ABI Blog Exchange

Elkhorn, Wisconsin residents seeking debt relief or a debt settlement company must heed the old saying, “If it sounds too good to be true, then it probably is.” Unfortunately, there are a lot of dishonest companies in this world and some of them hail from the State of Wisconsin. According to the Wisconsin State Court of Appeals, a Wisconsin debt settlement company must pay its customers back $4.2 million in debt settlement service fees. The Wisconsin debt settlement company of Morgan Drexen, Inc. advised its customers to stop paying all creditors. Instead, Morgan Drexen took the money and placed it into an account which Morgan Drexen controlled. Once a client’s “account” accumulated enough funds necessary to buy down debt, Morgan Drexen would negotiate settlements with its clients’ creditors, pay said creditors, and then pay themselves a fee for their service. Morgan Drexen, Inc. operated under this practice for five years, during which time they received $8 million from their Wisconsin client. They paid themselves $4.2 million, over half of all fund received. Morgan Drexen, Inc. was accused of operating without a license. They argued the case, but a hearing examiner ordered them to return the $4.2 million and pay an additional $1.89 million for breaking the law. The case went to the District II Court of Appeals. The Appeals Court ruled that the hearing examiner did not err in determining Morgan Drexen violated the law.

Read More from: Wynn at Law, LLC

1 hour 36 min ago
Our Examiners, a panel of some of the leading bankruptcy experts, weighed in this week on the topic of venue reform. And in more than a dozen responses, they agreed—the venue provisions of the bankruptcy code, as is, work well for businesses and creditors. Their opinions stand in opposition to those published in an op-ed by the now-retired Judge Steven Rhodes, who argued vehemently that this is an area of the law that needs changing. The debate also sparked comments and tweets from readers, many of whom agreed with the Examiners that this part of the code shouldn’t be changed. In the comments section of one of the posts, Christopher A. Ward called the venue fight “misguided.”

Read More from: WSJ.com: Bankruptcy Beat

3 hours 23 min ago
“An attorney’s reluctance, or that of his assistant, to work after 6:30 p.m. one evening in order to meet a court-imposed filing deadline does not constitute excusable neglect.” – In re An In the next post in our series discussing the interplay between the fallibilities of computers and bankruptcy practice, we look at the deepest fear that so many of us have – if we have last-minute problems with electronic filing as a deadline approaches, will we be out of luck, hat in hand, begging forgiveness from our clients?  The Bankruptcy Court for the Central District of California says “yes!”
3 hours 41 min ago
Thanks to Epiq Systems, the latest monthly bankruptcy figures are out, and they show a 10.1% year-over-year decline. We now have had 52 straight months of year-over-year declines in the U.S. bankruptcy filing rate. The graph to the right shows the trend in year-over-year changes. There was a daily average of 3,422 bankruptcy filings in February, compared to 3,804 from the previous year. Total February bankruptcy filings were just over 65,000. (Daily averages are computed based on business days.) I forecasted approximately 800,000 bankruptcy filings for the 2015 calendar year, and the first two months of the calendar year suggested we are spot on that forecast. The first few months of the calendar historically see the highest filing rates of the year. January and February usually account for about 15.5% of the annual total, and extrapolating that historical pattern to the 124,052 filings so far in 2015 puts us right at 800.000 for the calendar year. (For new readers, reasons for the decline are explained in many of my posts collected here.)

Read More from: Credit Slips

4 hours 58 min ago
The subprime consumer lending business is booming. But lenders that think they have the risk-based pricing model figured out may be in for a rude awakening.

Read More from: BankThink

5 hours 29 min ago
With my attention drawn to other matters, my personal blogging has been light for the past month. One of the things that had my attention was the Caulkett case currently pending before the Supreme Court. The issue in Caulkett is whether a wholly underwater second mortgage can be avoided in a chapter 7 bankruptcy. Without any value to reach, a wholly underwater second would not seem to be an allowed secured claim within the meaning of section 506.

