Senate Bill Would Give More Rights to Municipal Employees in Bankruptcies

Senate Bill Would Give More Rights to Municipal Employees in Bankruptcies

ABI Bankruptcy Brief | June 5, 2014
 
  

June 5, 2014

 
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SENATE BILL WOULD GIVE MORE RIGHTS TO MUNICIPAL EMPLOYEES IN BANKRUPTCIES

Inspired by the City of Detroit's proposed plan of adjustment that gives a haircut to government workers, two U.S. senators have introduced a bill that gives more rights to municipal employees in chapter 9 bankruptcy proceedings, BondBuyer.com reported yesterday. But experts warn that the measure could lead to more litigation and raise Constitutional issues. "The Bankruptcy Fairness and Employee Benefits Protection Act" (S. 2418), introduced on Monday by Sens. Jay Rockefeller (D-W.Va.) and Elizabeth Warren (D-Mass.), would establish rights for municipal employees and retirees similar to those provided for workers in corporate bankruptcies. The bill, for example, would give municipal employees and retirees a priority claim for unpaid wages and benefits. It would prohibit cuts in municipal employee and retiree compensation and benefits below the minimum levels necessary for the municipality to emerge from bankruptcy. However, noted chapter 9 expert Jim Spiotto says the bill would actually create a higher standard for rejecting labor contracts by applying the chapter 11 requirements to municipal bankruptcies, leading to more litigation among other unintended consequences. Read more.

For more on the "Bankruptcy Fairness and Employee Benefits Protection Act," please click here.


ANALYSIS: LBOS FACE THEIR DAY OF RECKONING

The bankruptcy filing of Energy Future Holdings has not only raised high-yield default rates for U.S. companies, but it also means that there have now been 10 leveraged buy-out (LBO)-related company defaults so far in 2014, one shy of the total for all of 2013, according to an analysis today on CFO.com. The failure of Energy Future Holdings -- it represents the eighth-largest bankruptcy of all time with $40.1 billion in pre-petition assets, as well as the largest LBO default to date -- also pushed up the tally of loan and bond defaults associated with LBOs. With Energy Future Holdings defaulting on $35.8 billion in outstanding loans and bonds, there have now been $42.3 billion in bond and institutional loan defaults related to LBOs since 2007. That dollar amount represents 31 percent of total defaults from 2007 to the present, according to a new report from Fitch Ratings. Read the full analysis.

REPORT: HALF OF AMERICANS CAN'T AFFORD THEIR HOMES

New research finds that a majority of homeowners and renters are finding it hard to meet rising rents and mortgage payments even as the housing market slowly recovers, MarketWatch.com reported yesterday. Over half of Americans (52 percent) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the "How Housing Matters Survey," which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less-safe neighborhood or one with worse schools. What's more, at least 15 percent of American homeowners (or residents of 78 counties across the country) are living in housing markets where the monthly mortgage payment on a median-priced home requires more than 30 percent of the monthly median household income -- long considered the maximum for rent/mortgage repayments. Housing costs above that threshold are "unaffordable by historic standards," says Daren Blomquist, a vice president at real estate data firm RealtyTrac. Although mortgage rates are still quite low, down payments, poor credit and tighter lending standards remain three of the biggest hurdles for buying a home, especially among young people, Blomquist says. "The slow jobs recovery for young adults has made it harder for them to save and to get a mortgage." Nearly 84 percent of young people are delaying major life decisions due to the poor economy, according to a 2013 survey by Generation Opportunity, a nonprofit think tank based in Arlington, Va. Read more.

GM FIRES 15 EMPLOYEES OVER RECALL FAILURES

General Motors Co. Chief Executive Mary Barra today dismissed 15 employees in the wake of what she called a "brutally tough and deeply troubling" report that chronicled why it took the automaker 11 years to recall cars equipped with a defective ignition switch, the Wall Street Journal reported today. Barra said that the company reprimanded five other employees in conjunction with the probe by former U.S. Attorney Anton Valukas. The defective switches have been linked to numerous accidents and deaths. The U.S. attorney's office in Manhattan has a criminal probe underway, and states' attorneys general and the Securities and Exchange Commission are separately looking into GM's handling of the recall. GM also declined to release the names of the people it dismissed, confirming only that engineers Raymond DeGiorgio and Gary Altman were among them. Barra said that more than half of the people were senior executives at GM, but that GM chief counsel Michael Millikin was still with the company. Congress is continuing to investigate, while the company continues to litigate whether its chapter 11 plan insulates it from facing personal injury claims. Read more. (Subscription required.)

