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Chicago Fed Predicts Detroit Filing to Impact Muni Markets for Years

ABI Bankruptcy Brief | October 24, 2013
 
  

October 24, 2013

 
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  NEWS AND ANALYSIS   

CHICAGO FED PREDICTS DETROIT FILING TO IMPACT MUNI MARKETS FOR YEARS

As the hearing to consider Detroit's chapter 9 eligibility is underway in bankruptcy court, a commentary in the November edition of the Chicago Fed Letter found that the filing has had little impact on the cost of municipal financing outside of Michigan, but it has the potential to set a number of precedents with far-reaching consequences. Apart from Michigan municipalities, the market reaction to the Detroit bankruptcy filing has been negligible, the commentary found. In the week following the Detroit Emergency Manager's June 14, 2013, proposal to subordinate general obligation (GO) bonds, the difference (spread) between the yield on the nationwide Standard & Poor's (S&P) Municipal Bond General Obligation Index (SAPIGO) and the yield on ten-year U.S. Treasury bonds declined 8 basis points. The SAPIGO-ten-year U.S. Treasury bond yield spread did increase by 9 basis points the day after Detroit's chapter 9 filing on July 18 but quickly returned to its pre-bankruptcy level. In contrast, the spread between the yield on the S&P Municipal Bond Michigan General Obligation Index (SAPIMIG) and the yield on SAPIGO increased 14 basis points following the EM proposal. The spread further jumped by 29 basis points on the day after Detroit's bankruptcy filing and has remained elevated since, suggesting that the filing has had a material impact on borrowing costs of Michigan municipal issuers. To date, Detroit's bankruptcy filing has had little impact on the cost of municipal financing outside of Michigan, but the case has the potential to set a number of precedents, such as with the treatment of pension and other post-employment benefit obligations vis-a-vis bonded debt, the degree of protection afforded by state constitutions, and the value of the unlimited tax pledges approved by the electorate. The commentary contends that the resolution of these issues in court will change the shape of municipal financial markets for years to come. Click here to read the full commentary.

FIRMS FIGHT HOWREY ESTATE ON UNFINISHED BUSINESS CLAIMS

As the Howrey estate rakes in settlements, a handful of firms are still trying to tear down a controversial bankruptcy doctrine that has vexed the legal industry for years, The Recorder reported today. Six firms that hired former Howrey partners urged Bankruptcy Judge Dennis Montali yesterday to dismiss the claims filed against them by the now-defunct firm's bankruptcy trustee, Allan Diamond. Suing under the unfinished business doctrine, Diamond is seeking to recover profits from the work that former Howrey partners brought with them to their new firms, arguing that it is property of the estate. But the law firm defendants insist that the claims go against legal ethics rules, which favor clients' unfettered freedom to hire and fire legal counsel. The law in Washington D.C., which governs Howrey's partnership agreement, also shuns rules that restrict clients' ability to choose their counsel, said Pillsbury Winthrop Shaw Pittman partner David Keyko, who argued on behalf of his firm. Hogan Lovells, Jones Day and Haynes and Boone argued their motions to dismiss independently before Montali. Earlier in the day, Pillsbury, Neal Gerber & Eisenberg and Kasowitz, Benson, Torres & Friedman presented a joint motion to dismiss the unfinished-business claims against them. The coalition shrunk this week when Ropes & Gray, Venable and Shearman & Sterling informed the court that they had settled with Diamond, who has netted more than $2 million in settlements this week. Read more. (Subscription required.)

REPORT: MOST AMERICANS ACCUMULATING DEBT FASTER THAN THEY'RE SAVING FOR RETIREMENT

A new report has found that a majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation's troubled system for old-age saving, the Washington Post reported today. Three in five workers with defined contribution accounts are "debt savers," according to the report released today, meaning that their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement. Currently, workers with retirement savings accounts put aside more than 11 percent of their pay for retirement -- 5 percent in their own accounts, and 6.2 percent in Social Security. Despite that -- and despite the $2.5 trillion the report says employers have poured into defined contribution accounts from 1992 to 2012 -- the retirement readiness of most Americans has been slipping, according to the report by HelloWallet, a Washington, D.C.-based firm that offers technology-based financial advice to workers and conducts research of economic behavior. The report found that the amount of money that households nearing retirement are dedicating to pay down debts has increased 69 percent over the past two decades. Households headed by people ages 55 to 64 now spend 22 cents of each dollar to pay off old loans -- about the same percentage as younger people, according to the report. Read more.

