Bankruptcy Brief

House Votes to Extend Pandemic-Era Bankruptcy Relief

ABI Bankruptcy Brief

March 18, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

House Votes to Extend Pandemic-Era Bankruptcy Relief

Just days before a key deadline, the House yesterday easily voted to extend personal and small business bankruptcy relief provisions that were part of last year's pandemic aid packages through March 2022, Law360 reported. The relief packages raised the maximum debt limit for small businesses using a streamlined bankruptcy process, and allowed individuals to seek COVID-19-related hardship modifications, among other changes. Bankruptcy provisions in the CARES Act are set to expire March 27, while others included in the December relief package have an end date of Dec. 27. House Judiciary Committee Chairman Jerry Nadler, D-N.Y., sponsored the COVID-19 Bankruptcy Relief Extension Act, which would extend certain elements until March 27, 2022. The bipartisan measure passed the House on a 399-14 vote with all opposition coming from Republicans, mostly members of the conservative Freedom Caucus. Rep. Ben Cline of Virginia, the Republican co-sponsor, noted that pandemic lockdowns started just weeks after the Small Business Reorganization Act took effect in February 2020. He said nearly a third of the small businesses entering that streamlined bankruptcy process over the last year would not have been eligible if the CARES Act had not raised the maximum debt limit. The extended measures would prevent COVID-19 relief funds from being counted as income or estate property for the purpose of bankruptcies; allow individuals and families making payments under a chapter 13 plan to seek payment modifications for COVID-19-related hardships; and bar individuals and families in bankruptcy proceedings from being required to put down a deposit to maintain utility services. The bill would also establish that individuals and families in bankruptcy are eligible for CARES Act mortgage forbearance and eviction moratorium provisions, and ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed three or fewer mortgage payments can still discharge their debts. The bill now goes to the Senate, where prospects for passage are favorable as Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa) introduced similar legislation on Feb. 25. (Subscription required.)

Landlords Struggling to Stay Afloat See Lifeline in COVID-19 Relief for Renters

Nearly 10 million Americans are behind on their rent payments, according to the U.S. Census Bureau, and Stephanie Graves is seeing that play out first-hand, NPR reported. She's a landlord in the Houston area and says that tenants in most of her buildings are struggling. Graves says she isn't evicting any tenants who try to pay what they can and who stay in touch with her. But that means she's losing money: The rents coming in don't cover her mortgage payments and paying the staff. Between the last two COVID-19 relief measures, Congress has approved upwards of $50 billion in rental assistance money, and that is just now starting to become available. "February looked really scary for us," says Kelle Senyé, who oversees about 400 affordable housing units around Albuquerque, N.M. She says more than a quarter of those were behind on rent payments last month. And she's just found out that residents can now apply for the federal money approved by Congress. Senyé says she's not evicting anybody for nonpayment of rent during the pandemic. But many other landlords have not been so understanding. Some have been aggressive about evicting people who've lost work and fallen behind on rent, so housing groups say protections are needed as this money gets flowing. Currently, there's an order from the Centers for Disease Control and Prevention aimed at stopping evictions, but it has loopholes and expires in two weeks. "What we're worried about is [what happens] if those protections are allowed to lapse," said Peter Hepburn, an assistant professor at Rutgers University and a researcher at Princeton University's Eviction Lab, which is tracking evictions during the pandemic. "We could see a million eviction cases filed in very short order across the country."

Analysis: The Pandemic Ignited a Housing Boom — but It’s Different from the Last One

The residential real estate market is on its biggest tear since 2006, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom, according to a Wall Street Journal analysis. Buyers have higher credit ratings these days, are flusher with cash and are putting down more up front. In 2020, sales of previously owned U.S. homes surged to their highest level in 14 years, and many economists forecast sales to rise again this year. In the mid-2000s, loose mortgage-lending standards enabled borrowers with poor credit histories to purchase homes beyond their means, sometimes with mortgages that required low payments in the early years of the loan. Too much new construction led to an oversupply of houses. Financial firms packaged these risky mortgages as securities and sold them to investors. When more homeowners started defaulting on their mortgages, lenders suffered large losses and the entire financial system froze up. Many homeowners paid a big price. Between 2006 and 2014, about 9.3 million households went through foreclosure, gave up their home to a lender or sold in a distressed sale, according to a 2015 estimate from the National Association of Realtors. The current housing boom is far more stable than the last one and poses fewer systemic risks, economists say. A downside: There are more barriers to entry, and it’s more difficult for buyers who aren’t already homeowners to make that first purchase. (Subscription required.)

U.S. Weekly Jobless Claims Rise to 770,000 with Layoffs Still High

The number of Americans seeking unemployment benefits rose last week to 770,000, a sign that layoffs remain high even as much of the U.S. economy is steadily recovering from the coronavirus recession, the Associated Press reported. Today’s report from the Labor Department showed that jobless claims climbed from 725,000 the week before. The numbers have dropped sharply since the depths of the recession last spring but still show that employers in some industries continue to lay off workers. Before the pandemic struck, applications for unemployment aid had never topped 700,000 in any one week. The four-week average of claims, which smooths out weekly variations, dropped to 746,000, the lowest since late November. A total of 4.1 million people are continuing to collect traditional state unemployment benefits, down 18,000 from the previous week. Including separate federal programs that are intended to help workers displaced by the health crisis, 18.2 million Americans received some form of jobless aid in the week of Feb. 27, down by 1.9 million from the week before. The continuing layoffs are occurring even as the overall job market has shown solid improvement. Last month, U.S. employers added a robust 379,000 jobs, the most since October and a sign that the economy is strengthening as consumers spend more and states and cities ease business restrictions.

Global Supply Chain Continues to Face Challenges

Supply chain woes mounted worldwide for makers of everything from cars and clothing to home siding and medical needle containers, as the extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions, the Wall Street Journal reported. Toyota Motor Corp., Honda Motor Co. and Samsung Electronics Co. were the latest multinational companies to chime in about setbacks, with the two automakers saying yesterday they would halt production at plants in North America. Toyota cited a shortage of petrochemicals, the manufacturing of which has been hobbled by last month’s Texas freeze. Honda pointed to a combination of port issues, the semiconductor shortage, pandemic-related problems and the crippling U.S. weather. Samsung, a smartphone and chip-making giant, said a severe global shortage in semiconductors would hurt its business into the next quarter. Koh Dong-jin, the co-chief executive officer of Samsung, told investors yesterday that dealing with the chip supply/demand imbalance had become a priority for staff and that executives were traveling overseas, despite restrictions, to discuss the issue with business partners. The disruptions underscore how several forces are coming together to squeeze the world’s supply chains, from the pandemic-driven rise in consumer demand for tech goods to a backlog of imports at clogged California ports to U.S. factory outages caused by weather woes. They are creating cost increases and delays for numerous industries, company executives and analysts say, affecting profit margins and the prices that companies and consumers ultimately pay for many goods. (Subscription required.)

ASM Spotlight: Don't Miss "The State of the Industry: Perspectives, Opportunities and Predictions" Plenary

ABI’s Annual Spring Meeting returns April 12-22, bringing top bankruptcy practitioners, judges and academics together via an enhanced virtual platform to discuss the most important issues facing the profession. “The State of the Industry: Perspectives, Opportunities and Predictions,” the opening plenary session, sets the stage for the conference by discussing the economic, scientific and behavioral influences that will, at least in part, shape the restructuring landscape in the coming year. Led by a major international media organization, the panel discussion will include leaders in industry, economics, banking and finance, and will focus on macroeconomic predictions for 2021, industry expectations and risks, and how the pandemic and COVID-19 vaccine will impact the economy in 2021 and thereafter.

Evolve and grow your practice by registering for ABI's Annual Spring Meeting today!

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!

ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Unbanked Stimulus-Seekers Rush to Open Checking Accounts

The IRS, FDIC, and more than 70 banks and credit unions are urging consumers to open affordable accounts so they can receive their Economic Impact Payments quickly and safely, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Biden Signs $1.9 Trillion COVID-19 Relief Bill

ABI Bankruptcy Brief

March 11, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Biden Signs $1.9 Trillion COVID-19 Relief Bill

President Joe Biden today signed the $1.9 trillion pandemic-relief bill into law, capping his first major legislative achievement and allowing aid to flow to tens of millions of individuals, businesses, and state and local governments, Bloomberg News reported. Biden signed the bill in an Oval Office ceremony alongside Vice President Kamala Harris, one day sooner than expected. Congress sent the measure to Biden’s desk on Wednesday after the House passed it on a 220-to-211 vote along party lines. No Republicans supported the bill in the Senate, either. Under the just-passed law, most Americans will begin receiving $1,400 direct payments, with disbursal starting within days. The measure provides additional child-tax credits and new health-insurance subsidies while extending a $300 per week supplemental unemployment benefit into September. State and local governments will get more than $360 billion, cash-strapped union pension funds get a rescue, schools are set to receive money to speed re-opening, and funds will go to ramp up vaccinations.

House Lawmakers Strike Bipartisan Deal to Extend Small Business Loan Program

The leaders of the House Small Business Committee reached a bipartisan agreement to extend the Paycheck Protection Program for two months amid growing concern that its March 31 expiration would deprive many employers of aid, POLITICO reported. The deal struck by House Small Business Chair Nydia Velázquez (D-N.Y.) and Rep. Blaine Luetkemeyer (R-Mo.), the committee's top Republican, would delay the PPP's loan application deadline to May 31. It would also give the Small Business Administration authority to continue processing pending applications for 30 days after that date. The PPP, the source of more than $687 billion in pandemic relief, offers government-backed small business loans that can be forgiven if employers agree to maintain payroll. The House will vote on the bill next week, a senior Democratic aide said, before members leave Washington until mid-April. The biggest hurdle in enacting the bill would be the Senate, where it would likely need unanimous agreement to expedite passage and avoid a lengthy floor debate. But in a sign of potentially broad bipartisan support, the House will take up the bill using an accelerated procedure requiring support from two-thirds of members. The delayed deadline would provide relief to businesses seeking PPP aid as well as lenders responsible for submitting loan applications to the SBA.