MISS LAST FRIDAY'S STUDENT DEBT SYMPOSIUM? PURCHASE THE SESSIONS ON ABI'S ELEARNING WEBSITE!

If you were not able to attend ABI's Student Debt Symposium held last Friday at Georgetown University Law Center, you can purchase all sessions from the program on ABI's eLearning site! This unique day-long symposium, funded in part by a grant from the National Conference of Bankruptcy Judges Endowment for Education, featured academics, consumer bankruptcy practitioners, bankruptcy judges, consumers and policy-makers addressing the causes, consequences and possible reform of the student debt problem. Sessions available for purchase include:

- What We Have: An Overview of the Student Loan Process
- What We Have Is Broken: Problems with the Current System and System-Wide Fixes
- Economic Effect of the Increase in Student Borrowing and Debt
- Default and Distress Issues
- How Hard Is the "Hard" in "Hardship"? The Current State of § 523(a)(8)
- The Chapter 13 Option
- Avoiding Bankruptcy: What Options Exist (and Are Accessible)?
- The Easy Fix: Is Repealing § 523(a)(8) Really the Answer?

To purchase the sessions, please click here.

NEW CASE SUMMARY ON VOLO: WIAND V. LEE (11TH CIR.)

Summarized by Paul Avron of Berger Singerman LLP

The Eleventh Circuit ruled that (1) a transfer made in furtherance of a Ponzi scheme establishes as a matter of law actual intent to hinder, delay or defraud under Florida's version of the Uniform Fraudulent Transfer Act without the need to consider the "badges of fraud," and (2) entities in receivership are "creditors" required to establish an actually fraudulent transfer because they were harmed when their assets were wrongfully transferred to the detriment of their innocent investors.

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: COULD TOTAL BANKRUPTCY FILINGS DECLINE TO 900,000 FOR CY 2014?

A recent blog post discusses the fact that there have been just over 405,500 total bankruptcy filings in the first five months of 2014. For the past three years, filings for the January - May time period have made up approximately 44.5 percent of the yearly total. Extrapolating this data, the post examines the possibility that there will be just over 900,000 bankruptcies for the entire 2014 calendar year. This would be the lowest number since 2007.

For the latest monthly filing statistics from Epiq Data Systems, be sure to visit ABI's Newsroom.

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

A special Bankruptcy Code chapter 14 should be created for "TBTF" (too-big-to-fail) financial institutions.

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

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  CALENDAR OF EVENTS
 

2014

June
- Memphis Consumer Bankruptcy Conference
    June 6, 2014 | Memphis, Tenn.
- abiLIVE Webinar: The 1111(b) Election: Advanced Mathematics and Strategies
    June 12, 2014 |
- Central States Bankruptcy Workshop
    June 12-15, 2014 | Lake Geneva, Wis.
- abiWorkshop: Chief Bankruptcy Judges Roundtable
    June 16, 2014 | Alexandria, Va.
- Cross-Border Insolvency Program
    June 20, 2014 | New York, N.Y.
- ABI Endowment Baseball Event
    June 26, 2014 | Chicago, Ill.

July
- abiLIVE Webinar: Proposed Chapter 14 and the Future of Large Financial Institution Resolution
    July 15, 2014 |
- Northeast Bankruptcy Conference
    July 17-20, 2014 | Stowe, Vt.

  

 



- Southeast Bankruptcy Workshop
    July 24-27, 2014 | Amelia Island, Fla.
- Mid-Atlantic Bankruptcy Workshop
    July 31-August 2, 2014 | Cambridge, Md.

August
- ABI Endowment Baseball Event
    Aug. 13, 2014 | Baltimore, Md.
- Fourth Hawai'i Bankruptcy Workshop
    Aug. 13-16, 2014 | Maui, Hawai'i

September
- Southwest Bankruptcy Conference
    Sept. 4-6, 2014 | Las Vegas, Nev.

October
- Midwestern Bankruptcy Institute
    Oct. 16-17, 2014 | Kansas City, Mo.

 

 
 
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