FDIC SAYS INSURANCE FUND'S GROWTH UNLIKELY TO ALTER BANK RATES

The Federal Deposit Insurance Corp. said that it is unlikely to change the rates banks pay for insurance that guarantees customer deposits even as the fund continues to stay on track to meet deadlines for its health, Bloomberg News reported yesterday. The federal backstop, funded by assessments on banks, was at $37.9 billion by June 30, up from a deficit of $20.9 billion at the end of 2009 as bank failures surged during the credit crisis. The FDIC predicted that it will spend $4 billion to cover bank shutdowns in the next five years, a projection that has declined another $1 billion since April as the industry improves, according to a report issued yesterday updating the fund's health. The fund returned to a positive balance in 2011, and the FDIC anticipates that its income from assessments on banks will drop from about $12.4 billion in 2012 to about $10 billion this year as conditions improve and because growth in the assessment base has been more sluggish than expected, according to the report. The fund still has less than its required reserve ratio of 1.15 percent of the deposits it insures, and the FDIC expects to reach that goal by 2019 -- an extension of one year from earlier estimates because of a "more conservative projection of future assessment revenue." The reserve ratio was at 0.63 percent by June 30, the agency said. The Dodd-Frank Act of 2010 required the FDIC to increase the target ratio even higher to 1.35 percent by Sept. 30, 2020. Read more.

HIGH-END SPENDERS SHRUG OFF ECONOMIC HEADWIND

Despite continued weak employment data and gridlock in Washington, D.C., consumers are showing surprising signs of confidence, opening their wallets to buy big-ticket items ranging from washing machines to boats, the Wall Street Journal reported today. The average household in the top 20 percent of earners has seen its income rise more than 6 percent since 2008, before adjusting for inflation, according to data from the Census Bureau; among the top 5 percent, the increase has been nearly 8 percent. Households in the middle of the income distribution have seen just a 2 percent gain, on average, while incomes for the poorest Americans haven't returned to their pre-recession peak. Even so, the average American household spent $51,442 in 2012, surpassing for the first time its prerecession peak, the Labor Department said last month. Read more. (Subscription required.)

ATTENDING NCBJ'S 87TH ANNUAL CONFERENCE NEXT WEEK IN ATLANTA? DOWNLOAD THE CONFERENCE APP AND BE SURE TO ATTEND ABI'S SESSIONS!

If you are attending the National Conference of Bankruptcy Judges 87th Annual Conference in Atlanta next week, be sure to tap into the following resources and programs:

Have you downloaded the official NCBJ Conference app for Apple iOS or the Google Android devices? Built by ABI, the app contains the conference schedule, materials, hotel map, speaker info, access to the conference Twitter feed and more. You can customize it to remind you when your favorite session is about to start.
To download the app for iOS devices from iTunes, please click here.

To download the app for Android devices from the Google Play store, please click here.

Also, ABI will be sponsoring a number of great programs on Nov. 1 at the conference:

-Topics for the ABI/NCBJ Roundtables include: Single Asset Real Estate Cases, Streamlining the Process- National Chapter 13 Plan- Good or Bad? Part 1, What to Do after the Sale? Structured Dismissals, Liquidating Trusts and Chapter 7 Conversion, Chapter 7 & Hot Topics, Current Labor and Employment Issues in Bankruptcy Cases, Where the Work Is: Does the Restructuring Profession Need to Be Restructured?, Streamlining the Process- National Chapter 13 Plan- Good or Bad? Part II, Chapter 11 Professional Issues: Proper Disclosure and Retention and Addressing the New Rules of the Road on Compensation. The programs require pre-registration through the NCBJ.

