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Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? The explosive growth of student debt has become not only a mounting political issue, but its near-suffocating effect on millions of Americans also is causing considerable macroeconomic impacts. The statistics are daunting: Total student debt now exceeds $1.2 trillion, up from only $240 billion just 12 years ago. During this period, the number of borrowers has increased more than 65% to nearly 40 million, with average student loans increasing nearly 50%. And as graduate school ranks increased during the most recent financial downturn, average student debt for these former students is now approaching $100,000. There are many causes for these dramatic increases. Tuition is increasing at far greater than the rate of inflation, and enrollment at “for-profit” colleges, which are highly dependent on “risky” student loans, is exploding. It’s no wonder that the default rate on student loans is the highest of any debt category, approaching close to 20%.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? The explosive growth of student debt has become not only a mounting political issue, but its near-suffocating effect on millions of Americans also is causing considerable macroeconomic impacts. The statistics are daunting: Total student debt now exceeds $1.2 trillion, up from only $240 billion just 12 years ago. During this period, the number of borrowers has increased more than 65% to nearly 40 million, with average student loans increasing nearly 50%. And as graduate school ranks increased during the most recent financial downturn, average student debt for these former students is now approaching $100,000. There are many causes for these dramatic increases. Tuition is increasing at far greater than the rate of inflation, and enrollment at “for-profit” colleges, which are highly dependent on “risky” student loans, is exploding. It’s no wonder that the default rate on student loans is the highest of any debt category, approaching close to 20%.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? Currently, the bankruptcy code makes it very difficult to discharge (walk away from) student loan debt, often leaving new graduates in debt to the point at which it negatively impacts their decision to make major purchases such as real estate or cars, take jobs they want as opposed to jobs simply for a higher salary or any paycheck at all, or even marry or leave home. Although it appears that the current state of the student-loan market begs for reform, simply relaxing the barriers to student-loan forgiveness in bankruptcy may actually aggravate the issue and leave the underlying problem of rising higher education costs unresolved. This isn’t to say that the market itself is not reacting. Perhaps in recognition of the skyrocketing cost of higher education, recent reforms do provide payment alternatives including grace periods to delay or prevent defaults, reduced repayment terms during periods of unemployment, or repayment plans tied to a percentage of the recent graduate’s salary.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? Currently, the bankruptcy code makes it very difficult to discharge (walk away from) student loan debt, often leaving new graduates in debt to the point at which it negatively impacts their decision to make major purchases such as real estate or cars, take jobs they want as opposed to jobs simply for a higher salary or any paycheck at all, or even marry or leave home. Although it appears that the current state of the student-loan market begs for reform, simply relaxing the barriers to student-loan forgiveness in bankruptcy may actually aggravate the issue and leave the underlying problem of rising higher education costs unresolved. This isn’t to say that the market itself is not reacting. Perhaps in recognition of the skyrocketing cost of higher education, recent reforms do provide payment alternatives including grace periods to delay or prevent defaults, reduced repayment terms during periods of unemployment, or repayment plans tied to a percentage of the recent graduate’s salary.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
A new wave of artificial intelligence applications work by crunching financial data to answer customers' questions. This may give financial institutions a leg up over their nonbank competitors, since the latter group tends to lack vast reserves of people's financial information.

