Monthly Archives: June 2007

Health Insurance and BK

Really nice editorial today in the Buffalo News Opinion section, Health Insurance Coverage Can Fall Short.  In this election year when we consider issues like health insurance coverage, health care costs and consumer credit issues, we need to consider that they are all interconnected.

I will say that the numbers in this article don’t really match what I see in my practice.  Mine are more depressing.  I see far more people than this article indicates who have never had health insurance.  In most cases, their employers don’t offer it.  In some cases their employer offers it, but the employee’s share of the premium would be 40% or more of the employee’s gross income.

I don’t know the answers.  If there were any easy answers, we wouldn’t have these problems.  What I do know is that tinkering with one part of the system won’t fix the big picture.


Credit Reports, Freezes and Thaws

When my clients don’t understand why they are having certain problems with credit reporting agencies (“CRA’s”), I ask them how much money they have paid the three major credit reporting agencies lately. I usually get a blank look followed fairly quickly by the realization that they aren’t the CRA’s’ customer — the creditors are. That understanding is central to understanding why the credit reporting agencies’ trade organization pays two full-time lobbyist to lobby State Legislatures and Congress opposing legistlation increasing consumer’s access to and control over their credit reports.

A credit freeze allows a consumer to place a freeze on his credit history — which means the CRA’s may not issue a report to any creditor on that consumer. It is from those reports that the CRA’s make their money. So, credit freezes are not good for the CRA’s business.  However, a credit freeze is usually the best tool to fight new account fraud and other types of credit fraud stemming from identity theft.

Hence, the current political game. The CRA’s, through their industry organization, hire lobbyists to argue that credit freezes are too expensive, too much trouble and not really worth it. Despite those efforts by the end of this year 35 States will have some laws requiring companies to inform consumers when the consumers’ personal data turns up missing — and a lot of those States also provide for some form of credit freeze.

The next player on the field are car lenders. Impulse car purchases can get lost if creditors have to wait three days (standard waiting time) to remove (or thaw) a credit freeze so that a car loan can be approved. Car lenders want a 24-hour time period to thaw a freeze — or less.
Finally, Congress is being hauled into what started at the State level. The CRA’s want a national standard, and hopefully one that is at least as lenient as the most lenient of the State statutes. Consumer advocates only want a federal standard if it is at least as effective as the most effective state statutes.

In April Sen. Mark Pryor from Arkansas introduced a bill to implement a national standard for credit freezes. His bill is modeled after the California legislation which allows for a $10 fee per CRA and application by certified mail only. If a Federal bill passes it will preempt all conflicting State statutes. Most of the State statutes I am familiar with require the payment of a smaller fee ($10 per CRA adds up to $30) and request by regular mail instead of certified.

USA Today has run an article recently on this issue, but it hasn’t made my local paper. I think it is an issue that warrants some attention and public discussion.


Filing Numbers

I get asked fairly often what is happening with Bankruptcy filing rates. Well, LexisNexis has just released some Nationwide numbers. Let’s start with an idea of what normal used to be.

According to a report I found on the Court Administrator’s web page, nationally there were 407,572 Bankruptcy cases filed in the first Quarter of 2004. So, that is about 135,800 cases a month. Of those cases, 28% of all of them were Chapter 13 filings. I’ve always heard that historically, about 30% of all consumer filings were Chapter 13’s, so 28% of all cases (including commercial cases) being 13’s looks pretty normal to me.

At the end of 2006, nationally we were filing about 55,000 cases a month. The most recent figures (April and May, 2007) are hovering right around 70,000 cases a month, and the current percentage of 13’s is continuing to decline. Very early after the new Act was passed, most cases filed were 13’s. As of the end of last year, 13’s accounted for about 40% of filings. They are now down to 35% of all filings.  Those figures are national.

Oklahoma is running behind the trend. Nationally, filings are basically back to 50% of pre-reform levels. The Western District of Oklahoma isn’t there yet. We had fewer than 500 cases filed in May, 2007. There were just under 1,100 cases filed in May, 2004. I don’t actually know our 13 percentage under the old act. However, in May, 2007 130 of our 480+ cases were 13’s. That is a whopping 28%.

