November 15, 2008

Chapter 11 Analysis from Profs Warren and Westbrook

This article, "Chapter 11: Conventional Wisdom and Reality," with more mind-boggling data, is about a year old but has some really useful information on the uses and successes of "a cross-section" of chapter 11 cases.  The total assets in the cases studied range from $13 (dollars) to $19 billion.  The article can be accessed here. 

The facts that struck me are:

November 15, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

September 04, 2008

Prof. Nancy Rapoport Article on Ethics in Bankrupty Court

"(Almost) Everything We Learned about Pleasing Bankruptcy Judges, We Learned in Kindergarten," July, 2008 can be accessed here.  This is an amusing way of looking at very old rules, "Be Prepared," "Don't Lie," etc.

September 4, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

September 01, 2008

Over-Spending is Cause for Personal Bankruptcy According to New Study

Well, I'm glad we cleared that up!  Professor Ning Zhu, Professor at University of California, Davis, has some great statistics which show what I have been saying for years: over-spending by consumers is the biggest cause for consumer bankruptcies, not medical problems, divorce and unemployment.  The article is here.  According to Zhu, the overspending makes the consumer "more susceptible to adverse events" but the spender knows that he can file bankruptcy and only partially bear the cost of the overspending. 

Having agreed with him on the cause for filing, I still have no problem with the consumer bankruptcy rules and ease of bankruptcy.  The credit card companies extend credit every day to people with marginal ability to repay and now want rules preventing bankruptcy so that the telephone collectors won't be impeded from bludgeoning these people into paying the credit card before anything else.    

Professor Zhu writes, "In terms of policy implication, our findings indicate that by imposing greater costs, the more stringent requirements for filing in the new law may deter some households from over-consumption."  I disagree with that comment completely.  With credit card issuers bombarding consumers with easy credit and ridiculously high interest rates, the only thing "greater costs" accomplishes is more and more people "going underground" after running their credit cards to unacceptable limits.  Without the bankruptcy fresh start, these consumers will work "under the table," cash their paychecks so there is no bank account to seize or simply work less or not at all so there is no paycheck to seize.   The primary accomplishment of bankruptcy is it stops that phone from ringing - the collector gorillas - and the consumer can rejoin society.   

Zhu points out that credit card debt equals almost a full year of income for "the bankrupt households" he studied.  That means something like a third of their pre-tax income goes to pay the interest alone.  How can credit card issuers extend that kind of debt to those kinds of consumers?  And now they want Congress to simply prevent the bankruptcy filing!  My vote is to rescind the 2005 Amendments. 

September 1, 2008 in Article Reviews | Permalink | Comments (2) | TrackBack

August 21, 2008

Article on Professional Fees in Chapter 11 Cases

Professor Stephen Lubben has a recent article in the American Bankruptcy Journal on Professional Fees in Chapter 11 cases.   Lubben, Stephen J.,Corporate Reorganization & Professional Fees. American Bankruptcy Law Journal, Vol. 82, p. 77, 2008  Available at SSRN: http://ssrn.com/abstract=1094032

From his abstract:

"Among the key findings of this study are:

- Most of the regulation of professional fees provided by the Bankruptcy Code is valuable primarily for its deterrence effects.  Retention applications are rarely denied and requested fees are rarely reduced. This, of course, does not mean that the regulatory system is broken, but rather that much of the system is not easily viewed by outsiders.

- Unlike prior studies, I find that time spent in chapter 11 seems to have very little independent effect on the costs of the case.  Factors like the size of the debtor corporation, the number of professionals retained, and whether a committee is appointed play much bigger roles.

- Professional fees in chapter 11 are subject to economies of scale.  In particular, with every 1 percent increase in the size of a debtor, professional fees only grow by less than half a percent - holding other key factors constant.

- Lost in the sound and fury about large professional expenses in large cases is the fact that almost 35 percent of the chapter 11 cases result in no payment whatsoever to the professionals. These are typically smaller cases that are often converted to chapter 7 or dismissed outright."

August 21, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

July 22, 2008

Must Read Empirical Study on Credit Card Profits

This is a great article by a young Harvard fellow, Michael Simkovic, which establishes with empirical data that bankruptcy filings are down because of the amendments, credit card profits are up hugely since the amendments, and credit card companies have not passed the savings from fewer bankruptcy case writeoffs onto the consumer.  Interest rates, late charges and other fees have risen in the past two years.  Why?  Apparently because of the lack of competition among credit card issuers, the lack of ability of the consumer to compare the rates of different issuers, and the lack of ability to change cards once the consumer is up to his ears in debt.  The article can be accessed here.   

