Calling on the CFPB for Help: Telling Stories and Consumer Protection

Since it began operating in 2011, the Consumer Financial Protection Bureau (CFPB) has handled more than a million complaints regarding consumer financial product and services. Beginning in June 2015, the CFPB began publishing consumers’ narratives submitted with their complaints. This Article analyses a random sample of 5,000 of these narratives to assess how people engage with the complaint mechanism in light of the CFPB’s role in processing complaints. I find that people predominately use the complaint function for two distinct purposes: to express their anger and frustration about companies’ practices, or to express sadness and fear about how companies’ practices have impacted their lives. When people write with anger and frustration, they typically direct their comments to the subject company, which aligns with the CFPB’s role in processing complaints. In contrast, when people write with sadness and fear, they often plead with the CFPB for individualized help in solving their broader problems. But the CFPB is not equipped to help people on an individual basis and such is not the goal of its complaint mechanism. Identifying that some consumers seem to expect the CFPB to provide this type of assistance presents an opportunity for the CFPB to address the serious problems that these consumers are voicing and to enhance how it utilizes the complaint data to further its goal of consumer protection. However, the CFPB is but one government agency that allows people to write narratives describing their problems. This Article thus provides suggestions for how agencies generally may mine their narrative databases to help people in need and to advance their missions

Bankruptcy as Social Safety Net

One in ten Americans have filed bankruptcy at some point during their adult lives. Contrary to the pronouncements of some politicians, these filings do not reflect a series of personal failures and should not be understood as failures of character. Indeed, most of the people who file bankruptcy struggle for years to pay their debts before turning to bankruptcy law and courts for help. And most of the people who file say that they felt shame upon filing. Instead, the bankruptcy filings of millions and millions of people reflect systematic policy choices over the past forty years that have left individuals to deal with life’s risks by themselves, without a safety net. In this post, I explain what we can learn about the social and economic problems that plague our society by paying greater attention to the people who file bankruptcy, and why, absent broader changes, we can expect consumer bankruptcy to remain integral to helping people survive in a society marked by racial, ethnic, and gender inequality and with increasing disparities in income and wealth

Secured Credit in Religious Institutions\u27 Reorganizations

Scholars increasingly assume that most businesses enter Chapter 11 with a high percentage of secured debt, which leads to a high percentage of cases ending in the sale of the debtor’s assets under section 363 of the Bankruptcy Code rather than with confirmation of a reorganization plan. However, evidence and discussions about “the end of bankruptcy” center on secured creditors’ role in the reorganizations of very large corporations. The few analyses of cross-sections of Chapter 11 proceedings suggest that secured creditor control is not nearly as omnipresent as asserted and that 363 sales are not as dominant as assumed. This Essay adds original empirical evidence to the debate by highlighting how one subset of debtors — religious organizations — whose main creditors typically are secured lenders have used the reorganization process. By focusing on 363 sales and other indices of creditor control, plan proposal and confirmation rates, recoveries to creditors, and post-bankruptcy survival rates, this Essay establishes that the traditional negotiated Chapter 11 case is alive and thriving among these debtors. The data suggest that these cases preserved significant value for secured creditors, while distributing value to unsecured creditors. The results show that further empirical examinations of secured creditors’ role in Chapter 11 cases may yield insights that diverge from current understandings of how creditor control impacts modern reorganization, and what that control means for reforms of Chapter 11

Consumers\u27 Declining Power in the Fintech Auto Loan Market

Automobiles have become part of America’s infrastructure. For most people, having access to a car is crucial to their livelihoods and they will take on significant amounts of debt to purchase vehicles. Auto debt is unlike any other consumer debt, both in its structure, which allows creditors to easily seize collateral, and in its lack of regulation. The unique and lucrative nature of auto debt has not gone unnoticed by lenders or by companies leveraging fintech to offer people new ways to purchase cars and car loans. This Article assesses the evolving marketplace for auto sales, leasing, and loans to evaluate how Americans access cars, including consumer bankruptcy’s place in helping people keep their cars. Based on this assessment, it argues that power imbalances between auto lenders and consumers have widened and likely will continue to widen, to people’s detriment. The Article ends by outlining and evaluating a series of ideas to facilitate needed “car security” for Americans

When Faith Falls Short: Bankruptcy Decisions of Churches

What does a church do when it is about to go bust? Religious organizations, like any business, can experience financial distress. Leaders could try to solve their churches’ financial problems on their own. Perhaps leaders do not view the problems as addressable with law. Or perhaps they do not think, as a moral or spiritual matter, that they should resort to the legal system, such as bankruptcy, to deal with their churches’ inability to pay its debts. Yet about ninety religious organizations seek to reorganize under the Bankruptcy Code every year. This Article relies on interviews with forty-five of these organizations’ leaders and attorneys to examine how the leaders conceptualized their churches’ financial distress as legal problems and decided to address those legal problems with bankruptcy. Through these inquiries, the Article sheds light on longstanding questions about how people and organizations decide to use the legal system versus doing nothing or solving problems through self-help.The Article thus provides one of the first assessments of how small organizations view their problems as legal problems, and the first assessment of how leaders of small organizations decide to file for bankruptcy. Church leaders’ journeys began with struggling to solve their congregations’ financial problems themselves and proclaiming that “bankruptcy from a spiritual standpoint is a no-no.” Most often, creditors’ foreclosure threats brought law to leaders’ attention. Leaders then turned to social networks for help understanding their legal options. Drawing from these results, the Article also scrutinizes how leaders’ reliance on social networks and feelings of stigma and shame because of their decisions to file influence debates about restricting access to bankruptcy

