Author: david lander

  • Perhaps Preferential Transfer Litigation is Not Worth the Cost- two tiny adjustments in that direction.

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    david lander

    Although the primary thrust of the Small Business Reorganization Act of 2019 which was signed by the President on August 23 is to provide relief to reorganizing small businesses, the act has two provisions that are intended to provide  some relief from the threat of questionable and small dollar bankruptcy preference claims. One of the preference aspects of this new law requires bankruptcy trustees and post confirmation trustees and debtors in possession and others who initiate preference actions to: consider, before commencing suit, an alleged preference recipient’s statutory defenses based on “reasonable diligence in the circumstances; and taking into account a party’s known or reasonably knowable affirmative defenses.” (punctuation added) The second preference aspect of the new law amends a bankruptcy venue provision that, if applied to preference suits, may reduce the number of small (under $25,000) preference cases filed.

    Although the avoidance of preferences has been part of US Bankruptcy law for over two hundred years and has generated considerable litigation, there is virtually no empirical research into the actual operation and impact of American preference law. 

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  • Bankruptcy and Mindfulness

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    david lander

    The practice of mindfulness and other types of meditation are growing on the coasts and within the law school and lawyer communities. Perhaps these practices can provide meaningful benefits to bankruptcy clients, bankruptcy lawyers and bankruptcy professors and judges. The essence of "mindfulness for lawyers" efforts begins with the notion that the adversary system can take a toll on home life, friendships and our own notions of who we want to be. A meditation practice can help us concentrate and be the best lawyers we can be and also the best friends and family members we want to be; and perhaps even help us to be the kind of persons we want to be. It is a mix of focusing more fully on the present, mixing that with lovingkindness to ourselves and others, and observing what is going on in our minds, all without judgment.

    Consumer bankruptcy debtors, creditors, practitioners and judges are constantly faced with problems for which the legal system is at best a partial solution. In most cases there are a few true winners and a host of partial winners, partial losers and complete losers. Mindfulness can help us keep a focus on the matter in front of us and also help us maintain our passion for life and practice.  On the business bankruptcy side, our duty of loyalty combined with the zealous representation ethic can allow the day-to-day fighting to change our character and perhaps even our values. In every community there are a host of ways of starting such a practice.  The book 10% Happier by Dan Harris is an easy entry point and in most communities there is a Mindfulness Based Stress Reduction course available.  More and more law schools and bar associations are providing such opportunities. Mindfulnessinlawsociety.com and themindfullawstudent.com are excellent resources.  I am enjoying teaching mindfulness to law students as well as faculty and staff at Saint Louis University Law School. 

     

     

  • The Community in Which Consumer Debtor Lawyers Reside 

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    david lander

    Just as tax and estate planning lawyers are part of a network of helpers that includes accountants and financial planners, consumer debtor attorneys should ideally be part of a network of able and responsible helpers. Sadly, since prospective consumer debtors lack financial resources, the availability and quality of their non lawyer helpers is suspect.  There is a network of credit counseling agencies but critics have long attacked the effectiveness and loyalty of their services. Many CDFI's and some neighborhood centers provide quality help, but they are very limited in number.  One of several reasons for these weaknesses is the "chicken and egg" dilemma, that the career line for these potential helpers is very limited and thus the training system for their preparation is likewise very limited.  

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  • Hope for Helping the Prospective Payday Loan Customer

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    david lander

    Short term (payday) loans and high interest consumer installment loans continue to deplete low income households of micro dollars and their communities of macro dollars. Although the CFPB seems intent on supporting the depletions, a good number of states have provided some relief.  Even in states without interest rate limitations there are a couple of ideas that can help.

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  • Who Teaches Bankruptcy Law?

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    david lander

    A survey some years ago showed that bankruptcy was one of the law school courses most often taught by adjuncts rather than full time teachers. This has several impacts on the teaching of bankruptcy law. Full time teachers often have contact with one another and may meet at AALS or other professional meetings but  the adjuncts who teach bankruptcy may not have much interaction with other bankruptcy teachers. In addition,  although some of the adjuncts are judges, more of the lawyer- adjuncts are likely to be business bankruptcy lawyers and fewer to be consumer lawyers. Another survey years ago indicated that there were a number of chapter 11 courses being taught, but almost no advanced courses in consumer bankruptcy. At one time there was a sub-committee of the ABA Business Bankruptcy Committee focused on the teaching of bankruptcy in which full time and adjunct teachers met to talk about these topics. Recently the ABA created a new committee to study the role of adjuncts in legal education.

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  • Counseling Help for Distressed Student Loan Borrowers?

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    david lander

    As always, it has been very enjoyable to be a guest here. Three thoughts until next time.

    1. At least two major organizations are about to join or have recently stepped into the effort to provide help to distressed student loan borrowers. National Foundation for Credit Counseling is launching an effort that was piloted by several of their larger members. Also,Neighborworks is launching an effort. We need high quality counseling for these borrowers, but the counseling programs face many challenges including the following

                a. Training must include not only the very complicated technical issues, but also counseling and interpersonal techniques; trainers must know both areas;

                b. These will hopefully be more than just diagnosis and pointing to the right program; digging into each individual case to help the borrower find the best option is complicated and takes time and skills;

                c. This counseling requires more than a single session and previous NFCC programs have not accommodated follow up sessions;

                d. The programs require serious quality control; and    

                e.  Finally,each provider MUST have a relationship with a legal services program or law school clinic that has expertise in student loan borrower programs so that referrals are smooth;

            2. Use of adjuncts at many law schools is undergoing major changes. In a few months I hope to start on a factual review of what is happening and comment on what that means for legal education. The fall in number of students the last several years at most law schools and the continuing pressure by the Bar for more practice-oriented education are two factors. And then there is the question of the most effective way of integrating adjuncts with the full time faculty and the general curriculum. More on this topic down the road after more numbers are in. 