U.S. Weekly Jobless Claims Drop to Four-Month Low

The number of Americans filing new claims for jobless benefits dropped to a four-month low last week as an improving public health environment allows more segments of the economy to reopen, putting the labor market recovery back on track, Reuters reported. Still, a full recovery from the deep scars inflicted by the COVID-19 pandemic will probably take years, with the weekly unemployment claims report from the Labor Department today also showing a whopping 20.1 million Americans collecting unemployment checks in late February. Initial claims for state unemployment benefits decreased 42,000 to a seasonally adjusted 712,000 for the week ended March 6, the lowest level since early November. Data for the prior week was revised to show 9,000 more applications received than previously reported. Unadjusted claims dropped by 47,170 to 709,458 last week amid declines in Texas, New York and Mississippi, where claims had been boosted in the prior period by harsh weather. Claims rose in Ohio, which has been plagued by fraudulent applications.

Companies Are Holding Off on Firing Workers Right Now

Millions of workers have been laid off during the pandemic, but cutting ties with individual employees over performance issues has become vastly more complicated, several employers say, the Wall Street Journal reported. Companies had underperforming workers when virus-related lockdowns began, and they still do now. Yet as their workers contend with a year of pandemic stresses — from school closures to child-care crises to burnout from long homebound workdays — many businesses are reluctant to fire or even raise issues of underperformance for now, executives and corporate advisers say. Since the pandemic was declared nearly a year ago, the U.S. has shed 9.5 million jobs, according to the Labor Department, but the government doesn’t track performance-related firings. Some companies and human-resources advisers, though, say many employers are unofficially preaching forbearance. Termination means being cast into a fragile job market and, often, losing health insurance during a global health crisis. Without a clear line of sight into the daily challenges of remote teams, some business leaders say they often are unsure what is at the root of performance problems, especially if the worker has been a good employee in the past.  (Subscription required.)

In related news, two airline giants said that they would cancel tens of thousands of planned layoffs because of aid earmarked for them in the $1.9 trillion stimulus measure passed by Congress this week, an early sign of job losses averted by the landmark package, the Washington Post reported. Scott Kirby, CEO of United Airlines, which had warned employees about 14,000 layoffs last month, said in a social media post that Congress’s new funding for airlines would allow the workers to receive their paychecks and health care through September. American Airlines said that it planned to rescind notices it sent last month to 13,000 employees about coming layoffs. The $1.9 trillion stimulus package Congress passed yesterday, which was signed into law by President Biden today, delivers payments for middle- and lower-income households and expands unemployment benefits for workers. It also sets aside hundreds of billions of dollars for cities and states, school reopenings, vaccine distribution and testing, and other health care funding. Unlike previous stimulus efforts, Biden’s relief package includes far less for companies, but it does include $65 billion that is directed to a range of hurting industries, including restaurants, aviation, live entertainment and tourism.

U.S. Household Wealth Hits Record $130 Trillion Despite Pandemic

Combined household wealth in the U.S. hit a record $130.2 trillion in the last quarter of 2020 despite the devastating economic effects of the coronavirus, according to Federal Reserve data released today, The Hill reported. Household wealth jumped 10.1 percent last year compared with 2019, driven in large part by surging stock and home prices after interest rates were lowered to combat the financial fallout of the pandemic. The Fed data does not break down the distribution of wealth, meaning it could mask the effects of inequality. Wealthy households are far more likely to own stocks and real estate than households in other income brackets. In the fourth quarter alone, stock values rose $4.9 trillion, while real estate shot up $900 billion. Those two assets accounted for more than 80 percent of the overall increase in wealth during the final three months of 2020. Balances in cash, checking accounts and savings deposits rose by $642.7 billion, according to a calculation of the data from Reuters, reaching their own record of $14.1 trillion.

ASM Spotlight: Don't Miss "The State of the Industry: Perspectives, Opportunities and Predictions" Plenary

ABI’s Annual Spring Meeting returns April 12-22, bringing top bankruptcy practitioners, judges and academics together via an enhanced virtual platform to discuss the most important issues facing the profession. “The State of the Industry: Perspectives, Opportunities and Predictions,” the opening plenary session, sets the stage for the conference by discussing the economic, scientific and behavioral influences that will, at least in part, shape the restructuring landscape in the coming year. Led by a major international media organization, the panel discussion will include leaders in industry, economics, banking and finance, and will focus on macroeconomic predictions for 2021, industry expectations and risks, and how the pandemic and COVID-19 vaccine will impact the economy in 2021 and thereafter.

Evolve and grow your practice by registering for ABI's Annual Spring Meeting today!

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!

ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Chopra, Gensler Nominations Move Forward

Biden’s CFPB and SEC choices move to the full Senate following mostly party-line banking committee votes, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Commentary: SBA Consent to PPP Debtor Loan Provisions Under CARES Act II: Just Do It, Already!!!!!

ABI Bankruptcy Brief

March 4, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Commentary: SBA Consent to PPP Debtor Loan Provisions Under CARES Act II: Just Do It, Already!!!!!

by Thomas J. Salerno
Stinson LLP; Phoenix


CARES Act II finally provided for some eligibility for some debtors to finally have access to PPP loans under CARES Act II (“PPP III Loans”). Under CARES Act II, at least subchapter V, chapter 12 and chapter 13 debtors have eligibility for PPP III Loans (providing amendments to Bankruptcy Code § 364). Champagne corks had barely finished popping when bankruptcy lawyers read the full text of CARES Act II, which has the extraordinary “Mother, may I” clause. While hope sprang eternal with a changing of the guard at the Department of the Treasury (with Janet Yellen now confirmed as Secretary) and the pending nomination of Isabella Guzman for Administrator of the SBA (replacing Mr. Mnuchin and Ms. Carranza from the prior administration), at least this author optimistically hoped that these changes would also bring about a shift in anti-debtor sentiment at both Treasury and the SBA. With only weeks left before CARES Act II’s PPP loan program is set to expire (barring extension), what has the SBA done? Well, nothing. Nothing at all. The SBA (either through oversight or intentional policy) has “pocket-vetoed” this part of CARES Act II and done nothing. In this instance, inaction is a definitive action: The PPP III Loans of CARES Act II cannot legally go into effect without affirmative SBA consent, and time is most certainly running out. Most debtors are waiting, anxiously awaiting, some blessing from the hallowed halls of D.C. for help in their distress — but not everyone. One debtor in Connecticut decided to take the battle to the SBA. On March 2, 2021, Chip’s Southington LLC decided to force the issue and is seeking (in the form of a mandamus/injunction action) an order requiring the SBA to give its consent under § 320(f), thereby fulfilling CARES Act II’s stated purpose. Click here to read the full commentary.

Senate Vote on Stimulus Bill Likely Pushed into Weekend

The Senate enters the final stages of debating President Joe Biden’s $1.9 trillion pandemic relief bill today, with passage in the chamber likely pushed off until the weekend, Bloomberg News reported. Senate Majority Leader Chuck Schumer (D-N.Y.) had planned to kick off the process yesterday, but lacked an official cost estimate on the latest version of the bill, which has been trimmed down from the House-passed measure. In addition to stripping out a minimum-wage increase to comply with Senate rules, Biden agreed to moderate Democrats’ demands for tightening eligibility for $1,400 stimulus checks, which will also affect the Congressional Budget Office’s calculation of the overall price tag. Once the CBO’s numbers are in and the Senate votes to begin debate, a process starts that Republicans are threatening to drag out as long as possible to register their opposition to the massive bill. The Senate is plowing ahead despite warnings from federal law enforcement agencies that a militia group might have been plotting to attack the Capitol today, about two months after a Jan. 6 siege of the building by extremist supporters of then-President Donald Trump that led to five deaths. The threat may extend into the weekend as the Senate deals with the coronavirus relief bill. A joint intelligence bulletin late Tuesday from the Homeland Security Department and the Federal Bureau of Investigation warned that extremists discussed carrying out attacks at the Capitol from March 4 to March 6.

Experts Examine Important Consumer Bankruptcy Law Changes Enacted in December

Legislative measures throughout 2020 were aimed at providing economic stability to meet the challenges of the financial distress caused by the COVID-19 pandemic, and December saw a flurry of activity that resulted in the Combined Consolidated Appropriations Act of 2021. The $2.3 trillion spending bill combined $900 billion in stimulus relief for the COVID-19 pandemic with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year. The bill passed both chambers of Congress on Dec. 21 and was signed into law by the President on December 27. Within the nearly 5,600 pages of this bill were important changes to the Bankruptcy Code. In this podcast, ABI Consumer Committee Co-Chair Christopher L. Hawkins of Bradley Arant Boult Cummings LLP (Birmingham, Ala.) discusses the changes with Charissa Potts of Freedom Law, PC (Eastpointe, Mich.) and John Rao of the National Consumer Law Center (Boston).

Texas Watchdog Says Power Grid Operator Made $16 Billion Error

A firm hired to monitor Texas’s power markets says the region’s grid manager overpriced electricity for almost two days during last month’s energy crisis, resulting in $16 billion in overcharges, Bloomberg News reported. Amid the deep winter freeze that knocked nearly half of power generation offline, the Electric Reliability Council of Texas, known as Ercot, set the price of electricity at the $9,000-a-megawatt-hour maximum — standard practice during a grid emergency. But Ercot left that price in place days longer than necessary, resulting in massive overcharges, according to Potomac Economics, an independent market monitor hired by the State of Texas to assess Ercot’s performance. In an unusual move, the firm recommended in a letter to regulators that the pricing be corrected and that $16 billion in charges be reversed as a result. Potomac isn’t the first to say that leaving electricity prices at the $9,000 cap for so long was a mistake. Plenty of power companies at risk of defaulting on their payments have said the same. But the market monitor is giving that opinion considerable weight and could sway regulators to let companies off the hook for some of the massive electricity charges they incurred during the crisis. The Arctic blast that crippled Texas’s grid and plunged more than 4 million homes and businesses into darkness for days has pushed many companies to the brink of insolvency and stressed the power market, which is facing a more than $2.5 billion payment shortfall. One utility, Brazos Electric Power Cooperative, has already filed for bankruptcy, while retailer Griddy Energy LLC defaulted and has been banned from participating in the market.

