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U.S. Foreclosure Filings Down 10 Percent in July

ABI Bankruptcy Brief | August 9, 2012
 
  

August 9, 2012

 
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  NEWS AND ANALYSIS   

U.S. FORECLOSURE FILINGS DOWN 10 PERCENT IN JULY

Market researcher RealtyTrac reported that the number of U.S. properties with foreclosure filings slipped 10 percent in July from a year earlier, the Wall Street Journal reported today. There were 191,925 U.S. properties with default notices, scheduled auctions and bank repossessions in July, a 3 percent decrease from the prior month. One in every 686 U.S. housing units had a foreclosure filing last month, RealtyTrac reported. U.S. foreclosure activity has now decreased on a year-over-year basis for 22 consecutive months, according to the report. The latest month's decline was driven primarily by a 21 percent decline in bank repossessions from a year earlier. Properties starting the foreclosure process increased on an annual basis for the third straight month in July, rising 6 percent last month. Foreclosure starts rose on a year-over-year basis in 27 states. Read more. (Subscription required.)

CONSUMERS CUT BACK ON CREDIT CARD USE IN JUNE, BUT OVERALL BORROWING CONTINUES TO RISE

Americans cut back on credit card use in June, a sign that high sustained unemployment and slow growth have made some more cautious about spending, the Associated Press reported yesterday. Still, total consumer borrowing increased as many took on loans to buy cars and attend school. Consumer borrowing rose by $6.5 billion from May to June totaling $2.58 trillion, the Federal Reserve said on Tuesday. Auto and student loans rose by $10.2 billion to $1.71 trillion in June. Credit card debt fell $3.7 billion to $865 billion. Household debt, including mortgages and home equity lines of credit, has declined for 16 straight quarters to $12.9 trillion in March, according to the Fed. That is down from $13.8 trillion in March 2008. Read more.

REPORT: WEAK CREDIT QUALITY OF U.S. CITIES IS BIGGER CONCERN THAN BANKRUPTCIES

Morgan Stanley's municipal debt strategists said on Tuesday that weaker local credit quality should be a greater concern for municipal debt investors than chapter 9 filings, Reuters reported on Wednesday. "Our updated case study analysis of recent chapter 9 filings affirms that bankruptcies may pick up somewhat, but the ongoing deterioration of local credit quality is a more relevant systemic risk," Morgan Stanley Research's Michael Zezas and Meghan Robson said in a report. The researchers said that chapter 9 filings and municipalities flirting with bankruptcy are "likely to remain modest and idiosyncratic." Even so they urged scrutinizing state and local credits, adding that they favor enterprise revenue debt over general obligation bonds. Read more.

ANALYSIS: UPPER-MIDDLE-INCOME HOUSEHOLDS SEE BIGGEST JUMPS IN STUDENT LOAN BURDEN

According to a Wall Street Journal analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage of households with student-loan debt from 2007-10, the latest figures available. The Journal's analysis defined upper-middle-income households as those with annual incomes between the 80th and 95th percentiles of all households nationwide. Among this group, 25.6 percent had student loan debt in 2010, up from 19.5 percent in 2007. For all households, the portion with student loan debt rose to 19.1 percent in 2010 from 15.2 percent in 2007. The amount borrowed by upper-middle-income families, meanwhile, has soared. They owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007, after adjusting for inflation, according to the Journal's analysis. Read more. (Subscription required.)

ANALYSIS: RECESSION GENERATION OPTS TO RENT – NOT BUY – BIG TICKET ITEMS

Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible, Bloomberg News reported yesterday. As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers, said Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. College graduates earned less coming out of the recession, according to a May study by the John J. Heldrich Center for Workforce Development at Rutgers. Those graduating during 2009-11 earned a median salary in their starting job $3,000 less than the $30,000 seen in 2007. The majority of students owed $20,000 to pay off their education, and 40 percent of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car. Read more.

