NEWS AND ANALYSIS
ANALYSIS: DEWSNUP LIVES -- EVEN FOR UNDERWATER MORTGAGES
by Prof. Charles Tabb
Jones Chair in Law, University of Illinois
Of Counsel, Foley & Lardner LLP
The U.S. Supreme Court on June 1, 2015, unanimously held in Bank of America, N.A. v. Caulkett that a chapter 7 debtor cannot "strip off" even a totally underwater mortgage under § 506(d), reversing the Eleventh Circuit. In so holding, the Court not only reaffirmed but extended its controversial decision in Dewsnup v. Timm, 502 U.S. 410 (1992), in which the Court had held that a chapter 7 debtor cannot "strip down" a partially underwater mortgage under § 506(d). Many observers had thought -- especially after oral argument in Caulkett -- that the Court might take this opportunity to overturn its much-criticized Dewsnup decision, or at the very least confine it to partially underwater mortgages. Instead, much as Mark Twain once quipped that "the reports of his death were greatly exaggerated," the reports of Dewsnup's demise proved premature. Writing for the Court, Justice Thomas concluded that "Dewsnup’s construction of "secured claim" resolves the question presented here." The Court's decision in Caulkett now indicates that mortgage liens are sacrosanct in chapter 7, irrespective of whether they are partially or totally underwater. Whether they will be so in chapter 13 remains to be seen, but mortgagees have a plausible argument to extend Caulkett there as well. Click here to read the full analysis from Prof. Tabb.
ABI will be holding a media teleconference tomorrow at 2 p.m. ET featuring experts discussing the Supreme Court's recent decisions in consumer bankruptcy cases. A limited number of lines have been reserved for ABI members to listen to the discussion. If you would like to listen to the teleconference, please reply to ABI Public Affairs Manager John Hartgen at [email protected]
MAY COMMERCIAL CHAPTER 11s INCREASE 16 PERCENT FROM PREVIOUS YEAR, TOTAL BANKRUPTCY FILINGS DECREASE 19 PERCENT
Total bankruptcy filings in the United States decreased 19 percent in May 2015 over May of last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 69,286 in May 2015, down from the May 2014 total of 85,711. Consumer filings also declined 19 percent to 66,771 from the May 2014 consumer filing total of 82,473. Total commercial filings in May 2015 decreased to 2,515, representing a 22 percent decline from the 3,238 business filings recorded in May 2014. In contrast to the other filing categories, commercial chapter 11 filings increased 16 percent to 498 filings in May 2015 from the 431 commercial chapter 11 filings registered in May 2014. Read the full press release.
SEN. ELIZABETH WARREN SHARPLY CRITICIZES SEC CHAIRMAN IN LETTER
Sen. Elizabeth Warren (D-Mass.) today sharply criticized SEC Chair Mary Jo White in a letter, saying that her tenure as the head of the SEC has been "extremely disappointing" and that she "appears" to have broken promises made to lawmakers during her confirmation hearings in early 2013, the Wall Street Journal reported. Warren has repeatedly rebuked regulators for not being tougher on big financial institutions in the years since the 2008 crisis. White, in a statement, disputed Warren's charges. "Senator Warren's mischaracterization of my statements and the agency's accomplishments is unfortunate, but it will not detract from the work we have done, and will continue to do, on behalf of investors," White said. In her letter, Warren took aim at several issues, including a long-delayed executive compensation rule mandated by the 2010 Dodd-Frank law requiring companies to disclose the pay gap between chief executives and their employees. Read more. (Subscription required.)
MIDSIZE BANKS APPROACH STRESS TEST DEADLINE
A first-of-its-kind deadline is approaching for midsize U.S. banks to disclose results of their internal "stress tests" later this month, the Wall Street Journal reported today. The Federal Reserve and other bank overseers issued a reminder today about the disclosures, which are required to happen between June 15 and June 30. Banks with between $10 billion and $50 billion in assets are required under the 2010 Dodd-Frank law to run the tests, which simulate each bank's performance during a hypothetical recession. Banks like New York Community Bancorp Inc. and CIT Group Inc. must disclose a description of the risks included in their stress tests, their losses, revenue, and capital levels under a "severely adverse" economic scenario, and other details, the banking regulators said. Unlike the "stress tests" for larger firms, regulators won't issue a public judgment approving or disapproving the midsize banks’ results and won't run their own simulation of how each bank would fare. The results also won't be a prerequisite for regulatory approval of banks' plans to reward shareholders with dividends and other payouts. Read more. (Subscription required.)
THURSDAY: FREE DEMO OF MODIOLEGAL'S AUDIO EDITION OF THE ABI JOURNAL
Hosted by ABI's Young and New Members Committee, ModioLegal's CEO will detail this Thursday its streaming audio service, which offers the print content of the ABI Journal in a human-narrated, article-specific audio format. ModioLegal's service allows you to listen to the Journal from your computer, tablet or smartphone at your convenience! All participants will have the opportunity to sign-up for a free 1‑month trial at the webinar's conclusion.
Register today to reserve your seat!
ABI LIVE WEBINAR ON JUNE 16 TO EXAMINE ASSET SALES ISSUES IN OIL AND GAS BANKRUPTCIES
Join the latest abiLIVE Webinar on June 16 to explore the unique challenges that can arise in a § 363 sale of the assets of a business involved in the energy industry, with a particular emphasis on oil and gas bankruptcies. Presented by ABI's Asset Sales Committee, the webinar features experts discussing the interplay in energy company bankruptcy cases among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance on national, regional and local levels. Speakers on the program are Bryan M. Gaston of Conway MacKenzie (Houston), Ira L. Herman of Thompson & Knight LLP (New York) and Shari L. Heyen of Greenberg Traurig, LLP (Houston). Click here for the ABI member price.
For additional information on oil and gas company bankruptcies, be sure to pick up a copy of ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy.
NEXT ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS
The next ABI Workshop, the 2015 Bankruptcy Judges Roundtable, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. Networking reception to follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.
NEW CASE SUMMARY ON VOLO: OFFICIAL COMMITTEE OF UNSECURED CREDITORS V. CIT GROUP/BUSINESS CREDIT INC. (IN RE JEVIC HOLDING CORP.; 3D CIR.)
Summarized by Thomas Horan of Womble Carlyle Sandridge & Rice LLP
The U.S. Court of Appeals for the Third Circuit held that where there is no showing that a structured dismissal of a chapter 11 case "has been contrived to evade the procedural protections and safeguards of the plan confirmation or conversion processes, a bankruptcy court has discretion to order such a disposition."
There are more than 1,700 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: NEW CREDIT SCORE MODELS HOLD PROMISE FOR CREDIT ACCESS
A recent blog post said that new credit-scoring models could increase the number of eligible borrowers in the U.S. without weakening the underwriting parameters in today's tightened credit market.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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