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A Healthy Dialogue, Except on Rezoning, at East Harlem Town Hall

Abigail Savitch-Lew

The mayor speaks to constituents at an East Harlem town hall on Thursday September 28.


Residents of Spanish Harlem have a lot concerning them these days, from the disaster in Puerto Rico to Trump’s rescinding of DACA—to the potential impacts of the city’s proposed neighborhood rezoning. At a town hall on Thursday night, residents showed adamant opposition to the proposed rezoning, which the City Planning Commission is expected to vote on this Monday, but the mayor took issue with their concerns.

Beyond discussion of the rezoning, however, there was overall a deal of respect expressed for Mayor De Blasio at the town hall, and a good deal of gratitude for the accomplishments of three-term local councilmember and City Council Speaker Melissa Mark-Viverito, who has only a few months left on the job.

De Blasio took time at the beginning of the meeting to praise Mark-Viverito, saying the city would look back at her time in City Council as a “golden age” and heralding her work on tenant protections, affordable housing, criminal justice and safety, as well as her recent advocacy for Puerto Rico. The federal government’s lack of action to serve the island he described as “truly an atrocity” and he urged constituents to learn about how they could help.

Before opening the floor, de Blasio noted a number of small improvements he said were being undertaken immediately. New lights had been installed that day on the intersection of 125th Street and Park Avenue; improvements were being made to local small parks; the sidewalks of Johnson Houses would be fixed by the end of the year, and there would be new litter collections on key streets.

Constituents brought up a wide variety of problems—not enough licenses for street venders, a police officer perceived to have a disrespectful tone, a landlord’s illegal renovation work without a permit, for instance—and the mayor and his commissioners tried to deliver answers or a promise to follow-up.

Here are five of the most common issues raised by constituents:

NYCHA concerns

The town hall took place in Johnson Houses’ community center and drew a large number of NYCHA residents from the surrounding area. East Harlem has the highest concentration of NYCHA developments in the city, with nearly 30 percent of residents living in NYCHA, according to the East Harlem Neighborhood Plan.

Tenant leader Ethel Velez, noting the amount of money the mayor had dedicated to his affordable housing, asked for more money to preserve NYCHA’s dilapidated building stock. Others brought specific requests or concerns: Wagner Houses needs a bigger senior center. Polo Grounds is infested with raccoons and suffers from leaks and potholes. A neighbor is breaking NYCHA’s rule against the ownership of pitbulls. Others were concerned about rent increases and the rumored “privatization” of NYCHA.

Some residents were also reeling from a recent, unresolved death just one street away at Jefferson Houses. As reported by The Daily News, on August 19, 33-year-old Yanina Boitel, a mother of three and grandmother, was found dead after falling off the roof of her building. One Jefferson resident brought up concerns about safety and building cameras; later, a woman who appeared to be a close relative of Boitel said in near-tears that she didn’t believe it was a suicide. An NYPD official couldn’t speak to the details due to an ongoing investigation, but said that thanks to a heavy cop presence at Jefferson and Johnson Houses, shootings were down 50 percent for the year. The De Blasio team mentioned resources coming for new cameras.

As for the other concerns, De Blasio said that given the absence of sufficient federal funding, he’d put an unprecedented amount of city money into NYCHA repairs, including $1.3 billion in capital funds in just one year, and said the city would continue to, in each year, take more responsibility. He justified his commitment to creating new affordable housing, but promised that NYCHA “will never be privatized, I want to be 100 percent clear.”

He and NYCHA chair Shola Olatoye emphasized that when private entities like Goldman Sachs become investment partners in a NYCHA building—as in cases where the city is moving NYCHA buildings to the Rental Assistance Demonstration program—NYCHA still retains ownership of the land and control of important decisions. As for the rent increases, Olatoye says they were mandated by the federal government and in no case should make a resident pay more than 30 percent of their income.

They also made some commitments: to explore the location of a new senior center for Wagner Houses, to reexamine the regulations governing the removal of illegal pets, and—since residents were asking for it—to provide more stringent enforcement of trash rules through increased ticketing.

The rezoning

A group of Movement for Justice in El Barrio members protested the proposed rezoning outside the community center, and within the town hall there were a couple speeches condemning it—followed by resounding applause and chants. One resident said the market-rate housing brought by a rezoning would exacerbate displacement and accused De Blasio of catering to developers’ interests.

“You might disagree with me on the vision but don’t look for a motive that isn’t there,” said De Blasio, arguing that the plan would bring new, permanent affordable housing and was a once-in-a-generation opportunity to bring new investments to East Harlem. “I’m convinced that the market-rate housing is not going to change the trajectory of all neighborhoods.” He said NYCHA and rent-stabilized housing would remain protected—though many advocates are concerned the administration is underestimating the risks to rent-stabilized housing. Mark-Viverito spoke to the importance of a balance, and said she would work for the priorities of the neighborhood plan.

When another resident from the Justice Center in El Barrio said that none of the mandated new housing would be truly affordable to the lowest incomes and condemned the mayor for selling land to private developers, De Blasio dismissed her concerns and wouldn’t go further into it. According to The Post , a nearby resident shouted “Bull shit!”, Mark-Viverito defended the mayor, and soon after security guards escorted a group of residents out as they chanted “no rezoning.”

Trouble in the schools

Showing his deep concern about the recent stabbing death of a student in a Bronx high school, De Blasio began the evening with a moment of silence for 15-year-old Matthew McCree. The Times has reported that the student charged with murder may have reacted in response to bullying. Several residents called for deeper interventions to stem violence and provide more city services for youth.

In addition, a charter school student asked whether de Blasio would support lifting the cap on charter schools, and a parent complained of lack of space in a building with three co-located schools.

De Blasio pointed to the administration’s growing investment in the CureViolence model, which seeks to reduce violence through peer-to-peer conflict resolution, his investments in school counseling, the city’s new mental illness program Thrive NYC, and in creating an after-school seat for every middle schooler who wants one. He promised to continue improving public schools but said he didn’t think the cap on charters should be removed.

New and old worries at HDFCs

Housing Development Fund Corporations (HDFCs), or low-income cooperatives, provide some of the city’s most affordable homeownership opportunities, but some HDFCs face problems, including worsening building conditions, financial mismanagement, or increasingly loss of affordability.

A couple speakers raised concerns with the city’s potential foreclosure of 84 HDFCs and plan to transfer the HDFCs, which are in debt to the city, to third-party owners that will stabilize and rehabilitate the buildings and make the shareholders tenants. De Blasio’s team, while justifying the measure, said that buildings willing to get on a payment plan and avoid foreclosure could come see the Commissioner of Housing Preservation and Development (HPD) immediately.

A plan for homelessness

At least two residents raised concerns about the homelessness crisis, with one saying that hundreds of people were leaving the shelter on Randall and Ward’s Island and entering East Harlem because they had nowhere else to go, while many patients of the methadone clinics on 125th Street were hanging out on the street. A member of Picture the Homeless asked for, and still couldn’t get, a position from the mayor on the Housing Not Warehousing Act.

De Blasio’s Human Resources Commissioner Steven Banks announced that the administration had stopped requiring homeless people to leave their shelters during the day and now were encouraging residents to take part in employment programs at their shelter. De Blasio acknowledged the crisis but also defended his approach to homelessness, pointing to his investments in eviction-prevention, a rent freeze, and in rental assistance to move families out of homeless shelters, among other efforts.

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Bankruptcy filing has $93.5M Packard Square project in limbo

ANN ARBOR, MI – The developer of Ann Arbor’s Packard Square is seeking Chapter 11 bankruptcy for the project as he looks to reorganize and secure financing to finish the $93.5 million residential and retail development.

Developer Craig Schubiner of Bloomfield Hills, filed a bankruptcy petition on behalf of Packard Square LLC on Sept. 5 in U.S. Bankruptcy Court for the Eastern District of Michigan. The case is set for a hearing Oct. 11 in Detroit.

The Packard Square project is about 65 percent complete, Schubiner says in his court filing. The project is located at 2502 Packard St., about 2 miles southeast of downtown Ann Arbor. It includes 249 apartments and roughly 24,000 square feet of retail space in one building, with an underground parking garage.

