Once Is Not Enough: Preserving Consumers' Rights to Bankruptcy Protection

Indiana Law Journal

Volumn 74, Issue 2, 1999, Pages 438-499

  DeJarnatt, Susan L ^a  

^a TEMPLE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0346552905     PISSN: 00196665     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (343)

1. Jeff Jacoby, Rewarding Deadbeats, BOSTON GLOBE, June 10, 1997, at A27.
2. Survey Response of the Standing Chapter 13 Trustee from the Eastern District of Virginia (question 20) (on file with Author) [hereinafter Trustee, E.D. Va.]; see infra Part FV.
3. See, e.g., Forgive Us Our Debts?, DAILY OKLAHOMAN, Dec. 28, 1996, at 4, available in 1996 WL 12316335; Fred R. Bleakley, Personal Bankruptcy Filings Are Soaring, WALL ST. J., May 8,1996, at A2; A Profile of Debt, Income and Expenses of Consumers in Bankruptcy 3-5 (Dec. 17, 1996) [hereinafter Stolen Testimony] (testimony of Dr. Michael E. Staten, Director of the Credit Research Center at the Krannert Graduate School of Management, Purdue University, before the National Bankruptcy Review Commission) (unpublished testimony on file with author); James Carter, Editorial, A Fresh Start or a Free Ride?, ST. LOUIS POST-DISPATCH, Jan. 7, 1997, at 11B; LAWRENCE CHIMERINE, MASTERCARD INT'L, AMERICANS IN DEBT: THE REALITY 24, 29 (1997); Robert L. Secton & Gary Galles, Editorial, Why the Rise in Bankruptcy?, INV. BUS. DAILY, Jan. 7, 1997, at A2, available in 1997 WL 4601028.
4. See, e.g., Forgive Us Our Debts?, DAILY OKLAHOMAN, Dec. 28, 1996, at 4, available in 1996 WL 12316335; Fred R. Bleakley, Personal Bankruptcy Filings Are Soaring, WALL ST. J., May 8,1996, at A2; A Profile of Debt, Income and Expenses of Consumers in Bankruptcy 3-5 (Dec. 17, 1996) [hereinafter Stolen Testimony] (testimony of Dr. Michael E. Staten, Director of the Credit Research Center at the Krannert Graduate School of Management, Purdue University, before the National Bankruptcy Review Commission) (unpublished testimony on file with author); James Carter, Editorial, A Fresh Start or a Free Ride?, ST. LOUIS POST-DISPATCH, Jan. 7, 1997, at 11B; LAWRENCE CHIMERINE, MASTERCARD INT'L, AMERICANS IN DEBT: THE REALITY 24, 29 (1997); Robert L. Secton & Gary Galles, Editorial, Why the Rise in Bankruptcy?, INV. BUS. DAILY, Jan. 7, 1997, at A2, available in 1997 WL 4601028.
5. See, e.g., Forgive Us Our Debts?, DAILY OKLAHOMAN, Dec. 28, 1996, at 4, available in 1996 WL 12316335; Fred R. Bleakley, Personal Bankruptcy Filings Are Soaring, WALL ST. J., May 8,1996, at A2; A Profile of Debt, Income and Expenses of Consumers in Bankruptcy 3-5 (Dec. 17, 1996) [hereinafter Stolen Testimony] (testimony of Dr. Michael E. Staten, Director of the Credit Research Center at the Krannert Graduate School of Management, Purdue University, before the National Bankruptcy Review Commission) (unpublished testimony on file with author); James Carter, Editorial, A Fresh Start or a Free Ride?, ST. LOUIS POST-DISPATCH, Jan. 7, 1997, at 11B; LAWRENCE CHIMERINE, MASTERCARD INT'L, AMERICANS IN DEBT: THE REALITY 24, 29 (1997); Robert L. Secton & Gary Galles, Editorial, Why the Rise in Bankruptcy?, INV. BUS. DAILY, Jan. 7, 1997, at A2, available in 1997 WL 4601028.
6. See, e.g., Forgive Us Our Debts?, DAILY OKLAHOMAN, Dec. 28, 1996, at 4, available in 1996 WL 12316335; Fred R. Bleakley, Personal Bankruptcy Filings Are Soaring, WALL ST. J., May 8,1996, at A2; A Profile of Debt, Income and Expenses of Consumers in Bankruptcy 3-5 (Dec. 17, 1996) [hereinafter Stolen Testimony] (testimony of Dr. Michael E. Staten, Director of the Credit Research Center at the Krannert Graduate School of Management, Purdue University, before the National Bankruptcy Review Commission) (unpublished testimony on file with author); James Carter, Editorial, A Fresh Start or a Free Ride?, ST. LOUIS POST-DISPATCH, Jan. 7, 1997, at 11B; LAWRENCE CHIMERINE, MASTERCARD INT'L, AMERICANS IN DEBT: THE REALITY 24, 29 (1997); Robert L. Secton & Gary Galles, Editorial, Why the Rise in Bankruptcy?, INV. BUS. DAILY, Jan. 7, 1997, at A2, available in 1997 WL 4601028.
7. See, e.g., Forgive Us Our Debts?, DAILY OKLAHOMAN, Dec. 28, 1996, at 4, available in 1996 WL 12316335; Fred R. Bleakley, Personal Bankruptcy Filings Are Soaring, WALL ST. J., May 8,1996, at A2; A Profile of Debt, Income and Expenses of Consumers in Bankruptcy 3-5 (Dec. 17, 1996) [hereinafter Stolen Testimony] (testimony of Dr. Michael E. Staten, Director of the Credit Research Center at the Krannert Graduate School of Management, Purdue University, before the National Bankruptcy Review Commission) (unpublished testimony on file with author); James Carter, Editorial, A Fresh Start or a Free Ride?, ST. LOUIS POST-DISPATCH, Jan. 7, 1997, at 11B; LAWRENCE CHIMERINE, MASTERCARD INT'L, AMERICANS IN DEBT: THE REALITY 24, 29 (1997); Robert L. Secton & Gary Galles, Editorial, Why the Rise in Bankruptcy?, INV. BUS. DAILY, Jan. 7, 1997, at A2, available in 1997 WL 4601028.
8. "Academicians have an obligation to be clear on one point: there are no data showing that the consumer bankruptcy system is shot through with abuse. Indeed, most data, including the consumer credit industry's own studies, show that the system is generally used by American families in desperate financial circumstances." Elizabeth Warren, A Principled Approach to Consumer Bankruptcy, 71 AM. BANKR. L.J. 483, 493 (1997) [hereinafter Warren, Principled Approach]; see also Jean Braucher, Increasing Uniformity in Consumer Bankruptcy: Means Testing as a Distraction and the National Bankruptcy Review Commission's Proposals as a Starting Point, 6 AM. BANKR. INST. L. REV. 1, 7-8 (1998); Elizabeth Warren, The Bankruptcy Crisis, 73 IND. L.J. 1079 (1998) [hereinafter Warren, Bankruptcy Crisis] .
9. "Academicians have an obligation to be clear on one point: there are no data showing that the consumer bankruptcy system is shot through with abuse. Indeed, most data, including the consumer credit industry's own studies, show that the system is generally used by American families in desperate financial circumstances." Elizabeth Warren, A Principled Approach to Consumer Bankruptcy, 71 AM. BANKR. L.J. 483, 493 (1997) [hereinafter Warren, Principled Approach]; see also Jean Braucher, Increasing Uniformity in Consumer Bankruptcy: Means Testing as a Distraction and the National Bankruptcy Review Commission's Proposals as a Starting Point, 6 AM. BANKR. INST. L. REV. 1, 7-8 (1998); Elizabeth Warren, The Bankruptcy Crisis, 73 IND. L.J. 1079 (1998) [hereinafter Warren, Bankruptcy Crisis] .
10. "Academicians have an obligation to be clear on one point: there are no data showing that the consumer bankruptcy system is shot through with abuse. Indeed, most data, including the consumer credit industry's own studies, show that the system is generally used by American families in desperate financial circumstances." Elizabeth Warren, A Principled Approach to Consumer Bankruptcy, 71 AM. BANKR. L.J. 483, 493 (1997) [hereinafter Warren, Principled Approach]; see also Jean Braucher, Increasing Uniformity in Consumer Bankruptcy: Means Testing as a Distraction and the National Bankruptcy Review Commission's Proposals as a Starting Point, 6 AM. BANKR. INST. L. REV. 1, 7-8 (1998); Elizabeth Warren, The Bankruptcy Crisis, 73 IND. L.J. 1079 (1998) [hereinafter Warren, Bankruptcy Crisis] .
11. See the Bankruptcy Reform Act of 1998, which was passed by the House of Representatives on June 10,1998. H.R. 3150, 105th Cong. (1998). A similar bill, originally the Consumer Bankruptcy Reform Act of 1997, passed the Senate on September 23, 1998 as an amendment to H.R. 3150. The conference version heavily favored H.R. 3150 and was passed by the House. In the face of a threatened filibuster and presidential veto, the conference bill was not brought to a vote in the Senate before it adjourned. See Caroline E. Mayer, Negotiators Complete Bankruptcy Reform Bill, WASH. POST, Oct. 8,1998, at E1. Several other bills were introduced, including the Responsible Borrower Protection Bankruptcy Act, H.R. 2500,105th Cong. (1997) (dropped in favor of House Bill 3150), and the Consumer Lenders and Borrowers Bankruptcy Responsibility Act of 1998, H.R. 3146,105th Cong. (1998). The more balanced bill, House Bill 3146, was left dormant in committee. The bankruptcy "reform" effort will begin anew in the 106th Congress. See Michael Schroeder & Jacob M. Schlesinger, Financial-Services Bills Appear Dead, For Now, WALL ST. J., Oct. 12, 1998, at A4. This legislative effort has been described as "the quest that is approached about every two decades - the search for a 'fair' consumer bankruptcy system." Henry E. Hildebrand, III, The Hidden Costs of Bankruptcy Reform, AM. BANKR. INST. J., Apr. 1998, at 16; see also Bankruptcy Law Revision: Hearings on H.R. 3150 Before the House Subcomm. on Commercial and Admin. Law, 105th Cong. (1998) [hereinafter Donald Testimony] (statement of Hon. Bernice B. Donald, U.S. District Court Judge), available in 1998 WL 11515640 (detailing the history of the-credit industry's legislative efforts to reduce access to bankruptcy relief). This Article analyzes H.R. 3150 as passed by the House of Representatives in June as the prime example of the credit industry's proposals concerning repeat bankruptcy filings.
12. See the Bankruptcy Reform Act of 1998, which was passed by the House of Representatives on June 10,1998. H.R. 3150, 105th Cong. (1998). A similar bill, originally the Consumer Bankruptcy Reform Act of 1997, passed the Senate on September 23, 1998 as an amendment to H.R. 3150. The conference version heavily favored H.R. 3150 and was passed by the House. In the face of a threatened filibuster and presidential veto, the conference bill was not brought to a vote in the Senate before it adjourned. See Caroline E. Mayer, Negotiators Complete Bankruptcy Reform Bill, WASH. POST, Oct. 8,1998, at E1. Several other bills were introduced, including the Responsible Borrower Protection Bankruptcy Act, H.R. 2500,105th Cong. (1997) (dropped in favor of House Bill 3150), and the Consumer Lenders and Borrowers Bankruptcy Responsibility Act of 1998, H.R. 3146,105th Cong. (1998). The more balanced bill, House Bill 3146, was left dormant in committee. The bankruptcy "reform" effort will begin anew in the 106th Congress. See Michael Schroeder & Jacob M. Schlesinger, Financial-Services Bills Appear Dead, For Now, WALL ST. J., Oct. 12, 1998, at A4. This legislative effort has been described as "the quest that is approached about every two decades - the search for a 'fair' consumer bankruptcy system." Henry E. Hildebrand, III, The Hidden Costs of Bankruptcy Reform, AM. BANKR. INST. J., Apr. 1998, at 16; see also Bankruptcy Law Revision: Hearings on H.R. 3150 Before the House Subcomm. on Commercial and Admin. Law, 105th Cong. (1998) [hereinafter Donald Testimony] (statement of Hon. Bernice B. Donald, U.S. District Court Judge), available in 1998 WL 11515640 (detailing the history of the-credit industry's legislative efforts to reduce access to bankruptcy relief). This Article analyzes H.R. 3150 as passed by the House of Representatives in June as the prime example of the credit industry's proposals concerning repeat bankruptcy filings.
