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Web posted and Copyright © 1/12/98, American Bankruptcy Institute.

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: Consumer Credit Counseling
Problem ReferencedProposed Solutions
Steven D. GoldsteinPresident, Credit Department, Sears Roebuck & Co.Heard Brady speak at National Retail Fed'n Credit Mangmnt Advisory Council342(b)329(a), 341(d)As a result of advertising blitzes in the media, consumers are bombarded with advertising promoting bankruptcy as a panacea for financial problems, but are provided little or no help regarding viable alternatives.Amend section 342(b) to require that the clerk of the court, in addition to providing the debtor with information regarding the alternative chapters under which the individual is eligible to proceed, must provide the debtor with notice of the availability of consumer credit counseling service available within the court's jurisdiction and an explanation that the service provides a low-cost alternative to bankruptcy filing prior to the date of any filing. Amend section 329(a) to require the debtor's attorney to file an affirmation to the court that the attorney provided the debtor with notice of the availability of consumer credit counseling. Amend section 341(d) to require the trustee to advise the debtor of the availability of consumer credit counseling as an alternative to proceeding with the case and to verify that debtor received notification of the above.
Kenneth L. RobinsonPresident; National Ass'n of Federal Credit Unions

Lack of consumer credit education leads to many bankrutpcies.Incentives should be established to encourage debtors to seek consumer credit counseling. Proposed incentives could be faster deletion of bankruptcy from credit record.
Steven D. GoldsteinPresident, Credit - Sears, Roebuck and Co.; also on behalf of other National Retail Federation members
342(b), 329(a), 341(d)
Debtors are often unaware of the alternatives to bankruptcy.Amend § 342(b) to require that the clerk of the court, in addition to providing the debtor with information regarding the alternative chapters under which the individual is eligible to proceed, must provide the debtor with notice of the availability of consumer credit counseling services within the court's jurisdiction and an explanation that the service provides a low-cost alternative to bankruptcy filing prior to the date of any filing. Also, amend § 329(a) to require the debtor's attorney to file an affirmation that the debtor was advised about the availability of consumer credit counseling services, and amend § 341(d) to require the trustee to advise the debtor of the availability of consumer credit counseling as an alternative to proceeding with the case.
Steven D. GoldsteinPresident, Credit - Sears, Roebuck and Co.; also on behalf of other National Retail Federation members
Some courts have increasingly abbreviated the time between the proposal of a plan at a § 341 hearing and subsequent confirmation of the plan, leaving little time for creditors to evaluate the plan and protect their interests before their rights are "cut off improvidently by impetuous action by the court."Amend § 1325(a) to require a minimum 10-day period between the first § 341(a) meeting and the date of confirmation of the plan.
Brian L. Mc DonnellPresident, Navy Federal Credit Union
Bankruptcy is increasingly being perceived as an "easy way out" for debtors seeking to avoid responsibility for their actions. In addition, many people no longer consider bankruptcy to be a financial stigma. It is imperative that bankruptcy procedures be revised to discourage financial irresponsibility in today's highly leveraged personal economic environment.Amend § 521 to require debtors who have not completed a personal financial management course in the previous 180 days to complete appropriate financial counseling and training within 45 days after filing a petition, without which the petition will be automatically dismissed.
Commercial Law League of AmericaCommercial Law League of America (CLLA)

The Commerical Law League of America believes that the following issue should be considered by the NBRC: Should more be done to provide consumer counseling alternatives to bankruptcy Should consumer education become part of the bankruptcy process Who should perform this functionThe CLLA believes that these issues should receive top priority (no additional details are provided).
Robert M. Zinman, on behalf of the Bankruptcy InstituteAmerican Bankruptcy Institute ("ABI")Numerous position papers, memoranda and research material

Consumer credit counseling is beneficial, but it is not available to debtors in many regions. Consumer education also provides many benefits, and should be provided by a neutral government agency such as the Office of the United States Trustee.The practice of consumer credit counseling "needs to be specifically authorized by statute or it may be discontinued by the United States Trustee program." In addition, the Trustee program should offer consumer education. If the United States Trustee system is going to be funded in part by fees from each chapter 13 case, which totals millions of dollars each year, "perhaps a portion of the fund could be used to provide consumer [education]."
Karen GrossProfessor, New York Law School

The author provides this "Preliminary Proposal" on debtor education, in which she discusses issues relating to the possible organization and funding of debtor education programs. She concludes that we are wasting an opportunity to provide a true "fresh start" if we do not eduate debtors as part of the bankruptcy process. An in-depth discussion of these issues is provided.The author recommends that a volunteer pilot program be established in select regions of the country that would be available to chapter 7 debtors, while permitting chapter 13 trustees with education programs in effect to continue the same.
Professor Karen GrossProfessor of Law, New York Law School

