Skip to main content
Help Center
banner

ABI Blog Exchange

article-exchange

Insolvency Service “reframes” view of creditor – IPs can apply their discretion (UK)

Read Article

Student Loan Crisis & Bankruptcy: Why Does Congress Allow This To Continue? (In re Duncanson)

By: Donald L Swanson We have a student loan crisis in these United States.  That crisis dates back to 2005, when Congress enacted one of the harshest-imaginable bankruptcy laws for student loans.[Fn. 1]  That 2005 law, in bi-partisan fashion: Illustrating the harshness of the current law on discharging student loans in bankruptcy is this recent opinion... Continue Reading →

Bankr. W.D.N.C.- In re Sabrina Berry- First Amendment protects against Automatic Stay Violation

Bankr. W.D.N.C.- In re Sabrina Berry- First Amendment protects against Automatic Stay Violation Ed Boltz Wed, 08/27/2025 - 15:30 Summary: In this Chapter 7 case, the erstwhile interim 6th Congressional District chair for the Democratic Party Sabrina Berry sought sanctions under § 362(k) against creditor (and political rival) Dr. Grace Galloway, alleging that Galloway’s April 2025 Facebook posts and comments at a May 10 district political convention accusing Berry of theft were a willful violation of the automatic stay. The dispute arose after Berry filed bankruptcy on March 31, 2025, listing Galloway as a $3,900 unsecured creditor from a 2023 judgment. Days before the convention, Galloway announced her own candidacy for the same district chair position and publicly referenced the debt. Berry claimed Galloway’s social media and in-person remarks were an attempt to shame her into payment. Galloway denied any collection intent, asserting her speech was part of a political campaign and protected under the First Amendment. The court found the most credible evidence showed minimal interaction at the convention, no direction to others to pressure Berry, and that Berry could not even see the Facebook posts unless shown by third parties. While the posts “toed the line,” they were not attempts to collect a debt but rather political speech about Berry’s qualifications for office. Judge Edwards further held that even if the conduct might otherwise implicate § 362(a)(6), political campaign speech on a candidate’s financial history “occupies the highest rung of the hierarchy of First Amendment values” and likely could not constitutionally be sanctioned under § 362(k). The motion was denied. Additionally, there are multiple Adversary Proceedings pending in this bankruptcy case seeking to have debts declared nondischargeable based on allegations of fraud by the Debtor. Commentary: Although the opinion is circumspect about the political affiliations of Berry and Galloway, it is hard to ignore the subtext. The April 2025 dust-up — played out both online and in the middle of a contested party convention — ended not with a victory for either, but with the floor-nomination and election of Susan Smith as district chair. This public defeat, coupled with the courtroom airing of grievances in August, may well have been an unspoken catalyst for Berry’s June 6, 2025 defection to the Republican Party, as later trumpeted in the NC GOP’s own press release. From a bankruptcy practitioner’s perspective, the decision highlights two key points. First, § 362(a)(6) remains aimed at collection activity, not political opposition research, even when the “research” is personal, unflattering, and debt-related. Second, in a collision between bankruptcy’s protections and core political speech, courts will tread very carefully, if not defer entirely, to First Amendment safeguards. Debtor’s counsel should be mindful that in a campaign context, even factually accurate but reputationally damaging statements about a debt may be insulated from sanctions, absent clear evidence of coercive collection intent. And for those whose political aspirations run parallel to their bankruptcy cases, the lesson may be simple: the automatic stay is a shield against collection, not a cloak of invisibility against your rivals on the convention floor — especially if they, too, have “receipts in hand.” With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_sabrina_berry.pdf (447.01 KB) Category Western District

Bankr. W.D.N.C.: In re Stone/Stone v. MOHELA/Stone v. IRS- Dismissal of Chapter 7, together with SLAP and IRS AP

Bankr. W.D.N.C.: In re Stone/Stone v. MOHELA/Stone v. IRS- Dismissal of Chapter 7, together with SLAP and IRS AP Ed Boltz Tue, 08/26/2025 - 15:48 Summary: In March 2025, the debtor, a licensed clinical social worker, filed a Chapter 7 petition, omitting or underreporting significant self-employment income from her counseling business, QC Counseling, along with other assets and creditors. An audit revealed that her actual six-month average income was nearly double what she reported, creating a $232,675.80 sixty-month disposable income figure and triggering the § 707(b)(2) presumption of abuse. She failed to rebut the presumption and, under the Calhoun factors, the court also found bad faith, citing inflated expenses, high-end housing and vehicle costs, and inaccurate schedules. While the base case was pending, she filed two adversary proceedings: one to discharge $104,867 in student loans under the Brunner undue hardship standard, and one to discharge $29,178 in recent federal income taxes under § 105(a) equitable powers. On the student loans, the court found she failed all three Brunner prongs — her corrected income left ample surplus to make the $315 monthly payment, her circumstances were not likely to persist in a way that would prevent repayment, and her decade-long history of making less than 1% of required payments showed a lack of good faith. On the taxes, the court noted § 523(a)(1) expressly bars discharge of the recent liabilities and that § 105(a) cannot override explicit Code provisions. The court granted the motions to dismiss the base case under §§ 707(b)(1), (b)(3) and (a), and separately dismissed both adversary proceedings under Rule 12(b)(6). Comment: Once the base Chapter 7 was dismissed for abuse and bad faith, the student loan and tax discharge adversaries were effectively academic — no bankruptcy case, no discharge to except a debt from. While there is a line of authority holding that dismissal of the main case generally moots pending adversaries, Judge Edwards nonetheless issued detailed rulings on both. That may have been intended to create a record discouraging refiling with the same claims, to conserve judicial resources if the debtor tried again, or to provide clarity on the legal shortcomings in her theories. But procedurally, the necessity is debatable: courts have often simply dismissed adversaries as moot upon dismissal of the underlying case as there is no longer a case of controversy in the Adversary Proceedings. While perhaps giving insight into judicial thinking, those portions of this decision are ultimately merely dicta. An obvious question regarding the bankruptcy petition and the Adversary Proceedings is whether, despite the serious miscalculations and errors in those, the pro se debtor actually completed all of the complicated schedules, pleadings and calculations necessary for a bankruptcy case completely on her own. (That those calculations and pleading were inaccurate and always tilted in her favor could be seen as evidence of sophistication.) And while on the face of the filings, the debtor denied using a non-attorney preparer or a lawyer ghost-writer and the documents lack sovereign citizen or obvious AI-generated language, that absence of evidence is not conclusive proof that none occurred. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_stone.pdf (414.51 KB) Category Western District