13. See the Bankruptcy Reform Act of 1998, which was passed by the House of Representatives on June 10,1998. H.R. 3150, 105th Cong. (1998). A similar bill, originally the Consumer Bankruptcy Reform Act of 1997, passed the Senate on September 23, 1998 as an amendment to H.R. 3150. The conference version heavily favored H.R. 3150 and was passed by the House. In the face of a threatened filibuster and presidential veto, the conference bill was not brought to a vote in the Senate before it adjourned. See Caroline E. Mayer, Negotiators Complete Bankruptcy Reform Bill, WASH. POST, Oct. 8,1998, at E1. Several other bills were introduced, including the Responsible Borrower Protection Bankruptcy Act, H.R. 2500,105th Cong. (1997) (dropped in favor of House Bill 3150), and the Consumer Lenders and Borrowers Bankruptcy Responsibility Act of 1998, H.R. 3146,105th Cong. (1998). The more balanced bill, House Bill 3146, was left dormant in committee. The bankruptcy "reform" effort will begin anew in the 106th Congress. See Michael Schroeder & Jacob M. Schlesinger, Financial-Services Bills Appear Dead, For Now, WALL ST. J., Oct. 12, 1998, at A4. This legislative effort has been described as "the quest that is approached about every two decades - the search for a 'fair' consumer bankruptcy system." Henry E. Hildebrand, III, The Hidden Costs of Bankruptcy Reform, AM. BANKR. INST. J., Apr. 1998, at 16; see also Bankruptcy Law Revision: Hearings on H.R. 3150 Before the House Subcomm. on Commercial and Admin. Law, 105th Cong. (1998) [hereinafter Donald Testimony] (statement of Hon. Bernice B. Donald, U.S. District Court Judge), available in 1998 WL 11515640 (detailing the history of the-credit industry's legislative efforts to reduce access to bankruptcy relief). This Article analyzes H.R. 3150 as passed by the House of Representatives in June as the prime example of the credit industry's proposals concerning repeat bankruptcy filings.
14. See the Bankruptcy Reform Act of 1998, which was passed by the House of Representatives on June 10,1998. H.R. 3150, 105th Cong. (1998). A similar bill, originally the Consumer Bankruptcy Reform Act of 1997, passed the Senate on September 23, 1998 as an amendment to H.R. 3150. The conference version heavily favored H.R. 3150 and was passed by the House. In the face of a threatened filibuster and presidential veto, the conference bill was not brought to a vote in the Senate before it adjourned. See Caroline E. Mayer, Negotiators Complete Bankruptcy Reform Bill, WASH. POST, Oct. 8,1998, at E1. Several other bills were introduced, including the Responsible Borrower Protection Bankruptcy Act, H.R. 2500,105th Cong. (1997) (dropped in favor of House Bill 3150), and the Consumer Lenders and Borrowers Bankruptcy Responsibility Act of 1998, H.R. 3146,105th Cong. (1998). The more balanced bill, House Bill 3146, was left dormant in committee. The bankruptcy "reform" effort will begin anew in the 106th Congress. See Michael Schroeder & Jacob M. Schlesinger, Financial-Services Bills Appear Dead, For Now, WALL ST. J., Oct. 12, 1998, at A4. This legislative effort has been described as "the quest that is approached about every two decades - the search for a 'fair' consumer bankruptcy system." Henry E. Hildebrand, III, The Hidden Costs of Bankruptcy Reform, AM. BANKR. INST. J., Apr. 1998, at 16; see also Bankruptcy Law Revision: Hearings on H.R. 3150 Before the House Subcomm. on Commercial and Admin. Law, 105th Cong. (1998) [hereinafter Donald Testimony] (statement of Hon. Bernice B. Donald, U.S. District Court Judge), available in 1998 WL 11515640 (detailing the history of the-credit industry's legislative efforts to reduce access to bankruptcy relief). This Article analyzes H.R. 3150 as passed by the House of Representatives in June as the prime example of the credit industry's proposals concerning repeat bankruptcy filings.
15. For a helpful summary of the differences between the Chapter 7 liquidation bankruptcy and the Chapter 13 repayment plan bankruptcy, see HENRY J. SOMMER ET AL., CONSUMER BANKRUPTCY LAW & PRACTICE § 6.3 (5th ed. 1996).
16. See, e.g., Warren, Principled Approach, supra note 4, at 490; Gary Klein, Consumer Bankruptcy in the Balance: The National Bankruptcy Review Commission's Recommendations Tilt Towards Creditors, 5 AM. BANKR. INST. L. REV. 293, 295 n.13 (1997); Hildebrand, supra note 5, at 16; Braucher, supra note 4, at 1-2, 5.
17. See, e.g., Warren, Principled Approach, supra note 4, at 490; Gary Klein, Consumer Bankruptcy in the Balance: The National Bankruptcy Review Commission's Recommendations Tilt Towards Creditors, 5 AM. BANKR. INST. L. REV. 293, 295 n.13 (1997); Hildebrand, supra note 5, at 16; Braucher, supra note 4, at 1-2, 5.
18. See infra Parts IV, V.
19. Under § 109(g), an individual or a family farmer is barred from filing any type of bankruptcy for 180 days after her prior bankruptcy was dismissed "for willful failure of the debtor to abide by orders of the courts, or to appear before the court in proper prosecution of the case," or if the debtor voluntarily dismissed her prior case after a creditor requested relief from the automatic stay. 11 U.S.C. § 109(g) (1994). Section 349(a) provides that dismissal of a bankruptcy case does not bar future filings or later discharge of dischargeable debts included in the dismissed case, except as provided in § 109(g) or unless the court "for cause, orders otherwise." Id. § 349(a). Section 1325(a)(3) directs the court to confirm Chapter 13 plans that, inter alia, are proposed in good faith. Id. § 1325(a).
20. House Bill 3150 can fairly be described as a credit industry bill. Credit industry representatives wrote key provisions of the legislation. See Jacob M. Schlesinger, Card Games: As Bankruptcies Surge, Creditors Lobby Hard to Get Tougher Laws, WALL ST. J., June 17, 1998, at A1. According to the New York Times, financial services companies collectively spent over $40 million to promote House Bill 3150 and other banking legislation in 1997. Katharine Q. Seelye, House to Vote Today on Legislation for Bankruptcy Overhaul, N.Y. TIMES, June 10, 1998, at A18; see Donald Testimony, supra note 5; Klein, supra note 7, at 295 nn.11-14.
21. House Bill 3150 can fairly be described as a credit industry bill. Credit industry representatives wrote key provisions of the legislation. See Jacob M. Schlesinger, Card Games: As Bankruptcies Surge, Creditors Lobby Hard to Get Tougher Laws, WALL ST. J., June 17, 1998, at A1. According to the New York Times, financial services companies collectively spent over $40 million to promote House Bill 3150 and other banking legislation in 1997. Katharine Q. Seelye, House to Vote Today on Legislation for Bankruptcy Overhaul, N.Y. TIMES, June 10, 1998, at A18; see Donald Testimony, supra note 5; Klein, supra note 7, at 295 nn.11-14.
22. See infra text accompanying notes 73-82.
23. The credit industry bills restrict initial access to Chapter 13, making bankruptcy protection more difficult and more expensive to get. See infra Part II.C.
24. See infra Parts II, III; see also Eugene R. Wedoff, An Analysis of the Consumer Bankruptcy Provisions of H.R. 3150, Proposed Bankruptcy Reform Legislation (visited Jan. 18, 1999) 〈http://www.abrworld.org/legis/bills/revwedofmar98.html〉.
25. See Wedoff, supra note 13; see also infra Part VI.
26. See Julia Patterson Forrester, Mortgaging the American Dream: A Critical Evaluation of the Federal Government's Promotion of Home Equity Financing, 69 TUL. L. REV. 373, 406 (1994). See generally Anne B. Schlay, Housing in the Broader Context in the United States, 6 HOUSING POL'Y DEBATE 695 (1995).
27. See Julia Patterson Forrester, Mortgaging the American Dream: A Critical Evaluation of the Federal Government's Promotion of Home Equity Financing, 69 TUL. L. REV. 373, 406 (1994). See generally Anne B. Schlay, Housing in the Broader Context in the United States, 6 HOUSING POL'Y DEBATE 695 (1995).
28. See S. REP. No. 95-989, at 141 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5927; H.R. REP. No. 95-595, at 118 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6079; Warren, Principled Approach, supra note 4, at 495; Braucher, supra note 4, at 12 & n.65.
29. 11 U.S.C. §§ 1301-1330 (1994).
30. See LAWRENCE P. KING, ET AL., 8 COLLIER ON BANKRUPTCY, ¶ 1300.01-.02 (15th ed. revised, 1998).
31. See id.
32. See id. at ¶ 1322.01.
33. See 11 U.S.C. § 1322(a)(1).
34. See id. § 1322(a)(2).
35. See id. § 1322(a)(3).
36. See id. § 1325(a)(4). Section 1325(a)(4) allows a debtor to retain non-exempt property in a Chapter 13 bankruptcy so long as she pays her creditors the value of what they would have received if that property had been sold in a Chapter 7 liquidation. Id. 25. See id. § 1325(b)(1)(A).
37. See id. § 1325(a)(3).
38. See id. § 1325(c).
39. See id. § 1325(a)(6).
40. See id. § 1322(d).
41. See Klein, supra note 7, at 322 nn.177-78.
42. The Chapter 13 "superdischarge" discharges a broader range of debts than can be discharged under Chapter 7, including older tax obligations and debts resulting from fraud or malicious and willful injury. Compare 11 U.S.C. § 1328(a) (1994), with 11 U.S.C. § 523(a) (1994). This incentive to choose Chapter 13 is also under legislative attack. See supra note 5.
43. Secured claims, a mortgage for example, are typically treated in one of four ways in a Chapter 13 plan. The plan can not provide for the claim at all. Such a claim rides through the bankruptcy unaffected and is not discharged. The holder of the claim must still seek relief from the automatic stay before enforcing the claim outside of the bankruptcy but relief is usually easily obtained. The plan may provide for cure and reinstatement of the claim. In this situation the debtor must resume making her ongoing installment payments on the debt directly to the creditor but, through her plan payments, the creditor receives distributions sufficient to cover the present value of the amount necessary to cure as of the filing date for the bankruptcy. When the plan is consummated and the debtor receives a discharge, she should be reinstated and be current on the mortgage as if the delinquency and the bankruptcy never existed. Where the collateral is worth less than the amount of the debt, the debtor may bifurcate the claim into secured and unsecured claims, pay the secured claim in full and provide for the unsecured portion as she does for all other unsecured claims. In this situation, the debtor will pay off the entire secured claim and the mortgage should be satisfied once she achieves discharge. Finally, the debtor has the option of paying the secured claim in full - in other words, the entire remaining balance can be provided for in the plan. Again, this treatment should result in satisfaction of the mortgage once discharge is achieved. See SOMMER ET AL., supra note 6, at 235-63.
