ABI Blog Exchange

 In the debate in Wisconsin over the  Right to Work bill, the legislators opposed to the bill questioned why no businesses were testifying in support of the law, if it was--as stated--going to drive business growth. The Wisconsin Assembly got an answer when James Murray testified about the Right to Work bill. Mr. Murray explained that if passed, Right to Work would definitely increase his business: helping people file personal bankruptcy. Bankruptcy could become big business in Wisconsin, he said, noting that with a Right to Work law, Wisconsin could climb higher than 12th place on the per capita filing rate.  Enjoy 7 minutes of brilliant satire and bankruptcy humor, courtesy of You Tube. Hat tip to Professor Michelle Arnopol Cecil for sharing this with me.  

Read More from: Credit Slips

6 days 10 hours ago
A Congressional overhaul of U.S. bankruptcy law may be keeping financially struggling people out of bankruptcy court, but it hasn’t kept them from going broke, researchers have found. A new study from the Federal Reserve Bank of New York puts a spotlight on a pocket of financially struggling people who, researchers say, are too poor to file for bankruptcy after federal lawmakers changed the law in 2005 and made it more expensive. The study was written by economists Stefania Albanesi of the New York Fed and Jaromir Nosal of Columbia University. Specifically, the report found a “sizable group of individuals exists that does not file for bankruptcy, but seems unable to pay off their debts.” By cutting off the path to bankruptcy, the 2005 law–the Bankruptcy Abuse Prevention and Consumer Protection Act–may have removed the chance for a fresh start for those that need it most, the study said. “These individuals are concentrated at the bottom of the income distribution, and therefore they are the ones who would be expected to benefit most from the relief offered by personal bankruptcy,” the researchers said.

Read More from: WSJ.com: Bankruptcy Beat

6 days 11 hours ago
A Congressional overhaul of U.S. bankruptcy law may be keeping financially struggling people out of bankruptcy court, but it hasn’t kept them from going broke, researchers have found. A new study from the Federal Reserve Bank of New York puts a spotlight on a pocket of financially struggling people who, researchers say, are too poor to file for bankruptcy after federal lawmakers changed the law in 2005 and made it more expensive. The study was written by economists Stefania Albanesi of the New York Fed and Jaromir Nosal of Columbia University. Specifically, the report found a “sizable group of individuals exists that does not file for bankruptcy, but seems unable to pay off their debts.” By cutting off the path to bankruptcy, the 2005 law–the Bankruptcy Abuse Prevention and Consumer Protection Act–may have removed the chance for a fresh start for those that need it most, the study said. “These individuals are concentrated at the bottom of the income distribution, and therefore they are the ones who would be expected to benefit most from the relief offered by personal bankruptcy,” the researchers said.

Read More from: WSJ.com: Bankruptcy Beat

6 days 11 hours ago
A Congressional overhaul of U.S. bankruptcy law may be keeping financially struggling people out of bankruptcy court, but it hasn’t kept them from going broke, researchers have found. A new study from the Federal Reserve Bank of New York puts a spotlight on a pocket of financially struggling people who, researchers say, are too poor to file for bankruptcy after federal lawmakers changed the law in 2005 and made it more expensive. The study was written by economists Stefania Albanesi of the New York Fed and Jaromir Nosal of Columbia University. Specifically, the report found a “sizable group of individuals exists that does not file for bankruptcy, but seems unable to pay off their debts.” By cutting off the path to bankruptcy, the 2005 law–the Bankruptcy Abuse Prevention and Consumer Protection Act–may have removed the chance for a fresh start for those that need it most, the study said. “These individuals are concentrated at the bottom of the income distribution, and therefore they are the ones who would be expected to benefit most from the relief offered by personal bankruptcy,” the researchers said.