-ABI luncheon in the Imperial Ballroom from 12:45-2:30 p.m. ET featuring Prof. Jeffrey Rosensweig, global and economics forecaster and expert on global investing and business strategy.

-Hearing from 2:30-4:30 p.m. ET of ABI's Commission to Study the Reform of Chapter 11. The hearing will take place in Room A601-602, and focus on corporate governance issues in bankruptcy. Witnesses set to testify at the hearing include:

  • Dennis F. Dunne of Milbank, Tweed, Hadley & McCloy, LLP (New York) will testify about the role of committees in chapter 11.
  • William K. Snyder of Deloitte CRG (Dallas) is testifying on the role of the chief restructuring officer (CRO) in chapter 11.
  • Brady C. Williamson of Godfrey & Kahn, SC (Madison, Wisc.) will testify about the use of examiners in corporate bankruptcy cases.
  • Mark A. Gittelman of PNC Bank (Philadelphia) is testifying on structural changes in the court systems, including creating a national bankruptcy court venue for mega cases.
  • Prof. Anne Lawton of Michigan State University College of Law (East Lansing, Mich.) will testify about special accommodations for small and middle market cases.
  • W. Clarkson McDow, United States Trustee (ret.) Region 4 (Columbia, S.C.) will testify about the U.S. Trustee's role in chapter 11 cases.
    For more, please visit http://commission.abi.org.

- Be sure to visit ABI's booth (#5) and C.A.R.E's booth (#6) to learn about new promotions, products and more!

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.

RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!

You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 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. 6 program include:

- Living with the New CFPB Mortgage Servicing Rules
- Business Lending: Navigating What Lies Ahead
- Business Lending: Recent Legal Developments

For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.

EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15

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.

ABI IN-DEPTH

NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES

In this "Bankruptcy In Depth" video, ABI Resident Scholar Kara Bruce and Eric Brunstad of Dechert LLP (Hartford, Conn.) preview 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. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.

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: IN RE W.R. GRACE & CO., ET AL. (3D CIR.)

Summarized by Weston Eguchi of Willkie Farr & Gallagher LLP

Affirming the district court's ruling, the Third Circuit Court of Appeals held that (a) § 524(g) broadly encompasses all asbestos-related actions against the debtors, including claims for indemnification and contribution like those asserted by the appellants; (b) appellants' indemnification and contribution claims were sufficiently similar to direct personal injury claims of asbestos plaintiffs to be classified together under § 1122; (c) provisions of trusts that appellants alleged were discriminatory toward indirect claims did not violate § 1123(a)(4)'s requirement that a plan provide the same treatment for each claim or interest in a class; and (d) trusts did not violate § 524(g)'s requirement that the channeling injunction be "fair and equitable" to future claimants because appellants' assertions (that there must be certainty of the amount and procedure for distributions and that participation of asbestos claimants attorneys' on the trust advisory committee was unfair to indirect claimants) were irrelevant and baseless.

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: CALCULATE COST OF EQUITY TO TRULY MEASURE A BANK'S PERFORMANCE

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post found that the financial crisis demonstrates the need to reincorporate risk considerations into performance measurements. The post proposes that this can be accomplished by focusing not on return on equity (ROE), but on the spread between ROE and an institution's cost of equity.

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

Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?

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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  CALENDAR OF EVENTS
 

2013

November
- abiWorkshop: "Risky Times for Secured Lenders and Servicers"
   Nov. 6, 2013 | Alexandria, Va.
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.
-abiWorkshop: "You Can't Discharge Student Loans in Bankruptcy - Or Can You?"
   Nov. 15, 2013 | Alexandria, Va.
- Delaware Views from the Bench
   Nov. 25, 2013 | Wilmington, Del.

  



December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
January
- Western Consumer Bankruptcy Conference
    Jan. 20, 2014 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
    Jan. 23-24, 2014 | Denver, Colo.


 
 
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Bankruptcy Cases to Be Considered by Supreme Court Previewed in New Bankruptcy in Depth Video

ABI Bankruptcy Brief | October 17, 2013
 
  

October 17, 2013

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

BANKRUPTCY CASES TO BE CONSIDERED BY SUPREME COURT PREVIEWED IN NEW "BANKRUPTCY IN DEPTH" VIDEO

ABI's next "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce talking with Eric Brunstad of Dechert LLP (Hartford, Conn.) to preview 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. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.

