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I have been actively involved the past two weeks training new VBAs. One problem that all of them had was when I gave them a petition they immediately started entering the information into their bankruptcy software. Let me ask you a question: If you were going to paint a room, would you walk in with a paint can and start painting? Of course not. You would prepare the room first. This is a common behavior you should adapt for anything you do. Whether you are cooking, running errands, paying bills or working on a new bankruptcy petition; you need to do prep work before you begin the actual work.

Hopefully the information below will help save you a great deal of time and teach you some of the skills of preparing a bankruptcy petition before you begin the initial input.

Does the debtor reside in a community property state?

Item 16 on the Statement of Affairs provides you with a list of all the community property states. If a debtor is married and is filing a petition without their spouse, there could be a problem. In a community property state, everything the spouse owns belongs to the other spouse. Also, all the debts the spouse owes is also owed by the other spouse. Therefore, if a debtor is filing a bankruptcy petition without their spouse, they need to be made aware that collectors will most likely attempt to collect from the non-filing spouse when the bankruptcy petition is filed.

Therefore, before you start working on a bankruptcy petition where the debtor resides in a community property state, make sure that both the husband and wife are filing together. If not, the attorney needs to prepare an Affidavit that is signed by both the husband and wife stating they understand creditors may collect from the non-filing spouse. This way, the attorney can be protected by providing verification they warned the debtor of this problem occurring and fulfill their due diligence.

Has the debtor filed bankruptcy before?

This past week one of my students entered an entire bankruptcy petition and later found that the debtor had filed a previous bankruptcy less than 2 years ago. All the work she did was lost and the attorney could not be billed for this time since it was the VBAs fault for not checking facts before starting the input of the case. So to prevent this from happening; before you start working on a bankruptcy petition, do a check in PACER. Also, check the Client Intake Forms and tax returns to see if the debtor has lived at any previous addresses. This will tell you whether you need to check in different jurisdictions other than where the debtor currently resides for previous bankruptcy filings. Also, to triple check your facts do a background check for previous addresses. One service I use is http://www.ussearch.com/

Are the debtors behind in their mortgage payment?

If the debtors are seriously behind in their mortgage payment (6 months or more) you may have a problem if the debtors cannot qualify for a Chapter 13. If debtors are behind in their mortgage payment and file a Chapter 7, they are normally required to catch up all the back payments before the 341 Meeting. However, in some cases, the attorney will provide foreclosure mediation services to the debtor and either reduce, strip or negotiate the mortgage to the benefit of the debtor. If these negotiations occur, the attorney will provide you with the figures you need to enter on the bankruptcy petition before it is filed.

Or, if you have received advanced training in foreclosure mediation, the attorney may hire you to negotiate with the mortgage company on behalf of the debtor. (See the references below for training materials in foreclosure mediation.)

Is the real property due for a Sheriff’s sale?

If the client or attorney does not tell you about a Sheriff’s sale that is scheduled to occur, you can normally find the information when you do an online lawsuit check. You can also check the Real Estate page of the Client Intake Forms to see how many months the debtors are behind in mortgage payments. If there is a pending Sheriff’s sale and the debtors want to keep the house, you should not decide to go on vacation, attend family outings or lay the matter aside. Instead, you need to jump into high gear and make sure a bankruptcy petition is filed in order to protect the debtor’s home.

I cannot begin to tell you how many times I have had to work all night to save a person’s home. But two people I trained during the past month encountered this situation and instead of rolling up their sleeves and working, they left me with the responsibility. It was more important for them to attend an AVON meeting and go on a weekend picnic than to save a person’s home. People who put their personal life above their business responsibilities will never grow their companies into professional operations. Owning your own business is nothing like working 9 to 5. Therefore, if you don’t want the responsibility, go work for an employer.

Summary

These are just a few of the problems I encountered during the last two weeks of training. As I encounter more, I will write more articles to help you so that you do not make the same mistakes.