LAX BANKING LAW OBSCURED MONEY FLOW IN STANDARD CHARTERED'S MONEY LAUNDERING CASE

The list of global banks that have been accused in recent years of laundering foreign transactions totaling billions of dollars has been growing — Credit Suisse, Lloyds, Barclays, ING, HSBC — and now Standard Chartered, the New York Times reported today. The details in each case are different, with the international banks suspected of using their American subsidiaries to process tainted money for clients that included Iran, Cuba, North Korea, sponsors of terrorist groups and drug cartels. What the cases have in common is that the accused banks took advantage of a law that was not changed until 2008 and that allowed banks to disguise client identities and move their money offshore. The cases, including one filed this week by New York’s banking regulator against Standard Chartered, also cast a harsh light on just how much activity with Iran was permitted in the years leading up to 2008 and whether the practices had violated the spirit, if not the letter, of the law. Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In these so-called U-turn transactions, the banks could provide scant information about the client to their American units as long as they stated they had thoroughly vetted the transactions for suspicious activity. Read more.

LATEST ABI PODCAST EXPLORES HEALTH CARE INSOLVENCIES

ABI Executive Director Samuel J. Gerdano talks with Leslie A. Berkoff of Moritt Hock & Hamroff LLP and Robert A. Guy, Jr. of Frost Brown Todd LLC, the lead editors of ABI's Health Care Insolvency Manual, Third Edition. Berkoff and Guy discuss current issues surrounding health care insolvencies, the new health care law and the need to release this year’s new edition of the Health Care Insolvency Manual. To listen to the podcast, please click here.

For more information and to purchase ABI's Health Care Insolvency Manual, please click here.


ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: NATIONAL BANK OF ARKANSAS V. PANTHER MOUNTAIN LAND DEVELOPMENT, LLC (IN RE PANTHER MOUNTAIN LAND DEVELOPMENT, LLC; 8TH CIR.)

Summarized by Adam Ballinger of Lindquist & Vennum, PLLP

The Eighth Circuit ruled that the automatic stay does not apply to an action against a debtor's improvement districts formed under Arkansas law because the improvement districts are property of neither the debtor nor the debtors themselves. The doctrine of equitable laches does not apply because there is no showing of detrimental reliance of the debtor upon a party's failure to raise this particular challenge.

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

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: SURVEY SHOWS EMPLOYEES USE INTERNAL CHANNELS FOR REPORTING MISCONDUCT

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Amid concerns that the SEC whistleblower rules will encourage employees to bypass internal protocols and take allegations of misconduct directly to the Commission, a recent blog post reported on a survey by the nonprofit Ethics Resource Center that found that only one out of six employees ever reported misconduct to regulators or other outside channels.

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

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

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

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

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SE 2012
Nov. 12, 2012
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  CALENDAR OF EVENTS
 

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

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

  


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

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


 
 
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Detroit Chapter 9 Sends Warning to Other Cities Bondholders

ABI Bankruptcy Brief | December 3, 2013
 
  

December 5, 2013

 
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  NEWS AND ANALYSIS   

DETROIT CHAPTER 9 SENDS WARNING TO OTHER CITIES, BONDHOLDERS

Bankruptcy Judge Steven Rhodes' decision on Tuesday to authorize Detroit's chapter 9 bankruptcy serves as a warning for government leaders who are grappling with budget problems, bondholders and unions that are fighting cuts, the Detroit Free Press reported today. Although no one expects a sudden rush of municipal bankruptcy filings, unions fear that chapter 9 may become a more viable option for distressed municipalities after Judge Rhodes ruled that pensions could be cut as a way for Detroit to dig itself out of debt. The ruling comes as pensions, which are straining municipal budgets throughout the country, have become the target of other cities and states that are dealing with chronic debt. As Rhodes was issuing his ruling Tuesday that pensions are fair game for cuts under bankruptcy, state lawmakers in Illinois were passing a bill to overhaul that state's pension system, cutting an estimated $90 billion to $100 billion in pension benefits over three decades. In California, several cities have filed for bankruptcy in recent years with huge pension obligations looming -- but none have targeted pension cuts. "This is going to be a playbook used by other cities," University of Michigan bankruptcy law professor John Pottow said of Detroit's strategy. "It's pretty huge because the courts in California, which has very similar laws, have tried to avoid coming to a decision on it before." Read more.

