Commentary: The Coming Wave of Business Bankruptcies*​​​

Corporate bankruptcies in America are on the rise, insolvencies have already reached a post-financial-crisis high in England and Wales, and they have surged in the eurozone, too. Allianz forecasts a rise in insolvencies in advanced economies in the next few years, as more businesses refinance on to higher rates. Indeed, in the coming five years, over $3 trillion of corporate debt is due for repayment in the U.S., according to a Financial Times editorial. The hit to businesses, and workers, is the cold reality of higher rates. In the long run, however, it could be positive for the economy. Part of the rise in insolvencies is a catch-up effect. Many companies that fold are likely to have been propped up by COVID-19 policy measures, and would have collapsed in any case. Zombie companies — which include enterprises that are in financial distress and persistently unprofitable — will be pinched too, according to the commentary. These businesses proliferated in the era of low rates that followed the global financial crisis: Their share of listed companies globally rose 4 percentage points to 10 percent in 2021, according to an IMF working paper. Read more.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
 

H.R. 3315, the "National Guard and Reservists Debt Relief Extension Act of 2023," Passes Out of House Judiciary Committee​​​

H.R. 3315, the "National Guard and Reservists Debt Relief Extension Act of 2023," passed out of the House Judiciary Committee on a 24-0 vote on Nov. 2 and is now before the full House of Representatives for consideration. The bipartisan measure, introduced by Rep. Steve Cohen (D-Tenn.), aims to provide the same means-test treatment under chapter 7 of the Bankruptcy Code for guard members and reservists who were recently federally deployed as that of active-duty servicemembers. According to the bill summary, the legislation aims to exempt, for an additional four-year period, from the application of the means-test presumption of abuse under chapter 7 qualifying members of reserve components of the Armed Forces and members of the National Guard who, after Sept. 11, 2001, are called to active duty or to perform a homeland defense activity for not less than 90 days. “It’s the appropriate manner for dealing with the bankruptcy courts and folks that serve us, and reservists, and the difficulties they might have meeting their debts when they’re sent overseas in particular," Cohen said during the markup hearing on Nov. 2. The timetable for consideration by the full House of Representatives is currently uncertain.

Click here for full bill text.

Click here for Rep. Cohen's statement.
 

NY Fed: U.S. Q3 Credit Card Debt Up on Strong Economy as Credit Woes Tick Higher​​​

The Federal Reserve Bank of New York reported Tuesday that U.S. total household debt levels rose in the third quarter amid strong growth in credit card borrowings fueled by a hot economy, although there were mounting signs that some borrowers are facing increased challenges managing the money they've borrowed, Reuters reported. In its quarterly report, the bank said that overall debt levels increased by 1.3% during the third quarter to a level of $17.29 trillion. Within that rise, credit card borrowing levels rose by 4.7% to $1.08 trillion, with the bank noting that over the last year there's been a $154 billion increase in these types of balances, the largest since the New York Fed began tracking such data in 1999. Overall debt delinquency increased by 3% as of September from a 2.6% increase in the second quarter, the report said, while still standing below the 4.7% delinquency rate seen in the fourth quarter of 2019, just ahead of the pandemic’s arrival. Read more.
 

White House Says 5.5M Borrowers Enrolled in Biden’s New Student Loan Plan​​​

The Biden administration announced on Wednesday that nearly 5.5 million borrowers are enrolled in its new student loan repayment plan, which offers lower monthly payments and caps interest accrual, Politico reported. The Education Department also released a new breakdown of enrollment in the new income-driven repayment plan for each congressional district as GOP lawmakers are pushing to repeal the program. About 2.9 million of the borrowers enrolled in the plan have incomes that are low enough that they are not required to make a monthly payment this year, White House domestic policy adviser Neera Tanden told reporters on Wednesday. An administration official said that more than 2 million people enrolled in the plan are borrowers who newly signed up for Biden’s program in the past several months, while the other borrowers were automatically enrolled in the new plan because they had already been enrolled in the previous version of it. The Education Department said that the 5.5 million borrowers enrolled in the SAVE plan account for about $300 billion of the $1.6 trillion in outstanding federal student loan debt. The department also said that 75 percent of borrowers enrolled in the SAVE plan had previously received a Pell grant. Read more.
 

