Posted on June 9, 2009 by Kevin Chern Esq.
Challenges to the application of certain provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act began the very day the law took effect. One of the first to bring suit to have the law declared unconstitutional was the law firm of Milavetz, Gallop & Milavetz. Now, nearly four years later, the United States Supreme Court has agreed to decide the Constitutionality of language prohibiting attorneys from advising clients to take on debt in advance of a bankruptcy filing.
The Eighth Circuit Court of Appeals decided last year that the legislature had intended to include paid bankruptcy attorneys in the definition of "debt relief agency", and that the 526(a)(4) restrictions were overly broad as applied to bankruptcy attorneys. The court ruled, however, that the section 528 disclosure requirements passed the rational basis test.
For more on the history of the Milavetz case:
http://blog.startfreshtoday.com/2007/04/articles/practicing-bankruptcy-law/bapcpa-provisions-declared-unconstitutional-as-applied-to-minnesota-attorneys/
http://blog.startfreshtoday.com/2006/12/articles/practicing-bankruptcy-law/section-528-advertising-disclosure-requirements-fail-constitutional-test/
http://blog.startfreshtoday.com/2006/12/articles/practicing-bankruptcy-law/rulings-against-bapcpa-debt-relief-agency-provisions-continue-to-mount/
Posted on March 4, 2009 by Kevin Chern Esq.
H.R. 1106, which would authorize judicial modification of mortgage loans, may go to a vote in the House of Representatives as early as tomorrow. The future of the bill is uncertain, with solid Republican opposition and a full-court press from banking industry lobbyists. While the Mortgage Bankers Association and others in the credit industry claim that the provision would ultimately mean more expensive mortgages, Senator Dick Durbin, who sponsored the companion bill in the U.S. Senate, estimates that about 1/3 of homeowners facing foreclosure in the next two years could be helped directly by this bill. Credit Suisse offers a more conservative but still substantial estimate of 20%. Given the projected 8 million + foreclosures in the coming years, that's a lot of homeowners. Just as importantly, it has the potential to slow the foreclosure spiral and help the housing market stabilize.
Obviously, the provision would put a powerful tool in our arsenals as consumer bankruptcy attorneys and allow us to help a sector of our clientele whose options have been sorely limited up to this point. Another important point is the key contrast between this and most other foreclosure-prevention plans: no taxpayer dollars are required to put this plan in motion. Careless lenders and underwriters will bear their share of the burden.
Versions of this bill have failed before, and this may be the "now or never" moment for the modification provisions.
NACBA has assembled this contact information to make it easy to weigh in on the bill:
Here's what you can do TODAY:
1. Phone 1-877-354-4958 between 9am and 6pm Eastern time only. You will be given specific suggestions for the substance of your phone conversation and prompted to enter your zip code.
Depending on your Congressional district, your call will be routed to the office of your Senator, your House Rep, or the White House.
2. Get word out to your clients, staff, family, friends, and colleagues who might also be interested in speaking in support of H.R. 1106. Please email your contacts today to ask them to phone in on our toll-free 877 number.
Tell them why their call in to their legislator is so important. We want word of this effort to spread.
3. If you blog, you may want to consider writing about HR 1106 and encourage readers to phone in support of H.R. 1106 using the toll-free line.
Thank you in advance for helping us to make this 11th-hour push for passage of H.R. 1106.
TOLL FREE LINE: 877.354.4958
There is also a contact form available on the NACBA website at http://www.congressweb.com/cweb4/index.cfm?orgcode=nacba&hotissue=1
Please take a moment to make contact today. The vote could take place as early as tomorrow.
Posted on January 12, 2009 by Kevin Chern Esq.
It's a hollow victory to be told that you were right after the damage is done, so we can take small pleasure in the fact that the New York Federal Reserve has taken note that the 2005 bankruptcy reform might have harmed the economy. In fact, three researchers at the New York Fed are calling the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act "seismic".
As bankruptcy attorneys across the country pointed out in the days (and years) leading up to the passage of BAPCPA, making it more difficult to file for bankruptcy didn't make resources magically appear in the hands of cash-strapped debtors who might otherwise have been filing for Chapter 7 bankruptcy. Some people would be prevented from discharging debts, but that didn't mean they'd have the means to pay them.
The credit industry, long on optimism and low on reason, clung to the idea that consumer debtors could be forced to pay their credit card bills and other unsecured debts, even if they didn't have enough money to do so.
Turns out they were right, according to these researchers. According to the report, debtors who could otherwise have filed for Chapter 7 bankruptcy, discharged unsecured debts and put their limited resources into saving their homes were instead forced into Chapter 13 bankruptcy, where funds that might otherwise have paid mortgages were diverted to unsecured debt. Before BAPCPA, relative mortgage performance improved as the number of bankruptcy filings increased, but that trend has reversed.
The study appears to leave some open questions, and many bankruptcy experts--even those who were firmly opposed to BAPCPA--appear skeptical about the extent of the impact. Read the full report from the New York Federal Reserve here: Seismic Effects of the Bankruptcy Reform
Posted on January 8, 2009 by Kevin Chern Esq.
DePaul Law School, in conjunction with the Commercial Law League of America, will hold its Annual Symposium on Thursday, April 16th, 2009 at the Westin Michigan Avenue Hotel in Chicago, Illinois.
The theme for the symposium will be Into the Sunset: Bankruptcy as Scriptwriter of the Dénouement of Financial Distress.
Posted on December 17, 2008 by Kevin Chern Esq.
The Department of Justice is currently accepting comments on a rule for proposed procedures and criteria that U.S. Trustees would use to determine if applicants seeking to become or remain an approved provider for personal finance management courses satisfy all the requirements of the U.S. Bankruptcy Code.
The current rule establishes mandatory prerequisites and minimum standards for applicants seeking to become an approved provider for personal finance management courses. Under the proposed new rule, the U.S. Trustees will approve applicants for inclusion on provider lists available to the public in one or more federal judicial districts. Inclusion on the provider lists will turn on whether the applicant has met all the requirements of the U.S. Bankruptcy Code.
All comments for the proposed rule should be submitted prior to January 13, 2009. For more information, please see the Notice of Proposed Rule Making.
Posted on December 8, 2008 by Kevin Chern Esq.
Senator Dick Durbin (D-IL), will hold a press conference on Tuesday, December 9th, at 12:30 p.m., in order to announce that his first order of business on the first day of the 111th Congress will be to introduce his Helping Families to Save Their Homes in Bankruptcy legislation. Senator Durbin will further announce his plans to see to it that this legislation will be included in the economic stimulus package that will be reviewed by the new Congress.
You can read more about the bill at Govtrack.us.
Posted on November 10, 2008 by Kevin Chern Esq.
On June 6, 2008, the Administrative Office of Courts awarded a bankruptcy noticing contract to BAE Systems Information Technology Inc. (BAE). The contract became effective on October 1st. Just want does BAE offer to court customers? I'm glad you asked. According to Susan Thurston, Clerk of the Court for the U.S. Bankruptcy Court for the District of Rhode Island in Providence, key features of this contract include:
1) Improved Address Matching: Data Quality XI will be employed by BAE to increase multi-stuffing efficiency, reduce costs and improve notice delivery.
2) Single Mailing to Joint Debtors: Duplicate notices to joint debtors will be eliminated for joint debtors with the same address.
3) Complete Online Electronic/ Preferred Mailing Address Registration: Under the new contract, complete online sign-up for creditor registration of preferred e-mail and/or U.S. mail addresses will be available.
4) Desktop Notice Management System: In January of 2010, an optional desktop notice management system for notice recipients will be offered to retrieve and store EBN notices transmitted through the E- mail Link service.
5) Online Notice Recipient Surveys: BAE is also charged with the task of providing online surveys at the EBN and National Creditor Registration Service websites.
6. National Change of Address: To help improve notice delivery and reduce the amount of returned mail, BAE will use the U.S. Postal Service National Change of Address database for print mailing and address creation through CM/ECF and PACER systems.
7) Alert and Web Page for Correcting/Maintaining Addresses: BAE will send messages to notice recipients alerting them to errors in the addresses provided for them in the case mailing list. The recipient will then be able to correct its address by accessing a new Web page provided by the BNC for correcting and maintaining addresses.
8) Bypass List to Debtor's Attorney via E-mail: Instead of printing the bypass list, the BNC will send the list to the debtor's attorney by e-mail. Under the current system, when the BNC is unable to deliver a notice to an intended recipient due to an address deficiency, a bypass list is mailed to the debtor's attorney.
9) Certificate of Notice to Include Notice of E-Filing Recipient Information: Once the CM/ECF is enhanced, the BNC will add a section to the end of the current Certificate of Notice, which will display the CM/ECF Notice of Electronic Filing information as received from the court. The luxury of this will result in all noticing and delivery information being included in one document for easier verification and follow-up.
If you would like to learn more about the impending changes or to register for EBN or NCRS, go to:
http://www.ebnuscourts.com/ and https://www.ncrsuscourts.com/.
Posted on November 5, 2008 by Kevin Chern Esq.
As of November 4, 2008, the people of the United States of America have clearly spoken by voting for change in electing Barack Obama as the new Commander-in-Chief. The American Bankruptcy Institute (ABI)reports that change will be a key factor in reforms that the Obama administration will make to the current Bankruptcy Code. According to ABI, President-Elect Obama plans to reform the Bankruptcy Code so that homeowners will be able to modify mortgages in Chapter 13 proceedings and offer additional assistance to disaster victims, members of the military, and other groups. For many working and middle-class families, January 20, 2009 cannot come soon enough.
You can read more concerning the bankruptcy reforms and other key issues on Obama's website.
Posted on October 15, 2008 by Kevin Chern Esq.
The Executive Office for U.S. Trustees (EOUST) has issued a final ruling which requires uniform forms for the final reports submitted by trustees handling Chapter 7, 12, and 13 cases. The rule will take effect April 1, 2009.
The Attorney General is obligated to issue rules requiring uniform forms for final reports by trustees involved in Chapter 7, 12, and 13 of the Bankruptcy Code. As stated in the Federal Register, The BAPCPA requires the rule to strike the best achievable practical balance between (1) the reasonable needs of the public for information about the operational results of the Federal bankruptcy system, (2) economy, simplicity, and lack of undue burden on persons with a duty to file these reports, and (3) appropriate privacy concerns and safeguards.
This rule is known as Section 602 of the BAPCPA and codified at 28 U.S.C. 589b. To read more, refer to regulations.gov.
Posted on August 28, 2007 by Kevin Chern Esq.
Word on the street (and in the
New York Times) is that Senator Richard Durbin (D-IL) will soon propose legislation to amend the Bankruptcy Code in order to better protect American homeowners facing foreclosure.
We don't yet know much about the "Helping Families Avoid Foreclosure Act" and it's provisions, except that it's slated to be proposed in September. Let's hope it incorporates many of the suggestions set forth in the
Joint Memo for Proposed Bankruptcy Law Reform: Solutions to Preserve Homeownership published by the National Consumer Law Center, the National Association of Consumer Bankruptcy Attorneys, the Consumer Federation of America, the National Association of Consumer Advocates, and the Center for Responsible Lending in April.
If you haven't yet read the proposal, it includes (among others) suggested amendments to:
- Eliminate the Chapter 13 prohibition on modification of loans secured by the debtor's primary residence;
- Extend the time allowed for repayment of claims secured by the debtor's residence;
- Allow for balloon payments to pay off home mortgages at the end of the plan; and
- Waive the credit counseling requirement when a foreclosure proceeding is in progress
Posted on August 20, 2007 by Tiffany Sanders J.D.
Katherine Porter's recent longitudinal post-bankruptcy study revealed something that may be hard for the credit industry to explain--something we've all known though anecdotal evidence for a long time, but which can no longer be denied: credit card companies are very, very eager to extend new credit to families fresh out of bankruptcy.
In fact, according to Porter's study, a post-bankruptcy household receives about three times as many credit solicitations as a household where there has been no bankruptcy filing. That's no oversight, either; many of these credit solicitations specifically refer to the recipient's recent bankruptcy.
Many bankruptcy and consumer credit experts, including Harvard Law Professor Elizabeth Warren, have pointed out that there are big profit margins in dealing with a sector of society that struggles to pay its bills on time: those consumers are more likely to incur late fees, over the limit fees, and to trigger punitive interest rates.
Still, there's no money to be made if the bills aren't paid at all, a fact that calls into question the credit industry's "deadbeat debtor" model of bankruptcy filing. If, as the credit industry has been loudly proclaiming for a dozen years, it believes that bankruptcy petitioners are morally bankrupt strategic filers who work the system to avoid paying their bills, then it makes no sense that these same credit card companies are tripping over themselves to do business with those debtors again.
No, as Porter explicitly points out, "Efforts to lend to post-bankruptcy familes are more consistent with an adverse events model of bankruptcy than the 'deadbeat debtor' model."
The debtor focus of the bankruptcy reform debate overshadowed to the point of exclusion any serious scrutiny of credit industry behavior. Porter suggests that post-bankruptcy credit marketing as it exists today is a product of existing bankruptcy law by eliminating the possibility of bankruptcy discharge for eight years and removing "competition" for those repayment dollars by eradicating past debt.
The study sets for excellent support for a completely new analysis of bankruptcy law from the perspective of shaping credit industry as well as debtor behavior to make the most of the fresh start bankruptcy provides. The entire study is well worth a read:
Bankrupt Profits: The Credit Industry's Business Model for PostBankruptcy Lending
Posted on April 20, 2007 by Kevin Chern Esq.
Yesterday, the United States District Court for the District of Minnesota entered its final order in the
Milavetz case, granting the plaintiff's motion for summary judgment and declaring that:
1. Sections 526 (a) (4), 528 (a) (4) and 528 (b) (2) are unconstitutional, "as applied to attorneys in the District of Minnesota".
2. Attorneys in the District of Minnesota are excluded from the term "debt relief agency" as defined in 11 U.S.C. section 101 (12A) and, as such, are not subject to any of the duties relating to BAPCPA defined debt relief agencies.
The Minnesota law firm of Milavetz, Gallop & Milavetz, P.A., along with two unnamed prospective clients, was among the
first to file Constitutional challenges to BACPA, commencing this case in November of 2005, just weeks after the new law took effect. In December of 2006, the Court made extensive findings declaring various provisions of BAPCPA unConstitutional and unenforceable as applied to attorneys. Nonetheless, the United States opposed plaintiff's motion for summary judgment at a hearing in February.
Posted on December 27, 2006 by Kevin Chern Esq.
In the November
ABI Journal , Part I of
Professor Charles Tabb's examination of consumer bankruptcy trends examined filing rates and the Chapter 7 / Chapter 13 balance. In Part II this month,
Professor Tabb makes a clear prediction: Filing rates probably will soon return to the range of pre-BAPCPA levels. Tabb doesn't expect, however, that those rates will continue to climb. That's because his research shows a clear correlation between the level of revolving consumer debt (primarily credit card debt) and bankruptcy filings, and the revolving credit market seems to be largely saturated.
Tabb's analysis is full of interesting details, including the fact that the correlation of bankruptcy filings with revolving debt as a whole is much stronger than the correlation between bankruptcy filings and delinquencies, or between bankruptcy filings and debt-to-income ratios. Overall debt correlates with bankruptcy filings, but not as closely as revolving debt. The bottom line: the level of credit card debt in America appears to be the clearest predictor of the bankruptcy filing rate. Based on that correlation, we can expect filings to climb back to pre-BAPCPA levels in the near future.
For all its interesting data, the article is as worthy of a read for Tabb's delivery of stunning information such as "The evidence shows that debtors file bankruptcy in very predictable numbers, depending not on what the bankruptcy law provides, but on how burdened they are with debt." This, Tabb suggests, shouldn't have come as a surprise to Congress. Of course, those members of Congress who spearheaded the 2005 bankruptcy reforms have shown themselves to be quite easily surprised by the obvious. Bob Lawless talks about a recent example--one that would be entertaining if real federal legislation hadn't sprung from this kind of ignorance--on the
Credit Slips blog:
Senator Grassley Struggles to Understand the Means Testing Forms
Posted on November 22, 2006 by Kevin Chern Esq.