STUDENT DEBT OWED BY CLASS OF 2012 RISES TO $29,400

U.S. college students are leaving school with higher amounts of debt as they increase borrowing to keep up with rising tuition, Bloomberg News reported yesterday. Graduates of the class of 2012 who took loans for bachelors' degrees owed an average of $29,400. The level of debt represents an average annual increase of 6 percent from the $23,450 incurred by borrowers who graduated in 2008, the last year the federal government reported the data, according to a report released yesterday by The Institute for College Access & Success, an Oakland, California-based nonprofit group. The share of college seniors with debt rose to 71 percent from 68 percent in the four-year period. States with the highest debt were in the Northeast and Midwest, led by Delaware. Read more.

For further analysis of the student debt and bankruptcy issues, be sure to pick up a copy of ABI's Graduating with Debt: Student Loans under the Bankruptcy Code, now available in the ABI Bookstore.

TREASURY SECRETARY: REFORMS MAKING FINANCIAL SYSTEM SAFER

U.S. Treasury Secretary Jacob Lew said that post-crisis efforts to bolster the financial system have made the U.S. economy safer, but added that more work is needed, including international protections that mirror those here, the Wall Street Journal reported today. Lew said that while efforts to implement the 2010 Dodd-Frank law have "taken longer than we hoped," the rules are largely falling into place and are helping to bolster the financial system. He said that more needs to be done, including ensuring that U.S. regulators have resources to enforce the rules and the adoption of robust protections by global counterparts to fortify the international financial system. Lew said that the regulatory efforts have reduced the attractiveness of being a large bank by raising the cost -- part of an effort to ensure no bank remains "too big to fail." He stopped short of declaring victory in saying that the U.S. has ended the chance that any bank is so large it would need a government rescue if it ran into trouble, but added that while he believes the U.S. "will meet that test ... there is no precise point at which you can prove with certainty that we have done enough." He said that the U.S. was prepared to go further if necessary. Read more. (Subscription required.)

WALL STREET TRADE GROUPS SUE CFTC OVER DODD-FRANK RULES

Wall Street's biggest lobbying groups have banded together to sue the Commodity Futures Trading Commission, seeking to curb the overseas reach of its rules and rein in a regulatory barrage by its departing Chairman Gary Gensler, Bloomberg News reported yesterday. The suit, filed yesterday in federal court in Washington, D.C., seeks to overturn guidance that the CFTC approved in July. The trade associations, which represent Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and other swap dealers, say that the agency illegally set regulations by issuing guidance documents and staff advisories rather than formal commission-approved rules. The lawsuit focuses on the often arcane way that agencies set policy. Formal agency rules require cost-benefit analysis and votes by commissioners, who are picked by the president and confirmed by the Senate. The guidance document in July, which was approved in a commission vote, lacked economic analysis. The advisories in November lacked both economic analysis and a formal vote. While the groups asked the court to vacate the CFTC policy, the case could have the practical effect of slowing the foreign trading rules. Read more.

ANALYSIS: SMALLER MORTGAGE LENDERS LEAD FIELD

Big banks have been retrenching from the mortgage business recently, leaving smaller players to pick up larger chunks of business, the Wall Street Journal reported today. As of the third quarter, smaller mortgage players held a 60 percent market share of the U.S. origination market, up from 39 percent in 2009, according to industry publication Inside Mortgage Finance. In the third quarter alone, the smaller lenders, defined as those outside the top five, gained about six percentage points of market share, according to data compiled by Paul Miller, an analyst with FBR Capital Markets. The midsize and smaller players have grown despite tightening their underwriting standards, much like larger banks have since the financial crisis. But the smaller banks' capital rules aren't as stringent as those that make mortgages a costly enterprise for the biggest firms. Big banks began pulling out of certain mortgage businesses after new international rules required them to hold more capital for certain assets. Big banks "don't have the same view of the value of those assets relative to the cost of capital today," explained Jim Cutillo, chief executive of Stonegate Mortgage. Read more. (Subscription required.)

