Consumer Bankruptcy

Heather Giannino and Hannah Hutman, co-chairs of ABI’s Consumer Bankruptcy Committee, thank all committee members for their participation this year.

The committee is proud to have organized and hosted another very successful Consumer Practice Extravaganza (CPEX) in partnership with ABI’s professional staff, Co-Chairs Jeffrey Fraser and Summer Shaw, and a robust planning committee. Committee leadership serving on the CPEX planning committee included Heather Giannino (Co-Chair), Jeffrey Fraser (Special Projects Leader), Karlene Archer (Education Director), Mike Miller (Communications Manager) and Kara Gendron (Membership Relations Director).

Over the past year, case law around privacy and data security has been evolving in crypto industry bankruptcies, as courts grapple with familiar issues in a new industry. Debtors, unsecured creditors’ committees and other proponents of greater privacy for creditors of crypto companies argue that greater precautions are required because crypto company creditors are more likely than creditors of other types of companies to be targeted by identity theft and scams. Crypto assets can be attractive to scammers and other bad actors due to the anonymity of cryptocurrency transactions and difficulty tracing crypto assets.

With the U.S. Trustee Program announcing that § 341 meetings for all chapter 7 and 13 cases will be heading to Zoom, there is no turning back now. Most routine consumer bankruptcy cases can now be completed without the debtor ever leaving home.

Gone are the days of plastic grocery bags full of unopened mail from creditors. Gone are the days of printing hundreds of pages of bankruptcy schedules. Gone are the days of debtors listening to prior answers during § 341 meetings and simply parroting responses. Gone are the days of finding parking at the bankruptcy courthouse. Gone are the days of debtors finding it difficult to access a local or nearby attorney (a big win for access to the bankruptcy system). Gone are the days of wet-ink signatures (in some jurisdictions).

When a debtor’s assets appreciate after filing a chapter 13 petition, historically that appreciation has inured to the debtor and not to the estate [1]. That norm is gradually evaporating, as courts are beginning to hold that post-petition appreciation belongs to creditors [2]. The ambiguity in chapter 13 of the Bankruptcy Code is responsible for shifting appreciation from debtors to creditors.

This ambiguity arrived at the forefront of the bankruptcy bar’s attention through two cases that dealt with post-petition, pre-conversion increases in home values. Although these cases deal with post-petition appreciation in the context of conversion, they underscore the vast differences in how the bench approaches property of the estate in chapter 13.

One of the most highly anticipated events of the year, ABI’s online Consumer Practice Extravaganza (CPEX) will return October 30-November 10, with on-demand access for an additional 60 days. Now in its third year, CPEX offers a wealth of CLE for the incredibly low price of just $100. Sessions this year will feature such topics as student loan discharge, chapter 13, subchapter V and artificial intelligence, as well as presentations on changes to forms and other matters. Find out more and register at cpex23.com!

Congress’s decision to use the passive voice has cost at least one debtor the discharge of a significant debt. The U.S. Supreme Court in Bartenwerfer v. Buckley ended a long journey through the Ninth Circuit for a debtor whose husband committed fraud and when she sought to discharge the debt that resulted from a judgment for that fraudulent action.[1] Instead of analyzing whether the debtor was culpable in the fraud, the Supreme Court instead held that the debt — not the debtor — was the subject of 11 U.S.C. § 523(a)(2)(A), and since the debt itself resulted from fraud, it could not be discharged.

Consumer and business bankruptcy attorneys alike have been conditioned to feel fear or awe, depending on the circumstances, at hearing the name Clifford White for almost 20 years. When White announced in 2022 that he would retire, consumer practitioners had been looking forward to the announcement of the new director, mostly to identify the focus that the U.S. Trustee Program would take. Could we anticipate a director with a business focus as interest rates grow and the controversial Texas Two-Step is in limbo, or a consumer-experienced director with the anticipated rise in consumer filings and the struggles of inflation coming to light?