NATIONAL BANKRUPTCY REVIEW COMMISSION

---

URGENT ALERT

Immediate Need To Call National Bankruptcy Review Commission In Support Of Proposed Changes to Bankruptcy Code To Stop Multiple Bankruptcy Filing Abuse.

The Commission may be reached as follows:

National Bankruptcy Review Commission
One Columbus Circle, N.E., Suite 5-130
Washington, D.C. 20544
Telephone: (202) 273-1813
Fax: (202) 273-1048
E-Mail:  hq@nbrc.gov

     On March 5, 1997 the National Bankruptcy Review Commission ("Review Commission"), Consumer Bankruptcy Working Group ("Working Group"), issued a "Discussion Paper" describing a "tentative framework of specific changes to Chapter 7 and 13." A copy of that Discussion Papers may be found by clicking here.  Later, on May 6, 1997, the working paper was revised in a draft format.  Although not as favorable to mortgage lenders as the first draft, the second draft includes important provisions which will help eliminate multiple bankruptcy filing abuse. These include a two year bar to the filing of most Chapter 7 and Chapter 13 cases and a specific provision allowing for "In Rem" orders.  To view the current draft, click here.

A Halt To Repeat Filings

      The Mortgage Servicing industry has been abused by repeat bankruptcy filings.  It is estimated that over ten (10) percent of all bankruptcy filings are repeat filings whose sole purpose is to invoke the automatic stay to prevent foreclosure, i.e., there is no true bankruptcy purpose other than the automatic stay.  The damage caused to the industry by these filings is estimated to be in excess of $2 billion.  (For additional information on multiple bankruptcy filing abuse see the following article:  Thinking Outside The Box In Fighting Multiple Bankruptcy Filing Abuse)

       In addition to the harm caused to the mortgage banking industry, and to other similar industries, multiple bankruptcy filing abuse causes harm to our judicial system.  The flagrant abuse of the bankruptcy system, and the current inability of the courts to fashion appropriate remedies, undermines the entire judicial process.

      The National Bankruptcy Review Commission has heard sufficient testimony to view multiple bankruptcy filing abuse as a problem to be resolved by suggested legislative change.  Thus, the Working Group's "Discussion Paper" includes specific reference to the problem and a suggested solutions.  

      As the Working Group's first draft noted:  "This proposal would eliminate the ability of debtors to abuse the process by refiling repeatedly to avoid either foreclosure of their property or eviction by their landlords. Debtors in Chapter 7 or Chapter 13 would have only one chance in six years to file for bankruptcy and to get an automatic stay under the Bankruptcy Code."  The only exception lies in Chapter 13 cases where a debtor "could get an additional limited stay after a case was closed only if a debtor moved to reopen the case and requested reimposition of the stay on collateral based on sufficiently changed circumstances that assured reasonable success in repayment."

     These initial thoughts have evolved into a prohibition to filing more than once every two years and in rem orders.   Although the suggested changes are not as clear as one would like, they are a great step forward in the fight against multiple bankruptcy filing abuse.  

     Consumer bankruptcy groups have recognized this effect and have flooded the National Bankruptcy Review Commission with calls against these proposed changes. Unfortunately, the Review Commission has received virtually no calls from the creditor community in support of these changes.

     IT IS TIME TO ACT! PLEASE CONTACT THE NATIONAL BANKRUPTCY REVIEW COMMISSION [NOTE ADDRESS ABOVE] AND INDICATE YOUR DISGUST OF MULTIPLE BANKRUPTCY FILING ABUSE AND STRONG SUPPORT FOR THE PROPOSED CHANGES.  IN ADDITION TO CALLING, A FOLLOW-UP BY FAX OR LETTER WOULD ALSO BE HIGHLY BENEFICIAL.

     At the very least, please click here and send an e-mail message to the Review Commission supporting the bar on repeat filings.

      Not all is good with the Discussion Paper, especially if you have nonpurchase money (or nonrefinance of purchase money) transactions (i.e., junior liens, home equity lines of credit and other junior instruments).  These nonpurchase money related transactions are not afforded the current protection from cramdown.  Thus, the Debtor can bifurcate these loans into secured and unsecured portions and pay less than the full amount of the unsecured portion despite the fact that the property might be the principle residence of the Debtor at the time of the bankruptcy filing.

     The Discussion Paper also leaves open a number of critical areas- the concepts are broadly worded and the exact statutory language is omitted.   While first trust deed/mortgage lenders should be encouraged; we still must carefully watch the process and ensure that our rights are protected.

| Home | What's New | Firm Profile | Firm Resume | Firm Publications |
| Library | Bookstore | Missing Assignment Database | Mortgage Banking Training |
| Employment | Guestbook | Industry News | Industry Calendar | Search |
| Forms | Photo Albums | Miscellaneous | Disclaimer | Contact us! |