LATEST ABI PODCAST EXAMINES RECENT BANK SETTLEMENTS AND "TOO BIG TO JAIL"

In light of recent bank settlements over bad behavior stemming from the financial crisis, ABI Resident Scholar Prof. Kara Bruce talks with Prof. Gregory Gilchrist of the University of Toledo Law School about why more indictments against banks or their employees have not occurred. Gilchrist, who is the author of the forthcoming University of Colorado Law Review article, "The Special Problem of Banks and Crime," discusses recent settlements and the issues surrounding "too big to jail." Click here to listen.

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

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

ATTENDING ABI'S WINTER LEADERSHIP CONFERENCE? MAKE SURE TO USE THE WLC APP!

If you are currently attending ABI's 25th Annual Winter Leadership Conference in Rancho Palos Verdes, Calif., be sure to utilize the WLC app currently available for Apple iOS and Google Android devices. Use the app to pull up the conference schedule, download program materials, find out about speakers and sponsors and let your voice at the conference be heard over social media! Click here to download the app.

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

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

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

Speakers on the webinar include:

-Daniel F. Dooley of MorrisAnderson (Chicago)

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

-Ivan Lehon of Ernst & Young (New York)

-Allen Soong of Deloitte CRG (Los Angeles)

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

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

Click here for more information and to register.

ABI IN-DEPTH

RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!

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

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

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

NEW CASE SUMMARY ON VOLO: JONES V. U.S. TRUSTEE, EUGENE (9TH CIR.)

Summarized by David Shemano of Peitzman Weg LLP

The Ninth Circuit ruled that fraud that would have served as grounds for denying a chapter 7 discharge if it had been known at the time of the discharge can serve as grounds for the later revocation of that discharge.

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

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: RISK OF LENDER CONCENTRATION OVERLOOKED IN HOUSING REFORM DEBATE

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A new blog post finds that ignoring the effects of loan seller origination, sourcing and servicing processes in a post-GSE secondary market could generate losses for taxpayers.

For witness testimony and a video of the hearing, please be sure to visit http://commission.abi.org.

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 holder of an unstayed judgment, which is subject to an ongoing appeal, can qualify as a petitioning creditor under § 303(b)(1).

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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abiLIVE
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COMING UP

 

 

 

Western Consumer Bankruptcy Conference
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Rocky Mountain Bankruptcy Conference
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Caribbean Insolvency Symposium
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VALCON2014
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VALCON2014
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  CALENDAR OF EVENTS
 

2013

December
-abiLIVE Webinar
    Dec. 11, 2013

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

  


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

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


 
 
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Analysis Foreclosure Wave Averted as Doomsayers Defied

ABI Bankruptcy Brief | November 27 2012
 
  

November 29, 2012

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

ANALYSIS: FORECLOSURE WAVE AVERTED AS DOOMSAYERS DEFIED

The U.S. has not seen the surge of delinquent homes predicted by market researchers, academics and Wall Street analysts following the settlement of the government's investigation into faulty mortgage practices, Bloomberg News reported today. The flood failed to materialize, even after the five biggest U.S. mortgage servicers reached a $25 billion settlement with federal and state regulators in February. Instead, the number of properties for sale shrank to the fewest in a decade, prices appreciated at the fastest pace since 2005, and the gradual healing of the housing market helped boost consumer confidence and the economy. Banks have stepped up foreclosure alternatives to avoid legal challenges. They are forgiving debt, modifying payment plans and approving short sales that allow homeowners to sell for less than they owe. Read more.

