If your financial situation is nearing an emergency and you need to file for bankruptcy quickly, contact our lawyers before filing a “skeleton case” with minimal information. If you don’t give all the documents and paperwork associated with a regular bankruptcy, you might jeopardize your case. Skeleton or emergency bankruptcy filings are common when debtors are facing foreclosure or another harmful debt collection act from creditors. Filing for bankruptcy gives you an automatic stay, and an emergency filing may only contain core bankruptcy documents. That automatic stay may not last forever if creditors successfully motion to lift it. The risk of successful creditor motions to lift stays or dismiss cases increases when debtors rush filing, so let us prepare a strong and complete bankruptcy case for you. Call our bankruptcy lawyers at (215) 701-6519 or (609) 755-3115 for help with your case from Young, Marr, Mallis & Associates. How Do Emergency and Regular Bankruptcy Filings Differ? Emergency bankruptcy filings are bare-bones cases. Debtors submit the core bankruptcy documents in the hopes of getting an automatic stay. This would immediately pause all collection efforts from creditors, which is one of the major benefits of bankruptcy. Reason for Filing While all bankruptcies are because of debt, considering filing an emergency bankruptcy means you need urgent relief. The automatic stay stops ongoing foreclosure proceedings, wage garnishment, and vehicle repossession, all of which add to debtors’ distress. Bankruptcy can even stop an impending sheriff’s sale of a foreclosed home because of the automatic stay. Although our bankruptcy lawyers understand that debtors want immediate relief from an automatic stay, rushing to file is inadvisable. Although you might temporarily stop foreclosure, creditors may successfully motion to lift the automatic stay or dismiss the case if you are not prepared. Creditors should warn you about car repossession, foreclosure, and even wage garnishment before it begins. When you get those warnings, you can call our lawyers. We can begin preparing your bankruptcy case immediately and file it as soon as possible without rushing the process. Then, you can benefit from an automatic stay and other features of bankruptcy and avoid risking case dismissal. Initial Documents Emergency bankruptcy filings typically only contain the core bankruptcy documents. Debtors must submit a bankruptcy petition, a creditor matrix, a creditor counseling certification or waiver, and a Statement of Social Security Number. There may be additional paperwork required upon filing a skeleton or emergency bankruptcy case, and judges may dismiss petitions if all the necessary information is not provided. When you file a regular bankruptcy petition, you include most core documents from the get-go. This includes all the aforementioned documents and others, many of which are specific to the bankruptcy chapter you are filing, whether Chapter 7 or 13. Debtors filing skeleton bankruptcy cases still need to submit all the required paperwork and documents for bankruptcy at some point. If they do not, their cases may be dismissed, which is why accomplishing this from the outset is beneficial. What Are the Similarities Between Emergency and Regular Bankruptcy Filings? No matter how quickly you file for bankruptcy, your case will go through the court, go on your credit report, and may end in a debt discharge. Go Through the Court All bankruptcy cases are processed through the court, regardless of whether they are emergency or regular filings. That means a judge oversees your bankruptcy case. The judge might dismiss incomplete petitions or skeleton cases that are too sparse upon filing. The judge may also hear motions from creditors to lift automatic stays or dismiss cases; therefore, debtors must be prepared to defend against such attempts. Go on Credit Report Bankruptcy always goes on your credit report. Whether an emergency filing is successful or not, such as when the judge dismisses it or the debtor fails to make the repayment, it will still be reported on their credit report. The dismissed case will also remain on your credit report for the same duration as a successful, regular bankruptcy case, typically seven to ten years, depending on the chapter filed. This is another reason why taking the time to file a bankruptcy case is important, as a dismissed case can also negatively impact your credit. Get a Debt Discharge At the end of any successful bankruptcy case, the debtor gets a debt discharge. Any unpaid dischargeable debts, such as medical and credit card debt, are erased. You may only receive a debt discharge if your emergency bankruptcy case is resolved and you repay all secured debts in full. If that doesn’t happen, you won’t get a debt discharge, whether in an emergency or regular bankruptcy filing. What if I Need to File Emergency Bankruptcy? Even if you need urgent relief from an automatic stay, do not rush to file a skeleton case without our lawyers. We can still file your case quickly, but not too quickly that it jeopardizes its success. If you are facing foreclosure, wage garnishment, or other stressful debt collection activities, please call us. We can review your debt and overall financial situation to devise the best path forward. That may be filing Chapter 7 or Chapter 13 bankruptcy, but you need to take the time to figure that out. Chapter 7 bankruptcy liquidates your assets, so you should not file that chapter unless you are prepared for that result. Chapter 13 bankruptcy requires a repayment plan. Debtors must present repayment plans for the court’s approval within 14 days of filing a bankruptcy case. If you rush your case without knowing this, you might miss the deadline for submitting the repayment plan. If that happens, any creditor may motion to dismiss the bankruptcy case, and the judge might agree. Call for Help with Your Bankruptcy Case Now Call Young, Marr, Mallis & Associates at (215) 701-6519 or (609) 755-3115 to discuss your case for free with our Philadelphia bankruptcy lawyers.