U.S. Jobless Claims Tick Up to 745,000 as Layoffs Remain High

The number of Americans applying for unemployment benefits edged higher last week to 745,000, a sign that many employers continue to cut jobs despite a drop in confirmed viral infections and evidence that the overall economy is improving, the Associated Press reported. Today’s report from the Labor Department showed that jobless claims rose by 9,000 from the previous week. Though the pace of layoffs has eased since the year began, they remain high by historical standards. Before the virus flattened the U.S. economy a year ago, applications for unemployment aid had never topped 700,000 in any week, even during the Great Recession. All told, 4.3 million Americans are receiving traditional state unemployment benefits. Counting supplemental federal unemployment programs that were established to soften the economic damage from the virus, an estimated 18 million people are collecting some form of jobless aid. In Texas, applications for benefits surged by nearly 18,000 in the aftermath of freezing weather and power outages. And jobless claims rose by more than 17,000 in Ohio, where the weekly totals have been thrown off by potentially fraudulent claims. Restrictions on businesses and the reluctance of many Americans to shop, travel, dine out or attend mass events have weighed persistently on the job market. Job growth averaged a meager 29,000 a month from November through January, and the nation still has nearly 10 million fewer jobs than it did in February 2020.

CFPB Report: More than 11 Million Families at Risk of Losing Housing

The Consumer Financial Protection Bureau (CFPB) issued a report on March 1 that warns of widespread evictions and foreclosures once federal, state and local pandemic protections come to an end, absent additional public and private action. Over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent. Homeowners alone are estimated to owe almost $90 billion in missed payments. The last time this many families were behind on their mortgages was during the Great Recession. The federal government is going to great lengths to protect homeowners and renters. Recent actions by the Federal Housing Finance Agency, the Federal Housing Administration, the Department of Veterans Affairs and the U.S. Department of Agriculture prohibit lenders from foreclosing on most mortgages until June 30, 2021. After that date, families who cannot resume making regular payments will need to make an agreement with their lender to avoid foreclosure. Residential eviction protections for renters have been extended through March 31, 2021.

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!

ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: CFPB Officially Proposes Delay of QM Changes

The Consumer Financial Protection Bureau issued a proposal moving the compliance date for the Qualified Mortgage rule revamp to October 2022, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
 

Durbin, Grassley Introduce Bipartisan Legislation to Extend CARES Act Bankruptcy Relief Provisions

ABI Bankruptcy Brief

February 25, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Durbin, Grassley Introduce Bipartisan Legislation to Extend CARES Act Bankruptcy Relief Provisions

Amid the ongoing COVID-19 pandemic, U.S. Senate Democratic Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, and U.S. Senator Chuck Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, today introduced the COVID-19 Bankruptcy Relief Extension Act, bipartisan legislation to temporarily extend COVID-19 bankruptcy relief provisions enacted as part of the March 2020 CARES Act and December 2020 omnibus appropriations bill, according to a press release. The bill would extend for an additional year CARES Act bankruptcy provisions that are set to expire on March 27, 2021. These provisions do the following:

- Allow more small businesses to file for streamlined chapter 11 bankruptcy proceedings under Grassley’s Small Business Reorganization Act of 2019 by increasing the maximum debt limit for those procedures from $2.7m to $7.5m.

- Amend the definition of income for chapters 7 and 13 to exclude federal COVID-related relief payments from being treated as “income” for purposes of filing bankruptcy.
- Clarify that the calculation of disposable income for purposes of confirming a chapter 13 plan does not include COVID-related relief payments.
- Permit individuals and families in chapter 13 to seek payment plan modifications for plans confirmed before the date of enactment of this extender bill if they are experiencing a material financial hardship due to the coronavirus pandemic.

In addition, the bill would extend until March 27, 2022, several additional COVID bankruptcy relief provisions that were included in the December omnibus/COVID relief package and that are set to expire in December 2021. These provisions do the following:

- Provide that federal COVID relief payments to individuals are exempt from being treated as property of the estate in bankruptcy proceedings.
- Ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed 3 or fewer mortgage payments because of the pandemic are not denied a discharge for their other debts (though the mortgage payments would continue to be owed).
- Ensure that families that are or were in bankruptcy proceedings are not ineligible from CARES Act mortgage forbearance and eviction moratorium provisions.
- Set forth a process for creditors to file a proof of claim for payments deferred during forbearance periods granted under the CARES Act, and permit modification of a chapter 13 plan to account for such proofs of claim.
- Prevent the termination of utility services in bankruptcy by ensuring that individuals and families will not be required to furnish a security deposit to maintain utility services during bankruptcy.
- Exempt customs brokers who collect and pay duties to Customs and Border Patrol on behalf of importers from the clawback provisions of the Bankruptcy Code when an importer files bankruptcy.

Get the insight, analysis and statistics you need on the Small Business Reorganization Act and subchapter V elections by visiting ABI’s SBRA Resources website.

‘Purgatory’ Grips $146 Billion of Distressed Commercial Property

The coronavirus outbreak helped push about $146 billion of commercial real estate into serious risk of bankruptcy or default at the end of last year, particularly in hotels and retail, according to data compiled by Real Capital Analytics, a commercial real estate data firm, Bloomberg News reported. Troubled borrowers secured breaks of six to 18 months on their debt last spring as the pandemic shut down large parts of the economy and revenue dried up. But nearly a year later, some lenders are running out of patience and don’t have the ability to keep extending credit. A glimpse of what lies ahead is provided by the $540 billion market for mortgage loans bundled into securities. About 7.58% of the loan recipients were at least 30 days late on a payment in January, led by 19.19% of hospitality loan recipients and 12.68% of retail loan recipients, according to Trepp, the real estate data firm. The special servicing rate was 9.72% for the overall market, with nearly a quarter of them hospitality loans and 17% of them retail loans. “We have tons of stuff that’s in purgatory,” according to Manus Clancy, a senior managing director at Trepp. “The workout notes every month say the special servicer and the borrower are talking about forbearance and extension.” Roughly $430 billion of commercial real estate debt comes due this year, out of $2.3 trillion that matures in the next five years, according to Morgan Stanley.

Unemployment Claims Dropped Last Week

New claims for unemployment fell last week, the government reported on Thursday, the latest sign that the labor market’s recovery, however slow and unsteady, is continuing, the New York Times reported. A total of 710,000 workers filed first-time claims for state benefits during the week that ended Feb. 20, a decrease of 132,000, the Labor Department said. In addition, 451,000 new claims were filed for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who do not routinely qualify for state benefits, a decline of 61,000. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 730,000, a decline of 111,000. Although initial jobless claims are nowhere near the eye-popping levels seen last spring, they are still extraordinarily high by historical standards. There are roughly 10 million fewer jobs than there were last year at this time. Analysts also cautioned against reading too much into a single week’s changes. The combined average of new state and federal unemployment insurance claims over the first eight weeks of this year is actually slightly higher than it was over the last eight weeks of 2020.

Democrats Call for Relief Package to Waive Taxes on Unemployment Benefits

A group of House Democrats is urging leadership to provide tax relief for recipients of unemployment benefits in the $1.9 trillion coronavirus relief package the House is expected to vote on this week, The Hill reported. "As we work to deliver on much-needed support for families, workers, and businesses, we should not be extending benefits with one hand and taxing them with the other," the lawmakers wrote in a letter dated today. Rep. Cindy Axne (D-Iowa) took the lead on the letter, which was signed by 11 other House Democrats and sent to Speaker Nancy Pelosi (D-Calif.), House Majority Leader Steny Hoyer (D-Md.), House Budget Committee Chairman John Yarmuth (D-Ky.) and House Rules Committee Chairman James McGovern (D-Mass.). The pandemic resulted in millions of Americans receiving unemployment benefits for the first time in 2020. Relief legislation enacted last year created several federal unemployment programs. Unemployment compensation is subject to federal income taxes, but many Americans were unaware of this when they received benefits. As a result, people may be surprised when they file their 2020 tax returns this year that they owe money to the IRS or are entitled to smaller refunds than they expected. The relief package that the House is considering this week extends federal unemployment programs, but it doesn't exempt any unemployment benefits from taxes. The Democratic lawmakers who wrote the letter are sponsors of a bill that would exempt the first $10,200 in unemployment insurance (UI) received last year from federal income taxes, and they want their measure to be included in a manager's amendment to the relief package.

Report: New York City’s Arts and Recreation Employment Down by 66 Percent

Employment in New York City’s arts, entertainment and recreation sector plummeted by 66 percent from December 2019 to December 2020, according to a report released on Wednesday by the New York State Comptroller’s office that detailed the economy’s devastation from the coronavirus and the serious obstacles to recovery, the New York Times reported. The report from Thomas DiNapoli’s office said that the sector had seen the largest drop of all the parts of the city’s economy. A full comeback, it said, would depend on significant government assistance. The sector “is a cornerstone of the city’s ability to attract businesses, residents and visitors alike,” the report said. “Yet the sector relies on audiences who gather to take part in shared experiences, and this way of life has been significantly disrupted by the pandemic.” Although nearly all business has been affected by the pandemic, its impact on arts, entertainment and recreation entities has been particularly striking. From 2009 to 2019, employment in the sector — which in this report includes performing arts, spectator sports, gambling, entertainment, recreation, museums, parks and historical sites — grew by 42 percent, faster than the 30 percent rate for total private sector employment. In 2019, according to the report, more than 90,000 people in 6,250 establishments were employed in the arts, entertainment and recreation. Those jobs had an average salary of $79,300 and provided $7.4 billion in total wages. In addition to businesses with employees, the report said, there are a large number of people who were self-employed, including artists and musicians. In February 2020, just before the pandemic shutdown in New York City, nearly 87,000 people were employed in the arts, entertainment and recreation sector there, the report said. Many major institutions announced closures on March 12. A statewide stay-at-home order went into effect on March 22. By April, employment in the sector stood at 34,100 jobs.

