Or maybe this is just a continuing, disappointed sigh that this group, who tries to build a profession around selling houses, is itself oversold.

Latest example arose where a homeowner was referred to me by his accountant, concerned about a pending short sale of the client’s home.  By our rough calculations, the short sale of the house would trigger about a quarter of a million dollars in forgiveness of debt income.  After discussing it with the client, we called his realtor who had negotiated this sale without discussing a quarter of a million dollars in phantom income to the client hidden in the deal.

When I explained my concern, the realtor’s come back addressed the capital gains tax exclusion for homeowners!  He apparently knew nothing about the tax consequences of a short sale, especially one that didn’t qualify for the special provisions recently enacted.  Worse he seemed indifferent about the adverse impact on his client.

Seems to me the essence of a profession is an institutionalized concern for the client/patient that trumps the self interest of the professional.  I don’t for a moment argue that realtors ought to be giving tax advice;  I do argue that they ought to be able to spot common tax issues and direct the client to an expert.  Here, the realtor was clueless and exposed the client to being blind sided by a huge tax obligation.

A professional has to do better.

I’ve talked here about my website devoted to rookie bankruptcy lawyers at www.bankruptcymastery.com.  In all the flurry in the last week, I forgot to mention here, where I think lots of my readers are bankruptcy lawyers, that I’ve developed an online course that became available last Tuesday,

My thoughts on why such a course is needed are here.

In short, the course is designed for lawyers new to bankruptcy practice.  It’s 16 sessions on what you need to know to file a consumer bankruptcy Chapter 7, from the initial meeting with the client, clients to avoid, through each of the schedules to reviewing and signing the petition.

Since I dropped the ball here, I’m making the first video available free to readers of the Soapbox. The course, available two segments a week,  is offered for $297.  At the end of the month, the opening “sale” is over and the price goes up. To sign up for the full course, go to the members page for Bankruptcy Mastery.

I would also appreciate your feedback on the course.  I’m a veteran bankruptcy lawyer, but this teaching business is new, and I’m open to comments that will help me do it better.

Cathy

Get two hours of practice oriented training on dealing with creditor claims in a consumer bankruptcy case June 17 in Mountain View.  Targeted at attorneys new to bankruptcy practice, we will look at when, why and how to review creditor claims.

We’ll also walk through the rules and procedures for contested matters in general, including objections to confirmation; motions for relief from stay; and motions for violation of the automatic stay.

Sign up online:  seating is limited.

WHEN: June 17, 2010 5-7 p.m.

WHERE: Computer History Museum
(Shoreline exit from 101) 1401 N. Shoreline Blvd., Mountain View CA

INSTRUCTOR: Cathleen Moran
Bankruptcy Specialist, California State Bar Board of Legal Specialization

MCLE : 2 hours of general credit

COST: $260

Cathy

Next class in my irregular series on bankruptcy practice skills for rookie bankruptcy lawyers was announced today:  Creditor Claims & Contested Matters.

Two hours on proof of claim basics;  reviewing and objecting to claims; and handling a contested matter in bankruptcy court.

June 17    5-7 at the Computer History Museum in Mountain View.  The usual larger room is being demolished, so seating is even more limited than for the last class.

You can sign up at Law-full.com

My colleagure at Bankruptcy Law Network Peter Orville wrote

It is natural to be afraid of doing something you’ve never done before, like filing for bankruptcy protection. This is especially true if you’ve heard stories about why you shouldn’t file bankruptcy

My beef is that the fear of bankruptcy is promoted by those with something to gain by demonizing bankruptcy. It’s the creditors, their cohorts the credit scoring folks, and the debt settlement companies who want you to think that filing bankruptcy is the end of life as we know it.  They all profit if consumers are scared off of filing bankruptcy.

My charge to my clients is that bankruptcy is not painful, or at least, any pain is self inflicted.  You can make yourself (or allow yourself) to feel as miserable and worthless as you choose to do so.  No one associated with the courts, including trustees, is judgmental.  A debtor does not have to justify his choice of bankruptcy relief and does not have to prove he is “worthy” of a discharge.  Eligibility for a discharge, even after bankruptcy reform, is presumed.

