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Creditor Lawsuit Could Undo Auto Bailout Force GM into Bankruptcy

ABI Bankruptcy Brief | October 9, 2012
 
  

October 9, 2012

 
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CREDITOR LAWSUIT COULD UNDO AUTO BAILOUT, FORCE GM INTO BANKRUPTCY

A backroom deal negotiated by General Motors during the auto bailout to fulfill the Obama administration's demand for a quick bankruptcy could be reversed, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009, according to a report in the Washington Free Beacon yesterday. As GM teetered on the edge of bankruptcy in June 2009, it cut a $367 million "lock-up agreement" with several major creditors in order to prevent its Canadian subsidiary from going under. The move spared the subsidiary from fulfilling the $1 billion debt it owed the creditors—major hedge funds—ensuring that GM would not have to face bankruptcy courts in two nations, which could have delayed the company’s recovery. "Many U.S. creditors waived their rights to object because the government wanted to push through the bailout for political reasons," risk analyst Chris Whalen said. "If they had continued through normal channels, they could have easily been in bankruptcy for five years." "When I approved the sale agreement and entered the sale approval order, I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs,” Bankruptcy Judge Robert Gerber said in July. “It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all." Industry experts say that GM should be very concerned with the judge’s reaction to the deal. More is at stake than the roughly $1 billion that “old GM’s” spurned creditors are seeking, according to industry observers. Judge Gerber may have to reopen the entire bailout, and that, according to bankruptcy experts, could unravel the entire settlement. Read more.

U.S. CHARGES 530 PEOPLE IN MORTGAGE PROBE WITH $1 BILLION IN LOSSES

Attorney General Eric Holder said today that the U.S. brought charges against 530 people over mortgage schemes that cost homeowners more than $1 billion, Bloomberg News reported. More than 73,000 homeowners were victims of various frauds for which charges were filed during a year-long crackdown, including "foreclosure rescue schemes" that take advantage of those who have fallen behind on payments, the Justice Department said. Typical schemes involved promises to homeowners that foreclosures could be prevented by payment of a fee, according to the statement. As part of the schemes, "investors" purchase the mortgage or the titles of homes are transferred to those taking part in the fraud, resulting in homeowners losing their property, the department said. Read more.

COURT SAYS CONGRESS CANNOT BLOCK PAY HIKES FOR JUDGES

The U.S. Court of Appeals for the Federal Circuit in a 10-2 decision on Friday found that Congress cannot revoke cost-of-living adjustments promised to federal judges in the Ethics Reform Act of 1989, reversing the court's holding to the contrary in 2001, the National Law Journal reported yesterday. Six current and retired federal judges sued over Congress' decision to block cost-of-living adjustments in the past and whether legislation passed after the court's 2001 decision overrode provisions of the 1989 law. In the Oct. 5 decision, the court found that Congress had violated the Compensation Clause of the Constitution, which aims to protect judicial independence by limiting the ability of the other branches of government from reducing judges' salaries. If Congress wanted to amend the 1989 law, the judges wrote, it could, but not in a way that affected any sitting judges. Read more.

WALL STREET REGULATOR RAMPS UP ENFORCEMENT

The Commodity Futures Trading Commission (CFTC), once considered a toothless regulator, brought a record number of enforcement cases over the past year as fines soared, the New York Times DealBook blog reported on Friday. The agency said on Friday that it levied $585 million in sanctions during its 2012 fiscal year, which ended Sept. 30, up from $450 million the year before. The surge in fines is largely tied to one case. In June, the British bank Barclays agreed to pay $200 million to the agency for trying to manipulating a crucial interest rate. Read more.

ABI MEMBERS CAN RECEIVE A DISCOUNT ON THEIR PURCHASE OF A DEBTOR WORLD

A Debtor World, published by Oxford University Press, contains a collection of contributions about the societal implications of private debt from top scholars at the 2008 Debt Symposium sponsored by ABI and hosted by the University of Illinois College of Law. The essays comprising this volume are authored by dozens of leading U.S. and international academics who have written about debt or issues related to debt in a wide range of disciplines including law, sociology, psychology, history, economics and more. The collection explores debt as neither a problem nor a solution but as a phenomenon, and promotes the exchange of knowledge to better comprehend why consumers and businesses decide to borrow money. It explores what happens to businesses and consumers under heavy debt loads, and what legal norms and institutions societies need in order to encourage the efficient use of debt while promoting a greater understanding of the global phenomenon of increased indebtedness and societal dependence. To order your copy and receive an ABI member discount, please click here and enter promo code "31256" when making your purchase. The discount expires 12/31.

SHOW YOUR SUPPORT FOR STEVEN GOLICK, A COLLEAGUE AND ABI LEADER

Our friend Steven Golick (Osler Hoskin & Harcourt LLP, Toronto) is facing a medical crisis. He has been diagnosed with a serious brain tumor, requiring complex surgery and treatment. Steven’s spirits are very strong and he and his family remain optimistic, but he can use our support. A prominent international restructuring attorney and an ABI member since 1994, Steven is also a founding member of the ABI house band, the Indubitable Equivalents. Because the band is important to Steven, his fellow band-mates have organized a new Blog site for Steven's friends and colleagues to show their love and support at this critical time. Please click on this link to share your thoughts with many others, and post as often as you'd like.

ABI IN-DEPTH

LAST CHANCE TO GET YOUR TICKET FOR TOMORROW’S PLAYOFF GAME TO SEE THE ST. LOUIS CARDINALS TAKE ON THE WASHINGTON NATIONALS IN D.C.!

Only a few tickets remain to the ABI Endowment's special event at Nationals Park tomorrow at 1 p.m. ET to see the St. Louis Cardinals take on the Washington Nationals in Game 3 of the National League Division Series. For $400, you will receive a game ticket to a luxury suite, food and open bar. Don't miss playoff baseball in Washington, D.C.! Click here to register!

Sponsorships Are also Available!
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MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26

Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.

ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at sgerdano@abiworld.org.

LATEST CASE SUMMARY ON VOLO: LIQUIDATORS OF LEHMAN BROTHERS AUSTRALIA LTD. V. LEHMAN BROTHERS SPECIAL FINANCING INC. (IN RE LEHMAN BROTHERS HOLDINGS INC.; 2D CIR.)

Summarized by Janice Grubin of Todtman, Nachamie, Spizz & Johns, P.C.

The Second Circuit vacated and remanded the judgment of the district court and reinstated the appeal for consideration of the bankruptcy court order denying intervention on the merits. Given that (1) denials of intervention are generally considered to be final appealable orders in the non-bankruptcy context, (2) the bankruptcy standard for finality is more flexible than other civil litigation and (3) the pragmatic approach is required by the instant circumstances, the Circuit held that the bankruptcy court's denial of the appellants' motions to intervene was a final, appealable order.

There are more than 650 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: PINNACLE UNIONS BALK AT AIRLINE'S ATTEMPTS TO SCRAP CONTRACT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post reported on how Pinnacle Airlines Corp.'s thousands of pilots and flight attendants are objecting to the airline’s bid to scrap their contracts, a move the regional carrier says is necessary to exit bankruptcy protection.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?

Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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LAST CHANCE!

ABI ENDOWMENT EVENT: WASHINGTON NATIONALS PLAYOFF GAME!

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Oct. 10, 2012
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Oct. 16, 2012
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ABI/ST. JOHN'S "BANKRUPTCY AND RACE: IS THERE A RELATION?" SYMPOSIUM
Oct. 19, 2012
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ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING
Oct. 26, 2012
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  CALENDAR OF EVENTS
 

October
- ABI Endowment Event: Nationals Playoff Game
     October 10, 2012 | Washington, D.C.
- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar
October 15, 2012
- ABI/Bloomberg Distressed Lending Conference
October 16, 2012 | New York, N.Y..
- International Insolvency and Restructuring Symposium
     October 18, 2012 | Rome, Italy
- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium
     October 19, 2012 | Queens, N.Y.
- ABI Program at NCBJ's Annual Conference
     October 26, 2012 | San Diego, Calif.

November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Professional Development Program
     November 9, 2012 | New York, N.Y.

  

 

- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.
- Winter Leadership Conference
     November 29 - December 1, 2012 | Tucson, Ariz.

December
- Forty-Hour Bankruptcy Mediation Training
     December 4-8, 2012 | New York, N.Y.

2013

January
- Rocky Mountain Bankruptcy Conference
     January 24-25, 2013 | Denver, Colo.

February
- Kansas City Advanced Consumer Bankruptcy Practice Institute
     February 17-19, 2013 | Kansas City, Mo.


