ABI Blog Exchange

The United States Bankruptcy Court for the District of Montana hereby announces the retirement of Clerk of Court Bernard F. “Bernie” McCarthy, effective February 27, 2015.Bernie was appointed to the office of clerk of court on January 2,1990 by Judge John L. Peterson. Prior to becoming clerk of court Bernie served as justice of the peace in Helena, Montana, from 1985 to 1990. Bernie graduated with a degree in history from Carroll College in 1977, and received a juris doctorate from the University of Montana School of Law in 1983. Bernie served as chair of the Federal Judicial Center Clerk’s Education Advisory Committee from 1994 to 1998, and was president of the National Conference of Bankruptcy Clerks from 1998 to 2000. He served as president of the State Bar of Montana from 2005 to 2006.  The court will hold an open house retirement celebration in Bernie’s honor at the Mansfield Courthouse in Butte from 1:00 to 3:00 p.m. on March 27, 2015.
1 hour 28 min ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  Venue has been hotly debated in bankruptcy circles for years. While the current rules provide significant leeway for a company to decide where it should file for bankruptcy protection, venue reformers believe that the rules should be amended to limit proper venue to the district of the debtor’s principal place of business or principal assets, or in a district where an affiliate has filed for bankruptcy relief when the affiliate owns more than 50% of the debtor’s voting shares. Poking a stick in the eye of the reformers, the recent ABI Commission to Study the Reform of Chapter 11 didn’t recommend any changes to the rules on venue in chapter 11 cases.

Read More from: WSJ.com: Bankruptcy Beat

1 hour 49 min ago
Authored by J. Ellsworth Summers, Jr. and Scott St. Amandand J. Ellsworth Summers, Jr. and Scott St. Amand of Rogers TowersAs we discussed in our previous post, in the wake of the financial crisis that began with large financial institutions failing in 2008, practitioners and politicians alike have been calling for Bankruptcy Code reform.  Both the U.S. House and Senate have proposed solutions, yet with the recent midterm election results, the future of these two proposals is murkier than ever. Part 1: The House Plan:  Subchapter 5 The House of Representatives has proposed a revision of Chapter 11 that would add a fifth subchapter to the Bankruptcy Code dealing specifically with the promotion of recapitalization of distressed financial institutions and protecting global financial markets from panic.  The proposal, entitled the “Financial Institutions Bankruptcy Act” (FIBA), was passed by the House Judiciary Committee in a bipartisan vote in September and now sits before the full chamber.

Read More from: Florida Banking Law Blog

2 hours 17 min ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The sporadic outcry for reform of the bankruptcy venue statute is unwarranted—the existing law provides debtors with appropriate flexibility to reorganize while simultaneously protecting interested parties. In short, the venue debate is much ado about nothing. “Reformers” contend that permitting a debtor to file a case in either its state of incorporation, principal place of business or location of the filing of an affiliate inappropriately allows a debtor to file where it has the best chance of getting a favorable ruling on a particular issue. Why is this a problem? Aren’t those same incentives at play when parties negotiate what the governing law of a contract should be? If so-called “forum shopping” jeopardizes the fundamental underpinnings of our bankruptcy system, isn’t there a similar level of danger in the very fact that a  single issue could be decided differently depending on which bankruptcy court oversees a case?

Read More from: WSJ.com: Bankruptcy Beat

2 hours 18 min ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  When the ABI Commission to Study the Reform of Chapter 11 declined to make a recommendation on venue selection reform this past December, a number of people were surprised and disappointed. Critics of the rules as currently written have a number of issues with them, but generally they say the rules are too broadly scripted. As a result, debtors “shop” for a venue where case law on issues critical to their reorganization are most favorable. It’s important to remember that in a restructuring only the debtor has a fiduciary duty to maximize recovery for all stakeholders, whereas individual creditors have a duty only to themselves. It’s therefore reasonable to expect that a debtor will select a venue where case law supports its efforts to achieve a successful reorganization. In fact, you could argue that’s exactly what a debtor should be doing. Of course, there are rules prescribing proper venue that must also be followed. But assuming they are, courts tend to defer to a debtor’s choice of venue and have said as much in high-profile cases like Energy Future Holdings and, most recently, in Caesars.

Read More from: WSJ.com: Bankruptcy Beat

2 hours 50 min ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The venue provisions governing where a company may file a chapter 11 bankruptcy case shouldn’t be reformed. The current venue rules for chapter 11 bankruptcies permit a company to file its bankruptcy petition in the district of its (i) state of incorporation, (ii) principal place of business, (iii) principal assets or (iv) affiliate has already filed. Critics of the venue statute complain that companies use the venue statute to venue-shop their way to courts with favorable precedent, often with an insignificant nexus to the debtors’ business activities. They also argue that the venue rules create venue options that are inconvenient for creditors or other, potentially, smaller constituencies and other stakeholders.

