Traditionally, Texas bankruptcy cases have been determined by a mechanical approach which uses your past to define your future, but things are changing in the laws. As a result, people were left to rely on their past to determine their future. But what if your financial situation changes? Perhaps you have been laid off and you are no longer making the money you were three months ago. This is going to drastically affect your means test, which determines what type of bankruptcy you are eligible to file for. The Lanning ruling allows more realistic projections to affect the results of your bankruptcy.

More recently, people have been applying for modifications if their financial status severely changes. The Lanning ruling helps avoid modifications by allowing the debtor a more realistic viewing of their current financial status. The wording of the new law refers to projected income which is merely a prediction of what your income is going to look like based on things that are already known or are even definite. Presenting this information to the judge may take some preparation time, which ultimately delays the process.

Unfortunately filing for bankruptcy for most people in Dallas is a time sensitive process and may want to be done as quickly as possible. As much as the Lanning ruling helps the debtor it can have negative effects, but as a whole the advantage far outweighs the disadvantages. This monumental change is a rational movement towards financial stability, and simply the most practical way to identify what the debtor can and cannot afford.

I was asked by an Editor at the Dallas Observer for some quick observations about the ruling that he could use in an article.  Of course I was happy to oblige, and I got my analysis written before anyone else in the country did.  After I was done sending it over for the Observer, I took some time to read what other journalists were saying about the ruling.

Daniel Kaplan of SportsBusiness Journal tweeted that the creditors were very happy with the ruling because the judge ruled that the Chapter 11 Plan could not be confirmed as written.  Other journalists (including the AP) picked up on that theme and ran with it.  Some called the ruling a “crushing blow” to the chances of a Greenberg/Ryan sale and that theme was repeated over and over as each news source parroted what the last one said.

This “crushing blow” stuff is nonsense.  If there is one thing I’ve learned in my almost twenty years as a lawyer, it’s that there is always two sides to every story.  ALWAYS.

It looks like Hicks (and, ergo, the team) mostly wins.  Judge Lynn says that Hicks has to make some changes to the Plan soon.  OK, so it can’t be confirmed in its current form.  So the creditors can call that part a victory.

The lenders, however, lost their argument that THEY got to decide who purchases the team (they argued that once Hicks went into default, control automatically shifted to them).  The lenders also lost their argument that Hicks MUST sell to the highest bidder.

That second point is the key to the entire case.  Nobody has mentioned it yet, but this whole bankruptcy case is about leverage, not control.  The lenders do not really care if Crane buys the team and do not really believe he can or will.

Instead, the whole reason they are fighting Hicks is to convince Greenberg/Ryan to raise their offer or to get Hicks to kick in the shortfall.  The “fair” thing to do is for Hicks to pay it in but naturally he’d rather fight the creditors long enough that Greenberg/Ryan get tired of it and just offer to pay it themselves.

Another interesting thing in the ruling is that at the specific request of MLB, Judge Lynn avoided the issue of whether MLB’s constitution trumps bankruptcy law.  It could have been an issue if the bankruptcy court ruled that the lenders were in control but then MLB replied with “we don’t have to accept anyone into our private club that we don’t want as a member.”  Watching MLB argue that tension would have been the most interesting part of the whole case!

The AP and other journalists who parroted the story are right in that Judge Lynn is requiring creditors to vote and approve the current Plan, but that’s only unless/until Hicks makes the changes to the Plan that Judge Lynn says need to be made.  If the creditors are happy, it’s because Judge Lynn didn’t just completely pour them out.  He is not going to confirm the Plan as it now stands, but all Hicks has to do is make some amendments to the Plan to pay the creditors interest on their 75MM and whatever else the court picks at.  Once those are made, Judge Lynn will likely approve it and the creditors (Monarch, et al.) won’t have gained anything.

Once the new Plan goes on file, the two Rangers Equity Holdings companies will have to re-vote to approve it.  In order to scuttle the deal now, the creditors have to figure out a way to take control of the Rangers Equity Holdings companies so they can cast the vote the way they want.  The involuntary bankruptcy cases that the creditors filed against the Rangers Equity Holdings companies several weeks ago may eventually get the creditors some control, but not soon enough I’ll bet.

If I fought Mike Tyson and somehow won the first round on points, I too would be elated.  But that wouldn’t mean that I had any better chance of actually winning the fight.

Later, I think the journalists who reported yesterday’s ruling as a “crushing blow” will realize the creditors (Monarch) just won the first battle and lost the war.

