Lehman bankruptcy - $1.1 billion in fees

"While talk of the end of the bankruptcy boom is fast spreading, every month seems like holiday season in the Lehman Brothers bankruptcy, the largest in U.S. history. The tab for outside legal advisers and other professionals broke the $1.1 billion barrier by early December."

More here.

Isn't it Just Paperwork?

So why do we care about the notes, mortgages, and other documents that were supposed to be transferred into these large mortgage trusts that we keep seeing in the news?  Well, it could mean Doomsday for many large financial institutions in America.  I'm not saying this would be a good thing or a bad thing - probably, a bad thing - most certainly, if the mortgage "pools" were found not to be securitized, it very well could cause the meltdown of the U.S. financial industry. There's a great description of exactly why on 4closurefraud.org.  Here's an excerpt:

"If the notes and mortgages were not properly transferred to the trusts, then the mortgage-backed securities that the investors’ purchased were in fact non-mortgage-backed securities. In such a case, investors would have a claim for the rescission of the MBS, meaning that the securitization would be unwound, with investors receiving back their original payments at par (possibly with interest at the judgment rate). Rescission would mean that the securitization sponsor would have the notes and mortgages on its books, meaning that the losses on the loans would be the securitization sponsor’s, not the MBS investors, and that the securitization sponsor would have to have risk-weighted capital for the mortgages. If this problem exists on a wide-scale, there is not the capital in the financial system to pay for the rescission claims; the rescission claims would be in the trillions of dollars, making the major banking institutions in the United States would be insolvent."

More here.

Another "Real Housewives" bankruptcy

James Bellino, husband of “Real Housewife of Orange County” Alexis Bellino, has filed for Chapter 11 bankruptcy protection for his company...Bellino is president of Global Marine, Inc. — a single-asset real estate corporation. A 7-page document filed Wednesday at U.S. Bankruptcy Court, Central District of California states that “after any exempt property is excluded and administrative expenses paid, there will be no funds available to unsecured creditors.”

The bankruptcy filing says the estimated number of creditors is between 1 and 49, and the estimated assets of Global Marine, Inc. are between $1,000,001 and $10 million.  Bellino’s business is based at his 6-bedroom home in Newport Beach, which has been listed for sale and scheduled for a foreclosure auction.

More here.

The Giudices Get Sued!

Your favorite Muppet-lookalike Teresa, and her husband juicy Joe Giudice (his legal name is Giuseppe; I will call them "T&J" for kicks) of "Real Housewives of New Jersey" fame were sued on September 2 by the government.  Specifically, by the United States Trustee overseeing New Jersey.  The U.S. Trustee is a division of the U.S. Department of Justice, given the significant job of serving as a "watchdog" for fraud and abuse in bankruptcy cases.  A lawsuit in bankruptcy court is called an "adversary proceeding" and the complaint against Teresa and Joe was filed under adversary 10-2150 (the main case is 09-39032).  Just this past Monday, T&J responded to the lawsuit! T&J are some bad apples -- allegedly, that is!

The complaint against our dear friends T&J sets out 5 counts or grounds on which the bankruptcy judge could deny T&J's discharge.  Being denied a discharge is a serious affair; generally the bankruptcy trustee still sells any non-exempt assets (those above and beyond what the law says you get to keep), AND you still owe all your debts.  You do NOT want to end up in that situation as it is the "worst of all worlds" (your stuff is sold off, but you still owe your debts).  This all just highlights the importance of full disclosure when you file for bankruptcy.  Anywho, the counts and allegations set forth in the complaint against T&J are as follows (references are to the sections of the bankruptcy code):

1. False oath or account, 727(a)(4)(A).   Among other things, T&J allegedly didn't tell the court about a bank account, 2 pieces of real property, business interests, 3 cars and a boat (including a Cadillac Escalade, an F350, a quad, and the boat), several debts, a leased 2005 Maserati Quattroporte, $7,083.33 a month in income from starring on  "Real Houswives," Teresa's website and business, and Teresa's publishing contract for "Skinny Italian."  When you sign your bankruptcy petition, you do so under penalty of perjury, attesting that the documents are true and correct.  Here, the U.S. Trustee is alleging that all the stuff left off of the initial schedules amounts to a "false oath or account" and that T&J should not get a discharge.  The complaint also indicates that there is stuff that the schedules STILL have not been amended to disclose.
2. Concealing assets 1 year pre-filing, 727(a)(2)(A).  Sometimes property is accidentally left off of bankruptcy schedules, but in this case the U.S. Trustee is alleging that the omission of the assets above amounts to intentional concealment.
3. Concealing assets post-filing, 727(a)(2)(B).  The 3rd count is similar to #2, but deals with post-filing mischief.  The U.S. Trustee is alleging that Teresa intentionally concealed her business and website "TG Fabulicious" (which was originally named TG Fabalicious) and approximately $300,000 in income that passed through a bank account at Lakeland Bank both before and after filing (and which was not disclosed on the initial schedules).
4. Falsifying or failing to preserve records, 727(a)(3).  Allegedly, T&J have not filed tax returns for 2006-2008 but they represented to the court that they had filed them.  Also, T&J allegedly failed (i.e., should have but didn't) to produce business records for one of Joe's business ventures.
5. The "what the heck is up with this?" section - failure to explain loss of assets or deficiency of assets, 727(a)(5).  If you have been irresponsible and used assets or property to, say, go on vacation, or you gambled assets and money away, then the court can deny your discharge.  The U.S. Trustee is alleging that T&J have not explained why they can't pay their debts with the "Real Housewives" income, or Joe's income (in 2008 he was apparently making $54,269 a month).  If your case just doesn't add up, you have assets that you spent on things other than repaying your debts, then your discharge can be denied.  If you have bought a bunch of stuff on credit cards and undervalue the stuff on your bankruptcy schedules, your discharge can be denied.

If you're interested in a copy of the complaint, you can download it from the New Jersey Bankruptcy Court website (you'll need a public access account), or please email me as I'd like to also find out who (if anyone) reads my blog.  My next post will outline what T&J have to say (through their attorney) about all of this.  Future posts will include information about what exactly inside that Italian bordello that backs up to Interstate 287 Towaco, NJ house is being sold, so stay tuned.

How to Fix Bad Credit

"How do I dig myself out of this mess?"  Many of my clients ask this -- whether it's because they just filed for bankruptcy, or after years of struggling with not enough income and too many expenses.  First, take a deep breath -- your credit score is not your life, and you are not a bad person just because you have bad credit.

And next, read this article for some tips on how to help clean up your credit score (yes, secured credit cards are a great way to improve your credit!).

Octomom Going on Welfare, Faces Foreclosure

"[Nadya] Suleman has repeatedly fallen behind on her mortgage payments and her mortgage holder is ready to begin the foreclosure process "right now." She narrowly avoided foreclosure in April."

More at Huffington Post.

Too Much Shopping? Teresa and Joe Giudice of "Real Housewives" speak out about their bankruptcy

Joe, a former successful real estate developer, explains that the bankruptcy filing had nothing to do with his wife's excessive shopping, and instead, was "almost all business" related.

"It was tenants not paying rent, and it was a bad situation with my business partner," who betrayed him and continues to tell lies about him, Joe claims.

Read more: http://www.nydailynews.com/gossip/2010/09/01/2010-09-01_real_housewives_star_teresa_giudice_is_humiliated_about_bankruptcy_i_learned_fro.html#ixzz0yI4MvbUc

You can view the Giudice's bankruptcy paperwork at the U.S. Bankruptcy Court's website (you must register for a public access account):