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Regulators and 13 Banks Complete 9.3 Billion Deal for Foreclosure Relief

ABI Bankruptcy Brief | February 26 2013
 
  

February 28, 2013

 
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  NEWS AND ANALYSIS   

REGULATORS AND 13 BANKS COMPLETE $9.3 BILLION DEAL FOR FORECLOSURE RELIEF

Federal banking regulators have reached a $9.3 billion pact with 13 major lenders to settle claims of foreclosure abuses like bungled loan modifications and flawed paperwork, the New York Times DealBook blog reported today. The settlement is made up of $3.6 billion in cash relief and $5.7 billion in relief to avert foreclosures. Under the deal, homeowners can receive up to $125,000 in cash relief. Despite the banner numbers in the settlement, consumer groups and a range of lawmakers have criticized it for not providing enough relief for aggrieved homeowners. The agreement formalizes the tentative deals that were reached in January between the mortgage servicing companies and the regulators from the Office of the Comptroller of the Currency and the Federal Reserve. Read more.

FORECLOSURE SALES IN 2012 HIT LOWEST MARK IN FIVE YEARS

While 2012 had the fewest foreclosure-related sales of homes since 2007, RealtyTrac released figures today showing that levels remained far higher than before the bursting of the housing-market bubble, MarketWatch.com reported today. Almost 950,000 U.S. properties in some state of foreclosure or owned by a bank were sold in 2012, down 6 percent from the prior year, according to RealtyTrac, an online foreclosure marketplace. Despite the decline, these sales remain far above the pre-bubble-burst levels: There were about 46,000 foreclosure-related sales in 2005, according to RealtyTrac. Foreclosure-related sales made up about 21 percent of all U.S. residential sales last year, down from 23 percent in the prior year, but much greater than the roughly 1 percent of foreclosure sales in 2005. Meanwhile, properties sold as short sales rose 4 percent from the prior year. These short sales made up about 22 percent of all residential sales last year. Read more.

CFPB DECELERATES REVIEW OF CHECKING OVERDRAFT RULES

The Consumer Financial Protection Bureau (CFPB), which last year began exploring whether to tighten rules on checking overdraft fees, has decided against quick action after hearing from smaller U.S. banks that rely on the revenue, Bloomberg News reported today. The bureau announced Feb. 22, 2012, that it was collecting data on overdraft practices and would complete the inquiry by the end of 2012. Nine large banks, including Bank of America Corp., U.S. Bancorp and Regions Financial Corp., are providing information. This month, CFPB director Richard Cordray said that no decisions have been made about possible new rules, adding that "over the next couple of years" the agency will continue to work on the matter. Camden Fine, president of the Independent Community Bankers of America, said revenue from overdraft fees represents 3 percent to 15 percent of total income for institutions in his association. In 2011, bank customers paid $31.6 billion in overdraft fees, down from $33.1 billion in 2010, according to Moebs Services, a research firm. About 15 million Americans overdraw their accounts 10 or more times a year, Moebs reported. Read more.

COMMENTARY: "TOO BIG TO FAIL" RULES HURTING "TOO SMALL TO COMPETE" BANKS

Almost five years have passed since governments in Europe, the U.K. and the U.S. used about $600 billion in capital to shore up banks during the worst financial crisis since the Great Depression, and regulators are still trying to ensure that it never happens again, according to a Bloomberg News commentary today. "With all the debating going on, the financial market structure didn't change very much," Zhu Min, the International Monetary Fund's deputy managing director, said in January. Some say the industry's biggest banks should be forced to break up, including Sanford Weill and John Reed, who created New York-based Citigroup Inc. They have said that financial conglomerates could be more valuable and safer if split apart. So have former Merrill Lynch & Co. Chief Executive Officer David Komansky and former Morgan Stanley CEO Philip Purcell. Investors such as Joshua Siegel, founder and managing principal at New York-based StoneCastle Partners LLC, see bigger changes at the other end of the spectrum. Small banks will seek mergers because their management teams are aging and new regulations are too costly to bear, he says. JPMorgan's Jamie Dimon, a critic of regulations he views as unnecessary or excessive, has recently touted the benefits. He told Citigroup analysts this month that new rules will help banks such as JPMorgan, the largest in the U.S., win market share from smaller competitors, the analysts wrote in a report. Read more.

ANALYSIS: FOR SEC, A SETBACK IN BID FOR MORE TIME IN FRAUD CASES

The Supreme Court yesterday delivered a swift and decisive rejection of the Securities and Exchange Commission's argument that it should operate under a more forgiving statute of limitations in pursuing penalties in fraud cases, the New York Times DealBook blog reported yesterday. As a result of the decision, the agency will have to find a long-term solution to give itself more time to investigate cases. In Gabelli v. Securities and Exchange Commission, Chief Justice John G. Roberts Jr. wrote in the unanimous decision rejecting the SEC's argument that a federal statute that limits the government's authority to pursue civil penalties should commence when a fraud is discovered, not when it occurs. The SEC was hoping that the court would apply what is known as the "discovery rule." In 2010, the Supreme Court endorsed this rule in a private securities fraud class-action suit, Merck & Co. v. Reynolds, stating that "something different was needed in the case of fraud, where a defendant's deceptive conduct may prevent a plaintiff from even knowing that he or she has been defrauded." In the Gabelli case, the SEC filed fraud charges in 2008 against mutual fund manager Marc Gabelli and a colleague, Bruce Alpert, saying that they had violated the Investment Advisers Act of 1940 for permitting an investor to engage in market timing. In its complaint, the SEC sought civil monetary penalties based on market timing that it claimed had taken place from 1999 to 2002, which resulted in the preferred investor purportedly reaping significant profits while ordinary investors suffered large losses. Read more.

LATEST BLOOMBERG "BILL ON BANKRUPTCY" VIDEO: SECRET MADOFF AGREEMENT MAY HARM VICTIMS

Money stolen from victims of the Bernie Madoff Ponzi scheme is earmarked for someone who may have been an accomplice in the fraud, and the agreement is being kept secret by a federal district judge. That's the first item on the new video with Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle. Click here to view.

DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"

A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

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

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"

Do not miss the "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. ABI's 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. This webinar is sure to sell out; register now for the special ABI member rate of $75!

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: CLINTON AVENUE CLO FUND LTD. V. BANK OF AMERICA, N.A. (11TH CIR.)

Summarized by Weston Eguchi of Willkie Farr & Gallagher LLP

Affirming the district court's rulings, the Eleventh Circuit concluded that (A) the plaintiff term lenders lacked standing to enforce the defendant revolving lenders' promise to lend to borrowers under a credit agreement; and (B) summary judgment on the issue of whether the revolving lenders were required to fund under the credit agreement was inappropriate where the relevant contractual language was ambiguous such that consideration of extrinsic evidence of the parties' intent would be necessary.

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: ASSIGNMENT OF RENTS: SIXTH CIRCUIT THROWS OUT DEBT-BUYER SETTLEMENT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post reported that the Sixth Circuit recently threw out a nationwide settlement involving Midland, a robo-signing debt buyer, and more than a million consumers. This will allow other class and individual actions to proceed against Midland. The suit was thrown out for faulty notice to class members, who were not told in the settlement notice that they’d lose their individual fraud claims against Midland.

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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NEXT WEEK:

 

 

 

Paskay 2013
March 7-9, 2013
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COMING UP

 

 

 

 

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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BBW 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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  CALENDAR OF EVENTS
 

2013

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
- 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.


 
 
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Report Average Credit Card Debt Late Payments Fall in First Quarter

ABI Bankruptcy Brief | May 21 2013
 
  

May 21, 2013

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

REPORT: AVERAGE CREDIT CARD DEBT, LATE PAYMENTS FALL IN FIRST QUARTER

Credit reporting agency TransUnion said that the rate of credit card payments at least 90 days overdue fell to 0.69 percent in the first quarter from 0.85 percent a year earlier — a drop of nearly 19 percent, the Associated Press reported today. The January-March card delinquency rate was also down from 0.73 in the October-December quarter, when many consumers ramped up credit use to finance holiday season purchases. Average credit card debt per borrower fell 1.7 percent to $4,878 in the first quarter from $4,962 in the same period last year, TransUnion said. On a quarterly basis, it declined 4.8 percent from $5,122 in the fourth quarter. TransUnion, however, has forecast that average credit card debt will rise by roughly 8 percent to $5,446 by the end of this year — the highest level in four years. Read more.

