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Cancer Treatment's side effects may include bankruptcy

The Houston Chronicle reports on the expensive treatments for cancer in our society today, and on the trend or need for oncologists to discuss with patients the cost of treatment and their financial options.  It is a hair raising article more for what it does not directly say, and for which it alludes.  Some patients need to consider the financial costs and their position in life to determine if they want to live.  In short, maybe if the patient cannot afford the treatment, then maybe he or she should not undertake the cure.

Because of the ever increasing costs associated with chemotherapy oncologists are to receive their first guidelines on how to have a straight talk with patients about the affordability of treatment choices.  These guidelines will address in particular patients whose cancer cannot be cured but who are seeking both the longest possible survival and the best quality of life — and may be aware it could mean bankrupting their families.

The statement is particularly staggering when you think that apart from the survival rate, that patients must make financial choices on the quality of life, and the pain they must obviously endure, during the time they have remaining.  Yet, bankruptcy is an option for the survivors of these people as well.  Somehow, that is not right.  There probably needs to be guidelines for bankruptcy attorneys to discuss these issues with cancer survivors and their families who face the prospect of filing.

We have to face facts.  Drug prices are a growing issue for every disease, especially for people who are uninsured. But cancer sticker shock is hitting hard now, as a list of more advanced biotech drugs have made treatment rounds costing $100,000, or even more, no longer a rarity. Also, patients are living longer, which is good news but means they need treatment for longer periods. The cost of cancer care is rising 15 percent a year.

We as bankruptcy practitioners know that unlike some medical services that might be obtained without the appropriate amount of funds upfront, the same is not often true for medications.  Patients and families cover these costs by taking out loans on their homes, credit cards, and the like.  These come back to haunt the families and survivors later on as the only way to end the problem is through bankruptcy.

Car Title Lenders Are Doing America Harm

Is LoanMax and other companies like it the new face of evil int he eye's of consumers?  Are they preying on people?

An article in the Houston Chronicle suggests that this might be so in regard to those companies that make largely unregulated and high interest rate loans to desperate people and families in exchange for the title to their family vehicles.

The Chronicle describes a number of different automobiles at one particular automobile auction that were the victims of such unpaid title loans.

The paper also suggested that whereas payday lenders have been the bad guy in the predatory lending debate, their close cousin, car title lenders, have cruised along unnoticed and unregulated in several states. Also, in those states where there is an effort to regulate the industry efforts have failed as the lenders pour hundreds of thousands of dollars into legislative campaigns.

Advocates for the poor say they do not have the resources to fight both industries at the same time, vowing that once the payday lenders are in check, they vow to go after car title lenders.

Title loans, which are short-term, high interest loans secured by a car title, can be even more disastrous than payday loans.  This is because these types of loans are secured by family's most important asset.

Car title lenders operate in nearly half the states, about a dozen of which have specific laws regulating how much the lenders can charge. Where there are no laws specific to the industry, title lenders operate under regulations governing pawn shop brokers or other lenders, or under laws that intend to regulate credit cards.  By structuring their loans as open-end credit, the lenders can charge triple-digit interest and whatever terms they wish as long as they don't charge anything for 25 days. In most states, the entire loan is due in one month, but can be rolled over and new fees charged.

This year, legislation was introduced in at least eight states, from Florida to South Dakota. Last year, 16 states took on car title lenders, and six of those — Iowa, Mississippi, Nevada, Montana, Oregon and Utah — passed some sort of regulations.

Some have taken on payday and car title lenders at once. New Hampshire legislators are close to an agreement on a 36 percent interest rate cap on payday and car title loans, and the governor there has said he would support it. Congress also banned payday lenders, car title lenders and tax refund anticipation loan companies from charging members of the military or their families more than 36 percent interest.

The lenders have fought hard against regulations.

In Virginia alone, four car title lenders contributed more than $280,000 to legislators in 2007. One company, Anderson Financial Services, which does business as LoanMax and several other lenders, donated more than $185,000, according to the Virginia Public Access Project, an independent, nonprofit tracker of money in state politics.

There is no nationwide data on the industry. Because the lenders are unregulated in several states, officials have no way of keeping track of the loans.  There also is no way to know how many borrowers are losing their cars. Bryan Buchanan Auto Auction near Roanoke VA, for example, auction off about 100 car title loan repos each month.  On February night, about 20 repossessed by LoanMax were auctioned, most bringing between $750 and $2,500.

