Main | September 30, 2007 - October 6, 2007 »

September 29, 2007

Legislation Introduced to Help Homeowners Facing Foreclosure

On September 20, 2007, a bill was introduced in the House of Representatives to help homeowners facing foreclosure - "The Emergency Home Ownership and Mortgage Equity Protection Act of 2007."  H.R. 3609.  It is fairly short but it removes the requirement that homeowners facing foreclosure get consumer counseling before filing a chapter 13.  It also removes the restriction on modifying a loan secured by the debtor's residence.  This should certainly put a smile on the faces of consumer bankruptcy attorneys everywhere. 

September 29, 2007 in Legislation | Permalink | Comments (0) | TrackBack

"Courting Failure" by Professor Lynn LoPucki

This 2005 book by Professor LoPucki is subtitled, "How Competition for Big Cases is Corrupting the Bankruptcy Courts."  It is a little surprising how blatant LoPucki is about accusing judges, in New York and Delaware primarily, of courting the local bar in order to induce large corporations to file in their particular jurisdiction.  He tells stories of how other courts blew it by not kow-towing to the big firms that decide where to file the big cases.  If huge fees and rates are even questioned or first day motions, cash collateral motions, and exclusivity are not simply rubber stamped, the court will never see a big case again, he asserts.  If there is a hint that a judge might appoint a chapter 11 trustee early in the case, the court is not considered.  Management of the big cases choose the attorneys.  A chapter 11 trustee chooses his own attorneys and typically investigates management.  According to LoPucki, the New York judge in the Enron case performed admirably but Ken Lay's standards.   

Why you might ask would a judge in Chicago or Houston want to see large cases filed in their jurisdictions, much less compete for the "privilege"?  LoPucki answers that the judge handling the case will win a lot of new friends, get his or her name in the paper a lot, and achieve notoriety.  Some of course do not want the extra work but many do.  LoPucki does not even hint that a judge will get any financial benefit from the big cases coming to town although obviously a big case judge will be actively sought by the big firms after retirement. 

The book is supported very nicely be statistics and tables and is a very entertaining read.  His factual proof is compelling.  He cites how Judge Burton Lifland in New York was "accidentally" getting something like half the big cases filed in New York when there were five judges "on the wheel."  He got a statistician involved to compute the probability of that accident. 

Let me know what you think.  Jon Hayes      

September 29, 2007 in Book Reports | Permalink | Comments (0) | TrackBack

September 28, 2007

Taxation of Foreclosure Sales

This is a post from my friend Dennis McGoldrick in Torrance, Cal.  Dennis is a former chapter 7 trustee, a certified bankruptcy specialist and one of the best bankruptcy lawyers I know. The issue of who is taxed on the gain on the foreclosure sale when a bankruptcy has been filed can get complicated. As I tell my students over and over, know when to call a specialist! This is a complicated area. Do not depend on this short summary. Make sure you have all the facts, etc. etc.

Jon Hayes

"Taxation of foreclosure sales is one of the toughest questions. The entity who/which owns the property at the time of the sale is the entity who/which is responsible for the tax on the gain. If a foreclosure sale occurs before the bankruptcy, the debtor is liable for the tax, as the sale is really a debtor sale of the property. The Foreclosure Trustee sells the property under a power of sale given by the debtor.

In order to avoid tax in this situation, the bankruptcy must be filed before the sale, and must not close before the sale. Under section 541, the filing of the bankruptcy creates an estate and the estate then is the owner and seller of the property (the power of sale would also inure to the estate). The estate is responsible for its own taxes and files its own tax return. Trapping the foreclosure sale in the estate is therefore paramount when there is a taxable gain. Under section 349, the closing of a bankruptcy gives (abandons) all of the unadministered property of the estate back to the debtor. As a result, a foreclosure sale after a bankruptcy would be taxable to the debtor. If the debtor does not live in any of the properties to be foreclosed, the debtor will not be able to claim the $250,000 tax free gain (requires living in the property for 2 years). So you must trap the sales of properties which will generate a gain in the estate. If there is no other asset to administer, the trustee will not take notice of the foreclosure as the trustee will have no real income and cannot pay any tax, so no tax return for the estate is ever filed. The real problem comes when/if the trustee has another asset to administer. A competent trustee will realize the foreclosure sales will generate a tax, so the trustee will move to abandon the foreclosure properties back to the debtor."