Before Congress Again: Subchapter V’s $7,500,000 Debt Limit (S.A. 3382 to S.2296)

By:  Donald L. Swanson On July 31, 2025, Senators Grassley (R) and Durbin (D) introduce in the U.S. Senate an amendment (S.A.3382) to the “National Defense Authorization Act for Fiscal Year 2026” (S.2296). Said amendment proposes to reinstate the debt limit for Subchapter V eligibility at $7,500,000, from its current inflation-adjusted $3,424,000. Subchapter V Chronology... Continue Reading →

Law Review (Note): McLaughlin, Brendan- The Rooker-Feldman Doctrine in the Bankruptcy Context

Law Review (Note): McLaughlin, Brendan- The Rooker-Feldman Doctrine in the Bankruptcy Context Ed Boltz Mon, 08/25/2025 - 19:06 Available at: https://scholarship.law.stjohns.edu/bankruptcy_research_library/375/ Abstract: An unfavorable state court judgment can lead to the losing party seeking a second bite at the apple in federal court, but the Rooker-Feldman doctrine blocks second attempts with limited exceptions. The jurisdictional doctrine is derived from two United States Supreme Court cases: Rooker v. Fidelity Trust Co. and District of Columbia Court of Appeals v. Feldman, where the collective holdings stand for the principle that a state court judgment is conclusive and that the lower federal courts lack jurisdiction to review such judgments. The Supreme Court is the only federal court authorized to review state court judgments. The Rooker-Feldman doctrine serves as a jurisdictional barrier of entry into federal courts for bankruptcy litigation. The doctrine stays narrow enough not to preclude all state court appeals to the federal judiciary but assists in precluding parties seeking to relitigate the same arguments made in state court. This article addresses key case law in the context of bankruptcy surrounding the Rooker-Feldman doctrine. Part I explains potential limitations that arise from the strong preclusive effect that Rooker-Feldman can have on state court appeals. Part II outlines the federal exemptions and provision of title 11 of the United States Code (the "Bankruptcy Code") that allow for certain matters from state court to be litigated, while also enabling Rooker-Feldman to be a beneficial tool in precluding other state court issues that should be kept out of federal court. Finally, Part III examines a Fifth Circuit decision that presents a prime example of the doctrine in action. Commentary: For consumer bankruptcy practitioners, Rooker-Feldman is often less a shield than a buzzsaw—capable of slicing through creative pleadings that seek to re-argue a foreclosure’s validity, unwind a state judgment lien on grounds other than those available under §§ 522(f) or 544, or nullify a divorce decree’s property division. As the doctrine’s exceptions show, the key is to frame the federal claim as arising under Title 11 itself, not as an attack on the “bona fides” of the state court ruling. Enforcing the automatic stay or discharge, pursuing preference or fraudulent transfer claims, or challenging post-petition conduct will generally survive Rooker-Feldman scrutiny. But arguments that “the state court got it wrong” about ownership, amount owed, or procedural fairness—no matter how righteous—belong in state appellate courts, not bankruptcy court. In short, Rooker-Feldman is the polite but firm bouncer at the federal courthouse door: it keeps out patrons who have already lost across the street, but will wave in those who can show a valid federal bankruptcy ticket. The skill lies in knowing whether your client’s grievance is truly about a new injury or just another bite at the same apple. To read a copy of the transcript, please see: With proper attribution, please share this post. Blog comments Attachment Document the_rooker-feldman_doctrine_in_the_bankruptcy_context.pdf (277.59 KB) Category Law Reviews & Studies

Weekly News – August 22

Claire’s finds a Buyer, the demise of the BK lawyer, safe harbors in retreat (phew!), Bausch Game of Thrones, Klockner tanks, and much, much more… Creditor Corner Your weekly curated…

Law Review (Note): Mesrobian, Kalina- Reconsideration of a Previously Allowed or Disallowed Claim Under Section 502(j) of the Bankruptcy Code in New York and Delaware.

