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Access to Justice, Consumer Bankruptcy Edition

posted by Pamela Foohey

The Great Recession, the CFPB's creation, the rise of debt buying, changes in the debt collection industry, and advances in data collection have encouraged more research recently into issues of access to justice in the context of consumer law and consumer bankruptcy. This spring, the consumer bankruptcy portion of the Emory Bankruptcy Development Journal's annual symposium focused on access to justice and "vindicating the rights of all consumers." Professors Susan Block-Lieb, Kara Bruce, Alexander Sickler, and I spoke at the symposium about how a range of consumer law, finance, and bankruptcy topics converge as issues of access to justice.

We recently posted our accompanying papers (detailed further below) to SSRN. My essay overviews what we know about the barriers people face entering the consumer bankruptcy system, identifies areas for further research, and proposes a couple ideas for improving access to bankruptcy. Susan Block-Lieb’s essay focuses on how cities can assist people dealing with financial troubles. And Kara Bruce’s and Alex Sickler’s co-authored essay reviews the state of FDCPA litigation in chapter 13 cases in light of Midland Funding v. Johnson and explores alternatives to combat the filing of proofs of claim for stale debts.

In my essay, Access to Consumer Bankruptcy, I discuss what we know about the barriers that people face to filing bankruptcy, with the goal of identifying where more research is needed versus where focusing on implementing improvements is likely to be more productive. People face both internal and external barriers to filing bankruptcy. For people to use the bankruptcy system, they must understand that filing is a way to deal with their financial issues. But not everyone will think of money troubles as legal problems. If their problems remain "alegal," they may do nothing, try to negotiate on own, or turn to third parties for help. As I detail, we know little about how people think about their financial problems as legal problems.

As one of my essay’s main contributions, I analyze a sample of narratives accompanying consumers' complaints about financial products and services submitted to the CFPB, thereby beginning to explore how people connect their financial problems to bankruptcy. Although the narratives provide a necessarily select and narrow view of how people think about bankruptcy, at present, the narratives are one of a handful of data sources that includes people with financial troubles before they file bankruptcy. What makes the narratives particularly interesting is that consumers are not prompted to think about bankruptcy when they submit their complaints. If consumers mention bankruptcy in their narratives, they do so because bankruptcy is naturally on their minds. As such, the narratives offer a unique view into how people think about financial troubles as bankruptcy issues.  

Susan Block-Lieb's essay, Cities as a Source of Consumers’ Financial Empowerment, steps into the question of access to justice at the point when people are beginning to understand their problems are legal issues and are deciding how best to address their problems. Filing bankruptcy is one avenue that people may consider. They also may turn to other legal avenues or involve third parties. Block-Lieb’s essay focuses on how cities can assist people dealing with financial troubles decide how best to try to resolve their problems.

The second part of my essay focuses on the external barriers that people face filing bankruptcy. I overview the ever-increasing body of research about consumer bankruptcy’s “local legal culture,” systemic racial bias, and the link between attorneys’ fees and bankruptcy chapter choice. Based on this review, though more research always is useful, I conclude that it is time to place more attention on thinking about how to begin to remedy issues with access to bankruptcy—particularly the racial disparity in use of chapter 7 and chapter 13—and provide a couple modest suggestions.

Finally, Kara Bruce’s and Alex Sickler’s essay, Private Remedies and Access to Justice in a Post-Midland World, takes on the question of access to justice from inside the consumer bankruptcy system, once people have filed. Using FDCPA litigation in chapter 13 bankruptcy as a lens into how bankruptcy laws and procedures themselves can improve people’s access to justice, they consider what the rise and fall of these FDCPA claims shows about the role private litigation in improving access to justice within consumer bankruptcy.      

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