EDITORIAL: DERIVATIVES REFORM ON THE ROPES

New rules to regulate derivatives, adopted last week by the Commodity Futures Trading Commission, are a victory for Wall Street and a setback for financial reform, according to a New York Times editorial yesterday. The regulations, required under the Dodd-Frank reform law, are intended to impose transparency and competition on the notoriously opaque multitrillion-dollar market for derivatives, which is dominated by five banks: JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley. In the run-up to the financial crisis — and since — the lack of transparency and competition has fostered recklessness and instability, according to the editorial. Under the Dodd-Frank law, derivatives are supposed to be traded on “swap execution facilities,” which are to operate much like the exchanges that exist for equities and futures. Even as the new rules shift much of the trading to those facilities, the editorial says that they will also preserve the ability of the banks to maintain their old practices. For instance, the commission’s initial proposal called for hedge funds, asset managers and corporations to contact at least five banks when seeking prices for a derivatives contract. In a major concession to the banks, that number was lowered to two in the final rule. Read the full editorial.

REGULATORS TO VOTE ON OVERSIGHT OF NONBANK FINANCIAL INSTITUTIONS

Treasury Secretary Jacob Lew told the Senate Banking Committee that U.S. regulators will soon vote on which large nonbank financial firms will face much stricter government oversight as policymakers seek to reduce risks posed by Wall Street to the broader economy, the Wall Street Journal reported today. Lew appeared before the Senate Banking Committee to discuss the work of federal regulators to implement the 2010 Dodd-Frank financial-overhaul law and limit potential risks to the financial system. The Financial Stability Oversight Council, comprised of Treasury officials and other regulators, have struggled in deciding which large, complex financial firms should be subject to higher capital and other rules because of the potential risks they pose to the financial system. "The Council discussed its ongoing analysis at its most recent meeting on April 25, and it expects to vote on proposed designations of an initial set of nonbank financial companies in the near term," Lew said. While federal officials have declined to say publicly which firms are being considered for a "systemic" designation, at least three companies have reached the final of three stages in the review process. Prudential Financial Inc., American International Group Inc. and the GE Capital unit of General Electric Co. have advanced to the third stage, though regulators are considering a number of firms that could ultimately be subject to the enhanced oversight. "Yields and volatility in fixed-income markets are very low by historical standards, which may be providing incentives for market participants to 'reach for yield' by investing in lower-grade credit," Lew said in prepared remarks. Read more. (Subscription required.)

Click here to read Lew's prepared testimony for today's Senate Banking Committee hearing.

ANALYSIS: WIELDING HARRISBURG EXAMPLE, SEC AIMS FOR CITIES TO COMPLY WITH DISCLOSURE RULES

The Securities and Exchange Commission's rebuke of the city of Harrisburg this month over fraudulent statements and long-overdue disclosures to its bondholders could be seen as a warning to state and local politicians who offer too rosy a view of their financial health, according to a Reuters analysis yesterday. However, clear-cut cases of officials misstating their city's finances, such as Harrisburg, remain relatively rare, and the main goal of the U.S. Securities and Exchange Commission is far more basic: cajoling thousands of cities, counties and other organizations that sell bonds into complying with its disclosure rules. When the SEC charged the cash-strapped capital city of Pennsylvania on May 6, it effectively put officials across the country on notice that even political statements such as annual state-of-the-city addresses must not overstate financial conditions. The message was, "What you say can and will be used against you," said Ben Watkins, head of Florida's Division of Bond Finance. "What makes it precedent-setting is that it's the first time there's been an enforcement action on statements made by public officials." The SEC said Harrisburg had defrauded its creditors because numerous officials glossed over its disastrous finances and the city was overdue in its disclosures. While no individuals were held to account, an SEC commissioner said that it would not show such restraint in the future. Read more.

ABI LIVE WEBINAR NEXT WEEK WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES

Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

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!

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE

Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. 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! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO

ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: BANK OF CORDELL V. STURGEON (IN RE STURGEON; 10TH CIR.)

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

The Tenth Circuit BAP found that the evidence supported the bankruptcy court’s finding that the debtor was an active, knowing participant in a fraudulent scheme to deceive the appellee through a series of false representations and false pretenses that created a contrived and misleading understanding by the appellee, and that the debtor thereby intended to deceive the appellee.

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: WILL TRADITIONAL CHAPTER 11 INVESTORS FIND A ROLE IN CHAPTER 9?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. While most chapter 11 cases have “rules of engagement” that are well-known by the sophisticated players who are guided by the Bankruptcy Code and an extensive body of case law, chapter 9 lacks much of this clarity, making it a scarier place for traditional funds to invest, according to a recent blog post.

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 implement constructive trusts in any case where applicable state law would recognize them.

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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CCA Webinar 2013
May 29, 2013
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June 7, 2013
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CSBW 2013
June 13-16, 2013
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Golf Tournament 2013
June 14, 2013
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INSOL’s Latin American Regional Seminar in São Paulo, Brazil
June 13, 2013
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NE 2013
July 11-14, 2013
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SEBW 2013
July 18-21, 2013
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MA 2013
Aug. 8-10, 2013
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SW 2013
Aug. 22-24, 2013
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NYIC Golf Tournament 2013
Sept. 10, 2013
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Endowment Baseball 2013
Sept. 12, 2013
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Endowment Football 2013
Oct. 6, 2013
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40-Hour Mediation Program
Dec. 8-12, 2013
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  CALENDAR OF EVENTS
 

2013

May
- ABI Live Webinar: Consumer Class Actions
     May 29, 2013

June
- Memphis Consumer Bankruptcy Conference
     June 7, 2013 | Memphis, Tenn.
- Central States Bankruptcy Workshop
     June 13-16, 2013 | Grand Traverse, Mich.
- INSOL’s Latin American Regional Seminar
     June 13, 2013 | São Paulo, Brazil
- Charity Golf Tournament
     June 14, 2013 | City of Industry, Calif.

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.
- Southwest Bankruptcy Conference
    August 22-24, 2013 | Incline Village, Nev.

September
- ABI Endowment Golf & Tennis Outing
    Sept. 10, 2013 | Maplewood, N.J.
- ABI Endowment Baseball Game
    Sept. 12, 2013 | Baltimore, Md.

October
- ABI Endowment Football Game
    Oct. 6, 2013 | Miami, Fla.

December
- ABI/St. John’s Bankruptcy Mediation Training
    Dec. 8-12, 2013 | New York


 
 
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Analysis When Lenders Are Not Paid Back

ABI Bankruptcy Brief | August 20, 2013
 
  

August 20, 2013

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

ANALYSIS: WHEN LENDERS ARE NOT PAID BACK

Much of the lending done in the U.S. relies on having both collateral and contractual obligations (loan covenants) that together provide the lender with assurance that the funds lent out will be repaid. Rather than putting up physical assets as collateral, governments often instead promise to repay bondholders out of a dedicated stream of income, such as via the tolls collected on a bridge or out of unspecified revenue from future taxes. It is not surprising, then, that a financial crisis involving trillions of dollars of bad loans led to legal conflicts and policy debates about the role of collateral and the sanctity of contracts, according to an analysis in today's New York Times Economix Blog. It seems likely that people owed money by the city of Detroit will get less than promised. One of the many elements in the city's bankruptcy proceedings is the treatment of the holders of general obligation bonds, which constitute $530 million out of the city's $18 billion in total debt. In the past, this type of municipal bond was considered relatively safe in that the borrowing authority was seen as having an implicit commitment to raise taxes as necessary to pay off the obligation. The proposal from Kevyn Orr, Detroit's emergency manager, however, would have these bonds paid back at only 20 cents on the dollar. With Detroit city services already threadbare, and with Orr's bankruptcy proposal foisting losses on retired city workers and current employees through reductions in pensions and other benefits, it seems only fair for bondholders to share in the pain. Bond insurers are likely to file suit, but success by Orr in upending the heretofore accepted view of general obligation bonds could inflict considerable pain on other municipal borrowers, who might well expect to pay higher interest rates to investors nervous that one day other cities might follow Detroit's example. Click here to read the full analysis.