An interesting paper by University of Illinois law professor
Charles Tabb appears in this month's
American Bankruptcy Institute Journal. Tabb has crunched some interesting numbers and pointed out that the average monthly quarterly Chapter 7 bankruptcy filings from the beginning of 2001 through the enactment of BAPCPA were 275,297. When what Tabb calls the "aberrant quarters"--those from the enactment date through the effective date and through the most current quarter for which data is available--are likewise averaged, the average filings are somewhat
higher than pre-enactment filings: 298,886/quarter.
Tabb also points out that the Chapter 7:Chapter 13 ratio has changed dramatically from pre-BAPCPA days, but that fluctuation appears to be largely related to the spike and then drop in Chapter 7 filings; the long term proportion is difficult to predict.
Posted on October 16, 2006 by Kevin Chern Esq.
After the way the Associated Press mischaracterized NACBA's findings earlier this year, it shouldn't come as any surprise that an AP reporter this week wrote that the paperwork hurdles in Chapter 7 bankruptcy have "become insurmountable". You can find the original article in the Sun News; we wanted to share with you the response of consumer bankruptcy attorney Sheryl Schelin.
October 16, 2006
Editor
The Sun News
Via Email Only -
To the editor:
In a recent article, Marcy Gordon (AP) tries to convince American consumers that the 2005 changes to the Bankruptcy Code have led to "insurmountable" obstacles barring them from filing for bankruptcy protection. While I am no fan of the new law - the gallingly-named Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA, or "Act") - I cannot allow the portrait painted by Ms. Gordon's article to go unchallenged.
Consumers deserve to know the truth about their rights, free from the gloss of collection industry deception. This Act, as Ms. Gordon essentially acknowledges, was the creation of that industry, lobbyists for which peppered Congress with horror stories about greedy, lying debtors who hide piles of cash from the hardworking, honest creditors. Never mind that such abuses were so rare as to be inconsequential, statistically speaking, or that creditor abuses were arguably more numerous (and yet remain unaddressed). Despite this bad law (both in underlying policy and in execution), consumer bankruptcy attorneys want the public to know that bankruptcy relief is still available.
Ms. Gordon quotes Lawrence Brooke, a DC-area attorney, as saying of the new law, "It's a help-the-banks, squish-the-little-guy law." While I don't disagree with Mr. Brooke on this point, I would hardly qualify the paperwork required as "insurmountable." Any bankruptcy filing requires the debtor to understand thoroughly his financial life. This can be intimidating for many debtors, but it's a step all debtors need to take in some context, if they want to escape the overwhelming pressures such oppressive debt causes. When aided by legal counsel, the debtor will find this process to be actually empowering.
True, attorneys who dabble in bankruptcy may end up reevaluating their business practices. The new laws make it imperative for debtors to receive counsel from qualified attorneys who focus on these areas, keep up with the rapidly developing state of the law, and can advise consumers specifically (as opposed to business interests, which are covered by other chapters and different rules).
Ms. Gordon's article cites filing statistics in support of her claim that the Act is scaring away debtors. Contrary to Ms. Gordon's claims, numbers tell only one small chapter of the story in this case. The 2005 filing numbers were, many believe, artificially inflated: the credit industry created media buzz that the new law would make it nearly impossible for debtors to seek relief. Ironically, the industry's efforts backfired, creating a mad rush to the courthouse in the months immediately preceding the new law's effective date. Further, anecdotal evidence from many of my colleagues in other parts of the country suggests that filings might be climbing back to pre-BAPCPA levels.
Most importantly, the decline in filings this year, I believe, reflects a massive disinformation campaign being waged on "the front lines" of the war against the American consumer. Time and again I hear the same stories from fellow consumer bankruptcy attorneys and their clients who report conversations with aggressive debt collectors that appear to be reading from the same script all across the country - a script appalling in its blatant disregard for the truth and overwhelming in its obvious disdain for the consumer's intelligence:
-"Bankruptcy is no longer available - Congress repealed it."
-"You're not eligible for filing bankruptcy, and I have proof." (Interestingly, when pressed to identify or produce that proof, the collector declines.)
-"You own a home, so you can't file for bankruptcy. That's illegal."
-"You will never get credit again if you file for bankruptcy."
-And my personal favorite: "If you file for bankruptcy, you'll be committing a crime."
To make this as plain as possible: Bankruptcy relief, while admittedly subject to new obligations and requirements, is most certainly still available. Consumers are not ineligible to file for bankruptcy relief simply because they own a home. Nor will the vast majority of consumer debtors facing bankruptcy lose all their property, or forever be denied credit as a result of the filing for bankruptcy. And finally, merely filing for bankruptcy in and of itself will not result in the debtor being subject to criminal prosecution, without intent to defraud, an overt act of perjury in the schedules or other papers filed, or some other specific, distinct criminal act.
The proponents of the Act hold a view that would be laughable if it hadn't led to such absurd results. The irony is that the Act will not achieve the goal of reducing filings in the long run, for one very simple reason: it does nothing to address the real cause of rising filing rates - the underlying oppression of the working poor in America. Rising medical costs, wages that do not keep track with rising costs of living, serious illness and injury, debtor harassment, greedy collectors who try to collect the uncollectible (even going so far as attempting to collect debts long since extinguished by discharge or by the expiration of the statute of limitations), the loss of jobs to overseas markets - these and other contributing factors remain. But so does bankruptcy protection, and that is most definitely a very good thing for the vast majority of consumers who, contrary to Congressional views as evidenced by the new law, are honest, hardworking, and well-intentioned people trying to do the best they can under next-to-impossible circumstances.
And because Congress makes me say it: I am a federally designated debt relief agency. I help people file for bankruptcy under the laws of the United States. And I am proud of it.
Sincerely,
Sheryl Schelin
Posted on October 5, 2006 by Kevin Chern Esq.
As the first anniversary of the controversial 2005 bankruptcy reform provisions nears, the National Association of Consumer Bankruptcy Attorneys (NACBA) has conducted a survey of 700 consumer bankruptcy attorneys. The results are unsurprising: "the primary impact of the new law appears to be more paperwork hassles and higher expenses for already cash-strapped consumers."
More than 75% of the attorneys surveyed indicated that the time involved in preparing a bankruptcy petition has increased by 50% or more since the law change. More than a quarter of respondents said their preparation time had doubled. More than 90% of respondents perceived that the change in the law had primarily increased costs, with little or no substantive impact.
Henry Sommer, President of NACBA, points out that the means test, intended to screen out abuses, has instead demonstrated that the credit industry's ten-year lobby was misguided. "Virtually none of the people who file chapter 7 cases are able to pay more."
Additionally, the study showed:
--Fewer than 1/3 of bankruptcy attorneys report seeing an increase in forced Chapter 13 repayment plans
--More than 2/3 of consumer bankruptcy attorneys report a jump in consumer inquiries during the third quarter of 2006
--Fewer than 10% of cases handled by participating attorneys were linked to discretionary spending issues
The problems that pushed consumers to file for bankruptcy haven't gone away, and consumers are beginning to discover that bankruptcy is still a viable option for them. 57% of attorneys surveyed expect bankruptcy filings to return to pre-BAPCPA levels by the second anniversary of the new law, with more than 10% predicting that filings will reach normal levels by the end of 2006.
Posted on July 19, 2006 by Kevin Chern Esq.
The Chicago Tribune this week announced "Personal Bankruptcy Filings Plunge". Whether through mischaracterization or misunderstanding, mainstream media across the country are reporting on the dramatic drop in bankruptcy filings over a similar period in the previous year: it happened when the fourth quarter 2005 stats were released, and it's happening now, in the wake of the first quarter 2006 stats.
It's certainly true that far fewer personal Chapter 7 cases were filed in the first quarter of 2006 (65,397) than in the first quarter of 2005 (289,239). But in reporting consistently on the dramatic decline, the press persistently ignores the clear trend in filings since the law change.
Breaking down the statistics by month since the law change paints a much more realistic picture:
November, 2005: 5,460 (7); 8,298 (13)
December, 2005: 9,274 (7); 12,362 (13)
January, 2006: 13,033 (7); 14,202 (13)
February, 2006: 19,591 (7); 15,761 (13)
March, 2006: 30,626 (7); 19,351 (13)
In addition to the steady increase in filings each month since the law change, the proportion of Chapter 7 cases is working its way back toward the norm. Although both mainstream media and industry sources like Lundquist Consulting point to the increase in percentage of Chapter 13 filings versus prior years, that ratio is dropping monthly, with Chapter 7 filings far outstripping 13s during March, 2006.
Additionally, the Tribune reports that June personal bankruptcy filings averaged 2,272 per day. Although the paper compared that to the "typical" 5,000-6,000 filings per day before the law change. The more significant comparison, however, seems to be with current numbers: if the reported average is accurate, then June filings--significantly outdistancing March filings--show that the trend back toward pre-BAPCPA numbers continues.
Posted on July 14, 2006 by Tiffany Sanders J.D.
Back in May, we reported that the National Association of Consumer Bankruptcy Attorneys (NACBA) and the Connecticut Bar Assocation (CBA) had filed suit in federal court alleging that the "debt relief agency" provisions of BAPCPA prohibited attorneys from providing complete and accurate information to their clients, making it impossible to fulfill their ethical obligations.
NACBA/CBA requested a preliminary injunction prohibiting application of those provisions to NACBA/CBA members until the issue had been decided.
Yesterday, the District Court heard arguments on the preliminary injunction. Eugene S. Melchionne, Esq. kindly provided an "eyewitness account" of the hearing. NACBA was represented by Peter Rubin and Henry Sommer, and CBA by Tom Gugliotti and Barry Fiegenbaum. There were also several NACBA members in attendance, including Eugene, Charlie Maglieri, Jed Berliner and Susan Williams.
Peter Rubin, by Eugene's account, presented an excellent case and ably answered the judge's many questions. In contrast, the government's argument reportedly relied heavily on the idea that where the law was written overbroadly, the government wouldn't think of enforcing it "that way."
No indication of the direction the judge might be leaning, but all indications were that he'd educated himself on the issues and asked a number of pertinent questions. We'll post information about the ruling as soon as it is available.
Posted on June 1, 2006 by Kevin Chern Esq.
The internet provides a lot of quick, convenient access, but it has its dangers, too. One of those dangers is that anyone who has access to a computer and can write a reasonable English sentence can hold himself out as an expert and someone, somewhere, is going to be fooled. Maybe a lot of someones. And then the "information" spreads.
That appears to be exactly what happened last week, when The Motley Fool contributor Selena Maranjian decided to pick up a message board post from 2003 explaining why you shouldn't file for bankruptcy and turn it into a column that ended up appearing on MSNBC.com.
So three years ago, a guy calling himself CPAScott wrote a discussion group post about why he didn't think people should file for bankruptcy, and the post was rife with misinformation. And now, three years and one major law change later, his advice appears on MSNBC, giving consumers helpful "information" like:
Bankruptcy will ruin your credit for a minimum of ten years. That's right, Scott isn't even content to suggest (erroneously) that bankruptcy will "ruin" your credit for the ten years it may remain on your credit report. Instead, he suggests that "it may take much longer to repair your FICO score". He completely ignores the fact that people can and should be rebuilding FICO scores during those ten years, and that most who keep their current bills current see significant improvements in the first 12-24 months post-bankruptcy.
You will lose some of your possessions. That's will, not may. Scott completely ignores the fact that most Chapter 7 filers don't own any non-exempt property and so don't lose any possessions, and doesn't even touch on Chapter 13 repayment plans.
You will lose your credit cards. Scott emphasizes that loss of credit cards is a problem because in the event of some unforeseen problem like the need for a car repair, "you might find it difficult--or impossible--to be able to produce the cash necessary to deal with it...spare cash will be sparse." So in addition to ignoring the possibility of obtaining a credit card almost immediately after bankruptcy, our poster seems to advocate relying on credit cards to cover emergency expenses rather than budgeting and saving for them. It's difficult to understand how Scott's header here--that you'll lose your credit cards--leads to his concluding suggestion that spare cash will be sparse.
The list then shifts to scare tactics and guilt: What if after you file bankruptcy, you get in a car accident and the other driver gets a multi-million dollar judgment against you? Bankruptcy proceedings are public record--you might end up in the newspaper! And you wouldn't want that, because bankruptcy is an "admission of defeat" and "saying you can't manage your own life--that your promise...is no good."
Whether Scott is simply misinformed and well-intentioned or an emissary of the credit industry, it's troubling that an anonymous message board post, three years old and full of easily discredited ideas should find it's way to an outlet like MSNBC, where it will likely be read by many consumers as authoritative simply because of the source. The final source, that is...not the guy who once did some ranting on a message board about a subject he clearly knows little about.
Posted on May 17, 2006 by Kevin Chern Esq.
The National Association of Consumer Bankruptcy Attorneys (NACBA) is offering a free workshop to victims survivors of Hurricane Katrina. Many hurricane survivors find themselves beleaguered by financial problems in the wake of property losses, emergency expenses, and interruption of employment.
The event, which will take place in the Grand Ballroom of the New Orleans Marriott Hotel (555 Canal Street) at 3:30 p.m. on May 20, will offer free information about the victims' rights and options.
Participants will then be invited to a screening of Maxed Out, the credit crisis documentary recently featured at the Sundance Film Festival.
Posted on May 11, 2006 by Kevin Chern Esq.
The National Association of Consumer Bankruptcy Attorneys (NACBA) and the Connecticut Bar Association (CBA) filed suit in federal court today challenging provisions of the bankruptcy statute that took effect in October, 2005.
NACBA and CBA assert that the "debt relief agency" provisions of the new law prohibit attorneys from providing certain legal advice and require statements that are untrue or may be misleading to clients and potential clients.
According to CBA President Louis R. Pepe, the requirements, if applied to attorneys, prevent them from carrying out their ethical obligations to clients, since they cannot lawfully provide complete and truthful advice.
NACBA President Henry J. Sommer says that the concerns are so great that some attorneys are choosing not to represent any consumer bankruptcy clients, even on a pro bono basis, for fear of being classified as a debt relief agency under the law.
The lawsuit seeks a preliminary injunction prohibiting the provisions from being applied to attorneys pending further order of the court. No hearing date has yet been set, but we'll all be watching for further developments.
You can read the complaint and additional information at www.nacba.org.
Posted on April 7, 2006 by Kevin Chern Esq.
After BAPCPA went into effect in October, Chapter 13 filings slightly led Chapter 7 filings for the remainder of 2005. However, it looks like that tide is turning already. According to data released by LexisNexis this week, only nine states reported higher Chapter 13 filings in the first quarter of 2006.
In March, more 60% of consumer bankruptcies were filed under Chapter 7. Perhaps even more significantly, the total number of bankruptcy filings in March exceeded 50,0000--more than double the number filed in January of this year.
Perhaps as the effects of the huge increase in filings last October dissipate and the misinformation leading consumers to believe that Chapter 7 is out of reach is gradually corrected, the fluctuations of the past six months are finally stabilizing.
Posted on March 21, 2006 by Kevin Chern Esq.
The March American Bankruptcy Institute Journal includes an interesting analysis of the way BAPCPA may be hurting the very industry that fought so long to see it passed. Henry E. Hildebrand, III, a Chapter 13 Trustee from Tennessee, points out that while more consumers may be filing under Chapter 13 (as the law's proponents intended), those Chapter 13 filings are often not translating into any payments at all to secured creditors.
That's because the new system for determining disposable income is dependent on a formulaic application that doesn't necessarily have a basis in reality. For instance, because "current monthly income" is not, in fact, current monthly income, but rather based on income over a six month period, it is possible that the debtor's actual income is significantly higher than the "current monthly income" on which the Chapter 13 calculations are based. And then, of course, the debtor may also have additional income that is statutorily excluded, such as child support and social security income.
Additionally, since the old system wherein the Trustee could examine expenses for reasonableness on a case-by-case basis has given way to statutorily permitted expenses, many debtors end up with no disposable income-on paper, anyway.
Hildebrand suggests that the consumer credit industry, after years of lobbying for this kind of reform, may turn out to be BAPCPA's biggest victims.
Posted on February 23, 2006 by Kevin Chern Esq.
