Bankruptcy Brief

Nominations for the 2023 Judge William L. Norton, Jr. Judicial Excellence Award Due by July 17!

ABI and Thomson Reuters are accepting nominations for the 2023 Judge William L. Norton, Jr. Excellence Award. Named for former bankruptcy judge and longtime West author William L. Norton Jr., each year’s award will honor a bankruptcy judge whose career has embodied the same dedication to the insolvency community as did that of the award’s namesake. The award will be presented at the annual meeting of the National Conference of Bankruptcy Judges (NCBJ) to a judge who has distinguished himself or herself as an educator, writer, or scholar. Thomson Reuters will present a commemorative plaque to the recipient and will also donate $5,000 to the ABI Endowment for Education. This donation will be used by the ABI and NCBJ toward joint projects to foster bankruptcy education and research. Nominations are due by July 17. For instructions on how to submit nominations and more information about the award, please submit via the form attached on this page.

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USTP to Resume Debtor Audits in March 2023

December 22, 2022

Bankruptcy Brief

NEWS AND ANALYSIS

USTP to Resume Debtor Audits in March 2023

Effective March 13, 2023, the USTP will resume its designation of individual chapter 7 and chapter 13 cases for audit. These audits had been suspended in March 2020 due to public health concerns associated with the COVID-19 pandemic. As authorized in section 603(a) of Public Law 109-8, the USTP established procedures for independent audit firms to audit petitions, schedules and other information in consumer bankruptcy cases. Pursuant to 28 U.S.C. § 586(f), the USTP contracts with independent accounting firms to perform audits in cases designated by the USTP. Read more.

Commentary: Will the Supreme Court Employ Vicarious Liability to Block an Innocent Debtor’s Discharge?*
By David R. Kuney
On Dec. 6, 2022, the U.S. Supreme Court heard oral argument in Bartenwerfer v. Buckley, (Case No. 21-908). The question presented arose under the Code’s section setting forth an exception to debts that may be discharged. Section 523(a)(2)(A) states, “A discharge … does not discharge an individual debtor from any debt … for money, property [or] services … to the extent obtained by … actual fraud.” Ms. Bartenwerfer did not commit actual fraud herself, but the court found that her husband did in connection with the renovation and sale of their home (which they owned jointly) to the respondent. The question was whether Ms. Bartenwerfer could lose her discharge for “actual fraud” on the grounds that she was “vicariously liable” for the fraud of her husband/partner. We think the answer is no, because § 523(a)(2)(A) requires “actual fraud,” which includes “scienter,” or intent, and the requirement for intent precludes reliance on vicarious liability. A decision is pending. In the words of one scholar, the decision by the Supreme Court could force thousands of individual debtors into “permanent or at least indefinite pauperism,” and could do so where an innocent spouse is denied a discharge because of the wrongdoing of her spouse. Ms. Kate Bartenwerfer faces a claim of over $1.3 million for a wrong committed by her husband. A ruling that a spouse can lose his or her discharge through the misconduct of a spouse would run deeply counter to notions of protection for the honest debtor and would be injurious to marital relationships. Read the full commentary.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Analysis: Why This Is No Madoff Moment for FTX Creditors

The legion of creditors who lost billions in last month’s collapse of crypto exchange FTX just got a tiny piece of good news: A number of parties that received payments and political contributions from the company; its jailed founder, Sam Bankman-Fried; and his associates have expressed a willingness to return the money, FTX said in a statement Monday night, the New York Times DealBook blog reported. Politicians were among the biggest benefactors. Mr. Bankman-Fried; Ryan Salame, the former co-CEO of FTX; and Nishad Singh, a former head of engineering at the company, donated a total of $84.3 million to Democrats, Republicans and political action committees since 2019, according to data collected by OpenSecrets.org and shared with DealBook. Some politicians, including Hakeem Jeffries, the incoming Democratic leader in the House, and Representative-elect Aaron Bean, a Republican from Florida, have returned donations or given the money to charity since FTX fell into scandal. Clawing back enough to make creditors whole will be difficult. FTX went bankrupt last month owing more than $3 billion to its top 50 creditors and having racked up losses that exceeded $8 billion. Many commentators have pointed to the case of Bernie Madoff, the poster child for Ponzi-schemers, as a model for how FTX’s new CEO, John Ray III, and a bankruptcy court might collect assets to repay depositors. In that case, judges ruled that a court-appointed trustee, Irving Picard, was allowed to claw back funds from anyone who pulled out more money than they put in. Mr. Madoff, though, may be an imperfect model for FTX because he claimed he was investing his clients’ funds, but there was no evidence of that. He appears instead to have kept their money in cash. FTX’s client funds, by contrast, were almost certainly converted into some cryptocurrency that traded on exchanges. In that case, experts say that clients of FTX could claim that they were entitled to gains — and if they were lucky enough to get their money out earlier, they could probably keep them. Read more.

Child Care Faces $24 Billion Fiscal Cliff as Pandemic Aid Ends

A crucial source of emergency funding for U.S. child care providers is starting to run out, threatening to hit an already overstretched industry at one of its biggest pain points: trying to hold on to low-paid staff in a tight job market, Bloomberg Businessweek reported. Much of the $24 billion handed out as part of the pandemic-era American Rescue Plan (ARP) has been used by child care providers to give wage increases or bonuses to teachers to discourage them from leaving for higher-paying jobs. With the supply of federal dollars coming to an end, providers say they’ll likely have to roll back those raises or increase tuition, something that’s already caused some parents to pull their kids out of care. Read more.

U.S. Jobless Claims Tick Up, Economy Grows Faster than Previously Thought

The U.S. labor market remains historically tight, and resilient consumer spending propelled stronger economic growth this summer than previously estimated, the Wall Street Journal reported. But economists say higher interest rates resulting from the Federal Reserve’s efforts to tame inflation could weigh on growth and hiring in the coming year. New filings for unemployment benefits rose by a seasonally adjusted 2,000 last week but remain at historically low levels, the Labor Department reported today. The 216,000 claims last week were in line with pre-pandemic levels, when the labor market was also tight, suggesting that employers are holding on to workers despite concerns about an economic slowdown. In a separate report, the Commerce Department said third-quarter economic growth was stronger than previously estimated. The economy grew at a 3.2% seasonally adjusted annual rate, up from an earlier estimate of 2.9%, largely due to higher estimates of consumer spending. The third-quarter number snapped two consecutive quarters of contraction. Taken together, the two reports point to an economy in expansion despite the Fed’s aggressive pace of interest-rate increases. Fed officials are looking to cool the economy to bring down inflation, which hit 40-year highs earlier this year. There have been early hints of softening. Retail sales fell a seasonally adjusted 0.6% in November from the previous month, the Commerce Department said earlier this month. Continuing jobless claims, which reflect the number of people seeking ongoing unemployment benefits, moved down by 6,000 in the week ended Dec. 10., but have slowly climbed since mid-September. That could be a sign that some unemployed people are taking longer to find new jobs. Read more.

Mortgage Buydowns Are Making a Comeback

Rising borrowing costs have dramatically increased the cost of buying a home this year, reviving interest in mortgage products like temporary buydowns that fell out of favor after the 2008 financial crisis, the Wall Street Journal reported. Temporary buydowns offer steep, but short-term, savings on mortgage rates. Borrowers get a much lower rate in the loan’s first year that gradually increases until it resets to a rate in line with market conditions at the time the loan was made. They differ from standard buydowns, in which buyers pay an upfront fee to permanently lower the loan’s rate. Unlike adjustable-rate mortgages, the loans reset to a fixed rate. Buyers typically don’t cover the cost of temporary buydowns. Home sellers, lenders and builders can use temporary buydowns to win over buyers concerned about high rates. They cover the difference between the actual mortgage rate and the rate the buyer pays, stashing those funds into a custodial account that the lender dips into each month. (Subscription required.) Read more.

