In this episode of The Florida Bar Podcast from the 2017 Annual Florida Bar Convention, host Liz McCausland reviews updates in the field of bankruptcy with Barbara Leach. They dive into topics like exemptions, debt payment using credit cards, and student loan dischargeability.
Barbara Leach is the managing attorney of Barbara Leach Law, PL. She practices family law, consumer bankruptcy, and civil litigation
Liz McCausland is an experienced attorney and Supreme Court Certified Circuit Civil Mediator.
The Florida Bar Podcast
2017 Annual Florida Bar Convention: Bankruptcy Law Updates
Intro: Welcome to The Florida Bar Podcast, where we highlight the latest trends in law office and law practice management to help you run your law firm, brought to you by The Florida Bar’s Practice Resource Institute. You are listening to Legal Talk Network.
Liz McCausland: Hello and welcome to The Florida Bar Podcast, brought to you by The Practice Resource Institute on Legal Talk Network. This is Liz McCausland, and I am recording from the 2017 Annual Florida Bar Convention in Boca Raton, Florida. Thank you for joining us today.
I am stepping in today for Jonathon and Christine. I am a bankruptcy practitioner in Orlando, Florida and I am also a mediator, mediating large amount of bankruptcy cases, primarily loan modification cases in Florida, as well as for other states.
Joining me today I have Barbara Leach, and we are going to talk about the Bankruptcy Law Update.
Before we do that, let’s learn more about Barbara. And Barbara, if you could just tell us where do you work and what do you do?
Barbara Leach: I have a small firm in Orlando and I practice predominantly family law and consumer bankruptcy. So I am really excited to be here to talk about bankruptcy and what’s going on, because it’s an ever-changing world.
Liz McCausland: Well, you are a busy, busy practitioner I know, how did you get roped into doing the case law update?
Barbara Leach: This is a CLE that’s put on annually by the solo small firm section of The Florida Bar and it’s a really great way for general practitioner or even a very specialized practitioner to get a little bit of an overview of what’s going on in like six different practice areas.
So at this event they have real estate family law, criminal, bankruptcy updates and I — this is the second year that I have presented the Bankruptcy Update and I think it’s because of my affiliation with the Solo & Small Firm Section; I am on the Executive Council, as are you Liz McCausland.
Liz McCausland: Like I said, I know you are a busy girl. So tell me, what was the most earth-shattering case that you found this year in bankruptcy world?
Barbara Leach: Well, I hate to disappoint you, but I didn’t find anything earth-shattering. Out of all the cases I reviewed, and that includes United States Supreme Court Eleventh Circuit District Court, which if you are not a bankruptcy practitioner, bankruptcy’s courts first line of appeal is actually the District Court.
So I did Eleventh District Courts in Florida and all the bankruptcy court opinions for about an 11 month period. And the trend that I see is just courts continuing to massage the law and rule largely consistently. The conversation we had last year about this, there was a lot more that had come down last year. This year we didn’t see that same kind of earth-shattering opinion. There were just a few cases that were before the United States Supreme Court that had to deal with bankruptcy and nothing was surprising.
Liz McCausland: Okay. Well, what was I guess the most practical then that you found?
Barbara Leach: I would say the most practical case that I found relates to exemptions that there were several cases that came out, just flushing out what debtors can identify as exemptions or not. One of the, I found, that helped my practice the most was the idea that if a husband and wife are co-debtors and they are filing joint bankruptcy, if the husband, for argument’s sake, is the only one on the note, he can claim homestead exemption and the wife can then claim the wildcard exemption, and again, for those of you who don’t do a lot of bankruptcy usually it’s one or the other.
And here, in this case it’s a limited set of facts or circumstances, but you could actually claim both.
Liz McCausland: That is interesting. That would probably be a kind of debtor leaning, it sounds like, case finding.
Barbara Leach: I would say that that’s true, that it is — it is very debtor-centric in that way.
Having said that, as far as that being debtor leaning, there was an opinion that came out regarding — you all will recall last year the United States Supreme Court was — there was the issue about IRS filings when you do your return. And as you people listening might or might not be aware, there are some limited circumstances when you can discharge IRS debt.
