With outstanding student debt topping one trillion dollars and the default rate on federal loans approaching 15 percent, many borrowers are finding themselves in a spiral of debt and financial ruin, according to a CNBC.com commentary by Sen. Marco Rubio (R-Fla.) and Rep. Tom Petri (R-Wis.). This week, the Federal Reserve announced that American consumer debt is higher than it's ever been, with student loans leading this surge. It's important to note that a significant number of borrowers default on small debt levels, according to the commentary. In fact, the average amount of a defaulted federal loan is roughly $14,000. Many of these defaults occur because our system focuses the burden of repayment on a borrower's initial years out of school when he or she is least equipped to bear it. As a result, temporary struggles to find a job right out of college or low initial earnings turn into needless defaults. And while other options exist, the system's bewildering complexity prevents many students from taking advantage of them. Far better would be to have each borrower's payments set automatically as an affordable percentage of income, according to Rubio and Petri. For most, this would mean paying less early in their careers and more as their income grows over time. Additionally, borrowers would be protected from income shocks such as unemployment, something many recent graduates have struggled with during the economic downturn. Read the full commentary.
For further discussion of the student loan debt crisis, be sure to attend ABI's Student Loan Debt Symposium, which will feature Rep. Petri, sponsor of a new graduated loan repayment bill, as the keynote speaker. Click here for more information or to register.
GM OFFICIALS TO FACE QUESTIONING IN CRIMINAL PROBE
Government investigators are about to start calling in General Motors Co. officials for questioning as they intensify a criminal probe into the auto maker's mishandling of faulty ignition switches that are linked to 13 deaths, the Wall Street Journal reported today. As the criminal probe moves forward, GM Chief Executive Mary Barra is sticking with her plan to delay answering key questions about the ignition-switch recall until the company's internal investigation of the matter wraps up. Barra is under growing pressure from regulators, lawmakers and accident victims and their families to deliver more quickly on her promises of transparency. Barra has refused to give Congress and federal vehicle-safety regulators the names of those inside GM who made the decisions that delayed the compay's recall, saying that those responses must wait until Chicago attorney Anton Valukas, who is spearheading the company's probe, completes his findings. GM hired Valukas last month. Last week, Barra told lawmakers she expected him to complete his investigation in 45 to 60 days. Barra's strategy is costing GM $7,000 a day in fines, which the National Highway Traffic Safety Administration began to levy after GM missed an April 3 deadline to answer 107 questions about the recall. Read more. (Subscription required.)
New GM shielded itself from liability for crashes that happened before its 2009 bankruptcy. Victims are left to sue a shell company that has few assets. Congressional pressure is building for GM to establish a victim compensation fund notwithstanding the limit on liability. For further analysis, make sure to attend the "Large Complex Trusts: A General Motors Case Study" panel at ABI's Annual Spring Meeting. This panel will discuss the General Motors bankruptcy case with an in-depth discussion about the issuance of public units in a major bankruptcy. The session will also include the challenges addressed by the trust such as liability claims. For more information or to register, please click here.
REALTYTRAC: U.S. FORECLOSURES FALL TO LOWEST QUARTERLY LEVEL SINCE MID-2007
RealtyTrac reported that the number of U.S. home foreclosure filings slid 23 percent in March from a year ago, helping bring first-quarter foreclosure activity to its lowest level since the second quarter of 2007, Reuters reported today. However, there were 117,485 U.S. properties with default notices, scheduled auctions and bank repossessions in March, according to RealtyTrac, which lifted overall foreclosure activity by 4 percent last month from February, when it posted a more than seven-year low. The monthly increase was driven by a 7 percent rise in foreclosure starts. Overall, though, more U.S. homeowners are keeping up with their mortgage payments. March was the 42nd straight month where U.S. foreclosure activity dropped from year-ago levels. A total of 28,840 U.S. properties were repossessed by lenders in March, down 5 percent from February, and a 34 percent drop from the same month a year ago to the lowest level since July 2007. Read more.
FANNIE MAE, FREDDIE MAC SHAREHOLDERS RAIL AGAINST MEASURE TO DISMANTLE TWO FIRMS
Dozens of Fannie Mae and Freddie Mac shareholders flocked to Capitol Hill yesterday to protest a Senate proposal that they say would trample on the rights of the mortgage giants' investors, the Washington Post reported today. Over the past two weeks, three groups have weighed in forcefully on the Senate legislation, which seeks to dismantle D.C.-based Fannie and McLean-based Freddie, replace them with a new entity and shift more of the risks of mortgage lending to the private sector. These groups are demanding a stop to what they view as the government's rip-off of Fannie and Freddie investors. In August 2012, about four years after the government took control of the two mortgage firms, federal officials directed the companies to turn over nearly all profits to the U.S. Treasury. Several investor groups have sued to challenge the arrangement. The Senate legislation, introduced by Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho), does not address how to deal with the shareholders. Some key lawmakers, including Crapo, have said that they are looking to the courts for answers. But as a Senate panel prepares to vote on the Johnson-Crapo measure possibly later this month, the newly formed groups are making it known that they want Congress to deal with the issue. Read more.
CARE FOUNDER JUDGE JOHN C. NINFO AWARDED WITH 2014 EXCELLENCE IN FINANCIAL LITERACY EDUCATION LEGACY AWARD
Credit Abuse Resistance Education (CARE) Founder Hon. John C. Ninfo II received the 2014 Excellence In Financial Literacy Education (EIFLE) Award by the Institute for Financial Literacy for his distinguished accomplishments in developing, implementing and promoting successful financial literacy education worldwide. Now in its eighth year, the EIFLE Awards were created to acknowledge innovation, dedication and the commitment of individuals and organizations that support financial literacy education worldwide. For more information on CARE and how you can help, please click here.
EXPLORE CHALLENGES THAT LIE AHEAD FOR UNITS AND TRUSTS ESTABLISHED FROM GM'S BANKRUPTCY AT SPECIAL PRESENTATION AT ABI'S ANNUAL SPRING MEETING
Watch below to find out more about what is on tap for ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone.
NEW CASE SUMMARY ON VOLO: COLLINS V. EBERT, ET AL. (IN RE MARANATHA CONSTRUCTION CO.; 5TH CIR.)
Summarized by Doug Stewart of Stewart Robbins & Brown LLC
The Fifth Circuit affirmed the district court's decision finding veil-piercing claims to be property of the estate under 11 U.S.C. § 541(a)(1) and properly pursued by the bankruptcy trustee where the appellant creditors alleged only the same general harm suffered by all other creditors and failed to allege any harm personal only to them.
There are nearly 1,300 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: COLLINS V. EBERT, ET AL (IN RE MARANATHA CONSTRUCTION CO.; 5TH CIR.)
A recent post on the ABI Blog Exchange looks at a few items consumers should know about tax liens after 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.
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