COMMENTARY: NO BANKER LEFT BEHIND

The Detroit bankruptcy case has been cast as a contest between bondholders and pensioners that can be resolved only by shared sacrifice. In principle, there is no problem with that, although in practice, the pensioners' fair share will have to take into account their extreme vulnerability: Public pensions are not federally insured, and many municipal retirees do not receive Social Security. What is problematic is shared sacrifice that does not seem to apply to the big banks that abetted Detroit's descent into bankruptcy, according to a commentary in Friday's New York Times. Just days before its bankruptcy filing last month, Detroit reached its first settlement with creditors. The settlement was with UBS and Bank of America, and although the precise terms will not be nailed down until the bankruptcy judge weighs in, Detroit is set to pay an estimated $250 million to terminate a soured derivatives transaction from 2005 that was supposed to protect Detroit from rising interest payments on a chunk of its variable rate debt. By 2009, both interest rates and the city's credit rating were falling, forcing Detroit to pay the banks some $50 million a year and to pledge roughly $11 million a month in casino-tax revenue as additional collateral. The banks have agreed in a settlement to a discount of as much as 25 percent off what they are owed. But the haircut doesn't mean that the banks will suffer. The banks' 25 percent hit is nothing compared with the city's suggested 90 percent cut to the pensions' unfunded liability — which will result in benefit cuts that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening, according to the commentary. Click here to read the full commentary.

DETROIT SCHOOLS SELL BONDS, FOR A PRICE

Detroit's public-school system sold $92 million in debt today at a substantial yield premium in the largest Michigan municipal-bond sale since Detroit's bankruptcy filing last month, the Wall Street Journal reported today. The Michigan Finance Authority, which sold the debt for Detroit Public Schools, offered the one-year debt at a yield of 4.375%. That compares with 0.18% on a typical triple-A-rated, one-year municipal bond, according to Thomson Reuters Municipal Market Data. The borrowing is backed by a pledge of state aid, a protection cited by some investors who placed orders for the debt. Still, some investors stayed away. Detroit's bankruptcy, filed July 18, has sparked concerns that municipal bonds may not be as safe as many investors once assumed. Kevyn Orr, the city's emergency manager, has proposed imposing cuts on some muni bondholders as the city looks to restructure more than $18 billion in debt. And while Detroit's school district is a separate entity from the city and isn't involved in its bankruptcy, it has still seen its share of financial struggles. It has been under state control, under a separate emergency manager, since 2009, and it has also lost more than 33,000 students, or 40% of its enrollment base, since 2010, according to S&P. Even so, holders of the one-year debt sold today should get paid even if enrollment falls as much as 33%, according to S&P. Click here to read the full article. (Subscription required.)

TRANSUNION: AUTO LOAN DELINQUENCIES REMAIN FLAT DESPITE INCREASE IN LOAN BALANCES

The national auto loan delinquency rate (the percentage of accounts 60 or more days past due) remained relatively flat year-over-year, moving from 0.79% in Q2 2012 to 0.80% in Q2 2013, according to a newswire report today. On a quarter-over-quarter basis, the auto loan delinquency rate experienced an 8-basis-point drop from 0.88% in Q1 2013, according to data provided by TransUnion's Industry Insights Report. Auto loan balances continue to increase, jumping more than 4% between Q2 2012 ($12,875) and Q2 2013 ($13,435). Every state except for Michigan experienced an increase in average auto loan balances during this time frame. While subprime borrower debt increased more than 7% in the last year, delinquency levels for this segment remained about the same, moving from 4.94% in Q2 2012 to 5.02% in Q2 2013. Click here to read the full article.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE SOUTHWEST BANKRUPTCY CONFERENCE ON THURSDAY

The 6th stop for the ABI Golf Tour is on Aug. 22 at the Incline Village Champion course, held in conjunction with ABI's Southwest Bankruptcy Conference. 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 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: AMERICAN BANK, FSB V. IN RE CORNERSTONE COMMUNITY BANK (IN RE AMERICAN BANK, FSB; 6TH CIR.)

Summarized by Bryan Robinson of Law Offices of Bryan Robinson

The Sixth Circuit Court of Appeals affirmed the ruling by the district court that, in regards to the competing secured claims by American Bank and Cornerstone Community Bank, in the funds of the insolvent debtor U.S. Insurance Group (USIG), held in an account at Cornerstone, American Bank's interest was superior to Cornerstone's interest and that Cornerstone had no right to the money. The court's decision was based on the Premium Finance Company Act, Tenn. Code Ann. §§ 56-37-101 et seq. (2008), which gave American a senior perfected security interest in the contested funds good against any competing interest claimed by Cornerstone.

There are nearly 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: § 502(b)(2) AND THE COLLECTION OF POST-PETITION INTEREST

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post discusses the Ninth Circuit's decision that a creditor can collect post-petition interest from a nondebtor party even though the Code prohibits a creditor from asserting a claim for "unmatured interest."

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

A class of claims should not be considered impaired for purposes of § 1129(a)(10) if the impairment results from the plan proponents' exercise of discretion (i.e., artificial impairment) and not driven by economic need. (In re Village at Camp Bowie I LP).

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

August
- Southwest Bankruptcy Conference
    August 22-24, 2013 | Incline Village, Nev.

September
- ABI Endowment Golf & Tennis Outing
    Sept. 10, 2013 | Maplewood, N.J.
- ABI Endowment Baseball Game
    Sept. 12, 2013 | Baltimore, Md.
- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 18-19, 2013 | New York
- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors
     Sept. 24, 2013
- Bankruptcy 2013: Views from the Bench
    Sept. 27, 2013 | Washington, D.C.

October
- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum
    Oct. 4, 2013 | Kansas City, Mo.
- Professional Development Program
    Oct. 11, 2013 | New York, N.Y.


  


- Chicago Consumer Bankruptcy Conference
    Oct. 14, 2013 | Chicago, Ill.
- International Insolvency & Restructuring Symposium
    Oct. 25, 2013 | Berlin, Germany

November
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Austin Advanced Consumer Bankruptcy Practice Institute
   Nov. 10-12, 2013 | Austin, Texas
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.

December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
- ABI/St. John’s Bankruptcy Mediation Training
    Dec. 8-12, 2013 | New York


 
 
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Foreclosure Starts Down on Annual Basis in October

ABI Bankruptcy Brief | November 15 2012
 
  

November 15, 2012

 
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  NEWS AND ANALYSIS   

FORECLOSURE STARTS DOWN ON ANNUAL BASIS IN OCTOBER

U.S. homes are entering the foreclosure process at a slower pace than a year ago, and fewer properties are being repossessed by lenders, the Associated Press reported today. Between January and October, 971,533 homes were placed on the path to foreclosure, down 8 percent from the same period last year, foreclosure listing firm RealtyTrac Inc. said today. At the other end of the foreclosure process, banks repossessed 559,063 homes through the end of last month, a decline of nearly 19 percent from a year earlier. That puts lenders on pace to complete 650,000 foreclosures this year, down from 800,000 in 2011, the firm said. The data, however, also shows that there are signs at the state level that more homes could end up in foreclosure in the coming months. The trend is most evident in judicial-process states such as New York, Florida and New Jersey. Fourteen states saw an annual increase in foreclosure activity, which RealtyTrac measures as the number of homes receiving a default notice, scheduled for auction or repossessed by the bank. Read more.

To see the percentage of loans in foreclosure by state (judicial v. non-judicial) for 3Q 2012, please visit ABI's Chart of the Day page.

MAJOR RETAILERS SELLING FINANCIAL PRODUCTS, CHALLENGING BANK OFFERINGS

As the nation's largest banks remain stingy with credit offerings following the financial downturn, major retailers are stepping in to fill the void, the New York Times reported today. Customers can now withdraw cash at an ATM with a prepaid card from Walmart, take out a loan at Home Depot for a kitchen renovation or kick-start a new venture with a small-business loan from Sam’s Club. This year, Walmart even started to test selling a life insurance policy. Consumer advocates are torn about the growth of this shadow banking industry. Financial products are making it into the hands of people who might not otherwise qualify for them, but these products are not always subject to the same regulations as bank products are. And to turn a profit, retailers generally have to charge more to people with poor credit or none at all. Read more.

