Atty. Larry Yang

Big 2 may file for bankruptcy reorganization

Friday, 03 April 2009 22:11 Atty. Lawrence Yang

In response to the car maker’s GM and Chrysler’s statement made earlier this year that consumers will not buy cars from a bankrupt company for fear of getting worthless car warranties, the rationale espoused by the big 3 to justify bail out funds from Uncle Sam in lieu of filing for bankruptcy relief, President Obama said on Monday that all warranties issued by bail out recipients GM and Chrysler will be guaranteed by the full faith and trust of the U.S. government. In the same breath, the President showed the door to the CEO of GM to be replaced by his appointee, and said that Chrysler had 30 days to reach a joint venture deal with Italy’s Fiat, or face a certain death.

Homeowner Affordability and Stability Plan (HASP)

Friday, 27 March 2009 20:22 Atty. Lawrence Yang

(Part 2)

L ast week we discussed Part 1 of the Homeowner Affordability and Stability Plan or HASP which hopes to fix the mortgage meltdown by enabling qualifying homeowners to refinance or modify their mortgages. This will be accomplished by relaxing lending standards making it easier for borrowers to qualify for new loans and by rewarding lenders who provide those loans. The plan addresses two types of homeowners. The first type is homeowners who have good credit who want to refinance their houses to take advantage of current low rates of interest but cannot do so because the value of their houses have dropped too low, wiping out any equity. The administration estimates that the number of homeowners in this category is between 7 million to 9 million families. Here, HASP will allow loans to be made up of 105 percent of the property’s value. For example, client who filed bankruptcy 10 years ago, now has a perfect credit score, and comes to see me to get a loan modification to reduce his mortgage payment.

Home affordability and stability plan

Friday, 20 March 2009 22:39 Atty. Lawrence Yang

THE President announced his much-awaited HOME AFFORDABILITY & STABILITY PLAN last week. The objective of the plan is to bring mortgages in line with home values. What does this mean? It means that the plan recognizes that the values of houses have dropped so much that even those who have made big down payments to buy their houses have under water mortgages.

Congress passes BK Amendment to force loan modifications

Saturday, 14 March 2009 00:12 Atty. Lawrence Yang

CONGRESS passed the "Cram down" bill last Thursday. This is the much awaited legislative portion of the Obama plan that would amend bankruptcy law to empower bankruptcy judges to modify mortgages by cutting the balance on trust deeds to equal the current fair market value of the residence, extend the payment period of the mortgage, reduce mortgage payment and reduce mortgage interest. Presumably, this would be done in a chapter 13, not a chapter 7. This is an effective alternative to loan modification negotiations, which is purely voluntary on the part of creditors. Homeowners are presently at the mercy of creditors when they want their mortgages modified.

President Obama unveils foreclosure prevention package

Saturday, 07 March 2009 00:00 Atty. Larry Yang

The President unveiled his much awaited foreclosure prevention program announcing on television today that he would put $75 billion into helping as many as 9 million homeowners obtain affordable mortgage terms. He proposes to help homeowners modify mortgages basically in two ways. One way is through legislation that will amend bankruptcy law to allow judges to modify the mortgages of distressed homeowners, including reducing the principal of the loan to the property’s current market value. Through this amendment, debtors who file chapter 13 can petition bankruptcy courts to reduce their mortgage payments by reducing interest rates and extending the duration of the loan as well as reducing the secured portion of the loan to equal the current value of the property. I would imagine that bankruptcy judges would have the power to split the first trust deed into secured and unsecured portions. Under current bankruptcy law, bankruptcy judges have no power to divide first trust deeds into secured and unsecured even if there is not enough equity to support the entire loan. And judges will have the power to nullify junior liens on the house such as second and third trust deeds and home equity loan lines. These will probably be converted into unsecured debt. But even under current law, bankruptcy judges do have the power to strip junior trust deeds into unsecured debt in California. Thus, the major thrust of the proposed amendment will be to cut first mortgages down to the current value of the property and lower mortgage payment to an amount that the debtor can actually afford, thus allowing debtor to keep his house permanently. I fully endorse this amendment to bankruptcy law. It’s a good thing for debtors to have this option. Debtors can use this amendment to legally force a mortgage reduction payment and the cut the loan balance. This is something that cannot be done at this time except through negotiation in a loan modification program that creditors do not have to agree to if they choose not to.

