Law Review: Jiménez, Dalié, Missing Strugglers: Debt's Reach, Bankruptcy's Limits, and a Proxy for Who's Left Out (July 31, 2025). Ed Boltz Wed, 08/20/2025 - 18:56 Available at:   SSRN: https://ssrn.com/abstract=5377387 Summary: This essay uses Debt's Grip as a point of departure to examine how debt operates as a system of social control in the United States. While the book offers a vivid portrait of those who file for bankruptcy, it also gestures toward a broader reality: millions of financially distressed individuals who never access relief. Drawing on legal scholarship and political theory, this Essay argues that debt disciplines individuals, fragments solidarity, and undermines democratic agency. It proposes a new metric-the ratio of debt collection lawsuits to bankruptcy filings-as a proxy for unmet need, revealing a population of "missing strugglers" visible to creditors but excluded from legal protection. The analysis calls for reimagining legal and political responses to financial distress beyond the bankruptcy system. Commentary: In Missing Strugglers: Debt’s Reach, Bankruptcy’s Limits, and a Proxy for Who’s Left Out, Professor Dalié Jiménez uses Debt’s Grip—Pamela Foohey, Robert Lawless, and Deborah Thorne’s recent portrait of bankruptcy filers—as a starting point to explore an even larger population: financially distressed individuals who never file for bankruptcy. While Debt’s Grip captures the stories and statistics of those who do file, Jiménez focuses on those absent from the system yet visible to creditors, courts, and debt buyers—the “missing strugglers.” Drawing on political theory, racial capitalism scholarship, and data from the Debt Collection Lab, Jiménez argues that debt functions not just as an economic burden but as a mechanism of social control: replacing social provision with credit (Abbye Atkinson), extracting value from the poor (Chrystin Ondersma), shaping self-perception and political agency (Maurizio Lazzarato), and deepening racial inequities (Louise Seamster). The paper proposes a “lawsuit-to-bankruptcy ratio” as an empirical proxy for unmet need, revealing that in many jurisdictions, there are 6–9 debt collection lawsuits for every consumer bankruptcy filing. The result is a stark picture: bankruptcy is reaching only a fraction of those in deep financial distress, and the gap reflects structural exclusion, not stability. The conclusion calls for reimagining relief beyond bankruptcy, confronting debt as a public governance problem, and rebuilding collective provision. Jiménez’s analysis should be a wake-up call for consumer bankruptcy attorneys. The “missing strugglers” are not avoiding relief because they are immune to debt collection pressure; they are caught in precisely the shame spirals described in Joe Gladstone's Financial Shame Spirals, convinced that filing for bankruptcy is a personal failure rather than a legal right. Ondersma’s Dignity, Not Debt reinforces that these shame dynamics are not incidental—they are cultivated by extractive credit systems that profit from keeping people in repayment purgatory for as long as possible. This is also where David Graeber’s Debt: The First 5,000 Years is useful—not for doctrinal guidance, but for perspective. Debt has long been used to structure relationships of power, obligation, and subordination. What Jiménez documents is the modern American iteration of that ancient dynamic, in which relief is rationed, punishment is automated, and the moral narrative favors creditors.   Encouraging more of this population to access bankruptcy requires more than marketing—it demands systemic and cultural interventions: Proactive Outreach in Civil Courts – Partner with legal aid, pro bono programs, and court clerks to provide bankruptcy information to defendants in debt collection lawsuits. Handouts at first appearances or mediation sessions could frame bankruptcy as a tool, not a stigma. Medical and Social Service Partnerships – Many “missing strugglers” first encounter financial crises through hospitals, clinics, or social service agencies. Training frontline workers to identify potential bankruptcy candidates and refer them to reputable attorneys could intercept clients before default judgments pile up.  That includes building partnerships between groups,  including the Debt Collection Lab with whom Jimenez is working,  and private consumer bankruptcy attorneys to find representation for debtors that is both affordable for consumers and provides reasonable compensation for the lawyers. Public Education Campaigns – Use local media, libraries, and community centers to demystify bankruptcy. Counter prevailing myths (“you lose everything,” “you’ll never get credit again”) with facts about exemptions, credit recovery, and the automatic stay. Fee Innovations – High upfront costs are a major barrier. Attorneys could offer sliding-scale retainers, bifurcated fee arrangements, or Chapter 13 “fee through the plan” options as ways to make bankruptcy financially accessible. Cultural Reframing – Borrow from the Debt Collective’s organizing model to normalize bankruptcy as an act of economic self-defense. If default and garnishment are seen as passive defeat, filing should be framed as taking control. Legislative and Rule Changes – Support reforms to streamline filing for low-asset debtors, expand exemptions, and reduce administrative burdens. Simplified forms and online filing could lower the entry threshold. The “lawsuit-to-bankruptcy ratio” is not just a scholarly metric—it’s a practice tool. Attorneys can use it to identify high-need, low-filing communities and direct outreach accordingly. The more visible and accessible bankruptcy becomes—both in message and in method—the more likely these “missing strugglers” are to see it not as a last-resort defeat, but as a path to reset and rebuild. Wild-Haired Suggestion: Perhaps the most unintentionally revealing moment in Missing Strugglers is its pop culture citation—Chicago Med, Season 3, Episode 15 (“Devil in Disguise”)—where a patient