 
 
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Analysis How Chapter 11 Saved the U.S. Economy

ABI Bankruptcy Brief | March 26 2013
 
  

March 26, 2013

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

ANALYSIS: HOW CHAPTER 11 SAVED THE U.S. ECONOMY

Harvard Business School Prof. Stuart C. Gilson’s recent study of the 2008 financial crisis says that restructuring and chapter 11 played a heroic role in helping the country rebound. In his article in the 2012 Journal of Applied Corporate Finance, Gilson writes that the "amount of debt that needed to be restructured posed a seemingly insurmountable challenge." At one point, "$3.5 trillion of corporate debt was distressed or in default. [Between] 2008 and 2009, $1.8 trillion worth of public company assets entered chapter 11 bankruptcy protection—almost 20 times more than during the prior two years," according to Gilson. A significant portion of the private-equity industry, he says, was "widely believed to be on the verge of extinction." Instead, in a relatively short time, much of the corporate debt that defaulted during the financial crisis has been managed down, mass liquidations have been averted, and corporate profits, balance sheets and values have rebounded with remarkable speed, according to Gilson's analysis. Read more.

REPORT: U.S. STUDENT LOAN WRITE-OFFS HIT $3 BILLION IN FIRST TWO MONTHS OF 2013

An Equifax study showed that U.S. banks wrote off $3 billion of student loan debt in the first two months of 2013, up more than 36 percent from the same period a year ago, Reuters reported yesterday. The credit reporting agency also said that student lending has grown from last year because more people are going back to school and the cost of higher education has risen. "Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs," Equifax Chief Economist Amy Crews Cutts said in a statement. U.S. student loan debt reform has become a more pressing issue since the U.S. Consumer Financial Protection Bureau (CFPB) reported in March 2012 that the total surpassed $1 trillion by the end of 2011 and as interest rates on subsidized Stafford loan rates are set to double in July. The cost of earning a 4-year undergraduate degree has gone up by 5.2 percent per year in the last decade, according to the CFPB, forcing more students to take out loans. Read more.

For more information, be sure to register for ABI's "Student Loans: Bankruptcy May Not Have the Answers – But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. Click here for more information.

U.S. CRACKS DOWN ON "FORCED" INSURANCE

A U.S. housing regulator is cracking down on a little-known practice that has hit millions of struggling borrowers with high-price homeowners' insurance policies arranged by banks that benefit from the costly coverage, the Wall Street Journal reported today. The Federal Housing Finance Agency (FHFA), which regulates mortgage giants Fannie Mae and Freddie Mac, plans to file a notice today to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance. Such "forced" policies are imposed on homeowners whose standard property coverage lapses, typically because the borrower stops making payments. Critics say that the fee system has given banks a financial incentive to arrange more expensive homeowners' policies than are necessary. FHFA's move would apply nationwide to all mortgages guaranteed or owned by Fannie and Freddie—about half of the housing market. Read more. (Subscription required.)

COMMENTARY: IS IT ALREADY TIME TO WEAKEN DODD-FRANK?

A key effort in the Dodd-Frank financial reform act has been to bring transparency and reforms to the complex market of derivatives, but Republicans and Democrats on the House Agriculture Committee on Wednesday approved seven bills that would roll back parts of the Dodd-Frank financial regulations, according to a commentary in Sunday's Washington Post. However, Dodd-Frank's regulation of derivatives is crucially important to alleviate future financial crises and set a proper course for reform, according to the commentary. The bills now headed to the House floor for a vote weaken Title VII of Dodd-Frank, which is the part that regulates derivatives. "Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal," financier Warren Buffett said. Bill Clinton said that he was wrong to avoid regulating derivatives when he had the chance. These financial instruments played a central role in the financial crisis, culminating in the collapse and bailout of AIG. Since Dodd-Frank, there has been extensive debate about the new rules for derivatives, which range from collateral to price transparency. But there has also been a counter-debate about who has to follow the new rules. Those who fall under "end-user exemptions" are largely able to forgo following the Dodd-Frank rules, and the easiest way to understand the bills passed out of the Agriculture Committee is to note that they seek to expand the scope of those exemptions. One bill would weaken cross-border regulations, allowing U.S. firms that run their derivatives in other countries to avoid following the new derivative rules. In the age of electronic trading and overlapping jurisdictions, this limits the ability of regulators to make sure that prudential standards are set in this country. Read more.

LAWSUIT SHEDS LIGHT ON ALLEGED INFLATION OF LEGAL BILL

The thorny issue of law firm billing is at the heart of a lawsuit involving a fee dispute between a law firm and Adam H. Victor, an energy industry executive, the New York Times DealBook blog reported yesterday. After DLA Piper sued Victor for $675,000 in unpaid legal bills, Victor filed a counterclaim, accusing the law firm of a "sweeping practice of overbilling." Victor's feud with DLA Piper began after he retained the firm in April 2010 to prepare a bankruptcy filing for one of his companies. The lawsuit has brought to light e-mails from DLA Piper’s lawyers about how the bill was running way over budget. Another described a colleague’s approach to the assignment as "churn that bill, baby!" Legal ethics scholars said that it is highly unusual to find documentary evidence of possible churning — the creation of unnecessary work to drive up a client's bill. Read more.

HOTEL BLOCK FOR ABI'S ANNUAL SPRING MEETING ALMOST SOLD OUT! REGISTER TODAY!

The hotel block at the Gaylord National Resort and Convention Center in National Harbor, Md., is almost sold out for ABI’s 2013 Annual Spring Meeting! Held April 18-21, 2013, ASM features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• Current Issues for Financial Advisors in Bankruptcy Cases
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Make sure to register today!

ABI IN-DEPTH

TEE OFF ON THE NEW ABI GOLF TOUR!

Starting with the Annual Spring Meeting, ABI will offer conference registrants the option to participate in the ABI Golf Tour. The Tour will take place concurrently with all conference golf tournaments. The Tour is designed to enhance the golfing experience for serious golfers, while still offering a fun networking opportunity for players of any ability. As opposed to the format used at ABI’s regular conference events, Tour participants will "play their own ball." They will be grouped on the golf course separately from other conference golf participants and will typically play ahead of the other participants, expediting Tour play. Tour participants will be randomly grouped in foursomes, unless otherwise requested of the Commissioner in advance of each tournament. Prizes will be awarded for each individual Tour event, which are sponsored by Great American Group. The grand prize is the "Great American Cup," also sponsored by Great American Group, which will be awarded to the top player at the end of the Tour season. Registration is free. Click here for more information and a list of 2013 ABI Golf Tour event venues.

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!

An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: NORTH AMERICAN BANKING CO. V. LEONARD (IN RE WEB2B PAYMENT SOLUTIONS INC.; 8TH CIR.)

Summarized by Brendan Gage, U.S. Bankruptcy Court, Eastern & Western Districts of Arkansas

Affirming the bankruptcy court, the Bankruptcy Appellate Panel for the Eighth Circuit held that a creditor loses its possessory lien in deposit accounts when it turns over the account funds to the trustee without requesting a court to adequately protect its lien in the funds.

There are more than 800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: WHAT IS NEXT FOR CREDITORS OF DETROIT?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the potential next steps for creditors of financially distressed Detroit.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Who will win the NCAA basketball tournament?

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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  CALENDAR OF EVENTS
 

2013

April
- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"
     April 5, 2013
- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"
     April 10, 2013
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.

May
- "Nuts and Bolts" Program at NYCBC
     May 15, 2013 | New York, N.Y.
- ABI Endowment Cocktail Reception
     May 15, 2013 | New York, N.Y.
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.
- Litigation Skills Symposium
     May 21-24, 2013 | Dallas, Texas


  

 

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.

July
- Northeast Bankruptcy Conference and Northeast Consumer Forum
     July 11-14, 2013 | Newport, R.I.
- Southeast Bankruptcy Workshop
     July 18-21, 2013 | Amelia Island, Fla.


 
 
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Foreclosures Grow Again as Funding for Help Wanes

ABI Bankruptcy Brief | August 7, 2012
 
  

August 7, 2012

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

FORECLOSURES GROW AGAIN AS FUNDING FOR HELP WANES

With millions of homes still in the foreclosure pipeline, mortgage counselors across the country say they are handling increasingly complex cases for homeowners who are unemployed, underwater or redefaulting -- and sometimes, all three, Bloomberg News reported today. Even as borrowers’ problems become more intractable, federal support is waning. Counseling programs are funded largely through the U.S. Department of Housing and Urban Development, which has allocated about $620 million to advise approximately 1.36 million homeowners since December 2007, according to a NeighborWorks America June 11 report to Congress. Last November, Congress appropriated $45 million for housing counseling in fiscal year 2012 after slashing all counseling funding during April budget negotiations. HUD had requested $88 million. The House passed a 2013 HUD appropriations bill in June allocating $45 million to housing counseling, $10 million less than HUD requested. The bill is now stalled in the Senate, and the White House has said President Barack Obama plans to veto the bill if passed in its current form. Administration officials are urging states to compensate for declining funds with money from a recent court settlement with mortgage servicers. Counselors, who act as neutral third parties between homeowners and lenders, say their services will be needed as long as unemployment remains high, scammers target struggling homeowners and states change their foreclosure policies, as happens frequently. Read more.