But the United States Supreme Court ruled that in some circumstances a return that is filed late might not be considered a valid return. That it might have been found not in good faith, and that that has the potential to impact that dischargeability. Yeah, that was a big case last year. And my friends who do IRS debt dischargeability practice, they were waiting to see what that — how courts would interpret that, how liberally would they construe that, either in favor of creditors or in favor of debtors. So we are still looking to see how that’s all going to shakeout.
Liz McCausland: Okay. Well, that’s definitely interesting. What are some maybe trends that you saw in bankruptcy or that you are seeing in bankruptcy?
Barbara Leach: Again, a continuation from last year. But I think where last year we saw a little bit of a split, now we see the courts lining up to — if a debtor surrenders property, their home or investment property in bankruptcy, in the past we have had those debtors try to defend foreclosure actions. It’s the whole idea, I am surrendering the property, but I want to live in it as long as possible. I want to milk this foreclosure case as long as possible so I can live rent free, if you would. That’s obviously very creditor-centric approach to characterizing this issue.
But in this circumstance or as a follow-up to that, courts are unequivocally telling debtors that they cannot defend foreclosure actions if they have filed bankruptcy and said they were going to surrender the property.
So we actually have creditors going back to closed bankruptcy cases, opening them, getting the court to issue an order to the debtor that they cannot defend, that they have to remove it. Even as specific as saying, you have to remove your answer in affirmative defenses, or at least you have to remove your affirmative defenses in state foreclosure case, you can’t litigate that.
Liz McCausland: That’s really interesting, because I know that’s been maybe a long-term plan for a lot of people to stay in their homes longer.
Barbara Leach: Yeah.
Liz McCausland: I will tell you which case I was most kind of surprised about, because as a bankruptcy practitioner I have always subscribed to the fact that you cannot charge my fees, and so it just doesn’t make sense. You are going to charge —
Barbara Leach: What do you mean by charge your fees?
Liz McCausland: Well, you can’t use a credit card to pay the legal fees for filing bankruptcy, because you do so knowing that you are going to discharge that debt. And there was a District Court case that said, no, debtors can charge the legal fees onto a credit card that they then discharge the debt on, because it was found that they were necessary costs, just like gas and food, and so that they were able to do that. And that was kind of a new one for me, because I had always proceeded under the assumption that you couldn’t do it, because you knew you were going to be discharging that debt.
Barbara Leach: And if you will remember since — listeners, Liz and I both practice in Orlando and we are in front of the bankruptcy judges with frequency, you will recall that there was a law firm that got in trouble because they were having their clients use credit cards to pay fees.
Liz McCausland: Yes. And this was I think — that law firm, the case came out at the review of their practices and the court said that was okay.
Barbara Leach: I understand that. It makes me a little bit uncomfortable, and although that might be a District Court opinion, so ostensibly that’s binding to the bankruptcy courts, that makes me nervous.
Liz McCausland: Me too, me too. And the other thing that we recently had, at least in the Middle District, is one of our judges, Judge Jackson came forward and said that a debtor who purchases a property, maybe through a tax sale or through an HOA sale, they could actually cram down that property in bankruptcy. They didn’t have to be in privity of contract with the mortgager. So they didn’t have to be a borrower on the note. And that the definition of claim is so broad that they can actually cram down that property. So that’s a new one that I think we should watch.
Barbara Leach: It will be interesting. I don’t know if that issue will percolate up for us to look to and enough for that to be addressed this time next year, but if not by next year, then maybe the year following that, because I can absolutely see creditors bristling at that kind of ruling and that decision. And obviously it’s going to be in limited circumstances, but I can also see savvy, sophisticated debtors using a 13, using that as a tool to benefit them.
Liz McCausland: Oh, absolutely, absolutely, because really the creditors, had the homeowners stayed in the home, wouldn’t have to face a cram down, because it would be homestead property, but now that it’s been purchased, then they are losing out because of the cram down. So I bet it does go further, but we will have to see next year.