drowning in medical debt has apparently never even heard of bankruptcy. If television shapes public consciousness, no wonder the “missing strugglers” stay missing. The obvious corrective? A television procedural, equal parts heartstring-tugging drama and deadpan comedy, called “The Chapter.” Each week, our scrappy, overworked consumer bankruptcy attorneys would juggle eccentric clients (“Yes, sir, the court will still take your case even if you list your goldfish as a dependent”), relentless creditors, and the occasional heroic rescue of a family home. Plotlines would blend Law & Order’s case-of-the-week structure with Parks & Recreation-style office hijinks—except instead of catching criminals or building parks, our heroes halt garnishments, dodge means-test landmines, and negotiate reaffirmations with car lenders who “just need to talk to a manager.” Season arc? The attorneys battle an evil, deep-pocketed debt buyer empire while educating America on exemptions, the automatic stay, and why “no, you don’t lose everything.” Viewers would laugh, cry, and—crucially—walk away knowing that bankruptcy is a real, legal option when debt is crushing them. In other words, The Chapter could do for debtor relief what CSI did for forensic science, except with fewer microscopes and more confirmation hearings. All we need is a Los Angeles based law professor to pitch this to Netflix. To read a copy of the transcript, please see: Blog comments Attachment Document missing_strugglers_debts_reach_bankruptcys_limits_and_a_proxy_for_whos_left_out.pdf (342.44 KB) Category Law Reviews & Studies

Webpronews reports a 73% increase in corporate bankruptcies for 2025, with business bankruptcy filings reaching their highest monthly level since 2020.At Shenwick & Associates, we have observed this increase and wish to review the various types of bankruptcy available to businesses.Chapter 7 Bankruptcy involves the liquidation of a business by a Chapter 7 Bankruptcy Trustee. The Trustee closes the business and liquidates any assets for the benefit of creditors. However, the Chapter 7 bankruptcy trustee can also commence avoidance actions (preference and fraudulent conveyance actions) and sue the corporate debtor's shareholders if they have used business assets for personal expenses.Chapter 11 Bankruptcy can involve reorganization or liquidation of assets by existing management. Unfortunately, Chapter 11 reorganizations require filing a plan and a disclosure statement, as well as soliciting votes to confirm a plan. This process can be extremely expensive, often prohibitively so for small businesses. A business can also use a Chapter 11 filing for liquidation by existing management.Subchapter V Bankruptcy is a type of Chapter 11 bankruptcy filing for small businesses. The maximum debt is $3,424,000, and at least 50% of the debtor’s total debts must stem from commercial or business activities. Only small business debtors (which may include individuals or entities) may file under Subchapter V. Subchapter V is a simplified form of Chapter 11 filing; a debtor only needs to file a plan, not a plan and disclosure statement.Chapter 13 Bankruptcy is for individuals only.People with questions about what type of Bankruptcy to file can call Jim Shenwick, EsqJim Shenwick, Esq  917 363 3391  jshenwick@gmail.com Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

Law Review (Note): Denaroso, Daniel- Granting a Stay for Non-Debtors Ed Boltz Tue, 08/19/2025 - 15:24 Available at:   https://scholarship.law.stjohns.edu/bankruptcy_research_library/373/ Summary: This note surveys the state of “non-debtor stays” after the Supreme Court’s Harrington v. Purdue Pharma decision, in which the Court held that the Bankruptcy Code does not authorize a plan provision that “effectively seeks to discharge claims against a non-debtor without the consent of affected claimants.” While Purdue involved a permanent injunction in favor of the Sackler family in a Chapter 11 case, post-Purdue lower courts have read the decision narrowly—distinguishing between prohibited permanent nonconsensual third-party releases and still-permissible temporary stays or preliminary injunctions protecting non-debtors when necessary for a debtor’s reorganization. The note reviews three examples: Delaware- In re Parlement Techs: recalibrated “likelihood of success on the merits” for preliminary injunctions, finding temporary non-debtor relief can still be granted if essential to reorganization or likely to be replaced by a consensual release. S.D.N.Y.- In re Hal Luftig Co.: extended an automatic stay to a non-debtor for five years where the individual’s continued involvement was essential to the plan, even over the objection of the largest creditor. N.D. Ill.- In re Coast to Coast Leasing: adopted Delaware’s reasoning and upheld temporary non-debtor injunctive relief to facilitate reorganization. The author emphasizes that courts are preserving this relief by keeping it temporary, tied to reorganization needs, and analytically distinct from the *Purdue*-barred permanent releases. Commentary: This discussion—like Purdue, much of the legal scholarship, and the practice norms of nearly every Chapter 11 lawyer, judge, and the U.S. Trustee program—almost completely ignores the fact that Congress has already confronted the question of co-debtor protections and codified a clear, express answer in 11 U.S.C. § 1301. That section provides an automatic co-debtor stay in Chapter 13 cases, halting collection efforts against an individual liable with the debtor on a consumer debt, unless relief from stay is granted. Congress thereby demonstrated two important points: 1. It knows how to authorize co-debtor protections when it wants to. 2. It chose to do so only in the Chapter 13 context, for consumer debts, with specific exceptions and procedures for relief. Seen through that lens, the entire post-Purdue debate over whether courts can fashion non-debtor stays under §§ 105 and 362 in Chapter 11 reorganizations is not just a matter of statutory