I’ve launched a new web site, www.bankruptcymastery.com, dedicated to being a resource for lawyers new to the practice of consumer bankruptcy law.  I envision it as being a tool to learn, systematically, those things beyond the Code that are necessary to be an effective bankruptcy lawyer.

I’ve been mentoring an increasing group of local young lawyers, one on one, and that simply isn’t sustainable.  After all, I’m supposed to be in the business of helping my clients.

Content at bankruptcymastery.com is focused on transmitting those things I’ve learned in 30 years of doing this.  While I can’t eradicate “learning by doing” and “trial and error”, I’m going to try to offer an alternative:  teaching that is focused, available, and systematic.

If you’re a lawyer new to this practice, check it out: www.bankruptcymastery.com.  There’s a free ecourse available now, with new things in the hopper.  Join me there.

Cathy

Start the new year with a new skill set:  Chapter 13 Bankruptcy.  I’m doing a four hour class on Saturday, January 9th in Mountain View looking at the basics of Chapter 13 bankruptcy, with an emphasis on how to craft a plan that’s confirmable.

We’ll talk about the best interests of creditors test, how to do a liquidation analysis, the application of the “hanging paragraph”, Till, Kagenveama, and Smith.  Time allotted to do some hypothetical plans and discuss the results.

You veterans out there can send your new associates for a systematic introduction at Chapter 13.

Sign up is available at www.law-full.com/13workshop.html.

Seating is limited and there are only 25 places remaining.

Remember the maxim that all politics are local?  All of bankruptcy law is local, too, despite the fact that it’s federal law, since bankruptcy looks to state law to determine property rights.  What happens to those property rights in bankruptcy is a matter of federal law.

My friend David Leibowitz’s statement that in a community property state, one spouse is liable for the debts of the other is,  at best, misleading under California community property law.  David practices in Wisconsin.

In California, the community property is liable for the debts of either spouse.  Property acquired during marriage is presumed to be community property, but the spouses can agree to the contrary.

The non contracting spouse has no personal liability for the spouse’s debts:  a creditor with a judgment against the spouse cannot reach the other’s separate property.

Further, in California, there is no liability for garden variety debts of the other spouse once the marriage ends:   your spouse’s debts don’t follow you after the marriage unless the judment of dissolution so provides.

My word picture in trying to explain community property and community claims to clients is that from a creditor’s perspective, the marriage really involves three entities:  two spouses and the community property:  a menage a trois, sanctioned by the law<g>.

The other point to draw here is that even input from a highly capable lawyer such as David, while accurate about the law of the state in which he practices, is not fully applicable in other states.  You cannot “research” your legal questions on the internet and get information that can be reliably applied to your situation.  That’s what lawyers are for, and why we have licenses from the state in which we practice.

Save January 9, 2010 (can you believe that date?) for a workshop on Chapter 13 basics, with an emphasis on drafting Chapter 13 plans.

We’ll gather at the Computer History Museum (101 and Shoreline) in Mountain View at 9:30 for a four hour exploration of Chapter 13.  The room will be set up to allow use of your laptop;  I expect to have several hypotheticals where computer or calculator would be handy.

Cost will be $250;  4 hours of MCLE credit has been applied for.

Sign up on line at www.law-full.com/13workshop.html.  Space is limited to 45 participants.

A bipartisan group of Representatives is planning to offer an amendment to the Wall Street reform bill being debated on December 9th that would allow bankruptcy judges to approve changes to mortgages on the family home.

Currently, lenders are protected from plan terms that change the terms of loans secured by personal residences.  Judges can approve plans that modify secured debts on investment property, vacation homes, and commercial buildings, but not on the most important asset an individual has.

The amendment is identical to H.R. 1106, which passed the House last fall and was defeated by banking interests in the Senate.  Well, banks are now profitable, the foreclosure contagion is spreading to prime loans, and the voluntary mortgage modification programs are laughably ineffective.

Nearly 8% of American home loans are delinquent, and 25 percent of homes are underwater.  Without mortgage modification, I advise many clients to walk away from homes where the debt towers above the present value of the houses.

