concerns to handle an increase in the number of bankruptcy filings, and the financial ramification from additional charge-offs due to defaults. For creditors’ attorneys, the challenge will be to staff properly to handle any increase in fillings. For the debtor, it is when it will be the right time to file the bankruptcy. Can the debtor be more successful attempting a workout with creditors? Is the debtor able to seek modification or forbearance to prevent foreclosures or repossessions of vehicles? For debtors’ attorneys, the challenge is how to run a practice with a substantially lower number of cases. Are debtors’ firms looking to expand to different types of work, reduce staffing and consider mergers? Can you share any other emergent trends that have been shaping bankruptcy and fraud litigation this year? Federal Rule of Bankruptcy Procedure Rule 3001. This is becoming the basis for increased litigation as it pertains to the filing of proof of claims. The issue revolves around the requirement that the creditor break out any interest, fees and costs included in the balance in the filed proof of claim. The issue for creditors, and specifically debt buyers, is that when the obligations are purchased, the debt buyer is purchasing principal. On revolving credit obligations at the end of the billing cycle, any interest, fees and costs are rolled into principal. Debtors are bringing actions when interest, fees and costs are not provided, stating that the original obligation, if not current when the bankruptcy was filed, does break out those amounts. The actions are commenced as violations of the FDCPA or objections to claims. Debtors are seeking damages and an award of attorney’s fees. Some are even seeking to certify a class action. This issue will continue to evolve, and it may take an amendment of the bankruptcy code or a Supreme Court ruling to stem the tide of litigation in this area. Unfortunately, that is going to take some time. EXPERT INSIGHT 55
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