Construction has been overseen in recent months by McKinley Inc. after a Washtenaw County judge approved putting the troubled project into a receivership. Project investors had filed suit out of concern that the project was not proceeding in a timely manner.

Work appears to be at a standstill following the bankruptcy filing.

In a letter included in bankruptcy filing addressed to James A. Fink, an Ann Arbor-based attorney representing McKinley, Schubiner outlined what he saw as “troubling issues” and “dismal progress” at Packard Square since November 2016, when McKinley took control.

Court orders McKinley to oversee building of Packard Square in Ann Arbor

The complaints outlined in Schubiner’s letter include:

  • A lack of communication and marketing for the mixed-use building.
  • Work needing to be redone because of errors or quality.
  • Winterizing failures.
  • Budget wastes related to legal fees and security

One of the main concerns alleged is that McKinley’s primary agent in the court-ordered receivership, Matthew Mason, has since left the company.

“The damages caused by McKinley Inc. and Matthew Mason have been and continue to be completely foreseeable and by this letter, McKinley Inc. and Matthew Mason are again put on notice that they will be held liable,” Schubiner wrote in the Sept. 4 letter.

Chris Allen, assistant vice president and director of special projects at McKinley, said in an email to The Ann Arbor News he could not comment on Packard Square.

The bankruptcy filing sheds some light on the status of Packard Square.

Schubiner estimated the project to be worth $93.5 million once completed, and has a value of $73.8 million in its current state.

The bankruptcy filing states that the development has assets between $50-$100 million and liabilities between $10-$50 million.

According to the petition, Schubiner would lose about $20 million in value for Packard Square if the bankruptcy proceeding is rejected and he is forced to cease construction.

Schubiner says in his filing that he would obtain new financing to complete the project if the bankruptcy petition is approved. He said the project has secured a new lender and is awaiting the judge’s decision.

Schubiner also outlined issues Packard Square had with some of the original contractors on the project, which broke ground in 2014, that delayed construction work and prompted lenders to seek a receivership.

He cited labor shortages due to the Little Caesers Arena project in Detroit and an electrician strike related to Gaylor Electric employees attempting to unionize.

In the bankruptcy petition, it is alleged that McKinley has had 12 to 15 workers on site at Packard Square most days and is deliberately postponing or slowing progress down at the development.

Since McKinley has taken over, two community meetings have been held and attended by residents living near Packard Square who have voiced concerns on the development’s progress.

Officials talk challenges, future of Ann Arbor’s Packard Square project

McKinley representatives said they expected to finish Packard Square by the end of 2017 or the first part of 2018.

Ann Arbor’s Packard Square could be finished by year’s end

One resident living near Packard Square said the bankruptcy petition is discouraging to the Georgetown neighborhood residents. Packard Square is under construction at the former Georgetown Mall site.

Jennifer Nguyen is part of the Georgetown Neighborhood Association and has been communicating any Packard Square news to an email list made up of residents who have seen construction crews come and go on the site.

“I don’t think anybody in the neighborhood considers it an improvement if the original developer takes back over,” Nguyen said. “We’ve seen enough of what he has to offer. There is almost universal discouragement with his business practices.”

Ann Arbor Councilman Jack Eaton, of Ward 4, was also present at the community meetings and said he was disappointed to hear the project has filed for bankruptcy. He sees the petition as a “last-ditch attempt” to avoid foreclosure proceedings.

“The delay the bankruptcy process will cause will have a detrimental impact on the neighborhood,” Eaton said in an email. “McKinley was making good progress on the project. Importantly, McKinley was good at communicating with the neighbors.”

Eaton also pointed out the city of Ann Arbor shares some blame for changing zoning rules and offering brownfield funding to allow the project to proceed, despite concerns about the original developer’s previous projects.

“The City needs to be more sensitive to the impact that large projects have on adjoining neighborhoods,” Eaton said. “We need to exercise some degree of skepticism when reviewing the claims of developers with questionable histories of success.”

Since learning of Schubiner’s petition to file for bankruptcy, Nguyen has received what she described as “outraged” responses to news the original developer is seeking to regain control of the construction.

She recalls the round of applause at the December community meeting organized by McKinley, and the relief felt by those in attendance that the work could get done in a realistic timeframe.

“No one has faith in the original developer and his ability to finish the project,” Nguyen said. “The path looks unclear as to how to finish this project.”

A list of 57 creditors are named in the bankruptcy petition. They include 39 Michigan companies and companies as far away as Texas and California.

Some have not been paid for any of the work done on Packard Square, while others are still waiting on final payments, the petition claims.

At least three of those creditors- Zeeland Lumber and Supply Co., Gaylor Electric Inc. and E.L. Painting – sent letters to the Eastern District of Michigan bankruptcy court, backing up Schubiner and requesting the court-ordered receiver be removed from the project.

A meeting of the creditors is scheduled for Oct. 3 in Detroit, according to court documents in the Public Access to Court Electronic Records database.

At least one hearing has taken place involving both the original developer, original lender and the court-ordered receiver.

Judge Thomas J. Tucker has ordered another hearing Oct. 11 for more testimony before deciding whether or not to approve bankruptcy for Packard Square LLC.

Schubiner could not be reached for comment, though his lawyers did respond to an email from The Ann Arbor News.

“At this time, Packard Square LLC is awaiting rulings on two pending motions in court,” said David Dragich of Dragich Law. “Accordingly, we will reserve our comments until after the judge makes his decisions.”

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American Homeowner Preservation CEO Jorge Newbery Speaking at the TBLI Conference Nordic

CHICAGO, Sept. 29, 2017 /PRNewswire/ — Jorge P. Newbery, founder and CEO of American Homeowner Preservation (“AHP”), will be a featured speaker at the TBLI Conference Nordic 2017 in Stockholm, Sweden.  The conference, which takes place on September 28th and 29th, highlights investment opportunities in ESG (environmental, social, and governance) and impact investing.

Newbery’s firm focuses on social impact investments, utilizing Regulation Crowdfunding under Title IV of the JOBS Act to purchase distressed mortgages at deep discounts; it then shares these discounts with homeowners to avoid foreclosure.  Newbery will appear on a panel entitled “Alternative Investment Innovation” and plans to educate the mostly-European audience about foreclosure solutions for America’s “most vulnerable communities.”

“AHP is streamlining our process for non-U.S. investors,” Newbery said, explaining that they are now able to invest as quickly and easily as their U.S. counterparts.  ”The TBLI conference is an opportunity to further expand our mission outside America, and show the world that there is money to be made as well as social benefits to be realized from helping homeowners avoid foreclosure.”

Newbery is one of only three American CEOs present at the conference this year.  He sees his appearance as representing the American impact investing community, and gave praise to the TBLI conference and its founder, Robert Rubinstein.

“The TBLI Conference has been a leader in driving discussion around impact investing for two decades,” said Newbery.  ”I’m glad that AHP can be a part of it.”

Newbery’s panel will take place Friday, September 29th at 9:15 AM at NASDAQ.  A full schedule can be found here.

To learn more about TBLI, visit .

American Homeowner Preservation started in 2008 as a 501c3 nonprofit before transitioning to for profit.  AHP now utilizes Regulation A+ to raise funds from both accredited and non-accredited investors.  Investments fuel the purchase of distressed mortgages from lenders including banks and hedge funds.  AHP then crafts sustainable solutions to keep families in their homes with favorable terms. To learn more visit

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SOURCE American Homeowner Preservation

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FHFA, GSEs Continue Keeping Homeowners From Foreclosure

The Federal Housing Finance Agency (FHFA) released its Q2 2017 Foreclosure Prevention Report, outlining results of the continued efforts the agency and the GSEs are implementing to prevent homeowners from going into foreclosure.

According to the report, Q2 2017 brought an additional 48,760 foreclosure prevention actions to keep struggling homeowners in their home, bringing the total foreclosure preventions to 3,931,224 since the GSEs first came under the FHFA’s conservatorship toward the end of 2008. The report notes that, to date, permanent loan modifications have accounted for 2 million of the 3.2 million homeowners that have been able to retain their homes.