The Pawn Shop Business Is Booming!

As stated on HuffPo, while banks are scrambling for recover, the Fed is repeatedly cutting interest rates, the pawn shop business is booming.  What this likely means for the United States economy is not good.  What it means for those trying to avoid bankruptcy is likely worse.  After a while people will run out of valuable items to sell to pawn shops.  My guess is that they will then look at auto title loans and payday loans and credit cards to make ends meet.  As one pawn shop owner points out that money he hands out -- no questions asked -- typically comes with an effective APR of 60%.  All of this reflects that times are getting tougher.

Bush's Hoovervilles

Business Press Failed Us In Regard To The Credit Card Industry

The Columbia Journalism Review reports on how the business press missed a sea change in the credit-card industry.  Primary among what was missed is a body of work, compiled by nonprofit groups, academics, documentarians, and others, that marshaled data to make visible a dramatic qualitative and quantitative—and recent—shift in the relationship between the credit-card industry and its customers that does not benefit the consumer.  That is that the credit-card exchange has shifted from a lending and underwriting paradigm to a sales paradigm involving penalties, fees, and default interest.  Rates that were illegal a generation ago are no longer regrettable outcomes to be avoided but central to the business model.  A  business model that centers on a besieged American middle class caught in an iron vice of stagnating incomes; shrinking disposable income; rising costs for health care, housing, and education; usurious and rapacious practices of the credit-card industry; a growing, consolidating, and increasingly sophisticated debt-collection industry; and, to add insult to injury, a new bankruptcy law that closes the courthouse door to formerly eligible debtors.  And, this view is supported by credible, anecdotal and aggregate data and happens also to be true.

Debt Collectors Try to Put on a Friendlier Face

According to an article in The New York Times, the debt collection industry is working to shed its reputation for remorselessly hounding people.

Go get the money, but put on a smile, I guess, but try to appear to be more helpful and sympathetic, and act like you are a force for good.  For example, they have taken to call debtors “our customers," and they are pushing consumer tips on the ideal way to respond when a collector comes calling.  Now how nice can you get?

“Collectors actually care about consumers,” said Rozanne Andersen, general counsel of ACA International, the main industry trade group. “They want to teach consumers how to get out of debt. They’re trying to put themselves out of business.”

5th Circuit Establishes Interest Rate In 13 Plans As Prime Plus And Not Contract Rate

This has been much consternation about how to calculate the effective interest to creditors to be paid through Chapter 13 plans since BAPCPA passed in 2005.  Some creditors have continued to demand higher interest rates and have argued that BAPCPA had some way abrogated the Supreme Court's decision in Till v SCS Credit Corp., 541 U.S. 465 (2004) given the anti-cramdown provision in the new Bankruptcy Code.  Some bankruptcy judges have even argued against Till by looking at the decision personally and stating that not even bankruptcy judges can get such an interest rate.  Well, the issue is closer to be resolved.

I guess we all owe bankruptcy attorney William (Bill) Lively of Tyler, Texas a debt of gratitude in sticking with this matter, because the 5th Circuit now seems to have leveled the playing field in a decision that benefits the debtors and consumers.

In a ruling upholding the decision of the Bankruptcy Judge Bill Parker for the Eastern District of Texas, the 5th Circuit Court of Appeals in New Orleans ruled in the soon to be published decision of Drive Financial Services v. Bobby and Freda Jordan (here) (5th Cir. March 12, 2008), that the "hanging paragraph" following 11 U.S.C. § 1325(a)(9), which would limit the stripping down of a purchase money security interest of collateral purchased within 910 days of the bankruptcy filing, did not prevent a cram down of the interest rate consistent with the Supreme Court's decision in Till.

Drive Financial argued the hanging paragraph of § 1325(a)(9) made 11 U.S.C. § 506 inapplicable, and that the Supreme Court's decision in Till should not apply because (1) it was decided for the hanging paragraph was enacted into law, and (2) Till was a fragmented court decision in which no narrow ground was established as to how interest in a Chapter 13 plan was to be determined .  Therefore, Drive Financial argued that the Court should mandate its prior "presumptive contract rate approach" in Green Tree Fin. Servicing Corp. v Smithwick, 121 F.3d 211, 214-15 (5th Cir. 1997), which basically said that the plan should require the rate of interest required in the contract unless the debtor could prove that the lender would now loan the money at a lesser rate.