I listened to the National Association of Consumer Bankruptcy Attorneys' press conference this afternoon. I wish Michael Martinez had, too. Martinez covered the release of NACBA's report on the impact of the October 17, 2005 bankruptcy reform for the Associated Press, which means that his version of NACBA's assessment has appeared-and will presumably continue to appear-in news outlets across the country. Thus, a public already all-too confused about the motivations for and impact of the 2005 bankruptcy reforms will be greeted with this opening assessment:
Last year's overhaul of the nation's bankruptcy code has done little to prevent people from skipping out on debts while burdening others who seek bankruptcy protections for legitimate reasons, according to a survey commissioned by a trade group of bankruptcy attorneys.
Technically, of course, Martinez's opening line is true-NACBA's report, like all of the speakers at the press conference, clearly states that the 2005 reforms have done little to prevent people from skipping out on debts. Unfortunately, Martinez fails to mention that the reason the reforms haven't accomplished that purpose isn't that irresponsible debtors are still slipping through the cracks in large numbers, but because they never were.
In fact, the AP story goes on to say that the credit counseling requirement "did little to weed out deadbeats trying to use bankruptcy to avoid debts." Again, that much is true-because the statement of Brad Botes, Executive Director of NACBA and the NACBA report make the consistent point so clearly conveyed in just one line in the report's title: Bankruptcy Reform's Impact: Where Are All the Deadbeats? The new law isn't weeding them out because it can't find them. It can't find them because they're not the bulk-or even a significant minority-of the people who seek bankruptcy protection.
Of course, that doesn't come as a surprise to anyone who practices bankruptcy law. We already knew that the vast majority-79%, according to the NACBA study-of people filing bankruptcy found themselves in dire straits due to circumstances entirely beyond their control like catastrophic illness, death of a spouse, or job loss.
Bankruptcy reform, as the NACBA report so clearly demonstrates, creates additional hurdles for people already in desperate circumstances-people Botes describes as "already flat on their back due to financial crises over which they have no control." The Associated Press spin on the story creates two more hurdles when it misleads the public into believing that deadbeats are still spinning the process instead of acknowledging that they never were, and when it fails to correct the mythology that has many honest debtors believing that bankruptcy protection is no longer available to them.
Posted on February 22, 2006 by Kevin Chern Esq.
The National Association of Consumer Bankruptcy Attorneys (NACBA) will reveal findings of a study of more than 50,000 consumers impacted by the 2005 bankruptcy reforms today in a live telephone-based press conference. The conference will take place at 1:30 p.m. EST and can be accessed by dialing 1-800-860-2442.
As most consumer bankruptcy attorneys and credit counseling professionals might have anticipated, NACBA is expected to announce that the new bankruptcy law is not working as intended, and is instead imposing harsh burdens on consumers who have already been impacted by difficult circumstances beyond their control.
For complete details of the NACBA study, listen to streaming video of the news event after 6:00 p.m. EST at www.nacba.org.
Posted on February 6, 2006 by Kevin Chern Esq.
The U.S. Trustee has posted updated median income information and IRS standards for allowable living expenses, but the new numbers aren't slated to take effect until February 13, 2006. While the changes aren't dramatic-the increase in median income seems to be in the neighborhood of 3.4% for most states-there are inevitably some clients who will fall within that window.
Obviously, if your client isn't in a hurry and his means test results would differ depending on which set of numbers you applied, you'd simply delay filing until after February 13. But the reality of our industry is that many clients can't wait two weeks to file when they walk through the door.
Must a debtor faced with imminent foreclosure or repossession, but falling in the gap between the 2004 and 2005 numbers, choose between filing in time to invoke the automatic stay and qualifying for Chapter 7? And how can we safely and effectively advise clients in this situation, where there's a significant downside to either option?
Those questions, and the statutory language regarding the applicable numbers, have some practitioners questioning whether the UST's office has exceeded its authority in delaying the application of the new data.
Posted on January 25, 2006 by Kevin Chern Esq.
Posted on January 4, 2006 by Kevin Chern Esq.
By Rodney Tanaka, Staff Writer
Inland Valley Daily Bulletin
WEST COVINA - New bankruptcy laws went into effect on Oct. 17, prompting an unprecedented surge in filings as people worried they wouldn't qualify under the new regulations. But contrary to popular belief the new laws don't eliminate bankruptcy as an option, said M. Erik Clark, a partner with the West Covina law firm of Borowitz, Lozano & Clark. "Bankruptcy is an option once we clear the hurdles," he said Wednesday. The Bankruptcy Abuse Prevention and Consumer Protection Act went into effect on Oct. 17. More than 600,000 bankruptcies were filed nationwide in October 2005 to beat the deadline, compared to about 130,000 filed in October 2004, according to the American Bankruptcy Institute. Advanced publicity about the new law suggested the new regulations were much less debtor friendly and restricted access to Chapter 7 of the bankruptcy code, said Samuel Gerdano, executive director of the American Bankruptcy Institute. Some even believed that bankruptcy would not be available after Oct. 17. "So that kind of panic environment caused a stampede to file, a rush that courts are only now beginning to finish working their way through," Gerdano said. "Since Oct. 17, filings really dropped off dramatically nationwide." But most people will still be eligible to file for Chapter 7, he said. By many accounts, the new law represents the most significant revision to the United States bankruptcy code since the late 1800s, Clark said. One major change is the "means test," measuring a debtor's income against the median income of his or her home state. For example, a single Californian's average monthly income from the previous six months would be compared to California's median income. The annual median income in California is estimated at $42,012. If the debtor's average income falls below the state median, they are not affected by many of the new laws, Clark said. But even those with incomes above the state median can qualify for bankruptcy, they just need to take several additional steps, he said. Much of the burden of these new laws falls on bankruptcy attorneys and others who counsel debtors, Clark said. The laws require more receipts and paperwork, and debtors will likely pay more in bankruptcy court filing fees, Clark said. Someone planning to file for bankruptcy must also attend a U.S. Trustee-approved credit counseling program before filing. "The end result is it made it more complicated and more expensive for people facing financial problems to get relief," Clark said. Most people who file for bankruptcy are not trying to cheat the system, nor are they people who don't know how to manage their money, Clark said. They are for the most part hard-working, honest people who come across circumstances they either didn't or couldn't plan for, such as medical expenses or those going through a divorce, he said. "The bankruptcy system was set up to give people a fresh start when some sort of event made their financial situation overwhelming," Clark said.
Posted on January 3, 2006 by Kevin Chern Esq.
2006 is predicted to be a strong year of growth for the American economy, continuing the rebuilding that has been taking place since the tumble our stock market took a few years ago. While many have forgotten the challenges that led to the dot-com burst and the insuing "mini-crash" on the stock market, there are still some who would caution us of approaching diffuculties. Read below to see the top six dangers the US economy faces this new year, according to Dean Calbreath.
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Posted on January 3, 2006 by Kevin Chern Esq.
After the holiday season rushed past us, we now find outselves in the year 2006, and many Americans are wondering where all of their savings went. This time of year is often one of the hardest - extra expenses, higher heating bills, and unexpected costs seem to come at us from everywhere. What many Americans do not even realize, though, is that the rules for filing for bankruptcy have been changed. So before you decide that you'll file your debt away, be sure to read up on those changes.
Posted on January 3, 2006 by Kevin Chern Esq.
By LAWRENCE MISHEL
and ROSS EISENBREY
1. Profits are up, but the wages and the incomes of average Americans are down.
* Inflation-adjusted hourly and weekly wages are still below where they were at the start of the recovery in November 2001. Yet, productivity-the growth of the economic pie-is up by 13.5%.
* Wage growth has been shortchanged because 35% of the growth of total income in the corporate sector has been distributed as corporate profits, far more than the 22% in previous periods.
* Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.
2. More and more people are deeper and deeper in debt.
* The indebtedness of U.S. households, after adjusting for inflation, has risen 35.7% over the last four years.
* The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago.
* The debt-service ratio (the percent of after-tax income that goes to pay off debts) is at an all-time high of 13.6%.
* The personal savings rate is negative for the first time since WWII.
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Posted on January 3, 2006 by Kevin Chern Esq.
It is important for all of us to be educated on the realities of bankruptcy, even if it does not seem to be a reality we will soon face, the day may come when we think that filing is the answer. But many debtors, especially students, do not understand all of the ins and outs of filing for bankruptcy. What are the bennifits? What are the ramifications? Why we don't all need to be bankruptcy experts, it's a good idea for us all to have a basic idea.
Below are links to two articles detailing the bankruptcy process for those who wish to learn more.
A Q&A on the new Bankruptcy Law
Some Students see Bankruptcy as a Quick Fix
Posted on January 3, 2006 by Kevin Chern Esq.
It seems that some professionals in the bankruptcy industry have a severe detachment from the reality that debtors in this country face. Read below to see just how unrealistic the expectations of some so called experts are when it comes to the spending habits of those in debt.
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Posted on January 3, 2006 by Kevin Chern Esq.
When consumers find themselves under the load of credit card debt, it can be very daunting to ever find their way out. While help is available, consumers don't always know who to turn to - some turn to the credit card companies themselves. There are measures that a lender can take to help their debtors - they do want them to keep making payments, after all. Read below to discover some of the bennifits - and dangers - of the various types of assistance your credit card company may be able to offer.
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Posted on January 3, 2006 by Kevin Chern Esq.
Credit card losses, or charge-offs, topped 7% in October due to the surge in bankruptcy filings in the final weeks leading up to the full implementation of the bankruptcy reform laws. The worst is not over, since issuers treat bankruptcy related charge-offs differently. Last week, MBNA reported that its charge-offs were up sharply in November and it is bracing for another hit in December. MBNA charges-off bankrupt accounts by the end of the second calendar month following receipt of notification of the filing from the applicable court. Capital One's charge-offs for October exploded to 7.93%. Since Cap One promptly charges-off bankrupt accounts, the figures for November were significantly below the prior month. Nevertheless, the accelerated rate of bankruptcy filings in September and October are biting the bank credit card industry hard. Credit card issuers should realize lower charge-off ratios in the second quarter of 2006 and beyond as the bankruptcy process becomes more onerous for American consumers. During July, August and September, there were a record 542,022 consumer and business bankruptcy filings, a 37% increase over one-year ago. It is expected that filings for the first two weeks of October may exceed 300,000. These filings will be reflected on card issuers' books in December and January.
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Posted on January 3, 2006 by Kevin Chern Esq.
By Kathy Chu
USA TODAY
In case you weren't spending enough this holiday season to buy gifts and heat your home, you might have to take another hit: higher credit card payments.
Nearly three years after regulators said minimum monthly payments should let you pay off debt in a "reasonable period of time," some banks are finally acting.
Most of the top 10 credit card issuers have raised their minimum payments this year.
Regulators urged banks to adjust their minimum payments by the end of this year. The banks' delayed response to the guidelines issued in January 2003 means millions of people are being hit with higher credit card bills this holiday season.
The increase comes just as energy bills are soaring and a new bankruptcy law has made it harder to erase debt.
Banks say it takes time to update systems to accommodate the regulators' instructions. "These are not simple changes," said Alan Elias, a spokesman for Washington Mutual.
Still, "With a few exceptions, we expect them to be in compliance by year's end," said Barbara Grunkemeyer of the Office of the Comptroller of the Currency, one of the agencies that issued the guidelines.
Regulators didn't require minimum payments to rise by a fixed amount. But they said payments should cover fees and finance charges, plus 1 percent of principal. Until now, some minimums didn't even cover the interest owed, so debt would just kept growing.
Some card holders could see their minimum payment double, to 4 percent of the balance from 2 percent. On a $10,000 balance, the payment could jump to $400 from $200.
In the long run, the change is healthy for consumers: It means they'll pay off their credit cards more quickly. But at least at first, the higher payments could create financial hardship.
John Penn of the American Bankruptcy Institute expects more filings from low-income consumers who can't handle higher credit card payments. "If one of your bills doubled, it won't knock you out of the game immediately," Penn said. "You'll be late on some other bills, and you'll scramble, and it'll catch up to you eventually."
Yet it might not be feasible for some to declare bankruptcy.
"If (issuers) had done this a year ago, consumers who were underwater may have considered bankruptcy," but they may think twice about doing so after the stricter bankruptcy rules have taken effect, said Chi Chi Wu, staff attorney at the National Consumer Law Center.
Posted on January 3, 2006 by Kevin Chern Esq.
During January, American consumers could see their minimum payments on their credit cards increase by much as 100%. This increase has the potential to harshly effect many debtors, quite possibly pushing some to the brink of bankruptcy. Read below to learn about what consumers can do to prevent credit card debt from ruining their finances.
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Posted on January 2, 2006 by Kevin Chern Esq.
BY JULIAN BENBOW
TIMES-DISPATCH STAFF WRITER
Tuesday, December 27, 2005
Chapter 13 bankruptcy trustee Robert Hyman said about 450 cases came through his downtown office in the last three months of 2004. The total so far in the same span this year: 25.
After the historic spike in bankruptcy filings just before Congress' bankruptcy-reform bill took effect in October, filings fell off locally and nationally. Hyman guessed that activity will pick up again in the spring, but at this point he admits that a good guess is about all he has.
"It's a crystal-ball call," said Hyman, one of three Chapter 13 trustees in Virginia. "You figure Christmas debt will start catching up around February, so around April you can [anticipate] some filings."
Just not at the same pace as before.
More than 4,100 area residents filed for bankruptcy protection at the federal court in Richmond in October. Last month, only 86 consumer petitions were filed. While the dropoff might suggest that consumers' financial woes aren't as bad as advertised, Hyman said that doesn't necessarily mean people aren't swimming in debt.
"The same people that had financial troubles on Oct. 1 still had financial trouble on Nov. 1," he said. "I just think that really anyone who thought about [filing for bankruptcy] has already done it.
"There are always going to be unforeseen circumstances. But I don't think it's ever going to get back to where it was."
The change in the law was meant to balance the filing system for debtors and creditors by making it more difficult to file for Chapter 7 bankruptcy -- liquidation -- and encouraging credit counseling and Chapter 13 bankruptcy -- reorganization of debts.
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Posted on January 1, 2006 by Kevin Chern Esq.
DOVER - With minimum payments for many credit cards set to double in January, those who scrape by month to month may get socked when their holiday shopping bills come in.
Federal mandates requiring the rise in minimum payment rates are meant to encourage people to pay off their debt more quickly. But though crafted with an eye toward solvency, the requirements could exact a toll in the short run - especially among those who don't see the change coming.
Nancy Coverdale of Dover always pays above the minimum on her bill. But that's her decision, she said, and she's not happy to hear she won't have a choice about whether to pay more in the future.
She'd never heard of the change before Thursday. "It really shouldn't be," she said.
"What about the people who can barely make the minimum payment?"
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Posted on December 30, 2005 by Kevin Chern Esq.
It might seem counterintuitive that many credit card companies would inundate the recently bankrupt with solicitations for new cards. It's especially perplexing that those same companies would do so after having spent more than eight years and $100 million lobbying Congress to protect them from irresponsible borrowers with a draconian new bankruptcy law.
But the truth is that credit card companies aren't all that interested in customers who pay their bills in full every month. They really want the so-called revolvers, people who don't cover their balances and pony up those juicy interest payments and fees. The tighter repayment provisions in the new law will encourage companies to trawl for even less-qualified customers.
This is all a stark reminder of just how one-sided the new bankruptcy law is. While access to Chapter 7 bankruptcy has been sharply curtailed in the law, which went into effect in October, credit card companies are welcome to keep stuffing mailboxes with pre-approved cards.
Legislators ignored the five billion solicitations for new cards sent out last year alone. They pretended that the blame for the rising number of bankruptcies and delinquencies lay solely at the doorstep of debtors who recklessly used bankruptcy courts to dodge their responsibilities. This year, we've set a record with more than two million people in this country declaring bankruptcy. And many of their doorsteps are littered with direct mail offering new, high-interest cards.
At the very least, the credit card industry shares responsibility for this surge in bankruptcy filings. And with the reams of data and advanced risk-modeling tools available to financial companies, it is fair to argue that they deserve the better part of the blame.
The industry would have you believe that lending to the recently bankrupt is a service. "The people coming out of bankruptcy need an opportunity to get back on their feet," a spokeswoman for the American Bankers Association was quoted as saying in a recent article in The Times. It is the standard excuse for irresponsible lending: serving the underserved.
Indeed, with the help of these second-chance Samaritans, bankrupt Americans can quickly assume a new millstone of debt - only this time it will be even tougher to escape. If Congress is going to leave its bankruptcy law on the books, it should at least demand as much responsibility from the lenders as it is forcing on the borrowers.
