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Author’s Rights When a Publisher Files Bankruptcy

DISCLAIMER: Just to CYA, I feel like putting up a disclaimer. There is much that I don’t know about the Triskelion situation and any discussion regarding the law and the legal issues surrounding copyrights and publisher bankruptcies are general and not to apply to any one particular situation. If you feel like you are in a position where you, personally, need to apply this information to a case, you should seek a lawyer right away. My posting of my thoughts regarding the legal issues surrounding this matter or matters similar should not be construed as specific legal advice nor does it create an attorney/client relationship.

When Triskelion announcement that it would be closing its doors and filing bankruptcy, the issue of authorial rights arose. I did a little primer on copyright law a couple of weeks ago as it related to Simon & Schuster’s rights grab. For ease of reading, I’ll include the pertinent parts here.

Brief summary of copyright protection:

When an artist creates a work of art, this art has a copyright. The copyright is a form of protection that is granted by the U.S. Congress. Essentially, the writer of a book has the right to

  • reproduce the work (make a copy)
  • prepare derivative works (i.e., a series of books like the Black Dagger Brotherhood series or Eve Dallas series)
  • distribute copies to the public by sale or other transfer of ownership, by rental, lease or lending; (sell print rights)
  • perform the work (i.e., sell the rights to have a movie or tv show based on it);

Essentially an author engages in a sale of intellectual property which are known as the rights of distribution. The question presented is whether an author’s rights to her copyrighted work (her book) reverts to her upon the filing of bankruptcy.

Background of Bankruptcy Proceeding
The goal of bankruptcy is to allow the debtor to have a fresh start, unencumbered by debts. Understanding the goal of bankruptcy is important because that is how bankruptcy judges interpret the bankruptcy code and apply it to each legal and factual question that is put before them. A Chapter 7 Bankruptcy is a liquidation of assets. A Chapter 11 Bankruptcy is a reorganization. These are the most often referred to bankruptcies although there are technically six different kinds. Each bankruptcy is known by the chapter it occupies in Title 11 of United States Code – the laws that govern the federal bankruptcy system.

An uncomplicated personal Chapter 7 bankruptcy can be opened and closed in 4 months. A more complicated one will take more time. Essentially, a debtor files for bankruptcy and is required to file the following items:

  1. schedules of assets and liabilities;
  2. a schedule of current income and expenditures;
  3. a statement of financial affairs;
  4. a schedule of executory contracts and unexpired leases; and
  5. tax returns.

Fed. R. Bankr. P. 1007(b). The above information will include a list of all creditors and the source of all income. Once the petition is filed, all attempts at collection of a debt owed must stop. This is called a “stay.” A creditor cannot initiate or continue lawsuits, telephone calls or even emails that attempt recover a debt such unpaid royalties. If a creditor does not obey the “stay”, the creditor can be held in contempt which might be a fine or even jail time.

A trustee is assigned. Within a couple months of the filing, there is a meeting of the creditors. This is open to the public and held in one of the bankruptcy rooms (generally not a courtroom). The debtor is put under oath and both the trustee and the creditor may ask questions. Generally there are many debtors present. Each one is called up, placed under oath, asked questions and then dismissed. The trustee then gathers up all the assets, liquidates them and determines a discharge plan. The discharge plan repays creditors according to security interest. Those creditors who have a security interest get paid first and then the unsecured creditors follow, in order of priority. If there are no objections to discharge, the case is closed. Once the debts are discharged, any attempt to recover that debt is viewed unfavorably and the creditor can be held in contempt of court (not a good thing).

In many cases, however, there is litigation involved objections to discharge. This is called an Adversary Complaint or Proceeding. It costs $250.00 to file an adversary complaint. Soon after the bankruptcy is filed, a notice is sent to creditors via either mail or electronically, indicating the intent to discharge debts and then giving a deadline by which a creditor can file an objection or complaint. Deadlines in court are hard and fast (generally) and must be met or you can lose your rights entirely. There is one other proceeding for a creditor to take and that is a Relief from Stay. Essentially, the creditor is saying to the trustee and the court that the debt owed is of such a nature that Stay does not apply. It costs $150.00 to file a Motion for Relief from Stay.

Ipso Facto Clauses.

Someone emailed me the following clause that was in one of the Triskelion contracts.