FEDERAL JUDICIARY BUDGET INCREASES IN LAST-MINUTE BUDGET DEAL

The budget deal Congress approved yesterday to reopen the government and raise the debt ceiling provides $51 million in additional funding to the judiciary and to federal defenders, the Legal Times reported today. Federal court officials and members of the Senate Judiciary Committee greeted the increase as good news, although it is small when compared to $350 million in budget cuts earlier this year as part of sequestration. The extra funding would primarily go to pay the backlog of attorney fees under the Criminal Justice Act, which funds court-appointed private counsel. Payments were suspended in mid-September, when funding ran out two weeks before the end of the fiscal year. The bill also includes $4.8 billion for judiciary salaries and expenses. That amounts to a $25 million annual increase over FY2013, court officials said. The legislation gives judiciary officials the ability to float those funds among accounts to respond to the most urgent budget needs as they arise. Overall, the judiciary budget would rise from about $6.65 billion to about $6.7 billion. Read more.

PROPERTY TAXES, SKIPPED PENSION PAYMENTS BOOST DETROIT'S CASHFLOW

A report released yesterday showed that Detroit's revenue dropped by 9 percent in the first quarter of fiscal 2014 compared with the same period in fiscal 2013, but an influx of property taxes and skipped pension contributions boosted the city's cashflow, Reuters reported yesterday. In his quarterly report to Michigan officials, Kevyn Orr, Detroit's state-appointed emergency manager, said the city ended the quarter on Sept. 30 with a cash balance of $128.5 million that exceeded projections by $56.7 million. However, Orr said that Detroit's financial condition "continues to be dire" as it works its way through bankruptcy court, where its eligibility to remain there will be the subject of a trial next week. City revenue for the quarter, including property, income and gambling taxes, totaled $220.2 million, a drop of about $22 million from fiscal 2013's first quarter. Expenses also fell by about $11 million as the city's headcount dropped to approximately 9,322 workers at the quarter's end from 10,325 in the same period last year, according to the report. Read more.

LATEST SETTLEMENT REPORT FINDS BANKS GIVING TIMELY MORTGAGE RELIEF

The $25 billion national mortgage settlement, intended to help homeowners affected by the housing crisis, appears to be running ahead of schedule, according to a new report by the monitor of the program, the New York Times reported today. However, the number of households helped by the settlement has fallen short of the original predictions, and critics complained that too much relief was given to people who gave up their homes in short sales and not enough to help people retain their homes. Early last year, five banks signed on to the settlement over their use of mass-produced, faulty documents to evict homeowners. As of Dec. 31, they had provided $38.7 billion in relief in raw dollar terms, the report said. But because not every type of relief is counted the same way under the settlement's terms, they had fulfilled only about 80 percent of their total obligation. Prior to yesterday, banks had self-reported their progress in raw dollar terms. The new report is the first in which the monitor, Joseph A. Smith Jr., has disclosed the amount of credit they have earned toward the settlement obligation. The report credited them $4.1 billion for principal reduction on primary mortgages, $2.2 billion for principal reductions in second mortgages, and $5.4 billion in short sales or deeds in lieu of foreclosure, in which the homeowner is allowed to sell the house for less than what is owed or simply hand it over to the bank. It also credited $2.6 billion for allowing people who owed more on their mortgage than their home was worth to refinance at lower interest rates. Read more.

