Henry’s comments at the cdcbaa Calvin Ashland dinner were stirring and meaningful. I recorded his comments which he looked at and approved.
Comments by Henry Sommer
upon receiving CDCBAA Attorney of the Year Award
Recorded by M. Jonathan Hayes
November 15, 2018
Ken Klee: [00:00:31] And for the record, let me read the plaque. “CDCBAA, Central District Consumer Bankruptcy Attorneys Association, Henry J. Sommer, Attorney of the Year 2018, Calvin K. Ashland Award, an annual award presented to those individuals who exemplify in the course of their profession, compassion, understanding, and concern for the individual consumer.” Each recipient has upheld these values that were found in the heart and in the courtroom of the Honorable Calvin K. Ashland. This award alternates between judges, trustees, and attorneys, each of equal importance in our bankruptcy system of justice.
Henry Sommer: [00:01:13] Thank you. (applause) Thank you, Ken, for that very generous introduction. And thank you to the CDCBAA for honoring me with this award. I can see from the distinguished past recipients, of which Ken was the first, what an honor it is.
We are on about the 40th anniversary of the Bankruptcy Reform Act, and I thought tonight I’d give a few reflections on my journey through that law, and what has changed, what has not. I started out as a young Legal Services lawyer, now not quite so young, forty years later. I used to know quite a few judges, and I’m finding that more and more of them are retired, and I don’t know so many of these new judges that are coming on the bench. But interestingly, I never took Bankruptcy in law school. Some of you may have had that same experience. I never got to learn from Vern Countryman at Harvard Law School, although I did get to know him a few years later and teach some courses with him, but before 1978 I’d only handled a handful of consumer bankruptcy cases under the Bankruptcy Act, and was just getting to know a little bit about bankruptcy.
And then I read about this new law that was passed, that Ken and Rich Levin had so much to do with the drafting of, and I went to a CLE program that was a video of an Ali-aba program where Ken was on the panel, Rich Levin was on the panel, a couple of other Los Angeles lawyers, I think. George Treister, I think, was on the panel. I think Barney Shapiro may have been on it too. And as I was listening to them speak about this new law, I had a kind of epiphany that this law could solve so many of the problems that we were facing every day in our Legal Services office. We were fighting to keep people’s utilities from being shut off. We were trying to keep people’s cars from being repossessed. The only way you could do that in Pennsylvania was to go into court and get an injunction. We were fighting foreclosures. Pennsylvania had a total exemption for personal property of $300—still does, as a matter of fact. Pennsylvania, great exemption laws for rich people, because we had protection for entireties property. So if a rich person was in business, and his spouse did not sign, then all of their entireties property, which was virtually all their property, was totally protected. But if you were a poor person, and you and your spouse signed a finance broker in Sunshine Coast company contract, they were taking the security interest in household goods that they used to threaten people with—which of course the Bankruptcy Code dealt with.
And we had law suits. Pennsylvania was pretty archaic: we had complaints in assumpsit on contracts, and if someone brought a case in assumpsit, they got a lien on the person’s house, and they put it up for sheriff’s sale. And of course the Bankruptcy Code dealt with that, by providing for the avoidance of judicial liens. And then we had Social Security overpayments, and we used to try to get them waived by the Social Security Administration, which was a lot of work. And on and on, really.
And so I started thinking about all these things, and I wrote an article for a Legal Services publication, and after that, one thing led to another, and I was writing a book for the National Consumer Law Center, and I somehow got noticed by Vern Countryman, and Larry King, and some of those people, and that led to some of the other things that Ken spoke about. So Ken, thanks for being part of getting me started on my journey through bankruptcy law.
[00:05:54] As I think Ken mentioned, we were in the same law school class. I don’t think we ever laid eyes on each other—at least knowingly—since I wasn’t taking Bankruptcy courses, and Ken was. I didn’t meet Ken until the early 1980s, but he’s certainly been someone who I’ve known and respected for many years since then.
[00:06:15] Of course now we have the 2005 law, which I refuse to call by—I’ve always refused — in Collier, I’ve tried to maintain that we don’t refer to it as the so-called Bankruptcy Abuse Prevention and Consumer Protection Act, so I call it the 2005 law. And that has changed a lot of things. Bankruptcy has changed, so that when the ’78 code was enacted, Chapter 13 was something that you had incentives to go into—it was meant to have the broader discharge, it had a lot of flexibility, it had a lot of things that were meant to give people an incentive to go into a plan to pay back their debts.