If the Publisher is adjudicated as bankrupt or liquidates its business, this agreement shall thereupon terminate, and all rights granted to the Publisher shall automatically revert to the Author.

Upon such termination, the Author, at his or her option, may purchase any remaining book stock for any print edition (not including electronic downloads or print on demand editions) for one-half of their manufacturing costs. The Author must exercise this option within sixty (60) days of notice by the Publisher

This is known as an Ipso Facto clause and generally held to be invalid by 11 U.S.C.  §541(c)(1)(B) and  §351(e) . In some situations, depending on whether the creditor has an executory contract, these clauses can be upheld but, for the most part, these clauses have no teeth in a bankruptcy case. See, e.g. In re Southern Pacific Funding Corp., 268 F.3d 712, 716 (9th Cir. 2001).

Executory Contracts

An executory contract is one where both sides still have to do something. I.e., in a writing situation, if an author “sold” her story to a publisher and has yet to write the book and the publisher has yet to pay an advance, there are still parts of the signed contract that needs to be executed or accomplished. This is known as the Countryman test (based upon a Professor Countryman who first articulated the test). The 9th Circuit (which is the Appellate court that governs the US Bankruptcy court in Arizona) still follows the Countryman test. See In re Robert L. Helms Construction & Development Co., Inc., 139 F.3d 702 (9th Cir. 1998) (quoting the Countryman test with approval).

In 1992, the Bankruptcy Court in the Southern District of New York rejected the Countryman test and determined that a contract would be deemed executory if the debtor had any obligations to fulfill, such as the payment of royalties. Cohen v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert Group, Inc.), 138 B.R. 687, 708 (Bankr. S.D.N.Y. 1992). While some Intellectual Property (IP) attorneys believed that this should be the standard, Drexel has not been widely adopted. See Moore, Entertainment Bankruptcies: The Copyright Act Meets The Bankruptcy Code, 48 Bus. Lawyer 567, 583 (1993).

A contract is not considered to be executory if the author has completed the book (fulfilled her side of the bargain) but is due royalties (the publisher’s side of the bargain). There are two cases which address the nature of an author’s contract with a publisher and both cases say that the contract is not an executory one. In re Stein & Day, Inc., 81 B.R. 263 (Bankr. S.D.N.Y. 1988) and In re Learning Publications, Inc., 94 B.R. 763 (Bankr. M.D. Fla. 1988).

Why is this distinction important? Because section 365(e) says that in the case of executory contracts, a debtor might not actually be in possession of those rights and therefore cannot assign or sell them to someone else. Further, the author can force the debtor to assume or reject a contract. If the debtor assumes it, it must cure all past defaults (pay past unpaid royalties) and prove that it can fulfill future obligations. If the contract is rejected, the author can take her rights and go away. It is also possible, under some provisions of section 365(e), that you could prove that the contract is not assumable and thus the debtor must reject the contract and the author can take her rights and go away.

If the contract is non executory, then you turn to the copyright law which says that a transfer of rights cannot be done without the permission of the licensor (the author). The problem is if the contract contains permission for the publisher to resell those rights, then the author has given permission already and therefore the rights are those to dispose of by the bankruptcy trustee.

The law also provides that the trustee can go back and reclaim transfers (reversion of rights) which were done within 90 days and during a time of insolvency. Or another creditor can apply to have the pre-petition transfer negated.

The question of whether authors could band together is a sticky one because each author has a different interest and could be in direct conflict with another author. I.e., an author who received her rights back 6 months ago but hasn’t been paid royalties for six months might rather see all the contracts assumed and sold so that there was money in the estate. Her interests would be in direct conflict with another author who hasn’t got her rights back yet.

Some links of interest:

The US Bankruptcy Court for the District of Arizona has a proof of claim form online that can be filled out by anyone who is owed money by the debtor. This claim form is one that you can fill out online and then print off and fax to the clerk of court at (602) 682-4004.

The Arizona court system has always been light years ahead of its sister courts in terms of technology (they have kiosk divorces). There is alot of information on the site that can be helpful in filling out forms and securing one’s position as a creditor in the bankruptcy.

Conclusion.

