American Bankruptcy Institute | Consumer: Basic Bankruptcy Concept

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The following abstract summarizes the text of submissions made to the National Bankruptcy Review Commission. The abstract is organized by NBRC working group and topic.

The Final Report of the NBRC can be viewed on-line. To obtain a copy of any document shown below, contact the Center for Legislative Archives, Room 205, National Archives Building, Washington, D.C. 20408. The telephone number is 202/501-5350. Mr. R. Michael McReynolds, Deputy Director, will be able to assist with specific inquiries. (The NBRC documents will be housed at this location until June, 1999. Thereafter, the records will be transferred to the Center's archives in College Park, MD.)

Consumer: Basic Bankruptcy Concept

ID	Name	Group	Other	Code Sec	Cross Ref	Problem Referenced	Proposed Solutions
NBRC- 0022	USA Today					Alarming Rise in Number of consumer bankruptcies. Reasons cited: Loss of job or income; Slow-growing wages; lack of medical or auto insurance; Divorce; Financial illiteracy; High-risk lending.	Bankruptcy is not best alternative. Discussion of Ch. 7 and Ch. 13 alternatives. Bankruptcy stays on credit report for up to 10 years. No need to resort to bankruptcy. Consumer Credit Counseling Services. Develop repayment plans and negotiate with creditors on your behalf. Retain self-respect.
NBRC- 0080	Jerry L'Hommedieu	Bankruptcy Manager;Toyota Motor Credit Corporation	Invited Participant& Conference call conferee			Basic Bankruptcy Concept is problematic in that it attempts to reform the current system.	Specific recommendations will follow. Toyota as well as other secured creditors believe that current system should not be recreated.
NBRC- 0081	Thomas E. Ray	Attorney; Ray & Bolen				Basic bankruptcy concept fails to understand the fundamentals of the consumer bankruptcy system. Problems are individual and must be addressed individually.	Creditors must be given more responsibility for granting credit to those persons who cannot handle it.
NBRC- 0082	Rita Choy	Bankruptcy Attorney; Morgan Hill, CA				Proposal for a generic single bankruptcy system would be destructive to both creditors and debtors. Concept would cheapen the system and not necessarily reduce costs. Attempts to place every case in a box that equitably cannot fit every case.	Currently, Ch. 13 attorneys are low cost; bankr. judges already issue lift stay orders where eviction is final in state court; budget counseling should be optional like in family law cases; current mechanisms deal with liens effectively.
NBRC- 0083	William M. Gotten; R. Preston Wilson; Russell W. Savory	Attorneys; Gotten, Wilson & Savory				Basic Bankruptcy concept is misguided and current system does not need any major overhaul.	Most problems in bankruptcy have been greatly resolved by congress. Current system is understood by judges, debtors and creditors and is fairly applied. Current system works well and major change is not needed.
NBRC- 0084	William A. Chatterton	Attorney; Ross and Chatterton				Biggest problem with BBC is that it forces debtors into an adhesive contract. No ability to negotiate individualized terms. Second problem, is that the BBC would make consumer bankruptcy less flexible. An expensive counseling and education program is not necessary for most debtors.	Agrees with BBC that a more sensitive reporting system is necessary. Also agrees that debtors should be given a credit break for attempting to repay through Ch. 13 than walking away in Ch. 7.
NBRC- 0085	Edward L. Montedonico	Attorney at law				Disagrees with the BBC. More good than bad in the current system. Random auditing of the system would make debtor fraud skyrocket. Should not eliminate trustee/administrator involvement in cases.	Hopes that Commission will continue to review position and make select improvements to the system and not a major overhaul. The wheel does not need to be reinvented, but made rounded.
NBRC- 0086	National Association of Bankruptcy Trustees	National Organization of Panel Trustees				Disagrees with the "asset-based" system proposed in the BBC. No one will police debtors and ensure that all nonexempt property is turned over to trustee. No one administer "special provisions" not a mere administrative function. One trustee cannot perform two functions. Who pays the trustee Unclear if they would split the fee under the BBC. Accelerated discharge gives debtor unfair advantage, due to expedited schedule, will have a better chance of "escaping the system." Expedited stay termination impairs trustee's ability to liquidate estate.	BBC initially looks like a streamlined Ch. 7 system. In practice, however, this system will result in no real change to two-route system. Cases filed without special provisions C or E would be treated like Ch. 7 and those filing utilizing special provisions C and E would be treated like Ch. 13. NABT encourages the NBRC to review the practical effect of a BB system, particularly from the point of view of the Ch. 7-like trustee who would have to administer the system.
NBRC- 0087	Undersigned Bankruptcy Attorneys of the Eastern District of Missouri					Strongly urge the NBRC not to adopt the BBC at this time.	Encourage the Commission and the consumer working group to focus its efforts on reforming the current system rather than continuing to analyze proposals for a single consumer chapter.
NBRC- 0088	Philip F. Counce	Attorney				BBC proposal goes far beyond the congressional mandate and would revamp the basic framework of the bankruptcy code. Congress stated that they are generally satisfied with the general framework of the code.	Proposals create suspicion that only persons heard from were creditors acting in their own self-interest. Urges Commission to stick to their mandate and not try to revamp bankruptcy code.
NBRC- 0089	George W. Stevenson	Attorney; Stevenson & Emerson	Has attended virtually all NBRC meeting on consumer matters.			BBC is the product of a preconceived notion of changes and not the result of the discussion at the meetings. Fair to say that all of the parties affected are requesting that the NBRC recommend small modification to remedy problems that exist.	Time to devote Commission energies to refining system that has stood the test of time.
