120 posts categorized "Consumer Bankruptcy"

Race and Chapter 13

posted by Bob Lawless

As Adam noted in his kind post, the New York Times today featured our study, "Race, Attorney Influence, and Bankruptcy Chapter Choice." My co-authors are Credit Slips blogger Jean Braucher, a law professor at the University of Arizona, and Dov Cohen, a professor at the University of Illinois who holds a cross appointment in psychology and law. And, we all express many thanks to the NYT reporter, Tara Siegel Bernard, who spent a lot of time slogging through the statistics and legal intricacies in our study.

In a nutshell, the study reports real-world data from the Consumer Bankruptcy Project showing that, among bankrupcy filers, blacks file chapter 13 at higher rates than all other races. The effect is large -- for example, blacks even had a higher chapter 13 rate (54.6%) than homeowners (47.1%). The second part of the study showed that, in a random sample, bankruptcy attorneys were more likely to recommend chapter 13 for a hypothetical couple named "Reggie & Latisha" who went to the African Methodist Episcopal Church as compared to "Todd & Allison" who went to the United Methodist Church. Also, attorneys were more likely to see "Reggie & Latisha" as having good values and being more competent when they expressed a preference for chapter 13.

Continue reading "Race and Chapter 13" »

Kudos to Jean Braucher and Bob Lawless!

posted by Adam Levitin

A new study by Credit Slips own Jean Braucher and Bob Lawless (with Dov Cohen) on race and bankruptcy filings received very prominent and well-deserved page A1 coverage in the New York Times.  It's a fabulous study, and it's wonderful to see it getting such great media attention. 

Bankruptcy, Backwards

posted by Adam Levitin

Credit Slips Own Anna Gelpern has a great new article in the Yale Law Journal that very much deserves a plug. It's called "Bankruptcy, Backwards:  The Problem of Quasi-Sovereign Debt." The article deals with the problems of financial distress for quasi-sovereigns, like US states or even to some degree EU member states. As Anna points out, bankruptcy seems to mean all things to all people, and as a result framing discussions of how to deal with quasi-sovereign debt---where there is no bankruptcy regime of any sort--quickly devolves into debates about existing bankruptcy systems, like US Chapter 9, rather than starting from the unique problems of quasi-sovereign debtors and then figuring out what sort of financial restructuring system might make sense.

I highly recommend the article, particularly for those of us who don't regularly deal with sovereign debt issues. There's a strange divide in practice and scholarship between domestic bankruptcy and sovereign debt restructuring. A few people (David Skeel, Steven Schwarcz, Bob Rasmussen, e.g.) have written in both areas, but they remain pretty separate fields. Anna's insights from the sovereign debt field are very useful for domestic bankruptcy scholars, as they help us step back and see the larger picture of what is going on.  

Foreclosure Timelines and Mortgage Delinquency: More Evidence from Bankruptcy

posted by Melissa Jacoby

At the end of a lively session yesterday at Duke Law School featuring Professor Stephen Ware of University of Kansas Law School, there was a brief discussion of whether shorter foreclosure timelines and clearer rules would promote more workouts of delinquent mortgages. The aforementioned paper about bankrupt homeowners suggests that the opposite might actually be the case: among homeowners in bankruptcy, longer foreclosure timelines in their home states were associated with a lower probability of foreclosure initiation while shorter timelines were associated with a higher probability of foreclosure initiation.

Continue reading "Foreclosure Timelines and Mortgage Delinquency: More Evidence from Bankruptcy" »

What is the Relationship Between Credit Cards and Mortgage Delinquency?

posted by Melissa Jacoby

Previously I mentioned this new paper on homeowners in bankruptcy in the American Bankruptcy Law Journal. The central goal of the paper was to investigate what makes homeowners more or less likely to have mortgage troubles as they head into bankruptcy. One of the notable findings is that, across all the models, credit access had a significant effect on keeping mortgages current and avoiding foreclosure initiation (specifics listed pp. 302-304). But why?

Continue reading "What is the Relationship Between Credit Cards and Mortgage Delinquency? " »

BROKE: A New Book on Consumer Debt and Bankruptcy

posted by Katie Porter

Just in time for New Year's resolutions on 1) reading more, 2) paring back your own debt, and 3) learning more about consumer bankruptcy to help you do your job (if you are a lawyer, judge, or academic, media, etc), the book, Broke: How Debt Bankrupts the Middle Class was released from Stanford University Press.

