How to Get Involved with the ABI Consumer Commission

As Jason Kilborn noted last month, the American Bankruptcy Institute (ABI) has formed a Commission on Consumer Bankruptcy. More information about the Commission is available on its web site including the unfortunate news that it got saddled with me as the reporter. We very much invite input and suggestions about the Commission's work. Right now is an especially good time to get involved as the Commission sets its agenda.

The ABI has charged the Commission with "researching and recommending improvements to the consumer bankruptcy system that can be implemented within its existing structure. These changes might include amendments to the Bankruptcy Code, changes to the Federal Rules of Bankruptcy Procedure, administrative rules or actions, recommendations on proper interpretations of existing law and other best practices that judges, trustees and lawyers can implement."

Secured Transactions in the Funny Pages

From the always wonderful Pearls Before Swine, some humor for the secured lending crowd.

Katie, Remember Us When

It is with incredibly mixed feelings that I pass along to our readers that Professor Katie Porter is leaving our blog. Katie was one of the original bloggers on Credit Slips back in 2006. There were a number of us who were working together in an intensive data-collection phase of a research project, and a blog was a great way to have some intellectual interaction that was more than how to word a survey question. It worked and somehow the blog stayed around. Katie's posts are insightful, thought-provoking, and witty. We will miss her contributions.

If we have to lose one of our founding bloggers, it is at least for a very exciting reason. Katie is leaving Credit Slips is to focus her efforts on her recently announced candidacy for the U.S. House of Representatives in California's 45th Congressional District. Speaking for myself, I think Katie would be fantastic in Congress. She is whip-smart and a determined advocate for consumers. Former Credit Slips blogger Elizabeth Warren put it succinctly: "Katie is a fighter!" I wish Katie nothing but success in her campaign.

We also have made a change to the way we list our blog contributors. At one time, it made sense to distinguish between more frequent and less frequent contributors. Now, everyone is simply listed as a contributor. This change is long overdue, and I had been meaning to make it for a while. My day job seems to keep interfering with the many ideas I often have to improve the blog.

Bankruptcy Fees in the Trump Budget

Thanks a tweet to the sharp-eyed Drew Dawson at the University of Miami, I saw this article in Politico that among the surprises in Trump's budget is an increase in bankruptcy filing fees (see item 5). Well, this seemed important to those of us in the bankruptcy world so I thought I would check it out. It proved surprisingly more difficult in this day and age than one would think to get a PDF copy of the Trump budget outline, but I finally found one. I am not sure the characterization of an increase in "bankruptcy filing fees" is entirely accurate.

Above is a screenshot from p. 30 of the document (clicking on it should bring up a full-sized image in a popup window). Keep in mind this is an outline of the underlying budget document. What appears to be proposed in an increase in the quarterly U.S. Trustee fee for chapter 11 filers and not a general increase in all bankruptcy filing fees or even the chapter 11 filing fee. Of course, the paragraph does characterize it as an increase in bankruptcy filing fees so maybe there is such a broad increase in the budget itself.

Does anybody know for certain?

Arbitrating the Discharge

The Second Circuit currently has a pending case (Anderson v. Credit One Bank, No. 16-2496) that raises the question of whether an alleged violation of the bankruptcy discharge injunction is subject to a predispute arbitration agreement. Professors Ralph Brubaker and Bruce Markell have joined me on an amicus brief explaining why the answer has to be "no." You can download the brief from SSRN. (UPDATE 3/3: The link was broken but should be fixed now.)

Bankruptcy specialists know the "discharge" means the forgiveness of prebankruptcy debts. The "discharge injunction" comes from section 524 of the Bankruptcy Code, which states that the entry of a discharge shall operate as an injunction against attempts to collect prebankruptcy debts. Indeed, one of the things the brief tries to make clear is that the "discharge" and "discharge injunction" are different concepts. Historically, filing bankruptcy gave rise to a discharge, but there was no enforcement of that discharge in the federal court that issued it. Rather, the debtor could plead the discharge as an affirmative defense in a state-court collection action.

Bankruptcy Filings for 2017 -- Let's Say 767,000

According to Epiq Systems, there were 771, 894 total U.S. bankruptcy filings in 2016, a decline of 5.8% from 2015. The overall annual decline in 2015 was 10.0% and was 11.8% in 2014.  As I noted yesterday, the rate of decrease is decreasing.

At the beginning of 2016, I projected 780,000 filings for the year. That forecast was only 1.0% off. Pride goeth before a fall. Here is my thinking for 2017.