silence—it’s a matter of statutory choice. Congress gave Chapter 13 debtors and their co-obligors a tailored protection and omitted any similar provision for Chapter 11. The judicial creativity in finding temporary workarounds in Chapter 11 thus sits uneasily beside the plain text and structure of the Code. From a consumer bankruptcy perspective, Purdue and this note are reminders that while courts and practitioners in the business reorganization world are struggling to salvage a form of co-debtor relief, Chapter 13 debtors already enjoy it automatically. The difference is not accidental—it’s a policy choice Congress made to encourage individuals to file under Chapter 13 rather than Chapter 7, and to preserve household stability by protecting co-signers during plan performance. Yet, the lack of recognition of § 1301 in academic writing and large-scale Chapter 11 commentary reflects a broader pattern: consumer-specific provisions are often treated as quirky footnotes rather than integral parts of the Bankruptcy Code’s design. That blind spot leads to doctrinal debates that sometimes reinvent (or contradict) solutions already on the books. A more coherent bankruptcy discourse—especially in light of Purdue—would grapple with why Congress expressly gave a statutory co-debtor stay to Chapter 13 but not to Chapter 11, and whether any expansion of non-debtor protections in business reorganizations ought to come from Congress, not from judicial improvisation. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document granting_a_stay_for_non-debtors.pdf (301.71 KB) Category Law Reviews & Studies

4th Cir.: Grice v. Independent Bank- Nationwide Federal Class Action Allowed Despite State "Door Closing" Statute Ed Boltz Mon, 08/18/2025 - 16:54 Summary: Jamila Grice, a South Carolina resident, sued Independent Bank (a Michigan-chartered bank) over three allegedly improper account fee practices: 1. Treating accounts as overdrawn despite sufficient funds; 2. Charging multiple NSF fees for the same transaction; and 3. Doubling up on out-of-network ATM fees for a single withdrawal. She sought to certify nationwide classes for each practice. Independent Bank argued that South Carolina’s “Door Closing Statute” (S.C. Code § 15-5-150), as interpreted in Farmer v. Monsanto Corp., prohibited nonresidents from joining a class unless their claim arose in South Carolina. The district court agreed, excluded out-of-state members, found numerosity lacking, and denied certification. The Fourth Circuit reversed. Writing for the majority, Judge Benjamin held that under Shady Grove Orthopedic Assocs. v. Allstate, Rule 23 directly conflicts with the Door Closing Statute because both answer the same question—when a class action may be maintained. Since Rule 23 is valid under the Rules Enabling Act and the Constitution, it governs exclusively in federal court. State laws can’t add extra requirements to class certification. Judge Agee concurred in the judgment but would have taken a simpler route: Farmer itself construed the statute as applying only in state circuit courts, not federal courts. On that reading, there’s no conflict to resolve—§ 15-5-150 never applies in federal class actions in the first place. Commentary & Utility in Consumer Bankruptcy: The ruling reaffirms that in federal court, Rule 23’s “one-size-fits-all” approach overrides state procedural limits on class membership. That means a nationwide class action can proceed in South Carolina’s federal courts without excluding nonresidents, even if a state statute would bar them in state court. For consumer bankruptcy attorneys, the implications could extend beyond bank fee litigation. Many violations of bankruptcy protections—such as the automatic stay (§ 362), the discharge injunction (§ 524(a)(2)), the failure to properly credit plan payments or correct account histories under § 524(i), and failures to give accurate postpetition mortgage notices under Rule 3002.1—are committed by large national creditors and servicers whose conduct affects debtors in every state. Grice strengthens the argument that such violations can be addressed through nationwide class actions in bankruptcy courts or in federal district court proceedings related to bankruptcy cases because: Nationwide scope preserved: Creditors cannot use state “door closing” statutes to limit class membership only to debtors in a single state, keeping the remedy proportionate to the scope of the harm. Uniform federal protections: The Bankruptcy Code and Rules are federal law; enforcing them through Rule 23 nationwide classes in federal court aligns with the uniformity principle of bankruptcy jurisdiction. Enhanced deterrence: Including all affected debtors in a single class action—rather than splintering cases by state—raises the stakes for systemic violations of § 362, § 524, § 524(i), and Rule 3002.1. Judicial efficiency: Particularly for automated, repeated violations (e.g., post-discharge collection letters, misapplication of payments, failure to file payment change notices), a single nationwide proceeding avoids duplicative litigation in multiple courts. In short, Grice is not just about bank overdraft fees—it could be a procedural green light for pursuing classwide relief for violations of federal bankruptcy protections without being hobbled by state-law residency restrictions. This can make class remedies a viable and potent tool when systemic misconduct affects debtors nationwide. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document grice_v._independent_bank.pdf (201.77 KB) Category 4th Circuit Court of Appeals