LAWSUIT COULD UNDO SALE THAT CREATED NEW GM, COMPANY SAYS

The new General Motors Co. could be undone by a $3 billion lawsuit that pits general creditors against hedge funds including Appaloosa Management LP, Elliott Management Corp. and Fortress Investment Group LLC, Bloomberg News reported today. A trust for creditors of the old, bankrupt part of the automaker now known as Motors Liquidation Co. sued the hedge funds in bankruptcy court in March, alleging that while GM was preparing its bankruptcy filing on June 1, 2009, the funds, which held notes in a Canadian unit of GM, "saw an eleventh-hour opportunity for profit and pounced." The trust seeks to have a $2.67 billion claim and a $367 million payment negotiated for holders of notes in GM's Nova Scotia unit disallowed or reduced, saying that the hedge funds seek more than three times what General Motors actually owed them. General Motors, the currently operating automaker that split off from the bankrupt unit through a purchase of its assets July 10, said that the trust's objections "threaten to disturb" the sale that saved the U.S. automaker, allowing it to prosper. Read more.

FEDERAL RESERVE SAYS U.S. BANK LENDING CONDITIONS EASING

The Federal Reserve said yesterday that banks continued to ease lending standards for larger firms in the last three months but that small businesses are still having a hard time accessing credit, Reuters reported today. The results from the central bank's quarterly senior loan officer survey suggest that the ability of firms to borrow has continued to improve despite recent signs of weakness in the economic recovery. A number of banks eased loan standards on auto and credit card loans, the Fed said. Strong demand for prime mortgage loans offered further evidence that a nascent housing rebound is finally beginning to take hold, according to the survey. U.S. banks are benefiting from new business due to a decrease in lending from European institutions, the survey found. Read more.

FEARING AN IMPASSE IN CONGRESS, INDUSTRY CUTS SPENDING

A rising number of manufacturers are canceling new investments and putting off new hires because they fear that paralysis in Washington, D.C., will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months, the New York Times reported on Sunday. Democrats and Republicans in Congress are far apart on how to extend the Bush-era tax breaks beyond January — the same month automatic spending reductions are set to take effect — unless there is a deal to trim the deficit. The combination of tax increases and spending cuts is creating an economic threat that Federal Reserve Chairman Ben S. Bernanke calls "the fiscal cliff." The worries come amid broader fears that the economy is losing momentum; the annual rate of economic growth in the second quarter fell to 1.5 percent from 2 percent in the first quarter, and 4.1 percent in the last quarter of 2011. On Thursday, the Commerce Department reported that factory orders unexpectedly fell 0.5 percent in June from the previous month, while data on the labor market released on Friday showed job creation still falling short of the level needed to bring down the unemployment rate. Read more.

STATE REGULATORS URGE CONGRESS TO EXTEND DEPOSIT INSURANCE

State regulators on Friday sent a letter to Congress urging for the extension of a special program that provides government insurance on bank accounts known as the Transaction Account Guarantee (TAG), the Wall Street Journal reported on Saturday. It is clear that "the stability provided by the TAG program is still necessary," wrote John Ryan, president of the Conference of State Bank Supervisors. The guarantee program insures all bank deposits above the traditional $250,000 limit for guaranteed deposits provided by the Federal Deposit Insurance Corp. The result is a sense of safety for companies and municipalities that want to deposit large sums of cash at banks for use in managing payroll, for instance. The program covers more than a trillion dollars worth of zero-interest deposits at large and small banks. The program was created in 2008 in the midst of market chaos stemming from the financial crisis. Four years later, the program faces a Dec. 31 expiration date, absent congressional action. Read more. (Subscription required.)

SMALL BANKS CRITICIZE PROPOSED BANK CAPITAL RULES

Executives at many small banks complain that the forthcoming bank capital rules proposed by the OCC, Federal Reserve and Federal Deposit Insurance Corp. to implement an international agreement known as Basel III could force the banks to cut back on loans to small businesses or homeowners, the Wall Street Journal reported today. The current economic malaise has heightened concern about the health of smaller lenders. Smaller banks say they are a bigger driver of growth in their communities—particularly for small businesses—than their bigger, multinational rivals. Lenders with less than $1 billion in assets made up about 10 percent of industry assets as of the first quarter but made 37 percent of small loans to businesses and farms, according to research by the FDIC, which has launched an initiative to better understand the challenges facing community banks. At a vote to send the draft rules out for comment, Federal Reserve governor Elizabeth Duke raised concerns that new treatment of mortgages and other assets under the new capital rules could hamper legitimate lending by smaller lenders. Small lenders say that the elaborate Basel III system was designed to rein in the large, internationally active banks that brought the financial system to its knees, not small community institutions. Read more. (Subscription required.)

LATEST ABI PUBLICATION EXPLORES OIL AND GAS BANKRUPTCIES

The U.S. oil and gas industry is especially vulnerable to the effects of myriad internal and external factors, ranging from global credit markets to domestic and foreign geopolitical events, and from technological developments and limitations to population growth and even the weather. These factors have contributed to a dramatic increase in restructurings and bankruptcy filings over the last decade. Bankruptcy cases involving exploration and production companies raise unique issues, resulting from the interplay among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance. When Gushers Go Dry: The Essentials of Oil and Gas Bankruptcy provides a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. For more information about ordering the book, please visit the ABI Bookstore.

ABI IN-DEPTH

ABI MEMBERS WELCOME TO ATTEND ABC'S FREE HALF-DAY "BANKRUPTCY: BACK TO THE FUTURE" PROGRAM IN SEPTEMBER

The American College of Bankruptcy invites you to attend a free half-day program on Sept. 28 at the IIT Chicago-Kent College of Law for a discussion of many of the challenging topics facing current bankruptcy and reorganization professionals. Topics to be addressed include recent decisions of the U.S. Supreme Court and Court of Appeals, important work of the Advisory Committee on Bankruptcy Rules, and developments in the field of bankruptcy ethics. The speakers for the program are among the nation’s leading judges, academics and bankruptcy professionals. While there is no cost to attend, seating is limited, so early reservation is suggested. For more information and to register, please click here.

LATEST CASE SUMMARY ON VOLO: TERRY V. STANDARD INSURANCE CO. (IN RE TERRY; 8TH CIR.)

Summarized by Sarah Smegal of Bartlett Hackett Feinberg P.C.

The Eighth Circuit BAP reversed the bankruptcy court and remanded the case for a determination of whether the equities favored allowing the creditor to recoup the debtor's pre-petition overpayment of disability insurance benefits from post-petition benefits. Reviewing the bankruptcy court's decision de novo, the BAP held that the debtor's debt to Standard was revived when Standard turned over the $45,316.54 to the trustee in response to the preference demand letter. Standard's right to reimbursement was a claim entitled to be paid as a general unsecured claim as allowed under Section 502(h). Standard did not file a proof of claim, so its claim was not allowed and it was not entitled to any distribution in the case. Its claim was also discharged under Section 727(b). The BAP found that although the debt was discharged and Standard could not collect the overpayment affirmatively, Standard's equitable defense of recoupment survived and could be exercised under the policy. For recoupment to apply, the creditor must have a claim against the debtor that arose from the same transaction as the debtor's claim against the creditor. The BAP ruled that both parties' rights and obligations arose out of a single contract, i.e. the long-term disability insurance policy. Recoupment is only allowed where it would be inequitable for the debtor to enjoy the benefits of the transaction without also meeting his obligations, and is also narrowly construed in bankruptcy. Accordingly, as the equities must be weighed and the question was not reached by the bankruptcy court, the BAP remanded the case.

Nearly 600 appellate opinions are summarized on Volo typically within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: THIRD CIRCUIT REVISITS EQUITABLE MOOTNESS IN PHILADELPHIA NEWSPAPERS CASE

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examined how the U.S. Court of Appeals for the Third Circuit recently held in In re Philadelphia Newspapers LLC, No. 11-3257 (3d Cir. July 26, 2012) that an appeal cannot be dismissed as equitably moot solely on the basis that a chapter 11 plan has been substantially consummated.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll
The Twombly/Iqbal rule for pleading ‘plausible’ claims has been applied too stringently in dismissing avoidance actions for failure to state a claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

IS YOUR ABI MEMBERSHIP PROFILE CURRENT?