Bankruptcy Rate Rises in December . . . A Blip and Not a Blip

Something happened in the U.S. bankruptcy courts that had not happened since October 2010. The daily filing rate increased on a year-over-year basis. There were 56,394 filings in December 2016 as compared to 53,844 in the previous December. Also, because the 2016 filings were spread over one less business day than in 2015, the rise represented a 9.7% increase in the daily filing rate. The lighter-red line in the graph to right the shows just how dramatic the spike was.

ABI Podcast on Race and Chapter 13

In October, a panel at the National Conference of Bankruptcy Judges explored the role of race and implicit bias in the bankruptcy system. Called "The Color of Money: The Implications of Race and Ethnicity in Addressing Debt," the panel included a presentation by yours truly about our research exploring the intersection of race and chapter 13. If you were not at NCBJ, the American Bankruptcy Institute was kind enough to ask me to do a podcast about our research and the updates to it since its original appearance in 2012. The podcast is a little over seventeen minutes long if you want to give it a listen.

ABA Journal Blawg 100!

Credit Slips is honored to have been selected as part of the ABA Journal's Blawg 100, their annual list of the top 100 blogs about law and lawyering. It is our second year in a row for inclusion on the list.

We appreciate all of our readers and are humbled by the time you spend with us. The comments to the posts continually demonstrate that one of the things that makes this blog work is our readership. Thanks for visiting.

The Big 1-0

Today is the tenth anniversary of the launch of Credit Slips. We started the blog in the middle of a big research project as an exercise in team building We also thought the blog might be a place where we could try to reach a wider audience about the scholarship coming out of the project. It is hard to believe we are still chugging along after 10 years.

A lot has happened in 10 years. When we started, blogging was relatively new and especially new for academics trying to reach outside the ivy-covered walls. There weren't no Twitter or Facebook, and Pokemon was passé. Looking back at that first post, four of the original seven bloggers are still with the blog. Things have moved on considerably for most all of the original bloggers. One of us got hired and tenured at one of this nation's leading law schools. A few of us have moved universities. One of us even became the senior United States senator from Massachusetts. Some of our newest bloggers are people we were mentoring as junior scholars or even students ten years ago. For myself over the past 10 years, I managed to move to a new faculty office down the hallway.

We have been talking about a few changes to the blog to keep current with the times, but the changes will not affect our topical focus. Our goal remains what it has been from the start, which is to reach outside the legal academy to have conversations with who care deeply about the policy issues surrounding credit, finance & bankruptcy. Thanks for being part of the conversation.

Porter's Modern Consumer Law

Credit Slips blogger Katie Porter has produced a new textbook in consumer law that anyone teaching the subject should consider adopting. Indeed, law professors not teaching consumer law should to take a look at it and consider whether they should add the class to their teaching portfolio. A 2013 poll on Brian Leiter's Law School Reports named consumer law as the number one "area of law which deserves more attention in the legal academy." Next academic year I will be picking up a new course, and the emergence of Porter's new text made the decision easy for me as to which course it will be.

In the preface, Porter makes explicit her three-pronged approach to the topic of consumer law:

1. The book situates consumer law within the business-law curriculum. "Consumer law is big business," she notes. Understanding the legal issues requires understanding the "deal," the information flow, and the market in which the transaction occurs. Porter expressly recognizes, "the world of consumer practice offers opportunities for lawyers to represent consumers (as government lawyers, policy advocates, and plaintiffs’ attorneys) and to represent businesses (as in-house counsel, defense attorneys, and
   lobbyists)."
2. The book provides a strong theoretical frame by situating consumer law at the intersection of tort and contract. The book does not present consumer law as a hodgepodge of cases and statutes loosely organized around the term "consumer." Rather it recognizes that a lot of what travels under the law of "consumer law" responds to the gaps that traditional contract and torts doctrines have when it comes to the issues that consumer transactions create.
3. The book explores where the social-science literature has learning for consumer law. Porter looks to see what psychology, sociology, marketing, and economics can add to our understanding of the legal issues. By doing so, the book explores the difference between law on the ground and law in the books. 

The book uses a problem-based method of instruction that will be familiar to users of Porter's co-authored bankruptcy textbook or my co-authored secured transactions textbook. The problems range from straight-forward statute readers to teach doctrine to tough client counseling problems that focus on real-world lawyering skills.

More information, including a table of contents and a sample chapter, can be found at Aspen Publishers.

Annual U.S. Bankruptcy Filings on Track for 6.7% Decline

It has been a while since I last checked in on bankruptcy filing rates. The arrival of the latest figures from Epiq Systems was a welcome reminder to do so.