NBRC- 0090	Kenneth J. Doran	Attorney; Doran Law Offices				1. Not really a single-track system. Difficult to craft a system that is uniform and also adaptable. 2. Impossible to "de-link" repayment options and not have disparate treatment of similarly situated creditors. 3. Not really a simplification of the present system. 4. Abusive repeat filings are NOT rampant. 5. Mandatory education is too expensive an answer for those debtors that don't need it. 6. Voluntary repayment preserves current ch. 13 practice. 7. Limitations on permissible affirmations should be seriously considered current system works fine.	No strong case is made for approaching consumer bankruptcy revision via a major conceptual change, without clear courses having been plotted on more of the specific issues. The conceptual approach, as outlined, carries a significant danger of a system that is on balance less beneficial to consumer debtors, without any clear need or justification for that course of action.
NBRC- 0091	David S. Kennedy	Chief Bankruptcy Judge; Western District of TN				Greatly surprised and disappointed by BBC. Does not find anything so inefficient with the current system to warrant a major overhaul. BBC is against congressional mandate of "fine-tuning". If it's not broken, why overhaul it.	In the event the Commission seriously considers the BBC, urges it to consult first with various bankruptcy experts.
NBRC- 0092	Dean S. Cooper	Associate General Counsel; Freddie Mac	Invited participant to Consumer group, Santa Fe			Supports four central goals of the bankruptcy system: 1. Promote consistency; 2. make system more cost effective; 3. simplify the process; and 4. restrict bankruptcy to debtors who are legitimately in need of bankruptcy to reorganize their debts.	1. Standard for relief from stay (after x number of missed payments) should be consistent throughout the country. 2. Immense fees and innefficiency come from attorney and repeat filers. De-linking secured from unsecured debt would not improve the ability of debtors to pay their secured debt and would encourage filings in order to restructure home mortgage debt. 3. Encouragement should be to work out differences without resorting to bankruptcy. Nothing in the code rpevents relief for those individuals who simply don't want to try to repay their debts and leave the lenders holding the bag.
NBRC- 0093	Ike Schulman	President; National Association of Consumer Bankruptcy Attorneys	Invited Participant to numerous NBRC meetings.			BBC is a very disappointing conclusion to the initial deliberations of the consumer working group. NACBA's concern is with fundamental misdirection of the BBC. Contrary to the mandate of the Commission. Not fine-tuning, but total overhaul. Problems that BBC attempts to correct in the current system do not necessarily exist.	1. Total uniformity is impossible to achieve without removing all discretion of bankruptcy judges. Current two-chapter system is cost-effective, with the single exception of asset chapter 7 cases. 3. Simplified system would still require individualized and often complex legal advice. 4. Balance in system between debtors and creditors must be maintained. 5. One strike and you're out is a draconian answer to a false assumption about the problem of repeat filings. NACBA Goals: Encourage ch. 13 on an individualized basis. Preserve chapter 7 as an alternative for ch. 7 debtors. BBC should be rejected. Focus should be on how current system can be fine-tuned. Focus on nationwide filings; motivations of those filing; and reasons why certain debtors and certain locales tend to choose one chapter over another.
NBRC- 0094	Sharon Faughn Hermosillo	Attorney; San Jose, CA				BBC is vague and oversimplified. Judge discretion affects all aspects of the court system. Unreasonable to attempt to legislate the distinctions away. Ch. 13 debtors are still trying to repay as much as possible. An unsuccessful first plan does not mean that these debtors should be barred from continuing to try an pay back as much as is possible.	Chapter 13 debtors rely on their attorneys throughout the entire plan process. A single chapter system will work only when all debtors have no assets and no nondischargeable debt and no desire to pay unsecured creditors. BBC shows a harshness towards debtors and a misunderstanding of how creditors are benefitted by chapter 13.
NBRC- 0095	A. Thomas DeWoskin	Attorney; Greensfelder, Hemker & Gale, P.C.				Strongly opposes BBC. New single chapter would not pass constitutional scrutiny. Without a ch. 7 alternative would violate 13th amendment. If the proposal requires a debtor to pay over all of his disposable income to his creditors, what happens to a debtor with no disposable income Is he denied bankruptcy relief	Sure that there are many other serious problems with the proposal, but did not have time to include all criticism.
NBRC- 0096	Kathleen A. McDonald	President; National Association of Chapter 13 Trustees	Invited participant to July meeting.			Strongly opposes the wholesale scrapping of the current system. BBC virtually guarantees the elimination of repayment of dischargeable unsecured claims. Repayment bankruptcy is based on quid pro quo element missing from the BBC: the freedom to retain non-exempt property. Uniformity of outcome should not be instituted at the expense of uniformity of process (repeat filers are not the huge problem). Wide discretion permitted for ch. 13 plans. Process to reaffirm debts that cannot be met would lead to other unrealistic credit situations. Each can be fixed without overhaul of current system. Judge should remain as gatekeeper of the system. Benefit of debt repayment should not be sacrificed for predictability of outcome.	The NACTT encourages the NBRC to follow the advice of most practitioners and focus on responding to the needs of the existing system.
NBRC- 0097	Wendell J. Sherk	Attorney at law				The BBC is aimed at three systemic problems (possibility of abuse; complexity and expense; and non-uniformity). All creditor concerns and the same creditor concerns that have been raised throughout the history of bankruptcy. Rewriting the code will not acheive uniformity. The procedural side could achieve greater uniformity, like specialized appellate processes. None of the solutions deal with debtor abuse. Re-filing is not the problem it appears and could be changed by a simple amendment to section 109(g). Post-discharge audit is interesting in theory but impossible in practice. The education proposal is the triumph of hope over experience. Would be too difficult to administer. Voluntary repayment system is nothing more than a distribution trustee. A complete re-write of current law would necessarily lead to greater complexity and expense.	The NBRC should consider the fundamental goal of bankruptcy: the fresh start. The Code serves that goal well. The creditor community will never be happy with the concept of a discharge. Bankruptcy is a debtor rather than a creditor remedy. Permit a debate on the nature of the remedy if that is the desire of the NBRC. But the current system does not need to be fixed with a complete overhaul. Make a good system work better.
