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Bob Lawless
University of Illinois
I'm a college professor with 3 kids.
Recent Activity
Suppose a company facing mass tort liability to U.S. citizens produced a piece of paper that read "Cook Islands Liability Extinguishment Corporation." The company then says to the tort victims, "We have formed this corporation under the law of the... Continue reading
Posted Mar 1, 2022 at Credit Slips
My memory is that this auto-renewal practice is not new, and I remember having raised the issue with ABI also a few years ago.
Toggle Commented Feb 28, 2022 on Bye, Bye, ABI at Credit Slips
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There will be around 400,000 total bankruptcy filings in 2021. That figure is historically low. The table to the right shows annual filing figures since 2010, which was the post-2005 peak. The 400,000 filings this year is a 75% reduction... Continue reading
Posted Dec 27, 2021 at Credit Slips
Past Credit Slips guest blogger, Jim Hawkins from the University of Houston, and his student, Tiffany Penner, alerted me to their recent publication in the Emory Law Journal entitled, "Advertising Injustices: Marketing Race and Credit in America." The paper takes... Continue reading
Posted Sep 25, 2021 at Credit Slips
Thanks for a thoughtful question. Pamela Foohey just wrote on this blog about ideas of things the Department of Education could do administratively to help with the student-loan problem (https://www.creditslips.org/creditslips/2021/07/the-department-of-education-can-help-with-student-loans-in-bankruptcy.html). At the heart of the question is the scope of bankruptcy's fresh start. Even if many (although not all) student-loan borrowers might qualify for income-driven repayment (IDR) plans, should they have to spend decades in these plans? After all, most of us don't feel that we should say to someone with thousands of dollars in medical debt, "That's OK. You can just pay a few hundred dollars each month for the rest of your life." Even if the IDR amount is zero, how long should the debtor have to stay in the IDR? The law does not require people who filed bankruptcy years ago to repay the discharged debts if their circumstances improve. A big part of the motive for bankruptcy filers under this law would be the clean slate. An IDR does not eliminate the debt. It continues to hang over the person and affect ability to borrow. Also, as an administrative forbearance, it can be taken away should the political pendulum give us another secretary of education who is hostile to student borrowers. Finally, there can be tax consequences to any debt forgiven outside the bankruptcy system. Discharging a student loan in bankruptcy generally will not have any tax consequences.
A new bill from Senators Durbin and Cornyn promises a way out of student loan debt through a change in the bankruptcy laws. The Fresh START Through Bankruptcy Act of 2021 makes one principal change. After 10 years from the... Continue reading
Posted Aug 4, 2021 at Credit Slips
P.S.--I should be clear that I am not accusing you of sophistry. Those are the arguments the lawyers for J&J will make.
Remedy, Adam? You sue the guys and gals with the money. My more serious answer is that you sue whoever has the assets the company "indirectly parted" with. Completely off the top of my head, I don't think anyone other than the assets you want back is a necessary party to the proceeding. My quibble with your response is that you're partly arguing the definition. I take your point, but aren't you using a nonstatutory, everyday meaning of the word "transfer." Under the statute, it includes "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset." That is a pretty broad signal to ignore this sophistry of "I didn't 'part' with the asset. I just never had it."
It is "far from clear" that Texas's Uniform Fraudulent Transfer Act (UFTA) would defer to the Texas Corporate Code on the definition of a "transfer?" I'll only buy that if "far from clear" means UFTA clearly would not defer to the Texas Corporate Code. UFTA says "As used in this Act" certain words have certain definitions. It would be lawyerly sophistry to argue that another statute then somehow mysteriously controls the definition, almost as if there is some natural law meaning of "transfer." The same is true for the Bankruptcy Code. Both UFTA and the Bankruptcy Code have a deliberately broad definition of "transfer" and that includes the "indirect parting" of an interest in asset. That broad language is there to eliminate exactly the sort of form-over-substance lawyering happening with the "Texas Two-Step." As you allude, Adam, the game here is a nonfrivolous argument that will allow these companies to create costs and litigation leverage to escape full responsibility. P.S.--I still have concerns about the potential for abuse of criminal fraudulent liability claims in consumer cases. It gives creditors and trustees too big of a hammer to wield against consumers.
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Today marks fifteen years of the Credit Slips blog. We started modestly on this date in 2006 while we were in the throes of doing all the tedious ground work for what would be the 2007 version of the Consumer... Continue reading
Posted Jul 18, 2021 at Credit Slips
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The latest data from Epiq Systems shows that year-over-year bankruptcy filings dropped again in May after an increase in April. The April and May figures are particularly important because they give us two months of year-over-year comparisons with post-Covid data.... Continue reading
Posted Jun 7, 2021 at Credit Slips
On behalf of the other Credit Slips bloggers and myself, I would like to welcome Professor Chris Odinet as a guest blogger. Chris is a professor at the University of Iowa College of Law and is part of a new... Continue reading
Posted Apr 19, 2021 at Credit Slips
When one is looking at total bankruptcy filings, the subchapter V and even all the chapter 11s put together are such a small percentage that they don't move the needle at all.