Big Changes to 401(k) Retirement Plans Move Ahead in Congress

Congress is on the verge of passing a bill that aims to help Americans save more for retirement and leave their retirement savings untouched and untaxed for longer, the Wall Street Journal reported. The bill nearing approval raises the age people are required to start withdrawing money from tax-deferred retirement accounts to 75 from 72. It increases retirement savings contribution limits for older workers and provides an increased incentive to people with low and moderate incomes to save in retirement accounts. It also paves the way for more employers to offer emergency savings accounts inside 401(k) plans. Congress, which published the final details of the bill on Tuesday, is expected to pass the measure in the next few days as part of a larger year-end spending bill. President Biden is expected to sign it soon after. Lawmakers have been writing and negotiating the changes to America’s retirement system for several years in response to an aging U.S. population. Also driving the need for changes, say lawmakers and many investment professionals, is that more employers have shifted responsibility for retirement savings to individuals. Roughly half of American households aren’t saving enough to sustain their standards of living after retirement, according to Boston College’s Center for Retirement Research. The bipartisan retirement measure builds on retirement-policy changes enacted in 2019 that, among other things, raised the age people were required to start withdrawing money from retirement accounts to 72 from 70½. Read more.

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New on ABI’s Bankruptcy Blog Exchange: Lawmakers Caution SBA on Admitting Fintech Lenders to 7(a) Program

In their first meeting since the Small Business Administration proposed opening its flagship 7(a) loan guarantee program to fintechs, Democrats and Republicans on the Senate Small Business Committee have made it clear that the agency must be prepared to effectively oversee any new lenders it lets in the door, according to a recent blog post.

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M&A Likely to Remain Strong in 2022 as COVID-19 Looms over Business Plans

December 23, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

M&A Likely to Remain Strong in 2022 as COVID-19 Looms over Business Plans

Mergers and acquisitions hit a record in 2021, fueled by low interest rates, a surge in private-equity fundraising and companies’ efforts to respond to broader shifts in their industries, the Wall Street Journal reported. The total value of global M&A transactions through Dec. 21 was $5.7 trillion, up 64% from the same period a year before, according to Refinitiv, a data provider. The total number of deals, meanwhile, rose 22% during that period, to 59,748, Refinitiv said. Many of the factors that propelled deal-making in 2021 are expected to continue into next year, M&A lawyers and advisers said. But policy changes on the horizon could dampen the pace of corporate tie-ups, including interest-rate increases from the Federal Reserve — which could increase companies’ financing costs — as well as increased scrutiny from antitrust regulators. It also remains to be seen whether new variants of COVID-19, such as Omicron, have an impact on corporate deal-making, advisers said. (Subscription required.)

Commentary: CFPB Takes Aim at ‘Buy Now, Pay Later’ Credit*

Layaway strategy, which had been largely retired, is having a resurgence with modern-day features, according to a Washington Post commentary. The current “buy now, pay later” (BNPL) transactions are done over apps rather than at a store’s customer service counter. And you get the product now, rather than having to wait to pay it off. The ease of the payment plans might be leading to more impulse purchases — not just during the holidays but all year — and that is making the Consumer Financial Protection Bureau (CFPB) uneasy. The CFPB recently ordered five companies offering “buy now, pay later” credit to answer some questions about their business practices. The CFPB has asked Affirm, Afterpay, Klarna, PayPal and Zip to collect information on the risks and benefits of the BNPL offerings. Among other issues, the CFPB is concerned about the level of debt consumers are racking up and what data is being collected. “Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists, where the consumer gets the product immediately but gets the debt immediately, too,” said CFPB Director Rohit Chopra. BNPL credit deals allow consumers to split the payments for the purchases, typically into four interest-free installments. Fees may kick in only if payments are made late. The BNPL credit products are popular among younger adults and lower-income consumers, and usage of the payment plans has spiked during the pandemic. Twenty percent of Americans said they had used a BNPL payment plan in the previous 12 months, according to a poll over the summer by SurveyMonkey. More than half of those making less than $50,000 a year said that they are interested in using the service because they would not have been able to afford their purchases otherwise, the SurveyMonkey poll found.

* The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

November Consumer Prices Up 5.7 Percent over Past Year, Fastest in 39 Years

U.S. consumer prices rose 5.7 percent over the past year, the fastest pace in 39 years, as a surge in inflation confronts Americans with the holiday shopping season underway, the Associated Press reported. The November increase, reported Thursday by the Commerce Department, followed a 5.1 percent rise for the 12 months ending in October, continuing a string of annual price gains that have run well above the 2 percent inflation target set by the Federal Reserve. Consumer spending, which accounts for 70 percent of U.S. economic activity, rose 0.6 percent in November, a solid gain but below the 1.4 percent surge in October. Personal incomes, which provide the fuel for future spending increases, rose 0.4 percent in November, slightly lower than the 0.5 percent increase in October. Both gains came after a 1 percent plunge in incomes in September, the month that government benefit programs such as expanded unemployment benefits came to an end.

Small Businesses Struck by Omicron Face Hard Choices Before Holiday

After nearly two years of dealing with worker shortages, pandemic restrictions and rising prices, many small businesses are suddenly facing a surge of employee illnesses from the Omicron variant that is leading to some hard choices, the Wall Street Journal reported. Steingold’s of Chicago, a deli in the city’s Lakeview neighborhood, had weathered the pandemic without a single case of COVID-19 until last week, when one in 10 employees tested positive. Co-owner Aaron Steingold followed with a positive result a few days later. Steingold decided to close the shop, which is known for its bagels, lox and corned beef, on Saturday and reopened Wednesday, after the remaining staffers tested negative on both rapid and PCR tests. He and the other staffer who tested positive will continue to isolate, and the shop for now will be taking orders with no indoor dining, he said. Everyone on the staff is fully vaccinated and boosted, he said, but that doesn’t seem to matter with this strain of the virus. As the Omicron variant has led to another surge of infections around the country, some cities are beginning to crank up restrictions. On Tuesday, Chicago Mayor Lori Lightfoot said that starting Jan. 3, Chicagoans will have to show proof of vaccination to enter restaurants, bars, gyms and entertainment venues that serve food or drink. Boston and Philadelphia have announced similar plans. For small-business owners, the current surge of the virus is coming at what feels like the worst possible time. They endured previous shutdowns, and a tight labor market has made it harder to return to capacity once they reopened. Supply-chain disruptions have also hurt business. (Subscription required.)

U.S. Jobless Claims Unchanged at 205,000

Jobless claims remained at 205,000 as the four-week average, which smooths out week-to-week ups and downs, rose to just over 206,000, the Associated Press reported. The numbers suggest that the spread of the omicron variant did not immediately trigger a wave of layoffs. Altogether, 1.9 million Americans were collecting traditional unemployment aid the week that ended Dec. 11. The weekly claims numbers, a proxy for layoffs, have fallen steadily throughout most of the year. Employers are reluctant to let workers go at a time when it’s so tough to find replacements. The U.S. had a near-record 11 million job openings in October, and 4.2 million Americans quit their jobs — just off September’s record 4.4 million — because there are so many opportunities.

The competition fact pattern is available here.