References

The Complete Foreclosure Mediation Kit
http://www.713training.com/shop/cart.php?m=product_detail&p=93

Chapter 13 Training Seminar, Los Angeles CA
http://www.713training.com/shop/cart.php?m=product_detail&p=100

Introduction to Chapter 13 Concepts
http://www.713training.com/shop/cart.php?m=product_detail&p=101

Join the NAVBA and Save 10 Percent on All Products
http://www.navba.org/administrator/signup.php

Lesson for the Week of May 18, 2009

Every week attorneys from almost every state send me their Chapter 13 petitions for review. Normally, I am called in after the petition has been filed and the Trustee has objected to the Plan. It is a well known fact that I love Chapter 13s and word gets around fast. That is why attorneys call me almost on a daily basis; and this is the material I use to help train you.

Lesson of the Week

For the lesson this week I chose a petition that was probably the worst case I have encountered in quite awhile. The attorney had already attended the 341 Meeting and the Trustee had objected to it for several reasons. The attorney sent me the Amended Chapter 13 Plan and the Trustee’s Objection. I had nothing else to go on.

The first thing I did was login to PACER and review Schedule I and J of the petition. I immediately noticed that the debtors had an income of $5,567.23 on Schedule I and monthly expenditures of $6,913.00 on Schedule J. Immediately, I saw this petition should have been a Chapter 7 because there was no money left over to make a Chapter 13 Plan payment, which was one of the objections made by the Trustee.

Secondly, I did a search on PACER under the LAST NAME of the debtors. The reason I searched by LAST NAME instead of the CASE NUMBER was because I wanted to see if there were any Adversary Proceedings against them. To my surprise, the debtors had filed TWO Chapter 7 petitions since January. How is this possible? Because the cases were dismissed for non-payment of filing fees. In most bankruptcy courts, they allow debtors an opportunity to file or reopen a case within 30 days of filing if it is dismissed solely due to the non-payment of filing fees. Note: Bankruptcy courts are normally very lenient in trying to give debtors the benefit of the doubt unless the attorney or debtors have abused their leniency.

In this case, the debtors had proposed one payment of $89.00 (which was paid when they filed their petition) and $70.00 a week for 3 additional weeks. They did not fulfill the promise they made. Instead, they made the $89.00 payment and did nothing else.

To make matters even worse, these debtors did not even use an attorney to file their Chapter 7 petition. They tried to do the job by themselves which is the worst thing they could have done. Not only did they get their case dismissed, but they demonstrated a reputation of non-payment to the court. These types of actions can have great impact on a case and the way the debtors are treated by the bankruptcy court.

Repeating the same mistake, the debtors filed another Application to Pay Filing Fee in Installments and made one payment of $89.00 when they filed their second bankruptcy petition. Again, they did not fulfill their promise to make payments of $70.00 per week so they got their second Chapter 7 dismissed.

Finally the debtors decided they needed to pay an attorney to file their bankruptcy for them. The attorney discovered the debtors were 12 months behind in their mortgage. With the average monthly mortgage payment being $4,500 per month, this means the debtors had almost $60,000 in arrears, fees and interest to pay back in addition to making their mortgage payment. In an effort to save their home, the attorney placed the debtors into a Chapter 13 (although they could not afford it.) This is common practice in many law firms but it only temporarily fixes the problem. If the Chapter 13 Plan is lucky enough to get confirmed, the debtors normally cannot afford the Plan payment so they get their case dismissed for non-payment anyway.

Possible Scenarios

Debtors who are behind in their mortgage payments have several options available to them today. One option is the government Work-Out Plan that avoids bankruptcy entirely. But a debtor must be willing to make adjustments to their personal finances and take the responsibility to fulfill their agreements in the Work-Out Plan. Plus, they cannot wait a year and then try to do something. This shows a pattern of neglect and irresponsibility and some law firms and debt work-out programs will not accept them.

