The Recent Erosion of the Secured Creditor's Rights through Cases, Rules and Statutory Changes in Bankruptcy Law

One can view the law of creditors' rights as a series of cyclesin which alternatively the rights of the creditor and then those of the debtor are in ascendancy. Looking back through Americanlegislative history, one sees both the state legislatures and the Congress intervening on behalf of debtors in a variety of ways onmany occasions. An early example of such intervention was the enactment, particularly in the Midwest and West, of generous exemption laws that removed a variety of property beyond the reach of general creditors. A second example is the enactment of usury laws, which continue to be a substantial restriction on the rates that creditors can charge to consumer debtors. Other examples are laws giving mortgagors rights to redeem property after foreclosures and laws providing for upset prices at foreclosure sales. These legislative attempts to protect certain debtor interests often have been frustrated by the clever devices ofcreditors' lawyers. Thus, some of the restrictions on foreclosure and redemption periods were met by deeds of trust with explicit powers to sell. Usury laws have been circumvented by the advocacy of the time-price doctrine and by the substitution of a variety of fees and charges in lieu of interest. Thus, if one carefully examined the law of most states, one would find a continuous cycle of hard times, debtor complaint, legislative response, and creditor attempts at circumvention.