Consumer: Property of the Estate
| ID | Name | Group | Other | Code
Sec |
Cross
Ref | Problem
Referenced | Proposed
Solutions |
NBRC-
0098 | Polly S. Higdon | Bankruptcy Judge;
District of Oregon | Invited 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 Schulman | President; National
Association of Consumer Bankruptcy Attorneys | Invited 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. Arkison | Law Offices of Peter
H. Arkison | Made oral presentation to the
NBRC on November 1, 1995 | 363 | 704 | The 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 Riddle | National Multi
Housing Council |
| 362 | 541 |
| 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 Elston | Chrysler 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. Goldstein | President, 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 Elston | Chrysler Financial
Services, Toyota Motor Credit Company, Ford Motor Credit Company,
General Motors, and American Financial Services |
| 1301 | 541 | § 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. Goldstein | President, Credit
Department, Sears Roebuck & Co. | Heard
Brady speak at National Retail Fed'n Credit Mangmnt Advisory
Council | 521(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. Goldstein | President, Credit
Department, Sears Roebuck & Co. | Heard
Brady speak at National Retail Fed'n Credit Mangmnt Advisory
Council | 1325 | 1330 | Current 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. Goldstein | President, Credit
Department, Sears Roebuck & Co. | Heard
Brady speak at National Retail Fed'n Credit Mangmnt Advisory
Council | 1325(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 Elston | Chrysler Financial
Services, Toyota Motor Credit Company, Ford Motor Credit Company,
General Motors, and American Financial Services |
| 365 | 1322 | The 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. Colton | National Association
of Home Builders |
| 362 | 541 | Housing 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. Sommer | National Bankruptcy
Conference | Submitted 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. Sommer | National Bankruptcy
Conference | Submitted 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. Robinson | President;
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. Robinson | President;
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 Trustees | Attorneys and
bankruptcy trustees | Statement 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. Ceccotti | NBRC
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. Goldstein | President, 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
Institute | American 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. Walker | General Counsel,
U.S. Securities and Exchange Commission |
| 543 | 547(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. Sullivan | Attorney |
| 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. Muha | Executive 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 Quigley | Attorney, 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 Thurlow | President, 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. Allegra | Deputy Associate
Attorney General, U.S. Department of Justice | Memorandum 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 Leonard | Attorney, 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. Wedoff | U.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. Longenecker | Attorney |
|
|
| 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. Roost | Attorney |
| 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. Spector | United 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." |