Read More from: Credit Slips

6 hours 28 min ago
Most people who file bankruptcy don’t want anyone else to know. Some of my clients try to hide their break for financial freedom from friends and neighbors. Others are worried about their boss finding out. Occasionally, someone will try to keep it from their mate. But trying to hide his bankruptcy nearly cost one client $103,000! Because he hid his bankruptcy filing from his accountant. It’s all about the tax When my client got his bankruptcy discharge, stripping off the junior lien on his house, the mortgage lender dutifully sent him a form 1099. The tax form correctly reported that $288,000 of debt had been forgiven in the last tax year. And my client delivered the 1099 to his tax preparer, who in turn said, That will be an extra $103,000 in tax, due and payable on April 15th. Only, once the tax preparer got the news about the bankruptcy filing, it wasn’t so. Debt forgiven in bankruptcy isn’t taxable A discharge in bankruptcy is the first exception to the standard tax rule that debt that is forgiven is treated as if it were cash income. When the discharge occurs by reason of a case under Title 11, the discharged debt is not taxable income.
6 hours 37 min ago
Authored by Jon Sacks, Scott St. Amand and Heather S. Nason, Jon Sacks, Scott St. Amand and Heather S. Nasonand Jon Sacks, Scott St. Amand and Heather S. Nason of Rogers TowersInvesting in commercial real estate is a pipe dream for all but the highest net worth individuals.  However, in July of last year, the Hard Rock Hotel in Palm Springs defied conventional real estate logic and sold a fifteen percent stake in their property to a group of investors.  Although groups of real estate investors, through more conventional models, such as REITs are increasingly more common, the Hard Rock sale was noteworthy because the money was raised using an unconventional method in commercial real estate: crowdfunding. Crowdfunding makes use of the easy accessibility of vast networks of friends, family and colleagues through social media websites like Facebook, Twitter and LinkedIn to get the word out about a new business and attract investors.  Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives and venture capitalists.

Read More from: Florida Banking Law Blog

6 hours 52 min ago
A RadioShack store in San Francisco
Getty Images
RadioShack Corp .’s creditors ironed out the final details of a $285 million bankruptcy loan at a court hearing Wednesday amid indications that suppliers, landlords and other unsecured creditors will sustain significant losses in the retailer’s chapter 11 proceeding. 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.”) A bankruptcy judge on Wednesday refused to disband an official committee of junior bondholders of Caesars Entertainment Operating Co. debt, a win for investors in the largest unit of the casino giant. Read the DBR article in WSJ.

Read More from: WSJ.com: Bankruptcy Beat

7 hours 16 min ago
When the government owns banks, lending decisions tend to be driven by politics rather than economics. Resources flow to those with influence and banks under-price risk in order to appeal to voters. That's bad news for everyone.

Read More from: BankThink

7 hours 29 min ago
Receiving Wide Coverage ... Blast from the Fed's Past: Newly released transcripts from the Federal Reserve's 2009 policy meetings offer fresh insight in the mindsets of central bank officials during the rocky aftermath of the financial crisis. The New York Times' Neil Irwin condemns the Fed for worrying so much about the consequences of their actions that they hesitated to adopt stronger measures at the time. "By 2009 virtually the entire committee had a clear understanding...