Posted on December 29, 2005 by Kevin Chern Esq.
If you've been using credit cards to do your holiday shopping, you might want to think again. Government regulators are urging banks to double the monthly minimum payments on credit cards. And if you're one of the millions of Americans who carries a credit card balance from month to month, you could be in for a real surprise when you get your next bill.
It's a last minute Christmas shopping rush. For people who buy with credit cards, it could take a while to pay off all those gifts. And with consumer debt up to two trillion dollars and 40 percent of credit card holders carrying a monthly balance, credit card debt is a huge problem in this country.
That's why banks are going to double minimum payments on those card balances, starting as early as next month.
We asked shoppers if they pay their entire balance every month.
"Heck no! It doesn't ever work that way. Not since I got my first card in 1963."
One man told us he's in so much debt, he wishes there was no such thing as credit cards.
"It's no good, it's better just to buy what you have in your pocket and then you don't have to worry about it later."
Even though the doubling of the minimum credit card payment might hurt some consumers, the government says it's being put into place to help them pay off their debt.
For example, if you have a credit card balance of $2,000 dollars with an 18 percent interest rate, it will take you 30 years to pay it off if you pay the usual 2 percent minimum payment. But with that minimum increasing to four percent, it will only take 10 years to pay off.
Diane Gaskill says she pays hers in full every month for that very reason.
"I know a lot of people who don't and are always worried after the first of the year and trying to catch up and save all their money so they can pay it off.
But for some, these credit card changes won't make an ounce of difference in their overall debt.
"Won't affect me a bit. Cause if I can't pay it at them minimum now, I can't pay it at the minimum rate then."
And with new bankruptcy bills in place now, it's even harder to wipe out consumer debt.
Posted on December 29, 2005 by Kevin Chern Esq.
The drop-off in consumer bankruptcy petitions since the nation's bankruptcy law changed belies the fact that there are still many Americans in serious financial trouble.
Bankruptcy filings peaked at a record of more than 315,000 a week before the law took effect Oct. 17 but have since fallen to a weekly rate of about 3,500, according to Lundquist Consulting Inc., a financial-information and consulting company based in Burlingame, Calif.
"As far as what's happening in the (bankruptcy) courts, it's like the snake that swallowed the rat," said Texas lawyer John Penn, who is president of the American Bankruptcy Institute in Washington. "It's going to take a while to digest, but the system will go on."
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Posted on December 28, 2005 by Kevin Chern Esq.
Posted on December 22, 2005 by Kevin Chern Esq.
The Budger Reconciliation Act, approved by the House of Representitives earlier this week and by the Senate yesterday, raised the fees associated with filing for bankruptcy. Under the new fee structure, the cost of filing a Chapter 7 bankruptcy will rise from $220 to $245, and the cost of filing for Chapter 13 bankruptcy will rise from $150 to $235. These prices still do not include the various fees found under 28 U.S.C. 1930 (b), which raise the costs to $299 to file for Chapter 7 and $274 to file for Chapter 13.
Chapter 11 bankruptcy filings were intended to increase in cost from $1,000 to $2,750, but due to an error in which section was cited in the bill, only railroad bankruptcy fees were raised for Chapter 11.
This increase was opposed by all democratic senators, and several republicans. It took the vote of Vide President Dick Chaney to break the tie and pass the act. This new fee structure has been put in place solely to raise funds, and at the expense of the Americans who can least afford it. The new fees do not go into effect until 60 days after the bill was passed, and it still must pass the House one more time, due to edits made by the Senate to avoid violating Senate budget reconciliation rules.
Posted on December 14, 2005 by Kevin Chern Esq.
"Newly Bankrupt Raking In Piles of Credit Offers"
By TIMOTHY EGAN
Re-Published from the New York Times: December 11, 2005
TACOMA, Wash., Dec. 9 - As one of more than two million Americans who rushed to a courthouse this year to file for bankruptcy before a tough new law took effect, Laura Fogle is glad for her chance at a fresh start. A nurse and single mother of two, she blames her use of credit cards after cancer surgery for falling into deep debt.
Kevin P. Casey for The New York Times
Laura Fogle, a nurse who lives in Tacoma, Wash., filed for bankruptcy, but that hasn't stopped credit lenders from seeking her business.
Ms. Fogle is broke, and may not seem to be the kind of person to whom banks would want to offer credit cards. But she said she had no sooner filed for bankruptcy, and sworn off plastic, than she was hit with a flurry of solicitations from major banks.
-----Brought to you by StartFreshToday.com - Your Complete BAPCPA Solution.--------
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Posted on December 12, 2005 by Kevin Chern Esq.
By Gail Appleson, St. Louis Post-Dispatch
Debtors still can get a fresh start under new bankruptcy rules that took effect
Oct. 17, but changes in the law make it much more complicated and expensive.
The new law - the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 - aims to make it harder to escape debts; it requires an investigation
into whether people who want to declare bankruptcy can pay off at least some
bills.
But the new rules also introduced liability risks for lawyers, making it almost
impossible now to find one who's willing to take a pro bono bankruptcy case.
"No, this is not a good law," said William Mueller of the Law Offices of
Mueller and Haller, doing business as The Bankruptcy Center in Belleville.
Congress said it passed the hundreds of pages of changes to make people pay
creditors if they are able to do so, he said. "But that's not what's been done."
But credit industry officials said stringent new rules were needed to stop
debtors from misusing the system to cheat creditors.
"The high level of bankruptcy in this country is of serious concern," said
Susan Keating, president and chief executive of the National Foundation for
Credit Counseling in Silver Spring, Md. "With the level of consumer debt today
and the attitude 'Buy now, pay later,' we have some very serious problems
looming."
Continue Reading...
Posted on December 12, 2005 by Kevin Chern Esq.
The following comes from the NACBA member e-mail updates:
December 8, 2005
Dear NACBA Member,
I'm very pleased to announce that NACBA's Board of Directors has selected Brad Botes as NACBA's first full-time Executive Director, effective January 1, 2006. Brad has been a member of NACBA's board.
Read Brad's bio
Brad brings a great deal of enthusiasm, as well as management and organizational expertise, to this new position, a position that NACBA has come to need, and, with our increased membership, can now afford.
Our expanded staffing, including Administrative Director Candace Lambrecht, as well as Jewell Allred, who will be Brad's assistant, will enhance the value of NACBA membership. I am confident that you will soon see the positive results of these changes, which will include upgrades to the NACBA listserv, making it more usable for those who might find it overwhelming in its current form, improvements in the NACBA website, and additional educational opportunities for our members.
Maureen Thompson will continue to work as part of our team, with the new title of Legislative Director. We expect that Maureen will now be able to broaden her activities to include more work with the media, and more work with members pursuing state legislative initiatives, in addition to her continued work on Capitol Hill. Watch for more details of some of these efforts in the months to come.
I know you will join me in welcoming Brad and Jewell to their new positions. We will be giving contact information in early January.
Sincerely,
Henry J. Sommer
NACBA President
Posted on December 9, 2005 by Kevin Chern Esq.
The Supreme Court ruled today that the government can seize an individual's social security benefits to pay old student loans. This case protects that government's ability to distribute student loans, but hurts certian citizens who depend on their social security check, and is a topic of much debate in legal circles. Click here to read an article on MSNBC detailing the decision.
Posted on December 9, 2005 by Kevin Chern Esq.
This piece, Tri-Cities Lawyer Arrested for Contempt (November 30, 2005), reports on a lawyer arrested for contempt for pressuring his client to lie at trial. The lawyer was caught when the client presented the judge with the email exchanges documenting the lawyer's advice to the client to lie - and her response that "I understand that in defense cases you cannot always tell the entire truth. I am just concerned that I am telling a complete lie."
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Posted on December 9, 2005 by Kevin Chern Esq.
High interest rates, combined with a slow job market have combined to force higher than normal foreclosure rates on American home owners, with no relief in sight. It seems that today families who typically would not have had such troubles find themselves unable to make their mortgage payments and end up losing their homes. Read on below to find an article by Rebecca Deusser disecting this troubling new trend.
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Posted on December 9, 2005 by Kevin Chern Esq.
Hale Stewart, a Houston, TX tax lawyer and accountant, sees the American financial picture boiled down to a few basic elements -- "weak job growth, lack of meaningful upward mobility, and an explosion of consumer debt."
In his view, because "people are making the same [money] as they did five years ago," they've turned to things like credit cards and home equity to finance their lifestyles and cover basic needs.
Stewart, who writes many blog articles on economic issues under the pseudonym "Bonddad," believes the American consumer is "almost maxed out on debt. Eventually they'll get to a point where they just can't take any more [debt] on, voluntarily or otherwise."
"The economy is standing up on sticks. Something's just not working right."
Posted on December 9, 2005 by Kevin Chern Esq.
Kovacs is as all-American as one can be. Blonde and blue-eyed, with a winning smile, she works a quiet government job in the suburbs of Maryland while raising a baby girl by herself.
She likes to go to concerts in D.C. with friends, wonders if her daughter will start walking soon, and exercises regularly to get rid of her (largely imagined) excess poundage.
And like many other Americans, Melanie (not her real name) is climbing her way out of a quicksand trap of credit card debt and rising prices for goods, while trying to provide a good education for her daughter and a decent living for herself.
Melanie's solution was to refinance her new home in Maryland using a two-year adjustable mortgage, and cash out the equity to pay off her credit card debt.
"It got to the point where it felt like I was getting nowhere," she recalls. "I'd make these big payments each month, but the interest just kept getting bigger and bigger, so my debt never really changed."
By consolidating her debt via the refinance, Melanie is taking a risk, due to the possibility of her mortgage payments increasing, but she sees it as a good deal.
"My total payments will only be $100 more a month...it's worth it to get rid of those awful credit cards, and housing prices in this area are just fantastic." Melanie plans to sell her home before her payments increase, counting on the continuing appreciation of homes in the D.C. area to offset her closing costs.
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Posted on December 9, 2005 by Kevin Chern Esq.
By JUSTIN KRUSE Special correspondent
"Sam" liked to spend money. He spent it on himself; he spent it on his family; he even spent it on his friends. It wasn't that he made a lot of money, but he liked to buy things that would make him or the people around him happy. This all happened three years ago, but Sam is still paying for it today.
"I guess I went a little bit crazy with my credit cards," the 20-year-old Onalaska native said. "It didn't feel like I was spending my money. It was too easy to use."
Now Sam, who agreed to talk on condition of anonymity, is $6,000 in debt and barely making his minimum payments as a UW-La Crosse student working part time.
He received his first credit card when he graduated from high school. Half a year later he had maxed out his credit card and opened a new card to transfer his old balance. He saw "0 percent interest for six months" as a blessing. He thought he would just pay off his old balance on his new card with no interest charges and be out of debt.
But somehow it didn't work out that way. Instead of paying off the new card and cutting it up he fell back into his old ways and started charging again. Pretty soon his new card, which was used to pay off the old card's debt, began to acquire its own debt. Sam had another maxed out card, and again, he signed up for a new card at "0 percent interest."
"I couldn't really stop," Sam said about his spending habits. "If I saw something that I liked I would buy it with my credit card."
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Posted on December 9, 2005 by Kevin Chern Esq.
By ALEX VEIGA, AP Business Writer1 hour, 19 minutes ago
A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to a new economic report released Wednesday.
The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.
"We expect housing to start slowing the economy this quarter or the next," said Edward Leamer, director of the study done at the University of California, Los Angeles.
"Some jobs in manufacturing might well disappear as a result of weakness in housing, but this may be offset by jobs brought home or not lost to foreign competition," he wrote.
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Posted on December 9, 2005 by Kevin Chern Esq.
A new opinion by the Supreme Court decides that student loans can be paid by an offset to social security benefits. The entire document is linked to below.
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Posted on December 9, 2005 by Kevin Chern Esq.
The new bankruptcy laws were intended to bennifit credit card issuers by forcing their clients to pay back some of what they owe every month. However, this is not what always happens. Read through this article by Liz Pulliam Weston for a full report.
Posted on December 9, 2005 by Kevin Chern Esq.
Be sure to checkout ABI's Bankruptcy Blog. It is a well written journal which attempts to review all new cases which interpret the BAPCPA.
Posted on December 9, 2005 by Kevin Chern Esq.
By Andrea Coombes, MarketWatch
Last Update: 8:56 PM ET Dec 4, 2005
SAN FRANCISCO (MarketWatch) -- New bankruptcy rules are boosting legal costs, a side effect that will likely push more debt-laden consumers to consider going it alone in bankruptcy court.
But if you fumble a bankruptcy proceeding, representing yourself could end up costing you more than you'd save on legal fees. Many bankruptcy lawyers will say you need a lawyer; self-help-book marketers will say you don't. Here's what you need to know before deciding whether to handle it on your own.
Already, attorneys say they're charging 10% to 75% more because of the additional investigative work required under the new law, which went into effect in October, with fees for a Chapter 7 filing as high as $1,750 versus $1,000 before the new law, though fees vary widely by locale.
In Chapter 7, most of a consumer's debts are wiped out. Lawyers charge higher fees for the more-complex Chapter 13, in which consumers enter a repayment plan to pay back a portion of their debts.
Bankruptcy "can be an expensive proceeding, but it can be much more expensive if you don't do it properly, and it can cause you hardships that may be irreversible, such as losing a home or a car that might have been protected," said Brad Botes, a consumer bankruptcy attorney with Bond & Botes, in Birmingham, Ala.
And, many lawyers say, added paperwork requirements under the new law, plus more-stringent rules regarding erroneous filings, make self-filing an even worse idea now.
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Posted on December 9, 2005 by Kevin Chern Esq.
Thanks to our friend Max Gardner III provided us with this letter he wrote to a reporter at the LA Times.
I have never seen so many "urban myths" about the current status of our Bankruptcy laws. For example, a substantial number of American consumers simply believe that bankruptcy relief is no longer available. They think the Bankruptcy laws have been revoked by the Congress. Some other myths include the following: you must take and pass a test before you file; you must take and pass a test before you can get out of bankruptcy after you file; the IRS will audit all of your tax returns if you file; a husband can file but not a wife; a wife can file but not a husband; you have to have a fixed number of children to file; you cannot file if you have any children; you cannot collect any additional child support if you file; you will be required to pay substantially more child support if you file; you cannot own a car and file; if you own a car and file the car will be repossessed; you must have lived in the same state for at least 10 years before you can file; you can't file in the state you live in; your home will be subject to an inspection and complete inventory by the FBI if you file; if you make more than $166.00 per month then you cannot file; and the list goes on and on.
Of course, none of these statements are accurate. What we are finding out here in the real world is that one of the unintended consequences of Bankruptcy Reform is that in many instances the relief is better under the new law than under the old law. And, more importantly, the new law will certainly not slow down the number of new cases. With the cost of energy, the doubling of the minimum monthly payments on most credit cards as of next month, and the interest rates kicking in on all of the Adjustable Rate Mortgages, I fully expect the number of cases filed in 2006 to come close to those filed in 2004. It will take some time to reach the 2005 total since about 800,000 debtors filed in the weeks before October 17.
So, the point of this email is to suggest that you write a story on these "urban myths" and to let the average American know that bankruptcy relief is still an option and in some cases a better deal than it was before October 17.
O. Max Gardner III
Posted on December 1, 2005 by Kevin Chern Esq.
The United States Bankruptcy Court for the District of Nevada recently held that the $125,000 exemption cap under new Code Section 522(p) on homestead interests not held for more than 1,215 days before the petition is filed applies to all debtors, even where the debtor's state has opted out of the federal bankruptcy exemptions and has a state law homestead exemption that is higher than the new federal cap. In re Virissimo, 2005 Bankr. LEXIS 2085, No. BK-S-05-13605-LBR (Bankr. D. Nev. October 31, 2005).
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Posted on December 1, 2005 by Kevin Chern Esq.
Counsel hoping to avoid the new pre-petition credit counseling requirement by relying on the "exigent circumstances" provision under new Bankruptcy Code Section 109(h)(3)-brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)-should take close note of a recent decision by the United States Bankruptcy Court for the Western District of Missouri. In re Gee, No. 05-71886-drd (Oct. 26, 2005).
