Consumer Bankruptcy Committee Meeting Minutes
2006 Winter Leadership Conference
Hon. Dennis Dow, co-chair of the committee, discussed several opportunities for the members of the committee to become more active:
1. Electronic newsletter – the committee always needs submissions. Judge Dow will send out an email to members of the committee seeking articles.
2. ListServe – for members to participate in discussions.
3. Articles for Consumer Corner – members are encouraged to submit longer articles for
publication in the Consumer Corner section of the ABI Journal.
Please contact Timothy
Moratzka with Mackall, Crounse & Moore
Judge Dow discussed the committee meeting at the Annual Spring Meeting (April 2007). The topic will be §707(b), Income and Expense Issues in Chapter 7 and Chapter 13 Cases. Judge Eileen Hollowell from Arizona will moderate. Diane Kerns, a chapter 13 trustee, will be on the panel along with Mark Redmiles of the U. S. Trustee’s Office, who is the chief of enforcement.
A panel discussion was held regarding the promulgation of new Bankruptcy Rules. The distinguished panel was made up of Judge Keith Lundin, Judge Christopher Klein, Judge Thomas Waldron, and Prof. Allen Resnick. Judge Waldron reviewed the process of promulgating new and amended rules by the Rules Committee. Materials related to this process are available online. Judge Waldron noted that the language in BAPCPA is “a mess,” and it may be beyond the ability of the Bankruptcy Rules to address some of the problems in the statute. Prof. Resnick also spoke about the rule-making process. He formerly served on the Rules Committee. He noted that the Rules Committee is a part of the Judicial Conference. The Advisory Committee on the Bankruptcy Rules, which is a subcommittee of the Rules Committee, is made up of 16 members.
There was discussion about the work of the Rules Committee to promulgate interim rules after BAPCPA was enacted. Since they had only four months to come up with draft interim rules, these did not go through the standard rule-making process. This process generally takes three years to promulgate both new rules and forms.
In March 2006, a draft of proposed rules were published and put out for public comment. The draft rules are available for review online at http://www.uscourts.gov/rules. The deadline to submit comments is Feb. 15, 2007. In addition, a hearing by the Rules Committee to consider testimony related to the proposed amended rules is set for Jan. 22, 2007 in Washington, D.C. Anyone can submit a request to testify at the hearing.
There was discussion regarding the official forms, which are promulgated pursuant to Bankruptcy Rule 9009. Putting together these official forms, and attempting to stay neutral with regard to issues related to different interpretations of the Bankruptcy Code, is sometimes a difficult process. There was discussion of director forms, which are put out by the director of the Administrative Office of the U. S. Courts. These forms do not go through the standard rule-making process. One of these forms is the reaffirmation form.
The panel then addressed issues related to the Form 22, which is the form used to calculate current monthly income (CMI) under the new “means test.” Judge Lundin noted that Form 22 seems to be driving the case law. There was a discussion regarding the continued relevance of Form 6 (schedules I and J). There was a very lively discussion regarding issues related to the calculation of CMI.
At the conclusion of the committee meeting, David Wheeler made a brief presentation on the survey currently being taken by the ABI’s Rules Task Force. The Task Force has requested all ABI members to fill out the survey, which is available online at the ABI Web site (www.abiworld.org/source/auls_survey/loginpage). The information from the survey will be compiled and used by ABI in submitting comments to the Rules Committee. ABI has filed a request to testify at the upcoming hearing in January 2007.