Barbara Leach: Something else that is interesting and I don’t know if this has always been happening or if this is a trend, but the concept of debtors bringing lawsuits against creditors for FDCPA, Fair Debt Collection Practices Act violations as it relates to contacts that are made to the debtor, either immediately before the filing of the BK or post-filing of the BK, but there seems to be an uptick in actually trustees also very astutely and savvily bringing lawsuits against those creditors.
The reason I even bring that up now is there have been several cases on the bankruptcy court level and actually even one on the District Court, where they are litigating the issue of these information sheets that banks send to homeowners after their debt has been discharged. So they are still in the property, they have either surrendered it or they have said they are going to affirm the debt, but whoever affirms a mortgage really.
And I don’t know, at least in Central Florida, I don’t know that the judges would actually — they are not prone to accepting a reaffirmation agreement on a home mortgage, but the idea is the banks send these information sheets after the discharge. It could be a circumstance where frankly people might still be making their house payment.
Liz McCausland: Do you think that there has been an uptick in looking at the violations of the Debt Collection Act because bankruptcy filings are lower and so those practitioners are looking more into their cases for ways to protect their clients, they just simply have more time to do that?
Barbara Leach: I had not put that two and two together to get to that point, but I think that makes perfect sense. Do you know what year we are at in terms of that —
Liz McCausland: I want to say the third year, second or third year.
Barbara Leach: Yeah, so you are absolutely right. Practitioners who exclusively do bankruptcy, you are right, they have more — perhaps they have more time, and the same thing can then be extended to trustees, if they now have more time to do that. And I know that the trustees who do that, they partner with firms who specialize in, not that we can say specialize, in that sort of practice area for those debt collection prosecutions as it were.
Liz McCausland: Well, one thing that Florida has really led the nation on are mortgage modifications in bankruptcy. I think it started really in the Middle District, Orlando Division and then it spread throughout the state. I know now several other states have adopted it and I think it’s probably kept up on some of our filings and made a lot more cases — there are more cases now that complete because the debtor is not having to do the traditional bankruptcy, where they pay the regular mortgage and the arrearage. And now they are able to pay what they can afford until they go to mediation and they get a mediated settlement. So that has been I think a trend or an idea of the court that has helped keep bankruptcy filings up.
Do you think that there’s any other things that are coming down the pike that the court is looking at to maybe help consumers that will also impact the bankruptcy world?
Barbara Leach: Before I answer your question, student loans, I just want to say, dear listeners, Liz is so modest. She is actually one of the thought leaders and the revolutionary leaders who has been responsible for this whole mortgage mediation modification trend, that you are absolute right, started in Orlando and has just been embraced in the entire state. And I know you go around the country actually training bankruptcy judges and trustees and practitioners as to this opportunity and how it can really have an impact on saving people’s homes.
I have done some plaintiffs foreclosure work and then I have done some defense foreclosure work, so state court actions. When somebody comes into my office I say, you will have a much better chance of success for remediation through a bankruptcy court action than you will in a state court action, because in the State of Florida, as we all know, there is no duty to mediating good faith per the rules.
But I think that that’s not true in the federal bankruptcy court system, that they — creditors and debtors both have to come to the table to negotiate in good faith. What’s the percentage success rate that you all get?
Liz McCausland: It depends on the month, anywhere from 60% to we have had as high as 80% success rate on those that have requested mortgage modifications.
Barbara Leach: That’s extraordinary.
Liz McCausland: Yeah, in Orlando alone we have saved over 4,000 homes, keeping families in their homes. So I really appreciate that you singled me out for the praise, but really who needs to get the praise are forward-thinking judges and the team of attorneys, creditors’ side, debtors’ side, both and the trustee, Laurie Weatherford, who really brought a team together to think it all through and start the program.
And then the court of course who just backed it 100%, and I think it’s really spread because it’s a great program, that’s helped a lot of people, not just homeowners, but it has helped banks too, and the banks have bought into the program. So we are really very lucky.
So you were saying student loans, you think though as were the next I guess.