In the case, the debtor filed a Chapter 13 petition on the day that her home was scheduled for a foreclosure sale. However, she had not received or requested the credit counseling required under new Bankruptcy Code Section 109(h)(1) before she filed her petition. Accordingly, along with the petition, the debtor's attorney filed a certification of "exigent circumstances" under Section 109(h)(3) asking the court to waive the credit counseling requirement due to the impending foreclosure sale, the debtor's lack of funds, and her inability to meet with counsel. Four days after filing her petition, the debtor sought to obtain credit counseling, but was advised that she would have to wait to receive paperwork through the mail in order to register for the counseling.
The court held that the debtor did not satisfy Section 109(h)(3) because her attorney's certification did not establish that the debtor had requested and not received credit counseling during the five-day period prior to the filing of her petition.
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Posted on December 1, 2005 by Kevin Chern Esq.
Three months have passed since hurricane Katrina, and the unoffical grace period offered by most lenders has ended. Today, December 1, hundreds of home owners who lost their houses to the storm must begin making payments on their mortgages again. This sudden demand for money will force many of these debtors into bankruptcy, or will at least mark the beginning of a long struggle to get out of debt. A story discussing this issue written by Caroline Mayer is included below.
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Posted on November 30, 2005 by Kevin Chern Esq.
As expected, many consumers who were thinking about declaring bankruptcy rushed to get in before the law changed this past October. An average week for bankruptcy filings was around 30,000 before the effects of the new law were felt, and in the week before the new law 479,430 people filed for bankruptcy!
In the weeks since the new bill was passed we've seen the number of consumers filing for bankruptcy fall to only 3,000 per week. That number seems to be on the rise, with 3,600 filings last week, as the market appears on course to return to normal.
Posted on November 30, 2005 by Kevin Chern Esq.
The U.S. Bankruptcy Court for the Western District of New York recently held that a debtor's failure to file a statement of intention in his Chapter 13 case did not result in the termination of the automatic stay under new Code section 362(h). In re Schlitzer, No. 05-80001 (Nov. 17, 2005).
In the case, a pro se debtor filed a Chapter 13 case but failed to file the Schedules and Statements required by Section 521 and Rule 1007, his Chapter 13 Monthly and Disposable Income Form or a Chapter 13 Plan.
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Posted on November 29, 2005 by Kevin Chern Esq.
From the Washington Post:
Personal Bankruptcy Filings Fall Sharply
By Caroline E. Mayer
Washington Post Staff Writer
Tuesday, November 22, 2005; D03
In the month since a new bankruptcy law took effect, the number of Americans filing for protection from their creditors has slowed to a trickle, running at one-tenth the normal number of filings.
Last week, the nation's federal bankruptcy courts received about 3,600 petitions, according to Lundquist Consulting Inc., a California financial research firm that tracks bankruptcy data from the nation's courts. In a usual week, about 30,000 cases are filed.
Of course, nothing has been normal at the bankruptcy courts for the past few months, as the more restrictive law took effect on Oct. 17. In the week before the deadline, the number of cases filed reached 479,430, Lundquist said. The previous week, petitions totaled 124,037.
That surge explains why filings have dropped so low now, said Maryland lawyer Brett Weiss. "Just about everyone who was even thinking of filing filed before Oct. 17," he said.
The new law, long sought by the financial industry, makes it harder and more expensive for people to completely wipe out their debts under Chapter 7 bankruptcy.
Lundquist said filings last week averaged about 600 a day, slightly up from the previous two weeks, when new petitions were averaging 400 to 500 a day.
The lull will not last for long, Weiss predicted. "This spring is going to be a very busy time," he said, warning that this winter's expected high heating bills and a new federally mandated policy requiring higher minimum payments on credit card bills will push many financially strapped Americans over the edge.
Those who are filing for bankruptcy now are debtors who either procrastinated or are facing an imminent foreclosure, garnishment of wages or seizure of assets, Weiss said.
Locally, 25 cases were filed in the Alexandria bankruptcy court in the month after Oct. 17. Twelve of those were for Chapter 7. Last year, the Alexandria court received about 400 new cases a month -- almost all for Chapter 7.
In Maryland, about 320 personal bankruptcy cases were filed since Oct. 17, of which 138 were for Chapter 7. Last year, the courts received an average of 2,400 filings a month; about two-thirds of those were for Chapter 7.
In the District, 24 bankruptcies were filed in the last month, 14 under Chapter 7. Last year, filings averaged about 160 per month. About three-fourths of those were for Chapter 7.
Posted on November 29, 2005 by Kevin Chern Esq.
Of frightening note, the article points out that in 2004 there were 581,000 new businesses founded and 576,000 closed. The safety net has now diminished.
The Small Business Association states that small companies provide "roughly 3/4 of the net new jobs added to the economy and employ 1/2 of the private workforce".
The bottom line as illustrated by Professor White, "this would make the U.S. more like Germany, where bankrupty law has never provided a fresh start, risk taking is frowned upon, there are many fewer entrepreneurs, unemployment is higher and economic growth is slower."
Some excellent reading in this file:
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Posted on November 29, 2005 by Kevin Chern Esq.
An interesting article from the Concord Monitor:
New law reduces bankruptcy filings
Only 28 cases since law changed Oct. 17
By JOELLE FARRELL
Monitor staff
More than 1,700 state residents filed for bankruptcy in the two weeks before October 17, when new federal legislation making it harder and more expensive to file became effective.
Since then, only 28 bankruptcy cases have been filed in U.S. Bankruptcy Court in Manchester, down from 73 cases during the same time period last year.
Some lawyers said fewer people are filing now because they rushed to file before the October deadline. Filings likely will increase after the holiday season, when credit card debt and heating costs can become overwhelming, lawyers interviewed yesterday said.
But even if the number of bankruptcy filings continue to decrease, it may not mean that the system, or people's financial troubles, are fixed. While some may be able to find an alternative to filing bankruptcy, others who face financial hardship from illness or divorce may struggle to pay the extra costs associated with the new law, said Mark Cornell, a Concord attorney.
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Posted on November 29, 2005 by Kevin Chern Esq.
From the Warren Reports -- Original Article can be found at:
TPMCafe.com
Congress can change the bankruptcy laws, but those changes won't keep people from going broke. And, at least so far, no matter how hard they try to say it is over, the supporters of the new laws can't push bankruptcy out of the national conversation.
Eight years ago lobbyists described the bankruptcy bill as a speeding train that couldn't be stopped. That was a savvy estimate because all the money was on one side and all the hurting on the other--a perfect prescription for a change in the law. Besides, bankruptcy law was supposed to pass below the radar screen and not attract much attention in the popular press. But the stories just keep rolling in.
Nov 28, 2005 -- 02:29:53 PM EST
The sharp rise in filings just before the law took effect, followed by the sharp drop in filings in the weeks following the law, caught a lot of attention last week. New lawsuits challenging the constitutionality of the provisions in the bankruptcy laws that restrict what lawyers can tell their clients and how lawyers must describe themselves are generating more interest. And even the academic literature is beginning to catch up. A note in the most recent Yale Law Journal points out that despite the claims of the bill's supporters that the bankruptcy laws would help those trying to collect child support, no one has been fooled by the rhetoric; the new law undermines the relative position of support claimants.
Congress has not stayed out of the game. In the wake of Katrina, three bills have been introduced, two in the Senate and one in the House, all designed to give a better break to hurricane victims. Another new bill focuses on bankruptcy relief for people who are victimized by creditors who won't negotiate about past-due bills. Corporate responsibility for asbestos victims and pension promises are also on the bankruptcy radar screen.
I don't kid myself that Congress is on the verge of a big turn around, ready to renounce the credit card companies that paid for this legislation and try to help out ordinary working families. But I do wonder: The big time credit card lenders and their friends in Washington pushed this law through Congress, but could it be that the price they will pay isn't over?
The harsh realities of economic life for millions of hard-working Americans who get sick, who lose their jobs, or whose spouses take off, will stay in the news. Small businesses will struggle with the fallout from floods, rising interest rates, or poor market conditions. All of these people will need a way to deal with collection calls and mortgage foreclosures, a reason to get up in the morning and go to work and a way to protect their children from debt collectors all afternoon.
The bankruptcy wars aren't over.
Posted on November 21, 2005 by Kevin Chern Esq.
The new bankruptcy law has risen an immense ammount of controversy as its effects begin to be felt. From the individual consumer filing for bankruptcy to the lawyer facing new fees and responsibilities, the new bankruptcy laws have had far-reaching effects. Continue reading below to find a meaty article written by Nicholas Kulish examining how the law has effected America. The effectiveness and fairness of the new law will certianly be discussed for years to come.
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Posted on November 16, 2005 by Kevin Chern Esq.
An article in the December issue of Scientic American is the newest in a long line of recent public interest in bankruptcy. Citing a 1978 court decision which allowed national banks to charge interest rates determined in their home state, the article examines where our current debt-heavy culture spawned. It appears that since allowing banks to charge high interest rates, more consumers were drawn into debt (credit card companies could afford to give cards to less-qualified customers at these higher rates). Today the trend continues as applications for credit become less personal, and feel more anonymous. This rising ability for less-qualified individuals to recieve credit does not appear to be effectively fought by new bankruptcy laws. Despite BARF's attempts to make it more diffucult to file for chapter 7 bankruptcy, bankruptcy experts, "tend to be skeptical or noncommital about the effictiveness in reducing filings." Look for this article to be available at the Scientific American website soon.
Posted on November 15, 2005 by Kevin Chern Esq.
Arguing that the BAPCPA violates the first and fifth amendment rights of both attorneys and consumers, a Minnesota firm, Milavetz, Gallop & Milavetz P.A., has challenged the act. The challenge argues against the act's ability to limit the advice an attorney can give to clients, especially due to the act's lack of specifics.
You can download the complaint as a pdf by clicking here.
Posted on November 15, 2005 by Kevin Chern Esq.
The Washington Post recently ran an article discussing Supreme Court nominee Samuel Alito's assertion in a 1985 essay that the constitution does not protect abortion. While Alito continues to look apealing to many conservatives, his record continues to reveal opinions and arguments which garner cringes from the left. Alito's views on abortion, afirmative action and gun control often flirt with the extreme right, and seem to indicate that his seat on the bench would be a seat firmly favoring republican ideals.
Posted on November 14, 2005 by Kevin Chern Esq.
The ramifications of the new Bankruptcy Act continue to be felt across the country. This article is another in a long string of articles we have seen lately examining the debtor's plight under the new laws. Michael Rappaport's article contains suggestiosns or how one can hopefully avoid facing bankruptcy in the first place - something we should all educate ourselves on. Especially interesting is the discussion of young people being sucked into a life-long debt habit, one that could cost them thousands of dollars over their lives if they blindly accept the use of all the credit cards being offered every day in this country.
Posted on November 14, 2005 by Kevin Chern Esq.
A large part of the new bankruptcy act is the requirement that debtors must now be investigated by their bankruptcy attorney. The attorney must complete a "reasonable investigation" of the debtor's financial affairs and assets before they can file. Recently, the Congressional Budget Office estimated that the cost of performing these investigations just for the year 2007 will be between $240 million and $800 million dollars, and would remain in that range for years to come.
Adding $800 million in costs to bankruptcy attorneys each year will serve to do little but increase the price of filing for bankruptcy in this country. Despite the obvious financial troubles of those looking to file, the new bankruptcy code has continued to demand more of the one thing these debtors do not have: cash. That $800 million dollars, even if it is spread across thousands of bankruptcy attorneys filing hundreds of cases a year, could easily still add up to a significant cost per case, a cost which will be passed directly to consumers trying to file for bankruptcy.
Posted on November 14, 2005 by Kevin Chern Esq.
There is an excellent Article in the November edition of the ABI Journal on this issue. The author (Thomas E. Ray) argues that the lack of uniformity of the exclusions under 707(b)(7), which is based on disparate median family income, renders the means test unconstitutional under Article 1, Section 8, of the Constitution. This Section grants to Congress the power to establish "uniform laws on the subject of bankruptcies throughout the United States." He argues that since the median family income varies from state to state the "uniformity" rule is violated. Because of disparities in median family income, a single debtor with an annual income under the means test of $50,000 in Connecticut would be excluded under 707(b)(7) from the presumption of abuse, while a debtor with the exact same CMI in Mississippi would be subject to the presumption and most likely a dismissal of his Chapter 7 case. Ray also argues that the second glaring lack of uniformity relates to the variances in living expenses under the means test. He cites the housing and utilities standards as the most non-uniform. He points out that the expenses not only change from state to state but from county to county within each state. For example, a family of 4 in Hamilton County, TN, would have an allowable monthly expense of $1,242, while a similar family in Polk County, TN, which is in the same judicial district, would have an allowable expenses of $935.00.
See Opinion by the late Justice Rehnquist in Railway Labor Executives Association v Gibbons, 455 U.S. 469, 473.
Posted on November 9, 2005 by Kevin Chern Esq.
I'm posting this for you from an editorial in the Providence Journal.
Troubling bankruptcy fix
01:00 AM EST on Tuesday, November 8, 2005
Across the country, thousands of people rushed last month to declare bankruptcy. In many cities, that meant standing in long lines. It also meant long hours for bankruptcy lawyers, who struggled to meet deadlines ahead of the change in the law, on Oct. 17.
The first significant overhaul of the bankruptcy law in a quarter-century makes it harder for people to clear away debt, under Chapter 7. Instead, more debtors will be forced to reorder their affairs under Chapter 13, which will oblige them to set up a five-year repayment plan. Within six months, these filers will also have to get credit counseling and financial education. Declaring bankruptcy will cost more, too: Because lawyers are required to do more paperwork, their charges are expected to rise, probably by a few hundred dollars per case.
It is clear who the winners in this setup are likely to be. Along with lawyers, credit-counseling agencies should profit. In fact, the law almost looks like a windfall of new business for them -- without money from Congress to pay for additional counseling. If the credit industry fails to up its contribution, counseling agencies are apt to get their piece of the action from the people seeking help.
Already, some counseling agencies have been accused of aggressively steering people into debt-management plans, and away from other options. Under these plans, according to a New York Times report, the debtor pays the agency with a single monthly check. After taking its slice, the agency is expected to divide the rest among creditors. Often, though, the debt never diminishes, even after years of payments.
The Internal Revenue Service is threatening to revoke the nonprofit status of some of these agencies. But it seems unlikely to get far, especially when there are so few to take on the expected steep increase in demand.
The other winners, of course, are credit-card companies, banks and merchants, all of which lobbied hard for the new law. The fact that Congress has done nothing to curb industry tricks to hide usurious credit-card interest rates and fees only magnifies the unfairness of the new law. Easy credit (and deceptive marketing) is what drove many Americans into debt in the first place.
The losers under the new law will largely be middle-income Americans: It targets people who make more than the median in their states. Often, though, these are people who have been hit with job loss, serious medical bills or divorce. Certainly, careless spenders ought to make amends, and it is clear that more prudent consumers are the ones who have paid the price of such profligacy, through higher costs for goods and credit. Unfortunately, the new bankruptcy law punishes the unlucky as well as the reckless.
Posted on November 7, 2005 by Kevin Chern Esq.
New Survey Report Reveals Truth Behind Credit Card Debt Explosion in the U.S.
--Citing Skyrocketing Costs, Dwindling Savings and Stagnant Wages, More American Families Are Turning To Credit Cards As Their Financial Safety Net
Article also located at: Center for Responsible Lending
October 12, 2005
Washington, D.C. "American families are turning to credit cards to make ends meet in an increasingly volatile economy, according to The Plastic Safety Net: The Reality Behind Credit Card Debt in America, a new report released today by Demos and the Center for Responsible Lending. Released just five days before the new bankruptcy law takes effect and effectively shuts the door on financial recovery for millions, The Plastic Safety Net presents new findings from a national survey on credit card debt among low- and middle-income households?˘‚Ǩ"those whose earnings fell between 50 percent and 120 percent of local median income. The survey provides new information about why households are in credit card debt, how long they have carried their debt and the impact this debt has had on their economic security.
Research shows that credit card debt in America has almost tripled since 1989 and increased 31 percent since 2000. Americans now owe some $800 billion in credit card debt. In addition, owing largely to job instability and medical costs, bankruptcies rose from 616,000 in 1989 to over 1.8 million in 2004.