U.S. Retirement Crisis Hits Black Americans Hard

Many American households aren’t prepared for retirement, but Black Americans are even further behind than whites, according to academic and government data, the Wall Street Journal reported. The recent economic turmoil is likely widening the disparity. Many Black Americans are hampered in saving for retirement by such factors as less intergenerational wealth, more college debt, lower incomes and lower homeownership rates than white Americans, according to academic and government data. Even before the pandemic hammered the economy, Black families on average had roughly one-sixth the savings set aside for retirement compared with white families, according to an analysis of government data by the Urban Institute think tank. That is $25,000 in retirement savings accounts for Black households as of 2016 versus $158,000 for white households. Hispanic households fared only slightly better than Black ones at $29,000. Black families often have less cushion in their paychecks to draw on in case of emergencies and are more likely to pull from retirement accounts when a problem arises. White households earned a median income of $69,823 in 2019 versus $43,862 for Black households, census data shows. (Subscription required.)

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!

ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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Alexandria, VA 22314
 

Jobless Claims Surge to 861,000 in Recent Week

ABI Bankruptcy Brief

February 18, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Jobless Claims Surge to 861,000 in Recent Week

Initial jobless claims surged to a seasonally adjusted 861,000 in the second week of February, according to data released Thursday by the Labor Department, a sign that the labor market continues to struggle to recover from the COVID-19 pandemic, The Hill reported. Data for recent weeks, which showed claims dipping below 800,000 for the first time in weeks, has regularly been revised upward. Last week's 793,000 figure was revised upward by 55,000, reaching 848,000. Weekly jobless claims remain similar to their August levels, having left behind the slight improvement seen in October and November, and briefly in January. The latest data comes as Congress pushes to advance a $1.9 trillion COVID-19 relief package, including an extension for emergency unemployment benefits that are set to run out after March 14. An additional 516,299 people filed initial claims through Pandemic Unemployment Assistance, one of the expiring programs that extend jobless benefits to the self-employed and gig economy workers. That brings the total number of unadjusted initial claims above 1.3 million. By the end of January, 18.3 million people were filing continuing claims, according to the Department of Labor.

Mostly United over COVID-19 Relief Legislation, Democrats Face Divisions over Biden’s Massive Second Economic Plan

Even as President Biden and congressional Democrats work to pass their $1.9 trillion coronavirus relief bill, they’re bracing for the next big legislative scramble, this time over another massive spending bill that’s already drawing intense lobbying and threatening Democratic unity, the Washington Post reported. Biden’s next package could be far pricier than the coronavirus bill. Although plans remain fluid, it’s expected to center on a major infrastructure investment while also tackling other priorities, such as clean energy, domestic manufacturing, and child and elder care. However, as the next must-pass bill in a divided Congress where legislative opportunities will be scarce, it has unleashed a torrent of other demands, as advocates for issues from climate change to immigration push to get included. The cacophony of competing demands is already threatening to divide Democrats who have largely united behind the coronavirus relief bill, which is expected to advance in the House next week despite simmering disagreements over a handful of issues, including a minimum-wage hike to $15. Moderate-leaning Democrats could balk at spending trillions more on issues that range far afield from emergency economic relief, and fights are already brewing over how far to go in raising taxes to pay for what comes next.

COVID-19-Stricken Concert Halls, Clubs Await $15 Billion Grant Program

When Steve Sheldon learned that Congress had authorized a $15 billion grant program for companies that host live events, he felt relieved. With cash reserves at his Long Beach, Calif.-based EPIC Entertainment Group running low, a grant would help him keep paying his two workers, the Wall Street Journal reported. A month later, the Small Business Administration has yet to say when the program will launch, and Mr. Sheldon said he has been confused by eligibility guidelines the agency has issued so far. Feeling that he couldn’t afford to wait for clarity on such issues, Sheldon instead applied for a potentially much smaller amount under a separate coronavirus aid program of forgivable loans for small businesses that is available now. “At this point, it’s either accept funding now and keep moving forward, or two people would have to be let go,” Sheldon said. The urgency surrounding his decision reflects the dire circumstances facing live-event businesses. Labor Department data show that the arts, entertainment and recreation industry lost 800,000 jobs as of January compared with last February, just before the pandemic took hold. The U.S. economy overall lost almost 10 million jobs over the same period. Many live-event businesses have found it difficult to operate even at reduced capacity because of government restrictions and lack of demand as Americans avoid gatherings for fear of contracting the coronavirus. (Subscription required.)

Corporate Spending Plans Tweaked as Recovery Pace Remains Uncertain

Finance chiefs are fine-tuning the way they draft their annual spending plans, opting for more frequent check-ins to review and authorize costs throughout the year after the coronavirus pandemic rendered their 2020 budgets virtually obsolete, the Wall Street Journal reported. The pandemic revealed shortfalls in companies’ financial planning last year after government lockdowns aimed at curbing the spread of COVID-19 upended revenue projections and forced companies to rescind guidance. The impact of the virus has varied across industries, lifting profits at grocery chains and makers of cleaning supplies while causing ongoing financial pain for retail, travel and hospitality businesses. The core problem facing chief financial officers is that traditional methods for developing a budget are backward-looking by design, meaning they can quickly become useless in a crisis. For many companies, budgeting is a monthslong annual ritual that begins in the fall. CFOs develop detailed spending and revenue plans, which are approved by their boards at the beginning of the year. Finance departments then forecast their actual performance against their budget goals. “If we start from last year with the pandemic, comparing your actuals to your budget [was] pretty much meaningless,” said Gina Gutzeit, leader of the office of CFO solutions at FTI Consulting Inc., a business advisory firm. The pandemic has prompted some companies to update their spending plans more frequently, such as monthly or quarterly, and to rely on forecasts that look beyond the current year. The process, known as rolling forecasting, has been around for years but has become more popular in recent months, advisers said. (Subscription required.)

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Due by March 5!

ABI’s Asset Sales Committee has opened the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are due by Friday, March 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Fed's Brainard Backs Stress Test-Like Exercise to Address Climate Risks

Federal Reserve Gov. Lael Brainard said "scenario analysis" is distinct from traditional regulatory tools to assess capital strength, but can measure the long-term impact of weather events and the transition to a greener economy, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Last Year's Unemployment Benefits Could Cost Americans $50 Billion at Tax Time

ABI Bankruptcy Brief

February 11, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Last Year's Unemployment Benefits Could Cost Americans $50 Billion at Tax Time

With tax season officially starting on Friday, millions of Americans could be in for a shock: owing taxes on unemployment benefits they received in 2020, CBSNews.com reported. The federal government and most states consider jobless aid taxable income. But unlike a paycheck, taxes typically aren't automatically deducted from such benefits, with the IRS expecting its cut. Goldman Sachs estimates people could end up owing as much as $50 billion in taxes on unemployment insurance benefits they got last year — as layoffs soared during the coronavirus pandemic — come the April 15 tax filing deadline. That could wipe out many taxpayers' refunds and even dent the economy. Congress could still intervene as Democratic lawmakers have introduced a bill to exempt unemployment benefits from taxes.



In related news, the number of Americans filing for first-time unemployment benefits rose last week as the coronavirus pandemic continues to trigger a high number of layoffs, FoxBusiness.com reported. Figures released today by the Labor Department showed that 793,000 Americans filed first-time jobless claims in the week ended Feb. 6. The number has remained stubbornly high for months, hovering around four times the pre-crisis level, although it's well below the peak of almost 7 million that was reached when stay-at-home orders were first issued in March. Almost 70 million Americans, or about 40% of the labor force, have filed for unemployment benefits during the pandemic. Continued claims, or the number of Americans who are consecutively receiving unemployment benefits, fell to 4.54 million, a decline of about 145,000 from the previous week. The report shows that roughly 20.4 million Americans were receiving some kind of jobless benefit through Jan. 23, an increase of about 2.5 million from the previous week.




Additionally, nearly 11 million Americans will lose unemployment benefits in about two months without additional COVID-19 relief, according to a new analysis, CNBC.com reported. That "benefits cliff" is larger than the one workers faced in December when Congress was debating the contours of a $900 billion pandemic aid measure, according to research published yesterday by The Century Foundation, a left-leaning think tank. However, Democrats appear poised to pass a $1.9 trillion relief package proposed last month by President Joe Biden within a few weeks, which would avert another cliff. December’s $900 billion package ultimately extended two temporary federal programs — Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation — that were set to lapse the day after Christmas. Now, those programs — which support the long-term unemployed and others like self-employed and gig workers — were extended through March 14. Workers who don’t exhaust their allotment of benefits by that date can continue collecting benefits up to April 11. About 10.6 million people will lose their benefits by mid-April and won’t qualify for more aid through other programs, according to The Century Foundation analysis, authored by senior fellow Andy Stettner and Elizabeth Pancotti, a policy advisor at Employ America. That figure amounts to roughly 1.5 million more workers than were poised to lose jobless benefits in December, according to the analysis.


