American Bankruptcy Institute
Join Renew Refer a Colleague Partners Search ABI Store Contact Us Site Map
 
American Bankruptcy Institute
 
About ABIABI MembershipMeetings & EventsOnline ResourcesPublicationsNews RoomConsumer Bankruptcy Center
Bankruptcy Statistics
 
Bankruptcy Reports, Research and Testimony
 
Bankruptcy-Related Organizations
 
National Bankruptcy Review Commission Archive
   
Submission Abstract
   
Working Group Proposals
   
Meeting Agendas
   
ABI Testimony
   
Meeting Minutes
 
Bankruptcy Visuals
 
Bankruptcy Research Database
             
 Print this page
 
 
News Room

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: Property of the Estate
IDNameGroupOtherCode
Sec
Cross
Ref
Problem ReferencedProposed Solutions
NBRC-
0098
Polly S. HigdonBankruptcy Judge; District of OregonInvited Participant to Consumer group - Santa Fe meeting.1325(a)(4)1325(a)(6) & 1325(b)The schedules and the SOFA often contain inaccurate information. If the information is inaccurate, the case cannot proceed as the Code contemplates. e.g., if the assets and their values are not accurate, the requirements of section 1325(a)(4) are affected. If the income and expenses are not accurate, the requirements of sections 1325(a)(6) and 1325(b) are affected. If the liabilities are not accurate, section 109 could be implicated. Creditors are usually not in a position to question the accuracy of this information.In OR, we have been so concerned with this problem, have discussed with the trustees the possibility of initiating a district-wide random "audit" process for individual cases. Due to lack of staffing, the trustees have not been in a position to commence such a program. Of course, the court does not have the means to check these documents.
NBRC-
0101
Ike SchulmanPresident; National Association of Consumer Bankruptcy AttorneysInvited Participant to numerous NBRC meetings.

Some courts treat rent-to-own contracts as installment purchase contracts and such claims are dealt with in the ch. 13 plan. Other courts treat rent-to-own contracts as executory contracts. In those courts, the rent to own contract cannot be paid as partially secured through the ch. 13 plan.Usually rent-to-own contracts are entered into only by the least sophisticated debtors who end up paying up to ten times the purchase value of the item. If a debtor files ch. 13 while in a rent-to-own contract in a jurisdiction where the contract is treated as executory, must divert a disproportionate amount of income in order to make those contract payments rather than having those funds available to be shared among all creditors in his plan. In such cases, the rent-to-own creditor is guaranteed 100% payment of its largely unsecured claim at the expense of the other unsecured creditors.NACBA recommends that the bankruptcy code be amended to clarify that rent-to-own contracts are to be treated as installment purchase contracts.
NBRC-
0110
Peter H. ArkisonLaw Offices of Peter H. ArkisonMade oral presentation to the NBRC on November 1, 1995363704The provisions of §§ 363 and 704 are inconsistent.Allow the Chapter 7 Trustee to use property of the estate (i.e. to pay expenses such as insurance costs and sell estate property) without notice to creditors or judicial approval.
NBRC-
0118
Clarine Nardi RiddleNational Multi Housing Council
362541
Amend section 362(a), or create a new section 362(b)(7) to except eviction, summary processes, or unlawful detainer proceedings involving residential real estate.
NBRC-
0120
Judith ElstonChrysler Financial Services, Toyota Motor Credit Company, Ford Motor Credit Company, General Motors, and American Financial Services Association
521
Debtors either do not file or do not perform statements of intent with respect to estate property.The Code should be amended to provide an incentive for filing the statement of intent and performing the stated intent within the required amount of time. The Code should also be amended to provide that that debtors who do not execute reaffirmation agreements shall not be allowed to keep their vehicle or make payments.
NBRC-
0132
Steven D. GoldsteinPresident, Credit Department, Sears Roebuck & Co.Heard Brady speak at National Retail Fed'n Credit Mangmnt Advisory Council

