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Ed Boltz
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And for bankruptcy? At the very least, separate classification of student loans in Chapter 13 to allow maintenance of IDR payments should be allowed. And that's the very least. A small step further, waiver of student loan default, although possible allowable already, should be explicitly allowed as a third option to rehabilitation or consolidation. This is especially needed for debtors that have defaulted once in an IDR, as they otherwise have to start over. It would also avoid the pointless, but draconian and dispiriting 18.5% collection penalty that is imposed for other means of resolving a default. Any payments under a Chapter 13 plan could be considered as sufficient for an IDR. The Secretary of Education already has the authority to authorize non-conforming IDR payments, but to the best of my knowledge never has under either the Obama or Trump administrations. Choosing between saving your house or car and continuing to make an IDR (which under the strict mechanical calculation ignores emergency expenses) is something of a Hobson's choice. The filing of a Chapter 7 should not automatically put a borrower into an administrative forbearance, where their IDR payments are accepted but not applied to the 10/20/25 year forgiveness terms. Seriously, you've suggested nothing for private loans. The answer: DISCHARGE. And for senior citizens? A nice 20 year IDR of $0 from their Social Security check. DISCHARGE. And, more generally, DISCHARGE.
Toggle Commented Apr 2, 2019 on Student Loan Fixes at Credit Slips
If you want some irony, look at the bankruptcy court cases, including In re Parkman from Mississippi, where judges lose their minds over the possibility that debtors will be able to enforce boilerplate language in confirmation orders through nonstandard provisions.
Toggle Commented Dec 24, 2018 on Contractual Lunacies at Credit Slips
To give, or perhaps take, credit where credit is due, the safe harbor criteria were suggested to the Department of Education several years back in a Dear Colleague Letter from a group of Democratic Senators, lead by Dick Durbin, based on ideas from NCLC and NACBA.
I've suggested many times ways that the goal of increasing discharges in Chapter 13 cases could be accomplished if courts ( and Ch. 13 Trustees) read the "best interests of creditors and the estate" in 1307(c) to to encompass the proposition that a discharge of debts through conversion of an non-performing Ch.13 case to Ch. 7 is in the best interests of creditors and the estate. It helps creditors by providing a final distribution (or lack thereof) in satisfaction of debts, stopping them (because, Lord knows they can't stop themselves) from collecting bad debts. It helps the estate because non-exempt equity gets liquidated and exempt equity is freed for productive use again. Ch. 13 Debtors should still be allowed to choose dismissal (particularly where there is non-exempt equity), but the presumption should be conversion not dismissal. This would tie the representation of the debtor in an involuntary converted case to the original Ch. 13, making it part and parcel of the representation. Then debtors would be free of debts and, if a second Chapter 13 filing was still needed, there would be neither a limited term automatic stay nor (except if there were nondischargable debts, like student loans) an Applicable Commitment Period, allowing the second case to be shorter, if affordable.
How apt of a comparison is it between the discharge rates of Attorney Fee Only plans and "regular" Chapter 13 cases? Using the $3200 average fee and the maximum 10% Trustee Commission, that would require a monthly payment as low as $60.00 or so. (Since these are presumed to be viable Ch. 7 cases, there shouldn't be either a Disposable Income or liquidation requirement.) This assumption may be incorrect, but it would seem likely that a plan that required only $60.00 a month would be more likely to succeed than a higher one that included on-going mortgage payments and an arrearage, car payments, taxes or any of the other secured or priority claims.
Does the judiciary keep statistics on the average number of years judges have served? Anecdotally, it seems there has been a generational change on the bankruptcy bench, with an increasing number of post-BACPA judges. Breaking down the statistic tilting on the reversal rate of that fulcrum could be interesting.
From the 1931 North Carolina law review of laws enacted that year: The other act (Ch. 208) prohibits any person or corporation from soliciting from any creditor the representation of any claim in bankruptcy, insolvency, or receivership proceedings or in connection with assignments for the benefit of creditors, and also forbids any person not an attorney to appear on behalf of another in any such proceedings. It would seem that as applied to claims and proceedings in bankruptcy (which cover the great majority of claims and proceedings involving insolvent estates) the prohibition is ineffectual and unconstitutional as being an attempt on the part of the State to regulate the prosecution of claims in courts of the United States.
