News

Report Blasts Credit Counseling

Consumers Warned About CCCS

WASHINGTON, July 12 /PRNewswire/ -- A national advocacy group, Consumers for responsible Credit Solutions, released an 80-page report today that carries serious warnings for consumers about the nation's best known chain of credit counseling agencies, Consumer Credit Counseling Services (CCCS).

Some of the many creditors who have been represented on the NFCC Board of Trustees have recently paid hundreds of millions of dollars in Federal Trade Commission fines and other settlements for anti-consumer practices and abusing consumers' rights.

The report argues the best way to make the credit counseling industry more favorable to consumers is to reduce the direct influence and control of creditors and encourage the growth of independent, non-NFCC credit counseling agencies.

The report finds two factors have particularly enabled problems to arise: a lack of national regulatory standards; and mandates that credit counseling agencies be "nonprofit," which exempts them from most state and federal regulation. This has left an industry that handles billions of dollars in consumer payments largely unregulated. The report recommends establishing national standards and opening the industry to professional financial services businesses that already serve consumers and are already subject to regulatory scrutiny.

Consumers looking to better understand the NFCC and the industry are urged to read the report entitled: "Nonprofits In Service to One of America's Most Profitable Industries: A Report On How Creditor Control of the Credit Counseling Industry Hurts Consumers and The Need For Fundamental Reform." Copies are available at: http://bkthisweek.c.topica.com/maacsc6aa8siUb7B71ne/

U.S. Headed For New Bankruptcy Filing Record

Americans are going broke as never before: A record 1,625,208 families sought bankruptcy protection last year, and filings are up 2.7 percent so far in 2004.

Put another way, 1 in 73 households declared bankruptcy in 2003, numbers that make it likely you have a neighbor, co-worker or family member who was, is or is about to go bankrupt. Experts Elizabeth Warren and Amelia Warren Tyagi expect more families to see bankruptcy court than divorce court this year.

Americans hold $8.9 trillion collectively in household debt, a record compared to their disposable income. Simply put: We spend more than we can afford.

By MARY DEIBEL, Scripps Howard News Service

HEADLINES http://bkthisweek.c.topica.com/maacsc6aa8sipb7B71ne/

Trustee's Attorney Engaged In Pointless Litigation

Trustee's Attorney Claims $19K In Fees To Collect $14K In Funds

Bruce Leichty, in his capacity as counsel for a Chapter 7 trustee, appeals the bankruptcy court's order, which, pursuant to 11 U.S.C. § 330, awarded only half of the compensation he requested in his final fee application. The bankruptcy court did not award the full amount requested because it concluded that Leichty pursued litigation that was not reasonable or necessary in its entirety. We hold that the bankruptcy court did not abuse its discretion in making this determination.

Held, it is readily apparent that if the legal fees exceed the recovery, the estate is not benefitted. Even if the potential for recovering attorney's fees is included, incurring $19,065 in legal fees in exchange for the uncertain prospect of recovering $14,000 for a priority creditor holding a nondischargeable debt could reasonably be characterized as a "modest" benefit to the estate.

In re STRAND (9th Cir. 2004)

Student Loan Discharged: Ill Health Key Factor

Held, debtor satisfied all three elements of the Brunner test and her student loan was discharged pursuant to 11 U.S.C. section 523(a)(8). Availability of income-contingent repayment plan did not preclude finding of undue hardship.

Durrani suffers from diabetes, high blood pressure, high cholesterol, poor vision and osteoarthritis in one knee. She has a permanent handicapped parking placard from the Illinois Secretary of State. 8. Durrani has consistently tithed to her congregation for over 20 years. In 2001, she tithed $1,706 and made additional offerings of $42. In 2002, she tithed $1,967 and made additional offerings of $37. Through May 18, 2003, she had tithed $1,105 and made additional offerings of $23.

Accordingly, the issues that must be resolved in the instant proceeding are: 1. Whether, based on current income and expenses, Durrani can maintain a "minimal" standard of living for herself if forced to repay the loan; 2. Whether additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the loan; and 3. Whether Durrani has made good faith efforts to repay the loan.

Durrani v. ECMC (Bankr. N.D. Il. 2004)

BANKRUPTCY LAW UPDATE

http://bkthisweek.c.topica.com/maacsc6aa8sjWb7B71ne/

Teens Headed For Bankruptcy, Too?

Students Maxing Out Credit Cards

According to the Customer Federation of America (Wash., D.C.) aggressive credit card marketing, lack of financial education, and peer pressure is causing increasing debt among teenagers and college students.

Over the last five years credit card marketing has shifted from young professionals to college freshmen and high school seniors. It is estimated that 80% of young people between 18 and 20 are cardholders, according to a George Mason University survey. The survey also found that about 60% of those have "maxed the out" during their freshman year.