Federal courts vary from circuit to circuit and even within districts as to the standard to be applied in valuing the assets of the bankruptcy estate.Adopt replacement value, to be defined as the cost of securing closely comparable substitute merchandise and services, as the valuation standard in all chapter 7 and chapter 13 cases. The proposed amendment, in addition to providing a certain and readily demonstrable guideline, represents the most realistic approximation of the real-world cost of acquiring an asset.
NBRC-
0120
Judith ElstonChrysler Financial Services, Toyota Motor Credit Company, Ford Motor Credit Company, General Motors, and American Financial Services
1301541§ 1301 provides protection to non-filing co-signers even after the debtor has eliminated her own obligation to the creditor.Modify § 1301 to lift the co-debtor stay upon confirmation of the plan in those situations in which the debtor proposes to "surrender" or "abandon" her interst in collateral. Conversely, maintain the co-debtor stay until the case is discharged when the debtor maintains possession of the collateral or proposes a satisfactory payment plan.
NBRC-
0132
Steven D. GoldsteinPresident, Credit Department, Sears Roebuck & Co.Heard Brady speak at National Retail Fed'n Credit Mangmnt Advisory Council521(1)
With the growing number of filings, consumers using different variations of the same name on different accounts, name changes in connection with marriage or divorce, frequent changes of address in our mobile society, many debtors holding multiple accounts with a single creditor, the inclusion of millions of files of large regional and nationwide credit grantors, the failure of many account holders to provide social security numbers, the growing number of state privacy sanctions prohibiting creditors from asking consumers for social security numbers and the increasingly punitive sanctions imposed on creditors which may inadvertantly contact a debtor in technical violation of the automatic stay about an account not listed or incorrectly identified on the schedules.The proposed amendment would ease an unintended burden on creditors, promote efficiency and reduce the risk of sanctions. Amend section 521(1) to require account numbers on all schedules filed by the debtor.
NBRC-
0132
Steven D. GoldsteinPresident, Credit Department, Sears Roebuck & Co.Heard Brady speak at National Retail Fed'n Credit Mangmnt Advisory Council13251330Current policy goals underlying chapter 13 of the bankruptcy code should permit modification of a plan and reconsideration of its funding in cases where actual income substantially exceeds the amount originally projected.Amend sections 1325 or 1330 to subject all actual disposable income, not just projected disposable income, to the repayment plan and permit unsecured creditors to move for the reopening of a case and a court mandated modification of the plan in the event of the debtor's financial position is substantially changed or actual disposable income does not correspond to the amount projected as part of the plan.
NBRC-
0132
Steven D. GoldsteinPresident, Credit Department, Sears Roebuck & Co.Heard Brady speak at National Retail Fed'n Credit Mangmnt Advisory Council1325(a)
Courts in districts with high caseloads have increasingly abbreviated time between the first 341 meeting and the confirmation of the plan. In some cases, confirmation literally occurrs in a matter of hours.Amend section 1325(a) to require a minimum 10-day period between the first 341(a) meeting and the date of confirmation of the plan.
NBRC-
0120
Judith ElstonChrysler Financial Services, Toyota Motor Credit Company, Ford Motor Credit Company, General Motors, and American Financial Services
3651322The Code does not address personal property leases with enough detail.§ 365 or the Bankruptcy Rules should be amended to authorize the presentation of an assumption agreement with an attached order in an uncontested scenario, which would provide for the debtor's assumption of the lease with the concurrence of the trustee without the necessity of a motion and hearing if the debtor is represented by counsel. The word "promptly" should be changed to say that the cure must be paid on or before the first payment to the creditor. In a Chapter 13 case, a lease should be assumed or rejected by a certain date.
NBRC-
0122
Kent W. ColtonNational Association of Home Builders
362541Housing providers bear the brunt of frivolous bankruptcy filings.Amend § 362 (a)(3) to exempt "possession of a residence by a tenant under a rental agreement;" OR add § 362(b)(17) to exempt "possession of a residence by a tenant under a rental agreement" from the definition of "property of the estate."
NBRC-
0123
Henry J. SommerNational Bankruptcy ConferenceSubmitted report entitled "Reforming the Bankruptcy Code"547
Case law varies sharply regarding whether wages garnished within 90 days prepetition may be recovered under § 547.Clarify that garnishment of monies earned by debtor during 90 days prepetition should be subject to preference recovery notwithstanding any nonbankruptcy law that would divest the debtor of an interest in property at an earlier point in time.
NBRC-
0123
Henry J. SommerNational Bankruptcy ConferenceSubmitted report entitled "Reforming the Bankruptcy Code"

