FIRST QUARTER BANKRUPTCY FILINGS FALL 15 PERCENT FROM 2014, COMMERCIAL FILINGS DROP 19 PERCENT
Total U.S. bankruptcy filings fell 15 percent in the first calendar quarter (Jan. 1 - March 31) of 2015 from the same period in 2014, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 205,705 in the first quarter of 2015, down 15 percent from the 231,829 filings registered in the first calendar quarter of 2014. Total commercial filings for the first three months of 2015 were 7,392, representing a 19 percent decrease from the 9,135 filings during the same period in 2014. The 198,313 total noncommercial filings recorded in the first calendar quarter of 2015 represented an 11 percent decrease from the 2014 total of 222,694. "Declining bankruptcy totals will likely extend through 2015 as interest rates are still favorable for businesses and consumer debt levels remain flat," said ABI Executive Director Samuel J. Gerdano. "Filings this year could drop as low as 800,000." Read the full ABI press release.
COMMENTARY: PARENTS AND STUDENTS PARTIALLY IN THE DARK ABOUT SCHOOLS PLACED ON STUDENT-AID WATCHLIST
The Department of Education took a step toward transparency this week when it released a partial list of nearly 560 colleges and universities -- the majority of them for-profit institutions -- that have been placed under student-aid restrictions because of concerns about their finances and their compliance with federal law. But its failure to release all the names is a clear disservice to students who may end up applying to colleges that might be on the verge of shutting down, according to a New York Times editorial today. The listed institutions have been placed under what is known as "Heightened Cash Monitoring," which means that the government wants to know whether federal student aid is being properly distributed and used. Schools wind up on the list for various reasons, including certification problems, missing financial statements and management issues. Under Level 1 scrutiny, schools can continue to draw down federal funds as long as they account for them properly. Under Level 2 scrutiny, the schools cannot apply for federal funds until they have dipped into their own institutional funds. Last summer, the federal government delayed reimbursement to Corinthian Colleges, one of the country's largest operators of for-profit colleges and trade schools. This proved fatal; the chain collapsed and agreed to sell or shut down about 100 campuses. Read the full editorial.
PENSION SHORTFALL HAS BOND INVESTORS, CREDIT-RATING FIRMS WARY OF CHICAGO'S FINANCES
Fearing that a multibillion-dollar pension shortfall might undermine Chicago's finances, some bond investors and credit-rating firms see higher risk, the Wall Street Journal reported today. Four pension funds in the nation's third-largest city are facing a combined funding gap of about $20 billion after years of underfunding and market losses during the recession. In comparison, Chicago has a $3.5 billion annual budget for general operating expenses. Moody's Investors Service cut the city’s credit rating in February to Baa2, two notches above junk status, and maintained a negative outlook. The firm warned that the city’s "highly elevated" unfunded pension liabilities could increase, "placing significant strain on the city's financial operations." Other ratings firms give the city higher grades. To make matters worse, there is a real possibility that Chicago may have to pay higher interest rates to issue new bonds. Three bond insurers, Assured Guaranty Ltd., National Public Finance Guarantee Corp. and Build America Mutual, have already backed billions of dollars combined of Chicago bonds and are at or near their limits for how much Chicago debt tied to property taxes they are willing to insure. Read more. (Subscription required.)
COMMENTARY: POSTAL BANKING COULD MAKE POSTAL SYSTEM’S TROUBLES WORSE
With the payday lending industry under the spotlight by the CFPB, many policy progressives think that a possible alternative could be to turn the U.S. Postal Service into a financial institution, with the authority to provide small-dollar loans at reasonable rates -- as well as an array of other services, including savings accounts, according to a commentary in today's Washington Post. Mark Dimondstein, president of the American Postal Workers Union, says that the post office could be a "public option" for the quarter of the population that the Federal Deposit Insurance Corp. identifies as being disconnected either totally or partially from the financial system. Postal banking exists in other industrialized democracies; it began in Britain in 1861, and the U.S. itself had a version of it between 1911 and 1967. Yet postal banking's long history should actually be a red flag, according to the commentary: Can the cash-flow issues of the 21st century's "under-banked" population be solved with an idea based on a business model from the 19th century? Giving this mission to a troubled, federally backed legacy institution would short-circuit potentially beneficial innovation by the private sector, including both existing financial institutions and newcomers. Read the full commentary.
DISCOUNTED SUBSCRIPTIONS TO AUDIO ABI JOURNAL AVAILABLE FROM MODIOLEGAL!
Subscribe now to our new streaming audio Journal, offered by ModioLegal. Narrated articles from each issue of the ABI Journal can now be accessed through your web browser -- on your computer, smartphone, or tablet -- for a low monthly fee. For a limited time, subscribe to this new service now for just $9.95 a month (regularly $12.95) with coupon code abi-early. Sign up for any audio Journal plan, and your first month is free! Go to http://www.modiolegal.com/subscribe to learn more, or send an email to [email protected] for a free demo.
ABI'S NEWEST TITLE, CHAPTER 15 FOR FOREIGN DEBTORS, IS AVAILABLE FOR PRE-ORDER!
Every month brings several new cases filed under chapter 15, making this a rare growth spot in corporate bankruptcy. ABI's newest title, Chapter 15 for Foreign Debtors, covers all aspects of the UNCITRAL Model Law on Cross-Border Insolvency, as well as chapter 15 of the Bankruptcy Code. The book also provides details about foreign representatives, avoidance actions, creditor protections, concurrent proceedings, comity and much more. An extensive appendix filled with sample case documents and forms related to chapter 15 proceedings is included. To pre-order your copy at the ABI member price (log-in required) of $75, please click here. (Printed copies will be delivered in April 2015.)
NEW CASE SUMMARY ON VOLO: DALZELL V. RP STEAMBOAT SPRINGS LLC (10TH CIR.)
Summarized by Lars Fuller of BakerHostetler
The Tenth Circuit, voting 2-1 (J. Lucero dissenting), affirmed the judgment of the U.S. District Court (D. Colo.) finding that a developer of a master-planned subdivision was not liable under the Interstate Land Sales Full Disclosure Act because the master developer neither directly nor indirectly sold the condominium units at issue. The Tenth Circuit cited with approval a 2013 case in which the Fourth Circuit reversed the dismissal of a bankruptcy trustee's suits against the promoters of a development who had obtained dismissal at trial court because they were not sellers, and where the Fourth Circuit discussed the absence of liability of non-sellers and non-promoters.
There are nearly 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: DANGERS LURK IN FED'S ZERO RATE POLICY
The Fed was right to aggressively lower interest rates after the 2008 crisis, according to a recent blog post, but continuing with zero interest rates and quantitative easing for seven years after the crisis is in conflict with the goal of increased employment and economic growth.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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.