Read More from: WSJ.com: Bankruptcy Beat

6 days 11 hours ago
The big decision out of the Fifth Circuit this month was a Ponzi scheme case against The Golf Channel.    Honorable mentions included the follow up appeal in the Frazin case which first addressed consent in Stern cases and several cases involving mortgages.  Because there have been slim pickings among bankruptcy cases per se,  I have included several non-bankruptcy cases which generally involve debtor-creditor relations.  Torres v. Krueger, No. 13-11165 (5th Cir.
6 days 14 hours ago
On March 3, 2015, the Eighth Circuit issued an opinion holding—consistent with past Eighth Circuit precedent—that an order denying plan confirmation does not constitute a final order that may be appealed without leave of the court.  The opinion was not only a harsh reality-check for the debtor, but a reminder of the circuit split that exists with respect this important issue.  Luckily, there is cause to believe that the circuit split may not exist for much longer: earlier this month, the Supreme Court heard oral argument in a case presenting the very question whether an order denying plan confirmation constitutes a “final order” within the meaning of 28 U.S.C. § 158(a)(1).   “Flexible” Finality
6 days 14 hours ago
The Ninth Circuit BAP today affirmed a Bankruptcy Court’s decisions denying a debtors motion to allow a late filed claim  and entering judgment in favor of a creditor that was omitted from the schedules in an asset chapter 7 case.  The Court recognized:
The language contained in § 523(a)(3)(A) is clear and not ambiguous: a debt is excepted from discharge if the creditor was neither listed nor scheduled and did not otherwise know of the bankruptcy case in time to file a timely POC. As there is nothing for us to interpret, we must enforce the statute according to its terms.
The lesson to be learned is that sloppy work preparing schedules carries harsh consequences.  A copy of the opinion may be found here.  Mahakian-14-1115.
6 days 15 hours ago
Hear the one about 28-year old Owen Li, manager of hedge fund Canarsie Capital, sending an apology letter to investors disclosing that he had lost 99.7% of the funds under management? No, here is the New York Times article about it. Read more here.
6 days 16 hours ago
Marketplace lenders are aggressively marketing their loans as a way to refinance expensive credit card debt. And with more affordable interest rates and faster loan application processes, there's reason to believe that firms like Lending Club and SoFi will beat out banks.

Read More from: BankThink

6 days 16 hours ago
Lying awake at night, thinking about where the money is going to come from to pay the stack of mounting bills is unnerving and all-consuming. Being in debt quickly becomes so overwhelming that people often make choices that make the problem worse, instead of better. If you are dealing with a financial crisis at home, talk with a bankruptcy lawyer about next steps. There are many alternatives to bankruptcy such as consolidation or debt negotiation; talking to a lawyer doesn’t mean you have to file for bankruptcy protection. However, you may find out that it is your best option. Here’s what not to do when you are drowning in debt:
  • You’ve been saving for retirement all of your life and now an accident or job loss has put you at risk of losing your home. So, you look toward that 401K or other retirement nest egg. It’s an option, but not a great one. Many people in debt empty retirement accounts trying to get back into the black. Experts say, however, that unless you have enough save to pay off all of your debt and still retire with money in the bank, this is not a workable solution.
6 days 17 hours ago
Fumbled opportunities? Nearly one in six NFL players goes bankrupt within 12 years of retirement.
(TIMOTHY A. CLARY/AFP/GETTY IMAGES)
Despite big paydays, many National Football League players run into financial trouble after they retire and nearly one in six files for bankruptcy within a dozen years of hanging up their cleats, according to a new analysis. “Players with median-length careers earn about $3.2 million in a few years. If they are forward-looking and patient, they should save a large fraction of their income to provide for when they retire from the NFL,” Kyle Carlson, Joshua Kim, Annamaria Lusardi and Colin F. Camerer wrote in a working paper released this month by the National Bureau of Economic Research. Instead, the researchers found that 15.7% of players file for bankruptcy within 12 years of retiring from the league, with little difference based on career length or earnings. “Having played for a long time and having been a successful and well-paid player does not provide much protection against the risk of going bankrupt,” they wrote.

Read More from: WSJ.com: Bankruptcy Beat

6 days 17 hours ago
Fumbled opportunities? Nearly one in six NFL players goes bankrupt within 12 years of retirement.
(TIMOTHY A. CLARY/AFP/GETTY IMAGES)
Despite big paydays, many National Football League players run into financial trouble after they retire and nearly one in six files for bankruptcy within a dozen years of hanging up their cleats, according to a new analysis. “Players with median-length careers earn about $3.2 million in a few years. If they are forward-looking and patient, they should save a large fraction of their income to provide for when they retire from the NFL,” Kyle Carlson, Joshua Kim, Annamaria Lusardi and Colin F. Camerer wrote in a working paper released this month by the National Bureau of Economic Research. Instead, the researchers found that 15.7% of players file for bankruptcy within 12 years of retiring from the league, with little difference based on career length or earnings. “Having played for a long time and having been a successful and well-paid player does not provide much protection against the risk of going bankrupt,” they wrote.

Read More from: WSJ.com: Bankruptcy Beat

6 days 17 hours ago
Fumbled opportunities? Nearly one in six NFL players goes bankrupt within 12 years of retirement.
(TIMOTHY A. CLARY/AFP/GETTY IMAGES)
Despite big paydays, many National Football League players run into financial trouble after they retire and nearly one in six files for bankruptcy within a dozen years of hanging up their cleats, according to a new analysis. “Players with median-length careers earn about $3.2 million in a few years. If they are forward-looking and patient, they should save a large fraction of their income to provide for when they retire from the NFL,” Kyle Carlson, Joshua Kim, Annamaria Lusardi and Colin F. Camerer wrote in a working paper released this month by the National Bureau of Economic Research. Instead, the researchers found that 15.7% of players file for bankruptcy within 12 years of retiring from the league, with little difference based on career length or earnings. “Having played for a long time and having been a successful and well-paid player does not provide much protection against the risk of going bankrupt,” they wrote.