BrokeThe book makes extensive use of the 2007 Consumer Bankruptcy Project data, providing statistics, analysis, and commentary on consumer bankruptcy and debt topics. I edited the volume, and chapter contributors are many Credit Slips regulars or guest bloggers--Jacob Hacker, Bob Lawless, Kevin Leicht, Angela Littwin, Deborah Thorne, and Elizabeth Warren--along with other top scholars.

In the next few weeks, the chapter authors will blog here at Credit Slips about the research featured in the book, but to whet your appetite, I've included a table of contents for the book after the break. The book is accessible to lay readers but its scholarly focus provides plenty of data to educate and surprise even bankruptcy experts. Working on the book, I certainly learned a great deal about timely and important topics such as how pro se debtors (those without attorneys) fare in bankruptcy, where families go after they lose their homes to foreclosure, how bankruptcy affects couple's marriages, and the ways that bankrupt households differ in their financial straits from other households of concern such as those with low assets or late payments on debt. Of course I'm biased but I think the book provides the most comprehensive overview of the consumer bankruptcy system since the enactment of the 2005 bankruptcy amendments.

Continue reading "BROKE: A New Book on Consumer Debt and Bankruptcy" »

In or Out of Mortgage Trouble? A Study of Bankrupt Homeowners

posted by Melissa Jacoby

This is a newly published paper  in the American Bankruptcy Law Journal that I was lucky to work on with Daniel McCue and Eric Belsky at the Joint Center for Housing Studies at Harvard University. Using previously unexamined data in the 2007 Consumer Bankruptcy Project, we study what makes homeowners more or less likely to have mortgage troubles as they head into bankruptcy. Although much can be said about the econometric analysis, for now I wanted to mention quickly that the paper includes descriptive details about bankrupt homeowners (debtor-reported) such as numbers of missed mortgage payments, use of adjustable rate mortgages, mortgage broker use, mobile homes, and refinancing or home equity lines of credit. So please check it out!   

Your Government Prefers Chapter 13

posted by Katie Porter

Today, I went looking for the court costs payable by chapter 13 debtors who wants to convert their cases to chapter 7. I admit that like many Americans my starting point was Google. I quickly landed here, at the Bankruptcy Basics page provided by the Administrative Office of the U.S. Courts, a division of the judiciary. The site says that it "provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed." From this description,  you might expect a factual, value-neutral description of the fundamental choice facing all consumer debtors: whether to chose chapter 7 or chapter 13. But look what I found when I read up on Chapter 7 and Chapter 13 . . .

Continue reading "Your Government Prefers Chapter 13 " »

New Resource: NCLC's Bankruptcy Mortgage Project

posted by Jean Braucher

The National Consumer Law Center has launched a useful new resource for the bankruptcy community called the Bankruptcy Mortgage Project. See here. Those likely to find it handy include judges, consumers, trustees, mortgage servicers, attorneys, and academics. The website, created with a grant from the National Conference of Bankruptcy Judges’ Endowment for Education, collects all sorts of documents related to mortgage issues in consumer bankruptcy cases. It thus provides easy, free access to various local rules, forms, general orders, and court opinions.

Continue reading "New Resource: NCLC's Bankruptcy Mortgage Project" »

A Deeper Dive into Racial Disparities in Chapter Choice and Women in Bankruptcy

posted by Geoff Smith

Thanks again to Bob Lawless for his excellent post this morning highlighting the findings from our latest report, “Bridging the Gap II: Examining Trends and Patterns of Personal Bankruptcy in Cook County's Communities of Color." The report found evidence of racial disparities in chapter choice in Cook County, IL, as well as a disproportionately high concentration of filings among women living in communities of color. If you don’t have time to read the whole thing, check out our press release and policy brief.