Read More from: WSJ.com: Bankruptcy Beat

3 hours 30 min ago
The Truth in Lending Act (“TILA”) provides, in the event the lender fails to make certain required disclosures, a right in the consumer borrower to rescind a home loan “by notifying the creditor. . . of his intention to do so” within three years of the date the loan was consummate.  15 U.S.C. § 1635(a).  However, how must the consumer notify the creditor of his intention to rescind?  Must the consumer file a lawsuit seeking rescission, or may he rescind by simply sending the creditor a letter rescinding the loan?  In its opinion in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015), the U.S. Supreme Court held that a simple letter will suffice. In Jesinoski, the consumer borrowers sent a letter to Countrywide Home Loans rescinding their loan within three years following consummation of their loan.  A year and a day after sending the letter, the Jesinoskis files a lawsuit seeking rescission and damages.  The District Court entered a judgment in favor of Countrywide, holding that a borrower may exercise his or her right of rescission only by filing a lawsuit within three years after the loan is consummated.  The Eight Circuit affirmed that decision, but the Supreme Court reversed. 

Read More from: Creditors' Rights

4 hours 16 min ago
If cramdown failures are par for the course, why are we all so fascinated with them? One thing is certain: they always provide a good teaching moment for practitioners. Marlow Manor’s chapter 11 single asset real estate case is no different. In Marlow Manor, the Ninth Circuit Bankruptcy Appellate Panel held that the bankruptcy court did not err in (i) refusing to confirm the debtor’s chapter 11 plan, which improperly classified two unsecured and impaired deficiency claims of its lender in separate classes as secured and unimpaired, and (ii) rejecting an aspect of the plan, which treated the lender as if it had made a section 1111(b)(2) election.  Background Marlow Manor owned a portion of a high rise in downtown Anchorage. The high rise was subdivided by a developer (the debtor’s manager, Marc Marlow into a two unit condominium project: (i) Unit A was owned by an investor and (ii) Unit B was owed by Marlow Manor. Unit B was to be converted into a senior assisted living home and was financed by a $5.4 million construction loan. In 2007, the Alaska Housing Financing Corporation (“AHFC”) refinanced the majority of the construction loan through two long term loans in the amount of $5.45 million (summarized in the chart below).
4 hours 24 min ago
Lifestyle Lift, a nationwide chain of cosmetic surgery centers, abruptly shut down the majority of its business Monday and said it is considering filing for bankruptcy. The Wall Street Journal has the Daily Bankruptcy Review article here. (Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”) Lehman Brothers Holdings Inc. collapsed more than six years ago, but the failed investment bank is still paying millions in bonuses to the team winding down its business, DBR reports in WSJ. Creditors have come to terms with RadioShack Corp. over bonuses top-ranking insiders stand to earn in the weeks ahead, as the retailer attempts to save a slice of its battered collection of stores, DBR (sub. req.) reports.

Read More from: WSJ.com: Bankruptcy Beat

4 hours 54 min ago
BlackRock has revised its U.S. proxy voting guidelines,following their annual review of governance and proxy voting trends. The guidelines are not expected to result in significant differences from how BlackRock has voted in the past.
5 hours 1 min ago
Banks have to invest in mobile technology in order to keep up with millennials. But bankers also need opportunities to rub shoulders with young customers Â-- and small, conveniently-situated branches give them an opportunity to do so.

Read More from: BankThink

5 hours 16 min ago
Receiving Wide Coverage ... Nothing But Stress: Foreign banks are stressed about the stress tests. Deutsche Bank and Santander are both expected to be called out by the Federal Reserve on Thursday, when the stress test results are announced, for lapses in risk management. Capital isn't the issue with foreign banks. Instead, it's how they measure and predict risks and losses. DB, Santander, Barclays, Credit Suisse, HSBC and UBS are "now spending heavily and recruiting projectÂ...

