A Valuable Resource: NCBRC.org

Sometimes we forget that, with all its flaws, consumer bankruptcy is still a remarkable institution, providing meaningful relief to more than two million Americans a year (counting co-debtors and dependents). The system’s singular feature is that most individuals can find a private attorney to represent them at a relatively low flat fee, typically worth it in light of the benefits of a bankruptcy discharge to most debtors.  In other areas of consumer law, it is much harder for individuals to find a private attorney.  Despite changes in bankruptcy law in 2005 that increased the cost of access to the system, the consumer debtor bar has figured out how to deliver services for reasonable fees.

If the need to appeal arises, however, the affordability equation often breaks down, a problem made worse by the wretched drafting of the 2005 law, creating hundreds of difficult new legal issues.  A debtor in bankruptcy may have a good legal case on appeal but no way to pay a private attorney for the expense of researching and writing a brief and preparing for oral argument.  An appeal adds thousands of dollars of additional cost.  The National Consumer Bankruptcy Rights Center was formed to address this problem, helping to protect debtors’ rights as well as the integrity of the consumer bankruptcy system by making sure that cogent arguments are made at the appellate level.  NCBRC (pronounced Nic-Bric) provides assistance by either working directly with debtors’ attorneys or by filing amicus (friend of the court) briefs in courts throughout the country.

Anyone interested in consumer bankruptcy law should find NCBRC’s web site, www.ncbrc.org, useful as a resource, both for its bank of briefs and its blog about important consumer cases.

Started as the Amicus Project of the National Association of Consumer Bankruptcy Attorneys, NCBRC has independently incorporated as an IRC section 501(c)(3) nonprofit, allowing it to receive tax-exempt charitable donations.  (Full disclosure:  I serve on the NCBRC board of directors because justice in bankruptcy requires that courts get good representation on both sides of appellate disputes, something that is beyond the means of most consumer debtors.) 

The NCBRC site features a set of briefs submitted in cases around the country.  Since bankruptcy appeals can go from the many bankruptcy courts to Bankruptcy Appellate Panels or on direct appeal to the U.S. Courts of Appeals, the norm is for significant issues to be appealed multiple times around the country, so that a publicly available bank of briefs comes in handy.  Obviously, it can be useful to appellate litigators.  Furthermore, the arguments in the briefs are ones that can be used in hearings before the bankruptcy courts, sometimes resolving issues without need for appeal.

The NCBRC site also has a running blog to alert practitioners to important decisions.  Here are a few recent cases currently featured on the blog (and cites to all these cases are there, too):

In re Flores, from the Ninth Circuit.  This upholds Kagenveama on the issue of applicable commitment period (ACP) as applied to projected disposable income (PDI) in chapter 13, under section 1325(b). Thus, in the Ninth Circuit, an above-median-income debtor with no PDI can confirm a plan that is shorter than the ACP of five years.  The court upheld the approach that ACP doesn’t apply to a debtor with no PDI.  This means a split continues between the Ninth Circuit and the Sixth (Baud) and the Eleventh (Tennyson) Circuits. The court found that the Kagenveama decision is not clearly irreconcilable with Hamilton v. Lanning and therefore only the Supreme Court or the Ninth Circuit en banc can negate Kagenveama.

Woolsey v. Citibank, Tenth Circuit.  Chapter 13 debtors sought to strip a wholly unsecured junior lien from their home, but chose the difficult route of using section 506(d),when section 1322(b)(2) has been widely accepted as a way to do so, albeit with the discharge dependent on completing the plan.   Rejecting the section 506(d) argument, the court suggested that it agreed with the section 1322(b)(2) route.  Meanwhile, as the NCBRC blog points out, the Eleventh Circuit in an unpublished decision issued last spring, McNeil v. GMAC, upheld lien stripping in chapter 7 of a wholly unsecured junior lien, distinguishing those facts from the Supreme Court’s Dewsnup case, which dealt with an undersecured lien, not a worthless one. The Eleventh Circuit said its 1989 Folendore case was still good law.  So the McNeil case is similar to Flores in that both follow earlier circuit authority absent a clear conflict with Supreme Court authority.  Furthermore, it permits chapter 7 debtors to strip worthless liens, which for some will make their homes affordable.

Sikes v. Crager, Fifth Circuit.  The court held that a chapter 13 debtor who proposes a “fee only” plan is not automatically in bad faith.  This decision is in accord with a First Circuit decision, Puffer, handed down earlier this year and holding that a fee only plan is not per se in bad faith.  Bankruptcy may be affordable for many, but when fees are expected up front in chapter 7, a fee-only chapter 13 can be a way to deal with relentless collection efforts and avoid a painful period of saving up for bankruptcy.

The NCBRC blog often has some interesting discussion of implications of the cases, along with citations to other decisions on the same point.  Check it out.