SENATE PANEL APPROVES BILL TO EASE SMALL BUSINESS BANKRUPTCIES
The Senate Judiciary Committee today approved bipartisan legislation that would modify the chapter 11 bankruptcy process to help small companies remain in business and preserve jobs, AccountingToday.com reported. The bill was introduced last month by Sens. Sheldon Whitehouse (D-R.I.) and Charles Grassley (R-Iowa) and was passed by the Judiciary Committee today. "Chapter 11 was designed for large publicly-traded corporations and does not work for many small businesses," Whitehouse said. S. 2370, the "Small Business Reorganization Efficiency and Clarity Act," would give debtors and courts 45 additional days (for a total of 90) to confirm their bankruptcy plans. While the current 45-day deadline was intended to expedite small business cases, it has proven to be an insufficient amount of time for many debtors and courts, according to the bill's authors. The bill would also eliminate an ambiguous "catch all" reporting requirement that results in
unnecessary filings and wasted attorney hours. In addition, the bill would allow small business debtors to retain pre-filing counsel and other professionals even if such professionals have small claims against the estate. Read more.
For the full text of S. 2370, the "Small Business Reorganization Efficiency and Clarity Act," please click here.
SURVEY: MEDICAL COSTS PUSHING AMERICANS FURTHER INTO CREDIT CARD DEBT
Left-leaning research and policy center Demos released the results of a survey showing that many low- and middle-income Americans are paying for medical bills with their credit cards, the HuffingtonPost.com reported today. The survey sampled 997 adults in February and March who had carried credit card debt for at least three months and found an average debt of $7,145 with $1,678 attributable to medical costs. Almost 50 percent of American households bought out-of-pocket medical expenses on credit, the survey found. Even though the average credit card debt reported this year decreased from its $9,887 level in 2008, the percentage of American families taking on credit card debt for spending related to necessities remains about the same as during the financial crisis. About two in five households used their credit cards for basic living expenses such as groceries and rent, according to the Demos survey. To read the full survey, please click here.
COMMENTARY: FULL DISCLOSURE FOR STUDENT BORROWERS
Nationally, about two-thirds of bachelor's degree recipients now borrow from either public or private lenders, up significantly from the early ’90s, when about 45 percent of graduates borrowed from all sources, including family, according to an editorial in yesterday's New York Times. According to an analysis by the Federal Reserve Bank of New York, the average debt for student borrowers last year was about $23,300, while 10 percent owed more than $54,000 and 3 percent owed more than $100,000. Federal law requires schools to provide students minimal "entry" and "exit" loan counseling. Many schools market themselves to students without explaining the real costs of attendance. Letters informing them about financial aid awards often blur the distinction between loans and grants to make the school look like a better deal than it is, according to the editorial. The Obama administration has taken some important steps to address these problems. A
proposal would require colleges to clearly disclose costs in a standardized "shopping sheet" that would let students see the aid they are receiving and the debt that they would incur. Later this year, it plans to post an Internet "scorecard" that rates each college nationally on affordability and value — defined by graduation rates and whether graduates earn enough on average to repay their debts. Read more.
SENATORS SEEK TO REMOVE BANKERS FROM 12 REGIONAL FED BOARDS
Senators Bernie Sanders (I-Vt.), Barbara Boxer (D-Calif.) and Mark Begich (D-Alaska) introduced legislation on Tuesday that would remove banking industry executives from the 12 regional Fed banks' boards of directors, Bloomberg News reported yesterday. "Allowing currently employed banking industry executives to serve as directors on the boards of directors of Federal Reserve banks is a clear conflict of interest that must be eliminated," according to the text of the bill, released today by Sanders. The structure of the central bank is under new scrutiny following a $2 billion trading loss at JPMorgan Chase & Co., whose chief executive officer, Jamie Dimon, is on the board of directors of the New York Fed. This is "not a perceived conflict, but a real conflict of interest when bank presidents and employees of banks sit on the very boards that regulate them and sometimes bail them out," Boxer said. Read more.