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Regulators Must Root Out Bias in AI-Based Lending

A recent decision reminds creditors of the harsh consequences of failing to comply with a court-imposed deadline for filing claims in a bankruptcy case, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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Analysis: Federal Court Holds that Student Loan Trusts Are Subject to CFPB Enforcement Authority

December 16, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

Analysis: Federal Court Holds that Student Loan Trusts Are Subject to CFPB Enforcement Authority

Judge Stephanos Bibas, visiting judge in the U.S. District Court for the District Delaware from the U.S. Court of Appeals for the Third Circuit, on Dec. 13 denied a motion to dismiss a lawsuit brought by the Consumer Financial Protection Bureau (CFPB) in Consumer Financial Protection Bureau v. The National Collegiate Master Student Loan Trusts, allowing the enforcement action to proceed directly against The National Collegiate Student Loan Trusts. In allowing the action to proceed, the court ruled that the trusts were “covered persons” under the Consumer Financial Protection Act (CFPA) despite having no employees and contracting with special servicers and subservicers to service and collect on the student loans.

Student Loan Payment Pause Will Not Be Extended, White House Confirms

The federal student loan forbearance period will end as planned on Jan. 31, 2022, White House press secretary Jen Psaki confirmed at a press briefing last week. Starting in February, federal student loan borrowers will resume their monthly payments, FoxBusiness.com reported. While the Education Department is "still assessing the impact of the omicron variant," Psaki said that "a smooth transition back into repayment is a high priority for the administration." With less than 50 days left in the student loan forbearance period, several progressive Democrats, including Senate Majority Leader Chuck Schumer (D-N.Y.), are urging President Joe Biden to reconsider this decision.

Weekly Jobless Claims Increase Slightly to 206,000 After Hitting 52-Year Low

New applications for jobless aid rose slightly last week after dropping to the lowest level since 1969, according to data released today by the Labor Department, The Hill reported. In the week ending Dec. 11, seasonally adjusted initial claims for unemployment insurance totaled 206,000. Claims rose by 18,000 from the previous week’s revised total of 188,000. The four-week moving average for claims fell by 16,000 to 203,750, the lowest level since Nov. 15, 1969. The Labor Department said Thursday it expected a decline of 34,989 claims based on seasonal factors. Without adjusting for the seasonal drop, claims fell by 16,426.

Analysis: Three Miles and $400 Apart: Hospital Prices Vary Wildly Even in the Same City

To get inside health care costs, the Wall Street Journal looked at newly public data from one market: Boston, home to some of the world’s most prominent hospitals. U.S. hospitals for the first time this year had to divulge all their prices under a new federal rule. The goal is to make it easier to compare prices for medical care, just as you can with flights, computers or cars. The data reveals the wide variety of prices charged by different hospitals. It also reveals the many rates each hospital charges different patients for the same service, depending on their insurance. The rate is often highest for patients without insurance. The Journal calculated the fees of a hypothetical patient that got hurt in an accident and went to the Massachusetts General Hospital emergency room. The hospital's rate for the level-four ER visit is $946, the price negotiated by Blue Cross Blue Shield of Massachusetts for the patient’s preferred-provider organization plan. Other plans pay more — or less — for the same visit. The patient will owe only a portion of the out-of-pocket cost, as their employer covers most of it. If the patient had gone to another Boston hospital, the price of that visit might have been far less. At Carney Hospital, the rate with the patient’s plan would have been $548. At Boston Medical Center, it would have been $577. Quality differences may explain why some prices vary between hospitals, but not why prices are so different at the same hospital. Those reasons are generally out of a patient’s control. Hospitals and insurance companies set prices through bargaining, where they make trade-offs that save money for some patients but not others. Some hospitals or insurers can have more skill or leverage to negotiate prices, and they typically cut broad deals that may secure a low rate on certain services in exchange for concessions on others. (Subscription required.)

IRS Makes Final Monthly Child Tax Credit Payment, Unless Congress Acts

The Treasury Department and IRS on Wednesday made their final monthly child tax credit payment under President Biden’s coronavirus relief law, as the administration and congressional Democrats push to enact legislation to extend the payments, The Hill reported. The agencies distributed more than $16 billion in payments Wednesday to the households of about 61 million children, Treasury said. Since the monthly payments started in July, Treasury and the IRS have sent out nearly $93 billion in payments. “Since July, monthly payments of the Child Tax Credit have helped millions of families pay for essentials such as food, childcare, and other household needs as those expenses arise,” Treasury Secretary Janet Yellen said in a statement. “The lives of tens of millions of children across the country have improved because families have received tax relief when they need it most.” The coronavirus relief law Biden signed in March expanded the child tax credit for 2021. As part of the expansion, Treasury and the IRS sent out monthly advance payments of the credit in the second half of this year. Families have received monthly payments of up to $300 for each child under aged 6 and up to $250 for each child aged 6 to 17. Wednesday’s payment is the final monthly payment absent congressional action. While Democrats intend to extend the monthly payments for one year as part of their social spending and climate package, the Senate has yet to pass a version of the legislation. The IRS has told lawmakers that they should pass an extension by Dec. 28 in order for a monthly payment to be made on Jan. 15.

Bank Analysts Grapple with Capital Impact of New Derivatives Rule

Wall Street analysts are trying to understand the extent to which a new derivatives rule will affect the performance of big banks as they wrap up the fourth quarter, Reuters reported. The rule is one of a number of measures introduced by regulators to discourage banks from taking excessive risks in the over-the-counter derivatives market, which contributed toward the 2007-09 financial crisis. After years of industry lobbying and fine-tuning by regulators, the rule goes into full force in January. Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. have said that the rule could require them to hold more capital, but how much will depend on their derivatives positions and the measures they take to reduce their exposures.

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Regulators Must Root Out Bias in AI-Based Lending

The fundamental question facing financial regulators when they consider the use of artificial intelligence and machine learning in banking is this: Do the rewards outweigh the risks? That’s doubly true when those tools are used to underwrite consumer loans, according to a recent blog post. Just last month, the chairs of the House Financial Services Committee and the Task Force on Artificial Intelligence sent a letter to the heads of five federal financial services regulatory agencies reminding them to keep up with the advance of AI tech and to make sure they police the industry for biased algorithms that could harm consumers and businesses.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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Government Urges Supreme Court to Review Constitutionality of the 2018 Increase in U.S. Trustee Fees

December 9, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

Government Urges Supreme Court to Review Constitutionality of the 2018 Increase in U.S. Trustee Fees

Late yesterday, the U.S. Solicitor General urged the Supreme Court to grant certiorari, resolve a circuit split and decide whether the increase in fees payable to the U.S. Trustee system in 2018 violated the uniformity aspect of the Bankruptcy Clause of the Constitution because it was not immediately applicable in the two states that have bankruptcy administrators rather than U.S. Trustees. (Siegel v. Fitzgerald, 21-441 (Sup. Ct.) (cert. pending), according to a special edition of Rochelle’s Daily Wire. The Solicitor General was responding to the petition for certiorari filed in September by the liquidating trustee of Circuit City Stores Inc., who is seeking to overturn the decision by the Fourth Circuit finding no constitutional violation. (See Siegel v. Fitzgerald (In re Circuit City Stores Inc. ), 996 F.3d 156 (4th Cir. April 29, 2021). Naturally, the Solicitor General believes that the Fourth Circuit was correct in finding no constitutional infirmity. The Fifth Circuit reached the same conclusion in Hobbs v. Buffets LLC (In re Buffets LLC), 979 F.3d 366 (5th Cir. Nov. 3, 2020). The Solicitor General said that Siegel was an “appropriate vehicle” for review because a federal statute has been held unconstitutional in two circuits, and the circuit split is “unlikely to be resolved without review by this Court.” In addition, the government’s advocate in the Supreme Court said that the constitutional question was “unobstructed by threshold issues or factual complications that could prevent the Court from reaching the question presented.”

