||NEWS AND ANALYSIS
DELAWARE SLATED FOR NEW BANKRUPTCY JUDGE AMID GROWING CASELOAD
Delaware's U.S. Bankruptcy Court, the busiest in the country for chapter 11 filings, is getting an additional judge to help handle what officials see as a "full-blown crisis," the subject of a Senate hearing today, Bloomberg News reported. The Wilmington, Del.-based court has a caseload justifying a dozen judges, while it has only half that number now, Chief Delaware U.S. District Judge Gregory M. Sleet, who oversees the bankruptcy unit, said in his 2013 annual report. "The seventh judgeship is important, and funding it is obviously necessary," said Sen. Chris Coons (D-Del.), chairman of the Senate Judiciary Subcommittee on Bankruptcy and the Courts, which held a hearing this afternoon titled "Sequestering Justice: How the Budget Crisis Is Undermining Our Courts." The hearing centered on the impact of the federal government's spending sequestration on the courts. Coons has been helping to strengthen the financial underpinnings of the bankruptcy courts, sponsoring the bipartisan Temporary Bankruptcy Judgeship Extension Act to extend expiring authorizations in 14 states and Puerto Rico. "A full-blown crisis awaits us" in Delaware as the bankruptcy court deals with 28 percent in budget cuts over three years, necessitating the elimination of 23 of 72 office employees and a furlough program "whereby all staff of the clerk's office take one day every two weeks, without pay, equating to a 10 percent decrease in their salaries," Sleet wrote. The additional bankruptcy judge who has been authorized for Delaware by federal court administrators, "has not been funded," Sleet said. Read more.
To read the prepared witness testimony from today's Senate hearing, please click here.
BACKLOG OF FORECLOSURES CONTINUES TO BLOCK HOUSING RECOVERY
Analysts claim that while the housing market is on the mend -- with progress even in the hardest-hit states -- the backlog of homes in foreclosure and bank-owned properties are still clogging the pipeline, HousingWire.com reported yesterday. The East Coast is a testament to such findings, where the duration of the foreclosure process is high in large part to judicial foreclosure procedures in states using that process, according to the Federal Reserve Bank of New York's latest report. The volume of distressed properties continues to impact housing momentum, and consequently, there is a compelling need for improved public policy on the local and national levels to minimize losses and externalities resulting from foreclosures and REO inventory, explained Diego Aragon, Richard Peach and Joseph Tracy of the New York Fed. As of March 2013, nearly 3 percent of all first-lien loans secured by one-to-four-unit residential properties were 90-plus days delinquent, essentially unchanged from June 2012. In contrast, the percentage of loans in foreclosure, which leveled off at around 4 percent from 2011 through 2012, declined to 3.5 percent by early 2013, the report noted. The decline in the percentage of loans in the foreclosure process was due to a sharp decrease in the number of loans flowing into foreclosure. Read more.
ANALYSIS: DODD-FRANK REMAINS A WORK IN PROGRESS 3 YEARS LATER
When President Obama signed the Dodd-Frank Act to overhaul financial regulation three years ago, he observed that for the new rules to be effective, regulators would have to be vigilant, according to a Washington Post analysis yesterday. The moment marked the beginning of what has proven to be a slow and arduous process of trying to implement one of the most ambitious pieces of legislation in decades -- the Dodd-Frank Wall Street Reform and Consumer Protection Act. Given the severity of the financial crisis, there was great expectation that regulators would move swiftly to enact and enforce the landmark legislation. But the same intense lobbying and political wrangling that took place when the bill was being written has continued to delay or water down some of its provisions. Federal watchdogs were tasked with writing 398 rules to flesh out the law, but they have missed 62 percent of the deadlines set by Congress, according to data from Davis Polk & Wardwell, a law firm that represents financial institutions. Lately, there has been a renewed commitment from the administration to accelerate the process. Treasury Secretary Jack Lew told an audience of investors in New York last week that "by the end of this year, the core elements of the Dodd-Frank Act will be substantially in place." A top priority, he said, is to complete the long-delayed Volcker Rule, a controversial provision that would ban federally insured banks from proprietary trading: using their own capital to make trades. Read more.