In addition, the GSEs combined serious delinquency rate stood at 0.9 percent. the lowest it’s been since January 2008, according to the report. In comparison, Federal Housing Administration serious delinquencies fell 3.8 percent, Veteran Affairs loans fell by 2.0 percent. Industry average decline was 2.5 percent.

The number of 60+ day delinquencies has also declined, at a rate of 6 percent, falling to a total number of 354,178, from 377,622 at the end of the first quarter. Real estate owned was also down to 40,392, a 9 percent decrease.

Foreclosure starts by the GSEs also fell in the second quarter by 11 percent to a total of 44,989, and third-party foreclosure fell to 17,542, a drop of 9.0 percent.

Of all completed foreclosure prevention actions that led to home retention, which amounted to 88,171, repayment plans accounted for 18,076 of those actions, forbearance plans 3,750, and charge-offs-in-lieu 736. Standard loan modifications accounted for 65,709.

Home forfeiture, nonforeclosure actions totaled 9,693, of which 6,626 of those were short sales, and 3,067 were deeds-in-lieu.

You can find the full Foreclosure Prevention Report on the FHFA’s website.

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Avoiding Foreclosure After a Natural Disaster

When a natural disaster strikes, it has the tendency to temporarily turn our world upside down. It puts stress on us physically, mentally and emotionally. It also throws pocketbooks way out of whack and can put a serious strain on finances.

If you’re overwhelmed at the prospect of rebuilding, you may be thinking you need to walk away from your home and let it go into foreclosure. There are a variety of reasons why that’s not ideal. At the same time, your mortgage lender should have the resources to be able to help you during this time. We’ll go over some options that may be available to assist clients affected by natural disasters.

If you’re considering a foreclosure, you should know the ramifications. It also helps to know the resources that are available to help keep you in your home. Let’s go over those.

Impact of Foreclosure

A foreclosure is a big step to take in terms of both your life and your financial profile. For starters, you’re turning over your home to your lender. You have to find another place to live at least on a temporary basis.

The biggest thing to be aware of in terms of finances with foreclosure is the impact it has on your credit. For starters, your credit score is going to take a big hit. The foreclosure also remains on your credit report for seven years. The actual impact on your FICO score does lessen over time.

The other important thing to know is that you may have a hard time getting a mortgage for a while. Mortgage investors like Fannie Mae, Freddie Mac, FHA and VA want to feel confident in your ability to pay off the home note. When you have a foreclosure on your record, there’s a little hesitance there.

Different lenders may have different policies surrounding this and there are also individual policies that mortgage investors have. The following timelines apply here at Quicken Loans. Other lenders may or may not have different policies.

The soonest we can help you with any kind of loan option is one year after the foreclosure. If you want an FHA, VA or USDA loan, the waiting period is three years. Finally, if you’re working on getting a conventional loan through Fannie Mae or Freddie Mac, you need to wait at least seven years from the time the foreclosure shows up on your credit.

A foreclosure may not only affect your ability to get a loan, but it may also impact the terms and the type of rate you can get. It can hinder your chances of getting a home in the near future.

Options to Avoid Foreclosure

The effects of foreclosure can be drastic, but the reason you’re considering it may be that you don’t know how you’re going to be able to get your financial situation in order and find a way to get back on your feet. No one has an easy time when trying to recover from a tornado, hurricane, earthquake or other catastrophe. That said, there are definitely options available to help you.

Mortgage Payment Assistance

Natural disasters temporarily take away a lot of our income in terms of preparing and getting supplies. The effects can last much longer if your workplace is closed for repairs for any length of time following the disaster.

You don’t want to fall behind on your mortgage payment without contacting your lender. Every disaster is different, but if you typically reside in a declared disaster area, your lender has options to help you. FHA, VA, Freddie Mac and Fannie Mae have all come up with plans to help people affected by these disasters. The response from the major mortgage investors is different for every situation. With that said, let’s list past options to see what might be available to you.

Investors can give lenders the option to do something with their mortgage payments called a forbearance. A forbearance is a period in which your payments are paused. Lenders sometimes have latitude on how long the forbearance should be in order to give you time to work on necessary repairs, and get back to work and start getting things back in order.

When a forbearance is finished, you have the option of making payments in one lump sum. However, you don’t necessarily have to do it this way. Lenders may have the option of doing a noncredit-impacting loan modification and work with you to extend the term of the loan to fund the number of payments you missed.

This is just one potential solution among others, but you won’t know until you contact your lender. Don’t hesitate to reach out if you think you’re going to have trouble.

If you’re a Quicken Loans client, you can get in touch with our Servicing team at any time by calling (800) 508-0944. From there, someone will be happy to look into your situation and see how we can assist.

Rebuilding Assistance

Cost and time involved in rebuilding are factors that lead homeowners to consider foreclosure. There’s no doubt that it’s a considerable expense. With that said, there are definitely resources available to help.

One of the first places to look is at your homeowners insurance policy. It’s designed to cover you in the event of house damage. Get a copy of your policy and know in advance what it covers. These policies typically don’t cover flood damage without additional flood insurance. Unless you live in an area that frequently floods, your lender may not have required you to carry the additional coverage.

If you’re getting ready to file a claim, be sure to document the extent of the damage for the insurance company by taking pictures. You also have a responsibility to make any temporary repairs necessary to mitigate against further damage. You can do this by making temporary repairs like putting up tarps and boarding-up exposed areas.

Keep all receipts because your insurer may be able to reimburse you for out-of-pocket expenses for temporary living arrangements as well as temporary repair.

If you feel it’s necessary to move permanently, you can take a look at settling with your insurance company and buying a new house instead of repairing the old one. It’s still important to estimate how much it would cost to repair because that’s your basis for beginning replacement negotiation and how much you can get. If you choose to go this route, you just need to make sure you’re going to get enough to pay off your current mortgage.

Other Available Resources

If you can’t make an insurance claim or your deductible is too high for it to make sense, there are other resources out there.

The Federal Emergency Management Agency (FEMA) provides all sorts of disaster relief resources in federally declared disaster zones. One type of this assistance is a grant to help with the rebuilding process. If you receive a grant, you don’t have to pay it back.

The Small Business Administration also provides low-interest disaster loans to businesses of all sizes, nonprofit organizations, homeowners and renters. With these loans, you can replace damaged or destroyed real estate, personal property, machinery and equipment, as well as inventory and business assets.

Finally, the American Red Cross offers temporary assistance with food, shelter and medical care in the wake of disasters. They’re also able to help with recovery plans to help you on your path to recovery.

It’s not going to be an easy process, but there are ways to recover from this and make sure you stay in your home. If you need assistance with your mortgage payment, feel free to give us a call at (800) 508-0944. If you need help with your insurance claim, our Insurance Loss team will be happy to guide you if you give us a call at (866) 947-8425.

If you have any questions, you can feel free to reach out to us in the comments. We’ll be happy to direct you to the right place.

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Caught in the Bankruptcy Feedback Loop

To file a Chapter 7 with George, it costs the debtor $555, with most of that due up front. That is about half of what many other attorneys charge in Memphis. But, to George, it just seems like enough. “I figure I spend about two hours on average per Chapter 7 [case],” he said. “So that’s pretty fair, I’d say.”

George also doesn’t file Chapter 13 cases for no money down, instead asking for around $200 dollars, giving his clients a much more balanced choice between how much money they have to come up with to file Chapter 7 versus Chapter 13.

George’s black clients file under Chapter 7 almost half the time, according to ProPublica’s analysis, a rate that is almost two and a half times what is typical in the district. There is also little racial disparity in what portion of his black and white clients end up in Chapter 7. Payne and George agree that their flexibility with fees is likely a key reason they are able to file more Chapter 7 cases for black clients.

There are understandable reasons why attorneys tend to be less flexible with Chapter 7 fees. When debtors receive a discharge of their debts at the end of the case, outstanding fees to their attorneys are also wiped out. Any further payments are voluntary. As a result, debtor attorneys—in Memphis or anywhere else—generally require the entirety of their fee up front. To address this problem, some scholars have called for Congress to change the law to make attorney fees clearly exempt from discharge.