Analysis: Why Washington Won’t Fix Student Debt Plans that Overload Families

U.S. lawmakers know the federal Plus student loan programs have plunged millions of families into debt — and they aren’t eager to fix the problem, according to a Wall Street Journal analysis. Congress in the 1990s created a way for parents to borrow essentially unlimited amounts to send their children to college. It did the same for graduate students roughly a decade later. For undergraduate debt, the government imposes a dollar limit. The Parent Plus and Grad Plus programs let people borrow the total cost of attendance — room and board, books and personal expenses on top of tuition — for as many years as it takes to get the degree. Lawmakers and administration officials in both parties acknowledge that the programs have left many borrowers with balances they will struggle to repay, yet Congress has repeatedly punted on changing the programs. Among the reasons: resistance to restricting disadvantaged students’ access to funds, fear of angering universities, and the fact that the programs — on paper, at least — have historically made money for the government. “You’ve got the universities and colleges who want free-flowing capital through these loan programs. For students and parents who want to go to school or want their offspring to go to school, it’s a means to an end,” said former Rep. Rob Andrews (D-N.J.), who first introduced a bill proposing the direct student loan program three decades ago. “It’s only later that people observe those negative consequences.” The Plus programs combined have become the fastest-growing portion of student loans, miring 3.6 million parents and 1.5 million graduate students in debt. Plus loans made up about 12% of the outstanding $1.6 trillion in federal student loans as of June 30, but roughly 26% of the $78 billion in new loans in the academic year that ended then, a Wall Street Journal analysis shows. Their interest rates, at 6.28% for new loans this year, are significantly higher than for other federal student loans. In 2018 and 2019, graduate students who were supposed to begin repaying Plus loans a decade prior collectively owed 70% of what they borrowed, just shy of the 74% that undergraduates from the same period still owed, a Journal analysis of new Education Department figures found. Parents had 60% of their debt outstanding at the end of that decade, the most recent data available show. (Subscription required.)

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Weekly Jobless Claims Hit Lowest Level in 52 Years

New claims for unemployment insurance dropped to 184,000 last week, according to data released Thursday by the Labor Department, falling to the lowest level in more than 52 years, The Hill reported. Last week’s total was the lowest since September 1969 and breaks the previous record for the lowest number of weekly jobless claims since the emergence of the pandemic. In the week ending Dec. 4, seasonally adjusted initial claims for jobless aid fell by 43,000 from the previous week’s revised level of 227,000. While the plunge in jobless claims appeared to show a strengthening labor market, economists said that the scale of the drop could be skewed by seasonal adjustments based on pre-pandemic hiring patterns. Non-seasonally adjusted claims totaled 280,665 last week, rising 29.3 percent from the previous week. The Bureau of Labor Statistics (BLS) said it was expecting a seasonal increase of 106,047 claims last week.

COVID-19 Spurs Biggest Rise in Life-Insurance Payouts in a Century

The COVID-19 pandemic last year drove the biggest increase in death benefits paid by U.S. life insurers since the 1918 influenza epidemic, an industry trade group said, the Wall Street Journal reported. Death-benefit payments rose 15.4% in 2020 to $90.43 billion, mostly due to the pandemic, according to the American Council of Life Insurers (ACLI). In 1918, payments surged 41%. The hit to the insurance industry was less than expected early in the pandemic because many of the victims were older people who typically have smaller policies. The industry paid out $78.36 billion in 2019, and payouts have typically increased modestly each year. COVID-19 also spurred the fastest rise in sales of insurance policies in 25 years, an industry research group said. Combined with good returns on some of insurers’ investments, industry assets increased 7.7% to $8.2 trillion in 2020, ACLI’s figures show. (Subscription required.)

Major U.S. Retailers Urge Action by Congress on Online Stolen, Counterfeit Goods Sales

The chief executives of major U.S. retailers including Target, Home Depot, Kroger, CVS Health, Autozone and Best Buy today urged Congress to take action to address the online selling of stolen, counterfeit and dangerous consumer products, Reuters reported. The group called on Congress to crack down on anonymous online sales, citing the growing impact of organized retail crime. "Retail establishments of all kinds have seen a significant uptick in organized crime in communities across the nation," the letter said. "Criminals are capitalizing on the anonymity of the Internet and the failure of certain marketplaces to verify their sellers. This trend has made retail businesses a target for increasing theft." On Friday, the White House said that it has been in contact with federal law enforcement officials over a string of flash-mob "smash and grab" robberies of U.S. retail stores. A wave of smash-and-grab crimes is plaguing upscale stores in major U.S. cities, with mobs of thieves making off with expensive goods in brazen raids. The cities of San Francisco and Los Angeles have seen several high-profile robberies. The letter calls on Congress to pass legislation to make it "easier for consumers to identify exactly who they are buying from, and make it harder for criminal elements to hide behind fake screennames and false business information." The bill, introduced in 2020, would require verification of third-party sellers on online retail marketplaces. It would also order online platforms that allow third-party sellers of consumer products "to authenticate the identity of high-volume third-party sellers" to "prevent organized retail crime.”

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Libor Fix Wins House Support in Drive to Avert Transition Chaos

The U.S. House approved legislation designed to protect trillions of dollars of assets from chaos when the London interbank offered rate expires, in one of the final key steps aimed at guaranteeing an orderly transition from the discredited benchmark, according to a recent blog post.

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Judicial Security Bill Advances to Senate Floor

December 2, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

Judicial Security Bill Advances to Senate Floor

A bill to protect federal judges and their families from threats and attacks has advanced to the full Senate, and a U.S. district judge from New Jersey, whose son was slain by an angry litigant, urged Congress to pass the legislation without delay, according to a U.S. Courts press release. The Daniel Anderl Judicial Security and Privacy Act, named for the late son of Judge Esther Salas, was voted out of the Senate Judiciary Committee earlier today by a 22-0 vote with one senator voting present. Daniel Anderl was fatally shot in July 2020, and Salas’s husband Mark Anderl was gravely wounded, when a disgruntled litigant came to the family’s door posing as a deliveryman. The gunman found the judge’s personal information on the internet. Daniel, a student at Catholic University in Washington, D.C., had just turned 20. The bipartisan bill would protect judges’ personally identifiable information from resale by data brokers. It would also allow federal judges to redact personal information displayed on federal government internet sites and prevent publication of personal information by other businesses and individuals where there is no legitimate news media or other public interest.

Click here to read the full bill text.

Analysis: Twenty Years After Enron, Investors Are Still Vulnerable to Fraud

The collapse of Enron, which filed for bankruptcy protection 20 years ago today, shook the capital markets and led directly to the demise of Arthur Andersen, the auditing firm that approved Enron’s annual statements and accounting acrobatics. The scandals led to new rules and laws for corporations and auditors that were meant to prevent future frauds of such massive scale. Two decades later, no similar blowups have occurred in U.S. markets, but it’s not clear that investors are any safer today than they were before Enron Corp. failed, according to an analysis in Bloomberg Businessweek. At the time of the Enron fiasco, Andersen had already been enmeshed in frauds at Waste Management Inc., Sunbeam Products Inc. and the Baptist Foundation of Arizona. Soon an even bigger fraud would emerge at WorldCom, another Andersen client. In the wake of the Waste Management collapse, the U.S. Securities and Exchange Commission hit Andersen with a $7 million fine, sanctioned four partners, and issued an injunction against any further violations of securities laws. Once the Enron fraud began to emerge, Andersen’s Houston office quickly activated its “document retention policy,” shredding Enron work papers in advance of an SEC inquiry. As public outrage grew, the Justice Department charged the firm with obstruction. In settlement talks, prosecutors insisted that Andersen admit to some form of wrongdoing. Andersen’s management refused, maintaining that the firm had not broken any laws. A Houston jury convicted Andersen in 2002, effectively putting it out of business. The 2002 Sarbanes-Oxley Act, a wide-ranging law to strengthen auditors’ oversight, added to the pressure on corporations to avoid reporting dodgy numbers. For a few years, the specter of Andersen’s fate injected a rigor into its peers’ audits that had previously been absent. Earnings restatements rose in 2003, 2004, and 2005, a sign that the act’s accounting reforms, coupled with emboldened auditors, were curing corporations of bad practices. But in 2005 the Supreme Court reversed Andersen’s conviction, which had essentially shut down a global firm with 85,000 employees. From 2005 onward, it was clear that the government would be wary of any prosecution that could further reduce the ranks of the Big Four: Deloitte, Ernst & Young, KPMG, and PwC, according to the analysis.

