Law Review Note: Gatti, Kathleen- The Regulatory Power Exception to the Automatic Stay Ed Boltz Thu, 11/07/2024 - 19:14 Available at:   https://scholarship.law.stjohns.edu/bankruptcy_research_library/354/ Summary: Upon a filing a petition under title 11 of the United States Code (the "Bankruptcy Code"), all actions against a debtor are generally automatically stayed. While the automatic stay is broad, there are exceptions. Under the regulatory power or police power exception, a governmental unit or organization is not stayed from taking any action "to enforce such governmental unit's or organization's police and regulatory power." Not all actions by a government are immune from the automatic stay. Courts have generally held that an action to effectuate a "public policy" is not stayed, but an action to advance the government’s "'pecuniary interest" is stayed. This memorandum explores the regulatory power exception of the automatic stay. Part A of this memorandum will describe the subcategories of the regulatory power exception, namely public policy or public welfare actions. For the purposes of this memorandum, the discussion is limited to government actions against corporations in the environmental and employment law spheres, as these are the two major areas where the regulatory exception is asserted. Part B will describe actions in the government's pecuniary interest that do not qualify as exempt. Commentary: This note focuses solely on corporate bankruptcy and government regulatory powers,  to the exclusion of the same on consumer or individual cases. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document the_regulatory_power_exception_to_the_automatic_stay_1.pdf (255.85 KB) Category Law Reviews & Studies

Law Review Note: Meehan, Lianna- Amended Proofs of Claims that Present a new Request for Relief Could be Disallowed Ed Boltz Thu, 11/07/2024 - 19:12 Available at:   https://scholarship.law.stjohns.edu/bankruptcy_research_library/365/ Abstract: When a creditor seeks to amend a proof of claim after the bar date has passed with an amount different to that provided in the original proof of claim, courts engage in an equitable analysis of multiple factors to determine whether to grant or deny the motion to amend. Under certain circumstances, Bankruptcy Rule 9006(b)(1) gives creditors an opportunity to file a proof of claim after the bar date has passed. This memorandum examines whether a creditor can amend a timely-filed proof of claim after the bar date has passed with an amount that is unrelated to the costs in the original proof of claim. Part I discusses how a completely new claim will be disallowed under the Pioneer test. Part II discusses the length of the delay and whether a showing of good cause could allow the claim. Part III discusses how bankruptcy judges have full discretion over whether to allow an amended proof of claim. Part IV discusses chapter 11 proceedings and the importance of avoiding disruption after a plan is filed. Part V discusses how a creditor’s reliance on legal counsel will not fulfill the excusable neglect standard when their attorney misses a deadline such as the bar date. Commentary: While focused on late filed claims in Chapter 11 cases,  this note would have benefited from examining how in Chapter 13 both  Rule 3002.1  allows the filing of what are essentially post-petition claims  by mortgage servicers and 11 U.S.C. §1305  explicitly allows post-petition tax claims, as well as claims necessary "for the debtor's performance under the plan."  That Congress and the National Bankruptcy Rules Committee (with the approval of the Supreme Court and Congress)  created procedures, requirements and restrictions in Chapter 13  but apparently not in Chapter 11,  would seem pertinent. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document amended_proofs_of_claims_that_present_a_new_request_for_relief_co.pdf (354.93 KB) Category Law Reviews & Studies

Law Review: Gergen, Mark P., Contract Law's Morality and Punitive Debt Enforcement (August 08, 2024). Ed Boltz Thu, 11/07/2024 - 04:08 Available at:   https://ssrn.com/abstract=4976632 or http://dx.doi.org/10.2139/ssrn.4976632 Abstract: This article uses punitive enforcement of personal debt to critically examine contemporary moral theories of contract. Charles Fried and Peter Benson take the position that contract law appropriately embodies the morality of commercial exchange. This has unacceptable implications for enforcement of personal debt because it licenses creditors to demand and enforce as harsh terms as the market allows and treats debtor protection laws (like bankruptcy law) as problematic social interventions in the natural order of contract law and the marketplace.  