4th Cir.: Emiabata v. Burnett- Improper Dismissal of Bankruptcy Appeal Ed Boltz Wed, 06/18/2025 - 15:43 Summary: In Emiabata v. Burnett, the Fourth Circuit vacated the district court’s dismissal of a Chapter 13 debtor’s appeal for failure to prosecute. The debtors, Sylvia and Philip Emiabata, timely appealed the bankruptcy court’s dismissal of their Chapter 13 case but failed to follow through with essential procedural steps—namely filing a designation of record, statement of issues, and paying the filing fee. Upon recommendation from the bankruptcy court, the district court dismissed the appeal outright. The Emiabatas then appealed that dismissal. The Fourth Circuit found that the district court abused its discretion by failing to apply the balancing test mandated in In re Serra Builders, Inc., 970 F.2d 1309 (4th Cir. 1992), which governs dismissals for procedural failures in bankruptcy appeals. That test requires a court to: Make findings of bad faith or negligence, Give the appellant notice and an opportunity to explain the delay, Consider prejudice to the other parties, and Weigh the impact of dismissal versus other available sanctions. Because the district court did not explicitly consider any of these factors before imposing the "harsh sanction" of dismissal, the Fourth Circuit deemed it an abuse of discretion and remanded the case for proper analysis under Serra Builders. Commentary: Emiabata reinforces that even seemingly clear-cut failures to prosecute appeals must be handled with procedural care. The Fourth Circuit's insistence on the Serra Builders framework prevents summary dismissals from substituting for substantive judicial consideration—particularly when dealing with unsophisticated or pro se litigants. With proper attribution,  please share this post.  To read a copy of the transcript, please see: To read a copy of the transcript, please see: Blog comments Attachment Document emiabata_v._burnett.pdf (113.75 KB) Document emiabata_notice_of_appeal.pdf (3.62 MB) Category 4th Circuit Court of Appeals

4th Cir.: Kovachevich v. NMIC- Voluntary Cancellation of Private Mortgage Insurance Stafford Patterson Tue, 06/17/2025 - 21:09 Available at:  Summary: In Kovachevich v. NMIC, the Fourth Circuit tackled an important question under the federal Homeowners Protection Act (HPA): whether a borrower is entitled to a refund of prepaid private mortgage insurance (PMI) premiums when PMI is cancelled not under one of the Act’s statutory benchmarks, but through a voluntary agreement. The court affirmed dismissal of the borrower’s HPA claim, holding that only statutory cancellations under 12 U.S.C. § 4902(a)-(c) trigger a right to refund under § 4902(f). However, it vacated the district court’s wholesale dismissal of the borrower’s state-law claims for unjust enrichment and conversion, remanding for consideration of supplemental jurisdiction. Kovachevich had prepaid PMI premiums as part of his 2020 mortgage, which was required due to his sub-20% down payment. In 2021, although he did not qualify for statutory cancellation under § 4902, his servicer agreed to a voluntary termination of PMI under § 4910(b). He then sought a pro-rated refund of the unearned premiums from NMIC, which was denied. Kovachevich sued under the HPA and state law. The district court dismissed the HPA claim, finding that voluntary cancellations did not qualify for the refund provision under § 4902(f), and dismissed the state-law claims for lack of jurisdiction. The Fourth Circuit affirmed the district court on the core issue that   statutory refund rights are limited: The plain language of § 4902(f)(1) provides for refunds of “unearned premiums” only upon “termination or cancellation … under this section”—i.e., when triggered by the borrower meeting specific amortization benchmarks in § 4902(a)-(c). § 4902(f)(2) Tied to (f)(1): The second paragraph, which requires mortgage insurers to remit premiums to servicers for repayment, only applies “for repayment in accordance with paragraph (1).” Thus, if (f)(1) isn’t triggered, there is no duty to refund under (f)(2) either. Although § 4910(b) allows voluntary cancellations beyond the statutory scheme, it does not create a separate right to a refund. The court  however took issue with the district court’s categorical dismissal of Kovachevich’s state-law claims for lack of jurisdiction. Since federal courts have discretion under 28 U.S.C. § 1367 to retain supplemental jurisdiction even after disposing of all federal claims, the panel remanded for the district court to exercise its discretion properly rather than treating jurisdiction as automatically lost. Commentary: Here  is a helpful table for statutory cancellation of PMI under the  Homeowners Protection Act: Trigger Condition Action Required § 4902(a) – Borrower Request UPB is 80% of Original Value + good payment history + current Borrower must request cancellation § 4902(b) – Automatic Termination UPB is 78% of Original Value  + current Automatic by servicer § 4902(c) – Midpoint Termination Midpoint of loan + current Automatic by servicer The statutory definition of a "good payment history"   is found at 12 U.S.C. § 4901(4): The term ‘good payment history’ means no payments 60 days past due in the 24 months preceding the cancellation request, and no payments 30 days past due in the 12 months preceding the cancellation request. For consumer bankruptcy attorneys  this should allow the borrower to request termination of the PMI once they have made 24 consecutive payments under a confirmed plan and reached the 20% equity mark. This could certainly be a nonstandard provision in a Chapter 13 plan: Private Mortgage Insurance (PMI) Termination Pursuant to 12 U.S.C. § 4902(a): The Debtor has or will satisfy the conditions for borrower-requested cancellation of private mortgage insurance (PMI) under the Homeowners Protection Act (12 U.S.C. § 4902(a)). The mortgage servicer shall, upon written request by the Debtor and proof of eligibility, cancel PMI and cease collecting PMI premiums no later than 45 days after the Debtor reaches an unpaid principal balance equal to or less than 80% of the original value of the mortgaged property, provided the Debtor: (1) is current on payments pursuant to the confirmed plan at the time of the request; (2) has a good payment history as defined in 12 U.S.C. § 4901(4) and as evidenced by having made 24 consecutive and on-time payments under the confirmed plan; (3) certifies that the property value has not declined and has an unpaid principal balance of 80% of the original value of the home; and (4) certifies that the property is not subject to subordinate liens. Upon cancellation, any unearned PMI premiums, if applicable under federal or state law, shall be returned to the Debtor or applied to reduce the mortgage arrearage claim, as appropriate. The Chapter 13 Trustee shall adjust ongoing mortgage conduit payments and reduce the Chapter 13 plan payment accordingly once written confirmation of PMI cancellation is filed with the Court. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments

N.C. Ct. of App.: Palmetto RTC v. Fielden- Slander of Title and Lis Pendens Ed Boltz Fri, 06/13/2025 - 19:49 Summary: Palmetto RTC, LLC, a land entitlement firm, contracted to purchase a 61-acre tract in Union County from the Fielden family, with plans to simultaneously flip it to a third-party developer. When the transaction failed to close before the contractual deadline—and Palmetto’s end buyer never authorized performance—Palmetto attempted to preserve its position by filing suit and a lis pendens. The Fieldens, who had since pursued sale to a different developer, counterclaimed for slander of title. The trial court dismissed Palmetto’s unjust enrichment claim due to the existence of an express contract, and the jury returned a verdict for the Fieldens, including $152,001 in damages on their slander of title counterclaim. The trial court denied Palmetto’s motion for JNOV or a new trial. On appeal, the North Carolina Court of Appeals affirmed the dismissal of the unjust enrichment claim, holding that the development efforts Palmetto claimed as extra-contractual were squarely contemplated in the express agreement. The court also affirmed the denial of JNOV, finding that while the Fieldens did not specifically plead the statutory slander of title under the Real Property Marketable Title Act, their notice pleading was sufficient to survive. However, the court reversed and remanded for a new trial on the slander of title claim. The Court held that the lis pendens filed by Palmetto was not a “registered notice” under N.C. Gen. Stat. § 47B-6, and therefore the statutory slander of title instruction was erroneous. Since a lis pendens is filed with the clerk of court—not the register of deeds—and is merely procedural rather than a substantive claim to title, it cannot support a statutory slander of title cause of action. As such, the case was remanded for retrial on the Fieldens’ slander of title counterclaim, presumably under the common law theory requiring proof of malice and falsity. Commentary: The careful parsing of the statutory framework under the Real Property Marketable Title Act by the Court of Appeals shows a subtle but critical clarification: filing a lis pendens is not the same as recording a notice under the Act. Practitioners representing land developers or disgruntled buyers should take heed—not every filing with the court that affects property gives rise to statutory tort liability, particularly under § 47B-6.  This would likely also hold true in regards to a judgment lien,  since those arise by operation of law and are not recorded either. From a consumer or bankruptcy attorney’s perspective, this opinion’s implications may be most pronounced when defending against lis pendens abuse. The appellate court signals that litigants cannot short-circuit traditional common law protections by invoking statutory slander of title theories unless the technical filing requirements—specifically recording with the register of deeds—are satisfied. This preserves important safeguards against chilling the use of lis pendens to protect real estate interests during bona fide disputes, a point equally relevant in adversary proceedings involving real property in Chapter 13 and Chapter 11 bankruptcies. That said,  a lien recorded following the filing of a bankruptcy case or an improperly conducted foreclosure,  could potentially also give rise to a cause of action for a valid common law slander of title claim, but would need to show the following elements: Falsity (the lien is invalid due to stay), Malice (intent or reckless disregard), Publication (recording the lien), Special damages (lost sale, fees, etc.) With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document palmetto_rtc_v._fielden.pdf (154.67 KB) Category NC Court of Appeals

After doing a bankruptcy for her mom, we helped Tammy sue Navy Federal. Back in 2011, Navy Federal emptied out the savings account where 14-year-old Tammy (not her real name) saved the money she made babysitting. Tammy’s mom, Jessica, needed to file for bankruptcy because she had been out of work for nine months.  She was now two months behind on her second mortgage.  (The second mortgage was from Navy Federal.)  She just got a new job paying half of what she had been making, and she was glad to get that.  But she knew she would not be able to pay all her debts and still feed her children. When she came to see me about filing for bankruptcy, Jessica mentioned in passing that Navy Fed had helped themselves to her daughter’s savings account.  How could they do it? I was shocked.  But I figured out how they do it. Most banks set up children’s accounts under the Uniform Transfers to Minor’s Act, where the parent is the custodian of the account, but the child is the owner. Navy Fed apparently doesn’t do it that way.  Instead, they set up a joint account, with the parent and the child. This gives them right, as they see it, to take Tammy’s money to make mom’s payment. I think that stinks.  The child, by definition, is a child, and hasn’t agreed to co-sign for mom.  So I don’t think the credit union can pretend the little girl did. So we sued; and Navy Federal agreed with us. They gave Tammy her money back before the court date. When you file for bankruptcy and owe money to Navy Fed, they will empty out your accounts So take your money out of Navy Federal.  And that includes your minor children’s money, too. The post After Bankruptcy, suing Navy Federal appeared first on Robert Weed Virginia Bankruptcy Attorney.