Read More from: BankThink

9 hours 5 min ago
People watch the vice presidential debate in 2008 between then-Democratic vice presidential candidate, Joe Biden, and Republican vice presidential candidate, Sarah Palin, in Hawk ‘n’ Dove in Washington on Oct. 2, 2008.
Associated Press
The bankruptcy case for landmark Washington, D.C., watering hole Hawk ‘n’ Dove ended abruptly on Wednesday with a settlement between the bar’s owners and a group led by D.C. restaurateur Xavier Cervera. The judge overseeing the bankruptcy has dismissed the case at the owners’ request. Details about the settlement between Mr. Cervera, who sold Hawk ‘n’ Dove and eight other restaurants in 2012, and the investors who bought them weren’t disclosed, so it is unclear who won the battle. Hawk ‘n’ Dove and eight other restaurants filed for bankruptcy nearly a year ago—March 28, 2014—as their owners were facing a deadline to make a payment Xavier Cervera and his partners. As part of the 2012 sale, Mr. Cervera and the other sellers agreed to take $4.5 million upfront and another roughly $9.7 million in smaller payments made over time, according to documents filed in U.S. Bankruptcy Court in Washington. If the new owners missed a payment, the sellers could take the restaurants back. Putting the restaurants into bankruptcy protection prevented that takeover and forced the groups to negotiate.

Read More from: WSJ.com: Bankruptcy Beat

1 day 1 hour ago
People watch the vice presidential debate in 2008 between then-Democratic vice presidential candidate, Joe Biden, and Republican vice presidential candidate, Sarah Palin, in Hawk ‘n’ Dove in Washington on Oct. 2, 2008.
Associated Press
The bankruptcy case for landmark Washington, D.C., watering hole Hawk ‘n’ Dove ended abruptly on Wednesday with a settlement between the bar’s owners and a group led by D.C. restaurateur Xavier Cervera. The judge overseeing the bankruptcy has dismissed the case at the owners’ request. Details about the settlement between Mr. Cervera, who sold Hawk ‘n’ Dove and eight other restaurants in 2012, and the investors who bought them weren’t disclosed, so it is unclear who won the battle. Hawk ‘n’ Dove and eight other restaurants filed for bankruptcy nearly a year ago—March 28, 2014—as their owners were facing a deadline to make a payment Xavier Cervera and his partners. As part of the 2012 sale, Mr. Cervera and the other sellers agreed to take $4.5 million upfront and another roughly $9.7 million in smaller payments made over time, according to documents filed in U.S. Bankruptcy Court in Washington. If the new owners missed a payment, the sellers could take the restaurants back. Putting the restaurants into bankruptcy protection prevented that takeover and forced the groups to negotiate.

Read More from: WSJ.com: Bankruptcy Beat

1 day 1 hour ago
Fireworks erupt over Metlife Stadium ahead of Super Bowl XLVIII between the Seattle Seahawks and the Denver Broncos on Feb. 2, 2014. in East Rutherford, N.J.
Getty Images
Lehman Brothers and the New York Giants have settled their long-running dispute over a soured interest-rate swap tied to the financing of the football team’s stadium. Lehman sued Giants Stadium LLC in 2013, claiming it was owed $100 million under the swap. Giants Stadium LLC was set up by the team’s owners, the Mara and Tisch families, to fund the construction of MetLife Stadium. To finance the stadium, the Giants unit issued $650 million in bonds, the bulk of which were underwritten by Lehman. The Giants entered an interest-rate swap agreement with the bank. Lehman offered a lower interest rate to the Giants to beat out Goldman Sachs Group Inc. for the business. But in September 2008, Lehman collapsed, causing it to default on the deal and apparently creating a loss for the Giants.

Read More from: WSJ.com: Bankruptcy Beat

1 day 2 hours ago
Fireworks erupt over Metlife Stadium ahead of Super Bowl XLVIII between the Seattle Seahawks and the Denver Broncos on Feb. 2, 2014. in East Rutherford, N.J.
Getty Images
Lehman Brothers and the New York Giants have settled their long-running dispute over a soured interest-rate swap tied to the financing of the football team’s stadium. Lehman sued Giants Stadium LLC in 2013, claiming it was owed $100 million under the swap. Giants Stadium LLC was set up by the team’s owners, the Mara and Tisch families, to fund the construction of MetLife Stadium. To finance the stadium, the Giants unit issued $650 million in bonds, the bulk of which were underwritten by Lehman. The Giants entered an interest-rate swap agreement with the bank. Lehman offered a lower interest rate to the Giants to beat out Goldman Sachs Group Inc. for the business. But in September 2008, Lehman collapsed, causing it to default on the deal and apparently creating a loss for the Giants.

