Bankruptcy Article of the Week
Lien Avoidance Abuse - Another Myth Dispelled
The 1978 amendment to the Bankruptcy Code allowing debtors to avoid nonpossessory, nonpurchase money liens on household goods turned a spotlight on yet another area of creditor abuse, and gave rise to FTC regulations instituting similar protections outside of bankruptcy. These limitations arose largely out of concern that creditors were taking advantage of low-income borrowers by taking liens on property that had primarily sentimental value.
But the bankruptcy courts had wide latitude in determining what items fell within the statutory protections, and in the drafting of BAPCPA the perception of debtor abuse weighed heavily. We're all too familiar with the perceived abuses trumpeted by the credit industry—the picture of courts teeming with deadbeat debtors who had cheerfully run up credit card bills secure in the knowledge that bankruptcy would make it all go away. A similar vision was suggested in relation to loans secured by household goods: what if debtors knew that they could avoid those liens, and so ran out and took out loans secured by household good knowing that they were going to file for bankruptcy and would be able to avoid those liens?
In response, Congress narrowed the list of household goods as defined in 11 U.S.C. § 522(f)(4). Pursuant to statutory requirement, the EOUST recently submitted a report to Congress on the impact of that change. Unsurprisingly, the primary conclusion in the report—based in large part on a study by the RAND Institute for Civil Justice—was that more time and more data would be required in order to draw any meaningful conclusions.
Early data, however, suggest that the change in the statutory language hasn't had much practical effect. The study addressed three key questions:
- Have the average debtor's general financial characteristics changed from before to after BAPCPA enactment?
- Has there been a significant change in the amount or frequency of loans secured with household goods by the average debtor from before to after BAPCPA enactment?
- Has the distribution of debtors' intentions regarding household goods pledged as collateral for a secured, nonpossessory, nonpurchase money loan changed from before to after BAPCPA enactment?
The first question was intended simply to rule out another possible explanation for any discrepancies discovered, and the only significant change noted was an overall drop in assets and secured claims—the researchers suggested that this was likely related to the decline in real property values and associated obligations.
The frequency of loans secured by household goods affected by the change actually increased, significantly weakening the idea that debtors were motivated to secure such loans by the availability of avoidance in bankruptcy. Insufficient information was collected to make a statistically valid assessment of any shift in debtors' intentions.
The report's summary section states directly that it is impossible to draw any conclusions regarding BAPCPA's effect on debtors' lien-avoidance rights. The report goes on to acknowledge that the study has made no effort to assess whether BAPCPA has accomplished its intended goals.
The report does point out, though, that it appears that Chapter 7 debtors rarely avail themselves of the nonpossessory, nonpurchase money lien avoidance rights in Chapter 7 bankruptcy post-BAPCPA…and rarely did so pre-BAPCPA. Although the study asserts that additional data is needed, it appears that the household goods lien-avoidance issue is just one more area in which Congress was persuaded to act to solve a problem that never existed.
Did You Know.
that you can now purchase telephonic credit counseling and debtor education courses for your clients?
That's right! Clients without computers can now complete the credit counseling and debtor education requirements via our telephonic courses, which are available for purchase from the convenience of your firm's account.
Simply begin by logging in to your SFT account and creating a client profile. Once the client profile is registered in your shopping cart, the options to purchase the telephonic credit counseling and debtor education courses will appear.
After making your purchase, follow the prompt from the ensuing screen to "Click Here for Instructions to access..." the corresponding course. Taking this action will bring you to a screen with the phone number and all other information that the client will need in order to complete the telephonic credit counseling or debtor education course that you've just bought.
Got questions? Feel free to call our new toll free telephone number at 1-800-435-9138 or email info@startfreshtoday.com with any questions you may have about purchasing the telephonic credit counseling and debtor education courses.
Please check out next week's newsletter for more information on our new telephonic credit counseling and debtor education courses.
ABI Podcast with Director of US Trustees' Executive Office
On November 16th, the American Bankruptcy Institute (ABI) interviewed Cliff White, the Director of the Executive Office for U.S. Trustees.
White discussed a variety of topics during the interview, including the Program's implementation and enforcement of BAPCPA, its work in the Chapter 11 area, and the recent Congressional hearing on its efforts to combat abuse.
Listen to the podcast on the ABI website at http://podcast.abiworld.org.
Need More Client Inserts?
If you're in need of more copies of credit counseling and debtor education inserts for your client intake folders, take advantage of our new ordering process.
Simply access our new order form. From here, let us know whether you are or are not a SFT customer, fill out the required fields as indicated by a red *, and click "Submit" to order your new client inserts.
As always, we will ship out your new inserts free-of-charge as soon as possible. All we ask is that you include your new inserts in your client intake folders. Thanks again for your cooperation!
Have a Safe & Happy Thanksgiving
Kevin's Corner
Practice Management Tip of the Week:
"In last week's newsletter, we talked about the importance of tracking data to help you determine which of your marketing efforts are generating the most business and the highest fees.
"Collecting that data consistently and making sure that this information gets compiled in a meaningful way is critical—otherwise, you've wasted the time it takes to gather the information.
"First, be consistent: gathering useful data means asking every consumer who comes through the door or calls your office the same set of questions. And, as we mentioned last week, those questions should be detailed: you're not just looking for "on television" or "in the yellow pages", but specifics about the time, the channel, the book, the advertisement.
"Next, make sure that the data is collected in a central location where it can be updated, synthesized and analyzed. That may be as simple as creating a spreadsheet on a shared network drive that can be updated by anyone who comes in contact with prospects and clients, or it may mean assigning someone to gather this information from the rest of the attorneys and staff on a regular basis and process it.
"This information should be updated at every stage of the process, so that you're tracking not just inquiries but appointments set, appointments kept, and conversions.
"You don't have to depend on your prospects' responses for all of your information. Here are some additional steps you can take to gather accurate information about your sources of business and make use of that data:
- Use a unique telephone number for each yellow page ad you place, so that you know immediately where that prospective client saw your ad;
- Consider using a unique telephone number for any print or television advertising as well, though you'll have to weigh the benefits of tracking against the advantage of a recognizable "vanity" number for your practice; and
- Keep track of fees along with inquiry and conversion information; it may turn out that some marketing outlets attract higher-fee cases than others.
"The information you gather will help you determine not only which marketing sources are paying off for you, but how to handle inquiries from each as they come through the door—or over the phone. In the next newsletter, we'll talk about how you can use this information not just to assess the value of your marketing investments, but to increase conversions from each."
- Kevin Chern
President, Start Fresh Today
The Numbers Game
There were 81,065 bankruptcy filings in October, based on preliminary figures examined by the Automated Access to Court Electronic Records (AACER).
In comparison, there were only 67,542 bankruptcy filings in September.
However, remember that there were three more business days in the month of October (22) as compared to September (19).
With that stated, there were 3,685 bankruptcy filings per day in October as compared to 3,550 daily bankruptcy filings in September; thus marking a 3.7 percent increase.
The Numbers Game, Part 2
SFT Pigskin Predictions for Thanksgiving Day
Green Bay Packers at Detroit Lions:
Packers 27, Detroit 23
New York Jets at Dallas Cowboys:
Dallas 38, New York 10
Indianapolis Colts at Atlanta Falcons:
Colts 26, Falcons 13