Discharge in Chapter 13 is an Uphill Climb For most people, most of the time, getting a discharge is the goal of a bankruptcy case. The Supreme Court put it this way.  “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’  to the ‘honest but unfortunate debtor.’ ” The discharge means the debts are gone. About half Chapter 13 cases end up dismissed Nationally, in Chapter 13, only about half the cases get a discharge. The other half get dismissed. Here in the Alexandria Division, there were 238 Chapter 13 cases filed by lawyers during January through June 2025. Most of those cases, 162 out of that 238 were filed by just six lawyers. Those same top six lawyer also had 88 dismissals. The two busiest lawyers filed 101 cases and had 66 dismissals. The next four lawyers filed 61 cases and had 22 dismissals. It looks like the busiest lawyers had more than half their cases dismissed; for the next busiest, about a third. (We filed seventeen Chapter 13 cases in the first half of 2025 and had four dismissals.) (Are you looking for a lawyer to file Chapter 13 and hope to get a discharge? You may want a lawyer who does many, but not too many, Chapter 13 cases.) The Bad News. Often, Chapter 13 dismissal is a disaster. People can end up losing their homes. Chapter 13 dismissal sometimes means people lose their homes. The Good News. Sometimes, people recover from a dismissed Chapter 13, by filing a new case and trying again. Sometimes the problem just goes away. Not all dismissed Chapter 13s are bad. Examples of “Good Result” Chapter 13 Dismissals Greg and Sally were falling behind on their mortgage and couldn’t pay their unsecured debts. We filed Chapter 13 to catch the house up. But, that case got dismissed, because they couldn’t afford the payments. Fortunately, Greg then got approved for an 80% VA disability, and they filed Chapter 13 again. With that VA income, they were comfortably to catch up the mortgage and pay their other debts. Sadly, two years later, Sally and then Greg both died a few months apart. Their remaining unpaid debts died with them, so the Chapter 13 was dismissed. (Afterward, their daughter sold the house.) Marcus was in a divorce dispute with his ex wife about paying her half of the value of an overseas property in his name. He filed Chapter 13 to spread the payment over five years. After the bankruptcy was filed, they worked out a new agreement to just transfer that property to their daughter. That solved the problem and the Chapter 13 was then dismissed. PS  In case you are wondering, I never use real names in my examples. The post Discharge and Dismissal in Chapter 13 appeared first on Robert Weed Virginia Bankruptcy Attorney.

Law Review: Judge William Brown (ret.)- Consumer Bankruptcy Law Chapters 7 & 13 Ed Boltz Fri, 08/15/2025 - 16:22 Available at:    https://www.fjc.gov/sites/default/files/materials/09/Consumer-Bankruptcy-Law-Chapters-7-and-13-Second-Edition.pdf Preface: This monograph provides an overview of consumer bankruptcy law and describes the statutory framework for bankruptcy relief under Chapters 7 and 13 of the Bankruptcy Code, Title 11 of the U.S. Code. It is intended primarily as a reference for Article III judges, especially district judges, who may not handle bankruptcy cases frequently; other judges may also find it helpful. The monograph describes the types of fact and legal issues that arise in the bankruptcy and appellate courts, highlighting the relevant and principal Su-preme Court,  appellate, and trial court authority. Important circuit conflicts are examined where applicable. This edition updates case law and legislation. Case law is current through February 28, 2025. Some unpublished decisions are cited. Although they are not precedential, they may have persuasive value. References to the U.S. Code are to the 2022 version unless stated otherwise. References to “the Code” refer to the Bankruptcy Code, which is Title 11. For Official Bankruptcy Forms, please visit https://www.uscourts.gov/forms-rules/forms/bankruptcy-forms. Bankruptcy forms are subject to periodic revision, with several revisions to Official and Director’s Bankruptcy Forms and their instructions taking effect on June 22 and December 1, 2024. Restyling of Bankruptcy Rules Parts I through IX took effect December 1, 2024. The restyled Bankruptcy Rules now apply the same general drafting guidelines and principles used in restyling the Appellate, Criminal, Civil, and Evidence Rules. These changes are intended to be stylistic only. Additional substantive amendments to Bankruptcy Rules 1007, 4004, 5009, 7001, and 9006 and new Rule 8023.1 took effect December 1, 2024. Please check the For Further Reference section, which lists suggested sources for more complete analyses of consumer bankruptcy issues and law. The author would like to thank Judge Jon P. McCalla (W.D. Tenn.) for his invaluable review of the drafts of the first and second editions of this monograph. Commentary: While the explicitly identified audience for Judge Brown's excellent manuscript for the Federal Judicial Center about consumer bankruptcy are the federal district court judges "who may not handle bankruptcy cases frequently", that seems to be a degree of (retired) judicial discretion in not noting the uniformly recognized bankruptcy reality that the higher on the appellate ladder, the less the judges (or justices!) actually understand about consumer cases.  Similarly, a respect for federalism perhaps explains this isn't directed to educating state court judges, from whom the alien and byzantine nature of bankruptcy law often results in blank stares or even hostility.  But more being just a primer for non-bankruptcy judges,  this clear and concise overview of consumer bankruptcy, at less than 100 pages (footnotes are ignored!), this is a perfect introduction for paralegals and others without bankruptcy experience.  Even for those who have think they already delved deeplyy into the Bankruptcy Code,  there are valuable veins to mine, including that Judge Brown's summary, rather than the oft repeated dross/gloss on Ch. 13 (made again and again in academic papers) that "Chapter 13 requires payment of a debtor's income" to creditors,  instead recognizes that unsecured creditors are rarely paid much, let alone in full.  More specific nuggets for me included the comment regarding Bankruptcy Rule 1019(b)(3) and its limitations on when exemptions can challenged following conversion- making Ch. 20 an even more useful alloy for debtors. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document consumer-bankruptcy-law-chapters-7-and-13-second-edition.pdf (2.01 MB) Category Law Reviews & Studies