SEC REPORT FINDS FAULTS WITH CREDIT RATERS

The Securities and Exchange Commission (SEC) said in a report today that the credit-ratings industry remains plagued by failures in meeting its own standards, weak oversight and poor documentation of its rating decisions, despite years of heightened scrutiny after the financial crisis, the Wall Street Journal reported. In its second annual report on the nine credit-rating firms registered with the agency, the SEC said that Standard & Poor's Ratings Services, Moody's Investors Service and Fitch Ratings still do not always follow their own standards for rating deals. The firms are required by the SEC to disclose and follow their methodologies for assigning ratings to securities so that investors know how those deals are being judged. The Dodd-Frank financial overhaul legislation required the SEC to conduct annual examinations of the registered rating firms, and deliver a report on its findings. Read more. (Subscription required.)

Click here to read the SEC's report.

REGULATORS SEEK CHANGES IN HOW MONEY-MARKET FUNDS OPERATE

The government on Tuesday inched closer to tightening its oversight of the $2.6 trillion money-market industry when a panel of top financial regulators put forward options for addressing the industry’s vulnerabilities, the Washington Post reported yesterday. The industry immediately expressed frustration with the proposal, saying that it resembles a plan that failed to gain support from the Securities and Exchange Commission. That plan, vigorously opposed by the industry, stalled when three of the SEC’s five commissioners said they would reject it. Under the recommendations put forward on Tuesday by the Financial Stability Oversight Council, the funds would have to set aside reserves as a buffer for times of crisis, restrict how quickly investors can redeem their money, or allow the value of a fund’s shares to fluctuate. Currently, one share of a money market fund is generally valued at $1. The funds have been popular with investors because they seem as stable and reliable as a bank account. But unlike bank accounts, they are not federally insured, and that image of security was shattered during the 2008 financial crisis when the Reserve Primary Fund, the nation’s first money-market fund, "broke the buck" because its value fell below $1 a share. Read more.

OPEN PUBLIC HEARING ON CHAPTER 11 REFORM AT ABI'S WINTER LEADERSHIP CONFERENCE

ABI's Commission to Study the Reform of Chapter 11 will hold a public hearing on Friday, Nov. 30, at 11:15 a.m. (MT) during the Winter Leadership Conference in Tucson, Ariz., at the JW Marriott Starr Pass Resort. Members are welcome to provide testimony on their suggestions for ways to improve the operation of chapter 11. The hearing is the fifth in a series of public field hearings. Statements and video from all the recent hearings can be found at the Commission website at http://commission.abi.org.

Interested members should contact Sam Gerdano at sgerdano@abiworld.org for more details about in-person testimony. Those interested may also file written statements of any length for consideration by the Commission. All materials will be part of the Commission's record to be transmitted to Congress following the two-year investigation and report. Please consider this great opportunity to become part of the legal reform of the Bankruptcy Code.

RICHMOND BAR CALLING FOR NOMINATIONS TO FILL JUDICIAL VACANCY; SUBMISSIONS MUST BE RECEIVED BY DEC. 13

The Judiciary Committee of the Richmond (Va.) Bar Association invites ABI members to submit nominations to fill a judicial vacancy in the U.S. Bankruptcy Court for the Eastern District of Virginia. The court is looking to fill the vacancy left by the retirement of Bankruptcy Judge Douglas O. Tice, Jr.

Suggestions must be in writing and should be mailed to Virginia H. Grigg, Esq., c/o Richmond Bar Association, P.O. Box 1213, Richmond, Virginia 23218 or hand-delivered to her at the Bar office located at 707 E. Main Street, Suite 1620, Richmond, VA 23219. Nominations must be received by 4:00 p.m. ET on Thursday, December 13, 2012, in order to be considered.

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: STOEBNER V. SAN DIEGO GAS & ELECTRIC CO. (IN RE LGI ENERGY SOLUTIONS INC.; 8TH CIR.)

Summarized by Eric Lockridge of Kean Miller LLP

The Eighth Circuit ruled that where the debtor acted as a payment intermediary between a utility and a customer and the contract between the debtor and customer required the debtor to remit funds to the utility, the contract created a trust obligation in favor of the utility. Consquently, for purposes of § 547, the utility was a creditor of the debtor because the creditor (1) had unsecured claims for breach of trust and (2) was an intended beneficiary. Further, for purposes of calculating subsequent new value, the issue was not the subsequent services provided by the utility to the customer, but the subsequent payments from the customer to the debtor.

There are nearly 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: BOFA VS. MBIA AND THE FUTURE OF PRIVATE LABEL SECURITIZATION

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines the ongoing litigation between BofA and MBIA and its effect on the future of mortgage-backed securities.

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

Despite the "free and clear" language of Sect. 363(f), purchasers of assets in 363 sales may still be liable for injuries to unidentifiable future claimants. (In re Grumman Olson Indus, S.D.N.Y.).

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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  CALENDAR OF EVENTS
 

November
- 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
- 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.
- Kansas City Advanced Consumer Bankruptcy Practice Institute
     February 17-19, 2013 | Kansas City, Mo.
- VALCON 2013
     February 20-22, 2013 | Las Vegas, Nev.


 
 
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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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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.


 
 
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Fannie Mae and Freddie Mac to Allow On-Time Borrowers to Walk

ABI Bankruptcy Brief | January 29 2013
 
  

January 29, 2013

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

FANNIE MAE AND FREDDIE MAC TO ALLOW ON-TIME BORROWERS TO WALK

Fannie Mae and Freddie Mac will let some borrowers who kept up mortgage payments as their homes lost value to erase their debts by giving up the properties, Bloomberg News reported yesterday. Non-delinquent borrowers with illnesses, job changes or other reasons will become eligible in March to apply for a so-called deed-in-lieu transaction that erases the shortfall between a property’s value and the size of its mortgage. It follows a change in November that lets on-time borrowers sell properties for less than they owe, known as short sales, wiping out the remaining mortgage debt. While these changes will help some Americans escape underwater loans, it will further add to the losses at the mortgage giants previously bailed out with $190 billion of taxpayer money. Read more.

ANALYSIS: THOUGH ENCOURAGING, HOUSING FIGURES NOT NECESSARILY POINTING TO NEW BOOM

Though some commentators are beginning to say that the U.S. has reached a major turning point in the housing market, there is too much uncertainty to justify any aggressive speculative moves by homeowners right now, according to a New York Times analysis by Yale Prof. Robert Shiller, co-founder of the S.&P./Case-Shiller 20-City home price index. On the one hand, there were sharp price increases in 2012, with the S.&P./Case-Shiller 20-City Index up a total of 9 percent over the six months from March to September. That comes after what was generally a decline in prices for five consecutive years. And while prices dropped very slightly in October, the trend was quite encouraging for the market. But some of these changes were seasonal as home prices have tended to rise every midyear and to fall slightly every fall and winter, according to Shiller. After screening out these effects, a number of indicators are up, including data for housing starts and permits as well as the National Association of Home Builders/Wells Fargo Index of traffic of prospective homebuyers, which has made a spectacular rebound since last spring. However, nothing drastically different occurred in the economy from March to September, according to Shiller. Last spring, Shiller, along with Karl Case of Wellesley College and Anne Thompson of McGraw-Hill Construction, conducted a detailed survey of the attitudes of recent home buyers in four American cities, but did not detect any evidence of increased optimism. Read more.

FAIR ISAAC: OVERDUE STUDENT LOANS REACH 15 PERCENT DELINQUENCY RATE

Fair Isaac Corp. said that delinquency rates on U.S. student loans made in the past two years stand at 15 percent as recent graduates struggle to find jobs, Bloomberg News reported today. The rate for 2010 through 2012 compares with 12.4 percent for loans made from 2005 to 2007, Fair Isaac’s FICO Labs said today, citing data from October. Average student-loan debt last year rose to $27,253 from $17,233 in 2005, and almost 60 percent of bank managers surveyed in December expect delinquencies to worsen in six months, FICO said. Student loans are the largest source of unsecured consumer debt in the U.S., according to the Consumer Financial Protection Bureau, and the rise in unpaid loans has spurred speculation about a possible bubble. With college costs climbing faster than the rate of inflation over the past four decades, outstanding education debt has swelled to $1 trillion, more than the amount Americans collectively owe on their credit cards. Read more.

