Sens. Chris Murphy (D-Conn.), Elizabeth Warren (D-Mass.), Barbara Boxer (D-Calif.), Jack Reed (D-R.I.), Chuck Schumer (D-N.Y.), Sherrod Brown (D-Ohio), Mark Begich (D-Alaska), Kirsten Gillibrand (D- N.Y.) and Richard Blumenthal (D-Conn.) criticized the federal government for earning an estimated $66 billion in profits from student loans originated between 2007 and 2012, the Associated Press reported on Sunday. Reacting to a Government Accountability Office report Friday, Blumenthal and Murphy said that it was wrong for the government to benefit from the struggle of young people who are dealing with escalating college costs. A previous Congressional Budget Office report estimated the government will pocket an additional $185 billion in profits on new student loans made over the next 10 years. "It's disgraceful that the federal government could make a whopping $66 billion profit off of students who are already strapped for cash," Murphy said. The senators have committed to wringing government profits out of student loans and addressing the $1.2 trillion in outstanding student loan debt they say is crushing families and putting a strain on the economy. Read more.
ABI will be holding a symposium on the causes and economic consequences of the student loan debt bubble at the Georgetown University Law Center on May 30. Also be on the look-out for an upcoming ABI podcast featuring Sen. Richard Durbin (D-Ill.) discussing student loan debt and legislation he is sponsoring, S. 1803, the "Student Loan Borrower Bill of Rights."
SOME STUDENT LOAN BORROWERS GET RELIEF FROM SMALL LENDERS
Student loan borrowers who feel trapped by high-rate private loans finally have more options to refinance their debt, but not everyone will be able to find relief, Reuters reported yesterday. In January, Citizens Bank became the latest to offer private consolidation loans that provide lower and sometimes fixed rates to borrowers with good credit or creditworthy co-signers. It joins a handful of banks, credit unions and a few online crowdfunding experiments like SoFi and Commonbond that are attracted by low default rates and relatively little big-bank competition. The Consumer Financial Protection Bureau last year criticized the lack of refinancing options for private student loans, which typically have higher variable rates than do fixed-rate federal student loans. The bureau complained that private lenders have been slow to modify repayment plans for troubled borrowers, which is in sharp contrast to federal student loan programs that offer flexible repayment options, including income-based plans. Many lenders have curtailed or shut down their private student loan operations in recent years. JPMorgan Chase and Co. and Wells Fargo & Co. were among the few major banks offering private student loan consolidation, and Chase exited the private student loan market late last year. Read more.
ANALYSIS: DETROIT TURNS BANKRUPTCY INTO CHALLENGE OF BANKS
Detroit's bankruptcy is rapidly shaping up as a battle between Wall Street and Main Street, at least as far as the city's creditors are concerned, the New York Times DealBook blog reported today. Amy Laskey, a managing director at Fitch Ratings, said in a recent report that she sensed an "us versus them" orientation toward debt repayment. And in the view of bondholders, bond insurers and other financial institutions, it only grew worse last week after the city circulated its plan to emerge from bankruptcy and filed a lawsuit on Friday. The suit, brought by Detroit Emergency Manager Kevyn D. Orr, seeks to invalidate complex transactions that helped finance the city's pension system in 2005. In a not-so-veiled criticism, the city said that the deal was done "at the prompting of investment banks that would profit handsomely from the transaction." The banks that led the deal were Bank of America and UBS. They helped Detroit borrow $1.4 billion for its shaky pension system and also signed long-term financial contracts with the city, known as interest-rate swaps, to hedge the debt. Detroit has already stopped paying back the $1.4 billion, but for the first six months of its bankruptcy it kept honoring the swaps contracts and at one point offered to pay the two banks hundreds of millions of dollars -- money it would have had to borrow -- to end them. But the lawsuit now seeks to cancel the swaps, arguing that they were illegal from the outset along with the related debt transactions. Read more.