ANALYSIS OF DETROIT'S CHAPTER 9 FILING
BAD REAL ESTATE DEALS RETURN TO HAUNT DETROIT'S PENSIONS
A litany of real estate deals gone wrong is showing how Detroit's retirement system for 30,000 employees and retirees -- propped up by $1.4 billion in borrowed money -- became a cash cow for a select few, Bloomberg News reported today. Now, these bad investments are coming back to haunt workers and pensioners as Detroit Emergency Manager Kevyn Orr proposed slashing their benefits in the city's chapter 9 filing last week, the biggest municipal bankruptcy in U.S. history. Orr wants to restructure $18 billion in debt and long-term obligations and is asking some creditors to accept less than 20 cents on the dollar. Detroit's pensions are underfunded by as much as $3.5 billion in part because of unrealistic assumptions of 8 percent annual investment returns, Orr has said. The pensions say that the gap between assets and obligations to retirees is $700 million, according to a June 20 statement. "Detroit has been working its way to a level of insolvency for decades," Orr said at a news briefing after the bankruptcy filing. The city was "continuing to borrow, continuing to defer pension payments, continuing not to pay its bills on time, continuing a deepening insolvency." On July 19, a Michigan state court judge ruled that Detroit's chapter 9 filing violated the state's constitution by impairing pension benefits. Michigan's attorney general has appealed. Bankruptcy Judge Steven W. Rhodes in Detroit set a hearing for tomorrow to consider giving the city protection from lawsuits. Though authorities have investigated past investments authorized by the two pension boards, personnel changes have occurred on both with changes in city administrations. The present general retirement system trustees are acting responsibly, said the board's legal counsel, Michael VanOverbeke. In June, Orr ordered city investigators to review pension investments, as well as operations and other aspects of employee-benefit programs. Read more.
ABI will be holding a media teleconference tomorrow at 3:30 p.m. ET to examine Detroit's chapter 9 filing and what lies ahead. There are a limited number of spaces available to listen to the live program. If you would like to listen, please contact ABI Public Affairs Manager John Hartgen at [email protected]
ANALYSIS: DETROIT'S BANKRUPTCY REVEALS DYSFUNCTION COMMON IN CITIES
The financial pressures that pushed Detroit into becoming the largest municipal bankruptcy filing in U.S. history are also playing out on a smaller scale in cities around the nation, Bloomberg News reported yesterday. Diminished tax revenue and rising labor costs have left four cities insolvent since 2007. "None of the other cities are as far along, but there are dozens, if not hundreds of cities that have similar issues," said Alan Mallach, a senior fellow at the Brookings Institution. "Every other industrial city has problems that could send them down the same path." U.S. municipalities have recovered slowly from the 18-month recession that ended four years ago, which depressed property-tax revenue and led to investment losses for pensions that many cities haven't fully funded for years. Projected pension and health care obligations for the 61 biggest cities will top assets by about $217 billion, according to a study by the Pew Charitable Trusts, a Philadelphia-based research and public-policy group. Read more.
For an analysis of the situation in Detroit, municipal distress and chapter 9 bankruptcy, be sure to pick up a copy of ABI's Municipalities in Peril: The ABI Guide to Chapter 9, Second Edition, from the ABI Bookstore.
COMMENTARY: GETTING DETROIT BACK ON ITS FEET
There is no doubt that Detroit's bankruptcy proceedings will be very painful for Detroit's population of 700,000, but the bankruptcy case might also allow the city to be relieved of paying back its bondholders and banks much of the estimated $9 billion they lent to Detroit on overly rosy assumptions, according to an editorial in today's New York Times. This group of lenders and investors will, of course, push the city and state to also force concessions on city workers and retirees, whose pension funds are underfinanced by about $3.5 billion. But city officials should resist the idea of cutting the pension payments for the city's public workers, which average $19,000 a year. Unlike the situation in other troubled cities where government officials made lavish pension promises and workers gamed the system to inflate their benefits, Detroit's pension problems are quite modest. Moreover, city employees have already had their pay and benefits reduced significantly in recent years. Slashing the meager fixed incomes of retirees will also hurt the city's weak economy because they are more likely to spend most of the money they receive in local businesses. Labor unions also argue that Michigan's Constitution protects their pensions from cuts, which will set up a potentially long legal battle that the city can ill afford. Read the full editorial.