SENATORS INTRODUCE BILL TO HELP AMERICANS STRUGGLING WITH MEDICAL DEBT

Sen. Jeff Merkley (D-Ore.) reintroduced legislation yesterday to prohibit companies from using paid off or settled medical debt in assessing consumer credit scores, the Albany Tribune reported today. The Medical Debt Responsibility Act, which is cosponsored by Senators Dick Durbin (D-Ill.), Chuck Schumer (D-N.Y.), Tom Harkin (D-Iowa), Sherrod Brown (D-Ohio), Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.), could help as many as 75 million Americans by prohibiting consumer credit agencies from using paid-off or settled medical debt collections in assessing a consumer’s credit-worthiness. In addition, the bill would require the creditor or credit rating agency to expunge the medical debt from the consumer’s record within 45 days from the day it is paid off or settled. Read more.

ANALYSIS: WHY DELEVERAGING STILL RULES MARKETS IN 2013

Though the deleveraging process for both the financial and housing sectors continued in 2012, it has a long way to go to return to the long-run flat trends, according to a Bloomberg News analysis yesterday. The commentary identifies a number of forces that dominate the current investment landscape:

• the deleveraging of private economic sectors and financial institutions;
• the monetary and fiscal responses to the resulting slow growth and financial risks;
• Competitive devaluations;
• the fixation of investors on monetary easing that obscures weak real economic activity; and
• central bank-engineered low interest rates that have spawned more distortions and investor zeal for yield, regardless of risk.

The financial sector began its huge leveraging push in the 1970s as the debt-to-equity ratios of some financial institutions leaped. The household sector followed in the early 1980s, when credit card debt ballooned and mortgage down payments dropped from 20 percent to 10 percent, then to 0 percent. At the height of the housing boom, home-improvement loans added to conventional mortgages pushed debt-to-equity ratios into negative terrritory. The commentary predicts about five more years of deleveraging, bringing the total span to about 10 years, which is about the normal duration of this process after major financial bubbles. Once deleveraging is completed in another five years or so, according to the analysis, long-term trend growth of about 3.5 percent a year will resume. Read more.

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!

LAW FIRM BANKRUPTCIES AMONG TOPICS TO BE EXAMINED 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
• 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!

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!

DON'T MISS THE 9TH ANNUAL WHARTON RESTRUCTURING AND DISTRESSED INVESTING CONFERENCE ON FEB. 22!

The University of Pennsylvania's Wharton School of Business will be holding the 9th Annual Wharton Restructuring and Distressed Investing Conference on Feb. 22 at the Hyatt at The Bellevue in Philadelphia. The theme of this year's conference is “Health of Nations: Distress, Recovery or Revival?” It will offer a unique opportunity to hear from a distinguished gathering of keynote speakers and panelists in their discussion of the current economic climate and issues of debt, investing, and restructuring across the globe. To register, please click here.

LATEST CASE SUMMARY ON VOLO: MASSACHUSETTS DEPT. OF UNEMPLOYMENT ASSISTANCE V. OPK BIOTECH LLC (IN RE PBBPC INC.; 1ST CIR.)

Summarized by Hale Yazicioglu, Bartlett Hackett Feinberg P.C.

The First Circuit BAP, adopting the expansive definition of “interest” in § 363(f) of the Bankruptcy Code, held that “interest” in § 363(f) includes all obligations that may flow from ownership of property, including the right to tax the purchaser of the debtor’s assets at the same high rate imposed on the debtor. The First Circuit BAP first evaluated its jurisdiction on appeal and found that the bankruptcy court order approving the stipulation entered into between the parties effectively terminated the litigation, and therefore was a final judgment from which the parties could appeal to the BAP.

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: THIRD CIRCUIT REJECTS WAIT-AND-SEE VALUATION APPROACH AND ACCEPTS LIENSTRIPPING IN § 506(a)

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines In re Heritage Highgate, Inc., in which the Third Circuit held that the fair market value of property as of the confirmation date controls whether or not a lien is fully secured. Additionally, the court held that lienstripping is permissible in a chapter 11 reorganization.

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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NEXT EVENT:

 

 

 

ACBPIKC 2013
Feb. 7-9, 2013
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COMING UP:

 

 

 

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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9th Annual Wharton Restructuring and Distressed Investing Conference
Feb. 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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"Nuts and Bolts" Program at ASM- A Must for Junior Professionals or Those New to Bankruptcy Practice
April 18, 2013
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ASM 2013
April 18-21, 2013
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ASM 2013
May 16, 2013
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  CALENDAR OF EVENTS
 

2013

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.
- 9th Annual Wharton
Restructuring and Distressed Investing Conference

     February 22, 2013 | Philadelphia, Pa.


  

 

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
- "Nuts and Bolts" Program at ASM
     April 18, 2013 | National Harbor, Md.
- Annual Spring Meeting
     April 18-21, 2013 | National Harbor, Md.

May
- New York City Bankruptcy Conference
     May 16, 2013 | New York, N.Y.


 
 
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Regulators to Give More Guidance on Leveraged Loans

ABI Bankruptcy Brief | October 23, 2014
 
  

October 23, 2014

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

REGULATORS TO GIVE MORE GUIDANCE ON LEVERAGED LOANS

U.S. regulators are preparing to offer more public guidance for banks that provide loans for private-equity deals, as officials and financiers have tussled for months over acceptable practices, the Wall Street Journal reported today. The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. reportedly plan to publish a list of frequently asked questions about their guidance governing so-called leveraged loans. The document, which could be made public as soon as next week, is the latest by regulators to cajole banks into compliance with March 2013 guidance that urged them to avoid providing companies with what the agencies deem as too much debt. The guidance targeted a type of financing tapped by private-equity firms to take over corporations, among other uses. The regulators also told banks to limit borrowing agreements that stretch out payment timelines or don't contain ample lender protections, known as covenants. Some banks have resisted regulators' push — sometimes based on interpretations of what they called unclear guidance, other times concluding that certain deals can move forward as exceptions. About half of U.S. private-equity deals this year have breached a rough limit set by regulators of debt that exceeded six times a company's earnings before interest, taxes, depreciation and amortization, or EBITDA, according to data provider S&P Capital IQ LCD. At 52 percent, that is the same rate as 2007, the peak of the leveraged buyout boom. Read more (subscription required).

ANALYSIS: YEARS AFTER THE MARKET COLLAPSE, SIDELINED BORROWERS RETURN

Four years since foreclosures and short sales peaked during the Great Recession, millions of former borrowers have spent the required amount of time on the sidelines, which means that they have cleared at least one of the major hurdles required to qualify for another government-backed mortgage, the New York Times reported today. "We certainly have heard from a number of lenders that boomerang buyers are coming back," said Michael Fratantoni, chief economist at the Mortgage Bankers Association. He added that the situation varies across the country because the foreclosure process takes longer in certain states. Bank of America, one of the nation's largest lenders, said that of all its approved loans and loan applications from January through September, only about 1 percent came from consumers with short sales or foreclosures. But some mortgage brokers report that more people are calling. In August, Fannie Mae tweaked its rules for borrowers who went through short sales and those who voluntarily signed a home over to a lender (through what is known as a deed in lieu). Fannie said that it would continue to permit loans as soon as two years after those events hit borrowers' credit reports, as long as they could document that something like a job loss or a divorce pushed them over the financial edge. They would also need a down payment of at least 5 percent. Read more.

COMMENTARY: IS THE CFPB COMMITTING REGULATORY OVERREACH?

The Consumer Financial Protection Bureau (CFPB) is touted as one of the crowning achievements of the Dodd-Frank Act, but a new CFPB report on student loans is highly flawed, raising doubts about its regulatory reach over the private student loan market, according to a commentary in The Hill yesterday. The CFPB was created to bring all consumer financial products under one regulatory umbrella. It oversees everything in the financial sector that affects consumers — from credit cards to mortgages to auto and student loans. Last week, the CFPB issued its third annual report on student loan complaints. The agency first created a platform for student loan complaints in 2012 and embarked on a massive solicitation for general comment on private student loans in 2013. Shortly after, CFPB brought private non-bank loan servicers under its oversight authority. Complaints regarding loans and loan servicers are up 38 percent year over year, with many complaints indicating that private lenders and servicers "provided no options [to modify repayment plans], leading the borrower to default." Complaints against student loan giant Navient (formerly Sallie Mae) were up a staggering 48 percent, with the entire rise dubiously occurring in the month of December. But a closer look reveals that the report is fundamentally flawed, according to the commentary. First, the report makes the private student loan market seem entirely to blame for the growing student debt crisis. Second, it offers no analytical evidence that private student lenders are unwilling to work with struggling borrowers. Read the full commentary.

