postings by Bob Lawless

About 44% of Chapter 11s are Subchapter V Cases

posted by Bob Lawless

As many readers will know, Congress created subchapter V to streamline the chapter 11 process and to make it work better for small businesses. It became effective in March 2020, just as the pandemic hit, and was available to businesses with less than $2,500,000 in debts. Congress raised the debt limit to $7,500,000 to make it available to more businesses, and that higher debt limit will sunset on June 21, 2024, unless Congress acts. By all accounts, subchapter V is working as designed, helping small-business owners to continue their businesses. Both the National Bankruptcy Conference and the American Bankruptcy Institute's Task Force on Subchapter V have recommended that Congress make the $7,500,000 debt cap permanent. 

How much does it matter? How many chapter 11 filers use subchapter V? The answer to those questions is more difficult than it should be.  The readily available bankruptcy statistics from the U.S. Courts do not report subchapter V cases, although they should. To answer those questions, I downloaded the integrated bankruptcy petition database from the Federal Judicial Center, which contains every bankruptcy petition filed.

And the answer is . . . in 2023, forty-five percent of chapter 11 debtors used subchapter V. That was 1,854 of the 4,121 chapter 11 cases in 2023. Unfortunately, the database does not have the subchapter V variable for years before 2023. Well it does, but the variable is not reliable for years before 2023. The rest of the post, "below the fold," explains the rest of my math.

Continue reading "About 44% of Chapter 11s are Subchapter V Cases" »

Let's End Bankruptcy Judge Shopping

posted by Bob Lawless

Credit Slips bloggers Adam Levitin, Stephen Lubben, and I joined eight other academics in putting our names to a letter calling for the Southern District of Texas to end its practice of having a "complex chapter 11" panel composed of two bankruptcy judges. This procedure ensures that large corporate debtors filing chapter 11 know their cases will be heard by one of these two judges rather than being randomly assigned among the judges on the court. Congress has authorized up to six bankruptcy judges for the Southern District of Texas. Although I do not speak for Levitin and Lubben, I wanted to elaborate on my reasons for signing the letter.

Corporate bankruptcy venue abuse remains overdue for reform as explained by Credit Slips bloggers just a few times both on and off the blog. For some examples, see here, here, here, here, here, and here. The problem with the complex chapter 11 panel is even worse because it creates the appearance of being able to pick your own judge. Whatever benefits there are from having a specialized panel for large cases, and I am sure there are some, they are not worth the corrosive effect on public confidence in an impartial system of justice. Because the bankruptcy court created the complex chapter 11 panel as a local administrative procedure, the same court could end it with a stroke of a pen.

Continue reading "Let's End Bankruptcy Judge Shopping" »

The Lasting Economic Effects of Slavery

posted by Bob Lawless

Nicholas Brown has written the latest piece in a fascinating Reuters series documenting how the effects of slavery remain with us today. Brown's article, entitled "American Dreams," follows two families over 150 years. One family is the descendants of enslavers, and the other is the descendants of those who they enslaved. It is a case study of how slavery, the Jim Crow era, and racial discrimination put the two families on very different economic paths. It brings home the lingering effects of these shameful parts of U.S. history in ways that aggregate statistics about wealth disparity often do not. Credit Slips readers will be particularly interested in how bankruptcy helped the white family (and not because I am quoted there). We say that our blog's mission is to discuss credit, finance, and bankruptcy issues, and if you are here, you likely have those interests as well. I strongly recommend Brown's article.

Interest by Any Other Name Would Cost Just as Much

posted by Bob Lawless

Some odd news has reached my desk about Illinois's Predatory Loan Prevention Act (PLPA) and efforts to clarify its application to pawnbrokers. As many Credit Slips readers will know Illinois passed a 36% APR cap on consumer lending in 2021. The cap applies "notwithstanding any other provision of law" and specifically excepts banks but no other other lenders.

Despite this language, the pawnbroker industry filed suit claiming it was not covered by the law. Every state has a specialized law regulating pawnbrokers. It was not frivolous to claim the PLPA did not apply, but it did not seem like a winner given the PLPA's clear statutory directive. Nonetheless, a state trial judge granted a preliminary injunction preventing the Illinois Department of Professional and Financial Regulation from enforcing the PLPA against pawnbrokers. It was perhaps a lucky break they drew the same state trial judge that had issued a temporary restraining against the vaccine and testing mandates by the Chicago Public Schools only to be reversed twelve days later. Two years has passed since the preliminary injunction was issued, and that litigation still languishes (which is another story for another day).

There have been efforts for legislative action to clarify the application of the PLPA to pawnbrokers. This is where the odd news comes in because the story is that there is squabbling over whether pawnbrokers are already subject to a 3% per month/36% per year cap. To understand that, we need to dig a bit into the Illinois Pawnbroker Regulation Act.

Continue reading "Interest by Any Other Name Would Cost Just as Much" »

Consumer Law Scholars Conference--Call for Abstracts

posted by Bob Lawless

The Center for Consumer Law & Economic Justice at Berkeley Law has announced the call for abstracts for the 2024 Consumer Law Scholars Conference. Abstracts are due by September 8, 2023, for the conference scheduled for February 29-March 1, 2024. The conference welcomes abstracts from a wide array of methods and virtually any topic involving consumers in the marketplace. More information about abstract submission is here


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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless ([email protected]) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.


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