Arbitration Clauses in Bankruptcy

07 Oct Arbitration Clauses in Bankruptcy

Attention has been given recently to the use of arbitration clauses to avoid scrutiny by Bankruptcy Courts and move disputes to the more creditor-friendly arbitrators hand-picked by the creditors. Several recent cases have approved such clauses (although it is not clear whether the clauses were rejected in the Schedules or the Plan, or if such rejection was argued). Change may be on the horizon, however, thanks to the alliance between U.S. Senators Richard Durbin (D-Ill.) and Charles Schumer (D-NY).

As BLN member Jay Fleischman posted recently, arbitration stacks the deck against consumers.  As a result, creditors have increasingly tried to remove cases alleging wrongdoing by them from Bankruptcy Courts to arbitration panels. But it appears that these one-sided anti-consumer provisions are finally being scrutinized.

Several recent bills introduced in Congress place some restrictions on the availability of arbitration clauses. The Arbitration Fairness Act of 2007 (S. 1782 and H.R. 3010) and The Helping Families Save Their Homes in Bankruptcy Act of 2007 (S. 2136) both contain language prohibiting the enforcement of arbitration clauses in bankruptcy. Passage of these bills will ensure that consumers can have their day in Court, before a real, neutral judge, instead of in absentia, before an arbitrator chosen by the creditor who is arguing before him or her. Urge your Senator and Representative to support these bills.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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