Read More from: WSJ.com: Bankruptcy Beat

6 days 17 hours ago
It seems with ever increasing regularity, there is a chapter 13 emergency filing that my office has to complete. It used to be that a Sheriff sale was the main reason for an emergency filing. As long as the case was filed before the actual Sheriff sale took place, the homeowner had the right to+ Read More The post Emergency Chapter 13 Filing: From Consultation To Filing In Two Hours appeared first on David M. Siegel.
6 days 17 hours ago
The ABI has spent thousands of hours on its Chapter 11 Commission Report; the National Bankruptcy Conference is hard at work on its "Rethinking Chapter 11" project. Underlying these and other such efforts is an overwhelming frustration with the failure of Chapter 11, under current circumstances to empower true reorganization. Hard to believe but it was not always this way. During the first decade or two of the Bankruptcy Code it seemed to be working pretty well; in fact many courts were unwilling to consider quick sales of the entire business. Many large cases resulted in a confirmed reorganization plan although some led to further chapter 11 efforts or failure; the results in smaller or medium-sized cases were more uneven with a healthy percentage being dismissed or converted to Chapter 7.  There was almost no discussion of Section 363 at the Ten Year Retrospective on Chapter 11 in Williamsburg and there was little commentary on its use. Indeed, the 1997 report of the Bankruptcy Review Commission did not focus on this issue.  Beginning sometime between the Code's tenth and twenty-fifth birthdays the tide shifted; not only did most courts back off from their legal position that Chapter 11 was for reorganization and that any sale of the entire business needed to be done within a Plan, but the vast majority of cases seemed to shift to quick 363 sales to a suitor that was identified before the filing with an auction possible if there were competing bidders. 

Read More from: Credit Slips

6 days 18 hours ago
When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. Under bankruptcy’s “absolute priority rule,” creditors generally must be paid in full before equity gets anything. That usually means that holders of equity, or claims treated as equity, get nothing. Section 510(b) Mandatory Subordination. A recent decision by the U.S. Court of Appeals for the Ninth Circuit in In re Tristar Esperanza Properties, LLC serves as a good reminder of the special bankruptcy rules involving mandatory subordination of certain equity-like claims. More on the Tristar case in a minute, but first let’s take a look at the provision that spells out the mandatory subordination rule. Section 510(b) of the Bankruptcy Code provides:
6 days 18 hours ago
The New York Times carried an important story about the risky investment moves of life insurance companies. There's a lot of good stuff in the story, but it missed an important angle, namely the consumer harm that has already resulted from bank affiliation with captive reinsurers in the private mortgage insurance space, namely inflated and unecessary private mortgage insurance premiums because of illegal kickback arrangements. 

Read More from: Credit Slips

6 days 18 hours ago
In a recent opinion, the Ninth Circuit Court of Appeals held that the FDIC may be liable in damages to a counter party for breach of a bank’s pre-receivership contract.  Bank of Manhattan v. Federal Deposit Insurance Corporation, 2015 WL 898232 (9th Circ. 2015).  The facts in Bank of Manhattan involved a participation agreement between two banks.  Bank of Manhattan’s predecessor in interest – Professional Business Bank (“PBB”) – sold a participation interest in a loan to First Heritage Bank (“Heritage”).  The participation agreement contained two key provisions relevant to the case:  (1) Heritage could not transfer its interest in the loan without PBB’s prior written consent and (2) PBB was granted a right of first refusal entitling it to repurchase Heritage’s interest in the loan on the latter’s receipt of a bona fide third party offer. 

Read More from: Creditors' Rights

6 days 18 hours ago
The Basel Committee needs to measure the efficacy of recently implemented rules, strengthen banks' operational risk requirements and make banks' risk models less variable. Luckily, secretary general William Coen has vowed to do just that.

Read More from: BankThink

6 days 18 hours ago
On September 9, 2013, Furniture Brands International (“Furniture Brands”) and various related entities filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  We initially published a blog post about the filing here: Furniture Brands Files for Bankruptcy in Delaware Seeking to Sell Assets On August 1, 2014, the Debtors’ confirmed chapter 11 plan became effective, thereby creating the FBI Wind Down, Inc. Liquidating Trust (the “Trust”) and appointing Alan D. Halperin as the Trustee.  We recently were informed that the Trustee has begun sending out preference demand letters, informing recipients that if they do not settle their liability, he will bring a preference lawsuit.  The Trustee will argue that the transfers, or payments, received by various defendants are avoidable and subject to recovery under 11 U.S.C. § 547 and 548 of the United States Bankruptcy Code. Defenses to a Preference Action
6 days 19 hours ago

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