Can’t Travel to WLC? Attend Online to Catch All of the Engaging Programming!

You will not want to miss insights from some of the country’s top insolvency and restructuring experts on issues confronting the profession in 2022 at ABI’s 2021 Winter Leadership Conference, taking place Dec. 9-11. Click below to watch a promo!

Now offering a virtual attendance option, the conference will feature 24 concurrent sessions addressing a diverse spectrum of key insolvency topics for both business and consumer practitioners, including a 2022 economic outlook, mass tort chapter 11 cases, the future of the SBRA, real estate restructurings and more. Register today to attend via an engaging virtual portal to grow your knowledge and network!

Jobless Claims Remain Near Pandemic Low but Grow as More Americans Apply for Unemployment

The number of Americans applying for unemployment benefits rose last week, even though the U.S. job market has been rebounding from last year's coronavirus recession, the Associated Press reported. Jobless claims climbed by 28,000 to 222,000 from the previous week's 52-year low of 194,000, the Labor Department reported Thursday. The four-week average of claims, which smooths out week-to-week ups and downs, fell below 239,000, a pandemic low. Since topping 900,000 in early January, the weekly applications — a proxy for layoffs — have been falling more or less steadily. Overall, 2 million Americans were receiving traditional jobless benefits the week that ended Nov. 20, down by 107,000 from the week before. Until Sept. 6, the federal government had supplemented state unemployment insurance programs by paying an extra payment of $300 a week and extending benefits to gig workers and to those who were out of work for six months or more. Including the federal programs, the number of Americans receiving some form of jobless aid peaked at more than 33 million in June 2020.

Some Professional Degrees Leave Students with High Debt but Without High Salaries

Professional degrees like dentistry and veterinary medicine are leaving many students with immense college debt, threatening the outlook for fields that provide essential public services, according to a Wall Street Journal analysis of federal data. The culprits span graduate programs at big state schools, for-profit colleges and some of the U.S.’s elite private universities. In addition to programs for veterinarians and dentists, chiropractic medicine, physical therapy and optometry produced graduates with some of the worst combinations of high debt and modest beginning paychecks, according to newly released data from the U.S. Department of Education. Students pursuing professional programs can take out loans to cover all their school costs and living expenses under a federal loan program called Grad Plus. (Subscription required.)

Poll: Nearly Half of Americans Are Experiencing Financial Hardship Due to Inflation

Nearly half of Americans in a new Gallup poll reported that recent price increases are causing their family some degree of financial hardship, with 10 percent describing the hardship as severe, The Hill reported. Overall, 45 percent of respondents said that they are facing financial hardships related to increased prices. Gallup said lower-income households are likely to have been hit especially hard by the recent price increases, with 71 percent of households making less than $40,000 a year saying inflation has caused hardship. Twenty-eight percent of this group described the hardship they are experiencing as severe, saying it affects their ability to maintain their current standard of living. In contrast, only 47 percent of middle-income households and 29 percent in upper-income households report that inflation has caused hardship. Americans who received less education are also reporting financial hardship following price increases. Just under 55 percent of U.S. adults without a college degree say inflation has caused financial hardship, with 30 percent of those with a college degree saying the same.

COVID Is Set to Cost the Tourism Industry $1.6 Trillion This Year. Omicron Could Make It Worse.

The return of stricter COVID restrictions to fight the latest variant, omicron, has already left some travelers stranded. For many tourism businesses, it’s also threatening hopes of an upcoming holiday boost this year — especially after last year’s shutdowns emptied out popular destinations, from the Colosseum in Rome to the resort island of Bali, the Washington Post reported. “There was a kind of sunrise on the horizon” earlier this year, said Tobias Warnecke, the German hotel association’s economic adviser. Now, thanks to infections and rule changes roaring back, and fears over omicron, “we have a lot of cancellations, and we’re on our way down.” With scientists rushing to better understand the variant and its high number of mutations, governments including in the U.S. have started tightening masking, quarantine and travel rules. Many have closed their borders to the southern region of Africa where scientists first detected the variant, though it has since popped up in the U.S. and more than a dozen countries from Canada to Japan. The timing also has the aviation industry worried. The president of Emirates airline has noted that a hit to the peak travel season in December could cause “significant traumas in the business,” which had been seeing a recovery.

Amendments to the Federal Rules of Bankruptcy Procedure Took Effect Yesterday

Four bankruptcy rule amendments took effect yesterday, as summarized by Robert Eisenach on JD Supra. They are all relatively minor technical or administrative revisions. Amendments include:

• Rule 2005, addressing release conditions for a debtor taken into custody, was amended to refer to the correct section of Title 18.

• Rule 3007, governing the servicing of claim objections, was amended to make clear that an insured depository institution, now identified only as one “defined in section 3 of the Federal Deposit Insurance Act,” also has to be served pursuant to Rule 7004(h) and its more rigorous service requirements (including certified mail in some situations).

• Rule 7007.1, involving corporate ownership disclosures, was amended to align with similar disclosure rules in the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure. It has been revised to apply only to nongovernmental corporations, including when such corporations intervene in bankruptcy cases and adversary proceedings.

• Rule 9036, governing notice and service, was amended to address high-volume paper-notice recipients and to specify procedures for such recipients related to the Bankruptcy Noticing Center (BNC).

• Although not a Bankruptcy Rule, Federal Rule of Appellate Procedure 6, which governs bankruptcy appeals, was also revised slightly but only to change the reference to a form given the amendments made to Federal Rule of Appellate Procedure Rule 3 (which, in turn, split former Form 1 into Form 1A and Form 1B).

Click here for the full set of rule changes.

The rule changes are also detailed in an article in the December 2021 ABI Journal by Una M. O’Boyle, who is the clerk of the U.S. Bankruptcy Court for the District of Delaware and the former chief deputy of the U.S. Bankruptcy Court for the Southern District of New York. Click here to read the article.