Finally, let me end with the a note of caution. I read on Angela James’ blog that some Triskelion authors were debating online as to whether they could repackage their work (ie. changing the name) and resell to a different epublisher. Without a clear conclusion as to whether the authors actually have the distribution rights to their work back from Triskelion, any action like that could be viewed as contempt (fine or jail) or fraud (big money damages). I think the author has to ask herself whether she wants to be responsible for possibly embroiling the new publisher in an expensive suit in bankruptcy or whether she wants to gain a reputation for deviousness. That can’t be good for business.

I think an author has three options. She can hire an attorney to explore various ideas such as pursuing the claim that the author’s contract is executory in nature. If the author cannot afford a lawyer, then she can contact the clerk of court for assistance. It might be that an author may decide that the time and expensive to recover her rights aren’t worth it.

I know this all sucks and I hope I don’t sound cold hearted when you read this. That’s not my intention (although if you get to know me, you’ll know that I am a just the facts kind of person). I just know that the legal system is confusing and complicated and I hoped to shed some light on a topic that seems of importance to the romance community. My best to all of you authors in pursuing your dreams.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

32 Comments

  1. Jayne
    Jun 24, 2007 @ 04:10:25

    “Without a clear conclusion as to whether the authors actually have the distribution rights to their work back from Triskelion, any action like that could be viewed as contempt (fine or jail) or fraud (big money damages). I think the author has to ask herself whether she wants to be responsible for possibly embroiling the new publisher in an expensive suit in bankruptcy or whether she wants to gain a reputation for deviousness. That can't be good for business.”

    The first thing that popped into my head after reading this part was this- Dara. Joy. ‘Nuff said?

    And if those Ipso Facto clauses that other publishers have been mentioning aren’t worth the paper they’re written on, why are they even included on any contracts? Shouldn’t a contract lawyer speak up and warn clients not to count on these?

    Jayne- the confused

  2. Pam Champagne
    Jun 24, 2007 @ 05:10:57

    Thanks, Jane. Great information. And you didn’t sound cold. The fact that you went to all this trouble to post shows you care about the authors’ situation.

  3. Angie
    Jun 24, 2007 @ 05:40:22

    I find myself really wondering what a creditor would do with the contracts to reclaim money. It seems unlikely to me that an established publisher would make a grab for them and buy them, know what I mean? So what are the other options?

    I suspect it’s the authors owed royalties who are going to lose out. That though it might take time, rights will eventually be returned. Of course, I’m just purely speculating. None of us will really know until it all plays out. The whole thing is a cruddy deal.hopefully it can be resolved quickly.

  4. Avaron Dale
    Jun 24, 2007 @ 07:17:32

    I second Jayne. Someone please explain to me why the Ipso Facto clauses are included in a contract if they are invalid in the case of bankruptcy of the company?

  5. Jane
    Jun 24, 2007 @ 08:37:14

    Ipso Facto clauses are likely to be included in hopes of a change in the law or a reinterpretation of the bankruptcy code. I.e., if you don’t have it and the law changes, you wouldn’t benefit from it. Having a clause in the contract that is unenforceable doesn’t make the entire contract a failure.

    Some courts, like the Drexel court, have tried to interpret the code to benefit the creditor and there are some legal scholars who believe that ipso facto clauses are important because it is unfair to the solvent party.

  6. sherry thomas
    Jun 24, 2007 @ 08:45:59

    Thanks for the post. You are very good at making the law easily understandable.

  7. Teddy Pig
    Jun 24, 2007 @ 08:52:05

    But is that clause not a outright misrepresentation of the legal realities around a bankruptcy. So why even have it?

    If the law does not recognize that clause or what it describes as happening then to me the person who created the contract is intentionally misleading the person signing the contract.

    My mother was a paralegal and taught me to suspect all lawyers and the use of legalese. It seems hard enough to just understand what they are having you sign and the ramifications of signing it but then you bring up “hopes of a change in the law” and I start to wonder.

  8. Jane
    Jun 24, 2007 @ 08:58:37

    TP – the law is not always a settled proposition with one court interpreting a clause differently than another. But as to the second part, if you sign a contract and do not know the provisions of each part of the contract, that’s on you. The only time you can complain about a contract that you signed is if the contract is signed under coercion, duress, incapacity, or if you can’t read, etc.

    The court presumes that you’ve not only read it and signed it, but understand it so there is no fraudulent misrepresentation by including it in the contract.

