In a more recent decision, the U.S. Supreme Court issued an opinion not related to BAPCPA, but with perhaps far more reaching impact on bankruptcy litigants. On June 23, 2011, in a 5-4 decision, the Supreme Court held that jurisdiction to issue final judgment of certain claims is constitutionally reserved for state or federal district courts. Stern v. Marshall, 2011 WL 2472792 (U.S.). Many are familiar with this case as it has played out in the tabloids. Vickie Lynn Marshall, also known as Anna Nicole Smith, married Texas multi-millionaire J. Howard Marshall shortly before his death. Anna Nicole and her husband’s son Pierce Marshall litigated claims to the Marshall fortune for years in various courts, and the litigation was continued by their respective estates after their deaths. When Anna Nicole filed bankruptcy in California, Pierce filed a claim for defamation and alleged that his claim was nondischargeable. Anna Nicole contested the claim and filed a counterclaim against Pierce for tortuous interference. The bankruptcy court ruled in Anna Nicole’s favor to the tune of $425 million in damages on her counterclaim (later reduced to $88.5 million), which it treated as a “core proceeding” and Pierce appealed. The Supreme Court held that the bankruptcy court “lacked constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim”. It is too early to tell how much of an impact Stern v. Marshall will have on bankruptcy practice, but the decision clearly has the potential to increase costs and delay resolution of bankruptcy litigation.

Why are bankruptcy filings down if the economy is still suffering? Are people just too broke to file bankruptcy? Not exactly. Just like location is a key element in real estate regardless of the general real estate market performance, jobs and credit availability are key factors impacting bankruptcy filings. Tennessee is a wage garnishment state and has always been a state where a high percentage of consumer bankruptcy cases are filed under chapter 13. With high unemployment, debtors have less ability to fund chapter 13 reorganization plans and are less worried about wage garnishment. The depreciation in real estate values to eliminate or reduce home equity and the length of time it takes a mortgage creditor to foreclose are also impacting bankruptcy decisions.

On May 22, 2009 President Barack Obama signed legislation referred to as the Credit Card Bill of Rights Act of 2009. This legislation amends the Truth and Lending Act, and provides consumers with many reforms to the way credit cards are issued and administered. Highlights of the legislation include provisions requiring lenders to apply payments to the balances with the highest interest rates first. It also prohibits increasing a consumer’s rates on existing balances based on late payments to another lender. The new law mandates 45 days notice before a lender could increase a card’s interest rate. It also prohibits retroactive rate increases on existing balances unless a consumer is 60 days late with his or her payment. Credit card companies would have to revert to the original, lower rate if a cardholder stays current six months after a late payment. The legislation also limits credit extended to college students and limits a lender’s ability to charge fees for making payments via telephone and the internet.

Most of the provisions of the new law will become effective February 22, 2010. Critics of the legislation predict that all credit card holders will see an increase in their interest rates as a result of the legislation. Opponents of the legislation also are concerned that it will reduce available credit during an economic crisis.

Without this legislation, homeowners will have to continue to deal directly with their mortgage lender for potential loss mitigation or loan modification. Lenders are overwhelmed with the amount of requests for relief in this time of increasing unemployment and declining home values.

My clients are reporting frustration with the untimely response or lack of response from their mortgage lenders with a request for modification. Unsophisticated consumers are finding it nearly impossible to navigate the loan modification process. Many of my clients were awaiting notice about a loan modification when they were forced to file Chapter 13 bankruptcy to save their home on the eve of foreclosure. Chapter 13 remains a viable option for homeowners who got behind on their mortgage payments for whatever reason, but now have a stabilized financial situation. Chapter 13 allows homeowners to cure the mortgage arrearage over three to five years while maintaining regular mortgage payments to their lender.