U.S. MORTGAGE-BACKER ROLE GROWS AS FISCAL TALKS DELAY FIX

The federal government's role as the backer of most U.S. home loans is becoming entrenched as fiscal issues divert Congress and the White House from a housing-finance overhaul that would shift more risk to private capital, Bloomberg News reported today. At the core of such an overhaul is the future of Washington, D.C.-based Fannie Mae and McLean, Va.-based Freddie Mac, the government-sponsored enterprises (GSEs) that provide market liquidity by buying home loans and bundling them into securities. As they neared collapse in 2008, the companies were placed into federal conservatorship. "It is vital to the long-term health of our country’s housing and financial markets that our elected leaders seek to bring the conservatorships to a conclusion, and to define the government's role and requirements for housing finance in the future," said Federal Housing Finance Agency acting director Edward J. DeMarco. Housing-finance reform is only “number two or three” on the agenda for Congress, Jim Millstein, the former U.S. Treasury Department chief restructuring officer who now runs advisory firm Millstein & Co., said. "The reality is that a now-four-year-long conservatorship is no longer even threatening to become a nationalization of the mortgage market," said Millstein. "It is becoming the nationalization of the mortgage market." Read more.

DODD-FRANK SWAP-CLEARING RULE GETS CFTC FINAL APPROVAL

Wall Street's largest swap dealers, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., will be required to guarantee trades at clearinghouses starting in March under a rule made final by the top U.S. derivatives regulator, Bloomberg News reported today. The five-member Commodity Futures Trading Commission voted unanimously in a private process yesterday to complete the final determinations, the agency said. The rule, which had been scheduled for a public vote, determines which credit and interest-rate swaps must be guaranteed at clearinghouses owned by LCH.Clearnet Group Ltd., CME Group Inc. and Intercontinental Exchange Inc. "Central clearing lowers the risk of the highly interconnected financial system," CFTC Chairman Gary Gensler said. "It also democratizes the market by eliminating the need for market participants to individually determine counterparty credit risk, as now clearinghouses stand between buyers and sellers." Read more.

FINAL VOLCKER RULE TO BE DELAYED UNTIL 2013

Due to the complexity of the Volcker rule, the challenges of agency coordination and the volume of feedback regulators received, government officials are now pointing to the first quarter of 2013 as a more likely deadline over the year-end goal shared previously by participants like Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp., CNBC.com reported yesterday. "Our goal is to achieve a strong and consistent rule, although the process is not as easy or simple as any of us would like," said Treasury Undersecretary Mary Miller. Miller noted that regulators had received more than 18,000 comment letters on the proposed rule, but they were making "steady progress" toward its implementation. The rule, part of the Dodd-Frank Act, aims to restrict banks from making certain speculative investments for their own gain — also known as proprietary trading. Such practices came under harsh scrutiny during the financial crisis when banks made big bets based on the direction of the economy, while advising clients otherwise. Read more.

EXPERTS SAY BANKRUPTCY AN UNATTRACTIVE OPTION FOR DETROIT

While Detroit appears to be headed toward chapter 9 bankruptcy as political and legal battles continue to stall fiscal reforms required by the state for the release of millions in critical bond funding, financial and legal experts warn that the city should avoid bankruptcy, the Detroit News reported today. Experts say that Detroit, which would be the biggest city ever to file for bankruptcy protection in American history, should steel itself for a long, costly process involving a litany of unknowns if the state allows it to proceed with a chapter 9 filing. "The way the laws are now, it's a really messy option," said Kenneth Whipple, a retired businessman and member of the city's Financial Advisory Board created by Gov. Rick Snyder to help monitor Detroit's finances. "There aren't any cities as big as Detroit in as complicated a legal structure that have gone that way." The city and state have been at an impasse over the specific reforms Detroit must meet as part of a "milestone agreement" to claim $30 million in state bond funding that is currently being held in escrow. Detroit needs the funds to get through yet another short-term cash crunch, but the Snyder administration seems unwilling to budge. Read more.

LIVE WEBCASTS AVAILABLE TOMORROW FROM ABI'S WINTER LEADERSHIP CONFERENCE!