Law Review (Note): Mesrobian, Kalina- Reconsideration of a Previously Allowed or Disallowed Claim Under Section 502(j) of the Bankruptcy Code in New York and Delaware. Ed Boltz Fri, 08/22/2025 - 15:33 Available at: https://scholarship.law.stjohns.edu/bankruptcy_research_library/376/ Abstract: Section 502(j) of title 11 of the United States Code (the "Bankruptcy Code") states that "[a] claim that has been allowed or disallowed may be reconsidered for cause" in a bankruptcy case. 11 U.S.C.S. §502(j). Section 502(j) further states that "a reconsidered claim may be allowed or disallowed according to the equities of the case." Id. There is no definition of "for cause" or "according to the equities of the case," but the courts have generally held that reconsideration ultimately "lies within the discretion of the court." This article will analyze the scenarios under which a bankruptcy court in New York and Delaware may reconsider previously allowed or disallowed claims under Section 502(j). First, the memorandum will discuss the governing law applicable to this issue. Subsequently, the article is divided into two sections; the first will highlight situations in which courts have historically granted motions to reconsider claims, while the second will discuss the rationale adopted by courts that deny reconsideration of claims. Summary: This note surveys how bankruptcy courts in New York and Delaware reconsider previously allowed or disallowed claims under § 502(j). That section allows reconsideration of claims “for cause” and adjustment “according to the equities of the case,” without defining either term. The memorandum frames the analysis as a two-step process: Determine whether “cause” exists—often evaluated through Bankruptcy Rules 3008 and 9024, incorporating Fed. R. Civ. P. 60(b) and its “excusable neglect” standard. If cause exists, decide whether the equities favor allowance or disallowance. Courts in both districts generally follow the Pioneer factors for excusable neglect—prejudice to the debtor, length and reason for delay, and good faith—but in the default judgment context may instead apply the Second Circuit’s American Alliance test, which omits the “reason for delay” factor and is more forgiving. Examples of granted reconsideration include cases where creditors lacked notice of objections, delays were short, and claims were facially meritorious ( Bluestem Brands, Enron, Coxeter). Denials typically involve long or unexplained delays, willful inaction, lack of new evidence, or untimely motions under Rule 9024’s one-year limit ( Gonzalez, Nations First Capital, JWP Info. Servs., Spiegel, Dana, Palmer, Tender Loving Care). The article concludes that the decision is highly fact-dependent, grounded in equitable discretion, and guided by the interplay of statutory language and procedural rules. Commentary: While the article here is solid, its exclusive focus on New York and Delaware decisions betrays the all-too-common myopia in academic bankruptcy literature—particularly law review notes—of treating Chapter 11 corporate practice as the whole of bankruptcy law. The claims allowance process, the application of § 502(j), and the governing Bankruptcy Rules are identical in Chapter 13 cases. Yet decisions from consumer jurisdictions—where reconsideration often involves pro se creditors, mortgage servicers, and debt buyers—are entirely absent. This is more than just a matter of geographic or chapter diversity. In Chapter 13, motions under § 502(j) are often the vehicle for: Correcting mortgage arrearage claims after Rule 3002.1 determinations. Addressing creditor misapplication of plan payments. Reinstating disallowed claims when debtors cure deficiencies. Allowance of late claims. Disallowance of secured claims after surrender of collateral. Such cases can be rich with practical guidance about what “cause” and “equities” mean in the context of wage-earner plans, where distributions are ongoing and prejudice to either side can be magnified by the plan’s structure. By limiting the analysis to large corporate reorganizations in the Southern District of New York and the District of Delaware, the note reinforces a false divide between “serious” Chapter 11 jurisprudence and supposedly parochial consumer practice. In reality, the procedural posture, evidentiary burdens, and equitable balancing are the same—and consumer cases may present fact patterns more immediately relevant to the majority of bankruptcy practitioners. A more comprehensive treatment would compare Pioneer- and American Alliance-based analyses in both contexts, highlight whether courts apply different tolerance levels for delay in shorter, fixed-term plans, and identify recurring creditor behaviors unique to consumer cases. That would not only make the scholarship more representative of bankruptcy as a whole, it would also ensure that guidance on § 502(j) reaches those most likely to use it—the attorneys and judges handling the thousands of Chapter 13 cases filed each year outside the narrow corridors of Manhattan and Wilmington bankruptcy courthouses. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document reconsideration_of_a_previously_allowed_or_disallowed_claim.pdf (291.45 KB) Category Law Reviews & Studies

Law Review (Note): Parky, Hayung- Property of the Estate Under Section 541—Accrual of Causes of Action and the "Sufficiently Rooted" Test