Read More from: BankThink

2 weeks 2 days ago
The roughly $7 million sale of the Fresh Produce retail chain, which sells vacation-inspired clothing to women, got approval from a bankruptcy judge. In a court order signed Tuesday, Judge Michael Romero approved the chain’s sale to an investor group that includes Fresh Produce’s existing owners, Thom and Mary Ellen Vernon. The deal is expected to keep more than half of Fresh Produce’s 27 stores open. The retailer targets both tourists and “non-tourist customers for whom a ‘vacation state of mind’ resonates,” Chief Financial Officer Jo Stone said in earlier documents filed in in U.S. Bankruptcy Court in Denver. The Boulder, Colo., chain filed for chapter 11 protection on April 4, blaming an “aggressive overexpansion” and high turnover in key positions. As the company began to struggle last year, it closed a store, laid off workers and cut employee pay by 10%. Fresh Produce employed 270 people at the time of its bankruptcy and made $37.9 million in sales during its most recent fiscal year.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
The roughly $7 million sale of the Fresh Produce retail chain, which sells vacation-inspired clothing to women, got approval from a bankruptcy judge. In a court order signed Tuesday, Judge Michael Romero approved the chain’s sale to an investor group that includes Fresh Produce’s existing owners, Thom and Mary Ellen Vernon. The deal is expected to keep more than half of Fresh Produce’s 27 stores open. The retailer targets both tourists and “non-tourist customers for whom a ‘vacation state of mind’ resonates,” Chief Financial Officer Jo Stone said in earlier documents filed in in U.S. Bankruptcy Court in Denver. The Boulder, Colo., chain filed for chapter 11 protection on April 4, blaming an “aggressive overexpansion” and high turnover in key positions. As the company began to struggle last year, it closed a store, laid off workers and cut employee pay by 10%. Fresh Produce employed 270 people at the time of its bankruptcy and made $37.9 million in sales during its most recent fiscal year.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? It’s not exactly “breaking news” that student loan debt has become an insurmountable issue for many recent graduates. The problem is now so widespread that we must reform the bankruptcy code to help alleviate the burden on individuals and the U.S. economic future. Borrowers rarely try to discharge student loan debt because of the bankruptcy code’s stringent requirements that apply to forgiveness of such obligations. Since 2005, all qualified educational loans, including private loans, are impracticality non-dischargeable. However, treating student loan debt this way impacts not just individuals, but the economy as a whole. The staggering rate of growth of educational debt will ultimately have rippling (and crippling) effects on other financial sectors.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? It’s not exactly “breaking news” that student loan debt has become an insurmountable issue for many recent graduates. The problem is now so widespread that we must reform the bankruptcy code to help alleviate the burden on individuals and the U.S. economic future. Borrowers rarely try to discharge student loan debt because of the bankruptcy code’s stringent requirements that apply to forgiveness of such obligations. Since 2005, all qualified educational loans, including private loans, are impracticality non-dischargeable. However, treating student loan debt this way impacts not just individuals, but the economy as a whole. The staggering rate of growth of educational debt will ultimately have rippling (and crippling) effects on other financial sectors.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
PwC’s February 2015 MoneyTree Report provides that 2014 wasn’t just a good year for venture capital, it was a great year. Venture capitalists invested a total of $48.3 billion in 4,356 deals in 2014 which correlates to a 61% more dollars invested in and an overall 4% increase in the number of deals in 2014, as compared to 2013. Read more here.
2 weeks 2 days ago
Nearly 100% of all urban riots in America have occurred where the market economy either failed or didn't exist to begin with. Banks are well positioned to help bring economic opportunity to underserved neighborhoods and make free enterprise work for all.

Read More from: BankThink

2 weeks 2 days ago
Receiving Wide Coverage ... All Politics Is Local: The Wall Street Journal and Financial Times both look at the draft legislation introduced on Tuesday by Sen. Richard Shelby, R-Ala., to provide regulatory relief to financial institutions. American Banker stories provided an executive summary of Shelby's proposal and an analysis of how the political maneuvering will play out between Republicans and Democrats. The political game was the focus of one Journal story, with Democrats immediately expressing reservations...

Read More from: BankThink

2 weeks 2 days ago
Associated Press
Standard General LP, the hedge fund that saved more than 1,700 RadioShack  stores from liquidation, has been declared the new owner of the RadioShack brand, with a winning bid of $26.2 million. 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.”) The question of how to divide $7.3 billion raised in the international bankruptcy of Nortel Networks Corp. was answered Tuesday by two judges, one in the U.S. and one in Canada. Read the DBR article in WSJ.