Keeping a current profile will allow you to benefit from one of ABI's most important services - networking. When you update your profile, you are putting your most valuable information in the membership directory. Be sure to include your areas of expertise, firm information, education and join any other committees that are of interest. Click here to update your profile.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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NEXT EVENT:

SE 2012
Sept. 13-14, 2012
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COMING UP:

 

SW 2012
Sept. 13-15, 2012
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NYU 2012
Sept. 19-20, 2012
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NABMW 2012
Oct. 4, 2012
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SE 2012
Oct. 5, 2012
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SE 2012
Oct. 5, 2012
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SE 2012
Oct. 8, 2012
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SE 2012
Oct. 18, 2012
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U.S./Mexico Restructuring Symposium
Mexico City, Mexico
Nov. 7, 2012

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SE 2012
Nov. 12, 2012
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  CALENDAR OF EVENTS
 

September
- Complex Financial Restructuring Program
     September 13-14, 2012 | Las Vegas, Nev.
- Southwest Bankruptcy Conference
     September 13-15, 2012 | Las Vegas, Nev.
- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
     September 19-20, 2012 | New York, N.Y.
- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program
     September 28, 2012 | Chicago, Ill.

October
- Nuts & Bolts for Young and New Practitioners - KC
     October 4, 2012 | Kansas City, Mo.
- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum
     October 5, 2012 | Kansas City, Mo.

  


- Bankruptcy 2012: Views from the Bench
     October 5, 2012 | Washington, D.C.
- Chicago Consumer Bankruptcy Conference
     October 8, 2012 | Chicago, Ill.
- International Insolvency and Restructuring Symposium
     October 18, 2012 | Rome, Italy

November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.


 
 
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Too-Big-to-Fail Claim Disputed by Bank Groups

ABI Bankruptcy Brief | March 12 2013
 
  

March 12, 2013

 
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  NEWS AND ANALYSIS   

"TOO-BIG-TO FAIL" CLAIM DISPUTED BY BANK GROUPS

Lobbying groups for the largest U.S. banks pushed back against claims that they remain too big to fail, rebutting assertions by lawmakers and regulators that they enjoy a "taxpayer subsidy" because of their size, Bloomberg News reported yesterday. The Dodd-Frank Act, passed by Congress in response to the 2008 credit crisis, greatly diminished the advantage that the biggest lenders held over smaller rivals, five industry groups wrote today in a brief on the issue. "There is substantial evidence that the market recognizes the impact Dodd-Frank has had on investor expectations," the Clearing House, Financial Services Forum, Financial Services Roundtable, Securities Industry and Financial Markets Association and American Bankers Association said in their brief. “Given the sizable costs associated with new regulations, together with the new orderly liquidation framework, any purported TBTF-related funding advantage has clearly been reduced or even eliminated." The financial-industry groups, representing lenders such as JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., are responding to complaints by lawmakers and regulators including Warren and Dallas Federal Reserve President Richard Fisher that Dodd-Frank did not do enough to rein in big lenders. Read more.

COMMENTARY: HOW TO SHRINK THE "TOO-BIG-TO-FAIL" BANKS

A dozen megabanks today control almost 70 percent of the assets in the U.S. banking industry as the concentration of assets has been in progress for years, but it intensified during the 2008–09 financial crisis, when several failing giants were absorbed by larger, presumably healthier ones, according to a commentary in today's Wall Street Journal. Meanwhile, the mere 0.2 percent of banks deemed "too big to fail" are treated differently from the other 99.8 percent, and differently from other businesses. Implicit government policy has made these institutions exempt from the normal processes of bankruptcy and creative destruction, according to the commentary. Without fear of failure, these banks and their counterparties can take excessive risks. The commentary offers a few steps to level the competitive landscape:

1) Roll back the federal safety net—deposit insurance and the Federal Reserve's discount window—to apply only to traditional commercial banks, and not to the nonbank affiliates of bank holding companies or the parent companies themselves, which the safety net was never intended to protect.

2) Require customers, creditors and counterparties of all nonbank affiliates and the parent holding companies to sign a simple, legally binding, unambiguous disclosure acknowledging and accepting that there is no government guarantee—ever—backstopping their investment. A similar disclaimer would apply to bank deposits outside the FDIC insurance limit and other unsecured debts.

3) Restructure the largest financial holding companies so that every one of their corporate entities is subject to a speedy bankruptcy process and, in the case of banking entities themselves, be of a size that is "too small to save."

Click here to read the full commentary. (Subscription required.)

ANALYSIS: AS ASBESTOS CLAIMS RISE, SO DO WORRIES ABOUT FRAUD

With dozens of asbestos-related manufacturers forced into bankruptcy, a burgeoning swath of the legal action has shifted out of the courtroom and into a world of trusts that evaluate claims and authorize payouts with little outside scrutiny, according to an analysis yesterday in the Wall Street Journal. Fraud allegations have periodically dogged the trusts, and even though the worst asbestos-related diseases are finally starting to taper off, there is growing concern that the trusts will run out of money before America runs out of asbestos victims. Three decades after Manville Corp. collapsed under an avalanche of asbestos litigation, personal-injury claims in the case continue to pile up at a rate of 85 per day. By last March, a Manville bankruptcy trust had already paid out nearly $4.3 billion. "Right now there are a lot of suggestions that fraud and abuse are present," says House Judiciary Chairman Bob Goodlatte, a Republican from Virginia, who has scheduled a hearing Wednesday on a bill requiring trusts to publish detailed claims reports to help ensure that money goes only to legitimate victims. In recent months, judges across the country who handle asbestos cases involving still-viable companies have granted defense requests to subpoena bankruptcy trusts to sniff out potentially false and conflicting evidence. Many defendants believe such data could help expose fraudulent or inflated claims that could potentially save them hundreds of millions of dollars in jury verdicts. Read more. (Subscription required.)

Click here to review the bill text of H.R. 982, the "Furthering Asbestos Claim Transparency (FACT) Act of 2013" introduced by Rep. Blake Farenthold (R-Texas), which will be examined tomorrow at a hearing before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law at 2:30 p.m. ET.

COMMENTARY: ENTERPRISE VALUE TAX PROPOSAL WOULD HIT FIRMS THAT HAVE NOTHING TO DO WITH "CARRIED INTEREST"

The Enterprise Value Tax (EVT) has been inserted into congressional proposals to "fix" carried interest, but the legislation would claw back significantly more money than investment managers and other financial professionals have ever saved by taking legal, proper and open advantage of the carried-interest tax treatment, according to a commentary in today's Wall Street Journal. Under current law, entrepreneurs of all types who sell their companies are taxed on the profits at the capital-gains rate. The EVT seeks to change this, but only for the sale of certain businesses—namely investment-service partnerships, the sale of which would now be taxed as regular income. The EVT is designed to claw back entrepreneurs' supposedly ill-gotten carried-interest gains from the past. Worse, the commentary says that the proposed new tax would mostly affect people who do not currently benefit much, if at all, from the tax treatment of carried interest. The savings afforded to carried interest have benefited only a small subset of investment managers who have substantial performance-fee earnings in the form of long-term capital gains. That category does not include many hedge funds, whose gains are mostly short-term, or traditional money managers, who do not center their businesses around performance fees. The EVT would raise the bulk of its revenue from investment-services partnerships that have little or no carried-interest earnings, or whose carried interest is already taxed at the same rate as ordinary income because the performance fee results from ordinary income or short-term capital gains. Read the full commentary. (Subscription required.)

For insight, the Cato Institute released an analysis last year on the dangers of the proposed enterprise value tax. Click here to read the analysis.

REPORT: APPEALS COURT ACTIVITY RISES, BANKRUPTCY COURTS AND DISTRICT COURTS SEE DROP-OFF IN CASELOADS IN FY2012

Appeals court activity increased in fiscal year 2012 (12-month period ending Sept. 30, 2012) as filings dropped in bankruptcy courts and district courts, according to the "Judicial Business of the U.S. Courts" report released today by the Administrative Office of the U.S. Courts. The regional U.S. courts of appeals reported that filings rose 4 percent to 57,501. In the U.S. district courts, total filings fell 5 percent to 372,563 as civil case filings decreased 4 percent to 278,442 and criminal defendant filings declined 9 percent to 94,121. Petitions filed in the U.S. bankruptcy courts dropped 14 percent to 1,261,140. To read the report and review the caseload totals, please click here.

SMU DEDMAN SCHOOL OF LAW TAKES TOP HONORS AT 21st ANNUAL DUBERSTEIN MOOT COURT COMPETITION

Students from Southern Methodist University Dedman School of Law prevailed over a record 60 other student teams to win first place at the 21st Annual Conrad B. Duberstein National Bankruptcy Moot Court Competition, held March 9-11 in New York. The competition is co-sponsored by the American Bankruptcy Institute and St. John’s University School of Law. Florida Coastal School of Law took second place in the competition, while the University of Florida Frederic G. Levin College of Law and a team from Stetson University College of Law shared the honors for third place. The University of Miami School of Law won the award for the Best Brief of the competition, and Nicholas Andrews of Mississippi College School of Law took the honor of Best Advocate. Nearly 1,000 members of the New York-area insolvency community attended the final-night awards dinner at Pier 60 on the Manhattan waterfront. For more information on ABI's Conrad B. Duberstein National Bankruptcy Moot Court Competition, please go to http://www.stjohns.edu/academics/graduate/law/academics/llm/duberstein.