Law Review (Note): Parky, Hayung- Property of the Estate Under Section 541—Accrual of Causes of Action and the "Sufficiently Rooted" Test Ed Boltz Thu, 08/21/2025 - 18:15 Available at: https://scholarship.law.stjohns.edu/bankruptcy_research_library/377/ Abstract: This article examines the scope of property included in a bankruptcy estate under section 541 of the Bankruptcy Code, with a focus on causes of action arising both before and after the bankruptcy petition date. Courts apply a two-part analysis to determine whether a claim is part of the estate: (1) whether it accrued as of the petition date, and (2) whether a post-petition claim is sufficiently rooted in the pre-bankruptcy past. This article explores how courts interpret and apply these components to determine estate property. Summary: This note reviews how courts determine whether causes of action—whether accruing pre- or post-petition—are included in the bankruptcy estate under 11 U.S.C. § 541. It explains that courts apply a two-step test: (1) whether the claim accrued as of the petition date under applicable state law, and (2) whether, if accruing post-petition, it is nonetheless “sufficiently rooted in the pre-bankruptcy past” to be considered estate property. “Accrual” turns on whether all elements of the claim existed and were discoverable under state law at filing. Lack of debtor knowledge typically does not prevent accrual unless discovery-based rules apply and the injury was undiscoverable. Post-petition claims may be drawn into the estate under the “sufficiently rooted” doctrine from Segal v. Rochelle, which looks to whether the claim has a strong nexus to prepetition events such that neither the pre- nor post-petition conduct alone would be sufficient to create the claim. The note surveys cases on both sides: asbestos and employment claims brought in when rooted in prepetition injury or conduct, versus defective medical device cases excluded when no prepetition injury had manifested. The conclusion is that courts focus on the factual connection to pre-bankruptcy history, not just legal accrual, when deciding if a post-petition claim belongs to the estate. Commentary: This is a well-researched survey of how § 541’s broad definition of “property of the estate” interacts with claim accrual and the “sufficiently rooted” test. The note rightly underscores that accrual is a matter of state law and that “sufficiently rooted” is an independent, equitable inquiry. However, the analysis is incomplete for Chapter 13 practice because it does not address § 1306, which expands property of the estate to include not just the § 541 snapshot at filing but also “earnings from services performed by the debtor after the commencement of the case” and “property . . . that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted.” In the Chapter 13 context, this statutory expansion often makes the “accrual” and “rooted” debates largely academic—post-petition causes of action (tort, contract, or statutory) generally enter the estate without regard to when they accrued, at least until vesting at confirmation under § 1327 alters the analysis. For consumer bankruptcy practitioners, omitting § 1306 leaves out the key reason why post-petition slip-and-fall cases, wage claims, and even inheritances (per Carroll v. Logan) often require turnover or plan modification in Chapter 13. Without it, the article reads as though post-petition claims are presumptively excluded unless “rooted”—a statement that may mislead anyone applying the rule outside of Chapter 7. In the real-world application, In re Sorrells from the WDVA (July 2, 2025) illustrates that even where the property clearly falls into the estate (here, an inherited IRA and potential probate distribution under § 1306), the more determinative question post-confirmation is whether res judicata from § 1327 is overcome under Murphy v. O’Donnell by a “substantial and unanticipated” change in financial condition. When a Chapter 13 case converts to Chapter 7, 11 U.S.C. § 348(f) generally limits the Chapter 7 estate to property that was part of the estate as of the original petition date and still in the debtor’s possession at conversion. Post-petition assets acquired during the Chapter 13—such as wages, causes of action, or inheritances that became estate property under § 1306—are ordinarily excluded from the new Chapter 7 estate, unless the conversion is in bad faith. This “snapshot back” effect can effectively “remove” post-petition property from the estate, returning it to the debtor, and is often a strategic consideration for debtors facing an unexpected post-petition windfall in a struggling Chapter 13. In short: the note is a solid primer on § 541 doctrine, but Chapter 13 lawyers should mentally append “. . . and then check §§ 348, 1306 and 1327” before relying on it in practice. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document property_of_the_estate_under_section_541_accrual_of_causes_of_act_1.pdf (266.95 KB) Category Law Reviews & Studies

§ 363 Sale of Genetic Information? (In re 23andme)

By: Donald L Swanson Here are two legal policies in these United States that can conflict: The conflict is this: what happens when value maximization in bankruptcy requires the sale of PII? A recent example of a bankruptcy court struggling with this conflict is, In re 23andme Holding Co., Case No. 25-40976, Eastern Missouri Bankruptcy Court... Continue Reading →

Law Review: Jiménez, Dalié, Missing Strugglers: Debt's Reach, Bankruptcy's Limits, and a Proxy for Who's Left Out (July 31, 2025).