  9. Teddy Pig
    Jun 24, 2007 @ 09:09:57

    Right but as you have pointed out here this clause assumes you have knowledge of the legalities of a bankruptcy and understand the obfuscation in it’s wording.

  10. Jane
    Jun 24, 2007 @ 09:18:36

    TP – I think the onus is on each person signing a contract to understand its terms and know the legal affect of them. I don’t see it as an obfuscation or a misrepresentation. In fact, it is a clause that has no benefit to the publisher at all so why would they include it to intentionally mislead anyone? If it does anything at all, it would help an author if it could be upheld (as has been in certain circumstances).

    The clause, as it stands now, operates to the same effect as if there was no clause. In a fraud, you have to show reliance. Would an author have done anything different if that clause was not included? The clause is for the protection of the author, not the publisher.

  11. Teddy Pig
    Jun 24, 2007 @ 09:47:47

    “Would an author have done anything different if that clause was not included?”

    Well yes in my mind, the author would not be lead to think that the “typical” bankruptcy proceedings DID NOT apply to them and their rights and that this clause somehow “covered them” in all cases of this company going bankrupt as to make them exempt.
    When as you have stated it does not.

    “The clause is for the protection of the author, not the publisher.”

    There it is though the wording of under “certain circumstances”.

  12. Jane
    Jun 24, 2007 @ 09:51:26

    I guess I don’t see what you are getting at TP. The clause has no effect for the publisher under any circumstances. The inclusion is for the benefit of the author.

    Also, why do you assume that publishers know more about b-ruptcy law than authors? Samhain has those very clauses in their contracts. The fact is that you simply should not sign a contract without understanding all the legal terms. If you do sign a contract without undertaking an investigation as to what your rights are, the court does not feel sorry for you nor will it hold your hand. If it isn’t worth a couple hundred dollars for a legal review, then it must not be an important legal commitment you are making.

  13. Teddy Pig
    Jun 24, 2007 @ 09:52:13

    But I do agree with you Jane… Always pays to have a good attorney look these things over.

    In a world full warning labels you would think they would have included contracts.

  14. Linn Random
    Jun 24, 2007 @ 09:53:47

    I’m in the front row of Dear Author and cheering. You have not only provided a forum but offered some eye opening facts that every author should take heed to learn and understand.

    For years I’ve been telling authors your books are not your babies this is your business. Its important to learn the business side of this industry–all of it. From understanding contracts to the importance of marketing and promotion.

    I’ve gone back into several posts by Anon and he/she was so right on so many points. She was never hateful, though some of her/his hurts came through loud and clear. He/she was screaming in warning but in retrospect it was already too late. Six months, this can go back six months!

    No one can put a price on the late night hours, the expense to promote your work much less explaining it to readers. In each book lies an author’s dream. How dark does your heart have to be to kill a dream?

    Where are Ron and Kristi Studts now?

    Have they apologized? How hard is it to do the right thing? They knew this was a possibility months ago.

    For those of us who once built Triskelion to the last author who had their book accepted, we are all on a rollar coaster that rides up with hope, down with anger and injustice, around the curve to an uncertain future left for the books at Trisk.

    I apologize for this soapbox but I so feel anguish for the authors caught in this vortex.

    I will end as my previous post because I do believe in time, each author will regain their rights to any books tangled in the Triskelion downfall. I would urge everyone to continue on with your wip until that time. I would urge everyone that while you weren’t accorded the rights of human decency you deserved, if you are with a new publisher, make sure they are aware. I’ve read some authors are considering to just simply change the title, name or their work and submit it to an unsuspecting publisher. DON’T. Thats not only dangerous but its fraud and the long term effects will last longer than this big bump inthe road.

    Refocus your attention to your wip, remember who you are, a wonderful writer, author. Like a Phoenix, each of you will rise again, stronger, more powerful and beautiful your new found wisdom has come with a very high price. You will see your name on a book again, I beleive in you.

    And again Dear Authors, thank you for giving everyone good informatiion. This is not your fight and yet, you’ve more than stood for right and the honor of everyone here. Thank you, God Bless you. Linn

  15. Sarah Frantz
    Jun 24, 2007 @ 10:12:51

    Jane, you amaze me with your dedication in deciphering and your clarity in writing here about incredibly arcane bankruptcy law. Well, I guess it isn’t actually arcane, it just sounds like it. As someone who has absolutely no financial interest in this (I don’t think I ever even bought a book from Trisk), I just want to thank you for being a place where people who are involved can come for some sort of clarity and information. I think the service you’re providing is absolutely invaluable. Wow.

