Filings Fall 14 Percent for the First Half of 2012 Commercial Filings Drop 22 Percent

ABI Bankruptcy Brief | July 5, 2012

July 5, 2012

NEWS AND ANALYSIS

BANKRUPTCY FILINGS FALL 14 PERCENT FOR THE FIRST HALF OF 2012, COMMERCIAL FILINGS DROP 22 PERCENT

Total bankruptcy filings totaled 632,130 nationwide during the first six months of 2012 (Jan. 1-June 30), a 14 percent decrease from the 731,500 total filings during the same period a year ago, according to data provided by Epiq Systems, Inc. The 601,184 total noncommercial filings for the first half of 2012 represented a 13 percent drop from the noncommercial filing total of 691,902 for the first half of 2011. Total commercial filings during the first six months of the year were 30,946, representing a 22 percent decrease from the 39,598 filings during the same period in 2011. Chapter 11 filings also fell during the first half of 2012 as the 5,313 filings represented a 12 percent decrease from the 6,070 chapter 11 filings during the first six months of 2011.

“We are on pace for perhaps the lowest total new bankruptcies since before the financial crisis in 2008,” said ABI Executive Director Samuel J. Gerdano. “With sustained low interest rates and weak consumer spending, we expect bankruptcies to stay at relatively low levels through the end of 2012.”

The 99,057 total bankruptcy filings for the month of June represented an 18 percent decrease compared to the 120,698 filings in June 2011. The 94,437 total noncommercial filings for June represented a 17 percent drop from the June 2011 noncommercial filing total of 114,162. Total commercial filings for June 2012 were 4,620, representing a 29 percent decrease from the 6,536 filings during the same period in 2011. Click here to read ABI’s full press release.

CFPB PLANS TO MAKE OVER MORTGAGE MARKET

Over the next six months, the Consumer Financial Protection Bureau (CFPB) intends to overhaul the home mortgage market as a first step toward improving its fairness and clarity, the New York Times reported today. The CFPB plans to propose rules this summer that will address the biggest stumbling blocks buyers face. When shopping for a loan, consumers will get a more complete and understandable "good faith estimate" of the costs. Before closing a sale, consumers will receive a single, revamped disclosure form of the terms — the interest rate that they will pay, how it could change over the course of the loan and how much cash is needed at closing. And mortgage servicers will be required to provide clearer information, better service and options for a borrower facing foreclosure. Read more.

REPORT: COUNTRYWIDE WON INFLUENCE ON CAPITOL HILL WITH DISCOUNT LOANS

A House report found that the former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, the Associated Press reported today. The report said that the discounts made from January 1996 to June 2008 were not only aimed at gaining influence for the company but to help prop up mortgage giant Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control. Fannie was responsible for purchasing a large volume of Countrywide's subprime mortgages. Countrywide was taken over by Bank of America in January 2008, relieving the financial services industry and regulators from the messy task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion at a time when the nation faced a widening credit crisis, massive foreclosures and an economic downturn. The House Oversight and Government Reform Committee also named six current and former members of Congress who received discount loans, but all of their names had surfaced previously. Read more.

ANALYSIS: BIG BANKS' "LIVING WILLS" AIMING FOR BANKRUPTCY NOT BAILOUTS

U.S. regulators, seeking to prevent a repeat of taxpayer-funded bailouts of the financial system, released summaries of plans for breaking up nine of the world’s largest banks in the event of an emergency, Bloomberg News reported on Tuesday. The banks required to file were JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, Barclays PLC, Deutsche Bank AG, Credit Suisse Group AG and UBS AG. Some banks said that it would be possible to save their main businesses and avoid full liquidations. As regulators instructed, the proposals presumed markets would be functioning normally with buyers ready to make large acquisitions without government backing. That was not the case when firms, including Bear Stearns Cos., collapsed during 2008's credit crisis, and the law allows the regulators to require more complicated stress scenarios in future rounds. Non-banking entities, such as Bank of America's Merrill Lynch unit, could be put through bankruptcy proceedings, the Charlotte, N.C.-based company said. Broker-dealer units would be liquidated according to the Securities Investor Protection Act, it said. Citigroup, the third-biggest U.S. bank with operations in more than 100 countries, said that it could separate its deposit-taking banking unit, Citibank NA, from broker-dealer units that trade stocks and bonds. The N.Y.-based parent would then go bankrupt and sell off the broker-dealers, according to the plan. Read more.

ABI IN-DEPTH

“SUBJECTING BUSINESS PROJECTIONS TO SCRUTINY IN VALUATION DISPUTES” WEBINAR TO BE HELD ON JULY 30!

Reassembling the speakers from one of the most popular panels at the New York City Bankruptcy Conference this year, ABI will be holding a live webinar on July 30 at 11 a.m. ET titled, "Subjecting Business Projections to Scrutiny in Valuation Disputes." Panelists include:

Moderator David Pauker of Goldin Associates, LLC (New York)
Martin J. Bienenstock of Proskauer (New York)
David M. Hillman of Schulte Roth & Zabel LLP (New York)
Bankruptcy Judge Robert E. Gerber (S.D.N.Y.)

The panel will address:

How much deference should management projections be accorded?
How do you determine whether projections are unrealistically optimistic or pessimistic?
What is the relevance of "market consensus?"
How do management’s incentives impact projections?

The webinar is available to ABI members for $75 and is approved for 1.0 CLE hours in Calif., Ga., Hawaii, Ill., N.Y. (approved jurisdiction policy) S.C. and Texas. CLE approval is pending in Del., Fla., Pa. and Tenn. To register, please click here.

LATEST CASE SUMMARY ON VOLO: TERRY V. SUNTRUST BANKS, INC. (4TH CIR.)

Summarized by Cullen Speckhart of Roussos, Lassiter, Glanzer & Barnhart

SunTrust, which held the general operating account of LandAmerica 1031 Exchange Services, Inc. (LES), sold LES certain securities, and extended LES a line of credit, could not be held liable for aiding and abetting a breach of fiduciary duty by LES to 1031 exchangers because LES itself had not assumed such fiduciary duties. In addition, SunTrust could not be held liable for civil conspiracy in connection with LES activities.

More than 500 appellate opinions are summarized on Volo typically 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: WHEN DOES IT MAKE SENSE TO REAFFIRM AN AUTO LOAN IN CHAPTER 7 BANKRUPTCY?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines when it makes sense to reaffirm car loans in a chapter 7 bankruptcy proceeding.

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
The full-payment rule in section 1325's "hanging paragraph" for new car PMSIs should be repealed to level the playing field between car lenders and other partially and fully unsecured creditors.

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

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