So, what does all this mean? Beats me. What I do know is that Bankruptcy isn’t dead. Most of my clients are getting essentially the same relief they were getting under the old Act, it just takes them more time and costs them more money; and the pre-filing credit counseling requirement is a waste of time and money.


Is Big Brother’s Name Google?

This blog now has a minimum age for readership.

You must be old enough to remember the phrase, “Careful, Big Brother is watching.”  Except now it should be, “Careful, Google is watching.”

I was just reading a Complaint and Request for Injunction that purports to have been filed with the FTC by EPIC (Electronic Privacy Information Center). Now, I read it on a web page. I have not checked with the FTC to make sure it is not an elaborate hoax, but this one would be elaborate.  Disclaimers now done.
According to this complaint Google really is collecting all of the information that passes through its hands. Oh, and its privacy policies may not be what you would want them to be. Ok, so why care now?  Privacy has been outdated for how long?   Well, because Google is trying to merge with the Internet ad power, Doubleclick. Then, Google will be able to use all the information it has been gathering:

  • Email histories from Gmail;
  • Histories of all search querries coupled with IP addresses;
  • Indexes of computer desktops courtesy of Google desktop;
  • All Instant Messages sent through Google Talk;
  • RSS feed usage and histories through Google Reader;
  • Details on your YouTube habit;
  • All payment information obtained through Google checkout;
  • Schedules on Google Calendar;
  • Presumably documents from Google Applications;
  • Your Orkut profile — including hobbies, friends, etc;
  • All searches done with Google toolbar, identified with a special cookie to track web movement;
  • and whatever else Google has planned for us.

All this to help it target Doubleclick marketing campaigns. If the special cookie in the Google toolbar gave you pause, the Doubleclick merger should get your attention. Doubleclick tracks your web progress as part of their marking business.

Anyone who thinks they can’t be identified by this kind of information missed the media storm when AOL mistakenly released some search data last summer. The AOL data did not include the kind of Personally Identifiable Information (PII) that Google stores, and people were still being identified by their search history. Now add in your IP address, email usage, billing histories and who knows what else — Google knows you.

Excuse me, I have to go delete my Google Toolbar.


Where Stupidity Meets Duty = Fraud? has an interesting article available, Wow, I Could Have Had a Prime Mortgage. This article discusses the well-known fact that mortgage brokers make more by selling sub-prime mortgages than prime mortgages. That creates a real incentive to not offer the customer the best deal up front. In fact, according to this article somewhere up to 50% of all the prime mortgages sold in recent years were sold to borrowers who could have qualified for Prime mortgages.

In other words, a lot of the foreclosure mess we are watching didn’t need to happen.  I’m not just referring to the cost of home loss, or the general loss in property values for the rest of us. This whole mess also has the potential to do some serious damage to institutional investors (like pension funds) and the whole credit market — depending on whose crystal ball you believe.

Sure, you really ought to ask before you take out a mortgage. Sure, you should pull your credit report, figure your position and call around; but the most vulnerable in our community are the least likely to do that. Oh, and just in case you were wondering, anyone buying a house really should talk to someone other than their real estate agent before taking the first loan package handed to them. (Yep, referring to a statement in the CNN article again.)

So, what I want to know is, if a mortgage lender offers a sub-prime, adjustable rate mortgage when the borrowers could qualify for much better terms; does he have a duty to mention that they might qualify for a prime mortgage? In other words, is failing to offer the best available terms fraud?

My guess is that it isn’t. Of course, my guess is also that it is going to be very dependent on state consumer credit/mortgage broker licensing regulations.

If anybody has any thoughts on this, let me know.


I know, let’s blame Mikey

I love how every generation loves to blame younger ones for not quite being up to snuff. It has been a social sport since at least ancient Rome so I don’t expect it to change any time soon. I’m already playing, and I expect many years of enjoyment ahead of me.

The natural consequence of this sport is that whenever I tell anyone my age or older that I am a Bankruptcy lawyer, I get treated to the lecture about how we shouldn’t be letting these 20 and 30 somethings go around charging every toy they want and then filing for bankruptcy. My response is not generally regarded as polite cocktail party small talk.