Cash-in-Pockets Emerges as New Democratic Approach to Federal Aid in Coronavirus Bill

Congressional Democrats are using coronavirus relief legislation to advance a vision of federal aid to households that is focused on cash assistance with few restrictions, moving away from the work requirements and minimum-income thresholds that have been cornerstones of federal policies for decades, the Wall Street Journal reported. The bill’s $1,400-per-person direct payments, expansion of the child tax credit and extension of unemployment insurance all would provide flexible cash to households. Democrats have emphasized the breadth of households’ needs during the pandemic and have rejected Republicans’ concerns that giving people money would discourage them from returning to work. For lower-income and middle-income households, the combination of policies in the Democrats’ legislation could yield significant short-term increases in income. While unemployment benefits have an application process and eligibility restrictions, direct payments and the child tax credit expansion would have no strings attached, and they are available even to households with no income. The bottom 20% of households by income would see their after-tax incomes rise by 20% because of the plan’s direct payments and tax credit expansions, according to the Tax Policy Center, a project of the Urban Institute and Brookings Institution. That group would get an average benefit of $2,810, while the middle 20% of households would get an average of $3,360, or 5.5% of after-tax income. Higher-income households would get smaller amounts, and for now, Democrats are waiting before advancing the tax increases on top earners they promised during last year’s campaign. (Subscription required.)

Retailers Hold On to Stores in Hopes of Surge of Shoppers

A surge of expected store closings early this year hasn’t materialized after strong holiday sales prompted retailers to hold on to their leases in hopes of a shopping rebound, Bloomberg News reported. “It wasn’t the wave everyone thought it would be,” said Ryan Mulcunry, a managing director at B. Riley Financial Inc. who advises retailers. Last year, retailers announced plans to shutter a record 12,200 stores, according to CoStar Group. But some are now reconsidering after larger holiday revenues and ready support from lenders gave them more breathing room, Mulcunry said. Holiday sales jumped 8.3% in November and December compared to a year earlier, according to the National Retail Federation, easily beating an expected gain of 3.6% to 5.2%. Traditionally, troubled retailers have sought to restructure their debts — which can include filing for bankruptcy and closing locations — early in the year when they are flush with cash following the holiday season. Even this year, not all retailers have been spared. Women’s clothing company Christopher & Banks Corp. filed for bankruptcy last month and is liquidating nearly 450 locations. Department store chain Belk Inc. also said it would seek court protection. But it now makes more sense for some retailers to hold on to leases in preparation for easing pandemic restrictions, according to Mulcunry. Part of the hope is that consumers will return as they tire of online shopping and seek new outfits for when they return to their offices. Even if retailers do decide to shut some locations, “you’ll get more for your inventory in June,” he said. “A lot of people are betting on this summer having good store and mall traffic.”

Commentary: The Biden Administration and Puerto Rico: A Proposal for a Beneficial Relationship*

The Biden Administration has an opportunity to address the crisis in Puerto Rico and rectify the enormous problems that plague Puerto Rico, according to a commentary in the New York Law Journal. The implementation of a long-term economic development and infrastructure program will benefit not only Puerto Rico, but also its creditors. Puerto Rico needs a Marshall Plan to resuscitate its moribund economy, according to the commentary. The repeal of the Jones Act is a key component of that long-term economic plan. The Jones Act requires that all freight shipped on a vessel into Puerto Rico from an American port must be shipped on a U.S.-flagged vessel with a U.S. crew. The Jones Act has been described as archaic legislation that is protectionism at its worst that has significantly increased the cost of shipping goods to Puerto Rico, the commentary explains. Another important component of a long-term economic development plan for Puerto Rico is the reenactment of Internal Revenue Code § 936, which was pivotal to the Puerto Rican economy. Under § 936, U.S. corporations were granted a tax exemption from income originating in Puerto Rico. In 2006, when § 936 was no longer in effect, the Puerto Rican economy went into recession. Additionally, it is estimated that Puerto Rico’s infrastructure will need a $23 billion investment in the next 10 years to help it modernize, which will make Puerto Rico more attractive for business investment and can provide an economic stimulus for the Puerto Rican economy.



*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

COVID-19 Forces Co-Working Firms to Recast Their Business Model

The pandemic is compelling a number of co-working firms to discard original business models, or accelerate the adoption of a new one, with the broader office market under threat, the Wall Street Journal reported. The original strategy, popularized by WeWork and many of its peers, involved leasing as much office space in city centers as possible, and then effectively subletting it to companies for a profit. This approach led to spectacular growth and sent WeWork’s valuation soaring to $47 billion. With the majority of office employees still working from home during Covid-19, demand has plummeted. But co-working firms remain on the hook for the expensive long-term leases they signed during the boom years, and many are struggling to meet these obligations. Knotel Inc. became the industry’s biggest victim yet of this mismatch when it filed for chapter 11 bankruptcy last month. Now, some analysts suggest the pandemic is accelerating the end of the industry’s lease-and-sublet model. “The business model was similar to picking up pennies in front of a steamroller, which history has shown isn’t a sustainable strategy,” said Daniel Ismail, a senior analyst at commercial real-estate analytics firm Green Street. Instead, he expects revenue-sharing agreements to become more common. They are similar to the relationship between hotel owners and operators, where operators get fees and a share of profits but don’t have to pay rent. Revenue-sharing deals are considered less risky because they leave operators with lower fixed costs. “You will be making more money on the space, if you’re doing a lease deal, when times are good,” said Shlomo Silber, chief executive of New York-based co-working company Bond Collective. “However, when times are bad, you’ll really get hurt.” (Subscription required.)

Experts Unpack Important Commercial Bankruptcy Law Changes Enacted in December on Latest ABI Podcast

Legislative measures throughout 2020 were aimed at providing economic stability to meet the challenges of the financial distress caused by the COVID-19 pandemic, and December saw a flurry of activity that resulted in the Combined Consolidated Appropriations Act of 2021. The $2.3 trillion spending bill combined $900 billion in stimulus relief for the COVID-19 pandemic with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year. The bill passed both chambers of Congress on Dec. 21 and was signed into law by the President on December 27. Within the nearly 5,600 pages of this bill were important changes to the Bankruptcy Code. In this podcast, ABI Legislation Committee Co-Chair Ferve Khan of BakerHostetler (New York) discusses the changes with Tiffany Payne Geyer of BakerHostetler (Orlando) and Tom Salerno of Stinson LLP (Phoenix).

Celebrate ABI's 40 Under 40 Class of 2020 at a Special Virtual Program on Thursday!

Join us on February 18 at 7 p.m. EDT as we honor ABI’s 2020 Class of 40 Under 40. This newest class of honorees is an incredibly accomplished and diverse group, reflecting the multidisciplinary nature of our professional community. ABI is very proud to do its part to usher in the next generation of insolvency leaders. The virtual program includes a keynote by author, adventurer and entrepreneur Garrett Gravesen. He is the author of the international bestseller 10 Seconds of Insane Courage. The event will also feature remarks from ABI leadership and a special presentation for this year's 40 honorees, and will conclude with networking. Register for FREE.

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Now Being Accepted!

ABI’s Asset Sales Committee has opened the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are due by Friday, March 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Most PPP Loans Going to Repeat Customers

The majority of Paycheck Protection Program loans are being approved for borrowers in industries that have yet to regain their footing, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

White House Is ‘Extremely Open’ to Student-Loan Debt Cancellation, Schumer Says

ABI Bankruptcy Brief

February 4, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

White House Is ‘Extremely Open’ to Student-Loan Debt Cancellation, Schumer Says

Congressional Democrats are ramping up pressure on the White House to cancel student debt, but the White House still appears to be kicking the issue to Congress, MarketWatch.com reported. Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) reintroduced a resolution today calling on the president to immediately cancel up to $50,000 in student debt for each borrower. Schumer and Warren were speaking at a press conference where they were joined by Democratic representatives Ilhan Omar, Ayanna Pressley and other lawmakers who introduced a companion resolution in the House. Calls for Biden to use his executive authority to cancel student debt have grown since his election in November. Amid the pandemic-induced downturn, cancelling student debt has emerged among progressives and some mainstream Democrats as an attractive option because it may not require Congressional wrangling. “Cancelling student-loan debt is the single most effective executive action that President Biden can take to kick start this economy,” Warren said at the press conference. However, despite the pressure from lawmakers, it appears Biden still may be hesitant to use his authority to cancel student loans. During the White House press briefing Thursday, Jen Psaki, the White House press secretary, reiterated Biden’s support for Congress to cancel $10,000 in student debt per person as a response to the COVID crisis. Still, Psaki acknowledged the President’s power to deal with the issue through his authority, noting that Biden directed the Department of Education to extend the payments and collections pause on federal student loans when he took office. Schumer, Warren and other supporters of cancelling student debt through executive action are relying on a reading of the Higher Education Act, backed by legal experts, which says Congress has granted the Secretary of Education the power to cancel student debt. Other supporters of student-debt cancellation disagree, saying that using executive authority raises legal questions that could draw lawsuits from student-loan servicers, lenders and other entities involved in the loan process.

Federal Aid for Closed Cultural Venues Will Be a Race for Cash

In December, Congress created a $15 billion grant fund for clubs and performance spaces, recognizing that thousands of cultural institutions were at risk of closing permanently because there is no safe way to attend a rock concert or Broadway musical in a pandemic. Now comes the hard part: doling out the cash, the New York Times reported. The list of eligible recipients is large, and the Small Business Administration — the agency in charge of creating rules and systems for the initiative, the Shuttered Venue Operators Grant — has never run a major grant program. Its biggest pandemic relief effort, the $800 billion Paycheck Protection Program, was an extension of a long-running loan program, and even then it was plagued by confusion, complexity and inequities. “People are cautiously optimistic and excited, but there’s also so much anxiety,” said Liz Tallent, the marketing and special events director at the Orange Peel, an 18-year-old music club in Asheville, N.C. The shuttered-venue grant program was the result of a nearly yearlong effort by the National Independent Venue Association, a grass-roots group that formed in April. Lobbyists and activists argued that live-events businesses needed grants on top of Paycheck Protection Program loans — which weren’t designed for long-term shutdowns — because their entire business model had been destroyed. Small Business Administration officials have not yet determined when the grant program will begin, but three people familiar with the preparations said the agency was likely to circulate rules and guidance as early as this week and start taking applications a few weeks later. Unlike the Paycheck Protection Program, which relied on banks to vet applicants and has disbursed nearly $600 billion in loans so far, the venue program will be run directly by the Small Business Administration’s Office of Disaster Assistance. That unit has been swamped managing another pandemic relief effort, the Economic Injury Disaster Loan system, which distributed $194 billion in a hasty and problem-plagued effort that the agency’s inspector general warned might have lost tens of billions of dollars to ineligible or fraudulent takers. Those who fought for the venue program are imploring the Small Business Administration to create strict safeguards to ensure that the $15 billion gets to the independent venues, arts groups and producers that most need it. (Publicly traded companies like Live Nation and AEG are ineligible.)