Interesting. I don't think subprime auto loan defaults will drive the bankruptcy filing rate, especially if the result is that people are losing their automobiles anyway after they file. Are we sure that subprime auto loan delinquencies are rising? I don't know either way. I looked for some data, and the most recent I could find was from September 2020. It was only for auto loans generally. It suggested auto loan delinquencies were down slightly during the pandemic.
Headlines recently appeared in the usual places about a big March jump in bankruptcy filings. It is true that March 2021 total bankruptcy filings were 43,425 (according to the Epiq Systems data) and that was a 39.1% increase from February... Continue reading
Posted Apr 7, 2021 at Credit Slips
Except that is a pretty big caveat. The "child" cases--corporate subsidiary/affiliate filings--are not small numbers. In my blog post, I pointed out that Le Pain Quotidien accounted for 43% of all the chapter 11 "filings" in May. In the big chapter 11 venues--Manhattan, Delaware, Houston, and Richmond--filings by large corporate filers are almost certainly the reason those places look to have had big increases. Even in smaller jurisdictions that have fewer filings to begin with, one corporate filing could produce a spike. I think it's really difficult to understand what is going with chapter 11 filings without backing out the affiliate filings.
Like Adam said, the calculations depend on household size and state. But, let's use a 2-person household in Indiana. The median income for a 2-person household in Indiana is $65,577. A monthly income of $15,500 is $186,000. That is over the applicable median income by $186,000 - $65,577 = $120,423. Therefore the MPO should be $58,500 plus 150% of the excess over $100,000. Stated mathematically: $58,500 + 150% * ($120,423 - $100,000) = $58,500 + $30,634.50 = $89,134.50. The plan would have to pay that amount over 36 months which is a monthly payment of $2,476 or 16% of their gross monthly income. (The bill says that the relevant amount should be $94,500 plus 150% of the excess of the amount over $100,000. That was a mathematical error. The figure should have been $58,500, which is the sum of the amounts for a person with income of an excess of $100,000 over the state median income.) The means-test payment would depend on a lot of things, not the least of which are secured debt payments. The $257,000 payment you calculated would be for a five-year plan where CBRA plans are three-year plans. The $257,000 total payment works out to about 27% of monthly gross income. That does not sound like a lot in the abstract, but considering that take-home pay will be a lot less and with some home-loan and car-loan payments, there will be little margin for error. Indeed, even at 16% of gross monthly income, the MPO is hardly a free ride.
Toggle Commented Jan 12, 2021 on CBRA Op-Ed at Credit Slips
As Credit Slips readers know, the Small Business Reorganization Act added subchapter V to chapter 11 of the Bankruptcy Code earlier this year. My go-to resource on subchapter V has been a thorough summary written by Judge Paul Bonapfel of... Continue reading
Posted Dec 11, 2020 at Credit Slips
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A popular narrative is that bankruptcy filing rates are increasing dramatically. That is not true. If you want to know what is happening with the bankruptcy filing rate during covid-19, the best source is Ed Flynn's analyses over at the... Continue reading
Posted Aug 5, 2020 at Credit Slips
Thanks, Jim. No need to attribute to me. All I did was "bucket fill" a map I had using the list in Collier. It took about three minutes, if that. As to Minnesota, I don't know if the law changed. Collier does not list it as an opt-out state
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Professor Emily Kadens has just published a great paper that explodes the myths about Twyne's Case. We all know Twyne as the case where an insolvent farmer gave away his sheep, thereby leading to a Star Chamber decision that laid... Continue reading
Posted Jul 29, 2020 at Credit Slips
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OK, bankruptcy mavens. What is this a map of? Answer below the fold. That's right, the states in blue have opted out of the federal exemptions and only allow bankruptcy filers to use the state exemptions, at least according to... Continue reading
Posted Jul 29, 2020 at Credit Slips
My colleague, Ralph Brubaker, and Gerald Posner have a New York Times op-ed assailing how the Sacklers are using Purdue Pharma's chapter 11 to shield themselves from personal liability. The bankruptcy world knows this tactic under the labels of third-party... Continue reading
Posted Jul 22, 2020 at Credit Slips
That is a good point. The FJC database captures the checkbox on the petition, which only asks about bankruptcies in the last eight years so using that datapoint does tend toward an overcount. In the Consumer Bankruptcy Project data, however, one-sixth of the filers who check the box are disclosing a bankruptcy that was more than eight years old and presumably are picked up as a repeat filer in the FJC data. (The FJC database does not have the date of the prior bankruptcy.) More significantly, there are ways my estimate undercounts. Based on recent data, people live an average of 32 years after their bankruptcy, but that number was almost certainly several years higher in the 1990s and 2000s when bankruptcy filers were younger on average. That interacts with a slightly increasing life expectancy in difficult ways to compute. Also, there has been a slight downward trend in joint filings, meaning today's joint filing rate is probably lower than it was historically. Putting all that together is why I took my 11.1% computation and said "about 10%" is a good estimate. We are not going to do better than a ballpark estimate using these figures. What surprised me is that estimate is magnitudes higher than I would expect many people would guess.
The past few days I had been wondering exactly how many persons in the U.S. have filed bankruptcy. By that, I don't mean how many filed last week, last month, or last year. Rather, how many persons walking around the... Continue reading
Posted Jun 22, 2020 at Credit Slips