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Consumer Bankruptcy Law and Practice: 6.2.2.4.1 The available protections
Closely related to the problem of reputation is that of discrimination against debtors who have filed bankruptcy cases. To a large extent, the Bankruptcy Code alleviates this problem.
Consumer Bankruptcy Law and Practice: 6.2.2.4.2 Medical debts
Medical debts to doctors or hospitals with whom a patient would like to have a continuing relationship are often a source of concern. Particularly in small communities where there may not be many health care providers, clients may worry that a discharge will leave them with few options for future care.
Consumer Bankruptcy Law and Practice: 6.2.2.5 Clients’ Feelings of Moral Obligation
Another factor mitigating against bankruptcy may be the client’s personal feelings on the subject. This difficult subject, which is generally outside a lawyer’s training, must be discussed carefully and with understanding. Remember, it is not easy for clients suddenly to decide to seemingly discard those values that may have guided them since childhood.
Consumer Bankruptcy Law and Practice: 6.2.2.6 Cost of Filing a Bankruptcy Petition
Besides any attorney fees, bankruptcy carries an out-of-pocket cost for the filing fee, normally $338 in a chapter 7 case and $313 in a chapter 13 case.59 The chapter 7 filing fee may be waived by the court for a debtor unable to pay it.60 Debtors must also pay the costs of a consumer credit counseling briefing and a personal financial management education course, usually totaling $25 to $100, unless those costs are waived due to inability to pay.61 Occa
Consumer Bankruptcy Law and Practice: 6.2.2.7 Is Bankruptcy Necessary?
The question of fees leads back to a more basic issue. In some states, there are debtors who are totally judgment-proof at the time they seek advice. Legally, creditors can do virtually nothing to harm these clients.
Consumer Bankruptcy Law and Practice: 6.2.2.8.1 When bankruptcy will not help
Finally, there are some cases in which bankruptcy is the wrong tool to use and in which none of the advantages listed above will be realized.
Consumer Bankruptcy Law and Practice: 6.3.1 Overview
Bound up with the decision of whether to file a bankruptcy case is the question of which type of bankruptcy offers the greatest benefit to a client. Although this decision may normally be changed at least once by converting the case after it is filed, it is nonetheless of obvious importance to ultimately settle upon the chapter offering the greatest advantages for the debtor.
Consumer Bankruptcy Law and Practice: 6.4 Should Both Spouses File?
In cases in which both spouses are represented, an additional question presents itself—whether both spouses should file, or only one of them. The answer to this question is that it is usually preferable for both to file.
Consumer Bankruptcy Law and Practice: 6.5.1 Reasons to File Quickly
A final factor to be considered in deciding on a course of action is the timing of the petition. Even after the debtor decides that a bankruptcy should be filed, in many cases it is advisable to wait before filing.
Consumer Bankruptcy Law and Practice: 6.5.2.1 Fraudulent Acts, Conveyances, and Preferences
One of the prime reasons for a delay before filing stems from the possible effects, both negative and positive, of prebankruptcy transfers. Some transfers already made may dictate a delay in filing, and it may be advisable to take time to make others before filing in order to gain maximum advantage from the case.
Consumer Bankruptcy Law and Practice: 6.5.3.8 Less Common Reasons for Delaying a Petition
The situations described above are the most common scenarios in which the timing of the bankruptcy case can work to the debtor’s advantage or disadvantage. They are not the only ones. For example, if debtors have recently placed substantial amounts in education savings accounts, the amounts excluded from the bankruptcy estate under subsections 541(b)(5) and (b)(6) may be affected by a delay in filing. A quickly rising real estate market may dictate filing a bankruptcy case sooner rather than later so that the debtor’s home equity does not increase to an amount that cannot be exempted.
Repossessions: 2.2.1 History of Article 9 and Its Amendments
Article 9 of the Uniform Commercial Code (UCC) was approved in 1962, along with the rest of the UCC, by the Uniform Law Commission (then called the National Conference of Commissioners on Uniform State Laws or NCCUSL) and the American Law Institute (ALI). It has undergone significant amendment twice, in 1972 and 1999 (when the 2001 amendments were finalized).
Repossessions: 2.2.2 Substantive Overview of UCC Article 9
UCC Article 9 is the fundamental law regulating security interests and repossession of personal property. Article 9 offers a framework for determining when the creditor has a valid security interest, when and how it can repossess and dispose of the collateral, and the rights of the creditor and debtor after the collateral’s disposition.
Repossessions: 2.2.3.1 Summary of Substantive Changes
As detailed in § 2.2.1, supra, the Uniform Law Commission and ALI approved major changes to Article 9 in 1999.
Repossessions: 2.2.4.1 Generally
Article 9 of the Uniform Commercial Code (UCC) applies to any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract.58 “Security interest” is defined at UCC § 1-201(b)(35)59 as an interest in personal property or fixtures which secures payment or performance of an obligation.
Repossessions: 2.2.4.3.1 True leases and bailments
Despite its broad scope, there are certain specific transactions that UCC Article 9 does not cover. True leases,84 for example, do not fall within the definition of security interest in UCC § 1-201(b)(35), as set forth in UCC § 1-203.85 These true leases are governed by Article 2A. Nevertheless, many transactions that are described as leases will meet the definition of security interest.86
Repossessions: 2.2.4.3.2 Deposit accounts
A particularly important exclusion is deposit accounts in consumer transactions.88 When Article 9 was revised in 2001, its scope was expanded, and there were proposals to allow security interests in consumers’ bank accounts. These proposals would have allowed a creditor to insert boilerplate language into a contract to extend its security interest to any deposit account the consumer had.
Repossessions: 2.2.4.3.3 Tort claims, insurance claims, wage assignments, other exclusions
Article 9 applies to commercial tort claims, but excludes non-commercial tort claims from its scope.102 In addition, Article 9 is inapplicable to transfers of interests in, or assignments of, claims under insurance policies;103 non-agricultural statutory or common law liens;104 wage assignments;105 rights of set-off;106 and interests in real estate.
Repossessions: 2.2.4.4 Consensual Liens Versus Statutory Liens
Article 9 applies to consensual security interests.111 It explicitly excludes liens, other than agricultural liens, given by statute or other rule of law for services or materials.112 The only part of Article 9 that applies to statutory liens is a set of rules for determining priority between statutory liens for services or materials and Article 9 security interests.113
Repossessions: 2.2.4.5.1 Introduction
UCC Article 9 applies only to interests in personal property and not to interests in real estate.115 Separate state realty laws regulate foreclosure on real property pursuant to a mortgage, deed of trust, or similar instrument.116 Some states have specific statutes governing security interests in realty-personalty hybrids, such as cooperative apartments.117
Repossessions: 2.2.4.5.2 Security interests in obligations secured by real estate
Although revised Article 9 does not apply to security interests in real estate, it does apply to security interests in mortgage notes and other obligations secured by real property.121 In other words, revised Article 9 does not govern the creation of security interests in real property (other than fixtures) but it provides certain rules for security interests in, and transfers of, those obligations. Thus, when a mortgage holder securitizes the loan, revised Article 9 establishes rules for recording and perfecting that transaction.
Repossessions: 2.2.4.5.3 When collateral includes both personalty and realty
Sometimes a single security agreement covers both personalty and realty. In this situation, UCC § 9-604 provides the creditor with two options upon the debtor’s default. The creditor can proceed against the personalty under UCC Article 9, or the creditor can proceed against both the realty and the personalty pursuant to state real estate law.125