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September Commercial Chapter 11 Filings Up 33 Percent over Last Year; Total Filings Increase 6 Percent

Alexandria, Va. Commercial chapter 11 filings totaled 414 in September, a 33 percent increase over September 2018’s total of 312 filings, according to data provided by Epiq Systems, Inc. Overall business filings increased 11 percent to 3,129 filings in September from September 2018’s total of 2,822 business filings. Total U.S. filings registered 61,113 in September 2019, up 6 percent from last September’s total of 57,619. The 57,984 consumer filings in September also represented a 6 percent increase from the September 2018 consumer total of 54,797.

“Bankruptcy provides the reprieve needed for financially distressed families and businesses dealing with increasing costs and debt loads,” said ABI Executive Director Samuel J. Gerdano. “Recently enacted laws update the Bankruptcy Code to improve access to bankruptcy for struggling Main Street businesses, farmers and veterans looking to achieve a financial fresh start.”

The “Small Business Reorganization Act of 2019” (SBRA; Public Law No: 116-54), “HAVEN Act” (Public Law No: 116-52) and “Family Farmer Relief Act of 2019” (Public Law No: 116-51) were signed into law by President Trump on Aug. 23. The bipartisan bills, which ABI testified in support of in June, passed the House in late July and the Senate on August 1. The provisions of the Family Farmer Relief Act and HAVEN Act are now in effect and the SBRA becomes effective in February 2020. For more information on the legislation, watch this ABI media webinar.

Total U.S. bankruptcy filings rose 1 percent during the first nine months of 2019 (Jan. 1-Sept. 30) from the same period a year ago as the 580,470 filings were a slight increase from 576,749 filings in 2018. The 551,062 total noncommercial filings through the first three quarters of 2019 also represented a 1 percent increase from the noncommercial filing total of 548,348 through the first three quarters of 2018. Commercial bankruptcy filings during the first nine months of the year increased 4 percent to 29,408 from the 28,401 filings during the same period in 2018. Commercial chapter 11 filings also increased during the first nine months of 2019, as the 4,127 filings represented an 8 percent upturn from the 3,805 chapter 11 filings during the first nine months of 2018.

The average nationwide per capita bankruptcy filing rate for the first nine calendar months of 2019 (Jan. 1-Sept. 30) decreased slightly to 2.5 (total filings per 1,000 population) from the 2.51 rate for the first eight months of the year. The average daily filing total in September 2019 was 3,056, a 1 percent increase from the 3,033 total daily filings registered in September 2018. States with the highest per capita filing rates (total filings per 1,000 population) through the first nine months of 2019 were:

1. Alabama (5.67)

2. Tennessee (5.45)

3. Georgia (4.41)

4. Mississippi (4.23)

5. Nevada (3.80)

For further information about the statistics or additional requests, please contact ABI Public Affairs Officer John Hartgen at 703-894-5935 or jhartgen@abiworld.org.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.

Epiq Systems is a leading provider of managed technology for the global legal profession. Epiq Systems offers innovative technology solutions for electronic discovery, document review, legal notification, claims administration and controlled disbursement of funds. Epiq System’s clients include leading law firms, corporate legal departments, bankruptcy trustees, government agencies, mortgage processors, financial institutions, and other professional advisors who require innovative technology, responsive service and deep subject-matter expertise. For more information on Epiq Systems, Inc., please visit http://www.epiqsystems.com.

Commentary- The Small Business Reorganization Act Arrives in February 2020; Here's What You Need to Know

ABI Bankruptcy Brief

September 12, 2019

 
ABI Bankruptcy Brief
 
 
NEWS AND ANALYSIS

Commentary: The Small Business Reorganization Act Arrives in February 2020; Here's What You Need to Know

With President Trump’s signature on Aug. 23, the "Small Business Reorganization Act of 2019" (SBRA) will officially take effect in February 2020. The SBRA is designed to fill a gap in the current bankruptcy laws by providing a framework for small businesses to successfully reorganize in bankruptcy court, according to a recent commentary in the National Law Review. Under the SBRA, the Bankruptcy Code will be amended to ease the procedural burden on small businesses seeking reorganization. The SBRA amends the Bankruptcy Code with the addition of a new subchapter V to chapter 11, defining a small business debtor as an entity with an aggregate of noncontingent liquidated secured and unsecured debt of not more than $2,725,625. The SBRA mandates that a standing trustee be appointed in every small business chapter 11, similar to the existing statutes for chapter 12 and chapter 13. Among other provisions, the new subchapter will now allow a small business to confirm a plan over the objections of creditors, which is a significant change and should greatly increase the overall success rate for small businesses.



Also, don't miss the ABI Talk at the Winter Leadership Conference on Dec. 6, "New Reorganization Hope for Main Street Debtors," to be delivered by Bankruptcy Judge Michelle Harner (D. Md.; Baltimore). Register here.