Such a change could have a large effect. The firm that files the most bankruptcy cases in Atlanta, for example, files Chapter 7 cases for $0 down, with the entirety of the fee due through an installment plan that lasts several months. The chief judge in the Northern District of Georgia has ruled that such arrangements are legal, and other large firms in the Atlanta area have adopted the practice.

The result is clear. In the heart of the South, most of the filings in the Northern District of Georgia are under Chapter 7—compared to less than 30 percent in the rest of the state. And notably, black debtors in that district file under Chapter 7 almost half the time, a rate significantly higher than even the white debtors in the Western District of Tennessee.

* * *

For now, things in Memphis continue as they seemingly always have. In April, less than six months after it began, Novasha Miller’s Chapter 13 case was dismissed. Though she hasn’t heard anything yet, her old landlord’s collection agency is again free to attempt garnishment of her wages.

Miller said that a miscommunication with her attorney led to the dismissal. After she changed jobs again (the new one pays a little bit less, $9.36 an hour, but it’s full-time and she likes the people), she notified Ray’s office, she said, but the plan payments were never set up to be automatically withdrawn from her paychecks. However it happened, having paid about $600, all of which was absorbed by court and attorney fees, she was back to square one. Choosing Chapter 7 could have resulted in her emerging from bankruptcy with her student loan as her only remaining debt. Instead, her debts, having gone unpaid for months, were now larger—she’s not clear yet just how much—the interest applied as if the bankruptcy had never happened.

She is thinking of filing again, maybe with a different attorney. And hopefully, she said, this time it’ll work out.

Hannah Fresques, a reporter at ProPublica, oversaw data analysis for this story. Mike Tigas, a developer at ProPublica, contributed additional data-gathering.

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Niagara Falls takes legal step to address ‘zombie’ houses – Lockport Union

Niagara Falls officials have filed what they say is among the first regional legal claims under a new state law meant to arm governments against the spread of urban blight.

Citizens Bank, which earlier this year was subject to a public shaming campaign led by the Niagara Falls Department of Community Development, was served on Tuesday with a summons to the Niagara County division of state Supreme Court at its offices in Rhode Island and Virginia.

The legal claim is in relation to five Cataract City properties, including: 502 77th St., 8220 Frontier Ave., 8414 Lindbergh Ave., 2444 LaSalle Ave., and 763 16th St.

According to the department’s filing, the houses were inspected and deemed “abandoned” or “vacant” – either left behind by previous owners or otherwise in limbo – waiting for the bank to initiate or complete foreclosure proceedings.

Community Development Director Seth Piccirillo called the structures “unacceptable in Niagara Falls neighborhoods.”

“The Citizens Bank legal complaint is tangible proof of our level of seriousness on zombie properties,” he said.

All of properties named in the filing were publicly identified this summer when the community development department posted signs on the lawns of the homes that read: “How Did This Zombie Get Here? We’re Looking At You, Citizens Bank!”

Under new state legislation, formally known as the 2016 Zombie Property and Foreclosure Prevention Act, the city will have a legal course in an attempt to compel upkeep and collect fines for what the law classifies as “property neglect.”

The signs were placed on July 10 in conjunction with a seven-day notice sent to the bank asking it to join the city in an effort to expedite the foreclosure process. In addition, the notices demanded the vacant properties be brought in compliance with state law and state property maintenance code.

According to the department, “exterior code violations” were identified earlier this summer at all five properties in a review conducted by team members of the Zombie Project Initiative, an endeavor led by coordinator Christine Marino.

The court filing states that the bank has “failed to inspect, maintain or secure the properties sufficiently.” From the time of the July notice to date, 79 days have passed, including weekends. Under the law, that would amount to nearly $39,000 in potential fines.

The tab will continue to grow until a final order on the matter is submitted to state Supreme Court, though the presiding judge in the case could exercise discretion over the sum of the fine.

Marino previously said the department’s intention was to work with the banks in an attempt to address the zombie homes, but those attempts have not proved fruitful.

“The minimal response we have received from Citizens Bank was not solution focused,” she said.

“We stated in our initial letter to Citizens Bank that, per the law, if the properties are not brought to code, it is our responsibility to the community to take legal action, and that is what we are doing, on behalf of our residents,” Marino said.

Marino’s initiative and position are funded through a $250,000, three-year grant from the state Attorney General’s Office, a portion of a $12.6 million cash pot set aside from settlements obtained by the state in the wake of the 2008 financial crisis.

A spokesman for Citizens Bank, Rory Sheehan, said the bank declined to comment on the matter “due to pending litigation.”

The five homes named in the lawsuit represent a small slice of at least 120 zombie homes cataloged thus far by the department.

The city has a pair of other recently acquired tools aimed at stemming blight, including:

• A land bank organization it signed on to earlier this year, which will allow the city to purchase and orchestrate rehabilitation of zombie homes and other vacant properties with a trio of Niagara County’s most populated municipalities. It is also funded with competitive grants through the state AG’s office and

• Ongoing reforms to its annual foreclosed property auction to stop predatory landlords from cyclically purchasing neglected city homes.

Together the aim is, not only to slow the dilapidation in city neighborhoods, but also to find a way to offer them up for sale, thereby increasing property values and the potential for private homeownership in the Falls, officials said.

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How the Bankruptcy System Is Failing Black Americans


This story originally appeared on ProPublica and was co-published with the Atlantic.

Novasha Miller pushed through the revolving doors of the black glass tower on Jefferson Avenue last December and felt a rush of déjà vu. The building, conspicuous in Memphis’ modest skyline along the Mississippi River, looms over its neighbors. Then she remembered: Years ago, as a teenager, she’d accompanied her mother inside.

Now she was 32, herself the mother of a teenager , and she was entering the same door, taking the same elevator. Like her mother before her, Miller was filing for bankruptcy. 

She’d cried when she made the decision, but with three boys and one uneven paycheck, every month was a narrow escape. A debt collector had recently won a court judgment against her and, along with that, the ability to seize a chunk of her pay. Soon, she would be forced to decide between groceries or electricity.

Bankruptcy, she figured, despite its stink of shame and failure, would stop all that. She could begin anew: older, wiser, and with a job at a catering company that paid $10.50 an hour, a good bump from her last one. She could keep dreaming of a life where she had money left over at the end of each month, a chance of one day owning a home.

What Miller didn’t know when she swallowed her pride and called a local bankruptcy attorney is that she would probably end up right back where she started, with the same debts, in the same crisis. For the black debtors who, for generations, have made Memphis the bankruptcy capital of the U.S., the system delivers neither forgiveness nor renewal.

Up on the sixth floor of that tower where I met Miller last February, the U.S. Bankruptcy Court for the Western District of Tennessee appeared to be a well-functioning machine. Debtors, nearly all black like her, crowded the wedge-shaped waiting area as lawyers, paralegals and court staff, almost all white, milled about in front. Hundreds of cases are filed here every week, and those who oversee and administer the process all proudly note the court’s marvelous efficiency. Millions of dollars flow smoothly to creditors, to the court, to bankruptcy attorneys.

But the machine hides a harsh reality. When ProPublica analyzed consumer bankruptcy filings nationwide, the district stood out, both for the stunning number of cases in which debtors were unable to get relief, and for the reasons why. In Memphis, an entrenched legal culture has made bankruptcy a boon for attorneys while miring clients like Miller in a cycle of futility.

Under federal bankruptcy law, people overwhelmed by debt have a choice: They can either file under Chapter 7, which wipes out debts and, since most filers lack significant assets, allows them to keep what little they have. Or they can choose Chapter 13, which usually requires five years of payments to creditors before any debts are eliminated, but blocks foreclosures and car repossessions as long as debtors can keep up. In most of the country, Chapter 7 is the overwhelming choice. Only in the South, in a band of states stretching from North Carolina to Texas, is Chapter 13 predominant.

