Attempt to require “losers” to pay attorney fees fails

 Consumer Law, Indiana  Comments Off on Attempt to require “losers” to pay attorney fees fails
Feb 012013

Indiana Senate Bill 88, which would have required the “loser” in a civil lawsuit to pay the “winner’s” legal fees, has been withdrawn by the author, Sen. Mike Delph, R-Carmel. Hallelujah.

Why was this a bad idea? First, not all cases have a clearly defined “winner” and “loser” when all is said and done. Sometimes, each party wins on at least one issue, and loses on at least one more. Sometimes nobody “wins,” especially in divorce and guardianship cases.

Second, assuming the reason for this change was to prevent frivolous lawsuits, this purpose is already served by IC 34-1-32-1, which allows a court to award attorney’s fees to a  prevailing party, if it finds that another party brought or maintained a frivolous, unreasonable or groundless claim or defense,or litigated the action in bad faith.

Third, just the possibility of being forced to pay the other side’s fees – even if there is a really, really good case – would have a chilling effect on bringing lawsuits altogether, including those with merit. This is especially true for those with the most to lose – individuals who have already been taken advantage of, who are already loathe to rock the boat again and call attention to their problems, who are on the brink of financial ruin (if they haven’t already gone over) and the only way they can afford to get help for their problems is to seek out pro bono legal counsel, agree to contingency fee arrangements, or proceed  without an attorney at all and hope for the best. Agreed, not all cases should be brought, and not all problems are best resolved through the judicial process. However, if we take away the last hope of those who have been victimized, scammed, or treated unfairly, then those that victimize, scam, and act unfairly will only continue to gain power and resources at the expense of those that don’t.

Finally, this is America.  The English require the loser to pay – which is why it is called the “English Rule.”  The rule that requires each party to pay its own fees and costs is called the “American Rule.” Let’s keep it that way.

Maybe it isn’t just you.

 Consumer Law  Comments Off on Maybe it isn’t just you.
Jun 192012

Have you had trouble with your credit card company?  Have you ever wondered if that same company did the same d@mn thing to other people too?  Today, the CFPB not only released a report of complaints made against the credit card companies, but it also announced that it has launched a new database of consumer complaints.  OK, so there’s not much there – it’s in beta, and only has complaints received since June 1st, 2012 (even though they have been accepting complaints since July, 2011).  And the search parameters are rather clunky.  I tried to search for complaints coming out of the state of Indiana (I saw one from a local zip code, so I knew they were there), but you can’t do that (easily, anyway – and face it, I need quick and easy).  But the CFPB is looking for feedback, so go ahead – check it out and give them some.

Generation gap + income gap = The Kids Aren’t Alright

 Bankruptcy, Consumer Law  Comments Off on Generation gap + income gap = The Kids Aren’t Alright
Nov 092011

We all know how hard it used to be for prior generations – struggling to get to school in the dark, through deep snow, uphill both ways  – you know the jokes.  However, what made that joke funny was the hope – nay, the knowledge – that the younger generation was going to have a better life than the one before, and that one’s assets and net worth would increase over time.  Now, those expectations are in real jeopardy. 

According to a new report from the Pew Research Center, the wealth gap between the older and the younger generations as stretched to the widest on record.  There are two aspects to this study: (1) how much wealthier each age group is as compared to the younger generations, and (2) how the wealth of each age group has changed over the past 25 years.  

Let’s start with (2) – same generations, different years.  After adjusting for inflation, the net worth of households, as a whole, increased by 10% from 1984 to 2009.  Not bad, right?  However, breaking that down by age group, the disparity of the changes between the groups is huge.  At the “top” end of the age spectrum (households headed by an adult 65 or older), the net worth increased by 42% from 1984 to 2009.  However, in that same period of time, the net worth of households headed by an adult under 35 decreased by 68%.  Households headed by those between 35 and 44 didn’t fare much better – their net worth decreased by “only” 44%.   At least there is still some net worth – in 2009, 20% of households had no or negative net worth (compared with 11% in 1984). 

Next, we look at (1) – the gaps between the generations themselves.  In 1984, the wealth disparity between the over 65 and the under 35 crowds was only 10 to 1.  In 2005, it was 22 to 1.  In 2009, it was 47 to 1.  And the numbers themselves cause concern – the median net worth for the under-35 crowd dropped from $11,521 to just $3,662.  That is only one medical emergency, one blown transmission, or one dead furnace away from having no net worth at all. 

Why is this?  I’m sure some of this related to the various save/spend policies of each generation – and each younger generation seems to focus more on the “spend” aspect (or maybe I’m just becoming one of those old fogeys).  However, other factors noted in the report include:

  • Declining home values, leading to decreased equity.  This has a greater impact on the those with newer mortgages with balances at (or more than) the home’s value. 
  • Delayed marriages and increases in single parent households.  Not sharing housing and child-rearing expenses with a spouse (or spousal equivalent) definitely leaves less $ available for saving for the future. 
  • Delayed retirement.  This not only increases the income (and assets) of those keeping their jobs, but also delays employment for the person that would have otherwise filled the vacancy caused by retirement. 
  • Higher debt loads – especially student loans.  And don’t forget that student loans are forever – if you can’t afford them, you can’t get rid of them in bankruptcy.  Ever.  Well, unless you’re dead.  Maybe. 

So, what to do? 

