Bankruptcy Headlines

Commentary: Deflate Gate and Bankruptcy Reform

People (and institutions) like rules that give them a competitive edge, and you need only to look at the recent headlines and the media coverage of “Deflate Gate” to understand this basic concept, according to a commentary by Prof. Michelle Harner in Credit Slips today. Reportedly, Tom Brady, Peyton Manning, and other quarterbacks lobbied the NFL to allow each team to supply its own set of footballs for use by that team’s quarterback during games. How does any of this relate to chapter 11 reform, Prof Harner asks? To answer that question, ask yourself a different one: Do you like how chapter 11 currently resolves your client’s key issues in most instances? If you answered “yes,” you likely see no reason for reform. If you answered “no,” you likely would favor reform, but perhaps only those aspects of reform beneficial to your client. Therein lies the ever-present dilemma for policymakers: implementing the best policy for the overall federal bankruptcy system in the midst of so much noise.

GT Advanced Shareholders Denied Role in Bankruptcy

A bankruptcy judge on Monday denied a request by GT Advanced Technologies Inc. shareholders to have a voice in the former Apple Inc. supplier’s bankruptcy, though he left open the possibility for the group to come back with a new proposal, the Wall Street Journal reported today. Bankruptcy Judge Henry Boroff issued the one-paragraph denial after a Monday hearing in U.S. Bankruptcy Court in Springfield, Mass. The shareholders had argued they should be given an official role in the case — with expenses paid for out of the debtor’s coffers — because GT Advanced’s business is still worth enough to leave a payout for them.

Detroit May Offer City Workers Half Off on Vacant Homes

Detroit may offer city employees a 50 percent discount on homes sold through the city's auction program as part of its efforts to rebound after exiting its historic bankruptcy in December, Reuters reported yesterday. The proposal introduced to the City Council on Tuesday is for current city employees, their families and retired city workers. The idea is to encourage families to repopulate devastated neighborhoods that have seen a decades-long exodus by residents. The issue will be discussed tomorrow by members of the planning and economic development committee, who will decide whether to recommend it to the full council. If approved, the program could take effect by mid-February.

Commentary: How Student Debt Harms the Economy

Ever-escalating tuitions, especially in the past dozen years, have produced an explosion of associated debt, as students and their families resorted to borrowing to cover college prices that are the only major expense item in the economy that is growing faster than health care, according to a commentary in the Wall Street Journal today. According to the Federal Reserve, educational debt has shot past every other category — credit cards, auto loans, refinancings — except home mortgages, reaching some $1.3 trillion this year. Analyses in the Wall Street Journal and by Experian in 2014 show that 40 million people, roughly 70 percent of recent graduates, are now borrowers. In the class of 2014, the average borrower left with an average load of $33,000. Now comes evidence that it’s not just consumer spending that these debts are denting, but also economic dynamism, according to the commentary. A variety of indicators suggests that the debt burden is weighing on the engine that has always characterized American economic leadership — and the factor that many have assumed will overcome many structural and self-imposed challenges: our propensity to innovate and to invent new vehicles of wealth creation.

State Representative Files Bill to Allow Illinois Municipalities to Seek Bankruptcy Protections

State Representative Ron Sandack (R) filed legislation this week that would make Illinois the 25th state that allows municipalities to seek bankruptcy protections under chapter 9 of the U.S. Bankruptcy Code, the Chicago Tribune reported today. Illinois statutes currently do not allow for such authorization for municipal governments. "I hear regularly from municipal leaders who worry about their ability to pay their bills and meet other debt requirements," said Sandack. "This bill would provide one more tool that municipalities could have at their disposal to address their financial futures in a reasonable and taxpayer-friendly manner."