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Legislative Update

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NBRC to Vote on Dischargeability Issues and Trustee Liability by Mail Ballot: Bright Line Standards Sought

The National Bankruptcy Review Commission is considering a proposal that would make credit card debts incurrred within 30 days of the order for relief nondischargeable, while making all other credit card debt dischargeable, thus amending §523(a)(2) to create a "bright line" rule. Debts incurred to pay federal taxes, including payment by credit card, would continue to be nondischargeable no matter when the payment was made in relation to the petition. (Consumer Working Group proposal #7). Credit card dischargeability cases are difficult to prove, with the cases announcing divergent legal standards and reaching differing results. " A 'rough justice' standard that does not require litigation of the underlying principle in each case, may be the fairest and most expedient method ...", according to an NBRC memo explaining the proposal. Another proposal (#5) in the §523 area would specifically allow bankruptcy courts to enter money judgments for nondischargeable debts, but would clarify that issues not actually litigated in the state court (e.g., default judgments) should not be given preclusive effect in the bankruptcy court.

In the area of valuation, the NBRC will vote by mail on a proposal that a creditor's secured claim in personal property should be determined by the property's wholesale price. Earlier this year, the Supreme Court had announced a "replacement value" standard for such property, but one that would likely entail a fact-intensive review by the courts. The NBRC proposal is intended to be a bright line standard.

In the area of personal liability for trustees, the NBRC would resolve the current patchwork of legal standards to provide that panel trustees would be subject to suit only to the extent that they acted outside the scope of their authority and that they acted with gross negligence in the performance of their fiduciary duties. "Gross negligence" would be defined as reckless indifference or deliberate disregard of the trustee's fiduciary duty. The NRBC proposal stopped short of extending the standard to one of "willful and intentional" misconduct. A chapter 11 trustee would be subject to suit only to the extent that the trustee has violated the standard of care applicable to officers and directors of a corporation in the state in which the chapter 11 case is pending.

Voting on the proposals will occur this month. The NRBCs final report to Congress, the President and Chief Justice is due on October 20.

The Coming Changes in Bankruptcy Practice: What the Bankruptcy Commission Recommended and How it Will Affect You

Three one and one-half hour live telephone seminars provided by the American Bankruptcy Institute as a service to its members and to the bankruptcy community. Each seminar will consist of a one-hour lecture by the faculty and 30 minutes of open discussion between faculty and participants, during which the faculty may answer questions. ABI will provide written educational materials prior to each telephone seminar.

The seminars, approved for CLE credit in most states, will be convenient, economical, efficient and interactive.

Audio casettes of each of the three seminars will be available for purchase following the completion of the last seminar. For further information, contact ABI or visit the ABI Publications Catalogue.

Registration Information and Form

Thursday, November 13, 1997
Jurisdiction and Procedural Reforms, Appellate Structure and Ethics
  • Karen Cordry, National Association of Attorneys General
  • Hon. Lee M. Jackwig, U.S. Bankruptcy Court, Des Moines, Iowa
  • Robin E. Phelan, Haynes & Boone, Dallas, Texas

Tuesday, November 18, 1997
Commercial Bankruptcy, including new rules for Small Businesses, Partnerships and Single Asset Cases

  • Hon. Rosemary Gambardella, U.S. Bankruptcy Court, Newark, N.J.
  • Prof. Nancy B. Rapoport, The Ohio State University College of Law
  • Robert J. White, O'Melveny & Myers, Los Angeles, Calif.

Thursday, November 20, 1997
Consumer Bankruptcy: New Framework and Exemptions

  • Hon. William H. Brown, U.S. Bankruptcy Court, Memphis, Tenn.
  • Ford Elsaesser, Elsaesser, Jarzabek & Anderson, Sandpoint, Id.
  • Robert F. Mitsch, American Bankruptcy Service, St. Paul, Minn.
Journal Date: 
Monday, September 1, 1997

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$95 for each telephone seminar or
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