FANNIE MAE SURVIVAL IS BACK ON THE TABLE FOR POLICYMAKERS

The consensus in Washington, D.C., that Fannie Mae and Freddie Mac should be dismantled is weakening amid opposition from hedge funds, regional banks and others who could benefit if the companies survive in some form, Bloomberg News reported yesterday. President Barack Obama and lawmakers from both parties have called for the two mortgage-finance companies to be replaced by a new U.S. housing system. While the official position hasn't changed, a bipartisan group of U.S. senators writing legislation is grappling with how to ensure that changes to Fannie Mae and Freddie Mac don't disrupt the recovering housing market. Some Democrats said that they are leery of engineering a switch that would liquidate the government-sponsored enterprises (GSEs), leaving it to private entities to risk their own capital on home loans. Since they nearly collapsed during the 2008 credit crisis, the two companies have drawn $187.5 billion from taxpayers and have been considered too politically toxic to be preserved. While the U.S. holds controlling stakes, the outcome will affect private investors including hedge funds Perry Capital and Paulson and Co., which have accumulated preferred shares and have spent months lobbying for Fannie Mae and Freddie Mac to be recapitalized. The hedge funds gained little traction in early meetings with senators such as Bob Corker (R-Tenn.), who publicly rejected their pleas in the spring. As the legislative process advances and involves a wider group of lawmakers, some are listening to the argument that an entirely new system could risk instability in the market. Read more.

FED WEIGHS SURCHARGE ON BANKS' PHYSICAL COMMODITY BUSINESSES

Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, the Wall Street Journal reported today. Such an approach could encourage banks to pare back their involvement in physical commodities, which has increasingly raised concerns among regulators and lawmakers. While no decision has been made, imposing a surcharge would allow the Fed to sidestep a legal jam caused by existing laws that set Goldman Sachs Group Inc. and Morgan Stanley apart from peers and give the former investment banks broad leeway to own commodities. The Fed has been considering scaling back the ability of banks to own such assets amid concerns that commodities ownership has expanded beyond what regulators originally envisioned. To avoid a regulatory situation where only some banks can own commodities, the Fed is considering a surcharge that would ensure that all banks hold more capital to account for potential risks posed by the assets they own or lease. Read more. (Subscription required.)

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.

RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!

You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 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. 6 program include:

- Living with the New CFPB Mortgage Servicing Rules
- Business Lending: Navigating What Lies Ahead
- Business Lending: Recent Legal Developments

For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.

EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15

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.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: UTNEHMER V. CRULL (IN RE UTNEHMER; 9TH CIR.)

Summarized by Hilda Montes de Oca of the U.S. Bankruptcy Court for the Central District of California

Applying California partnership law, the Ninth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court because it erred when it decided that a partnership existed between the debtor defendant and plaintiff creditor based upon the terms of a loan agreement. As there was no partnership, the debtor owed no fiduciary obligations to the creditor. The BAP further found that the bankruptcy court used the wrong mens rea standard for defalcation. As a result, the bankruptcy court erred in determining that debtor's debt to creditor was excepted from discharge as a defalcation by a fiduciary pursuant to § 523(a)(4).

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: OCC'S COMMERCIAL REAL ESTATE LENDING HANDBOOK MISSES THE MARK ON POTENTIAL LEGAL ISSUES

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post finds the new version of the Office of the Comptroller of the Currency's (OCC) Commercial Real Estate Lending Handbook to be lacking in addressing potential legal issues associated with risks in commercial real estate lending.

The abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers," on Nov. 6 will cover potential legal issues associated with commercial lending. Attend in person or via live webstream.

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

Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?

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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  CALENDAR OF EVENTS
 

2013

October
- International Insolvency & Restructuring Symposium
    Oct. 25, 2013 | Berlin, Germany

November
- abiWorkshop: "Risky Times for Secured Lenders and Servicers"
   Nov. 6, 2013 | Alexandria, Va.
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.
-abiWorkshop: "You Can't Discharge Student Loans in Bankruptcy - Or Can You?"
   Nov. 15, 2013 | Alexandria, Va.

  



- Delaware Views from the Bench
   Nov. 25, 2013 | Wilmington, Del.

December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
January
- Western Consumer Bankruptcy Conference
    Jan. 20, 2014 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
    Jan. 23-24, 2014 | Denver, Colo.