DID YOU MISS MONDAY'S abiLIVE WEBINAR DISCUSSING § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES? RECORDING IS NOW AVAILABLE!
If you were not able to join Monday's well-attended abiLIVE webinar examining § 1111(b), a recording of the program is now available for downloading! Utilizing a case study, ABI's panel of experts explored the issues surrounding a lender's decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel also walked attendees through the necessary mathematical analyses used to examine these issues. The 90-minute recording is available for the special price of $75 and can be purchased here.
NEW abiLIVE WEBINAR ON AUGUST 20: HOW WILL THE NEW U.S. TRUSTEE FEE GUIDELINES IMPACT YOU?
The new U.S. Trustee Fee Guidelines will affect all attorneys and firms who work on larger chapter 11 cases filed on or after November 1st. ABI's Ethics & Professional Compensation Committee will present a panel of experts, including Cliff White, the director of the U.S. Trustee Program, to discuss some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Register today to hear government, attorney and academic perspectives on this important and timely topic.
ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE MID-ATLANTIC BANKRUPTCY WORKSHOP IN AUGUST
The 5th stop for the ABI Golf Tour is the Hershey Country Club, in conjunction with the Mid-Atlantic Bankruptcy Workshop. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event last week at Amelia Island, Fla. There's no charge to register or participate in the Tour.
NORTON JUDICIAL EXCELLENCE AWARD NOMINATIONS OPEN UNTIL JULY 29
Nominations are now open for the 8th Annual Judge William L. Norton Judicial Excellence Award, to be presented during the ABI luncheon at the annual meeting of the National Conference of Bankruptcy Judges on Nov. 1, 2013. The award is presented by ABI and Thomson Reuters each year to the current or retired bankruptcy judge whose career embodies the same continued dedication and outstanding contributions to the insolvency community as the award’s namesake, Judge Norton. Nominations are considered by a committee made up of representatives from the Norton treatise and past ABI presidents. Nomination forms, which must be submitted by July 29, are available from Clay Mattson at Thomson Reuters ([email protected]).
NEW ABI "BANKRUPTCY IN DEPTH" ON-DEMAND CLE PROGRAM LOOKS AT PRINCIPLES OF PROPERTY OF THE ESTATE: DEMYSTIFYING EQUITABLE INTERESTS
In this 90-minute seminar, Profs. Andrew Kull of Boston University School of Law and Scott Pryor of Regent University School of Law provide an in-depth analysis of a legal principle that has become, in their words, "a long-lost area of the law": § 541 of the Bankruptcy Code. Seeking to demystify what is meant by "property of the estate" and, in particular, the distinction between legal or equitable interests of the debtor in property, Kull and Pryor describe the legal entanglements that ensue when legal title belongs to one person but the equitable title belongs to someone else. The cost of the seminar, which includes written materials and qualifies for 1.5 hours of CLE, is $95. To order or to learn more, click here.
ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!
Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!
NEW CASE SUMMARY ON VOLO: ISAACSON V. MANTY (IN RE ISAACSON; 8TH CIR.)
Summarized by Bryan Robinson of the Law Offices of Bryan Robinson
The U.S. Court of Appeals for the Eighth Circuit upheld the district court's affirmation of the bankruptcy courts imposition of sanctions against the plaintiff (Isaacson) for making factually unsupported, inflammatory and harassing statements against the bankruptcy judge, the bankruptcy trustee, the bankruptcy court and the U.S. Trustee's Office, according to documents filed with the court.
There are more than 900 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FURTHER EXAMINATION OF DETROIT'S CHAPTER 9 FILING
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post takes a closer look at the issues surrounding Detroit's chapter 9 filing.
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
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