Associate Attorney General Vanita Gupta Delivers Remarks at the National Association of Consumer Bankruptcy Attorney’s Annual Convention

Remarks as Prepared for Delivery

Thank you, Richard, for that kind introduction. It’s a privilege to be here at NACBA’s annual convention. NACBA does important work ensuring that debtors receive high-quality legal representation and advocating for systemic improvements to the bankruptcy system. I’m grateful for the chance to speak to you all today about the Justice Department’s efforts on consumer-bankruptcy issues and how those efforts connect to our broader priorities.

I don’t need to persuade this group of the importance of bankruptcy law. More Americans come to the courts in bankruptcy proceedings than in almost any other area of practice. And they come to the courts at a vulnerable point in their lives. The bankruptcy system has enormous power — yet, in part because of that power and because it can be so difficult to understand from the outside, the bankruptcy process is prone to abuse. 

The stakes of the bankruptcy process succeeding or failing are very high. People coming to the bankruptcy courts may not have great trust in our legal system. They have often just experienced a wrenching event, like a job loss, a natural disaster or a medical emergency. They may have been the victims of fraud or of unfair, deceptive or abusive lending practices. They may feel that other legal protections should have stopped them from reaching this point. And they may worry about what comes after the bankruptcy filing. If a bankruptcy goes well, the debtor will start fresh with increased confidence in our institutions and our legal system. But if it goes poorly, she or he may experience a loss of trust as well as more acute financial harms.

So people in bankruptcy need skillful, ethical, creative, empathetic lawyers — lawyers who understand the gravity of the situation and who prioritize their clients’ interest in putting their debts behind them. What NACBA does to disseminate best practices throughout the bankruptcy bar is essential. And what the National Consumer Bankruptcy Rights Center does in coordinating high-quality legal arguments in important cases is also crucial for the development of the law.

But even the most talented debtors’ attorneys cannot confront these problems alone. The success of the bankruptcy system is too important to leave to any single group. And understanding these failures requires thinking about bankruptcy’s relationship to the legal system as a whole.

So I want to focus today on what the Department of Justice is doing, across our components, to reflect our commitment to “ensur[ing] economic opportunity and fairness” in bankruptcy and beyond. Our work falls into four themes — breaking down barriers, ensuring access, promoting fairness and demanding accountability.

The first of these themes is about breaking down barriers, both within the Justice Department and across the federal family.

I have spent my entire career pursuing justice for the most vulnerable among us, including communities of color, immigrants and refugees, victims of violence and people who are incarcerated. I know that, at its best, law can be a tool for those communities to vindicate our country’s promises of liberty and justice for all. When people face employment or housing discrimination; when they are victims of financial predators; when their communities are disproportionately affected by environmental harms; when they lose their jobs as companies consolidate — those actions distort the free, fair, and competitive economy. They undermine our democracy. And they often violate the law. The Justice Department is working hard to address those wrongs.

My portfolio as Associate Attorney General touches upon a wide range of subjects: everything from voting rights and police practices to competition and consumer protection, as well as efforts to ensure that we improve the quality of indigent criminal defense and enhance civil legal representation for low-income litigants. But there are values that bring those disparate strands together. And among those values is a commitment to economic justice. 

Bankruptcy law is an area where law and economic justice meet. And so a key piece of our bankruptcy work needs to be connecting that work to the department and the government’s broader economic justice priorities.

That project will be spearheaded by the United States Trustee Program, which I have the privilege of overseeing. The program occupies an unusual position in the department: Its client is not the federal government or an individual agency. Instead, it advocates for the fairness and integrity of the bankruptcy process itself, helping ensure that the system works for everyone and not just for the powerful. It guarantees that the bankruptcy laws are followed, even when others would prefer to bend those rules.

As you know, we are delighted to have a new director of the Trustee Program — Tara Twomey, who was a leader in your organization before she became a leader in ours. For over two decades, Tara has been a passionate voice for making the bankruptcy system accessible to all. She will build on the leadership of her predecessor, Ramona Elliott, who led the program with distinction following Cliff White’s retirement.