We are at the halfway point for the year, and the U.S. has had 398,000 bankruptcy filings. It is tempting to simply double that figure to get an estimate of what filings will total for all of 2016, but that estimate would be too high. Bankruptcy filings are somewhat more concentrated in the first six months of the calendar, which have accounted for about 52% of yearly filings for the past two years. Extrapolating from recent experience would mean there will be 764,000 filings for the calendar year.

That would be a 6.7% decline in filings from 2015. Back in January, I forecasted a 5% decline or 780,000 filings for 2016. Given that we are well within the confidence interval of that estimate, I will take that. Although we still have half the year left to go, the model I use for the forecasting looks to be holding up.

In terms of trends, we have had 68 straight months of year-over-year declines in the daily filing rate. The annualized filing rate per 1,000 currently stands at 2.46. The graph shows a 12-month moving average for filings per 1,000 persons since 2008. The discerning eye will note the tail of the graph is flattening. The year-over-year decline is slowing. Where we saw double-digit declines in 2013-14, the declines are in the 5%-8% figures now.

Law & Society, 2016 Panels on Household Finance

If you happen to be at the 2016 Law & Society Association meetings in New Orleans, stop by the panels from the Collaborative Research Network (CRN) on Household Finance. This group got its start as an international collaborative studying overindebtedness thanks for the leadership of people like the late Jean Braucher, Johanna Niemi, Iain Ramsay, and Bill Whitford. We have scholars from all over the world and from diverse disciplines thinking about how law on the ground affects household financial outcomes. Below the fold is a listing of panels, topics, and presenters for this year. If you are an academic and want to be on the CRN email list, contact me or Credit Slips blogger Dalie Jimenez.

Puerto Rico: Blame and the Debt of "the Other"

Recently, I have been spending a lot of time thinking about the psychology of other people's indebtedness. I see parallels from this work and the way we think about Puerto Rican government debt. This thinking then tends to stand in the way of solutions.

An example is the psychological idea of the fundamental attribution error. This heuristic means we over-attribute other people's behavior to their personality rather than their circumstance. The guy speeding past me on the highway is a jerk instead of late for a meeting. Our neighbor who has filed bankruptcy is irresponsible rather than the victim of a job layoff. It is not that some people aren't jerks or irresponsible. Rather, we over-attribute behavior to personality rather than circumstance. If you don't see my point, there is probably something wrong with you. (Get it?)

2016 Bankruptcy Forecast -- Let's Say 780,000

Forecasting U.S. bankruptcy filings for this year was a little more complicated. In a comment to my post about the total 2015 bankruptcy filings, Erich Fabricius made the astute observation that December 2016 saw the introduction of new bankruptcy forms and that could explain my befuddlement at the abnormally large 14.8% decline for December in terms of year-over-year daily filing rates. November, in contrast, saw almost no decline in the year-over-year rate, which is also unusual. The relatively stronger numbers in November suggests that attorneys were perhaps trying to beat the deadline before the new forms went into effect. The effect would not have to be huge -- shifting 5,000 filings from December into November would have been enough to create this effect.

What that means is my preferred mathematical model to predict bankruptcy filings for the next year has to start with the immediately previous two months being untypical months. If I run the model with the actual data, I get 800,000 filings. If I "correct" the numbers for November and December to what would have been expected had recent monthly trends continued, the model predicts 782,000 filings. The model controls for the amount of outstanding consumer credit and national personal income and has proven accurate in the past. 

Bankruptcy Filings Drop 10% in 2015

According to the latest figures from Epiq Systems, total U.S. bankruptcy filings dropped 10% in 2015. The yearly total was 819,240 compared to 910,090 the previous year. As bankruptcy experts know, these figures are low. In 2015, there were 2.55 bankruptcy petitions per 1,000 persons, the lowest figure since 1989, ignoring the statistical gyrations around the 2005 bankruptcy law. If the decline keeps up, we won't even have to ignore the 2005-06 statistical gyrations for the statement to be true.

Last January, when forecasting the number of 2015 filings, I wrote, "a good estimate for 2015 bankruptcy filings is 800,000." That turned out to be not too bad of a forecast, off by only 2,5%. As the model I used seems to have been a good prediction, I will try it again and post the results here on Credit Slips.

Before I go off to crunch numbers, one other thing caught my eye in the latest numbers. The daily filing rate for December was only 2,446, which was a year-over-year decline of 14.8%. The decline in U.S. bankruptcy filings had been slowing, and I was expecting the decline to eventually flatten out. December is an unusually slow month for bankruptcy filings, but it is an unusually slow month every year. I am always cautious about extrapolating too much from one month of data, but the size of the decline in December took me by surprise. 