AMERICANS BOOST SPENDING ON REMODELING
Americans are spending lavishly again to upgrade their homes, an indication that they remain confident about the long-term prospects for the recovery of the housing market despite recent signs of weakness, the Wall Street Journal reported today. Homeowners spent $130 billion on remodeling projects last year, according to data released Monday by the U.S. Census Bureau. That was up 3.1 percent from 2012 and was the largest amount of home-remodeling spending since 2007, the year that the housing downturn began. Permits for remodeling jobs in the U.S. rose 5.1 percent last year from 2012, the largest increase since 2010, when the figures began their rebound from a 10-year low, according to permit-tracking company BuildFax. Home-equity lending -- which sank to its lowest level of the past 10 years in 2010 -- jumped 18 percent last year to $123.4 billion, according to estimates by Moody's Analytics. According to real estate data firm CoreLogic, two-thirds of all U.S. homeowners had at least 20 percent equity in their homes as of last year's third quarter, up from 53.2 percent two years earlier. Read more. (Subscription required.)
LATEST ABI PODCAST EXPLORES HOW FAILURE CAN LEAD TO SUCCESS
The latest ABI Podcast features ABI Executive Director Sam Gerdano speaking with Bloomberg View writer Megan McArdle, author of The Up Side of Down: Why Failing Well Is the Key to Success. Based on her research of both personal and business failure, McArdle provides examples of how businesses and consumers have built a fresh start after financial disaster. The new book from Viking Press is set for release on February 11. Click here to listen to the podcast.
JOIN ABI'S UNSECURED TRADE CREDITORS COMMITTEE TOMORROW FOR A DISCUSSION ON IP RIGHTS
Join ABI's Unsecured Trade Creditors Committee tomorrow, Feb. 5, for its bi-monthly call at 4:00 pm EST to discuss unsecured creditors' intellectual property rights. The call will explore why and how intellectual property rights provide an unsecured creditor with leverage, what provisions of the Bankruptcy Code should be relied upon and what strategies to consider (when to file objections, etc.). The committee we will also discuss some real-life examples of situations in which an unsecured creditor's rights in intellectual property made a huge difference.
Participant code: 692933
Bring your questions, thoughts and best practices -- the committee wants to hear from you! If you cannot make this call, mark your calendars for the committee's next open call, which will take place on June 4th.
PUBLIC COMMENT PERIOD ENDS NEXT WEEK FOR PROPOSED AMENDMENTS TO THE FEDERAL RULES OF BANKRUPTCY PROCEDURE
The Judicial Conference Advisory Committee on Bankruptcy Rules has proposed amendments to the Federal Rules of Bankruptcy Procedure and Official Forms, and requested that the proposals be circulated to the bench, bar, and public for comment. On August 15, 2013, the public comment period opened for the proposed amendments to Bankruptcy Rules 2002, 3002, 3007, 3012, 3015, 4003, 5005, 5009, 7001, 9006, and 9009 and Official Forms 17A, 17B, 17C, 22A-1, 22A-1Supp, 22A-2, 22B, 22C-1, 22C-2, 101, 101A, 101B, 104, 105, 106Sum, 106A/B, 106C, 106D, 106E/F, 106G, 106H, 106Dec, 107, 112, 113, 119, 121, 318, 423 and 427. The public comment period closes on February 15, 2014. For more information, please click here.
To access the online comment site for the proposed amendments, please click here.
PURCHASE EITHER THE CONSUMER OR BUSINESS EDITION OF THE BEST OF ABI 2013 AND RECEIVE A FREE ADDITIONAL TITLE!
To make room for new books in 2014, ABI is having a special Bookstore clearance sale. Now, when you buy either Best of ABI 2013: The Year in Business Bankruptcy or The Year in Consumer Bankruptcy, you can choose a free book from a select list of ABI publications. You'll be able to make your selection when you click "Buy Now" on either edition of the Best of ABI 2013. To purchase the Best of ABI 2013: The Year in Business Bankruptcy, please click here.