I’ve asked Tara to build bridges to other parts of government with a role to play in this work. The department’s own Office for Access to Justice, relaunched in this Administration after a period of dormancy, will be paying more attention to consumer-credit issues, and is planning to co-host a listening session in the coming months on virtual consumer debtor meetings, a subject I’ll return to later. We are deepening our relationships with the Consumer Financial Protection Bureau, because patterns of creditor misconduct we see could inform its actions under its own, independent authority. We are in dialogue with the Department of Education about a range of bankruptcy-related issues, including one I’ll soon discuss in detail. Every part of the federal government has its own perspective on these issues, and lowering the barriers between them will allow us to better see the effects of our policy decisions on the people most directly affected by the bankruptcy process.

Another theme of our work is ensuring that obtaining a fresh start is no more burdensome than the relevant statutes, rules and court decisions require. Filing for bankruptcy is onerous: Tara has shown me examples of the dense collection of complex forms that a debtor must file to initiate the process. Some of that burden is necessary for the system to function. But where we can make it easier for eligible debtors to enter the bankruptcy process, we should. And here’s what we are doing to advance that goal.

First, we are committed to opposing the use of unnecessary form questionnaires and document checklists. We are working to ensure greater compliance with the best practices developed in 2012 in coordination with this group, NABT (National Association of Bankruptcy Trustees), and NACTT (National Association of Chapter 13 Trustees). To that end, we have amended our Chapter 7 trustee handbook to incorporate these best practices and are clearly communicating these expectations to the field.

Second, I’m very excited about our Video 341 pilot project. 341 meetings are often the only meeting a debtor will need to attend as part of a bankruptcy case. And before the pandemic, they often required the debtor to take time off of work, secure child care, or travel long distances to attend the in-person meeting. COVID forced us to consider alternative models for these meetings, and we saw that those meetings made it easier for debtors and their families. Because of that experience, we are trying to keep the flexibility of virtual meetings without sacrificing those meetings’ utility. Already this year, we have had over 2,000 video meetings in Colorado, Utah and Wyoming — and, just last week, we announced that we are expanding the pilot program to Ohio, Michigan, the San Diego area, Hawaii and the Pacific Island territories. We will continue to refine and expand the program based on the feedback we receive — and, as I mentioned earlier, USTP and Access to Justice will hold a listening session on this topic in the coming months.

Third, we heard from consumer advocates, including NACBA, that chapter 7 trustees were challenging fee waiver requests submitted by the lowest income debtors. Congress has chosen to allow impoverished debtors to waive chapter 7 filing fees.  The statute does not require trustees to review, evaluate, or object to fee-waiver applications, and needless examination of these applications can be intrusive and impede access to justice. Earlier this year, we updated our trustee handbook to instruct trustees that, unless local rules or procedures require otherwise, they are not expected to scrutinize these fee-waiver requests.  Absent a direction from Congress or the courts, we do not want trustees to spend their time flyspecking fee waivers.

We are also committed to ensuring that the bankruptcy process, once initiated, proceeds fairly. 

I’ll focus on a policy that I’m very proud of — our creation of a more equitable and accessible process to handle student-loan discharge requests. You know all about — and are advocating to change — the high bar Congress has set for discharging student loan debt. But we also know that the bar was not meant to be insurmountable. And after extensive conversations with our colleagues at the Department of Education and other stakeholders, we are taking steps to ensure that the statute is not applied in ways that prevent eligible debtors from discharging their loans.

We came into that policy process with three goals. First, to set clear, transparent and consistent expectations for discharge that even unrepresented debtors can understand. Second, to simplify the fact-gathering process and avoid intrusive and burdensome discovery. And third, where the facts and law support it, to increase the number of cases where the government recommends to the bankruptcy court that student loans should be discharged.

I’m happy to say that our new process meets those goals. I’ll cover just a few highlights:

We have minimized the need for discovery by encouraging debtors to file an attestation form with the information the government needs to evaluate a discharge request. We all know that discovery can be invasive and time-consuming, and there is no reason to require that prolonged and extensive process in every case when student-loan-discharge cases often turn on discrete pieces of information we can obtain in advance.

