Some borrowers want to continue to pay their loans without going through the formal confirmation process. However, there are some benefits to the borrower of confirmation. When a borrower confirms a debt, this is seen by lending agencies that register while the person regularly makes payments on time. Although personal liability is exempt in the event of bankruptcy, a secured creditor reserves the right to take claims on his or her security, unless the bankruptcy law provides for the right to pledge. (365) If a debtor is late in the loan contract before bankruptcy, the right of repayment of the creditor is clear. If the debtor remains aware prior to the declaration of insolvency and wishes to remain informed, it is not certain that a debtor has the right to retain the property and continue to pay despite the interim bankruptcy proceedings. In the search for a solution, many courts have looked at section 521, paragraph 2, which was included in the code in 1984 and requires debtors to indicate their guarantee intentions. As options, the provision lists surrender, affirmation and withdrawal. At present, it is not clear whether this provision materially and comprehensively defines the security options and obligations of debtors or whether Section 521 (2) is merely a notification provision that has no material impact on other bankruptcy or bankruptcy rights and rights.
(366) Inequality is of particular concern, as the benefits of assertions are not distributed equitably among the creditors` organization. The current bankruptcy process offers opportunities that foster this inequality. Section 341 of the Bankruptcy Code stipulates that any debtor participating in a meeting must be questioned by the agent or creditors. However, instead of registering debtors, it appears that Meeting 341 is often used for other purposes. The Commission has heard on several occasions that creditors attend these meetings so that they can deal directly with debtors in the corridors before or after the meeting in order to invite debtors to repeat their debts. Lawyers indicated that creditors regularly claimed their clients directly, while lawyers looked after other clients. Clients were already convinced to sign when the lawyers were involved. The small group of creditors who are able to oversee the bankruptcy process receives a significant share of the confirmations in the system, many on nominally or totally unsecured “no”s, while other creditors receive nothing.
A press article tells the story of “The Good Lady”, a representative of the distributor who follows the debtors of the courthouse to convince them to repeat their debts. (343) 345 If the lender is over-guaranteed, this approach departs from the general rule of section 506, point b), of the bankruptcy code. Under Section 506 (b), if the guarantee of a loan has a credit value greater than the residual debt, a secured creditor may be entitled to a fee and fee up to the value of the guarantee, if the original loan agreement provides for it. Going back to the 1981 text, about 19% of debtors who applied for Chapter 7 confirm one or more debts. (319) Given Congress` express intention to restrict access to assertions, this figure seemed surprisingly high at the time. According to a national survey of insolvent debtors conducted by Visa, 52% of debtors said, until 1996, that they repeated one or more debts.