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Posted on November 7, 2005 by Kevin Chern Esq.
The following post portraying a day of crazed bankruptcy creditor meetings comes from The Shelby Starr
"It just takes a couple of bumps in the road to land in bankruptcy.
Just ask the crowd of folks who flooded the Cleveland County courthouse and surrounding parking lots Friday morning for bankruptcy court. Deputy M.V. Reavis said bailiffs were told to expect about a thousand people.
They reside in U.S. Bankruptcy Court's Western District of the state, which includes six counties.
They ranged from young adults to senior citizens. Some had young children in tow.
Friday was the first meeting with creditors.
In the courtroom handling Chapter 7 filings, pews were so full some people stood along the doors until a seat became available.
Trying to determine if his clients were in the courtroom, one attorney announced, "If I'm your attorney, would you raise your hand?"
Some blamed the economy, job losses, and most recently, a change in the state bankruptcy law - for the large crowd.
So there wouldn't be any surprises, many said their attorney forewarned them about the heavy number of cases.
Lamar Suttles considers himself one of the lucky ones. He was told he was free to go by 9:20 a.m.
The Morganton resident says child support is the primary reason he landed in Chapter 7 bankruptcy.
"Half my check's going - one for this, one for that."
On Oct. 17, a new bankruptcy law took effect under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
"And that's one reason there's been such a rush," to file, said Huntersville Attorney Mike Elliott. "It severely limited their ability to file Chapter 7."
Most of the people in court Friday filed their cases about 30 days ago, he said.
He represented four clients in court Friday, but said he has about 50 he will represent in Charlotte in the next few weeks.
Posted on November 3, 2005 by Kevin Chern Esq.
The IRS just issued a press release providing a good summary of critical tax issues under BAPCPA. The relevant portion of the release follows below:
Tax Returns Must be Filed:
Under the new law, if debtors fail to file a return that becomes due after the date of their bankruptcy petition, or fail to file an extension, the IRS may request the Court to order a conversion (change from Chapter 7 to Chapter 11 or from Chapter 11 to Chapter 13, for example) or dismissal of the case. Conversion or dismissal may also be ordered if a Chapter 11 debtor fails to timely pay tax obligations owed after the date of the bankruptcy petition.
In order to have their plan confirmed, Chapter 13 debtors must also file all tax returns with the IRS for the four-year period before the bankruptcy petition. The debtor must establish filing by the first meeting of creditors.
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Posted on November 2, 2005 by Kevin Chern Esq.
Below is an ABA report regarding the the liability of attorneys under the new bankruptcy laws. What should be taken from this article is that attorneys are reasponsible for checking up on their clients, but they are not expected to expend obscene ammounts of energy in the process. They key word is "reasonable".
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Posted on November 1, 2005 by Kevin Chern Esq.
I've been reviewing Judge Alito's bankruptcy opinions in order to get a sense of how he would rule on bankruptcy cases should his nomination be confirmed by the Senate. Although he has authored a number of bankruptcy related decisions, only a few involved consumer bankruptcy issues. However, one opinion does not bode well for the consumer bankruptcy bar.
In Mathews v. Pineo, 19 F.3d 121 (3d Cir. 1994), he reversed a bankruptcy court decision which had discharged approximately $200,000 the debtor owed to the National Health Service Corps (NHSC) arising out of her receipt of a scholarship from the NHSC that required that she serve as a physician for a three-year period in a high-priority location determined by the NHSC in exchange for the scholarship.
The debtor received scholarships totaling more than $46,000, but she refused to serve in the location selected by NHSC. As a result, the NHSC sued her and obtained a judgment of more than $146,000 (the federal statute establishing the scholarship provides for treble damages and interest for a participant's failure to honor the service commitment). In response, she filed a Chapter 7 seeking to discharge the full amount of her debt to the NHSC, which had reached $400,000.
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Posted on November 1, 2005 by Kevin Chern Esq.
The new bankruptcy code is a very dense, potentially confusing document. It can help to see the rules spelled out not only in detail, but in terms of how they effect you. This is a very nicely detailed article by Aleksandra Todorova running through all the ramifications of the new bankruptcy law for consumers.
By Aleksandra Todorova
October 31, 2005
The new bankruptcy law that took effect in mid-October requires filers of Chapter 7 or 13 bankruptcy to get credit counseling beforehand.
That might sound perfectly reasonable to the casual observer. But the requirement has raised concerns among bankruptcy practitioners and consumer-advocate groups, who say it will do little to aid those who are drowning in debt - and could even hurt.
According to the new requirement, people must go through a 90-minute counseling session six or fewer months before filing for bankruptcy and must attend a personal financial-management course in order to exit bankruptcy.
The rationale, according to Susan Keating, president and CEO of the National Foundation for Credit Counseling, a Silver Springs, Md.-based trade organization, is to help people make informed decisions. "The focus is to really work with every individual who walks in the door, help them review their personal financial circumstances and really understand what their options are for the future," she says. "That includes a full budget analysis and review and a discussion about what alternatives are available to them."
But problems abound. Here are the major concerns voiced by consumer groups, and some ways to address them.
Continue Reading...
Posted on October 31, 2005 by Kevin Chern Esq.
A Republican-sponsored bill is currently under debate in the House which would suspend a lawyer's license to practice if they repeatedly file "frivolous" lawsuits. Such suits, in which the law is misinterpreted, or the facts do not hold up, cost the government in court costs, as well as raising insurance rates, according to proponents of the bill. However, this bill could easily deter legitimate claims if lawyers aren't looking at a sure thing. Our legal system should never strive to turn away cases which may not be cut and dry, the entire system exists to decide such debates.
This is another example of America's wealthy insurance industry tryign to buy a bill which protects its assets and holds any consumers who may have a complaint at bay. The consumer must always have the right to fight back against the large corporation, and by threatenign lawyers who would represent such consumers, this bill would take the legs out from under the individual.
Posted on October 28, 2005 by Kevin Chern Esq.
New bankruptcy laws recently passed require the use of a state median income. The number is calculated by the IRS and the Census Bureau, and their new estimates are about to come out. Several fellow bankruptcy attorneys have expressed concern over how these numbers will be adjusted, and what the new median incomes will be. Obviously for debtors near that median, it could be hugely important if they end up above or below that line; it could be the difference between filing for bankrutpcy and staying buried in debt. Check back with The Bankruptcy Lawyers Blog to see how this issue plays out.
Posted on October 27, 2005 by Kevin Chern Esq.
The new bankruptcy laws don't change investment strategy for most Americans, but making sure you do not end up in financial trouble has become more imporant than it used to be. There is some sound advice from Janet Novack in her article Protection Time.
Posted on October 27, 2005 by Kevin Chern Esq.
Troubles continue for the Bush White House as Harriet Miers withdrew her bid for the Supreme Court today. Citing concern that the process was creating a "burden" for the administration, Miers informed President Bush of her withdrawl last night. Bush "reluctantly accepted" Miers' withdrawl.
Posted on October 26, 2005 by Kevin Chern Esq.
Some of the following I am paraphrasing from NACBA discussions & I would like to thank Linda Hamm for her contributions:
Reports have been pointing to the voluminous number of bankruptcy filings in the 7-10 days leading up to the law change. I wrote about this in earlier posts, see "New Bankruptcy Law is Not Cause for PANIC" - where we quoted trustees as saying, "Four or five months' worth of cases were filed within a week" -- also see "Bankruptcy Filings Deluge Courts"
When the dust settles, we're looking at upwards of 500,000 bankruptcies filed during the last week before BARF, and with an estimated $20,000 of credit card debt per filing (this could be higher), then we're talking about credit card companies that are going to be writing off $10,000,000,000 in debt.
Now before you start feeling sorry for Big Credit keep in mind that they're making money on the credit card transactions, too. They charge 2-3% of each transaction as an additional fee to the merchant who takes the card. "Over 1 billion gallons of gas are sold in the United States every single day (the base figure is 7 billion gallons sold worldwide daily - (National Association for Convenience Stores), and approximately 50% of that is put on a credit card. At $2.75 per gallon, that's $41,250,000 daily, just on gas sales."
Yes, they're taking some upfront losses with the flood of discharges - and I'd be willing to bet that they had hoped for a slight sprinkle in filings instead of a monsoon. Despite their huge loss, they still manage to make more money than they know what to do with. And they're looking at this quarters' losses as an investment in the years to come where a greater % of consumers are stuck with the debt - regardless of the consumer's plight: See Senator Durbin's comments at: "Sen. Durbin addresses bankruptcy bill on the Senate floor". Especially, "What it means is fewer people who walk into bankruptcy court will be able to walk out with a clean slate. Many people walking in, crushed by debt, will find themselves walking out still carrying most of that debt."
I for one am not going to be sending any hallmark cards to Big Credit.
Posted on October 25, 2005 by Kevin Chern Esq.
This probably will not come as much of a shock to many of you who read this blog - I've been writing about the hardships of the consumer for months now. A recent study compiled from mortgage data states that:
"As the cost of living rises and wages stagnate, borrowers are increasingly turning to credit cards to pay their monthly mortgage payment, a new study by a consumer advocacy group says."
Read the full report here: Mortgage Daily - You'll need to register first.
Posted on October 25, 2005 by Kevin Chern Esq.
I am posting Senator Durbin's comments on the bankruptcy bill from his address to the Senate Monday. He speaks plainly and he seems to say just the right words to cut through the political mire and say it like it is.
CONGRESSIONAL RECORD
SENATE
PAGE S11750
Oct. 24, 2005
(Senator Dick Durbin, D-IL)
Mr. DURBIN. I thank the President for recognizing me.
I would like to follow on the remarks made by the Democratic leader of the Senate. The American people we represent expect us on the floor of the Senate to truly represent them and their real concerns-the needs of their families, the needs of their communities, the needs of businesses and farmers. We are elected to speak for them and to come together in common purpose on a bipartisan basis and deal with the real issues Americans face.
I would certainly acknowledge that the pending appropriations bill for Labor, Health and Human Services, which includes education as well, is one of the most important appropriations bills that addresses those needs. In years gone by, there was a Congressman from Kentucky named Bill Natcher who was the chairman of the subcommittee that handles this bill. He always called this bill on the House floor the "people's appropriations bill." I think it was aptly named because it meant so much.
So as we visit this bill this week, it is time well spent, time to reflect on what we can do to help education in America, time to reflect on what we can do in the area of health care for America, medical research for America. It is time to look at some of the most basic programs we count on.
Sadly, this bill is the exception, it is not the rule.
Too many times we come to the floor of the Senate not to serve the needs of the people of this great Nation, but to serve the needs of special interest groups. They dominate this process because it has become such an expensive process. Unless you are independently wealthy and can finance your own campaigns from the millions of dollars you made before you came to the Senate, most Senators, mere mortals, spend their time raising money. From whom? Well, from their voters somewhat but, by and large, from special interest groups. So it is no surprise that the agenda of the Senate reflects those special interest groups.
Just a week ago, the new law went into effect. Professor Warren of Harvard Law School this morning in the New York Times talks about what it is going to mean. This was a 9-year effort by the financial institutions and credit card companies of America to make it more difficult for families to file for bankruptcy. Nine years they put into it, and they finally scored their big victory this year. They got this new bankruptcy bill passed.
What it means is fewer people who walk into bankruptcy court will be able to walk out with a clean slate. Many people walking in, crushed by debt, will find themselves walking out still carrying most of that debt.
Who are these people? Who are these folks who have been accused of abusing the bankruptcy system? Take a look at them: Over half of them are people who were overwhelmed by one thing-medical bills. There was an article in the New York Times this Sunday on the front page-my colleagues might have read it-of a family with health insurance and a sick baby who ended up losing their home, despite the fact they had health insurance, because of the serious medical problems that little baby faced.
This new bankruptcy law pushed on us by financial institutions and credit card companies will make it more difficult for families like that to ever erase the slate and start over. The special interests won again.
Posted on October 24, 2005 by Kevin Chern Esq.
Show Me the Money
The following was written as an Op/Ed piece for the NY Times by Elizabeth Warren - she is a professor at Harvard Law, and co-author of "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke."
Published: October 24, 2005
IS there celebration in the halls of Citibank this week? Is MBNA uncorking the Champagne while Ford Motor Credit serves cake? Eleven years ago, these and other creditors pushed hard to re-elect sympathetic members of Congress who would enact a tougher bankruptcy law. Last Monday, the law they lobbied for went into effect.
It was a long fight - President Bill Clinton vetoed one bill, anti-abortion forces derailed another - but in the end the credit industry succeeded in making it much harder for struggling families to ease their debt loads. The industry helped fend off efforts to soften the bankruptcy bill's impact on soldiers fighting overseas and on victims of natural disasters. It even turned thumbs down on an amendment to limit enforcement of debts that carried more than 100 percent interest.
But is the new bankruptcy law now set in stone? Is Congress that rigid, the financial industry that strong?
In a free-market economy, bankruptcy laws are written and rewritten as new economic problems bubble to the surface. Today, consumers and small businesses that have been swamped by debt are in the crosshairs. Tomorrow, insurance company failures, a collapse of the mortgage-lending market, or another outrageous story of a Wall Street executive who hung onto a fortune while seeking shelter in bankruptcy may excite Congressional attention.
Even as the new law goes into effect, there are six new bankruptcy bills pending in Congress, three of them responding to the recent hurricanes. Others are sure to follow: Several members of Congress have railed against the airlines' use of bankruptcy to write off their pension obligations, for example.
Continue Reading...
Posted on October 24, 2005 by Kevin Chern Esq.
Original Article at The Toledo Blade
When Toledo construction worker George Myrice Jr. filed for bankruptcy last month, it stopped collection action by creditors, including those of his landlord.
Judge C. Allen McConnell signed an order suspending eviction proceedings begun by Windy Lake Properties LLC two weeks earlier after Mr. Myrice allegedly missed two rent payments on a house on Berdan Avenue in West Toledo.
But, under bankruptcy reforms that took effect last week, the ability of tenants to delay eviction by filing for bankruptcy will be curtailed.
The reforms will change multiple sectors of the housing industry.
Among those affected are residential landlords and tenants, shopping center owners, condominium and homeowners associations, and people who try to shield assets by squirreling them away in pricey residences in Florida and other states with debtor-friendly laws. The reforms did not affect previous bankruptcy filings.
Overall, the new law is a victory for real estate interests, said Megan Booth, senior policy representative for the National Association of Realtors.
"It was a success for the real estate industry," she said.
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Posted on October 24, 2005 by Kevin Chern Esq.
Article from the Herald
It is perhaps cruel irony that at the end of a week in which the misnamed federal "Bankruptcy Abuse Prevention Act" went into effect, many ordinary people - including those prone to bankruptcy - watched to see what sort of havoc another major hurricane might bring.
Indeed, more than half a year after the legislation was signed into law, the images and stories of heartache from natural catastrophes Katrina only serve to magnify the bill's shortcomings. While no one is denying that widespread credit card and bankruptcy abuse occur, the new law is far too punitive on those who can least afford to pay.
Continue Reading...
Posted on October 24, 2005 by Kevin Chern Esq.
I'm posting this as a good summary of the pre-law vs. post-law reality. There has been such a flood of press and ads related to getting consumers to file before the law change - now that it's here, it's time to get the word out there that, "you can still file for bankruptcy".
Here's the article:
"Change can be frightening, especially when it concerns legislation governing personal finances.
"Don't hit the panic button just yet," said attorney David Sergeant. "The new bankruptcy law has been somewhat over discussed from a 'scare' stand- point. It's got people thinking they can't file for relief - that's not the case. It just means there will be more work to do. Bankruptcy is still an option."
Sergeant, of Fort Dodge, specializes in bankruptcy law, acting on behalf of both individuals and the government. He not only helps people seeking debt relief, he switches hats and acts as a regional trustee with the Central Division of Northern District of Iowa and is responsible for reviewing cases to determine whether there remains any items of value that can be turned into money for creditors.
As a trustee, he normally has three or four hearing dates set each a month. However, because people were frightened by reports of increased stringency within the bankruptcy laws that went into effect Oct. 17, Sergeant said he expects three times the normal number of hearings to be set in November to handle the flood of cases filed just before the deadline.