We have set out a number of circumstances where we will presume that debtors lack future ability to pay. We know, based on our and the Department of Education’s experiences, that there are categories of people who are really unlikely to improve their financial circumstances.  And so if your clients are elderly, disabled, have experienced long-term unemployment, were unable to obtain the degrees for which they incurred loans, or have been in repayment on their loans for more than ten years, we will presume that they will continue to lack ability to repay their loans, and so will satisfy the relevant portion of the test. We think that this common-sense approach will make a real difference on the ground.

We are also rethinking our approach to what many courts call the “good faith” prong of the undue-hardship standard. In our guidance to Justice Department attorneys litigating these cases, we note that there are many reasons debtors do not enroll in income-driven repayment plans, especially given the flaws with many of those plans that the Department of Education and the CFPB have identified.  Reasonable decisions not to enroll in those plans should not preclude a debtor from discharging his or her debt. And decisions by a debtor to make payments, apply for deferment, or otherwise meaningfully engage with Education or with a loan servicer are steps that evidence good faith.

Since releasing the guidance, we have trained our lawyers throughout the country on how to implement the new policy. We are already seeing results: We are aware of at least 100 cases in which borrowers have agreed to use the process established by the guidance — and, with the benefit of that process, we have been able to support full or partial discharge in the overwhelming majority of cases we have considered to date. 

One thing that we wanted to do in creating the guidance was to reevaluate the procedures after one year of operation.  I hope that you will share your thoughts on how we can continue to improve.

Finally, we are hard at work to protect the bankruptcy system from fraud and inaccuracies. I would be remiss if I didn’t briefly mention our Chapter 11 work here: USTP is fighting — among other battles — to block attempts to abuse the bankruptcy process to avoid tort litigation, including through third-party releases that deprive injured Americans of their right to sue individuals and entities who are not seeking bankruptcy protections. But we are also taking a number of steps to protect consumer debtors specifically.

In October, we finalized the resolution of creditor enforcement matters with two national financial institutions. Those banks were providing inaccurate proofs of claim in bankruptcy. Together, they agreed to remediate about $8.5 million to consumer debtors and bankruptcy estates; neither resolution precludes affected debtors from pursuing their own actions as appropriate.

And moving forward, we are also going to be focused on protecting debtors from elder fraud and abuse. Combating elder fraud in all its forms is a priority of the Attorney General and of the Justice Department, and we have launched new initiatives to help advance elder justice. Elder fraud can often bankrupt seniors, and we are working to train department attorneys on how to recognize signs of abuse. We will not hesitate to make criminal referrals in appropriate cases.

What I’ve told you today is just a snapshot of our work to protect consumers, in bankruptcy and beyond. Our leaders in the department, including Tara, are thinking through a number of other policy changes to advance the department’s commitment to economic justice. So I’m sure we’ll have more to say soon. And in the meantime, I encourage you all to continue to engage with us when you see something we can do better. We are listening. Like all other institutions, we cannot change what we do not know.  And even though we will not see eye-to-eye on all issues, we are always grateful for thoughtful ideas in this complex area.

Let me close with this: During the height of the Civil Rights Movement, Attorney General Robert F. Kennedy urged members of the legal profession, as part of their obligation to support equal justice under law, to use their knowledge and skills to advance the rights of those who are most vulnerable. He said: “It is time we used those traditional skills — our precision, our understanding of technicalities, our adversary skills, our negotiating skills, our understanding of procedural maneuvers—on behalf of the poor. Only when we have done all these things, when we’ve created in fact a system of equal Justice for all — a system which recognizes in fact the dignity of all [people] — will our profession have lived up to its responsibilities.”

Every day, consumer bankruptcy attorneys are at the front line of this work, bringing tenacity and subject-matter expertise to fight for a fresh start. Helping debtors traverse the bankruptcy system, although sometimes challenging, is a direct and tangible way to advance equal justice under law. So thank you for the work that you do, and I look forward to continuing to engage.