STUDY EXAMINES QUALITY OF LIFE OF BANKRUPTCY FILERS
A new study finds that bankruptcy filers make more money and live longer than those who were denied such protection, Fortune Magazine reported today. In a working paper released Monday by the National Bureau of Economic Research, economists Will Dobbie and Jae Song examine 500,000 bankruptcy filings in the U.S. to measure the effect of bankruptcy laws on consumers. They found that the Bankruptcy Code is an effective social insurance policy. According to their findings, getting approved for chapter 13 bankruptcy protection "increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclosure rates by 19.1 percentage points." Read more.
While many American families during the recession paid off debt and got their finances in order, the latest data from the Federal Reserve's Flow of Funds shows that Americans are taking on debt once again to finance new cars, college tuition, and other consumer goods, Bloomberg News reported today. American household debt peaked in 2007 and has since fallen 15 percent as home mortgage debt accounts for much of the decline — it's dropped 22 percent since 2007. Consumer debt, on the other hand, has continued to increase and just reached an all-time high of $3.2 trillion. Americans have added about $100 billion of student debt a year to their balance sheets since 2008. Credit cards and auto loans have also come roaring back, particularly auto loans. According to the Bureau of Economic Analysis, spending on cars has increased 35 percent since the recession, almost all on new cars. Consumption per capita has been rising since the recession, despite stagnant income. Read more.
EXPERTS WEIGH IN ON CONSUMER CREDIT, REGULATION AND THE ECONOMY
Prof. Todd Zywicki of the George Mason University School of Law and other experts gathered today at the Cato Institute to discuss his new book, Consumer Credit and the American Economy, and the reasons behind consumer borrowing and consumer credit regulation. Zywicki pointed out that people use credit to make their lives better and that credit cards have replaced many forms of lending over time. More stringent forms of regulating have resulted in consumer credit-term repricing (substitute one credit term for another, such as transfer fees), product substitution and credit rationing, according to Zywicki. Product substitution and credit rationing have led to lower-income families not being able to access favorable credit card terms, and thus having to opt for payday lending products, installment loans or even pawn shops. Regulation after the 2008 crisis intensified the effect of lower-income consumers not being able to access credit card products, according to Zywicki, and allowed payday loans and pawn shops to proliferate. Prof. Heidi M. Schooner of the Columbus School of Law at Catholic University of America said that regulation does play into the value of credit cards, offering better protections against unauthorized use versus other payment systems. She pointed out that regulation is directed at large bank products and not smaller suppliers of credit. Prof. Anthony Yezer of George Washington University also worries about effect of regulation on the cost of credit. To watch a replay of the Cato Institute panel on Consumer Credit and the American Economy, be sure to check back here.
ANALYSIS: REVISITING THE LEHMAN BROTHERS BAILOUT THAT NEVER WAS
At issue six years ago was whether the Fed could save Lehman Brothers, a major investment bank whose failure might threaten the entire economy, the New York Times reported today. The answer for some inside the Fed was yes, the government could bail out Lehman, according to new accounts by Fed officials who were there at the time. However, the firm was allowed to collapse overnight, a decision that, in hindsight, let problems at one bank snowball into a full-blown panic. By the time it was over, nearly every other major bank had to be saved. Ben S. Bernanke, the Fed chairman at the time, Henry M. Paulson Jr., the former Treasury Secretary, and Timothy F. Geithner, who was then president of the New York Fed, have all argued that Lehman Brothers was in such a deep hole from its risky real estate investments that the Fed did not have the legal authority to rescue it. But now, interviews with current and former Fed officials show that a group inside the New York Fed was leaning toward the opposite conclusion: that Lehman was narrowly solvent and therefore might have qualified for a bailout. In the frenetic events of what has become known as the Lehman weekend in 2008, that preliminary analysis never reached senior officials before they decided to let Lehman fail. Read more.
DEATHS TIED TO FLAWED GM IGNITION RISE TO 23, AS COMPENSATION OFFERS GO OUT
The number of deaths linked to General Motors' defective ignition switch has risen again — to 23, according to new figures posted yesterday by the program set up to compensate victims, the New York Times reported yesterday. The program, overseen by Kenneth R. Feinberg, a victim compensation specialist, is sending its first letters with payment offers to more than 30 families that have filed death and injury claims, said Camille Biros, the deputy administrator of the program. Thirty-nine claims have been determined to be eligible for payments from the company. As of last Friday, the program had received 867 claims, including 153 for deaths. Biros said that the fund had officially rejected about 40 of the total claims. The others were still under review, most of them awaiting more evidence that the faulty ignition switch was a factor in the crash. The deadline for filing claims is Dec. 31, though the process of evaluating them and requesting additional evidence could continue for months after that. Read more.
DON'T MISS THIS WEEK'S FREE ABI ASSET SALES COMMITTEE TELECONFERENCE!
Members are encouraged to dial-in and listen or participate on upcoming ABI Committee conference calls. (More than 100 attended last week's lively call of the Business Reorganization Committee.) While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:
Asset Sales Committee: Thursday, Oct. 2; 4 pm ET
Topic: Call to cover "the progeny of Fisker," as well as the practical implications of the decisions.
Speakers: Oscar Pinkas of Dentons (New York) and Justin Paget of Hunton & Williams LLP (Richmond, Va.)
Unsecured Trade Creditors Committee: Thursday, Oct. 23; 4 pm ET
Topic: "Tricks of the Trade: New Issues and Strategies in Preference Cases"
Speakers: Mark Felger of Cozen O'Connor (Wilmington, Del.) and Travis Powers of Buchanan Ingersoll & Rooney PC (Buffalo, N.Y.)
All committee teleconferences are free to ABI members and registration is not required. Simply utilize the following dial-in information:
Call in: (712) 432-1500
Participant code: 692933
WE WANT TO HEAR FROM YOU: MAKE SURE TO FILL OUT ABI'S ANNUAL MEMBER SURVEY!
ABI's Annual Member Survey was sent via e-mail yesterday. Please take the time to fill out the survey so that we can better tailor our products, events and services to your needs. If you did not receive an e-mail yesterday containing the Annual Member Survey, please contact ABI Membership Director Chris Thackston at [email protected].
NEW CASE SUMMARY ON VOLO: KRYS V. FARNUM PLACE LLC (IN RE FAIRFIELD SENTRY LTD.; 2D CIR.)
Summarized by Robert Yan of Farrell Fritz PC
Vacating and remanding the district court's order affirming the bankruptcy court's order denying an application to conduct, in a chapter 15 ancillary bankruptcy proceeding, a §363 review of a sale of customer claims filed in a SIPA liquidation (the "SIPA Claim"), the U.S. Court of Appeals for the Second Circuit held that the sale of the SIPA Claim is a "transfer of an interest of the debtor in property that is within the territorial jurisdiction of the United States" within the meaning of 11 U.S.C. § 1520(a)(2), and therefore the sale is subject to review under § 363.
There are nearly 1,500 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: FURTHER EXAMINATION OF THE CFPB'S SERVICING ENFORCEMENT ORDER AGAINST FLAGSTAR
A recent blog post takes a closer look at the Consumer Financial Protection Bureau's (CFPB) consent order with Flagstar Bank regarding its default mortgage servicing practices. It's the first enforcement action of the CFPB's new servicing rules, and its "benching" remedy, which prevents Flagstar from most default servicing until it demonstrates compliance, shows that the Bureau is serious about cleaning out the Augean stables of servicing.
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 debt ceiling for chapter 13 cases should be increased substantially again, perhaps to $5 million.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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