The responsibility of knowing which path to pick falls to those seeking relief. In Memphis, about three-quarters of filings are under Chapter 13. That’s how Miller filed. She thought the two chapters were “the same,” she told me.

Initially, they are. Upon filing, debtors are shielded from garnishments and debt collectors. But whereas under Chapter 7 those protections are generally made permanent after a few months, under Chapter 13 they last only as long as payments are made. Most Chapter 13 filers in Memphis don’t last a year, let alone five.

As efficiently as cases are opened, they are closed—usually because debtors fail to keep up with payments, according to a ProPublica analysis of court data. In 2015, over 9,000 cases in the district were dismissed—more cases than were filed in 22 other states that year. Less than a third of Chapter 13 cases in the district result in a discharge of debts. And when their cases are dismissed, debtors are often in worse straits, because as they struggled to make payments, the interest on their unpaid debts continued to mount. Once the refuge of bankruptcy is gone, the debt floods back larger than ever. They’ve borne the costs of bankruptcy—attorney and filing fees, a seven-year flag on their credit reports—without receiving its primary benefit. A system that is supposed to eliminate debt instead serves to magnify it.

Driving this tremendous churn of filings is a handful of bankruptcy attorneys with what sounds like an easy pitch: immediate relief, for free. In Memphis, it typically costs around $1,000 to hire an attorney to file a Chapter 7, but most attorneys will file a Chapter 13 for no money down. Ultimately, the fees for Chapter 13 filings are higher—upwards of $3,000—but the payments are stretched over time. For many people, this is the only option they can afford: debt relief on credit. For attorneys, they gain clients—and a regular flow of fees—they might not otherwise get, even if few of their clients get lasting relief.

Chapter 7 Filing Rates Are Higher in Black Areas, With Patterns Similar to White Areas…

Chapter 7 Filings per 1,000 Residents—Majority Black Zip Codes vs. Majority White Zip Codes


Chapter 13 Filings per 1,000 Residents—Majority Black Zip Codes vs. Majority White Zip Codes


For black filers in Memphis, relief is particularly rare. They are more likely than their white peers to file under Chapter 13 and less likely to complete a Chapter 13 plan. Because failure is so frequent in Memphis, many people file again and again. In 2015, about half of the black debtors who filed under Chapter 13 in the district had done so at least once before in the previous five years. Some had filed as many as 20 times over their lifetimes. Here, bankruptcy is often not the one-time rescue it was envisioned to be, but rather a way for the poor to hold on to basic necessities like electricity for a couple months.

“The way we have it set up, our culture, has a lot of unintended consequences,” said Judge Jennie Latta, one of five bankruptcy judges in the Western District of Tennessee. Since 1997, when she took the bench, the racial disparities in Memphis have been evident, she said. “It was troubling to me then, and it’s still troubling to me.”

When I asked judges, trustees, who administer the cases, and debtor attorneys what could be done to reduce racial disparities and improve outcomes, I was mostly met with resignation. I heard a lot about the poverty in Memphis and a legal culture with deeply rooted traditions. But ProPublica’s analysis identified bankruptcy attorneys in Memphis who had much more success in getting their black clients out of debt. These attorneys had a different approach, preferring Chapter 7 to Chapter 13, and, crucially, allowing more flexibility in what clients paid upfront in fees.

Scrutiny of Memphis is important, because the racial differences we found there are present across the country. Nationally, the odds of black debtors choosing Chapter 13 instead of Chapter 7 were more than twice as high as for white debtors with a similar financial profile. And once they chose Chapter 13, we found, the odds of their cases ending in dismissal—with no relief from their debts—were about 50 percent higher.

Meanwhile, the $0-down style of bankruptcy practiced in Memphis, long common across the South, is quietly growing in popularity elsewhere. Chicago in particular has seen an explosion of Chapter 13 filings in recent years. A recent study found that the “no money down” model is becoming more prevalent, prompting concerns that it is snaring increasing numbers of unsuspecting debtors and ultimately keeping them in debt.

About 10 miles south of the black glass tower lies the community of Whitehaven. Famous as the site of Graceland, Elvis Presley’s mansion, its streets are lined with miles of humbler homes, mostly one- or two-bedroom bungalows. The houses reflect the range of financial security among Whitehaven’s almost exclusively black residents: Some lawns are immaculately kept in front of neat, pretty facades, while others run riot with weeds next to broken-down cars.

This is where Novasha Miller was born and raised. She went to Hillcrest High on Graceland Drive and still lives in the area. Here, bankruptcy has a startling ubiquity. Count the bankruptcies filed from 2011 through 2015 by residents of Whitehaven, and there is almost one for every three households.

Miller’s spiral downward began in late 2014, when she and her sons moved into a $545-per-month apartment in Highland Meadows, a complex pitched on its website as nestled in a “serene woodland setting.” Inside, roads wander around shaded clusters of two-story structures, some with boarded-up doors and windows.

Miller soon realized she’d made a mistake by signing the lease. Roaches emerged every time she cooked, she said. Underneath the kitchen sink, mold was spreading that seemed to aggravate her 10-year-old son’s asthma. The stove broke; then bedbugs arrived, leaving telltale marks up and down her and her boys’ arms.

Despite her calls and complaints, she said, management didn’t fix the mold issue and told her she’d have to pay for an exterminator herself. Finally, she decided to move. She wrote a letter saying she was breaking her lease and explaining why.

“My kids’ health is more important than anything, and I just had to leave,” she told me. (The company that manages Highland Meadows did not respond to requests for comment.)

A couple of months after she moved, Absolute Recovery Services, a collection agency, sent her a letter saying she owed $5,531—a total that seemed inflated to Miller. If she didn’t pay up immediately, the agency wrote, it might sue. It followed through the next month, tacking on a $1,844 attorney fee, for a total bill of $7,375.

Derek Whitlock, the attorney who represented Absolute Recovery Services in its suit against Miller, provided ProPublica with an accounting of Miller’s debt. Only $1,635 was due to back rent; the rest stemmed from eight different types of fees—all of which, Whitlock said, Miller had “contractually agreed to.” Miller’s lease had also stated that residents were “responsible for keeping the premises free from infestation of pest, etc.,” he said.

With no attorney to represent her, Miller went to court. Delayed by a search for parking, she missed her case, and Absolute Recovery won a judgment against her. A court employee told her the agency could soon move to garnish her paycheck, she said.

Under Tennessee law, debt collectors can seize up to a quarter of debtors’ take-home pay, and in Shelby County, which contains Memphis, they sought to do so in over 21,000 cases in 2015, according to a ProPublica analysis of court records. Such garnishments are far more common in black neighborhoods.

“I cried, stressing at work,” said Miller. “I couldn’t work, trying to figure out what to do.”

At the time, Miller earned $9 an hour working for a catering company where her hours were often cut without warning. Although she’d never had an extended stretch of unemployment, the last several years had been a struggle. She still carried $19,000 in student loans from a cosmetology program, and a $1,100 loan from a car title lender, TitleMax, which she’d used to cover one month’s shortfall. TitleMax routinely lends at annual interest rates above 150 percent in Tennessee, and every month Miller had to come up with about $100 in interest to keep the company from seizing her 2003 Pontiac Grand Prix. If Absolute Recovery garnished her wages, Miller stood to lose her apartment, her electricity or the car she drove to work.

The pressure, she said, pushed her into bankruptcy court. “It’s hard out here,” she said. “I hate that I had to go through it just to keep people from garnishing my check.”

She Googled “bankruptcy attorney” and landed on the website of Arthur Ray, who has been practicing in Memphis since the 1970s. His website was topped with “$0” in large type. “Most of our Chapter 13 bankruptcies are filed for $0 attorney’s fee up front.” She called and made an appointment.

Earlier this year, I headed to Memphis to meet people like Miller and find out why attorneys there kept funneling their black clients into Chapter 13 plans when so few could complete them. I came armed with what amounted to a score sheet for each attorney, showing how their black and white clients had fared. ProPublica had taken every case filed in the district over 15 years, paired it with census information and put it on a map. In a starkly segregated city like Memphis, we could deduce the race of their clients with confidence based on where they lived.