44. See Klein, supra note 7, at 322 & n.179.
45. Section 1322 requires that Chapter 13 plans be adequately funded to provide for the claims, to provide for full payment of priority claims, and to treat claims within each class equally. 11 U.S.C. § 1322(a)(1)-(3). Section 1325 directs the court to confirm a plan if it complies with the Code, fees have been paid, the plan is proposed in good faith, the creditors receive no less than what they would get in a Chapter 7 liquidation, the plan provides for the present value of the provided for secured claims, and the debtor will be able to make the payments. Id. § 1325(a) (1994). If the trustee or an unsecured claimant objects to confirmation, the court cannot confirm a plan unless the value of property to be distributed under the plan is not less than the amount of the claims, and the plan requires the debtor to submit all of her disposable income for three years to fund the plan. See id. § 1325(b).
46. See id. § 727(a)(8).
47. See Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934); H.R. REP. No. 95-595, at 117 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6078; Warren, Principled Approach, supra note 4, at 491.
48. Priority debts are defined in § 507 and include the administrative expenses of the bankruptcy, certain tax debts, wage and pension claims of the debtor's employees, consumer deposits, alimony, and child support. 11 U.S.C. § 507 (1994).
49. See id. § 1322 for required plan provisions.
50. See NAT'L BANKR. REV. COMM'N, BANKRUPTCY: THE NEXT TWENTY YEARS 233-34 (1997) [hereinafter COMMISSION REPORT].
51. Only Chapter 13 offers the debtor the opportunity to reinstate delinquent secured debts, most important a mortgage debt, by allowing her to resume making her ongoing payments and, through her Chapter 13 plan, paying the secured creditor the entire delinquent amount over the life of the plan. Because mortgage lenders are loathe to accept any payment agreement that exceeds six months, repayment through Chapter 13 is the ordinary debtor's only effective way of catching up on a delinquent mortgage to retain ownership of her home. See Jean Braucher, Lawyers and Consumer Bankruptcy: One Code, Many Cultures, 67 AM. BANKR. L.J. 501, 526 (1993).
52. 11 U.S.C. § 109(g) (1994). This provision was added to the Code to preclude bad faith debtors from filing on the eve of foreclosure, failing to comply with any Code obligations, dismissing the bankruptcy once the creditor gets relief from the stay, and then refiling on the eve of the new foreclosure. See In re Narod, 138 B.R. 478, 483 (Bankr. E.D. Pa. 1992).
53. See infra Part V. Chapter 13 plans must apply the debtor's disposable income for distribution under the plan and must be proposed in good faith. See 11 U.S.C. § 1325(a)(3), (b)(1)(B) (1994). Some circuits explicitly impose the additional requirement that the debtor file the petition itself in good faith; lack of good faith is grounds for dismissal of the bankruptcy. See In re Lilley, 91 F.3d 491, 496 (3d Cir. 1996).
54. Bankruptcy filings increased to 1.3 million in 1997, an increase over the 1.1 million filed in 1996. See Braucher, supra note 4, at 4 n.21 (citing Consumer Bankruptcy Filings Up 20 Percent in 1997, CONSUMER BANKR. NEWS, Mar. 26, 1998, at 1). The vast majority of bankruptcy filings are consumer filings under Chapters 7 and 13. See Warren, Principled Approach, supra note 4, at 488 n.12.
55. Bankruptcy filings increased to 1.3 million in 1997, an increase over the 1.1 million filed in 1996. See Braucher, supra note 4, at 4 n.21 (citing Consumer Bankruptcy Filings Up 20 Percent in 1997, CONSUMER BANKR. NEWS, Mar. 26, 1998, at 1). The vast majority of bankruptcy filings are consumer filings under Chapters 7 and 13. See Warren, Principled Approach, supra note 4, at 488 n.12.
56. See Staten Testimony, supra note 3, at 3-5;
57. Chimerine, supra note 3, at 19; see also Hearings on H.R. 3150 Before the Subcomm. on Financial Insts. and Regulatory Relief of the Senate Comm. on Banking, Housing, and Urban Affairs, 105th Cong. (1998), available in 1998 WL 8991929 [hereinafter Smith Testimony] (testimony of James E. Smith, Chairman, Am. Bankers Assoc.'s Gov't Relations Council);
58. Hearings on H.R. 3150 Before the Subcomm. on Admin. Oversight and the Senate Comm. on the Judiciary, 105th Cong. (1998), available in 1998 WL 8993075 [hereinafter McDonnell Testimony] (testimony of Brian L. McDonnell, Nat'l Assoc. of Federal Credit Unions);
59. The Financial Costs of Personal Bankruptcy, Hearings on H.R. 3150 Before the Subcomm. on Financial Insts. and Regulatory Relief of the Senate Banking Comm., 105th Cong. (1998), available in 1998 WL 18090108 [hereinafterLauritano Testimony] (testimony of Mark Lauritano, Senior Vice Pres., WEFA, Inc.);
60. Personal Bankruptcy Consumer Credit Crisis, Hearings on H.R. 3150 Before the Subcomm. on Admin. Oversight and the Courts of the Senate Comm. on the Judiciary, 105th Cong. (1997), available in 1997 WL 10569500 [hereinafter Crone Testimony] (testimony of Kenneth R. Crone, Senior Vice Pres., Visa U.S.A., Inc.);
61. Bankruptcy Revision, Hearings on H.R. 3150 Before the Subcomm. on Commercial and Admin. Law of the House of Representatives' Comm. on the Judiciary, 105th Cong. (1998),
62. available in 1998 WL 8992756 [hereinafter Hammonds Testimony] (testimony of Bruce L. Hammonds, Senior Vice Chairman and Chief Operating Officer, MBNA Corp.); id., available in 1998 WL 8993085 [hereinafter Wallace Testimony] (statement of George J. Wallace, member, Eckert, Seamans, Cherin & Mellott, LCC). But see
63. Bankruptcy Revision: Hearings on H.R. 3150 Before the Subcomm. on Financial Insts. and Regulatory Relief of the Senate Comm. on Banking, Housing, and Urban Affairs, 105th Cong. (1998), available in 1998 WL 8991931 [hereinafter Brewer Testimony] (testimony of William E. Brewer, Jr., National Association of Consumer Bankruptcy Attorneys). Mr. Brewer attributes the increase in consumer bankruptcy filings to the 238% increase in outstanding revolving consumer credit from 1986 to 1996. The increase in bankruptcy filings in the same period was only 122% - half of the increase in outstanding credit. He attributes the increase in bankruptcy to the enormous increase in outstanding credit at a time when disposable household income has not increased for much of the population, resulting in increased debt-to-income ratios in household and increased bankruptcy filings. See id.; see
64. also Warren, Bankruptcy Crisis, supra note 4, at 1080-81 (arguing that consumer bankruptcies are increasing because consumers' debts are rising faster than their incomes).
65. Lauritano Testimony, supra note 44.
66. See Smith Testimony, supra note 44; see also Bankruptcy Revision, Hearings on H.R. 3150 Before the Subcomm. on Commercial and Admin. Law Judiciary Comm. of the House of Representatives, 105th Cong. (1998), available in 1998 WL 8992757 [hereinafter Kosturko Testimony] (testimony of William T. Kosturko, America's Community Bankers on Consumer Bankruptcy); Judicial Revision, Hearings on H.R. 3150 Before the Judiciary Subcomm. on Admin. Oversight and the Courts of the Senate, 105th Cong. (1998), available in 1998 WL 8993334 [hereinafter AMSA Testimony] (testimony of the American Financial Services Assoc.); Wallace Testimony, supra note 44.
67. See Smith Testimony, supra note 44; see also Bankruptcy Revision, Hearings on H.R. 3150 Before the Subcomm. on Commercial and Admin. Law Judiciary Comm. of the House of Representatives, 105th Cong. (1998), available in 1998 WL 8992757 [hereinafter Kosturko Testimony] (testimony of William T. Kosturko, America's Community Bankers on Consumer Bankruptcy); Judicial Revision, Hearings on H.R. 3150 Before the Judiciary Subcomm. on Admin. Oversight and the Courts of the Senate, 105th Cong. (1998), available in 1998 WL 8993334 [hereinafter AMSA Testimony] (testimony of the American Financial Services Assoc.); Wallace Testimony, supra note 44.
68. See Smith Testimony, supra note 44.
69. See, e.g., Spencer Zone Baretz, Note, Combating the Chapter 13 Serial Filer: An Argument for Orders Containing Prospective Relief from the Automatic Stay Provision, 25 HOFSTRA L. REV. 1315, 1315-17 (1997) (referring to the "increasingly common problem" of Chapter 13 serial filers without any supporting citation to Chapter 13 cases).
70. See infra note 59.
71. TERESA A. SULLIVAN ET AL., AS WE FORGIVE OUR DEBTORS: BANKRUPTCY AND CONSUMER CREDIT IN AMERICA (1989) [hereinafter SULLIVAN ET AL., AS WE FORGIVE]; Teresa A. Sullivan et al., Consumer Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts 1981-1991, 68 AM. BANKR. L.J. 121, 122 (1994) [hereinafter Sullivan et al., Consumer Debtors].
72. TERESA A. SULLIVAN ET AL., AS WE FORGIVE OUR DEBTORS: BANKRUPTCY AND CONSUMER CREDIT IN AMERICA (1989) [hereinafter SULLIVAN ET AL., AS WE FORGIVE]; Teresa A. Sullivan et al., Consumer Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts 1981-1991, 68 AM. BANKR. L.J. 121, 122 (1994) [hereinafter Sullivan et al., Consumer Debtors].
73. See SULLIVAN ET AL., As WE FORGIVE, supra note 50, at 331; see also Lawrence M. Ausubel, Credit Card Defaults, Credit Card Profits, and Bankruptcy, 71 AM. BANKR. L.J. 249, 256-58 (1997); Klein, supra note 7, at 294-95 & nn.6-9.
74. See SULLIVAN ET AL., As WE FORGIVE, supra note 50, at 331; see also Lawrence M. Ausubel, Credit Card Defaults, Credit Card Profits, and Bankruptcy, 71 AM. BANKR. L.J. 249, 256-58 (1997); Klein, supra note 7, at 294-95 & nn.6-9.
75. The authors described the conclusions of their study resulting in As We Forgive: The debtors who filed for bankruptcy were, with few exceptions, mired in debt. Only a small fraction had any hope of repaying. Even those debtors who voluntarily attempted repayment in chapter 13 were in terrible shape: at most, only about a third were able to complete their repayment plans, and a significant portion of those debtors were making only minimal repayments. We concluded that the loudly heralded cases of abuse made good newspaper copy or were effective for lobbying Congress, but that they simply did not describe the typical experiences of consumer debtors in bankruptcy. Sullivan et al., Consumer Debtors, supra note 50, at 123.
76. Id. at 124.
77. See Ausubel, supra note 51, at 251-54; see also Brewer Testimony, supra note 44.
78. See Ausubel, supra note 51, at 263-64. Ausubel cites estimates that in 1995, credit card issuers sent more than 2.7 billion direct mail card solicitations, in addition to huge numbers of telephone solicitations.
79. Id. at 264-65.
80. See id. at 269. For an example of the industry's disposition toward offering credit to consumers who are unlikely to be able to repay, see infra note 68.
81. SULLIVAN ET AL., AS WE FORGIVE, supra note 50, at 191.
82. "The image of clever debtors who declare bankruptcy when their six-year waiting period has ended and their debts have peaked is a vision from policymakers' nightmares more than it is a reality in the bankruptcy system." Id. at 196-97.