Not able to attend ABI’s Winter Leadership Conference starting today in Tucson, Ariz.? You will not want to miss two events tomorrow available via live webstream: ABI’s Chapter 11 Commission and a concert by ABI’s Indubitable Equivalents dedicated to Steven Golick.

• At 1:15 p.m. ET (11:15 a.m. MT), ABI's Commission to Study the Reform of Chapter 11 will hold its final public hearing of 2012. Members are encouraged to watch the hearing via a live webstream available at http://commission.abi.org. All materials are part of the Commission's record to be transmitted to Congress following the two-year investigation and report.

• At 11:30 p.m. ET (9:30 pm MT), ABI’s Indubitable Equivalents will perform a concert dedicated to ABI member, leader and band mate, Steven Golick, who has recently undergone successful surgery to remove a brain tumor. Steve will be watching from his home in Toronto. Watch the concert live at www.abiband.com.

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 in Richmond. 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: KEYSER V. WASATCH TOWERS CONDOMINIUM OWNERS ASSOCIATION INC. (IN RE KEYSER; 10TH CIR.)

Summarized by Brendan Gage of St. John's University School of Law

Affirming the Bankruptcy Appellate Panel, the Tenth Circuit dismissed an appeal by debtor Steven Keyser for lack of jurisdiction because his notice of appeal was untimely under Fed. R. Bankr. P. 8002(a).

There are over 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: COURT DECISION SPELLS WIN FOR VITRO BONDHOLDERS

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines a U.S. appellate court decision yesterday that upheld a bankruptcy court decision to reject Mexican glassmaker's Vitro SAB’s controversial bankruptcy plan. The decision represented a win for bondholders that have been sparring with the company for years over its debt restructuring plan.

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.

LATEST BLOOMBERG LAW VIDEO: BILL ON BANKRUPTCY- PATRIOT COAL CASE KICKED FROM MANHATTAN TO ST. LOUIS

The decision sending the Patriot Coal Corp. reorganization to St. Louis will focus debate on the near impossibility of convincing a judge in New York or Delaware to send a bankruptcy somewhere else, as Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss on their new video. Click here to watch.

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.

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:

LIVE WEBCASTS AVAILABLE TOMORROW FROM ABI'S WINTER LEADERSHIP CONFERENCE:

• ABI's Commission to Study the Reform of Chapter 11 public hearing at 1:15 p.m. ET (11:15 a.m. MT).
Click here to access.

• ABI’s Indubitable Equivalents concert dedicated to ABI member, leader and band mate, Steven Golick at 11:30 p.m. ET (9:30 pm MT).
Click here to access.

 

COMING UP:

 

 

MT 2012
Dec. 4-8, 2012
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WCBC 2013
Jan. 21, 2013
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ACBPIKC 2013
Jan. 24-25, 2013
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ACBPIKC 2013
Feb. 7-9, 2013
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ACBPIKC 2013
Feb. 17-19, 2013
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ACBPIKC 2013
Feb. 20-22, 2013
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BBW 2013
March 22, 2013
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  CALENDAR OF EVENTS
 

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.

March
- Bankruptcy Battleground West
     March 22, 2012 | Los Angeles, Calif.


 
 
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Report Many Cant Pay Their Direct Federal Student Loans

ABI Bankruptcy Brief | August 6, 2013
 
  

August 6, 2013

 
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  NEWS AND ANALYSIS   

REPORT: MANY CAN'T PAY THEIR DIRECT FEDERAL STUDENT LOANS

Just about four in 10 borrowers with direct federal student loans are paying them back, according to a report released yesterday that offers the first comprehensive snapshot of the program since the government created it in 2010, the Wall Street Journal reported today. Many of the 27.8 million borrowers with these newer direct federal loans aren't yet required to make payments: About 35 percent are still in school or within a six-month grace period after graduation, the report said. But about 18 percent are in programs designed to help distressed borrowers or have returned to school. Nearly 8 percent are in default, meaning the borrower hasn't made a payment in at least a year, according to the Consumer Financial Protection Bureau, the federal regulator that released the report. The report indicates that a significant number of borrowers in the new program are unable to repay. Excluding borrowers who don't yet have to make payments because they are still in school or within the grace period, more than a fifth -- about 22 percent -- are in default or forbearance. Read more. (Subscription required.)