LATEST ABI PODCAST EXAMINES THE EFFECTIVENESS OF CHAPTER 11 FOR CHURCH FINANCIAL DISTRESS

The latest ABI Podcast features ABI Resident Scholar Scott Pryor speaking with Prof. Pamela Foohey of the University of Illinois College of Law discussing her recent paper examining church reorganizations that filed for chapter 11 protection, titled "Bankrupting the Faith." Foohey discusses her empirical study looking at church bankruptcies from 2006-11 to draw out the characteristics of the filings and case outcomes to see if bankruptcy is an effective solution to the institution's financial problems. Click here to listen.

To read Prof. Foohey's study, please click here.

DON'T MISS ABC'S FREE EVENT, "THE AUTO BANKRUPTCIES: CHECKING THE REARVIEW MIRROR," ON MARCH 22!

ABI members are encouraged to register for the American College of Bankruptcy's "The Auto Bankruptcies: Checking the Rearview Mirror" on March 22 at Boston College Law School in Newton, Mass. The afternoon event will feature key players looking back at the events that led to GM and Chrysler being placed into bankruptcy and the lessons that have been learned from the cases. Panelists include:

Corrine Ball of Jones Day (New York), who served as lead bankruptcy counsel to Chrysler.

Matthew A. Feldman of Willkie Farr and Gallagher LLP (New York), who served as chief legal advisor to the Obama administration's Task Force on the Auto Industry.

• Hon. Arthur J. Gonzalez, a Senior Fellow at New York University School of Law and formerly the Chief Bankruptcy Judge for the U.S. Bankruptcy Court for the Southern District of New York, who presided over the Chrysler chapter 11 proceedings.

Harvey R. Miller of Weil, Gotshal & Manges LLP (New York), who served as lead bankruptcy counsel to GM.

The moderator will be Mark N. Berman of Nixon Peabody LLP (New York).

Registration for the afternoon event is free, so be sure to sign up today before it reaches capacity!

ABI'S ANNUAL SPRING MEETING: CONSUMER PROGRAMMING WITH CROSS-OVER APPEAL

With four session tracks looking at issues geared toward chapter 11 restructurings, financial advisors, professional development and consumer bankruptcy, a number of sessions at ABI's Annual Spring Meeting have cross-over appeal for both consumer and business practitioners. Sessions include:

The Appellate Process: This distinguished panel will explore recent issues in appellate practice that are of interest to both consumer and business practitioners, including the ability to bypass intermediary appellate courts and take appeals directly to the circuit courts.

Consumer Class Actions: This panel will explore the potential benefits and pitfalls of class actions by debtors/trustees against creditors in chapter 13 cases, which are highlighted by two recent decisions of the Fifth Circuit. Many of the issues discussed during this panel will be useful in business cases as well.

The Individual Conundrum - Chapter 7, 11 or 13?: Deciding on the appropriate chapter for a high net worth individual contemplating a bankruptcy filing can be a daunting task. This panel will explore the considerations that guide the practitioner in advising individual clients in making this decision.

To register for the Annual Spring Meeting and to see the full schedule of program tracks and events, please click here.

ABI IN-DEPTH

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!

An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: COOK V. BACA (10TH CIR.)

Summarized by Steven T. Mulligan of Bieging Shapiro & Barber LLP

The court affirmed the dismissal of the pro se appellant's complaint in part and remanded with instructions to modify a portion of the dismissal from a dismissal with prejudice to one without prejudice for lack of subject-matter jurisdiction. The court found that the appellant lacked the standing to argue that a violation of the automatic stay had occurred because the BAP had already found that such claims belong to the bankruptcy estate, so the appellant lacked standing to bring such arguments.

There are more than 750 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: PROBLEMS AT FHA TOO BIG FOR CONGRESS TO IGNORE

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post found that reform efforts could result in a much smaller scope of permissible lending at the FHA, with a renewed focus on its traditional core of low-income customers, higher credit score requirements and increased down payments.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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BBW 2013
March 22, 2013
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BBW 2013
April 5, 2013
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BBW 2013
April 10, 2013
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ASM NAB 2013
April 18, 2013
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ASM 2013
April 18-21, 2013
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NYCBC 2013
May 15, 2013
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ASM 2013
May 16, 2013
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ASM 2013
May 21-24, 2013
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ASM 2013
June 7, 2013
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ASM 2013
June 13-16, 2013
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NE 2013
July 11-14, 2013
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ASM 2013
July 18-21, 2013
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  CALENDAR OF EVENTS
 

2013

March
- Bankruptcy Battleground West
     March 22, 2013 | Los Angeles, Calif.

April
- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"
     April 5, 2013
- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"
     April 10, 2013
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.


  

 

May
- "Nuts and Bolts" Program at NYCBC
     May 15, 2013 | New York, N.Y.
- ABI Endowment Cocktail Reception
     May 15, 2013 | New York, N.Y.
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.
- Litigation Skills Symposium
     May 21-24, 2013 | Dallas, Texas

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.

July
- Northeast Bankruptcy Conference and Northeast Consumer Forum
     July 11-14, 2013 | Newport, R.I.
- Southeast Bankruptcy Workshop
     July 18-21, 2013 | Amelia Island, Fla.


 
 
ABI BookstoreABI Endowment Fund ABI Endowment Fund
 

ABI Bankruptcy Brief Government Losses Pile Up from Auto Industry Bailout

ABI Bankruptcy Brief | December 10, 2013
 
  

December 10, 2013

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

TELECONFERENCE RECAPS ABI'S CHAPTER 11 REFORM COMMISSION'S EFFORTS IN 2013, STEPS FORWARD IN 2014

Listen to the recording of yesterday's media teleconference featuring a recap of ABI's Commission to Study the Reform of Chapter 11 activities in 2013 and a preview of the next steps for the Commission's final report at the end of in 2014. Commission Co-Chairs Robert J. Keach and Al Togut were joined by Prof. Michelle Harner to discuss the Commission's efforts. The moderator for the teleconference was ABI Resident Scholar Kara Bruce. Click here to listen to the recording.

GOVERNMENT LOSSES PILE UP FROM AUTO INDUSTRY BAILOUT

The Treasury Department announced yesterday that the government has sold its remaining shares of General Motors (GM) and that losses from the 2009 auto industry bailout total about $15 billion, FoxNews.com reported today. Treasury officials said the government has recovered about $39.9 billion of the $49.5 billion earmarked for GM under the Troubled Asset Relief Program (TARP) approved by Congress as the company teetered on the brink of bankruptcy nearly five years ago. In exchange for the bailout, the government received $2.1 billion in preferred GM stock and a 60.8 percent equity stake in the company. Treasury has intermittently sold its shares of GM but always at a price below that which would have allowed the government to break even on the deal, which accounts for the nearly $10 billion in losses. The government has lost an additional $1.3 billion on its bailout to Chrysler, a Treasury official said. Read more.

COMMENTARY: HOW GENERAL MOTORS WAS REALLY SAVED

Five years after an unprecedented government equity investment, General Motors is thriving and the Treasury yesterday sold its remaining shares, according to a Forbes Magazine commentary today by Jay Alix, founder of AlixPartners and who helped advise on GM's turnaround. The real GM turnaround story, significant in saving the auto industry and the economy, is contrary to the one that has been published, according to Alix, saying that the plan that was developed, implemented and then funded by the government was devised inside GM well before President Obama took office. For a global company as big and complex as GM, a "normal" bankruptcy would tie up the company's affairs for years, driving away customers, resulting in a tumultuous liquidation, according to Alix. Before the companies had filed for bankruptcy, Alix in 2008 proposed that GM split into two very separate parts before filing: "NewCo," a new company with a clean balance sheet, taking on GM's best brands and operations; and "OldCo," the leftover GM with most of the liabilities. All of the operational restructuring to make the new company profitable would also occur before a bankruptcy filing so GM could go through bankruptcy in a matter of days -- not months or years with creditors and other litigants fighting over the corporate carcass while the revenue line crashes. Read the full commentary.

ANALYSIS: AEON FINANCIAL FLIES UNDER REGULATORY RADAR FOR DEBT COLLECTION

Aeon Financial, the firm that threatened to foreclose on thousands of struggling homeowners in Maryland, Ohio and Washington, D.C., is a mystery: It lists no owners, no local office, no Web site, according to an analysis in Sunday's Washington Post. Aeon Financial is incorporated in Delaware, operates from mail-drop boxes in Chicago and is represented by a law firm with an address at a 7,200-square-foot estate on a mountainside near Vail, Colo. Yet no other tax lien purchaser in the District has been more aggressive in recent years, buying the liens placed on properties when owners fell behind on their taxes, then charging families thousands in fees to save their homes from foreclosure. Aeon has been accused by the city's attorney general of predatory and unlawful practices and has been harshly criticized by local judges for overbilling. All along, the firm has remained shrouded in corporate secrecy as it pushed to foreclose on more than 700 houses in every ward of the District. Aeon's story underscores how an obscure tax lien company -- backed by large banks and savvy lawyers -- can move from city to city with little government scrutiny, taking in millions from distressed homeowners. The firm came into the District eight years ago with hardball tactics, sending families threatening letters and demanding $5,000 or more in legal fees and other costs, often more than three times the tax debt. Read more.