4th Cir.: Austin v. Experian- Arbitration required in FCRA Case Ed Boltz Thu, 08/14/2025 - 15:08 Summary: In this published decision, the Fourth Circuit reversed the district court’s refusal to compel arbitration in a Fair Credit Reporting Act (FCRA) case brought by a Chapter 13 debtor against Experian. The debtor, after receiving a bankruptcy discharge, discovered that Experian continued to report discharged debts as delinquent, allegedly contributing to credit denials. After repeated disputes failed to correct the inaccuracies, the debtor sued under 15 U.S.C. §§ 1681e(b) and 1681i(a). Experian moved to compel arbitration based on an arbitration clause embedded in the “CreditWorks” service agreement—an online credit monitoring product operated by its affiliate ConsumerInfo.com. The district court excluded Experian’s supporting declaration (from its VP of Business Governance) on hearsay and foundation grounds and further held that the online enrollment process did not constitute mutual assent. The Fourth Circuit reversed on both fronts: It held that the declaration was improperly excluded; a corporate officer can authenticate digital records and testify based on business records and oversight. It found that the website design clearly informed the user that clicking “Create Your Account” constituted agreement to the Terms of Use, which included a broad arbitration clause. Accordingly, the Court ruled that the debtor had agreed to arbitrate his dispute and remanded the case. Commentary: While Austin v. Experian appears, at first blush, to be a straightforward win for mandatory arbitration enforcement, it raises significant questions for consumer advocates—especially in light of the Goldman Sachs Bank v. Brown,  that is pending at the 4th Circuit, where NACBA and NCBRC have filed an amicus brief. In Austin, the Fourth Circuit emphasized that a user who clicks a button labeled “Create Your Account” after being presented with a linked Terms of Use has given reasonable notice and manifested assent—even if the user is signing up for a free service from a related, but technically distinct, corporate entity. This continues the trend of courts stretching the reach of arbitration clauses embedded in clickwrap agreements. But here’s the tension: In Goldman Sachs Bank v. Brown,  the consumer bankruptcy community has argued that arbitration should not be allowed to displace core functions of the Bankruptcy Code—especially judicial enforcement of the automatic stay under 11 U.S.C. § 362(k). In that case, the debtor brought a contempt action for stay violations by Goldman Sachs, who then sought to force the dispute into arbitration under the terms of the underlying loan agreement. Where Austin* and Brown diverge—subtly but importantly—is in the source of the legal claim: *In Austin, the claim was brought  under the FCRA—a federal consumer protection statute enforceable in arbitration if parties so agree. was for post-discharge  causes of action In Brown, the claim is for violation of the automatic stay, a statutory injunction arising only upon the filing of a bankruptcy petition, with enforcement entrusted by Congress to the Bankruptcy Courts themselves. 1. Request a Free Credit Report Through AnnualCreditReport.com Why it’s safe: This site is authorized by federal law under the Fair Credit Reporting Act (FCRA), specifically 15 U.S.C. § 1681j(a), and does not require users to agree to arbitration. It’s operated by the three nationwide credit bureaus (Equifax, Experian, and TransUnion) pursuant to a mandate from the FTC and CFPB. How: Fill out the request form (available on AnnualCreditReport.com) and mail it to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 3. Dispute Errors via Written Correspondence (Not Online Portals) Why it’s safe: Disputing inaccuracies via online portals often requires agreement to terms—including arbitration. Writing by mail allows the consumer to preserve legal rights and avoid waiver. How: Send a dispute letter directly to the credit bureau’s mailing address listed on the credit report. Always send via certified mail and retain proof. ⚠️ Avoid These Common Traps Trap Why to Avoid Credit monitoring “free trials” These nearly always include forced arbitration clauses buried in Terms of Use. Credit score apps (Credit Karma, Experian app, etc.) Accessing your score or report through these often requires broad arbitration agreements. Clicking "I Agree" to any Terms of Use Even if you never open or read the terms, the courts (as in Austin v. Experian) may find that you agreed to arbitration. 🛡️ Attorney Tip: If you're representing a consumer or advising clients post-bankruptcy, warn them not to dispute credit errors online or sign up for credit monitoring services through Experian, Equifax, or TransUnion without understanding the arbitration implications. Instead, have them use AnnualCreditReport.com or send disputes via certified mail. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document austin_v._experian.pdf (220.38 KB) Category 4th Circuit Court of Appeals