  16. Doreen Orsini
    Jun 24, 2007 @ 10:27:13

    Thank you for doing this. The varying opinions from lawyers amazed me. Literary and bankruptcy lawyers! I agree with those who say that this will eventually end and rights will either end up in the author’s hand or — hopefully — a publisher’s. The contracts will still be valid if sold, meaning royalties must be paid by whomever buys it and publishes the book. I’m setting book two of my vampire series aside and getting to work finishing my new series. Sadly, my favorite aunt passed away last night. My grief has given me a chance to look at this and say, “It should be the worst of my problems.” Authors can write more books, ladies. Release those stories that were put on the back burner while you promoted Triskelion’s releases! And hug those you love. They matter.
    Doreen

  17. Charlene Teglia
    Jun 24, 2007 @ 10:46:06

    Thanks for a wonderfully concise explanation of the ins and outs. I hope to never find myself mired in a similar situation, but it’s been very educational and helpful to understand that I can’t count on the clauses in my contracts to protect me in the event of publisher bankruptcy. As GI Joe says, knowing is half the battle.

  18. Jayne
    Jun 24, 2007 @ 10:59:23

    Okay, here’s a question for ya Jane. If I’m Nancy Newauthor and am ready to sign with a publisher, do I need to get a lawyer who is licensed in the state in which that publisher is based to look over the contract for me? Or does it not matter? And should this lawyer point out all the clauses and parts of the contract that aren’t legally enforceable?

    I guess as a naive non-lawyer, I’m still sitting here in slight shock that a part of a legal contract isn’t legal.

  19. Robin
    Jun 24, 2007 @ 11:00:17

    But as to the second part, if you sign a contract and do not know the provisions of each part of the contract, that's on you.

    And the law does protect the person who did not write the contract when there are ambiguous terms, because any ambiguity in a contract is interpreted against the contract drafter. So the onus is on the drafter to write a valid contract and the onus is on the other signatory to know the terms to which s/he agrees. Although courts no longer formally emphasize the “meeting of the minds” test (except for my favorite tv show, “The People’s Court), the whole idea of a contract is that it represents an agreement between parties to something for which both parties have both duties and rights. And ultimately, the freedom to contract is deemed more important than the possibility of having an unfair contract, although equity is strongly considered when a contract relationship lands in litigation. And lawyers make mistakes, too. I was always surprised at how eager many of my law school classmates were to get out and practice, because part of me is terrified of what’s going to happen once I’m licensed and can give legal advice or handle issues outside the kind of supervision — and protection — we get as law students. Bright, conscientious lawyers are absolutely fallible, so even contracts drafted by well-respected attorneys can contain errors and flaws.

    As to the inclusion of Ipso Facto clauses, many contracts are so-called “boilerplate” (e.g. leases), where the parties are basically filling in a form (and leases often have these IP clauses in them, too), and often neither of the people entering into that kind of contract is a lawyer. So these types of clauses appear routinely even though they are rarely enforceable in a bankruptcy situation (IIRC they are often broader than bankruptcy, and so there might be other situations in which they can be enforced, but I may be wrong about that).

    I would urge everyone to continue on with your wip until that time. I would urge everyone that while you weren't accorded the rights of human decency you deserved, if you are with a new publisher, make sure they are aware. I've read some authors are considering to just simply change the title, name or their work and submit it to an unsuspecting publisher. DON'T. Thats not only dangerous but its fraud and the long term effects will last longer than this big bump in the road.