I caught up with Ray by phone. Like most of the higher volume lawyers in the district, Ray is white while most of his clients are black. About nine out of every 10 of his cases is a Chapter 13. And he was twice as likely to file under Chapter 7 for a white client as he was for a black client.

None of this troubles Ray in the least. If Chapter 13 has an evangelist, it’s Ray, who trumpets its attributes unapologetically. In his eyes, debtors need Chapter 13 to train them to get their financial houses in order and instill discipline on their unruly spending.“

“A Chapter 13 shows people how to live without buying things for that 60-month plan,” he said. “With a Chapter 7, wham bam it’s over, and they’re back to the same old thing, the bad habits that got them in trouble to begin with.”

When debtors squander Chapter 7’s power to erase debt, he argued, they are stuck—barred from filing again for eight years. Better to keep that option in reserve for something truly catastrophic, he said.

Ray conceded that most of his clients do not successfully complete their Chapter 13 plans, but he argued that wasn’t so bad. “It may be a long time before the creditors come after them,” he said. And when the phone calls and the legal notices do come back, “then they can file again.”

In Western Tennessee, More Bankruptcy Filings, But Less Debt Relief for Black Debtors

Filings by Disposition, 2008-2010, All Chapters, Majority Black Census Tracts vs. Majority White Census Tracts


I told Ray that Novasha Miller hadn’t understood the difference between the two chapters. Ray was not troubled by this either. As required by law, he said, he provides clients with documents explaining the difference, but any client who asks about Chapter 7 will get an argument from him. “They need to learn how to live not buying things on credit,” he said.

Few attorneys are likely to express this paternalistic view as bluntly as Ray, but the idea that bankruptcy courts should rehabilitate debtors instead of simply freeing them of their debts dates back to the 1930s, when, buoyed by creditors’ lobbying efforts, Chapter 13 first became law. It’s a form of bankruptcy that sprang from the South: Started as an experiment by the bankruptcy court in Birmingham, Alabama, it was added to the federal bankruptcy code through a bill authored by a Memphis congressman. To this day, many see Chapter 13 as the more honorable form of bankruptcy because it includes some attempt to repay debts.

But when I asked some of Ray’s colleagues why so many of their clients filed under Chapter 13, honor was rarely mentioned. Instead, they said it was about holding on.

“Chapter 13 is generally a ‘keep your stuff’ chapter,” is how Bert Benham, a Memphis bankruptcy attorney, put it.

Most people who end up filing in the district don’t own much. In 2015, 69 percent of those who filed under Chapter 13 didn’t own a home, and the median, or typical, income was less than $23,000 per year.

For many people, the most important thing is keeping their car, a necessity in Memphis, which has little public transportation. Used car lots abound, offering subprime credit. When borrowers fall behind and lenders threaten repossession, Chapter 7 won’t stop that from happening. But Chapter 13 allows secured debts to be repaid over the course of the plan. In theory, loan payments on a car or mortgage can be reduced to an affordable level, providing time to catch up without fear of repossession or foreclosure.

Lured by this promise, desperate Chapter 13 filers can spend years caught in a loop. One Whitehaven resident told me how, in order to hold on to her car, she’d filed under Chapter 13 four times since 2011. The first time, she lost her job a year and a half after filing, and her case was dismissed after she fell behind. She immediately filed again to keep the car for job interviews, using unemployment benefits to make the payments until she couldn’t. She then filed a third time. Finally in 2014, after her third dismissal, she got a new part-time job paying $11 an hour and filed again.

She still has two years of payments to go and will have spent most of her 30’s trying to hold on to her car. “If I’d known,” she said, “I just would have let my car go.”

Bernise Fulwiley, 60, filed for Chapter 13 in 2014 to avoid foreclosure on her home, a brick bungalow with a large maple in the yard on a corner in Whitehaven. The following year, she lost her warehouse job when she required foot surgery and couldn’t keep up her payments. She got another warehouse job, earning $9.50 an hour, and filed again. She has kept up the payments for two years, and is determined to make it for three more.

“‘God, go before me. Open this door! Help me, Lord!’ That’s been my prayer,” she said. “I ain’t gonna never give up.”

For decades, the most prolific bankruptcy firm in Memphis has been Jimmy McElroy’s, known for its long-running TV commercials featuring the now-deceased Ruby Wilson, a legendary blues and gospel singer dubbed the Queen of Beale Street. At the end of 30-second spots, she exclaimed, “Miss Ruby sings the blues, and you don’t have to!”

McElroy, a mild-mannered white man in his 70s with a genteel lilt to his speech, told me that “the ultimate success” for a Chapter 13 filing is “to pay it out, get a discharge, get out of debt. And then learn to live within your means.” From 2011 through 2015, McElroy’s firm filed over 8,000 Chapter 13 cases and fewer than 900 Chapter 7 cases. About 80 percent of his clients come from predominantly black neighborhoods.

But “ultimate success” is rare at his firm. Only about one in five of the Chapter 13 cases filed by his black clients reached discharge, a rate typical for the district. When I asked why, McElroy, whose office is in the same tower as the bankruptcy court, said clients generally “get the temporary relief they needed,” but then things just happen: “They lose their job. They get sick. They get a divorce.”

Sometimes Chapter 7 does seem like a better choice, he said, but the client can’t afford to pay the attorney fee, which, at his firm, is about $1,000. In those cases, he’ll advise them to start with a Chapter 13, since it’s “more affordable to get into,” he said. “I tell them … ‘If you get in a better situation, we can convert later.’”

Debtors are, indeed, allowed to switch from Chapter 13 to Chapter 7 after their cases have begun, although it typically requires paying an additional attorney fee. But this rarely happens in the district. Only about 5 percent of Chapter 13 filings since 2008 converted to Chapter 7, according to our analysis. For McElroy’s firm’s cases, it was 2 percent.

Often in Memphis, the whole goal of bankruptcy is just to address basic needs, even if only for a month or two.

Last year, Memphis Light, Gas and Water cut off customers’ electricity for nonpayment 98,000 times. It’s an “astoundingly high” number given that Memphis provides electricity to fewer than 400,000 customers and “far higher than any other large urban utility that I’ve seen,” said John Howat, senior energy analyst with the National Consumer Law Center.

Nearly half the Chapter 13 cases filed by black residents in the district had utility debt, our analysis of 2010 filings found. The typical debt with the utility company was $1,100. For customers with poor credit, the utility has a policy of disconnecting service within a couple months if the arrears grow beyond $200.

MLGW does offer programs for low-income customers and installment plans for those who fall behind. “We have probably some of the most liberal customer assistance programs of any utility in the country,” said Gale Carson, spokeswoman for MLGW.

But that assistance is limited to just a few thousand households. And the installment plans require customers to make the payments in addition to their normal monthly bills.

By declaring bankruptcy, debtors can start a monthly Chapter 13 plan tied to their income and get the power turned back on within a month or so.

In February, I visited Michael Baloga, an attorney at Long, Umsted, Jones Kriger, at the firm’s downtown storefront, just down the street from the Shelby County Jail and next door to a bail bond agent.

“Chapter 13 bankruptcy can be a necessary evil at times,” he told me. “Like, for today, there are people who are coming in because it’s cold, and they don’t have electricity.”

Baloga said he didn’t like to file cases just for that reason. “But on the other hand, am I going to let them sit and freeze in their home because they don’t have it? … I know that they’re going to file the bankruptcy and that they’re not going to stay in it very long. In the alternative, am I just going to turn them away and say, ‘No, you’re not going to get a chance at all?’”

For the firm’s predominantly poor and black clientele, the chances are remarkably low: Only one in 10 of the cases result in a discharge. Most don’t last six months.

Using bankruptcy this way “seems like using a sledgehammer to hang a picture,” said Judge Latta. But she understands why debtors do it. “I think bankruptcy, in Memphis anyway, is very much part of the social safety net,” she said, “and all these problems fall down into it.”

About 18,000 times each year, Tennessee suspends the driver’s license of a Shelby County resident for failing to pay a traffic fine, according to state data obtained by Just City, a Memphis nonprofit advocacy organization. About 84 percent are black drivers, although only half of Shelby County’s residents are black.