2006 Annual Spring Meeting
The program for the meeting of the Consumer Committee consisted of a panel discussion and review of decisions rendered by the courts to date interpreting certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Entitled "BAPCPA Decisions: Temporary or Timeless? – A Case Update With Emphasis on Emerging Themes and Statutory Interpretation," the presentation was made by the Honorable Bruce Markell, United States Bankruptcy Judge for the District of Nevada and Senior Fellow in Bankruptcy and Commercial Law at the William S. Boyd School of Law, University of Nevada Las Vegas, David L. Rosendorf, shareholder at Kozyak, Tropin & Throckmorton in Miami and editor of the ABI’s BAPCPA Blog and Christopher Lefebvre, a consumer bankruptcy attorney in Pawtucket, R.I. The panel discussed the interpretative challenges presented by several provisions of BAPCPA and the principles of construction, drawn from opinions of the United States Supreme Court, being used by courts to interpret these provisions. The panel reviewed decisions rendered to date on credit counseling issues, including the dispute among courts as to whether the appropriate sanction for the failure of a debtor to obtain required prepetition credit counseling is dismissal of the case or striking the petition. Also reviewed were the cases interpreting the new limitations on the duration of the automatic stay for debtors with previous bankruptcy filings. The panel also discussed recent decisions on exemption limitations, including the differing opinions on whether those limitations apply in opt out states. The final topic was new restrictions on debtors’ ability to restructure claims held by creditors financing automobiles purchased within the 910-day period prior to the filing of the petition.
Brief mention was made of the Committee’s ListServ, which has seen increased activity since the effective date of BAPCPA. The Committee’s ListServ moderators are Alane Becket and Christopher Lefebvre. Judge Dow, the editor of the Committee’s electronic newsletter, also solicited volunteers to author articles for the newsletter. Anyone interested in writing an article for the newsletter or with ideas for topics for articles should contact Judge Dow. The deadline for submission of material for the next edition of the electronic newsletter is June 27.
Finally, Ann vom Eigen, Deputy Executive Director and General Counsel of ABI, presented a proposal for a lender handbook on BAPCPA to be produced and published jointly by the ABI and the Mortgage Bankers Association and America’s Community Bankers. The handbook would include basic information for lenders on key issues arising in cases under the Bankruptcy Code, including the recent changes effected by BAPCPA. Anyone interested in participating in the project should contact Ann vom Eigen.
The Joint Committee Meeting of the Ethics and Consumer Bankruptcy Law Committees of the ABI featured a lively panel discussion on the effects of BAPCPA on the practices of consumer bankruptcy lawyers for both debtors and creditors. The distinguished panel consisted of Professor Jean Braucher (Univ. of Arizona), Steven Jay Katzman (UST for Regions 15 and 16 (acting)), Richard Nelson (Cohen, Todd, Kite & Stanford, LLC, Cincinnati, OH), and Thomas Yerbich (Rules Atty, D. AK). The discussion was moderated by outgoing Ethics Committee Co-Chair Richard Carmody —(Adams and Reese LLP, Birmingham, AL). Many of the approximately fifty attendees participated in the discussion with questions and comments.
The panel’s presentation focused upon consideration of the designation "Debt Relief Agency" and the ethical problems created by attorneys and petition preparers being so designated. Steve Katzman provided a helpful power-point presentation concerning the salient provisions of the new Act involving "DRAs". From those provisions there flowed a discussion of the Act’s impact on the attorney-client privilege, the impact on state ethics requirements, advertising and possible suits against DRA’s by "assisted persons". The panel focused, in particular, on the potential for litigation by "assisted persons", which has attracted the attention of malpractice insurers.
The panel next discussed the duties of, and risks to, Debt Relief Agencies who must advise their clients on disclosure, values and the incurring of additional debt. This led to observations on the retention letter process as a way of clarifying responsibilities for clients and their counsel. Several comments were made, and a colloquy ensued, on the ability of attorneys to "unbundle"; their services in an a la carte fashion. The consensus of the panel was that the core debtor representation should not be allowed to be unbundled, although some federal districts would apparently allow the practice.
Finally, the panel discussed the effect of the Act on the pro bono practices of historically non-consumer firms. Since a pro bono case does not involve charging a fee for services to an "assisted person", it was posited that the firms should not bear the DRA designation. However, the panelists generally agreed that if such work can be done under the auspices of a §501(c)(3) entity, attorneys could achieve greater assurance of non-DRA status.