[00:07:04] We used to have the Chapter 13 plan that was like a deal. You made this plan at the beginning of the case, and you carried it out, and that was it. Now, I think Chapter 13 is really taking on a lot of the aspects of indentured servitude. And unfortunately, the Ninth Circuit BAP has had decisions where they sort of say, “We’ve got you. For three or five years, if you get any extra money, we want it.” And of course the flexibility has largely been taken away. We now have these form plans. I guess you’ve had one here for a long time, but it’s gone nationwide. There was some hope that the form plans—initially there was hope that there would be a really good national plan. Some people had hope—I was a little skeptical—it would be a really good national plan that would take the place of these local plans. Of course that didn’t happen, but the new rules do say you could put in nonstandard provisions. Well now we’re starting to see how a lot of the courts are reacting to that, and they aren’t very happy with a lot of the nonstandard provisions. So Chapter 13’s become kind of a cookie cutter type of proceeding at this point, and in some places it’s been like that for a long time, but again, I think that’s a step backward, really. Certainly the national form plan didn’t give us what additionally it was supposed to promote, greater uniformity across the country. We basically have pretty much what we had before.
[00:08:50] The biggest effect of the 2005 law, I think, was the increased cost of filing bankruptcy. It really took something that in many places, maybe not Los Angeles, could be done for under $1,000 in Chapter 7, and which people could usually scrounge together, to something like $2,000 or more to file a Chapter 7 in a lot of places—which is a pretty daunting amount for a family that’s stressed by debt—usually a lot more than you could just, you know, raise by not paying your utilities and a couple of other things, in order to use that money to file your Chapter 7 case. I think that’s one of the reasons that we’ve seen some increase in Chapter 13 cases– because those can still be filed more or less with no money down. And of course some of you may have seen the Pro Publica articles about Chapter 13 in Memphis, and the issues about race, and why more African Americans are filing Chapter 13 than white people. I think my own explanation for that is they need that no-money-down remedy more. There is less family wealth in African-American families and low-income African-American families. You know, a white family often can find some relative or somebody who can give them a little money to file a Chapter 7. That’s much less true in African-American families. And some of the reasons that they file in Memphis is they have traffic tickets or parking tickets—again, someone who’s a little better off could pay those off and doesn’t need to file Chapter 13 to deal with it. So that’s my explanation. I don’t think the bankruptcy lawyers are racist, contrary to some academics. But this increase in cost I think has been a terrible thing, and has directly led to the big decrease in filings that we’ve seen. It was masked by the recession. I think if the cost hadn’t gone up, we would have had even probably two million or more cases a year during the recession. But now, after the recession ended, we all know that the number of filings has gone down by 50 percent. That, obviously, has been a huge step backward, because it’s decreased the access of the low-income people to the bankruptcy system. Supposedly the 2005 bankruptcy amendments were going to go after the high-income debtors, and we know that that didn’t happen. Who it really ended up hurting was the low-income debtors. And that’s a shame.
[00:11:38] Now one big change since 1978 that I am quite proud of, though, is the formation of NACBA, National Association of Consumer Bankruptcy Attorneys; and later on NCBRC, the National Consumer Bankruptcy Rights Center. In 1992, I think it was, I got a call from a guy named Ike Shulman. I’d never heard of Ike Shulman. And he said, “We’re trying to form a national consumer bankruptcy organization.” And I was a little skeptical. I said, “I want to hear more about it. If you’re just fighting for the rights of bankruptcy attorneys, I’m really not that interested.” And he said, “Oh, no, we want to fight for the rights of consumer bankruptcy debtors. That’s going to be the mission of the organization.” So I signed up, I was on the board from the beginning. We had our first convention I think about eight or nine months later, where the board members, most of whom had never met each other, all met in Ashville, North Carolina. I think we had about sixty or sixty-five people at that convention, and frankly I could never have imagined how big NACBA would grow. We sort of gradually went up to about 1,200 members, and sort of plateaued there at 1,200-1,400. And then, of course, as some of you may know, after the 2005 amendments, we went up to close to 4,000 members. When I became president, which happened right after the 2005 amendments, I was aiming for 2,000. I thought, “Boy, if we could get to 2,000, we’d be in great shape.” Of course we far surpassed that within a year, and that was terrific. And then of course we started writing amicus briefs in the late nineties, and eventually we spun off the National Consumer Bankruptcy Rights Center as a 501(c)(3) organization.
I don’t know if any of you saw it, there was a recent book by Professor Ronald Mann, about bankruptcy and the Supreme Court. And one of the things he did in that book was an analysis of the influence of different amicus briefs in the Supreme Court. And he did that by either looking at where the Court cited an amicus brief in its opinion, or whether it adopted an argument that was only in the amicus brief. And his finding was that by a significant margin, other than the solicitor general in bankruptcy cases, NACBA and NCBRC’s amicus briefs had more influence than any those of other entity. So obviously we’re quite proud of that. What NCBRC tries to do is in cases that are significant, file an amicus brief. We do it in circuit courts around the country. We file about twenty a year. We assist bankruptcy appellate counsel in additional cases, or give them advice — should they appeal, how they should go about it. We all know that a lot of consumer bankruptcy lawyers aren’t experienced in appellate practice, and so we get people, we get law professors, we get former bankruptcy judges, we get experienced appellate lawyers in the Supreme Court. We’ve usually had one of the Supreme Court bar—there’s a whole specialized Supreme Court bar in Washington now—to write our briefs, and they do it pro bono.
