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Yale Law School has a proud tradition of the clinic method, where real people’s legal problems are highlighted against the backdrop of existing law. But G. Eric Brunstad Jr.’s Secured Transactions class recently took real world lessons to a higher level, watching their professor spar at the nation’s highest court over emerging bankruptcy policy. The U.S. Supreme Court only takes up one or two bankruptcy cases a year. Brunstad, a partner at Bingham McCutchen’s Hartford, Conn., office, has been called into all of the past six Supreme Court bankruptcy cases, either as a brief writer or appellate advocate. Brunstad’s ability to make students — and judges — understand difficult concepts was evident at oral arguments in Till v. SCS Credit Corp., a battle over car payment interest rates in a Chapter 13 bankruptcy. The Supreme Court heard the case in December and a ruling is pending. In 1998, Lee and Amy Till bought a 1990 Chevy pickup truck from Instant Auto Finance in Kokomo, Ind., which was financed by SCS Credit at 21 percent. A year later they filed Chapter 13 bankruptcy, triggering bankruptcy’s “automatic stay,” and Instant Auto couldn’t repossess the truck. The Tills proposed a Chapter 13 repayment plan with a “cramdown” interest rate of 9.5 percent on the remaining $4,000 value of the truck. The 9.5 percent was based on 8 percent representing an average car loan plus 1.5 percent added for the Tills’ “subprime” credit status. To the couple, the difference between winning or losing was less than $500. But 740,000 people file bankruptcy each year, and the case was one that stood to alter the balance of rights between debtors and creditors. The Tills’ case went up to the 7th U.S. Circuit Court of Appeals, which issued a split decision favoring creditors. It pegged the interest rate at the auto loan rate of 21 percent. But a dissenting judge said that approach ignored the lender’s savings from not having to foreclose on the truck and find a new borrower, contending bankruptcy’s secured creditors shouldn’t get such “eye-popping” interest rates. Before the Supreme Court, Brunstad noted that studies based on overall Chapter 13 filings show that 60 percent fail to complete their three-to-five-year payment plans. Justice Stephen Breyer said the auto loan rate, by definition, had to be wrong because it was entered into years before the bankruptcy. “We know that interest rates fell one or two percent during that time,” he said. But Brunstad surprised Breyer by noting that sub-prime rates did not fall at all. “If that’s so, then the risk went up,” Breyer said. “No, that’s not correct, your honor,” Brunstad replied. State law caps the maximum interest rate, so when prime interest rates go down, it increases the pool of potential borrowers, but doesn’t lower the high-risk rate, he explained. Later, Brunstad made the point that it would be unfair to reward those who file bankruptcy with loan rates that are far lower than their peers in the same risk pool who manage to avoid bankruptcy. Interviewed afterward, law student Derek Kaufman said he was impressed by the way his professor held his ground and persuasively addressed concerns raised by Breyer and Ruth Bader Ginsberg.

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