Professor: Arguments about debt, bankruptcy similar to onetime debtors prisons

Thursday, May 22, 2014

LAWRENCE — When it comes to debt and bankruptcy, some things never change. While people are no longer imprisoned for failing to pay their debts as England did a century ago, a new article by a University of Kansas law professor shows that the key arguments about enforcing debts or relieving them in bankruptcy have changed very little since then.

Stephen Ware, professor of law, has authored “A 20th Century Debate About Imprisonment for Debt,” which explores the parliamentary debate in England circa 1909 about whether to continue imprisoning debtors and notes how current debates about consumer debt in the United States rest on some very similar arguments. The article will be published by the American Journal of Legal History.

“Many people who settled in the 13 colonies that became the United States were fleeing debts in England, so it’s no surprise that the U.S. ended debtors’ prisons long before England, which continued to use them well into the 20th century,” Ware said. 

While the United States has done away with debtors’ prisons, many parallels exist today. For example, debtors who lose lawsuits can be ordered by courts to appear in person to answer questions about their income and assets. If debtors fail to appear at that time and place, they can be held in contempt of court, and an arrest warrant will be issued. The debtor can stop the arrest by agreeing to a payment plan, but if the debtor again misses payments, he or she may be arrested.

“While technically jailed for contempt of court, not the underlying debt, that distinction may be lost on a struggling debtor who cannot afford a lawyer to explain it and advocate for the debtor,” Ware said.

More fundamental parallels connect the England Ware studied with the United States of today. Then and now, when unpaid creditors win a lawsuit, they don’t actually receive money but simply have a legal document (judgment) stating they are owed money. In order to receive payment, some sort of additional pressure on the debtor is often required.

“But what types of pressure should the law permit, and when should debtors be relieved of that pressure by filing for bankruptcy? Those are the perennial questions,” said Ware, who has taught debt-collection and bankruptcy law for more than 15 years.

Today that pressure on judgment debtors often takes the form of wage garnishment. States have varying restrictions on how much, if any, of a person’s wages may be garnished, and there is a federal limit on how much can be withheld as well. Bankruptcy usually ends garnishment and other forms of debt-collection pressure, Ware said, so about 1 million debtors a year file for bankruptcy in the United States. Bankruptcy relief was much less generous in early 20th century England, according to Ware’s article.

In both 1909 England and the United States today, some argue that a typical debtor’s wages and assets should be protected from the collection efforts of creditors, especially those whose business practices seem designed to exploit unsophisticated or desperate borrowers. In contrast, the other side in this perennial debate argues that reducing the pressure on debtors to pay increases lenders’ losses from bad loans and thus makes them less likely to lend to borrowers who lack valuable collateral or strong payment histories.

“Easily available credit for low- and moderate-income borrowers was the key issue in England a century ago and is still central in today’s consumer debt and bankruptcy debates,” Ware said. “In every era, it seems, some argue that a plentiful supply of consumer credit lowers interest rates and helps people borrow in ways that improve their lives, while others argue that it tempts people to live beyond their means — with bad results not just for those debtors unable to pay but also for their families and society as a whole.”

These recurring issues appear in several of Ware’s classes, including bankruptcy and consumer law. While bankruptcy law focuses on relief for those unable to pay their debts, “consumer law generally tries to protect people from incurring too much debt — or the wrong kinds of debt — in the first place,” Ware said.

Consumer law is changing rapidly as a new federal agency, the Consumer Financial Protection Bureau, considers new regulations on several aspects of consumer credit agreements, including consumer arbitration, a topic on which Ware has testified before both houses of Congress and as an expert witness in court.

Consumer credit agreements are now influenced by far more complex regulation and technology than existed in the era of English debtors’ prisons, when credit was usually extended by a local merchant who knew the borrower personally. Today’s credit bureaus electronically track billions of transactions a year and assemble the data on each consumer in detailed reports available to lenders thousands of miles away who allow consumers to apply for credit online.