AALS & The Slips

Quite a few Credit Slips bloggers and former guests are panelists at the session the Debtor-Creditor Section of the Association of American Law Schools (AALS) meeting.The session is entitled, "Bankruptcy for the Ninety-Five Percent: Making the System Work for Small and Medium-Sized Businesses and Sole Proprietors" and will take place on Saturday from 1:30 - 3:15 PM. If you are at the AALS meeting, check it out. Panelists and discussants are Matthew Bruckner, Andrew Dawson, Pamela Foohey, Margaret Howard, Melissa Jacoby, Ed Morrison, Foteini Teloni, and Jay Westbrook. The moderator is Gene Wedoff, recently of the U.S. Bankruptcy Court for the Northern District of Illinois. 

Foohey on Black Churches in Bankruptcy

Credit Slips blogger Pamela Foohey has a new article on SSRN, "Lender Discrimination, Black Churches, and Bankruptcy." This paper builds on her previous work about churches in bankruptcy to dig into the demographics of which churches end up in bankruptcy court. From her abstract: "Churches with predominately black membership — Black Churches — appeared in chapter 11 more than three times as often as they appear among churches across the country. A conservative estimate of the percentage of Black Churches among religious congregation chapter 11 debtors is 60%. The likely percentage is upward of 75%. Black Churches account for 21% of congregations nationwide."

Foohey discusses the various reasons why black churches would be overrepresented in chapter 11. I suspect there will be a lot of debate about the paper's conclusions, but it is hard to argue with the notion that race matters in bankruptcy as it does across so many parts of life in the U.S. (h/t to Mechele Dickerson's work). Foohey's paper will get bankruptcy experts talking again about why and how it matters, even if there is disagreement on the specifics.

Making the ABA Journal's Blawg 100

The ABA Journal has named Credit Slips to its annual Blawg 100. Thanks for the recognition! We really appreciate it. It is a list of great blogs, and we are honored to be included on it. And, thanks to our readers and commenters who help to make this little part of the Internet a great community.

Indiana Adds Some Bankruptcy to Its Bar Exam

Bernie Trujillo emailed me from Valparaiso University with the news that the Indiana bar examiners have added some bankruptcy law to the state bar exam. Specifically and effective February 2018, the Indiana bar exam will include "Indiana debt collection, including garnishment, attachment, and bankruptcy exemptions." A few years back, I noted that bankruptcy law was fair game on the Texas bar exam. Indiana's move appears to double the number of states with coverage of any bankruptcy law on the state exam. Regardless of whether bankruptcy law needs to be covered, I think it is probably a good thing to add coverage of judicial remedies. Every year in my courses, a fair percentage of the students seem surprised to learn that all those judicial decisions they study in the first year are not self-enforcing.

Indiana's move also bucks a trend noted by Slipster Jason Kilborn of declining coverage of commercial law law on state bar exams. In addition to debt collection law, Indiana is adding secured transactions to the list of subjects.

UPDATE (11/17/15): Bernie pointed out that secured transactions was already covered under the heading "commercial law," which is no longer listed. The change was to scale back "commercial law" to "secured transactions." Because sales is tested under the heading "contracts" by the Multistate Bar Exam, the Indiana change is effectively the same as Jason noted with the move by the Multistate Bar Examiners with regard to their essays -- dropping negotiable instruments/UCC Articles 3 and 4.

Welcoming Back David Lander

Frequent readers of the blog will know that David Lander has guest blogged for us several times. When he was last with us, David left with four topics he wanted to discuss further. When David wrote and said he had the time to turn back to these topics, we were delighted to welcome him back. David combines extensive big law firm experience with a background in consumer and individual representations. These days, David is spending his time as an adjunct professor at St. Louis University. David always has thoughtful things to say about the state of our bankruptcy and consumer finance systems. Welcome back.

How Do You C It?

One of the great challenges to the bankruptcy system if not to the American way of life is those who insist on capitalizing the  letter c when discussing chapters of the Bankruptcy Code. If it is "section 1129," as the Bluebook dictates, then it is "chapter 11." Both are merely designations for a portion of a statute.  The defense that is given to me is that the capitalized c just looks better. Are we supposed to capitalize words now merely because the mood strikes us? Are there no rules left? The horror. The horror.

When confronted with the RaNdOm CaPiTaLiZeR CrOwd, weak-willed persons such as myself cave in a spirit of compromise and also because I am a heckuva guy. Someone stronger must oppose this tyranny.