NBRC- 0099	John C. Akard	Bankruptcy Judge; Northern District of Texas				BBC is simply what is being done currently, only in another form. System is as uniform as it should be, given that individuals comprise it. Attempt to deal with specific secured debt but not with others. Atleast ch. 13 deals with all of a debtor's creditors. BBC is also not any quicker than the current system. Also, BBC is not less expensive. Bankruptcy system is not being abused, is being used by people who really need it. Creditors are to blame also for the repeat filers. Credit reporting community is now distinguishing between ch. 7 and ch. 13. Spot auditing is not being done in every case by the ch. 7 or ch. 13 trustee.	In summary, the present system is operating as well as humans can operate anything. It is not broken, please don't fix it.
NBRC- 0103	Robert Martin	Bankruptcy Judge; District of Wisconsin				Proposes single chapter bankruptcy concept, but focuses on several bankrutpcy concepts from the current code.	Single chapter available only to individuals and would be the only chapter under which individuals could file. Every debtor would have to file schedules and SOFA, same surrender of nonexempt property for liquidation and distribution by a trustee. No case could be dismissed. Failure to meet requirements would result in denial of discharge. Every debtor would receive a prompt limited discharge similar to ch. 7. Debtor may provide for secured debt by proposing a redemption plan. Plan could select among secured claims, by paying wholesale value plus 10% interest paid in not more than 36 mos. A superdischarge plan would be confirmed in the same way as a redemption plan. Scheme is intended to avoid a choice of chapters without removing options. By articulating standards, cases should be treated alike. If a plan is completed benefits will be maximized than that under current code. Recommends this alternative scheme to the BBC.
NBRC- 0104	Gary Klein	Staff Attorney; National Consumer Law Center, Inc.	Invited participants - April Meeting			Current system is moving towards predictability. Greatest threat to predictability would be radical overhaul of current system. Policy concerns and interests balanced in system require a system of some complexity. Single chapter proposal is impractical. Increase public confidence that system is being used effectively. Good remedies already exists under the code to prevent abusive filings.	NBRC should attempt to craft a relatively narrow agenda which takes account of the very high percentage of debtors who are in real financial distress. High volatility for individual consumers. An inevitable result of the expansion of consumer credit and the changes in the way it is granted. As a result, more consumers have problems repaying their debts. Please recognize these legitimate needs in identifying and resolving your consumer agenda.
NBRC- 0106	Randall J. Newsome	Bankruptcy Judge; Northern District of California	Invited Participant to September meeting, unable to attend.			Variability between districts on ch. 13 cases is not a problem. Consensus among judges exists and the system is working well. Basing a bankruptcy system on the Federal Sentencing Guidelines model would strip the equity out of the system, force judges to exercise their discretion through judicial subterfuge. Only other significant disparity has to do with exemptions. A proposal eliminating the opt-out from the exemption in section 522. Reducing complexity is also a largely non-existent problem. Overwhelming bulk of 7 and 13 cases are simple. Increasing predictability is by no means limited to consumer bankruptcy. Local bars represent consumer debtors and the lack of predictability is reduced because they are familiar with local practice. Bankruptcy is considered a necessary evil. No matter what the reform, always be a lender who lends too much and a creditor who spends too much.	BBC is a worthwhile attempt to foster public confidence in the system. It tries to do too much and ultimately fail in its purpose. Although the system is being abused, the largest abuse comes from frequent filers. Although many have legitimate reasons, many do so for obstruction and delay. Only way to control this problem is to do so at the gate. Re-filers (w/i 3 years) should have to pay a $350. filing fee and include a statement of changed circumstance in support of the filing. A third bankruptcy within 6 years would require a $700 filing fee, file the statement, and consent to participation and completion of a credit counseling program to be designed by the U.S. Trustee. No more than 3 bankruptcies in a 6 year period. Gatekeeper method is far simpler and needs more fine-tuning. More effective solution than the BBC.
NBRC- 0108	Leif M. Clark	Bankruptcy Judge; C.D. Texas			Uniformity around the country sounds good in theory but not in practice. In practice, it forces the system into a least common denominator. Flexibility and creativity are not the same as lack of predictability. In locales where the duty to handle ch. 13 confirmations is perceived as "drudge work" by the bench the task gets handed around to different judges, resulting in high levels of unpredictability within the community. Random assignment of ch. 13 cases is premised on a litigation model that does not translate well into an administrative-intense process like chapter 13.		Chapter 13 is more and adminsitrative and ADR model of dispute resolution and should be modeled on such a system to promote predictability.
NBRC- 0111	Lynn Maynard Gollin	Tew & Beasley; past President of the Bankruptcy Bar Association for the Southern District of Florida				Members of the Bankruptcy Bar Association for the Southern District of Florida feel that the NBRC should explore reform in the areas of Chapter 13 bankruptcies and consumer bankruptcies.	No proposal submitted.