Read More from: WSJ.com: Bankruptcy Beat

1 day 2 hours ago
The March 2015 edition of the ABI Journal includes an article written by Douglas N. Candeub. The article analyzes the outcome in In re East West Resort Development V. LP, a recent Delaware Bankruptcy Court decision, where the claimant seeking to recover from the debtors’ available liability insurance was, surprisingly, held obligated to pay for the covered litigation expenses that the debtors incurred in litigating against that claimant. Doug examines the background to the opinion, and highlights the acute level of attentiveness that may be required of creditors in a bankruptcy case that have claims covered by insurance, especially where the insurance policy should not be treated as an “executory contract” under the Bankruptcy Code. Click here to read “When a Non-Executory Insurance Policy Is Assumed: A Case Study.”
1 day 2 hours ago
The CEO of Vanguard has issued letters regarding shareholder engagement to the independent chair or lead director of approximately 500 of Vanguard’s largest holdings. The letter is published on Vanguard’s website, and discusses the importance of effective engagement for both shareholders and boards, with the “best boards” working to seek feedback and perspectives independent of management, and engagement functioning as a dialogue with both parties listening to and informing each other.  
1 day 3 hours ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The venue provision of the bankruptcy code shouldn’t be changed and, in fact, works exceedingly well. The recent report from the ABI Commission studying the reform of chapter 11, which came up with several proposed substantive improvements to the bankruptcy code, specifically didn’t propose changes to the issue of venue.  In my view that was the correct approach. There is already a specific section, 28 U.S.C. §1412, which provides that venues in bankruptcy cases may be transferred in the interest of justice or for the convenience of the parties. That provision has been successfully used in large and small cases over many years to transfer venue where appropriate, including recently when Caesars was transferred from the District of Delaware to the Northern District of Illinois. Any party may move to transfer venue, even if all the other parties don’t want the change. The one moving party could be right, but it’s not a democracy. Rather, it’s up to the bankruptcy court to decide.

Read More from: WSJ.com: Bankruptcy Beat

1 day 3 hours ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The venue provision of the bankruptcy code shouldn’t be changed and, in fact, works exceedingly well. The recent report from the ABI Commission studying the reform of chapter 11, which came up with several proposed substantive improvements to the bankruptcy code, specifically didn’t propose changes to the issue of venue.  In my view that was the correct approach. There is already a specific section, 28 U.S.C. §1412, which provides that venues in bankruptcy cases may be transferred in the interest of justice or for the convenience of the parties. That provision has been successfully used in large and small cases over many years to transfer venue where appropriate, including recently when Caesars was transferred from the District of Delaware to the Northern District of Illinois. Any party may move to transfer venue, even if all the other parties don’t want the change. The one moving party could be right, but it’s not a democracy. Rather, it’s up to the bankruptcy court to decide.

Read More from: WSJ.com: Bankruptcy Beat

1 day 3 hours ago
Should bankruptcy laws that allow companies broad latitude in selecting a venue be reformed?  The bankruptcy venue requirements strike a fair balance between deference to a debtor’s chosen venue and the interests of other stakeholders. In our experience, a prudent venue choice by a debtor can enhance the progress and outcome of a chapter 11 case and thereby benefit all stakeholders. Further limiting a debtor’s venue choices is not necessary or advisable. The current venue rules permit a debtor to file for bankruptcy in the district where the debtor is domiciled, resides, has a principal place of business, or has principal assets, generally within 180 days immediately preceding the filing date. A “piggy-back” filing may also be made in the district where there is another bankruptcy case pending with respect to an affiliate of the debtor.

Read More from: WSJ.com: Bankruptcy Beat

1 day 4 hours ago

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