Carmakers ask for more bail out money

Friday, 27 February 2009 21:05 Atty. Lawrence Yang

THE CEO’s of General Motors and Chrysler went to Washington again this week with tin cups in hand asking for more bail out funds to stay afloat. Both companies already received $17 billion in federal loans in the last two months and have submitted their plans to Congress to show Uncle Sam how they will restructure themselves so that they can survive and pay back bail out funds. GM and Chrysler are asking for $21.6 billion more on top of the $17 billion they already got. Might as well ask for everything they can get while the Administration and legislators throw money at every economic problem they see brought about by the mortgage meltdown and the recession. While the carmakers are shuttering factories and laying off workers by the hundreds of thousands to show that they mean business to cut down on overhead, product lines and dealerships, Washington is expanding the capacities of printing presses so that more and more money can be printed to fund the bail outs. When the business gets bigger, so does the bail out. All this money being given to the titans of business, industry and banking so that very large businesses which are actually bankrupt can avoid going to bankruptcy court where they should be going in the first place to reorganize themselves. Most of the airline companies went through bankruptcy proceedings since September 11 and they have come out as leaner and profitable businesses without receiving any bail out funds from the government. And we still dare to fly with them. Why should the carmakers be treated as business prima donnas?

Trump’s Casino company files for bankruptcy

Saturday, 21 February 2009 03:23 Atty. Lawrence Yang

The 3 Atlantic City casinos once run by Donald Trump filed for Chapter 11 bankruptcy protection recently for the third time. These are the Taj Mahal, Trump Plaza Hotel and Casino, and Trump Marina Hotel Casino. The last bankruptcy filing for his casinos was 2004. Trump Entertainment Resorts made the bankruptcy filing after Mr. Trump resigned as chairman of the board. Mr. Trump resigned after bondholders and their allies on the board rejected Mr. Trump’s offer to buy the company and take it private. Although Mr. Trump’s name is still on the casinos, he is currently a minority stockholder of the casinos at 28 percent. According to court papers, the company has $2.06 billion in assets and more than $1.74 billion in debt. Since this is a chapter 11 bankruptcy, all 3 casinos will continue to operate as usual during the bankruptcy proceedings. Note that this filing does not include the new Trump hotel in Las Vegas. This hotel is owned by another company, which did not file for bankruptcy. Further, the hotel in Las Vegas is a 5 star hotel that does not have a casino.

Discharge denied because of intent to harm a creditor

Saturday, 14 February 2009 02:13 Atty. Lawrence Yang

(1 vote, average: 5.00 out of 5)

If debtor acted with intent to harm one creditor, can another creditor raise this conduct to ask the Bankruptcy court to deny debtor’s discharge even if creditor was not the target of debtor’s actions? This was the question raised in In Re Kent. In this case, plaintiff sold his landscaping business to debtor in 2001 for $625,000. Plaintiff financed $100,000 of the purchase price. Debtor was doing well with the business for several years. Then he found out that his bookkeeper embezzled about $100,000 from him and had not been paying his corporate or business taxes. Debtor then worked out an installment payment plan with the IRS without knowing that he was paying little more than interest on the tax claim. He then made an offer in compromise and stopped making his installment payments. The IRS responded by serving a Notice of Intent to Levy. Debtor responded by operating under a new business name that was registered in the name of debtor’s mother and transferring assets from the old business to the new business. Debtor’s wife also transferred her interest in the real property back to her father. She had received an interest in the property, which was owned by her parents, after debtor bought the landscaping business.

How does bankruptcy lead to recovery?

Saturday, 07 February 2009 01:51 Atty. Lawrence Yang

For the layman, it is sometimes difficult to comprehend how two inconsistent situations co-exist. Bankruptcy and death is easily understood. Bankruptcy seems to imply that the bankruptcy entity or person is financially dead. But, bankruptcy and recovery? How is that possible? Perhaps we should pose this question to Mr. Trump. His companies have filed for bankruptcy reorganization several times and as recent as 2004. Yet his companies emerge from bankruptcy court leaner and are profitable once more. In fact, Mr. Trump advocates that the Big 3 carmakers of Detroit, GM, Ford and Chrysler, should go through bankruptcy instead of being given bail out funds so they can continue operating. Practically all of the major airlines have gone through bankruptcy since the Sept. 11 attack. But they still operate, and we still continue to ride on the planes of airlines that have been bankrupt. Some of these airlines have been in and out of bankruptcy court for the last eight years. When was the last time you flew on United or Delta. Both emerged from bankruptcy court as leaner and profitable companies. Even Kmart was in bankruptcy 10 years ago. Yet we still buy things from Kmart today.