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Consumer Bankruptcy Committee Calls for Student Loan Reform

A group of consumer bankruptcy experts have given a wish list of changes they would make to bankruptcy law’s rules on student loans to another group of experts who could take those changes to Congress later this year, WSJ Pro Bankruptcy reported. Bankruptcy lawyers, trustees and other experts who are part of the American Bankruptcy Institute’s Consumer Bankruptcy Committee declared it “time to explore options for dealing successfully with student loan debt in bankruptcy” in a nine-page memo that lays out their frustrations with existing laws. The group of more than 800 ABI members called for Congress to implement several changes, including giving borrowers the power to cancel private loans and creating mediation programs. “We have all seen the effects of burdensome student loans,” committee officials said in the memo. “While we cannot do much about the root causes of skyrocketing education costs and diminishing public support for institutions of higher learning, we can try to suggest ways in which the bankruptcy process can aid the honest, but unfortunate student loan debtor.” The wish list was released to a panel of law professors, federal judges and consumer advocates that formed last year to examine the problems that have arisen within the U.S. consumer bankruptcy system since 1978, the year of the law’s last major overhaul. The Commission on Consumer Bankruptcy, which is also led by the nonpartisan American Bankruptcy Institute, is expected to release a report in December with recommendations on how to fix the problems.

Weinstein Co. Says Its Bankruptcy Filing Won't Protect Ex-Chairman

The Weinstein Company’s bankruptcy filing will not protect ex-chairman Harvey Weinstein, who has been accused of sexual harassment and assault, an attorney for the studio told U.S. Bankruptcy Court Judge Mary Walrath yesterday, Reuters reported. “We are not here to protect Harvey Weinstein,” attorney Paul Zumbro said. “(The Weinstein Company) filing for bankruptcy relief in no way affects anyone’s ability to pursue civil or criminal claims against Harvey Weinstein.” Weinstein, who co-founded the company with his brother Bob and once was one of Hollywood’s most influential men, has been accused of sexual misconduct including rape by more than 70 women. He has denied having non-consensual sex with anyone. It has been unclear how his alleged victims would be treated in a potential bankruptcy filing. Read more.

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Commentary: Weinstein Co. Case Gets Veteran Judge, Legal Hardliner

The judge in charge of the Weinstein Co. bankruptcy case, Judge Mary Walrath, is one of the country’s most experienced chapter 11 jurists, a legal hardliner and a potential nightmare for the board of the embattled movie studio, according to a WSJ Pro Bankruptcy commentary. Bankruptcy will offer no way out of legal trouble for Weinstein executives accused in multiple lawsuits of aiding the alleged sexual predations of studio co-founder Harvey Weinstein, if Judge Walrath’s track record is any indication. A nearly 20-year veteran of the U.S. Bankruptcy Court in Wilmington, Del., Judge Walrath is known for ruling quickly and decisively, often issuing decisions from the bench. She has been described by one lawyer who has practiced before her for years as a “classic district court judge.” The implication is that she’s not prone to wink at corporate foibles in the name of saving a business, according to the commentary. Read more

*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.

Agriculture Secretary Signals Trump Administration May Leave Biofuel Reform to Lawmakers

U.S. Agriculture Secretary Sonny Perdue signaled on Tuesday that the Trump administration was backing off efforts to make major changes to the nation’s biofuels program and may leave it to lawmakers to settle the divisive issue instead, Reuters reported. The White House spent the last few weeks trying to negotiate a heated dispute between the corn and oil industries, key constituencies for President Donald Trump, over the future of the Renewable Fuel Program — a regulation that requires refiners to blend increasing volumes of biofuels like ethanol into the nation’s fuel. The RFS has created a lucrative market for Midwest corn farmers, but refiners who must prove compliance by earning or purchasing blending credits say it is too costly. Perdue said he and U.S. Environmental Protection Agency chief Scott Pruitt sent the White House a list of options, but it was unclear if Trump would ultimately implement changes to the RFS on the executive level, as has been widely expected, or whether it would instead leave reforms to Congress.

Oaktree Takes Aim at Claire’s, Apollo

Claire’s Stores Inc. entered bankruptcy Monday with a reorganization plan already blessed by private-equity owner Apollo Global Management and first-lien debt holder Elliott Management Corp., but at least one noteholder — Oaktree Capital Management LP — is already objecting to the proposed deal, WSJ Pro Bankruptcy reported. In a court filing and at the teen accessories retailer’s debut bankruptcy hearing Tuesday, Los Angeles-based debt investor Oaktree said holders of $240 million in second-lien notes were unfairly shut out of the negotiations, which could pave the way for first-lien creditors to take control of the company when it exits chapter 11. Oaktree owns 72 percent of the second-lien debt and said it will walk away with nothing in the proposed reorganization. Claire’s went private in 2007 in a $3.1 billion leveraged buyout led by Apollo. Apollo, which owns 98 percent of the equity and 28 percent of three different loans, is on board with the restructuring, which is aimed at cutting $1.9 billion in debt from the retailer’s balance sheet.

Toys 'R' Us Says It’s 'Making Every Effort' to Pay Vendors

Toys ‘R’ Us said at a bankruptcy court hearing on Tuesday that it was working hard to maximize payments to suppliers and lenders, as it starts to shutter 735 big-box toy stores across the U.S., Reuters reported. More than 50 suppliers, including Barbie maker Mattel and Lego, have objected in some form to the proceedings by the storied toy retailer to liquidate its U.S. business, putting 30,000 jobs at risk. Toys ‘R’ Us had been trying to reorganize under U.S. Chapter 11 but last week said those efforts had failed and it was quickly running out of cash. It is also winding down its U.K business, but is looking for a buyer for operations in Canada, Europe and Asia. Some trade vendors are demanding the company return any unpaid inventory rather than selling it and using going out of business sales to pay secured lenders and bankruptcy lawyers, at their cost, court papers showed. “We’re making every effort to make sure (trade vendors) will be paid in full,” Lazard’s David Kurtz, who is advising Toys ‘R’ Us, testified at a hearing at U.S. Bankruptcy Court in Richmond, Virginia. Read more

One of the worst outcomes for a business owner is having a major customer file for bankruptcy and leave behind a large unpaid account receivable. ABI's Business Creditor’s Guide to Distressed Vendors, Debt Collection and Bankruptcy provides an insider’s look into the options available to help screen a business’s customers, plan for worst-case scenarios, and, if the situation does arrive, efficiently handle the fallout.