Bankruptcy on Last Week Tonight with John Oliver

The consumer bankruptcy system has made it to late-night television! The main segment on Last Week Tonight with John Oliver this week focused on bankruptcy. As described: "John Oliver details why people file for bankruptcy, how needlessly difficult the process can be, and the ways we can better serve people struggling with debt." Twenty minutes about consumer bankruptcy!

Per usual, it's a well-researched, understandable, and fast-moving segment, with dashes of dark humor. My favorite references Julianne Moore's character in Magnolia. To the well-research part: It is supported by a host of papers about consumer bankruptcy, including the work of several current and former Slipsters. Among them is Portraits of Bankruptcy Filers (forthcoming Georgia Law Review), the most recent article based on Consumer Bankruptcy Project (CBP) data, co-authored with Slipster Bob Lawless and former Slipster Debb Thorne. In Portraits, we rely on data from 2013 to 2019 to describe who is using the bankruptcy system, providing the first comprehensive overview of bankruptcy filers in thirty years.   

Also referenced are Life in the Sweatbox, former Slipster Angela Littwin's The Do-It Yourself Mirage: Complexity in the Bankruptcy System, Slipster Bob Lawless, Jean Braucher, and Dov Cohen's Race, Attorney Influence, and Bankruptcy Chapter Choice, and the ABI Commission on Consumer Bankruptcy's report. The segment closes by highlighting the Consumer Bankruptcy Reform Act of 2020 (and includes a bonus at the end, which you'll have to watch to find out what that's about).

Dissecting the Increase in Chapter 11 Filings

I just finished teaching an intensive one-week course at Cardozo School of Law designed to introduce students broadly to bankruptcy and reorganization. The course covered debt collection, consumer bankruptcy, large public-company reorganization, small business reorganization (including the SBRA), municipal bankruptcy, cannabis and bankruptcy, third-party releases, and even a bit on chapter 15.  A theme throughout the week was changes in filings during the pandemic. To impress upon students that chapter 11 filings indeed are up, but that doesn't mean they are up everywhere across the country, I created this map. It details year-over-year increases or decreases in chapter 11 filings  based on jurisdiction.

I relied on data from the American Bankruptcy Institute / Epiq detailing total chapter 11 filings in 2019 and 2020. The map thus includes non-commercial chapter 11 filings. Historically, based on data from the Administrative Office of the United States Courts, a very small percentage of chapter 11 filings are non-business-debt filings--historically, about 6%. The more important caveat is that the map counts each filing as a case, even if the case is that of a "child" company filing with a "parent." See Slipster Bob Lawless's prior post about how parent/child filings can make it seem like commercial filings are rising much more than they actually are. Regardless, across the country, in 2020, chapter 11 filings generally are down. And where chapter 11 filings have increased, they seemingly have increased a lot.

74 Law Professors Sign Letter in Support of the Consumer Bankruptcy Reform Act

Last week, Senator Elizabeth Warren (D-MA) and Representative Jerrold Nadler (D-NY) introduced the Consumer Bankruptcy Reform Act of 2020 (CBRA). As Slipster Adam Levitin detailed, the CBRA proposes a single chapter structure designed to streamline the consumer bankruptcy process. This morning, 74 bankruptcy and consumer law professors sent to Senator Warren a letter in support of the CBRA.

As the letter states, the signatories support the CBRA because it "provides a thoughtful, workable, and comprehensive response to the problems that plague the current consumer bankruptcy system." Before I discuss the letter further, a disclosure: I spearheaded this letter and circulated it among bankruptcy and consumer law scholars for signature.

In detailing our support of the CBRA, the letter points out the key ways in which the current consumer bankruptcy system can fail to provide effective relief and can shut people out because they cannot afford an attorney. Adam's recent post discusses research about substantial regional differences in the use of bankruptcy and the disparate use of chapter 13 by Black households--and the consequences of these differences on bankruptcy's uniformity and on access to justice. The CBRA will simplify the filing process, reduce fees, and address racial and gender disparities. Its new chapter 10 will allow people to address their most pressing concerns, whether that be keeping homes, keeping cars, staying in rental property, or discharging debts. It also provides for a discharge of student loan debt. And it addresses debt collection in bankruptcy cases by expanding the FDCPA and giving the CFPB some supervision and enforcement authority in consumer bankruptcy cases.

Importantly, as noted at the end of the letter, the new single chapter is not a free ride. People who can pay will not be able to walk away from their obligations. Overall, the CBRA will address systemic issues and other problems that plague the current consumer bankruptcy system. Find the full letter from law professors here.

Update on Churches Filing Chapter 11 Bankruptcy

As parts of the country are counting ballots, I thought I'd post about counting church chapter 11 cases. The headlines about churches and other religious organizations filing chapter 11 still focus predominately -- almost exclusively -- on Catholic Diocese filings. As of June 2020, 27 Catholic religious organizations have filed chapter 11, as detailed on a site put together by Professor Marie Reilly. But Catholic religious organizations' filings are a very small sliver of churches filing bankruptcy, as my prior research has shown. The last time that I updated my count of religious organization chapter 11 cases was at the end of 2017, and the last time I updated denominations and demographics of the congregations that file was in 2013. Since then, I've continued to track religious organizations' chapter 11 filings, using the same methodology, through the end of 2019. 