Yep, 800,000 Bankruptcy Filings This Year

My blogging has been light the past few months as we have been working on the eighth edition of what will now be LoPucki, Warren & Lawless, Secured Transactions: A Systems Approach. For you secured transactions teachers out there, we have returned a first set of page proofs and everything looks on track for publication later this year well in advance of the spring semester.

To get back into the blogging swing of things, I go to where else . . . bankruptcy filing data. Back in January, I predicted that total 2015 bankruptcy filings for the U.S. would be "somewhere around 800,000." Revisiting that prediction, the numbers seem right on track to meet it.

In Which We Enter the Fourth Grade

Today is the ninth anniversary of Credit Slips, which means we are now old enough for the fourth grade. Thanks for reading and for your support.

The year we started, 2006, seems so long ago. The W was in the White House, and we were "Mission Accomplished" in Iraq for three whole years at that point. We had just experienced the second sitting vice president to shoot another person while in office. And, it was a year the St. Louis Cardinals would win the World Series (so some things change not so much). CFPB was just a nascent idea that one of our co-bloggers was promoting.

I won't make any predictions about the next nine years lest I anger the Giant Robot Overlords who will be in charge by then.

Gelpern on Puerto Rico and Greece on Rehm

Credit Slips blogger, Anna Gelpern, was on the Diane Rehm Show this morning discussing the financial problems in Puerto Rico and Greece. Gelpern of Georgetown University was joined by Greg Ip of the Wall Street Journal and Matthias Matthjis of Johns Hopkins. A link to the full audio program can be found here. 

Professor Jay Westbrook Joins Us

My  best email of the day will be Professor Jay Westbrook's email saying he will join our mostly merry band of bloggers on a permanent basis. Westbrook has been guest blogging with us for a few weeks. Thanks to our great community of followers and your engagement with the issue we discuss, we have been able to persuade him to hang around. Westbrook is a legend in the field, and we are very proud to him as part of the Credit Slips team.

1,000 Twitter Followers

That is an amazing milestone. Thank you everyone for your interest in what we have to say here.

If you want to follow us on Twitter or subscribe to our Facebook page, there are buttons on the right-side of the screen. These outlets are simply other channels we use to get our content to those who want to receive it.

Pearls

A comic strip for the Credit Slips crowd from Stephan Pastis:

Pearls Before Swine Comic Strip, March 06, 2015 on GoComics.com.

Bankruptcy Filings Down Again 10.1% in February 2015

Thanks to Epiq Systems, the latest monthly bankruptcy figures are out, and they show a 10.1% year-over-year decline. We now have had 52 straight months of year-over-year declines in the U.S. bankruptcy filing rate. The graph to the right shows the trend in year-over-year changes.

There was a daily average of 3,422 bankruptcy filings in February, compared to 3,804 from the previous year. Total February bankruptcy filings were just over 65,000. (Daily averages are computed based on business days.)

I forecasted approximately 800,000 bankruptcy filings for the 2015 calendar year, and the first two months of the calendar year suggested we are spot on that forecast. The first few months of the calendar historically see the highest filing rates of the year. January and February usually account for about 15.5% of the annual total, and extrapolating that historical pattern to the 124,052 filings so far in 2015 puts us right at 800.000 for the calendar year.

(For new readers, reasons for the decline are explained in many of my posts collected here.)

Credit Slips Bloggers' Amicus Briefs in Caulkett

With my attention drawn to other matters, my personal blogging has been light for the past month. One of the things that had my attention was the Caulkett case currently pending before the Supreme Court. The issue in Caulkett is whether a wholly underwater second mortgage can be avoided in a chapter 7 bankruptcy. Without any value to reach, a wholly underwater second would not seem to be an allowed secured claim within the meaning of section 506.

Along with fellow Credit Slips blogger, John Pottow, and Professor Bruce Markell, I filed an amicus brief in Caulkett supporting the debtor.  One of our points is that Long v. Bullard, which supposedly stands for the proposition that "liens ride through bankruptcy," involved other issues entirely. I'll try to expand on that point in another blog post. But, we were not alone in representing Credit Slips in the case. Blogger Adam Levitin filed his own superb amicus brief supporting the debtor that provides an in-depth look at the facts, evidence, and policy around second mortgages. All of the briefs in the case can be found at SCOTUSBlog.

Welcoming Jay Westbrook to Credit Slips

It is with great pleasure that I welcome Professor Jay L. Westbrook of the University of Texas as a guest blogger for Credit Slips. To people in the bankruptcy community, Professor Westbrook needs no introduction. He is a leader in both international bankruptcy and empirical studies of bankruptcy. The phrase "see Sullivan, Warren & Westbrook" is often the cite for any fact we need to know about the bankruptcy system. There is nobody I know who does not think the world of him, both professionally and personally. We have hoped for many years that he would take a turn at Credit Slips, and we are glad the time has finally come.