Subsiding Layoffs Raise Cautious Optimism for U.S. Labor Market

The number of Americans filing new applications for unemployment benefits decreased further last week, suggesting the labor market was stabilizing as authorities started to loosen pandemic-related restrictions on businesses, Reuters reported. Despite the signs that layoffs are abating, the weekly jobless claims report from the Labor Department today showed at least 17.8 million Americans were on benefits in mid-January, indicating that long-term unemployment was likely becoming entrenched. That could boost President Joe Biden’s push for the U.S. Congress to pass his $1.9 trillion recovery plan. Treasury Secretary Janet Yellen told ABC’s Good Morning America that the massive stimulus plan was needed to overcome the economic pain caused by the COVID-19 pandemic. “It’s too early to predict that this begins a strong reversal of excruciatingly high layoffs,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Another round of stimulus is important.” Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 779,000 for the week ended Jan. 30. That was the third straight weekly decline. Economists polled by Reuters had forecast 830,000 applications for the latest week. Unadjusted claims decreased 23,525 to 816,247 last week. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.165 million people filed claims last week, down from 1.243 million in the prior period.

Sen. Romney Proposes Monthly Payments for Families with Children

Sen. Mitt Romney (R-Utah) today unveiled a proposal to provide monthly payments to families with children, The Hill reported. The proposal comes as many Democrats have similarly expressed interest in providing payments to families with children on a monthly basis. "This proposal offers a path toward greater security for America’s families by consolidating the many complicated programs to create a monthly cash benefit for them, without adding to the deficit,” Romney said. Under Romney's proposal, the existing child tax credit would be replaced with monthly payments of $350 for children ages 5 and under and $250 for children ages 6 to 17. Families would be capped at monthly payments of $1,250. All children with Social Security numbers would be eligible for the payments, and parents would also be eligible to apply to start getting the benefit four months before a child's due date. The payment amounts phase out for single tax filers with income above $200,000 and married couples with income above $400,000 — the same income phaseout thresholds for the current child tax credit. The Social Security Administration would administer the monthly payments, and people would reconcile any overpayments or underpayments with the IRS when they filed their tax returns.

Poll: One-third Say Financial Struggles Made Them Relocate During Pandemic

One in three Americans who relocated during the coronavirus pandemic said they did so due to related financial issues, according to polling from Pew Research Center released today, The Hill reported. In a November survey, a total of 32 percent of adults who moved last year cited monetary hardships, including 17 percent who named the loss of their jobs and another 15 percent who said it was due to another financial reason. Comparatively, in June 2020, 18 percent of people who had relocated cited financial reasons, either a job loss or otherwise. Meanwhile, 17 percent said they had moved to be closer to a relative or partner, down slightly from 20 percent in June, while 14 percent said they relocated due to particular risk from the virus where they lived. This represented a major drop from June, when 28 percent of those relocating did so due to the risk of the virus in their area. A similar percentage of Americans who had someone else move in with them cited financial difficulties. Thirty-six percent of that group cited money trouble, compared to 18 percent who said closer proximity to a relative or partner and 14 percent who cited the risk of the virus where the person who moved in had lived.

U.S. Factory Orders Beat Expectations in December

New orders for U.S.-made goods rose more than expected in December and business spending on equipment was solid, pointing to continued strength in the manufacturing industry in the near term, Reuters reported. The Commerce Department said today that factory orders increased 1.1% after surging 1.3% in November. Economists polled by Reuters had forecast factory orders gaining 0.7% in December. Orders dropped 6.6% year-on-year. Manufacturing, which accounts for 11.9% of the U.S. economy, has been driven by strong demand for goods such as electronics and furniture as 23.7% of the labor force works from home because of the COVID-19 pandemic. But spending on long-lasting manufactured goods declined for a second straight month in December, government data showed last week.

Next Tuesday: Don’t Miss ABI’s Virtual Caribbean Insolvency Symposium! Examine Landlord and Tenant Dilemmas, Subchapter V, Cross-Border Issues and More

ABI’s 2021 Caribbean Insolvency Symposium returns in a virtual format to bring together regional judges and top practitioners for a half-day of interactive and informative programming examining the top issues facing the industry. In addition to concurrent sessions, the Symposium will also feature session tracks tailored specifically for business and consumer practitioners. Attendees have the opportunity to earn up to 12.6/12.5 hours of CLE/CPE credit, including up to 1.8/1.5 hours of ethics, from the comfort of their home or office with 30 days of access to conference session recordings!

Concurrent Sessions:

• Welcome and Judicial Round & Round Plenary
• Subchapter V in the COVID-19 Era

Business Track:

• Landlord and Tenant Dilemmas in a COVID and Post-COVID Environment
• Cross-Border Rescue and Failure: Temas Candentes (Hot Topics)

Consumer Track:

• Counseling the Client During the Post-COVID Period
• Recent Consumer Case Law Developments with Bill Rochelle

Click here to register.

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Now Being Accepted!

ABI’s Asset Sales Committee has opened the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are due by Friday, March 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Small Businesses Give Fintechs Low Marks for Pandemic Relief

Only 18% of businesses that received a Paycheck Protection Program or other loan from an online lender were satisfied with customer service, while 42% said they were dissatisfied, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
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66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Jobless Claims Fall Slightly as Another 847,000 Americans Apply for Unemployment Aid

ABI Bankruptcy Brief

January 28, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Jobless Claims Fall Slightly as Another 847,000 Americans Apply for Unemployment Aid

The number of Americans filing for state unemployment benefits edged lower but remained elevated last week, as the labor market struggles to recover from a surge in COVID-19 infections nationwide amid new restrictions to help curb the spread of the virus, FoxBusiness.com reported. Figures released today by the Labor Department showed that 847,000 Americans filed first-time jobless claims in the week ended Jan. 23, slightly lower than the 875,000 forecast by Refinitiv economists. The number is nearly four times the pre-crisis level but is well below the peak of almost 7 million that was reached when stay-at-home orders were first issued in March. Almost 70 million Americans, or about 40% of the labor force, have filed for unemployment benefits during the pandemic. The number of people who are continuing to receive unemployment benefits fell to 4.77 million, a decline of about 203,000 from the previous week. The report shows that roughly 18.28 million Americans were receiving some kind of jobless benefit through Jan. 9, an increase of 2.29 million from the previous week.

Analysis: The Economy Cooled in the Fall, but 2020 Proved Better than Feared

The U.S. economic recovery stumbled but didn’t collapse at the end of last year, setting the stage for a much stronger rebound this year, the New York Times reported. Gross domestic product rose 1 percent in the final three months of 2020, the Commerce Department said today. That represented a sharp slowdown from the previous quarter, when business reopenings led to a record 7.5 percent growth rate. On an annualized basis, G.D.P. increased 4 percent in the fourth quarter, down from 33.4 percent in the third. Looking at the quarter as a whole obscures the full extent of the slump: Many analysts believe economic output declined outright in November and December, as rising coronavirus cases and waning government aid led consumers to pull back on spending and forced businesses to shut down, in some cases for good. Personal income actually fell in the fourth quarter. But four weeks into January, the new year looks different. Aid passed by Congress in December has begun to flow in enhanced unemployment benefits, small-business loans and direct payments to households. Two runoff elections in Georgia delivered Democratic control of the Senate, making further rounds of assistance more likely. And the rollout of coronavirus vaccines, though slower than hoped, offers the prospect that hotels, bars and other businesses hurt by the pandemic will see customers return later this year. The late-year slump was driven by a slowdown in consumer spending. Spending grew less than 1 percent in the fourth quarter, compared with 9 percent in the third. But parts of the economy that are less exposed to the pandemic helped pick up the slack. The housing market continued to surge, partly because of low interest rates, and business investment was strong, a sign of confidence among corporate leaders. The economy is still in a significant hole, however. Measured against the final quarter of 2019, G.D.P. ended 2020 down 2.5 percent, making it the second-worst calendar year on record after a 2.8 percent contraction in 2008. Comparing 2020’s output overall with the previous year’s, G.D.P. fell 3.5 percent, the worst on record. The economy has regained roughly three-quarters of the output lost during the collapse last spring, and only a bit more than half of the jobs.

Schumer Warns Democrats Could Go It Alone on Coronavirus Relief as Soon as Next Week

Senate Majority Leader Charles Schumer (D-N.Y.) today warned that Democrats were willing to go it alone on the next coronavirus relief package, potentially starting the process as soon as next week, The Hill reported. Schumer, speaking from the Senate floor, said that it was the "preference" of Democrats to work with Republicans on a sixth coronavirus relief package, but that if GOP senators wanted to move too slowly, or go smaller than Democrats think necessary, they will move more aid without GOP support. "The dangers of undershooting our response are far greater than overshooting ... so the Senate as early as next week will begin the process of considering a very strong COVID relief bill," Schumer said from the Senate floor. "We have a responsibility to help the American people fast, particularly given these new economic numbers. The Senate will begin that work next week," Schumer continued. To pass more coronavirus relief without Republican support, Democrats will need to use reconciliation, a budget process that lets some bills bypass the 60-vote legislative filibuster. Democrats would first need to pave the way by passing a budget resolution that provides instructions to committees for drafting legislation. Sen. Dick Durbin (D-Ill.), Schumer's top lieutenant, said that Democrats are considering taking up the budget resolution next week "as a very real possibility," but stressed that no final decisions have been made.