83. Id. at 193.
84. Id. at 5-7; see also Teresa A. Sullivan et al., Limiting Access to Bankruptcy Discharge: An Analysis of the Creditors'Data, 1983 WIS. L. REV. 1091 (rebutting 1 CREDIT RESEARCH CTR., PURDUE UNIV., CONSUMER BANKRUPTCY STUDY 88-91 (1982)).
85. Id. at 5-7; see also Teresa A. Sullivan et al., Limiting Access to Bankruptcy Discharge: An Analysis of the Creditors'Data, 1983 WIS. L. REV. 1091 (rebutting 1 CREDIT RESEARCH CTR., PURDUE UNIV., CONSUMER BANKRUPTCY STUDY 88-91 (1982)).
86. Id. at 5-7; see also Teresa A. Sullivan et al., Limiting Access to Bankruptcy Discharge: An Analysis of the Creditors'Data, 1983 WIS. L. REV. 1091 (rebutting 1 CREDIT RESEARCH CTR., PURDUE UNIV., CONSUMER BANKRUPTCY STUDY 88-91 (1982)).
87. See, e.g., John M. Barron & Micheal E. Staten, Personal Bankruptcy: A Report on Petitioners' Ability-to-Pay 26 (Oct. 6,1997) (on file with author); Lauritano Testimony, supra note 44; Kosturko Testimony, supra note 46; Schlesinger, supra note 10, at A1.
88. See Staten Testimony, supra note 3, at 4.
89. Professor Staten's study was critiqued by the General Accounting Office, which noted five "areas of concern": (1) the report's assumptions about the information debtors provide at the time of filing bankruptcy regarding their income, expenses, and debts and the stability of their income and expenses over a 5-year period were not validated; (2) the report did not clearly define the universe of debts for which it estimated debtors' ability to pay; (3) payments on nonhousing debts that debtors state they intended to reaffirm - voluntarily agree to repay - were not included in debtor expenses in determining the net income debtors had available to pay their nonpriority, nonhousing debts; (4) the report presented results based on data from all 13 locations combined and provided little discussion of the considerable variation among the 13 locations used in the analysis; and (5) a scientific, random sampling methodology was not used to select the 13 bankruptcy locations or the bankruptcy petitions used in the analysis. U.S. GEN. ACCOUNTING OFFICE, GAO/GGD-98-47, PERSONAL BANKRUPTCY: THE CREDIT RESEARCH CENTER REPORT ON DEBTORS' ABILITY TO PAY 2-3 (1998) [hereinafter GAO REPORT]; see also Warren, Bankruptcy Crisis, supra note 4, at 1088-93.
90. Professor Staten's study was critiqued by the General Accounting Office, which noted five "areas of concern": (1) the report's assumptions about the information debtors provide at the time of filing bankruptcy regarding their income, expenses, and debts and the stability of their income and expenses over a 5-year period were not validated; (2) the report did not clearly define the universe of debts for which it estimated debtors' ability to pay; (3) payments on nonhousing debts that debtors state they intended to reaffirm - voluntarily agree to repay - were not included in debtor expenses in determining the net income debtors had available to pay their nonpriority, nonhousing debts; (4) the report presented results based on data from all 13 locations combined and provided little discussion of the considerable variation among the 13 locations used in the analysis; and (5) a scientific, random sampling methodology was not used to select the 13 bankruptcy locations or the bankruptcy petitions used in the analysis. U.S. GEN. ACCOUNTING OFFICE, GAO/GGD-98-47, PERSONAL BANKRUPTCY: THE CREDIT RESEARCH CENTER REPORT ON DEBTORS' ABILITY TO PAY 2-3 (1998) [hereinafter GAO REPORT]; see also Warren, Bankruptcy Crisis, supra note 4, at 1088-93.
91. See GAO REPORT, supra note 64, at 2; Warren, Bankruptcy Crisis, supra note 4, at 1089; Klein, supra note 7, at 294-95 & n.7. "The one study which suggested that some debtors in Chapter 7 have the ability to pay their debts was exposed as fundamentally flawed. The study neglected to account for a debtor's need to make ongoing payments on car loans and other nondischargeable debts irrespective of the bankruptcy." Id. at 294 (referring to a study, cited supra note 62, conducted by Dr. John M. Barron & Dr. Michael Staten). "The ability to make partial payments on the balance of the debts is substantially lower than Barron and Staten calculate after these debts are separated out." Id. at 294 n.7.
92. See AT & T Universal Card Servs. v. Ellingsworth (In re Ellingsworth), 212 B.R. 326 (Bankr. W.D. Mo. 1997).
93. See id. at 328.
94. Despite this bleak picture, one creditor solicited Mrs. Ellingsworth over the telephone for a $4000 limit card based on her Fair, Issacs Credit Bureau Score ("FICO"), which focuses primarily on the borrower's history of payment, not on any other form of credit worthiness. See id. at 328. The Ellingsworth court noted, "[u]nfortunately this tactic guarantees that borrowers who are encouraged to use credit cards until they acquire unsecured debt that far exceeds their income will ultimately not be able to pay their bills on time." Id. at 331.
95. See AT & T Universal Card Servs. v. Mercer (In re Mercer), 220 B.R. 315, 317 (Bankr. S.D. Miss. 1998).
96. In both Ellingsworth and Mercer, the credit issuer - AT & T Universal Card Services-was denied its request to make the debt non-dischargeable. AT & T argued, unsuccessfully, in each case that the debtors' dire circumstances showed a lack of intent to pay the debt. The courts each determined that AT & T failed to show it relied on any intent to pay given the woeful financial state of each debtor at the time the company solicited the debtor for credit. See In re Ellingsworth, 212 B.R. at 339; In re Mercer, 220 B.R. at 316, 328.
97. See Klein, supra note 7, at 318 ("There is no evidence that abusive use of bankruptcy has any effect on credit card interest rates."); Ausubel, supra note 51, at 261.
98. See Klein, supra note 7, at 304 n.71.
99. See Wedoff, supra note 13; Braucher, supra note 4, at 11; Klein, supra note 7, at 323-24; Warren, Principled Approach, supra note 4, at 504-06.
100. The Bankruptcy Reform Act of 1998 requires the prospective debtor to try to repay her debts through a registered credit counseling service before she files for bankruptcy. H.R. 3150, 105th Cong. § 406 (1998). With her bankruptcy filing, the debtor will have to provide financial statements including copies of her last three years of federal tax returns. See id. She will have to provide copies of all of her bankruptcy papers to any creditor upon request. See id. 75. If her income exceeds the national median for a family of her size or smaller, the debtor will have to remain in Chapter 13 for five years, rather than the current three. See id. §§ 102, 409. Judge Wedoff notes the anomaly of using the median family income as a bench mark. The median shrinks relative to increases in family size. Instead of providing greater access to Chapter 13 protection for big and presumably more financially distressed families, the use of the national median as a cut-off means that the bigger family is at a higher risk of exceeding it and being forced into a five-year Chapter 13 subject to higher payments. See Wedoff, supra note 13. She will have to pay a minimum of $50 per month to her noninsider unsecured creditors regardless of her ability to pay these claims; and must pay her "monthly net income," not just her disposable income, to her unsecured nonpriority creditors. See H.R. 3150, § 102. The debtor will have to make "adequate protection" payments to any secured creditor until that creditor begins receiving distributions under the plan. Distribution does not begin until confirmation which normally takes several months. During this interval, however, the debtor will have to make the proposed plan payments to the trustee under current law. The proposal would increase the burden on the debtor to make not only the ongoing mortgage payments and the trustee payments but also any ongoing payments on allegedly secured debts, for example, towels subject to a security interest, in order to avoid loss of the property. See id. § 162. It is becoming quite common for credit card companies to take security interests in every item purchased with the card. I have in the past year signed credit card receipts which purported to take security interests in sheets and towels, shoes, and other items of dubious value if repossessed. (The receipts are on file with the author.) She will be required to provide updated financial information including tax returns every year she is in bankruptcy. See id. § 406. She will be subject to random audits that may require much more extensive investigation and proof of her financial situation. See id. § 404. She will have to pay her unsecured claims pro rata with her secured claims. See id. § 102. She will have to remain current on her child support obligations. See id. § 146. She will have to pay support obligations as a first priority before administrative fees, including her attorney's fees. See id. 76. The debtor will not be able to discharge any debt incurred within 90 days of her filing in excess of $250 to any one creditor for necessities. See H.R. 3150, § 142. Her discharge will not cover any debts incurred by fraud or willful and malicious injury; or nonsupport property debts arising from divorce; or interest owed to governmental units for support debts or tax debts that are now dischargeable under current law. See id. §§ 143, 145-146, 508.
101. See Hildebrand, supra note 5, at 16-17.
102. See S. 1301,105th Cong. § 303 (1997); H.R. 3150, § 121.
103. See S. 1301, § 303; H.R. 3150, § 121.
104. S. 1301, § 303; see also H.R. 3150, § 121.
105. H.R. 3150, § 121.
106. See id.
107. See id. § 171.
108. See 11 U.S.C. § 727(a)(8) (1994).
109. See H.R. 3150, § 171.
110. See 11 U.S.C. § 1328 (1994).
111. See H.R. 3150, § 171.
112. Section 171 of H.R. 3150 provides that "the court shall not grant a discharge . . . if the debtor has received a discharge in any case filed under this title within 5 years of the order for relief under this chapter." It is unclear whether the five years runs from the date of the first filing, or the entry of discharge in the first case.
113. The trustees' responses repeatedly express frustration with the lumping together of these discrete issues. You've got to distinguish between a serial filing and a repeat filing[.] Serial filing is where the code is being abused, i.e., the filing is for the sole purpose of invoking the automatic stay, with no intent to proceed with the Chapter 13 case. Quite honestly, very few of these individual Debtor(s) have any idea they are abusing the Code. Most are doing it at the instance of "professional" advice. Trustee, ED. Va., supra note 2 (question 11). "The problem is not serial filings, it is abusive filings. The first filing - if abusive - should be dealt with firmly. Serial filings are a symptom of sloppy administration." Survey Response of Trustee of the District of Maine (each emphasis in original) (on file with author). "I do not believe that there is a problem with the Bankruptcy Code or the Bankruptcy system which such surveys as this seem to imply." Survey Response of a Trustee of the Western District of Tennesee (question 21) (on file with author). "First, serial filings are not the problem; abusive filings are the problem. A distinction must be made." Id.
114. See Warren, Principled Approach, supra note 4, at 485-86. The lobbyists worked to get out their messages - or, as a representative of the consumer credit industry stressed at the December 1996 meeting, their "message" (with the emphasis on the singular), since, he explained, they all felt exactly the same way and supported exactly the same approach to the consumer bankruptcy system, and they wanted to know if anyone in the credit industry stepped out of line. Id. at 486 (parenthetical in original); see also Klein, supra note 7, at 293.
115. See Warren, Principled Approach, supra note 4, at 485-86. The lobbyists worked to get out their messages - or, as a representative of the consumer credit industry stressed at the December 1996 meeting, their "message" (with the emphasis on the singular), since, he explained, they all felt exactly the same way and supported exactly the same approach to the consumer bankruptcy system, and they wanted to know if anyone in the credit industry stepped out of line. Id. at 486 (parenthetical in original); see also Klein, supra note 7, at 293.
116. See Michael P. Scharf & Lawrence D. Roberts, The Interstellar Relations of the Federation: International Law and "Star Trek: The Next Generation," 25 U. TOL. L. REV. 577, 602 n.158 (1994) ("The Borg are a hostile race with one collective mind and are committed to the forcible assimilation of all other races.").