Make your selection when you click "Buy Now" on either edition of the Best of ABI 2013. To purchase the Best of ABI 2013: The Year in Consumer Bankruptcy, please click here.
LOOKING FOR A REPLAY OF THE "BACK TO BASICS" WEBINARS? CHECK OUT ABI'S CLE SITE!
The final installment of ABI's "Back to Basics" live webinar series, hosted by the Young and New Members Committee, was held last week, and you will soon have the opportunity to access the programs at your convenience! The three webinars in the series, an examination of financial statements and operating reports, using financial documents as evidence and issues surrounding bankruptcy and hedge funds, are posted to ABI's e-Learning website. Let a trusted CLE provider help get your associates up to speed.
ABI'S SIXTH ANNUAL LAW STUDENT WRITING COMPETITION DEADLINE APPROACHING
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
DETROIT EMERGENCY MANAGER KEVYN ORR TO KEYNOTE ABI'S 32ND ANNUAL SPRING MEETING ON APRIL 25
Kevyn Orr, emergency manager to the city of Detroit, will provide the keynote at the Friday Luncheon at ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various "tracks," including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. The Annual Spring Meeting offers 18.25/22 hours of CLE/CPE credit, along with ethics credit totaling 3.25/4 hours. In addition, committee sessions will drill down on topics covered in the larger sessions to provide you with the most practical and varied CLE/CPE experience ever. Also featured will be a special half-day optional event sponsored by ABI and the FCBA titled "The Intersection of the FCC and Bankruptcy Law."
Sessions at the 2014 Annual Spring Meeting include:
- 18th Annual Great Debates
- Where the Work Is (and Isn't)
- The Ever-Changing Role of Committees
- Large Complex Trusts: A General Motors Case Study
- Municipal Bankruptcies
- Use of Governmental Assistance Programs in Chapter 13
- The Financial Professional's Role in Out-of-Court Restructurings and Dissolutions
- Civility in the Restructuring Profession
- Union Contracts
- Student Loan Update
- Social Media: What You Don't Know Can Hurt You
- The § 363 Sale Process from a Transactional Perspective
The conference kicks off with an Opening Reception at the Smithsonian's National Museum of the American Indian, offering a truly D.C. experience. Optional events include a golf tournament at Westfields Golf Club, a Washington Nationals vs. San Diego Padres baseball game and an evening at the Kennedy Center with the National Symphony Orchestra.
NEW CASE SUMMARY ON VOLO: BENDETTI V. GUNNESS (IN RE GUNNESS; 9TH CIR.)
Summarized by Mark Hudson of Schian Walker
The Ninth Circuit affirmed the bankruptcy court by granting summary judgment to the debtor, ruling that attorney's fees owed jointly and severally by the debtor and her husband to the husband's ex-wife and the ex-wife's attorney were not excepted from discharge by either 11 U.S.C. § 523(a)(5) or (15) because the debtor is not the spouse, ex-spouse or child of the creditor(s). The BAP declined to expand the plain meaning of either provision to include the debtor, rejecting arguments that the status of an ex-spouse should be imputed to her because she had been joined as a party in the dissolution proceeding or that she was a participant in the fraudulent transfer scheme.
There are more than 1,200 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: TENTH CIRCUIT BAP CLARIFIES CREDITORS' RIGHTS TO FILE PLANS IN SMALL BUSINESS CHAPTER 11 CASES
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. In ruling that the provisions of § 1121(e) apply only to small business debtors, the Tenth Circuit BAP held in Thurner Industries Inc. v. Gunnison Energy Corporation (In re Riviera Drilling & Exploration Company) that creditors of a small business debtor may file plans of reorganization more than 300 days after the order for relief has been filed.
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 Bankruptcy Code permits a debtor to artificially impair a class for cramdown purposes.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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