Preliminary results are in. Highlights: churches, synagogues, mosques, and other religious organizations are still filing bankruptcy, and the denominations and demographics of the congregations that filed have remained basically the same.*

As shown on the graph to the right, between 2014 and 2019, an average of 59 religious organizations filed chapter 11 each year.** This is lower than the average of 87 cases between 2006 and 2013 that I've previously reported, but it is consistent with a decline and leveling off of consumer bankruptcy filings overall during this period. As I've noted, in the past, religious organization chapter 11 filings tracked personal bankruptcy filings, not business bankruptcy filings. This continues to be true.

Find tables with congregation denominations and demographics, and some more detailed discussion after the jump.

Taub's New Book on White Collar Crime (and its connection to bankruptcy)

I just finished Professor Jennifer Taub's new book, Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime. The book has been out for a couple weeks and it's already receiving rave reviews. I'm a bit late to the party. But I wanted to add my praise to the chorus. And add a shout out to bankruptcy's place in the dealing with the cost of white collar crime. Taub's introduction starts with three quick examples: the Sackler family, Pacific Gas & Electric, and General Motors. The examples aren't about their bankruptcy cases. They are about actions prior to their chapter 11 filings which had to be worked out in bankruptcy. As I read, I thought -- that ended in bankruptcy, so did that, and, yep, bankruptcy for that one too. Taub's book, of course, is not about bankruptcy. But if you're interested in white collar crime backstories of some headliner bankruptcy filings, this book will help make those connections. And it will elucidate the big business of white collar crime in a captivating read. In short, highly recommended.

Bankruptcy, Credit, and Finance Panels at Upcoming AALS Meeting

As with (almost) all events now, the 2021 AALS Annual Meeting is going forward as a virtual conference at the beginning of January. Deadlines for calls for papers are approaching soon. For our professor readers, the Section on Financial Institutions and Consumer Financial Protection and the Section on Commercial & Consumer Law have calls that may interest you. Details about each below the break.

The Resurgence of Calls For Financial Literacy

Today is the last day of National Financial Literacy Month. At a time when the economy has come to a grinding halt, it seems pertinent to talk about financial literacy, or, more accurately, the fallacy of financial education. Agata Soroko recently published a short essay in Public Seminar -- The Financial Literacy Delusion. In it, she details how calls for financial education already are ramping up in light of the coronavirus's highlighting how little savings most Americans have. I suspected that the refrain that it's people's fault that they didn't have sufficient savings to cover a few months, and thus that they exacerbated the economic downturn with their inability to control themselves enough to save, would emerge with a vengeance in the coming months.

Combating that narrative will become more important than ever, as a matter of economic policy, but also of kindness and understanding to each other. Indeed, it's important right now as Congress considers how to help American families during the crisis. As Slipster Dalie Jimenez, Chris Odinet, and I wrote in our just-uploaded-to-SSRN essay, The Folly of Credit As Pandemic Relief, forthcoming in UCLA Law Review Discourse, in the CARES Act, Congress predominately provided relief to Americans in the form of credit products, not actual cash. This very likely will prove to be problematic because people will be unable to repay in the coming months, just as they are unable to pay for their necessities now. They simply do not have the money, and will not in the future because people still won't have sufficient income to accumulate meaningful savings. As Soroko writes, financial education cannot solve widening income disparities, rising costs, and wealth inequality--the roots of why many Americans have so little savings.

Save the Date: 3rd Annual Consumer Law Scholars Conference

To give us something to look forward to, the Berkeley Center for Consumer Law and Economic Justice recently announced that the third annual Consumer Law Scholars Conference (CLSC) will take place on March 4-5, 2021, at Boston University. The conference is organized by scholars well-known to Credit Slips: Kathleen Engel, Ted Mermin, Rory Van Loo, and Lauren Willis. I attended the inaugural conference at Berkeley Law a couple years ago. It brings together a great and diverse group of scholars working on a range of consumer-related issues. Some details from the announcement:

The conference will provide those who publish in the field of consumer law the opportunity to share their work with peers, give and receive feedback, and collaborate in setting a research agenda for the field as a whole. Speakers will include both leading scholars and prominent policymakers. Although the conference is focused on scholarship, practitioners are encouraged to attend.

The organizers will send out a call for paper in June. They welcome doctrinal, theoretical, and empirical approaches across a range of topics: common law contracts and products liability; UDA(A)P and disclosure laws; food, drug, and public health law; consumer lending, credit reporting, and fintech; loan servicing and debt collection; commercial speech and the First Amendment; federalism, preemption, and sovereign immunity as related to consumer transactions; regulation, supervision, and enforcement by public agencies; private enforcement; and the effect of the COVID-19 pandemic.