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Report: Neighbors of Canadian Lottery Winners Are More Likely to Go Bankrupt

Submitted by jhartgen@abi.org on Wed, 2018-05-30 00:00

Close neighbors of lottery winners in Canada tended to spend more on conspicuous goods, put more money into speculative investments such as stocks, borrow more money — and eventually declare bankruptcy, Bloomberg News reported. “The larger the dollar magnitude of a lottery prize of one individual in a very small neighborhood, the more subsequent bankruptcies there will be from other individuals in that neighborhood,” says the latest version of a working paper from the Federal Reserve Bank of Philadelphia by Sumit Agarwal of Georgetown University, Vyacheslav Mikhed of the Philadelphia Fed, and Barry Scholnick of the University of Alberta. It’s titled: “Does the Relative Income of Peers Cause Financial Distress? Evidence from Lottery Winners and Neighboring Bankruptcies.” An earlier version of their paper got a flurry of publicity in 2016 by presenting evidence from bankruptcy filings that neighbors were trying to keep up with the lottery winner in their midst. A telltale sign was that they raised spending on things that everyone in the neighborhood could see, such as cars, but not on indoor items like furniture. The new version adds some important insights, co-author Mikhed explained in an email. One is that neighbors who filed for bankruptcy tended to have more of their assets in high-risk investments such as stocks vs. low-risk ones like insurance and cash.

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Consumer Bankruptcy

Consumer Debt

Like the Second Circuit, Florida Judge Bars Arbitrating a Class Suit for Discharge Violations

Supreme Court’s subsequent Epic decision casts doubt on opinions overriding arbitration agreements in the bankruptcy context.

Judge Name - Do not use it.

Roberta A. Colton

Fourth Circuit Holds Local Rule Invalid for Dispensing with a Hearing

Fourth Circuit again shows itself to be a debtor-friendly venue.

Judge Name - Do not use it.

Allyson K. Duncan

Analysis: Cancer Patients Twice as Likely to Declare Bankruptcy

Submitted by jhartgen@abi.org on Wed, 2018-05-23 00:00

As treatment costs soar and insurance coverage shrinks, hospitals and patient advocates around the U.S. are rushing to offer more help to patients who have no financial counseling, the Associated Press reported. Cancer centers are hiring experts to help patients navigate the insurance system, while nonprofits are teaching people to think about handling costs when treatments starts instead of waiting for a financial crisis to hit. "We know a lot of very solidly middle class families, they were fine and then ... their financial lives changed," said Jean Sachs, CEO of the nonprofit Living Beyond Breast Cancer. "They're not prepared for the cost of cancer, let alone the care." The Affordable Care Act sets limits for how much people have to spend on care each year. But cancer treatments often extend beyond a year, and those limits don't apply to care sought outside the increasingly narrow network of doctors and hospitals that some insurers offer. Patient costs also can rise because newer cancer treatments are more tolerable, so people can stay on them longer, said Dr. Yousuf Zafar, a Duke Cancer Institute oncologist who studies financial distress.

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Consumer Bankruptcy

Consumer Debt

Health Care

Parties to a Civil Union Held Eligible to File a Joint Petition

Chicago judge takes stand for the equality of same-sex couples.

Judge Name - Do not use it.

Deborah L. Thorne

ABI Consumer Bankruptcy Commission Provides Recommendations for Department of Education's Evaluation of Student Loans in Bankruptcy

Submitted by jhartgen@abi.org on Tue, 2018-05-22 00:00

Alexandria, Va. — The ABI Commission on Consumer Bankruptcy provided recommendations in response to the Department of Education’s request for information (RFI) on the evaluation of undue hardship claims in adversary actions seeking student loan discharges in bankruptcy. “The Department of Education plays an important role in the administration of the student-loan system,” Commission co-chairs Hon. William H. Brown (ret.) and Hon. Elizabeth L. Perris (ret.) write in a letter provided with the recommendations. “Action at the regulatory level could have a major effect in alleviating the growing burdens of student debt on everyday Americans and the overall economy.”

The Department of Education published its RFI in the Federal Register on Feb. 21 seeking “public comment on factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases.” While the Commission is working on a report of recommendations improving the overall consumer bankruptcy system to be published at the end of the year, it agreed to release several regulatory recommendations that directly respond to the RFI.

Recommendations include:

Bright-line Rules

“Our recommendations suggest two sets of bright-line rules, one built around federal Social Security and veterans disability benefits and the other based on the federal poverty guidelines. Both require the borrower to have undergone eligibility screening by a federal administrative agency. More importantly, both indicate borrowers highly likely to be in severe financial distress and therefore repayment would likely cause undue hardship.”

Avoiding Unnecessary Costs

“Formal litigation discovery processes should be the last, not the first, resort. If the borrower submits satisfactory evidence of undue hardship outside the litigation process, the student loan creditor should agree that the debtor is entitled to discharge of the student loan debt.”

Alternative Repayment Plans

“The safeguards built into the confirmation of a chapter 13 plan set out statutory requirements more stringent than the Department’s income-driven repayment plans, including a liquidation analysis that is not otherwise considered by the Department. These safeguards should suffice for determining the amount necessary for an alternative repayment.”

Best Interpretation of 11 U.S.C. § 523(a)(8)

“As the Request for Information notes, many courts have interpreted the undue hardship standard using a three-factor test known as the Brunner test. We believe the best interpretation of the Brunner test will hew closely to the statute and will not include some of the glosses included in applying the test.”

To read the Commission’s full submission to the Department of Education’s RFI, please visit https://consumercommission.abi.org/. Please note that theserecommendations are focused on the regulatory reforms that are the subject of the RFI and should not be understood as the Commission’s recommendations for possible legislative changes or any other reforms.

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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 12,000 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.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.

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Consumer Bankruptcy

Tuesday, May 22, 2018 - 12:00