Critical and reconstructive theories do better. Seana Shiffrin’s warning contract law and the morality it embodies could weaken norms of interpersonal morality is spot on with respect to punitive debt enforcement. It would be tragic if the morality of contract law weakened a long-standing interpersonal norm requiring a creditor to be lenient when a debtor is unable to pay for reasons beyond their control. Liberal contract theory does even better. It demands lawmakers do an autonomy accounting in deciding how to regulate debt enforcement and put a thumb on the scale in economic analysis in favor of reducing pain suffered by debtors who default or who pay in distress. The thumb’s weight depends on whether inflicting pain increases access to credit or reduces the cost of credit because of the different stakes for people’s autonomy. Liberal contract also would replace the morality of commercial exchange with a norm demanding people treat each other as substantive equals in contractual interactions. This norm would have profound implications for punitive debt enforcement. The required changes in creditor behavior are so great that it casts doubt on whether this is a cognizable legal norm currently. But this is not a reason to dismiss the norm of relational justice as a pipe dream. The morality of contract law is to, some extent, a social construct, like contract law itself. If contract law can be reconstructed along genuinely liberal lines, then there will be a robust set of rules tempering the power of creditors to punish people who default. That will be understood as aspects of a general requirement that people treat each other as substantive equals. Broadening contract theory to include debtor protection laws and linking the leniency norm to the norm of relational justice, are small steps in this direction. Commentary: The inclusion of David Graeber's anthropological research and economic theories,  particularly from Debt: The First 5,000 Years,  as a counter ( along with work by Seana Shiffrin) to the arguments  of Charles Fried's Contract as Promise and Peter Benson's Justice in Transactions  is a welcome inclusion in this paper and bankruptcy academic literature in general.   Another analysis of the morality of debt  (unmentioned in this article) is “The Ethics of Bankruptcy” by Jukka Kilpi, which provides a Kantian analysis of bankruptcy based on maximizing an individual’s autonomy, both in keeping promises and when discharge from those obligations becomes necessary. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document contract_laws_morality_and_punitive_debt_enforcement.pdf (663.74 KB) Category Law Reviews & Studies

M.D.N.C.: Custer v. Dovenmuehle Mortgage- NC Debt Collection Act Does Not Require Default for Protections to Apply Ed Boltz Wed, 11/06/2024 - 17:41 Summary: George Custer sued Dovenmuehle Mortgage, Inc. (DMI) on behalf of a proposed class, alleging that DMI’s phone payment fee violates North Carolina’s Debt Collection Act (NCDCA) and Unfair and Deceptive Trade Practices Act (UDTPA). DMI moved to dismiss the complaint, arguing that the fee was legally permissible, the NCDCA didn’t apply because Custer wasn’t in default, and that the Mortgage Debt Collection and Servicing Act superseded the NCDCA. The court denied DMI's motion, concluding that Custer had sufficiently alleged claims under both statutes. For the NCDCA claim, the court found that the law’s protections do not depend on a consumer being in default and that DMI hadn’t shown a specific legal right to impose the fee. The court also found the UDTPA claim plausible, as Custer alleged that DMI’s fees were unfair and misleading, particularly because DMI did not disclose that these fees were unrelated to actual costs. The case will proceed to further litigation. Commentary: The North Carolina Court of Appeals held that a “debt” under the NCDCA does not require a consumer to be in default. Onnipauper LLC v. Dunston, 290 N.C. App. 486, 490, 892 S.E.2d 487, 491 (2023).  (Attached.) Very nice work by Ben Sheridan and Jed Nolan,  along with the rest of their legal team. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document onnipauper_llc_v._dunston.pdf (150.74 KB) Document custer_v_doevenmuhle.pdf (248.83 KB) Category Middle District

Law Review: Steinbaum, Marshall and Jiménez, Dalié and Glater, Jonathan and Fann, Chloe and Morales Sanchez, Axel and Collier, Daniel, Student Loan Borrowers and Pandemic-Era Interventions in California (August 15, 2024). Ed Boltz Wed, 11/06/2024 - 17:38 Available at: https://ssrn.com/abstract=4939397 or http://dx.doi.org/10.2139/ssrn.4939397 Abstract: From 2020 to 2023, the federal government implemented a series of large-scale, high-profile interventions to address the financial uncertainty and economic emergency caused by the COVID-19 pandemic, and to provide long-term fixes to several existing programs aimed at helping ease the burden of student loans on borrowers and families. These interventions included several rounds of funding passed by Congress to provide direct funding to institutions of higher education and students, a pause on federal student loan payments, and reforms to address long-standing problems in existing debt relief programs including the Public Service Loan Forgiveness (PSLF) program. Given the nationwide scale and simultaneous nature of many of these efforts, research on the impacts of any single policy or program remains limited. This analysis seeks to better understand the effects of these policies on