As the 116th Congress ended, the bill died. However, with the democrats in control of both the House and Senate in the 117th Congress, there is a strong chance the bill will be reintroduced this year. When the bill was first introduced, there was both strong support and strong opposition from both sides involved in the bankruptcy process. Reintroduction of the bill could allow meaningful discussions in order to address some of the issues that plague bankruptcy cases on both the debtor and creditor sides.
Other movement in Congress occurred on February 25, 2021. Senators Dick Durbin and Chuck Grassley introduced bipartisan legislation to extend the CARES Act Bankruptcy Relief Provisions. The current law was to sunset on March 27, 2021. The legislation would extend the temporary bankruptcy provisions until March 2022 and provide critical relief to families and small business facing hardship due to the ongoing COVID-19 pandemic. (See Dick Durbin February 25, 2020 Press Release). The legislation would also extend the provisions of the Small Business Reorganization Act, increasing the maximum debt limit to $7.5 million. The bill would also exempt COVID-related relief payments from consumer cases for purposes of the means test and disposable income. Lastly, the bill would not deny a discharge to those debtors who missed 3 or fewer payments due to COVID circumstances. The legislation passed, and the protections under the CARES Act will now run through March of 2022. As a result, you can expect to see a continued number of Subchapter V filings.
Although the number of consumer filings did not explode, plaintiff and debtor attorneys continue to raise the issues of the itemization of interest fees and costs in proof of claims. Although this issue has not been widespread throughout the country, we have seen an increase in activity – particularly in Florida, Georgia, and Virginia. We have no Circuit Court opinions; however, several Bankruptcy Courts have set forth their views as to how these amounts should be set out and whether damages exist. In Thomas v. Midland Funding LLC (17-0510), the Bankruptcy Judge for Western District of Virginia issued a lengthy opinion setting forth her views on whether the breakdown of interest, fees, and costs satisfies the itemization requirement set forth in Federal Rule of Bankruptcy Procedure 3001(c)(2)(a) (“FRBP 2001(c)”). That Rule requires that an itemized statement of the interest, fees, expenses, or charges must be filed with the proof of claim “[i]f, in addition to its principal amount, a claim includes interest, fees, expenses, or other charges incurred before the petition was filed.”
The court went on to state that the creditor, for failing to properly itemize, did not comply fully with FRBP 3001(c) and opened itself up to potential sanctions under FRBP 3001(c)(2)(D). The court has the ability to “award other appropriate relief, including reasonable expenses and attorney’s fees caused by the failure.” We will see where the Western District of Virginia proceeds on this issue, but it has laid out a current road map for creditors to follow.
2020 was a year that many would like to forget. What the second half of 2021 brings will be a wait and see scenario. Once foreclosures and evictions are initiated again, are we likely to see increases in consumer bankruptcy filings? Can small businesses survive, or will there be additional closures? Will Circuit Courts provide any additional guidance as to FDCPA actions and bankruptcy? Will the Supreme Court continue to accept and hear bankruptcy cases? Is bankruptcy reform on the horizon?
Six months into 2021, we have not seen the feared tsunami of consumer bankruptcy filings. Bankruptcy courts are not overwhelmed. This lack of an increase in bankruptcies could extend for a substantial period of time as businesses reopen, COVID restrictions are released, consumers begin to spend and travel, and certain states and the government look to resume foreclosure and eviction moratoriums. We optimistically wait to see what the second half of 2021 brings.