NBRC- 0131	National Association of Bankruptcy Trustees	Invited Participants - Various meetings.				The concept of a consolidated chapter for consumer debtors, requiring those debtors who enter into some forced payment plan will not be effective. 1. Debtors may not have any income to repay their debts; 2. Debtors may be judgment proof (no assets) and would have not incentive to seek relief.; 3. Debtors would find a way to beat the system, by changing jobs, getting fired, or taking lower paying jobs during ch. 13 case; 4. Taking all of a debtor's disposable income condemns the debtor to a life at the poverty level which is not in the best public interest; 5. debtors would be encouraged to engage in extensive pre-bankruptcy planning including fraudulent conveyances and trusts in an effort to become judgment proof without filing for bankruptcy; 6. Forcing debtors to work would violate the thirteenth amendment; 7. the trustee would have little incentive to investigate the affairs of the debtor to uncover hidden assets or avoidable transfers. True liquidation value wuld seldom be determined; and 8. Debtors who do not want to be in chapter 13 are not likely to successfully complete a chapter 13 plan. Forcing debtors into a repayment plan would result in failed bankruptcies, which would leave both debtors and creditors with no relief. Debtors should ahve an option of paying off all or a portion of their debt, in order to avoid liquidation.	NABT encourages the NBRC to recommend changes in the current system which would further encourage debtors to seek relief under chapter 13, prevent the improper use of Ch. 7 and to adequately address the issues and concerns of creditors. However, the NABT hopes that ch. 7 and ch. 13 will be maintained as separate chapters, allowing for a variety of relief, depending on the facts of each case.
NBRC- 0116	Kenneth J. Doran	Law Offices of Kenneth J. Doran	Participated at Consumer Bankruptcy Working Group on July 19.			Prior to encouraging or requiring consumer debtors to undergo credit education, the NBRC should consider (i) Who will guide the content of the education; (ii) Cost of education will likely outwiegh benefit.	N/A
NBRC- 0150	Judge David S. Kennedy	Chief Bankruptcy Judge, Western District of Tennessee				Whether the bankruptcy system requires uniformity.	Total uniformity of bankruptcy practice and procedure will never be completely achieved due to variances in state real property laws and local traditions and customs. Not at all convinced that total uniformity is even a desired goal. Each state and debtor-creditors are obviously somewhat different. Impressed with the flexibility of the bankruptcy code that allows for fact specific treatment and relief. System, no matter how successful, will always be complained about, even by those who benefit from it. Fine-tuning a system that is otherwise working well is far more desireable that major overhaul.
NBRC- 0160	Judge George Brody	Bankruptcy Judge, Southern District of CA				Applauds recommendation to do away with the markedly different treatment accorded to debtors and creditors by chapter 7 and 13. Ch. 13 is based on a false premise, as it accords advantages not found in ch. 7. Ch. 13 is used for advantages and not for debt repayment. Substantial repayment plans are rare. No justification for permitting advantages of 13 without a corresponding subtantial repayment plan.	Consumer bankruptcy is generally an administrative process. Judge participation is minimal. To the extent bankruptcy relief is available to consumer debtors, such releif should be simple, expedient and inexpensive. Changes you propose would do away with the present disparate treatment of debtors and creditors in ch. 7 and ch. 13 would minimize a debtor's ability to manipulate the process and provide debtors and creditors with a more streamlined, cost-effective and predictable system.
NBRC- 0161	Raymond P. Bell, Jr.	Nationsbank Card Services, Recovery Department				"Oppose[s] Professor Warren's basic bankrutpcy concept." (Author does not provide any additional details.)	Opposes Professor Warren's basic bankruptcy concept
NBRC- 0162	Judge Ray Reynolds Graves	Bankruptcy Judge, Eastern District of Michigan		362		Idea that automatic stay will be limited to foreclosure actions in order to allow the retirement of a mortgage delinquency and not applicable to unsecured creditor actions leaves open the possibility and, indeed, the probability that debtor's counsel will request and ex parte TRO against all creditor action. Judges will be inundated with emergency requests to sign TRO's because the automatic stay will apply on a selective basis. Would invite chaos to have automatic stay apply selectively.	Leave the automatic stay provisions alone. If a debtor, in good faith, needs to meet with the mortgage lender and his accountant in order to restructure the mortgage, but is facing the possibility of additional post-petition lawsuits and default judgments from unsecured creditors, I for one, will invite and grant a TRO so that the debtor can have the opportunity to figure out what to do. Since 1979, section 362 has eliminated the need for this judicial activism. Why should we invite this chaos.
NBRC- 0162	Judge Ray Reynolds Graves	Bankruptcy Judge, Eastern District of Michigan				Who will be responsible for random audits of debtors It does not seem plausible that any new agency will be created to perform random audits, nor will the chapter 13 trustee and the US trustee be given additional resources to shoulder this responsibility. Abuses in the system can be ferreted out by creditors under Rule 2004. Once again creditors want to place the burden the ther gov't, which they, in their own self-interest should shoulder.	Ideally, the UST should and could already be performing random audits.
NBRC- 0162	Judge Ray Reynolds Graves	Bankruptcy Judge, Eastern District of Michigan				Consumer credit reporting agencies have become a powerful, unresponsive and insensitive bureaucratic nightmare.	There is absolutely no reason to believe that the credit reporting system will in any way change its practice of reporting, negatively, all bankruptcy filings on a consumer credit report. Even a statutory requirement that a separate report be filed.
NBRC- 0162	Judge Ray Reynolds Graves	Bankruptcy Judge, Eastern District of Michigan				Basic Bankruptcy takes on more than is required to address current consumer bakruptcy issues.	More attention should be spent on defining property of the estate post-petition and post-confirmation in ch. 13's. Also issues regarding special treatment to tax creditors in all chapters should be addressed as well as defining a reasonable time to cure mortgage arrearages. These simple changes might go a long way towards helping debtors and creditor, rather than a wholesale re-write of consumer bankruptcy.
NBRC- 0167	Judge Steven A. Felsenthal	Bankruptcy Judge; Northern District of Texas	Attachment on letter from Judge John C. Akard N.D. Tx Bankr.			Twenty years cannot provide a sufficent perspective to assess the Code. Emphasis on uniformity can lead to unworkable rigidity. Disparate treatment does not mean unfairness. Should not equate multiple filers with abuse. Legilsating certain manadtory results will eliminate equity from the bankruptcy system.	New legislation addressing current problems should not trigger bigger problems. Consumer debtors and theis creditors might be well-served by a statute authorizing venue within a fixed number of miles from the debtor's residence. Would address realities of modern life and improved transportation outgrowing federal district boundaries such as Dallas (N.D. Tex.) and Plano (E.D. Tex.).
