Early versions of the proposed bankruptcy legislation, both in the House of Representatives and in the Senate, would have prohibited any confirmation agreement. The relevant provisions, which received bipartisan support, allayed concerns that « creditors have developed techniques to avoid the consequences of a debtor`s bankruptcy and that bankruptcies have suffered as a result. Bankruptcy often makes them little better than they were before. Unequal bargaining between debtors and creditors and the superior experience of creditors in bankruptcy continue to lead to frequent confirmations. (307) Although debtors have always been able to voluntarily honour their debts, the removal of enforceable assertions is a key factor in making insolvency relief an effective remedy. It ensures that a debtor does not come out of bankruptcy in the same situation as when he entered. (308) Updated statements. Through all these legal permutations, the experience of the assertions of the 1978 code has shown that the existing procedural constraints have not achieved the desired objectives. In 1978, few policy makers were able to think about unsecured debt being routinely confirmed, but the data indicate that this is happening. 322 Id.; See also Letter from Jeffrey A. Tassey, Senior Vice President, Government and Legal Affairs, American Financial Services Assoc., (January 21, 1997) (realistic confirmation rate for « Big Three » auto lenders would be 30-40% of their accounts 7 borrowers receivable, giving about 107,000 confirmations in 1996). Return to the text Debtors` incentives must also be taken into account. Currently, well-informed debtors can structure a very advantageous bankruptcy with a combination of Chapter 7 and debt assertion. The incentive of a debtor to apply under Chapter 13 is reduced by the ability to repeat certain claims in Chapter 7. Any debtor who sees an advantage in the repayment of certain creditors has little reason to present Chapter 13 if this benefit can be obtained by discharge under Chapter 7, in connection with one or two privately negotiated confirmation agreements.
A judge found that the discovery of Sears` practices was only a « tiny tip of a very large iceberg. » (355) Already May Department Stores, Co. (Filene`s and Lord and Taylor), (356) GE Capital Services (map edition for Montgomery Ward and Lechmere), (357) Federated Stores Department (Bloomingdales and Macy`s), (358) and AT-T Universal face similar charges. After reviewing its own practices, Federated acknowledged that nearly 18% of the confirmation portfolio had been inappropriate since 1990. Ge Capital also acknowledged « in court documents that it may, in some cases, have failed to inform bankruptcy judges that the agreements were in place. » (359) Ford and Chrysler`s financial statements are also subject to a review of the same practices. (360) Attorneys general in a number of states are investigating dozens of lenders for debt collection by these measures, in express violation of the bankruptcy law procedure. The confirmation agreement indicated that debtors had a monthly expense deficit relative to revenues of $233.45, in accordance with debtors I and J`s plans. The debtors attempted to confirm a mortgage bill of more than US$250,000. After 11 us.C.