TOMORROW'S ABILIVE WEBINAR LOOKS AT HOW TO HIRE THE RIGHT FINANCIAL ADVISORS

ABI's Financial Advisors & Investment Banking Committee is proud to present the next abiLIVE webinar, "How to Hire the Right Financial Advisors," on Dec. 11 from 1-2:15 p.m. ET. The program will provide attendees with an overview and basic understanding of the different types of financial advisors that may be relevant for in- and out-of-court cases. Topics include:

- The different types of financial advisors available;
- The benefits and limitations for each category of advisor; and
- How to select the right advisor for the job.

Speakers on the webinar include:

-Daniel F. Dooley of MorrisAnderson (Chicago)

-Gregory S. Hays of Hays Financial Consulting LLC (Atlanta)

-Ivan Lehon of Ernst & Young (New York)

-Allen Soong of Deloitte CRG (Los Angeles)

-Teri Stratton of Piper Jaffray & Co. (El Segundo, Calif.)

Registration is $75 for ABI members/$175 for non-members. Have a number of colleagues that would like to participate? Take advantage of group pricing for ABI members: register 5 or more and the registration cost drops to $60 per person!

Click here for more information and to register.

NOW AVAILABLE FOR PRE-ORDER: BEST OF ABI 2013: THE YEAR IN CONSUMER BANKRUPTCY

Now available for pre-order in the ABI Bookstore is Best of ABI 2013: The Year in Consumer Bankruptcy. This must-have reference contains the best ABI Journal articles and papers from ABI's top-rated educational seminars selected by ABI Board Member Alane Becket of Becket & Lee LLP (Malvern, Pa.) to cover the most important developments in consumer bankruptcy for 2013. The book delves into such timely topics as the foreclosure crisis, tax issues, the latest on chapter 13, student loans and much more, and it also features relevant case summaries drawn from ABI's Volo site (volo.abi.org). Make sure to log into www.abi.org to get your discounted ABI member pricing. The book will ship in mid-December. Click here to order.

ABI IN-DEPTH

RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!

Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

NEW CASE SUMMARY ON VOLO: SAPERE WEALTH MGMT LLC V. MF GLOBAL HOLDINGS LTD. (In re MF Global Holdings Ltd.) (2ND CIR.)

Summarized by Weston Eguchi of Willkie Farr & Gallagher LLP

Affirming District Court's judgment, dismissing Appellants' appeal from the Bankruptcy Court's order for lack of jurisdiction on the basis that the Bankruptcy Court's order was interlocutory rather than final, because it did not foreclose Appellants' ability to continue to assert a priority right to distributions under chapter 11. The Second Circuit relied on prior case law holding that an order was interlocutory where it contained expressions of non-finality and contemplated significant further proceedings to determine the rights of parties.

There are more than 1,000 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: BEING FULLY SECURED MAY NOT BE A COMPLETE DEFENSE

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A new blog post, looking at the case of Gladstone v. Bank of America, N.A. (In re Vassau), 499 B.R. 864 (Bankr. S.D. Cal. 2013), concluded that, as a general principle, a creditor that is fully secured is not concerned about potential preference claims (since it would have been entitled to full payment in a chapter 7 proceeding, and thus one of the elements of a preference claim is not met). However, this case illustrated that the analysis may be more complicated if there are junior secured creditors.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Electricity qualifies as a "good" entitled to administrative expense status under § 503(b)(9).

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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Caribbean Insolvency Symposium
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VALCON2014
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VALCON2014
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  CALENDAR OF EVENTS
 

2013

December
-abiLIVE Webinar
    Dec. 11, 2013

January
- Western Consumer Bankruptcy Conference
    Jan. 20, 2014 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
    Jan. 23-24, 2014 | Denver, Colo.

  

 

February
- Caribbean Insolvency Symposium
    Feb. 6-8, 2014 | San Juan, P.R.
- VALCON14
    Feb. 26-28, 2014 | Las Vegas, Nev.

March
- Bankruptcy Battleground West
    March 11, 2014 | Los Angeles, Calif.

 

 
 
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ABIs Chapter 11 Commission Eyes Updates to Bankruptcy Code

ABI Bankruptcy Brief | January 17 2013
 
  

January 17, 2013

 
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  NEWS AND ANALYSIS   

ABI'S CHAPTER 11 COMMISSION EYES UPDATES TO BANKRUPTCY CODE

With the Bankruptcy Code now 35 years old, 2013 looks to be a key year in developing a replacement as ABI's Chapter 11 Commission continues its study of chapter 11 with a "top to bottom look" at the Code, The Deal reported yesterday. No specific changes have been recommended to date, and the Commission will not be close to specifics until it gets reports from all 13 of its advisory committees, according to Commission Co-Chair Al Togut of Togut, Segal & Segal LLP (New York). The commission, which is just looking at corporate chapter 11 and the parts of the code that affect business bankruptcies, expects to complete its report in the spring of 2014, said fellow Co-Chair Bob Keach of Bernstein Shur (Portland, Maine), adding that by the end of 2013 the commission should have a good idea of what the report will look like. The report will have two components: ideas for change where there is a consensus and proposals that lack a consensus. Since the ABI does not lobby Congress for legislation, an organization or a combination of organizations will likely work to convert the report into legislation, said Keach. "The idea is to develop a statute for the next 40 years that will get us through as well as this one did," Keach says. Read more.

PENSION FUNDING GAP WIDENS FOR BIG CITIES

A study released on Tuesday by the the Pew Center on the States found that major U.S. cities emerged from the financial crisis with increasingly underfunded pension and retiree health care plans, the Wall Street Journal reported today. Cities employing nearly half of U.S. municipal workers saw their pension and retiree health care funding levels fall from 79 percent in fiscal year 2007 to 74 percent in fiscal year 2009, according to the latest available data, the Pew report stated. The growing funding gulf, which the study estimated at more than $217 billion for the 61 cities in the study, raises worries about local finances at a time when states are also struggling to recover from the recession. More than half, or some $118 billion, of the projected pension shortfall stems from unfunded retiree health care costs, according to the Pew report. Read more. (Subscription required.)

ABI will be holding a media teleconference on Tuesday, Jan. 22, at 11 a.m. ET with experts examining municipal distress in 2013. There are limited spots available to ABI members that would like to join the call next week. Contact John Hartgen, ABI's Public Affairs Manager, at jhartgen@abiworld.org if you would like to participate in the teleconference.

CFPB'S NEW MORTGAGE RULES AID HOMEOWNERS

U.S. banks will have to do more to help struggling mortgage borrowers keep their homes under final rules released today by the Consumer Financial Protection Bureau (CFPB), the Wall Street Journal reported today. Mortgage-loan servicers, which collect borrowers' loan payments, will have to evaluate troubled borrowers for all loan-assistance options permitted by mortgage investors such as Fannie Mae and Freddie Mac, as well as private investors, according to the CFPB rules that will take effect in a year. Currently, no national standard exists for how mortgage servicers must treat defaulting borrowers. The lending industry "must consider all options available from the mortgage owners or investors to help the borrower retain the home," said CFPB director Richard Cordray. The industry "can no longer steer borrowers to those options that are most financially favorable for the servicer." The agency's move follows numerous federal and state efforts to regulate the industry, which came under fire after reports in 2010 found that banks were foreclosing on borrowers without properly reviewing documents and other paperwork, a practice dubbed "robo-signing." In 2011, regulators found abuses of foreclosure processes at 14 lenders. Ten of those lenders agreed to an $8.5 billion settlement of regulators' allegations. Read more. (Subscription required.)

ANALYSIS: "ODD COUPLE" IN U.S. HOUSE TO TACKLE MORTGAGE FINANCE

The will of the new Congress to begin rebuilding the U.S. mortgage finance system rests largely in the hands of Reps. Jeb Hensarling (R-Texas) and Maxine Waters (D-Calif.), known to be partisan fighters from opposite ends of the ideological spectrum, Bloomberg News reported yesterday. Hensarling is the new chairman of the House Financial Services Committee, while Waters is the highest-ranking Democrat. "While we clearly have profound philosophical differences – some might call us Capitol Hill’s newest odd couple – we are exploring areas of common concern where we hopefully can work together," Hensarling said. In addition to grappling with proposals to tweak and amend the Dodd-Frank regulatory law, they will be seeking common ground on what may be the panel's biggest issue this year: The future of Fannie Mae and Freddie Mac. For Hensarling, the solution is to abolish the government-owned mortgage companies and completely privatize the mortgage market. Waters argues that some government involvement is needed to preserve the 30-year fixed home loan. It is likely that the two lawmakers eventually will support a plan that would shrink the role of Fannie Mae and Freddie Mac without threatening to choke off the flow of money into home loans. Read more.