Barbara Leach: Yeah, we actually had this conversation last year as well in terms of the viability of student loan dischargeability in bankruptcy. And the door was opened under very, very limited set of circumstances. So like you and I, we would not be able to discharge our loans and frankly neither of us would ever want to be in the position where we could qualify to discharge our loans because it’s —
Liz McCausland: It’s a hard standard.
Barbara Leach: It really is. And you have to be physically incapable.
Liz McCausland: So do you think maybe it’s going the way of mortgage modifications, where they are going to think about maybe mediating a student loan and hopefully coming to a payment plan or something that will help both the student loan holder and the debtor?
Barbara Leach: I can see that happening. There was a case that came out this past year where somebody — the debtor was trying to discharge student loans and the court looked at the loan documents, saw that there was an arbitration provision in there and ordered the parties to arbitration. So I think the court using the loan documents themselves, but that’s — again, I just see that as a door opening, that’s not them saying no, you can’t do this.
Liz McCausland: Well, that’s I guess something that we are going to have to talk about next year; hopefully, there’s been some progress made to that. I know that judges are meeting and speaking about that and the student loan issues, and so hopefully we can have some answers at our next year’s podcast.
Barbara Leach: Well, hey Liz, maybe you should take the lead on that too, you and Laurie and Bob and Tammy Branson and the judges in the Middle District. You are right, it is a collective and I am not singling you out in the exclusion — to the exclusion of other people, but you all did a really great job with the mortgage modifications, maybe you can be the forerunners and thought leaders on student loans as well.
Liz McCausland: Well, no pressure there.
Barbara Leach: Lots of pressure. Lots of pressure.
Liz McCausland: Well, I know Barbara, you and I are both kind of lovers of apps and technology. Is there any technology in the bankruptcy world that would maybe be of interest to our listeners?
Barbara Leach: Now, hold on guys, I know you are thinking why would I ever want a bankruptcy app in my life, and let me just say that Bankruptcy+, so it’s like the word bankruptcy and then the “+” sign. It’s an app. It’s $15.99 to purchase, and it gives you the entire code and the rules and it’s updated and it’s right there handy. Like my eyesight is going, so I would probably be more inclined to download that on my iPad mini that I take to court, so I would have that handy.
And don’t forget, I mean I love having a hard copy of a code, but $16 is so much less expensive than if you are getting one of the annotated.
Liz McCausland: Agreed. Agreed. I am all about saving money; especially, when you are a bankruptcy firm, you are usually a solo small firm practitioner and you are looking to save money wherever you can.
So Barbara, before we close out, I have one more question for you. If our listeners would like to follow-up with you about topics we discussed today, how can they reach you?
Barbara Leach: Sure. I would love, I welcome the opportunity to discuss these things. My email is HYPERLINK “mailto:[email protected]” [email protected]. My Instagram is @babsbakesbliss, because I have got a cookie site also. And I am also on Facebook.
Liz McCausland: As an avid eater of babsbakes, I can tell you, they are delicious, and so please look her up on Instagram or email her if you have any questions about what we talked about.
This has been another edition of The Florida Bar podcast, brought to you by The Practice Resource Institute of Legal Talk Network. I want to thank our guest for joining us today. Barbara, thank you.
If you liked what you heard today, please find and rate us on iTunes. I am Liz McCausland and if they ever let me do this again, I will talk to you again, but until then, thank you for listening.
Outro: Thanks for listening to The Florida Bar Podcast, brought to you by the Florida Bar’s Practice Resource Institute and produced by the broadcast professionals at Legal Talk Network.
If you would like more information about today’s show, please visit HYPERLINK “http://www.legaltalknetwork.com/”legaltalknetwork.com. Subscribe via iTunes and RSS. Find the Florida Bar, the Florida Bar Practice Resource Institute and Legal Talk Network on Twitter, Facebook and LinkedIn, or download the free app from Legal Talk Network in Google Play and iTunes.
The views expressed by the participants of this program are their own and do not represent the views of, nor are they endorsed by Legal Talk Network, its officers, directors, employees, agents, representatives, shareholders, and subsidiaries. None of the content should be considered legal advice. As always, consult a lawyer.