E.D.N.C.: Lewis v. EquityExperts PART III- Amendment of Complaint for Class Action Against HOA Agent Ed Boltz Wed, 06/04/2025 - 16:48 Summary: Judge Louise Flanagan ruled on two key post-certification motions in this putative class action concerning alleged abusive debt collection practices targeting North Carolina homeowners’ associations (HO As). Lewis originally filed suit under the Fair Debt Collection Practices Act (FDCPA), the North Carolina Collection Agency Act (NCCAA), and the North Carolina Debt Collection Act (NCDCA), alleging that Equity Experts engaged in improper lien filings, foreclosure threats, and excessive collection fees against homeowners with delinquent HOA dues. After the court certified two classes — homeowners who received a “Notice of Lien” or a “Notice of Intent to Foreclose” and paid within 90 days — the litigation entered a contentious discovery phase, with both sides battling over the production of lien communications, fee details, and procedural manuals. Plaintiff sought to amend her complaint to align with newly uncovered discovery, while the defendant moved for reconsideration of the class certification order, particularly objecting to the court’s sua sponte modification of the class definitions. Judge Flanagan granted the motion to amend, finding the plaintiff had shown diligence in seeking amendment after learning of relevant discovery materials post-deadline. The court emphasized the complexities of discovery across hundreds of homeowner accounts and noted the plaintiff’s success on prior motions to compel — signaling that her pursuit of additional claims wasn’t mere delay or gamesmanship. On the motion for reconsideration, the court partly agreed, clarifying the class definitions to impose a 90-day limit for payments made after receiving the lien or foreclosure notice (tightening the causal chain for standing purposes) but rejected the defendant’s bid to narrow the class further or impose constraints on the types of payments. Importantly, the court reaffirmed that the predominant issues — whether the standardized lien and foreclosure notices misrepresented the legal status or inflated fees — were suitable for class-wide adjudication. It found that numerical thresholds (over 40 class members) and common factual patterns supported class treatment despite the defendant’s insistence on individualized defenses. For previous decisions: E.D.N.C.: Lewis v. EquityExperts.org- Excessive Fees illegal under FDCPA E.D.N.C.: Lewis v. Equityexperts.org II- Class Commentary: This ruling carries several noteworthy implications for consumer protection practitioners, especially those focused on HOA-related debt collection. First, the court’s willingness to allow class amendments after discovery fights underscores the importance of aggressive, diligent discovery strategies in consumer class actions. Plaintiffs’ counsel here successfully leveraged depositions and motions to compel to pry loose critical evidence, persuading the court that amendment was justified even months after the scheduling order deadline. Second, the 90-day payment window imposed on the class definitions is a significant tightening — emphasizing the need for plaintiffs to establish a plausible causal connection between the allegedly deceptive notices and any monetary harm. This echoes Fourth Circuit Article III standing jurisprudence (e.g., Fernandez v. RentGrow), reinforcing that mere receipt of a bad letter isn’t enough: there must be concrete harm, like a payment traceable to the violation. Third, the court’s rejection of arguments about individual account differences (like COVID delays, unique waivers, or payment plans) reflects the judiciary’s comfort with certifying consumer classes where standardized practices or form documents drive the key liability questions. This holds lessons for both sides: defendants can’t evade class treatment just by pointing to account-level noise, and plaintiffs should focus certification efforts on the common practices and representations underlying their claims. Finally, the decision foreshadows a continued battle over damages measurement — particularly whether the allegedly inflated or unauthorized fees can be assessed through class-wide comparison to actual service costs. Practitioners would do well to watch how the court handles this at the dispositive motion stage or trial, as it could shape future fee-based class actions under North Carolina law The challenge to the collection fees charged — claiming they were inflated, unauthorized, or charged before services were actually rendered. In Chapter 13, trustees and debtor's counsel routinely review creditor fees under § 502(b)(1) (disallowing claims unenforceable under nonbankruptcy law). Practitioners can look to this case to bolster objections to HOA claims where the fee schedules or collection charges exceed what state law allows, especially under the NC Debt Collection Act or the NCCAA.   While Ms.  Lewis'  HOA,  Abbington Ridge Townehomes,  does not appear to have any Proofs of Claim filed in Chapter 13 cases,  knowing what other HO As Equity Experts has represented would be helpful to ensure that disbursements are not made on potentially illegal and inappropriate claims in active cases. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document lewis_v._equity_experts.pdf (188.39 KB) Category Eastern District

Why Does the Bankruptcy Court Need My Tax Forms? When we file your bankruptcy case, we have to turn in copies of your last year’s tax forms. Your bankruptcy trustee will look at them, and you might get asked a question or two at your bankruptcy trustee hearing.  Do the tax forms match your pay stubs? Your tax forms should match your pay stubs, usually. If they don’t, be ready to explain why.  Maybe you lost your job; maybe you just lost your overtime. You may get asked. Are you drilling for oil in Texas? Or raising marijuana in California? Besides your main job, if you have a business or big investment on the side, the trustee wants to know. What about your family?  Your eligibility might depend on whether you are married or single, on the number and age of your children. That’s why we need to send in the complete set of your tax papers. Not just your W-2s. The whole 1040 form. Are you raising marijuana in California? The Tax forms are hardly ever a problem. You probably aren’t drilling for oil in Texas; and if you are not working at the same job, you can explain. We just need to send the forms in, so the trustee can do his job. The post Why Does the Bankruptcy Court Look at My Tax Forms appeared first on Robert Weed Virginia Bankruptcy Attorney.