That seems less problematic, except that the Code allows for corporate creditors to appear at 341 meetings, so is that partial preemption?
§ 84-9. Unlawful for anyone except attorney to appear for creditor in insolvency and certain other proceedings It shall be unlawful for any corporation, or any firm or other association of persons other than a law firm, or for any individual other than an attorney duly licensed to practice law, to appear for another in any bankruptcy or insolvency proceeding, or in any action or proceeding for or growing out of the appointment of a receiver, or in any matter involving an assignment for the benefit of creditors, or to present or vote any claim of another, whether under an assignment or transfer of such claim or in any other manner, in any of the actions, proceedings or matters hereinabove set out.
Would the Bankruptcy Code certainly be pre-empted? Following Butner v U.S., 440 U.S. 48, 99 S. Ct. 914 (1979), bankruptcy courts must look to state law for determination of property rights. Arguably, this statute defines when and whether the ownership of a property right, viz. the debt, can be transferred.
Does it matter that this statute doesn’t just apply to debt buyint in bankruptcy, but all insolvency proceedings?
§ 23-47. Violation of preceding section a misdemeanor. Any individual, corporation, or firm or other association of persons violating any provision of G.S. 23-46 shall be guilty of a Class 1 misdemeanor. (1931, c. 208, s. 3; 1993, c. 539, s. 399; 1994, Ex. Sess., c. 24, s. 14(c).)
As to your first question, I don't think debtor's attorneys in North Carolina knew about this- I certainly didn't. As to pre-emption, assuming that debt trading is pre-empted by the Bankrupty Code, is that pre-emption only binding while there is a bankruptcy? For example, assume a debt is sold during a Ch. 13 to represent the original creditor, but then the case is dismissed (maybe even for this purpose). Does that become un-pre-empted and now unlawful? Creditors always assert that the dismissal returns everything to the status quo ante, so this would seem an unwinding that hoists debt buyers on their own petard.
There are actually some recent developments with the Dept. of Ed that will increase the utility of bankruptcy. First, through work in several of my cases in North Carolina and by NACBA more broadly, Ed. is going to allow Chapter 13 debtors to enroll in the various income driven repayment plans for the first time ever. This will allow bankrupt debtors to start down the path, still too long at 20-25 years for most, but 10 years for Public Service debtors, of cancellation or forgiveness. Previously, Ch. 13 debtors student loans were placed in limbo during the length of the plan with interest nonetheless compounding. There are still issues to resolve with CH. 13 Trustees regarding unfair discrimination against other creditors in paying student loans under an IDR, but this is a small hurdle. Even more interesting is the possibility of using 11 USC 1322(a)(2) and (3) to first modify the rights of the student loan claim holders and then to waive any default on those loans. This would allow debtors to propose a Ch. 13 plan that waived the default on the student loans, both opening up the IDR options and avoiding the 18.5% collection costs assessed through a consolidation or rehabilitation. There is considerable push back from both Ed. and the bankruptcy court on whether a waiver of default can be proposed without the consent of the lender, but more will be coming on that.
Since you're starting from Michelle Harmer's post, I take it that the court special master suggestion is primarily for valuations in Ch. 11 cases, rather than consumer Ch. 13s, especially given that valuations battles are over higher amounts. (Not more important assets or even more tenacious battles.). But with these court appointed appraisers paid from the estate, the more meager assets in a Ch. 13 illustrate a problem even for larger bankruptcies- a debtor already has to value an asset in preparing a bankruptcy petition and bear the cost for doing such, whether relatively small like with looking up an NADA value online for a car, more modest like paying a couple hundred dollars for a real estate agent value, or more significant like getting a CPA to value a business. If a creditor can always come along and insist that the debtor use estate assets to pay for another appraisal, that harms the estate with no cost to the creditor. Better (and I've done this in Ch. 13 with creditors) is to share the cost of a mutually acceptable appraiser. (Of course, after I let a mortgage servicer pick an appraiser that came in with a value even lower than I started, the servicer tried to renege.)