Dennis

September 28, 2007 in Taxes | Permalink | Comments (0) | TrackBack

September 26, 2007

Bankruptcy Inn of the Court

This is a letter I received recently regarding the formation of the Southern California Bankruptcy Inn of the Court.  I was in an Inn of the Court several years ago and it was one of my favorite experiences.  If you are interested in joining, call Brett Curlee at the number below.  Our first meeting is scheduled for October 16, 2007. 

Dear Professor Hayes,

My name is Brett Curlee and I am the President of the Central District of California Consumer Bankruptcy Attorneys Association (CDCBAA). The CDCBAA represents 120 consumer bankruptcy attorneys in the Central District of California, and is the second largest consumer bankruptcy attorney organization in the United States.

Our organization was very excited to receive a charter from the American Inn Of Court to form the first ever Inn of Court here in Southern California devoted exclusively to the practice of bankruptcy law and litigation, the Southern California Bankruptcy Inn of Court.

I am writing to invite you and other professors from West Los Angeles School of Law who teach bankruptcy law, and students interested in practicing bankruptcy law to join our Inn.

The purpose of the Inn is to foster communication, civility, and professionalism in the bankruptcy courts, and more importantly, for senior bankruptcy attorneys and judges to mentor young lawyers and law students who wish to become bankruptcy lawyers or have an interest in bankruptcy law.

The Inn will meet 6 times this year, 2007-2008, starting in October 2007. This will be an excellent opportunity for UWLA students who have an interest in bankruptcy law to meet the Bankruptcy Judges and the senior preeminent bankruptcy and insolvency lawyers and faculty of various law schools in the Central District of California, and to gain an insight into the practice of bankruptcy law. With the recent changes in the bankruptcy code, there will also be an opportunity for students to discuss and debate the issues that practitioners are grappling with in the bankruptcy court on a daily basis.

I am very proud to offer this opportunity to you and your students. The invitations will be mailed shortly, and we are looking forward to meeting you at the Inn.

If you or any of your faculty or students have questions about participating in the Inn, please feel free to call me at (310) 203-3084.

Very Truly Yours,

Brett B. Curlee President of the CDCBAA President of the Southern California Bankruptcy Inn of Court

September 26, 2007 in Programs | Permalink | Comments (0) | TrackBack

September 25, 2007

Good Morning and Welcome

Hi.  I'm Jon Hayes, Senior Adjunct Professor of Law at the University of West Los Angeles.  I have taught Bankruptcy many times over about 20 years.  This semester I am teaching Business Organizations.  I have also taught, at various times, the Uniform Commercial Code (about 30 times), Advanced Bankruptcy Issues, Income Taxes, Contracts and Civil Procedure (once).

I am honored to be given the task of editing this Blog.  My interests include the world of bankruptcy and writing and teaching at the law school level.  While my practice is largely small business chapter 11s and litigation, I also file a few chapter 7 cases each year.  I am a member of the National Association of Consumer Bankruptcy Attorneys (NACBA) and the Central District Consumer Bankruptcy Attorneys Association (cdcbaa) which obviously concentrate on the consumer field.  I am also a member of the Los Angeles County Bar Association Bankruptcy Committee which tends to focus on chapter 11s and more advanced corporate bankruptcy issues.

As a hobby, I have been briefing every Ninth Circuit published case for the past few years.  Lately I have been adding other circuit cases at the BAP level which deal with issues arising from the mess known as BAPCPA.  I will include these briefs in this blog as they come out – an average of about four to five new opinions per month.  I am going to add to that all of the published opinions for the other circuits as well for this blog. 

I am also working on a book, the first incarnation of which will consist of a brief of every Supreme Court opinion ever written on bankruptcy issues.  I have 88 cases so far and hope to have every case, probably a few hundred in all, in the next year or two.  I will include those briefs as I finish them as well.  I mostly stay away from individual judge published opinions as there are simply too many and they tend to be terribly fact specific and are, of course, mandatory only in the particular courtroom occupied by the author.   

Anyway, I’ll get started tomorrow.  Drop me an email if you have any comments or issues for discussion.            

September 25, 2007 | Permalink | Comments (0) | TrackBack