News
Student Loans Didn’t Qualify as Commercial Debt for Sub V Eligibility
To be eligible to file a “SubV” Chapter 11 bankruptcy case, that “not less than 50% of the total debt” of the debtor must be “business debt”. But what constitutes “business debt”? In re Reis, – BR – (Bankruptcy Court, D. Idaho 5/2/23) discusses that question, and ruled two things: The business debt necessary to qualify for Subchapter V need not to have arisen from the debtor’s business at the time of filing, Bankruptcy Judge Meier says. Debtor’s student loan debt did NOT constitute business debt. Educational loans obtained to earn a professional degree will not qualify as arising from…
IRS Plans To Resume Collection Notices
As of April 29, 2023, the IRS said it had 3.8 million unprocessed individual returns. These include tax year 2022 returns, 2021 returns that need review or correction, and late filed prior-year returns. Of these, 2.4 million returns require special handling such as correcting errors. The agency has another 1.4 million paper returns to review and process. It takes the IRS over 21 days to issue a refund in these cases because they require special handling although an employee typically does not have to contact the taxpayer, the agency said. The General Accounting Office said in a report issued in…
Credit & Collection e-newsletter reports that all sides could be losers in the litigation about the legality/lack of legality of how the federal agency, the Consumer Protection Financial Bureau (“CFPB”) is funded
The Consumer Financial Protection Bureau (CFPB) is at a crossroads. Rather than live up to its “independent” promise, the agency has been nothing short of a political football. There is plenty of blame to go around on both sides of the CFPB battle, but the legal maneuvering and the race to the Supreme Court is not the solution. Rather, now is the time for Congress to act like adults and find the remedy for the CFPB that will allow the agency to be true to its mission of protecting consumers while at the same time ensuring a robust and compliant…
Consumer Financial Protection Bureau (CFPB) has taken action against one of the largest debt collectors in the United States
Credit & Collection e-newsletter of 3/30/23 reports: On March 23, 2023, the Consumer Financial Protection Bureau (CFPB) has taken action against one of the largest debt collectors in the United States, Portfolio Recovery Associates (PRA), for various violations of law, including a 2015 CFPB order. In the complaint, the CFPB accused Portfolio Recovery Associates of violating numerous requirements of the 2015 order as well as engaging in deceptive conduct in violation of the Fair Debt Collection Practices Act and the Consumer Financial Protection Act, and violating the Fair Credit Reporting Act and its implementing Regulation V. The CFPB filed a…
Did One, or More than One, of the Many regulators–DFPI, FRB, FDIC, CFPB, FINRA and Nasdaq—which each had some responsibility for supervising/regulating the now failed Silicon Valley Bank, fall down on the job?
Silicon Valley Bank was chartered by the State of California and was subject to the supervision of the California Department of Financial Protection & Innovation. The DFPI was not the bank’s regulator. The bank had adopted a bank holding company structure and elected financial holding company status. Thus, the bank’s holding company, SVB Financial Group, was subject to primary regulation, supervision, and examination by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The bank was subject to supervision and examination by the Federal Reserve and the DFPI. But wait, there’s more. The bank was…
American Bankruptcy Institute 3/21/23 e-article reports that Anxiety Strikes $8 Trillion Mortgage-Debt Market After Silicon Valley Bank (“SVB”) Collapse Last Week
Strains in the banking sector are roiling a roughly $8 trillion bond market considered almost as safe as U.S. government bonds, the Wall Street Journal reported. So-called agency mortgage bonds are widely held by banks, insurers and bond funds because they are backed by the mortgage loans from government-owned lenders Fannie Mae and Freddie Mac. The bonds are far less likely to default than most debt and are easy to buy and sell quickly, a crucial reason they were Silicon Valley Bank’s biggest investment before it foundered. But agency mortgage-backed securities, like all long-term bonds, are vulnerable to rising interest…
Department of Justice and Department of Education Released New Guidance for Stipulating to the Discharge of Federal Student Loans in Bankruptcy
NACBA (National Association of Consumer Bankruptcy Attorneys) reports that in November of 2022, the Department of Justice and Department of Education released new guidance for stipulating to the discharge of federal student loans in bankruptcy. These new guidelines direct DOJ attorneys to stipulate to the facts demonstrating that a debt would impose an undue hardship and recommend to the court that a debtor’s student loans be discharged under certain circumstances under a much less draconian standard and on a much more predictable basis. Comment of The Bankruptcy Law Firm, PC on 3/5/23: Attorneys who predict what the US Supreme Court…
American Bankruptcy Institute reports the following on 02/23/23
Additional Chapter 7 Trustee Payments Suspended for FY 2022 The Department of Justice (DOJ) has advised the Administrative Office of the U.S. Courts that it has insufficient funds available to transfer to the Judiciary to make additional payments to eligible chapter 7 bankruptcy trustees for fiscal year 2022, according to a U.S. Courts press release. Trustees interested in receiving the additional payments for fiscal year 2023 should still file payment eligibility certifications. The Bankruptcy Administration Improvement Act of 2020 (BAIA) established an additional payment for eligible chapter 7 trustees for fiscal years 2021 to 2026. The payments are funded by…
CFPB Targets Credit Card Late Fees As Junk Fees, Proposes Significant Reduction In Safe Harbor
For Card Issuers: The Consumer Financial Protection Bureau’s (the “CFPB” or the “Bureau”) latest move in its crusade against “junk fees” may hit closer to home for companies charging common fees that are considered, to date, to be lawful and valid. On February 1, the Bureau issued a Notice of Proposed Rulemaking1 (the “Proposed Rule”) targeting credit card late fees that would have substantial implications for the consumer credit card industry across essentially all credit bands and submarkets. Consumer credit card issuers currently are subject to a statutory prohibition against unreasonable penalty fees such as late fees.2 However, regulations implementing…
CFPB: 18% Drop Since 2020 in People with Reported Medical Debt
The number of people with medical debt on their credit reports fell by 8.2 million — or 17.9% — between 2020 and 2022, according to a report Tuesday from the U.S. Consumer Financial Protection Bureau (CFPB), the Associated Press reported. White House officials said in a separate draft report that the two-year drop likely stems from their policies. Among the programs they say contributed to less debt was an expansion of the Obama-era health care law that added 4.2 million people with some form of health insurance. In addition, local governments are leveraging $16 million in coronavirus relief funds to…