4th Cir.: In re Bestwall LLC- Solvent Debtor in Allowed in Bankruptcy Ed Boltz Wed, 08/13/2025 - 15:28 Summary: In this published decision, the Fourth Circuit affirmed the bankruptcy court’s denial of a motion to dismiss the Chapter 11 case of Bestwall LLC—a corporate entity created by Georgia-Pacific in a divisional merger (the so-called “Texas Two-Step”) to isolate and manage its asbestos liabilities. The Official Committee of Asbestos Claimants argued that federal courts lacked constitutional subject-matter jurisdiction because Bestwall was solvent and thus not “bankrupt” within the meaning of the Bankruptcy Clause. Writing for the majority, Judge Quattlebaum held that petitions filed under the Bankruptcy Code—even by solvent debtors—arise under federal law and are therefore within the constitutional and statutory jurisdiction of the federal courts. The panel emphasized that insolvency is not a jurisdictional requirement, even if it may be relevant at other procedural junctures, such as plan confirmation or bad faith dismissal. The court also rejected the idea that “financial distress” must exist for jurisdiction to lie, noting that the Bankruptcy Code itself does not define or require such a threshold. Commentary: Although Bestwall emerges from the asbestos litigation arena and involves corporate restructuring strategies unlikely to affect most consumer debtors directly, its implications for bankruptcy access are far-reaching. The decision affirms what consumer practitioners have long understood: insolvency is not a prerequisite to seeking relief under the Bankruptcy Code. Indeed, consumer debtors are routinely “solvent” when filing Chapter 13—especially those with significant home equity (amplified by rising property values) or retirement savings fully protected by exemptions. Similarly, Chapter 7 debtors may also be solvent on paper but lack liquidity to satisfy ongoing obligations or address litigation. Courts, trustees, and creditors typically deal with such circumstances through the best-interest-of-creditors test, the means test, or §707(b) motions—not by questioning the court’s jurisdiction. Unfortunately, the Bestwall majority missed an opportunity to contextualize Chapter 11 practice within the broader statutory framework of the Bankruptcy Code, including Chapters 7 and 13. This myopic focus on corporate and historical interpretations of the Bankruptcy Clause—as if bankruptcy were an exclusively commercial or eighteenth-century device—ignores the Code’s unified structure and the lived reality of consumer practice. Recognizing that balance-sheet solvency does not equate to financial feasibility, especially in the face of foreclosure, garnishment, or litigation, would have grounded the Fourth Circuit’s reasoning in the modern and practical operation of bankruptcy law. Just as corporate reorganizations like Bestwall’s may serve non-insolvency purposes (e.g., global claim resolution), so too do consumer cases often serve goals like saving a home, repaying taxes, or halting collection abuse. Courts evaluating corporate bankruptcy eligibility—particularly in the context of strategic filings like the Texas Two-Step—would benefit from comparing those cases to the standardized, transparent, and judicially accepted treatment of technically solvent consumer debtors in Chapter 13. Had the Fourth Circuit acknowledged this broader perspective, it could have offered a more complete constitutional and statutory analysis, and perhaps tempered concerns about “abuse” of bankruptcy protections by reminding critics that bankruptcy is not—and never has been—limited to the destitute. It is a tool of orderly debt resolution, whether the debtor is a Fortune 500 offshoot or a wage earner with two kids and a mortgage. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_bestwall.pdf (282.94 KB) Category 4th Circuit Court of Appeals

Law Review: Garrido, José and Kilborn, Jason J. and Rosha, Anjum, Personal Insolvency and Data Collection Systems. IMF Working Paper No. 2025/124 Ed Boltz Tue, 08/12/2025 - 16:48 Available at:  https://ssrn.com/abstract=5344990  Executive Summary: This paper examines the crucial role of data collection in personal insolvency regimes, highlighting its importance for effective policy making, legislative reforms, and economic analysis. As personal insolvency laws have evolved to address the complexities of modern credit-based economies, the need for comprehensive, systematic data collection has become increasingly apparent.  Personal insolvency laws offer several critical benefits across different stakeholders. For creditors, these laws maximize value and preserve inter-creditor equity through collective action processes. Debtors benefit from the relief provided and the opportunity for a "fresh start" or "second chance" through debt discharge. The broader economy and society gain from limiting the negative systemic effects of unregulated distressed debt, encouraging responsible lending practices, and fostering entrepreneurship.  Data collection serves two primary functions in personal insolvency: measuring the effectiveness and efficiency of the personal insolvency regime and gathering information for analysis and development of social policies. Robust data collection allows for informed decision making and evidence-based policy reforms. It enables the identification of trends and patterns in personal insolvency, ensures fairness and equity in the application of insolvency laws, facilitates research and analysis of consumer behavior and economic trends, and enables international comparisons and benchmarking.  When designing a data collection system, several key considerations must be taken into account. These include defining clear objectives aligned with the goals of the personal insolvency regime, ensuring data privacy and protection of sensitive personal information, standardizing data elements and formats for consistency and ease of analysis, minimizing the burden on respondents while collecting necessary information, and integrating data collection into existing insolvency processes and forms.  Effective implementation of a data collection system involves assigning responsibility to a relevant authority, such as a national statistics agency, insolvency regulator, or the courts. It requires designing user-friendly data collection forms with clear instructions, conducting pilot tests to identify and address potential challenges, implementing robust data security measures, providing training for staff involved in data collection and analysis, and regularly reviewing and updating the data collection process.  