Unfortunately, the majority of people I encounter are not responsible and are simply looking for a way to get free housing. These of the types of debtors I deal with every day. Unfortunately, this is why the bankruptcy court is filled with fraudulent attempts by debtors, which is why attorneys need to filter out these cases and only accept cases from debtors who are willing to take the necessary steps to save their home. Below are some suggestions I have for attorneys as well as VBAs to pass on to their attorneys:

A Simple Test to See if the Debtors Can Afford a Chapter 13

Find out how much money the debtors have after taxes and insurance is deducted (see Schedule I of the bankruptcy petition). Find out how much they debtors spend in monthly expenditures (see Schedule J of the bankruptcy petition). Subtract the monthly expenses from the income. If you have a negative figure, the debtors do not have enough money to fund a Chapter 13 Plan and they certainly do not have enough money left over to pay the arrearages on their mortgage.

How About a Cram-Down on the Mortgage?

In some circumstances, the appraised value of the primary residence has been used as the CLAIM amount instead of the actual CLAIM amount. For example: If a debtor owes $350,000 on their mortgage but they had their home appraised within the last year and it is only worth $200,000; the mortgage may be crammed down to only $200,000, thus saving the debtors $150,000.

By reducing the mortgage balance, the interest rate is lowered as well as the monthly payments. When this happens, it gives the debtors a Chapter 13 Plan payment they may be able to afford and stay in their home. However, the attorney risks an Objection being filed by the mortgage company. But, in reality, if the mortgage company foreclosed on the home, they would only get $200,000 (or less) anyway. By proposing to pay back the full $200,000 without any lapse in monthly payments, most mortgage companies will accept the cram down, especially if the debtors are in a hardship situation.

How About Stripping a Mortgage?

Many attorneys will also strip a second mortgage, thereby either eliminating the second mortgage entirely or paying the second mortgage on Schedule F as an unsecured, non-priority debt. The reasoning behind this is that if the home were foreclosed, the second mortgage would not be paid anyway. For example: The debtors owe $200,000 on a first mortgage and $50,000 on a second mortgage. The home was recently appraised at $150,000. If the home was foreclosed on, the $150,000 (or less) would be paid to the first mortgage company. The second mortgage company would receive nothing. Therefore, if the attorney proposes to pay the second mortgage company a percentage, they are normally very happy with what they can get.

However, if the debtor’s cannot afford to add the second mortgage as an unsecured, non-priority debt, the attorney will normally strip the second mortgage and eliminate it completely in the Chapter 13 Plan. This often occurs if the debtors are not into a 100% Chapter 13 Plan and adding in the second mortgage would adversely affect the other priority creditors or reduce the Plan down to 1% or less. Note: Never attempt a cram down or strip down unless you are working under the direction of an attorney. If this is not done properly, it could cause many unnecessary problems for the debtor and your job is to protect them, not cause them irritable harm.

Summary

Always remember that every bankruptcy petition is different. Every debtor has a unique set of circumstances and there are a variety of different options the attorney has open to them to work with. Many people who order my training materials believe they are going to get a cookie cutter training course. They want step by step direction that they can follow without any variance. I am thankful to report that the world of law is NOT like that. If you want cookie cutter methods in working a job, McDonalds and Wendys are hiring. But if you are a person that is tired of cutter cutter. If you are a person that enjoys thinking outside the box and using your brain in a logical manner, working as a virtual bankruptcy assistant may be the perfect field for you.

I hope this article helped many of the attorneys and virtual bankruptcy assistants working in debtor bankruptcy law to do a better job with their petitions. If you are new to the field and have questions about the virtual bankruptcy assistant industry, I urge you to download the free eBook: What is a VBA? which is available at: http://www.713training.com/getstarted.pdf

Do You Know an Attorney That Needs Help With Chapter 13s?