July 22, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

May 03, 2008

New Study on Justice Scalia Statutory Interpretation

I found a great new article on Justice Scalia, thanks to Professor David Hricik's Statutory Construction Blog.  Written by Professor Miranda McGowen at the University of San Diego, it is entitled, "Do as I Do, not as I say: An Empirical Investigation of Justice Scalia's Ordinary Meaning Method of Statutory Interpretation."  Studying Scalia's dissents for the past twenty years she concludes,

"This study shows that Justice Scalia consults an eclectic set of extrinsic materials when he is construing statutes.  He in fact uses essentially the same broad set of materials that other justices use—except for legislative history.

"This also study found that Justice Scalia’s methodology is eclectic, too.  In a quarter of the issues in this sample, Justice Scalia abandoned textualism in favor of overtly common law methods.  When interpreting regular statutes, his presumption in favor of ordinary meaning did little work for him; in a majority of cases Justice Scalia construes words in statutes in light of their specialized, legal meanings or the meaning they have accrued in case law or in common law, not their ordinary meaning.

"Whatever Justice Scalia says about his interpretive theory, he is as purposivist of a judge as they come.  The data show that he interprets statutes in light of purpose as frequently as the rest of the Court.  Purpose rather than text sometimes drives his interpretation; if statutory purpose requires it, he will sometimes adopt second-best textual interpretations.

"The purposes he attributes to statutes do not come from his theory of interpretation, for he claims that purpose analysis is generally improper, unless the text indicates the statute’s purpose.  Nor do they come from the legislative materials, for he considers them too unreliable and too easily manipulated to provide judges with the proper amount of constraint.

"Sometimes Justice Scalia does infer statutory purpose from the text, and sometimes from agency regulations.  But frequently, his sense of a statute’s purpose comes from earlier Court decisions and lower court decisions.  Indeed, this is so often the case that his statutory interpretation practice bears an uncanny resemblance to the kind of common law interpretation of statutes he has decried in his theoretical writings."

May 3, 2008 in Article Reviews, Supreme Court | Permalink | Comments (0) | TrackBack

April 16, 2008

Article on "Borrowed Regulations": The IRS's Ability to Decide Who Qualifys for Chapter 7

I highly recommend a new article published in the Norton Bankruptcy Law Advisor by Professor Matthew Stevenson and Kristin Hickman: The Administrative Law of Borrowed Regulations: Legal Questions Regarding the Bankruptcy Law's Incorporation of IRS Standards.  The article can be accessed here.   

From the abstract:  "To what extent, if at all, should bankruptcy courts defer to IRS statements, contained in documents other than the Standards themselves, about how the Standards should be applied?  May the IRS alter the Standards for its own purposes but not for bankruptcy purposes, or vice versa?  What procedures must the IRS use when it modifies the Standards, especially in light of the fact that the Standards now have an apparently binding effect in bankruptcy cases?"

April 16, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

March 26, 2008

Article From Judge Bruce Markell on Individual Chapter 11 Cases

Thanks to Bob Hiller for his post:

Subject: Individual Debtors in Chapter 11 after BAPCPA
"The Sub Rosa Subchapter: Individual Debtors in Chapter 11 after BAPCPA"

University of Illinois Law Review, Vol. 2007, p. 67
UNLV William S. Boyd School of Law Legal Studies Research Paper No. 08-03

BRUCE MARKELL, William S. Boyd School of Law, UNLV

In reforming the bankruptcy laws in 2005, Congress added several provisions to the Bankruptcy Code regarding the use of chapter 11 by individuals. These changes radically alter the basic chapter 11 rules with respect to individuals; among the most significant change is that postfiling service income, previously allocated to the individual debtor alone (and not available to pay prefiling creditor claims), was made property of the estate available to pay prefiling creditor claims. This article surveys the changes made and their possible impact, and suggests that they are sufficiently radical to have warranted a separate subchapter of chapter 11.

March 26, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

March 17, 2008

Payday Lenders and Bankruptcy

There are more payday lender storefronts today than McDonalds, so says Professor Paige Skiba.  Does 30 million lenders at 450% have any correlation with bankrptcy filings?  Definitely she concludes.  You can find the article here or at www.creditslips.org.   

March 17, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

February 26, 2008

Informative Insight on Appellate Briefs

This is a very informative post I received in an email today from the LA County Bar Assoc.  It is by Professor Scott Wood at Loyola Law School who questions a research attorney with 20 years experience with the California Court of Appeals.  You can access the article here. 

One great comment is that the appellant should concentrate on his best few arguments, (i.e., he says "how many errors can the trial judge make?), the respondent should make every argument possible since the court must affirm if any argument supports the result. 

