Small Business

Small Business Reorganization Act, HAVEN Act, Family Farmer Relief Act and National Guard and Reservists Debt Relief Extension Act Pass Out of House Judiciary Committee

The House Judiciary Committee brought forth a number of key pieces of bankruptcy legislation today at its mark-up hearing. The following bills were considered en bloc and reported favorably out of Committee for consideration by the House of Representatives:

- H.R. 3311, the “Small Business Reorganization Act of 2019”;

- H.R. 3304, the “National Guard and Reservists Debt Relief Extension Act of 2019”;

- H.R. 2938, the “Honoring American Veterans in Extreme Need Act of 2019” (“HAVEN Act”);

- and H.R. 2336, the “Family Farmer Relief Act of 2019”

ABI testified in support of H.R. 3311, 2938 and 2336 at the House Judiciary Committee's hearing on June 25.

To view the text of the bills and watch a replay of the mark-up hearing (consideration of the bankruptcy bills occurs during the final 10 minutes of the hearing), please click here.

Commentary: Canceling All Student Debt Is a Bad Idea* 

Canceling existing student debt would make millions of us who took out student loans, worked hard, lived frugally and paid off (or are paying off) what they borrowed feel like suckers, according to a Washington Post commentary. While Sen. Bernie Sanders (I-Vt.) or Sen. Elizabeth Warren (D-Mass.) tout proposals of taxpayers picking up the student debt tab, there are other strategies to tackling the growing problem of student loan debt, according to the commentary. For starters, let’s change the law so student debt can be discharged in bankruptcy. As things stand now, you can be so far underwater financially you need a submarine, but you can’t get rid of your student debt in bankruptcy the way you can get rid of unpayable medical or credit card debts. Letting people get rid of their student debt by going broke isn’t giving them a free ride: their financial foul-ups are public record and their credit is ruined for years, according to the commentary. Making student loans dischargeable in bankruptcy would put lenders at risk and make them pay attention to what they’re doing. Another thing we could do is expand the Public Service Loan Forgiveness program. That way, we could get a lot more people serving in the military or teaching in remote rural areas or practicing medicine there, doing public service and having some of their student debt canceled year by year. Yes, that puts us taxpayers on the hook for canceling student debt, but it’s not handing people a debt-cancellation freebie: It’s a trade. Do socially useful work, earn loan forgiveness.



*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.

Treatment of student loan debt in bankruptcy is the first topic addressed in the Final Report of ABI's Commission on Consumer Bankruptcy. To download a copy of the report, please click here.

To hear additional perspectives on the Commission's recommendations on student loan debt in bankruptcy, listen to this ABI Podcast.

Analysis: Big Law Bills More than $160 Million in Puerto Rico's Bankruptcy

Roughly 45 firms working on Puerto Rico’s debt restructuring, including top-tier firms such as Proskauer Rose, Norton Rose Fulbright, DLA Piper and Greenberg Traurig, have billed more than $400 million collectively in the two years since the restructuring began, American Lawyer reported. Firms in the Am Law 100 account for more than $160 million in fees and expenses. Analysts estimate that the total amount of debt tied to Puerto Rico’s restructuring totals more than $100 billion, far exceeding the second-largest municipal reorganization: Detroit, estimated at $18 billion. The $160 million figure does not include fees billed by several Am Law 100 firms that were not required to report expenses, as they do not represent the government. Those include Foley & Lardner; Gibson, Dunn & Crutcher; Dechert; Holland & Knight; and Skadden, Arps, Slate, Meagher & Flom. In total, at least a quarter of the Am Law 100 is in some way involved in Puerto Rico’s debt restructuring, according to an independent analysis of court filings by The American Lawyer and filings from Puerto Rico’s Financial and Management Oversight Board.

‘Reshoring’ Report Finds Factory Work Not Returning to U.S.

A report released yesterday stated that American trade policies aimed in part at returning factory work to the U.S. appear instead to be accelerating a shift in production from China to Vietnam and other low-cost nations, the Wall Street Journal reported. Despite escalating tariffs between the U.S. and China, American imports of manufactured goods from China and 13 other Asian countries rose 9 percent in 2018 to $816 billion, the largest annual increase in nearly a decade and outpacing a 6 percent increase in domestic manufacturing gross output, according to consulting firm A.T. Kearney Inc. The firm said that its annual index measuring the ratio of U.S. imports of Asian-made goods as a percentage of domestic manufacturing output reached 13.1 percent in 2018, up from 12.7 percent in 2017 and the highest A.T. Kearney has found in the past 10 years.


 

Commentary: Global Recession Risks Are Up, and Central Banks Aren’t Ready*

Ten years after the Federal Reserve worked alongside the European Central Bank and the Bank of Japan to bring the global economy back from the brink, their ability to prevent the next downturn is limited, according to a New York Times commentary. Whether the world’s central banks are prepared to combat another slump is becoming less of a hypothetical question as the global economy shows signs of strain. The chances that the U.S. will enter a recession by next year have grown as manufacturing weakens and trade uncertainty drags on. In Germany, the unemployment rate has ticked higher, and industrial production is slowing. In Japan, weak factory production and waning exports heighten vulnerability. A recession is far from inevitable — particularly one as deep and painful as the last. But the capacity for the type of decisive response that prevented an even worse outcome in 2008 has been hindered. Back then, central banks cut rates, bought up bonds, extended government backing to financial products, lent money to banks and in some cases coordinated with government authorities to make sure their rescue packages didn’t work at cross-purposes. It was an unprecedented period of experimentation, one that saved economies careening toward collapse. But today, interest rates remain below zero in Japan and Europe. They also are low by historical standards in the U.S., leaving less room to cut in a downturn. Most central banks still hold huge amounts of the bonds and other securities they bought to prop up their economies the last time, which could make another buying binge more difficult and dampen its effects.



