NEW DEVELOPMENTS AND TRENDS IN BANKRUPTCY

REVIEW Nationally, prior to BAPCPA, 50% of those filing a consumer case had filed a previous case, 65% had filed a case within the preceding year 30% had filed one case 10% had filed two cases 10% had filed more than two cases

Eastern District Trends in Filings Year Total cases Chapter 7 Chapter 13 13/7 Ratio 1990 4,974 3,685 1,105 30% 2001 10,113 6,881 3,159 46% 2004 9,658 6,499 3,230 50% 2008 3,217 1,608 1,570 98% 2009* 4,192 2,305 1,830 79% * Estimated based on figures through 9/30/09

Year Chapter 11 filings Adversaries 1990 183 314 2001 73 549 2004 50 236 2008 38 132 2009* 56 175 * Estimated based on filing through 9/30/09

Size of Commercial Filings in Assets Year / Total 11 Filings 0-50,000 50,001- 100,000 100,000- 500,000 500,000- 1.000.000 1,000,000-10M 10M-100M 2006/ 68 53 2 1 4 6 2007/ 43 5 19 3 9 2008/ 30 17 2009/38* 8 15 * Through 9/30/09

Success Rates Year Conf DSM’d w/o Conf w/in 365 days > 365 but <730 days >730 days Completed/ Pending Conv 2004 78% 56% 20% 66% 26% 8% 42% 2% 2005 71% 49% 50% 22% 12% 25% 2006 73% 80% 69% 6% 8%/ 59% 2007 79% 31% 54% 77% 1% 3%/ 69% 5% 2008 33% 65% 21% n/a 3%/67%

Effective December 1, 2009 New time limits will apply to: All pending actions unless infeasible or unjust. If infeasible or unjust, apply the former rule. Rules Enabling Act, 28 U.S.C. 2074

Hanging Paragraph Claims on a Vehicle Chrysler v Miller, 570 F.3d 633 (5th Cir. 2009) Secured lender retains the right to file a deficiency claim after surrender or foreclosure of a 910 vehicle. In re Dale, 2009 WL 2857998 (5th Cir. 2009) Creditor’s claim for negative equity included in a PMSI claim on a 910 vehicle did not destroy the nature of the claim. Negative equity was a “cost of acquiring the vehicle” and therefore a PMSI debt.

Changes to Exemptions Act 201- Effective June 30, 2009 Increases Homestead Exemption to $35,000 Extends protection to proceeds of insurance paid for damage to property after governor declares a natural disaster Limits creditor with a judgment on consumer credit card debt from seizing Judgment creditor may record judgment and a judicial lien is created. However, damages may be obtained if the property is seized an sold.

Pending changes to proofs of claim Rule 3001 New requirements : Escrow Account Statement Amount necessary to cure default Failure to attach may result in sanctions including attorneys fees and expenses

What format does the Escrow Statement take? In accordance with RESPA

Escrow charges Amt Date paid Mo amt Mos to petition date Total Hazard Ins $A X/X/XX A/12=M X/X/XX-Petition date=N M*N Flood Ins $B X/X/XX B/12=O X/X/XX-Petition date=P O*P Taxes $C X/X/XX C/12=Q X/X/XX-Petition date=R Q*R Total S T The two (2) months worth of escrow payments allowed under RESPA are calculated: [(A + B + C)/12 ] x 2 = U U + T = Catch Up Escrow Payments The actual escrow balance on petition date minus the Catch Up Escrow Payments (U + T) = escrow balance on proof of claim The debtor’s postpetition escrow account should begin with a balance equal to the Catch Up Escrow Payments (U + T). S = new monthly postpetition escrow payment added to postpetition installments of principal and interest

Debtor or third party has one year to challenge Rule 3002.1 Requires written notice to debtor, debtor’s attorney and trustee of any change in the monthly amount due on a home mortgage debt at least 30 days prior to the effective date of the change Requires written notice of the assessment, postpetition, of any fee or charge against a debtor’s account to debtor, debtor’s counsel and trustee within 30 days. Debtor or third party has one year to challenge Trustee must send Notice of Final Cure within 30 days of the last payment Creditor has 21 days to Object Court must hold a hearing on the Objection within 30 days

Pitfalls for the unwary: Failure to include missed escrow payments in the proof of claim See Campbell v Countrywide, 2008 WL 3906382 (5th Cir. 2008) Double dipping-inclusion of missed escrow payments in the proof of claim and collection of past due escrow postpetition through increased monthly payments See In re Fitch, 390 B.R. 834 (Bankr.E.D. La. 2008) Sheriff’s costs/ deposits Upcharges for third party expenses, i.e. inspection fees, BPO or appraisal costs Proper application of payments See In re Jones, 366 B.R. 584 (Bankr.E.D. La. 2007) In re Stewart, 391 B.R. 327 (Bnkr.E.D. La. 2008)

Truth in Lending Changes effective October 1, 2009 Section 226.36c(i) & (ii)-Servicing No servicer shall fail to credit a payment as of the date of receipt Impose a late fee or delinquency charge when only attributable to late fees or delinquency charges assessed on an earlier payment See http://www.fdic.gov/regulations/laws/rules/6500-1800.html#fdic6500226.35