NEWS AND ANALYSIS
NEW STUDENT LOAN RULES ADD PROTECTIONS FOR BORROWERS
The U.S. Department of Education has created new rules that will bolster borrower protections for federal education loans, the New York Times reported today. The new regulations will make it easier for distressed borrowers to get out of default and repay their loans, said Pauline Abernathy, vice president of the nonprofit Institute for College Access and Success, which supported the changes. More than 600,000 federal student loan borrowers who began repaying their debts in 2010 defaulted on their loans by 2012, according to federal data. Almost half -- 46 percent -- attended for-profit colleges, which also had higher average default rates than other schools: For-profit schools had an average default rate of almost 22 percent compared with about 15 percent for borrowers across all colleges. Under federal law, those who are in default on federal student loans may "rehabilitate" them by making nine on-time payments in amounts that are "reasonable and affordable." Rehabilitation lets the borrower get out of default and become eligible for further federal student aid. Some private debt collectors under contract with the government, however, were failing to offer payments that former students could afford, instead offering to allow payments based, for instance, on a percentage of the borrower's total debt. Such payments increased the commissions paid to collection agencies, but were often unworkable for borrowers. In its final rules, the Education Department requires that borrowers who want to rehabilitate loans must first be offered a payment amount similar to what would be offered under the federal income-based repayment program. That option, meant to help borrowers who have high debt in relation to income, caps a borrower's monthly payments at 15 percent of his or her monthly income. Read more.
For further analysis of student loan debt and bankruptcy, ABI has a new book and a workshop next Friday, Nov. 15, dedicated to this important issue.
ABI's newest publication, Graduating with Debt: Student Loans under the Bankruptcy Code, examines issues surrounding bankruptcy and student loan debt. Profs. Daniel A. Austin of Northeastern University (Boston) and Susan E. Hauser of North Carolina Central University School of Law (Durham, N.C.) looked at different types of student loans and loan-forgiveness programs, delinquency and default, and administrative and nonjudicial remedies for borrowers having trouble repaying their loans. For more information on Graduating with Debt, please click here.
ABI will also be hosting a workshop on Nov. 15 titled "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" Featured speakers at the Workshop include David Bergeron of the Center for American Progress (Washington, D.C.), Bankruptcy Judge Laurel Isicoff (S.D. Fla.; Miami) and Prof. Susan E. Hauser of North Carolina Central University (Durham, N.C.), co-author of Graduating with Debt. The program will last from 9:30 a.m. to 3:30 p.m. ET, and you can attend in person (66 Canal Center Plaza, Suite 600, Alexandria, Va. 22314) or via live webstream. For more information or to register to attend, please click here.
MORTGAGE DELINQUENCIES REACH 5-YEAR LOW
The share of U.S. mortgages that are seriously delinquent fell to a five-year low as job gains have been helping borrowers keep up with payments while rising home prices have been enabling others to sell, Bloomberg News reported today. The percentage of home loans that are more than 90 days behind or in the foreclosure process fell to 5.65 percent in the third quarter from 7.03 percent a year earlier, the Mortgage Bankers Association said in a report today. That is the lowest rate since the third quarter of 2008, when it was 5.17 percent. Fewer Americans are falling behind on their payments as the economy stabilizes and property values rise across the country. The jobless rate in September fell to 7.2 percent, the lowest level since November 2008. Median U.S. home prices rose 12.5 percent in the third quarter from a year earlier, the National Association of Realtors said yesterday. Cities hurt worst by the foreclosure crisis, such as Las Vegas, Atlanta and Sacramento, California, had the biggest increases. Read more.