NBRC- 0209	Gary Klein	National Consumer Law Center	Dec. 17, 1996 press release from the National Comsumer Law Center, entitled "Working Families Need Strong Bankruptcy Protections"			Author questions the validity of the "statistics" presented by Mr. Chimerine at the December '96 Commission meeting. The author concludes that the "statisitics" were misleading, self-serving and in some cases insupportable and without logical foundation. He requests that comsumer debtors be allowed a full opportunity to present testimony on substantive issues, and states that many of the Code's comsumer provisions are working poorly for debtors.	Author encourages the NBRC to set up a forum for unrebutted debtor testimony, and suggests that NBRC members spend a day in a bankruptcy courtroom to observe the winnowing process for less meritorious cases.
NBRC- 0210	Ike Shulman, on behalf of NACBA	President, National Association of Consumer Bankruptcy Attorneys (NACBA)	Press release from NACBA entitled "Bankruptcy Review Commission Provides Forum for Credit Industry Public Relations Campaign"			NACBA is "troubled that the December ['96] meeting of the Commission on consumer issues was so easily turned into a substantial public relations forum for the credit industry without any time for rebuttal by debtor advocates." NACBA is concerned that the Commission has "consistently scheduled many more consumer credit industry witnesses than representatives of debtors." They are also troubled to hear rumors of a "secret group, including Commission staff, which has been formed to rework the 'single chapter' proposal for the consumer working gorup [which] includes two of the most prominent credit industry lawyer/lobbyists [but] no comparable debtor representatives...."	NACBA requests that the NBRC set the schedule for the "promised opportunity for debtor advocates the address the Commission," and that time allotted be commensurate with that given to the credit industry.
NBRC- 0213	Ralph H. Kelley	Bankruptcy Judge (E.D. Tenn.)	Editorial dated Dec. 21, 1996, entitled "The Credit Card Crunch"			Author attaches an editorial dated December 21, 1996, from The Chattanooga Times, a paper owned by the New York Times, that echoes his sentiments of those of many of his colleagues. The editorial, entitled "The Credit Card Crunch," concludes that the abuse of credit "is a potential time bomb. Banks and credit card companies are right to be concerned [about increased concumer bankruptcy filings], but that concern obligates them to change policies that contribute to the problem." Such policies include the increased number of credit card solicitations, and profiting off of customers with poor credit by charging "risk based pricing" and "sub-prime lending" rates.	While chapters 7 and 13 may need minor changes, such as to exemption or reaffirmation provisions, it would appear that these chapters should be left substantially as they are.
NBRC- 0218	Avrum D. Lank	Reporter for the Milwaukee Journal Sentinel				Author's editorial in the Milwaukee Journal Sentinel, entitled "Credt Card Issuers' Views on Bankrutpcy Are Hypocritical," raises concerns about the credit card industry's motivation in encouraging the reduction of consumer bankruptcy filings. The author states, "Simply put, the industry has become an aggressive marketer with relaxed underwriting standards. Because profit margins are so high, the barriers to entry so low and the market so large, literally thousands of new credit cards have become available in the past few years. Inevitably, some of the issuers have granted credit to people who, in the past, would not have the chance of getting a card....These [credit card issuers] know they are taking on a higher risk of bankruptcy among their cutomers; it is part of their business plan. To compensate, they charge higher interest rates. For the industry then to turn around and cry because bankruptcies are rising is hypocritical."	Author states that the solution is "more responsible behavior among credit-card providers. Tighten standards so that the more risky cards are not issued. Require higher minimum payments. Restrict the number of cards available to one household. Don't allow cards to give cash advances at casinos and don't allow casinos to accept them."
NBRC- 0226	James Carter	Reporter, The Washington Times; former chief economist for the Republican National Committee, and former economist in the Office of Management and Budget and in the Congressional Budget Office				In his article published in the Washington Times entitled "Bankruptcy as the Last Resort," the author concludes that bankruptcy is increasingly becoming a first option, rather than a last resort as it was intented to be. He states that bankruptcy laws should give relief only to those who need it.	Author states that debtors with the ability to repay even a portion of their debts should be forced to do so. He recommends that the NBRC pay serious attention to loopholes in the Code that encourage debtors to file for bankruptcy and to use the bankruptcy system as a safe have for avoiding just debts.
NBRC- 0235	Kathleen A. McDonald	President, National Association of Chapter 13 Trustees (NACTT)				NACTT comments on Professor Warren's "Basic Bankruptcy Approach." They offer and discuss three basic criticims of this bankruptcy model: (1) the basic model does not reflect the suggestions of any segment of the professional community (who generally adhere to the maxim "If it ain't broke, don't fix it), but rather the suggestions of academicians who are not intimately involved with the bankruptcy process; (2) repayment bankruptcy is dependent upon a quid pro quo element missing in the basic model; and (3) the basic model strives for uniformity of outcome over uniformity of process, but parties should be entitled to uniform process.	"The NACTT encourages the Commission to follow the advice of most practitioners--to avoid the invitation of academicians who seek an impractical, untested system and instead focus on responding to all the needs of the existing system. The Commission should reject the Basic Model while still embracing its goals to strike toward a more uniform and predictable process."
