ABI Endowment Funded Study Finds Unsecured Creditor Recoveries Decreased Post-BAPCPA

ABI Bankruptcy Brief | November 19, 2013

November 19, 2013

NEWS AND ANALYSIS

ABI ENDOWMENT FUNDED STUDY FINDS UNSECURED CREDITOR RECOVERIES DECREASED POST-BAPCPA

Though the financial services industry lobbied Congress for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) in part to improve creditor returns in consumer bankruptcy proceedings, an ABI Endowment-funded study finds that recovery has been less effective. Prof. Lois Lupica of the University of Maine School of Law, who also authored the ABI Endowment-funded Consumer Bankruptcy Fee Study in 2011, was the reporter and principal investigator for "The Consumer Bankruptcy Creditor Distribution Study." The Fee Study found that there was a significant increase in access costs for consumers filing for chapter 7 or chapter 13. Lupica's new study built on that research to find that unsecured creditor distributions decreased for both chapter 7 and 13 cases after the enactment of BAPCPA. To access a copy of "The Consumer Bankruptcy Creditor Distribution Study," please click here.

ABA WEIGHS IN ON SUPREME COURT CASE FOCUSED ON BANKRUPTCY COURT POWERS

The American Bar Association filed an amicus brief in the Supreme Court case of Executive Benefits Insurance Agency v. Arkison, defending the right of bankruptcy judges to have the final say in their courtrooms, the Wall Street Journal reported today. ABA's brief is urging the Supreme Court to narrowly interpret its 2011 Stern v. Marshall ruling by confirming bankruptcy courts' broad ability to enter final orders and judgments. The Stern decision called into question the ability of bankruptcy judges to hear, let alone rule, on certain bankruptcy matters, including lawsuits. The effect of the ruling in Stern has been to prolong litigation, as plaintiffs and defendants battle over whether a bankruptcy or district judge should hear their case. As those litigation battles have played out, courts have split as to whether Stern broadly limited bankruptcy courts' powers. In addition to arguing for the legality of bankruptcy judges' final judgments, the ABA also raises a more practical concern: the "already very crowded" dockets of U.S. district courts, which have faced funding and personnel shortages. Limiting bankruptcy judges' powers would have "stark" consequences for district courts' workload, the ABA argues, pointing out that nearly 1.11 million bankruptcy cases were filed in the year ending Sept. 30. Moving more bankruptcy-related cases to the district court would also hurt those involved in the litigation, the ABA added. Read more. (Subscription required.)

To view the briefs filed in Executive Benefits Insurance Agency v. Arkison, including the amicus briefs filed in the case, be sure to visit ABI's Newsroom.

Want to find out more about this case and others scheduled by the Supreme Court for its 2013 term? ABI's new "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce and Eric Brunstad of Dechert LLP (Hartford, Conn.) previewing the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under § 105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. Available for the member price of $75, ABI will seek 1.25 hours of ethics CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for this program. To purchase the new "Bankruptcy In Depth" video, please click here.

NEW MORTGAGE FORM WOULD APPLY TO LENDERS LARGE AND SMALL

New rules by the Consumer Financial Protection Bureau requiring simplified mortgage paperwork will take effect in August 2015 without an exemption for small lenders, Bloomberg News reported today. The new regulation, the result of a two-and-a-half year effort to help borrowers shop around for home loans, would kick in on Aug. 1, 2015. Form prototypes include information such as interest rates, monthly payments and closing costs in bold type and a less cluttered format. The 2010 Dodd-Frank Act required the agency to propose the new form by July 21, 2012 without setting a deadline for completion. Read more.

REPORT: U.S. BANKS RESTRUCTURED FEWER BAD DEBTS IN Q3

A report by SNL Financial found that U.S. banks restructured fewer shaky loans for the third consecutive quarter, bringing the industry's aggregate amount of troubled-debt restructurings down to $174 billion in the third quarter from nearly $181 billion in the second quarter, the Boston Business Journal reported on Friday. Bank of America and Citibank were the only two banks to report troubled debt restructuring declines of more than $1 billion during the quarter. Bank of America cut $1.1 billion from its one- to four-family residential restructurings in the quarter, while Citi cut nearly the same amount from its residential troubled loan restructuring total. By the end of the quarter, restructured loans made up 2.24 percent of outstanding U.S. loans and leases. Read more.