borrowers, families, and students in California. Leveraging proprietary credit panel data, qualitative interviews with borrowers, and publicly available data from the U.S. Department of Education, we focus on the effects of three major interventions: the student loan payment pause, a one-time PSLF “waiver” to increase access to debt relief for public service workers, and funding to institutions from the Higher Education Emergency Relief Fund (HEERF). Our findings include: The student loan repayment pause narrowed the gap in homeownership between relatively advantaged and disadvantaged households in California and reduced the likelihood of delinquency on any type of loan more for borrowers subject to the payment pause. According to qualitative interviews of borrowers in California, the payment pause allowed student loan borrowers greater opportunity to consider family planning, save money, reduce other debts, relieve mental distress, while also enabling some participants to afford meaningful life experiences and make needed investments, such as house repairs. Improvements to the PSLF program that led to loan cancellation allowed borrowers the financial room to make large purchases and catch up on savings, as well as provide immediate economic support to family members. In California, public higher education institutions dedicated HEERF funds disproportionately to defraying the cost of tuition for students, which may have contributed to the state largely maintaining enrollment rates as institutions in other states suffered considerable declines.   Commentary: While this work is focused on the impact of student loan relief in California  during the pandemic,  it is still useful for showing the benefits  for borrowers of student loan relief elsewhere, with hopefully further research being forthcoming. And while it may seem obvious  to many that those individual benefits to borrowers described in this paper  add up together to societal benefits,  these findings would likely have broader political  appeal if those connections were made more explicit, viz.   How does  student loan relief improve  society as a whole,  not just individuals?  This could also  investigate issues of more conservative appeal such as if and how  student loan relief increased entrepreneurship and  the formation of small  businesses,  whether it encouraged  marriage (and reduced divorce),  allowed contributions to charities, etc. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document student_loan_borrowers_and_pandemic-era_interventions_in_california.pdf (917.27 KB) Category Law Reviews & Studies

Bankr. M.D.N.C.: In re Okeiyi- Immigration Support Affidavits are not Domestic Support Obligations Ed Boltz Wed, 11/06/2024 - 17:35 Summary: Asilonu,  while residing in Nigeria,  became engaged to Okeiyi's daughter.  Okeiyi submitted a Petition for Alien Fiancé on behalf of Asilonu with the United States Citizenship and Immigration Service (“USCIS”) to successfully assist him with gaining U.S. resident status.  Subsequently,  Okeiyi  also executed an Affidavit of Support as a joint sponsor for Asilonu's successful application for permanent residency.    These affidavits are legally binding contracts between the sponsor (Okeiyi) and the United States Government, which may be enforced by the immigrant beneficiary (Asilonu) and obliged Okeiyi to provide  Asilonu support at 125 percent of the Federal Poverty Guidelines until a  terminating  event as defined in the affidavit.  Separation and divorce are not terminating events under the affidavit, so of course, Asilonu and Okeiyi's daughter separated.  Asilonu, who pursued a graduate degree for several years,  brought suit against Okeiyi for this financial support,  eventually prevailing after a jury trial and being awarded  $45,862.50.    Okeiyi filed Chapter 7 bankruptcy and Asilonu  sought to have this debt declared a nondischargeable “domestic support obligation”  under 11 U.S.C. § 523(a)(5)  or (15) or for willful and malicious injury under 11 U.S.C. § 523(a)(6).   The bankruptcy court dismissed Asilonu’s  (a)(5) and (a)(15) claims finding that that Asilonu, as Okeiyi’s former son-in-law, did not fit the statutory requirements for a nondischargeable domestic support debt, which must be owed to a spouse, former spouse, or child.   The court further found that a breach of contract, without evidence of intent to cause harm, did not meet the standards for “willful and malicious injury.” Consequently, the court dismissed Asilonu’s claims, ruling the debt dischargeable. Commentary: While not necessarily groundbreaking and something of a niche issue, this case serves as a reminder of the limits of dischargeability exceptions in Chapter 7. Some of these issues may be mitigated in Chapter 13 cases, which have less encompassing exceptions to discharge,  particularly the differences between 11 U.S.C. § 523(a)(6) and § 1328(a)(4). With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_okeiyi.pdf (208.53 KB) Category Middle District

