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Ed Boltz
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Beyond the HEROES Act, there are also proposals, including from Rep. Mary Gar Scanlon and Sen. Sheldon Whitehouse, to restore the discharge for student loans for people with COVID related loss of income or medical expenses.
Toggle Commented Aug 17, 2020 on Student Loan Relief Update at Credit Slips
Too bad they don't support venue reform to relax unnecessarily restrictions on consumers filing in the most convenient forum.
When it comes to venue and bankruptcy, it shouldn't be a surprise that such is apied inequitable against consumers compared with corporations, nonprofits or regular. The EOUST will object to a consumer filing in the "wrong" jurisdiction in every case, even if there is not substantive difference in the outcome, without concern for the convenience of the consumer debtor. (That the Bankruptcy Administrators in North Carolina and Alabama take a more laissez faire approach only exacerbates the absurdity of the UST position.) Rasonable venue reform would tighten application for corporations and relax such for individuals.
Another less than perfect solution, but still an improvement would be the great use of IDRs through Chapter 13 plans, particularly coupled with court supervision and accounting for IDR payments. This is not that dissimilar a problem from the mortgage crisis, with the provisions of Rule 3002.1 being a model for overseeing such payments and determining the number of qualifying payments made during the bankruptcy.
Since the publisher is only 3 miles from my office in Durham, do you think I can just stop in and pick up a copy? Also, with it being published by Carolina Academic Press, does it have anything much about North Carolina debt collection? Since we have don't have wage garnishment but do have fairly robust debt collection and debt buyer statutes, creditors constantly complain about the lack of viable collection mechanisms.
I very much agree that this is, looking back, a blind spot that we didn't consider. You are also, to continue the visual metaphor, correct that "the very richness of our local resources" regarding bankruptcy, leaves Americans with the perception that we need not look to other countries. That outlook, however, seems to be both directions- I'm just reading "Bankruptcy- The Case for Relief in an Economy of Debt" by Joseph Spooner from the U.K. about the English (and I guess Welsh) system of bankruptcy and debt relief. It is chock full of references to U.S. bankruptcy law, policy, and research, but has far, far less from other nations, including English-speaking ones. This points again to the "richness" of our bankruptcy resources but also hints that there is a dearth of much from elsewhere. That said, it is very interesting to compare debt relief American style with elsewhere. One immediate take away is that the English administrative Debt Management Plans lacking the clear adversarial nature of American bankruptcy, seems to be a system that has been "captured" by the financial industry, who constantly ratchet up the requirements of such plans. So, even though consumer debtor's attorneys get accused of being greedy and racially biased, at least American debtors can have zealous advocates. You should actively reach out to the ABI to encourage its next project to be a review of what international insolvency can teach the U.S. about bankruptcy and debt solutions.
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