While more complex regulation and technology create new issues for lawyers, Ware emphasizes that the basic policy questions for lawmakers remain largely the same as they were generations ago.

“Usury law and other regulations of consumer credit agreements have been with us for centuries, and they raise very deep, timeless questions about human nature,” Ware said. “When are people suited to deciding for themselves which legally binding agreements to make, and when do they need lawmakers to restrict their choices so risky options are off the menu? And if lawmakers prohibit certain credit agreements as too risky, does that reduce bad loans or just drive them to a black market?”

Business duties a wild card in Kansas secretary of state race

Andy Marso wrote:

"Public attention in this year's Kansas secretary of state race has focused largely on voter registration and identification requirements spearheaded by Republican incumbent Kris Kobach.

But in addition to being the state's chief elections officer, the secretary of state also handles business filings, and Kobach and his Democratic challenger Jean Schodorf also are trying to burnish their credentials in that area."

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Professor: Free-trade agreement hampered by lack of transparency

Wednesday, May 07, 2014

LAWRENCE — The Trans-Pacific Partnership has the potential to be the most economically and politically significant free trade agreement in the Asia-Pacific region, but it is being hindered by a nontransparent drafting process and perceptions of favoring American corporate interests over poverty alleviation, according to a new article by a University of Kansas international trade law expert.

Raj Bhala, associate dean for International and Comparative Law and Rice Distinguished Professor at the School of Law, has authored “Trans-Pacific Partnership or Trampling Poor Partners? A Tentative Critical Review.” The article was published in the Manchester Journal of International Economic Law the same week President Barack Obama toured Asia discussing the agreement and other issues. The piece, listed in three different top-10, most-downloaded Social Science Research Resources Network categories, outlines problems that have stalled adoption of the agreement among the United States and 11 other nations that account for 40 percent of global gross domestic product.

“I didn’t start out seeking to criticize this agreement. I needed to be familiar with it to write the new edition of my next textbook and stay current in the classroom when teaching my students,” Bhala said. “As I learned more I became more skeptical and had more concerns. It became clear we are thinking too much about the wealthy elite, that our trade policy is ever-more corporatized, and we are also hearing these concerns from some of our closest friends and allies abroad.”

The Trans-Pacific Partnership, commonly known as TPP, was conceived in 2006 among four nations and has since expanded to 12. It is part of a growing trend among the U.S. and many other members of the World Trade Organization to form free-trade agreements, especially given the failure of the Doha Round to yield a comprehensive, ambitious and balanced multilateral deal. The U.S. alone has free-trade agreements with 20 nations, Korea, Colombia and Panama being the most recent.

One of the primary problems with the TPP is the lack of transparency in its drafting, Bhala said. Draft texts of free-trade agreements are generally made available to journalists and the public. Just two of the 29 TPP chapters were made available to the public. Those sections, addressing environmental and intellectual property law, only became so when they were leaked to WikiLeaks. Bhala’s scholarship draws from journalistic coverage of the leaked sections and analyses of domestic and foreign legal, governmental and nongovernmental organizations directly familiar with TPP talks.

American involvement in TPP makes economic sense, but also is driven by a strategic shift in focus from the seemingly easily troubled Middle East to the dynamic, entrepreneurial Asia-Pacific region, Bhala said. That strategic shift also means, if TPP takes effect, solidifying economic and political alliances to help contain China, even though the administration prefers not to make that admission. It is reminiscent of agreements the U.S. had with Western European nations to contain the Soviet Union during the Cold War. Even if China ultimately joins TPP, the U.S. and its allies already will have written rules on key issues of importance to China, such as duty-free, quota-free treatment for almost all traded goods, services sector liberalization, the behavior of state-owned enterprises and rules of origin for textiles and apparel merchandise. TPP then will be a “take it or leave it” proposition for China.