117. See Warren, Principled Approach, supra note 4, at 504-06.
118. See id. at 499.
119. Even scholars refer to the "abusive, serial filer" as extant without any empirical or other support. See, e.g., supra text accompanying note 48 (explaining that both the popular and academic press have deemed repeat filing as inherently abusive of the bankruptcy system); Richard S. Bell, The Effect of the Disposable Income Test of Section 1325(b)(1)(B) upon the Good Faith Inquiry of Section 1325(a)(3), 5 BANKR. DEV. J. 267, 269 (1987) (concluding that "extreme cases of multiple filing . . . constitute abuse" without any supporting citation to Chapter 13 cases); John F. Murphy, The Automatic Stay in Bankruptcy, 34 CLEV. ST. L. REV. 567, 622 (1986) (noting that "the filing of multiple petitions by debtors has been a continual source of dismay to many creditors who seek relief from the automatic stay . . . frequently the only substantial goal sought by a debtor" without any supporting citations); Richard T. Nimmer, Consumer Bankruptcy Abuse, 50 LAW & CONTEMP. PROBS. 89, 116 (1987) (claiming that "multiple filings over a brief time period in the face of impending foreclosure creates a presumption of abuse" without any supporting citation to Chapter 13 cases).
120. Even scholars refer to the "abusive, serial filer" as extant without any empirical or other support. See, e.g., supra text accompanying note 48 (explaining that both the popular and academic press have deemed repeat filing as inherently abusive of the bankruptcy system); Richard S. Bell, The Effect of the Disposable Income Test of Section 1325(b)(1)(B) upon the Good Faith Inquiry of Section 1325(a)(3), 5 BANKR. DEV. J. 267, 269 (1987) (concluding that "extreme cases of multiple filing . . . constitute abuse" without any supporting citation to Chapter 13 cases); John F. Murphy, The Automatic Stay in Bankruptcy, 34 CLEV. ST. L. REV. 567, 622 (1986) (noting that "the filing of multiple petitions by debtors has been a continual source of dismay to many creditors who seek relief from the automatic stay . . . frequently the only substantial goal sought by a debtor" without any supporting citations); Richard T. Nimmer, Consumer Bankruptcy Abuse, 50 LAW & CONTEMP. PROBS. 89, 116 (1987) (claiming that "multiple filings over a brief time period in the face of impending foreclosure creates a presumption of abuse" without any supporting citation to Chapter 13 cases).
121. Even scholars refer to the "abusive, serial filer" as extant without any empirical or other support. See, e.g., supra text accompanying note 48 (explaining that both the popular and academic press have deemed repeat filing as inherently abusive of the bankruptcy system); Richard S. Bell, The Effect of the Disposable Income Test of Section 1325(b)(1)(B) upon the Good Faith Inquiry of Section 1325(a)(3), 5 BANKR. DEV. J. 267, 269 (1987) (concluding that "extreme cases of multiple filing . . . constitute abuse" without any supporting citation to Chapter 13 cases); John F. Murphy, The Automatic Stay in Bankruptcy, 34 CLEV. ST. L. REV. 567, 622 (1986) (noting that "the filing of multiple petitions by debtors has been a continual source of dismay to many creditors who seek relief from the automatic stay . . . frequently the only substantial goal sought by a debtor" without any supporting citations); Richard T. Nimmer, Consumer Bankruptcy Abuse, 50 LAW & CONTEMP. PROBS. 89, 116 (1987) (claiming that "multiple filings over a brief time period in the face of impending foreclosure creates a presumption of abuse" without any supporting citation to Chapter 13 cases).
122. Indeed the speed and lack of debate and consideration in the current legislative process of bankruptcy reform has come under heavy criticism. See, e.g., Letter from Bruce A. Markell et al., Professors of Law, to the United States Congressional Judiciary Committees (last modified Apr. 3,1998) 〈http://www.law.indiana.edu/∼bmarkell/slowdown.html〉; Letter from 110 Bankruptcy Judges to the United States Congress (visited Oct. 1, 1998) 〈http://www .abiworld.org/headlines/98aprl6.html〉.
123. Indeed the speed and lack of debate and consideration in the current legislative process of bankruptcy reform has come under heavy criticism. See, e.g., Letter from Bruce A. Markell et al., Professors of Law, to the United States Congressional Judiciary Committees (last modified Apr. 3,1998) 〈http://www.law.indiana.edu/∼bmarkell/slowdown.html〉; Letter from 110 Bankruptcy Judges to the United States Congress (visited Oct. 1, 1998) 〈http://www .abiworld.org/headlines/98aprl6.html〉.
124. See infra Part IV; see also Donald Testimony, supra note 5. A recent study of serial filings in the Central District of California concluded that the vast majority of abusive serial Chapter 13 filings were instigated not by the debtors but by unscrupulous individuals who marketed themselves as foreclosure specialists or mortgage consultants. The Task Force Report recommends targeting the scam operators rather than eliminating the honest debtors' right to refile in good faith. See United States Bankruptcy Court, Central District of California, Final Report of the Bankruptcy Foreclosure Scam Task Force (May 1998) (visited July 8, 1998) 〈http://www.abiworld.org/research/finalreport_cdcalif_6_98.html〉 [hereinafter Task Force Report]. 97. "Substantial abuse" is not defined in the Code but most circuits define it as a debtor's ' effort to take unfair advantage of her creditors based on a totality of the circumstances. See, e.g., Green v. Staples (In re Green), 934 F.2d 568, 572 (4th Cir. 1991). The relevant circumstances include whether the debtor filed due to a sudden illness, disability or unemployment; whether the debtor incurred cash advances or made purchases beyond her ability to repay; whether the debtor's budget includes excessive or unreasonable expenses; and whether the schedules accurately reflect the debtor's true financial condition. See id. But see United States Trustee v. Harris, 960 F.2d 74, 77 (8th Cir. 1992) (holding that the debtor's ability to pay a substantial portion of his unsecured debts through a Chapter 13 plan was the primary determinant of "substantial abuse").
125. See 11 U.S.C. § 1325(a)(3) (1994); Downey Sav. & Loan Ass'n v. Metz (In re Mete), 820 F.2d 1495,1496-97 (9th Cir. 1987).
126. See Bankruptcy Reform Act of 1998, H.R. 3150, 105th Cong. § 121 (1998). Ironically, the big victim of the prompt loss of the stay in the Chapter 7 may not be the debtor at all. The Chapter 7 trustee will lose the chance to liquidate the property for the benefit of all creditors. See Wedoff, supra note 13.
127. See H.R. 3150, § 121.
128. See id.
129. See id.
130. See id.
131. See discussion infra Part VII.
132. See H.R. 3150, § 121.
133. See, e.g., Jean Braucher, Counseling Consumer Debtors to Make Their Own Informed Choices - A Question of Professional Responsibility, 5 AM. BANKR. INST. L. REV. 165 (1997).
134. See, e.g., Task Force Report, supra note 96, pt. II (concluding that the vast majority of abusive filings in the Central District of California resulted from the activities of self designated "foreclosure" specialists who, often without the understanding and even without the knowledge of the debtor, schemed to manipulate the Code to thwart foreclosure efforts). The scammers developed several techniques, including the transfer of partial interests in property subject to foreclosure; tag team filings by relatives and others who were recipients of the partial interests; deliberate nondisclosure of real estate assets on the schedules. See id. These scammers prey on the financially distressed, offering to save homes for an attractive but deceptively small fee. The offers are essentially worthless. The Task Force Report recommends reforms aimed at eliminating the abusive scammers rather than their victims. See id. at pt. V.
135. See Teresa Sullivan et al., Consumer Debtors, supra note 50, at 131-32 (noting that the existence of an effective legal services program greatly affected the use of bankruptcy by low income debtors in the Philadelphia area). Bankruptcy is one of the rare areas of the law where no waiver of court filing fees is permitted, further burdening low income families who need bankruptcy protection. See Klein, supra note 7, at 338. The attitude of the local legal community has an enormous effect on the choice of chapter and the results of bankruptcy filings, and the quality of lawyer counseling is too often compromised by the lawyer's need to fit into that culture or need to generate and protect her fees. See Braucher, supra note 106, at 166 & n.5, 174, 185-86, 198. See generally Braucher, supra note 40; Task Force Report, supra note 96, pt. II.
136. See Teresa Sullivan et al., Consumer Debtors, supra note 50, at 131-32 (noting that the existence of an effective legal services program greatly affected the use of bankruptcy by low income debtors in the Philadelphia area). Bankruptcy is one of the rare areas of the law where no waiver of court filing fees is permitted, further burdening low income families who need bankruptcy protection. See Klein, supra note 7, at 338. The attitude of the local legal community has an enormous effect on the choice of chapter and the results of bankruptcy filings, and the quality of lawyer counseling is too often compromised by the lawyer's need to fit into that culture or need to generate and protect her fees. See Braucher, supra note 106, at 166 & n.5, 174, 185-86, 198. See generally Braucher, supra note 40; Task Force Report, supra note 96, pt. II.
137. House Bill 3150 would allow exemption of all tax exempt retirement funds. H.R. 3150, § 119. The Religious Liberty and Charitable Donation Protection Act of 1998 amends the Code to allow a debtor to contribute up to 15% of her annual income to religious or charitable entities and to protect such donations from avoidance by the trustee. Pub. L. No. 105-183, 111 Stat. 517 (1998) (codified as 11 U.S.C.A. § 548(a) (West 1998)).
138. See Wedoff, supra note 13; Warren, Principled Approach, supra note 4, at 495; Braucher, supra note 4, at 10.
139. Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 603, 108 Stat. 4106, 4147.
140. See generally COMMISSION REPORT, supra note 39; Warren, Principled Approach, supra note 4, at 486.
141. See generally COMMISSION REPORT, supra note 39; Warren, Principled Approach, supra note 4, at 486.
142. Again there is a threat of assuming that multiple filings by one debtor are inherently abusive despite the Code's explicit allowance of such filings if they meet the good faith standard. See, e.g., Minutes of the National Bankruptcy Review Commission Meeting 5 (Nov. 1, 1995), available at 〈http://bankrupt.com/clla/11-1-95.html〉 ("The third problem area was that of fraud which included debtors giving false names, false addresses, lack of truthfulness about assets and serial filings."); Minutes of the National Bankruptcy Review Commission Meeting 9 (Apr. 19, 1996), available at 〈http://bankrupt.com/clla/4-19brc.html〉; National Bankr. Review Comm'n, Consumer Bankruptcy Issues List (revised Dec. 16, 1996) (on file with author) (listing "Repeat Filings/Abuse" as a topic and suggesting consideration of a six-year bar on refiling after dismissal and/or the imposition of a show cause requirement to obtain a stay in a second filing).
143. Again there is a threat of assuming that multiple filings by one debtor are inherently abusive despite the Code's explicit allowance of such filings if they meet the good faith standard. See, e.g., Minutes of the National Bankruptcy Review Commission Meeting 5 (Nov. 1, 1995), available at 〈http://bankrupt.com/clla/11-1-95.html〉 ("The third problem area was that of fraud which included debtors giving false names, false addresses, lack of truthfulness about assets and serial filings."); Minutes of the National Bankruptcy Review Commission Meeting 9 (Apr. 19, 1996), available at 〈http://bankrupt.com/clla/4-19brc.html〉; National Bankr. Review Comm'n, Consumer Bankruptcy Issues List (revised Dec. 16, 1996) (on file with author) (listing "Repeat Filings/Abuse" as a topic and suggesting consideration of a six-year bar on refiling after dismissal and/or the imposition of a show cause requirement to obtain a stay in a second filing).