NBRC- 0237	Ike Shulman	President, National Association of Consumer Bankruptcy Attorneys (NACBA)				NACBA views the Working Paper on the Basic Bankruptcy concept as dissappointing, misguided, and unsupportable. In particular, NACBA sees the Paper as misdirected because it envisions a complete restructuring of consumer debtor bankruptcy relief, contrary to the NBRC's mandate.	NABCA recommends rejection of the "Basic Bankruptcy" proposal, and suggests that consumer bankruptcy should not be overhauled but merely "fine-tuned," in order to promote the following goals: increased uniformity in treatment of cases; cost-effective, streamlined, predictability; simplified system not requiring complex legal advice; balance in system between creditors and debtors; limited access to bankruptcy relief and repeat filings; increased utilization of Chapter 13 on a voluntary basis; and preserved basic Chapter 7 protection as an alternative for consumer debtors. Additionally, the Government Working Group proposals that involve consumer-related issues should be jointly studied by the Consumer Working Group before the proposals are submitted to the full Commission. NACBA urges further study of: volume of filings, debtor motivation, reasons for electing one chapter over another, reasons certain regions of the country favor certain chapters, and Chapter 13 dismissals.
NBRC- 0238	Sharon Faughn Hermosillo	Attorney (represents Chapter 13 debtors)				"Basic Bankruptcy" proposal is vague and oversimplified. The automatic stay "speaks for itself and needs no other comment." The proposal demonstrates "harshness toward debtors that is not warranted and a misunderstanding of how creditors are benefitted by Chapter 13."	"Basic Bankruptcy" proposal should be rejected.
NBRC- 0239	Jerry L'Hommedieu	Bankruptcy Manager, Toyota Motor Credit Corporation				"Basic Bankruptcy" proposal does not adequately address concerns of abuse, complexity, expense and non-conformity. The consumer bankruptcy system should not be dramatically altered, as suggested in the proposal because consumer bankruptcy is generally working well.	Consumer bankruptcy should be only slightly modified, and not completely altered. "Basic Bankruptcy" proposal should be rejected in favor of a less drastic solution.
NBRC- 0241	Dean S. Cooper	Associate General Counsel, Freddie Mac				Freddie Mac supports the four basic goals of the Basic Bankruptcy Concept: consistentcy in case outcomes, cost-effectiveness and predictablility, simplification of the bankruptcy process, and restricting bankruptcy to those debtors legitmately in need of bankruptcy relief. Freddie Mac would be concerned about any changes to the bankruptcy process which result in an increase in the bankruptcy filings involving mortgages.	Freddie Mac generally supports the Basic Bankruptcy Concept.
NBRC- 0242	Wendell J. Sherk	Attorney				"Sytemic problems" identified in the Basic Bankruptcy proposal appear to be the same creditor cocerns that have been raised throughout history. Also, nothing in the proposal seriously addresses porcedures that could yield greater uniformity. In short, the proposal tries to cure technical concerns (e.g., lack of uniformity) with an unnecessarily drastic restructuring, in essence throwing the baby out with the bath water. The proposal tries to cure historic complaints (e.g., abuse, expense, and complexity) which can never be solved as long as bankruptcy exists as a debtor rahter than creditor remedy.	Basic Bankruptcy proposal suggests too drastic a restructuring of the bankruptcy system unless its intent is to make bankruptcy a creditor remedy instead of a debtor remedy.
NBRC- 0243	Kenneth J. Doran, on behalf of the Doran Law Offices	Attorney				Commissioner Warren's "Basic Bankruptcy" proposal would not really create a "single system." "De-linking" a debtor's options would actually create disparity, and the proposal does not "streamline" the system as it purports to do. Multiple filings should not occupy such a central role in the proposal because evidence does not suggest that such filings are rampant or not adequately addressed by the currect system. The proposed audits and education would burden debtors with expensive processes yielding small or uncertain benefits. Additionally, the notion of voluntary repayment is "economic nonsense."	Proposed "Basic Bankruptcy Concept" would produce a system that is on balance less beneficial to consumer debtors, without any clear need or justification for that course of action.
NBRC- 0244	David S. Kennedy	Chief Bankruptcy Judge (W.D. Tenn.)				Proposed "Basic Bankruptcy Concept" is disappointing, and goes far beyond the intended purpose and scope of the work of the Commission. The current system is not so inefficient or improper as to warrant such an "overhauling" or radical restructuring of the system.	"Basic Bankruptcy" concept is too drastic, and should be rejected in favor of a proposal that fine tunes instead of overhauls the bankruptcy system.
NBRC- 0261	Pam Catlin	CEO, Shefcu Credit Union				In her capacity as CEO of a small credit union, the author has observed that bankruptcy has increasingly become an easy way out for debtors. Less stigma is attached to filing for bankruptcy, and debtors are often able to reestablish credit soon after filing. Some debtors are just financially irresponsible and should not to entitled to this remedy that should be reserved for the most deserving of debtors. Another trend that is very frustrating for lenders is that creditors are not being encouraged to reconfirm any debt, or to choose chapter 13 over chapter 7.	In order to decrease the number of undeserving bankruptcy filings, a limit should be placed on the amount of credit card debt one person can accumulate. Also, in order to make bankruptcy less atractive, debtors who file for bankruptcy should have to face more severe consequences and should be forced to obtain financial counseling. Lastly, bankruptcy system should be revised to provide more incentive for debtors to pay back all or some of their debt.