Educating consumers about finance/credit/saving/budgeting/money management/buying and spending habits.Preliminary Proposal on Debtor Education Program Options
Earl F. LeitessAttorney, on behalf of National Credit Counseling Services, Inc. (NCC)

Author presents, on behalf of NCC, a "Proposal to the National Bankruptcy Review Commission for the Education and Counseling of Consumer Debtors"."NCC therefore, believing very strongly in its own mission, recommends for consideration by the Commission adoption of the enclosed proposal making education and counseling, by statute, part of the bankruptcy process for consumers."
Jennie Deden Behles Attorney

10 Author raises a number of questions about the proposal for Debtor Education: Who will pay Why is it necessary Uniformity of content and teacher competency Her biggest concern seems to be that it will be coming to late. "We need to do something to stop the first bankruptcy, not the second." Author is also not certain that education is the real answer. Author suggests that education needs to be done in the high schools, colleges, or require creditor grantors to educate when initial substantial credit is given. Author suggests that a survey of debtors be done to determine what they think about this situation, what they think they need. "We seem to be asking everybody but the person that everyone considers the source of the problem."
Phil G. Davis, IINationsBank Card Services

Author writes to explain work of NationsBank's Customer Advocacy Group, which is designed to deucate customers on how to effectively manage their budgets and to provide self-help and dignity to assist them getting through their financial hardship without filing for bankruptcy."We appreciate the hard work of the Bankruptcy Review Commission and ask for your support in ensuring that bankruptcy is the last alternative and not the first option."
Edward M. MoldtPrivate citizen

Author's son filed for bankruptcy on advice of friends and a bankruptcy attorney. Author worked with his son to sell some assets which was enough to satisfy the debt, all debts were paid, and the bankruptcy case was withdrawn. Author is upset that no counseling was provided, and that, even though the case was withdrawn and all debts paid, his son still has a notation on his credit report that a bankruptcy was filed.Provide counseling to debtors as to options to bankruptcy, and a way to clear credit report when bankruptcy filing is withdrawn and creditors paid in full.
William R. MapotherAttorneyChart of Mapother's Comments on Draft #1 Proposals; Memorandum on Draft #1 of Consumer Bankruptcy Working Group by author.

"In my judgment, the principal and root cause of bankruptcy is financial ignorance.""If I am correct, why doesn't the Commission develop a screening procedure that would steer the most rehabilitatible consumers away from the bankruptcy process Why doesn't the Commission recommend financial disincentives for debtors' lawyers who willy-nilly file bankruptcy petitions rather than recommend debt counseling by agencies such as CCCS Why doesn't the Commission require counseling as part of the bankruptcy process"
Kenneth L. RobinsonPresident, National Association of Federal Credit Unions (NAFCU)

NAFCU is concerned by "the lack of financial management skills apparent in those who file for bankruptcy."Debtor education should be mandatory.
William Mark BonneyStanding Chapter 13 Trustee, Eastern District of Oklahoma

10Author is in favor of debtor rehabilitation, but does not want to be responsible for providing the education. "I would hope that the process would allow me to contract out that service to an organizaation that is much more qualified to administer it."
James H. CossittAttorney

Author agrees that consumer education is needed and laudable, but questions whether the legal system is the correct mechanism for providing it.
Jeff OlsonCollection manager, US Federal Credit Union

Author sees more bankruptcies caused by budgeting problems than those of the catastrophic event type. Education is the key to rehabilitation. "Simply given "an opportunity to participate" is not enough."Author feels that debtor education must be mandatory, perhaps making discharge contingent upon the debtor's successful completion of a financial education program.
Jo WhiteLaw Clerk to Judge John C. Akard, U.S. Bankruptcy Court, Northern Distric of Texas

Author feels debtor education "would be both admirable and advantageous to debtors and creditors alike."
Edith H. Jones Bankruptcy Judge

"While we all support the concept of providing debtor education, it is not necessary to create federal debtor education.""...Chapter 13 trustees' education programs should certainly be allowed to continue, and we should do nothing to discourage the growing and apparently effective private business of credit counseling."
Thomas C. LeducDirector of Regulatory Issues, Michigan Credit Union League

"Consumers all to frequently find themselves in impossible situations based at leastin part on a lack of fundamental budgeting skills." In order for consumer education to be meaningful it must be mandatory."The Task Force recommends that prior to receiving a discharge in a Chapter 7 or a Chapter 13, the debtor be required to attend a formal educational program on basic budgeting, and to demonstrate his proficiency in this area by passing some sort of test." "As an incentive for the debtor to pursue a discharge under Chapter 13 rather than Chapter 7, the duration of this educational program could be longer under Chapter 7 than under Chapter 13."
William D. KirkwoodAccounts Control Supervisor, Simpson Community Federal Credit Union