This would make a big difference in the feasibility of of plans proposed by debtors, especially those debtors that took out the infamous subprime loans with lenders like Drive Financial.  Whether defined as predatory lending or not, the combination of high interest rates and high collateral value is a recipe for a failed bankruptcy plan. In this case Mr. and Mrs. Jordan had an outrageous interest rate of 17.95%.  Mr. and Mrs. Jordan had proposed a more reasonable rate of 7.5%, or a few points over the prime rate at the time.  If they had been required to pay the full amount owed on the vehicle they financed through Drive Financial, and pay the contract interest, it could have seriously jeopardized not only their plan or reorganization, but the plans of most debtors who have been forced to deal with subprime automobile lenders before filing.  In short, there might not be much relieve afforded by the filing of a bankruptcy.

The 5th Circuit found Drive Financial's argument to be "unpersuasive" because Till did not rely upon the fact that the creditor's claim had be bifurcated using 11 U.S.C. § 506, and the purpose of bifurcation is to determine how much of the claim is secured and not how much interest must be paid in a plan.  Further, the hanging paragraph only prevents the bifurcation of the purchase money secured claims that are less than 910 days old at the time of the filing of the bankruptcy case.  The Court found that the only difference in Till and the case at hand is that in Till only part of the claim under the pre-BAPCPA Bankruptcy Code was secured while the full claim under the Post-BAPCPA claim is secured.  As such, Till was not superseded by BAPCPA.

The 5th Circuit also disagreed that the decision in Till was so fragmented that it did not state precedent that had to be followed in regard to plan interest rate calculations.  In fact, the 5th Circuit found that although the Justices of the Supreme Court might have been divided on issues, that a plurality of them, joined by Justice Thomas, concurred in judgment to specifically overturn the 7th Circuit the applied essentially the same standard that the 5th Circuit had applied in Smithwick, above.  To reapply Smithwick, the holding of which had been specifically overturned by the Supreme Court by five currently active justices of the Supreme Court, "would be untenable at best".

The common denominator of Till stated that creditors being paid through a plan are entitled to apply a standard of prime plus rate and not the contract rate.  Justice Thomas argued against a risk premium being added to prime, but otherwise agreed with the other 4 justices in the majority.

(Picture of Tyler Bankruptcy Court Building).

Will It Blend? - Credit Cards

See what happens when we put 24 credit cards into a Blendtec blender.

Conversations with History: Elizabeth Warren

Conversations host Harry Kreisler welcomes Harvard Law Professor Elizabeth Warren for a discussion of the economic pressures confronting the two income middle class family as it struggles to pay mortgages, health care, and education costs. Professor Warren offers surprising answers to "Who goes bankrupt and why?"  and explores the role of banks and credit card companies in tightening the squeeze on the average American family. The interface between politics and the law in addressing these problems is explored.

The "Computer Did It" Is Not A Defense

On March 6, 2008 Bankruptcy Judge Jeffery A. Deller  of the Western District of Pennsylvania in Pittsburgh, had to find again that the "Computer Did It" defense often raised by creditors and collectors is not a defense at all.

In Wingard vs. Altona Regional Health Systems and Credit Control Collections the creditor argued that it did not willfully violate the stay because of a computer error the notices and at least one phone call was made to the debtors.

The Court found first that the automatic stay was willfully violated because in the 2nd Circuit, as in all circuits, the standard for determining a willful violation is only that Defendant had notice of the bankruptcy and intended the act which violated the stay.  There was no real discussion as to whether collection letters and phone calls constituted a violation because that is obvious.

For whatever reason creditors and collectors continue to believe that a mistake on their part seems to constitute a legitimate defense, which is completely opposite of the law.  The continuation of this argument continues to run up damages in the way of legal fees and costs, which make these practices particularily regrettable.

The Court first responding to Credit Control Collections comment that the letters went out because the matter "fell through the cracks" when the computer was not properly coded, and the agencies automatic system of sending letter was the culprit.  A notice having been send to creditor's counsel after one letter was sent, the Court asks, "How many times can a bankruptcy file 'fall through the cracks'"?

As to the "Computer Did It" defense in general, the Court quoting another opinion stated the defense is a "nonstarter ... since intelligent beings still control the computer and are thus responsible for their error ... having a clear obligation to adjust their programming and procedures and their instructions to employees to handle complex matters correctly".

The decision by Judge Deller is troubling in that he did not award damages for the attorneys' fees in this case.  The matter is silent, and so it is unknown if the debtor's properly requested or proved such damages.