Bankr. M.D.N.C.- In re Fall Creek One- Valuation of Glamping Pods Ed Boltz Tue, 06/03/2025 - 16:33 Summary: In this Chapter 11 case, Fall Creek One, LLC sought to reorganize after defaulting on a $4.4 million loan from Marine Federal Credit Union secured by real estate (a North Carolina property used for short-term rentals, including cabins and glamping pods). The debtor proposed a plan valuing the secured claim at only $2 million, while the creditor asserted a secured value exceeding $4.1 million. The court, under § 506(a), had to determine the secured value of the creditor’s claim by applying a fair market value standard. Both parties presented expert appraisals, but their approaches diverged: The debtor’s appraiser favored a sales comparison approach. The creditor’s appraiser used an income approach based on anticipated rental income after planned improvements. The court ultimately rejected the debtor’s low estimate as unsupported and somewhat inconsistent with its own plan projections, and it found that the income approach was more appropriate, especially since the debtor proposed to retain the income-producing property. Importantly, the court emphasized that valuation should reflect the property’s anticipated state after completing ongoing improvements (glamping pods, cabin repairs) and rely on the debtor’s own income projections, not historic underperformance. The court calculated the fair market value at $3,794,314.89 — higher than the debtor’s proposal but lower than the creditor’s maximum — using the debtor’s projected net income and a 9% capitalization rate, minus the costs to finish improvements. Commentary: While Fall Creek One is a business Chapter 11 case, it offers valuable lessons for consumer bankruptcy attorneys when valuing secured assets, particularly in Chapter 13: Burden of Proof Falls on the Debtor: The court put the burden on the debtor, especially since they had to prove their Chapter 11 confirmation elements. In consumer Chapter 13 cases, debtors similarly bear the burden when seeking to strip liens or bifurcate undersecured claims, so preparation and credible evidence are key. Income-Generating Assets Must Be Valued on Income Potential:  The court’s insistence on using the income approach — rather than a simple comparable sales or cost approach — underscores that when debtors propose to retain income-producing assets (like rental properties, commercial vehicles, or business equipment), valuation must reflect their future income potential, not just current market prices or past performance. For consumer cases, this could apply to investment properties or side businesses, where the debtor’s own projections carry weight in determining fair market value. Debtor’s Own Projections Can Bind Them:   The court was clear-eyed about the inconsistency between the debtor’s feasibility projections (used to prove the plan could work) and the lower valuations offered for claim bifurcation under § 506(a). In consumer Chapter 13, debtors who present optimistic income or expense projections to secure plan confirmation may find themselves bound by those same numbers when valuing secured claims (for example, cramming down auto loans or investment property liens). Attorneys should advise clients carefully to avoid undercutting themselves.  This can also impact later attempts by a debtor to sell property,  with any "increase"  in value  opening up issues about whether that constitutes a "substantial and unanticipated change in circumstances"  sufficient to justify a modification of the dividend to unsecured creditors.  Improvements and Repairs Matter:  Just as the court valued the property based on completion of the glamping pods and cabin repairs, consumer debtors seeking to value collateral (like home renovations or business equipment upgrades) should account for near-term improvements, not just “as-is” condition. Courts will look at what the collateral will reasonably be worth in the near future, especially when the plan’s success depends on it.   Choice of Appraisal Method: The opinion highlights that courts may discount or even reject appraisals that use inappropriate comparison pools or unjustified assumptions. For consumer debtors disputing valuations (say, for real estate or vehicles), it’s not enough to get “any” appraisal — the selected method must align with the asset’s intended use and the debtor’s situation.  Again  see   Alig v. Quicken Loans,  where the 4th Circuit Court of Appeals looked at improper disclosures prior to appraisals. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_fall_creek_one.pdf (608.18 KB) Category Middle District

Review (of a Book Review): Atkinson, Abbye, WHO'S AFRAID OF BANKRUPTCY? (March 10, 2025). Ed Boltz Mon, 06/02/2025 - 18:11 Available at:   https://harvardlawreview.org/print/vol-138/whos-afraid-of-bankruptcy/ Abstract: Book Review: UNJUST DEBTS: HOW OUR BANKRUPTCY SYSTEM MAKES AMERICA MORE UNEQUAL. By Melissa B. Jacoby. New York, N.Y.: New Press. 