Bankr. E.D.N.C.: In re Lamb- Burden of Establishing Cram-Down Value lies with the Debtor Ed Boltz Tue, 11/05/2024 - 15:55 Summary: The bankruptcy court  denied the confirmation of the debtors' Chapter 13 plan after objections from NewRez LLC (Shellpoint). The Lambs proposed to reduce Shellpoint’s claim on their mobile home to $6,000, treating the rest as unsecured, based on the property’s alleged value. Shellpoint objected, arguing the value was too low, and provided a J.D. Power Report indicating a higher value. At the hearing, Larry Lamb testified about the home’s deteriorated condition, including roof leaks, broken HVAC, and water damage. However, he did not provide a clear basis for his $6,000 valuation, and no expert valuation was presented by either party. The court found Lamb’s valuation unsupported by sufficient objective evidence, such as a comparable market price or industry-standard value like NADA to "discern any basis for that figure." The court ruled that the burden of proof for valuing the property in a cram-down scenario rests on the debtor. Since the Lambs did not sufficiently prove the $6,000 value by a preponderance of the evidence, the court sustained Shellpoint’s objection and denied confirmation without prejudice, allowing the Lambs an opportunity to present stronger evidence of the mobile home’s value. Commentary: This case should not be understood to hold that a debtor's valuation of property is not sufficient,  but merely that the debtor must be able to provide a basis for the court to discern how the debtor reached that value.  A valuable counter-example, also from the E.D.N.C.,  is  In re Ward,  where the debtor explicitly testified that  based on her "independent knowledge of sales and events affecting home values in her neighborhood", the tax value was accurate.  Perhaps had Mr.  Lamb here testified  that,  based on his independent knowledge,  having lived in a mobile home for at least 25 years (almost certainly longer than anyone else in the courtroom for that hearing),  and knowing the costs of repairs, the $6,000 value was accurate and perhaps even generous to Shellpoint. In response,  the debtor,  who still has the right to propose a new plan,  should perhaps send discovery to Shellpoint requiring it to produce evidence of how much it has actually sold used mobile homes in the last 10 years compared to the J.D. Power NADA values for each of those mobile homes.   Compilation and production  of that data would certainly assist the court in discerning the validity of J.D. Power value,  but Shellpoint might reconsider the return on investment in complying with such discovery, particularly in a dispute that at worst would result in a $25,000 cram-down and loss. To read a copy of the transcript, please see: With proper attribution,  please share this post.  Blog comments Attachment Document in_re_lamb.pdf (219.2 KB) Category Eastern District

Student Debt Relief: Nonbankruptcy Hardship Relief for Student Loans under the Higher Education Act Ed Boltz Tue, 11/05/2024 - 01:15 Available at: https://www.regulations.gov/document/ED-2023-OPE-0123-32489 Executive Summary: These proposed regulations would clarify the use of the Secretary's long standing authority to grant a waiver of some or all of the outstanding balance on a Federal student loan. (1) Under this proposed rule, the Department would specify how the Secretary would exercise discretionary authority to grant waivers using the following standard: the Secretary would determine that a borrower is experiencing or has experienced hardship related to the loan: (1) that is likely to impair the borrower's ability to fully repay the Federal government, or (2) that renders the costs of enforcing the full amount of the debt not justified by the expected benefits of continued collection of the entire debt (proposed § 30.91(a)). The proposed regulations would then provide a non-exhaustive list of factors the Secretary may consider in deciding whether to grant relief (proposed § 30.91(b)). Then, proposed § 30.91(c) would provide a process by which the Secretary may grant individualized automatic relief through a predictive assessment based on the factors in proposed § 30.91(b). Should the Secretary choose to exercise such discretion, proposed § 30.91(c) would provide immediate, one-time relief as soon as practicable. And, proposed § 30.91(d) would provide a primarily application-based process by which the Secretary may provide additional relief on an on-going basis. The proposed regulations describe two different pathways that the Secretary could take to exercise discretion to grant a waiver in instances where the borrower meets the hardship standard in proposed § 30.91(a). We describe those pathways in greater detail in the preamble below to assist the public in understanding how the proposed regulations would operate and to clarify terminology to guide such a discussion. The first pathway would be a “predictive assessment,” pursuant to proposed § 30.91(c), under which the Secretary would consider information in the Department's possession to determine whether the borrower meets the proposed standard for hardship in § 30.91(a) such that their loans are at least 80 percent likely to be in default within