Analysis: How Working from Home Has Reshaped What Americans Buy​​​

Americans are still spending more of their money on stuff than they did before the pandemic. There is little reason to think that is about to stop, according to a Wall Street Journal analysis. Early in the pandemic, unable to spend on things such as traveling and dining out, and with their finances buoyed by government relief, people bought goods with abandon. This played a role in the supply-chain snarls, the hefty price increases that beset the economy, and in retailers’ scramble to secure as much inventory as possible. As the economy gradually reopened, there was a reversal that left many stores burdened with more than they needed. Now, the rebound in services’ share of spending seems to have ended, and retailers’ inventory problems largely have been wrung out. Those selling furniture, electronics and appliances, for example, saw their inventory swell to as much as 1.75 times sales in December 2022, according to data from the Census Bureau. As of August, that ratio shrank back to 1.56, which is pretty much in line with pre-pandemic levels. U.S. consumers are still devoting a lot of spending toward goods — a reshaping of the economy that, in addition to any far-reaching consequences it might have, suggests that retailers’ 2023 holiday-season sales will be much higher than they might have imagined in 2019. Read more. (Subscription required.)
 

Latest ABI TechBytes Podcast Examines Cryptocurrency and the Law

This is the second in a series of TechBytes podcasts that looks at cryptocurrency and bankruptcy. On this episode, Patricia K. Burgess of Frost Brown Todd LLP (Nashville, Tenn.), the Special Projects Leader of ABI's Emerging Industries and Technology Committee, talks with John S. Wagster, who leads Frost Brown Todd's Technology Industry Team (Nashville, Tenn.), and Jared M. Tully, who is vice chair of Frost Brown Todd's Business Litigation Practice Group (Charleston, W.Va.) and serves as the team leader for the firm’s Community Bank and Financial Institutions Team. They discuss the ways in which the law is and isn't developing to meet the unique needs of crypto assets. Click here to listen to the podcast.
 

Miss Any of the 25+ Hours of CLE Programming at CPEX23? Access All Replays for Only $100!

Leading practitioners over the past two weeks examined key issues across the consumer bankruptcy landscape during ABI’s 2023 Consumer Practice Extravaganza (CPEX). Did you miss any of the sessions, including an exclusive “Fireside Chat” with EOUST Director Tara Twomey and deep dives into student loans, technology and the future, subchapter V of chapter 11, tax issues and more? Get access to all replays via a state-of-the-art virtual platform for only $100! All sessions will conveniently remain available until Jan. 31!

Vacancy Announcement for Bankruptcy Judgeship for the District of New Hampshire​​​

The U.S. Court of Appeals for the First Circuit is seeking applicants for a bankruptcy judge position in the U.S. Bankruptcy Court for the District of New Hampshire in Concord. The jurisdiction of a bankruptcy judge is specified in Title 28, United States Code, §§ 151-158, and explained in Title 11, United States Code, § 101, et seq. Attorneys are encouraged to apply, even if their experience is not specifically in bankruptcy law. Interested applicants may obtain an application on the Court of Appeals' website at https://www.ca1.uscourts.gov/employment. Persons applying for this position and willing to serve if selected should personally submit their applications to Susan Goldberg, Circuit Executive, via email at ca01_chjobs@ca1.uscourts.gov. Any applicant must comply with the financial disclosure requirements pursuant to the Ethics in Government Act of 1978, Title 5, United States Code Appendix, §§ 101-111, as implemented by the Judicial Conference of the United States, and will be required to satisfy FBI and IRS background investigations prior to appointment. The term of office is 14 years, and the current salary is $213,992. Applications are to be received no later than Monday, November 27, 2023. Persons will be considered without regard to race, color, age (over 40), gender, religion, national origin, disability, or sexual orientation. 

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