2024. Introduction: Who’s afraid of a bankruptcy filing? Perhaps we all should be given the increasingly outsized role that bankruptcy law plays in our market society. Handling more cases per year than any other category of federal court, bankruptcy courts attend to the disposition of debts related to both mundane contractual relationships and pressing social issues. That is to say, beyond its niche façade and dry reputation, bankruptcy law plays a significant role in the resolution of important public and private concerns. For example, bankruptcy law has resolved mass tort liability stemming from decades of widespread asbestos poisoning and from rampant child abuse within some of the most trusted social organizations like the Boy Scouts of America and the Catholic Church (pp. 166, 193–95). Moreover, bankruptcy law seems likely to become the primary locus for resolving mass tort liability stemming from the ongoing opioid crisis (pp. 155–56). Similarly, bankruptcy also indirectly resolves equally important, yet more quotidian social issues like the increasing economic vulnerability of the American family and economic inequality engendered by historical and ongoing racism and sexism in American consumer markets. In other words, debts related to issues that threaten to erode the fabric of our democracy are common in bankruptcy. Bankruptcy’s prominent role exists at the confluence of two policy choices. First, legislatures and courts have long prescribed money as an appropriate substitute for the value of public and private obligations. Second, Congress has broadly defined the scope of justiciable claims in bankruptcy to encompass any obligation that can be reduced to money. Thus, in a world in which liability of all sorts — voluntary or involuntary, contractual, tort-based, criminal, civil, constitutional, and so forth — is regularly expressed in and satisfied by dollars and cents, bankruptcy lingers in the background, ready to redistribute loss when a debtor cannot satisfy their obligation. In this regard, our federal bankruptcy law, the Bankruptcy Code, authorizes a system of “distribution and redistribution” of loss, and as then-Professor Elizabeth Warren once observed, “the distributional issues arising in bankruptcy involve costs to some and benefits to others.” A bankruptcy filing first halts any underlying adjudication or collection of the debtor’s financial obligations up to the time of filing, then the bankruptcy process considers when and how to redistribute the burden of satisfaction of those obligations. Most obviously, those burdens are likely borne by the debtor’s creditors who, once in bankruptcy, are generally no longer entitled to be repaid as required under nonbankruptcy law. Bankruptcy sometimes decides, however, that the debtor deserves no relief and must instead continue to bear the weight of their obligations. In addition, third-party stakeholders may also bear some burden attendant to this redistribution of obligation (p. 5). Bankruptcy law then glazes this redistribution in a finality that forever ends the debtor’s liability for any past, present, or future claims regarding liabilities accrued prior to bankruptcy, regardless of underlying law. In other words, bankruptcy law is extraordinary; it is a “superpower” (p. 15). In Unjust Debts: How Our Bankruptcy System Makes America More Unequal, Professor Melissa Jacoby shares her unique experiences embedded in the saga that is bankruptcy law’s evolution over the last thirty years. Jacoby has borne witness to its transition from an emergency toolkit for “the honest but unfortunate debtor” into an unduly biased institution that protects and indulges nonhuman entities, like corporations and municipalities, even as it directs its strongest disapprobation and illiberality toward individual filers. For these and other reasons, Jacoby begins her excellent book by noting that for her, it “is a story of falling out of love” with bankruptcy law (p. 1). She chronicles its descent into unjustified and sometimes cruel suspicion of individual filers (pp. 20–21). She explains how it makes the pain of financial distress worse by treating individuals as if their financial distress is their own fault rather than symptomatic of broad financial vulnerability in the American middle class (pp. 22–23).  Moreover, she shows how bankruptcy’s apparent antipathy for the plight of individuals in financial distress further exacerbates the economic inequality that plagues our market society (pp. 49–50). Jacoby then describes how bankruptcy law accords significant latitude to nonhuman filers as compared to individual filers. She documents how some nonhuman filers, through their sophisticated lawyers and C-suite denizens, have begun to exploit this leeway by invoking bankruptcy law’s “power tools” (p. 199) to manage with greater convenience “thorn[y] . . . legal problems that are not fundamentally about money” nor accompanied by true financial distress (p. 200). Moreover, in using bankruptcy like “a legal Swiss Army knife” to satisfy their instant needs (pp. 152–53), nonhuman filers have molded bankruptcy laws in ways that predictably seem to undermine the interests of individuals, whether as debtors or as creditors (pp. 8–10). In juxtaposing this disparate treatment of individual and nonhuman filers, Jacoby exposes bankruptcy law’s current normative vulnerabilities. While there may be some reasonable basis for treating individual filers differently from nonhuman filers, there is no current reasonable basis for treating individual filers worse than nonhuman filers. This leaves bankruptcy law susceptible to the idea that its evolution might be positively described as evidence of its effective capture by powerful and innovative legal actors and stakeholders who have become de facto bankruptcy policymakers (p. 245). Having witnessed firsthand bankruptcy law’s evolution and expansion over the course of her career, Jacoby has come to believe that bankruptcy should play a more limited role in the resolution of obligation in our market society than it currently does. Marshaling her deep and broad expertise and experience with bankruptcy law, she concludes that bankruptcy’s “expansion in usage” has carried it “into policy problems for which it has little training or preparation” (p. 153). Rather, bankruptcy’s current availability as a forum of first choice in the resolution of debt that implicates public issues, like mass tort liability, undermines