the supposed professionals who sold and profited from these exotic financial products?  Are we going to hear that the city council of Lewisburg, Tennesee bought more sewers for the town than they could afford?

When are we going to put our energies into a solution to the foreclosure crisis, rather than finding a scapegoat?

The bankruptcy mortgage modification provision, headed to the Senate this week, is a bargain to taxpayers next to the “voluntary” mortgage modification programs instituted by the administration.

HR 1106 involves no taxpayer money;  it strips the special interest provision sheltering banks from  home loan modification.  The costs of changing the mortgage so that the debtor pays the current value of the collateral and the lender is spared the costs of foreclosing are borne by the borrower and lender.

The modification and refinance programs introduced by the adminstration involve taxpayer  cash subsidies to servicers and borrowers who successfully renegotiate a mortgage.

Why is it that the opposition to judicial mortgage modification claim that the honest and responsible are paying the mortgage for the greedy and irresponsible?

American Express is offering a cash reward for card holders who cancel their accounts.  This is touted as a convenience to help card holders manage their finances.  Huh?

Is it my imagination, or weren’t credit card companies recently promoting the use of their cards as a means of conveniently managing money?

Old Am Ex Blue, we hardly knew ye…

We’ve poured money into the nation’s banks, and no amount of money seems to be sufficient to restart the flow of credit through the economy.  Our leaders, our newspapers, and our populace all feel we’ve been shorted.  What did the banks do with the money if they didn’t lend it out?

If you were the chairman of the board of a bank, looking around at the employment situation and the prospects for the economy getting worse, would you be anxious to bet on a borrower begin able to repay a loan?   What is the borrower’s house worth, today?  What’s it likely to be worth tomorrow?  What are the chances a business will prosper?

Frustrated as I am about the situation, objectively I can’t blame the banks for not lending now.  (Now, if you want to talk about what they lent over the past three years, then there’s plenty to talk about.)

The US tax code is stuffed with tax breaks to further some social policy or another.  We’ve made it safer for legislators to funnel money to the poor, the parents of college aspirants, those saving for retirement by giving them a tax break than by appropriating money for the purpose deemed worthwhile.

And these are the consumer breaks.  The business tax breaks, to favor one industry or behavior or another, are more prevalent and more complex still.

Kathy Kristof’s article today points out that the tax code has become so complex that most people hire others to prepare their returns and those professionally prepared returns are full of errors!

The national expenditure of talent and money to navigate the tax code is not a rational use of bright people.  Tom Friedman pointed out last week the waste of talent commited by Wall Street developing exotic financial instruments rather than genuinely useful products.

As an electorate, let’s become brave enough to make our policy choices upfront, and not disguised as a matter of taxation.  Consider what the nation could do with the energy and intellect of  accountants and lawyers liberated from tax issues as a result.