“Bluntly put, TPP and the pivot toward Asia is certainly justified by economic and demographic realities and projections. But the biggest reason is containing China,” Bhala said. “And setting rules of a big regional trade club before China joins, if it ever does, thus constraining it to play by those rules.”

However, in writing TPP rules, the U.S. and its trading partners have had profound disagreements. The perception is that American demands are simply too harsh, lack empathy and overtly favor American corporate interests over the most pressing matter in the Asia-Pacific region: poverty alleviation for those earning less than a dollar a day, and economic security for the fragile new middle class earning between $2 and $20 a day.

Two examples are opening Japanese agricultural markets to more imports from the U.S. and the sourcing of fabric for Vietnamese textiles, that country’s biggest industry. There are also disagreements on making Japanese markets more open to American cars and significant disputes on intellectual property. In the case of the latter, patents for pharmaceuticals, such as HIV/AIDS medications, are especially contentious. While American interests push for longer patent protection for medications, data exclusivity and so-called “evergreening,” Southeast Asian countries and NGOs argue that doing so only protects bloated corporations and stifles innovation while locals continue to die.

Those arguments are just a few of the problems holding up successful conclusion of TPP. Despite the differences among negotiating parties and political backlog in Washington, D.C., that has hampered American trade influence, Bhala believes there is still a good chance the parties will resolve their differences and finalize the free-trade agreement. That could be a boon not only to the nations involved in the agreement, but also to students in KU Law’s international trade courses. KU Law grads are practicing in 18 countries, including several Asian nations involved in TPP. The agreement could present many more opportunities for them, Bhala said.

“Essentially, this free-trade agreement is born of failure at the WTO level and the strategic shift to Asia,” Bhala said. “It’s bogged down by political gridlock in D.C., and a potpourri of disagreements on ancient issues such as farming and 21st century issues such as intellectual property, and the U.S. cannot bully its way to get a deal. I’m optimistic the U.S. will appreciate that sometimes helping our trading partners in the short term helps American in the long term.”

Building of dreams: A downtown real estate deal goes south, costing investors and retirees millions

Karen Dillon and Keith King wrote:

Millions of dollars are missing following the failed purchase of two landmark buildings in downtown Kansas City.

Critics say a Ponzi Scheme drained the pockets of dozens of victims including local power brokers, retirees living on fixed incomes and those with life-threatening illnesses, an investigation by 41 Action News found.

At the center of the defunct deals is Brenda Wood, a business woman from Leavenworth County who owns a small janitorial service that cleans school buildings and other facilities.

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KU expert: Supreme Court ruling in affirmative action case a narrow one

Tim Potter wrote:

"What does the Supreme Court’s ruling in the Michigan case mean for Kansas?

First, keep in mind that it is a narrow ruling, said Richard Levy, a constitutional law professor at the University of Kansas School of Law. The issue, Levy said Tuesday, is whether a ban on affirmative action is constitutional, not whether affirmative action itself is constitutional.

KU law professor researches hidden US rape crisis

Tom Dehart wrote:

"On March 4, University Associate Law Professor Corey Rayburn Yung, published an article in the Iowa Law Review entitled 'How to Lie with Rape Statistics: America’s Hidden Rape Crisis.'

The article analyzes the undercounting of rape statistics in 46 cities in the U.S. with a population of more than 100,000 people, estimating that about 800,000 to 1.2 million 'complaints of forcible vaginal rapes of female victims nationwide disappeared from the official records from 1995 and 2012.'

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KU law partners with Indian law schools

Kate Miller wrote:

"The University’s Law School recently revealed its new partnerships with four of India’s top law schools, which will encourage collaboration between students and faculty of the universities. In addition, the program aims to increase the University of Kansas’s visibility in India, enhancing job opportunities for law students from all universities involved.