FED OFFICIAL SAYS BIG BANKS NEED HIGHER CAPITAL LEVELS

Federal Reserve Bank of Boston President Eric Rosengren said yesterday that very large banks that count broker-dealer operations as an important part of their business need to hold higher levels of capital to reduce the risk these firms pose to the broader financial system, the Wall Street Journal reported today. "Given the risks that broker-dealer funding models pose, and the failure of many of the large broker-dealers during the crisis, it would seem appropriate that these organizations should be holding more capital," Rosengren said. "Larger capital positions for firms with a business model reliant on wholesale funding will help to further reduce the likelihood of a liability run." Rosengren has been a frequent advocate for additional changes to the financial regulatory environment in the wake of the financial crisis. He has focused on the unfinished business of the landmark Dodd-Frank Act, and has targeted money-market funds, among others, for serving as potential source of new financial instability. Read more. (Subscription required.)

PHEASANT FARMER ELIGIBLE FOR CHAPTER 12 PROTECTION

Bankruptcy Judge Diane Davis (N.D.N.Y.) recently ruled that a debtor who filed for chapter 12 protection claiming to be a pheasant farmer is eligible for chapter 12, the New York Law Journal reported yesterday. In the case of In re Marone Acee, 12-61631, the debtor was raised on a 3,000-acre crop and dairy farm, which he and other family members took over when his father retired. But by the time he filed bankruptcy, Acee had liquidated much of his equity in connection with a divorce action. With his crop acreage down to 1,000 acres and the corn and dairy business losing money, Acee sold off some of the property to his son, restricted the agricultural portion to growing berries and began a pheasant hunting operation. Acee is licensed by the state to buy and release the birds, which he houses in a former barn until they are fully grown. During the three-week incubation period, Acee needs to ensure that the pheasants are protected from predators and free of disease. Eventually, the birds are released as prey for Acee's customers. Two major creditors, Oneida Savings Bank and Access Federal Credit Union, argued that the pheasant hunting business is a recreational enterprise and not a farming operation. Judge Davis, however, disagreed. "[T]he Court finds that Acee's nontraditional game bird operation, in which he personally feeds, maintains, protects, and ultimately releases pheasants, constitutes a farming activity," Davis wrote. Read more. (Subscription required.)

PROVIDE CONSUMER BANKRUPTCY SERVICES? GET LISTED ON ABI'S NEW BANKRUPTCY RESOURCES SITE!

ABI launched the new Bankruptcy Resources site to help those in financial difficulty find out more about the bankruptcy option. The site provides a host of resources for financially struggling consumers, including a list of common consumer bankruptcy questions and straightforward answers. The site also includes a list of all our members who can provide help, along with over 600 locations that offer free services to qualified people. Want to find out more about being listed on the site? Click here.

ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER

The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

NEW ABILIVE WEBINAR LOOKS AT HOW TO HIRE THE RIGHT FINANCIAL ADVISORS

ABI's Financial Advisors & Investment Banking Committee is proud to present the next abiLIVE webinar, "How to Hire the Right Financial Advisors," on Dec. 11 from 1-2:15 p.m. ET. The program will provide attendees with an overview and basic understanding of the different types of financial advisors that may be relevant for in- and out-of-court cases. Topics include:

- The different types of financial advisors available;
- The benefits and limitations for each category of advisor; and
- How to select the right advisor for the job.

Speakers on the webinar include:

-Daniel F. Dooley of MorrisAnderson (Chicago)

-Gregory S. Hays of Hays Financial Consulting LLC (Atlanta)

-Ivan Lehon of Ernst & Young (New York)

-Allen Soong of Deloitte CRG (Los Angeles)

-Teri Stratton of Piper Jaffray & Co. (El Segundo, Calif.)

Registration is $75 for ABI members/$175 for non-members. Have a number of colleagues that would like to participate? Take advantage of group pricing for ABI members: register 5 or more and the registration cost drops to $60 per person!

Click here for more information and to register.

ABI IN-DEPTH

RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!

Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

NEW CASE SUMMARY ON VOLO: FISCHER V. GREAT WESTERN BANK (IN RE FISCHER; 8TH CIR.)

Summarized by Lars Fuller of Baker & Hostetler LLP

The Eighth Circuit BAP affirmed the bankruptcy court's denial of a debtor's motion for contempt against the lender. The BAP found that the bankruptcy court's order simply approving the stipulation did not contain any operative commands or direction upon the parties, and did not impose any time restriction upon the lender's obligations under the stipulation. The BAP found no grounds for contempt absent a party's violation of a specific, unambiguous provision of a court order.

There are more than 1,000 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: ALIX PARTNERS CEO DISCUSSES REASONS FOR LOWER NUMBER OF CORPORATE BANKRUPTCY FILINGS

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post looks at a recent interview by AlixPartners CEO Fred Crawford, who discusses how an era of historic monetary easing is creating an era of corporate America dodging bankruptcy.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

A holder of an unstayed judgment, which is subject to an ongoing appeal, can qualify as a petitioning creditor under § 303(b)(1).

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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