Kevin's Corner
Practice Management Tip on Online Reputation Management
"In a past practice management tip, I talked about the power of blogging – how blogs are relatively quick, easy and inexpensive ways to comment on the most recent developments in bankruptcy law, convey your expertise through creative means like answering general questions and potentially even become a resource to attract and gain new clients.
"While the benefits and appeal of blogging are great, the ability to disseminate information so quickly also comes with some drawbacks that may not necessarily apply to your firm but should at least be recognized.
"Earlier this month, Fastcase noted how the ease and popularity of legal blogging has bred a potentially dangerous side effect – the rise of blogs that have shifted from legal resources to legal tabloids and have thus become a forum for associates to leak private and sensitive information about their firms.
"While such situations may not apply to your firm, an important question still needs to be asked: does your firm have a policy intact to make sure that none of your sensitive information is being leaked on legal gossip blogs or anywhere else on the Internet?
"Just as we've touched upon in the past on important considerations with email communications, Fastcase details specific ways in which different law firms throughout the country have addressed this potentially troubling issue, including:
- monitoring major blogs like Above the Law and Greedy Associates to make sure that none of their sensitive information is being released through these channels;
- treating important documents with extra security; and
- discussing important information one-on-one as opposed to sending out hard copies and emails which may be forwarded to bloggers and other parties.
"In short, give the Fastcase blog post and its specific examples of how firms are treating this issue a read; it's definitely worthwhile for the modern bankruptcy practitioner who may be in the initial stages of learning about and implementing an online reputation management system within his or her firm."
- Kevin Chern
President, Start Fresh Today
The Numbers Game
Reports from Bloomberg indicate that the country's economic slump is continuing to deepen as the summer begins. Here are some of the bleak statistics:
- Consumer confidence levels are the lowest they've been since February, 1992, when the nation was in a "jobless recovery" period after the 1991-1992 contraction.
- June confidence levels were measured at 50.4, down from 58.1 in May and lower than predicted.
- Home prices in 20 cities are down 15.3% from a year ago, the greatest drop since such data has been collected.
- The S&P/Case-Shiller index showed a 1.4% drop in home prices in April, after a 2.2% drop in March.
Such numbers reflect climbing food and fuel prices, increasing unemployment and economic stress brought about by the housing slump.
On the Legislative Docket
We've written in the past about the problem of credit card debt among college students, and the questionable practice of allowing card issuers on campus to pitch cards to students. Representative Carolyn Maloney announced that the Financial Services Subcommittee on Financial Institutions and Consumer Credit will hold a hearing this week called "Problem Credit Card Practices Affecting Students: The Need for Legislative Action" to address the issue.
The subcommittee will hear testimony from New York's Attorney General's office, consumer groups, students and industry members. Maloney is quoted in a House press release as saying that "students deserve a fair shake," and shouldn't graduate with loads of credit card debt because of unfair and deceptive marketing tactics. Atta girl, Carolyn.
NACBA Pictures Available at Start Fresh Today
We are happy to say that pictures from last month's NACBA convention and our fundraiser party in Hollywood, California are now live on Start Fresh Today for your viewing.
Check out the NACBA 2008 Hollywood Photo Gallery right here. Perhaps you'll see yourself or something else interesting (like the picture below) that will stir memories of what a great time was had by all in attendance.
Bankruptcy Article of the Week
More Elderly Filing Bankruptcy, Study Reports
The study "Generations of Struggle," published this week by AARP (and forthcoming in next January's Harvard Law and Policy Review), explores data showing an increase among the percentage of older Americans (55-84) filing for bankruptcy. Harvard Law Professor Elizabeth Warren, Teresa A. Sullivan of the University of Michigan and Deborah Thorne of Ohio University conducted the research and provide some interesting analysis on the numbers and what they mean for the bankruptcy filing population.
Data were gathered from Consumer Bankruptcy Project (CBP) figures from 1991, 2001 and 2007 on the age distribution of petitioners over the last 16 years. The researchers highlighted three significant trends:
- Americans 55 and older saw the sharpest increase in bankruptcy filings;
- Americans 34 and younger experienced the largest decrease in filings; and
- The influence of Baby Boomers on bankruptcy stats has significantly lessened.
Though the exact reason for such shifts in the demographics of those filing for bankruptcy is still up for debate, the researchers proposed several possible explanations. Because medical costs have increased in the past 16 years, it's likely that older Americans are looking at higher medical bills than before and more responsibility for out-of-pocket expenses than previously.