"Four or five months' worth of cases were filed within a week," he said. "Everybody wanted to file before the changes took place. As far as I know, one case has been filed since the new law went into effect. Preceding it, I can't tell you how many, probably hundreds."
Continue Reading...
Posted on October 20, 2005 by Kevin Chern Esq.
An amazing number of consumers filed for bankruptcy last week, trying to squeeze in before new laws made bankruptcy a more diffucult process. The number has yet to be determined, as thousands of applications are still being processed.
Petitions From the Indebted Pour In as Old Law Runs Out
By Caroline E. Mayer
Washington Post Staff Writer
Thursday, October 20, 2005; Page D03
About a half million Americans may have filed for bankruptcy protection last week, trying to beat the Oct. 17 deadline when a new, more restrictive bankruptcy law took effect.
The courts were so inundated with petitions that thousands have yet to be recorded, according to Lundquist Consulting Inc., a California financial research firm that reports on case information collected daily from the nation's bankruptcy courts.
Lundquist said there were 205,129 bankruptcy filings as of late last week, nearly double the number posted the previous week. But the company said it anticipated another 300,000 petitions to be recorded this week, reflecting the cases filed on Saturday and Sunday as well as the backlog of paper petitions that were submitted last week but not yet posted.
That would make the total filings in the 10 days before the new bankruptcy law took effect about 500,000, or nearly a third of the total filed in all of 2004. Normally, about 30,000 cases are filed a week.
The new bankruptcy law, long sought by the financial industry, makes it harder and more expensive for people to completely wipe out their debts under Chapter 7 bankruptcy.
This week, bankruptcy lawyers say they are receiving very few queries from financially strapped consumers.
Posted on October 20, 2005 by Kevin Chern Esq.
A fun message from a well-respected creditor's attorney:
Not one word needs to be changed! And it's not just the debtor-related provisions. Try to figure out when (and if) the stay lifts automatically under the changes to Sections 362 and 521. Is it 30 days or 45 days after the 341? (Is it x days after the first date set for the 341 or x days after the 341? There may be a difference and Congress has been clear about it before. They can't even get this straight this time and it's in the same section!) Does it matter whether the stated intention is surrender, reaffirm or redeem? What if a debtor expresses an intent to surrender and then surrenders a car within 30 days after the first date set for the 341? Does the stay lift automatically? It does if they don't surrender, but does it terminate if they do surrender? What happens in the gap between 30 and 45 days when a debtor still has time to enter into a reaffirmation agreement or to redeem but the stay terminated after 30 days because they hadn't done it yet? Who wrote this nonsense?
Posted on October 18, 2005 by Kevin Chern Esq.
See the original article on the Motley Fool.
I think Bank of America (NYSE: BAC) likes me. Each month, it sends me three blank checks along with a cover letter enticing me to splurge on whatever I desire. In June, the bank urged me to take a dream vacation. In April, it suggested that I use one of the checks to pay my taxes. All I have to do is write the check, and the charge will go straight to my credit card. Those guys are cool.
As of today, however, I'd better be careful, since the Orwellian-sounding "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" is now law. Six months ago, the credit card lobby, consisting of MBNA (NYSE: KRB), Capital One (NYSE: COF), Citicorp (NYSE: C), Visa, and MasterCard, teamed up with august statesmen such as Sen. Joe Biden, D-Del., and Rep. Tom DeLay, R-Texas, to prevent the average American from abusing the generous privileges being offered by my friends at Bank of America and the other credit card companies. Fortunately for proponents of the law, the irony of the U.S. Congress lecturing anyone on the subject of indebtedness did not prevent its passage.....
Continue Reading...
Posted on October 17, 2005 by Kevin Chern Esq.
Every credit card company in America will have to raise their minimum monthly payment by the end of the year. This should help some debtors pay off their debts faster, but it will also undoubtably cause some headaches for others.
From Apply Now,Your Guide to Credit / Debt Management.
Though I applaud raising CC minimum payment, I cannot help but be angry.
Minimum payment on credit cards is being raised! It is raising from the existing 2% of the outstanding balance to 4%. Is raising minimum payment good news or bad news? It depends on which side of the credit card balance you are sitting. This issue will be more thoroughly discussed below but I cannot resist inserting a few comments to begin the discussion of raising credit card minimum payments.
GUIDE COMMENTARY
Though I applaud the credit card minimum payment increase, I cannot help but chastise the credit industry and Comptroller of the Currency (OCC) for the timing. I believe there is far too much coincidence that the new bankruptcy law just happens to occur at the same time as raising minimum payment rates. Allow me to ellaborate:
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Posted on October 17, 2005 by Kevin Chern Esq.
The following was pulled from an interview with bankruptcy lawyer, Max Gardner on CNN Headline News.
"This is a regional cable news show but I wanted to share my talking points with the firm:
The myth that bankruptcy somehow ended at 12:01 a.m. today is false. This propaganda has been advanced by the credit card industry to make consumers believe that bankruptcy relief is no longer available. It is simply not true.
The purpose of the new bankruptcy law is to discourage and in many cases intimidate people from filing for bankruptcy relief. Although consumers must do more things, and pay a little more money to file, all in all things are pretty much the same. My firm is taking new cases today for appointments next week and right now we have filed most of our available appointments.
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Posted on October 17, 2005 by Kevin Chern Esq.
Not all law makers are in favor of the new bankruptcy law, as exposed in this article from the AP. Some good insight to the other side of the debate. Read the article below.
A federal bankruptcy reform law taking effect Monday is bad law, said the judge who oversees court cases for north Mississippi residents overwhelmed by debt. "There could have been some reform to better the system, but this is a meat-ax approach rather than doing it in a studied way," said U.S. Bankruptcy Judge David Houston of Aberdeen. Congress changed the "gem of our bankruptcy system" so much that there'll be "a subculture of people that will owe a lot of money and just move away," Houston said in a recent interview. The new law imposes restrictions aimed at preventing people from using the bankruptcy court to dodge debts they could actually afford to pay. The "gem" in the current system, Houston said, is the Chapter 13 bankruptcy provision, which lets people with large debts reorganize their finances with court oversight to repay some or all the money over an extended period to creditors.
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Posted on October 17, 2005 by Kevin Chern Esq.
An AP article discussing how consumers of all ages can face bankruptcy. Read the entire text below.
MADLEN READ
Associated Press
At age 85, the last thing Virginia Norwood needed was to file for bankruptcy - during the past year, her husband died of cancer and Norwood and her daughter have struggled to hold on to their Dallas home.
But on Oct. 1, Norwood filed for Chapter 7 bankruptcy protection, a move that stopped the house from going into foreclosure and allowed Norwood and her daughter, Shari Murphy, 49, to stay afloat.
"I do not know what to do. And I'm very strong, that's what they told me at the hospital. They told me I was the strongest person they'd seen," Norwood said.
"We had to do something," said Murphy, an electrician who, after a back injury and two ensuing surgeries, has had a hard time finding a job.
As of Monday, people with financial plights like Norwood's face a bigger struggle as a new federal law takes effect and places limitations on personal bankruptcy filings. Two age groups, debtors under 35 and those over 65, are expected to have a particularly hard time under the law.
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Posted on October 14, 2005 by Kevin Chern Esq.
An Open Letter from Credit Card Company to American Consumers
Don't underestimate the impact your late payments made. Just 3% of credit card accounts are past due by 30 days or more each month. Yet income from penalty fees in our industry -- like the ones you paid in January, September, and November -- added up to a whopping $15 billion last year
You deserve a pat on the back for helping the industry reap an all-time high of $31 billion in annual fees, cash-advance fees, balance-transfer fees and merchant fees. Add that to the $80 billion in interest charges banks made last year, and you can see why we're partying. Bob in Consumer Care (he's the third guy from the left in the company conga line pictured on the front of this card) has promised even bigger things to come, including limits on teaser rates, higher charges for access checks, and over-limit charges. We hope that our best customers -- like you -- find these new features <http://www.fool.com/ccc/secrets/secrets04.htm> irresistible.
Since you've been so amenable to our fee increases in recent years (like a rock, you didn't even flinch when that late payment in 2003 canceled out your 9.9% teaser APR <http://www.fool.com/News/mft/2004/mft04102601.htm> or when we shortened your grace period to just 23 days!), we'd like to thank you for your patience and cooperation by giving you seven PlasticFantastic Convenience Cheques embossed with your initials. We're also upgrading your account to our prestigious Minque Card status, and giving you Fantastique Credit Insurance to try out for 30 days, absolutely free! As an added bonus we are offering our best tardy customers something extra special -- pay your bill late three consecutive months and we will name an employee's scholarship account in your honor!
Consider this our gift to you, and a personal "thank you" for making our jobs at PlasticFantastic Inc. more enjoyable.
Sincerely,
Julie
Customer Care Representative
PlasticFantastic Credit Inc.
Posted on October 14, 2005 by Kevin Chern Esq.
Click below to read another good article about the misconceptions about debt in America. The $800 billion owed to credit card companies in this country is not owed by reckless spenders out buying fancy toys on money they don't have. The average debtor in this country is an American just trying to make ends meet.
Click here to read the story.
Posted on October 14, 2005 by Kevin Chern Esq.
As an industry, bankruptcy attorneys have been working overtime lately, not just helping clients file, but correcting client's misconceptions of what the new bankruptcy laws entail. A large section of the general pubilc has been led to believe that bankruptcy will become overwhelmingly diffucult, or even impossible after Monday. This is not the case. The new bankruptcy code requires the debtor to jump through a few new hoops, but consumers who need to file for bankruptcy will find that these new requirements are achievable.
As a debtor, you retain most of the same rights once the bankruptcy procedure is complete, and creditors are not recieving any great increases in their rights. Fellow attorneys have heard questions ranging from, "Will I have to take a lie detector test to file?" to, "Is it true I can not own a car if I file under the new law?" The answer to these questions is NO. The rules are changing, but the end result of filing for bankruptcy remains largely the same.
Posted on October 13, 2005 by Kevin Chern Esq.
It is often believed that those who carry heavy credit burdens are those who buy extravagant goods, and live outside their means. Those of us in the industry know this stereotype is untrue and that many consumers who file for chapter 7 use their high-interest credit cards exclusively for necessary purchases. A new report released yesterday confirms this, just days before a new bankruptcy law goes into effect which will make it harder and more costly for these consumers to file for bankruptcy should they need to file.
Yesterday Demos and the Center for Responsible Lending released findings from a new national survey of household debt in a report called "The Plastic Safety Net: The Reality of Household Debt in America." These survey results show that low- and middle-income families are acquiring credit card debt to pay for essentials at the same time business practices in the credit card industry are making this debt more costly and harder to manage.
This report comes just five days before the new bankruptcy bill becomes effective and undermines consumers' ability to recover from heavy debt. Research shows that credit card debt in America has almost tripled since 1989 and now stands at $800 billion. http://www.responsiblelending.org/promos/101205-demos.cfm
Continue Reading...
Posted on October 13, 2005 by Kevin Chern Esq.
Concern over impending bankruptcy legislation has forced the hand of thousand of consumers over the past weeks. With new bankruptcy regulations making a chapter 7 more costly and the process more lengthy, bankruptcy attorneys are seeing several times their normal amount of business. The new law goes into effect on Monday so this week has been the last chance for many hoping to file under old guidelines. Though the rules will become stricter, and the process more pricey, those wishing to file for bankruptcy after next week will find attorneys still able to help those with legitimate claims.
By Robert Gavin, Globe Staff | October 13, 2005 Struggling debtors are rushing to file for bankruptcy before Monday, when a new law that makes it more complex and costly to gain protection from creditors goes into effect. In the first 11 days of October, more than 2,500 new bankruptcy cases were filed in Massachusetts, compared to 464 during the same period a year ago, according to the clerk's office at US Bankruptcy Court in Boston. More than 1,000 new cases were filed over the long Columbus Day weekend alone. Bankruptcy Court Clerk James Lynch said he expects the deluge to continue through the weekend. Over the last few weeks, local bankruptcy lawyers say they are filing up to five times as many cases as they normally would. The new law, passed by Congress and signed by President Bush in April, represents the first major overhaul of the bankruptcy code in more than a quarter-century. Pushed by banks, credit-card companies, and retailers, the changes make it harder for higher-income families -- in Massachusetts, a family of four with income of $85,000 or above -- to wipe out debts through bankruptcy; require debtors to seek credit and financial counseling, for which debtors have to pay; and boost filing fees. Consumers will feel the greatest impact from the bankruptcy overhaul, specialists said. But the new laws also are less favorable to businesses seeking protection while they reorganize operations, a section of the bankruptcy code known as Chapter 11.
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Posted on October 13, 2005 by Kevin Chern Esq.
Consumers using high-interest credit cards are about to get an unpleasant letter in the mail: new bankruptcy regulations require creditors to collect minimum payments which pay off debts faster than their high-interest credit cards build it. This is certainly a sound practice for debtors, who could end up paying credit card companies indefinitely under previous minimum payments, but for some debtors, who are barely making minimum payments as it is, this new rule may push them over the edge to bankruptcy. Unfortunately for these consumers, the new bankruptcy regulations also make filing for chapter 7 more complicated and expensive.
Read more here
Posted on October 13, 2005 by Kevin Chern Esq.
This article explores the goals of the new bankruptcy law, and what the new law will mean to consumers wishing to file. The fact is that with the law change only days away, bankruptcy attorneys across the nation are handling more cases than ever before as quickly as they can. A consumer trying to file for bankruptcy today may have a hard time finding a bankruptcy attorney who can handle the case before the new law takes effect. However, while the new laws bring stricter guidelines of who can file, those who legitimately cannot handle their current debts will find the process still available to them.
TUSCALOOSA | Personal bankruptcy filings have increased dramatically in the last six months, and especially in the last few weeks, as people in financial trouble beat the clock set by the sweeping rewrite of the U.S. Bankruptcy Code.
The new bankruptcy law will make it harder for consumers to walk away from credit card debt and other loans they're having trouble paying -- starting Monday.
That's when the 501-page bill President Bush signed almost six months ago takes effect.
Proponents of the new law say it will cut down on bankruptcy fraud and sort out those in dire financial straits from those simply avoiding paying debts. Critics believe it will hamper the efforts of those who legitimately need debt relief, such as someone who loses a job.
This tightening of rules has prompted many people to rush to the bank and file for bankruptcy while the process is not as difficult or expensive.
"It's going to be a lot harder for people to file under the new law, and much more expensive," said Claude Burns, a Tuscaloosa attorney who has been specializing in bankruptcy cases for 20 years.
Burns said that from Sept. 1 until Tuesday, he has processed about 100 new filings for clients. During the same six-week period in 2004, he handled about 40.
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Posted on October 13, 2005 by Kevin Chern Esq.
Credit card companies have introduced a new wave of cards with no late fees. At first this sounds like a great offer for customers who carry high debt, but there's a major string attached to this deal: late payments can result in higher interest rates, and negative credit reports. Those negative credit reports can, in turn, result in higher interest rates on a consumer's existing outstand debts. Rather than providing consumers with a new option for handling debt, these new cards can actually increase the risk of bankruptcy. Read more below.
New Credit Card Offers Remove Common Penalty
By Caroline E. Mayer
Washington Post Staff Writer
Thursday, October 13, 2005; D01
Credit card companies are pushing new cards with a twist: no $39 fees for late payments.
Designed to blunt criticism of ever-higher fees, the new cards -- with names like "Simplicity" and "Clear" -- still can ding late payers. After extolling its new features, Citibank's Simplicity card offer warns that late payments could trigger an increase in the interest rate charged on balances as well as a negative credit report. Such reports often cause other lenders to boost interest rates on a consumer's other outstanding debts.
American Express Co.'s Clear card will increase a user's interest rate to 28.74 percent if a consumer pays late twice a year.
David Robertson, president of the Nilson Report, a newsletter that monitors the credit card industry, said he thinks the new cards could be attractive to consumers fed up with punitive fees. However, he warns, the $39 late fees that are currently assessed may add up to far less than the hundreds of dollars in extra interest consumers would have to pay over time if the interest rates on their outstanding balances increase. "It's yet to be proven that consumers read the fine print," he said.
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Posted on October 12, 2005 by Kevin Chern Esq.