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: SEC Chief Says Cryptoexchanges Need Regulatory Oversight

Securities and Exchange Commission Chair Gary Gensler yesterday doubled down on his calls for more oversight of cryptocurrency trading platforms, offering new insight into his priorities as he seeks to crack down on the digital coin industry, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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$2 Billion in Student Loan Debt to Be Forgiven Under PSLF Program, with More on the Horizon

November 18, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

$2 Billion in Student Loan Debt to Be Forgiven Under PSLF Program, with More on the Horizon

The Biden administration is in the process of cancelling $2 billion in student loans for 30,000 borrowers, Forbes reported. “Check your inboxes!,” said Secretary of Education Miguel Cardona in a tweet last week, noting that $715 million in student loan forgiveness had already been finalized, with another $1.2 billion on the way. “Over the coming weeks, more borrowers — including veterans & service members — will get emails” about student loan forgiveness, he said. The relief that Secretary Cardona was referring to is a new expansion of the Public Service Loan Forgiveness (PSLF) program, which forgives the federal student loan debt of borrowers after 10 or more years of qualifying public service employment for nonprofit and government organizations. Last month, the Biden administration announced that it would temporarily relax some of the core PSLF program requirements. The PSLF program requires 120 “qualifying payments” for a borrower to achieve loan forgiveness. Previously, only Direct federal student loans, and certain types of repayment plans based on a borrower’s income, would count toward a borrower’s student loan forgiveness term under PSLF. Due to a combination of confusing eligibility criteria established by Congress, poor facilitation by loan servicers, and a lack of oversight by the Department of Education, many borrowers who thought they were on track for PSLF were not actually complying with the program’s rules. Other student loan borrowers were doing everything right, but encountered bureaucratic red tape and other administrative issues that caused payments to be rejected. As a result, the PSLF program has long suffered from low approval rates. Under the new changes announced last month, which the administration is calling the “Limited PSLF Waiver” program, the Department is temporarily relaxing the rules governing PSLF to allow most types of federal student loans, and most types of repayment plans, to qualify. The Department will also be counting past payments that should have qualified but were rejected due to technical issues or other errors.

U.S. Weekly Jobless Claims Drop to 268,000

The number of Americans applying for unemployment benefits fell for the seventh straight week to a pandemic low of 268,000, the Associated Press reported. U.S. jobless claims dipped by 1,000 last week from the week before, the Labor Department reported today. The applications for unemployment aid are a proxy for layoffs, and their steady decline this year — after topping 900,000 one week in early January — reflects the labor market’s strong recovery from last year’s brief but intense coronavirus recession. The four-week average of claims, which smooths week-to-week volatility, also fell to a pandemic low of just below 273,000. Jobless claims have been edging lower, toward their pre-pandemic level of around 220,000 a week. Overall, 2.1 million Americans were collecting traditional unemployment checks the week that ended Nov. 6, down by 129,000 from the week before. Until Sept. 6, the federal government had supplemented state unemployment insurance programs by paying an extra payment of $300 a week and extending benefits to gig workers and to those who had been out of work for six months or more. Including the federal programs, the number of Americans receiving some form of jobless aid peaked at more than 33 million in June last year.

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Mortgage Bills Are Coming Again, but $10 Billion in Aid May Arrive First

The $10 billion Homeowner Assistance Fund, part of the $1.9 trillion relief plan enacted by Congress and the Biden administration, will be crucial for still-struggling homeowners now that other measures — particularly the forbearance programs that put mortgage payments on hold for millions of Americans — are coming to an end, the New York Times reported. The legislation gives state, territorial and tribal governments wide latitude to help homeowners with expenses, with priority given to those who live in an area of “persistent poverty” or belong to a group that has been the subject of historical racial, ethnic or cultural discrimination. This week, New York became the first state to receive final approval for its plan; Gov. Kathy Hochul said in a statement that New York would distribute nearly $539 million for homeowners who were “at the greatest risk of foreclosure or displacement.” Each program sets its own rules, including how long it provides aid, the amount per household and the expenses covered. New York, for example, will provide up to $50,000 for costs including mortgage payments, utilities, broadband service and delinquent property taxes, with payments going directly to loan servicers, utility providers or tax authorities.

Supply-Chain Snarls Deliver Windfalls to Wall Street

Global supply-chain bottlenecks are creating headaches for retailers, delays for consumers — and big gains for financial firms that invested in container ships before the pandemic upended the logistics business, the Wall Street Journal reported. New York-based Mangrove Partners, which managed $1.3 billion at the end of September, was up 70% for the year through October. Roughly half of the hedge fund’s gains stem from shipping investments, said a person familiar with the firm. Mangrove focuses on inefficient or out-of-favor industries. Dublin-based hedge fund Pilgrim Global was up 105% for the year through September, thanks in part to a stake in Oslo-listed MPC Container Ships, according to an October investor letter. The fund managed about $100 million at the end of last year. MPC Container Ships stock is up 214% this year. After nearly a decade of distress, windfalls suddenly abound in the notoriously boom-and-bust container-ship sector. Danish giant A.P. Moller-Maersk A/S reported a profit of $5.44 billion for the third quarter — almost as much money as Amazon.com Inc. and United Parcel Service Inc. combined. Container-liner firm Zim Integrated Shipping Services Ltd., which has been restructured several times in roughly the past decade, had a market value of $1.4 billion at the end of its first trading day in January. It had a market value of $6.3 billion as of Wednesday. (Subscription required.)

Munis Set for ‘Golden Decade’ of Credit with Infrastructure Aid

U.S. municipalities are set for another massive infusion of cash from the $550 billion infrastructure package, leaving participants in the muni-bond market to assess the impact on the nation’s states and local governments, Bloomberg News reported. In a nutshell, the analysis boils down to a big takeaway: It’s great for credit quality in the $4 trillion market. Bank of America Corp., for example, sees a “golden decade” of credit ahead. But on the other hand, all that cash may even suppress bond sales. The legislation will unleash spending in an array of areas: It allocates around $110 billion for roads and bridges, $66 billion for rail and $39 billion for public transit. Another $65 billion is earmarked for connecting Americans to high-speed Internet, while $65 billion will go to the power grid and $55 billion for drinking-water systems. The influx comes as municipalities have already collected a historic infusion of $350 billion of federal cash from the American Rescue Plan.

Analysis: Amendments to the Federal Rules of Bankruptcy Procedure Take Effect December 1, 2021

This year, there are only four bankruptcy rule amendments expected to take effect on Dec. 1, according to an analysis by Robert Eisenbach on JD Supra. They are all relatively minor technical or administrative revisions. Amendments include:

• Rule 2005, addressing release conditions for a debtor taken into custody, was amended to refer to the correct section of Title 18.

• Rule 3007, governing the servicing of claim objections, was amended to make clear that an insured depository institution, now identified only as one “defined in section 3 of the Federal Deposit Insurance Act,” also has to be served pursuant to Rule 7004(h) and its more rigorous service requirements (including certified mail in some situations). Although a minor change, it’s a good reminder of the special service rules that apply to FDIC-insured depository institutions. The Committee Note clarifies that this provision does not apply to credit unions because they’re covered by National Credit Union Administration insurance instead of FDIC insurance.

• Rule 7007.1, involving corporate ownership disclosures, was amended to align with similar disclosure rules in the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure. It has been revised to apply only to nongovernmental corporations, including when such corporations intervene in bankruptcy cases and adversary proceedings.

• Rule 9036, governing notice and service, was amended to address high-volume paper-notice recipients and to specify procedures for such recipients related to the Bankruptcy Noticing Center (BNC).

• Although not a Bankruptcy Rule, Federal Rule of Appellate Procedure 6, which governs bankruptcy appeals, was also revised slightly but only to change the reference to a form given the amendments made to Federal Rule of Appellate Procedure Rule 3 (which, in turn, split former Form 1 into Form 1A and Form 1B).

Click here for the full set of rule changes.

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: SBA Chief Defends Direct-Lending Proposal

A hotly contested proposal that would allow the Small Business Administration to make small loans directly to borrowers would help “correct for gaps” in access to capital for disadvantaged businesses, Administrator Isabella Casillas Guzman says, according to a recent blog post. Appearing Tuesday before the House Small Business Committee, Guzman repeatedly defended the plan in the face of skeptical comments by Republican representatives. They questioned the wisdom of departing from the agency’s traditional model of backing loans made by private-sector lenders.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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October Commercial Chapter 11 Filings Increase 19 Percent, Total Bankruptcy Filings Increase 2 Percent

November 4, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

October Commercial Chapter 11 Filings Increase 19 Percent, Total Bankruptcy Filings Increase 2 Percent

The 294 commercial chapter 11 filings recorded in October 2021 represented a 19 percent increase from the 247 commercial chapter 11 filings in September 2021, according to data provided by Epiq. Overall October 2021 business filings increased 4 percent to 1,775 from September’s business total of 1,705. Total bankruptcy filings increased 2 percent, as the 31,477 filings in October 2021 were up from the 30,915 filings recorded in September. The 29,702 consumer filings in October also represented a 2 percent increase from September’s consumer total of 29,210.