If this report raised any burning questions, feel free to ask them on a conference call we will be hosting on Thursday at 11am CT (follow the link to register and get the call-in information).  If you’re shy, you can also send questions via Facebook or Twitter, and I’ll answer them on the call. I will be joined by Megan Cottrell of the Chicago Reporter.  The Reporter is an investigative magazine that published a companion piece to our report asking why these racial disparities in chapter choice might exist. I will also be joined by Woodstock Institute’s Policy and Communications Associate Katie Buitrago who will close out the call by telling the story of one bankruptcy filer, Roxie King, a grandmother of 20 from an African-American neighborhood in Chicago who went through Chapter 13 bankruptcy after being laid off from her job as an echocardiogram technician. Roxie tells her story in the video below:

Continue reading "A Deeper Dive into Racial Disparities in Chapter Choice and Women in Bankruptcy" »

One Consumer Bankruptcy System, or Many?

posted by Lois R. Lupica

As Principal Investigator of the Consumer Bankruptcy Fee Study, I've been gathering "qualitative data" from attorneys, trustees and judges about how the consumer bankruptcy system is working. I have conducted over a dozen focus groups, many, many one-on-one interviews, and have been privy to myriad list-serve threads discussing the costs of BAPCPA generally and more specifically, consumer bankruptcy attorney fees.

Here is one preliminary observation: there is a huge disparity with respect to how and how much attorneys are paid, depending upon where in the country they practice. This is not a shocking revelation on its face, given the disparities in the cost of living from city to city. The data reveal, however, variations that go beyond big city=expensive, small town=cheap.

Continue reading "One Consumer Bankruptcy System, or Many?" »

The Consumer Bankruptcy Fee Study

posted by Lois R. Lupica

Thanks to Katie and my friends at Credit Slips for the guest blogging gig.  I appreciate the invitation and the opportunity.

In my next couple of posts, I am going to report on the Consumer Bankruptcy Fee Study (see Katie's post below).  Today, I'm making a pitch to the consumer debtor's attorneys who have received (or will receive) an invitation to participate in a survey about their consumer bankruptcy practices.  To date, the Consumer Debtor Attorney Fee Survey has been distributed to ~400 lawyers who represent consumer debtors.  I expect to send out a couple of additional "waves" in the next weeks.  As I said in my cover note,

Continue reading "The Consumer Bankruptcy Fee Study" »

Bankruptcy Robosigning Business Challenged by Debtors, Trustee

posted by Alan White

A new amended class action complaint filed on behalf of Chapter 13 debtors, with their Trustee as additional plaintiff, describes in exhaustive detail the business of Lender Processing Services and its network of creditor attorneys and mortgage servicers.  The gist is that LPS sells the dominant software product to mortgage servicers, and the software is designed to refer all foreclosure and bankruptcy cases to LPS-affiliated firms, which then share legal fees earned by litigating stay motions and claims in bankruptcy with LPS companies.  In the process, LPS firms and their nonattorney employees allegedlly produce robosigned missing mortgage assignments and bankruptcy court filings.

This colorful pleading describes LPS as Mephistopheles and the participating law firms as Faust.  Some of the practices are familiar, thanks to Judge Sigmund's decision in the Taylor case, discussed here previously.  LPS and its affiliates, of course, vigorously dispute all allegations and claim that their business is perfectly legal, and does not constitute unauthorized practice of law, although their SEC filings are considerably more ambivalent on the latter point.

More details on this and related litigation are available in this detailed report.

Can HAMP Help in Bankruptcy?

posted by Katie Porter

About six months ago, the government rolled out guidelines for how HAMP should work for people in bankruptcy. Given bankruptcy's historical role as a foreclosure prevention device, it never made sense to me why from its inception, HAMP did not envision ways for homeowners in existing chapter 13 cases to seek loan modifications and for people to try to obtain a loan modification as part of their chapter 13 bankruptcy. This may have just resulted from the right people not being in touch in a timely fashion. But now that HAMP is available for people in bankruptcy, does it really provide much?

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Ransom Argument--Not Very Edifying

posted by Jean Braucher

The very first case argued today, the opening day of the 2010 Supreme Court term, was Ransom v. MBNA. Ransom presents an issue at the heart of the bankruptcy means test. The question for the Court is whether an above-median-income debtor in chapter 13 who does not currently have a car payment can take the IRS allowance for vehicle “ownership expense” as part of the means test. This issue also arises in chapter 7. You can find the transcript of the oral argument here. http://www.supremecourt.gov/oral_arguments/argument_transcripts/09-907.pdf

As with any oral argument, it is hard to know what to make of it as far as prediction as to the outcome. I will refrain from critiquing the lawyers’ arguments. I will merely note that Katie Porter recently asked why the government was involved and that although an answer to that question was not forthcoming, the government lawyer did end up serving the function of presenting a simple argument that the justices could (barely) follow.