144. Again there is a threat of assuming that multiple filings by one debtor are inherently abusive despite the Code's explicit allowance of such filings if they meet the good faith standard. See, e.g., Minutes of the National Bankruptcy Review Commission Meeting 5 (Nov. 1, 1995), available at 〈http://bankrupt.com/clla/11-1-95.html〉 ("The third problem area was that of fraud which included debtors giving false names, false addresses, lack of truthfulness about assets and serial filings."); Minutes of the National Bankruptcy Review Commission Meeting 9 (Apr. 19, 1996), available at 〈http://bankrupt.com/clla/4-19brc.html〉; National Bankr. Review Comm'n, Consumer Bankruptcy Issues List (revised Dec. 16, 1996) (on file with author) (listing "Repeat Filings/Abuse" as a topic and suggesting consideration of a six-year bar on refiling after dismissal and/or the imposition of a show cause requirement to obtain a stay in a second filing).
145. See COMMISSION REPORT, supra note 39, at 102.
146. See id.
147. See id.
148. See Klein, supra note 7, at 334. Compare COMMISSION REPORT, supra note 39 (the Commission's recommendations), with Bankruptcy Reform Act of 1998, H.R. 3150, 105th Cong. (1998) (the credit industry's bill).
149. See Klein, supra note 7, at 293, 297; Warren, Principled Approach, supra note 4, at 496; Wallace Testimony, supra note 44.
150. See Braucher, supra note 4, at 17-23; Warren, Principled Approach, supra note 4, at 492-93, 496.
151. See Klein, supra note 7, at 335; Warren, Principled Approach, supra note 4, at 491 n.13.
152. See Klein, supra note 7, at 335-36.
153. See 11 U.S.C. § 1302 (1994); 28 U.S.C. § 586 (1994). The trustee is appointed by the court in the districts in Alabama and North Carolina which are not part of the United States Trustee system.
154. See 11 U.S.C. § 1302; 28 U.S.C. § 586.
155. See 11 U.S.C. §§ 323, 341, 1302 (1994).
156. See Braucher, supra note 4, at 3 n.14, 12, 16.
157. See supra note 94.
158. Original instrument on file with author.
159. See, e.g., Memorandum from the Consumer Bankruptcy Working Group to the National Bankruptcy Review Commission 4 & n.11 (Apr. 11, 1997) (on file with author); Minutes of the National Bankruptcy Review Commission Meeting 8 (Oct. 20, 1996) (on file with author).
160. The questionnaire contained 22 questions, some with subparts.
161. The original responses are on file with the author.
162. See infra Tables 1, 2.
163. See infra Tables 4, 5.
164. See infra Table 5, Comment Section.
165. Responses on file with author.
166. See infra Tables 1, 2.
167. The scenarios were: Question 18(a): Debtor has ability to pay at time of filing but is laid off right after confirmation. Plan is dismissed for nonpayment after debtor has made 12 of 48 payments. Debtor regains job after dismissal and has the equivalent ability to pay as she had at time of original filing but remains subject to potential risk of layoff. Question 18(b): Same as above but debtor obtains new, more secure job at slightly higher rate of pay after dismissal. Question 18(c): Husband and wife debtor stop paying after marital separation. Bankruptcy is dismissed post confirmation after 20 of 60 plan payments are made. Wife refiles, listing as income child support she is entitled to but is not currently receiving. She also works but her income is less than the former marital income. Her plan is feasible if she receives the child support and a family court judgment has been entered directing wage garnishment against the husband. Question 18(d): Debtor's first bankruptcy was dismissed for nonpayment. Debtor stopped paying because he had to repair his roof. Debtor's income remains the same-he is on social security. Debtor refiles and now has contributions from his adult children listed. They file affidavits with court saying they are committed to giving their father $200 each month (total contribution from the children). Survey instrument on file with author.
168. See infra Table 3.
169. Seez infra Table 3.
170. See infra Table 3.
171. See infra Table 3.
172. See infra Table 3.
173. These proposals were pending before the National Bankruptcy Review Commission ("NBRC") at the time of the survey.
174. See infra Table 4.
175. See infra Table 4.
176. See infra Table 4.
177. Responses on file with author.
178. See infra Table 4.
179. See infra Table 4.
180. See infra Table 4.
181. See infra Table 4.
182. See infra Table 4.
183. See infra Table 4.
184. Responses on file with author.
185. Responses on file with author.
186. See infra Table 5.
187. See infra Table 5.
188. See infra Table 5.
189. See infra Table 5.
190. See infra Table 5.
191. See infra Table 5.
192. Kansas Trustee response (on file with author); see infra Table 5, Comment Section.
193. Maine Trustee response (on file with author); see infra Table 5, Comment Section.
194. California Trustee response (on file with author); see infra Table 5, Comment Section.
195. Utah Trustee response (on file with author); see infra Table 5, Comment Section.
196. Rhode Island Trustee response (on file with author); see infra Table 5, Comment Section.
197. See supra note 43.
198. Numerous other cases mention that the debtor involved has a previous bankruptcy filing; but very few cases, those that are catalogued in this Section, required the expenditure of judicial resources to resolve issues of good faith, relief from the automatic stay, dismissal, or confirmation that arose from the fact the debtor filed for bankruptcy more than one time. In contrast, a computer research query for all 1997 cases containing the terms "bankruptcy" and "false pretenses, a false representation, or actual fraud," language contained in the section 523(a)(2)(A) provision barring discharge of debts incurred by fraud, produced 104 case citations. A request for 1997 cases containing the terms "bankruptcy" and "523(a)(15)," the provision governing non-dischargeability of debts incurred from divorce or property settlements, produced 51 citations.
199. See Donald Testimony, supra note 5.
200. See, e.g., In re Richards, No. 97-14798DWS, 1998 WL 205915 (Bankr. E.D. Pa. Apr. 3, 1998); In re Siciliano, 167 B.R. 999 (Bankr. E.D. Pa. 1994).
201. See generally Society Nat'l Bank v. Barrett (In re Barrett), 964 F.2d 588 (6th Cir. 1992); Downey Sav. & Loan Ass'n v. Metz (In re Metz), 820 F.2d 1495 (9th Cir. 1987).
202. Indeed judicial efforts are not always appreciated by those creditors who benefit from them. One Texas bankruptcy judge, in response to publicized creditor concerns about repeat filings, issued show cause orders in five repeat filing cases pending before him. The orders directed the debtor to appear so that the debtor could explain the need for a repeat filing and invited any concerned creditor to present evidence of any damage suffered as a result of the repeat filings. All creditors in all five cases were notified. None appeared to claim damages. The court added that in 12 years on the bench, he could not recall "one instance of a creditor objecting to a repeat filing by a debtor." In re Tuckey, 222 B.R. 549, 552 (Bankr. N.D. Tex. 1998). That judge concluded that the creditors' demonstrated lack of concern about repeat filings relieved the court of the burden of sharing the non-existent concern. See id. 172. See Klein, supra note 7, at 294 n.5 ("Every lender has its favorite anecdote about how a debtor abused the Code. Most of the stories, when examined, establish how well the current Code actually works.").
203. See Smyrnos v. Padilla (In re Padilla), 213 B.R. 349 (B.A.P. 9th Cir. 1997); Turner v. Citizens Nat'l Bank (In re Turner), 207 B.R. 373 (B.A.P. 2d Cir. 1997); In re Barnett, 216 B.R. 202 (Bankr. N.D. Ohio 1997); Piwowarczyk v. Shayeb (In re Shayeb), 211 B.R. 390 (Bankr. D. Ariz. 1997); In re Britt, 211 B.R. 74 (Bankr. M.D. Fla. 1997); In re Day, 208 B.R. 358 (Bankr. E.D. Pa. 1997); Transamerica Credit Corp. v. Bullock (In re Bullock), 206 B.R. 389 (Bankr. E.D. Va. 1997).
204. See Klein v. Ulster Sav. Bank (In re Stein), 127 F.3d 292 (2d Cir. 1997); Perez v. Fajardo Fed. Sav. Bank, No. 96-2116,1997 WL 330410 (1st Cir. June 13,1997) (unpublished disposition); Colonial Auto Ctr. v. Tomlin (In re Tomlin), 105 F.3d 933 (4th Cir. 1997); Leavitt v. Soto (In re Leavitt), 209 B.R. 935 (B.A.P. 9th Cir. 1997); Andersson v. Security Fed. Sav. & Loan (In re Andersson), 209 B.R. 76 (B.A.P. 6th Cir. 1997); Chrysler Fin. Corp. v. Dickerson (In re Dickerson), 209 B.R. 703 (W.D. Tenn. 1997); In re Lippolis, 216 B.R. 378 (Bankr. E.D. Pa. 1997); In re Martin, 215 B.R. 119 (Bankr. N.D. Tex. 1997); In re Green, 214 B.R. 503 (Bankr. N.D. Ala. 1997); In re Yimam, 214 B.R. 463 (Bankr. D. Md. 1997); In re King, 214 B.R. 334 (Bankr. W.D. Tenn. 1997); In re McDaniels, 213 B.R. 197 (Bankr. M.D. Ga. 1997); In re Hurst, 212 B.R. 890 (Bankr. W.D. Tenn. 1997); In re Smart, 212 B.R. 419 (Bankr. S.D. Ga. 1997); In re Fernandez, 212 B.R. 361 (Bankr. C.D. Cal. 1997); In re Rauso, 212 B.R. 242 (Bankr. E.D. Pa. 1997); In re Ramos, 212 B.R. 29 (Bankr. D.P.R. 1997); In re McElroy, 210 B.R. 833 (Bankr. D. Or. 1997); In re Hollberg, 208 B.R. 755 (Bankr. D.D.C. 1997); In re Hric, 208 B.R. 21 (Bankr. D.N.J. 1997); In re Tanguay, 206 B.R. 575 (Bankr. M.D. Fla. 1997); Blue Ridge Bank v. Boswell (In re Boswell), 206 B.R. 421 (Bankr. W.D. Va. 1997); In re Ellinwood, 206 B.R. 300 (Bankr. W.D.N.Y. 1997).
205. See Fishell v. United States Trustee (In re Fishell), No. 95-1637,1997 WL 188458 (6th Cir. Apr. 16,1997) (unpublished disposition).
206. See In re Andersson, 209 B.R. at 78; In re Ramos, 212 B.R. at 30; In re Dickerson, 209 B.R. at 708.
207. See In re Dickerson, 209 B.R. at 704-05.
208. See id. at 705.
209. See id.
210. See id. at 706.
211. See id. at 707.
212. See Andersson v. Security Fed. Sav. & Loan (In re Andersson), 209 B.R. 76, 77 (6th Cir. B.A.P. 1997).
213. See id. at 78.
214. See In re Ramos, 212 B.R. 29, 30 (Bankr. D.P.R. 1997).
215. In re Merrill, 192 B.R. 245, 253 (Bankr. D. Colo. 1995).
216. See Colonial Auto Ctr. v. Tomlin (In re Tomlin), 105 F.3d 933, 936 (4th Cir. 1997). In re Tomlin did not hold that the bankruptcy court order created a permanent bar even where the debtor had filed three Chapter 13 petitions and three Chapter 7 petitions in the space of six years. Four of the petitions, all filed pro se, did not get out of the starting gate - they were dismissed because of the debtor's failure to file documents or to attend the creditor's meetings. The debtor's first Chapter 13 case made it through confirmation, but the debtor voluntarily dismissed the case after the mortgage company got relief from the stay. The debtor, represented by counsel, got a discharge under Chapter 7 in her last filing. See id. 187. See Leavitt v. Soto (In re Leavitt), 209 B.R. 935, 943 (B.A.P. 9th Cir. 1997).