Younger filers, they conjectured, could be more financially stable than before or could simply be struggling with debt longer before turning to bankruptcy protection.
Take a look at the exact figures for each age group over the years. The figures represent the percentage of total bankruptcy filers who fell into each age category in a given year.
| Age Group | 1991 | 2001 | 2007 | % Change (1991 – 2007) |
|---|---|---|---|---|
| 18 – 24 | 8.7 | 5.3 | 4.2 | - 51.7 |
| 25 – 34 | 36.7 | 26.1 | 21.9 | - 40.3 |
| 35 – 44 | 30.6 | 33.7 | 28.1 | - 8.2 |
| 45 – 54 | 15.8 | 23.2 | 23.5 | + 48.7 |
| 55 – 64 | 6.1 | 7.2 | 15.3 | + 150.8 |
| 65 – 74 | 1.8 | 3.0 | 5.0 | + 177.8 |
| 75+ | .3 | 1.5 | 2.0 | + 566.7 |
USA Today quotes Warren as saying that, as debt has become normalized in our society, more and more retirees are leaving the workforce with significant debt rather than significant savings. Plus, she continues, rising food and fuel costs often mean that Social Security benefits aren't adequate to cover living expenses.
While it's important to note that the bulk of filers came from those in their 30s and 40s throughout the period observed in this study, the drastic shifts at either end of the spectrum sound warning bells about what may be in store for the future of bankruptcy.
The researchers acknowledge in their analysis that BACPA could be influencing filing ages in some as yet undiscovered way (such as filing requirements favoring one age group over another), but do not make any mention of the trend of young adults moving back in with parents as a possible explanation for the decrease in bankruptcy filings among young people.
An analysis of the effect of recent college graduates returning to the family home on the finances of both young adults and their aging parents may offer more insight to the relative decrease and increase of bankruptcy filings among those demographics, respectively.
More Trouble for Countrywide Financial
Countrywide Financial Corp, once the nation's largest subprime lender, could face a civil lawsuit from the Illinois Attorney General's office for what the state is dubbing "unfair and deceptive practices" in mortgage lending transactions, according to this Wall Street Journal article.
Apparently, the AG's office started investigating Countrywide last fall and has announced that, after sifting through hundreds of thousands of pages of documents, it has announced that it has adequate information to bring a civil suit.
The allegations described are no longer surprising – loosened underwriting standards, loans with "risky features," marketing and selling methods that encouraged employees to originate loans regardless of a borrower's repayment capabilities – but, if the AG's office decides to file the suit, it will mark the first lawsuit brought against Countrywide by a state in regards to the current mortgage crisis.
Apparently, Illinois plans to demand that Countrywide void or modify any loans made involving unfair or deceptive practices, even if that means buying the loans back. The state will also reportedly request 90 days to review all pending and imminent foreclosures in order to determine whether or not fraud played a role at some point.
The Federal Government and SEC are currently conducting investigations of Countrywide Financial Corp. for related issues.
Legislative Updates
Here are some of the major legislative happenings to occur since our last newsletter.
Senate Poised to Pass Housing Bill
In a procedural vote earlier this week, the Senate approved 89-3 a housing bill that would allow struggling homeowners to refinance their mortgages to affordable, government-backed, fixed-rate, 30-year loans. A similar version of the bill has already been passed in the House and, if signed into law, is expected to bring relief to hundreds of thousands of homeowners.
The bill, which the New York Times has noted would constitute the biggest overhaul of government mortgage financing since the New Deal, would also offer tax breaks to first-time homebuyers purchasing unoccupied housing, allow Fannie Mae and Freddie Mac to back mortgages up to $625,000, provide money for foreclosure counseling and require stricter disclosure statements.
But the bill still faces some obstacles: though Senators reportedly want to pass it before the 4th of July recess, it's hit some stumbling blocks over a section about energy credits, and President Bush has threatened a veto. Despite the hurdles, the Senate is likely to move quickly, since the housing index indicated a 15% decrease in U.S. home values since April 2007.
House Passes Bill Exempting Reservists from Means Test
A bill passed by the House this week would excuse reservists and members of the National Guard from passing the BAPCPA-mandated means test before filing for Chapter 7. The exemption would apply to National Guard members and reservists who have served on active duty and those who have performed homeland defense activity for at least 90 days since September 11, 2001.
The exemption lasts throughout periods of activation and for a year and a half following such periods. Sponsors noted the need for the bill because inflated income from hazardous-duty pay and low living expenses during combat tours could falsely skew the income of soldiers returning from battlegrounds.
The bill will move to the Senate for further consideration.