FLORIDA DEFIES HOUSING REBOUND AS FORECLOSURES SOAR

More than six years after subprime lending and overbuilding led to the recent U.S. real estate slump, RealtyTrac Inc. reported that Florida had the biggest increase in home seizures last year, and the highest foreclosure rate, Bloomberg News reported today. One in every 32 Florida households received a notice of default, auction or repossession in 2012, more than double the average U.S. rate of one in every 72, according to RealtyTrac Inc.'s report. Home repossessions increased by 16,276 during the year to 84,456, the biggest gain nationwide. Adding to the state’s woes is a backlog of foreclosures caused by a required court review of each case. Judicial supervision of repossessions is slowing Florida’s rebound, in contrast to California and Arizona, so-called nonjudicial states, where lenders send notices to delinquent borrowers and record defaults at the county level without court intervention, said Lawrence Yun, chief economist of the National Association of Realtors. It took 853 days on average in Florida to complete a foreclosure in the fourth quarter, the third-longest behind New York and New Jersey, RealtyTrac said in today’s report. The U.S. average rose to 414 days from 348 days a year earlier, the most since the data firm began tracking the metric in 2007. Texas had the shortest period at 113 days. Almost 20 percent of outstanding Florida loans were more than 30 days delinquent or in foreclosure in November, the largest share of non-current mortgages in the nation, according to data provider Lender Processing Services. Read more.

ANALYSIS: REWRITING U.S. TAX LAW HAS CONSENSUS WHILE FIX PROVES ELUSIVE

Maintaining a bipartisan consensus in Congress to rewrite the U.S. tax code will be difficult as there is little agreement on what a tax overhaul means and what it is supposed to achieve, according to a Bloomberg News analysis yesterday. Republicans, who control the U.S. House, want lower tax rates and fewer breaks in a simpler system that raises no additional revenue. The Obama administration and many Democrats endorse some of those goals – particularly corporate rate reduction – while viewing a tax rewrite as a way to guarantee more revenue from top earners. That split will challenge lawmakers as they decide whether to rewrite the code as part of budget talks or work on a major tax bill without a fiscal agreement. Compromise remains elusive, though the code is more convoluted -- and therefore, ripe for change -- following passage of a law Jan. 1 that raised marginal rates and reinstated limits on personal exemptions and deductions. Read more.

BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: MF GLOBAL CREDITORS UNDETERRED BY LOW VALUE

The low valuation creditors of MF Global Holding Ltd. put on their liquidating chapter 11 plan is not deterring the bond market where debt is being sold for roughly twice the predicted recovery for unsecured creditors of the liquidating commodity broker's holding company. Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle explore this and other current cases in their latest video. Click here to view.

TAKE AN IN-DEPTH LOOK AT CREDITORS' COMMITTEES AND THE ROLE OF THE INDENTURE TRUSTEES AT ABI'S 31ST ANNUAL SPRING MEETING

The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Current Issues for Financial Advisors in Bankruptcy Cases
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• Law Firm Bankruptcies
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Register today!

ABI IN-DEPTH

ABI LIVE WEBINAR: REVISITING RADLAX AND HALL – NEW LEGAL AND PRACTICAL IMPACT OF THE DECISIONS

See why this was the top-rated panel at the ABI Winter Leadership Conference last month! Join the expert panel on Feb. 19 from 12:00-1:15pm EST as the summarize and discuss the legal impact and practical implications of the Supreme Court’s 2012 decisions in Radlax and Hall. Participants include:

Susan M. Freeman of Lewis and Roca LLP (Phoenix)

Adam A. Lewis of Morrison & Foerster LLP (San Francisco)

• Prof. Charles J. Tabb of the University of Illinois College of Law (Champaign, Ill.)

Eric E. Walker of Perkins Coie LLP (Chicago)

Click here to register!

LATEST CASE SUMMARY ON VOLO: TIMCO LLC V. T AND M SALES AGENCY INC. (IN RE TIMCO LLC; 6TH CIR.)

Summarized by James E. Bailey III of Butler Snow O'Mara Stevens & Cannada PLLC

The Sixth Circuit ruled that the appeal of the bankruptcy court's decision to remand a case removed by state court action to confirm an arbitration award that was affirmed by a district court was not reviewable by the court of appeals under 28 U.S.C. § 1334(d). The appeal of the order granting relief from the automatic stay to allow the state court action to proceed was moot where the debtor failed to obtain stay pending appeal and the state court had entered a valid order confirming an arbitration award.

There are more than 700 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: HIGH-INCOME EARNERS NOT BARRED FROM PASSING BANKRUPTCY'S MEANS TEST

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new post discusses the misconception that bankruptcy's means test bars high-income earners from qualifying for chapter 7 relief.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI'S INDUBITABLE EQUIVALENTS: TELL US A TUNE AND WE'LL SING YOU THAT SONG!

ABI's Indubitable Equivalents need your help: Tell us your favorite Rock and Roll tune - that elusive classic that takes you back, makes your feet tap, your head bang, and your horns come out! If we pick your song, you get widespread promotion by the band and you'll receive a free CD of IE’s greatest hits!

To enter, log onto www.abiband.com or “like” the Band’s Facebook page.

The fine print: No purchase necessary. You can enter as many times as you want. Multiple winners will be selected. Winners will be announced on the IE website and on Facebook. Entry deadline: January 31.

ABI Quick Poll

After Stern, bankruptcy courts do not have the constitutional authority to enter final judgments on fraudulent conveyance claims.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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MONDAY:

 

 

WCBC 2013
Jan. 21, 2013
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NEXT THURSDAY:

 

 

ACBPIKC 2013
Jan. 24-25, 2013
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COMING UP:

 

 

ACBPIKC 2013
Feb. 7-9, 2013
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ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions
Feb. 19, 2013
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ACBPIKC 2013
Feb. 20-22, 2013
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Paskay 2013
March 7-9, 2013
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BBW 2013
March 22, 2013
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ASM 2013
April 18-21, 2013
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  CALENDAR OF EVENTS
 

2013

January
- Western Consumer Bankruptcy Conference
     January 21, 2013 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
     January 24-25, 2013 | Denver, Colo.

February
- Caribbean Insolvency Symposium
     February 7-9, 2013 | Miami, Fla.
- ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions
     February 19, 2013


  

- VALCON 2013
     February 20-22, 2013 | Las Vegas, Nev.

March
- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice
     March 7-9, 2013 | St. Petersburg, Fla.
- Bankruptcy Battleground West
     March 22, 2013 | Los Angeles, Calif.

April
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.


 
 
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Analysis Doctors Being Driven into Bankruptcy

ABI Bankruptcy Brief | April 09 2013
 
  

April 9, 2013

 
home  |  newsroom  |  chart of the day  |  blogs  |  bankruptcy code and rules  |  statistics  |  legislative news  |  volo
  NEWS AND ANALYSIS   

ANALYSIS: DOCTORS BEING DRIVEN INTO BANKRUPTCY

As many doctors struggle to keep their practices financially sound, some are buckling under money woes and are being pushed into bankruptcy, CNNMoney.com reported yesterday. It is a trend that has accelerated in recent years, industry experts say, with potentially serious consequences for doctors and patients. Some physicians are still able to keep practicing after bankruptcy, but for others, it's a career-ending event. Chapter 11 bankruptcy filings by physician practices have spiked recently, noted Bobby Guy, co-chair of the American Bankruptcy Institute's Health Care Committee, who tracks bankruptcy trends tied to distressed businesses. The weak economy has taken a toll on doctors' revenue, as consumers cut back on office visits and lucrative elective procedures, said Guy. Doctors also blame shrinking insurance reimbursements, changing regulations, and the rising costs of malpractice insurance, drugs and other business necessities for making it harder to keep their practices afloat. Read more.

For more on medical insolvencies, be sure to pick up a copy of ABI’s Health Care Insolvency Manual, Third Edition, of which Mr. Guy is a co-author. Click here for more information.

NEW FEE ON BANKRUPTCY TRADES WILL BOOST COURTS' REVENUE

A new fee tied to trades of bankruptcy claims will bring in hundreds of thousands of dollars in revenue for the nation's bankruptcy courts when it takes effect next month, Dow Jones Daily Bankruptcy Review reported yesterday. Starting May 1, those who trade claims against companies under bankruptcy court protection will have to pay a $25 fee for each transaction they file with the court, according to the Administrative Office of the U.S. Courts. Last year saw 18,632 trades of claims worth more than $41 billion in 500 bankruptcy cases, according to SecondMarket Inc. If the fees had been in effect, bankruptcy courts would have earned $465,800 from those trades. For more information from the AOUSC on the fees, effective May 1, please click here.