If some courage and vision can be found in Congress, maybe I’ll have another solution to offer.  Contact your representatives and ask them to support the Conyers-Turner-Lofgren-Marshall amendment to H.R. 4173.  Find your representative and their contact information.

Homeowners should be walking away from underwater houses in droves, according to the analysis of University of Arizona law professor Brent White.  And they shouldn’t feel guilty about it either.

White’s argument is that until  borrowers make clear headed economic, rather than emotional, decisions about paying for underwater houses, the banks will not be moved to modify mortgages.  And of course, the statistics that are coming out about the number of mortgages actually, permanently modified are laughable:  something like 1700 mortgages modified in a country where 8% of mortgages are delinquent.

So, is a contract to repay money a moral commitment, or is it a promise made with economic consequences for breaking it?  Look at the example of professional sports coaches:  coach has a five year contract, team doesn’t perform, and owner fires coach after two years.  Coach has a right to damages for the remaining three years of the contract.

Does anyone think the team owner has done something immoral?  Rather, he has chosen to pay the price of breaking a legally enforceable promise to pay the coach for five years.

It is the scale of the impact that adoption of White’s view of home loans that has provoked a stern, finger wagging response from lenders and Fannie Mae.  White terms the campaign by banks, government and media to brand voluntary default as immoral as “social control”.

White’s 50+ page paper is available online.

On the surface, my initial consult had a tax problem: years of unpaid income taxes.  The salary was on the upper end of what I usually see.

It was only after we talked at length that the story came out:  the client had a mentally ill child and had drained retirement savings to pay for hospitalization for the child.

The client’s health insurance had a low limit on coverage for mental health;  the only way to pay for treatment was to dip into retirement savings, generating a tax obligation.

The bankruptcy schedules will show tax debt.  The underlying story will show that our health care system can be fatal to your economic health.

The amount of equity a California homeowner can protect from judgment creditors and bankruptcy trustees goes up on January 1, 2010.  A married couple will be able to exempt $100,000; a single person, $75,000; and the elderly or disabled, $175,000.

These increases are a welcome nod to the reality of California home prices: the current exemptions are almost insignificant against the cost of a house in California.

The balance of the California exemptions will change on April 1 in the tri annual adjustment for changes in the cost of living.

Remember, too, that debtors get the benefit of the unwritten exemptions.

If the headline drew you in, like the Geico gecko, you can complain you’ve been duped:  in bankruptcy, you disclose everything. Period.

My colleague David Leibowitz, himself a bankruptcy trustee writes, about things frequently omitted from bankruptcy schedules., and the possible consequences.

In my experience, the problem is not so much an intention to conceal that leads to omissions of assets, it’s failure to take disclosure seriously.  Clients don’t want to read the questionnaire that prompts them for various kinds of assets they might have.  They don’t commit to thinking about how this question might apply to their situation.  Or they assume because an asset has little market value, it’s excluded from the schedules.  You would not believe the number of clients whose completed questionnaires tell me they have no clothes. Yet I’ve never met with a naked client.

The hardest kind of things for laypeople to “see” as assets are those that are just legal rights, or even, possible legal rights:  the worker’s compensation claim, the claim against the landlord, the participation in a class action.  All of those are assets that need to be listed.

Often a trustee will elect not to administer even non exempt assets, because the effort to pursue them is too great compared to the possible return.  But even if the trustee were to administer the claim for the benefit of creditors, the loss to the debtor is usually far less than the value of the discharge of debts that results in bankruptcy.

The good folks at the Collaborative Law gathering yesterday had the same questions that their clients have:  when is the right time to file bankruptcy?  what happens when you file?  what does it  do to (for?) your life?

Collaborative Law, as I understand it, involves couples in a cooperative effort with a shared set of legal, financial, and mental health professionals to navigate a divorce.  My task was to add the bankruptcy arrow to their quiver.

It was energizing to meet a vibrant, engaged group of professionals all trying to make divorce and the accompanying issues more rational, less expensive, more comprehensive.