    As a layperson with no stake in this mess, I really hope that the Trisk authors heed this advice. After the 2005 changes to the Bankruptcy code (lobbied for with a mind-boggling amount of money by credit card companies), it is much more difficult to file Chapter 7, because it is generally for liquidation of consumer debt. The presumption in Chapter 7 now is “abuse,” so the debtor basically has to prove that s/he is legally worthy of financial discharge. And even though Trisk is a business, it can qualify as an “individual” under Chapter 7 rules. But that doesn’t mean that they are off the hook once they file, that they will qualify for all the Chapter 7 rules (there are complex tests to determine fresh start eligibility), and that they won’t be transferred into, say, Chapter 13, where they will have to pay off their debts instead of just discharging them. There is A LOT of process in a bankruptcy case, especially if the financial situation of the debtor is complicated. I knew NOTHING about bankruptcy until I took a law school class on it (taught by the former U.S. Trustee for the area encompassed by the Trisk case), and I was absolutely blown away by all the ins and outs, all the rules and limitations and areas of litigation. If I were a Trisk author at this point, I’d mentally separate myself from those Trisk books until everything gets straightened out (and following the advice of a good attorney or calling the AZ clerk’s office, or following up with RWA), because who knows what’s ultimately going to happen and how long it’s going to take, and who would want to spoil their reputation over that kind of thing? I’m not a Romance author, but I give away intellectual property every day, and one thing I’ve learned is that there’s always more where that came from — for every idea or piece of writing I give away (as work for hire), two more can come in to fill the gap. And usually the new ones are better than the old ones.

  20. Jane
    Jun 24, 2007 @ 11:29:10

    Some contracts have clauses which indicate what state’s laws govern but copyright issues are governed by federal courts which are supposed to be interpreting the law uniformly – although in reality that isn’t true. For the most part, though, these clauses are uniform and it shouldn’t matter where the contracting parties reside.

    As for the Ipso Facto clause, my opinion is that it would be worse to leave it out. Let us say that the b-ruptcy courts start enforcng the clause and I was the lawyer who said we should leave it out because it isn’t enforceable – I could see myself facing a huge malpractice suit.

  21. Lynne
    Jun 24, 2007 @ 11:40:29

    To all the Ja(y)nes — this post is yet more proof of the many ways you guys kick ass. Thank you for doing this.

  22. Lynne Connolly
    Jun 24, 2007 @ 16:58:15

    Thank you Jane. Very helpful.
    The way I look at it is this – I try to make every book I write better than the last one. I tend to write series, so I can’t deny this is a blow, but it does give me a chance to get a new series underway, one I’ve been dying to write.

    I had 12 books tangled up in the Triskelion fiasco. But when I looked more closely, 2 have expired contracts (in January and March this year) and the contracts weren’t formally renewed, although it says in the contract it has to be (the old Triskelion contract). One contract I didn’t send back, so it was never Trisk’s to begin with, and I have a release note dated June 1st for 7. That leaves 3, and I can’t resell one of those, because it’s part of a multi-author series and guess who wrote the first book – yep, Kristi Studts!
    So if the court decides not to backdate claims, I have all but 2, but I’d love those 2 back and I don’t want to resell the Department 57 series without them, if I can help it.
    Sigh. It’s a mess.
    But – I have new books out, elsewhere, one upcoming from Samhain, and some really interesting invitations from publishers. So it’s not all bad.

  23. Linn Random
    Jun 24, 2007 @ 19:03:32

    Unless there is something wrong with my computer, TriskelionPublishing.com is officially offline.

    Sad.

  24. Jewel McGuire
    Jun 24, 2007 @ 20:32:56

    There is nothing wrong with your computer. Both the Books loop and the Fever loop are offline as well. I guess the Studts have decided not to wait until the 2nd of July to close everything down.

  25. Miki
    Jun 24, 2007 @ 20:46:52

    After the 2005 changes to the Bankruptcy code (lobbied for with a mind-boggling amount of money by credit card companies), it is much more difficult to file Chapter 7, because it is generally for liquidation of consumer debt.

    Sigh.

    Okay, first, I work for a mortgage company, and it’s a part of a larger organization that includes banking and credit cards. So I’m sure that’ll make my opinion suspect.

    But it drives me crazy on a purely personal level when people talk about this issue and blame the companies that lend money or offer services with a promise for later payment. Why shouldn’t they want to be paid for what they offer?!

    I have friends who made a point of signing up for new credit cards and racking up as much debt as possible, once they decided to file for bankruptcy. Friends who learned enough about the laws to be sure to protect their house and cars, while screwing every creditor they couldn’t pay.

    It made me crazy then, and these are my friends! We hear about this kind of abuse all the time, and that to me necessitated changes in the law. (I’d love to see something done about wrongful litigation, too).