Law Review: Jiménez, Dalié, Missing Strugglers: Debt's Reach, Bankruptcy's Limits, and a Proxy for Who's Left Out (July 31, 2025). Ed Boltz Wed, 08/20/2025 - 18:56 Available at: SSRN: https://ssrn.com/abstract=5377387 Summary: This essay uses Debt's Grip as a point of departure to examine how debt operates as a system of social control in the United States. While the book offers a vivid portrait of those who file for bankruptcy, it also gestures toward a broader reality: millions of financially distressed individuals who never access relief. Drawing on legal scholarship and political theory, this Essay argues that debt disciplines individuals, fragments solidarity, and undermines democratic agency. It proposes a new metric-the ratio of debt collection lawsuits to bankruptcy filings-as a proxy for unmet need, revealing a population of "missing strugglers" visible to creditors but excluded from legal protection. The analysis calls for reimagining legal and political responses to financial distress beyond the bankruptcy system. Commentary: In Missing Strugglers: Debt’s Reach, Bankruptcy’s Limits, and a Proxy for Who’s Left Out, Professor Dalié Jiménez uses Debt’s Grip—Pamela Foohey, Robert Lawless, and Deborah Thorne’s recent portrait of bankruptcy filers—as a starting point to explore an even larger population: financially distressed individuals who never file for bankruptcy. While Debt’s Grip captures the stories and statistics of those who do file, Jiménez focuses on those absent from the system yet visible to creditors, courts, and debt buyers—the “missing strugglers.” Drawing on political theory, racial capitalism scholarship, and data from the Debt Collection Lab, Jiménez argues that debt functions not just as an economic burden but as a mechanism of social control: replacing social provision with credit (Abbye Atkinson), extracting value from the poor (Chrystin Ondersma), shaping self-perception and political agency (Maurizio Lazzarato), and deepening racial inequities (Louise Seamster). The paper proposes a “lawsuit-to-bankruptcy ratio” as an empirical proxy for unmet need, revealing that in many jurisdictions, there are 6–9 debt collection lawsuits for every consumer bankruptcy filing. The result is a stark picture: bankruptcy is reaching only a fraction of those in deep financial distress, and the gap reflects structural exclusion, not stability. The conclusion calls for reimagining relief beyond bankruptcy, confronting debt as a public governance problem, and rebuilding collective provision. Jiménez’s analysis should be a wake-up call for consumer bankruptcy attorneys. The “missing strugglers” are not avoiding relief because they are immune to debt collection pressure; they are caught in precisely the shame spirals described in Joe Gladstone's Financial Shame Spirals, convinced that filing for bankruptcy is a personal failure rather than a legal right. Ondersma’s Dignity, Not Debt reinforces that these shame dynamics are not incidental—they are cultivated by extractive credit systems that profit from keeping people in repayment purgatory for as long as possible. This is also where David Graeber’s Debt: The First 5,000 Years is useful—not for doctrinal guidance, but for perspective. Debt has long been used to structure relationships of power, obligation, and subordination. What Jiménez documents is the modern American iteration of that ancient dynamic, in which relief is rationed, punishment is automated, and the moral narrative favors creditors. Encouraging more of this population to access bankruptcy requires more than marketing—it demands systemic and cultural interventions: Proactive Outreach in Civil Courts – Partner with legal aid, pro bono programs, and court clerks to provide bankruptcy information to defendants in debt collection lawsuits. Handouts at first appearances or mediation sessions could frame bankruptcy as a tool, not a stigma. Medical and Social Service Partnerships – Many “missing strugglers” first encounter financial crises through hospitals, clinics, or social service agencies. Training frontline workers to identify potential bankruptcy candidates and refer them to reputable attorneys could intercept clients before default judgments pile up. That includes building partnerships between groups, including the Debt Collection Lab with whom Jimenez is working, and private consumer bankruptcy attorneys to find representation for debtors that is both affordable for consumers and provides reasonable compensation for the lawyers. Public Education Campaigns – Use local media, libraries, and community centers to demystify bankruptcy. Counter prevailing myths (“you lose everything,” “you’ll never get credit again”) with facts about exemptions, credit recovery, and the automatic stay. Fee Innovations – High upfront costs are a major barrier. Attorneys could offer sliding-scale retainers, bifurcated fee arrangements, or Chapter 13 “fee through the plan” options as ways to make bankruptcy financially accessible. Cultural Reframing – Borrow from the Debt Collective’s organizing model to normalize bankruptcy as an act of economic self-defense. If default and garnishment are seen as passive defeat, filing should be framed as taking control. Legislative and Rule Changes – Support reforms to streamline filing for low-asset debtors, expand exemptions, and reduce administrative burdens. Simplified forms and online filing could lower the entry threshold. The “lawsuit-to-bankruptcy ratio” is not just a scholarly metric—it’s a practice tool. Attorneys can use it to identify high-need, low-filing communities and direct outreach accordingly. The more visible and accessible bankruptcy becomes—both in message and in method—the more likely these “missing strugglers” are to see it not as a last-resort defeat, but as a path to reset and rebuild. Wild-Haired Suggestion: Perhaps the most unintentionally revealing moment in Missing Strugglers is its pop culture citation— Chicago Med, Season 3, Episode 15 (“Devil in Disguise”)—where a patient drowning in medical debt has apparently never even heard of bankruptcy. If television shapes public consciousness, no wonder the “missing strugglers” stay missing. The obvious corrective? A television procedural, equal parts heartstring-tugging drama and deadpan comedy, called “The Chapter.” Each week, our scrappy, overworked consumer bankruptcy attorneys would juggle eccentric clients (“Yes, sir, the court will still take your case even if you list your goldfish as a dependent”), relentless creditors, and the occasional heroic rescue of a family home. Plotlines would blend Law & Order’s case-of-the-week structure with Parks & Recreation-style office hijinks—except instead of catching criminals or building parks, our heroes halt garnishments, dodge means-test landmines, and negotiate reaffirmations with car lenders who “just need to talk to a manager.” Season arc? The attorneys battle an evil, deep-pocketed debt buyer empire while educating America on exemptions, the automatic stay, and why “no, you don’t lose everything.” Viewers would laugh, cry, and—crucially—walk away knowing that bankruptcy is a real, legal option when debt is crushing them. In other words, The Chapter could do for debtor relief what CSI did for forensic science, except with fewer microscopes and more confirmation hearings. All we need is a Los Angeles based law professor to pitch this to Netflix. To read a copy of the transcript, please see: Blog comments Attachment Document missing_strugglers_debts_reach_bankruptcys_limits_and_a_proxy_for_whos_left_out.pdf (342.44 KB) Category Law Reviews & Studies

Corporate Bankruptcy Filings in US

Webpronews reports a 73% increase in corporate bankruptcies for 2025, with business bankruptcy filings reaching their highest monthly level since 2020. At Shenwick & Associates, we have observed this increase and wish to review the various types of

