Study: Most Retailers Who Filed for Bankruptcy in Past 10 Years Ended Up in Liquidation

According to a new study by AlixPartners advisory firm, 55 percent of all U.S. retailers that have filed for bankruptcy over the past 10 years have ended up in liquidation, CNBC.com reported today. By comparison, less than 5 percent of nonretail filings over that period have had the same result. There are several reasons why bankruptcy represents more of a death knell for retailers than those in other industries -- the most significant of which relates to changes in the Bankruptcy Code, according to AlixPartners. Changes brought about by the Bankruptcy Abuse Prevention Act of 2005 (BAPCPA) condensed the timeline in which retailers had to garner approval for a sale or reorganization before they were pushed into liquidation. Other factors at play for distressed retailers include a robust number of liquidation firms; a new breed of lenders who are willing to get involved in the companies' operations; and demand for brands' intellectual property. Read more.

For more expert analysis of BAPCPA's effects on retailers and general business trends, make sure to listen to ABI's "BAPCPA at 10" business bankruptcy trends webinar.

Commentary: Why Student Loan Borrowers Should Pay Attention to These Two Court Cases

Two cases working their way through the legal system raise the possibility that courts could offer a looser definition of how troubled a borrower has to be before a bankruptcy judge can justify discharging his or her loans, according to a MarketWatch.com commentary yesterday. Many appeals courts apply the "Brunner test" to determine whether a debtor is eligible to have his loans discharged. The Eighth Circuit, however, applies a test called the "totality of circumstances" test, which takes "a broad-based view" regarding whether the debtor's circumstances rise to the level of undue hardship, according to Prof. Rafael Pardo of Emory University's School of Law. Additionally, the First Circuit hasn't officially adopted a standard for evaluating student debtors in bankruptcy, but it could weigh in soon. If the First Circuit chooses to adopt the totality test, that would harden a split among the circuits, which often "captures the Supreme Court's attention," Pardo said. But there's another case that could wind up at the Supreme Court first, according to the commentary. Mark Tetzlaff, a Wisconsin man in his 50s, who had $260,000 in student debt from business and law school when he filed for bankruptcy in 2012, appealed his case to the Supreme Court last week. He's asking the high court to reconsider a decision made by a Seventh Circuit Court of Appeals judge earlier this year, which found that Tetzlaff's financial circumstances don't merit discharging his student loans in bankruptcy. Read more.

For further analysis of student loans in bankruptcy, be sure to pick up a copy of ABI's Graduating with Debt: Student Loans under the Bankruptcy Code.

Class Action Lawsuit Claims Biloxi Used "Modern Debtors' Prison" to Extract Fee Money from Poor

A class action lawsuit was filed by the American Civil Liberties Union (ACLU) yesterday with a federal district court in Gulfport, Miss., against the city of Biloxi, its police department, the municipal court system and the private probation company JCS claiming that the agencies collectively conspired to create a modern form of debtors' prison as a ruse to extract cash from those least able to afford it -- the city's poor, The Guardian reported today. In a statement, the city of Biloxi said that it had not yet seen the lawsuit but insisted that it treated all defendants fairly. "We believe the ACLU is mistaken about the process in Biloxi," the city said. "The court has used community service in cases where defendants are unable to pay their fines." Kennedy v. City of Biloxi discloses that between September 2014 and March this year, at least 415 people were put in jail under warrants charging them with failure to pay fines owed to the city. According to court records, none of these 415 people had the money available when they were locked up. Nusrat Choudhury, an ACLU attorney involved in the lawsuit, called the Biloxi system "a debtors' prison from the dark ages." She said that people were being "arrested at traffic stops and in their homes, taken to jail and subjected to a jailhouse shakedown. They are told that unless they pay the full amount they will stay inside for days."

CFPB Admits to Bumps in Rollout of Home Loan Disclosure Rules

New federal loan disclosure rules that were designed to help borrowers understand what they were signing at their home's closing have had a bumpy rollout because of infighting in Congress and incompatible mortgage software, the Consumer Financial Protection Bureau's director Richard Cordray admitted to mortgage lenders, MarketWatch.com reported yesterday. "It has become apparent that the implementation process was not as smooth as we would have hoped," he said about the rollout of the "Know Before You Owe" rule. The rule gives consumers three days to pore over the loan documents, perhaps with an attorney or other trusted adviser, before closing on a loan. The rule, which was set to go into effect in August but was delayed by two months because the industry wasn't ready, is already being targeted for potentially slowing down home closings and requiring borrowers to pay more for the bank to hold an agreed-upon interest rate longer. This is called a loan lock, and for a fee it "locks in" an interest rate during the closing of a home sale. Before the rule went into effect, the typical loan lock was 30 days, which the consumer didn't pay for. But some lenders and brokers fear that now with the new rules increasing closing periods, a loan lock of 45 days or 60 days will be needed to keep the interest rate stable.

Commentary: The CFPB Declares War on Arbitration

The Consumer Financial Protection Bureau declared war on arbitration earlier this month as it considers a ban on arbitration clauses that prevent consumers from participating in class action lawsuits, according to a Forbes.com commentary on Monday. If enacted, the plan would severely curtail a contentious practice called mandatory arbitration, which consumer advocates have long argued does a disservice to people who have disputes with banks, credit card issuers and other financial service providers. The CFPB's contemplated proposal on arbitration may be a boon for class action lawyers, according to the commentary, but it would be a costly and unnecessary burden on financial transactions, the brunt of which would be borne by consumers.

Limited Space Available for Free abiLIVE Webinar Examining Pending Changes in the Bankruptcy Forms!

As most official bankruptcy forms will be replaced with substantially revised, reformatted and renumbered versions effective Dec. 1, ABI's Consumer Bankruptcy Committee will host an abiLIVE webinar on Nov. 16 to examine the pending changes in the forms. Join members of the Advisory Committee on Bankruptcy Rules, as well as a software expert from Stratus BK, to learn about the new forms. Registration is free, but is limited to 100 registrants! Click here for more information and to register.

Authors Discuss Bridging Bankruptcy Theory with Courtroom Procedure on Latest ABI Podcast

The latest ABI podcast features ABI Deputy Executive Director Amy Quackenboss talking with Michael Bernstein of Arnold & Porter LLP (Washington, D.C.) and Prof. George Kuney of the University of Tennessee College of Law (Knoxville, Tenn.) about their book, Bankruptcy in Practice, Fifth Edition. Bernstein and Kuney discuss how the book was revised to incorporate recent case law and changes to the Bankruptcy Code.

To purchase Bankruptcy in Practice, Fifth Edition, a great read for both new practitioners and seasoned professionals, please click here.