Saved Stimulus Checks Expected to Help Spur Economic Recovery

Many U.S. consumers are starting 2021 flush with savings that are likely to help fuel the economic recovery this year, the Wall Street Journal reported. The latest federal COVID-19 aid package sent $600 checks to many households that also received relief money last year, while more affluent households have built up pools of cash by curbing their spending during the pandemic. Americans saved $1.4 trillion in the first three quarters of 2020, or about twice as much as in the same period of the prior year, according to analysis by Berenberg Economics. That amount is equivalent to nearly 10% of 2019 household spending, estimates Berenberg’s chief economist, Holger Schmieding. “In this unusual recession, governments have been unusually generous, people have not been able to spend the money, and hence they have the money and will to spend,” Schmieding said. Once business restrictions are lifted and people feel it is safe to go out again, “there will be a lot of spending — my guess is the beaches will be crowded, the pubs will be crowded,” and “by May and June it will be in full swing,” he said. President Biden is calling for a $1.9 trillion COVID-19 relief package to help Americans weather the economic shock of the pandemic. His plan, which so far is meeting resistance from Republicans, includes $1,400-per-person direct payments to most households and a $400 weekly unemployment insurance supplement through September. (Subscription required.)

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Now Being Accepted!

ABI’s Asset Sales Committee has opened the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are due by Friday, March 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

Eligibility
A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: OCC Halts Publication of 'Fair Access' Rule

The rule, finalized in the waning days of the Trump administration and scheduled to take effect in April, would have punished banks for denying services to certain firms without documented reasons for doing so, according to a recent blog post.The rule, finalized in the waning days of the Trump administration and scheduled to take effect in April, would have punished banks for denying services to certain firms without documented reasons for doing so, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Pelosi Says House Will Move Immediately on COVID-19 Relief

January 21, 2021

 
ABIBankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Pelosi Says House Will Move Immediately on COVID-19 Relief

Speaker Nancy Pelosi (D-Calif.) said today that House Democrats will move immediately on a massive coronavirus relief package, setting the stage for an early showdown in the newly flipped Senate over the chief legislative priority of the nascent Biden administration, The Hill reported. House Democrats have rearranged their schedule over the next two weeks, scrapping votes next week to allow the relevant committees to consider the various provisions of their emerging COVID-19 relief package. Pelosi suggested that the package could hit the House floor as early as the week of Feb. 1. "We're getting ready for a COVID relief package. We'll be working on that as we go," she told reporters in the Capitol. "We'll be doing our ... committee work all next week so that we are completely ready to go to the floor when we come back." A Pelosi aide emphasized that no floor vote has been scheduled. Biden last week had unveiled a $1.9 trillion emergency relief package, which features many of the wish-list items contained in earlier proposals from Pelosi and House Democrats. That list includes hundreds of billions of dollars to develop and distribute COVID-19 vaccines, hike unemployment benefits, provide $1,400 in direct payments to qualified Americans, and help state and local governments cope financially with the ongoing crisis.

Biden Releases National COVID-19 Strategy, Will Order Agencies to Use Defense Production Act

President Biden today released his national strategy to end the COVID-19 pandemic, which will include using the Defense Production Act (DPA) and other powers to speed up the manufacturing of testing and vaccine supplies and other items needed to fight COVID-19. The Trump administration had resisted calls to release a comprehensive plan to fight COVID-19, instead deferring significant authority to the states. The plan released by the Biden administration today aims to instill confidence in the U.S. pandemic response by accelerating the vaccine rollout, boosting testing and access to treatments and protecting those at most risk, including communities of color. The administration will also use the DPA to accelerate production of syringes, raw materials used in vaccines and other items needed to quickly get shots in arms, officials said.

U.S. Jobless Claims Decline, but Remain Elevated at 900,000

The number of Americans seeking unemployment benefits fell slightly last week to 900,000, still a historically high level that points to ongoing job cuts in a raging pandemic, the Associated Press reported. The Labor Department also said that 5.1 million Americans are continuing to receive state jobless benefits, down from 5.2 million in the previous week. This suggests that while some of the unemployed are finding jobs, others are likely using up their state benefits and transitioning to separate extended-benefit programs. More than 10 million people are receiving aid from those extended programs, which now offer up to 50 weeks of benefits, or from a new program that provides benefits to contractors and the self-employed. All told, nearly 16 million people were on unemployment in the week that ended Jan. 2, the latest period for which data is available.

Commentary: How the American Unemployment System Failed*

The nation’s unemployment insurance program, conceived during the Great Depression, was meant to keep jobless workers and their families from suffering drops in income that could tip them into poverty or force them to liquidate their assets to afford food, rent and other necessities. Its goals included allowing the unemployed to wait for a productive job to materialize, rather than take the first one that appeared, and providing stability to the economy in recessions, mitigating the expected drop in consumption when millions of workers lost their jobs. The tussle in Congress last month over whether to extend emergency unemployment payments that were on the cusp of expiring — potentially pushing 12 million people into some form of destitution, according to the Century Foundation, a liberal policy research group — was a reminder that the system as designed has not been up to its task, according to a New York Times commentary. Unemployment insurance is controlled and funded by the states, within loose federal guidelines. But the federal government has been repeatedly called on to provide additional relief, including emergency patches to unemployment insurance after the Great Recession hit in 2008. Indeed, it has intervened in response to every recession since the 1950s. While a federal backstop may make sense for times of economic upheaval, the repeated recourse to Capitol Hill underscores the shortcomings of a chronically underfunded, patchwork system that has not kept up with changes in the workplace and puts the unemployed at the mercy of the nation’s political winds. While the surge in unemployment caused by the pandemic could offer an opening to overhaul the program — an opportunity strengthened by Democrats’ takeover of the White House and the Senate — any push for change must overcome powerful incentives vying to further shrink the program, according to the commentary.



*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Strapped Local Governments Turn to Private Developers to Finance Projects

For state and local governments, the pandemic has brought financial gloom: Tax collections are down, public health expenses are up and their infrastructure backlog is growing. For developers and real estate investors, it all spells opportunity, the New York Times reported. The fiscal challenges could spur new ways for the private sector to collaborate with state and local governments. Public-private partnerships, known as P3s, rely on developers and investors to shoulder upfront financial risk, often delaying payments from governments until revenue starts flowing or certain construction benchmarks are reached. The partnerships have been used for projects in parts of Asia, Australia, Britain, Canada and other parts of Europe. But state and local governments in the U.S. have been slower to embrace them. As their fiscal woes become worse, some government officials are looking more closely at them as a tool to jump-start their economies. Data suggests governments will need all the help they can get: The National League of Cities estimates that nearly 90 percent of cities will be less able to meet their needs in fiscal 2021 than in fiscal 2020. The American Society of Civil Engineers estimated that the U.S. would need to spend $4.59 trillion by 2025 to repair or rebuild roads, bridges, dams, airports, schools and other infrastructure. The partnerships have a mixed record, but they could be one way to bring back Main Streets and reinvigorate downtowns, experts say.

Biden Appoints U.S. Consumer Watchdog Veteran as Acting Director of CFPB

The White House announced President Joe Biden would appoint Dave Uejio to run the Consumer Financial Protection Bureau (CFPB) on an acting basis after its director, Kathy Kraninger, resigned at the new administration’s request, Reuters reported. Uejio will run the watchdog agency pending Senate confirmation of Federal Trade Commission member Rohit Chopra as its permanent director. Uejio is a nine-year CFPB veteran and was most recently its chief strategy officer. Kraninger, who was appointed by Republican President Donald Trump, tweeted she was resigning shortly after Biden was sworn in on Wednesday. Her term was due to end in 2023. Last year, however, the Supreme Court ruled in favor of a challenge, backed by the Trump administration and long supported by most Republicans, that argued that the CFPB director served at the president’s will.

Illinois Legislature Passes New “All-In” Finance Charge Cap

On January 13, 2021, the Illinois legislature overwhelmingly passed S.B. 1792, intended to, among other things, overhaul the state’s consumer finance laws. Described prior to enactment as a bill related to “Energy Storage Systems,” S.B. 1792 passed, together with other major bills, with remarkably little debate, according to an analysis on JDSupra.com. The drafters’ inclusion of the “Predatory Loan Prevention Act” in S.B. 1792 would extend the 36% “all-in” Military Annual Percentage Rate (MAPR) finance charge cap of the federal Military Lending Act (MLA) to “any person or entity that offers or makes a loan to a consumer in Illinois” unless made by a statutorily exempt entity (i.e., a bank, savings bank, savings and loan association, credit union or insurance company). (S.B. 1792 separately amends the Illinois Consumer Installment Loan Act and the Payday Loan Reform Act to apply this same 36% MAPR cap.) The cap is effective immediately upon the Governor’s signature, which is expected at any time.

First Circuit Seeks Applicants for Bankruptcy Judge Position in Puerto Rico

The U.S. Court of Appeals for the First Circuit is seeking applicants for a bankruptcy judge position for the U.S. Bankruptcy Court for the District of Puerto Rico in Ponce. Attorneys are encouraged to apply, even if their experience is not specifically in bankruptcy law. Interested applicants may obtain an application from the Circuit Executive's Office, from the Bankruptcy Court Clerk for the District of Puerto Rico, or by accessing the Court of Appeals' website at www.ca1.uscourts.gov. Persons interested in applying for this position and willing to serve if selected should personally submit their applications to Susan Goldberg, Circuit Executive, via email at [email protected]. The individual selected must comply with the statutory and Judicial Conference regulations regarding the filing of financial disclosure reports. The term of office is 14 years, and the current salary is $201,112. Applications are to be received no later than March 3, 2021. EOE.