SENATOR WARREN DEMANDS AN INVESTIGATION OF MORTGAGE COMPANIES

Sen. Elizabeth Warren (D-Mass.) on Monday called on the Government Accountability Office to investigate non-bank companies that service Americans' mortgages, noting in a letter co-signed by Rep. Elijah Cummings (D-Md.) that an increasing number of lawsuits have been filed in recent years against these firms — which are not regulated as strictly as banks, MotherJones.com reported yesterday. Mortgage servicers, whether they are owned by banks or not, handle mortgages after they've been sold to a customer. That means that they take care of administrative business that includes collecting mortgage payments and dealing with delinquent borrowers. What Warren and Cummings say they are worried about is that the share of non-banks servicing mortgages has grown astronomically — 300 percent between 2011 and 2013 — and it appears that the increased workload has led to shoddier service. The rise of the industry, which typically services lower-income borrowers, "has been accompanied by consumer complaints, lawsuits, and other regulatory actions as the servicers' workload outstrips their processing capacity," according to a recent report by the Federal Housing Finance Agency. Last December, for instance, the Consumer Financial Protection Bureau — the agency Warren helped create — entered a $2 billion settlement with the nation's largest non-bank servicer over mortgage mismanagement. Financial industry watchdogs and consumer advocates have charged that non-bank home loan servicing companies are often unwilling to work with troubled borrowers to modify mortgages and prevent foreclosures. Read more.

ANALYSIS: COLLEGES WHERE STUDENT LOAN DEFAULTS ARE SKYROCKETING

While data from the U.S. Department of Education showed that overall default rates fell to 13.7 percent from 14.7 percent two years ago, some schools moved in the opposite direction as default rates rose between two years ago and last year, and again between last year and this year, according to an analysis in QZ.com. Many of the schools on the list that are associated higher default levels are located deep in the heart of the U.S. industrial region known as the Rust Belt, which was particularly hard hit by the recession. "When the latest recession began in 2008, we, like other institutions, saw a significant influx of new students, a number of which were then not able to find jobs commensurate with their additional education, and others utilizing college as a source of loans they could not otherwise get to finance their living circumstances," said Rob Denson, president of Des Moines Area Community College, which saw default rates surge in recent years. "These are the loans we believe are most likely now in default." Denson added that he expects default rates to drop back down to pre-2008 levels in coming years. To see the full list of schools where default rates surged, please click here.

USTP UPDATES MEDIAN FAMILY INCOME DATA FOR CASES FILED ON OR AFTER NOV. 1

The U.S. Trustee Program (USTP) has updated the Census Bureau's Median Family Income Data and will apply the updated data to cases filed on or after Nov. 1. For the latest data required for completing Form 22A and Form 22C, please click here.

NEXT FREE COMMITTEE TELECONFERENCE WILL BE NOV. 4 ON THE BANK SECRECY ACT!

Members are encouraged to dial-in and listen to or participate in upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:

- Unsecured Trade Creditors Committee: Tuesday, Nov. 4; 3 pm ET
Topic: "Bank Secrecy Act and Anti-Money Laundering"
Speakers: Mark Gittelman of PNC Bank and Brent Weisenberg

All committee teleconferences are free to ABI members and registration is not required. Simply utilize the following dial-in information:

Call in: (712) 432-1500
Participant code: 692933

 

ABI MEMBERS IN SOUTHERN CALIFORNIA- DON'T MISS THE SPECIAL TMA EVENT TO BENEFIT THE WOUNDED WARRIOR PROJECT ON NOV. 12

ABI members are invited to attend TMA Southern California's special fundraiser to support the Wounded Warrior Project and SoCal veteran support groups on Nov. 12 at the Beverly Hilton. Funds raised will benefit the Wounded Warrior Project, Veterans Legal Institute and the Public Law Center. For more information or to attend, please click here.

ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19

ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf

VOLO ECLIPSES 1,500 CIRCUIT COURT SUMMARIES! NEW CASE SUMMARY ON VOLO: DERBABIAN V. BANK OF AMERICA, N.A. (6TH CIR.)

Summarized by Ryan Heilman of Wolfson Bolton PLLC

The Sixth Circuit affirmed the district's court's dismissal of the plaintiffs' eight-count complaint relating to the foreclosure-by-advertisement of their home. Specifically, the plaintiffs (1) failed to plead fraud with specificity, (2) failed to state a claim for breach of contract because agreements relating to loans from a financial institution must be in writing to be enforceable, (3) were barred by the statute of limitations from asserting Truth in Lending Act claims, and the recoupment and set-off exceptions do not apply to non-judicial foreclosures, (4) failed to adequately plead fraud, irregularity or prejudice with respect to the foreclosure process, (5) could not maintain an action to quiet title because they made no showing of superior title to the property, and (6) could not maintain an action for slander of title because they failed to plausibly identify any false statements.

There are more than 1,500 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: CREDIT RISK RETENTION RULES AND QUALIFIED RESIDENTIAL MORTGAGES

A recent blog post examines the government's long-awaited credit risk retention rules for securitization.

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 §547(c)(2) ordinary course preference defense should be repealed.

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
 

2014

October
- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.
- Claims-Trading Program
    Oct. 30, 2014 | New York
- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Complex Financial Restructuring Program
    Nov. 6, 2014 | Philadelphia
- Corporate Restructuring Competition
    Nov. 6-7, 2014 | Philadelphia
- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago
- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.
- Mid-Level Professional Development Program
    Nov. 12, 2014 | Chicago

  

 


December
- Winter Leadership Conference
    Dec. 4-6, 2014 | Palm Springs, Calif.
- 40-Hour Mediation Training Program
   Dec. 7-11, 2014 | New York

January
- New Orleans Consumer Bankruptcy Conference
    Jan. 19, 2015 | New Orleans
- Rocky Mountain Bankruptcy Conference
    Jan. 22-23, 2015 | Denver

February
- Caribbean Insolvency Symposium
    Feb. 5-7, 2015 | Grand Cayman, Cayman Islands
- VALCON 2015
    Feb. 25-27, 2015 | Las Vegas

 

 

 
 
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U.S. Banks Bigger Than GDP as Accounting Rift Masks Risk

ABI Bankruptcy Brief | February 21 2013
 
  

February 21, 2013

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

U.S. BANKS BIGGER THAN GDP AS ACCOUNTING RIFT MASKS RISK

Applying stricter accounting standards, such as those proposed by FDIC vice chairman Thomas Hoenig, for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are -- or about the size of the U.S. economy -- according to data compiled by Bloomberg yesterday. "Derivatives, like loans, carry risk," Hoenig said. "To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there." U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. Applying international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., would double the asset size while Citigroup Inc. would jump 60 percent, third-quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion. Read more.

COMMENTARY: TOO BIG TO FAIL CASTS LONG SHADOW

Despite the push to end corporate bailouts, the prospect of the government backstopping even more of the financial system is a possibility being debated within regulatory circles in regard to non-bank financing activity and was recently raised by the head of the Federal Reserve Bank of New York, according to a commentary in yesterday's Wall Street Journal. Regulators have been wrestling with how to reduce the risk of runs on the so-called shadow banking system, funding markets outside regulated banks. In particular, they have focused on making money-market funds less vulnerable. And they have looked to rein in risks posed by repurchase, or repo, markets, which involve the transfer of cash and securities between banks and financial firms. While regulated banks have faced far tighter oversight following the financial crisis, the shadow-banking market remains a source of potential instability. It is worth remembering that runs on non-bank institutions engaging in financing, rather than traditional bank runs, were a cause of the crisis and led to seizures of credit markets, according to the commentary. Read more. (Subscription required.)

FEDERAL RESERVE UNLIKELY TO END STIMULUS EFFORTS SOON

The prevailing sentiment at the Federal Reserve is that the central bank's efforts to pump tens of billions of dollars into the economy every month should not end anytime soon, the Washington Post reported today. Consumers are just beginning to reap the benefits of ultra-low interest rates and increased credit. Cutting off the program now could harm that fledgling progress before it is fully realized, according to Fed officials. That means the Fed is likely to give its latest stimulus initiative more time to filter through the broader economy. Read more.

