The following article written by attorney Elliott Levin, of Rubin and Levin, Indianapolis, Indiana is reprinted with Mr. Levin's permission. It should be said Mr. Levin's firm is one of the prominent creditors rights law firms in the state of Indiana and Mr. Levin is past president of the Commercial Law League of America. While the opinions are Mr. Levin's only, CCC welcomes comments or rebuttal to Mr. Levin's article.

Since the 1898 Bankruptcy Act, the foundation of the Bankruptcy Code has been that, if one gives up his or her nonexempt assets, they are entitled to a discharge in bankruptcy. This social safety net has given millions upon millions of consumers and individually owned business persons what is known as a fresh start, an attempt to restart their lives, free of debt, but again after having given up to a trustee in bankruptcy for the benefit of creditors all of their nonexempt assets. We know that the exemptions in every state run the gauntlet, and the farther west one goes, the more liberal the exemptions have become. In many states, notably Florida and Texas, there are virtually unlimited homestead exemptions. The exemptions are either written in the state constitution or passed by the legislature. We have all learned to live both with meager exemptions and with liberal exemptions.

What we have not come to live with and do not understand are the ongoing attempts to amend the Bankruptcy Code. The arguments set forth are that apparently working people are abusing it.

It is inconceivable to me how one statute, pushed by the credit card industry and financial institutions, can receive such negative publicity and such a negative response by so many academics, judges and practitioners, and still have the chance of becoming law. Not only have the vast majority of judges, practicing attorneys, panel trustees and well-noted law professors, such as Professor Bruce Markell, taken a stand against amendments to the Bankruptcy Code because of so-called abuse, but also most of the labor unions in our country today have taken an equal stand. If this is true, how can such a bill continue to be pushed in Congress and have the possibility of passage. The bill is un-American. It provides the limits that individuals may spend on household expense, food, clothing, car payments and places the government in the position of an extended household member who has veto power over how we spend our money. Attorneys must verify that their clients' Schedules of Assets and Liabilities are correct. The system is not abused, the delivery of free currency to those who cannot manage, is the abuse. I sit as a trustee in bankruptcy and if I may suggest, where an abuse exists, it is reported and there are proper procedures to convert or dismiss a case. Of any of the hundred cases I hear, few, if any, are "abuse". It is the hard working stiff who has lost his job, had overwhelming medical expenses, or some other catastrophe, like a failed business. I just do not see people abusing the system.

This is not a simple case. Present Bankruptcy Code provisions, notably 11 U.S.C. 507, protect against substantial abuse. Congress does not hesitate in promoting legislation to go after the big guys, like Michael Milliken from the 80's, or the chief operating officers and chief financial officers of Enron, Worldcom or Tyco, presently. Why do they place within their sights hard working individuals who might have had a calamity, such as high medical bills or loss of a job, simply because there might be some minimal abuse of the system.

I once read that the default rate with credit card companies is less than five percent. Some credit card companies charge up to 21 percent and their profits are incredible. These are the same companies who send unsolicited credit cards in the mail. Is it naïve to suggest that they have created their own defaults by making credit available to those who should not be extended the credit?

I was once told that passing legislation was a lot like making sausage, nobody ever wanted to know what went into it. I think I know what goes into this sausage. The credit card industry has spent hundreds of millions of dollars in lobbying fees and in contributions, and one might well ask, where is the personal responsibility of the credit card companies, not of the individuals who with the safety net provided by Congress may be able to get a fresh new start after bankruptcy. Somebody once told me that the camel was the result of a committee decision-it must have been a committee of Congress.

All of us at CCC of NY would like to welcome Thomas Young to the company. Tom comes to us with over 23 years sales experience and is a welcome addition to our Sales Dept.

We are starting a new feature in this month's Bernie's Brainers highlighting some questions we are asked by clients such as you. These types of questions come up periodically. Many of you may have had similar questions recently, or if not, I am sure you will hear them soon enough. We hope you find this beneficial and if you have a question you would like to ask us, just send us an e-mail. Names have not been associated with these questions as we have not cleared them with the call-in, but you know who you are:

1. "My client has filed Chapter 11 Bankruptcy and I am stuck for $10,000.00. They now tell me 'don't worry, you'll get paid, but in the meantime you have to sell to me' ". Is this true?
   The simple answer is no. The old German proverb exists for many customers. Beat me once, shame on you, beat me twice, shame on me. That, of course, will not get you paid and in many instances where you can keep the customer in business, you will have a greater chance at recovery of your original $10,000.00. The best situation is to create a super priority claim. In this instance, the court can order the old debt paid because they need your product to continue in business. An example of this is an advertiser that needs advertising to survive, such as the local movie theater. A newspaper held up advertising for the theater completely until the court allowed them to pay the prepetition debt and then got back in the newspaper. The argument was the Chapter 11 Bankruptcy would not work without customers, hence the need to appear in the paper with their competition. Not all of us are so lucky to be this exclusive, but still finding ways to sell to a customer who filed a Chapter 11 Bankruptcy without risk can be profitable and give the debtor a chance to put forth a plan that will see some of your money on the old debt. Cash-in-advance or COD is your best chance, but be sure they don't bounce checks.

2. "We are converting to a new system and want to change our terms from all over the board to standard 30 day terms. Will I be violating any federal laws if we do this?"
   With the advent of federal legislation in all that we do, it is no wonder you are hesitant to make the change. The truth is, these are your terms, not the debtors'. This is a good point of negotiation if they do not want to change or want other terms. You can set whatever terms you want and impose them as long as you do so on all new purchases. Meaning, you cannot go back and change special dating to suit your new terms if that was the terms of the sale. You can set new terms on all future orders.

3. "Does having a personal guarantee signed by the individual, but adding their title after their signature, eliminate them from prosecution if the corporation fails?"
   Usually, but at a recent seminar given by Richard Sugarmann of Connecticut, he pointed out that there is precedent in Connecticut by state courts that if a debtor signs a personal guarantee and then puts his title after, it could be construed that he knew what he was signing and has obligated himself personally. Many states have ruled the other way, but if you find yourself in this situation, ask us to check with our attorney in the state to be sure of the rules. Of course, the best way to catch the matter is at the beginning and return the guarantee for correct signature WITHOUT title and you can avoid this kind of trouble in the future.

What can run, but never walks; has a mouth, but never talks; has a head, but never weeps; has a bed, but never sleeps?

Answers to last month's riddle:
i4i (an eye for an eye), uPLATm (platinum), Pot O O O O (potatoes), bad bad (too bad), 13579 AZ (odds & ends), ch poorri (take from the rich, give to the poor), I'M you (I'm bigger than you), you the past (put the past behind you), Math the (the aftermath), go it it it it (go for it).

Thanks to everyone who joined us for our annual Symposium in Cleveland, Ohio. It was a great time and we will be sure to announce locations and dates of future CCC seminars and workshops!

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