    I’m a person who believes in personal responsibility. It shouldn’t be easy to go back on your word. It shouldn’t be easy to steal from companies who employ working stiffs just like them. It should be necessary to prove why you deserve a chance for a clean slate (like loss of a job or illness).

    And for what it’s worth, I don’t think it should be easy for business owners to screw their “suppliers” either – in this case, the “suppliers” being the authors.

  26. Robin
    Jun 24, 2007 @ 22:31:39

    But it drives me crazy on a purely personal level when people talk about this issue and blame the companies that lend money or offer services with a promise for later payment. Why shouldn't they want to be paid for what they offer?!

    As someone who is anal about paying my bills on time, I would be THRILLED if everyone was responsible — in part because it would make it so that other people’s failures didn’t have to fall on me in the form of rising interest rates, etc. But that doesn’t negate the fact that the credit card companies spend hundreds of millions of dollars to lobby for changes in the bankruptcy laws, changes that benefit them and that have had differential effects on others. Whether those changes are fair for consumers — especially in the midst of predatory lending practices and abolition of usury laws for interest rates — is arguable and argued among bankruptcy experts. Elizabeth Warren, who wrote the bankruptcy case book we used, is very critical of the 2005 changes, NOT because she’s an enemy of credit card companies, but because she — and others — see the bankruptcy code as a labyrinth of intersecting interests and the recent changes as very one-sided and problematic in other ways.

    Although my initial post did not include a critique of the credit card companies (merely a fact about their influence on the 2005 changes to the code), I do think that it’s completely possible to support the need for consumers to be more responsible and conscientious about dealing with their debt while at the same time feeling that the way the code changed was not necessarily fair for honest consumers, either. And truly, I do have a difficult time seeing credit card companies as victims, especially in a lending environment that too easily extends credit and actually thrives when consumers make late payments and rack up late charges and increased interest rates. I have friends who are on the lending side who tell me that creditors LOVE those customers off of which they can make the most money in late fees and interest. So yeah, I have problems with that, too. Basically, I think there’s bad behavior on both sides of this particular fence. And if consumers should be held to a higher standard of personal responsibility (and I agree that it shouldn’t be a cakewalk to clear one’s debts), I guess I’m skeptical about the idea that the credit card companies should have so much influence over how that occurs.

  27. Jayne
    Jun 25, 2007 @ 04:56:00

    Has anyone watched the documentary “Maxed Out?” Granted it comes down more against the predatory lenders then those in debt but it’s a frightening look at the staggering debt load in the US today.

  28. Keishon
    Jun 25, 2007 @ 07:46:13

    Has anyone watched the documentary “Maxed Out?�

    Is this out already? Must go see…thanks!

  29. Jayne
    Jun 25, 2007 @ 09:37:00

    I watched if from Netflix this past weekend.

  30. Robin
    Jun 25, 2007 @ 10:05:07

    For anyone interested in “Maxed Out,” here’s a good synopsis from the film site itself, as well as info on its availability.

  31. Miki
    Jun 25, 2007 @ 20:14:33

    But that doesn't negate the fact that the credit card companies spend hundreds of millions of dollars to lobby for changes in the bankruptcy laws, changes that benefit them and that have had differential effects on others.

    That’s fair enough, Robin. I wasn’t really trying to defend big business. And don’t get me started on what they pay CEO’s today (at the same time they’re sending our jobs “offshore”). I only mentioned that I worked for one because I wanted to be up front about my background.

    My friends’ abuse of the system has made me … sensitive :grin: … to complaints about the bankruptcy laws. So my reaction was a bit “knee-jerk”.

    On the other hand, all organizations – big or small – lobby for laws that benefit their charters. Senators and Representatives lobby for federal money for their states. It’s the nature of the beast. I wish we could get rid of lobbyists. But I also know that if the “official” role went away, it would only happen behind closed doors. I’m too old and cynical to be idealistic about our government. :grin:

  32. paula
    Nov 04, 2007 @ 18:12:49

    For those who did not realize it, the bankruptcy clause was valid and did work until the bankruptcy laws were rewritten in 2005 and outdated the once standard contract clause. Until someone takes the issue into a federal courtroom and sets a precedence as to if the clause can stand or not, no one will ever know the real power that clause. I wish the clause were grandfathered, but alas, no such luck exists.

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