217. See id. at 936-37.
218. See In re King, 214 B.R. 334, 335-36 (Bankr. W.D. Tenn. 1997); Ferez v. Fajardo Fed. Sav. Bank, No. 96-2116, 1997 WL 330410, at *1 (1st Cir. June 13, 1997) (unpublished disposition).
219. See In re King, 214 B.R. at 337.
220. See id. at 335-36.
221. See Perez, 1997 WL 330410, at *1.
222. Id.
223. See Stein v. Ulster Sav. Bank (In re Stein), 127 F.3d 292,293-94 (2d Cir. 1997); In re Smart, 212 B.R. 419, 420-21 (Bankr. S.D. Ga. 1997); In re Rauso, 212 B.R. 242, 243-45 (Bankr. E.D. Pa. 1997).
224. See In re Stein, 127 F.3d at 293-94.
225. See id. at 294. The sanctions order was vacated only because the lawyer did not get notice and opportunity to respond. The bankruptcy court's power to sanction the lawyer was not challenged. See id. 197. See In re Rauso, 212 B.R. at 243.
226. In re Smart, 212 B.R. at 420.
227. See 11 U.S.C. § 1307(b) (1994).
228. See In re Smart, 212 B.R. at 420.
229. See In re Martin, 215 B.R. 119, 121 (Bankr. N.D. Tex. 1997); In re Green, 214 B.R. 503, 509 (Bankr. N.D. Ala. 1997); In re Yimam, 214 B.R. 463,467 (Bankr. D. Md. 1997); In re Hurst, 212 B.R. 890, 894 (Bankr. W.D. Tenn. 1997); In re Fernandez, 212 B.R. 361, 372 (Bankr. C.D. Cal. 1997); In re Hric, 208 B.R. 21, 26 (Bankr. D.N.J. 1997); In re Ellinwood, 206 B.R. 300, 303 (Bankr. W.D.N.Y. 1997).
230. In re Green, 214 B.R. at 505-06.
231. See In re Fernandez, 212 B.R. at 363-66.
232. See id. at 368.
233. See In re Ellinwood, 206 B.R. at 303.
234. See id.
235. See In re Yimam, 214 B.R. 463, 464 (Bankr. D. Md. 1997).
236. See In re Martin, 215 B.R. 119, 120-21 (Bankr. N.D. Tex. 1997).
237. See In re Hric, 208 B.R. 21, 26 (Bankr. D.N.J. 1997).
238. See id.
239. See In re Hurst, 212 B.R. 890, 893 (Bankr. W.D. Tenn. 1997).
240. When a debtor fails to pay the mortgage postpetition or fails to make the trustee payments, either the mortgagor moves for relief or the trustee seeks a dismissal. The motion process is short. Existence of a case for 42 months indicates that the debtor made several years of payments though that fact is not specified in the Hurst opinion.
241. See In re Hurst, 212 B.R. at 892.
242. See id. at 892-94.
243. See In re McDaniels, 213 B.R. 197, 199 (Bankr. M.D. Ga. 1997); In re Hollberg, 208 B.R. 755, 755 (Bankr. D.D.C. 1997).
244. A dismissal on a trustee's motion is not a voluntary dismissal, leaving the creditor to prove that the dismissal was the result of willful behavior by the debtor. See In re McDaniels, 213 B.R. at 199-200.
245. See id. at 201.
246. See In re Hollberg, 208 B.R. at 755.
247. See id. at 756.
248. Bankruptcy Reform Act of 1998, H.R. 3150, 105th Cong. § 121 (1998).
249. Id.
250. See In re Yimam, 214 B.R. 463, 464 (Bankr. D. Md. 1997) ($1 million home); In re Fernandez, 212 B.R. 361, 363 (Bankr. C.D. Cal 1997) ($600,000 home).
251. See Klein, supra note 7, at 296,303; Wedoff, supra note 13.
252. See Downey Sav. & Loan Ass'n v. Metz (In re Metz), 820 F.2d 1495, 1498 (9th Cir. 1987); In re Lippolis, 216 B.R. 378, 386 (Bankr. E.D. Pa. 1997); In re McElroy, 210 B.R. 833, 837-38 (Bankr. D. Or. 1997); In re Tanguay, 206 B.R. 575, 576 (Bankr. M.D. Fla. 1997); Blue Ridge Bank v. Boswell (In re Boswell), 206 B.R. 421, 423 (Bankr. M.D. Fla. 1997).
253. See In re McElroy, 210 B.R. at 837-38.
254. See In re Tanguay, 206 B.R. at 579.
255. Id.
256. See In re Boswell, 206 B.R. at 424; In re Lippolis, 216 B.R. at 386.
257. See In re Boswell, 206 B.R. at 424.
258. See In re Lippolis, 216 B.R. at 380 n.3.
259. A Chapter 20 case is a Chapter 13 case filed after the debtor obtains a discharge in Chapter 7. See Lex A. Coleman, Individual Consumer "Chapter 20" Cases After Johnson: An Introduction to Nonbusiness Serial Filings Under Chapter 7 and Chapter 13 of the Bankruptcy Code, 9 BANKR. DEV. J. 357, 357 (1992).
260. See Johnson v. Homestate Bank, 501 U.S. 78 (1991).
261. See Smyrnos v. Padilla (In re Padilla), 213 B.R. 349, 351 (BAP. 9th Cir. 1997).
262. See Piwowarczyk v. Shayeb (In re Shayeb), 211 B.R. 390, 391 (Bankr. D. Ariz. 1997).
263. The debtor obtained a Chapter 13 discharge in 1994, filed a Chapter 7 case in 1996, and while the Chapter 7 case was still pending, filed a second Chapter 13 case in 1996. See Transamerica Credit Corp. v. Bullock (In re Bullock), 206 B.R. 389, 390-91 (Bankr. E.D. Va. 1997).
264. See id. at 393-94.
265. See id. at 391.
266. Id. at 394.
267. 211 B.R. 74,79 (Bankr. M.D. Fla. 1997).
268. She submitted accurate schedules and proposed to devote all of her disposable resources to fund the plan. See id. at 76.
269. See In re Barnett, 216 B.R. 202, 205 (Bankr. N.D. Ohio 1997).
270. See Turner v. Citizens Nat'l Bank (In re Turner), 207 B.R. 373, 378 (B.A.P. 2d Cir. 1997). The immediate issue before the B.A.P. was whether to grant the debtors' request for a stay of the bankruptcy court's relief order pending appeal. The B.A.P. denied the stay, holding that the debtors' likelihood of success on the merits was slim given that their Chapter 13 was a nullity so no stay on appeal was appropriate. See id. at 379. The debtors had engaged in further inappropriate manipulation of the Code which no doubt influenced the decision. Although their Chapter 13 plan proposed a sale of the house, they had taken no steps to effect a sale during the year that the foreclosure was pending. They mailed their Chapter 13 petition instead of providing direct notice to the mortgagor even though the foreclosure sale was imminent-in fact it occurred an hour before the petition was time stamped. And there were third-party bidders at the sale who stood to lose a house they had successfully purchased. See id. at 374-76.
271. See In re Day, 208 B.R. 358,360 (Bankr. E.D. Pa. 1997).
272. See Fishell v. United States (In re Fishell), No. 95-1637, 1997 WL 188458 (6th Cir. Apr. 16,1997) (unpublished disposition).
273. See id. at *5.
274. See F.D.I.C. v. Cortez, 96 F.3d 50 (2d Cir. 1996); In re Lilley, 91 F.3d 491 (3d Cir. 1996); Molitor v. Edison (In re Molitor), 76 F.3d 218 (8th Cir. 1996); Greatwood v. IRS (In re Greatwood), 194 B.R. 637 (B.A.P. 9th Cir. 1996), aff'd, 120 F.3d 268 (9th Cir. 1997); In re Inmon, 208 B.R. 455 (Bankr. E.D. Ark. 1996); In re Robertson, 206 B.R. 826 (Bankr. E.D. Va. 1996); In re Bucco, 205 B.R. 323 (Bankr. M.D. FIa. 1996); Norwalk Sav. Soc'y v. Peia (In re Peia), 204 B.R. 310 (Bankr. D. Conn. 1996); In re Spear, 203 B.R. 349 (Bankr. D. Mass. 1996); In re Harrison, 203 B.R. 253 (Bankr. E.D. Va. 1996); Hopkins v. United States (In re Hopkins), 201 B.R. 993 (Bankr. D. Nev. 1996); Vines v. IRS (In re Vines), 200 B.R. 940 (Bankr. M.D. Fla. 1996); In re Ziyambe, 200 B.R. 790 (Bankr. D.N.J. 1996); In re Greenberg, 200 B.R. 763 (Bankr. S.D.N.Y. 1996); In re Slater, 200 B.R. 491 (Bankr. E.D.N.Y. 1996); In re Ortiz, 200 B.R. 485 (Bankr. D.P.R. 1996); United States v. Smith (In re Smith), 199 B.R. 56 (Bankr. N.D. Okla. 1996); In re Robinson, 198 B.R. 1017 (Bankr. N.D. Ga. 1996); Mock v. Hannet, Inc. (In re Mock), 197 B.R. 1017 (Bankr. E.D. Pa. 1996); In re Robinson, 196 B.R. 454 (Bankr. E.D. Ark. 1996); In re Landes, 195 B.R. 855 (Bankr. E.D. Pa. 1996); In re Pickering, 195 B.R. 759 (Bankr. D. Mont. 1996); In re Burton, 195 B.R. 588 (Bankr. W.D.N.Y. 1996); In re Herrera, 194 B.R. 178 (Bankr. N.D. Ill. 1996); In re Stober, 193 B.R. 5 (Bankr. D. Ariz. 1996); Integra Bank v. Sixta (In re Smith), 192 B.R. 397 (Bankr. W.D. Pa. 1996); In re Harris, 192 B.R. 334 (Bankr. W.D.N.Y. 1996); Matter of Jones, 192 B.R. 289 (Bankr. M.D. Ga. 1996); Friend v. Chemical Residential Mortgage Corp. (In re Friend), 191 B.R. 391 (Bankr. W.D. Tenn. 1996). Again, the contrast to the number of reported cases involving other bankruptcy issues is illuminating. A computer search for 1996 cases containing the terms "bankruptcy" and "false pretenses, a false representation, or actual fraud" produced 111 case citations. A search for cases containing the terms "bankruptcy" and "523(a)(15)" produced 64 case citations. See supra note 167.
275. See In re Molitor, 76 F.3d at 220; In re Greatwood, 194 B.R. at 641; In re Inmon, 208 B.R. at 459; In re Robertson, 206 B.R. at 831 ; In re Bucco, 205 B.R. at 324; In re Peia, 204 B.R. at 331-32; In re Spear, 203 B.R. at 354-55; In re Harrison, 203 B.R. at 256; In re Hopkins, 201 B.R. at 996; In re Vines, 200 B.R. at 950; In re Ortiz, 200 B.R. at 490; In re Robinson, 198 B.R. at 1025; In re Mock, 197 B.R. at 474; In re Robinson, 196 B.R. at 459; In re Pickering, 195 B.R. at 769; In re Burton, 195 B.R. at 593; In re Herrera, 194 B.R. at 192; In re Stober, 193 B.R. at 11.
276. Tag team filings are those in which related debtors, usually married couples or other co-owners of property, file individual petitions serially in an effort to thwart foreclosure. First the husband may file and, once relief is granted in his case and foreclosure proceeds, the wife files to block the foreclosure effort. Timed well by bad faith debtors, such tag team filings cati interfere with foreclosure even despite the six-month bar on refiling effected by 11 U.S.C. § 109(g) (1994). Where the "debtors" have fractional interests in a property, the delay can be considerable. See Task Force Report, supra note 96, at 7.
