Kevin's Corner
Practice Management Tip on:
Information Flow in Your Law Office
"For consumer bankruptcy attorneys, change is becoming the norm. Some of those changes, like those ushered in by the passage of BAPCPA, are significant, while others are smaller and more technical in nature. But, as you well know, those little technical issues can become big substantive issues if there are mistakes or oversights.
"With bankruptcy filings rising dramatically, new bankruptcy rules taking effect and the announcement that debtor audits have started up again, it's a great time to take stock of the way this kind of information is communicated in your office.
"Unfortunately, in many law offices, the transfer of information like this is haphazard or "every man for himself." While it's true that each attorney has an ethical obligation to keep himself up to date on requirements and legal developments, you can save time and headaches for your attorneys and support staff by instituting clear procedures to disseminate this information promptly and clearly.
"There's no one optimal way to convey this information; there are many possibilities for effective communications in the law office, including:
- Keep a digital or looseleaf manual that's updated with each new piece of information or procedure;
- Use a firm wiki or employ an online project management system to keep information in a central location and provide automatic updates to those affected;
- Circulate a memo to all attorneys and staff advising them of new developments and pointing them to appropriate resources;
- Hold BRIEF regular meetings and make "new developments" a fixed item on the agenda;
- Use an internal newsletter to keep everyone up to date.
"As usual, the method itself is secondary--the important thing is to make sure that the same information reaches everyone in your office, that it does so promptly, and that your attorneys and staff know when and where they'll find that information."
- Kevin Chern
President, Start Fresh Today
An Important Reminder for All Bankruptcy Attorneys
The United States Trustee Program resumed debtor audits on May 12th after temporarily suspending its designation of cases in January for budgetary reasons.
As required in §603(a) of BAPCPA, these debtor audits will now be randomly conducted in every 1 out of 1,000 bankruptcy cases as compared to 1 out of every 250 bankruptcy cases before.
While there will be fewer random audits, the importance of making sure that the bankruptcy petitions we file for consumers are truthful and accurate cannot be forgotten, as our due-diligence reminder last month conveyed.
The Hollywood Life - A Recap of NACBA's 16th Annual Convention
We'd like to thank all of you who attended our fourth annual NACBA fundraiser party last weekend in Hollywood, California. It was great to catch up with so many of you during both the NACBA convention and our post-convention celebration.
A great time was had during our cocktail reception in the VIP section of the pool at the historic Roosevelt Hotel, and even better, a great cause was helped as we raised more than $3000 for the Public Counsel's Debtor Assistance Program and Consumer Law Project.
Thanks again for your generosity – we couldn't have achieved such success without your charity.
Be sure to check out upcoming editions of The Next Chapter for pictures from the fundraiser.
Bankruptcy Article of the Week
Did 2005 Rush to File Cost Consumers Their Homes?
Although we're far removed from the rush to file for bankruptcy before BAPCPA took effect in October of 2005 and bankruptcy filings are returning to normal, the impact of that last-minute frenzy is still with us. Some of the results were predictable, including the dramatic drop-off in bankruptcy filings in the wake of the rush, but others are just beginning to emerge.
For instance, when more than half a million Americans were hurrying to file last minute bankruptcy petitions 2½ years ago, few predicted the virtual collapse of the U.S. housing market. Perhaps, if they'd known what to expect, some of those people would have been a bit more cautious about preemptively taking an action that would limit their options for many years to come.
Now, as an increasing number of Americans find themselves facing foreclosure, those who were caught up in the wave of 11th hour Chapter 7 bankruptcy filings won't be eligible to file again for more than five years—and that means that if they do face foreclosure, they're unable to discharge deficiency judgments.
To make matters worse, the options for avoiding foreclosure are more limited for some. As an increasing number of subprime loans have fallen into default, subprime lenders across the country are laying off employees, scaling back their operations, or even closing their doors altogether. Traditional lenders are tightening up their standards and fewer options are available to those seeking to refinance—especially with blemished credit reports and lowered scores.
Of course, we're all well aware that the vast majority of consumers filing for bankruptcy have already reached a low point with regard to credit history and credit scores, and probably don't have a lot of lending options available to them, anyway. For many, bankruptcy is the first step toward improving credit. But does that general rule hold true for the consumers who weren't as close to the edge as the usual bankruptcy filer, and took action back in the fall of 2005 simply because they feared that the option might not be available if things took a turn for the worse? Would those consumers, particularly those who were homeowners trying to save their houses, have been better off to stick it out a little longer?
We don't have the data to answer those questions conclusively and, of course, the prohibition on the modification of residential mortgage terms in Chapter 13 bankruptcy also limits the remedies available to a homeowner facing foreclosure. Still, it's disturbing—if unsurprising—that more than three years after the passage of BAPCPA, fresh harms are still cropping up.
April Foreclosure Showers Unlikely to Bring May Flowers
April foreclosure filings were up 65 percent as compared to the same month a year ago and also up 4 percent from this past March, according to recent RealtyTrac findings detailed in the Wall Street Journal.
There were approximately 243,353 foreclosure filings in April, with Nevada retaining its top spot from March as the state with the highest foreclosure rate. In April, Nevada averaged one foreclosure filing for every 146 households.
Following Nevada in terms of having the highest state foreclosure rate were the familiar faces of California, Arizona, Florida and Colorado.
In Order to Survive Nowadays, Consumers Continue to Get Buried in Debt
As if you needed another reason to get your name and face out there to consumers who are struggling with credit card debt and in need of learning more about how filing for bankruptcy may provide them with a fresh financial start, check out these recent Federal Reserve figures as detailed by Bloomberg News.
- Consumer credit rose to $2.56 trillion in March.
- Consumer credit was up $15.3 billion in March as compared to an increase of $5.2 billion this past February. The March increase in consumer borrowing represented the biggest monthly jump since November 2007 (when consumers were borrowing more to buy gifts during the holidays) and was also more than two times the amount of what economists had predicted for the month.
- U.S. consumers borrowed $34 billion in the first quarter of 2008, the most amount of money borrowed since the first three months of 2001. If you don't remember, the U.S. economy entered its last "official" recession in the first quarter of 2001.
When it comes to whether the U.S. is currently in a recession, this headline perfectly summarizes many people's feelings on the topic.
Did a Foreclosure Crisis Kill off the Dinosaurs?
OK. This title is a bit over the top, but it's an attention grabber for an interesting article detailing how Americans may be affected by some unanticipated consequences of the foreclosure crisis.
In the News - Legislative Updates
Here's a recap of some of the major legislative happenings that went down since the last SFT newsletter:
- On May 19, Senate Banking Chairman Christopher Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) reached agreement on legislation that would allow the Federal Housing Administration to insure up to $300 billion in new mortgages for struggling homeowners.
- On May 14th, Senator Charles Schumer (D-NY) chastised Countrywide Financial Corp. in a letter to the Federal Trade Commission. In the letter, Schumer noted how Countrywide abused the bankruptcy process to proceed with foreclosure proceedings and then called for an investigation into the troubled company's practices.
- On May 8, President Bush signed into law the "Ensuring Continuing Access to Student Loans Act of 2008" in the midst of growing concerns about student loan availability during the credit crunch. On a related note, a recent BusinessWeek article detailed the sudden popularity of peer-to-peer loans as students find different ways to fund their college experience.
Stay updated on the latest bankruptcy and foreclosure legislation in our next newsletter.