Archives for November 2012

Lenny Dykstra pleads guilty to bankruptcy fraud and could get 30 months in prison for stripping his house of valuables

Too often, I hear clients who feel that if they/we do not tell about the things they want to hide, they will not get caught. Former Mets outfielder Lenny Dykstra plead guilty to bankruptcy fraud and if the prosecutor has his way, will be sentenced on December 3, to 30 months in prison. What did he do? He cleared valuables out of his California mansion, hid them in his bankruptcy filing, then  secretly sold them. We don’t know what he got for the purloined items but I doubt it was worth it.

Reputable attorneys will tell their clients that this behavior is not worth it, especially for high-visibility, or formerly-high-income debtors. Why doesn’t this work? First, there is always someone else who is involved or who knows what you did or what you had. Second, many people “tell lies to their lawyer, and tell the truth to the judge”. (As a trustee I saw this often, and the poor lawyer is sitting there, dumbfounded.) Third, trustees spend their professional lives as lie-detectors, and some are very good at it. Going in you have no idea who your trustee will be, or who else may be whispering in her ear about you.

Here is my take on this: There are worse things in life than having to pay your creditors something. Usually there is something that can be done, and some good deals that can be cut with a trustee to “redeem” (or buy back) things the trustee would otherwise sell. The key is to be honest, and to follow the lead of the knowledgeable and reputable lawyer you should be dealing with.

Or you can do what Mr. Dykstra did, and hope that you get lucky. ( and hope that no one notices all the stuff that is missing, or sees you selling it).  The prosecutor told his sentencing judge that he had an “arrogant world view”, feeling that he was untouchable because of his celebrity. The judge might very well throw  the book at him.

Any lawyer who suggests or recommends that you skirt the road of honesty is likely to be one who already has a reputation among the trustees. By being represented by such persons, you may unwittingly be putting a target on yourself. And the collateral damage could include the lawyer who counsels such behavior, or even the one who winks and looks the other way. I never want to put myself in a situation where what I did could be used as my client’s bargaining chip in plea negotiations.

Most people, when they understand the risks, take the high road, and make a better deal for themselves that Lenny Dykstra did.

After the storm, dealing with insurance claims is fraught with traps

This recent New York Times article provides some excellent guidance about handling insurance claims. http://www.nytimes.com/2012/11/10/your-money/home-insurance/after-the-storm-managing-your-homeowners-claim.html

We hope all our friends, clients and readers are healthy and hopefully weathered Hurricane Sandy and the nor’easter that followed well. We know the destruction at the shore is horrendous and heartbreaking for many.

Add the stress of dealing with insurance companies to the heartbreak and anxiety can be a recipe for a “perfect storm”.

My advice to clients is to be especially wary of anyone who approaches you to provide professional assistance. While there are many qualified and ethical Public Adjusters (these are different than “Independent Adjusters”), not all fit that description.

Whatever you do, try to stay organized and document everything. A binder or spiral notebook in which you create a “daily log”, to note all interactions, addresses, contact information, observations etc could be invaluable. A digital camera, good carrying bag and extra batteries are invaluable.

Demand copies of anything you are given to sign, right then and there. If you cannot have the copy then, offer to take the paper, make a copy and send the other party the original. Take notes of any

One other trick I learned from years as a trustee going into strange buildings to inspect or inventory: Pick one place as a “staging area” for your notes, camera, jacket etc, and do not put anything down anywhere else. Yes, I know, this is your property, but in the chaos of picking through a mess, this is still a good rule.

The other point is to be patient.

Finally, seek professional advice, from your own insurance agent, or adjusters or lawyers. These people are objective can help you sort things out.

Finally, try to remember that “this too shall pass”. Life goes on…

New Jersey foreclosures and loan modifications: improving and moving faster, but for how long

I just moderated a seminar for lawyers on the current state of foreclosures and loan modifications. The latest intelligence is that new foreclosure filings in New Jersey are moving from the filing of the Complaint to Sheriff’s Sale in 6 to 12 months. This is a far cry from the three-years-plus that was the accepted situation 6 months ago. The reasons are several. First, due to a 2011 temporary moratorium on filing and processing of foreclosures by six major mortgage loan services, the backlog of pending cases has been largely reduced. Second, the Superior Court foreclosure processing unit has add staff to deal with the workload. Third, the Court has set up electronic filing systems for foreclosures, that make it simpler and easily for court personnel to process new filings.

How long the current relatively fast processing of foreclosures  will continue is uncertain. Currently, there are 60,000 to 100,000 pending cases. Many, we are told, are older cases stalled by new documentation requirements for entry of a foreclosure judgment. And several sources has told us that there is a potential avalanche of other foreclosures waiting to be filed. Some believe that when this hits, we will be back to a three or even four year delay from start to finish.

Several unknowns still exist. Are lenders more willing to modify mortgage loans? The best answer is, it depends on who holds the loan. (Remember that almost all these mortgages are held by investor trusts. The “lender” is really only a loan servicer hired by the trustee). There are new state programs to help homeowners keep their homes. But many sources report instances of ridiculous and inconsistent treatment by lender representatives who process loan modification programs. It is still a long and uncertain road. Seeking Professional help, either through legal counsel, a HUD-qualified housing counselor, or one of the reputable sources who prepare the applications, is a wise move.

We are seeing more instances in which substantial reductions in loan balances are being offered by lenders. This is a hopeful sign as well.

Stay tuned. It is still wild and woolly out there.

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