NYC Chapter 7 Trustees and Abuse
From... https://www.danielgershburg.com/2014/09/02/nyc-chapter-7-trustees-abuse/
The New York Law Journal recently posted a story where two per diem attorneys in New York Cityfiled complaints against Chapter 7 Trustees for abuse of debtors. One of the debtors, the story alleges, is Spanish and was essentially verbally harassed and abused because he needed to use a translation service when he testified at the Meeting of the Creditors. Before I go further, let me make a few disclosures:
- One of the Trustees named in this story is Robert Geltzer. I previously worked as an Of Counsel to Mr. Geltzer in several cases, wherein we attempted to sue parochial schools to pay back tuition payments made by insolvent debtors. We lost. You can ready about my ass being handed to me by the Court here.
- I have, and currently still appear before Mr. Periera, who is the other trustee named in the story. In my experience, he and his office have been nothing short of professional to myself and all of the clients that appeared before him. That doesn’t mean he was never testy. That doesn’t mean he never raised his voice. That doesn’t mean I agree with some things he is currently doing. But he never came close to crossing the line.
- I’ve worked as an Of Counsel for other Bankruptcy Trustees in the Eastern and Southern District and have had great experiences with each one.
Now, onto the main story here:
Do Bankruptcy trustees go over the line in their questioning? Yes. I’ve seen this in person many times. If this actually occurred in this instance, then it’s reprehensible and should be dealt with, but a few factors should be considered.
Right now, Bankruptcy is dead. Completely dead. Barely any filings dead. In 2010, at it’s heyday, there were 18,891 Chapter 7 Bankruptcies filed in the Eastern District of New York. By 2013 that number had plummeted to 12,657. This year, the filings dropped 11 percent when compared to that of last year. Add to this the fact that debtors can now protect a boat load of equity in their homes thanks to a change in law signed by then Governor Patterson. This means that Trustees are no longer able to sell assets and make commissions from sales (the way they really make money) they were able to make just a few years ago. We, as debtors attorneys in New York City, can protect so much more of our clients assets now. We can protect up to $12,000 in cash if you’re filing for Bankruptcy in NYC or we can protect $300,000 in equity if you and your wife file and own a home. It’s extremely tough for a Trustee to sell anything now and make any money. They’re making about $60 a case and they’re probably not happy. That’s not an excuse for their actions, it’s just reality.
Non Attorney Bankruptcy Preparation:
MANY cases that go before the Trustee are prepared by outside services and not attorneys. Which, to me, is idiotic. Yes, as a Bankruptcy attorney, I have a self interest in this. But beyond that, I’ve seen morons prepare these things and cause people to lose their homes and cars. I literally mean morons. Petitions prepared by We The People fall into that category in my opinion. I’ve witnessed someone with hundreds of thousands in home equity come before a Trustee ( not one of the ones discussed above). That person had no business filing for Bankruptcy. Zero. Any lawyer 20 minutes out of law school could tell them that. But they paid $400 and they filed because they got shitty advice. And you know what the Trustee did? He said “Go speak to a lawyer and amend this petition.” Could have taken the home right there and sold it and made a boatload on commission. I’ve also witnessed trustees say to someone “Leave the keys to your car right here” because they used “a friend from the neighborhood” to file a case that shouldn’t have been filed. It takes a toll on Trustees to do this. The difference is that if an attorney is filing a case chances are that attorney has actually, you know, looked at the file and let the client know whether or not he should file. Trustees hate this stuff. The actual Bankruptcy disclosure MANDATES that a lawyer know the facts surrounding the petition he/she filed prior to filing it. Someone has to be responsible. In the majority of situations, it’s a lawyer. If the lawyer messes up and the house gets taken, the debtor can sue the lawyer. Good luck suing the neighborhood accountant/form preparer or We the People.
The use of per diem attorneys in New York Bankruptcy Court:
The article references Wd Ward Saxton, Esq. as one of the per diem attorneys who filed the complaint against Pereira. It should be noted that he was not the attorney who represented the aggrieved debtor. He simply “witnessed” the Trustee’s conduct. I’ve met Mr. Saxton several times over the years. He’s a competent, good attorney, and often does per diem work. Per diems essentially cover an appearance for an attorney who doesn’t show up. Like other lawyers, some are good and some not so much. Unless there is an emergency, we never hire them. Clients become super pissed once they come into Court and realize Daniel is in fact Rebecca and Rebecca is running a little late from the train. It’s just bad business and many times the client isn’t informed that you’re not planning to show. Clients are nervous when they go to Bankruptcy Court (which is normal) and so they don’t take kindly to paying a thousand dollars to the lawyer that doesn’t show to Court on the most important day.
Here’s the issue with per diem attorneys in Bankruptcy Court: Many trustees don’t appreciate per diems coming in for the same reasons I mentioned above. If you’re a per diem, and you have 20 cases that are being heard by a Trustee, the Trustee (rightfully, for the most part) thinks there’s no way you know the details surrounding the 20 cases you’re covering, which is going to make their job difficult. Why? Because there are 30 people waiting behind that debtor to be called and the Trustee has to ask the same 21 or so questions to all of them. If that debtor is not prepared for the meeting, it’s going to be a long day in ShitShowVille, as the debtor attempts to “ummm, not sure” his way through “yes” or “no” answers and the Trustee becomes more and more suspicious…or aggravated. The per diems can’t really say much because, you know, they just got the file a little while ago, so they say they will bring it up to the attorney who didn’t show. This defeats the actual purpose of the 341 Meeting (Meeting of the Creditors or Examination of the Debtor). Many Trustees have, on the record, required per diems to state whether or not they received a fee for the case. Simply put, some of them don’t like per diems and they believe the process takes much longer when they are involved because of preparation issues (which are not necessarily the fault of the per diems).
Translation is the most annoying thing on the Planet and is Misused
Translation services are necessary. They’re required and they should be for debtors who cannot speak English. A debtor who is filing Bankruptcy and doesn’t speak English has to have a proper way to communicate and answer some of the Trustees questions. Fact. Some translators are absolutely horrible. Fact. Trustees don’t care about these first two categories. There is a middle ground, though, where I’ve seen trustees essentially explode, and it is this middle ground that I want to touch upon. Imagine being in a room with 45-50 people that are filing Bankruptcy. 10 of those debtors needs translators. 7 of those have a per diem attorney. The debtors who need translators need 2 to 3 times as much time to examine as english speaking debtors. It’s just the way it is. But here’s what happens. The attorney requests a translator (“I think he/she may need a translator.”) Trustee complies. They get someone on the phone. The Trustee is to ask a debtor a question. The debtor is to speak; the translator to translate. Something like this: