Nashville Probate Committee Hosts Judge Kennedy

       Today, the Nashville Bar Association Probate Committee had the pleasure to have Davidson County's Probate Judge Randy Kennedy speak at our monthly meeting.  Various topics were discussed including new procedures for his courtroom and advice/tips for petitions to probate wills, specifically lost wills. But the bulk of the discussion involved the Judge discussing the proposed amendments to the State of Tennessee's Conservator and Guardianship laws.  Judge Kennedy summarized many of the changes and possible ramifications.  Overall, his main message was for the Tennessee bar members to read through the legislation and submit any comments, concerns, and questions to the legislature.  

       The Tennessee Bar Association is putting together a committee to research the new proposed amendments and submit a report discussing the positions of the probate bar.  A future article will include a more thorough discussion of the amendments and the specific provisions and their potential ramifications.  If interested, the following are links to the proposed amendments:

http://www.capitol.tn.gov/Bills/107/Bill/SB2519.pdf

http://www.capitol.tn.gov/Bills/107/Bill/SB2398.pdf

http://www.capitol.tn.gov/Bills/107/Bill/HB2456.pdf

Property Taxes in Bankruptcy

       As I write this article, the issue of property taxes is still unsettled in the Federal Districts of Tennessee, the 6^th Circuit, and in Bankruptcy law all over the country. Nevin Law Firm was fortunate enough to be the ones with the case to settle this newly arisen issue.

       This issue involves the treatment of property taxes in a Chapter 13 plan. Tennessee statute states that late paying property taxes are subject to 1% per month (12% per year) interest rate and a .5% per month (6% per year) penalty for a total of 18% rate. Section 506 of the Bankruptcy Code determines what post-petition interests and “fees, costs, and charges” are allowed. We are arguing that the additional 6% penalty is not a fee, cost, or charge and therefore should not be allowed. Metro Trustee, obviously is arguing they are entitled to the additional 6%.

       Now, for a Chapter 13 debtor every dollar counts. Debtors are placed on a very tight budget to pay as much as they can afford to their creditors so an additional 6% payment can break a budget, even if its only a few dollars extra per month. Additionally, after combining all these cases, the 6% penalty can mean hundreds of thousands of dollars to the counties of Tennessee and even more when addressing the entire 6^th Circuit. Another implication of this is that if a “penalty” is found to be a “fee, cost, or charge” other secured creditors will be able to collect post-petition penalties that accrue in the case. This will surely equal millions of dollars.

       We argued the issue two weeks ago and submitted supplemental briefs last week. Currently, the Judge is researching and writing his own opinion to decide whether we or the Metro Trustee is correct in interpreting the Bankruptcy Code, and I am eagerly awaiting his decision. It is very likely this case will go to the 6^th Circuit Court of Appeals and possibly the Supreme Court (which would be such an honor as a venue to argue the issue). Thus no matter the current decision, the issue will continue to be contested for the next couple of years. Again, we are very excited at the Nevin Law Firm to have the honor and responsibility to be handling this case and will post an update as soon as we receive the decision.

Loan Modifcations: Tips and Warnings

       As a Bankruptcy Firm, we see many good, hardworking people whose homes are in foreclosure. And after all these stories, I am surprised to see that many of them fell behind because of Loan Modification Programs. To be clear, modifying your loan can help you financially; however, I want to set out many tips and warnings you need to know before attempting a modification so you do not fall victim to what has led others to foreclosure and consequentially, bankruptcy.

       First, you need to know the truth. Very few borrowers after the process end up with a loan modification. I recently spoke with a friend of mine in the mortgage loan market and learned that approximately only 6% of those who apply end up lowering their mortgage payments. Six percent, that's all!

       Second, if you want to hire an attorney to work with you and your bank for a loan modification, DO NOT hire an attorney, agency, or professional who wants to be paid up front. I've heard plenty of stories, where a person pays a couple thousand dollars to an attorney to work with their bank. That money would be better spent on paying down your actual mortgage or to savings. Lots of times, these agencies are scams who take your money and run. Other times they are legitimate, but remember SIX PERCENT success rate. The only fee arrangement you should make is that the attorney you hire will receive a percentage of any savings from a successful modification. If anyone wants money up front, go somewhere else. A contingent fee makes the person you hire actually try to succeed since that is the only way of him getting paid. If he has already been paid, then he won't care if you end up being part of the 94% who fail.

       Lastly, keep making your mortgage payments during the process! Many people have said how their Bank told them that they don't have to make payments while applying, or that the bank only accepts those who are behind in their mortgage. If you must be in default to qualify, do not do it on purpose, stay current. And when your bank tells you that you are not obligated to keep making payments, the fine print says that if you do not succeed in getting a modification, all of those missed payments come due immediately along with interest and late fees. And then the bank ends up foreclosing on your home. So keep making those payments, and if you choose not to, do not spend that money. Save it on the great chance that do not succeed in modifying your loan.

       The Loan Modification is a long, complicated, and drawn out process that will likely lead to nothing. So please be smart about your money. Hopefully, you may end up as part of the 6%, but as you go through the process, remember these helpful tips and warnings.

Judge Mashburn's Investiture

       This past Friday, February 24, in Nashville was the investiture of Randal Mashburn as U.S. Bankruptcy Judge for the Middle District of Tennessee. Mashburn had previously practiced Bankruptcy law with the firm Baker, Donelson, Bearman, Caldwell & Berkowitz PC in Nashville. The oath was given by the Honorable Keith Lundin, Chief U.S. Bankruptcy Judge for the Middle District of Tennessee, with Mashburn's wife holding the Bible. Mashburn's other family members also helped don the Judge with his new robe. Also, present at the ceremony was the 6^th Circuit Court of Appeals judges as wells as the Federal District Judges for Middle Tennessee. Presentations were also given by TBA President-Elect Jackie Dixon and Robert Mendes, immediate past president of the Nashville Bar Association. 

       Judge Mashburn is extremely intelligent, has practiced Bankruptcy law for decades, and is well versed in Bankruptcy law.  The Middle District of Tennessee is lucky to have him as our newest judge.

HOA Fees and Foreclosures

       When a bank forecloses on a property the title of the property passes from the borrowing homeowner to the bank. Once this occurs, the bank not only becomes responsible, but also liable for paying the HOA fees if the house is subject to them. However, a homeowner can be stuck in a financial mess when a bank actually forgoes foreclosing. Banks are smart, and when they find out that the home they have begun foreclosure proceedings on has HOA fees, they will actually cease foreclosure and let the HOA fees build up against the homeowner.

       We recently saw this with one of our clients. The husband of the married couple had lost his job. Unable to pay the mortgage, the bank began foreclosure proceedings. In anticipation of the foreclosure the couple moved in with his caring mother. However, once the bank realized that HOA fees were required to be paid, they ceased the foreclosure. So as of now, the bank will not take the house, the couple no longer lives there, no one will buy the house because it is worth less than the mortgage on the property, and because the title of the property is in the couple's name, the HOA has sued the couple for past due HOA fees. So without the ability to get the title of the house out of their name and the ever increasing HOA debt, the only way out of this rut was to file bankruptcy. It was a very unfortunate situation, but when an underwater house is coupled with HOA fees, banks have figured out its better for them to stick the homeowner with the bill.