I have a perverse admiration for clients who have endured the pain and dispair of financial distress for as long as most of them have before seeking me out.  But life does not have to be that way;  bankruptcy is an honest and effective choice.   There is nothing to be afraid of.

Liz Weston, L.A. Times financial writer, walked a room full of bankruptcy attorneys at the Sacramento Valley Bankruptcy Forum through the impact of various credit events on your credit score last weekend.

She recounted how, after meeting some debtors as she worked on stories, she no longer saw debtors as deadbeats. She saw the challenges in their lives and the soundness of electing bankruptcy.  Her candor about the change in her world view was refreshing.

Having written a book on credit scoring, she naturally was caught up in the interface with bankruptcy.  But I as one who is frustrated by the fixation of those drowning in debt on their credit score, I wanted to stand up and shout:  Ruin your credit score, not your life!

The financial media sounds a drum beat that one’s life and worth is wrapped up in that credit score, something we don’t fully understand and based on credit reports which are notoriously inaccurate.  Life will end, we’re told, if our credit score declines.

That fear keeps American consumers struggling to pay debt that they can never, in this life or the next, repay.  They appear to consider a lifetime of minimum payments rather than a fresh start in bankruptcy to preserve their credit score.

As Liz pointed out, the credit score is dynamic:  it is constantly changing, and heals over time.  My call is to fix your balance sheet. Get rid of dischargeable debts.  Save for retirement.  Live beneath your means.  Don’t walk the financial tightrope.

I usually assure clients that institutional creditors are generally very observant of the automatic stay. Once they have notice, they cease collection.  But this month, in two of my pending Chapter 13 cases, Chase Home Loans has run off and set or actually conducted post bankruptcy foreclosure sales.

To make matters worse, given notice of the problem, Chase’s counsel has been either indifferent or ineffectual in moving to unwind the actions taken in violation of the stay.  I’m not sure whether this is simply happenstance, or presages a general meltdown of default mortgage servicing, but it is worrisome.

Susanne Robicsek’s post on the futility of keeping a home through bankruptcy brought to mind Professor Brent White’s paper on the use by government and financial counselors of fear and shame to keep people paying on mortgages on underwater homes.

White cites a litany of messages from apparently credable sources who chant that a foreclosure will scar your life forever onwards.  Further, these messages suggest that the law and morality require that you pay for something that no longer has value or no longer makes economic sense.

Somehow, I didn’t hear that electing to default on a mortgage was immoral when a couple of huge real estate investment companies walked from projects in New York.  Is it immoral only for individuals, but just good business for corporations?

I see my job as a bankruptcy  professional to ask the client to consider walking away.  Is the house genuinely affordable now?  Will the loan reset making it unaffordable in the future?  How much would the housing market have to appreciate just to be able to sell it for what you owe?  Do you want to take a further credit hit down the road when you need to leave this house?

Given the breadth of the current financial morass, I have doubts that what we take as gospel about the future availability of credit to those filing bankruptcy will be the rule in the future.  I doubt that credit availability will return to the norms of the past two decades anytime soon.  Who knows what the rules will be in the future?

I have to ask clients:  just what kind of financial pain are you prepared to endure in the expectation that the old rules will prevail?

The availability of parking at the BART (light rail) station has been my measure of the depth of the recession.  Lots of parking means that not very many folk are working and riding public transit to work.

On my way to Oakland bankruptcy court today, I had to park in the auxiliary parking lots.  Ah, I thought, recovery is on its way.

My partner suggested an alternative explanation: everyone in the parking lot was on their way to a job fair…..

When the house is unaffordable,  homeowners often look to a short sale or deed in lieu in the belief that avoiding foreclosure means avoiding the credit score hit.  Not so.

Sharon Epperson’s bit in USAWeekend today points out that a deed in lieu or a short sale will likely be reported as “not paid as agreed.” Put another way, you don’t get any points for trying to make the lender’s life easier.

This reinforces the pitch I often make that, if losing the house is inevitable, live there as long as possible for free.  Those months without mortgage payments and property taxes may be the only return you get on your housing investment.  Don’t lose out on that “return” by leaving earlier than you have to.