If you are an attorney (or know of an attorney) who needs help with Chapter 13s, please refer them to me. Also, drop me an email with the attorneys name and your contact information after you refer them. If I end up obtaining work from the attorney I will send you a 10% commission check. Also, if the attorney needs a VBA, I will refer them to you so you can have the petition work. It is a win/win situation for both of us, so keep me in mind if you run into attorneys who need assistance. I am probably only 1% of the population that loves Chapter 13 bankruptcy; so utilize my knowledge to your benefit so we both can prosper in our businesses.

Victoria Ring
http://www.713attorney.com
Certified Paralegal and Bankruptcy Specialist
I am located in Colorado Springs, Colorado
The main office located in Frankfort, Kentucky
Office: 614-323-8131
Fax: 614-355-0184

Note: This article is not written with the intent of taking business away from bankruptcy software companies who sell Local Forms and Chapter 13 Plans as “add on” packages. Instead, I am writing this article because I personally do not believe that anyone should be forced to buy something simply because they lack knowledge of other options available to them. Therefore, this article is written to inform you of the different options available so that you can make an informed decision before spending your money. –Victoria Ring

Why Are There Local Forms if Bankruptcy is Federal Law?

Local forms can be confusing at first. However, you need to remember that the United States government was developed in a manner so that each individual state could govern itself. Although Federal Law takes precedence over State law, the Federal forms of a bankruptcy petition remain standard throughout all 50 states. But, some state laws require additional State forms to be included along with the Federal forms when a bankruptcy petition is filed. That is why you need to keep up to date on the local rules of any bankruptcy court you are working in when preparing bankruptcy petitions.

Why Doesn’t My Bankruptcy Court Have a Chapter 13 Plan on Their Website?

Not all bankruptcy courts have a required format for their Chapter 13 Plan. If the bankruptcy court you are preparing a bankruptcy petition for does not have a Chapter 13 Plan form listed under “Local Forms” on the court’s website, you should be able to use the standard Chapter 13 Plan included free with the bankruptcy software you purchased.

In the list I provide at http://www.713training.com/links/forms.html you can scroll down through the list and see that some jurisdictions, as well as some States do not have a link for a Chapter 13 Plan. Again, this tells you that that particular state or jurisdiction accepts the standard Chapter 13 Plan provided free in the bankruptcy software program you are using.

Should You Buy Local Forms for Your Bankruptcy Software?

The choice is up to you. However, I believe it is important for you to understand all the facts so that you can make an informed decision before spending your money on something that is available to you free.

Most bankruptcy software programs provide you with a standard Chapter 13 Plan when you select a specific bankruptcy jurisdiction for the bankruptcy court you are preparing a bankruptcy petition for. However, the company who developed the software also sells additional local forms that you can purchase separately. Some of these local forms are $150 to $300 each; which can get quite expensive if you purchase them for all the different States the bankruptcy attorneys you work for are located in.

However, the majority of bankruptcy courts have a specific format for their Chapter 13 Plans. When they have any form requirement they post the form on their website. Often, these forms are available in Word, WordPerfect and almost always PDF format. In fact, the PDF is the best form to use because it is form fillable. This means, you simply download the form, click on a blank area and begin typing. In fact, some of the bankruptcy courts even provide Chapter 13 Plan forms that are not only form fillable but they also do calculations for you. These types of Chapter 13 Plans are really nice.

So Why Does Bankruptcy Software Companies Charge For Free Forms?

Bankruptcy software companies are not actually selling you the form. Instead, you are paying for the ability to have the form appear inside your bankruptcy software program. Plus the purchased forms normally will perform calculations within your bankruptcy software program. In other words, purchasing Chapter 13 Plans and additional court forms as “add ons” through the company who you purchased your bankruptcy software from is more of a convenience; it certainly is not a requirement.

Does This Matter to You?

That is a decision you will have to make for yourself. However, I will tell you what I did back in the old days, when I started The Lawyer Assistant and worked for attorney nationwide. The first time I began working for an attorney in a new jurisdiction I had not prepared a bankruptcy petition in, I would go to the court’s website and read the Local Rules. I also would review their Local Forms and find out if there were any additional forms I needed to file with the bankruptcy petition.