Two observations merit further attention. The new Act is going to increase the workload on both debtor’s counsel and bankruptcy case trustees. However, while counsel can increase their fees, the trustee’s fees were not increased by BAPCPA. In addition, it is expected that US Trustee enforcement of the Act’s provisions will focus on those practitioners who are seen as trying to shirk their responsibilities in representing debtors and creditors in consumer case
The meeting concluded with remarks by Co-Chairs for both the Ethics and Consumer Bankruptcy Law Committees and requests that committee members "get involved" . To that end, ABI members interested in writing, programming and/or other activities of the Ethics Committee are urged to contact Ethics Co-Chairs, Rick Meth (973-966-8319) and/or Terri Gardner (919-783-1037); those interested in the Consumer Bankruptcy Law Committee should contact the Hon. Dennis R. Dowor Hon.Thomas F. Waldron.
Documentation requirements for proofs of claim, particularly those based upon credit card usage, were the principal focus of the meeting of the Consumer Committee at the ABI Annual Spring Meeting. The panel, consisting of Alane Becket of Becket & Lee, David Lin of Robert J. Semrad & Associates and Elizabeth Gibson, Professor of Law at the University of North Carolina, analyzed a series of recent decisions discussing the required documentation for these kinds of claims and the consequences of failure to provide it. The panel also discussed recent developments in this litigation as well as practical ways of dealing with these issues through enhanced communication and cooperation between counsel for debtors and creditors.
As was the case with many other committee meetings at the Annual Spring Meeting, the Consumer Committee also devoted a portion of its time to discussing certain aspects of the new bankruptcy legislation. Tom Yerbich highlighted those provisions of the act which had already become effective as of that date, including certain limitations on the debtor’s right to claim homestead exemptions. The committee then spent some time advising members of various resources which were available through ABI and elsewhere providing summaries and analyses of the new legislation, including a synopsis prepared by Tom Yerbich and a summary and analysis by Judge Eugene Wedoff, both of which are posted on the ABI legislative page. Members were informed of the on-line seminar sponsored by ABI on May 3 on the consumer provisions of the legislation in which the committee leaders participated along with Sam Gerdano, Executive Director of the ABI, and Professor Jeffrey Morris, ABI’s current scholar-in-residence. The committee also discussed its plans to publish a special series of newsletter articles over the next six months on consumer aspects of the legislation. Mention was also made of the second edition of ABI’s publication Fundamentals of Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code, written by Tom Yerbich, which is scheduled for publication in early fall.
The committee teamed up with Professional Compensation to present “Court Oversight of Creditor Professional Fees in Consumer Bankruptcy Cases: Urban Myth or Developing Practice Area,” a discussion of issues relating to the allowance of creditor’s professional fees in chapter 7 and chapter 13 cases. In light of the increasing frequency of contracts that provide for attorney or “collection fees” in the world of consumer finance and the growing trend toward “nationalization” of consumer creditor practice in consumer bankruptcy cases, this is a topic of increasing importance to both debtor and creditor counsel. In addition, a review of “Waiver and Disclosure Issues in Bankruptcy Proceedings: Fleming, Jore, 11 U.S.C. §329 and Beyond,” was discussed, as well as important developments in the “Area of Disclosure by Court-appointed Counsel in Bankruptcy Proceedings,” which focused on the obligations of debtor’s counsel in consumer cases under 11 U.S.C. §329 and the developing impact of the recent Decisions of Fleming and Jore in business proceedings.