UPDATE June 23 at 12:51 pm: In the first hour or two after the ruling came out, I was the only one on record saying the ruling was not too shabby for the team– all the media outlets were saying it was a disaster.  Several are now seeing the bigger picture I espoused yesterday, including NBC Sports and Business of Sports Network. The astute commenters (specifically “ab03″) at Lone Star Ball had it figured out by early evening.

Local super-blog Baseball Time in Arlington has a great recap of the media’s rush to judgment.

However, PC did not file from 2005-2008, and is currently filing those
taxes with an account, who estimates the liability at approximately
100k. I’ve already explained to PC that there probably nothing that
bk can do with respect to those more recent tax debts that are
currently being filed (and which will thus be priority debts).

PC also has unsecured debts to two former employers totally 1.25
million. PC is a former floor trader, and these funds were seed
capital for trading. These are unsecured debts.

PC does not own a home, rents for $1500/month, and owns only some
personal goods (clothes, furniture) and a 2003 Land Rover with 100k
miles.

Discharging Taxes in Bankruptcy by King is supposed to be the mother of all
books on this topic. The bible as others like to refer to it.

The value of the vehicle is around $10,500–I’m estimating they will
get $8,000-9,000 at a sale. So, the deficiency will be something in
the range of $7,000-10,000.

Time limits between 7s are now 8 years, from a 13 to a 7 is 6 years, from a 7 to a 13, 4 years, and between 13s is 2 years. And yes it is between the dates of filing. And no a dismissed case doesn’t count, but it impacts how long the stay lasts if a subsequent case is filed within a year of the dismissal. The discharge of debt works pretty much the same now as it did before, you don’t have to pay part of credit card debt to get a chapter 7 discharge, it is just slightly easier for credit card companies to object to discharge.

That said, my initial consultation is always free anyway and I’m happy to sit with the potential client or chat on the phone to explain everything they want to know about the process. If that takes 30 minutes, that’s fine; if it takes a few hours, that’s OK too. By the time that I am done with the consultation, I hope that the potential client believes: (a) I know more or less what I am doing; (b) I very much have the client’s best interests at heart; and (c) if the client can come up with the fees and follow instructions, everything probably will be fine.

I work extremely hard completing my debtors’ papers,
preparing them for their 341 Meetings and just staying with them in general
throughout their matters.

I help a LOT of Dallas people save their homes or find an option that is suitable
for them. There are plenty of ethical rules that we as attorneys already
follow and its very sad when a few bad apples ruin it for the rest of us. I
know that I follow all of the guidelines that are in place for attorneys in
NY (i.e. the AG wanted certain disclosures in 14 point font in my retainer -
which BTW is 14 pages long). I don’t think it’s prudent as a business practice to bill for my services
after they are rendered when the person I am rendering services for can’t
pay perhaps their most important bill – their mortgage.

Also, as a Dallas bankruptcy attorney, a great majority of us either work on contingency or
get paid up front for our services. I don’ t think doing mods should be any
different.

Attorneys are supposed to be helping the public and this proposed rule
assumes that we are all crooks and cheats. I have cabinets full of intakes
where I did not think that I could help them, so I didnt take a dime from
them. I would hope that other attorneys who are handling loan modifications
are doing the same.

See 11 USC 362(b)(2)(A).

Note that while most divorce actions also seek to determine division
of assets, with some cbankruptcy clients, there are no assets to
divide. Also make sure clients are aware of how a divorce can impact
their bk case.

From my own limited experience working with a Texas client seeking a modification while in the midst of a foreclosure proceeding, I will say that the most frustrating thing my client dealt with was the fact that they denied her for HAMP without telling her why. And once they deny you for it one time, they will not revisit it. It also took her a full YEAR to discover that the HAMP mod was only a verbal pre-qual, and that all the back and forth paperwork that was going on for 3-4 months last year was not actually even for the HAMP mod, but was for a different modification entirely. And, like Stefanie said, they will deny for lots of things wrong with paperwork. My client’s servicing company just was very poor about telling her what was wrong/missing. Every time they rejected it, they said something was missing, and she had to call them to find out what it was. She would do that, only to not be told EVERYTHING that was missing. And the whole time she
thought it was for consideration for a HAMP mod, when it wasn’t.

That said, if you dont qualify for HAMP, every Texas bank has their own internal
modifications programs. You need to contact the bank and see if it is a
possibility. Depending on the bank, they may qualify you over the phone and
then there is A TON of paperwork that has to be filled out and a file will
get bounced for not dating the tax return (or signing the Profit and Loss
Statement, or signing the bank statements, etc.)

As far as I know, there has not been any Texas CLE’s on modifications …yet. You
have to do tons of them to know what each bank wants and how they want the
info. If you are going to do it for a client, get a 3rd party authorization
and start there.