NBRC- 0263	Heidi Heitkamp and other Attorney Generals belonging to the National Association of Attorneys General	Attorney General of North Dakota and Chief of the Bankruptcy and Taxation Working Group of the National Association of Attorneys General (NAAG); also Attorney Generals from AZ, AR, CA, CO, CT, DE, FL, HI, ID, MD, MA, MT, NE, NV, NH, NJ, NY, OH, OR, RI, SD, TN, TX, VT, WA, WI, WY				NAAG notes four areas of concern in the bankruptcy system: creditors should ne notified as soon as possible when their creditor rights are implicated; neither debtors nor creditors should be subject to onerous and strictly enforced procedural burdens that are not truly necessary; bankruptcy procedures are sometimes unnecessarily complicated and burdensome; involuntary creditors, such as government creditors, should be afforded special treatment in order to "protect the financial well-being of [the] citizenry."	NAAG suggests four fundamental principles that the NBRC should keep in mind when making recommendations: (1) because bankruptcy is a privilege given to the debtor, the debtor should bear a substantial burden of ensuring that creditors receive adequate notice of the existence of the case and its effect on creditors' rights; (2) only necessary and reasonable procedural requirements should be placed on creditors, and both debtors and creditors should be held to the same standard of compliance with their resepctive procedural requirements; (3) with the costs of bankruptcy ever increasing, procedures should be streamlined to reduce burdens on all participants in the case and let the parties "work smarter, not harder; and (4) bankruptcy should not be a basis for a debtor to avoid its obligations under laws applicable to all entities, nor should § 105 be viewed as providing a general authorization to the courts to overrule existing law on an ad hoc basis.
NBRC- 0279	Clifford H. Cline	Chapter 13 Debtor	Cover letter from Gerald K. Smith, enclosing Mr. Cline's correspondence and other documents relating to Mr. Cline's case			The author, a chapter 13 debtor, states that credit reporting agencies should not list an individual's chapter 13 bankruptcy case the same way as a chapter 7 case. The author asks why a debtor is "punished" for not filing under chapter 7 but paying creditors under chapter 13.	In order to encourage use of chapter 13 over chapter 7, and to avoid "punishing" debtors for choosing chapter 13, the Code should be amended so that chapter 13 and chapter 7 bankruptcy filings are listed differently by credit reporting agencies.
NBRC- 0284	David F. Bartone	President and CEO, Corning Federal Credit Union				Current bankrupcy laws have resulted in dramatic and continuing loan losses for the author's company. In the past three years, their total charge offs have risen from $342,286 to $974,505. Ninety-five of that increase was due to bankruptcy. Research has revealed that 80% of the loans were solid loans at the time they were granted, and that individuals were encouraged to file bankruptcy whether or not they had "real financial difficulty." Bankruptcy has simply become an easy way for individuals to avoid their financial obligations.	Bankruptcy system should be reformed so that bankruptcy does not continue to be the "easy way out."
NBRC- 0289	Ricki Helfer	Chairman, Federal Deposit Insurance Corporation				In his testimony before the Subcommittee on Financial Institutions and Regulatory Relief, Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the author provides an overview of the consumer credit market. He analyzes trends in delinquencies and charge-offs for home mortgages and credit card loans, addresses structural changes in the credit card market including personal bankruptcies and increased personal debt, and discusses the FDIC's supervisory initiatives to monitor consumer lending. Historically, consumer lending has been profitable for insured depository institutions. Dark spots on the banking industry's otherwise rosy picture, however, appear in the rise in personal bankruptcies, consumer debt, and rising losses in credit card lending. Full text of the author's testimony is provided.	FDIC does not believe there is cause for significant conern, but is closely monitoring the industry.
NBRC- 0290	Eugene A. Ludwig	Comptroller of the Treasury				In his testimony before the Subcommittee on Financial Institutions and Regulatory Relief, Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the author discusses recent trends in the commercial banking industry and consumer lending. He attributes increased loss rates and higher percentages of delinquent credit card and installment loans in part to the rise in consumer debt and trend toward less stigma associated with bankruptcy. Full text of the author's testimony is provided.	While there is no evidence of systemic consumer credit quality problems in the banking system at this time, the Treasury remains concerned about the trends in credit quality, particularly given the rise in consumer debt and bankruptcies.
NBRC- 0291	James Chessen, on behalf of the American Bankers Association	Chief Economist, American Bankers Association				In his testimony before the Subcommittee on Financial Institutions and Regulatory Relief, Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the author observes that: (1) Consumer credit balances have grown rapidly over the past three years due to a strong economy, the growing acceptance of credit cards as a means of payment, and a very healthy banking industry; (2) The ratio of consumer debt to income has risen over the past four years, and some individuals are finding it increasingly difficult to continue to meet their obligations; and (3) Rising consumer delinquencies are a concern for consumer lenders, but do not pose a serious threat to their financial condition. Full text of the author's testimony is provided.	The increase in consumer delinqunecies we have seen over the past six quarters raises a yellow caution flag, indicating that borrowers should think carefully before taking on new debt and lenders should exercise prudence in extending new credit.
NBRC- 0292	Edward Bankole	Vice President and Senior Analyst, Moody's Investors Service				In his testimony before the Subcommittee on Financial Institutions and Regulatory Relief, Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the author concludes that the average credit quality of the American consumer is weakening, as evidenced by rising rates of consumer bankruptcy filings, delinquencies, and losses in consumer loans. These trends are driven by banks and other lenders who have placed credit cards in the hands of a segment of consumers who have weaker ability to meet their growing obligations. Full text of the author's testimony is provided.	In light of these developments, the outlook for cnsumer credit quality is one of continued, but slower, deterioration through 1996 and into 1997 if the economy remains stable. But weakening consumer credit quality is not expected to have a debilitating impact on the strength of U.S. banks.
NBRC- 0293	Dr. Donald Ratajczak	Director, Economic Forecasting Center, Georgia State University				In his testimony before the Subcommittee on Financial Institutions and Regulatory Relief, Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the author states that he sees fewer concerns than many about the growth of consumer debt as a percentage of personal income. Consumer debt impacts a wide range of consumer and banking issues, producing both strengths and weaknesses in the economy. The stigma of bankruptcy is decreasing, and the Bankruptcy Code actually encourages risk taking in real estate holdings. By transfering ownership to relatives, debtors are often allowed to maintain living standards even as creditors experience reduced recovery from accounts under stress. Full text of the author's testimony is provided.	Concerns about rising debt ratios and signs of growing financial stress by a segment of the household sector are justified. However, household net worth has been growing rapidly, indicating consumer spending, while it slows from above the trend rates of growth that remain healthy. Also, financial institutions may not profit as much from their consumer accounts next year as they have so far this year, but they have sufficient capital to weather deterioration in the performance of their consumer loans.