the “foundational legal principles, including separation of powers and federalism,” that are meant to shore up our democracy (p. 11). Meanwhile, bankruptcy law has largely failed in its prime objective to “provide[] robust cancellation of obligations the average person recognizes as debts” (p. 11). Consequently, Jacoby argues that it is time for bankruptcy law to retract its current overextended arms and return to its first principles. She states that if her “book has a policy prescription, it is to reduce the footprint of the bankruptcy system” so that it “focus[es] on just debts,” where “just debts” has a dual meaning (pp. 10–11). First, bankruptcy should concern itself with only those debts that stem from traditional contractual relationships rather than taking up any obligation that can be expressed in monetary terms (p. 11). Second, bankruptcy should eschew attempts to harness its tremendous power to work around principles of fairness and justice (p. 11). Jacoby’s conclusion starkly contrasts with the expansiveness of the current bankruptcy system, and it invokes the current debate about bankruptcy’s role in the resolution of the opioid crisis and other current mass tort controversies, like talc-based illness. Clearly Jacoby’s proposal is rooted in her deep sense of justice and fairness, and the ways in which current bankruptcy policy and practice, in the context of mass tort liability, threaten to subordinate overall fairness in the name of resolution and finality (pp. 233–34). Yet, the reality is that money is ubiquitous as an expression of all obligation, both voluntary and involuntary (p. 6). Consequently, if only as a practical matter, to shrink bankruptcy in the ways that Jacoby and other bankruptcy minimalists suggest would inadvertently justify bankruptcy’s present shrunken approach to the most vulnerable individual debtors. From that perspective, an overinclusive bankruptcy law, with judicial safeguards, that is as generous to individuals as it currently is to nonhuman debtors might be preferable to an underinclusive bankruptcy system that is reduced in scope as to all filers. This Review proceeds as follows. Part I describes Jacoby’s observation that modern bankruptcy law unjustifiably treats individual filers worse than nonhuman filers. Jacoby explains how bankruptcy law generally treats individual filers, whom Jacoby refers to as “real pe[ople]” (p. 15), as presumptively abusive and profligate debtors from whom creditors and society should be protected (p. 21). She then explains how this approach exacerbates inequality among the most vulnerable debtors. Meanwhile, bankruptcy simultaneously treats nonhuman filers, whom Jacoby descriptively rather than pejoratively refers to as “fake people,” generally as in need of protection from overzealous creditors and other stakeholders (p. 64). Consequently, while severely restricting individual access to a maximal discharge of debt, current bankruptcy law has simultaneously expanded to permit nonhuman filers to take full advantage of its “extraordinary powers . . . to stay [all] parallel litigation” and “to finally resolve all pending claims and bar future claims against the debtor.” Part II posits that one way to reconcile this difference in treatment is to understand bankruptcy law positively as merely part of “the code of capital,” as termed by Professor Katharina Pistor, in which powerful interests and the legal professionals who represent them have guided bankruptcy law away from the plight of ordinary, over indebted Americans, and molded it into an institution that prioritizes their clients’ ends. Indeed, Pistor’s insight maps onto Jacoby’s explication of the general subordination of individual interests in bankruptcy law, whether as bankruptcy filers or as creditors in a nonhuman bankruptcy filing, in favor of more powerful institutional interests. Moreover, this perversion of bankruptcy law has caused Jacoby to take a minimalist stance on bankruptcy’s proper normative orientation (pp. 5–7, 11). Part III considers Jacoby’s minimalist stance on what role bankruptcy should play for individual filers and for nonhuman filers going forward. Her views align with bankruptcy minimalists who argue that bankruptcy’s penchant for quick-and-rough justice and its limited opportunities for appellate review — together with its tremendous power to mandate “a final and centralized end to litigation in the past, present, and future” — mean that bankruptcy’s applicability to the resolution of “social debt” should be limited. These arguments have developed in the context of bankruptcy’s current primacy in the resolution of mass tort liability, where minimalists have argued that bankruptcy law can conflict with core democratic features of our system of judicial federalism. Consequently, arguing against bankruptcy maximalists who favor function over form by understanding bankruptcy as an appropriate forum for the efficient resolution of aggregate claims, bankruptcy minimalists argue that bankruptcy is best suited to address the plight of companies in true financial distress, whose liability has ideally already been adjudicated in applicable state and federal courts. These minimalist arguments have crystallized in the context of bad-acting nonhuman filers who openly invoke a combination of limited liability and the Bankruptcy Code to escape from liability relatively unscathed. For example, it is intolerable to think that an alleged mass tortfeasor, like Johnson & Johnson, which has been accused of knowingly selling carcinogenic talc-based hygiene products for decades, could dance its way to financial exculpation merely by cleaving itself into two; saddling the resulting “bad company” with all its