||NEWS AND ANALYSIS
BILL PROPOSES BAN ON TUITION CLAWBACKS IN BANKRUPTCY
Rep. Chris Collins (R-N.Y.) is proposing to ban bankruptcy trustees from trying to claw back tuition money from universities and, in some cases, college students themselves, the Wall Street Journal reported today. Rep. Collins today introduced a bill that would block bankruptcy trustees from filing lawsuits against universities and college students to recover tuition money that had been paid years before. Parents who file for bankruptcy after paying for their children's college tuition can face scrutiny from court-appointed bankruptcy trustees who argue that the money should have been spent on their own growing debts. But with his bill, Rep. Collins said that it is up to parents to decide to prioritize a child's education over other bills like credit card or medical debt. Consumer bankruptcy experts who say the trend was nonexistent several years ago predict that the number of tuition-related lawsuits will rise alongside the cost of tuition. A Wall Street Journal search of public filings across the country turned up at least 25 colleges that have been asked to return money in recent years, and more than a dozen complied. Read more. (Subscription required.)
For more on student loans and bankruptcy, be sure to pick up a copy of ABI's Graduating with Debt: Student Loans under the Bankruptcy Code.
SHELBY INTRODUCES DODD-FRANK REVAMP LEGISLATION
Sen. Richard Shelby (R-Ala.), the head of the Senate Banking Committee, unveiled his long-awaited bill to toughen oversight of the Federal Reserve and ease the regulatory burden on dozens of banks, setting off what could be intense negotiations with Democrats, Bloomberg News reported today. In legislation that Sen. Shelby calls a "work in progress," he laid out ideas to make the Fed disclose more information to Congress about its monetary policy decisions and free some lenders from stringent capital requirements. The bill would mark the biggest revamp of the Dodd-Frank Act since its 2010 enactment and is also Shelby's signature legislative effort this year. The bill could free regional banks with less than $500 billion of assets, including US Bancorp, SunTrust Banks Inc., and PNC Financial Services Group Inc., from the most aggressive oversight established under Dodd-Frank. A council of financial regulators would still get to decide whether lenders with assets of between $50 billion and $500 billion deserve tough scrutiny and should hold substantial capital cushions. Another Shelby proposal is giving banks a break from what’s known as the qualified-mortgage rule by letting lenders get out of tough Dodd-Frank underwriting requirements when they keep a home loan on their books. A hearing is scheduled for next Thursday, May 21, for the Senate Banking Committee to mark up the legislation. Read more.
FDIC CHAIRMAN: A BIG BANK FAILURE WON'T IMPERIL SYSTEM
Nearly seven years after the financial crisis, Federal Deposit Insurance Corp. Chairman Martin Gruenberg said that U.S. regulators can safely guide a major financial firm to failure without taxpayer bailouts or catastrophic consequences for the financial system, the Wall Street Journal reported today. Gruenberg said that the disruptive collapse of a firm like Lehman Brothers Holdings Inc. is less likely to happen again given regulators' ability to force structural changes on banks, new powers to seize and dismantle failing firms, and global regulatory coordination. In some of his most definitive statements about the post-crisis landscape and the legacy of banks being "too big to fail," Gruenberg said that if a major financial firm ran into trouble today, "they would be allowed to fail and suffer the consequences of that failure." Read more. (Subscription required.)
COMMENTARY: THIS IS YOUR BRAIN ON EASY CREDIT
The reward circuitry of the human brain is vital to our survival, but it wasn't built to grapple with seductive credit card offers and no-money-down mortgages, according to an op-ed in yesterday's Wall Street Journal. Easy credit feeds our love of immediate gratification, distorts self-regulation and diminishes prudent market behavior, creating a destabilizing positive-feedback loop, according to the op-ed. The total indebtedness of U.S. households at the end of last year stood at $11.83 trillion, the Federal Reserve Bank of New York has estimated. That’s up by $117 billion from the previous quarter. Credit card balances rose by $20 billion, auto loans by $21 billion, and student loans by a startling $31 billion. Falling indebtedness after the financial meltdown of 2008 was due largely to default rather than repayment. Now as restrictions on credit are easing, debt levels have begun to climb again. Read more. (Subscription required.)
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NEW CASE SUMMARY ON VOLO: WAGNER V. WAGNER (IN RE WAGNER; 10TH CIR.)
Summarized by Eric Madden of Reid Collins & Tsai LLP
The Tenth Circuit Bankruptcy Appellate Panel determined that the bankruptcy court's findings in support of its decision to deny the debtor's discharge were not clearly erroneous and, therefore, affirmed its decision.
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: COURT REITERATES THAT DEBTOR'S SETOFF RIGHTS TRUMP THOSE OF CLAIMANT
A recent blog post examined the bankruptcy case of ADI Liquidation, Inc., Bankr. No. 14-12092 (KJC), in which the bankruptcy court considered a motion by creditor Western Family Foods, Inc. (WFFI) for relief from the automatic stay to exercise its setoff rights against its general unsecured claim against ADI Liquidation, Inc., et al. Meanwhile, the debtors asserted that they also hold certain setoff rights, and have asked for court approval of the exercise of their setoff rights against claimants who, like WFFI, have asserted administrative priority claims under § 503(b)(9). In the opinion, the court found that WFFI requested that its setoff rights trump those of the debtors.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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