            3. AFCPE (Association for Financial Counseling & Planning Education) has just received accreditation for its financial counselor certification from the National Commission for Certifying Agencies.  This is an important development for the field and i hope to comment in the future more fully on its meaning and impact. CFPB and many funders have been watching to see if the certification would be approved.

  • The Weight To Be Given To Comments From Bankruptcy Judges On Proposed Bankruptcy Rules and Forms

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    david lander

     The Advisory Committee on Bankruptcy Rules (and forms) has been quite active and successful over the past decade in improving the practice of law in the Bankruptcy Courts.  Some of their major innovations such as the overhaul of the process for appealing a decision of the bankruptcy court have engendered little comment and have been deemed important contributions to justice.  Others, such as the responses to changes in the consumer credit and consumer mortgage industries have engendered very active comment from both the creditor and debtor communities and the Committee has endeavored to evaluate carefully all such comments to make certain the proposed rules and forms are not only well written and thought through but also fair to both sides.  In the business bankruptcy  realm the proposed rules governing Informal Committees (2019) engendered significant comment from the claims buying industry and the Committee made numerous changes in response to those comments.

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  • What Would Effective Counseling for At Risk Student Loan Borrowers Look LIke?

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    david lander

    As the CFPB and Department of Education and others struggle with how best to provide effective help to at risk student loan borrowers, here is one example of a program that provided these services. For full disclosure I am the chair of the advisory committee of the organization that oversaw and funded the project.

    The Center for Excellence in Financial Counseling (“CEFC”) at the University of Missouri St Louis was founded and funded to develop ways to improve the quality of education and counseling for consumers in financial distress. For its first program, the organization has been exploring ways to help consumers who are at risk on the repayment of student loans. This is the first such program in the country and CEFC is encouraged about the results thus far and for the prospects going forward.

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  • The Future of Bankruptcy Work for Lawyers

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    david lander

    As expected, as the number of consumers filing bankruptcy has continued to decrease, the revenue of the consumer bankruptcy debtor and creditor bar has been hit hard. Over the past several years billable hours of business bankruptcy (including insolvency, workout or reorganization) lawyers have been dropping and many mid-level partners at large firms are looking for work in related or unrelated specialties. 

    We would expect consumer bankruptcy work to increase when:

    1. Filing has a better chance of discharging some or all student loan debt;
    2. Filing has a better chance of helping consumers modify the terms of their first mortgages;
    3. Filing has a better chance of helping consumers modify the terms of their car loans; and/or
    4. Credit card debt and/or defaults increase.

    The future is harder to call for the business bankruptcy field. Everyone expects the number of business failures and loan defaults to increase when interest rates tick up and those businesses that are surviving only because of the low rates cannot service their debts or find alternative financing.  Even though the economy had not been vibrant, with the exception of specific industries such as coal or oil defaults are low.

    The challenge is to predict to what extent law work in this area is down because of structural and legislative changes.  For example, the shift from traditional financial institution lenders to “Loan to Own” lenders has reduced the amount of law work related to default and/or restructure on both the debtor and the creditor side. Partly related to that change, the shift from chapter 11 reorganizations to “chapter” 363 sales has significantly reduced bankruptcy court work. One of the factors in the shift to 363 sales rather than true reorganizations was the legislative changes to Article 9 in all fifty states. When the ALI –ULI drafting committee made it much easier to take and enforce in bankruptcy court a security interest in just about every conceivable type of asset they reduced the reorganization leverage.

    What percentage of the drop off in work involving defaults, workouts and restructure is related to these factors will determine to what extent the work will grow when defaults rise.

  • A Different and Better Type of Financial Counseling For Low and Moderate Income Consumers May be on the Horizon

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    david lander

    After many years of lingering between mediocrity and dishonesty there may be early signs of improvement in the industry that provides financial counseling or coaching for low and moderate income consumers in financial difficulty. Sparks started by Single Stop/Robin Hood Foundation in the NYC area and Cities for Financial Empowerment in NYC and several other cities may have the potential to provide much needed help. This comes at a particularly important time since the search is on for providers to help consumers wend their way through the student loan default maze. There is considerable concern that dollars will go to mediocre providers who see their bottom line as more important that the needs of their customers and/or which do not have sufficient quality or quality controls.

    Many of the sparks of hope are located within a multi-service center, often a community development corporation or well-established neighborhood non-profit organization. Because there has not been a well-established career line for high quality professional financial counselors, the academic ladder into these jobs is slippery and has more holes than pegs. Likewise, the credentialing has been uneven. Over the past several decades there have been moments when quality research was undertaken but in the past decade such research as there has been has focused on financial literacy or savings and not this segment of the safety net. For these sparks to kindle it will be necessary for the academic preparation programs that do exist to step up. The bulk of the teaching has been at land grant universities in programs that send most of their graduates to financial planning where salaries are better or to the military which has generated a healthy career line since they have realized how important financial stability is to the psyche of their members. There is also some noise in the social work academy to infuse greater emphasis on things financial and perhaps create a relevant field of concentration. The development of a new set of courses at the City University of New York is a welcome first step, but it is crucial that quality control be maintained as those courses are expanded to institutions of learning at other Financial Empowerment cities. And it is crucial that PhD programs be developed to provide quality research and writing that is not subject to the conflicts of interest that have dominated in this field as the very credit counseling providers fund or otherwise control most of the research and writing that does exist.