Author finds that many of their members filing for bankruptcy have never had a late payment with them. He fears they may be using bankruptcy for a "head start" rather then a fresh start. Author feels that many of these people could be helped to find a way to solve their financial problems before they file for bankruptcy, as his credit union has helped many in this way. Also, many could affro to pay some, if not all, of their debt in Chapter 13 if they had counseling, rather than using Chapter 7.All debtors should be required to have financial counseling prior to filing for bankruptcy.
Bart DeCampVP-Lending, School Employees Credit Union Clark County

Author feels misinformation is leading to bankruptcy filings. "Attorneys are not explaining alternatives to debtors and push bankruptcy as quick and painless. The mass marketing of bankruptcy attorneys further tilts the scales. This credit union prides itself in taking time to work through problems with our members. Unfortunately, we seldom get the opportunity."No specific solution proposed.
Ed McKeeSenior Loan Officer/Vice President, Whatcom Education Credit Union

The credit union provides counseling to its members and believes it is very important."We believe that counseling should be mandatory and that bankruptcy attorneys should be required to do this prior to a bankruptcy filing and to provide proper disclosures about bankruptcy and what it really means and how the debtor will affected [sic] by it."
Margie EdwardsCollection Manager, Cowlitz Public Employees Credit Union

"If debtors were advised that there are more options to financial recovery other than bankruptcy, cases filed would decrease dramatically.""It is important for all debtors to have financial counseling prior to filing bankruptcy." "Credit Unions should be providing this service for members not bankruptcy attorneys."
Steven R. WilderSenior Vice President, Lending, Horizon Credit Union

"After many years of counseling not only our own members, but many other people as a certified financial counselor with our local Consumer Credit Counseling Service, I have found that counseling can only be effective if the counselor and the counseled are there voluntarily.""We support [the NBRC proposal that debtors be offered counseling and education in order to encourage realistic budgeting skills], however, it is unlikely that mandatory financial counseling will be effective at reducing insolvency."
Jill M. SturtevantAssistant General Counsel, Bank of America

"Bank of America strongly supports mandatory debtor education as a condition of receiving discharge."
Richard T. Wargo, Jr., Esq.Director, Compliance & Information, Pennsylvania Credit Union League & Pacul Services, Inc.

"All Chapter 7 and 13 debtors should complete education programs as a prerequisite to filing bankruptcy. Any effective program must stress personal responsibility and budgeting. Such programs should also encourage saving."
Paula E. LangguthAuthor, Bounce Back From Bankruptcy, Pellingham Casper Communications, LLC.

Author heartily agrees with the proposal to make debtor education available to all who seek bankruptcy protection."I would add completion of the debtor education program as something that could be favorably listed on the credit reports of Chapter 7 debtors, as well as Chapter 13 debtors."
James KirkChairman, Michigan Credit Union League Bankruptcy Task Force

"...we firmly believe that the best way to reduce bankruptcy filings is consumer education.""...we believe the Bankruptcy Code must require debtors to complete a basic budgeting educational program before obtaining a discharge."
Jeff SheetsConsumer Credit Counseling Service

Author writes on own behalf and not CCCS, but feels that CCCS might be of help in bankruptcy situations because they could advise clients who could not be helped by their Debt Management Program about which type of bankruptcy would be most beneficial to them. Author feels that attorneys do not do this because Chapter 7 is "cleaner" and does not require as much paperwork as Chapter 13.See above.
Joe LeeChief Judge, U.S. Bankruptcy Court, Eastern District of KentuckyCopy of article "The Counseling of Debtors in Bankruptcy Proceedings", by Hon. Joe Lee.

"I have long been an advocate of counseling for debtors, particularly those in chapter 13, but we have not had much success in sustaining experimental programs of this nature." "Debtors need counseling and reference to community services with respect to a panaply of problems that are not really financial in nature but appear so merely because debtors have borrowed money in an attempt to alleviate or deal with such problems.""In my view, if counseling is to be provided, it should be contracted out to bona fide social work agencies and not restricted to financial education programs."
Robin L. LambAuthor writes on behalf of the Board of Directors, Staff and Credit Committee of Allsteel Employees' Credit Union.