Jobless Claims Fall to 269,000, Hitting New Post-Lockdown Low

Claims for unemployment insurance fell to a new post-lockdown low during the final week of October, according to data released Thursday by the Labor Department, The Hill reported. In the week ending Oct. 30, initial claims for unemployment insurance totaled 269,000, a decline of 14,000 from the previous week’s revised level of 283,000. New weekly claims have reached the lowest total since March 14, 2020, when roughly 225,000 Americans filed first-time jobless aid applications shortly before the U.S. locked down to contain the spread of COVID-19. Claims have fallen steadily through October after plateauing in September as employers scramble to meet strong consumer demand. While the emergence of the delta variant in late July derailed the labor market, the economy was largely able to avoid layoffs and is poised to see a recovery in job growth after two disappointing months.

• Rule 2005, addressing release conditions for a debtor taken into custody, was amended to refer to the correct section of Title 18.

• Rule 3007, governing the servicing of claim objections, was amended to make clear that an insured depository institution, now identified only as one “defined in section 3 of the Federal Deposit Insurance Act,” also has to be served pursuant to Rule 7004(h) and its more rigorous service requirements (including certified mail in some situations). Although a minor change, it’s a good reminder of the special service rules that apply to FDIC-insured depository institutions. The Committee Note clarifies that this provision does not apply to credit unions because they’re covered by National Credit Union Administration insurance instead of FDIC insurance.

• Rule 7007.1, involving corporate ownership disclosures, was amended to align with similar disclosure rules in the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure. It has been revised to apply only to nongovernmental corporations, including when such corporations intervene in bankruptcy cases and adversary proceedings.

• Rule 9036, governing notice and service, was amended to address high-volume paper-notice recipients and to specify procedures for such recipients related to the Bankruptcy Noticing Center (BNC).

• Although not a Bankruptcy Rule, Federal Rule of Appellate Procedure 6, which governs bankruptcy appeals, was also revised slightly but only to change the reference to a form given the amendments made to Federal Rule of Appellate Procedure Rule 3 (which, in turn, split former Form 1 into Form 1A and Form 1B).

Click here for the full set of rule changes.

Next Week's Mid-Level Professional Development Virtual Program: Hospitality Insolvencies, Artificial Intelligence in Bankruptcy, Ethics and More!

ABI will be presenting its 2021 Annual Mid-Level Professional Development Program, geared specifically toward mid-level insolvency and restructuring professionals, on Nov. 9 via an innovative virtual platform. This specialized one-day event, spearheaded by honorees of ABI’s “40 Under 40” program, will feature a range of interactive educational sessions delivered via an innovative conference platform, capped off by a virtual mix-and-mingle networking event with colleagues. Attendees have the opportunity to earn up to 5 hours of CLE credit, including 1 hour of ethics, 1 hour of technology, 1 hour of skills and 1 hour of law office management. Program session recordings will be viewable until Dec. 9, 2021. Please note that CLE credit is not available for viewing on-demand recorded sessions. Register here!

SEC Chairman Says Cryptomarket Won’t Mature Without Oversight

Securities and Exchange Commission Chairman Gary Gensler said the regulator will be “very active” in bringing the digital currency market under its investor protection framework, as the Biden administration increases scrutiny of cryptocurrencies, the Wall Street Journal reported. Gensler’s comments on Tuesday came a day after a Treasury Department-led panel issued a report on stablecoins, which are cryptocurrencies pegged to assets such as the U.S. dollar. The report asks Congress to impose a new regulatory framework around stablecoins and to limit the issuance of such digital assets to banks. Stablecoins are issued by companies such as Tether Ltd. and Circle Internet Financial Inc. and are designed to combine the ability to trade quickly online like bitcoin with the stability of national currencies such as the dollar. But the panel said stablecoins could fuel instability if users come to doubt the value of the underlying assets that keep their prices stable, among other risks. Gensler at the conference compared cryptocurrency technology, which has been around for about 13 years, to a teenager, adding that he believes the technology won’t reach “adulthood” if it isn’t brought within broader regulatory oversight for issues such as anti-money-laundering and tax compliance. (Subscription required.)

House Democrats Add Paid Leave, State and Local Tax Deduction to Bill

House Democrats released an updated version of the party’s social spending and climate package, adding back a paid-leave program that had previously fallen out of the bill and including a measure sharply raising the $10,000 cap on the state and local tax deduction, the Wall Street Journal reported. The House bill, which top Democrats want to bring up to a vote in the chamber soon, is the latest proposal in the monthslong negotiations among Democrats over President Biden’s agenda. But it is set to face changes in the Senate, where Sen. Joe Manchin (D-W.Va.) has objected to the inclusion of a paid-leave benefit. The bill includes a variety of measures, proposing a universal prekindergarten program for three- and four-year-olds, subsidies for child care and health care costs, and tax credits for reducing carbon emissions, among other measures. The House text leaves many of those items, as well as proposed corporate minimum taxes and surtaxes on high-income individuals, largely unchanged from the White House’s $1.85 trillion framework released last week. In recent days, Democrats have rushed to resolve a final set of issues on prescription drug pricing, immigration and the capped deduction on state and local taxes. The measure faces an uphill battle in the Senate, where Manchin said yesterday that he continued to oppose its inclusion in the bill. Democratic leaders had stripped it out of the bill because of the West Virginia Democrat’s continued opposition, which other Democrats, several of them women, have pushed him to reconsider. (Subscription required.)

Biden Administration Sets Jan. 4 Vaccination Deadline for Private-Sector Workers

The Biden administration said on Thursday that large companies have until Jan. 4 to ensure that their workforces are fully vaccinated under a sweeping new coronavirus health measure that will cover 84 million private sector workers, the New York Times reported. The plan was first announced in September by President Biden, who directed the Labor Department to invoke its emergency powers over the safety of workplaces to require businesses with 100 or more employees to mandate vaccinations for all employees. Workers who refuse to get vaccinated must undergo weekly testing. Also on Thursday, the administration unveiled new emergency regulations for health care workers, including those at nursing homes caring for elderly and sick residents who are at high risk for infection. All 17 million workers at health care facilities receiving either Medicare or Medicaid funding must be vaccinated by Jan. 4.

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Narrower SBA Direct Lending Plan Fails to Appease Banks, Credit Unions

In a bid to win support among moderate lawmakers for its Build Back Better plan, the Biden administration agreed to more than halve the budget for a proposal that would let the Small Business Administration make direct loans. But even a hefty budget cut isn't enough to appease the banks and credit unions that oppose the plan, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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Economic Growth Rate Slowed in 3rd Quarter to 2 Percent as Delta Variant Derailed Recovery

October 28, 2021

Bankruptcy Brief

NEWS AND ANALYSIS

Economic Growth Rate Slowed in 3rd Quarter to 2 Percent as Delta Variant Derailed Recovery

Economic growth slowed sharply between July and September as the emergence of the COVID-19 delta variant derailed the recovery from the coronavirus recession, according to data released today by the Commerce Department, The Hill reported. U.S. gross domestic product (GDP) grew at an annualized rate of 2 percent in the third quarter, according to the Census Bureau’s first estimate. The economy grew at a 6.7 percent yearly pace in the second quarter of 2021, marking a sharp slowdown as the delta surge began. “The increase in third quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country,” the Census Bureau explained. “Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased.” The beginning of the delta surge in late July upended an economy that was adding roughly 1 million jobs per month. As cases surged, schools either delayed or canceled in-person education, consumer activity in hard-hit sectors declined, and millions of Americans were unable to return to the labor market.