Law Review (Note): Denaroso, Daniel- Granting a Stay for Non-Debtors

Law Review (Note): Denaroso, Daniel- Granting a Stay for Non-Debtors Ed Boltz Tue, 08/19/2025 - 15:24 Available at: https://scholarship.law.stjohns.edu/bankruptcy_research_library/373/ Summary: This note surveys the state of “non-debtor stays” after the Supreme Court’s Harrington v. Purdue Pharma decision, in which the Court held that the Bankruptcy Code does not authorize a plan provision that “effectively seeks to discharge claims against a non-debtor without the consent of affected claimants.” While Purdue involved a permanent injunction in favor of the Sackler family in a Chapter 11 case, post- Purdue lower courts have read the decision narrowly—distinguishing between prohibited permanent nonconsensual third-party releases and still-permissible temporary stays or preliminary injunctions protecting non-debtors when necessary for a debtor’s reorganization. The note reviews three examples: Delaware- In re Parlement Techs: recalibrated “likelihood of success on the merits” for preliminary injunctions, finding temporary non-debtor relief can still be granted if essential to reorganization or likely to be replaced by a consensual release. S.D.N.Y.- In re Hal Luftig Co.: extended an automatic stay to a non-debtor for five years where the individual’s continued involvement was essential to the plan, even over the objection of the largest creditor. N.D. Ill.- In re Coast to Coast Leasing: adopted Delaware’s reasoning and upheld temporary non-debtor injunctive relief to facilitate reorganization. The author emphasizes that courts are preserving this relief by keeping it temporary, tied to reorganization needs, and analytically distinct from the *Purdue*-barred permanent releases. Commentary: This discussion—like Purdue, much of the legal scholarship, and the practice norms of nearly every Chapter 11 lawyer, judge, and the U.S. Trustee program—almost completely ignores the fact that Congress has already confronted the question of co-debtor protections and codified a clear, express answer in 11 U.S.C. § 1301. That section provides an automatic co-debtor stay in Chapter 13 cases, halting collection efforts against an individual liable with the debtor on a consumer debt, unless relief from stay is granted. Congress thereby demonstrated two important points: 1. It knows how to authorize co-debtor protections when it wants to. 2. It chose to do so only in the Chapter 13 context, for consumer debts, with specific exceptions and procedures for relief. Seen through that lens, the entire post- Purdue debate over whether courts can fashion non-debtor stays under §§ 105 and 362 in Chapter 11 reorganizations is not just a matter of statutory silence—it’s a matter of statutory choice. Congress gave Chapter 13 debtors and their co-obligors a tailored protection and omitted any similar provision for Chapter 11. The judicial creativity in finding temporary workarounds in Chapter 11 thus sits uneasily beside the plain text and structure of the Code. From a consumer bankruptcy perspective, Purdue and this note are reminders that while courts and practitioners in the business reorganization world are struggling to salvage a form of co-debtor relief, Chapter 13 debtors already enjoy it automatically. The difference is not accidental—it’s a policy choice Congress made to encourage individuals to file under Chapter 13 rather than Chapter 7, and to preserve household stability by protecting co-signers during plan performance. Yet, the lack of recognition of § 1301 in academic writing and large-scale Chapter 11 commentary reflects a broader pattern: consumer-specific provisions are often treated as quirky footnotes rather than integral parts of the Bankruptcy Code’s design. That blind spot leads to doctrinal debates that sometimes reinvent (or contradict) solutions already on the books. A more coherent bankruptcy discourse—especially in light of Purdue—would grapple with why Congress expressly gave a statutory co-debtor stay to Chapter 13 but not to Chapter 11, and whether any expansion of non-debtor protections in business reorganizations ought to come from Congress, not from judicial improvisation. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document granting_a_stay_for_non-debtors.pdf (301.71 KB) Category Law Reviews & Studies

Selling Assets In Chapter 11, Subchapter V & Chapter 12: Under § 363/§ 1206 vs. Under A Confirmed Plan?

By: Donald L Swanson Bankruptcy may not be very good at a lot of things. But one thing bankruptcy is good at is this: selling assets. Bankruptcy sales outside the ordinary course of business traditionally perform well at achieving top dollar. Two separate procedures are authorized for sales of bankruptcy assets free-and-clear of liens in both... Continue Reading →

4th Cir.: Grice v. Independent Bank- Nationwide Federal Class Action Allowed Despite State "Door Closing" Statute