If I found a Local Form that needed filed with the bankruptcy petition I would print it out and type it in Microsoft Word. Then I would save the document as a template and use it every time I had to prepare a bankruptcy petition in that particular court district.

But the Hard Work is Eliminated for You

Today, you do not need to print out forms and individually type them. Instead, you simply download a PDF from the bankruptcy court’s website and fill it in on your computer screen. The process has been made simple, easy and quick for you. Plus, you save money and do not need to purchase additional forms from your bankruptcy software company.

What If You Don’t Have a Registered Version of Adobe Acrobat?

Normally it doesn’t matter if you have a registered version of Adobe Acrobat or not. The PDFs that you download from the bankruptcy court’s website are viewable in Adobe Reader (which is free.) You simply download the document, do a SAVE AS, and name the document (such as Chapter13Plan_JohnDoe.pdf.) Then, you fill in the PDF form and save it in John Doe’s file on your computer for filing electronically once your attorney has approved it. Next time you need to develop another Chapter 13 Plan in this court’s jurisdiction, go back to their website, download another PDF template and repeat the process.

What Do I Do With Documents in MS Word or WordPerfect Instead of PDF?

If you have Microsoft Word or WordPerfect, you can convert any document to a PDF within the software program. This function also eliminates the expense of purchasing Adobe Acrobat.

However, do not underestimate the power of the registered version of Adobe Acrobat. I have the Professional Version and I absolutely love it. I use my Adobe for developing eBooks that I sell on the internet as well as the development of fillable forms. But, if you are going to only use Adobe for reading PDF documents, filling in forms that have already been developed and saving the documents for filing with the bankruptcy court, you will not need to purchase the registered version of Adobe Acrobat.

Suggestion: If you find you need to create PDFs outside Microsoft Word, you may consider purchasing PDFFactory PRO at http://www.fineprint.com/ This is a lower cost alternative to Adobe Acrobat.

How Do I Get the PDF Into My Bankruptcy Software?

I have downloaded most of the major bankruptcy software programs and I found that all of them have the ability to insert a PDF into the bankruptcy petition during the electronic filing process. Simply open up your bankruptcy software, click on the HELP menu and search for something like “insert PDF” or “add PDF” or some other similar phrase. If you cannot find the answer in the HELP menu, call the bankruptcy software company and ask them how to perform the function in your particular program.

Another alternative would be to file the PDF separately from the bankruptcy petition. This is accomplished by logging into PACER (under your attorney’s ECF username and password) and electronically filing the PDF document. If you have never filed a separate document through PACER this process may appear intimidating at first because one-touch filing methods will make you lazy. But don’t despair. Learn how to do the process correctly as it will be a skill you will use over and over again. (See step-by-step instructions below to help you get started.)

How to File a Chapter 13 Plan Through PACER

You will need to know the case number to file the Chapter 13 Plan so the Plan and Certificate of Service (if applicable) may only be filed after the Chapter 13 case is open and the number assigned.

File the Chapter 13 Plan and the Certificate of Service (if applicable) together as one document. Have it prepared and saved as a PDF document.

Step 1 Login to PACER under the attorney’s ECF login.

Step 2 Click Bankruptcy on the Main Menu Bar.

Step 3 Select the Plan Category

Step 4 Check your case number and Click Next.

Step 5 Click on Chapter 13 Plan event and Click Next.

Step 6 Unless you are filing this document with another attorney, Click Next.

Step 7 Select the Party Screen will open. Highlight the debtor(s) and click next.

Step 8 Click on the Browse button to locate your document. Once verified, highlight it and click Open. Note: Do not use the attachment feature for the Certificate of Service. Keep the document together as a single document.

Step 9 Modify the text using the drop down boxes to indicate whether you have included the required certificate of service and click next.

Step 10 Proof-read your entry and Click Next.

