Randy Quast, who chairs the National Organization for the reform of Marijuana Laws, known as NORML, had built a Minnesota trucking company and sold it for $40 million. Travis and Leah Maurer were prominent in the marijuana movement in Oregon and wanted to start a legal growing operation and dispensary there. They thought Quast was an “ideal partner” for their venture. Now they are fighting in Oregon court and Quast has filed for bankruptcy after the operation fizzled, the Minneapolis Star Tribune reported. He may owe as much as $5 million to his former business partners, he said in the bankruptcy filing last month. The partnership fell apart months after it started, and the Maurers countersued Quast after he sued them three years ago. The $5 million he may owe the Maurers is the largest debt listed in his bankruptcy filing.
Alexandria, Va. — Increasing costs to file for chapter 7 bankruptcy continue to put the financial “fresh start” further out of reach for low-income Americans, according to an article in the February ABI. “Since BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), the cost of counsel for a routine chapter 7 case has increased beyond the reach of many people to pay for it,” write Bankruptcy Judge Henry Callaway (S.D. Ala.; Mobile) and Jonathan Petts of Upsolve (New York) in their article “Too Broke for a Fresh Start.” “As a result, many low-income Americans, particularly financially vulnerable minority communities, remain trapped in debt because they cannot access chapter 7.”
BAPCPA, which made a number of changes to bankruptcy law that were intended to prevent abuse of the bankruptcy system, added regulations that have significantly increased the costs of providing legal services to chapter 7 debtors. “Under BAPCPA, Congress significantly increased the amount of documentation that a debtor must provide their trustee to obtain a discharge, imposed personal liability on debtors' counsel for the accuracy of a debtor's bankruptcy forms, and required debtors to attend paid financial counseling sessions before and after filing in order to obtain a discharge (among other things),” Callaway and Petts write. “These new requirements significantly increased the cost of providing chapter 7 representation.” The authors estimate that the cost of chapter 7 now often reaches $2,000 in some markets.
Low-income debtors who cannot afford to pay chapter 7 attorneys' fees up front often face one of four negative outcomes, according to Callaway and Petts: (1) remaining stuck in debt outside bankruptcy protection; (2) filing deficient pro se petitions; (3) falling prey to fraudulent petition-preparers; or (4) filing a no-money-down chapter 13 case that is likely to result in dismissal without any lasting debt relief.
Given the severity of the current access problem, Callaway and Petts look at two new experiments in the legal system to make chapter 7 more accessible: electronic self-representation (eSR) by the Administrative Office of the U.S. Courts at a few test locations, and online legal aid, including Petts’ nonprofit, Upsolve.
“The approaches outlined in this article – and others not discussed here – deserve to be tested with data so we can see what works for those who cannot afford counsel,” Callaway and Petts write. “As stewards of the bankruptcy system, we have an obligation to find a better path forward.”
ABI’s Commission on Consumer Bankruptcy is preparing to release its final report of recommendations and improvements to the consumer bankruptcy system at ABI’s 2019 Annual Spring Meeting, set for April 11-14 in Washington, D.C. To view the ongoing work of the Consumer Commission, including videos of open meetings and prepared witness testimony, please click here.
To obtain a copy of “Too Broke for a Fresh Start,” please click here.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.
U.S. Bankruptcy Court records show the number of bankruptcy filings in Hawaii has increased by more than 40 percent to 149 cases last month, marking the highest level for January in seven years, the Associated Press reported. Last year's 1,490 bankruptcy cases brought an end to the state's seven-year streak of declining filings. Of the filings last month, 103 were for chapter 7 of the Bankruptcy Code, increasing from the 64 recorded the same period last year. Honolulu bankruptcy attorney <b>Blake Goodman</b> says he expects the number of cases to continue rising for the next several years. He said that based on the historical trend since 1990, statewide bankruptcy filings have largely followed an eight-year cycle.
Medical problems contributed to 66.5 percent of all bankruptcies, a figure that is virtually unchanged since before the passage of the Affordable Care Act (ACA), according to a study published yesterday as an editorial in the American Journal of Public Health. The findings indicate that 530,000 families suffer bankruptcies each year that are linked to illness or medical bills. The study, carried out by Dr. David U. Himmelstein, Profs. Robert M. Lawless, Pamela Foohey, Deborah Thorne, a sociologist from the Consumer Bankruptcy Project (CBP), and Dr. Steffie Woolhandler, surveyed a random sample of 910 Americans who filed for personal bankruptcy between 2013 and 2016, and abstracted the court records of their bankruptcy filings. These figures are similar to findings from the CBP’s medical bankruptcy surveys in 2001 and 2007, which were authored by three researchers in the current study (Himmelstein, Thorne, and Woolhandler), and then-Harvard law professor Elizabeth Warren. The current study found no evidence that the ACA reduced the proportion of bankruptcies driven by medical problems: 65.5 percent of debtors cited a medical contributor to their bankruptcy in the period prior to the ACA’s implementation as compared to 67.5 percent in the three years after the law came into effect.