I tend to think that a Q'uran, Torah or Rig Veda would be allowed out of a more modern concern for free exercise of religion. I would hope that , following Elizabeth I, bankruptcy judges would "have no desire to make windows into mens souls" to evaluate whether there was a true faith, either in the book or held by the debtor, but the problem would be in line drawing as to whether someone could practice bardolatry and exempt an original Shakespeare Folio.
I had the privilege of serving with Jean on the NACBA Board of Directors for several years. She was an incredible resource for all of us, continuing to assist even after she retired. Even while maintaining her high standards of scholarship, Jean was unusual as an academic in that she was unabashed and unapologetic in her open support of consumers. She will very much be missed.
Toggle Commented Nov 26, 2014 on Jean Braucher, In Memoriam at Credit Slips
Any thoughts on whether a confirmed Ch. 13 plan that either specifically terminates mandatory arbitration provisions or is merely silent redefines the debtor- creditor relationship such that there is no mandatory arbitration any longer?
Toggle Commented May 14, 2014 on Consumer Arbitration: Taking Stock at Credit Slips
Again, the solution for the debtor is to convert to Ch. 13, pay on the hypothetical Ch. 7 liqidation for 59 months, bulid equity and refinance the balance. So, yes, trustees should attack mortgages, because its good for the general unsecured creditors AND good for the debtor. All by removing the privileged status of a mortgage.
Toggle Commented Apr 7, 2014 on Reflections on the Dark Side at Credit Slips
It is not accurate to categorically state that Ch. 13 does not permit modification of residential mortgages- many courts have held that additional collateral securing the mortgage note, from appliances to escrow accounts, take away the protections of 1322b2. This case, in fact, also gives an example of how Ch. 13 could be used to modify a mortgage. Being unrecorded, the debtor would have equity above exemptions and would have to ay a decent dividend to unsecured creditors, but would in effect get to cram down the house to its liquidation, and not replacement, value, a better deal than any mortgage mod proposal. The debtor might get his or her exemption and definitely wouldnt pay interest on the EAE, since it wouldn't be a 100% payout. Further, EAE doesn't require equal monthly payments, so it could be ballooned to late in the case with a refinancing.
While credit unions are different from mega or community banks, they largely also carry water for their bigger, more voracious brethren. Witness the credit union support, mobilizing and sending their tellers to lobby on Capitol Hill for BAPCPA in 2004. Two big exceptions, both from my home state, are Self Help Credit Union, affiliated with the Center for Responsible Lending, an North Carolina State Employees' Credit Union.
The problems with the Espinosa approach (which would likely require a Ch. 20 to burn off other unsecured debt, since few courts have looked favorably on separately classifying student loans from dischargable unsecured claims) are first, that student loan servicers are hip to that idea and because bankruptcy judges (and Ch. 13 trustees) don't read Espinosa to encourage creative (or "gotcha") plans, but instead that it was a directive to prevent such plans under theyre "gatekeeper" function. So even if ECMC doesn't object, many bankruptcy judge and trustees will on their own.
Do the 6th Circuit judges own a bed and breakfast that the parties are required to stay at, since they otherwise would have dispensed with oral arguments, having clearly written the opinion beforehand?
Is there any sign of people resigning as trustee or, perhaps more tellingly, vacancies going unfilled? That would be an indicator of under compensation. There are many reasons for being a trustee that make the actual compensation something akin to a Walmart door buster- resume polishing, access to judges and the UST, marketing. This thesis would also be supported if there was an increase in trustees pursuing creditors, for example for pre-petition FDCPA violations (which aren't specifically exempt in many states). Some do, but for many its anathema to pursue anyone but debtors.
While I agree 100% with increasing Trustee compensation(How about a Proof of Claim filing fee?), I'm not sure that such would eliminate Trustees seeking additional compensation through creative assaults on normally exempt assets.