Consumer Bankruptcy

In light of current events, on April 7, 2020, the Consumer Committee held one of the most successful webinars in its history: “The Consumer Provisions of the CARES Act and Local Court Responses to the Pandemic.” The webinar drew over 1,000 attendees and was held within days of the passage of the far-reaching coronavirus pandemic legislation.

The automatic stay is one of the most extraordinary features of the Bankruptcy Code,[1] and the scope of the prohibition against the initiation or continuation “of a judicial, administrative, or other action or proceeding against the debtor” is extremely broad.[2] While the stay may be terminated by order of the bankruptcy court pursuant to § 362(d) of the Bankruptcy Code, the Supreme Court recently held that a bankruptcy court’s denial of relief from stay is a final, appealable order.[3]

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The “hanging paragraph” found at § 1325(a)(9) of the Bankruptcy Code is well known. This provision prevents the bifurcation of certain secured claims if the creditor holds a purchase money security interest (PMSI) in collateral acquired by the debtor within certain pre-petition time periods. Section 1325(a)(9) provides:

This webinar will discuss how new Bankruptcy Student Loan Management Programs are helping debtors solve their student loan issues. The webinar will cover the issues affecting debtors and their student loans as well as the solutions and tools the courts are implementing.

Richard Cole ([email protected]) and Jon Lieberman ([email protected]), co-chairs of the ABI Consumer Committee, would like to thank all of the committee members and leaders who have made 2019 a most productive and exciting year. Our committee officers are vital to the success of the committee throughout the year, and information about our committee leadership is listed below.

Michelle Bass ([email protected]) serves as our Membership Relations Director. The committee has seen a substantial membership increase this year, and Michelle takes the time to personally send a welcome to new committee members. Michelle will be planning a committee reception at the Annual Spring Meeting in April 2020.

Let’s face it: Effective consumer bankruptcy lawyers eschew litigation. Bankruptcy procedures promote compromise, and bankruptcy judges favor settlement. Many bankruptcy lawyers develop good settlement skills without ever participating in formal dispute-resolution processes. But occasionally, even effective lawyers can’t settle a case on their own. In those cases, lawyers need to know when to request the assistance of a mediator and how to successfully participate in a mediation.

The Basics

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Effective Oct. 1, 2019, the U.S. Bankruptcy Court for the Middle District of Florida has started its student loan management program (SLM). The program is the result of the work of debtors’ attorneys and the Department of Justice to create a forum for debtors and lenders to discuss consensual repayment options for student loans within bankruptcy cases and is primarily aimed at chapter 13 debtors, although it is available to individual or joint debtors filing under chapters 7, 11, 12 and 13.

The program uses a secure online portal for debtors to provide student loan creditors with necessary documents for them to cure defaults and seek income-driven repayment plans, rehabilitation, consolidation and settlement. The program allows parties 180 days, unless otherwise agreed, to conclude the procedures and come to a resolution.

On Aug. 26, 2019, the Family Farmer Relief Act of 2019 (Pub. L. No: 116-51) was signed into law, substantially increasing the debt limit for agricultural producers seeking to file for relief under chapter 12. The debt limit increase — from approximately $4.3 million to $10 million — will dramatically expand chapter 12 bankruptcy eligibility at a time of turmoil for the U.S. agriculture industry, precipitated by years of depressed farm income, crop overproduction, increased debt loads, natural disasters, extreme weather events and, more recently, retaliatory tariffs on many U.S. agricultural products as part of a renewed trade war.