Tomorrow's abiLIVE to Feature Two Leading Academics Examining How the Supreme Court's Decision in City of Chicago v. Fulton Will Impact Future Bankruptcy Case Law

Don't miss tomorrow's abiLIVE webinar at 1 p.m. EST, when ABI Editor-at-Large Bill Rochelle will discuss the case with two leading bankruptcy academics who filed amicus briefs in the case, Profs. John Pottow of the University of Michigan Law School (Ann Arbor, Mich.) and Ralph Brubaker of the University of Illinois College of Law (Champaign, Ill.). Register for FREE.

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New on ABI’s Bankruptcy Blog Exchange: Regulatory Pressure Growing on Installment Lenders

The fast-growing buy now/pay later industry is drawing scrutiny from legislators and regulators who fear it could become predatory, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
© 2021 American Bankruptcy Institute
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66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Supreme Court Holds that Merely Holding Property Isn’t a Stay Violation

January 14, 2021

 
ABIBankruptcy Brief
 
 
 
NEWS AND ANALYSIS

Supreme Court Holds that Merely Holding Property Isn’t a Stay Violation

Reversing the Seventh Circuit and resolving a split among the circuits, the Supreme Court ruled unanimously today in City of Chicago v. Fulton “that mere retention of property does not violate the [automatic stay in] § 362(a)(3),” according to a special edition of Rochelle’s Daily Wire. Writing for the 8/0 Court in a seven-page opinion, Justice Samuel A. Alito, Jr. said that Section 362(a)(3) “prohibits affirmative acts that would disturb the status quo of estate property.” He left the door open for a debtor to obtain somewhat similar relief under the turnover provisions of Section 542, although not so quickly. In a concurring opinion, Justice Sonia Sotomayor wrote separately to explain how a debtor may obtain the same or similar relief under other provisions of the Bankruptcy Code. Justice Amy Coney Barrett, who had not been appointed when the argument was held on October 13, did not take part in the consideration and decision of the case. Click here to read the full analysis.

Click here to read the full Supreme Court opinion.

Commentary: Reform Our Bankruptcy Laws Before a Tsunami of COVID Debt Comes Due*

Even with the latest coronavirus relief bill, the economic stresses from the pandemic will continue to mount. An assortment of federal, state, and local foreclosure, eviction and debt-collection moratoria have kept creditors at bay, and unemployment insurance has helped many families to stay afloat. But neither the collection moratoria nor unemployment insurance will last forever, and they are likely to lapse as COVID-19 wanes. That’s when the bill will come due, according to a commentary by former ABI Resident Scholar Prof. Adam Levitin of Georgetown University Law School on CNBC.com. Collection moratoria merely stop collection actions; they do not cancel debts. Unemployment insurance typically replaces only a fraction of consumers’ income, so bills mount up when a consumer is out of a job. When the moratoria lapse, consumers will still owe months of back rent or mortgage payments, not to mention interest and late fees that have been accruing. Those debts will not go away as the economy picks up. Bankruptcy has long been the economy’s safety valve for financial distress. When consumers get overloaded with debt, bankruptcy gives them the possibility of a fresh start and serves as a type of social insurance by spreading losses among creditors. Unfortunately, however, the bankruptcy system poses too many obstacles to consumers getting the immediate relief they need, according to Prof. Levitin. Recently introduced legislation cosponsored by Sen. Elizabeth Warren (D-Mass.) would correct these shortcomings with a wholesale reform of the consumer bankruptcy system. The proposed legislation would give consumers the tools to address all of their financial obligations — mortgages, car loans, student loans, medical debt, and more. It would enable renters to stay in their leases without catching up on months of back rent. And it would make it possible for consumers to actually afford to file for bankruptcy, according to Prof. Levitin. Collection moratoria have bought Congress some time to act before the debt-collection tsunami strikes. Congress should take action to reform consumer bankruptcy law so that it can operate as an effective safety valve for consumers’ economic fallout from COVID.



*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

SBA to Reopen Paycheck Protection Program Tomorrow

The Small Business Administration (SBA) tomorrow will begin accepting applications for the second round of Paycheck Protection Program (PPP) loans, the agency announced on Wednesday, The Hill reported. PPP-eligible lenders with less than $1 billion in assets can begin sending loans to the SBA for approval Friday, and the program will reopen to lenders of all sizes Tuesday, the agency said. The head start for smaller lenders is intended to ensure that smaller businesses can obtain PPP loans after many were unable to do so during the first round of disbursement in 2020. President Trump in December signed a bipartisan coronavirus relief bill allocating another $284 billion for the PPP, which offers loans to small businesses that can be entirely forgiven if used to retain workers and cover basic operating expenses. The SBA has issued 4.9 million PPP loans since the program opened in April and has already forgiven $100 billion in loans. The second round of PPP is open to both businesses that received loans in the first round and those who did not. To be eligible for a second PPP loan — which cannot exceed $2 million — a business must have 300 employees or fewer, have used or will soon use all of the money from its previous PPP loan for authorized uses, and can show at least a 25 percent decline in gross receipts between comparable quarters in 2019 and 2020, the agency said.

U.S. Unemployment Claims Rise as Coronavirus Weighs on Economy

The number of workers filing for jobless benefits posted its biggest weekly gain since the pandemic hit last March, and the head of the Federal Reserve has warned that the job market has a long way to go before it is strong again, the Wall Street Journal reported. Applications for unemployment claims, a proxy for layoffs, rose by 181,000 to 965,000 last week, the Labor Department said Thursday, reflecting rising layoffs amid a winter surge in coronavirus cases. The total for the week ended Jan. 9 also was the highest in nearly five months and put claims well above the roughly 800,000 a week they had averaged in recent months. “We are a long way from maximum employment,” Fed Chairman Jerome Powell said. The U.S. labor-market recovery stalled last month, with the December jobs report showing that the U.S. lost 140,000 payroll positions. The economic recovery’s slowdown has included weakness in household spending, though economists expect the economy to rebound later this year as a COVID-19 vaccine is distributed through the population. But the increase in unemployment claims is another sign that the economic recovery is, at least for now, sputtering, as COVID-19 infections hit record levels nationwide. Employers cut 140,000 jobs in December, marking the first decline since the pandemic hit last spring. The leisure and hospitality industry bore the brunt of the decline, shedding 498,000 jobs as a surge in coronavirus infections forced many restaurants and bars to close or scale back operations. (Subscription required.)

Commentary: Group of 12,500 Storefronts Reveals 2021 Retail Risk

To fully assess the frail health of America’s clothing and accessories business, it’s important to look beyond its biggest names to the tier of retailers that could be described as the industry’s middleweights: the specialty chains with $300 million to $3 billion in annual revenue and a sizeable store portfolio, such as Guess Inc., Chico’s FAS Inc. and Children’s Place Inc. Wall Street doesn’t closely track these companies, perhaps because of their relatively small market capitalizations, which are often less than $1 billion, according to a Bloomberg commentary. They warrant attention, though, because this group could be the epicenter of retail upheaval in 2021. Some middleweights have business models that were difficult to sustain before the pandemic and are even more so now. Cato Corp., for example, had only $825 million in revenue in 2019 but has nearly 1,350 stores — more physical locations than retailing juggernaut Best Buy Co. There are 17 middleweights that collectively accounted for $22 billion in revenue in 2019 – less than the annual sales of Macy’s that year. But they are a force at shopping centers because together they account for a staggering number of stores — about 12,500 — and that makes their travails important for the entire clothing industry. Any problems or retrenchments have the potential to affect their landlords and co-tenants. The middleweights are grappling with some of the same problems as their bigger counterparts. The pandemic has sapped clothing demand, and in some cases, the retailers came into this crisis in a weakened position because of prior poor decisions. Chico’s, whose Canadian subsidiary filed for bankruptcy in 2020, has recorded sagging sales for years amid stumbles with garment colors, prints and aesthetic. J. Jill, which teetered on the edge of bankruptcy in 2020, has also been hurt by fashion misfires. Compounding the problem, the companies in this group are not e-commerce pace-setters. At their scale, it might not make sense to build sprawling distribution centers like behemoths Gap and Macy’s, nor do they have as much muscle to flex with shipping partners. Their stores are often relatively tiny, an obstacle to fulfilling high volumes of orders from those locations. In some instances, they’ve been late to make moves that would have helped them endure the challenges of the pandemic.

IRS Watchdog: Millions Had Major Problems Last Year Getting Tax Refunds, Stimulus Payments

The IRS “generally performed well” carrying out last year’s tax-filing season and issuing the first round of coronavirus stimulus payments, but millions of taxpayers still encountered significant problems, according to a report issued on Wednesday by the agency's in-house watchdog, The Hill reported. “Despite the IRS’s overall success in managing the filing season and accurately paying the significant majority of [economic impact payments], some taxpayers experienced major problems, and the agency was not always fully transparent about its struggles,” National Taxpayer Advocate Erin Collins wrote in the annual report her office submits to Congress. The COVID-19 pandemic led the IRS last spring — during the middle of the filing season — to temporarily close mail facilities, call centers and taxpayer assistance centers. Around the same time, the IRS was tasked with issuing relief payments of up to $1,200 per adult and $500 per child that were authorized by the CARES Act. Collins said in her report that the IRS did a good job handling the tasks it could automate. In cases where taxpayers filed their returns electronically last year, the IRS was able to process the vast majority of the returns quickly and issue refunds promptly. Additionally, most taxpayers quickly received the correct stimulus payment amount, she said. However, Collins said there were several areas where taxpayers had major difficulties in 2020, including millions experiencing lengthy delays in getting their refunds.

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