The area of consumer rent-to-own contracts is rife with litigation and should be clarified.Treat consumer "rent-to-own" contracts as credit sales for all purposes in bankruptcy.
NBRC-
0152
Kenneth L. RobinsonPresident; National Ass'n of Federal Credit Unions
341
Problem of creditors who fail to receive info about debtor's estate prior to section 341 meeting. Frustration often results when a trustee refuses to share info about debtor's debt, etc. Due to lack of knowledge prior to meeting, meeting is often of little or no use to the creditor.Code should be amended to ensure that creditors receive schedules prior to 341 meeting. By requiring court to search an established database of creditors and sending out schedules within 5 days of the filing, creditors can receive essential info in a timely manner and the overall effectiveness of the meeting will be enhanced. Debtor should also be required to file statement of intent detailing what is to be done with secured property within 10 days of the filing. process will be expedited.
NBRC-
0152
Kenneth L. RobinsonPresident; National Ass'n of Federal Credit Unions


Too much flexibility exists among jurisdictions as how to define disposable income.A price range should be developed for each portion of the country. Range will allow for determination of reasonable costs of essential needs and limit a judge's ability to assign amounts that may vary greatly for similar cases in similar areas.
NBRC-
0193
James V. Stanton and Richard A. Steyer, on behalf of Natl. Assoc. of Bankruptcy TrusteesAttorneys and bankruptcy trusteesStatement by Saul Eisen, NABT's president

In the attached statement, the president of the National Association of Bankruptcy Trustees ("NABT") states that the Code should be amended to "clarify the effect of conversion from one chapter proceeding to another in light of property acquired post-petition, pre-conversion."Same.
NBRC-
0246
Babette A. CeccottiNBRC Commissioner; Attorney
541
Bankruptcy status of employee payroll deductions is often unclear. Employers, especially those with cash flow problems, are likely to be holding such payments in their general funds at the time of a bankruptcy filing rather than in segregated special accounts. Failure to remit these payments on time to the third parties to whom they are owed can result in a host of hardships.Section 541 should be amended to exclude payroll deduction monies owed by employees to third parties from the definition of "property of the estate." Such an amendment would elimiate the need for court intervention and case by case "constructive trust" analysis. By expressly excluding these funds from the estate property, the debtor may timely pay monies owed to third parties without causing adverse consequneces to its employees.
NBRC-
0274
Steven D. GoldsteinPresident, Credit - Sears, Roebuck and Co.; on behalf of other National Retail Federation members


Federal courts vary from circuit to circuit and even within districts as to the standard applied in valuing assets in a bankruptcy estate.Adopt replacement value (defined as the cost of securing closely comparable substitute merchandise and services) as the valuation standard in all chapter 7 and chapter 13 cases.
NBRC-
0320
Robert M. Zinman, on behalf of the Bankruptcy InstituteAmerican Bankruptcy Institute ("ABI")Numerous position papers, memoranda and research material