  • Tackle the student loan debt problem.  There are plenty of contributors to the problem – the schools who charge way too much for way too little, because that’s how they make money; the lenders who pass out loans like Halloween candy, knowing that the government will foot the bill, even if the student can’t; and the students who treat loans like “free” money or a substitute for a real income, with no understanding (or complete denial) of the impact these loans will have on their ability to build a post-school life.  If we make student loans dischargeable – or, at least, treat them like taxes (e.g., priority debts, and dischargeable after so many years have passed), then lenders will act like lenders and less like over-indulgent grandparents, and schools will be forced to evaluate prospective students for their ability to make a (real) living with the degrees the schools are selling, and control the costs of getting a degree.   And, at the very, VERY least, if student loans are SO important that they can’t ever be discharged, can we at least force students (and their co-signing parents) looking for student loans to get at least the same amount of “education” that we require those filing bankruptcy to get?  It may be the only real “education” some of these students actually receive. 
  • Allow for cramdown of mortgages on primary residences in bankruptcy.  Right now, if you owe more than your house is worth, you file bankruptcy, and you want to keep your home, the bankruptcy court can’t help you much.  Unless you convince the lender to reduce your principal (and good luck with that), you will be stuck with that ugly principal balance.  Even if you get a modification, the payment reductions come from reduced interest rates and longer terms, not a drop in the total amount owed.  Giving homeowners the power to reduce their principal balances in bankruptcy might get the mortgage lenders to start coming up with better modifications – before a homeowner has to resort to bankruptcy to survive. 
  • Another suggestion (thanks to Harry Holzer, a labor economist and public policy professor at Georgetown University) is to consider re-allocating at least some the federal government’s resources used for retirees’ to the younger generations, and to minimize (or reverse) cuts made to education and cash assistance for poor families.   Nice, but not likely to succeed under the current regime. 

 We’re not done yet.  These numbers will get worse before they get better (if they get better).  And if we, as the individual people whose actual lives go into these numbers, don’t take care of ourselves, who will?

Swimming in Different Oceans

 Consumer Law  Comments Off on Swimming in Different Oceans
Jul 272011

According to an analysis performed by the PEW Research Center, the wealth gap between whites and minorities has widened.  REALLY widened.  Not that it was all that great before – during the late 80’s and early 90’s, the ratios of median net worth for white households versus minority households ranged from about 7:1 to 10:1.  Between 2005 and 2009, however, that ration jumped to 15:1 for Hispanics, and almost 20:1 for blacks.  This disparity is the largest since the federal government started tracking this data 25 years ago. 

So, what caused this increased disparity?  Why didn’t the economic meltdown and later “recovery” affect every group equally (or at least more equally)?  A rising tide raises all boats, right?  Well, not if they are in different oceans – or, in this case, invested in different asset classes.  For all groups, home ownership is the biggest contributor to net worth.  However, for minorities, especially younger Hispanics and African-Americans, their home counts for more than half of their net worth.  For whites, that percentage is 44%.  The other major contributor to net worth (particularly older whites) is investment accounts – 401(k)’s, stock accounts, etc.

But why does this matter?  After the crash in 2008, the stock market rebounded, and now is doing better than ever.  The housing market didn’t, and will remain in turmoil for many more years.  Plus, many people in financial trouble deplete their retirement accounts to pay their mortgages, literally mortgaging their futures. 

Obviously, there’s much more to this disparity than just house v. stocks.  But this is something that can be helped, if the federal government and their lender cronies decided to view homeowners with a little less distain.

New Foreclosure Laws in Effect! But before you pop the cork…

 Consumer Law, Foreclosure, Indiana  Comments Off on New Foreclosure Laws in Effect! But before you pop the cork…
Jul 142011

This past July 1st, a slew of new (and amended) Indiana statutes went into effect, including the ones in Senate Enrolled Act 582.  SEA 582 contains several new and significantly changed laws regarding residential foreclosures.  As I see it, have some of these changes are good, some are not so good, and some just make me nervous.  Over the next few posts, I will delve into what I see as the most significant changes in SEA 582, and what they mean to Hoosiers facing foreclosure. 

To start, here is my summary of the provisions in SEA 582 that will have the greatest effect on Indiana homeowners and the attorneys that represent them:

1.    Changes to the foreclosure settlement conference process (IC 32-30-10.5 et al).  There are some helpful changes here, including improved notice to homeowners of the availability of a settlement conference, clarification of what, when, and to whom documents must be provided by the borrower and the creditor, a prohibition against charging the homeowners for the lender’s attorney’s fees for attending the settlement conference, and treating settlement conference requests as an appearance under the trial rules. 

However, there is one change makes me pause, namely, the addition of IC 32-30-10.5-8.6, which gives the judge the authority to order a borrower to make monthly “mortgage” payments, either to the court or into an attorney trust account, while the foreclosure action continues.  These payments are then to be disbursed either to the lender or the homeowner, depending on what happens during the foreclosure action.  Although the idea is worthy (a homeowner must be able to make monthly payments in order for a modification to succeed), I see some potential problems and consequences for unwary homeowners and their attorneys.  

2.    Creation of a new chapter granting immunity for lenders and others entering onto property that is “vacant” or “abandoned.”  This falls under the “nervous” category.  I’ll delve more into what constitutes “vacant” or “abandoned,” and how this can either help or, in the wrong hands, hurt certain homeowners. 

3.    A “suggestion” that the Legislature establish a committee to consider switching to non-judicial foreclosure.  Oh, boy.  I know, putting together a group of people to discuss whether to make a major change in how (and how fast) homeowners can lose their homes is a long way from actually making that change.  I also know that we are not the only state to consider this change (Florida has batted this one around, too).  So, I will go through some of the pros and cons of both types of foreclosure, and what Indiana homeowners could expect if this committee decides to recommend changes.  

 That’s enough for now.  Stay tuned – I’ll keep these postings coming over the next couple of weeks.