Welcome to Credit Slips, Jay!

Coming to Law -- Churches in Bankruptcy Edition

Credit Slips contributor Pamela Foohey has just posted her most recent work in her series of articles on churches in bankruptcy. I have been a big fan of this research project since Pamela was a fellow at the University of Illinois. She tells us not only about bankruptcy but also about the ways in which these churches look like most any small business. Most impressively, the work builds on existing literature on how people come to law to solve their problems and expands that literature into a new and nonobvious setting, suggesting this literature may have deep explanatory power to help us understand more about how people perceive and use law. It is exactly what we need more of in the law reviews -- scholarship using rigorous social science to help us understand what actually happens in the legal system.

Pamela's most recent paper, "When Faith Falls Short: Bankruptcy Decisions of Churches," relies on structured interviews with church leaders and and their lawyers. One of the most surprising things is the church leaders did not see their problems as legal. Foreclosure may have beckoned, but the leaders had to be brought to law. They turned to social and professional networks both to get information about the law and for support that bankruptcy was the correct thing to do. There is much more in Pamela's paper. Get it before SSRN runs out of electrons to send it to you.

Thank You to Michelle Harner

Credit Slips thanks Michelle Harner for guest blogging. She shared her own personal views about reforms for chapter 11. Although Harner was here in her personal capacity and speaking only for herself, her role as the reporter for the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 gives her a valuable and informed perspective on the issues. Thank you, Michelle.

Thanks to Matthew Bruckner

We want to thank Professor Matthew Bruckner of Howard University for hanging out at Credit Slips for a while. We appreciate him sharing his thoughts on some of the finance issues facing legal education and issues surrounding student debt.

The Fount of Bankruptcy Jurisdiction Overfloweth in the Most Recent ABLJ

Those fascinated by the logic and limits of the Bankruptcy Clause, Article III courts, and bankruptcy courts power will want to check out the most recent issue of the Amercan Bankruptcy Law Journal (vol. 88, no. 4):

• Kurt F. Gurynne, "Pandora's Box and Peace on the Darkling Plain: Setting the Article III Limits on Congress' Power to Assign Claims to Article I Bankruptcy Judges"
• Randolph J. Haines, "The Conservative Assault on Federal Equity"
• Adam M. Langley, Hon. David S. Kennedy & Hon. W. Homer Drake, "The Case for a Constitutional Bankruptcy Court"
• Stephen J. Lubben, "Puerto Rico and the Bankruptcy Clause"

Update: Yes, the headline to this post did originally say "font." Yes, I am that big of an idiot. In my defense, I caught it myself.

Welcome Back to Michelle Harner

We are happy to welcome back Professor Michelle Harner of the University of Maryland and the reporter for the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11. Harner has kindly offered to blog on her perspectives on the Commission's report. So she does not have to say -- anything she writes represents only her own views and not her views in her capacity as the reporter.

Bankruptcies Down 12% in 2014, Forecast Predicts the Same Decline for 2015

The final count for 2014 U.S. bankruptcy filings is in, thanks to the data from the ever-helpful Epiq Systems. There was a total of 910,090 total bankruptcies in 2014, a decline of 11.8% from the previous year.

In early June, my prediction was for 2014 bankruptcies to be "just over 900,000," a solid prediction but with half the data already in the books.

My prediction for 2015 bankruptcies is somewhere around 800,000, which would be another decline of 12%. I arrived at that figure in two ways.

ABA Reminder to Prosecutors: Owing Money Is Not A Crime

In November, the American Bar Association issued a formal opinion that it was unethical for prosecutors to allow debt collectors to use prosecutorial letterhead when no member of the prosecutor's staff reviews the file to determine if it is likely a crime has been committed. The most amazing thing about the opinion is that it had to be said at all.

I missed the story when it first came out, but Deepak Gupta was all over it at the Consumer Law & Policy Blog with a post and some screen shots of what these letters look like. Also, the ABA Journal has a story abou the ethics opinion.

Tributes to Jean

Our friend and co-blogger, Jean Braucher, passed away a week ago today. Our first post here on Credit Slips had only a few paragraphs about her contributions to our professional community. There was a lot more to say about Jean.

Since that time, a number of comments have made their way into my inbox or were posted on to that original post. The comments have come from practicing attorneys, academics, judges, and journalists and from all over the United States as well as Europe, Australia, and South America. If you sent me a longer comment, I hope I have done justice to it below in excerpting it, and my apologies if I mistakenly omitted some. Here is what people wrote about Jean.