4th Cir.: Grice v. Independent Bank- Nationwide Federal Class Action Allowed Despite State "Door Closing" Statute Ed Boltz Mon, 08/18/2025 - 16:54 Summary: Jamila Grice, a South Carolina resident, sued Independent Bank (a Michigan-chartered bank) over three allegedly improper account fee practices: 1. Treating accounts as overdrawn despite sufficient funds; 2. Charging multiple NSF fees for the same transaction; and 3. Doubling up on out-of-network ATM fees for a single withdrawal. She sought to certify nationwide classes for each practice. Independent Bank argued that South Carolina’s “Door Closing Statute” (S.C. Code § 15-5-150), as interpreted in Farmer v. Monsanto Corp., prohibited nonresidents from joining a class unless their claim arose in South Carolina. The district court agreed, excluded out-of-state members, found numerosity lacking, and denied certification. The Fourth Circuit reversed. Writing for the majority, Judge Benjamin held that under Shady Grove Orthopedic Assocs. v. Allstate, Rule 23 directly conflicts with the Door Closing Statute because both answer the same question—when a class action may be maintained. Since Rule 23 is valid under the Rules Enabling Act and the Constitution, it governs exclusively in federal court. State laws can’t add extra requirements to class certification. Judge Agee concurred in the judgment but would have taken a simpler route: Farmer itself construed the statute as applying only in state circuit courts, not federal courts. On that reading, there’s no conflict to resolve—§ 15-5-150 never applies in federal class actions in the first place. Commentary & Utility in Consumer Bankruptcy: The ruling reaffirms that in federal court, Rule 23’s “one-size-fits-all” approach overrides state procedural limits on class membership. That means a nationwide class action can proceed in South Carolina’s federal courts without excluding nonresidents, even if a state statute would bar them in state court. For consumer bankruptcy attorneys, the implications could extend beyond bank fee litigation. Many violations of bankruptcy protections—such as the automatic stay (§ 362), the discharge injunction (§ 524(a)(2)), the failure to properly credit plan payments or correct account histories under § 524(i), and failures to give accurate postpetition mortgage notices under Rule 3002.1—are committed by large national creditors and servicers whose conduct affects debtors in every state. Grice strengthens the argument that such violations can be addressed through nationwide class actions in bankruptcy courts or in federal district court proceedings related to bankruptcy cases because: Nationwide scope preserved: Creditors cannot use state “door closing” statutes to limit class membership only to debtors in a single state, keeping the remedy proportionate to the scope of the harm. Uniform federal protections: The Bankruptcy Code and Rules are federal law; enforcing them through Rule 23 nationwide classes in federal court aligns with the uniformity principle of bankruptcy jurisdiction. Enhanced deterrence: Including all affected debtors in a single class action—rather than splintering cases by state—raises the stakes for systemic violations of § 362, § 524, § 524(i), and Rule 3002.1. Judicial efficiency: Particularly for automated, repeated violations (e.g., post-discharge collection letters, misapplication of payments, failure to file payment change notices), a single nationwide proceeding avoids duplicative litigation in multiple courts. In short, Grice is not just about bank overdraft fees—it could be a procedural green light for pursuing classwide relief for violations of federal bankruptcy protections without being hobbled by state-law residency restrictions. This can make class remedies a viable and potent tool when systemic misconduct affects debtors nationwide. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document grice_v._independent_bank.pdf (201.77 KB) Category 4th Circuit Court of Appeals

Weekly News – August 15

Law firm DQ provisions still in the spotlight, Latest pro rata LME in Summit Behavioral Healthcare, Spirit hits choppy air, Kodak on the rocks, European blockers, and much, much more……

Discharge and Dismissal in Chapter 13

Discharge in Chapter 13 is an Uphill Climb For most people, most of the time, getting a discharge is the goal of a bankruptcy case. The Supreme Court put it this way. “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor.’ ” The discharge means […] The post Discharge and Dismissal in Chapter 13 appeared first on Robert Weed Virginia Bankruptcy Attorney.

Special Feature: Safe Harbors in the Spotlight

Questions Remaining after the 2nd Circuit’s decision In re Fairfield On August 5, 2025, the Court of Appeals for the Second Circuit handed down a ruling in the Madoff case…

Law Review: Judge William Brown (ret.)- Consumer Bankruptcy Law Chapters 7 & 13

Law Review: Judge William Brown (ret.)- Consumer Bankruptcy Law Chapters 7 & 13 Ed Boltz Fri, 08/15/2025 - 16:22 Available at: https://www.fjc.gov/sites/default/files/materials/09/Consumer-Bankruptc… Preface: This monograph provides an overview of consumer bankruptcy law and describes the statutory framework for bankruptcy relief under Chapters 7 and 13 of the Bankruptcy Code, Title 11 of the U.S. Code. It is intended primarily as a reference for Article III judges, especially district judges, who may not handle bankruptcy cases frequently; other judges may also find it helpful. The monograph describes the types of fact and legal issues that arise in the bankruptcy and appellate courts, highlighting the relevant and principal Su-preme Court, appellate, and trial court authority. Important circuit conflicts are examined where applicable. This edition updates case law and legislation. Case law is current through February 28, 2025. Some unpublished decisions are cited. Although they are not precedential, they may have persuasive value. References to the U.S. Code are to the 2022 version unless stated otherwise. References to “the Code” refer to the Bankruptcy Code, which is Title 11. For Official Bankruptcy Forms, please visit https://www.uscourts.gov/forms-rules/forms/bankruptcy-forms. Bankruptcy forms are subject to periodic revision, with several revisions to Official and Director’s Bankruptcy Forms and their instructions taking effect on June 22 and December 1, 2024. Restyling of Bankruptcy Rules Parts I through IX took effect December 1, 2024. The restyled Bankruptcy Rules now apply the same general drafting guidelines and principles used in restyling the Appellate, Criminal, Civil, and Evidence Rules. These changes are intended to be stylistic only. Additional substantive amendments to Bankruptcy Rules 1007, 4004, 5009, 7001, and 9006 and new Rule 8023.1 took effect December 1, 2024. Please check the For Further Reference section, which lists suggested sources for more complete analyses of consumer bankruptcy issues and law. The author would like to thank Judge Jon P. McCalla (W.D. Tenn.) for his invaluable review of the drafts of the first and second editions of this monograph. Commentary: While the explicitly identified audience for Judge Brown's excellent manuscript for the Federal Judicial Center about consumer bankruptcy are the federal district court judges "who may not handle bankruptcy cases frequently", that seems to be a degree of (retired) judicial discretion in not noting the uniformly recognized bankruptcy reality that the higher on the appellate ladder, the less the judges (or justices!) actually understand about consumer cases. Similarly, a respect for federalism perhaps explains this isn't directed to educating state court judges, from whom the alien and byzantine nature of bankruptcy law often results in blank stares or even hostility. But more being just a primer for non-bankruptcy judges, this clear and concise overview of consumer bankruptcy, at less than 100 pages (footnotes are ignored!), this is a perfect introduction for paralegals and others without bankruptcy experience. Even for those who have think they already delved deeplyy into the Bankruptcy Code, there are valuable veins to mine, including that Judge Brown's summary, rather than the oft repeated dross/gloss on Ch. 13 (made again and again in academic papers) that "Chapter 13 requires payment of a debtor's income" to creditors, instead recognizes that unsecured creditors are rarely paid much, let alone in full. More specific nuggets for me included the comment regarding Bankruptcy Rule 1019(b)(3) and its limitations on when exemptions can challenged following conversion- making Ch. 20 an even more useful alloy for debtors. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document consumer-bankruptcy-law-chapters-7-and-13-second-edition.pdf (2.01 MB) Category Law Reviews & Studies