It was encouraging to hear a non-apocalyptic BARF story today on National Public Radio. [you can listen to the broadcast here] On the News and Notes show, Pittsburgh bankruptcy attorney Robert Williams gave a calm and concise overview of BAPCPA. When asked whether individuals considering bankruptcy should rush out and file before the new law goes into effect, he cautioned against it. Instead, he suggested that such individuals should seek "experienced legal professionals," who will ultimately learn how to get the most for their clients under the new law. Although he recognizes that under the means test, some debtors will have a harder time qualifying for relief under new Chapter 7, many individuals in need and who can show they have special circumstances should be able to find "variances" in the law to escape the preclusive effect of the means test.
In other words, reports of death of bankruptcy have been greatly exaggerated. The public needs to know that the sky is not falling, and Mr. Williams has done an excellent job of keeping it informed.
Posted on October 12, 2005 by Kevin Chern Esq.
WASHINGTON, Oct. 12 [AScribe Newswire] -- American families are turning to credit cards to make ends meet in an increasingly volatile economy, according to "The Plastic Safety Net: The Reality Behind Credit Card Debt in America," a new report released today by Demos and Center for Responsible Lending. Released just five days before the new bankruptcy law takes effect and effectively shuts the door on financial recovery for millions, "The Plastic Safety Net" presents new findings from a national survey on credit card debt among low- and middle-income households -- those whose incomes fell between 50 percent and 120 percent of local median income.
The survey provides new information about why households are in credit card debt, how long they have carried their debt and the impact this debt has had on their economic security.
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Posted on October 12, 2005 by Kevin Chern Esq.
An interesting press release from the National Consumer Law Center reports that the NCLC and five other consumer advocacy groups approached the "big three" consumer reporting agencies-TransUnion, Experian and Equifax-to get them to make changes in their credit scoring formulas in order to help out victims of Hurricane Katrina-many of whom will undoubtedly experience a reduction in their credit scores as a result of the hurricane. The consumer groups requested that the CRAs develop and retain a "pre-disaster information" credit score based on pre-Katrina credit information for people in the affected areas. Under this proposal, "creditors could still get a current credit score, but at least the consumer credit file would also show the credit score before any Katrina-related delinquencies began to be reported," said Travis Plunkett of the Consumer Federation of America. Clearly, an individual's pre-Katrina score is likely to be a better indicator of his or her future credit behavior than a score temporarily depressed by missed payments as a result of the hurricane.
You will not be surprised to hear that this proposal was not well received. Equifax and Experian both declined the request; TransUnion has not yet responded. How's that for helping out in a crisis.
Posted on October 11, 2005 by Kevin Chern Esq.
Even with new bankruptcy laws in place, filing will still be accesable for most debtors. Many debtors racing to file under the current laws could likely have filed successfully once the new laws take effect. Read more here.
Posted on October 11, 2005 by Kevin Chern Esq.
Click here to read an intriguing blog post about Harriet Miers, President Bush's nominee for the Supreme Court.
Posted on October 11, 2005 by Kevin Chern Esq.
The new bankruptcy guidelines have created a new problem for the industry: not enough approved credit agencies.
John Accola of the Rocky Mountain News details the problem:
By John Accola, Rocky Mountain News
October 8, 2005
A week before a tougher national bankruptcy law kicks in, a shortage of "government approved" credit counselors threatens to undermine one of its key provisions.
Designed largely to weed out consumer cases where personal bankruptcy isn't the only option, the Bankruptcy Abuse Prevention and Consumer Protection Act requires debtors to undergo credit counseling within six months before filing for financial protection from creditors.
But as of Friday, the Justice Department reports that just 41 nonprofit credit counseling agencies - some equipped with call centers in Phoenix, Atlanta and Minneapolis - had been certified.
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Posted on October 11, 2005 by Kevin Chern Esq.
An interesting article discussing the effects of bankruptcy on families.
Sunday, October 9, 2005
By Eileen Alt Powell
Copyright © 2005 AP Wire
NEW YORK -- Three years ago, life looked awfully bleak to Carmine Warren.
While undergoing surgery and chemotherapy for cancer, Warren and his wife Lynette found the insurance payments they were getting didn't make up for his inability to work for weeks at a time, and their bills began piling up.
"It got to the point of: 'Do we pay the bills, do we pay for medicines or do we pay for food for us and our boys?'" Warren remembers.
When creditors threatened to put liens on their home in Orlando, Fla., the Warrens felt they had no choice but to file for bankruptcy.
Bankruptcy is a scary word for many families, who often associate it with failure. But experts say the majority of people who seek bankruptcy protection have suffered a severe financial setback.
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Posted on October 10, 2005 by Kevin Chern Esq.
In one of the first rulings under BAPCPA, In re Kaplan, the United States Bankruptcy Court for the Southern District of Florida held that the new $125,000 homestead exemption cap under § 522(p), covering property that is acquired within 1,215 days of the filing of the petition, applied to a Florida debtor who had purchased a condo within this 1,215-day period.
In so holding, the court rejected a decision by an Arizona Bankruptcy Court, In re McNabb, 326 B.R. 785 (June 23, 2005), which had held that the 522(p)'s homestead cap only applies in states that have not opted out of the federal exemption scheme. In rejecting this decision, Judge Robert Mark concluded that in BAPCPA, Congress specifically targeted what it believed were excessive state exemption laws, such as the Florida homestead exemption.
Although there is no official cite to the case yet, you can read about it here.
Posted on October 10, 2005 by Kevin Chern Esq.
Greg Paeth of the Cincinnati Post posted an article about the new bankruptcy laws today. You can read it here.
Posted on October 7, 2005 by Kevin Chern Esq.
By HARRY R. WEBER
AP Business Writer
BILOXI, Miss. (AP) -- First came out-of-pocket medical expenses, the bills piling up faster than Jerry Gollott and his wife could pay them. Then, sidelined by heart and back ailments, the retired police officer fell behind on his $1,370 monthly mortgage payment.
It wasn't until Hurricane Katrina, though, that Gollott's tenuous hold on solvency turned into a financial freefall that forced him to liquidate in bankruptcy court.
The burdens of the storm could eventually send many others down the same path, but a change in U.S. bankruptcy laws could make recovery even harder for those who follow, experts say.
"It's like staring into a big black hole, not knowing what's gonna happen to you," Gollott said last week as he drove around the debris that litters his battered Biloxi neighborhood.
Legal experts say there will likely be a surge in personal bankruptcy filings along the Gulf Coast months from now, as residents return and take stock. The wait could make things harder for some, as tougher limits on bankruptcy take effect Oct. 17.
Some lawmakers and bankruptcy attorneys are pushing Congress to delay the new law for Katrina victims. The Justice Department this week waived a requirement to undergo pre-filing credit counseling for Katrina victims and gave bankruptcy trustees some discretion on easing other requirements.
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Posted on October 7, 2005 by Kevin Chern Esq.
By Marcy Gordon, AP Business Writer | October 5, 2005 WASHINGTON --People filing for bankruptcy who were affected by Hurricane Katrina will get some leeway in meeting requirements of a strict new law. The action by the Justice Department's U.S. Trustee Program was disclosed in a letter to a lawmaker on Wednesday, a day after the department temporarily waived for Katrina victims the law's requirement that people filing for bankruptcy get credit counseling first. Some Democratic lawmakers and consumer advocates have said that the new bankruptcy law, which takes effect Oct. 17, will produce hardships for hurricane victims. The changes in the U.S. Bankruptcy Code, which make it harder to erase credit card and other debt through bankruptcy, are the most sweeping in a quarter century and will affect an estimated 30,000 to 210,000 people annually. A Justice Department official told Rep. James Sensenbrenner, R-Wis., chairman of the House Judiciary Committee, in the letter that the Trustee Program has directed its bankruptcy administrators in the field to exercise "appropriate restraint and discretion favorable to hurricane victims" in some of the law's requirements. The requirements in question include the core change made by the new law, an income test for determining whether people can have their debts canceled in exchange for forfeiting certain assets or if they must repay them under a court-ordered plan. The bankruptcy trustees, who administer the law around the country and make decisions on individuals' applications, are being told to consider lost income, increased expenses and other items resulting from the hurricane to be "special circumstances" to be taken into account in the means test. Some relief also is to be given hurricane victims in producing documents and attending public meetings with bankruptcy trustees. ------ Read more here.
Posted on October 7, 2005 by Kevin Chern Esq.
The US Bankruptcy Court recently approved interim rules for Bankruptcy. You can read the entire document here.
Posted on October 7, 2005 by Kevin Chern Esq.
USA Today's Sandra Block has some interesting points about Filing Bankruptcy in the shadow of Bankruptcy Law Reform.
http://www.usatoday.com/money/perfi/columnist/block/2005-10-03-bankruptcy_x.htm
Posted on October 7, 2005 by Kevin Chern Esq.
I've been doing some digging on Supreme Court nominee Harriet Miers' background and finding, like the rest of the world, remarkably little concrete evidence to go on. However, reading between the lines of the little that has emerged in the press, the picture-at least for practitioners of consumer bankruptcy law-is not an encouraging one. For example, Deborah Angell Smith, chairwoman of the Democratic Party of Collin County, Texas, is dismayed by Miers' strong pro-business background:
"I'm seriously concerned that she'll be a judge in the model of Priscilla Owen, who has a clear record of consistently deciding in favor of corporations over individual citizens and working families."
Another interesting tidbit indirectly places Miers on the side of automobile industry, no great friend of the consumer. Locke, Purnell, Rain & Harrell, the Texas law firm where Miers was managing partner, represented a group of automobile dealers in a Texas case in which then Governor George Bush signed a law blocking Texas consumers from collecting a $6 billion dollar judgment against car dealers for predatory lending and keeping secret kickbacks.
Although the prediction business is clearly a dangerous one, my sense is that if Miers' nomination is approved, she will almost certainly take the side of big business against the consumer bankruptcy bar. And if we are lucky enough to have a constitutional challenge to BAPCPA come before the Court-well, let's just say you can forget about that one.
I'd love to be proved wrong, however. If any of you find some good news about Miers, please send it my way.
Posted on October 5, 2005 by Kevin Chern Esq.
Read the letter detailing the US Trustees Program to address BAPCPA issues for Katrina Victims here: Download file
Also see the Associated Press release here: Katrina Bankruptcy Filers to Get Leeway
Posted on October 5, 2005 by Kevin Chern Esq.
Repost from MonstersandCritics.com
US News
People file for bankruptcy at record pace
By UPI
Oct 5, 2005, 19:00 GMT
WASHINGTON, DC, United States (UPI) -- U.S. bankruptcy filings hit a record 13,000 per day last week as people rushed to beat a new and more restrictive U.S. bankruptcy law, a report said.
Some 68,287 people sought bankruptcy last week, a 24 percent jump over the previous week, said California-based Lundquist Consulting. Year-to-date filings of 1.36 million are up 14 percent from last year.
This week is expected to set records as the Oct. 17 implementation of the new law approaches, when it will be more difficult and expensive for people to wipe out their debt under Chapter 7 bankruptcy.
Some Washington area law firms have stopped accepting new clients because of the deluge, the Washington Post reported Wednesday.
Hurricane Katrina victims, however, may skip credit counseling before filing under a temporary measure approved by the U.S. Trustee Program, which oversees U.S. bankruptcy courts.
'Everyone expected a steep spike in filings,' Sam Gerdano, executive director of the American Bankruptcy Institute, told the newspaper.
After Oct. 17, however, court clerk offices 'will be as lonely as a Maytag repairman,' Gerdano said.
Posted on October 4, 2005 by Kevin Chern Esq.
Although the US Trustee Directive waives the requirement related to credit counseling and debtor education, the Means Test provisions still apply. The practical issue with this is that a consumer hit by Katrina, with above median income for the last six months, will still be subject to Means Testing, possibly disqualifying the consumer from chapter 7 relief. Bottom line is that the new bankruptcy law considers all income over the last six months, while Katrina victims need a law that realistically considers only current income.
As a reminder of how ridiculous it would be for Katrina victims to fulfill the credit counseling requirement anyway, it's worth mentioning that there aren't any UST approved agencies in LA or MS:
"13 offices have been approved to provide counseling for Louisiana filers, but none is located in Louisiana. They say telephone and Internet counseling is available where in-person counseling is not. Five offices have been approved to provide counseling in southern Mississippi, although none are located in Mississippi." - ASSOCIATED PRESS
NYTimes Members see original article: Bankruptcy Law Provision Waived for Storm
Department of Justice Press Release: Download file
Posted on October 3, 2005 by Kevin Chern Esq.
President Bush today nominated Harriet Miers-the current White House General Counsel-to fill the seat of retiring justice Sandra Day O'Connor. Although President Bush stated that Miers "has devoted her life to the rule of law and the cause of justice," Miers has never served as a judge, and she has a minimal public record from which the Senate can evaluate her nomination. In fact, speculation is already flying that, as a result of her position as counsel to the President, she will assert the attorney-client and executive privileges in response to attempts to uncover her positions on the issues. Although it's difficult to predict what perspective she will bring to bankruptcy law, because she represented a number of large companies during her years in private practice as a corporate litigator, it's unlikely she'll be any great friend to the cause of consumer bankruptcy law. I'll do some digging and see if I can find out anything more about her.
I welcome any insight or comments.
Posted on September 30, 2005 by LexBlog
BARF is a competition between creditors trying to get a leg up on other creditors, and to get the last dime out of the consumer. Just look at the tension between the IRS/child support as priority creditors, car dealers getting the full benefit of the bargain, and the feeble attempt by the other unsecured creditors to get more money by tinkering with the homestead exemptions, 10 year lookback period, etc.
Let's face it, we only have BK because creditors fight among themselves to be first in line. As has been said BK, is an ORDERLY method to get debtors to pay as much as they can---while BARF may have started out by general unsecureds to get more money it wound up as a big fight between pesky creditors to be first in line, i.e., the pecking order was readjusted. Car dealers just got in front of general unsecureds with the 910 day rule. The IRS just got in front of general unsecureds by doing away with the super discharge. DMPs got in front of general unsecured creditors by making those pre-petition payments non-avoidable as a preference. Child support got in front of everyone.
The general unsecureds would then have gotten less than they were getting, so BARF had to generate more revenue, since the above greedy creditors just cut themselves a bigger piece of the existing pie, and they all needed to work together to get BARF passed. Thus we have the emphasis on exemptions/documentation, one tv, one vcr, one computer, the 10 year "lookback" period, the 1215 day homestead rule, the 730 day homestead rule, the IRS guidelines, etc. While these are the most onerous provisions of BARF, they are really just bones tossed to the general unsecureds who toted the freight to pass BARF.
The amount of money general unsecureds will get under BARF may actually wind up being less than they got before BARF. I mean just how much money is a used tv going to generate, and any lost homestead will probably get eaten up by taxes, car payments, etc.
These folks need to call a spade a spade. BARF is the best the creditors could do playing leap frog.
Written by Kathy Cruz - Hot Springs Arkansas
Posted on September 29, 2005 by Kevin Chern Esq.
Quite a few people have been asking around as to what the story is with a Bankruptcy Relief Bill for Katrina victims. There has been much speculation and a hefty dose of rumors.
The bill that comes closest to the mark (at least from a consumer and a consumer advocates' perspective) is titled the "Hurricane Katrina Bankruptcy Relief and Community Protection Act of 2005" and has been put forth by Feingold, Landrieu, Lieberman, Obama, Boxer and Feinstein and H. Clinton (among others).
It is currently scheduled to be "marked up" by the Senate Judiciary Committee next week, however, as mentioned in an earlier post, it may never get officially 'heard'.
For what it's worth - I've posted it for you here. Download file
Posted on September 29, 2005 by Kevin Chern Esq.
PILGRIM: New bankruptcy laws take effect on October 17th. If people earn more than the median income in their state and declare bankruptcy, they'll be forced to repay their debt. So the escape hatch for many of these families, Lou, is closing very fast.
DOBBS: Yes, this is utterly an assault on the middle class right now. It is absolutely unconscionable what Congress did with the bankruptcy law. Is it a travesty by any standard.
And the idiots at the U.S. Treasury Department suggesting raising minimum payments on credit cards at this point when so many families are strapped in this country is utterly, utterly mindless.
PILGRIM: Many of the debt experts are saying this is the perfect storm. This is a disaster for middle America.
DOBBS: It's just imperfect leadership on the part of our elected officials, storm or not. Thank you very much.