Author attaches a white paper entitled "Valuation Conflicts in the Consumer Bankruptcy Setting," by Richardo I. Kipatrick and Michael J. Zwick. The paper highliights the various approaches taken by the courts in their treatment of valuation, and the polarity of each approach in consumer bankruptcy cases.The authors of the white paper conclude that "there is no simple solution to the question of valuing collateral in consumer bankruptcy cases. While some areas of this issue appear to have followed a trend, others are subject to an ongoing debate which could require action by the Supreme Court or Congress. Until that point, one can only look to his or her jurisdiction for guidance."
NBRC-
0324
Richard H. WalkerGeneral Counsel, U.S. Securities and Exchange Commission
543547(c)In this submission representing the preliminary views from SEC staff, the author states that: (1) the SEC has a strong interest in ensuring that the bankruptcy courts are not used as a "haven for wrongdoers" in subversion of congressional intent; (2) scare enforcement resources should not be diverted into unnecessary or duplicative litigation in bankruptcy court; and (3) the SEC also has an interest pursuant to § 1109(a) as a party-in-interest, in protecting the interest of public investors who hold securities in companies involved in the bankruptcy system, ensuring adequate disclosure of reorganization plans that provide for the issuance of unregistered securities, and preventing the misuse of the Bankruptcy Code's exemption from Securities Act Registration.In furtherance of these interests and in order to prevent debtors from using the Code to avoid payment of disgorgement/restitution, the Code should be amended to: (1) Exclude disgorgement/restitution funds from property of the estate; (2) Exclude disgorgement/restitution funds from turnover provisions; and (3) Exclude disgorgement/restitution funds from the preference provisions.
NBRC-
0325
David M. SullivanAttorney
541
In a recent unpublished decision, the U.S Court of Appeals for the Sixth Circuit in a "Ponzi" case, denied recovery to the victim's of a debtor's pre-petition fraud who were able to specifically identify and trace their funds (a copy of the court's opinion is attached, as well as an article about the Supreme Court's refusal to grant certiorari in this case). To prevent further cases from reaching similar outcomes, Congress needs to specifically instruct the courts that the debtor's estate does not include property that the debtor steals.The Code should be amended so that the definition of property of the estate explcitly excludes property that was converted, embezzled, stolen or otherwise acquired by the debtor or obtained by the debtor's fraud to the extent that the property can be identified or traced using reasonable tracing methodologies.
NBRC-
0395
Denise B. MuhaExecutive Director, National Leased Housing Association ("NLHA")


Many tenants who are facing eviction proceedings are encouraged to file bankruptcy petitions to delay eviction. This process thwarts a landlord's ability to meet its obligations under federal program guidelines and prevents other qualified families from occupying the unit and receiving much needed federal rental assistance.NLHA endorses the recommendaiton of the National Multi Housing Council/National Apartment Association (attached) which proposes an amendment to the Bankruptcy Code that would specify that the possession of a residence by a tenant under a rental agreement shall not be deemed property of the esate.
NBRC-
0687
A. Stevens QuigleyAttorney, panel Chapter 7 trustee


Author feels that, if adopted, periodic audits will create a new bureaucracy and will be an added expense to the public and debtors. "The template model creates its own problems."Do not adopt auditing of debtors.
NBRC-
0750
Hon. James F. Queenan, Jr.United States Bankruptcy Judge, District of Massachusettes
544(a)(3)
"Section 544(a)(3) gives the trustee...the rights of a bona fide purchaser of real property from the debtor. Courts have interpreted this provision in a manner which brings an unfair windfall to the estate." Author gives the example of an attorney who purchases land for a client, taking title in his own name, but acting as a "straw". The fact of the straw ownership is not recorded, and the attorney goes bankrupt. "Many courts hold the trustee in bankruptcy, as a hypothetical bona fide purchaser, prevails over the beneficial owner in circumstances such as these." A minority have come out the other way. Apparently §544(a)(3) was enacted to give the trustee priority over an unrecoreded mortgage in those states where his lien creditor rights are insufficient to do so. As a general rule, creditors should not have more rights outside of bankruptcy than they had (or could get) at the filing."I therefore request the Commission to recommend to Congress an amendment to paragraph (3) clarifying its application only to transfers made by the debtor. This would continue to give the trustee priority over an unrecorded mortgage, but would prevent him from defeating unrecorede ownership interests in real property."
NBRC-
0807
Richard T. Wargo, Jr., Esq.Director, Compliance & Information, Pennsylvania Credit Union League & Pacul Services, Inc.