Compensation of debtors’ counsel in consumer cases was the focus of the Consumer Committee meeting held on April 16, 2004, and attended by approximately 50 members. The program featured a panel discussion led by Hon. Jennie Latta of the Western District of Tennessee, Diane Livingstone, an Assistant U.S. Trustee from Region 7, and Marjorie Payne Britt, a bankruptcy practitioner in Houston. Topics included recent holdings by the U.S. Supreme Court in Lamie v. U.S. Trustee and the Seventh Circuit’s decision in Bethea v. Adams & Associates and their implications for debtor’s counsel and the provision of legal services to debtors in chapter 7 cases. Judge Latta prepared an analysis of these decisions and their impact which is included in the conference educational materials. In addition, articles on both cases appear in the first quarterly edition of the Consumer Committee’s electronic newsletter on the ABI web site. Additional topics included the status of limited representation and unbundling of legal services as reflected in revisions to various state codes of ethics and professional responsibility and decisions of both state and federal courts. Also discussed were the varying approaches taken to compensation of debtor’s counsel in chapter 13 cases across the country, including the concept of a presumptive or "no-look" fee available to counsel in some jurisdictions and the requirements for earning that fee. These latter two topics are discussed in detail in a comprehensive outline prepared by Hon. David Kennedy of the Western District of Tennessee and included in the conference materials. A reprint of Tom Yerbich’s article on limited representation appearing in a recent edition of the ABI Journal was also made available to those who attended the meeting.
The Consumer Committee meeting was held on Dec. 5, 2003. An estimated 45 members attended (37 signed in). The meeting started with a brief update on the status of H.R. 975 by Judge Eugene Wedoff, co-chair. This was followed by a report on the quarterly committee electronic newsletter by Judge Dennis Dow, co-vice-chair. An educational program on hot issues in chapter 13 cases was presented by Judge Thomas Waldron, Richardo Kilpatrick and John Rao with significant participation by those in attendance. The subjects included cramdown interest rates in chapter 13, residential mortgages and the treatment of arrearages in the plan, including situations where there is a conflict between the treatment in the plan and the proof of claim filed by the creditor.
REMEDIES FOR ABUSIVE SERIAL FILINGS
On the agenda at the session of the Consumer Bankruptcy Committee at the Annual Spring Meeting was a program on efforts to formulate effective remedies for the problem of abusive serial filers. The program, presented by the Honorable Audrey Evans of the United States Bankruptcy Court for the Eastern and Western Districts of Arkansas and Pat Mears of Dickinson, Wright in Grand Rapids, Michigan reviewed and analyzed the ways in which courts and creditors have sought to deal with the problem of debtors filing successive petitions for relief to invoke the automatic stay and forestall creditor efforts to foreclose on collateral. Starting with the statutory framework relating to serial filings, the materials (click HERE for a link to outline) outline the history of the judicial response to the issue starting with the development and application of the concept of good faith in filing and conclude with a discussion of conventional procedural remedies like annulment of the automatic stay and more creative recent responses including the entry of in rem orders granting prospective relief from the automatic stay and binding upon any owner of the subject property. Also discussed are ethical issues for consideration by debtor’s counsel.
The Consumer Bankruptcy Committee's meeting was attended by 39 members. Committee co-chair Judge William Brown presided over the meeting and solicited committee member involvement in two new committee projects: A Consumer Bankruptcy Manual to be published by ABI and a Consumer Committee Newsletter to be published on ABI's web site and sent to the committee's listserve periodically. Several members expressed an interest in participating in these projects. The committee's co-chairs and vice chairs will select editors for the newsletter, with the expectation that a new edition would appear at least quarterly on the web site. Members who were not able to attend the Winter Meeting but who are interested in helping to write or edit sections of the Manual or the newsletter are encouraged to contact Judge Brown.
As in past meetings, it was suggested that if the bankruptcy bill is reintroduced in the next Congress and is enacted, the committee's members would be active in education on changes in consumer bankruptcy law.
Following these discussions, Judge Jim Marlar of the Bankruptcy Court in Arizona and a member of the 9th Circuit Bankruptcy Appellate Panel discussed appeals of consumer cases and issues. His discussion focused upon five consumer opinions issued by the 9th Circuit BAP in the past year.