If you have any problems, feel free to call the bankruptcy court and ask them to help you. Most bankruptcy court employees are more than willing to help you because they would rather you do the job right, versus them finding an error, contacting the bankruptcy attorney and starting over again. They realize it is a time-saver for them to help you so do not be afraid to call. Just remember to be courteous, humble and gracious. Thank them for their time and let them know you appreciate them. Your attitude is important because you are representing your attorney. If you should get the bankruptcy court upset due to your unprofessional behavior, the bankruptcy court will have no problem contacting your attorney and voicing their complaint. Therefore, make sure you stay cool, calm and collected and everything will work just fine. In fact, you may make a friend at the bankruptcy court and use them as a contact in the future for additional information and help you or your attorney may need.

Can I Prepare Bankruptcy Petitions for Attorneys Without Buying Bankruptcy Software?

Of course you can. However, I must warn you, the process will be more time consuming. Bankruptcy software automates many processes which in turn saves you a great deal of time. For example: If you fill out each individual Forms and Schedule in a bankruptcy petition there is a lot of information you must enter over and over again (such as the debtor’s name.) Also, you will have to do your own mathematical calculations compared to bankruptcy software programs that do that for you.

There are many other pluses to purchasing bankruptcy software but you can decide for yourself which method you prefer to use. If you want to download the fill-in-the-blank Federal Bankruptcy Forms, visit:
http://www.uscourts.gov/bkforms/bankruptcy_forms.html#official

Helpful Hints

1. Visit http://www.713training.com/links/
2. Click on the Bankruptcy Courts and Forms section
3. Find the bankruptcy court you are preparing a bankruptcy petition for
4. Click on the LOCAL RULES, print them out or read them online

Note: You may not completely understand everything you read in the LOCAL RULES for the bankruptcy court. Most LOCAL RULES are written in legalese and are directed to attorneys who have been to law school and understand the lingo. However, there is a lot you will understand and by reading the LOCAL RULES you will become more familiar with that particular bankruptcy court. This knowledge will increase your value to the attorney you are working for as well as preventing problems that can come up because you did not follow a LOCAL RULE.

5. Visit the link to the LOCAL FORMS AND TEMPLATES and look them over.

Note: The first time you look down through the list of LOCAL FORMS AND TEMPLATES you will undoubtedly be confused. Just take it slow. Many of the LOCAL FORMS will only be for cases AFTER the bankruptcy petition is filed. Other forms are for creditors and still others for appeal cases. Instead of being confused with the list of LOCAL FORMS remember this: Very often, the LOCAL FORMS you need for preparing a bankruptcy petition for your attorney are included inside the bankruptcy software you purchased. But if you find out that the software company is offering to sell you a specific LOCAL FORM, review the LOCAL FORMS on the bankruptcy court’s website before spending your hard earned money.

6. Rather than use the direct bankruptcy court link, the CHAPTER 13 PLAN link provided on the LINKS PAGE was downloaded and placed on the 713Training.Com website for ease of use. It was current at the time the web page was developed. However, court rules change often; therefore, it is to your advantage to check the LOCAL FORMS of the particular bankruptcy court’s website to make sure you are using the most recent Chapter 13 Plan if you will be using it to file for your bankruptcy attorney.

Note: Also, some bankruptcy courts require Chapter 13 Plan Cover Pages and even Chapter 13 Orders to be filed with the Chapter 13 Plan. Again, check the bankruptcy court website to make sure you have the current information.

Summary

My goal in providing this information to you is to save you $1,000s of dollars versus purchasing local forms offered by the major bankruptcy software companies. You should always keep in mind that Federal and State Bankruptcy Forms are provided free of charge to the public. Just like bankruptcy filing information is available for public knowledge. You should never be forced to pay for Federal and State Forms regardless if it is for incorporating your business, copyrighting a book, preparing income taxes or bankruptcy petitions, or any other Federal or State form required by the government. However, if you choose to purchase the forms, at least you will be making an informed decision and not being taken advantage of because you were not aware Federal and State forms were available free.

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