Read More from: BankThink

6 hours 14 min ago
In a fact-heavy 16 page opinion issued by Judge Shannon on March 2, 2015, we get a clear picture of the challenge faced by litigants when opposing aggressive pro-se litigants.  In Bishop v. Fannie Mae, Adv. Pro. No. 12-50912, the pro-se plaintiff was a chapter 13 debtor who was attempting to secure relief from his mortgage by bringing suit against Fannie Mae.  As reflected in the 5 pages of background, the plaintiffs raised litigation against Fannie Mae in multiple Delaware courts and at the time Judge Shannon’s opinion was issued, had lived in their home without having made a mortgage payment in over 6 years.  The Opinion can be read here.
6 hours 29 min ago
In conjunction with assuming the lease,  the Bankruptcy Code allows the debtor-tenant to assign the lease to a third party.  The party who is assigned the lease must provide the landlord with adequate assurance that it can meet the financial obligations of the lease.  If the party who is assuming the lease cannot provide the landlord with adequate assurance,  the landlord has cause to object to the assignment. Bankruptcy courts often apply the “business judgment” standard when considering whether to allow a tenant to assume and assign a lease. Under this standard, debtor-tenants are permitted to assign a lease provided it can show the transfer of the lease is a reasonable business decision.  Although courts provide debtor-tenants with broad discretion on the decision of whether to assume and assign a lease, the debtor-tenant must still demonstrate the assigned party’s ability to cure defaults under the lease and make future payments. Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.
6 hours 57 min ago
In re Appalachian Fuel, LLC, 521 B.R. 779 (Bankr. E.D. Ky. 2014) – A state department of environmental protection (DEP) filed an administrative expense application in the bankruptcy cases of coal mining debtors for reclamation costs and penalties for postpetition environmental … Continue reading →
8 hours 16 min ago
Did you recently abandon or move out of a property going through foreclosure in Walworth County? Are you a financial institution left with an abandoned property going through a Walworth County foreclosure? A recent Wisconsin Supreme Court decision could have interesting ramifications for both banks and homeowners. The decision states that mortgage lenders must sell foreclosed and abandoned property within a reasonable time after obtaining a foreclosure judgment. The “reasonable time” period will depend on the circumstances surrounding the foreclosure.   The Story Behind the New Walworth County Abandoned Foreclosure Law The decision came after a Milwaukee home was abandoned following a bank foreclosure process. The homeowner walked away. The bank did nothing. The home was then burglarized and vandalized as well as never properly maintained. The property became invaluable and not worth the bank’s time and money to sell. The home then racked up fines due to violating city codes. The homeowner was held responsible. Despite the homeowner’s attempt to declare the property abandoned, it never happened. The Circuit Court declared it did not have the authority to label a home abandoned.

Read More from: Wynn at Law, LLC

23 hours 42 min ago
Dear Leon, What is the best way to get out of debt quickly? I am flat broke. I have no extra money. Would a debt settlement plan be the best thing for me? I am tired of bill collectors chasing me. You of all people must know how. Please help. Sincerely, David in Sacramento, CA  
The best way to get out of debt quickly is to pay what you owe. But when you have no money, that won’t happen. The next best way to get out of debt quickly is to consider bankruptcy. There are very few people who should seriously consider a debt settlement plan. Here’s why that is. Debt settlement plans help very few people. There is no chance of a debt settlement plan helping you unless you have extra money. Without extra money, you can’t double up on payments. If you enter a debt settlement plan you won’t double up on anything but your misery. Debt settlement plans are also terribly expensive. They usually cost between two and four times the price of a bankruptcy case. And, here’s a bigger difference. Most if not all of your debts should be gone after you have paid a lawyer and filed bankruptcy.  But after you pay the settlement company fee, you still owe your debts. Paying in enough money to resolove your debts is a further expense. Paying the creditors is yet to come.

Read More from: Los Angeles Bankruptcy Blog

1 day 39 min ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The bankruptcy laws that allow companies flexibility in selecting a venue shouldn’t be changed. The vast majority of bankruptcy filings actually are filed either where the company has its principal place of business or where its principal assets are located. It’s only in larger cases that companies tend to file where the company is incorporated. There are good reasons for this. The goals of chapter 11 are to reorganize businesses and maximize the return to stakeholders while providing due process to interested parties. In determining where to file, large companies seek to minimize uncertainty. That can best be accomplished by filing in jurisdictions that have well-established precedent on key issues, such as first-day motions. In mega cases, that has been the Southern District of New York and Delaware. Thus, it shouldn’t be a surprise that many of the larger cases are filed there. It should be noted that often times it’s not just the company that wishes to file in these venues but the key lenders also, as they also desire predictability.

Read More from: WSJ.com: Bankruptcy Beat

1 day 2 hours ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed? The debate over venue shopping has been ongoing for years. The central concern—as viewed by Lynn LoPucki in “Courting Failure, How Competition for Big Cases Is Corrupting the Bankruptcy Courts”—is unbridled competition for cases by both Delaware and the Southern District of New York. Professor LoPucki substantiates the impact of this competition based on historic growth in either court’s market share and argues there is an attendant cost reflected in case outcomes, post-emergence. It is far from clear, however, that this concentration has impaired results. The volume of cases in these two jurisdictions may simply be self-reinforcing. Over time, caseloads in these courts have served to justify additional judges. This, in turn, affords both courts more cases, experience and corresponding efficiencies. Furthermore, either court is favored by dint of location central to the Northeast corridor, a region encompassing the preponderance of bankruptcy professionals, as well as dominant lenders.

Read More from: WSJ.com: Bankruptcy Beat

1 day 2 hours ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  Most bankruptcy cases should be heard in forums consistent with current law that are the most convenient and cost-effective for both the parties-in-interest and those most likely to play ongoing roles in chapter 11 case administration. Particularly in large enterprise chapter 11 cases, the location of the debtor’s principal place of business or principal assets may—or may not—be such a forum.

Read More from: WSJ.com: Bankruptcy Beat

1 day 3 hours ago

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