SUPREME COURT WILL HEAR BANKRUPTCY CASE INVOLVING CHARGE ON DEBTOR'S PROPERTY
The U.S. Supreme Court yesterday granted certiorari in a case involving the question of whether a bankruptcy court has the power to levy a financial charge against a chapter 7 debtor's residential property, which the debtor claims falls under the homestead exemption, Mealey's Daily News Service reported yesterday. In 2004, Stephen Law filed for chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Central District of California. He listed his home property value as $363,348 and sought a homestead exemption. The chapter 7 trustee, Alfred Siegel, did not object to the homestead exemption, but two years later the trustee moved to surcharge Law's homestead exemption $75,000. Law argued that he was not properly served in the process. The trustee countered that Law defrauded his creditors by filing a phony lien against his home to take value out of the property. The bankruptcy court granted the trustee's surcharge, and Law appealed to the U.S. Bankruptcy Appellate Panel (BAP) for the Ninth Circuit. The BAP reversed the surcharge order, concluding that it was "not warranted." The trustee appealed to the Ninth Circuit U.S. Court of Appeals, which reversed the BAP's ruling and determined that the surcharge was proper. Law then appealed to the Supreme Court, arguing that the Court should reverse the Ninth Circuit's ruling and order the trustee to pay him the $75,000 surcharge pertaining to the homestead exemption. The U.S. Solicitor General suggested that the Supreme Court not hear the case, contending that it did not present the question on which courts of appeals are divided. The case is Stephen Law v. Alfred Siegel, No. 12-5196, U.S. Sup. Read more.
CREDIT CARD DELINQUENCIES DECLINED IN MAY FOR MAJOR LENDERS
Late credit card payments declined for major lenders in May, continuing a steady performance that has been bolstered by recent signs that the U.S. economic recovery is gradually gaining traction, Dow Jones Newswires reported yesterday. Capital One Financial Corp., Discover Financial Services, JPMorgan Chase & Co., Bank of America Corp. and Citi said yesterday that their credit card delinquencies declined in May from April. At the same time, they also said that their net charge-off rates, which measure loans lenders deem uncollectible, fell during the month. American Express Co. said that its delinquency rate stayed flat at 1.1 percent in May while its net charge-off rate declined to 1.9 percent from 2.1 percent in April. Historically, major credit card lenders have experienced delinquency and loss rates of between 3 and 5 percent on average under what analysts consider to be a "normal" economic environment. Read more.
ANALYSIS: LAWMAKERS TO FOCUS ON FUTURE OF FANNIE MAE, FREDDIE MAC
Congress is gearing up to tackle an issue that has been mostly ignored for nearly five years: What to do with Fannie Mae and Freddie Mac, the bailed-out-but-now-profitable mortgage companies, according to an analysis in yesterday's Wall Street Journal. In the Senate, Republicans and Democrats have begun work on a bipartisan bill that would replace Fannie and Freddie within five years with a new "public guarantor" as part of a broader framework designed to gradually ease the government out of its outsized role of backstopping the nation's $10 trillion mortgage market. The effort is being led by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), although a formal bill has not been introduced. The Corker-Warner proposal would maintain a potentially significant federal role in the mortgage market by replacing Fannie and Freddie with a new system in which private entities would purchase mortgages from lenders and issue them to investors as securities. The bill would allow private entities to purchase an explicit government guarantee to cover catastrophic losses on mortgages issued as bonds from a new guarantor, called the Federal Mortgage Insurance Corp. But the new issuers would first have to raise a significant amount of capital that would take all losses before the federal guarantee would be triggered. The new "FMIC" would oversee the broader market, much like the Federal Deposit Insurance Corp. regulates banks and provides deposit insurance to minimize bank runs. Read more. (Subscription required.)
MUNICIPAL DEBT MARKET SEEN AS MORE INTERESTED IN FOMC THAN DETROIT
The $3.7 trillion U.S. municipal market looked beyond Detroit's default on some of its debt payments yesterday and instead remained focused on any signals as to how the Federal Reserve may scale back its stimulus measures, Reuters reported yesterday. Detroit Emergency Manager Kevyn Orr on Friday, who said that the financially troubled city faces even odds of a bankruptcy filing, announced a moratorium on some of the city's principal and interest payments, including a $39.7 million payment on $1.43 billion of pension certificates of participation, which he said was due last Friday. Orr also said that holders of Detroit's unsecured debt would be paid less than 10 cents on the dollar, although some creditors would get more based on revenues. About $11.5 billion of the city's debt is unsecured and $7 billion is secured, according to Orr, who aims to meet with creditors over the next 30 days. But the muni market yesterday did not dwell on Orr's plan, said Josh Gonze, co-manager of six municipal debt mutual funds with $10 billion in assets at Thornburg Investment Management in Santa Fe, N.M. "We knew this day was coming," Gonze said, noting Detroit's insured general obligation bonds traded on Monday at 94 to 98 cents on the dollar depending on coupon and maturity. Instead, Orr's plan opens up opportunities for distressed-debt investors and for picking up Detroit's essential services bonds, Gonze added. As dramatic as Orr's proposals may be, the muni market is more interested in cues regarding the potential end of easy-money policies that come out of the Federal Open Market Committee (FOMC) – the Federal Reserve’s policy-setting body – this week, said Billy Schmohl, a vice president at muni market-focused broker-dealer Alamo Capital in Walnut Creek, Calif. Read more.
NEW ABI LIVE WEBINAR ON JULY 15 WILL FOCUS ON THE § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES
Utilizing a case study, ABI's panel of experts on July 15 will explore issues surrounding a lender’s decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel will also walk attendees through the necessary mathematical analyses used to analyze these issues. The webinar will take place from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.
ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE NORTHEAST BANKRUPTCY CONFERENCE ON JULY 12
The next stop for the ABI Golf Tour is the famed Newport National course in Newport, R.I., in conjunction with the Northeast Bankruptcy Conference on July 12. Final scoring to win the Great American Cupsponsored by Great American Groupis based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.
NEW ABI "BANKRUPTCY IN DEPTH" ON-DEMAND CLE PROGRAM LOOKS AT PRINCIPLES OF PROPERTY OF THE ESTATE: DEMYSTIFYING EQUITABLE INTERESTS
In this 90-minute seminar, Profs. Andrew Kull of Boston University School of Law and Scott Pryor of Regent University School of Law provide an in-depth analysis of a legal principle that has become, in their words, "a long-lost area of the law": § 541 of the Bankruptcy Code. Seeking to demystify what is meant by "property of the estate" and, in particular, the distinction between legal or equitable interests of the debtor in property, Kull and Pryor describe the legal entanglements that ensue when legal title belongs to one person but the equitable title belongs to someone else. The cost of the seminar, which includes written materials and qualifies for 1.5 hours of CLE, is $95. To order or to learn more, click here.
ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!
Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!
NEW CASE SUMMARY ON VOLO: DAILEY V. MOSTOLLER (IN RE DALEY; 6TH CIR.)
Summarized by Faisal Delawalla of Burr & Forman LLP
The decisions of the bankruptcy court and the district court were reversed by the Sixth Circuit. The circuit court ruled that the debtor is entitled to a statutory presumption that his IRA is tax-exempt. Though the debtor was granted a lien in his IRA to Merrill Lynch, the circuit court found that the debtor did not use his IRA to obtain credit from Merrill Lynch.
There are more than 900 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 ANALYSIS OF LAW V. SIEGEL
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post examines the Supreme Court's grant of certiorari yesterday in the case of Law v. Siegel, which involves a debtor asking the Court to review the decision of a bankruptcy court to surcharge his homestead exemption under section 105.
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.
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