Click here to read the CFPB's report.

COMMENTARY: MOTOWN'S PENSION SHOWDOWN

Detroit's unions have found an unlikely ally in Michigan's Republican Attorney General Bill Schuette, who has taken up their argument that the state constitution precludes federal bankruptcy court from reducing pension benefits, according to an editorial in the Wall Street Journal today. If this view holds, according to the editorial, unions and politicians in financially strapped cities will be able to use chapter 9 as a new political default to shed their bond debts. The Detroit case is likely to set precedents because it's the first large city that has tried to force haircuts on pensioners through bankruptcy. Politicians in the bankrupt cities of Vallejo and Stockton, Calif., sidestepped the issue of whether federal bankruptcy law pre-empts state pension protections after the California Public Employees' Retirement System threatened an expensive legal fight. But with $3.5 billion in unfunded pension liabilities, Detroit can't afford to duck. While the U.S. Constitution's Supremacy Clause would seem to give federal bankruptcy law the upper hand, Congress has traditionally sought to straddle the U.S. system of dual sovereignty by including explicit pre-emptory language in statutes that are intended to supersede state laws. Chapter 9's language doesn't explicitly pre-empt state laws, according to the editorial, but there's a strong case to be made that pre-emption is intrinsic to municipal bankruptcy. The legal tension comes because Michigan's constitution, which passed in 1963, holds that "accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby." Read more. (Subscription required.)

A similar commentary in yesterday's New York Times finds that while it isn't politically feasible for the federal government to bail out Detroit, President Obama and Congress must step in to avert the worst fiscal collapse in urban American history. The commentary makes the case that the government must intervene because the symptoms of the municipal illness that made Detroit, with an estimated $18 billion in liabilities, the largest city in American history to declare bankruptcy are showing up in other cities. Emergency response times are lengthening in cash-starved cities. Libraries, parks and recreation facilities are shortening their hours or closing. Potholes go unfilled, sidewalks unrepaired and trees untrimmed. All that makes urban life rewarding and uplifting is under increasing pressure, in large part because of unaffordable public employee pension and health care costs. Read the full commentary.

For the latest information and analysis about the Detroit case, be sure to visit ABI's dedicated website, http://news.abi.org/Detroit.

PRIVATE-EQUITY PAYOUT DEBT SURGES

Private-equity firms are adding debt to companies they own in order to fund payouts to themselves at a record pace, as fears are mounting that the window for these deals will close if interest rates rise, the Wall Street Journal reported today. So far this year, $47.4 billion of new loans and bonds have been sold by companies to pay dividends to the private-equity firms that own them, according to data provider S&P Capital IQ LCD. That is 62 percent more than the same period last year, which wound up being the biggest year on record, with $64.2 billion sold to fund private-equity payouts. The added debt, known as a recapitalization, can increase companies' risk of default, according to a recent study by Moody's Investors Service. As dividend deals increase, many also are unusually risky lately, carrying low credit ratings and paying historically low interest rates to investors. "This is the leveraged-finance debt market that you can't quite kill," said Richard Farley, a lawyer with Paul Hastings LLP who represents banks in buyouts. Read more. (Subscription required.)

ANALYSIS: RETURN OF MEGA-MERGERS REFLECTS GROWING CONFIDENCE IN ECONOMY

Analysts say that the recent spike in merger activity reflects the return of the mega-merger and a gradual uptick in business confidence in the economy, the Washington Post reported today. It has been most evident in the ongoing battle for Dell computers, with founder Michael Dell upping his bid for the company to $25 billion Friday, and the high-profile buyout of H.J. Heinz by Warren Buffett's Berkshire Hathaway. Although the number of mergers is down compared with the corresponding period last year, a series of mega-mergers has helped increase the value of merger activity in 2013 to $607 billion from $486 billion during the corresponding period in 2012. Activity is picking up after an uneventful 2012, when no mega-mergers were announced, analysts said. But it is still far from 2011 levels, when low valuations contributed to a rush for deals. Read more.