*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.

Eleventh Circuit Accepting Applications for Bankruptcy Judgeship Position in the Middle District of Florida at Orlando

The U.S. Court of Appeals for the Eleventh Circuit is seeking applications from all highly qualified candidates for a 14-year appointment as U.S. Bankruptcy Judge for the Middle District of Florida at Orlando. All applications must be received by Aug. 1. For qualifications and submission guidelines, please click here.

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Senate Passes Four Bipartisan, Bicameral Bankruptcy Bills

The U.S. Senate today passed four bipartisan and bicameral bankruptcy bills before adjourning for its August recess. The bills are H.R. 3311, the Small Business Reorganization Act; H.R. 2336, the Family Farmer Relief Act; H.R. 2938, the Honoring American Veterans in Extreme Need Act (HAVEN Act); and H.R. 3304, the National Guard and Reservist Debt Relief Extension Act. ABI testified in support of H.R. 3311, H.R. 2336 and H.R. 2938. All the bills passed the U.S. House of Representatives last week and are non-controversial. The bills received unanimous consent to proceed to passage. The legislation will now be sent to President Trump to be signed into law. Click here to read ABI’s press release.

Consumer Groups Seek Extension of FDCPA Comment Period

Consumer advocacy groups have formally requested a two-month extension — to Oct. 21 — on the comment period for the Consumer Financial Protection Bureau’s proposed debt-collection rule, Auto Finance News reported. The comment period is currently set to expire on Aug. 19. Seven advocacy groups signed the letter, citing the long and complicated nature of the proposal. “The proposal’s broad and potential impact — on virtually every person in this country — adds to the complexity of analyzing and commenting on the implications for different constituencies,” the letter said. In fact, the consumer advocacy groups hold that these rules affect not only consumers with debt, but “anyone who may mistakenly be the subject of debt collection communications and litigation against the wrong person, wrong number or email address, or debts paid long ago,” making it difficult to respond adequately. Further, the letter cites the CFPB’s other activities as having consumed many of the resources of the consumer advocacy groups, including a proposal to rescind much of the payday loan rule, request for comment on overdraft opt-in rules, and the proposed rule under the Home Mortgage Disclosure Act. As of yesterday, 1,978 comments on the proposal had been submitted on the CFPB’s website.

Tapping Homes for Cash to Get Tougher Under New FHA Limits

The Trump administration is moving to restrict mortgage refinancings in which borrowers withdraw cash, the latest effort to curb the federal government’s exposure to potential defaults, the Wall Street Journal reported. The Federal Housing Administration, an arm of the Department of Housing and Urban Development that insures loans for mostly first-time buyers, announced today that it will limit cash-out refinancings in its program. Borrowers will be able to pull cash out only when the new loan amounts to 80 percent of the value of the home or less, down from 85 percent. The policy change, expected to take effect in September, follows a sharp rise in the use of cash-out refinancings over the past several years. Officials believe this has added risk to the $1.3 trillion government mortgage program. Borrowers aren’t tapping their homes for nearly as much cash as they did before the financial crisis. But rising home prices have rewarded owners with more equity in their homes, and many are turning it into cash to make home improvements or pay bills. In the FHA program, there were nearly 151,000 cash-out refinances in the 12 months that ended in September, versus roughly 43,000 during the same period five years earlier. (Subscription required.)

Commentary: Mortgage Rates Are Already Lower, but Not Providing a Spark to Homebuying*

Cheaper mortgages are usually a boon to the housing market, but this year, a sharp drop in mortgage rates hasn’t provided much of a lift, according to a New York Times commentary. Consumer borrowing costs, including mortgage rates, are heavily influenced by the market for government bonds, and yields on those bonds have been falling this year. Similarly, the rate on the 30-year fixed mortgage rate is down more than one percentage point, to 3.75 percent last week, according to Freddie Mac. Over the last 30 years, the rate has averaged about 6.25 percent. So the current rates might reasonably have been expected to spark a flurry of refinancing and home buying. But, because of rising home prices, there has been no boom so far. Through June, sales of existing homes were down 2 percent from a year earlier, and investment in residential structures had declined for six straight quarters. Sales of newly built homes remain well below their recent peak in late 2017. The housing market has traditionally been one of the most important channels by which the Fed’s rates can influence the economy because it can spur construction employment, sales of appliances and furniture, and services such as landscaping, all of which multiply the economic impact of a home’s purchase. But the math facing prospective American home buyers is daunting. Since June 2009, when the U.S. economy started its current expansion, the median price of existing homes has risen nearly 60 percent, far outpacing the 24 percent gain in median weekly earnings.



*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.

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