Bankruptcy is a powerful device to allow honest debtors to shed their debt and enjoy a fresh start in life. The news is rampant about debtors who hide assets in their backyard, try to sell assets on ebay or, like Dykstra, secrete and sell valuables. Now discovered, Dykstra has plead guilty to bankruptcy fraud and will likely serve up to 51 months in federal prison.

What did Dykstra do? Prosecutors say he hid, sold or destroyed more than $400,000 worth of items without permission of the bankruptcy trustee. Court documents show Dykstra said he put an oven, sconces and chandeliers into a storage unit, but prosecutors said he actually sold the items for $8,500. He also hid baseball gloves, balls, bats and other memorabilia from the bankruptcy court and creditors and sold them last year for about $15,000. So, what did prosecutors prove? After a career of World Series glory and millions of dollars, Dykstra threw it all away for just over twenty thousand dollars.

Many debtors hide relatively minor assets from the trustee not so much out of greed, but more out of fear: fear of impoverishment, fear of losing their former elevated sense of themselves, fear of losing control. What they find is that the cost of this fear is usually far greater than the value of the assets they secretly keep.

Prosecution for bankruptcy fraud is rare, but losing a bankruptcy discharge is not.  Complete disclosure of assets and debts, income and expenses is the cornerstone of the bankruptcy world. As Lenny Dykstra has sadly learned, the meager profits of a fraudulent bankruptcy case rarely equal the complete relief enjoyed by the honest debtor.

Lenny is competing for the “World’s Greatest Celebrity Debtor” in March Madness: Bankruptcy Brackets.

The post Lenny Dykstra: A Cautionary Tale of Fraud and Fear appeared first on Baltimore Bankruptcy Lawyer.

• No “Dual Tracking”  The California law is designed to help homeowners enjoy real relief from loan modifications, not just anxiety and frustration. Lenders will not be able to rush through a foreclosure process at the same time they ask for endless packages of tax returns, paystubs, bank statements, utility bills and the like. The loan modification process will need to be completed before the lender can foreclose.
• No robo-signing This practice of lenders’ auto-signing foreclosure documents without any review before a foreclosure sale scandalized the mortgage world and was a key motivator for the attorney general settlement. Private homeowners would have the right to sue lenders if they were damaged by robo-signing.
• No processor runarounds Lenders will have to assign a single person to any loan modification file, who will be the homeowners’ point of contact. This rule alone may help reduce the considerable loan modification stress.

The law is only applicable to owner-occupied first mortgages.

Loan modifications are certainly a mixed bag. A recent TransUnion study showed that six out of 10 homeowners who received a loan modification stopped paying their mortgage again after 18 months. This study did not include statistics to address the many more homeowners who did not qualify for loan modifications. The question is: do loan modifications provide any real relief to borrowers? Perhaps the California law will finally force the mortgage industry to give meaningful focus on this process. The rest of the country will be watching.

The post California Dreaming: 3 Reasons Why Their New Foreclosure Law May Spread Across The Country appeared first on Baltimore Bankruptcy Lawyer.

Honesty is the lynchpin of the bankruptcy system. Discharge and protection from creditors are powerful privileges, made possible by a debtor’s complete and accurate disclosure of his assets and debts, income and expenses. When a debtor refuses to disclose assets there is a subversion of the process. When this vet lied on his schedules, he gave up any right he had to receive the benefits from the bankruptcy system.

In truth, this debtor should never have filed his case. In the first instance, he has a $250,000 homestead exemption under Montana law. Had he not committed perjury on his bankruptcy schedules he never would have had to lose his home. He could have lived out the rest of his life peacefully.

As far as the creditors who were hounding him for the $109,000 in credit card and medical bills? He could have settled with the loudest of them by liquidating small amounts of the $66,000 and paying them accordingly. I believe he could have transferred the money to a trusted relative and then in three years filed a bankruptcy case. This is the kind of careful planning that is essential any time a person is considering a bankruptcy case.

The post 89 Year Old Vet Forced From Home Because Of Poor Planning And Dishonesty appeared first on Baltimore Bankruptcy Lawyer.

Frequently, however, the creditors are not circling overhead, just making you uncomfortable. Or else you may have decided to let go of a certain financial lifestyle and you want to finally move on with your life. It takes a lot of soul-searching and sleepless nights  to get to that point so the desire to put the painful past behind is understandable. However, if one of these situations apply to you you may do much better to plan carefully, wait out the storm and file on your own terms:

•  You owe significant taxes.  Income taxes are generally nondischargeable in bankruptcy but there are critical exceptions as you can see in this video. You may have to wait a year or 2 or 3 so that taxes may become dischargeable. If you can hang on during the wait the ability to get rid of the IRS once and for all may completely change your life.
• You have too many assets. In Maryland bankruptcies individual debtors may claim exemptions and keep approximately $21,000 in the equity in their home, $1,000 in household goods, $5,000 in tools of the trade and approximately $11,000 in everything else. (IRAs, 401(k)s, life insurance policies, cash recovery on account of personal injuries are not subject to any limitations).If your assets are worth substantially more than this you may have to take the time to  spend down excess cash or transfer property outright. If that happens you may have to wait up to 3 years to file that bankruptcy case. If you plan properly it will be worth it.
• You have unnecessarily transferred property–cash, stock, or vehicle–to a trusted friend or family member to keep it out of the hands of creditors. This frequently happens when individuals are afraid that the creditors will seize their property but are not aware that they are legally entitled to keep it. If that happens you will have to wait at least a year before filing for Chapter 7 or else you will not get a discharge in bankruptcy.

There are ways to hang on while you wait for the time to pass and be ready to file. If there’s a reason to rush into bankruptcy, you should get it done without procrastinating. But just as frequently, the better course is to calmly survey the landscape and file the case when you and your lawyer have considered all the possibilities.

The post Plan Your Bankruptcy Carefully: 3 Reasons To Wait Before Filing appeared first on Baltimore Bankruptcy Lawyer.