Jean Braucher, In Memoriam

It is with great sadness that I pass along the news that Jean Braucher passed away yesterday. Jean was my co-author, my co-blogger, and my friend. This news came suddenly this morning for all but her closest family and friends who were aware of her illness. 

The official record will show that Jean was a giant among bankruptcy and contracts scholars. Her work on local legal culture in bankruptcy courts is one of the standard references on the topic. As Dov Cohen and I were trying to understand the disparities we were seeing in our data among local bankruptcy courts, we turned to Jean. She joined our research team, and her understanding of the very fine detail of how the bankruptcy courts worked in action made the project's experimental materials a success. Jean also was widely known for her work on contracts law, being one of the authors of the seminal Contracts: Law in Action textbook.

That is the official record. I last saw Jean just in October at the symposium in honor of Bill Whitford where Jean presented her latest work. Bill exhorted us to study how the law actually worked and how it actually worked for the least-privileged in society. Jean lived that research ethos and spread it to others. She helped to nurture a small gathering at the Law & Society Association that has grown into a section of close to 100 household finance experts from around the globe. She was continuing to play a leadership role for that group while encouraging the next generation of scholars to become leaders in their own right.

Looking back at what I have written seems a paltry overview of the big footprint that Jean leaves in the  academic world. Her work touched so many others. Tomorrow I will give thanks that Jean was part of my professional life.

In the coming days, I hope to gather thoughts and remembrances of Jean into a longer blog post. If you knew or worked with Jean and have something to pass along, please email me.

Update (12/2/2014): A new post collects comments that were emailed to me. I have closed the comments on this post and encourage new comments to be left on the new post.

Probably No Strip-Offs After Supremes Rule

The headline for this post will be mysterious and perhaps slightly salacious in a general newsfeed, but bankruptcy experts will know it means the time is nigh in the 11th Circuit for lien strip-offs. The Supreme Court agreed to hear Bank of America v. Caulkett and Bank of America v. Toledo-Cardona, where the 11th Circuit allowed lien strip-offs of wholly underwater junior  mortgages in a chapter 7. The Supreme Court case of Dewsnup v. Timm would seem to hold otherwise, but the 11th Circuit ruled Dewsnup applied only to partially underwater mortgages. Hence, the 11th Circuit believe it was bound by its own pre-Dewsnup precedent allowing strip-offs for wholly underwater junior mortgages.

I like the 11th Circuit rule as a matter of policy, but I have to believe that as a matter of precedent, the Supreme Court is almost certain to reverse. I have to get back to work on some other things, but perhaps other Credit Slips bloggers might have more to say. Until then, SCOTUSBlog also has a summary.

A More Ancient Household Goods Rule

Courtesy of Jack Ayer, professor emeritus of law and polymathy, comes the following from the Wikipedia entry on Modigliani -- Amedeo, not Franco:

Modigliani was the fourth child, whose birth coincided with the disastrous financial collapse of his father's business interests. Amedeo's birth saved the family from ruin; according to an ancient law, creditors could not seize the bed of a pregnant woman or a mother with a newborn child. The bailiffs entered the family's home just as Eugenia went into labour; the family protected their most valuable assets by piling them on top of her.

It's on Wikipedia, so who is to dispute it?

A Filing Means What It Says

Almost two weeks ago now, the Delaware Supreme Court handed down its decision over J.P. Morgan's mistaken termination statement in the General Motors bankruptcy. (Note to Google Chrome users like me -- the link may not work; try a different web browser.)  I think they got it right, but to understand why, one obviously needs to know the facts. Melissa Jacoby has blogged about the case (especially) here and here. As Melissa explains in more detail in the former post, the case revolves a mistaken Uniform Commercial Code (UCC) filing by JPMorgan Chase. 

To really stylize the facts, there were two loans from JPMorgan Chase to General Motors. Let's call them Loan A and Loan B. Both loans were secured. Loan A was being paid off. Acting on behalf of JPMorgan Chase, lawyers for General Motors were instructed to file a termination statement in the UCC records. Because of a slip-up in the paperwork, termination statements were filed for both Loan A and Loan B. At the time General Motors entered bankruptcy, Loan B was still outstanding in the amount of $1.5 billion, meaning that if the termination statement is effective JPMorgan Chase would be unsecured in the General Motors bankruptcy.

