Skip to main content

Search

Consumer Bankruptcy Law and Practice: K.1 Introduction

This appendix contains three client handouts. The National Consumer Law Center provides copyright permission for individuals and organizations to copy or adapt these handouts for distribution without charge to consumers. No permission is granted to include these materials in other publications for sale.

Consumer Bankruptcy Law and Practice: K.2 Answers to Common Bankruptcy Questions

A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. This brochure cannot explain every aspect of the bankruptcy process. If you still have questions after reading it, you should speak with an attorney familiar with bankruptcy.

What Is Bankruptcy?

Consumer Bankruptcy Law and Practice: K.3 Your Legal Rights During and After Bankruptcy: Making the Most of Your Bankruptcy Discharge

Bankruptcy is a choice that may help if you are facing serious financial problems. You may be able to cancel your debts, stop collection calls, and get a fresh financial start. Bankruptcy can help with some financial problems, but does not guarantee you will avoid financial problems in the future. If you choose bankruptcy, you should take advantage of the fresh start it offers and then make careful decisions about future borrowing and credit, so you won’t ever need to file bankruptcy again!

How Long Will Bankruptcy Stay on My Credit Report?

Consumer Bankruptcy Law and Practice: K.4 Using Credit Wisely After Bankruptcy

Beware of Credit Offers Aimed at Recent Bankruptcy Filers

“Disguised” Reaffirmation Agreement

Carefully read any credit card or other credit offer from a company that claims to represent a lender you listed in your bankruptcy or own a debt you discharged. This may be from a debt collection company that is trying to trick you into reaffirming a debt. The fine print of the credit offer or agreement will likely say that you will get new credit, but only if some or all of the balance from the discharged debt is added to the new account.

Consumer Bankruptcy Law and Practice: D.1.2 The Initial Forms

It is common for offices that handle significant numbers of bankruptcy cases to use special computer programs that generate bankruptcy forms based on input data. There are a wide range of such programs now on the market. For offices which do not currently have ready access to such a program, the simplest alternative is to use the blank Official Forms that are available for download in Adobe Acrobat (PDF) fillable format on the website of the Administrative Office of the U.S.

Consumer Bankruptcy Law and Practice: D.1.4.1 Overview

Almost every bankruptcy court requires the filing of bankruptcy forms electronically. Whatever format in which the documents were created, the forms must be filed in Adobe Acrobat (PDF) format. This format is similar to an electronic photograph of the original document. An exception to the PDF requirement is that the creditor mailing list is filed in ASCII text (.txt) format.

Federal Deception Law: 3.1.1a.1 General

On October 21, 2022, a three-judge panel of the Fifth Circuit ruled that the Consumer Financial Protection Bureau’s (CFPB) funding mechanism is unconstitutional because it violates the Appropriations Clause.6 In addition, the Fifth Circuit held that the CFPB’s Payday Lending Rule is invalid because it was promulgated using the unconstitutional funding mechanism.

Federal Deception Law: 3.1.1a.2 The Fifth Circuit’s Ruling That the CFPB’s Funding Mechanism Is Unconstitutional—Community Financial Services Ass’n of America v. Consumer Financial Protection Bureau

In Community Financial Services Ass’n of America v. Consumer Financial Protection Bureau,10 the Fifth Circuit vacated the payment provisions of the CFPB’s Payday Lending Rule. Those provisions limit the number of times bounced payments can be resubmitted; the rule’s ability-to-repay provisions were previously repealed under former CFPB Director Kraninger.

Federal Deception Law: 3.1.1a.5 The Fifth Circuit Is in the Minority

Community Financial Services Ass’n of America v. Consumer Financial Protection Bureau does not bind courts in other circuits. The Fifth Circuit is the only court that has found the CFPB’s funding mechanism to be unconstitutional. The Second Circuit and the en banc D.C.

Federal Deception Law: 3.1.1a.8 Warning Courts of the Economy-Wide Impact If Eleven Years of CFPB Rulemaking Actions Are Subject to Challenge

If a court finds the CFPB’s funding structure to be unconstitutional, practitioners should push for a narrow remedy and explain that CFPB rules do not just protect consumers. CFPB rules offer clear standards for financial service providers, explain how these providers must comply with the law, shed light on ambiguous statutory provisions, provide model disclosures to use, exempt small entities from statutory requirements, offer safe harbors, or otherwise clarify that certain practices are allowed.

Federal Deception Law: 3.1.1a.9 Most CFPB Regulations Still Apply Even in the Fifth Circuit

Even if a court in the Fifth Circuit or elsewhere were to strike down CFPB rules, most consumer protection regulations should still survive such a ruling. With a few exceptions, the CFPB’s current rules were transferred wholesale from other agencies (most commonly the Federal Reserve) to the CFPB when the CFPB opened its doors in 2011. While changes to those rules since 2011 were promulgated using CFPB funding, the CFPB’s funding structure had nothing to do with rules that were adopted before that time.

Federal Deception Law: 3.1.1a.10 Claims Should Focus on Statutory Violations, Not Violations of The Statute’s Implementing Regulations

While courts consistently uphold the CFPB’s funding mechanism, there is a risk that a court, faced with a challenge to the CFPB’s funding, will stay litigation based on a CFPB rule until the Supreme Court decides the issue, rather than a trial court making its own judgment.35 This delay can be avoided by basing the litigation not on a CFPB rule, but on the underlying statute that the rule is implementing. Any ruling on the CFPB’s funding has no impact on the underlying statute.

Federal Deception Law: 3.1.1a.11 UDAP and Other State Statutory and Common Law Claims as Alternatives

The CFPB’s analysis in the supplemental information accompanying a rule provision may indicate why a practice is unfair, deceptive, or abusive. This same analysis may prove convincing to a court that the practice violates a state unfair and deceptive acts and practices (UDAP) statute. Every state has enacted a UDAP statute that prohibits deceptive and often unfair practices, and some have added a prohibition on abusive or unconscionable conduct. UDAP statutes were designed to be liberally and expansively interpreted.