Chapter 11 Reorganization and the Fair and Equitable Standard: How the Absolute Priority Rule Applies to All Nonprofit Entities

(Excerpt) The remainder of this Article proceeds in two stages. First, Parts II, III, and IV provide the background necessary to develop the theory. Part II chronicles the development of the fair and equitable standard and the absolute priority rule. This history is important to understanding the interconnectedness of the rule with the standard. Part III details the key functions of the absolute priority rule and the rule’s application to for-profit entities, with an emphasis on concerns regarding its compatibility with close corporations. This review highlights how courts’ current application of the absolute priority rule to nonprofits contravenes the rule’s purposes and deviates from the rule’s application to functionally similar for-profit entities, thereby creating situations in which plans that courts otherwise may reject are confirmed simply because the reorganizing entities are nonprofits. Next, before the Article sets forth a theory that reconciles this deviation, Part IV overviews the limited body of case law analyzing the rule’s operation in nonprofit bankruptcies. This overview provides one of the first compilations of cases dealing with nonprofit bankruptcies and begins to create a history of nonprofit reorganization. The last three parts of the Article develop a theory of how the absolute priority rule, by way of its core tenets, applies to all nonprofit entities through the fair and equitable standard. Combining the insights of Parts II and III with current case law, Part V first sets forth the theory and then provides examples of the theory’s application. Part VI suggests criticisms of the theory and, responding to those criticisms, explores the implications of applying Chapter 11 to nonprofits. Finally, Part VII offers concluding thoughts about the expanded utility of the absolute priority rule

A New Deal for Debtors: Providing Procedural Justice in Consumer Bankruptcy

Across the criminal and civil justice systems, research regarding procedural justice shows that people’s positive perceptions of legal processes are fundamental to the legal system’s effectiveness and to the rule of law. Approximately one million people file bankruptcy every year, making the consumer bankruptcy system the part of the federal court system with which the public most often comes into contact. Given the importance of bankruptcy to American families and the credit economy, there should exist a rich literature theorizing and investigating how people’s perceptions of consumer bankruptcy’s procedures advance the system’s goals. Instead, bankruptcy’s procedures have received strikingly little scholarly attention. This Article begins to fill this significant gap by combining procedural justice and related research with what is known about the people who file bankruptcy to craft a theory of consumer bankruptcy’s procedural deficiencies. If consumer bankruptcy is procedurally bankrupt, as this Article posits, then the “fresh start” delivered to struggling households is not nearly as fresh as presumed, hampering people’s return to their communities and to the credit economy. As such, this Article proposes two sets of changes to the consumer bankruptcy process—one modest and one more drastic. Both of these new deals for debtors promise to enhance people’s perceptions of bankruptcy’s procedural justice and thereby the legitimacy of the system

Child Support and (In)ability to Pay: The Case for the Cost Shares Model

Currently enacted child support guidelines primarily focus on maintaining children\u27s economic well-being when a single household is split into two. This article argues that this focus discounts another consideration which, when combined with the current analysis, could further advance children\u27s well-being: the ability of parents to pay. An analysis of payment characteristics demonstrates that lower child support obligations may increase the amount of child support paid on average. Lowering presumptive obligations will make lower-income parents better able and more likely to pay their obligations, thereby increasing the amount of child support paid to lower-income children, while at most only marginally decreasing the amount of support paid by middle and upper income parents, which, when paid at all, usually exceeds the minimum obligations established by guidelines. The Cost Shares model of child support guidelines implicitly incorporates payment ability into the existing analysis, yielding slightly lower obligations, and thereby making it a better and easily implemented alternative to current guidelines

Chapter 11 Reorganization and the Fair and Equitable Standard: How the Absolute Priority Rule Applies to All Nonprofit Entities

In recent years, nonprofit entities increasingly have sought bankruptcy protection. Though the Bankruptcy Code does not prevent nonprofits from reorganizing, Chapter 11 was designed for and applies best to for-profit businesses. This creates challenges for courts evaluating a nonprofit’s reorganization plan. This Article focuses on one crucial aspect of a court’s evaluation — the fair and equitable standard, a necessary, but not sufficient condition of which is satisfaction of the absolute priority rule. The few courts addressing absolute priority claims in nonprofit reorganizations have held that the rule is categorically inapplicable to nonprofit entities except in limited circumstances. These courts overall failed to consider explicitly whether the nonprofit demonstrated that the plan otherwise satisfied the fair and equitable standard. Thereby, these courts potentially created case law that may be read to provide that a nonprofit’s plan need not allocate all going concern value to creditors until creditors are paid in full, as is required by the absolute priority rule and as is fundamental to the fair and equitable standard. This Article sets forth a theory of how the rule, by way of its history and underlying principles, applies to all nonprofit entities through the fair and equitable standard. Application of these principles will force nonprofits to propose plans that meet one of Chapter 11’s rigorous approval criteria