Read More from: WSJ.com: Bankruptcy Beat

2 weeks 2 days ago
Series: IP 101 2015 There is a lot more to picking a name than checking the secretary of state’s records to make sure the name you want is available.  This webinar will teach the non-IP lawyer what he or she must know about choosing a name and then protecting that name. Read more here.
2 weeks 3 days ago
Field v. Bank of America, N.A. (In re Gibbs), 522 B.R. 282 (Bankr. D. Hawaii 2014) – A bankruptcy trustee sued a mortgage lender to recover for defects in a prepetition non-judicial foreclosure sale. The lender brought a motion to dismiss … Continue reading →
2 weeks 3 days ago
According to an article in the New York Times, Bank of America and JP Morgan Chase are finally agreeing to properly identify debts that were discharged in bankruptcy.  Bank of America and JPMorgan Chase have agreed to update borrowers’ credit reports within the next three months to reflect that the debts were extinguished. There has been a fierce battle over the lawsuits, brought by Charles Juntikka, a bankruptcy lawyer in Manhattan, and George F. Carpinello, a partner with Boies, Schiller & Flexner. Judge Robert D. Drain, who is presiding over the cases, has repeatedly refused the banks’ requests to throw out the lawsuits. In July, when he refused to dismiss the case against JPMorgan, he said, “The complaint sets forth a cause of action that Chase is using the inaccuracy of its credit reporting on a systematic basis to further its business of selling debts and its buyer’s collection of such debt.” At a hearing in April, transcripts show, the judge criticized Citigroup for not changing the way it reports debts to the credit reporting agencies. “I continue to believe there’s one reason, and one reason only, that Citibank refuses to change its policy,” the judge said. The reason, the judge went on, is “because it makes money off of it.”
2 weeks 3 days ago
Summary In a 14 page decision released May 12, 2015, Judge Sontchi of the Delaware Bankruptcy Court illustrated why even perfect motions to dismiss may not be worth filing.  Judge Sontchi’s opinion is available here (the “Opinion”).  The Opinion was issued in the adversary proceeding Alamo Group, LLC and Kirin Alamo, LLC v. A&G Realty Partners, LLC, et al., Case No. 14-50103.  In this adversary proceeding the plaintiffs alleged fraudulent misrepresentation, but failed to allege materiality, a necessary element of a Delaware common law fraud claim.  Opinion at *2.  Because the plaintiffs failed to plead materiality, Judge Sontchi held that “there [was] no need to detail the remaining elements of a Delaware common law fraud claim.  Plaintiffs’ Complaint fails on these grounds.”  Opinion at *14.  Yet, even with what amounted to a perfect motion to dismiss, Judge Sontchi concluded his Opinion with a statement that “Plaintiffs will be given an opportunity to amend the Complaint within 30 days…”  Opinion at *14. Background and Ruling
2 weeks 3 days ago
The Illinois Supreme Court issued its unanimous opinion this past Friday putting a stake through the heart of the legislature's latest attempt to evade its responsibility for woefully underfunding four of the state's five public pensions. Adam (among others) has discussed the pension issue in the Detroit bankruptcy case and the Michigan constitutional provision protecting pension benefits from impairment. The Illinois Constitution of 1970 has an identical provision (art. XIII, s. 5), which will have much more bite in the case of the state of Illinois--an entity that, unlike Detroit, is not eligible for bankruptcy protection. Long story short: the Supreme Court all but scoffed at the state's arguments that contracts can sometimes be impaired (and the state has a really, really good reason here) and that prohibiting the legislature from reducing vested pension benefits is an impermissible abdication of sovereign authority. The Court pointed out that it wasn't the legislature, but the people of Illinois, who imposed the pension protection restriction ...

Read More from: Credit Slips

2 weeks 3 days ago
Two recent decisions from large and highly contested chapter 11 cases add to the developing body of case law on the treatment of make-whole claims in bankruptcy.  First, in a two-part post, we discuss the United States Bankruptcy Court for the District of Delaware’s decision in Energy Future Holdings, and later, in a follow-up post, we discuss the United States District Court for the Southern District of New York’s affirmation of the United States Bankruptcy Court for the Southern District of New York’s make-whole rulings in Momentive.  (To access our previous post on the Southern District of New York bankruptcy court’s Momentive decision, click here).   
2 weeks 3 days ago

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