Commentary: The U.S. Should Rethink Public Service Loan Forgiveness*

The Joe Biden administration has announced an overhaul of the government’s public service loan-forgiveness program, which would allow tens of thousands who work for the government or nonprofits to discharge their loans ahead of schedule. The new policy aims to address flaws that have prevented borrowers from receiving the relief they were originally promised. The administration means well, but wide-scale debt-forgiveness is the wrong way to encourage students to pursue careers in public service, according to a Bloomberg News commentary. Under the existing program, which Congress created in 2007, student loan borrowers working for the government and in other nonprofit jobs can have their debts canceled if they’ve made monthly payments for at least 10 years. More than 1 million workers are potentially eligible, but their chances of realizing its full benefits are slim. Out of roughly 725,000 applicants since 2017, only 2% have had their loans discharged. Some had made the required number of payments but were nonetheless denied because of administrative errors. Others have been penalized for enrolling in federal loan programs that aren’t covered, or for making payments a few days late. Earlier this month, the Department of Education took steps to fix the system. Borrowers denied for having the wrong types of loans or because of late payments or other technicalities will now qualify. The government will also allow members of the military, who can suspend their student loan payments while on active duty, to count those months as credit toward full debt forgiveness. Starting next year, service members and federal employees will be automatically enrolled in PSLF instead of having to apply. Under the new rules, as many as 50,000 public service workers could receive immediate relief, wiping out $4.5 billion in student loan debt. All of this will help redeem the PSLF’s original commitment to public-sector workers. The trouble is that the original commitment was not well-judged. The government ought to revisit the basic principles and narrow the scope of the program, according to the commentary.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

CPEX21 Kicks Off Next Week! Immerse Yourself in the Future of Consumer Bankruptcy Practice, Student Loans, Mortgage Mediation and More!

Be sure to register today for ABI’s Consumer Practice Extravaganza (CPEX21), being held Nov. 1-12, during which leading practitioners will be examining key issues across the consumer bankruptcy landscape! Held on a state-of-the-art virtual platform, CPEX will feature five broad session tracks to ensure that there is something for every level of consumer practitioner, with deep dives into the future of bankruptcy and practice management, as well as spotlights on key consumer issues, bankruptcy 101 and ethics. Attendees can select sessions from any track, and all sessions will conveniently remain available to attendees for 30 days after the conclusion of the conference. CPEX will also feature a range of special “demo days” showcasing technology and money-saving tools especially designed for consumer practitioners, circuit-specific breakout sessions and plenaries, and networking with members of the consumer bench and bar. All for the registration price of only $100! Register here.

U.S. Jobless Claims Drop to Pandemic Low of 281,000

The number of Americans applying for unemployment benefits fell to a pandemic low last week as the job market continues to recover from last year’s coronavirus recession, the Associated Press reported. Jobless claims dropped by 10,000 to 281,000, the lowest since mid-March 2020, the Labor Department said Thursday. Since topping 900,000 in early January, weekly applications have steadily dropped, moving ever closer to pre-pandemic levels just above 200,000. The four-week average of claims, which smooths out week-to-week gyrations, fell by nearly 21,000 to 299,250, also a pandemic low. In all, 2.2 million people were collecting unemployment checks the week of Oct. 16, down from 7.7 million a year earlier. The pandemic slammed the economy in the spring of 2020. In March and April last year, employers slashed more than 22 million jobs as businesses closed or reduced hours in response to lockdowns and consumers staying home as a health precaution.

Exacerbated by the Pandemic, Child Care Crisis Hampers Economy

The pandemic has made clear what many experts had long warned: The absence of reliable and affordable child care limits which jobs people can accept, makes it harder to climb the corporate ladder and ultimately restricts the ability of the broader economy to grow, according to an Associated Press analysis. “Early learning is no longer seen as just a women’s issue or a children’s issue. It’s really seen as an economic issue. It’s about workforce participation,” said Mario Cardona, policy chief for Child Care Aware of America. “It’s about employers who don’t have to worry about whether they’ll be able to rely upon employees.” Child Care Aware estimates 9% of licensed child care programs have permanently closed since the pandemic began, based on its tally of nearly 16,000 shuttered centers and in-home daycare centers in 37 states between December 2019 and March 2021. The national crisis has forced many people — mostly women — to leave their jobs, reshaping the child care crisis as not just a problem for parents of young children, but also anyone who depends on them. It has contributed to a labor shortage, which in turn has hurt businesses and made it more difficult for customers to access goods and services. “The decisions we make about the availability of child care today will shape the U.S. macroeconomy for decades to come by influencing who returns to work, what types of jobs parents take and the career path they are able to follow,” said Betsey Stevenson, an economist at the University of Michigan. President Joe Biden has pledged an unprecedented burst of federal spending in hopes of fixing the child care market. At a recent town hall in Baltimore, he assured parents they would “not have to pay more than 7% of your income for child care.” Federal money would go directly to care centers to cover costs in excess of the 7% cap. This means the median U.S. family earning $86,372 would pay $6,046 annually for child care.

Analysis: Mandatory Arbitration Cases Have Soared During the Pandemic

U.S. employers relied heavily on arbitration in the first months of the pandemic, pushing a record number of complaints involving discrimination, harassment, wage theft and other grievances through a closed-door system largely weighted against consumers and workers, according to a report being released this week, the Washington Post reported. Companies closed nearly 14,000 arbitration cases in 2020, according to the American Association for Justice, the industry group for trial lawyers. That’s 17 percent more filings year over year, in a system with no path for appeal. And no company engaged in it more frequently than Family Dollar: The discount chain and its parent, Dollar Tree, arbitrated 1,135 cases in 2020 — nearly a third of all U.S. cases — compared with three the year before. Most nonunion U.S. companies require arbitration, leaving 60 million workers without legal recourse, according to a 2018 report from the Economic Policy Institute, a left-leaning think tank. Critics say the system, in which cases are decided by private arbitrators, keeps employment disputes out of the public eye and fails to hold corporations accountable. But proponents say it saves money and time, making it an efficient alternative to the court system, where lawsuits can take months, even years, to play out.

Biden Pitches $1.85 Trillion Framework to Ease Passage of Parallel Infrastructure Bill

The White House released a $1.85 trillion social policy and climate framework, putting out a still-developing product that top House Democrats hope will be enough to persuade progressives to drop their objections to a parallel, roughly $1 trillion infrastructure bill that leaders want to pass later today, the Wall Street Journal reported. President Biden met with House Democrats in the morning to pitch lawmakers on the framework, a far-slimmer piece of legislation than the $3.5 trillion the party originally had outlined. Democrats have been rushing to complete negotiations on the bill so that they also can move forward with the public-works legislation, which passed the Senate over the summer but has languished in the House. The White House framework released today called for funding for child care subsidies, universal prekindergarten, tax breaks for families, in-home care for elderly and disabled Americans, and tax credits aimed at combating climate change. But several party priorities were absent, including a national paid-leave program, while the fate of others, including a push to allow the government to negotiate drug prices, remained uncertain. (Subscription required.)

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: CFPB’s New Leader Is Putting Big Tech on Notice

Consumer Financial Protection Bureau Director Rohit Chopra is laying the groundwork for regulatory oversight of the largest technology companies as the agency crafts rules around consumer choice and control over financial data, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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