Student Borrowers ‘Preyed Upon’ by Loan Servicers, but Lawmakers Want to Change That

A House Financial Services Committee hearing on Tuesday tackled the issue of student lending and its ramifications for 45 million American student loan borrowers, CNBC.com reported. Both Democrats and Republicans on the committee agreed there are problems with the current student lending system. Specifically, lawmakers and consumer advocates criticized student loan servicing companies such as Navient, saying that student borrowers need more assistance and protections from these for-profit corporations. Democrats unveiled eight draft bills on Tuesday for discussion that would, among other things, establish a student borrowers’ bill of rights, strengthen credit-reporting standards, block debt collectors from unfairly going after student borrowers, protect private student loan borrowers and help borrowers with student debt purchase their first home. Seth Frotman, executive director of the Student Borrower Protection Center, says that student loan borrowers have a “bullseye” on their back and are subjected to “predatory tactics” from servicing companies from the day they take out their loan until the day they pay it back. He claims that’s because student borrowers have less rights than nearly any other type of borrower. “You have more protections if you’re paying back your credit card or your mortgage,” Frotman said.



The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy.

More Americans Going Without Health Coverage Despite Strong Economy, Census Bureau Finds

The proportion of Americans without health insurance grew significantly last year for the first time this decade, even as the economy’s strength pushed down the poverty level to its lowest point since 2001, according to federal data released on Tuesday, the Washington Post reported. The finding that 27.5 million U.S. residents lacked coverage in 2018, based on a large U.S. Census Bureau survey, reverses the trend that began when the Affordable Care Act expanded opportunities for poor and some middle-income people to get insurance. Taken together, the census numbers paint a portrait of an economy pulled in different directions, with the falling poverty rate coinciding with high inequality and the growing cadre of people at financial risk because they do not have health coverage. As more Americans found jobs, the poverty rate fell last year to its lowest level since 2001, and middle-class income inched marginally higher. Median U.S. income — the point at which half of U.S. families earn more and half earn less — topped $63,000 for the first time, although it was roughly the same level as it was 20 years ago, after adjusting for inflation.



An article in the Summer 2019 edition of the ABI Law Review found that individuals who experienced a gap in medical care coverage over a two-year period were roughly twice as likely to file for bankruptcy as those who retained continuous coverage. Click here to read the article. A forthcoming podcast will feature the authors, Profs. Brook E. Gotberg of the University of Missouri School of Law (Columbia, Mo.) and Prof. Michael D. Sousa of the University of Denver Sturm College of Law (Denver, Colo.), discussing their research.

U.S. Consumer Prices Rose 0.1 Percent in August

U.S. consumer prices rose slowly in August, held down by weak energy prices that masked a broader firming in price pressures, the Wall Street Journal reported. The consumer-price index, which measures what Americans pay for items from fresh whole milk to lawn-care services, rose a seasonally adjusted 0.1 percent in August from a month earlier, matching economists’ expectations. The sluggish pace of overall price growth largely reflected a decline in energy prices. Core consumer prices, which exclude the volatile categories of food and energy, increased 0.3 percent from the previous month. This marked the third straight monthly increase of 0.3 percent and an uptick from earlier in 2019. Prices for a wide array of goods and services rose last month. Rent and medical prices were among the drivers behind stronger inflation in August.

Need Cash? Companies Are Considering Magazine Subscriptions and Phone Bills When Making Loans

For decades, banks and other financiers have relied primarily on consumers’ borrowing history to make lending decisions. Now revenue-hungry companies are considering metrics both mundane and peculiar, like whether applicants shop at discount stores, subscribe to magazines or pay their phone bills on time, the Wall Street Journal reported. Those experimenting with new metrics range from big-name banks like Goldman Sachs Group Inc., Ally Financial Inc. and Discover Financial Services to upstart financial-technology firms. The changes are an about-face for many banks, which have spent much of the decade since the financial crisis chasing mostly ultra-creditworthy customers. But that pool is only so big. The field of potential new borrowers is huge: About 53 million U.S. adults don’t have credit scores, according to Fair Isaac Corp., creator of the widely used FICO scores. Another roughly 56 million have subprime scores. Some have a checkered borrowing history or high debt loads. But others, banks point out, just don’t have traditional borrowing backgrounds, often because they are new to the U.S. or pay for most expenses with cash. Government officials at times have encouraged or even required changes to the information in credit reports and scores, reasoning they would bring loans to deserving borrowers who might not fit a traditional mold.

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BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Specific Benefits Protected Under the HAVEN Act

A recent blog post explored the specific benefits protected under the Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act), which was signed into law by President Trump on Aug. 23.

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

 
© 2019 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

Miss Yesterday’s Webinar Examining New Bankruptcy Laws? Replay Available!

ABI Bankruptcy Brief

August 29, 2019

 
ABI Bankruptcy Brief
 
 
NEWS AND ANALYSIS

Miss Yesterday’s Webinar Examining New Bankruptcy Laws to Help Distressed Small Businesses, Disabled Veterans and Family Farmers? Replay Available!

