REPORT: LESSONS FROM DETROIT AND OTHER LOCAL GOVERNMENT BANKRUPTCIES
The recent high-profile bankruptcy filings by Detroit and a handful of other local governments around the country have renewed state and local policymaker interest in strategies to prevent future financial crises, as well as in the choices states face about whether to intervene to help distressed cities and counties, according to a new report from the Pew Charitable Trusts. Starting with Vallejo, Calif., in 2008, a string of chapter 9 bankruptcies have shaken Prichard, Ala., Central Falls, R.I., Jefferson County, Ala., Detroit, and Stockton and San Bernardino, Calif. Detroit was the largest municipal bankruptcy in U.S. history, and Jefferson was the largest county bankruptcy. According to the report, a few of the lessons learned are:
- Early state intervention in local governments' financial emergencies can help avert a crisis or possible insolvency.
- By taking active steps to budget over the long term -- matching expenses and revenue over several years -- local officials can promote fiscal health and increase their city's capacity to weather the ups and downs of the business cycle.
- Regular monitoring of local government finances can help state officials detect early signs of distress.
- State policymakers can prevent chapter 9 filings by developing alternatives, such as naming a monitor or temporary manager to restore a city's finances.
ANALYSIS: HIGH CREDIT QUALITY CITED IN MORTGAGE DELINQUENCY DECLINE
TransUnion said that the mortgage delinquency rate -- the rate of borrowers 60 days or more delinquent on their mortgages -- has continued its fast decline, falling to 2.72 percent in the second quarter ended June 30, Collections&Credit Risk reported today. The delinquency rate dropped 20 percent in the last year after reaching 3.42 percent in Q2 2014. The rate has contracted by half in just the last three years (5.39 percent in Q2 2012). "This is the lowest mortgage delinquency level we've seen in several years -- down from a peak of nearly 7 percent in early 2010," said Joe Mellman, vice president and head of TransUnion's mortgage group. "This is largely due to foreclosures and other seriously delinquent accounts continuing to work their way through the foreclosure process, as well as a reflection of the high credit quality of recent originations." Forty-eight states and all of the top 10 largest major metropolitan statistical areas saw double-digit year-over-year declines in seriously delinquent balances. Read more.
COMMENTARY: U.S. LACKS AMMO FOR NEXT ECONOMIC CRISIS
As the U.S. economic expansion ages and clouds gather overseas, policymakers worry if they will have the firepower to fight back a recession when one does arrive, according to a commentary today in the Wall Street Journal. The U.S. generally injects cash into the economy through interest-rate cuts, tax cuts or ramped-up federal spending. Those tools could be hard to employ when the next dip comes: Interest rates are near zero, and fiscal stimulus plans could be hampered by high levels of government debt and the prospect of growing budget deficits to cover entitlement spending on retired baby boomers. Although economists believe that the U.S. is near recession, looming threats are a reminder that the slow-growing global economy is just a shock away from peril. Japan’s economy contracted in the second quarter, and Europe recorded lackluster growth. China's slowdown, meanwhile, appears to be more severe than global policymakers initially realized, and a currency devaluation there might spur trade frictions. With the U.S. expansion entering its seventh year, policymakers are planning how to respond to the next downturn, which history shows is inevitable. The current expansion is now 16 months longer than the average since World War II, and none has lasted longer than a decade. Read more. (Subscription required.)
FORMER GOLDMAN EXECUTIVE IS CHOSEN TO LEAD DALLAS FED
The Federal Reserve Bank of Dallas yesterday chose for its new president Robert Steven Kaplan, a former Goldman Sachs executive, the New York Times reported today. Kaplan was head of investment banking at Goldman Sachs until leaving in 2006 for a job as a management professor at Harvard Business School. He will succeed Richard Fisher, an outspoken president who left the Fed in March. Kaplan will take office Sept. 8, in time to participate in a potentially important meeting of the Federal Open Market Committee the following week, when policymakers may decide to raise interest rates for the first time since the financial crisis. He will not vote, however. The presidents of the Fed's 12 regional reserve banks vote on a rotating basis, and the Dallas Fed does not hold a vote until 2017. Read more.
ABI WANTS TO SEE YOU IN PHOENIX THIS DECEMBER FOR THE WINTER LEADERSHIP CONFERENCE!
Join ABI on Dec. 3-5, 2015, at the historic Arizona Biltmore in downtown Phoenix for the 27th Annual Winter Leadership Conference. This can't-miss event is always a member favorite and this year will be no exception! There will be topics designed for consumer and business practitioners, as well as financial advisors. Earn up to 12/14 hours of CLE/CPE credit and 2.75/3 hours of ethics, and enjoy a plethora of social and networking events.
Highlights from the conference include:
Optional events, including a golf tournament, kayaking, tennis, horseback riding and much more
Great Debates on chapter 11 plans, whether a bankruptcy judge can disband a creditors' committee and must a creditor file a proof of claim
BAPCPA Consumer Issues: 10-Year Anniversary Special
Nine joint committee sessions, provided by ABI's 18 committees
A live Bloomberg "Eye on Bankruptcy" luncheon presentation
A special Casino Night!
A judges' roundtable on hot-button issues
Early-bird registration ends Oct. 2 so be sure to register to take advantage of the savings!
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ON-DEMAND VIDEO COURSE HELPS YOU PREPARE FOR THE ABC BOARD CERTIFICATION TEST!
Achieving American Board Certification (ABC) means you have met the rigorous, objective standards of a top professional in the areas of bankruptcy and/or creditors' rights. The ABC Exam is the essential step in this process, and this 5-part on-demand course will prepare you for the test. This intro video explains the benefits of ABC certification, the steps in the process and what to expect in the exam. The full exam prep course will qualify for 6 hours of CLE credit (where permitted for online learning), including 1 hour of ethics. The course is $295 for ABI members; $395 for non-members. The non-member $395 fee also includes 1 year of ABI Membership (a $295 value). Click here for more information and to purchase the course.
NEW CASE SUMMARY ON VOLO: BELSER V. NATIONSTAR MORTGAGE LLC (IN RE BELSER; 1ST CIR.)
Summarized by Hale Yazicioglu of Hinshaw & Culbertson LLP
The BAP first determined that Nationstar had standing to object to the plan confirmation contrary to the debtor's reasoning that Nationstar lacked standing because it did not file a proof of claim before objecting to Belser’s plan. According to the BAP, there is no requirement in Sect. 1324(a) that in order to be considered a "party in interest" and object to a plan, the creditor must have already filed a claim. Second, the BAP affirmed the bankruptcy court's application of the informal proof of claim doctrine in determining that Nationstar's plan objection constituted a valid informal proof of claim because it put the amount of the claim into the public record and put the debtor on notice of the existence, nature and amount of its claim and arrearage. In light of the circumstances (i.e., the plan objection, the debtor's filing of a claim on behalf of Nationstar and Nationstar's subsequent filed claim), the BAP affirmed the bankruptcy court's ruling that the Nationstar's claim would not be disallowed on the grounds of timeliness. No ruling was made on the merits of the claim filed.
There are more than 1,800 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: U.S. DEPARTMENT OF LABOR REINS IN INDEPENDENT CONTRACTOR MISCLASSIFICATION
A recent blog post reported on David Weil, Administrator for the U.S. Department of Labor, Wage and Hour Division, who recently issued an “Administrator’s Interpretation” regarding independent contractor misclassification — essentially firing a warning shot at the armada of rising independent-contractor-model businesses navigating the current markets.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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41st Lawrence P. King & Charles Seligson Workshop on Bankruptcy and Business Reorganization
Sept. 16-17, 2015 Register Today!