My Worlds Collide

I am obsessively interested in two things -- bankruptcy and Formula One auto racing. I feed the first interest through this blog. The second interest is tended to by watching way, way too much Formula One on television. Indeed, the best way to wind me up is to ask me if Formula One is the same as Nascar.

This weekend, my worlds collided when two Formula 1 teams -- Caterham and Marussia (shown to the right) --were placed in administration in the U.K., a procedure akin to chapter 11. I was going to resist doing a post, but now that Pat Fitzgerald over at Bankruptcy Beat has posted a story, I feel enabled.

Bankruptcy Filings Are Low, But Not Everywhere

Bankruptcy filings have dipped to their lowest rate since 1990, as previously blogged (ignoring anomalous statistical gyrations around the 2005 changes to the bankruptcy law). Over the past twelve months the bankruptcy filing rate per 1,000 persons has been 2.95, which is the first time it has been below 3.0 in almost 25 years. But, the filing rate is not that low everywhere.

Before discussing how the filing rates are different across the country, the usual question I get is why the bankruptcy filing rate has declined so much. The answer to that question is not this post. Rather, see many previous posts like here and here. The short version is that U.S. households are carrying less debt -- nothing more complicated than that. Along those lines see the post at Calculated Risk about the Fed's household debt service ratio being near record lows.

Whitford Symposium

Professor Bill Whitford of the University of Wisconsin will be an intellectual hero to many of the Credit Slips readers and contributors. Bill has done pathbreaking work in consumer bankruptcy law, consumer law, and corporate reorganizations. On October 24, the Temple Law Review will hold a symposium honoring Bill's career, "The (Un)Quiet Realist: Building and Reflecting on the Contributions of Bill Whitford." Speakers include current or past Credit Slips contributors Jean Braucher, Melissa Jacoby, Angie Littwin, Katie Porter, and me. The full agenda and more information can be found at the Temple Law Review web site. Attendees can earn up to five CLE credits (four substantive and one ethics).

When I first came into the legal academy, Bill was one of a small group of bankruptcy scholars getting out of their university offices and engaging with the world as it is. He is  a role model for me as an empirical scholar, and it is an honor to be asked to be part of this event.

Elizabeth Warren in Jeopardy! -- Em . . . That Is, the Game Show Jeopardy!

Former Credit Slips blogger Elizabeth Warren who also happens to be the senior senator from Massachusetts was a category on Jeopardy! last night. H/T to the WSJ's Bankruptcy Beat, which has a more complete story on the topic including the questions that were asked. None of the questions related to Credit Slips probably because they would have been too easy. Please let me hold on to that illusion.

None of the contestants could correctly give the full name of the agency of which Senator Warren was interim director, "the CFPB for short." Although she was commonly referred to as the "interim director," the title I remember her holding is "assistant to the president and special advisor to the Secretary of the Treasury" (e.g., here and here). It's a trivial point -- which I suppose is the point of Jeopard! -- but was she ever formally the "interim director" of the CFPB?

Bankruptcy Filings Will Be the Lowest Since 1995 -- Here Is a Reason Why

In June, I said we are on track for just over 900,000 bankruptcy filings for 2014. The latest data are in from Epiq Systems, and that 900,000 figure remains the best estimate for the calendar year. We have had 556,875 total bankruptcy filings this year, and in 2012 and 2013, the last five months added 39.5% more filings. That gives an estimate of abut 907,000 filings for 2014.

Year-over-year declines remain large. There were 77,489 total bankruptcy filings in July or 3,521 filings per business day, a 11.7% decline from the previous year.

As the chart shows, the number of bankruptcy filings will be the lowest in the last seventeen years -- indeed the lowest since 1995. Those of you paying attention at home might point out that 2006 and 2007 appear to be lower, but these were the years around the passage of the 2005 bankruptcy amendments. If we average 2005 - 2007 for a more accurate picture, there were 1.1 million filings per year.

Not Fraudulent, Voidable

At its annual meeting, the National Conference of Commissioners on Uniform State Laws (NCCUSL) formally adopted the Uniform Voidable Transactions Act (UVTA). Under its provisions, I believe it says any service member in uniform will be able to avoid a transaction . . . . Hold on, let me give it a read.

In Tribute to Dan Markel

On behalf of everyone at Credit Slips, I want to express our profound sadness at hearing of the tragic and untimely passing of Professor Dan Markel. a professor of law at Florida State University and a prominent criminal law theorist. Dan was the founder of PrawfsBlawg and a leader in the legal blogosphere. May his family and friends take some small comfort in knowing how Dan was considered a leader in his discipline.

His colleagues at PrawfsBlawg have a tribute with comments from many persons who knew, worked with and learned from Dan.