talc-based liability (in the case of Johnson & Johnson), while enriching the resulting “good company” with the profitable aspects of its business; then putting its “bad company” in bankruptcy in order to pay cents on the dollar to potentially thousands of its former customers (or their grieving families) presenting with, or who may in the future present with, ovarian cancer or other serious illnesses. This apparent abuse of bankruptcy law is so objectionable that it has even inspired a rare bipartisan effort in Congress to limit this so-called “Texas two-step” maneuver. Yet, as ever, bad facts threaten to make bad law. Although a minimalist approach to bankruptcy is intuitive in the present context, bankruptcy minimalism has hurt individual filers, particularly the most vulnerable individual filers. Thus, while bankruptcy’s current expansive approach to nonhuman filers has emboldened certain debtors to abuse the bankruptcy power to satisfy their own ends, a minimalist solution that is predicated on preconceived notions of financial distress or categorical limits on discharge threatens to throw the proverbial baby out with the dirty bathwater. Specifically, arguments in favor of further minimizing bankruptcy’s reach across the board neglect a harsh practical reality: As long as money damages are the principal expression of all obligations, bankruptcy is an important, if imperfect, backstop. While a robust bankruptcy law with judicial discretion to weed out true opportunism on a case-by-case basis would undoubtedly be over inclusive, it may also better serve the needs of individual filers whose financial distress stems from underlying criminal, contract, tort, familial, or other indebtedness that defies mechanical adjudication in bankruptcy. Commentary: It does verge a bit on parody about how self-consuming the world of bankruptcy commentary is that I'm blogging about a review of  Melissa Jacoby's Unjust Debts: How Our Bankruptcy System Makes America More Unequal,   which I already wrote about directly when it was first released.  (Albeit in a less prestigious forum.) That aside,  Prof.  Atkinson's review does make a more cogent argument against bankruptcy minimalism than my snarky suggestions that consumers flood the bankruptcy courts of Delaware with their own Chapter 11 cases.  While Professor Melissa Jacoby (and others) argue for shrinking the footprint of bankruptcy — limiting it mostly to contractual debts and curtailing its use in areas like mass torts — the article points out that this approach risks worsening outcomes for vulnerable individual debtors, since  Bankruptcy already disproportionately excludes or burdens individual debtors, especially marginalized groups, by: Imposing mechanical means tests (e.g., under BAPCPA) Keeping nondischargeable categories (like student loans, penal debt, domestic support obligations) Forcing Chapter 13 filers through intense, long-term surveillance before they get a discharge (unlike corporate Chapter 11 filers) Further shrinking bankruptcy (for example, by saying only “contract debts” should qualify) could cement or even worsen these exclusions, disproportionately hurting people who already lack wealth and are often carrying involuntary or unavoidable debts (e.g., criminal fines, child support, medical bills, tort damages). While certain that Congress is not likely to increase bankruptcy protections and relief for individuals,  it is similarly unlikely that it would restrict corporations in bankruptcy  without similarly imposing the same (or worse)  on real people.  One clear example would be a restriction on corporate venue (particularly using the Texas Two-Step),  often sought by academics,  which would certainly increase the burdens and risks on individual consumers  filing bankruptcy in the convenient forum for them. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document whos_afraid_of_bankruptcy.pdf (315.29 KB) Category Book Reviews

Law Review: Araujo, Ligia De, How Financial Consulting Can Help Prevent Business Bankruptcy in the U.S. (February 27, 2025). Ed Boltz Fri, 05/30/2025 - 18:57 Available at:  https://ssrn.com/abstract=5167034 Abstract: The rise in corporate bankruptcies across various sectors and business sizes in the United States highlights the importance of financial consulting as a fundamental tool for ensuring business sustainability. This article explores the role consulting can play in bankruptcy prevention, offering a detailed analysis of the economic landscape, emphasizing the significance of micro and small enterprises, and illustrating how financial consultants can assist with restructuring, strategic planning, and risk management. It also discusses the growing influence of emerging technologies such as artificial intelligence, process automation, and data analytics-on consulting processes. The article concludes by demonstrating that financial consulting, together with sound governance practices and long-term strategies, can be decisive in maintaining company competitiveness and survival in a business environment marked by challenges and uncertainties. Commentary: I'll make like Walt Whitman and contradict my repeated position that requiring that consumers take a credit counselling course before filing bankruptcy is a foolish waste of time and money,  by whole-heartedly endorsing the idea that  Tall Building Lawyers  should be forced to have their  clients watch a video on business sustainability before  filing their Chapter 11 case.   Or maybe it's just a terrible waste of time and money for everyone, whether a fake or real person in bankruptcy. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document ssrn-5167034.pdf (106.03 KB) Category Law Reviews & Studies