REGULATORS CONCERNED ABOUT MUNICIPAL-BOND DEALS

U.S. regulators are probing whether securities firms are circumventing the rules that were implemented in the wake of the financial crisis to protect municipalities against potentially biased investment advice, the Wall Street Journal reported today. At issue is whether banks are attempting to skirt post-crisis rules, including those restricting firms that provide financial advice to municipalities from underwriting certain municipal-bond transactions. Lawmakers and regulators implemented the changes to avoid situations similar to those leading up to the crisis in which some municipalities were steered into risky and complex deals that municipal officials did not fully understand. The 2010 Dodd-Frank law stipulates that banks hired as financial advisers act as fiduciaries, or in their clients' best interests. Regulators have also restricted banks from underwriting municipal-bond transactions if they were initially hired to advise on the deals. Yet the Securities and Exchange Commission is concerned that banks may be mischaracterizing their role in order to preserve their ability to underwrite bonds. The SEC is investigating several municipal contracts entered into by banks, including such banks as Goldman Sachs Group Inc., Piper Jaffray Cos., Robert W. Baird & Co. and Stifel Financial Corp. Read more. (Subscription required.)

INVESTORS PUT UP MILLIONS OF DOLLARS TO FUND LAWSUITS

A new generation of investors is plunging into "litigation finance" opportunities, putting up millions of dollars to fund lawsuits in hopes of collecting when the verdicts come down, the Wall Street Journal reported yesterday. Established financiers are expanding into new areas, including loans to law firms, and are finding clients among the biggest American companies. Law firms themselves are starting to jump on the bandwagon, seeking funding arrangements for clients who need help going after opponents with deeper pockets or who simply want to keep litigation costs off their balance sheets. Critics complain that the trend will enable frivolous lawsuits, and they have argued—including at a congressional hearing last month—that the government should step in to regulate funders of litigation. But as corporate legal budgets shrink, litigation-finance options are proliferating. One of the latest entrants is Gerchen Keller Capital LLC, a Chicago-based team that includes former lawyers from Gibson Dunn & Crutcher LLP and Bartlit Beck Herman Palenchar & Scott LLP. The group has raised more than $100 million and says there is plenty of room for newcomers given the size of the U.S. litigation market, which they put at more than $200 billion, measuring the money spent by plaintiffs and defendants on litigation. Read more. (Subscription required.)

DEMAND RETURNS FOR COMMERCIAL MORTGAGE-BACKED SECURITIES

Growing demand for subordinated commercial-mortgage debt is the latest example of investors seeking new opportunities for yield, the Wall Street Journal reported today. After years of near-zero benchmark interest rates, under which most fixed-income investments offer little return, some investors are becoming more willing to take risks. Despite the risks of subordinated commercial-mortgage debt, Cerberus Capital Management and other hedge funds are being lured by annual returns that typically top 20 percent for the least-safe portions of commercial mortgage-backed securities (CMBS). Cerberus is the latest large hedge fund to expand into this emerging hot market, which is raising concerns that lenders may make loans on properties with weak credit profiles to produce volume—a phenomenon that spun out of control in the mortgage markets during the years leading up to the financial crisis. The firm aims to launch the "Cerberus CMBS Opportunities Fund," which plans to both buy up and short commercial mortgage debt. Read more. (Subscription required.)

SENATE FINANCE COMMITTEE CHAIR MOVES TO RESHAPE TAX CODE

Last month, Senate Finance Committee Chairman Max Baucus (D-Mont.) summoned members of the committee to a closed-door meeting to discuss the first full-scale rewrite of the 5,600-page U.S. tax code in more than 25 years, the Washington Post reported yesterday. Baucus agrees with Sen. Orrin G. Hatch (R-Utah), the ranking Republican on the panel, that the committee should aim to produce a tax-reform plan by August, when Congress will once again need a deal to justify raising the legal limit on the $16.8 trillion in federal debt. Privately, senior Democrats dismiss Baucus's activities, saying that tax reform will not happen unless President Obama strikes a broad deal with Republicans that includes $600 billion more in taxes over the next decade. But Republicans are unlikely to agree to higher revenue without a tax code rewrite; aides said House Ways and Means Committee Chairman Dave Camp (R-Mich.) is pressing GOP leaders to demand tax reform in exchange for supporting a higher federal debt limit. Read more.

TOMORROW! DON’T MISS ABI’S LIVE WEBINAR, "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"

ABI's Consumer Bankruptcy Committee tomorrow presents the "Student Loans: Bankruptcy May Not Have the Answers – But Does Congress?" webinar from noon-1:15 ET. A panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

• Prof. Daniel A. Austin of Northeastern University School of Law (Boston)

Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)

Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. Register now for the special ABI member rate of $75!

 

HOTEL BLOCK FOR ABI'S ANNUAL SPRING MEETING ALMOST SOLD OUT! REGISTER TODAY!

The hotel block at the Gaylord National Resort and Convention Center in National Harbor, Md., is almost sold out for ABI’s 2013 Annual Spring Meeting! Held April 18-21, 2013, ASM features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• Current Issues for Financial Advisors in Bankruptcy Cases
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Make sure to register today!

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: COMMODITY FUTURES TRADING COMMISSION V. WALSH (2D CIR.)

Summarized by Carrie Hardman of Winston & Strawn LLP

The Second Circuit held that (1) securities fraud victims may be considered "similarly situated" for purposes of pro rata distributions when they are similarly situated in relationship to the fraud, losses, fraudsters and nature of their investments in a uniform Ponzi scheme; (2) absent further disparate treatment of the victim-investors, for purposes of distribution, there is no difference between victims that invested in a regulated entity versus a related non-regulated entity, as the protections afforded by regulation were designed not for the victim investors' benefit, but for the benefit of others; and (3) Till v. SCS Credit Corp., 541 U.S. 465, 477 (2004), does not apply in the securities fraud context, and no statutory provision exists to require the receiver to adjust distributions on account of inflation.

There are more than 800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: EXPLORING WHEN CONSUMERS SHOULD FILE FOR CHAPTER 11 VS. CHAPTER 13

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post explores situations in which a consumer should consider filing for chapter 11 protection rather than chapter 13.

Want to explore further perspectives on consumer filing choices? Be sure to register for ABI's Annual Spring Meeting, which will feature a session on the Consumer Bankruptcy Track titled "The Individual Conundrum—Chapter 7, 11 or 13?" For more information or to register, be sure to click here.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

TEE OFF ON THE NEW ABI GOLF TOUR!

Starting with the Annual Spring Meeting, ABI will offer conference registrants the option to participate in the ABI Golf Tour. The Tour will take place concurrently with all conference golf tournaments. The Tour is designed to enhance the golfing experience for serious golfers, while still offering a fun networking opportunity for players of any ability. As opposed to the format used at ABI’s regular conference events, Tour participants will "play their own ball." They will be grouped on the golf course separately from other conference golf participants and will typically play ahead of the other participants, expediting Tour play. Tour participants will be randomly grouped in foursomes, unless otherwise requested of the Commissioner in advance of each tournament. Prizes will be awarded for each individual Tour event, which are sponsored by Great American Group. The grand prize is the "Great American Cup," also sponsored by Great American Group, which will be awarded to the top player at the end of the Tour season. Registration is free. Click here for more information and a list of 2013 ABI Golf Tour event venues.

ABI Quick Poll

The scope of protection of "financial contracts" in bankruptcy should be rolled back to what it was before BAPCPA expanded it in 2005.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

  

 

TOMORROW:

 

 

 

BBW 2013
April 10, 2013
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COMING UP

 


 

ASM NAB 2013
April 18, 2013
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ASM 2013
April 18-21, 2013
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NYCBC 2013
May 15, 2013
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ASM 2013
May 16, 2013
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ASM 2013
May 21-24, 2013
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ASM 2013
June 7, 2013
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ASM 2013
June 13-16, 2013
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NE 2013
July 11-14, 2013
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ASM 2013
July 18-21, 2013
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MA 2013
Aug. 8-10, 2013
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  CALENDAR OF EVENTS
 

2013

April
- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"
     April 10, 2013
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.

May
- "Nuts and Bolts" Program at NYCBC
     May 15, 2013 | New York, N.Y.
- ABI Endowment Cocktail Reception
     May 15, 2013 | New York, N.Y.
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.
- Litigation Skills Symposium
     May 21-24, 2013 | Dallas, Texas


  

 

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.

July
- Northeast Bankruptcy Conference and Northeast Consumer Forum
     July 11-14, 2013 | Newport, R.I.
- Southeast Bankruptcy Workshop
     July 18-21, 2013 | Amelia Island, Fla.

August
- Mid-Atlantic Bankruptcy Workshop
    August 8-10, 2013 | Hershey, Pa.


 
 
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