CONSUMER BUREAU SAID TO WARN BANKS OF AUTO LENDING SUITS

The U.S. Consumer Financial Protection Bureau has told at least four banks that it may sue them over vehicle loans and interest-rate markups by auto dealers that appear discriminatory, Bloomberg News reported today. The banks received letters from the CFPB last week giving them 15 days to provide an explanation of the practice. The letters indicate the bureau believes the banks may have violated the Equal Credit Opportunity Act, a 1974 law that bars discrimination in lending. The letters, sent as vehicle loan originations are on the rise, demonstrate that the CFPB may be willing to sanction banks over mark-ups by auto dealers, which were excluded from the bureau’s supervision in the 2010 Dodd-Frank Law. As the economy has improved, auto truck loans climbed to $85.8 billion in the third quarter of 2012, according to the Federal Reserve. Read more.

LATEST ABI PODCAST EXAMINES ISSUES SURROUNDING "CROWDFUNDING" A CHAPTER 11 PLAN

ABI Resident Scholar Prof. Scott Pryor speaks with David C. McGrail of McGrail & Bensinger LLP (New York), author of the article "'Crowdfunding' a Chapter 11 Plan" in the February ABI Journal. McGrail explores the uses of crowdfunding, the effect of the JOBS Act on crowdfunding and how crowdfunding might be applicable in a chapter 11 reorganization. To listen to the podcast, please click here.

JUST ADDED! ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"

A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

EXPLORE CURRENT ISSUES FOR FINANCIAL ADVISORS IN BANKRUPTCY CASES AND MORE 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
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• 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!

Click here to register today!

ABI IN-DEPTH

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"

Do not miss the "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. ABI's 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. This webinar is sure to sell out; register now for the special ABI member rate of $75!

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: MELLENTINE V. AMERIQUEST MORTGAGE CO. (6TH CIR.)

Summarized by Prof. Laura Bartell of Wayne State University Law School

The Sixth Circuit reversed dismissal of claim under the Fair Debt Collection Practices Act (FDCPA) by homeowners against a law firm representing a lender in connection with the foreclosure of mortgage, holding that the law firm was a "debt collector" under the FDCPA. The Sixth Circuit also reversed judgment on the pleadings entered against the lender under the Real Estate Settlement and Procedures Act (RESPA), holding that the homeowners pleaded sufficient facts to state a claim. The court affirmed the dismissal of all other claims under FDCPA and RESPA.

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: ASSIGNMENT OF RENTS: ABSOLUTE MAY NOT BE SO ABSOLUTE

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the case of In re MRI Beltline Industrial, L.P. in which the debtor moved for authority to use rents received from tenants of commercial buildings that it owned, and for a "carve out" to permit it to use rents for administrative expenses (including its attorney fees). In response, the mortgagee asserted that the debtor did not have any interest in the rents, and thus could not use them, because its assignment of rents was absolute.

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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TOMORROW:

 

 

 

9th Annual Wharton Restructuring and Distressed Investing Conference
Feb. 22, 2013
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COMING UP

 

 

 

 

 

Paskay 2013
March 7-9, 2013
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BBW 2013
March 22, 2013
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NEW WEBINAR!

BBW 2013
April 5, 2013
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BBW 2013
April 10, 2013
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BBW 2013
April 18, 2013
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ASM 2013
April 18-21, 2013
Enter code "LOVEASM50" at checkout to save $50 on a new registration this week!
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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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  CALENDAR OF EVENTS
 

2013

February
- 9th Annual Wharton
Restructuring and Distressed Investing Conference

     February 22, 2013 | Philadelphia, Pa.

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
- 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.


 
 
ABI BookstoreABI Endowment Fund ABI Endowment Fund
 

Credit Card Delinquencies Reach 18-Year Low

ABI Bankruptcy Brief | April 02 2013
 
  

April 2, 2013

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

REPORT: CREDIT CARD DELINQUENCIES REACH 18-YEAR LOW

The American Bankers Association reported today that delinquencies on bank-issued credit cards sank to 2.47 percent in the fourth quarter of 2012 – the lowest level since 1994, CNNMoney.com reported today. The percentage of credit card accounts that were 30 days or more overdue during the quarter was roughly half the record high of 5.01 percent set in 2009 and well below the 15-year average of 3.87 percent. It was also down significantly from the previous quarter when 2.75 percent of credit card customers were delinquent on payments. Delinquencies in all three home-related categories – home equity loans, home equity lines of credit and property improvement loans – also fell during the fourth quarter. Read more.

COMMENTARY: PENSIONS NEED TO SHARE FINANCIAL PAIN WHEN CITIES GO BROKE

Stockton, Calif., wants bondholders to pay for its financial woes while leaving retirement benefits intact, but that approach undermines the law's power to rein in runaway pension costs, according to a Reuters commentary on Friday. The housing boom filled Stockton's coffers with tax revenue that officials squandered through poor management, pay raises and downtown renovations, according to the commentary. With the economic bust came $90 million in cuts over three years and, last summer, its chapter 9 filing. Bankruptcy Judge Christopher Klein yesterday approved Stockton's chapter 9 filing petition to move forward. The city's plan to right itself includes a bond-principal haircut that could be the first for a major municipality since the 1930s, according to the commentary. Some bonds could be cut as much as 83 percent, but officials would continue to pay out about $30 million a year to the California Public Employees' Retirement System (CalPERS), which manages the city's pensions. Wells Fargo and other bondholders owed more than $300 million have understandably cried foul. Legally, the securities they own merit the same treatment in bankruptcy as payments to CalPERS, according to the commentary. Central Falls, R.I., which exited bankruptcy last September, showed that a municipality can slash retirement benefits without a political or legal firestorm. Read more.

FORECLOSURE INVENTORY BALLOONED IN FIRST QUARTER OF 2013

RealtyTrac reported yesterday that nearly 1.5 million U.S. properties were actively in the foreclosure process or bank-owned in the first quarter of 2013, up 9 percent from the first quarter of 2012, but still down 32 percent from the peak of 2.2 million in December 2010, UPI.com reported yesterday. Though overall inventories are up, completed foreclosure inventories are still declining. CoreLogic reported yesterday that there were 54,000 completed foreclosures in the U.S. in February 2013, down from 67,000 in February 2012, a year-over-year decrease of 19 percent. On a month-over-month basis, completed foreclosures fell from 58,000 in January 2013 to the February level of 54,000, a decrease of 7 percent. Read more.

COMMENTARIES SHARE CONCERN OF RISK-TAKING BY BIG BANKS

Financial firms can borrow money more cheaply and with less market scrutiny when they have access to government guarantees of deposit insurance, loans from the Federal Reserve and, ultimately, taxpayer support such as what was seen with the Troubled Assets Relief Program in 2008, according to a commentary by Thomas M. Hoenig, the vice chairman of the Federal Deposit Insurance Corp., in Friday's Washington Post. Hoenig said that this safety net was intended to stabilize the financial system by protecting the payments system that transfers money around the country and the world, as well as the essential lending that commercial banks provide. But these protections also assure those who lend to banks that they will be repaid regardless of the condition of the bank. Under such circumstances, creditors give the firms a discount on the cost of the funds they borrow. Things are made more difficult, according to Hoenig, by the fact that the largest financial companies now combine traditional commercial banking with higher-risk activities such as trading so that both their banking and betting activities get access to these government protections and the multibillion-dollar subsidy that comes with them. Using subsidized money to finance the conglomerates’ bets encourages ever-higher levels of debt, risk and interconnectedness not attainable or sustainable in a truly free market, according to Hoenig. Click here to read the full commentary.

A related commentary in today's Wall Street Journal written by former FDIC chair Sheila Bair found that while bank use of risk models is common and not illegal, their use in bolstering a bank's capital ratios can give the public a false sense of security about the stability of the nation's largest financial institutions. Capital ratios (also called capital adequacy ratios) reflect the percentage of a bank's assets that are funded with equity and are a key barometer of the institution's financial strength: They measure the bank's ability to absorb losses and still remain solvent, according to Bair. While this should be a simple measure, it is not, according to Bair, because regulators allow banks to use a process called "risk weighting," which allows them to raise their capital ratios by characterizing the assets they hold as "low risk." For instance, as part of the Federal Reserve's recent stress test, the Bank of America reported to the Federal Reserve that its capital ratio is 11.4 percent. But that was a measure of the bank's common equity as a percentage of the assets it holds as weighted by their risk—which is much less than the value of these assets according to accounting rules. Take out the risk-weighting adjustment, and its capital ratio falls to 7.8 percent. On average, the three big universal banking companies (JPMorgan Chase, Bank of America and Citigroup) risk-weigh their assets at only 55 percent of their total assets. For every trillion dollars in accounting assets, these megabanks calculate their capital ratios as if the assets represented only $550 billion of risk. Read more. (Subscription required.)