So, here are a few facts for you. According to a study done at the Administrative Office of the U.S. Courts (and who better to know), Americans over 55 are filing bankruptcy at a far faster rate than the general population. The culprits are mortgage and health care costs. In 1994 only 27% of all bankruptcy filers were over the age of 45. In 2002 that percentage increased to 39%. This is in stark contrast to filers under the age of 25.  Only 4% of all American adults under the age of 25 filed for bankruptcy in 2002. That was down from 11% of that age group in 1999. So, the twenty-somethings are filing at less than half the rate that they were in the ’90’s; and the Boomers are filing at basically 1.5 times the rate they were in the ’90’s.

These findings are consistent with what I see in my practice. I have far more senior citizens who racked up their credit card debt in pharmacies then I do people under 35. By the upper 30’s the numbers start to pick up, but I am 42 and in the last year of the Baby Boom.  Easily most of my clients are older than I am.

If you want to read the full report, “Aging and Bankruptcy: The Baby Boomers Meet UP at Bankruptcy Court”, it was supposed to be in the May, 2007 issue of the ABI Journal.


Student Loan Scandal and its Silver Lining

Too many people still think that if student loans have been due and payable for at least 7 years, then they are freely dischargeable in a Bankruptcy. This used to be the law — 10 years ago or so. For the recent past most student loans have been not dischargeable (regardless of age) absent a showing of undue hardship — which is an incredibly high standard. There was a limited exception for completely private student loans.

Two years ago student loans took another slip down the non-dischargeable hill. In the 2005 amendments to the Bankruptcy Code, Congress made all student loans, federally insured and otherwise, non-dischargeable, 11 U.S.C. Section 523(a)(8), absent a showing of undue hardship.

Now, we have student loan scandals making headlines around the country, and Senator Biden has responded by filing S. 1561. I haven’t gotten my hands on a copy of the full text yet, but I understand that it limits the bankruptcy dischargeability provisions to loans, “made, insured or guaranteed” by a governmental unit. This would allow the discharge of all private student loans without a showing of undue hardship.

Frankly, there are some significant problems with what I have read. First of all, there is a rumor floating around that it would make loans made directly by state-supported Universities non-dischargeable, but not loans made by private Universities. Second, a complete repeal of the non-dischargeability protections could have the unintended effect of driving interest rates through the roof on private loans.

Whether this bill is perfect or not isn’t really the issue. This is an area that has needed Congressional attention for a while. About a year ago the U.S. Supreme Court ruled that Social Security retirement benefits could be garnished to pay student loan debts, and the undue hardship standard for Bankruptcy basically means that if you can afford to pay a lawyer to bring the adversary proceeding necessary to determine non-dischargeability — then, you lose.

It is a shame that it takes a good scandal to get Congress’ attention, but at least that still works.


First line of foreclosure defense — are you really the Plaintiff?

If you live in Jacksonville, Florida and qualify for Legal Aid — you’re in luck! You just might have access to one of the best foreclosure defense attorneys in the United States — April Charney. has an article on foreclosure defense that features April prominently. The dateline on it is June 18, 07; but I don’t know if it will be in a paper edition or not. The gist of the article is that April has successfully defended foreclosure actions where the plaintiff can’t prove that it owns the note and mortgage.

Yep, these things have been sold and repackaged so many times that in some areas the papertrail can no longer be followed. Consider if you will, the effect of this on our real property laws which haven’t changed much since the 14th Century.

Of course, sometimes it is more complicated than that. Sometimes, you can trace the ownership history — except it can’t happen. In one case described in the article the note and mortgage in question were bought by a securitized trust after the note was in default — and that is in violation of the trust terms.

Sometimes, a review of the title history reveals that the note and mortgage weren’t actually acquired by the Plaintiff until after it filed the foreclosure petition. Could that lawyer not spell Rule 11?

Of course, don’t expect to find this kind of title history in anyplace as archaic as the County Clerk’s office. Frequently, the assignments aren’t actually recorded. If all these assignments were recorded, they would have to pay filing fees on all of them. So, against whom are these assignments effective — if they aren’t perfected?

I’ll be going out of state for CLE on mortgage issues in the fall. It ought’a be fun.