 
 
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Preliminary Hearing on Detroits Chapter 9 Eligibility Concludes with Discussion on Pensions

ABI Bankruptcy Brief | October 17, 2013
 
  

October 22, 2013

 
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  NEWS AND ANALYSIS   

PRELIMINARY HEARING ON DETROIT'S CHAPTER 9 ELIGIBILITY MOVES CASE TO CRITICAL PHASE

In an exchange with an attorney representing Detroit's two pension funds, Bankruptcy Judge Steven Rhodes discussed whether protections for the city's pension funds could violate federal bankruptcy law. The exchange occurred during the closing session yesterday of a three-day preliminary hearing on Detroit's chapter 9 eligibility. Robert Gordon, the pension funds' attorney, argued that the city should not be eligible for bankruptcy protection because Michigan's constitution protects pensions from impairment, and because the retiree unions believe that the city will pursue pension cuts. While a Reuters story yesterday suggested that a decision was made on the pension issue, Judge Rhodes did not issue an opinion on the matter during the exchange, but he did pose tough questions to attorneys representing Detroit's unions, retirees and pension funds as they disputed the legal arguments the city's attorneys made last week. Even if Judge Rhodes believes that the Constitution prevents impairment, that is not an issue to be decided during the eligibility trial. The trial on Detroit's chapter 9 eligibility is scheduled to begin tomorrow. Read more.

CORDRAY DOESN'T EXPECT WAVE OF LITIGATION OVER CFPB'S QM RULE

U.S. Consumer Financial Protection Bureau Director Richard Cordray said that he doesn't anticipate an outburst of litigation after his agency's qualified mortgage rule takes effect next year, Bloomberg News reported yesterday. Regulators understand that banks will need time for implementation of the rule, which will require that lenders take certain steps to confirm a borrower's ability to repay, Cordray said yesterday. "Let me also assure you that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time -- a point that we have also been discussing with our fellow regulators," he said. The consumer bureau will have no data initially and will need to wait a few months after the rule takes effect in January to judge its impact, Cordray said. Read more.

For more on the CFPB's new mortgage servicing rules, be sure to attend the inaugural abiWorkshop program, "Risky Times for Secured Lenders and Servicers," on Nov. 6. One of the program sessions is devoted to the CFPB's new mortgage servicing rules scheduled to take effect next year. To register to attend in person or via live webstream, please click here.

DOJ SEES $13 BILLION JPMORGAN DEAL AS A TEMPLATE FOR FUTURE BANK SETTLEMENTS

The Justice Department plans to use its tentative $13 billion settlement with JPMorgan Chase as a blueprint for reaching similar deals with other banks in probes related to bad mortgages and the 2008 financial crisis, the Washington Post reported today. Justice Department officials plan to expand the use of a 1980s law that carries a relatively low burden of proof and gives prosecutors 10 years to pursue such cases, twice as long as under standard securities law. Under this model, the department would also require that some of the settlement money be directed to consumers; in JPMorgan's case, $4 billion would be set aside for struggling homeowners. The department would also refuse to allow banks to avoid criminal prosecution by paying higher civil penalties. The strategy will give the Justice Department several more years to extract multibillion-dollar fines from banks eager to rid themselves of crushing legal burdens. The strategy also includes requiring that any future deals include help for homeowners devastated by the housing market's collapse. Justice Department officials want JPMorgan to agree to aggressive forms of mortgage relief, including lowering the balances of borrowers who owe significantly more than their homes are worth. The agency wants that help directed to the areas most affected by the troubled housing market, including Detroit. Read more.

BIG U.S. BANKS SAY PROPOSAL TO LIMIT LEVERAGE ARBITRARY, HARMFUL

Some of the largest U.S. banks said a proposed rule to increase the capital they hold against potential losses is arbitrary and would put them at a disadvantage against non-U.S. banks facing easier requirements, Bloomberg News reported yesterday. The so-called leverage ratio -- proposed by banking regulators at 5 percent for holding companies and 6 percent for their banking units -- targeted banks with the most assets. In comment letters yesterday, New York-based Citigroup Inc., the third-biggest U.S. bank, said the idea could worsen an uneven global playing field for U.S. banks, and State Street Corp. said that the regulators showed "no evidence" they based the numbers on an impact study. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. proposed a tougher limit on U.S. firms than those agreed to in Basel III international accords. The leverage cap -- also affecting JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of America Corp., Wells Fargo & Co. and Bank of New York Mellon Corp. -- is meant to limit vulnerabilities in the financial system that were seen in the lead-up to the 2008 credit crisis. Read more.