Experts participated on an ABI Media Webinar yesterday that provided an overview of the recently enacted “Small Business Reorganization Act of 2019” (H.R. 3311), “HAVEN Act” (H.R. 2938) and “Family Farmer Relief Act of 2019” (H.R. 2336). President Donald J. Trump on Aug. 23 signed the bipartisan bills into law. The webinar features:

Robert J. Keach of Bernstein, Shur, Sawyer & Nelson (Portland, Maine) discussing SBRA. Keach testified on ABI’s behalf in support of H.R. 3311, H.R. 2938 and H.R. 2336 before the House Judiciary Committee Subcommittee on Antitrust, Commercial and Administrative Law on June 25.

Kristina Stanger of Nyemaster Goode, P.C. (Des Moines, Iowa) and Jessica Hopton Youngberg of the Veterans Legal Services Clinic at the New England Center & Home for Veterans in Boston, both members of ABI's Veterans' Affairs Task Force, discussing the HAVEN Act.

Joseph A. Peiffer of Ag & Business Legal Strategies (Cedar Rapids, Iowa) and Donald L. Swanson of Koley Jessen (Omaha, Neb.), both with more than 30 years of experience in bankruptcy and agricultural law, discussing the Family Farmer Relief Act.

ABI Executive Director Samuel J. Gerdano moderated the webinar. To watch the replay, please click here.
 

Commentary: Private Equity's Abuse of Limited Liability*

One of the central features of the Stop Wall Street Looting Act that was introduced by Sen. Elizabeth Warren and a number of co-sponsors is a targeted rollback of limited liability, according to a CreditSlips blog post by Prof. Adam Levitin of Georgetown University Law. This provision, more than any other, has gotten some commentators’ hackles up, even those who are willing to admit that there are real problems in the private-equity industry and who welcome some of the other reforms in the bill. The idea that limited liability is a sine qua non of the modern economy is practically Gospel to most business commentators. These commentators assume that without limited liability, no one will ever assume risks, such that any curtailment of limited liability is a death sentence for the private-equity industry, but they're wrong, according to Levitin. Limited liability is a substantial, regressive cross-subsidy to capital at the expense of tort creditors, tax authorities and small businesses. Limited liability is a relic of the underdeveloped financial markets of the Gilded Age and operates as an implicit form of leverage provided by law, according to Levitin. But it’s hardly either economically efficient or necessary for modern business activity.



*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.

Latest ABI Podcast Features Experts Discussing Consumer Commission's Recommendations on Discharge Violations, Attorney Competency and Lawyer Misconduct

ABI's latest podcast features members of ABI's Commission on Consumer Bankruptcy discussing recommendations from the Final Report looking at remedies for discharge violations, attorney competency and remedying lawyer misconduct. Commissioner Rudy Cerone of McGlinchey Stafford, PLLC, (New Orleans) moderates the discussion with fellow Commissioners Tara Twomey of the National Consumer Law Center (San Jose, Calif.) and Richardo Kilpatrick of Kilpatrick & Associates, P.C. (Auburn Hills, Mich.), and Karen Cordry of the National Association of Attorneys General (Washington, D.C.), who was a member of the Chapter 7 Advisory Committee.

White Paper: Retailers Face Tough Decisions as China Tariff Pressures Mount

To date, many consumer goods such as toys, shoes and electronics have been strategically exempted from the tariffs, which has to a great extent spared U.S. shoppers from feeling the pain at the point of sale. But based on the Trump administration’s position, if the most recent round of talks on the issue between President Trump and Chinese leader Xi Jinping do not end well, the pain could become very real for both U.S. consumers and the businesses they frequent sooner rather than later, according to a research paper by Hilco Global. New tariffs could impact 100 percent of the toys and sports equipment imported from China to the United States, as well as 93 percent of the footwear and 91 percent of textiles and clothing, according to an analysis by the Peterson Institute for International Economics. Moving ahead, many retailers may experience shortages of supply as they seek non-Chinese vendors and ramp up those new and intricate relationships. Additionally, because most are not in a position to raise pricing enough to nullify the impact of the increased tariffs on their businesses, it can also be expected that we will see continued compression of retail gross margins.

Banks Fire Up Their Mortgage Machines for a Refinancing Boom

With rates for home loans sinking to their lowest levels since late 2016, Wells Fargo & Co., the biggest mortgage lender in the U.S., has boosted staffing for the business by about 10 percent this year and plans to keep hiring. Bank of America Corp. is hiring in areas including sales, processing and underwriting. The mortgage industry has added almost 5,000 employees since March, a 1.5 percent gain, according to the Bureau of Labor Statistics. The volume of applications for refinancing mortgages has more than tripled since December, according to a barometer from the Mortgage Bankers Association.

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BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Small Business Reorganization Act Signed into Law — A New Frontier for Small Business Bankruptcies

President Trump on Aug. 23 signed the Small Business Reorganization Act (SBRA) into law. The SBRA is scheduled to take effect on February 22, 2020, and offers small businesses with aggregate liabilities that do not exceed $2,725,625 the opportunity to resolve their outstanding debts through a condensed and price conscious chapter 11 bankruptcy proceeding, according to a recent blog post. This new proceeding is to be governed under subchapter V to chapter 11 of the Bankruptcy Code.

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

 
© 2019 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314
 

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