"While creditors must be diligent, it's too difficult to investigate and raise exceptions or objections to discharge.""Debtors should be subject to audits to verify the accuracy of the representations contained in the debtors' schedules....The suggested national filing system may aid in detecting fraud and abuse."
NBRC-
0833
Heida ThurlowPresident, Chantal Cookware; Chair, Government affairs subcommittee on Bankruptcy Reform, National Housewares Manufacturers Association


Written copy of author's statements before the NBRC on June 19, 1997. Author is concerned about the rights of reclamation of small housewares manufacturers with respect to retailers who file for bankruptcy. Retailers "load up" on merchandise before filing for bankruptcy, and the suppliers can't get their wares back.1. The reclamation period should be at least 60 to 90 days; 2. reclamation should be available without the supplier proving that a bankrupt company was actually insolvent; 3. the reclamation right should extend to proceeds of the goods; 4. the bankruptcy law should not permit a lender with a general inventory lien to defeat a supplier's reclamation right.
NBRC-
0837
Francis M. AllegraDeputy Associate Attorney General, U.S. Department of JusticeMemorandum dated June 16, 1997 from Fran Allegra to Jonathan Gruber re: Treasury Comments on Bankruptcy Commission Position on Asset Exemption Levels.

"The consumer bankruptcy proposal envisions that random financial audits of debtors would be undertaken by Chapter 7 and Chapter 13 Trustees. The extent of the audits, their frequency, and the funding source for such audits are unspecified." "An audit system would be a welcome reform. Whether this reform is feasible, however, will depend on identification of a reliable funding source, such as, for example, and increase in filing fees. Whether private trustees have sufficient audit expertise or incentive to conduct such audits is another major concern....Moreover, for this recommendation to be credible, cost estimates for the audit program envisioned by the Commission should also be developed.""Perhaps a pilot study of various audit programs would be advisable."
NBRC-
0859
T. Bentley LeonardAttorney, Leonard & Biggers, P.A.


"Please take a few minutes to ahve your members look at the highly protective provisions of the Code relating to leases. The protective prpovisions may be appropriate for commercial leases but are highly inappropriate for consumer ones. I represent consumers who are routinely sucked into rent-to-own contracts which, in my opinion, are merely disguised security agreements....I can not imageine that the same provisions of the Code wwritten to protect lessors of commercial aircraft should apply to consumer leases."See above.
NBRC-
0883
Eugene R. WedoffU.S. Bankruptcy Judge, Northern District of Illinois


"Because the Proposal (at 17) would continue current law on conversion and dismissal of Chapter 13 cases, there is a need to spedivy what property remains in the Chapter 13 estate after confirmation, so as to define the debtor's ability to use taht property, the ability of postpetition creditors to enforce judgments against it, and the exten to which the property is part of the Chapter 7 estate on conversion.""...I believe that confirmation should not afect the property of the estate."
NBRC-
0969
Peter C. LongeneckerAttorney


In Oregon, the Chapter 7 trustees take the Earned Income Credit of any IRS tax refund. "This affects primarily and typically single, working mothers who are counting on this EIC to provide necessities for their childre.""Make the Earned Income Credit portion of any IRS tax refund totally exempt from the bankruptcy estate."
NBRC-
0999
Eric R.-T. RoostAttorney
348, 548
Author outlines situations in which cases which are converted from Chapter 13 to Chapter 7 could provide opportunities for fraud by the debtor due to the effect of §348(f)(1)(A) and §548(f)(1)(B) which freeze the property of the estate and valuation of property in the converted Chapter 7 case at levels determined in the Chapter 13 case.No specific solutions are proposed.
NBRC-
1079
Arthur J. SpectorUnited States Bankruptcy Judge, Eastern District of Michigan
1327(b)
Author raises the issue of "what if means for property to vest in the debtor upon confirmation of a chapter 13 plan. Section 1327(b) states: "Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor." This sentence has caused tremendous confusion." Author gives citations of cases illustrating the confusion. Author feels problems are caused by a lack of care by drafters in formulating the chapter 13 process.Don't make the same mistake as previous drafters of chapter 13. "When the statutes implementing the consumer framework are eventually drafted, think through what consequences the words will have. Consider alternative meanings others might reasonably place ont he terms chosen and the results they might cause. Pick a policy outcome and make the choice clear and unmistakable. Consider laying down a full record so that those who come later can understand what it was you intended to accomplish."



 

© 2014 American Bankruptcy Institute, All Rights Reserved