the next two years. The Department would make a predictive assessment that considers factors indicating hardship (described in proposed § 30.91(b)) and may, in the Secretary's discretion, then provide immediate relief by granting waivers to eligible borrowers, without requiring any action by those borrowers to seek that relief. The second pathway, which is under proposed § 30.91(d), would be a determination based on a “holistic assessment” of the borrower's circumstances (based on the factors in proposed § 30.91(b)) that meets the proposed hardship standard for waiver specified in proposed § 30.91(a). This assessment would focus on borrowers who are not otherwise eligible for the immediate relief under proposed § 30.91(c) and who are not eligible for relief sufficient to redress their hardships through other Department programs supporting student loan borrowers. Under this pathway for relief, the Department would conduct a holistic assessment of the borrower's hardship based on information about the borrower's experience with the factors in proposed § 30.91(b) obtained through an application or based on information already within the Department's possession, or a combination of the above. A borrower would be eligible for relief if, based on the Department's holistic assessment, the Department determines that the borrower is highly likely to be in default or experience similarly severe negative and persistent circumstances, and other options for payment relief would not sufficiently address the borrower's persistent hardship. The two pathways for relief described above, namely the immediate relief in proposed § 30.91(c) and the additional relief in proposed § 30.91(d), would operate separately and distinctly from each other and would therefore be fully severable. Because these proposed regulations only concern waivers due to hardship, these proposed hardship waivers would therefore also be separate and distinct from other proposed rules related to waivers of Federal student loan debt. (2)   Table 2.1—Summary of Proposed Provisions Provision Regulatory section Description of proposed provision Standard for waiver due to likely impairment of borrower ability to fully repay or undue costs of collection § 30.91(a) Provides that the Secretary may waive up to the outstanding balance of a Federal student loan held by the Department if the Secretary determines that the borrower has experienced or is experiencing hardship related to such a loan such that the hardship is likely to impair the borrower's ability to fully repay the Federal government or the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt. Factors that substantiate hardship § 30.91(b) Provides a non-exclusive list of factors the Secretary could consider in determining whether a borrower meets the standard for waiver based on hardship. Immediate relief for borrowers likely to default § 30.91(c) Provides that the Secretary may consider the borrower's factors indicating hardship described in proposed § 30.91(b) to exercise discretion to waive all or some of outstanding loans held by borrowers who the Secretary determines have experienced or are experiencing hardship such that their loans are at least 80 percent likely to be in default in the two years after the publication of the proposed regulations. Process for additional relief § 30.91(d) Provides that the Secretary may rely on data obtained from an application or by any other means, or potentially a combination or both, to provide relief for borrowers who are highly likely to be in default or to experience similarly severe and persistent negative circumstances, and other payment relief options do not sufficiently address the borrower's persistent hardship. Commentary: The non-exhaustive list of factors related to the borrower that the Secretary may consider  under Proposed § 30.91(b)  in determining whether a borrower meets the hardship standard for relief under these regulations include: Household income; Assets; Type of loans and total debt balances owed for loans described in proposed 30.91(a), including those not owed to the Department; Current repayment status and other repayment history information; Student loan total debt balances and required payments, relative to household income; Total debt balances and required payments, relative to household income; Receipt of a Pell Grant and other information from the Free Application for Federal Student Aid (FAFSA) form; Type and level of institution attended; Typical student outcomes associated with a program or programs attended; Whether the borrower has completed any postsecondary certificate or degree program for which the borrower received title IV, HEA financial assistance; Age; Disability; Age of the borrower's loan based upon first disbursement, or the disbursement of loans repaid by a consolidation loan; Receipt of means-tested public benefits; High-cost burdens for essential expenses, such as healthcare, caretaking, and housing; The extent to which hardship is likely to persist; and Any other indicators of hardship identified by the Secretary. While this does not explicitly recognize the filing of a bankruptcy or the likelihood of a bankruptcy as a factor in this nonbankruptcy hardship relief,  § 30.91(c)  would evaluate for nonbankruptcy hardship  relief if the debtor is "at least 80 percent likely to be in default in the two years after these proposed regulations are published."  