4th Cir.: Austin v. Experian- Arbitration required in FCRA Case

4th Cir.: Austin v. Experian- Arbitration required in FCRA Case Ed Boltz Thu, 08/14/2025 - 15:08 Summary: In this published decision, the Fourth Circuit reversed the district court’s refusal to compel arbitration in a Fair Credit Reporting Act (FCRA) case brought by a Chapter 13 debtor against Experian. The debtor, after receiving a bankruptcy discharge, discovered that Experian continued to report discharged debts as delinquent, allegedly contributing to credit denials. After repeated disputes failed to correct the inaccuracies, the debtor sued under 15 U.S.C. §§ 1681e(b) and 1681i(a). Experian moved to compel arbitration based on an arbitration clause embedded in the “CreditWorks” service agreement—an online credit monitoring product operated by its affiliate ConsumerInfo.com. The district court excluded Experian’s supporting declaration (from its VP of Business Governance) on hearsay and foundation grounds and further held that the online enrollment process did not constitute mutual assent. The Fourth Circuit reversed on both fronts: It held that the declaration was improperly excluded; a corporate officer can authenticate digital records and testify based on business records and oversight. It found that the website design clearly informed the user that clicking “Create Your Account” constituted agreement to the Terms of Use, which included a broad arbitration clause. Accordingly, the Court ruled that the debtor had agreed to arbitrate his dispute and remanded the case. Commentary: While Austin v. Experian appears, at first blush, to be a straightforward win for mandatory arbitration enforcement, it raises significant questions for consumer advocates—especially in light of the Goldman Sachs Bank v. Brown, that is pending at the 4th Circuit, where NACBA and NCBRC have filed an amicus brief. In Austin, the Fourth Circuit emphasized that a user who clicks a button labeled “Create Your Account” after being presented with a linked Terms of Use has given reasonable notice and manifested assent—even if the user is signing up for a free service from a related, but technically distinct, corporate entity. This continues the trend of courts stretching the reach of arbitration clauses embedded in clickwrap agreements. But here’s the tension: In Goldman Sachs Bank v. Brown, the consumer bankruptcy community has argued that arbitration should not be allowed to displace core functions of the Bankruptcy Code—especially judicial enforcement of the automatic stay under 11 U.S.C. § 362(k). In that case, the debtor brought a contempt action for stay violations by Goldman Sachs, who then sought to force the dispute into arbitration under the terms of the underlying loan agreement. Where Austin* and Brown diverge—subtly but importantly—is in the source of the legal claim: *In Austin, the claim was brought under the FCRA—a federal consumer protection statute enforceable in arbitration if parties so agree. was for post-discharge causes of action In Brown, the claim is for violation of the automatic stay, a statutory injunction arising only upon the filing of a bankruptcy petition, with enforcement entrusted by Congress to the Bankruptcy Courts themselves. 1. Request a Free Credit Report Through AnnualCreditReport.com Why it’s safe: This site is authorized by federal law under the Fair Credit Reporting Act (FCRA), specifically 15 U.S.C. § 1681j(a), and does not require users to agree to arbitration. It’s operated by the three nationwide credit bureaus (Equifax, Experian, and TransUnion) pursuant to a mandate from the FTC and CFPB. How: Fill out the request form (available on AnnualCreditReport.com) and mail it to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 3. Dispute Errors via Written Correspondence (Not Online Portals) Why it’s safe: Disputing inaccuracies via online portals often requires agreement to terms—including arbitration. Writing by mail allows the consumer to preserve legal rights and avoid waiver. How: Send a dispute letter directly to the credit bureau’s mailing address listed on the credit report. Always send via certified mail and retain proof. ⚠️ Avoid These Common Traps Trap Why to Avoid Credit monitoring “free trials” These nearly always include forced arbitration clauses buried in Terms of Use. Credit score apps (Credit Karma, Experian app, etc.) Accessing your score or report through these often requires broad arbitration agreements. Clicking "I Agree" to any Terms of Use Even if you never open or read the terms, the courts (as in Austin v. Experian) may find that you agreed to arbitration. ?️ Attorney Tip: If you're representing a consumer or advising clients post-bankruptcy, warn them not to dispute credit errors online or sign up for credit monitoring services through Experian, Equifax, or TransUnion without understanding the arbitration implications. Instead, have them use AnnualCreditReport.com or send disputes via certified mail. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document austin_v._experian.pdf (220.38 KB) Category 4th Circuit Court of Appeals

Impact on Bankruptcy Injunctions Following Supreme Court’s Trump v. CASA Decision

On June 27, 2025, the U.S. Supreme Court issued its decision in Trump v. CASA, Inc.,[1] which materially limited the ability of federal courts to issue so-called “universal” or “nationwide” injunctions. Injunctions are common in bankruptcy cases, sometimes at the outset and nearly always as a part of a debtor’s proposed plan to reorganize or liquidate. ...... Continue Reading