NBRC- 0297	John Dolan-Heitlinger	President and CEO, Keys Federal Credit Union				Since 1994, the author's company has experienced unprecedented losses from individuals filing bankruptcy under chapter 7. As a result, this company has been forced to use its capital reserves to cover these losses. Some of these debtors actually have incomes that would allow them to pay off at least a portion of their debts.	Bankruptcy system should be revised to make declaring bankruptcy more difficult, not easier. Whenever possible, debtors should have to pay off at least some portion of their debts.
NBRC- 0303	Commercial Law League of America	Commercial Law League of America (CLLA)				The Commerical Law League of America believes that the following issue should be considered by the NBRC: what is the goal of consumer bankruptcy	The CLLA believes that this issue should receive moderate priority because it is likely that the answer to the question of consumer bankruptcy's goal would bear a striking resemblance to the goals that now exist for consumer bankruptcy. Therefore, little or no resources need to be invested in this issue.
NBRC- 0342	Stephen Tsai	Attorney				The author encloses a copy of an article he wrote on bankruptcy reform which appeared in the New Jersey Law Journal. The article, entitled "Repairs for a Broken System," concludes that the bankruptcy suffers from abusive filings and that creates the perception that debtors unfairly keep most of their assets and proceed with their lives in well-to-do or even luxurious fashion without contributing anything to their creditors.	The Bankruptcy Code should be amended to discourage abusive and unnecessary filings, and to limit the availability of the automatic stay in order to force debtors to approach bankruptcy more seriously. Suggested amendments are provided and discussed.
NBRC- 0343	Joseph A. Chrystler	Standing Chapter 12 and Chapter 13 Trustee, Western District of Michigan				The author states that the bankruptcy system is based on a level of "misguided greed" from both debtors and creditors. He attaches a copy of a letter he recently sent to nineteen creditors in a chapter 13 case, describing the details of the case and admonishing the creditors for "not doing their homework" before issuing credit cards. The author considers this case, in which two elderly creditors have over $150,000 in credit card debt, to be the most flagrant credit card abuse he has ever seen.	When issuing credit cards, creditors need to be more careful about the financial suitability of debtors.
NBRC- 0358	Sandra Ward	Reporter, Barron's Financial Weekly				In her article entitled "Bailing Out: Bankruptcy, Once a Disgrace, Has Become As American as the Fourth," the author attributes rising bankruptcy rates to "easy money"--in short, the proliferation of credit cards. Some experts, she reports, also attribute the rise to "an attitude of entitlement."	None.
NBRC- 0359	Jane Bryant Quinn	Reporter, Newsweek				In her article entitled "The Check is in the Mail," the author assets that "There's no credit crisis. Most Americans don't let their consumer debt get out of hand." She states that surges in credit card balances are attribuatble to holiday purchases, and that balances often ebb and flow in this manner. Credit card issuers do, however, often issue cards to "marginal borrowers," which leads to higher delinquency rates. She reports that the most critical factors in bankruptcy fluctuations appear to be state and local public policy choices.	None.
NBRC- 0361	Drusilla Strobel					The author states that that many debtors who declare bankruptcy under chapter 7 earn $50,000 to $100,000 a year and could afford to pay at least some of their debts back. Instead, they file under chapter 7, and the avereage bill paying person ends up paying higher prices to cover the losses resulting from these bankruptcies.	Bankruptcy Code should be amended to permit only those debtors with "extenuating circumstances," such as permanently disability or illness than prevents the debtor from ever working again, to file under chapter 7. Otherwise, the debtor should only be permitted to file under chapter 13.
NBRC- 0362	John Schmeltzer	Chicago Tribune Staff Writer				In this article entitled "Credit Easy; Bankruptcy Easy; Lessons Come Harder," the author writes that "bankruptcy is becoming the solution of first resort for Americans faced with piles of debt." Moreover, American debtors face few consequences, if any. He attributes this change to decreasing stigma about bankruptcy, increased credit availability, and the 1978 amendments to the exemption provisions of the Bankruptcy Code.	None.
NBRC- 0364	Bruce Felton	Reporter, "Minding Your Business" column, The New York Times				In this article entitled "Going Bankrupt: The Scarlet 'B' or the Great Escape," the author answers a reader's questions about whether decalring bankruptcy is a practical solution. He observes that "The Chapter 7 filing process is not as onerous as you might expect," and that the toughest part of bankruptcy may be the sense of shame and failure it often brings.	The author concludes that for many people declaring personal bankruptcy is an effective way to escape situations they cannot control.
NBRC- 0373	National Consumer Law Center Inc.	National Consumer Law Center Inc. ("NCLC")				The NCLC believes that a significant majority of debtors are having real financial problems and need help. Famalies across the country are facing economic pressures, and they need a fair opportunity to get an effective fresh start. The fresh start is the cornerstone of bankruptcy, and trends which have undermined its effectiveness should be reversed.	Bankruptcy Code should be amended to reverse those trends which are eroding the fresh start: (1) discharge exceptions should be limited; (2) reaffirmations should be eliminated or at least restricted; (3) groundless dischargeability challenges should be controlled; (4) protections against post-bankruptcy discrimination should be clarified and strengthened; and (5) effective exemptions are necessary in states which opt out of the federal scheme.
NBRC- 0376	David S. Kennedy	Chief Bankruptcy Judge (W.D. Tenn.)	Copy of an article from the ABI Journal entitled "Dual Bankruptcy System Can Only Hurt Consumer Debtors"