ANALYSIS: PRIVATE-EQUITY FIRMS TARGETING RENTAL MARKET IN HOUSING'S HARDEST-HIT AREAS

Private-equity firms and hedge funds have bought as many as 200,000 homes across the U.S., typically in areas hardest hit by the housing crash, to profit from soaring demand for rentals, Bloomberg News reported yesterday. Demand for rental accommodations in the U.S. has grown as almost 8 million homes have been repossessed through foreclosure or sold for a loss since 2007, according to RealtyTrac. The homeownership rate dropped to 65 percent in the first half of this year, its lowest level since 1998, Census data show, and may keep falling as more owners lose their homes and slow income growth and tight credit limit people's ability to buy. Last year, U.S. home prices dropped to a low of 35 percent below their 2006 peak, triggering a wave of acquisitions from investors trying to turn a business that's been dominated by mom and pop landlords into an institutional asset class resembling the apartment industry. Blackstone Group LP has led the stampede, spending more than $7.5 billion on almost 40,000 properties, followed by American Homes 4 Rent with more than 20,000. Investors have largely targeted Phoenix, Atlanta, Dallas, Charlotte, N.C. and Tampa, Fla., where growth in jobs and population is expected to drive up rents and home values. Read more.

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.

NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES

ABI's next "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce talking with Eric Brunstad of Dechert LLP (Hartford, Conn.) to preview 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. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.

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.

RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!

You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 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. 6 program include:

- Living with the New CFPB Mortgage Servicing Rules
- Business Lending: Navigating What Lies Ahead
- Business Lending: Recent Legal Developments

For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.

EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15

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.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: PENNINGTON-THURMAN V. BANK OF AMERICA N.A. (IN RE PENNINGTON-THURMAN; 8TH CIR.)

Summarized by Michael Tamburini of the Commercial Law Group P.A.

The BAP affirmed the bankruptcy court's conclusion that the debtor's allegations against her mortgage lender were without merit and, therefore, it did not abuse its discretion in denying the debtor's motion to reopen her case to bring an adversary proceeding.

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: HOW MORTGAGE MARKETS CAN PRICE RISK EFFICIENTLY

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post suggested that higher capital requirements for federal mortgage lenders, more stringent qualified mortgage and qualified residential mortgage requirements for borrowers and a heightened reliance on private markets will help keep taxpayers from paying for future bailouts.

The abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers," on Nov. 6 will cover potential legal issues associated with the CFPB's new qualified mortgage lending rules set to take effect in 2014. Attend in person or via live webstream.

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

Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

  

 

FRIDAY:

 

 

 

Detroit
Register Today!

 

 

 

COMING UP

 

 

 

CFRP13
Register Today!

 

 

 

CFRP13
Register Today!

 

 

 

CRC13
Register Today!

 

 

 

Detroit
Register Today!

 

 

 

abiWorkshop_StudentDebt
Register Today!

 

 

 

Delaware
Register Today!

 

 

 

WLC
Register Today!

 

 

 

Western Consumer Bankruptcy Conference
Register Today!

 

 

 

Rocky Mountain Bankruptcy Conference
Register Today!

 
   
  CALENDAR OF EVENTS
 

2013

October
- International Insolvency & Restructuring Symposium
    Oct. 25, 2013 | Berlin, Germany

November
- abiWorkshop: "Risky Times for Secured Lenders and Servicers"
   Nov. 6, 2013 | Alexandria, Va.
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.
-abiWorkshop: "You Can't Discharge Student Loans in Bankruptcy - Or Can You?"
   Nov. 15, 2013 | Alexandria, Va.

  



- Delaware Views from the Bench
   Nov. 25, 2013 | Wilmington, Del.

December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
January
- Western Consumer Bankruptcy Conference
    Jan. 20, 2014 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
    Jan. 23-24, 2014 | Denver, Colo.


 
 
ABI BookstoreABI Endowment Fund ABI Endowment Fund
 

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