Consumer Bankruptcy Law and Practice: 6.3.4 Use of Chapter 11 by Consumer Debtors
In Toibb v. Radloff,101 the Supreme Court held that individual debtors may file under the reorganization provisions of chapter 11 of the Bankruptcy Code.
In Toibb v. Radloff,101 the Supreme Court held that individual debtors may file under the reorganization provisions of chapter 11 of the Bankruptcy Code.
As discussed elsewhere in this manual,168 the Department of Justice and Department of Education have recently adopted guidance intended to streamline and facilitate the discharge of student loans in bankruptcy. Debtors who believe that their student loans may be dischargeable should consider consolidation of their loans prior to filing a bankruptcy so that the consolidated loan will qualify for discharge.
Issues have been raised as to the application of the FTC Holder Rule where the Truth in Lending Act, the Equal Credit Opportunity Act, and the Magnuson-Moss Warranty Act limit an assignee’s liability for claims under those statutes.
This chapter considers two interrelated—but very separate—issues: (1) the validity of an electronic notice, disclosure, contract, or other record and (2) whether a consumer’s electronic signature is the legal equivalent of a handwritten signature.
The Electronic Signatures in Global and National Commerce Act14 (E-Sign) establishes the enforceability of electronic records and signatures as a matter of federal law and preempts state laws to the contrary.15 The E-Sign Act provides that—subject to a number of important conditions—(1) an electronic signature is the legal equivalent of a signature on a piece of paper, and (2) a contract, disclosure, o
The Uniform Law Commission (formerly known as the National Conference of Commissioners on Uniform State Laws) approved and recommended for enactment the Uniform Electronic Transactions Act (UETA) in 1999,21 and all but one state has enacted either a uniform version of UETA or UETA with amendments.22 The most notable amendments are those that add E-Sign’s special consumer consent requirements that are otherwise missing from the uniform version of UETA.
There is confusion about when UETA and E-Sign apply and when they are triggered. These laws apply only when another law or rule requires a paper writing or a “wet” signature. So, for example, if one buys a book online and charges the purchase to a credit card, neither UETA nor E-Sign is implicated, because there is no underlying legal requirement that the agreement to purchase a book be signed or recorded in a writing.
E-Sign provides that federal and state agencies can issue regulations, orders, or guidance interpreting E-Sign section 7001, which validates the legality of electronic records.40 However, a federal or state agency is not permitted to adopt any regulation, order, or guidance unless several conditions are met:
The rules regarding the validity of disclosures delivered electronically to a consumer are distinct from the question of whether a signature applied electronically fulfills a legal requirement for a signature.
Both E-Sign and UETA provide for the validity of an “electronic signature.”55 An “electronic signature” is defined as an “electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”56 “Electronic” is defined in both E-Sign and UETA as: “relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.”
E-Sign and UETA both apply only to communications that relate to a “transaction.” If the exchange does not meet that definition, that can be sufficient to remove it from coverage under UETA (or E-Sign).63 “Transaction” is defined under both statutes as any action relating to the conduct of business, consumer, or commercial affairs between two or more persons, including the sale, lease, or other disposition of personal property—including goods and intangibles, and real property—and of services.
E-Sign applies only to transactions in or affecting interstate or foreign commerce,67 while UETA contains no such limitations. As a result, only UETA and other state law regulate the use of electronic records or signatures in transactions not in interstate commerce.
While E-Sign applies to all federal writing requirements (such as consumer disclosures),76 it specifically excludes certain writings from its coverage, including important notices that are required to alert consumers to potential losses of important rights (such as cancellation of utility services, default on a mortgage contract or an eviction, or cancellation of health or life insurance).77
As a consumer protection—to ensure that consumers always receive the paper copies of these notices—Congress exempted a list of essential consumer notices from E-Sign’s coverage. In addition to E-Sign, many state enactments of UETA98 also exclude the following essential consumer notices from the rule that allows electronic records to stand in for paper writings:
[Editor’s Note: This section has been moved to § 11.2.8.4, infra.]
A California statute provides significant rights to consumers and employees when the business they are in arbitration with fails to pay initial arbitration fees, or other costs assessed on the business during the arbitration.261 The statute provides that if the business does not pay the required fees and costs to initiate an arbitration proceeding within thirty days after their due date, the business is in default and waives its right to compel arbitration.
Effective October 3, 2015, for loans to which the TILA-RESPA integrated disclosure rules apply, the early disclosure (“loan estimate”) requirements generally track those applicable to loans applied for on or after July 30, 2009, with some exceptions.359 Like the good faith estimate, the creditor must deliver (in person or electronically) or place the loan estimate form in the mail not later than the third business day after the creditor receives the consumer’s application.360 If the loan estimat
In the case of closed-end mortgage transactions, a “good faith” estimate means that the estimate is based on the best information “reasonably available.”586 Practitioners should develop a factual basis for why the differences occurred in order to show that the creditor did not use good faith in making the early disclosures.
Effective October 3, 2015, the creditor must ensure that the consumer receives the closing disclosures no later than three business days before consummation for mortgage loans to which the TILA-RESPA integrated disclosure rules apply.432 In the context of the closing disclosure, “business day” is defined to mean all calendar days except Sundays and the legal public holidays.433 In a rescindable transaction, each consumer who has a right to rescind must be given a
This chapter discusses TILA’s rules for open-end credit that is secured by a residence, more often called a home equity line of credit or HELOC. HELOCs are governed by the general TILA rules that apply to all consumer credit as well as rules limited to open-end credit, including some rules specific to just open-end credit secured by a consumer’s principal dwelling.
HELOCs became increasingly common after Congress passed the Home Equity Loan Consumer Protection Act in 1988,8 covering any agreement to open a HELOC plan or any application to open a HELOC after 1989.9 At that time less than six percent of homeowners had a HELOC. But, by 2007, that number had more than tripled.10
Regulation Z’s HELOC rules apply to open-end credit plans that are secured by the consumer’s dwelling.19 The official interpretations emphasize that section 1026.40, which contains the disclosure rules, “is not limited to plans secured by the consumer’s principal dwelling.”20 The Act contains a special definition of “principal dwelling,” defining it to include any second or vacation home of the consumer, but only for purposes of sections 1647 and 1665b, whic
Disreputable creditors sometimes take advantage of the weaker rules for HELOCs by disguising over-priced closed-end mortgages as HELOCs.