277. See In re Bucco, 205 B.R. at 324.
278. See In re Ortiz, 200 B.R. at 490.
279. See In re Stober, 193 B.R. at 11. The debtors failed to file full schedules, pay the filing fees, or make trustee or mortgage payments in any of their cases. The court directed that if the debtors violated § 109(g) by attempting another filing, it would hold a prompt hearing to vacate and annul the stay in such a case. See id. 252. See In re Inmon, 208 B.R. 455,459 (Bankr. E.D. Ark. 1996).
280. See id at 456-57.
281. See In re Robinson, 198 B.R. 1017, 1020, 1025 (Bankr. N.D. Ga. 1996).
282. See In re Herrera, 194 B.R. 178, 192 (Bankr. N.D. Ill. 1996).
283. See In re Robinson, 196 B.R. 454, 459 (Bankr. E.D. Ark. 1996). The debtor was apparently "helped" by a petition préparer whose penchant for including slanderous and irrelevant statements in the pleadings did not advance the debtor's cause. Id. 257. See In re Spear, 203 B.R. 349,354 (Bankr. D. Mass 1996).
284. See Mock v. Hanner, Inc. (In re Mock), 197 B.R. 468,474 (Bankr. E.D. Pa. 1996).
285. See In re Pickering, 195 B.R. 759, 769 (Bankr. D. Mont. 1996).
286. See In re Lilley, 91 F.3d 491, 496 (3d Cir 1996); Greatwood v. IRS (In re Greatwood), 194 B.R. 637, 640 (B.A.P. 9th Cir. 1996); In re Robertson, 206 B.R. 826, 831 (Bankr. E.D. Va. 1996); Vines v. IRS (In re Vines), 200 B.R. 940, 950 (Bankr. M.D. Fla. 1996).
287. See In re Greatwood, 194 B.R. at 639, 641.
288. See In re Vines, 200 B.R. at 943, 950.
289. See In re Robertson, 206 B.R. at 831.
290. See In re Lilley, 91 F.3d at 496.
291. See id.
292. See In re Harrison, 203 B.R. 253, 255-56 (Bankr. E.D. Va. 1996).
293. See Molitor v. Edison (In re Molitor), 76 F.3d 218,219-20 (8th Cir. 1996).
294. See In re Burton, 195 B.R. 588, 590 (Bankr. W.D.N.Y. 1996).
295. See id. at 593.
296. See Norwalk Sav. Soc'y v. Peia (In re Peia), 204 B.R. 310, 313 (Bankr. D. Conn. 1996). Peia was the only cross-border repeat filing case reported in 1996 or 1997, despite anecdotal complaints that the abundance of such filings requires the development of a national data base. See COMMISSION REPORT, supra note 39, at 105.
297. See id.
298. See In re Rambo, 196 B.R. 181, 188 (Bankr. W.D. Okla. 1996); In re Landes, 195 B.R. 855, 865-66 (Bankr. E.D. Pa. 1996); United States v. Smith (In re Smith), 199 B.R. 56, 57 (Bankr. N.D. Ohio 1996); In re Jones, 192 B.R. 289, 293 (Bankr. M.D. Ga. 1996); Friend v. Chemical Residential Mortgage Corp. (In re Friend), 191 B.R. 391, 395-96 (Bankr. W.D. Tenn. 1996).
299. In re Rambo, 196 B.R. at 187-88
300. See id. at 185-86.
301. In re Smith, 199 B. R. at 58.
302. See id.
303. See In re Jones, 192 B.R. at 290, 293.
304. See id.
305. See In re Friend, 191 B.R. at 393, 395.
306. See id.
307. See In re Landes, 195 B.R. 855, 862-63 (Bankr. E.D. Pa. 1996).
308. See F.D.I.C. v. Cortez, 96 F.3d 50, 51 (2d Cir. 1996); Norwalk Sav. Soc'y v. Peia (In re Peia), 204 B.R. 310, 313-15 (Bankr. D. Conn 1996); In re Slater, 200 B.R. 491, 498 (Bankr. E.D.N.Y. 1996); In re Greenberg, 200 B.R. 763, 768-69 (Bankr. S.D.N.Y. 1996); In re Robinson, 198 B.R. 1017, 1022 (Bankr. N.D. Ga. 1996); In re Herrera, 194 B.R. 178, 191 (Bankr. N.D. Ill. 1996); In re Harris, 192 B.R. 334, 337-38 (Bankr. W.D.N.Y. 1996); In re Smith, 192 B.R. 397, 400 (Bankr. W.D. Pa. 1996).
309. See In re Slater, 200 B.R. at 498.
310. See id. at 493-94.
311. See In re Harris, 192 B.R. at 338.
312. See In re Robinson, 198 B.R. at 1025.
313. See In re Herrera, 194 B.R. at 191.
314. See F.D.I.C. v. Cortez, 96 F.3d 50, 51 (2d Cir. 1996).
315. See In re Greenberg, 200 B.R. 763, 770 (Bankr. S.D.N.Y. 1996).
316. See Norwalk Sav. Soc'y v. Peia (In re Peia), 204 B.R. 310, 315 (Bankr. D. Conn. 1996).
317. Integra v. Sixta (In re Smith), 192 B.R. 397, 398 (Bankr. W.D. Pa. 1996).
318. See id.
319. See William C. Whitford, Has the Time Come to Repeal Chapter 13?, 65 IND. L.J. 85, 92-93 (1990).
320. See 11 U.S.C. §§ 1322, 1325 (1994). Depending on the origination date of the mortgage, the lender will get a windfall in bankruptcy - additional interest on the cure figure which itself includes the interest on principal owed under the loan contract. See id. § 1322(e); Rake v. Wade, 506 U.S. 1046 (1993).
321. Lien stripping is a bankruptcy event that places secured claims on an equal footing with other secured claims by treating the obligation as secured only to the extent of the actual value of the security - the claim holder enjoys the benefits of secured status to the extent its claim is truly secured - but cannot artificially inflate its rights at the expense of other unsecured claim holders or the debtor. See 11 U.S.C. § 506 (1994); David Gray Carlson, Bifurcation of Undersecured Claims in Bankruptcy, 70 AM. BANKR. L. J. 1, 14-15 (1996).
322. See 24 C.F.R. § 206.125(d)(1) (1998).
323. High loan-to-value lending has been described as "the hottest product on the market" by those involved in the mortgage lending industry. See Advertisement from AIC Conferences, Inc. for Residential Mortgage Delinquency & Default Management 1998 (on file with author).
324. As a homeowner in Philadelphia, I have received at least 35 mail solicitations for home equity loans from 25 different lenders since January 1, 1998. These mail solicitations frequently contain documents that appear to be checks in substantial sums - ranging from $25,000 to $80,000, although the fine print acknowledges that they are not negotiable. Many of the solicitations state explicitly that I was specially selected for a limited time offer (14) and that past or current credit problems are no obstacle (17). Nine explicitly advertise that I can borrow up to 125% of my home's value and 10 say no equity is required. One even offers a mini-vacation in Orlando, Florida "just for applying." I have not kept track of the numerous telephone solicitations which I find too annoying to tolerate.
325. Mail solicitation from New Jersey Mortgage and Investment Corporation ("NJMIC") (on file with author).
326. "Credit Problems are our specialty - bankruptcies, foreclosures, and delinquencies are no problem." Solicitation from Old City Mortgage (on file with author); "All credit histories considered." Solicitation from P.C. Mortgage Co. Inc. (on file with author); "Loans available for those with past or present credit problems. (Personal bankruptcies, late payment histories, judgements, financial hardship due to divorce and medical problems, etc.)." Solicitation from NJMIC (on file with author) (parenthetical in original).
327. The solicitations do not emphasize the interest rates charged for the loans but those that provide information on sample payments use Annual Percentage Rates ("APR") in the range of 12% to 14.5%. See, for example, Solicitations from Flagship Mortgage Services (14.390% APR) (on file with author), Capital One Lending Services (12.9% APR) (on file with author), and Direct Equity Lending (15.934% APR) (on file with author).
328. See Braucher, supra note 40, at 530, 535; Whitford, supra note 293, at 92-93.
329. See Braucher, supra note 40 at 546, 551 (stating that lawyers have a financial incentive to promote Chapter 13 filings to collect higher fees); Braucher, supra note 106, at 166 (noting that some lawyers have admitted to encouraging Chapter 13 out of financial self-interest).
330. Warren, Principled Approach, supra note 4, at 489 (single chapter idea).
331. This view also fails to consider that Chapter 13 has enormous strategic value as an excellent forum for consumer issues. In contrast to the short time frame of a Chapter 7 bankruptcy, the Chapter 13 process allows the debtor time to strategize; the issues matter sufficiently to justify involved litigation, and the court's jurisdiction is more firmly grounded. See David A. Scholl, Bankruptcy Court: The Ultimate Consumer Law Forum?, 44 Bus. LAW. 935, 938-39 (1989); William C. Whitford, The Ideal of Individualized Justice: Consumer Bankruptcy as Consumer Protection, and Consumer Protection in Consumer Bankruptcy, 68 AM. BANKR. L.J. 397, 404-05 (1994).
332. This view also fails to consider that Chapter 13 has enormous strategic value as an excellent forum for consumer issues. In contrast to the short time frame of a Chapter 7 bankruptcy, the Chapter 13 process allows the debtor time to strategize; the issues matter sufficiently to justify involved litigation, and the court's jurisdiction is more firmly grounded. See David A. Scholl, Bankruptcy Court: The Ultimate Consumer Law Forum?, 44 Bus. LAW. 935, 938-39 (1989); William C. Whitford, The Ideal of Individualized Justice: Consumer Bankruptcy as Consumer Protection, and Consumer Protection in Consumer Bankruptcy, 68 AM. BANKR. L.J. 397, 404-05 (1994).
333. SEE JOINT CENTER FOR HOUSING STUDIES, ANNUAL REPORT SHIFTS IN HOUSING POLICIES 2-3 (1997).
334. SEE KAREN GROSS, FAILURE AND FORGIVENESS, REBALANCING THE BANKRUPTCY SYSTEM 193-214 (1997).
335. See Benjamin B. Quinones, Redevelopment Redefined: Revitalizing the Central City with Resident Control, 27 U. MICH. J. L. REFORM 689, 707 (1994).
336. See Braucher, supra note 40, at 532 (noting a 100% repayment plan for San Antonio, Tex.); Whitford, supra note 305, at 405 & n.40, 410-11.
337. Professor Braucher has thoughtfully analyzed the professional responsibility issues raised by debtors' lawyers who funnel their clients into 100% payment Chapter 13 plans without adequately counseling the client about other options or without attempting to challenge local bankruptcy culture expectations that ignore the language of the disposable income test. See generally Braucher, supra note 106.
338. The Bankruptcy Reform Act of 1998 eliminates the disposable income test and substitutes the means testing prerequisite for Chapter 7 eligibility, H.R. 3150, 105th Cong. § 101 (1998), and requires payment of all monthly net income to unsecured non-priority creditors and administrative claimants with a minimum monthly payment of $50 regardless of income, see id. §§ 101, 102.
339. See Forrester, supra note 15, at 423-32; supra text accompanying notes 279-80.
340. See Klein, supra note 7, at 304 n.71.
341. See, e.g., CHIMERINE, supra note 3.
342. "[I]t cannot be an indication of bad faith that one takes advantage of a law that was passed for his benefit." In re Coburn, 175 B.R. 400, 403 (Bankr. D. Or. 1994).
343. See Ausubel, supra note 51, at 265-68; Klein, supra note 7, at 315-16.