February 26, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

February 25, 2008

Trying to Protect a Crook? File for the non-Crook Spouse

Here is the CDCBAA Newsletter for February, 2008.  It has an article about this topic by Dennis McGoldrick, former chapter 7 trustee in Los Angeles.  The subject is the little known and less understood "community property discharge" in Section 524.   

February 25, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

October 28, 2007

Chapter 15

There has been a lively discussion of chapter 15 on one of the list serves.  I thought the law review article cites might be helpful.  See Brooklyn Journal of International Law . . . a symposium volume entitled "Bankruptcy in the Global Village:  The Second Decade."  The volume can be found online here.

From Professor Jay Westbrook:  Avoidance Of Pre-Bankruptcy Transactions In Multinational Bankruptcy Cases, 42 Tex. Int'l L.J. 899 (2007); Universalism and Choice of Law, 23 Penn State Int. L.J. 625 (2005); Choice of Avoidance Law in Global Insolvencies, 17 Brook. J. Int. L. 499 (1991).

Also, as many of you know, Judge Samuel Bufford is writing a book on chapter 15.   I will post when it becomes available. 

JH

October 28, 2007 in Article Reviews | Permalink | Comments (0) | TrackBack

October 20, 2007

Great Kozinski Article on Writing Briefs and Oral Advocacy

Kozinski, Alex, The Wrong Stuff, 1992 B.Y.U. L. Rev. 325.  This article is 15 years old but is or should be mandatory reading in every law school writing or advocacy class.  It is actually a speech Judge Kozinski gave at BYU.  He subtitled it - How to Lose an Appeal.  As sarcastic as ever, Kozinski sets forth a great compendium of "don'ts" when writing and presenting your appeal. 

One comment which kind of surprised me is that the judges know the law.  Its likely one of the three wrote the opinion on one of the important cases relating to the issue at hand.  Consentrate on the facts and be sure to know the record inside and out.      

October 20, 2007 in Article Reviews | Permalink | Comments (0) | TrackBack

October 04, 2007

Great Insight on Credit Card Lending to "Bankrupts"

Professor Katie Porter has a great article on the practices of the credit card industry in lending to persons after they have filed bankruptcy.  Bankrupt Profits: The Credit Industry’s Business Model For Postbankruptcy Lending, Katherine Porter, College of Law, University of Iowa.  Using significant empirical data, she establishes that the credit card industry tells Congress that debtors are low-lifes who run up their credit card on frivolities intending to file bankruptcy to avoid repayment.  In reality, the industry views debtors as "new meat," a new source of profit. 

She says,

"This Article’s key finding is that creditors repeatedly solicit debtors to borrow after bankruptcy. Families receive dozens of offers for new credit in each month immediately after their bankruptcy discharge.  Some offers specifically target these families based on their recent financial problems, using bankruptcy as an advertising lure."

Her findings are based on a "core sample" of "1,250 consumer bankruptcy cases, consisting of 780 Chapter 7 bankruptcies and 470 Chapter 13 bankruptcies."  She analyzed the cases at the outset and did telephone interviews one and three years later. 

"Credit solicitation of recent bankruptcy debtors is rampant.  Nearly all debtors stated that they had received offers for credit in the first months following their bankruptcy.  One year postbankruptcy, these families reported that creditors sent them an average of more than fourteen credit offers per month."

Her findings are that 25% of the debtors had obtained new credit within one year of the filing.

"Two paradoxes emerge.  Debtors report more difficulty in obtaining secured loans than unsecured loans.  Also, debtors who chose Chapter 13 (repayment) bankruptcy instead of Chapter 7 (liquidation) bankruptcy have fewer opportunities to borrow.  Rather than identifying them to creditors as a 'responsible' borrower, repaying a portion of their past debts actually hinders a family’s access to future credit.  On the whole, the credit industry treats former Chapter 7 bankruptcy debtors as valuable customers, seeking to profit by loading these families with new debt immediately after bankruptcy."

"Chapter 13 families are significantly less likely to receive credit offers than Chapter 7 families.  The reported rate for Chapter 13 families is significantly lower than the fraction of Chapter 7 debtors (96.1 percent) who receive credit offers after filing bankruptcy.  At least in the short-term, Chapter 13 seems to be a modest deterrent to the credit industry’s efforts to turn bankrupt families into customers."

She concludes, "lenders’ intense solicitation of postbankruptcy families is consistent with an understanding of the consumer bankruptcy system as a refuge for decent, honest families reacting to adverse events such as job loss or illness."

October 4, 2007 in Article Reviews | Permalink | Comments (0) | TrackBack