"Through combined education from both the bankruptcy court and financial institutions maybe fewer debtors would file.""Education for debtors should be mandatory prior to the petition stage."
Eugene R. WedoffU.S. Bankruptcy Judge, Northern District of Illinois

Author approves the voluntary debtor education program and feels it will be seen as a benefit of bankruptcy and not a punishment, a perception which can be enhanced by making sure there is no additional cost to the debtor for the program.Do not charge debtors for the debtor education program. Also, limit judicial power to compel debtor education.
Norma HammesPresident, National Association of Consumer Bankruptcy Attorneys

"Debtors are universally humiliated and traumatized by filing bankruptcy, and to require them to submit to the further humiliation of attending "debtor's school" like "traffic school" is unjustifiable. On the other hand, many debtors will avail themselves of a budget counseling service as long as it is voluntary.""Debtor education should be voluntary rather than mandatory."
Toby L. RosenStanding Chapter 13 Trustee

This appears to be a written copy of a presentation to the Commission by the author on the topic of debtor education.Author proposes that for a debtor education program to be effective, one must know the debtor and address his problems. He then presents a method of educating the debtor within the framework of the bankruptcy process, as well as through a formal education component.
C. Michael StilsonBankruptcy Judge, Northern District of Alabama, Western Division

11Author feels that the "substantial" changes proposed to the Bankruptcy Code are not necessary, and that remedies already exist for most of the problems addresed by the Consumer Bankruptcy Working Group. Author addresses each proposal of the Working Group. With regard to debtor education, author notes that "[t]here are several very good debtor educaton prpograms currently in existence in Chapter 13 trustees' offices. An economical debtor education plan could be developed from these existing plans. Authorizing judges to require participation on a case-by-case basis would be helpful."
Kay L. CampbellCompliance Officer, McDonnell Douglas West Federal Credit Union

"To assume that consumers that find themselves in this situation [bankruptcy] is due strictly to not understanding how to handle their finances, would be an over simplification of the problem. There are other factors that need to be addressed if habits are to be changed." "Counseling could be a viable option since Consumer spending habits are often driven by psychological or emotional issues."Debtors should be required to attend "some sort of education program and/or counseling before filing bankruptcy."
Bruce MalloryVice President of Financial Services, SELCO Credit Union

Many debtors can avoid bankruptcy if they receive financial counseling prior to filing. The optionality of the proposed financial education program reduces it to a meaningless suggestion."I would recommend to the Commission that a mandatory screening procedure be implemented in order to rescue rehabilitatible consumers from bankruptcy. The Commission might recommend financial disincentives for debtors' lawyers who indifferently file bankruptcy petitions without recommending debt counselings."
Richard T. WargoCompliance and Information, Pennsylvania Credit Union League & Pacul Services, Inc.

Debtor education should be mandatory. "The curriculum could address the debtor's right and opportunity for a fresh start. The curriculum should also stress thrift and the responsible use of credit."
Timothy A. De BothCollections Manager for Community First Credit Union (CFCU)

Author wonders who is teaching people life management skills. Making debtor education optional makes it worthless. "The Commission should work more to balance bankruptcy between the debtors and creditors."A balance between debtors and creditors "could be better addressed if you [the Commission] would stick to education, rehabilitation, and repayment under Chapter 13."
Darren W. HurstCollection Officer, Salt Creek Valley Bank

Debtors do not know how to manage their money.Educate debtors in how to deal with money.
Karen Gross et al. Professor of Law, New York Law School (this is a form letter with no return address) 15 copies of the second page of the letter with different counter-signatures.

Author sends a form letter which she has signed which also has a second signature line which has been signed by different people. She sends a copy of each second page with the different signature. The letter seeks to emphasize the importance of post-filing debtor education. Author emphasizes three aspects of such a program: 1) implementation of such a program is a worthwhile goal; 2) such a program can best be achieved by taking all viewpoints into account; 3) a pilot program should first be established. "...we encourage the Commission to include these three points in its final report..."
Edward J. Flynncitizen

Author questions the practices of credit reporting agencies with regard to bankruptcy filing information.None
Grady Cash Center for Financial Well-Being

"One of the major obstacles to address in bankruptcy is motivating the consumer to change spending behaviors before finances get out of control." Author gives information about the Center for Financial Well-Being which provides workshops which integrate modified adult behavioral techniques within financial education workshops. Use author's training program to motivate consumers before financial problems occur.
Barbara J. SellersBankruptcy Judge, Southern District of Ohio, Eastern Division

"...the problem with the prepetition credit counseling mentioned in the proposal is taht these programs genereally lack the power or authority to stop the accrual of interest on unsecured debt. This limitation causes many debtors to emerge from these programs in worse financial condition than when they began.""That directive [concering perpetition credit counseling] needs to be very clearly thought through before it should be required."


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