After Judge Marlar's presentation, Judge Steven Rhodes, Chief Judge of the Bankruptcy Court for the Eastern District of Michigan and Chief Judge of the 6th Circuit¹s Bankruptcy Appellate Panel, discussed his empirical study of the omissions and errors in disclosure by individual chapter 7 debtors of assets in their bankruptcy schedules. An initial summary of his study appears in the May 2002 issue of Norton Bankruptcy Law Adviser, which is available on WestLaw, and a more complete law review article is expected in the future.
Following up on Judge Rhodes's presentation, Committee Vice Chair Tom Yerbich discussed the District of Alaska revision of its local rules, in part to address obtaining more complete and accurate disclosure of assets in the schedules.
Subsequent to the committee's formal meeting, some of the members met with John Penn, ABI's Vice President-Publications, to discuss the proposed Consumer Bankruptcy Manual. There seemed to be a consensus that this manual would be a primer suitable for introducing new attorneys and their staffs to the basics of consumer bankruptcy. Moreover, the manual might be used for debtor education. The possibility of using portions of the manual for a brochure that attorneys might give to consumer clients was suggested. Also, as a separate publication, some in attendance suggested that a primer on consumer bankruptcy, written from the perspective of creditors, might be a useful tool for creditor attorneys to provide to their clients. Committee Vice Chair Tom Yerbich offered as a substantial start on the consumer manual materials that he had written, and Tom's primer will be circulated among interested members and the Publications Committee for comment.
The goal of the Publications Committee is to have the initial consumer manual in publication by the Spring 2003 Meeting in order that it might be used as a part of the material for the Boot Camp program planned by ABI for new attorneys.
The Consumer Committee met at 9:30 a.m. on Friday, April 19, 2002 at the 20th Annual Meeting, with approximately 75 members attending. The meeting began with a discussion of the status of the pending Bankruptcy Reform Bill. Many members and the chairs had attended the Legislative Committee meeting earlier that morning and heard from Congressional staffers. The Committee's actions for 2002-3 depend upon the enactment of the pending Reform Bill. The members were advised that should the Reform Bill become law this year, the Committee would solicit their help in educational projects on the new law. It is contemplated that this Committee would be actively involved in teaching the changes in the law to Committee members, who in turn would be active in legal education on a regional and local level. If it becomes law, the Committee's co-chair Judge Wedoff will immediately update his summary of the law's changes and impacts for the ABI website and other publications.
Following a discussion of the Reform Bill's status, the Committee's education program was presented by ABI Member, Judge Jennie D. Latta of the Western District of Tennessee, who reviewed recent decisions under Code sections 523(a)(2) and (a)(6), as well as implications of section 523(a)(3). The discussion included active participation by the chairs and vice chairs of the Committee, as well as many questions and comments from attendees.
The committee presented a four-part educational program. First, Judge Wedoff presented a very brief report on the status of the bankruptcy reform legislation and encouraged attendance at the Legislative Committee for a detailed treatment of the subject. Second, Dennis Dow gave an overview of the impact of the Gramm-Leach-Bliley Act (dealing with privacy of fiancial information) on consumer bankruptcy practice. Third, Russ Reyolds, from the San Diego bankruptcy clerk's office, gave a demonstration (with live connection) of that court's electronic filing system. Finally, Tom Yerbich discussed practical issues involved in the transition to electronic filing. There was lively discussion of all of the non-legislative issues.
The Consumer Bankruptcy Committee meeting focused on the means test in the pending Bankruptcy Reform Act. Co-chair Judge Wedoff provided an example of joint chapter 7 debtors that would be subject to the test, and, in going through the application of the test and its related Internal Revenue Service standards, the discussion pointed out numerous areas of potential litigation for both creditors and debtors. Based on an assumption that the pending legislation will be enacted this year, the committee members were urged to become involved in educating practitioners about the new law.