Continue reading "Ransom Argument--Not Very Edifying" »

What Is the Government Interest in Bankruptcy Cases?

posted by Katie Porter

On Monday, the Supreme Court will hear arguments in Ransom v. MBNA, an appeal of a decision in a consumer bankruptcy case. The Bankruptcy Code requires chapter 13 debtors to commit all their "projected disposable income" to repaying their creditors. After 2005, for debtors whose income exceeds the median in their state, disposable income is determined by deducting certain expenses. In the Ransom case, the issue is whether a "debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards [of the IRS]” includes the cost of ownership for a vehicle that is not encumbered by a loan or lease.The statutory language is unclear, to put it mildly, and there are plausible readings of the statute that support either permitting or denying the expense.  So why is the U.S. government throwing its weight behind MBNA Bank and arguing that debtors should not be permitted to take the ownership deduction for vehicles that a debtor owns outright? What exactly is the government's interest in this case? Why are our taxpayer dollars at work here in briefing and arguing a dispute in which the adversarial aspect of bankruptcy (debtor and creditor litigating) seems to be fully functional?

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The Shadow Consumer Bankruptcy System

posted by Alan White

    Bankruptcy filings have not risen at anything like the rate at which consumer debt defaults have risen since 2007.  Part of the explanation may lie in the shadow bankruptcy system, a network of alternative service providers who purport to save debt-burdened consumers from the bankruptcy court.  While consumers being sued on delinquent credit cards and mortgages receive solicitations in the mail from bankruptcy attorneys, they are also deluged with a variety of other offers of aid.  These range from foreclosure rescue scams to a wide range of legitimate and dubious debt advice and counseling services, to debt elimination and debt settlement schemes.  While pondering this post I searched in the usual places for any good empirical data on the number of consumers participating in non-profit counseling, or the number of customers enticed by those who promise to make debt disappear, with no success.   We don't seem to know how many debtors go to these debt advice services.

Continue reading "The Shadow Consumer Bankruptcy System" »

The Thorne-Porter Financial Education Study

posted by Jean Braucher

Last week, a short item was posted on a bankruptcy listserv about the excellent new paper by Deborah Thorne and Katherine Porter, Debtors’ Assessments of Bankruptcy Financial Education, available on ssrn.com.  Despite the insights of the paper about the wisdom (or lack thereof) of the requirement of financial management education in bankruptcy and about how to improve the education as long as it remains a condition for bankruptcy discharge, the listserv item (predictably) unleashed a lot of venting by consumer bankruptcy attorneys.  I share their pain, but I still feel strongly that the paper is extremely valuable (a dream from a researcher’s point of view, for how much light it sheds).

Continue reading "The Thorne-Porter Financial Education Study" »

Debt Distress: Symptoms and Treatment

posted by Alan White
From the United Kingdom comes an interesting new study, based on a survey of more than 10,000 applicants for legal aid about their problems and the means they use to address them. The study explores the linkages between overindebtedness and social exclusion.  Consumers seeking help with debt problems are much more likely to face multiple related difficulties, including employment, mental health and other civil justice problems.  This longitudinal study also reports on the duration of debt problems and the success or failure of different strategies consumers employed.  The findings support the need for a broad array of services to assist consumers overwhelmed by debt, an approach characteristic of many European consumer bankruptcy and debt adjustment systems, about which Jason Kilborn and others have written.  These coordinated social service approaches are notably absent from the US bankruptcy system, at least officially, and apart from some token counseling requirements.  

Bankruptcy and the Crisis: Why so Few?

posted by Alan White

Many thanks to Bob for the invitation to guest blog here.  Those who follow Bob's postings on bankruptcy filing numbers will have seen that U.S. consumer bankruptcy filings have been plodding upwards steadily, but only to roughly where they were before the BAPCPA bubble back in 2005.  One of the inscrutable mysteries of the financial crisis of 2007-??, which is after all a housing and consumer debt crisis, has been how few bankruptcies have been filed.  Somehow, historically unprecedented levels of consumer debt and loan defaults have not produced the surge in bankruptcy filings one would expect.

Continue reading "Bankruptcy and the Crisis: Why so Few?" »


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