The paper recommends collecting data on various aspects of the personal insolvency system. This includes system efficiency metrics such as the number of applications, rejection rates,  reasons for rejection, processing times, and costs. Procedural outcomes, including discharge rates, reasons for denial of discharge, and plan completion rates, should also be tracked. Debtor demographics like age, gender, education, occupation, and geographic location provide valuable insights. Financial information, including types of creditors, debt composition, asset values, and income levels, is crucial for understanding the nature of personal insolvency cases. Additionally, institutional performance metrics for courts and insolvency practitioners should be collected to assess the efficiency of the system's administration.  In conclusion, implementing comprehensive data collection systems for personal insolvency is essential for assessing the effectiveness of personal insolvency laws in achieving their objectives. These systems provide valuable insights into broader economic and social trends, enable evidence-based policy decisions and legislative reforms, and enhance transparency and accountability in the personal insolvency system. While data collection requires investment in resources and infrastructure, the cost of not developing these systems is far higher. Countries should prioritize the assessment and improvement of their personal insolvency data collection mechanisms to ensure their insolvency regimes remain responsive, effective, and fair in the face of evolving economic challenges. By doing so, they can create a solid foundation for understanding and addressing the complex phenomenon of personal insolvency, ultimately contributing to more robust and equitable financial systems.  Commentary: In this IMF working paper, José Garrido, Jason Kilborn, and Anjum Rosha highlight what U.S. consumer bankruptcy attorneys have long sensed but lacked the infrastructure to definitively prove: the powerful insights, legislative ammunition, and litigation support that comprehensive demographic and procedural data could provide if the U.S. bankruptcy system were equipped with a well-structured data collection framework.   Advantages Demographic Visibility for Policy Reform:  As the authors note, “legislating in the dark is a disadvantage” in the age of big data. A data system that meaningfully tracks racial, gender, geographic, and income differences could reveal systemic inequities—such as those highlighted by Professors Argyle, Foohey, Lawless, and Thorne—but without relying solely on expensive academic studies and statistical inferences.  Disadvantages and Limitations Privacy and Stigma Risks: The paper rightly acknowledges that personal insolvency data implicates deep privacy concerns. In the U.S., where public PACER access already makes debtors vulnerable to reputational harm, enhanced data collection must be carefully anonymized and aggregated—or risk reinforcing creditor discrimination and social stigma. Potential Misuse by Creditors:  While designed to help debtors, such a system could be weaponized by creditors (or credit bureaus) to deny lending to individuals from zip codes with higher discharge rates or average plan failures. Attorneys should remain wary of data systems that operate without strong debtor-side advocacy.  Administrative and Technological Burden:  Implementing this kind of data collection—especially across 94 bankruptcy districts with wildly different practices—would require significant investment, training, and standardization. Without Congressional action or substantial funding, such reforms could become another unfunded mandate borne by already-stretched bankruptcy clerks and practitioners. A Caution and a Call To paraphrase Professor Kilborn’s prior work: we cannot fix what we refuse to measure. Just as North Carolina has learned from its (often under-analyzed) high volume of pro se filings and rural Chapter 13 cases, the U.S. as a whole needs a robust data regime that tracks not just filings and discharges, but who is filing—and who is not. Consumer attorneys should push for a demographic overlay to bankruptcy statistics—something more akin to the data available in student loans, healthcare, and criminal justice. Not to pathologize debtors, but to understand them—and build a better, fairer system in response.  For further reading: “Argyle et al., Race and Bankruptcy” (2023) “Foohey, Lawless, Thorne & Porter, Life in the Sweatbox” (2018) “Kilborn, Behavioral Economics, Overindebtedness & Comparative Consumer Bankruptcy: Searching for Causes and Evaluating Solutions” (2010) With proper attribution,  please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document personal_insolvency_and_data_collection_systems.pdf (2.88 MB) Category Law Reviews & Studies

Law Review: Paine, Fiona and Schoar, Antoinette and Thesmar, David, Attitudes to Debt: The Role of Moral Values (July 25, 2025) Ed Boltz Mon, 08/11/2025 - 18:36 Available at:   https://ssrn.com/abstract=5367017 Abstract: This paper tests how people’s moral values influence their views of debt contracts. We ask participants to make decisions about debt contracts in different hypothetical situations (vignettes). We separately measure their moral values using the Moral Foundations Questionnaire (Graham et al., 2009). We have three main sets of findings. First, differences in moral values strongly explain the cross-section of participants’ debt decisions. Participants with more conservative values show more support for credit score-based loan pricing, stricter forms of collateral, and tougher bankruptcy resolution. Second, when we randomly change the economic costs and benefits of debt within our vignettes, we find that participants change their answers in the direction predicted by economic theory. Third, participants’ beliefs of the functioning of the credit market strongly correlate with their moral values. Participants with conservative values are more likely to believe that strict enforcement and risk-based loan pricing provide incentives and are economically efficient. More liberal participants believe that insurance against unlucky shocks are important. Consistent with moral values being distinct from Bayesian beliefs, financial literacy does not attenuate moral values in shaping beliefs about what is economically efficient.  