Bankruptcy Commission Makes Rule Change Recommendations

What Creditors Need to Know

The American Bankruptcy Institute’s (ABI) Commission on Consumer Bankruptcy released its Final Report with some interesting recommendations back on April 12, 2019. Since it’s inception in 2016, the ABI commission was created to research and develop recommendations to improve the consumer bankruptcy system.

The ABI commission’s review focused on new trends regarding the acquisition of debt by consumers. In the conclusion, the commission created a Final Report including recommendations for amendments to the Bankruptcy Code as well as rules to make the bankruptcy system more efficient  and approachable.

Some of the issues addressed in the Final Report include:

• Remedies for discharge violation: Most courts only allow motions to enforce a discharge through a contempt proceeding. Therefore, in an effort to make it easier to seek relief, the commission recommends that a statutory private right of action be created for violations of the discharge. For example, a private right of action would be created for violations of the automatic stay, which would include sanctions consisting of costs, attorneys’ fees, and punitive damages. The commission further recommends amendments to the Bankruptcy Code that would allow motions to determine which creditor violated the discharge.
• Protection of Interests in Collateral Repossessed Prepetition: Circuit courts are currently divided as to whether collateral seized prepetition must be returned to the party entitled to possession afterward. To balance the competing interests of the debtor and creditor, the commission recommends that § 362(a)(3) be amended to provide that a creditor’s retention of estate property violates the automatic stay, but only if proof of insurance or other security is provided for the property subject to loss of value.
• Credit Counseling and Financial Management Course: The commission recommends amending the Fair Credit Reporting Act to mandate that consumer reporting agencies report the debtor’s successful completion of a financial management course, so that the impact of the course may be measured by changes in the debtor’s credit score.

Source: JD Supra