Sometimes we’ve been asked to argue the cases. Just to give you a sense, in the Ninth Circuit, some of the recent cases we had, the Goudelock case about condo fees; Hunsaker, which was about sovereign immunity and stay violations; Schwartz-Tallard about the automatic stay; Penrod — the Ninth Circuit’s the only circuit where negative equity doesn’t count as part of the purchase price for the 910 cars in Chapter 13, and of course there we recruited none other than Ken Klee to write our brief and argue it, and then argue against certiorari , sabotaging his own chance to argue in the Supreme Court; convincing the Supreme Court that even though the Ninth Circuit was the only circuit—there were like eight circuits that had ruled the other way—there was no split in the case law, because it was all an issue of state law. And we’ve been able to get other people to argue and take these cases on, and our briefs have often been cited by the appellate courts. And so I feel very good about that.
[00:16:41] NACBA also been very influential in lobbying on bankruptcy legislation. Believe it or not, the 2005 law could have been a lot worse. I mean, we were able to push back on a lot of issues, and make it significantly less bad than it started out. And we’re certainly continuing to take on that role. We have terrific contacts in the House. Jerry Nadler is going to be the Chair of the House Judiciary Committee. He was with us every step of the way on the 2005, was very active. He was the ranking member of the subcommittee that dealt with bankruptcy. Zoe Lofgren, the second-most-senior member of the Judiciary Committee in the House, is a good friend, really, of Ike Shulman and Norman Hammes in San Jose, so we have great contacts with her. David Cicilinne, who probably will be the chair of the Bankruptcy Subcommittee, is from John Rao’s district in Rhode Island. So we are pretty well-connected in the House, and of course as some of you may have heard, we have another bankruptcy law professor going to the House, going to Congress—Katie Porter, I understand, was called as the winner today in her congressional race. (applause) And in the Senate we similarly have some very good connections: to Senator Durbin, who worked with us on the 2005 law, who worked with us on the mortgage modification law, and has worked with us on student loan issues; Senator Whitehouse, from Rhode Island again, a friend of John Rao. We have some excellent connections there as well.
And we are already talking with the House Judiciary Committee about possible legislation on things that should not be very controversial, such as raising the debt limits for Chapter 13. (applause) I’m not sure anybody opposes that. Possibly some protections for the elderly in bankruptcy. I have to say that, being over sixty-five now, I guess I’m among the elderly, but hopefully won’t be using these protections. Maybe older people can discharge student loans. Trying to reduce the ridiculous amount of paperwork that the 2005 law put into place. (applause) Things that nobody needs, for people who are lower income—why do they need their payment advices and their tax returns, or certainly sixty days of payment advices; maybe just look at a year-to-date paystub; maybe the Chapter 7 debtors who are well below median income shouldn’t have to go back six months to calculate current monthly income. Nobody’s going to look at that. Maybe we could finally get rid of Rule 7004(h) – a ridiculous requirement that I think only Jesse Helms cared about, ever, but managed to get into the 1994 bill.
We’ve been talking about the idea that debtors who have to travel from a distance ought to be able to do their 341 meetings over Skype. You can do court hearings electronically, why can’t you do a 341 meeting? Those sorts of things. And I think if we could get a lot of those things passed, it would make a real difference in the cost. I mean, if a debtor didn’t have to miss a day of work to go to a 341 meeting, right there you’ve saved the debtor at least hundreds of dollars. So those are some of the things we’re working on.
[00:20:51] But I will say that we need your support. If you are not a member of NACBA and you are eligible for membership—which is everybody here except for those who represent primarily consumer creditors—you need to join, and you need to contribute to NCBRC. There are other reasons to join NACBA: we have a great listserv, we have webinars, we have terrific conventions, terrific educational programs, workshops—we’re going on a cruise to Cuba in a few weeks. But the main thing really is you are benefitting from the work that NACBA is doing if you represent debtors, so don’t be a free rider. It doesn’t cost that much to join, there are lots of benefits, but my plea—and I’m going to end with this—is that please, if you aren’t a member of NACBA, you should join. We have our president here, John Colwell. (applause) And we have one of our newest board members, Jenny Doling, from your district. (applause) Go up and talk to them, and they will give you any information. It’s not hard to join, we do have a website, nacba.org, but please, we need your support. With the number of filings—I’ll be candid—with the number of filings going down, the number of bankruptcy lawyers going down, our membership has gone down, and we need the support of everybody. It benefits your clients in every case, and hopefully it will be of even more benefit as we continue to do our work.
So with that, again I just want to thank the association for this great honor, and that’ll be it. Thank you.
(applause) [end at 23:10]