ANALYSIS: DEWEY'S DOWNFALL TOOK WEEKS; CLEAN-UP LOOMS FOR YEARS
Dewey & LeBoeuf LLP, a law firm with a 103-year history, collapsed in a matter of weeks, but cleaning up the debris may take years, Bloomberg News reported today. A trickle of partner defections in March turned into a torrent, with at least 250 of Dewey's 304 partners having now found new jobs. All five senior partners named to a new chairman’s office in March have left, and the firm faces a criminal probe. The staff at the firm’s Manhattan offices has been gone for more than a week. Joff Mitchell of Zolfo Cooper, a restructuring company, is winding the firm down while dunning former clients for bills they have little incentive to pay in full. That is bad news for the firm's creditors, including bank lenders owed at least $75 million and bondholders owed $125 million or more. Other creditors range from partners who got pay guarantees worth about $100 million to the firm's janitors, who have sued for about $300,000 in unpaid bills. Read more.
NEW-HOME SALES AMPLIFY OPTIMISM ABOUT HOUSING
Sales of newly built homes continued to pick up momentum, another sign that the long-beleaguered housing market is in recovery mode, the Wall Street Journal reported today. New-home sales for April rose 3.3 percent from March and were up 9.9 percent from a year earlier to a seasonally adjusted annual rate of 343,000, the Commerce Department said yesterday. While new homes account for about 10 percent of the housing stock sold each year, sales of previously owned homes have also shown strong gains recently, suggesting that the industry's improvements are widespread. The National Association of Realtors said on Tuesday that sales of previously owned homes, which make up the bulk of the housing market, rose 3.4 percent in April from the previous month. Read more. (Subscription required.)
WEBINAR ON JUNE 26 TO EXAMINE SUPREME COURT'S RULING IN RADLAX CASE
Having already examined the oral argument in a previous ABI media teleconference, panelists will reconvene for an ABI and West LegalEd Center webinar on June 26 to discuss the Supreme Court's forthcoming ruling in RadLAX Gateway Hotel LLC v. Amalgamated Bank, expected to be handed down in June. CLE credit will be available for the webinar that will last from 2:00-3:30 p.m. ET.
Experts on the program include:
• David Neff of Perkins Coie LLP (Chicago), the counsel of record for petitioner RadLAX Gateway Hotel LLC and participant in the argument.
• Jason S. Brookner of Andrews Kurth LLP (New York), whose article was cited in the brief for the respondent.
• Prof. Charles Tabb, the Alice Curtis Campbell Professor of Law at the University of Illinois College of Law, who recently published a paper titled "Credit Bidding, Security, and the Obsolescence of Chapter 11."
ABI Resident Scholar David Epstein will be the moderator for the webinar.
The webinar costs $115 and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.
ABI IN-DEPTH
JUNE 5 WEBINAR WILL EXAMINE HOW TO HANDLE AN ADMINISTRATIVELY INSOLVENT ESTATE
Panelists from one of the top-rated sessions at the 2011 Winter Leadership Conference are going to reconvene for an ABI and West LegalEd Center webinar on June 5 titled, "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South." CLE credit will be available for the webinar, which will last from 11 a.m. - 12:30 p.m. ET.
Speakers include:
• Robert J. Feinstein of Pachulski Stang Ziehl & Jones LLP (New York)
• Cathy Rae Hershcopf of Cooley LLP (New York)
• Robert L. LeHane of Kelley Drye & Warren LLP (New York)
Robert J. Keach of Bernstein Shur (Portland, Maine) will be the moderator for the webinar.
The webinar costs $115, and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.
LATEST CASE SUMMARY ON VOLO: WRIGHT V. OWENS CORNING (3D CIR.)
Summarized by Omid Moezzi from the Office of Chapter 13 Trustee Nancy Curry
The Court of Appeals affirmed the district court's ruling that the plaintiff's (Charles and Ethanne Waldo) claims could have been litigated in the federal bankruptcy action and previous state court actions. As such, the district court correctly granted defendant's (Ocwen Loan Servicing) motion to dismiss on the basis of claim preclusion due to previous lawsuits filed by the plaintiff.
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: SMALL-BANK M&A HINDERED BY FAULTY LOGIC ON VALUATIONS
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post said that merger and acquisition activity by small banks is still being hindered by faulty logic in thinking that valuations will return to their pre-financial crisis levels.
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 few “net winners” in a bankrupt Ponzi scheme should be required to turn over to the trustee any returns in excess of their original investment (with no special defenses or exceptions), to be distributed to the many “net losers” victimized by the scheme.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 37 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.