ANALYSIS: PACE OF MERGERS SLOWED IN THE FIRST QUARTER 2013 TO THE FEWEST SINCE 2003

Only 8,115 merger deals were announced worldwide in the first quarter of this year, the lowest number since 2003, according to data from Thomson Reuters, the New York Times DealBook blog reported today. While the combined value of $542.8 billion outpaced last year's first quarter by about 10 percent, it is still 26 percent below the level for the period in 2011. Bankers and lawyers have been publicly boasting about a nascent revival in mergers. In March, 97 percent of deal makers surveyed by the Brunswick Group public relations firm said that they expected more deals to be announced in North America this year than in the last year. Many advisers caution against judging 2013 by one quarter; some deals that would otherwise have been announced in the first quarter were moved to fourth quarter 2012 to avoid incurring potentially higher taxes, they said. Read more.

 

FRIDAY! DON’T MISS THE ABI LIVE WEBINAR – "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"

A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here.

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: SCHOPPE V. COMMISSIONER OF INTERNAL REVENUE (10TH CIR.)

Summarized by Eric Madden of Diamond McCarthy LLP

The Tenth Circuit ruled that the automatic stay under 11 U.S.C. § 362(a)(1) does not apply to a proceeding commenced by the debtor taxpayer's petition filed in tax court, including any appeal from rulings in the underlying proceeding. Adopting the reasoning of the First, Third, Fifth and Eleventh Circuits and rejecting the reasoning of the Ninth Circuit, the Tenth Circuit concluded that a petition filed in tax court is an independent judicial proceeding initiated by the debtor, not the continuation of an administrative proceeding against the debtor.

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: I'M A CREDITOR OF DETROIT...NOW WHAT? (PART 2)

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Previously examining some of the overarching issues that can make a chapter 9 restructuring more challenging for creditors than a chapter 11, a recent blog post takes a closer look at the financial challenges of 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.

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.

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FRIDAY:

 

 

 

BBW 2013
April 5, 2013
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COMING UP

 

 

 

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

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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February Bankruptcy Filings Decrease 21 Percent from Previous Year Commercial Filings Fall 29 Percent

ABI Bankruptcy Brief | March 5 2013
 
  

March 5, 2013

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

FEBRUARY BANKRUPTCY FILINGS DECREASE 21 PERCENT FROM PREVIOUS YEAR, COMMERCIAL FILINGS FALL 29 PERCENT

Total bankruptcy filings in the United States decreased 21 percent in February over last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 82,285 in February 2013, down from the February 2012 total of 104,537. Consumer filings declined 21 percent to 78,611 from the February 2012 consumer filing total of 99,378. Total commercial filings in February 2013 decreased to 3,674, representing a 29 percent decline from the 5,159 business filings recorded in February 2012. Total commercial chapter 11 filings also decreased 21 percent, to 609 filings in February from the 756 commercial chapter 11 filings recorded in February 2012.

While bankruptcies were down from a year ago, February’s bankruptcy filings trended upward from January. Total bankruptcy filings for the month of February represented a 5 percent increase over the 78,565 total filings registered in January 2013. The total noncommercial filings for February also represented a 5 percent increase from the January 2013 noncommercial filing total of 74,831. Although the February commercial filing total represented a 2 percent decline from the January 2013 commercial filing total of 3,734, February commercial chapter 11 filings represented a 27 percent increase when compared to the 481 filings the previous month. Read the ABI press release.

STATES, PRIVATE PLAINTIFFS PRESS SUIT AGAINST WALL STREET REFORM LAW

The plaintiffs that are challenging the constitutionality of the Wall Street reform law and the leadership of the Obama administration's new consumer protection agency are fighting to keep alive a suit in Washington, D.C., federal district court, the Legal Times reported on Friday. The private plaintiffs, including advocacy group Competitive Enterprise Institute and Texas-based State National Bank of Big Spring, on Feb. 27 responded to the U.S. Justice Department's effort to end the litigation. The 11 states that have joined the suit include Texas, South Carolina, Oklahoma, Michigan, and Ohio. The attorneys for the private plaintiffs, including O'Melveny & Myers partner Gregory Jacob and C. Boyden Gray, said in their court papers that the plaintiffs have presented sufficient evidence that the Dodd-Frank Wall Street Reform and Consumer Protection Act gave "unchecked and unprecedented powers" to federal agencies, including the newly created Consumer Financial Protection Bureau (CFPB). The states that joined the lawsuit are only challenging the government's ability to liquidate the largest banks, not the composition of the CFPB. Read more.

COMMENTARY: BLEEDING THE BORROWER DRY

Though 15 states have banned predatory, high-interest loans that payday lenders commonly use to pillage low-income borrowers, offshore lenders increasingly get around state laws by issuing predatory loans over the Internet, according to an editorial in yesterday's New York Times. About 12 million borrowers turn to payday lenders each year. A new study by the Pew Charitable Trusts found that only about 14 percent of borrowers can afford to take enough out of their monthly budget to repay the average payday loan. Instead, average borrowers carry a debt for five months, during which time they pay repeated fees to renew the loan. By the fifth month, someone who borrowed $375 will have paid about $520 in interest alone. Many also resort to borrowing from additional payday lenders. Not surprisingly, payday borrowers are more likely than others to default on credit card debt, to file for bankruptcy or to lose their bank accounts because of abuse of overdraft privileges. A bill pending in the Senate known as the Safe Lending Act would require all online lenders to comply with state laws that provide stronger consumer protections than the federal statutes. It would establish once and for all that payday loan borrowers have the right to stop lenders from raiding their bank accounts. State and federal regulators also need to prohibit banks from giving payday lenders access to the automatic payment system in states where predatory, high-interest loans are illegal. Read the full editorial.

REPORT: YOUNG ADULTS RETREAT FROM PILING UP DEBT

Young people are racking up larger amounts of student debt than ever before, but fresh data suggest they are becoming warier of other kinds of borrowing: Total debt among young adults dropped in the last decade to the lowest level in 15 years, the Wall Street Journal reported today. A typical young U.S. household—defined as one led by someone under age 35—had $15,000 in total debt in 2010, down from $18,000 in 2001 and the lowest since 1995, according to a recent Pew Research Center report and government data. Total debt includes mortgage loans, credit cards, auto lending, student loans and other consumer borrowing. In addition, fewer young adults carried credit card balances, and 22 percent did not have any debt at all in 2010—the most since government tracking began in 1983. Read more. (Subscription required.)

ANALYSIS: MOST BIG M&A DEALS FACED LEGAL CHALLENGES IN 2012

A study released by Cornerstone Research on Thursday found that it was rare for a merger or acquisition deal in 2012 to escape legal challenges from shareholders, Corporate Counsel reported on Friday. Nearly 96 percent of M&A deals valued at more than $500 million and 93 percent of those valued at more than $100 million engendered suits, according to Cornerstone's report titled, "Shareholder Litigation Involving Mergers and Acquisitions." On average, the report found that deals attracted more than 4.8 suits per transaction, with some filed within hours after an announcement. The average time between announcement of a deal and commencement of a legal challenge was 14 days, the report said. Read more.

DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"

A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

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

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"

Do not miss the "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. ABI's 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. This webinar is sure to sell out; register now for the special ABI member rate of $75!

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: PAUL V. ALLRED (IN RE PAUL; 8TH CIR.)

Summarized by Michael Tamburini of Polsinelli Shughart, PC

The BAP affirmed the order of the bankruptcy court concluding that the debtor had abandoned the subject property as his homestead, and therefore was not permitted to claim a homestead exemption on it.

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: ASSIGNMENT OF RENTS: GOVERNMENT BENEFIT CARDS CAN OPEN DOORS TO BANKING SYSTEM

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Cards preloaded with unemployment insurance, child support, food stamps and other government benefits can be viewed as potential bank accounts, waiting to be opened by people with the fewest quality opportunities to connect to the financial mainstream, according to a recent blog post.

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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THURSDAY:

 

 

 

Paskay 2013
March 7-9, 2013
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COMING UP

 

 

 

 

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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BBW 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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  CALENDAR OF EVENTS
 

2013

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
- 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.


 
 
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