Unless a Chapter 13 plan, which under the Bankruptcy Code must last at least 36 or 60 months,  provides for substantial  and regular payments of student loans during this period, the likelihood of their default is well above 80%, if not virtually certain, arguably qualifying for non-bankruptcy hardship relief. Of course,  all of this depends on the results of  the 2024 presidential election. With proper attribution,  please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document ed-2023-ope-0123-32489_content.pdf (556.29 KB) Category Student Loan Debt

Bankr. M.D.N.C.: In re Quevedo- EITC not Exempt as "support payment" & Division of Tax Refund between spouses Ed Boltz Tue, 11/05/2024 - 00:25 Summary: The  Bankruptcy Court for the Middle District of North Carolina sustained the objection filed by the Chapter 7 trustee against the debtor's claimed exemptions for their 2023 federal and state tax refunds—$10,035 federal and $1,490 state—based on North Carolina’s statutory exemptions for at N.C.G.S.  § 1C-1601(a)(12)  for “support payments” and with the Female Debtor's wildcard exemption. The trustee objected, arguing that the tax refunds, specifically the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC), do not qualify as “support payments” under N.C. Gen. Stat. § 1C-1601(a)(12),  which protects  "funds that have been received or to which the debtor is entitled, to the extent the payments or funds are reasonably necessary for the support of the debtor or any dependent of the debtor."    The court agreed, interpreting the statute as applying only to alimony, support, and child support payments within a family law context, not tax credits. The court rejected the debtors' interpretation, which would make nearly any financial support eligible for exemption, as overly broad. Additionally, the trustee argued that Bellido could not claim ownership of the refunds through the wildcard exemption since she had no taxable income or withholdings for 2023.   In that regard, the court ruled that the correct method for allocating joint tax refunds in bankruptcy cases should be based on the “separate filings rule,” which calculates each spouse’s share as if they filed individually. This approach, consistent with IRS guidelines, more accurately reflects individual ownership in joint refunds than the 50/50 division suggested by the debtors. As a result, the trustee’s objection was sustained, disallowing the claimed exemptions. The court ordered the ruling to be followed in contested cases, advising that trustees and debtors negotiate to avoid unnecessary litigation. Commentary: As usual  when ruling on exemptions,  the court began with the presumption that "exemption laws are to be liberally construed in favor of the debtor and allowance of the exemption."  That presumption,  however,  seems to always be little more than a feather on the scales  and which,  even when other IRS Guidance describes the purpose of the EITC being to  "[help] low- to moderate-income workers and families get a tax break" ,  is outweighed by trustee demands and hard-hearted courts concerned that protection the EITC as  "funds reasonably necessary for the support of the debtor or any dependent of the debtor"    would be an over-extension that would render the other sections of  N.C.G.S.  § 1C-1601(a)(12) superfluous. Research from the Center on Budget and Policy Priorities  report Policy Basics: The Earned Income Tax Credit has shown that  "that families mostly use the EITC to pay for necessities such as food and housing, and in some cases, for education or training to boost their job prospects and earning potential."  Recognition of this purpose and usage of EITC funds,  together with a full application of the "reasonable"  limitation in  N.C.G.S.  § 1C-1601(a)(12,  would have allowed both a liberal construction that still conservatively examined the need for the EITC funds. Certainly this is another example of how North Carolina's exemptions need to be reformed  or even the federal bankruptcy exemptions  more uniformly provide for the protection of these funds,  regardless of how stingy an opt-out state might be.   In choosing the "separate filings rule" for determining how much of a tax refund belongs to each spouse,  the bankruptcy court selected the most complicated resolution.  This will encourage consumer debtors attorney to prepare these sort of hypothetical tax returns,  increasing the costs of filing bankruptcy for low- to moderate-income workers and families (but heck-  they've got EITC funds and would certainly prefer to pay their own lawyer than hand those over to  some Chapter 7 trustee),  delaying the filing of their bankruptcy so the EITC funds can be reasonably used for the support of their family,  or diverting  those debtors into Chapter 13 cases,  where the trustees generally have a greater willingness to adopt a negotiated resolution (because unlike with Chapter 7 Trustees, their personal pecuniary interests are not meaningfully impacted by seizing funds.) With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document 23-80195_quevedo_-_order_sustaining_trustees_objection_to_amended_exemptions.pdf (806.22 KB) Category Middle District