The Consumer Committee meeting included the following: (1) a brief update on the status of the pending legislation, with a cautious prediction that it was unlikely to be enacted into law this term; (2) a thorough discussion of cramdown in Chapter 13 in the aftermath of the Supreme Court's Rash decision; and (3) a brief talk by Professor Rafi Efrat on comparative consumer bankruptcy laws and their social/legal environments (with the thesis that a more liberal discharge is appropriate where the social support system is less extensive).
The Consumer Bankruptcy Committee met at 8:00 a.m. on Sunday, April 30, 2000, with an excellent attendance. The session was chaired by Judge William Houston Brown, of the Western District of Tenn.; Kent V. Snyder, of Portland, Ore.; and Thomas A. Lee III, of Malvern, Pa. The program, which qualified for continuing legal education credit, with ample written material to support it, consisted of the following presentations:
Judge Elizabeth Perris of the District of Oregon led a discussion of reaffirmation and redemption practices and problems. The new recommended reaffirmation form issued by the Administrative Office of the U.S. Courts was examined, as were the variations in practice concerning reaffirmation hearings.
Judge Eugene Wedoff of the Northern District of Illinois, co-chair of the committee, was unable to attend this year's annual meeting; however, Judge Wedoff's video presentation of tenancy by entirety property interests, prepared by the Federal Judicial Center, was shown and a discussion of entireties issues followed.
The committee did not discuss the pending legislation in depth, since many members had attended the Legislation Committeeºs session on April 29.
Since the status of the passage of bankruptcy reform legislation is still somewhat uncertain, the Legislation and Consumer Bankruptcy Committees thought that a joint presentation discussion the various versions of the legislation would be helpful. Consequently, Bankruptcy Judges William H. Brown (W.D. Tenn.), Eugene Wedoff (N.D. Ill.), Wesley Steen (S.D. Texas) and David W. Houston III (N.D. Miss.) jointly presided over an open forum discussion of H.R. 833, the bankruptcy reform bill that passed the U.S. House of Representatives on May 5, 1999, and S. 625, which is currently pending in the U.S. Senate. As a part of the program, chapter 13 Trustee Henry Hildebrand (M.D. Tenn.) discussed the results of a study undertaken through the auspices of the National Association of Chapter 13 Trustees concerning the impact of the reform legislation on bankruptcy filings. The first part of the bifurcated presentation focused on the likelihood of the passage of reform legislation, particularly on recent developments in the Senate. Judge Houston reported that Senate Majority Leader Trent Lott (R-Miss.) had filed a petition for cloture to curtail debate on S. 625 just prior to the congressional recess. The petition is returnable to Jan. 25, 2000, the second day after the Senate reconvenes. The success of the cloture petition will, in large part, be dependent on negotiations and compromises reached by Republicans and Democrats who are interested in this legislation, either directly or tangentially.
One of the principal issues of concern in the reform legislation is the concept of "needs-based bankruptcy," or "means testing." Judge Wedoff discussed the differences in the respective approaches to means testing taken by the House and Senate. A critical component of means testing is the use of Internal Revenue Service guidelines to calculate a debtor's reasonable living expenses. Although the stated purpose of the reform legislation is to compel more debtors to file chapter 13 bankruptcies as opposed to chapter 7 liquidations, the second segment of the presentation focused on some of the modifications to chapter 13 that would be considered disincentives to file under that chapter. The discussion focused on (a) the "anti-cramdown" provisions that would be applicable to debts secured by automobiles and other personal property; (b) the expanded exceptions to dischargeability that would be incorporated into chapter 13; (c) the treatment that would be required for alimony and support obligations, particularly as conditions of confirmation and discharge; (d) credit counseling as a condition of bankruptcy eligibility, and debt management education as a condition of discharge; and (e) the expanded role required of panel and standing trustees in monitoring debtor eligibility.