In 2010, about a quarter of black residents filing Chapter 13 had outstanding debt with the Shelby County General Sessions Criminal Court, which handles mostly misdemeanors and traffic offenses, our data shows. Their typical debt was around $1,600.

Court officials said licenses are only suspended if defendants fail to pay fines within 12 months. The court offers installment plans, including one called the Driver’s Assistance Program that allows drivers to regain their licenses. But only about 230 people were enrolled in the program as of March, they said.

For those who can’t afford or don’t qualify for the court’s programs, Chapter 13 provides an answer. They can get their licenses reactivated within a matter of months and stretch payments over five years, if they make it that long. Such fines can’t be eliminated through Chapter 7.

In Chicago, similar pressures have led to a recent boom in Chapter 13 filings. Chapter 13 filings by black residents in the Northern District of Illinois rose 88 percent from 2011 to 2015, we found. There, the issue is mostly parking tickets, according to ProPublica’s analysis and a recent academic study of filings in Cook County. But, like Memphis, it’s overwhelmingly black debtors who file for Chapter 13 to forestall license suspensions or car seizures.

Black households are particularly vulnerable to financial difficulties like these. They have less incomefewer assets, and less financial stability than white ones—all deficits with deep roots. When they are hit with financial emergencies (a cut in pay, a needed car repair), they are less likely to have the resources to withstand them. The same vulnerabilities that make black Americans more likely to file for bankruptcy make them less likely to succeed in bankruptcy.

In Memphis, that means the debtors who use the bankruptcy system the most—low-income black debtors—fare the worst.

“I say all the time that in Memphis, debtors don’t earn a living wage,” said Sylvia Brown, one of the two trustees for Chapter 13 cases in Memphis.

few floors above the bankruptcy court are the offices of Cohen Fila, a firm with a mostly poor clientele and one of the highest volume practices in the district. I asked Tom Fila, a Yankee transplant who has practiced bankruptcy law in Memphis for more than 20 years, about one of his clients: The firm had filed 17 cases on her behalf, all but two under Chapter 13. She was one of at least 465 people who had filed for bankruptcy 10 or more times in the district between 2001 and 2015, ProPublica’s analysis found. These repeat filers tend to be among the poorest.

Fila bristled at the implication that his firm had filed the cases for any reason but the best interest of the client. “I’m not making money on these cases, and I probably shouldn’t file them,” he told me. “I often tell my clients that repeated filings aren’t doing them any good. They are ending up in the same spot they started in, only now they have multiple bankruptcy cases on their credit report…but at the end of the day I’m not the one living without utilities or being evicted or being without transportation.”

Of course, most of the time attorneys in the district do get paid something. When we analyzed the Chapter 13 cases filed in 2010, we found that, on average, attorneys in the district collected $1,340 per case out of their full $3,000 fee. Some firms, like Fila’s, collected much less (about $700), and some collected more.

But what has made bankruptcy a viable business for the biggest firms in Memphis for so long is the sheer volume. From the 12,000-plus Chapter 13 cases they filed in 2010, we estimate that attorneys reaped at least $16 million in attorney fees over the next five years. McElroy’s firm, the largest, collected at least $2 million.

Things have worked this way in the district for as long as anyone can remember. The district’s chief judge, David Kennedy, who has presided over cases since 1980, said attorneys have been charging $0 down to file Chapter 13s at least since the 1970s.

He sees no clear need for reform. Chapter 13 “provides, I think, better relief, depending on the circumstances,” he said, adding that the large number of dismissals is not necessarily bad. “Just because it doesn’t go to discharge doesn’t mean it’s a failed case.” A homeowner might file Chapter 13 to stop a foreclosure, he said, then use the breathing room to work out a loan modification with the mortgage servicer and drop the case voluntarily.

That undoubtedly does happen. But most debtors in the district don’t own a home.Judge Latta said efforts to help the poor file under Chapter 7 for free have met with resistance. “We get a lot of pushback on pro bono programs here,” she said. “[Attorneys] say, ‘But, judge, we can put them in

That undoubtedly does happen. But most debtors in the district don’t own a home.

Judge Latta said efforts to help the poor file under Chapter 7 for free have met with resistance. “We get a lot of pushback on pro bono programs here,” she said. “[Attorneys] say, ‘But, judge, we can put them in

Judge Latta said efforts to help the poor file under Chapter 7 for free have met with resistance. “We get a lot of pushback on pro bono programs here,” she said. “[Attorneys] say, ‘But, judge, we can put them in a Chapter 13, and we can get paid for that.’”

It’s no secret in Memphis that bankruptcy works differently outside the South, but the scope of that contrast is staggering. In 2015, for example, there were 9,000 Chapter 13 cases filed in Shelby County, while in Brooklyn, New York, there were fewer than 300. Brooklyn has a similar poverty rate, median income and higher housing costs. Like Shelby County, it has a large black population. It also has 1.6 million more people.

What’s the biggest difference? How bankruptcy attorneys are paid. In Brooklyn, attorneys usually ask for around $2,000 upfront to file a Chapter 13, said Michael Macco, a trustee in the Eastern District of New York. As a result, poorer households simply can’t afford to file. The typical Chapter 13 debtor who hired an attorney in Brooklyn in 2015 was a middle-income homeowner with $420,000 in assets—over 40 times more in assets than filers in Shelby County.

The reasons for vast differences like these among courts are largely arbitrary. While bankruptcy is a federal institution, ruled by laws made in Washington, D.C., each local court is essentially its own kingdom with its own customs shaped by the judges, trustees and attorneys who work there. Scrutiny of these differences, and how they affect debtors, has been scant.

While judges like Kennedy are untroubled by the flood of unsuccessful Chapter 13s, our analysis found Memphis attorneys who have built successful bankruptcy practices in a different way. In an office park on the eastern edge of the city, I met Jerome Payne, who has filed more Chapter 7s on behalf of black clients than anyone in the district in recent years, despite not being in the top 10 firms in terms of total volume.

That alone would make Payne stand out. But Payne is also, unlike all but a few debtor attorneys in Memphis, black.

A cop turned nurse turned attorney, Payne, 66, has been practicing bankruptcy law in Memphis since the 1990s. Inside his office, the thick carpeting and friendly banter between Payne and his two long-standing employees give the place a homey feel, albeit a home with files stacked everywhere and large binders labeled “GARNISHMENTS” spilling out of a cabinet.

African-American identity is a major part of his practice. When his firm sends out letters to prospective clients—usually people who have been sued over a debt – he tries to make sure they know. “I use black heritage stamps,” he said. Sometimes he uses Kwanzaa stamps. He includes a page with inspirational sayings, like one with a quote from Marcus Garvey, a leader of the Black Nationalist movement, who is depicted with his body in the shape of Africa.

The emphasis on blackness is not just a marketing gimmick, he said. Because the clients are “people who look like me,” he said, “they feel more comfortable with me.”

And that, he said, may help in convincing debtors that Chapter 7 is a better choice. Payne’s challenge, he said, is getting them “to take the emotions out of a home, the apartment, out of the vehicle” and decide that they are better off without the debt.

This discussion is what he calls his “come-to-Jesus meeting.” Contrary to Arthur Ray’s emphasis on teaching his clients financial discipline through five years of payments, Payne promotes the discipline of letting go of possessions they can’t afford.

“Me being African American, and me understanding my community, maybe I’ve been more successful in showing them that this is not the way you ought to go,” he said.

Crucially, Payne also approaches fees differently. Whether it’s a Chapter 7 or Chapter 13, the down payment is usually a couple hundred dollars, and his clients can pay the remainder in installments.

He doesn’t file Chapter 13 cases for no money down, because he just doesn’t like the idea. And he has an employee, instead of him, discuss fee arrangements with clients, he said, because “I found that it colors the way that I do business.”