CONSUMER SPENDING, INCOME CLIMB IN JUNE

U.S. consumer spending increased and inflation pushed higher in June, which could strengthen expectations that the Federal Reserve will curtail its bond purchases later this year, Reuters reported on Friday. The Commerce Department said on Friday that consumer spending rose 0.5 percent, lifted by automobile purchases and higher gasoline prices. May's increase was revised down to 0.2 percent from a previously reported 0.3 percent. June's increase in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was in line with economists' expectations. With prices picking up, consumer spending adjusted for inflation nudged up 0.1 percent. The consumer spending numbers were included in the second-quarter GDP report on Wednesday, which showed that the economy grew at a 1.7 percent annual pace after expanding at a 1.1 percent rate in the first three months of the year. Read more.

IN CASE YOU MISSED IT - abiLIVE WEBINAR DISCUSSING § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES RECORDING IS NOW AVAILABLE!

If you were not able to attend ABI's recent abiLIVE webinar examining § 1111(b), a recording of the program is now available for downloading! Utilizing a case study, ABI's panel of experts explored the issues surrounding a lender's decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel also walked attendees through the necessary mathematical analyses used to examine these issues. The 90-minute recording is available for the special price of $75 and can be purchased here.

abiLIVE WEBINAR ON AUGUST 20: HOW WILL THE NEW U.S. TRUSTEE FEE GUIDELINES IMPACT YOU?

The new U.S. Trustee Fee Guidelines will affect all attorneys and firms who work on larger chapter 11 cases filed on or after Nov. 1. ABI's Ethics & Professional Compensation Committee will present a panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, to discuss some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. Register today to hear government, attorney and academic perspectives speak on this important and timely topic.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE MID-ATLANTIC BANKRUPTCY WORKSHOP ON FRIDAY

The 5th stop for the ABI Golf Tour is the Hershey Country Club, held in conjunction with this week's Mid-Atlantic Bankruptcy Workshop. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Conference. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!

Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

NEW CASE SUMMARY ON VOLO: CHARLES W. RIES V. SCARLETT & GUCCIARDO, PA, ET AL. (8TH CIR.)

Summarized by Michael Cooley of Akin Gump Strauss Hauer & Feld LLP

Applying the plain language of Fed. R. Civ. P. 15(c)(1), the Eighth Circuit affirmed the principle that whether the party seeking to amend a pleading knew, when the original pleading was filed, of the identity of the party left out is irrelevant to the question of whether the amended pleading may relate back to the date of the original pleading. Rather, the ability to relate back an amendment to the date of the original pleading depends on whether the party to be added knew or should have known that, but for the mistake, it would have been named in the original pleading. Additionally, this case serves as an important reminder of the value in structuring settlement agreements to safeguard against the possibility that a bankruptcy filing thereafter could leave the nondebtor party to disgorge settlement payments as preferential transfers without the ability to resurrect the claims originally settled in consideration therefore.

There are more than 900 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: ONLY CONGRESS THINKS MAIN STREET BANKS ARE "TBTF"

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. Removing the arbitrary size designation for systemically important financial institutions would reduce costly regulation for regional banks, encourage industrywide competition and concentrate regulators' efforts on firms that actually warrant attention, 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

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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MA 2013
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abiLIVESeptember
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Endowment Football 2013
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Detroit
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  CALENDAR OF EVENTS
 

2013

August
- Mid-Atlantic Bankruptcy Workshop
    August 8-10, 2013 | Hershey, Pa.
- abiLIVE Webinar: How Will the New U.S. Trustee Fee Guidelines Impact You?
     August 20, 2013
- 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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