Lawyer teaches new LGBTQ course in KU law school

Hayley Francis wrote:

"Lawrence attorney David Brown is teaching a new lesbian, gay, bisexual, transgender, queer seminar in the KU School of Law this semester. Brown has represented gay and lesbian clients including two LGBTQ couples that recently sued the state of Kansas for the ability to file joint income tax returns. In a recent interview, Brown discussed his course and the impact of the latest court decisions:

KU Law partners with India’s top law schools

Thursday, April 10, 2014

LAWRENCE — The University of Kansas School of Law recently added four prominent Indian law schools to its growing list of international partners. The National Academy of Legal Studies and Research in Hyderabad, the Government Law College in Mumbai, the Jindal Global Law School near New Delhi and the Indian Law Institute in New Delhi signed memoranda of understanding with KU Law, pledging to collaborate on research projects, scholarship opportunities and faculty and student exchanges.

Raj Bhala, associate dean for international and comparative law and Rice Distinguished Professor, signed the agreements on behalf of KU Law Dean Stephen Mazza during Bhala’s February-March lecture tour of India. Professors Balakista Reddy, Kishu Daswani, Sridhar Patnaik and Manoj Kumar Sinha at the four Indian law schools, respectively, were instrumental in establishing the partnerships.

“Simply put, KU Law is the first American law school with such an ambitious opening to India,” Bhala said, noting the institutions’ locations in India’s technology hub (Hyderabad), financial and Bollywood center (Bombay), and political capital (Delhi). “It would be like a non-American law school having arrangements with Stanford, NYU or Columbia, and Georgetown.”

The non-binding MOUs do not include financial obligations or administrative requirements, but they encourage interaction, program development and cross-marketing of degree programs, Bhala said. They also open up international career opportunities for graduates.

The Indian schools join KU Law’s existing partner universities in Australia, China, Ireland, Italy, Korea, Kyrgyzstan, Mexico, New Zealand and Turkey.

“KU is proud to have affiliations with law schools around the world,” Dean Stephen Mazza said. “I’m pleased that we now have affiliations with some of the finest law schools in India.”

The agreements bring new academic and clinical opportunities for KU Law faculty and students. For students, KU is developing an internship program with the Director General of Foreign Trade in Mumbai and the Mumbai Export Promotion Councils. The partnerships also build KU’s web of international legal contacts, a valuable networking tool for students and alumni.

“We look forward to welcoming law students from these institutions,” Mazza said. “They will bring a welcome perspective to the classroom. We hope these agreements will open up opportunities for KU students to practice in India.”

Already, faculty and students are engaging with India. Professor Jean Phillips is the first non-Indian appointed to the all-India Advisory Council of the Institute of Clinical Legal Education and Research. She will work with top-ranking Indian judges, lawyers and academics to shape clinical legal education in India. Professor Elizabeth Kronk Warner is collaborating with prospective Muslim female lawyers and activists to provide contributions for an upcoming journal symposium. Mazza serves on the advisory board of the first tax law LL.M. program in Asia, established by partner Jindal Global Law School. Two second-year law students, Madeline Heeren and Aqmar Rahman, will intern this summer in New Delhi at one of India’s largest law firms.

In addition to brokering the agreements, Bhala gave 18 lectures during his tour. Topics ranged from international trade law to women’s issues in Islamic Law. Bhala also met with WTO negotiators from Bhutan, toured the High Courts of Mumbai and Delhi, visited a factory manufacturing pulleys and engaged in international trade and saw the museums and memorials of Prime Ministers Jawaharlal Nehru and Indira Gandhi.

Bhala’s visit comes just before Indian elections, during which all 543 seats in the Indian Parliament and the office of Prime Minister are up for grabs. An unprecedented 814 million people are expected to vote.

“India is the world’s largest free-market democracy and soon to be the world’s most populous nation,” Bhala said, noting its strategic importance to KU’s International and Comparative Law Program. “The Indian market is opening up. The barriers to entry for Jayhawk lawyers are coming down. Our partnerships ensure that KU Law is a player in global legal markets.”

 

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