Brad George is another attorney in the district who often files Chapter 7 cases for his clients. His approach is simple. “It’s not rocket science, I can tell you that,” said George, who is white and has practiced bankruptcy in Memphis for 20 years. If there is a good reason to do a Chapter 13, like a threatened foreclosure or driver’s license issue, then he will file that way. Otherwise, he said, “I think you should try and always, always, always do a [Chapter 7].”

To file a Chapter 7 with George, it costs the debtor $555, with most of that due upfront. That is about half of what many other attorneys charge in Memphis. But, to George, it just seems like enough.

“I figure I spend about two hours on average per Chapter 7 [case],” he said. “So that’s pretty fair, I’d say.”

George also doesn’t file Chapter 13 cases for no money down, instead asking for around $200 dollars, giving his clients a much more balanced choice between how much money they have to come up with to file Chapter 7 versus Chapter 13.

George’s black clients file under Chapter 7 almost half the time, according to our analysis, a rate that is almost two and a half times what is typical in the district. There is also little racial disparity in what portion of his black and white clients end up in Chapter 7.

Payne and George agree that their flexibility with fees is likely a key reason they are able to file more Chapter 7 cases for black clients.

There are understandable reasons why attorneys tend to be less flexible with Chapter 7 fees. When debtors receive a discharge of their debts at the end of the case, outstanding fees to their attorneys are also wiped out. Any further payments are voluntary. As a result, debtor attorneys—in Memphis or anywhere else—generally require the entirety of their fee upfront. To address this problem, some scholars have called for Congress to change the law to make attorney fees clearly exempt from discharge.

Such a change could have a large effect. The firm that files the most bankruptcy cases in Atlanta, for example, files Chapter 7 cases for $0 down, with the entirety of the fee due through an installment plan that lasts several months. The chief judge in the Northern District of Georgia has ruled that such arrangements are legal, and other large firms in the Atlanta area have adopted the practice.

The result is clear. In the heart of the South, most of the filings in the Northern District of Georgia are under Chapter 7—compared to less than 30 percent in the rest of the state. And notably, black debtors in that district file under Chapter 7 almost half the time, a rate significantly higher than even the white debtors in the Western District of Tennessee.

For now, things in Memphis continue as they seemingly always have. In April, less than six months after it began, Novasha Miller’s Chapter 13 case was dismissed. Though she hasn’t heard anything yet, her old landlord’s collection agency is again free to attempt garnishment of her wages.

Miller said that a miscommunication with her attorney led to the dismissal. After she changed jobs again (the new one pays a little bit less, $9.36 an hour, but it’s full-time and she likes the people), she notified Ray’s office, she said, but the plan payments were never set up to be automatically withdrawn from her paychecks. However it happened, having paid about $600, all of which was absorbed by court and attorney fees, she was back to square one. Choosing Chapter 7 could have resulted in her emerging from bankruptcy with her student loan as her only remaining debt. Instead, her debts, having gone unpaid for months, were now larger—she’s not clear yet just how much—the interest applied as if the bankruptcy had never happened.

She is thinking of filing again, maybe with a different attorney. And hopefully, she said, this time it’ll work out.

Article source:


NOTICE IS HEREBY GIVEN: That default has occurred in the conditions of the following described mortgage:

DATE OF MORTGAGE: September 2, 2005


MORTGAGOR(S): George Gellerstedt, an unmarried person

MORTGAGEE: Mortgage Electronic Registration Systems, Inc., a Delaware corporation, as nominee for American National Mortgage Inc. Financing Real Estate in America, a Minnesota corporation

DATE AND PLACE OF FILING: Recorded on October 19, 2005 as Document Number A000396355 in the Office of the County Recorder of Carlton County, Minnesota.

ASSIGNMENTS OF MORTGAGE: Assigned to: CitiMortgage, Inc. by assignment recorded on July 14, 2009 as Document Number A000425411 in the Office of the County Recorder of Carlton County, Minnesota; thereafter assigned to Federal National Mortgage Association by assignment recorded on June 23, 2014 as Document Number A000456926 in the Office of the County Recorder of Carlton County, Minnesota.

LEGAL DESCRIPTION OF PROPERTY: Lot 4, Torma Addition, Carlton County, Minnesota.




TRANSACTION AGENT: Mortgage Electronic Registration Systems, Inc.

NAME OF MORTGAGE ORIGINATOR: American National Mortgage Inc. Financing Real Estate in America, a Minnesota corporation




THAT no action or proceeding has been instituted at law to recover the debt then remaining secured by such mortgage, or any part thereof, or, if the action or proceeding has been instituted, that the same has been discontinued, or that an execution upon the judgment rendered therein has been returned unsatisfied, in whole or in part.

PURSUANT, to the power of sale contained in said mortgage, the above described property will be sold by the Sheriff of said county as follows:

DATE AND TIME OF SALE: November 21, 2017 at 10:00 AM.

PLACE OF SALE: Carlton County Sheriff’s Office, 317 Walnut Avenue, Carlton, Minnesota.

to pay the debt then secured by said mortgage and taxes, if any actually paid by the mortgagee, on the premises and the costs and disbursements allowed by law. The time allowed by law for redemption by said mortgagor(s), their personal representatives or assigns is six (6) months from the date of sale.

TIME AND DATE TO VACATE PROPERTY: Unless said mortgage is reinstated or the property redeemed, or unless the time for redemption is reduced by judicial order, you must vacate the premises by 11:59 p.m. on May 21, 2018.



Dated: September 22, 2017




By: /s/

Rebecca F. Schiller, Esq.

N. Kibongni Fondungallah, Esq.

Samuel R. Coleman, Esq.

*Corbin C. Smith, Esq.*

Attorneys for Mortgagee

The Academy Professional Building

25 Dale Street North

St. Paul, MN 55102

(651) 209-9760



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Bank takes Feroce mansion at foreclosure auction for $4.175 million

NEWPORT, R.I. – The Newport mansion owned by Benrus CEO and Republican gubernatorial hopeful Giovanni Feroce was foreclosed Wednesday by Coastway Community Bank, which bid $4.175 million for the property.

The bank, which held the $4-million mortgage and brought about the foreclosure auction, now owns the historic Wyndham estate at 36 Beacon Hill Rd.

While the proceeds are expected to cover the mortgage and approximately $75,000 in city property tax liens, there are multiple liens and attachments on the property related to Feroce’s business dealings — including some added just a few weeks ago.

Feroce didn’t attend the morning auction, which was conducted by Skip Ponte Jr. of Irving Shechtman Co., Inc., of Pawtucket. While the auction didn’t attract any serious bidders, it was attended by two agents from Mott Chace Sotheby’s International Realty, who held an “open house” at the same time for a four-acre lot next to the mansion. This land is listed for $1.795 million.

Feroce has been trying to sell the property for some time, without success.

He recently rejected a $4 million offer on the Wyndham property. An online auction on Aug. 28 brought in the highest bid of $3.75 million, but it wasn’t enough to cover the debts and clear the title of the mansion. Feroce also rejected a $1.1-million bid for a four-acre adjoining lot at 0 Brenton Rd.

Those who placed liens and attachments on the estate will end up pursuing Feroce personally. The attachments are from a variety of creditors ranging from the Internal Revenue Service to Feroce’s lawyers, vendors, landscapers and former employees.  The state Department of Labor and Training is still seeking more than $13,000 in fines for not having workers compensation insurance on Sky Chiefs players. A new IRS tax lien was placed on the property this month.

Feroce was CEO of Alex Ani when he bought the mansion and subdivided lots for $6.8 million in January 2014 after a foreclosure and bank sale. After leaving the jewelry company two months later, Feroce bought Benrus, a military-style watch and backpack company, invested in RI Local advertorial magazine, and launched the Providence Sky Chiefs semi-pro basketball team.

 Feroce leveraged his properties to support his foundering businesses, and by the fall of 2015, the mansion and land were on the market for a total of $12.99 million.

Feroce shut down RI Local in 2015, disbanded the Sky Chiefs this winter and closed the Benrus stores. In May, Feroce closed the Benrus headquarters in Providence — where the landlord is suing him for failing to pay the lease and use of a billboard — and moved the company address to a building in Manhattan that leases out “virtual office space.”

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