Commentary: While the Bankruptcy Code is a federal (and ostensibly)  neutral law, the emotional and moral terrain of debt is anything but. In their illuminating paper, Attitudes to Debt: The Role of Moral Values, Paine, Schoar, and Thesmar provide empirical backing to what many consumer bankruptcy attorneys witness daily: that a client’s willingness—or refusal—to file for bankruptcy is not purely a matter of finances or legal strategy, but a reflection of their deep-seated moral values. Layered atop this moral framework is another force—more corrosive and more hidden: shame. And as the recent study by Gladstone et al., Financial Shame Spirals: How Shame Intensifies Financial Hardship, highlights, shame is not just an effect of financial distress—it is a cause and accelerator of it. Together, these studies provide a powerful framework for attorneys seeking to guide clients through the emotional gauntlet of insolvency and also to engage meaningfully with public policy. Key Findings: Morals and Markets Paine et al. surveyed over 1,700 participants and found that: Moral values predict debt attitudes more strongly than political affiliation or financial literacy. Conservatives (respondents scoring higher on authority, sanctity, and loyalty) were more punitive toward defaulting borrowers.  Liberals (respondents scoring higher on fairness and care) supported more lenient debt relief. Efficiency arguments (e.g., higher credit costs from leniency) were less persuasive than personal stories. Responses shifted more significantly when a debtor’s narrative was introduced. Moral values shaped beliefs about how the credit system works, with conservatives viewing borrowers as responsible agents and liberals attributing financial distress more to systemic factors or bad luck. What emerges is a tale of *two moral economies*: one that values accountability through consequence and one that favors compassion and second chances. And both can be hostile to bankruptcy—just for different reasons. The Shame Spiral But even when a client intellectually understands the mechanics and morality of bankruptcy, they may still resist filing because of shame. Gladstone et al. demonstrate that: Shame creates a downward cycle—individuals who feel ashamed of their financial problems are less likely to seek help and more likely to engage in harmful coping strategies (e.g., taking out payday loans, ignoring bills, withdrawing socially). Unlike guilt, shame is about the self, not the act. A guilty client may say, “I made mistakes with money.”  A shamed client believes, “I am bad with money.” This shame inhibits action, especially filing bankruptcy, which many clients see as a public admission of failure. Thus, even clients whose moral intuitions align with forgiveness may remain trapped in shame. This can make bankruptcy seem less like a legal remedy and more like a moral confession—or worse, a scarlet letter. How Attorneys Can Use These Insights Reframing the Narrative:  Attorneys must help clients reframe bankruptcy as a tool for restoration, not a mark of disgrace. For clients with conservative leanings, this might mean emphasizing how bankruptcy allows them to return to being providers, taxpayers, and participants in the community. For liberal clients, focusing on systemic inequities and the justice of a fresh start may be more effective.  Both can be reminded: bankruptcy is not about escaping obligation—it is about confronting it *honestly and effectively*. It is the opposite of hiding.   Recognizing and Interrupting Shame Spirals:  Front-line staff and attorneys should be trained to listen for signs of shame: missed appointments, reluctance to provide documents, emotional withdrawal. These are not just logistical obstacles; they are symptoms of a deeper emotional burden. Normalize bankruptcy in your materials and in your voice. Tell clients how many others have filed—and gone on to thrive. Crafting Client-Facing Materials:  Website FA Qs, intake scripts, and mailers should be sensitive to shame. Avoid language like “are you failing to pay your debts?” in favor of “are debt payments making it harder to care for your family?” Speak to the outcomes, not the blame. Political and Legislative Implications:  For those engaging with policymakers and legislators, these findings offer a roadmap to shift the conversation around bankruptcy law: Moral arguments work: For conservatives, frame reforms as reinforcing personal responsibility *through structured second chances*. For liberals, emphasize the dignity of those burdened by systemic financial hardship. Stories matter more than spreadsheets: Humanize the policy debate with narratives—not just statistics—especially about veterans, elderly debtors, or families with medical bankruptcies. Combat financial shame through visibility: Encourage media coverage and public statements that present bankruptcy not as failure, but as financial recovery. Organizations like NACBA can use these findings to better shape amicus briefs, advocacy campaigns, and outreach to both sides of the political aisle. Conclusion:  Consumer bankruptcy attorneys have long operated not just as legal advisors, but as therapists, pastors, and sometimes confessors. These two studies—Attitudes to Debt and Financial Shame Spirals—offer a framework to understand why clients come to us burdened not only by debt, but by  moral conflict and emotional injury. By navigating these internal landscapes with empathy and strategy, we can help our clients not only discharge debt but reclaim dignity. And by bringing this understanding to legislators and the public, we can move toward a bankruptcy system—and a broader financial culture—that is not just legally sound, but morally wise. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document attitudes_to_debt_the_role_of_moral_values.pdf (1.2 MB) Category Law Reviews & Studies