Entering 2025, more and more Americans are falling behind on their bills as consumer debt continues to skyrocket. US households are relying more heavily on credit cards in order to meet basic needs and combat the mounting economic pressures — rising inflation, historically high auto loan payments, soaring student loan debt, insufficient retirement savings, and more. We’ll dive into key factors behind this consumer debt crisis and explore potential debt relief solutions, including personal bankruptcy. As Inflation Increases, So Does Financial Insecurity The cost of living in 2024 still remains higher than in previous years, despite the Fed attempting to lower and stabilize inflation at their 2% target rate. According to an October 2024 Bank of America survey, nearly 45% of Americans perceived themselves as living paycheck to paycheck. Housing, transportation, and utilities are getting more expensive, forcing individuals and families to make difficult choices like maxing out their credit cards or cutting back on essentials. Groceries alone have gone up by 2.3% compared to this period last year. The US Department of Agriculture (USDA) reported a 2.5% increase for the cost of meats, and a 40% spike for the cost of eggs. Stronger Reliance on Credit Cards for Basic Needs  With high inflation and stagnant wages, many Americans have turned to credit cards as a lifeline for covering basic needs. The Federal Reserve Bank of New York reported that credit card debt in the US has now surpassed $1.14 trillion dollars, which is 5.8% higher than the same period last year. It only pushes consumers to persistent debt with the average AP Rs having now reached a record-high of 22.8%, according to the Federal Reserve Board. Consequently, Americans are struggling to make minimum payments. The risk of penalties and lower credit score make borrowing even more costly. Read our blog article on how to clear your debt when you have maxed out credit cards. The Costly Resurgence of Student Loan Payments The COVID-19 pause on student loans set interest rates to 0%, which gave borrowers an opportunity to pay student loans interest-free or take a break from paying altogether. However, in September 2023, the 3-year long administrative forbearance came to an end. Now there are over 46 million borrowers with an outstanding total balance of $1.75 trillion dollars in federal and private student loan debt, paying an estimated $500 per month. This financial strain has borrowers resorting to deferred payments, income-driven repayment plans, or applying for a student loan discharge. Rainy Day Funds Are Depleting & Disappearing With a lack of emergency funds comes a lack of financial preparedness. According to Bankrate’s 2024 annual emergency fund report, 56% of US adults wouldn’t be able to pay for an emergency expense of $1,000 or more. This could be a trip to the emergency room, unexpected car repair, or income to pay for expenses while between jobs. Financial advisors generally suggest setting aside at least 3 to 6 months of living expenses for life emergencies. Start rebuilding your rainy day fund by opening up a savings account and budgeting your expenses each month. Seek a Way Out with Debt Relief Programs If your debt continues to pile up and starts to feel unmanageable, consider bankruptcy, debt consolidation, and other debt relief options. Chapter 7 bankruptcy wipes out all unsecured debts like credits cards or medical bills in exchange for selling some of your assets, often taking a few months to complete. Chapter 13 bankruptcy lets you keep your assets and puts you on a reorganization plan to pay back a portion of your debt over a 3-5 year timeframe based on what you can afford. Yes, your credit scores will be impacted, but they offer a fresh start for what may seem like an inescapable cycle of debt. Also, the stigma of bankruptcy has lessened over the years as many Americans have recognized that it’s more important to regain their financial stability than handle an uphill battle all by themselves. Safely & Confidently Navigate Bankruptcy with Lakelaw If you’re struggling with debt, you don’t have to go through this alone. Financial challenges can be overwhelming, but facing them is a true sign of strength, not failure. At Lakelaw, we will take care of you with the kindness, courtesy, respect, professionalism, and dedication that has been our hallmark since we were founded in 1999. We’ve been named one of the best bankruptcy law firms in the country by Best Lawyers, Super Lawyers, U.S. News & World Report, Martindale-Hubbell, and Lawdragon. We also have over 50 5-star reviews across Google and Yelp. Get a Free Confidential Consultation The post America’s Silent Consumer Debt Crisis appeared first on Lakelaw.