JULY BANKRUPTCY FILINGS DECREASE 12 PERCENT FROM PREVIOUS YEAR, BUSINESS FILINGS DECREASE 21 PERCENT
Total bankruptcy filings in the United States fell by 12 percent in July 2014 over July of last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 77,469 in July 2014, down from the July 2013 total of 87,746. Consumer filings declined 11 percent to 74,595 from the July 2013 consumer filing total of 84,114. Total commercial filings in July 2014 decreased to 2,874, representing a 21 percent decline from the 3,632 business filings recorded in July 2013. Total commercial chapter 11 filings dipped 34 percent to 357 filings in July 2014 from the 539 commercial chapter 11 filings registered in July 2013. Filings are on track to be the lowest since 2007. Read the full press release.
REPORT: WHY SMALL-BUSINESS LENDING HAS NOT RECOVERED
While lingering cyclical factors from the 2008 financial crisis may still be constraining access to bank credit, there are also structural barriers that seem to be preventing banks, both large and small, from ever fully returning to the small business market, according to a new Harvard Business School study, Forbes.com reported today. In the recent recession, small-business sales were hit hard and may still be soft, undermining their demand for loan capital, according to the study, titled "The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game." Income of the typical household headed by a self-employed person declined 19 percent in real terms between 2007 and 2010, according to the Federal Reserve's Survey of Consumer Finances. And a survey by the National Federation of Independent Businesses (NFIB) noted that small businesses reported sales as their number one problem for four straight years during the crisis and subsequent recovery. In addition, collateral owned by small businesses lost value during the financial crisis, potentially making small business borrowers less creditworthy today -- in fact, small business credit scores are lower now than before the Great Recession, according to the Harvard study. Click here to read the full study.
COMMENTARY: A PUERTO RICAN SOLUTION FOR ILLINOIS
If Puerto Rico Electric Power Authority (Prepa) can restructure its debt, there could be hope for states -- particularly Illinois -- whose own finances are sketchy, according to a commentary in yesterday's Wall Street Journal by Prof. David Skeel of the University of Pennsylvania School of Law. One obvious solution for Prepa might be to file for municipal bankruptcy, as public agencies of a state can do under chapter 9, but the U.S. Congress explicitly excluded Puerto Rico and Washington, D.C., from chapter 9 in the 1980s. Nor can Prepa file for chapter 11, as public corporations and agencies are barred from chapter 11. Mindful of the predicament, Puerto Rican lawmakers in June passed the "Puerto Rico Public Corporation Debt Enforcement and Recovery Act," which gives Prepa and similar entities two restructuring choices. The first suspends a public corporation's obligations for nine months, giving it time to negotiate a debt restructuring to be submitted to creditors for a vote. Under the second, a court can, subject to certain protections for creditors, impose a debt restructuring. Two groups of mutual funds holding $1.7 billion of Prepa's roughly $9 billion debt have sued, asking the federal court in Puerto Rico to declare the law unconstitutional. Their lawsuit argues that only Congress has the power to enact bankruptcy laws under the U.S. Constitution, which also prohibits a state (or commonwealth) from altering the terms of existing contracts. Puerto Rico's debt-restructuring statute will likely withstand this challenge, according to Skeel. The provision in the Bankruptcy Code that invalidates state laws to restructure municipal debt probably does not apply to Puerto Rico -- since its municipalities are not permitted to use chapter 9. Congress could dispel the uncertainty by allowing Puerto Rico's public corporations to file for bankruptcy under chapter 9 -- a solution proposed last Thursday by Democrat Pedro Pierluisi, the commonwealth's nonvoting delegate in Congress. Ideally, Puerto Rico itself, not just its municipalities, could be allowed to file for chapter 9. If the commonwealth can successfully restructure the debt of its public corporations, this will strongly suggest that Congress should provide a mechanism for troubled states to file for bankruptcy. Read the full commentary. (Subscription required.)
The "Puerto Rico Public Corporation Debt Enforcement and Recovery Act" will be the subject of a forthcoming ABI podcast. Stay tuned for details!
SURVEY: FAMILIES BORROWING LESS FOR COLLEGE
American families are relying more on their income and savings -- and less on loans -- to pay for college, according to an annual study by education lender Sallie Mae, the Wall Street Journal reported on Friday. In the 2013-14 academic year just ended, the typical family paid 22 percent of total college costs by borrowing, down from 27 percent in each of the preceding two school years. These families paid 42 percent of college costs by using income or savings from the parents and/or student, vs. 38 percent the year before and 40 percent in 2011-12, according to the Sallie Mae study, conducted by market-research company Ipsos Public Affairs. The average cost of college, $20,882, was relatively stable for the third year in a row after peaking at $24,097 in the 2009-10 year. These figures don't take into account any grants, scholarships or other non-loan aid students might receive. Read more. (Subscription required.)
SMALLER LAW FIRMS GET MORE M&A WORK
A handful of top law firms have been dominating the deals market, but new data released today show that more cost-conscious clients are also giving a lift to smaller firms that offer similar expertise but lower rates, the Wall Street Journal reported today. In 2013, law firms with 501 to 750 lawyers captured the biggest share of legal fees for high-value mergers-and-acquisitions work -- defined as deals that generate more than $1 million in legal bills -- for the second year in a row. The figures are based on an analysis of $15 billion in legal fees by CounselLink, a legal software business in the software division of LexisNexis. The report reviewed billings for 154 U.S. companies with revenues ranging from less than $1 billion to more than $10 billion. Read more. (Subscription required.)
TOMORROW! DISCUSS THIRD-PARTY RELEASES IN CHAPTER 11 ON THE UNSECURED TRADE CREDITORS CONFERENCE CALL -- ALL MEMBERS WELCOME!
The Unsecured Trade Creditors Committee will be holding its bi-monthly committee call tomorrow at 4 pm ET to discuss third-party releases in chapter 11. The call will be moderated by Lisa Gretchko of Howard & Howard Attorneys PLLC in Royal Oak, Mich., and she will be joined by Scott Wolfson of Wolfson Bolton PLLC in Troy, Mich. The UTC Committee has been holding bi-monthly committee calls since 2012 on a wide variety of topics. These bi-monthly committee calls are free and open to all ABI members. Previous call recordings can be found on the committee's website. For more information, please click here.
NEW CASE SUMMARY ON VOLO: VIDOV V. MARSHAK (IN RE VIDOV; 9TH CIR.)
Summarized by Bryan Robinson
In an unpublished opinion, the Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's summary judgment ruling. The bankruptcy court ruled that most of the alleged misrepresentations, concealment and other misconduct that the appellant complained about concern claims that the appellant as a matter of law released in the settlement agreement. As the claims had been waived pursuant to the release in the settlement agreement, the bankruptcy court concluded that the appellant would not be able to establish at trial all of the elements for an exception to discharge under either § 523(a)(2) (A) or § 523(a)(6).
There are more than 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: NINTH CIRCUIT FINDS CONSUMER'S DESCRIPTION OF BAC'S MISLEADING BEHAVIOR SUFFICIENT TO RAISE VALID ALLEGATION
A recent blog post examines the Ninth Circuit Court of Appeals decision in the case of Compton v. Countrywide Financial Corp. in which it reversed the District Court's dismissal, concluding that Compton sufficiently alleged that BAC engaged in an "unfair or deceptive act or practice" for the purpose of withstanding a motion to dismiss.
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
Consumer collateral should be valued at liquidation value in chapter 13 confirmations, even when the debtor retains the property.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
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.