LEW SAID TO WARN BANKS OF TOUGHER VOLCKER RULE
Treasury Secretary Jacob J. Lew warned chief executive officers of top U.S. banks in a private meeting last month that the final Volcker rule ban on proprietary trading would be tougher than Wall Street expects, Bloomberg News reported today. At the meeting, Lew told industry leaders that he has been encouraging regulators to make provisions of the Volcker rule more stringent. The bank executives, members of the Financial Services Forum, left the meeting concerned that the final rule would be more restrictive on their trading business than previously indicated. This week, regulators are putting the final touches on the rule, which could be released as soon as Dec. 10. That timeframe would put regulators on track to meet the administration's self-imposed deadline to complete the rule by the end of the year. Administration officials have signaled that one provision that will be more restrictive than the rule's first draft is its exemption for trades conducted as hedges against other risks. The revised rule is expected to require hedges to be taken against individual positions and limit broader hedges against a bank's entire portfolio. The change came in response to JPMorgan Chase & Co.'s "London Whale" trades, which cost the bank $6.2 billion in 2012 and were described by bank officials as portfolio hedging. Read more.
SMALL LENDERS CAUTIOUSLY RAMP UP FEES
Small lenders have been raising fees in recent months in order to offset the triple economic threat of low interest rates, tepid loan growth and increasing compliance costs that is squeezing the banking industry, the Wall Street Journal reported today. While large banks can push into more lucrative businesses, small lenders offer fewer products and services that can offset low profit margins in their core business. For them, fee increases are the best way to add revenue in a difficult environment. Small banks, however, must carefully weigh their choices so that they don't alienate their customer base. U.S. banks of all sizes collected $8.39 billion in fees on deposit accounts in the second quarter, according to the Federal Deposit Insurance Corp., up from $8.21 billion in the first quarter. Credit unions also are bringing in more fees, posting an increase of $1.87 billion in the second quarter compared with $1.79 billion in the first quarter, according to the National Credit Union Administration, which regulates more than 6,600 of the nonprofit lenders. Read more. (Subscription required.)
NEXT WEEK: EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM
Experts will tackle the hot topic of student lending issues in bankruptcy on the abiWorkshops series' new program, "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" The program will be held on Nov. 15 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 15 program include:
- Student Lending Today: Who Borrows, How Much, Delinquency & Default Trends
- Repayment Options: Income Based Repayment and New Lender/Servicer Programs
- Litigation under Sect. 523(a)(8): What Proofs Are Needed? Evidence Demonstration
For more information or to register for the "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" abiWorkshop on Nov. 15, please click here.
ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER
The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup sponsored by Great American Group is based on your top three scores from the seven ABI events. 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 at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.
NEW 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.
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.
ETHICS CLE AVAILABLE! NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES
Available now for purchase from ABI's eLearning Center (http://cle.abi.org) is a new "Bankruptcy In Depth" video featuring ABI Resident Scholar Kara Bruce and Eric Brunstad of Dechert LLP (Hartford, Conn.) previewing the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under §105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. He also provides a candid view of what it is like to argue a case before the Court and an in-depth analysis of the issues involved with the upcoming cases. Available for the member price of $75, ABI will also seek 1.25 hours of ethics CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for this program. This online CLE program is presumptively approved in CA, DE, FL, GA, HI, IL, NV, NJ, NY (Approved Jurisdiction Policy), RI and SC. Credit hours granted are subject to approval from each state, which has not been determined. To purchase the new "Bankruptcy In Depth" video, please click here.
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: SHELTON V. CITIMORTGAGE INC. (IN RE SHELTON; 8TH CIR.)
Summarized by Michael Tamburini of Commercial Law Group P.A.
The Eighth Circuit ruled that a secured creditor's lien is not void solely due to the fact that the secured creditor filed an untimely claim.
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: CAN BANKRUPTCY HELP SOLVE STUDENT LOAN DEBT EVEN IF THE DEBT IS NON-DISCHARGEABLE?
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. Bankruptcy Code § 523(a)(8) provides that unless the debtor can show "undue hardship," student loans will survive discharge.
Further analysis of student loans and bankruptcy will be the focus of the Nov. 15 abiWorkshop. For more information or to register, please 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.
ABI Quick Poll
Can litigant consent enable the bankruptcy court to enter final judgment in a matter which, after Stern, falls outside the court's constitutional authority?
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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